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EXHIBIT 10.19
EXECUTION
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LOAN AND TRUST AGREEMENT
by and among
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF MARICOPA,
CHAPARRAL CITY WATER COMPANY
and
BANK ONE, ARIZONA, NA, as Trustee
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The Industrial Development Authority of the County of Maricopa
Water System Improvement and Refunding Revenue Bonds
(Chaparral City Water Company Project)
$7,600,000 $1,320,000
Water System Improvement Revenue Bonds Water System Refunding Revenue Bonds
Series 1997A Series 1997B
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Dated as of December 1, 1997
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TABLE OF CONTENTS
Page
ARTICLE I
INTRODUCTION AND DEFINITIONS
Section 1.01. Description of this Agreement and the Parties ......................... 1
Section 1.02. Definitions ........................................................... 2
Section 1.03. Content of Certificates and Opinions .................................. 14
Section 1.04. Accounting Principles ................................................. 14
Section 1.05. Actions by Issuer and Company ......................................... 15
ARTICLE II
ASSIGNMENT AND PLEDGE OF SECURITY
Section 2.01. Assignment and Pledge of the Issurer and Company ...................... 15
Section 2.02. Further Assurance ..................................................... 16
Section 2.03. Defeasance ............................................................ 16
Section 2.04. Survival of Certain Provisions ........................................ 18
ARTICLE III
THE BONDS AND THE BORROWING
Section 3.01. The Bonds ............................................................. 19
Section 3.02. Application of Bond Proceeds and Company Funds ........................ 23
Section 3.03. Bond Fund ............................................................. 23
Section 3.04. Debt Service Reserve Fund ............................................. 24
Section 3.05. Rebate Fund ........................................................... 26
Section 3.06. Refunding Fund ........................................................ 28
Section 3.07. Project Fund .......................................................... 29
Section 3.08. Costs of 1997 Project ................................................. 29
Section 3.09. Disbursements from and Records of the Project Fund .................... 30
Section 3.10. Substantial Completions ............................................... 31
Section 3.11. Issuance of Parity Debt ............................................... 32
Section 3.12. Payments by the Company ............................................... 35
Section 3.13. Redemption of the Bonds ............................................... 37
Section 3.14. Paying Agent .......................................................... 41
Section 3.15 Investments ........................................................... 42
Section 3.16. Release of and Liens on Property ...................................... 43
Section 3.17. Moneys to be Held in Trust ............................................ 43
Section 3.18. Rights to Funds ....................................................... 44
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ARTICLE IV
THE PROJECT
Section 4.01. Acquisition, Construction, Installation, Equipment and Improvement .... 44
Section 4.02. Company Required to Pay Costs in Event Project Fund Insufficient ...... 44
ARTICLE V
COVENANTS AND WARRANTIES OF THE COMPANY AND OF THE ISSUER
Section 5.01. Corporate Organization Authorization and Powers ....................... 45
Section 5.02. Payment of Principal, Premium and Interest on Parity
Debt; Interest on Overdue Payments .................................... 46
Section 5.03. Covenants ............................................................. 46
Section 5.04. Annual Reports and Other Current Information .......................... 51
Section 5.05. Corporate Reorganization .............................................. 52
Section 5.06. Right to Notice ....................................................... 52
Section 5.07. Maintenance of Property ............................................... 52
Section 5.08. Compliance With Laws .................................................. 53
Section 5.09. Payment of Taxes ...................................................... 53
Section 5.10. Compliance with Covenants ............................................. 53
Section 5.11. Licenses and Permits .................................................. 53
Section 5.12. Financial Covenants ................................................... 54
Section 5.13. Limitations on Incurrence of Additional Indebtedness .................. 54
Section 5.14. Sale, Lease or other Disposition of Property .......................... 55
Section 5.15. Consolidation, Merger, Sale or Conveyance ............................. 55
Section 5.16. Restrictions on Guaranties ............................................ 56
Section 5.17. Limitations on Creation of Liens ...................................... 56
Section 5.18. Insurance ............................................................. 58
Section 5.19. Compliance with Laws and Regulations .................................. 59
Section 5.20. Environmental Compliance .............................................. 60
Section 5.21. Survival of Representations ........................................... 62
ARTICLE VI
DEFAULT AND REMEDIES
Section 6.01. Default by the Company ................................................ 62
Section 6.02. Remedies Upon Events of Default ....................................... 64
Section 6.03. Application of Moneys after Default ................................... 66
Section 6.04. Remedies Cumulative ................................................... 68
Section 6.05. Performance of the Company's Obligations .............................. 68
Section 6.06. Holders' Control of Proceedings ....................................... 68
Section 6.07. Remedies Subject to Provisions of Law ................................. 69
Section 6.08. Limitation on Suits by Holders ........................................ 69
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Section 6.09. Waiver of Certain Defenses ............................................ 70
Section 6.10. Opportunity to Cure ................................................... 70
Section 6.11. Rights of Bond Insurer Upon an Event of Default ....................... 70
ARTICLE VII
THE TRUSTEE
Section 7.01. Rights and Duties of the Trustee ...................................... 71
Section 7.02. Fees and Expenses of the Trustee; Indemnification ..................... 75
Section 7.03. Resignation or Removal of the Trustee ................................. 75
Section 7.04. Successor Trustee ..................................................... 75
ARTICLE VIII
THE ISSUER
Section 8.01. Rights and Duties of the Issuer ....................................... 76
Section 8.02. Expenses of the Issuer ................................................ 78
Section 8.03. Limitation on Recourse and Liability .................................. 78
Section 8.04. Unrelated Bond Issues ................................................. 79
Section 8.05. Indemnification ....................................................... 79
Section 8.06. Representations and Warranties of the Issuer ......................... 81
ARTICLE IX
THE BONDHOLDERS
Section 9.01. Action by Bondholders ................................................. 82
ARTICLE X
THE BOND INSURER
Section 10.01. Provisions Regarding the Bond Insurer ................................ 82
Section 10.02. Claims Upon the Bond Insurance Policy ................................ 83
Section 10.03. Indemnification ...................................................... 85
Section 10.04. Information to and Rights of Bond Insurer ............................ 85
Section 10.05. Consent of Bond Insurer .............................................. 86
ARTICLE XI
MISCELLANEOUS
Section 11.01. Amendment ............................................................. 87
Section 11.02. Successors and Assigns ................................................ 89
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Section 11.03. Notices .............................................................. 89
Section 11.04. Business Days ........................................................ 90
Section 11.05. Agreement Not for the Benefit of Other Parties; Bond
Insurer is Third Party Beneficiary ................................... 90
Section 11.06. Severability ......................................................... 91
Section 11.07. Counterparts ......................................................... 91
Section 11.08. Captions ............................................................. 91
Section 11.09. Governing Law ........................................................ 91
Section 11.10. Suspension of Publications or Mail ................................... 91
Section 11.11. Conflict of Interest ................................................. 91
Section 11.12. Continuing Disclosure ................................................ 91
SCHEDULE A Description of Existing Liens
SCHEDULE B Form of Project Fund Requisition
SCHEDULE C Credit Facility Requirements
SCHEDULE D Costs of Issuance
SCHEDULE E Descriptions of 1997 Project and 1985 Project
EXHIBIT I Form of Series 1997A Bond
Form of Series 1997B Bond
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ARTICLE I
INTRODUCTION AND DEFINITIONS
Section 1.01. Description of this Agreement and the Parties. This LOAN
AND TRUST AGREEMENT (the "Agreement") is entered into as of December 1, 1997 by
and among THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF MARICOPA, a
nonprofit corporation designated a political subdivision of the State of Arizona
(the "State") incorporated with the approval of Maricopa County, Arizona (the
"County"), pursuant to the provisions of the Constitution of the State and under
Title 35, Chapter 5, Arizona Revised Statutes, as amended (the "Issuer"),
CHAPARRAL CITY WATER COMPANY, an Arizona corporation (the "Company"), and BANK
ONE, ARIZONA, NA, as trustee (with its successors, the "Trustee").
This Agreement is a financing document combined with a trust agreement
under the Act and provides for the following transactions:
(a) the Issuer's issuance of its $7,600,000 Water System
Improvement Revenue Bonds (Chaparral City Water Company Project), Series
1997A (the "Series 1997A Bonds");
(b) the Issuer's issuance of its $1,320,000 Water System
Refunding Revenue Bonds (Chaparral City Water Company Project), Series
1997B (the "Series 1997B Bonds" and together with the Series 1997A
Bonds, the "Bonds");
(c) the Issuer's loan of the proceeds of the Series 1997A Bonds
to the Company for the purposes of (i) paying costs of certain
improvements to the water furnishing facilities of the Company located
in various locations in the Town of Fountain Hills, City of Scottsdale
and unincorporated Maricopa County (as hereinafter more fully described,
the "1997 Project"), which water furnishing facilities constitute a
"project" within the meaning of the Act, (ii) funding a reserve fund and
(iii) paying issuance expenses incurred in connection with the issuance
and sale of the Series 1997A Bonds;
(d) the Issuer's loan of the proceeds of the Series 1997B Bonds
to the Company for the purpose of refunding the 1985 Bonds, which 1985
Bonds were used to pay the costs of certain improvements to the
Company's water furnishing facilities which constitute a "project"
within the meaning of the Act (as hereinafter more fully described, the
"1985 Project");
(e) the Company's repayment of the loan of Bond proceeds from the
Issuer through payment to the Trustee of all amounts necessary to pay
the Bonds issued by the Issuer;
(f) the Issuer's assignment to the Trustee in trust for the
benefit and security of the Bond Insurer and the Bondholders of the
Issuer's rights under this Agreement and
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the revenues to be received from the Company hereunder except as
otherwise provided herein; and
(g) the Company's securing, as permitted by Section 3.11 hereof,
of Parity Debt.
In consideration of the mutual agreements and representations contained
in this Agreement and other good and valuable consideration, the receipt of
which is hereby acknowledged, the Company, the Issuer and the Trustee agree as
set forth herein for their own benefit and for the benefit of the Bondholders
and the Bond Insurer and holders of Parity Debt to the extent herein provided,
provided that any financial obligation of the Issuer hereunder shall not be a
general obligation of the Issuer nor a debt or pledge of the faith and credit of
the Issuer or the County, but shall be payable solely from the funds and
revenues assigned and pledged under this Agreement. The Issuer has no taxing
power.
Section 1.02. Definitions. In addition to terms defined elsewhere
herein, the following terms have the following meanings in this Agreement,
unless the context otherwise requires:
"Accountant" means a firm of Independent certified public accountants
(which may be the external auditing firm of the Company) and which is acceptable
to the Trustee.
"Act" means Title 35, Chapter 5, Arizona Revised Statutes, unless
otherwise specified herein, as amended from time to time.
"Additional Indebtedness" means any Indebtedness incurred by the Company
subsequent to the issuance of the Bonds.
"Additional Parity Indebtedness" means any Additional Indebtedness of
the Company that is secured by the Collateral on a parity basis, as provided
hereunder, with the Bonds.
"Affiliate" of any specified corporation or other entity means any other
entity directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified entity. For purposes of this
definition, "control" when used with respect to any specified entity means the
power to direct the management and policies of such entity, directly or
indirectly, whether through appointment of the Governing Body, ownership of
voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Aggregate Project" means the 1985 Project and the 1997 Project
collectively.
"Agreement" means this Loan and Trust Agreement, dated as of December 1,
1997, as it may be supplemented and amended in accordance with its terms.
"Ambac Assurance" means Ambac Assurance Corporation, a
Wisconsin-domiciled stock insurance company.
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"Annual Debt Service" means, for the Fiscal Year in question, the
aggregate of the payments made (other than from moneys irrevocably deposited
with the Trustee or otherwise irrevocably held in trust in a segregated account
for the benefit of a lender for purposes of such payments), in respect of
principal of and interest on Indebtedness of the Company during such period,
also taking into account with respect to Capitalized Interest, the provisions
pertaining to credit for Capitalized Interest.
"Authorized Officer" means (i) in the case of the issuer, the President,
any Vice President, Secretary/Treasurer or Assistant Secretary/Treasurer of the
Issuer, and when used with reference to an act or document of the Issuer also
means any other person authorized to perform the act or execute the document,
and (ii) in the case of the Company, the Chairman, the President, any Vice
President, the Secretary or Assistant Secretary of the Company, and when used
with reference to an act or document of the Company, also means any other person
or persons authorized to perform the act or execute the document.
"Beneficial Owners" means actual purchasers of the Bonds whose ownership
interest is evidenced only in the Book-Entry System maintained by the
Depository.
"Bond" or "Bonds" means, collectively, the Series 1997A Bonds and the
Series 1997E Bonds, and any Bond or Bonds duly issued in exchange or replacement
therefor and, where appropriate with respect to redemption, portions thereof in
authorized denominations.
"1985 Bonds" means the Issuer's Industrial Development Revenue Bonds
(Chaparral City Water Company Project) Series 1985, dated as of April 1, 1985 in
the original principal amount of $3,023,000 and currently outstanding in the
principal amount of $1,320,000.
"Bond Fund" means the fund by that name established pursuant to Section
3.03, including the Policy Payments Account therein established pursuant to
Section 10.02.
"Bondholder," "Holder," "Owner" or "Registered Owner" means (a) with
respect to the Parity Bonds, the registered owner of any of the Parity Bonds
from time to time as shown in the books kept by the Trustee as bond registrar
and transfer agent, and (b) with respect to Parity Debt, the persons or entities
identified in accordance with the provisions of Section 3.11 (c) hereof.
"Bond Insurance Policy" means the municipal bond insurance policy issued
by the Bond Insurer insuring the payment when due of the principal of and
interest on the Bonds as provided therein.
"Bond Insurer" means, with respect to the Bonds, Ambac Assurance.
"Bond Purchase Agreement" means the Bond Purchase Agreement dated
December 5, 1997 among the Issuer, the Company and Banc One Capital Corporation.
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"Bond Year" means. during the period while any Bonds remain outstanding,
the annual period (or, in the case of the first Bond Year, a period of 12 months
or less) provided for the computation of Rebate Amount for the Bonds under
Section 148(f) of the Code.
"Book-Entry System" means a system for clearing and settlement of
securities transactions among participants of a Depository (and other parties
having custodial relationships with such participants) through electronic or
manual book-entry changes in accounts of such participants maintained by the
Depository hereunder for recording ownership of the Bonds by Beneficial Owners
and transfers of ownership interests in the Bonds.
"Business Day" means a day on which banks located in each of the cities
in which the principal corporate trust offices of the Trustee and the Paying
Agent are located are not required or authorized to remain closed and on which
the New York Stock Exchange is not closed.
"Capitalized Interest" means the interest (exclusive of accrued interest
paid by the initial purchasers upon delivery of the Bonds) accruing upon the
Bonds during the period of construction of the 1997 Project.
"Capitalization Ratio" means the ratio of total Indebtedness of the
Company to the sum of total Indebtedness and total shareholders' equity, as
reflected in or derived from the most recent audited financial statements or
unaudited quarterly financial statements of the Company, as applicable.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or where pertinent, its statutory predecessor, the Internal Revenue Code
of 1954, as amended (the "1954 Code"). References to the Code and Sections of
the Code include relevant applicable regulations and proposed regulations
thereunder and under the 1954 Code; as amended from time to time, and any
successor provisions to those Sections, regulations or proposed regulations and,
in addition, all revenue rulings, announcements, notices, procedures and
judicial determinations under the foregoing applicable to the Bonds.
"Collateral" means the Mortgage and any other Lien on or security
interest granted in Property of Company herein and under any other mortgage or
security agreement or other document of similar import.
"Company" means Chaparral City Water Company, a corporation for profit
duly organized and validly existing under the laws of the State, and its lawful
successors and assigns to the extent permitted by this Agreement.
"Computation Date" means each date (including the date on which the
Bonds are paid in full) on which the Rebate Amount for the Bonds is computed or
is required to be computed in accordance with Section 148(f) of the Code.
"Condemnation Proceeds" shall have the meaning set forth in Section
4.04.
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"Consultant" means a person or firm which is not unacceptable to the
Trustee or the Bond Insurer, is a recognized professional consultant of
favorable reputation, having the skill and experience necessary to render the
particular report or certificate required, and is Independent.
"Continuing Disclosure Agreement" means the Continuing Disclosure
Certificate of the Company dated as of December 1, 1997.
"Costs of Issuance" means underwriter's discount or fees, counsel fees
(including bond counsel, Issuer's counsel, Issuer's financial advisor, counsel
to the Company, Trustee's counsel, and any other specialized counsel fees
incurred in connection with the issuance of the Bonds), recording fees, title
insurance, rating agency fees, Trustee fees incurred in connection with the
issuance of the Bonds and the Trustee's acceptance fee and first year
administration fee, Accountant fees related to the issuance of the Bonds,
printing costs, costs incurred in connection with the public approval process
for the Bonds, and any other fees or costs deemed costs of issuance for purposes
of Section 147(g) of the Code.
"County" means the County of Maricopa, Arizona.
"Credit Facility" means any irrevocable transferable letter of credit,
insurance policy, guaranty or other agreement constituting a credit enhancement
or liquidity facility which is in a commercially reasonable form.
"Debt Service Coverage Ratio" means the ratio of Income Available For
Debt Service of the Company to Annual Debt Service.
"Debt Service Reserve Fund" means the fund by that name established
pursuant to Section 3.04.
"Debt Service Reserve Fund Requirement" means (a) for the Bonds, an
amount which is equal to the maximum Annual Debt Service on Outstanding Bonds in
the current or any future Fiscal Year and (b) for Parity Bonds secured by the
Debt Service Reserve Fund, the amounts required by Section 3.11(b)(2) hereof.
"Defeasance Obligations" means the non-callable Permitted Investments
defined in clauses (i) and (ii) of such definition.
"DEPOSITORY" MEANS The Depository Trust Company, New York, New York or
any successor depository designated pursuant to Section 3.01(e).
"Event of Bankruptcy" MEANS if (i) the Company shall commence a
voluntary case under the federal bankruptcy laws, or shall become insolvent or
unable to pay its debts as, they become due, or shall make an assignment for the
benefit of creditors, or shall apply for, consent to or acquiesce in the
appointment of, or taking possession by, a trustee, receiver, custodian or
similar official or agent for itself or any substantial pan of its Property;
(ii) a trustee, receiver, conservator, custodian or similar official or agent
shall be appointed for the Company or for any
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substantial part of its Property and such trustee or receiver shall not be
discharged within 90 days; or (iii) the Company shall have an order or decree
for relief in an involuntary case under the federal bankruptcy laws entered
against it, or a petition seeking reorganization, readjustment, arrangement,
composition, or other similar relief as to it under the federal bankruptcy laws
or any similar law for the relief of debtors shall be brought against it and
shall not be discharged within 90 days.
"Event of Default" means any one of the events set forth in subsection
6,01(a).
"Fiscal Year" means the fiscal year ending December 31 or any other
fiscal year designated from time to time in writing by the Company to the
Trustee for purposes of making historical calculations or determinations set
forth in the Agreement on a Fiscal Year basis, or for purposes of combinations
or consolidation of accounting information. With respect to any successor or
assignee of the Company whose actual fiscal year is different from that
designated above, the actual fiscal year of such successor or assignee which
ended within the Fiscal Year designated above shall be used.
"Funds," collectively, means the Bond Fund, the Refunding Fund, the
Project Fund and the Debt Service Reserve Fund.
"Governing Body" means, with respect to the Company, its board of
directors, board of trustees, or other board or group of individuals in which
the power to direct the management and policies of the Company are vested.
"Government Obligations" means (i) direct obligations (other than an
obligation subject to variation in principal repayment) of the United States of
America ("United States Treasury Obligations"), (ii) obligations fully and
unconditionally guaranteed as to timely payment of principal and interest by the
United States of America, (iii) obligations fully and unconditionally guaranteed
as to timely payment of principal and interest by any agency or instrumentality
of the United States of America when such obligations are backed by the full
faith and credit of the United States of America, or (iv) evidences of ownership
of proportionate interests in future interest and principal payments on
obligations described in clause (i) above held by a bank or trust company as
custodian, under which the owner of the investment is the real party in interest
and has the right to proceed directly and individually against the obligor and
the underlying government obligations are not available to any person claiming
through the custodian or to whom the custodian may be obligated.
"Government Restriction" means the occurrence of the following: (i)
changes in applicable laws or governmental regulations shall have occurred which
prevent, have prevented or will prevent the Company and all other investor-owned
water utilities under similar circumstances, from generating sufficient income
Available for Debt Service to comply with the particular requirement of the
financing document in question, (ii) the effect upon the Company and all other
such utilities under circumstances similar to the circumstances set forth in
clause (i) above shall have been confirmed by a signed Consultant's opinion or
report delivered to the Trustee, (iii) an Officer's Certificate shall have been
delivered to the Trustee stating that the Company has generated the highest
level of Income Available for Debt Service which, in the
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opinion of such officer, could reasonably be generated given the circumstances
set forth in clause (i) above, and (iv) there shall have been delivered to the
Trustee, if requested by the Trustee, an Opinion of Counsel as to any
conclusions of law supporting the opinion or report of the Consultant.
"Guaranty" shall mean a loan commitment or other financial obligation of
the Company which loan commitment or obligation guarantees in any manner,
whether directly or indirectly, any obligation of any other Person; provided,
however, that notwithstanding the foregoing, none of the following shall be
deemed to constitute a Guaranty: (a) the endorsement in the ordinary course of
business of negotiable instruments for deposit or collection, (b) rentals
payable in future years under leases, other than leases properly capitalized
under generally accepted accounting principles, and (c) any indemnification
agreement entered into by the Company in connection with surety bonds,
performance bonds, bid bonds, material bonds, labor bonds, stay bonds, appeal
bonds and other similar bonds, except to the extent that a surety bond requires
reimbursement of cash deposits by the Company. Nothing in this definition or
otherwise shall be construed to count a Guaranty more than once.
"Historic Test Period" means (i) the most recent Fiscal Year of the
Company, if audited financial statements with respect to such Fiscal Year are
available or (ii) if such audited financial statements are not available, the
most recent period for which such audited financial statements are available,
"Income Available for Debt Service" means, as to any period of time, net
income before depreciation, amortization and interest of the Company, as
determined in accordance with generally accepted accounting principles
consistently applied; provided, that no determination thereof shall take into
account (a) any gain or loss resulting from either the extinguishment of
Indebtedness or the sale, exchange, revaluation or other disposition of capital
assets or other long term assets not in the ordinary course of business, (b) all
items which under generally accepted accounting principles are considered
extraordinary items and which are substantially non-cash charges, and (c) the
net proceeds of insurance (other than proceeds of business interruption
insurance and casualty insurance, but only to the extent that the loss resulting
from the casualty is included in expenses for the applicable period of time) and
condemnation awards.
"Indebtedness" means all obligations for payments of principal and
interest with respect to money borrowed, incurred or assumed by the Company, all
Guaranties, and all purchase money mortgages, financing or capital leases,
installment purchase contracts or other similar instruments in the nature of a
borrowing by which the Company will be unconditionally obligated to pay: Nothing
in this definition or otherwise shall be construed to count any Indebtedness
more than once.
"Indemnified Party" means the Issuer, the members of its Board of
Directors, its officers, counsel, financial advisors and agents, the County, and
its Board of Supervisors and agents and the Trustee, its directors, officers.
agents, attorneys and employees (each of the foregoing is individually referred
to herein as an "Indemnified Party" and collectively are referred to herein as
the "Indemnified Parties").
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"Independent" means an individual who is not, or a firm no member,
stockholder, director, officer or employee of which is, an officer, member,
director or employee of the Company or any Affiliate.
"Insurance Consultant" means an Independent Person or firm appointed by
the Company, and satisfactory to the Trustee, who is qualified to survey risks
and to recommend insurance coverage for water furnishing facilities and services
and organizations engaged in like operations, has actuarial personnel
experienced in the area of insurance for which the Company is insuring and who
has a favorable national reputation for skill and experience in such surveys and
such recommendations.
"Interest Payment Date" means the first (1st) day of each June and
December commencing June 1, 1998, provided that, if such day is not a Business
Day, any payment due on such date may be made on the next Business Day without
additional interest and with the same force and effect as if made on the
specified date for such payment.
"Issuer" means The Industrial Development Authority of the County of
Maricopa, a nonprofit corporation designated a political subdivision of the
State incorporated with the approval of the County pursuant to the provisions of
the Constitution of the State and under Title 35, Chapter 5, Arizona Revised
Statutes, as amended.
"Laws and Regulations" shall have the meaning given in Section 5.19(x).
"Lien" means any mortgage, pledge, security interest, lien, judgment
lien or other material encumbrance on title, including, but not limited to, any
mortgage or pledge of, security interest in or lien or encumbrance on any
Property of the Company which secures any Indebtedness or any other obligation
of the Company, or which secures any obligation of any Person, excluding liens
applicable to Property in which the Company has only a leasehold interest
unless the lien secures Indebtedness of the Company.
"Moody's" means Moody's Investors Service, a corporation organized and
existing under the laws of the State of Delaware, its successors and assigns.
"Mortgage" means the Deed of Trust, dated as of December 1, 1997, from
the Company to Bank One, Arizona, NA, as trustee thereunder, with the Trustee as
beneficiary, as amended in accordance with its terms.
"Mortgaged Property" means the real property subject to the Mortgage.
"1985 Project" means the Company's water furnishing facilities financed
with proceeds of the Series 1985 Bonds and refinanced with the proceeds of the
Series 1997E Bonds, as further described in Schedule E attached hereto.
"1997 Project" means the Company's water furnishing facilities financed
with the proceeds of the Series 1997A Bonds, as further described in Schedule E.
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"Officer's Certificate" means a certificate signed by an Authorized
Officer, which if not otherwise specified herein may be an Authorized Officer of
the Issuer or the Company.
"Opinion of Bond Counsel" means an opinion of any Independent firm of
attorneys, of nationally recognized standing in matters pertaining to the
federal tax exemption of interest on bonds issued by municipalities, and duly
admitted to practice law before the highest court of any state of the United
States.
"Opinion of Counsel" means a written opinion of an Independent attorney
or firm of attorneys selected by the Authorized Officer of the Company and
(except as otherwise provided in this Agreement) may be counsel for the Issuer,
the Company or for the Trustee.
"Original Purchaser" means Banc One Capital Corporation.
"Outstanding," when used to modify the term "Bonds," refers to Bonds
issued under this Agreement, excluding: (i) Bonds which have been exchanged or
replaced, or delivered to the Trustee for credit against a sinking fund
installment; (ii) Bonds which have been paid, subject to Section 2.03 herein;
(iii) Bonds which have become due and for the payment of which moneys have been
duly provided to the Trustee, subject to Section 2.03 herein; and (iv) Bonds for
which there have been irrevocably set aside with the Trustee sufficient money or
Defeasance Obligations bearing interest at such rates and with such maturities
as will provide sufficient funds to pay the principal of, premium, if any, and
interest on such Bonds as provided in Section 2.03; provided, however, that if
any such Bonds are to be redeemed prior to maturity, the Issuer shall have taken
all action necessary to redeem such Bonds and notice of such redemption shall
have been duly mailed in accordance with this Agreement or irrevocable
instructions so to mail shall have been given to the Trustee and provided
further that if the Bonds have been paid by Ambac Assurance such Bonds shall
remain outstanding in accordance with Section 2.03 hereof; and when used to
modify other "Indebtedness," refers to Indebtedness which as of such date
remains unpaid except Indebtedness for the payment or redemption of which
sufficient moneys have been irrevocably deposited to such date in trust for the
holders of such Indebtedness (whether upon or prior to the maturity or
redemption date of any such Indebtedness), or which is deemed to have been paid
with moneys or securities, pursuant to the provisions of the documents securing
such Indebtedness; provided that if such Indebtedness is to be redeemed prior
to the maturity thereof, notice of such redemption shall have been given or
irrevocable instructions shall have been made therefor and provided further,
that the 1985 Bonds shall not be considered to be outstanding from and after the
issuance of the Bonds.
"Parity Bonds" means the Bonds and any other bonds issued by the Issuer
pursuant to Section 3.11 secured by the Collateral on a parity basis, as
provided hereunder, with the Bonds and any Additional Parity Indebtedness.
"Parity Debt" means, collectively, the Bonds, any Parity Bonds and any
other Additional Parity Indebtedness, so long as they remain Outstanding,
"Paying Agent" means Bank One, Arizona, NA, and any successor Paying
Agent designated from time to time pursuant to Section 3.14.
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"Permitted Encumbrance" means a Permitted Encumbrance as described in
Section 5.17.
"Permitted Investments" means any of the following:
(i) Cash (insured at all times by the Federal Deposit Insurance
Corporation or otherwise collateralized with obligations described in paragraph
(ii) below);
(ii) Direct obligations of (including obligations issued or held in book
entry form on the books of) the Department of the Treasury of the United States
of America;
(iii) Obligations of any of the following federal agencies, which
obligations represent the full faith and credit of the United States of America,
including:
- Export-Import Bank
- Farm Credit System Financial Assistance Corporation
- Rural Economic Community Development Administration
(formerly the Farmers Home Administration)
- General Services Administration
- U.S. Maritime Administration
- Small Business Administration
- Government National Mortgage Association (GNMA)
- U.S. Department of Housing & Urban Development
(PHA's)
- Federal Housing Administration
- Federal Financing Bank;
(iv) Direct obligations of any of the following federal agencies which
obligations are not fully guaranteed by the full faith and credit of the United
States of America:
- Senior debt obligations rated "AAA" by Moody's
and "AAA" by S&P issued by the Federal National
Mortgage Association (FNMA) or Federal Home Loan
Mortgage Corporation (FHLMC)
- Obligations of the Resolution Funding Corporation
(REFCORP)
- Senior debt obligations of the Federal Home Loan Bank
System
- Senior debt obligations of other Government Sponsored
Agencies approved by Atabac Assurance;
(v) U.S. dollar denominated deposit accounts, federal funds and bankers'
acceptances with domestic commercial banks which have a rating on their short
term certificates of deposit on the date of purchase of "A-1" or "A-1 +" by S&P
and "P-1" by Moody's and maturing no more than 360 days after the date of
purchase. (Ratings on holding companies are not considered as the rating of the
bank.);
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(vi) Commercial paper which is rated at the time of purchase in
the single highest classification, "A-1 +" by S&P and "P-1" by Moody's
and which matures not more than 270 days after the date of purchase;
(vii) Investments in a money market fund rated "AAAm" or
"AAAm-G" or better by S&P, including funds for which the Trustee or its
affiliates act as advisor or custodian;
(viii) Pre-refunded Municipal Obligations defined as follows:
Any bonds or other obligations of any state of the United States of
America or of any agency, instrumentality or local governmental unit of
any such state which are not callable at the option of the obligor prior
to maturity or as to which irrevocable instructions have been given by
the obligor to call on the date specified in the notice; and
(A) which are rated, based on an irrevocable escrow
account or fund (the "escrow"), in the highest rating category
of S&P and Moody's or any successors thereto; or
(B) (i) which are fully secured as to principal and
interest and redemption premium, if any, by an escrow consisting
only of cash or obligations described in paragraph (ii) above,
which escrow may be applied only to the payment of such
principal of and interest and redemption premium, if any, on
such bonds or other obligations on the maturity date or dates
thereof or the specified redemption date or dates pursuant to
such irrevocable instructions, as appropriate, and (ii) which
escrow is sufficient, as verified by a nationally recognized
independent certified public accountant, to pay principal of and
interest and redemption premium, if any, on the bonds or other
obligations described in this paragraph on the maturity DATE or
dates specified in the irrevocable instructions referred to
above, as appropriate;
(ix) General obligations of states of the United States of
America with a rating of at least "A2/A" or higher by both Moody's and
S&P;
(x) Investment agreements approved in writing by Ambac Assurance
and supported by appropriate opinions of counsel with notice to S&P; and
(xi) Other forms of investments (including repurchase
agreements) approved in writing' by Ambac Assurance with notice to S&P.
"Person" means any natural person, firm, joint venture, association,
partnership (including without limitation, general and limited partnerships),
society, estate, trust, corporation. limited liability company, public body,
agency or political subdivision thereof or any other similar entity.
"project Fund" means the fund by that name established pursuant to
Section 3.07.
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"Property" means any and all land, leasehold interests, buildings,
machinery, equipment, hardware, and inventory of the Company wherever located
and whether now or hereafter acquired, and any and all rights, titles and
interests in and to any and all property whether real or personal, tangible or
intangible, and wherever situated and whether now or hereafter acquired.
"Property, Plant and Equipment" means all Property of the Company which
is property, plant and equipment under generally accepted accounting principles.
"Rebate Amount" means as of each Computation Date for the Bonds, an
amount equal to the sum of (i) plus (ii), computed in accordance with Section
14$(f) of the Code, where;
(i) is the excess of
(a) the aggregate amount earned from the date of
issuance of the Bonds (or during the computation period in case
of a variable yield issue) on all nonpurpose investments in
which gross proceeds of the Bonds are invested (other than
investments attributable to an excess described in this clause
(i)) including any gain or deducting any loss from disposition
of nonpurpose investments, over
(b) the amount that would have been earned if those
nonpurpose investments (other than amounts attributable to an
excess described in this clause (i)) had been invested at a rate
equal to the yield on the Bonds; and
(ii) is any income attributable to the excess described in
clause (i) of this definition.
"Rebate Consultant" means an Independent certified public accounting
firm or other qualified Independent person or firm with knowledge of or
experience in giving advice with respect to the provisions of Section 148(f) of
the Code, designated by a Company Officer's Certificate and reasonably
acceptable to the Trustee, and, initially, shall mean Arthur Andersen LLP..
"Rebate Fund" means the fund by that name established pursuant to
Section 3.05.
"Rebate Instructions" means the letter of instructions set forth as an
exhibit to the Tax Compliance Certificate of the Issuer dated the date of the
initial delivery of the Bonds.
"Refunding Fund" means the fund by that name established pursuant to
Section 3.06.
"Register" means the books kept and maintained by the Trustee, as
registrar, for the registration and transfer of Bonds.
"Related Bond Documents" means the Bond Purchase Agreement and any other
document relating to the Bonds, the security therefor or the federal tax-exempt
status thereof.
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"Release" shall have the meaning given in Section 5.19(a).
"S&P" means Standard & Poor's Rating Services, a division of The
McGraw-Hill Companies. Inc., a corporation organized and existing under the laws
of the State of New York, its successors and assigns.
"Series 1997A Bonds" means the $7,600,000 The Industrial Development
Authority of the County of Maricopa, Water System Improvement Revenue Bonds
(Chaparral City Water Company Project), Series 1997A, dated as of December 1,
1997.
"Series 19978 Bonds" means the $1,320,000 The Industrial Development
Authority of the County of Maricopa, Water System Refunding Revenue Bonds
(Chaparral City Water Company Project), Series 1997B, dated as of December 1,
1997.
"State" means the State of Arizona.
"Supplemental Agreement" means any indenture, loan agreement, financing
document or other agreement amending or supplementing the terms of this
Agreement or providing for the issuance or securing of Parity Bonds or
Additional Parity Indebtedness.
"Tax Compliance Certificate" means, collectively, the separate tax
compliance certificates dated the date of original issuance of the Bonds and
signed by the Company, the Original Purchaser, the Bond Insurer, and, in
reliance on the certificates of the foregoing, the Issuer, all regarding
'certain tax matters with respect to the Bonds.
"Trustee" means Bank One, Arizona, NA and any successor Trustee
designated pursuant to Section 7.04.
"1985 Trustee" means The Valley National Bank of Arizona, now known as
Bank One, Arizona, NA.
"Value" means (i) when used in connection with Property of the Company,
the cost basis of such property, net of accumulated depreciation, as it is
carried on the books of the Company and in conformity with generally accepted
accounting principles consistently applied; provided, however that, at the
option of the Company's Authorized Officer, the value of any item of real
property of the Company may be determined using an MAI appraisal dated no more
than one year from the date as of which such real property's value is used for
purposes of a test under this Agreement, filed with the Trustee, and (ii) when
used in connection with Permitted Investments, the value of such investments
determined as follows:
(1) as to investments, the value determined by a nationally
recognized pricing service that is used by the Trustee to reasonably
determine the value of investments held in its capacity as a trustee;
(2) as to certificates of deposit and bankers acceptances: the
face amount thereof, plus accrued interest; and
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(3) as to any investment not specified above; the value thereof
established by prior agreement between the Company, the Trustee and
Ambac Assurance.
"Variable Rate Indebtedness" means any Indebtedness that bears interest
at a variable, adjustable or floating rate.
Words importing persons include firms, associations and corporations,
and the singular and plural forms of words shall be deemed interchangeable
wherever appropriate.
Section 1.03. Content of Certificates and Opinions. Any certificate or
opinion made or given by an officer of the Company may be based, insofar as it
relates to legal, accounting or other specialized matters, upon a certificate or
opinion of or representation by counsel, an Accountant or a Consultant, unless
such officer has actual knowledge that the certificate, opinion or
representation with respect to the matters upon which such certificate or
statement may be based, as aforesaid, is erroneous. Any such certificate,
opinion or representation made or given by counsel, such Accountant or
Consultant may be based, insofar as it relates to factual matters (with respect
to which information is in the possession of the Company's Authorized Officer)
upon an Officer's Certificate or any certificate of or representation by an
officer of the Company, unless such counsel, Accountant or Consultant has actual
knowledge that the certificate or opinion or representation with respect to the
matters upon which such person's certificate or opinion or representation may be
based, as aforesaid, is erroneous. The same officer of the Company, or the same
counsel, Accountant or Consultant, as the case may be, need not certify to all
of the matters required to be certified under any provision of this Agreement,
but different officers, counsel, Accountants or Consultants may certify to
different matters, respectively.
Section 1.04. Accounting Principles. Where the character or amount of
any asset, liability or item of revenue or expense required to be determined, or
any consolidation, combination or other accounting computation is required to be
made, for the purposes of this Agreement or any agreement, document or
certificate executed and delivered in connection with or pursuant to this
Agreement, this shall be done in accordance with generally accepted accounting
principles at the time in effect, to the extent applicable, except where such
principles are inconsistent with the requirements of this Agreement.
Where the application of generally accepted accounting principles shall
require that with respect to any Fiscal Year of the Company, only a portion of
the Company's income or expenses, or both, incurred during the Fiscal Year be
included in any consolidation, combination or other accounting computation
required to be made for purposes of this Agreement or any agreement, document,
or certificate executed and delivered in connection with or pursuant to this
Agreement, then for all such purposes the amount of such income and expenses so
included shall be annualized by being multiplied by 365 (or 366) as appropriate)
and divided by the number of days in the Fiscal Year of the Company determined
under generally accepted accounting principles.
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As applied to any enterprise of a type with respect to which particular
accounting principles shall, from time to time, have been generally adapted or
modified, the term "generally accepted accounting principles" shall include such
adaptations or modifications,
Section 1.05. Action by Issuer and Company. Except as otherwise
expressly provided herein, for all purposes of this Agreement, the Authorized
Officer shall be authorized to act upon behalf of the Issuer, and the Authorized
Officer shall be authorized to act upon behalf of the Company.
(End of Article I)
ARTICLE II
ASSIGNMENT AND PLEDGE OF SECURITY
Section 2.01. Assignment and Pledge of the Issuer and Company.
(a) The Issuer does hereby:
(i) transfer and absolutely and irrevocably assign to the
Trustee, any right, title and interest of the Issuer in the Bond Fund, Refunding
Fund, the Project Fund and the Debt Service Reserve Fund, including all accounts
in those Funds, all moneys deposited therein and the investment earnings on such
moneys and any securities in which moneys in those Funds are invested and the
proceeds derived therefrom (except for any investment income that is required to
be rebated to the United States under the Code); and
(ii) further does hereby grant a security interest in, assign,
pledge and set over to the Trustee for the securing of the performance of the
obligations of the issuer hereinafter set forth: (a) the rights, title and
interest of the Issuer under this Agreement, except for the Issuer's rights to
(1) inspect books and records, (2) give or receive notices, approvals, consents,
requests, and other communications, (3) receive payment or reimbursement for
expenses, (4) receive reimbursement for a portion of its annual administrative
expenses, (5) immunity and limitation of liability, (6) indemnification from
liability by the Company, and (7) security for the Company's indemnification
obligation, including, but not limited to, the rights established under Sections
7.01, 8.01, 8.02, 8.03 and 8.05 of this Agreement, (b) all of the Issuer's
rights, whether currently existing or hereafter acquired, to receive and enforce
repayment of its loan of the proceeds of the Bonds and to enforce payment of
the Bonds and all proceeds of such rights and loan and (c) all revenues to be
received from the Company, but not including funds received by the Issuer for
its own use, whether as administrative fees, reimbursement, or indemnification,
and the rights thereto; and
(iii) subject to the provisions of this Agreement and, in
particular, the foregoing absolute and irrevocable assignment to the Trustee of
any right, title and interest of the Issuer in the Funds, any and all other real
or personal property of every name and nature from time to time hereafter by
delivery or by writing of any kind assigned, pledged or transferred, as and
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for additional security hereunder by the Issuer or by anyone in its behalf, or
with its written consent, to the Trustee, which is hereby authorized to receive
any and all such property at any and all times and to hold and apply the same
subject to the terms hereof.
(b) The Company joins in the pledge of, and grant of a security interest
in, such Funds and investments to the extent of its interest therein.
(c) The transfer, assignment, pledge and security interest described in
this Section 2.01 is for the benefit of the Bond Insurer, the Bondholders and
the holders of subsequent Parity Bonds; provided, however, that funds and
investments held in the Refunding Fund and Rebate Fund established under Section
3.06 and Section 3,05, respectively, shall not be pledged to the Bonds and shall
be applied solely as provided in said Section 3.06 and Section 3.05,
respectively; and provided further that the Debt Service Reserve Fund shall
secure subsequent Parity Bonds only if the requirements of Section 3.11(b)(2)
are satisfied.
Section 2.02. Further Assurance. The Issuer covenants that it will do,
execute, acknowledge, and deliver or cause to be done, executed, acknowledged,
and delivered by the parties within its control, such instruments supplemental
hereto and such further acts, instruments, and transfers as the Trustee may
reasonably require for the better assuring, transferring, mortgaging, conveying,
pledging, assigning, and confirming unto the Trustee, the Issuer's interest in
and to all interests, revenues, proceeds, and receipts pledged hereby to the
payment of the principal of, premium, if any, and interest on the Bonds in the
manner and to the extent contemplated herein. The Issuer shall be under no
obligation to prepare, record, or file any such instruments or transfers.
Section 2.03. Defeasance. When the Parity Bonds have been paid or
redeemed in full as provided in this Agreement, or after there have been
deposited with the Trustee sufficient moneys, or Defeasance Obligations in such
principal amounts, bearing interest at such rates and with such maturities as
will provide, as determined by a nationally recognized Accountant's verification
(which verification shall be addressed and delivered to the Issuer, the Trustee,
the Bond Insurer and the Company), sufficient funds to pay the principal of,
premium, if any, whether at maturity or upon earlier redemption, and interest on
the Parity Bonds as the same shall become due and payable, and when all the
rights hereunder of the Issuer, the Bondholders and Trustee have been provided
for, and all other obligations secured hereby have been paid in full, upon
written notice from the Company to the Issuer, the Bondholders and the Trustee,
the Bondholders shall cease to be entitled to any benefit or security under this
Agreement except the right to receive payment of the funds deposited and held
for payment and other rights which by their nature cannot be satisfied prior to
or simultaneously with termination of the lien hereof, the security interests
created by this Agreement (except in such funds and investment) shall terminate,
this Agreement shall cease and become null and void with respect to the Parity
Bonds (except for those provisions surviving by reason of Section 2.04 hereof),
and the Issuer and the Trustee shall execute and deliver (but the Issuer need
not prepare) such instruments as may be necessary to discharge the lien and
security interests created under this Agreement; provided, however, that if any
such Parity Bonds are to be redeemed prior to the maturity thereof, the Company
shall have taken all action necessary to redeem such Parity Bonds and notice of
such redemption shall have been duly given in accordance with this Agreement or
irrevocable
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instructions so to give shall have been given to the Trustee; and provided
further that the provisions of this Agreement relating to securing or for the
benefit of Parity Debt, including, but not limited to, the sections herein
creating the rights, duties and covenants of the Company relating to Parity Debt
or the rights and duties of the Trustee with respect to defaults and remedies,
shall survive such defeasance but shall terminate with respect to any series of
Parity Bonds on the date on which such series of Parity Bonds is no longer
Outstanding; and provided further, with respect to the Bonds, the Bond Insurer
must consent to any forward supply contract in any defeasance escrow for the
Bonds.
Upon such defeasance, the funds and investments required to pay or
redeem the Parity Bonds in full shall be irrevocably set aside for the purpose
and moneys held for defeasance shall be invested only as provided above in this
section, provided that other Defeasance Obligations may be substituted for
Defeasance Obligations deposited with the Trustee if the Trustee, the Bond
Insurer and the Issuer receive (i) verification from nationally recognized
Accountants which firm shall be satisfactory to the Trustee that the principal
and interest becoming due on investments held by the Trustee after such
transaction and any other moneys available therefor will provide the Trustee
with moneys which at all times will be sufficient to pay the principal of,
premium, if any, and interest on the Parity Bonds as the same shall become due
and payable, and (ii) an Opinion of Bond Counsel to the effect that such
transaction is in compliance with this Agreement and will not adversely affect
the exclusion from gross income under Section 103 of the Code of interest paid
on the Parity Bonds.
Any moneys held by the Trustee in accordance with the provisions of this
Section may be invested by the Trustee only in Defeasance Obligations having
maturity dates, or redemption dates, which, at the option of the holder of those
obligations, shall be not later than the date or dates at which moneys will be
required for the purposes described above. To the extent that any income or
interest earned by, or increment to, the investments held under this Section is
determined from time to time by the Trustee to be in excess of the amount
required to be held by the Trustee for the purposes of this Section, that
income, interest or increment shall be transferred at the time of that
determination in the manner provided herein for transfers of amounts remaining
in the Funds.
If any Parity Bonds are deemed to be paid and discharged pursuant to
this Section and will not mature or be redeemed within 90 days, then, within 15
days after those Parity Bonds are so deemed to be paid and discharged, the
Trustee shall cause a written notice to be given to each Holder at the close of
business on the date on which the Parity Bonds are deemed to be paid and
discharged at its address as it appears on the Register on that date on which
the Parity Bonds are deemed to be paid and discharged. The notice shall: (i)
state the numbers of the Parity Bonds deemed to be paid and discharged, or shall
state that all Parity Bonds are deemed to be paid and discharged; (ii) set forth
a description of the obligations held as described above; (iii) state whether
any Parity Bonds will be called for redemption prior to their scheduled maturity
or their redemption pursuant to mandatory redemption, including without
limitation, the mandatory sinking fund requirements; and (iv) if any Parity
Bonds will be so called for redemption, specify the date or dates on which those
Parity Bonds are to be called for redemption pursuant to a notice of redemption
given or irrevocable provision made for that notice pursuant to this Section.
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Any funds or property held by the Trustee solely for the benefit of the
Parity Bonds defeased and not required for payment or redemption of the parity
Bonds in full or for payment of rebate obligations pursuant to Section 3.05
shall, after satisfaction of all the accrued rights of the Issuer, the
Bondholders and the Trustee, be distributed pursuant to the written instructions
of the Company's Authorized Officer upon such notification, if any, as the
Issuer or the Trustee may reasonably require and upon receipt by the Issuer and
the Trustee of an Opinion of Bond Counsel that such distribution will not
adversely affect the exclusion from gross income under Section 103 of the Code
of interest paid on the Parity Bonds.
Notwithstanding anything herein to the contrary, in the event that the
principal and/or interest due on the Bonds shall be paid by Ambac Assurance
pursuant to the Bond Insurance Policy, the Bonds shall remain Outstanding for
all purposes, not be defeased or otherwise satisfied and not be considered paid
by the Issuer, and the assignment and pledge of the trust estate created
hereunder and all covenants, agreements and other obligations of the Issuer and
the Company, respectively, to such Bondholders shall continue to exist and shall
run to the benefit of Ambac Assurance, and Arribac Assurance shall be subrogated
to the rights of such Bondholders.
Section 2.04. Survival of Certain Provisions, Notwithstanding the
payment in full of the Parity Bonds and the termination or expiration of this
Agreement, any provisions hereof which relate to (a) the maturity of Parity
Bonds; (b) the interest payments and dates thereof; (c) the optional and
mandatory redemption provisions; (d) the credits against the sinking fund
installments; (e) the exchange, transfer and registration of Parity Bonds; (f)
the replacement of mutilated; destroyed, lost or stolen Parity Bonds; (g) the
safekeeping and cancellation of Parity Bonds; (h) the nonpresentment of Parity
Bonds; (i) the holding of moneys in trust; j) the Rebate Fund and the payment of
Rebate Amounts to the United States and other provisions which relate to
exclusion of interest on the Parity Bonds from gross income for federal income
tax purposes; (k) the repayments to the Company from the Funds; (1) the
indemnification of the Issuer or the Trustee; (m) the limited liability of the
Issuer as herein provided; (n) the limitation on recourse against the Issuer or
any incorporator, director, officer, counsel, financial advisor or agent of the
Issuer as herein provided; (o) the Issuer's rights to inspect books and records,
to give or receive notices, approvals, consents, requests and other
communications and to be paid or reimbursed for fees and expenses; (p) the
Issuer's rights established pursuant to Sections 8.01, 8.02, 8.03 and 8.05; (q)
the Trustee's rights established pursuant to Sections 7.02 and 8.05; (r) the
duties of the Trustee in connection with all of the foregoing; (s) the
interpretation of this Agreement; (t) the governing law; (u) the forum for
resolving disputes; and (v) the Issuer's right to rely on facts or certificates
shall remain in effect and shall be binding upon the Issuer, the Company, the
Trustee, the Paying Agents and the Holders, notwithstanding the release,
discharge and satisfaction of this Agreement. The provisions of this Article
shall survive the release, discharge and satisfaction of this Agreement,
(End of Article II)
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ARTICLE III
THE BONDS AND THE BORROWING
Section 3.01. The Bonds
(a) Details of the Bonds. The Bonds of each series shall be issued in
fully registered form and shall be numbered from R-1 sequentially in the order
of their issuance, or in any other manner deemed appropriate by the Trustee. The
Bonds shall initially be issued in book entry form and Beneficial Owners may
acquire beneficial interests in denominations of Five Thousand Dollars ($5,000)
and integral multiples of $5,000. The Bonds shall be dated December 1, 1997, and
shall bear interest from the Interest Payment Date to which interest has been
paid or for which provision has been made or, if no interest has been paid or
duly provided for, from December 1, 1997. The interest on the Bonds until they
come due shall be payable on June 1 and December 1 of each year, beginning on
June 1, 1998.
The Bonds shall be signed on behalf of the Issuer by the manual or
facsimile signature of an Authorized Officer. The authenticating certificate of
the Trustee shall be manually signed on behalf of the Trustee.
In case any officer whose facsimile signature shall appear on any Bond
shall cease to be such officer before the delivery thereof, such facsimile
signature shall nevertheless be valid and sufficient for all purposes as if he
or she had remained in office until after such delivery.
The Series 1997A Bonds shall mature on December 1 of each of the years
in the amounts and shall bear interest at the rates per annum as follows:
Year Principal Amount Interest Rate
---- ---------------- -------------
1998 $ 160,000 4.00%
1999 170,000 4.10
2000 180,000 4.20
2001 185,000 4.30
2002 195,000 4.40
2003 200,000 4.50
2004 210,000 4.60
2005 220,000 4.70
2006 230,000 4.75
2007 240,000 4.85
2011 1,000,000 5.20
2022 4,610,000 5.40
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The Series 19978 Bonds shall mature on December 1 of each of the years
in the amounts and shall bear interest at the rates per annum as follows:
Year Principal Amount Interest Rate
---- ---------------- -------------
2006 $ 305,000 4.65%
2022 1,015,000 5.30
The interest on the Bonds shall be computed on the basis of a 360-day
year consisting of twelve 30-day months.
The Bonds are subject to optional redemption, extraordinary optional
redemption and mandatory redemption through sinking fund installments, all as
described in this Agreement and in the form of Bonds.
No Bond shall be valid or become obligatory for any purpose or shall be
entitled to any security or benefit under this Agreement unless and until a
certificate of authentication, substantially in the forms set forth in Exhibit I
to this Agreement, shall have been signed by the Trustee. The authentication by
the Trustee upon any Bond shall be conclusive evidence that the Bond so
authenticated has been duly authenticated and delivered hereunder and is
entitled to the security and benefit of this Agreement. The certificate of the
Trustee may be executed by any person authorized by the Trustee, but it shall
not be necessary that the same authorized person sign the certificates of
authentication on all of the Bonds. In authenticating the Bonds, the Trustee
shall add the actual date of its authentication of Bonds.
Additional details of the Bonds shall be as set forth in the forms of
Bonds, as attached hereto as Exhibit I.
(b) Conditions to Issuance of Bonds. Prior to delivery by the Trustee of
any Bond, there shall have been received by the Trustee:
(1) A request and authorization to the Trustee on behalf of the
Issuer, signed by an Authorized Officer, to authenticate and deliver the
Bonds to, or on the order of, the Original Purchaser, upon payment to
the Trustee in immediately available funds of the amount specified
therein (including without limitation, any accrued interest), which
amount shall be deposited as provided in Sections 3.02 hereof.
(2) A copy of the resolution adopted by the Board of Directors
of the Issuer authorizing, inter alia, the execution and delivery of
this Agreement and the issuance of the Bonds, certified by the
Secretary/Treasurer or Assistant Secretary/Treasurer.
(3) A copy of the resolution adopted by the Board of Directors
of the Company authorizing, inter alia, the execution and delivery of
this Agreement.
(4) A duly executed counterpart of this Agreement.
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(5) The executed Bond Insurance Policy.
(6) The opinion of Squire, Sanders & Dempsey L.L.P., as Bond
Counsel.
(c) Replacement Bonds. Replacement Bonds shall be issued pursuant to
applicable law as a result of the destruction, loss or mutilation of the Bonds.
The costs of a replacement shall be paid or reimbursed by the Bondholder, who
shall indemnify the Issuer, the Trustee and the Company against all liability
and expense in connection therewith.
(d) Transfer and Exchange of Bonds. The Bonds will be transferred in
the bond register kept by the Trustee upon presentation thereof with a written
instrument of transfer in form satisfactory to the Trustee (a form of such
instrument being set out in Exhibit I and duly executed by the Owner or its
authorized representative, and no transfer shall be effective as to the Issuer
or the Trustee unless shown in such register and noted thereon with a record of
payments.
The Issuer, the Company, and the Trustee may treat the person in whose
name a Bond is registered as the absolute owner thereof for all purposes and
shall not be affected by any notice to the contrary.
Any Bond may be subdivided into and exchanged (at the expense of the
Company) for two (2) or more Bonds of the same series upon surrender thereof at
the corporate trust office of the Trustee, whereupon the Issuer and the Trustee
shall cause new Bonds to be issued. No Bond shall be subdivided by any such
exchange, however, so as to produce any Bond having immediately after such
exchange an outstanding principal amount of less than $5,000.
The Trustee shall not be required to make any exchange or transfer of
any Bond (i) if such Bond (or any portion thereof) has been selected for
redemption, (ii) during the ten (10) days preceding any date fixed for selection
for redemption if such bond (or any portion thereof) is eligible to be selected
for redemption or (iii) during the period of fifteen (15) days preceding any
Interest Payment Date.
At the request herewith of the Company, the Trustee is hereby appointed
bond registrar and transfer agent and accepts such appointment. The Trustee
shall keep a bond register in accordance with law showing at least (i) the names
and addresses of Bondholders, and (ii) the dates on which transfers of ownership
are registered. The Trustee shall also keep a record of redemption of the Bonds
showing the amounts, the dates on which Bonds are redeemed and the registered
owner bf the Bond at the time of redemption. The Company shall be obligated to
pay all costs of the Trustee incurred in connection with any exchange or the
transfer of Bonds, including, without limitation, the cost of preparation of a
new Bond or Bonds.
(e) Provisions for Book-Entry system. The Bonds will be subject to a
Book-Entry System of ownership and transfer, except as provided in (iii) below.
The general provisions for effecting such Book-Entry System are as follows:
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(i) At the request herewith of the Company, the Issuer hereby
designates The Depository Trust Company, New York, New York, as the
initial Depository hereunder.
(ii) Notwithstanding the provisions regarding exchange and
transfer of Bonds under (d) above the Bonds shall initially be evidenced
by one typewritten certificate for each maturity, in an amount equal to
the aggregate principal amount thereof. The Bonds so initially delivered
shall be registered in the name of "Cede & Co." as nominee for The
Depository Trust Company. The Bonds may not thereafter be transferred or
exchanged on the registration books of the Trustee as bond registrar
except:
(A) to any successor Depository designated pursuant to (iii)
below;
(B) to any successor nominee designated by a Depository; or
(C) if the Company shall elect to discontinue the Book-Entry
System pursuant to (iii) below, the Authorized Officer of the Company
will cause the Trustee to authenticate and deliver replacement Bonds in
fully registered form in authorized denominations in the names of the
Beneficial Owners or their nominees as certified by the Depository, at
the expense of the Company; thereafter the provisions of (d) above
regarding registration, transfer and exchange of Bonds shall apply.
(iii) The Trustee, pursuant to a request in an Officer's
Certificate for the removal or replacement of the Depository, and upon
30 days' notice to the Depository, may remove or replace the Depository.
The Trustee agrees to remove or replace the Depository at any time
pursuant to an Officer's Certificate. No action by the Issuer shall be
required to effect such a removal or replacement. The Depository may
determine not to continue to act as Depository for the Bonds upon 30
days written notice to the Trustee.
If the use of the Book Entry System is discontinued, then after
the Trustee has made provision for notification of the Beneficial Owners
of their book entry interests in the Bonds by appropriate notice to the
then Depository, the Issuer and the Trustee shall permit withdrawal of
the Bonds from the Depository, and authenticate and deliver Bond
certificates in fully registered form and in denominations authorized by
this Section to the assignees of the Depository or its nominee. Such
withdrawal, authentication and delivery shall be at the cost and expense
(including costs of printing or otherwise preparing, and delivering,
such replacement Bond certificates) of the Company.
(iv) So long as the Book-Entry System is used for the Bonds, the
Trustee will give any notice of redemption or any other notices required
to be given to Owners of Bonds only to the Depository or its nominee
registered as the Owner thereof. Any failure of the Depository to advise
any of its participants, or of any participant to notify the Beneficial
Owner, of any such notice and its content or effect will not affect the
validity of the redemption of the Bonds called for redemption or of any
other action premised on such notice. Neither the Company nor the
Trustee nor the Issuer is responsible or liable for the failure of the
Depository or any participant thereof to make
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any payment or give any notice to a Beneficial Owner in respect of the
Bonds or any error or delay relating thereto.
(v) Notwithstanding any other provision of this Agreement or the
Bonds to the contrary, so long as the Bonds are subject to a Book-Entry
System, it shall not be necessary for the Registered Owner to present
his Bond for payment of sinking fund installments. The sinking fund
installments may be noted on books kept by the Trustee and the
Depository for such purpose and the Bonds shall be tendered to the
Trustee at their maturity.
Section 3.02. Application of Bond Proceeds and Company Funds.
(a) All proceeds of the sale of the Bonds ($8,837,720.76, which is the
aggregate face amount of the Bonds less $95,000 in underwriter's discount (from
the Series 1997A Bonds only) plus $12,720.76 of accrued interest) shall be paid
to the Trustee against receipt therefor. Such proceeds shall be deposited or
transferred by the Trustee in the following manner:
(i) To the Bond Fund, $12,720.76, representing accrued interest
on the Bonds from their date to the date of delivery of the Bonds.
(ii) To the Debt Service Reserve Fund, $557,070 from, proceeds of
the Series 1997A Bonds and $98,690 from the Company.
(iii) To the Project Fund, $228,658.57 from the proceeds of the
Series 1997A Bonds, to be transferred on the date of original issuance
of the Bonds to the Bond Insurer for the premium for the Bond Insurance
Policy.
(iv) To the Refunding Fund, $1,320,000, representing the
principal amount of the Series 1997B Bonds, and $15,197.10 from the
Company, to be transferred on the date of original issuance of the Bonds
to the 1985 Trustee for purposes of reimbursing the issuer of the letter
of credit supporting the 1985 Bonds for certain amounts utilized to
refund the 1985 Bonds on December 11, 1997.
(v) To the Project Fund, $6,719,271.43, representing the balance
of the principal amount of the Series 1997A Bonds.
(b) Company agrees to deposit with the Trustee, prior to the original
delivery of the Bonds, the sum of $283,267.44 in immediately available funds.
Section 3.03. Bond Fund.
(a) Establishment and Purpose. A Bond Fund is hereby established with
the Trustee and moneys shall be deposited therein as provided in this Agreement.
The Trustee acknowledges that it holds the Bond Fund as agent for the
Bondholders as their interests appear. The moneys in the Bond Fund and any
investments held as part of such Fund shall be held in trust and, except as
otherwise provided in this Agreement or any Supplemental Agreement, shall
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be applied by the Trustee solely to pay principal (including sinking fund
installments) of, premium, if any, and interest on the Bonds. Moneys transferred
to the Bond Fund from the Debt Service Reserve Fund shall be applied only to
payment of principal (including sinking fund installments) of, premium, if any,
and interest on the Bonds and any Parity Bonds secured by the Debt Service
Reserve Fund as permitted by Section 3.11(b)(2).
(b) Unclaimed Moneys. In case any moneys deposited with the Trustee for
the payment of the principal (including sinking fund installments) of, premium,
if any, or interest on any Bond remain unclaimed six months prior to the date
when such moneys would escheat under applicable law, the Trustee shall so notify
the Issuer and the Company in writing, and upon receipt of an Officer's
Certificate so directing shall pay over to the Company the amount so deposited
and thereupon the Trustee and the Issuer shall be released from any further
liability with respect to the payment of such principal, premium or interest and
the Owner of such Bond shall be entitled (subject to any applicable statute of
limitations) to look only to the Company as an unsecured creditor for the
payment thereof.
Section 3.04. Debt Service Reserve Fund.
(a) A Debt Service Reserve Fund is hereby established with the Trustee
and moneys shall be deposited therein as provided in this Agreement. On the
date of issuance of the Bonds, the Company shall cause to be deposited therein
moneys or Permitted Investments in an amount which, together with the proceeds
of the Series 1997A Bonds deposited thereto pursuant to Section 3.02, shall be
at least equal to the Debt Service Reserve Fund Requirement. The moneys in the
Debt Service Reserve Fund and any investments held as a part of such Fund shall
be held in trust and, except as otherwise provided herein, shall be applied by
the Trustee solely to the payment of the principal (including sinking fund
installments) of and interest on the Bonds and any Parity Bonds secured by the
Debt Service Reserve Fund.
(b) If on the third Business Day prior to any Interest Payment Date the
amount in the Bond Fund is less than the amount then required to pay the
principal (including sinking fund installments) and interest then due on such
Interest Payment Date on the Bonds and Parity Bonds secured thereby, the Trustee
shall apply the amount in the Debt Service Reserve Fund to the extent necessary
to meet the deficiency. The Company shall remain liable for any required sums
which it has not paid to the Bond Fund and any subsequent payment thereof shall
be used to restore the funds so applied.
On any date on which a payment is due to the Rebate Fund pursuant to
subsection 3.05, the Trustee shall transfer from the Debt Service Reserve Fund
to the Rebate Fund an amount after any required transfer to the Bond Fund (to
the extent available) equal to such payment.
(c) If the Value of the Permitted Investments in the Debt Service
Reserve Fund on June 2 or December 2 of any year (less any payment made
therefrom on that day pursuant to subsection 3.04(b)) exceeds the Debt Service
Reserve Fund Requirement, the Trustee shall transfer the excess to the Bond Fund
to be applied to the payment of interest or principal on the Bonds and Parity
Bonds secured thereby on the next Interest Payment Date.
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(d) If and to the extent that the Value of the Permitted Investments in
the Debt Service Reserve Fund on any Valuation Date (as defined below) is less
than the Debt Service Reserve Fund Requirement as a result of a payment made
pursuant to subsection 3.04(b), the Company shall on or before the first day of
each of the twelve succeeding months deposit into the Debt Service Reserve Fund
an amount which, together with amounts deposited in prior months pursuant to
this Section 3.04(d), shall be at least equal to 1/12th of the deficiency in the
Debt Service Reserve Fund Requirement multiplied by the number of months elapsed
since such valuation Date.
The Trustee shall determine the Value of the Debt Service Reserve Fund
on each December 2 and on each June 2 (each, a "Valuation Date"). If and to the
extent that the Value of the Permitted Investments in the Debt Service Reserve
Fund on any Valuation Date is less than 90% of the Debt Service Reserve Fund
Requirement (except as a result of a payment made pursuant to subsection
3.04(b)), the Trustee shall provide written notice to the Company and the
Company shall on or before the first day of the sixth succeeding month deposit
into the Debt Service Reserve Fund an amount which, together with amounts on
deposit therein, shall be equal to the Debt Service Reserve Fund Requirement.
(e) On the terms and conditions specified in this subsection (e), all or
any portion of the cash or investments held is the Debt Service Reserve Fund, as
directed by an Officer's Certificate of the Company with consent of the Bond
Insurer, may be withdrawn and used for any purpose permitted under the Act and
replaced with a Credit Facility, or an existing Credit Facility in the Debt
Service Reserve Fund may be replaced with a substitute Credit Facility, in the
event the Company provides a Credit Facility from an insurer or bank which
complies with the requirements of Schedule C; provided, however, that the
issuer of such Credit Facility shall not have a senior security interest in any
of the Funds; and provided further that any such transfer involving cash or
investments constituting original proceeds of any Parity Bonds shall require an
Opinion of Bond Counsel addressed to the Issuer, the Bond Insurer and the
Trustee that such transfer will not adversely affect the exclusion from gross
income under Section 103 of the Code of interest paid on the Parity Bonds and
such transfer is permitted under the Act.
The Company shall obtain a substitute Credit Facility within six months
of the rating on an existing issuer of such Credit Facility being reduced below
"A+" or "A1" by S&P or Moody's, respectively, and shall, at least three months
prior to the expiration of a Credit Facility, obtain a substitute Credit
Facility or deposit cash into the Debt Service Reserve Fund to satisfy the Debt
Service Reserve Requirement. If a Credit Facility has been drawn down, any
monies available to repay the issuer of such Credit Facility must first be used
to reinstate the Credit Facility.
If at any time the Company shall deliver to the Issuer, the Trustee and
the Bond Insurer (i) a Credit Facility together with approval thereof by the
Bond Insurer, (ii) an Opinion of Counsel stating that the delivery of such
Credit Facility to the Trustee is authorized under this Agreement, complies with
the terms thereof and will not result in interest on the Bonds being included in
gross income for federal income tax purposes, and (iii) written evidence from
S&P, if the Parity Bonds are rated by S&P, and from Moody's, if the Parity Bonds
are rated by Moody's, to the effect that such rating agency has reviewed the
proposed substitute Credit
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Facility, and that (x) the issuance of the Credit Facility to the Trustee or (y)
if a Credit Facility is then in effect, the substitution of the proposed Credit
Facility for the Credit Facility then in effect, will not, by itself, result in
a reduction or withdrawal of its rating on the Parity Bonds, then the Trustee
shall accept such substitute Credit Facility and promptly surrender the
previously held Credit Facility, if any, to the issuer thereof for cancellation.
(f) So long as no Event of Default exists under this Agreement, the
Company may make withdrawals of money from the Debt Service Reserve Fund in
accordance with the provisions of this subsection (f), Upon receipt by the
Trustee of an Officer's Certificate of the Company not fewer than fifteen
Business Days prior to an Interest Payment Date, the Trustee shall transfer
moneys from the Debt Service Reserve Fund to the Bond Fund in the amount which
is directed therein; provided, that any amounts of money withdrawn or
transferred pursuant hereto shall not exceed the aggregate of (i) the amount of
money the Company shall deposit concurrently with that withdrawal or request
into the Debt Service Reserve Fund, and (ii) amounts of any investment income
credited to the Debt Service Reserve Fund pursuant hereto, to the extent that
the Trustee has not previously withdrawn or transferred moneys from the Debt
Service Reserve Fund on account of such investment income. Notwithstanding
anything to the contrary in this subsection (f), no withdrawal shall be made
pursuant to this subsection (f) if, after such withdrawal, the Value of the Debt
Service Reserve Fund would be less than the Debt Service Reserve Requirement.
(g) The Trustee shall give notice to the Bond Insurer within two
Business Days after knowledge of any draw upon the Debt Service Reserve Fund
other than (i) withdrawals of amounts in excess of the Debt Service Reserve
Requirement and (ii) withdrawals in connection with a refunding of the Bonds.
Section 3.05. Rebate Fund. There is hereby created and ordered
maintained as a separate deposit account in the custody of the Trustee a fund to
be designated as the Rebate Fund. Money and investments in the Rebate Fund shall
not be used for the payment of debt service on the Parity Bonds and any
provision hereof to the contrary notwithstanding, amounts credited to the Rebate
Fund shall be free and clear of any lien hereunder. Moneys and investments in
the Rebate Fund are not included within the trust estate executed in the
granting clauses hereof and shall be invested pursuant to the procedures and in
the manner provided for investment of moneys in the Funds.
Unless otherwise provided in Subsequent Rebate Instructions (defined
below), in accordance with the Rebate Instructions provided as Attachment A-1 to
the Tax Compliance Certificate, promptly after the end of each Computation Date
(which shall be done annually or such longer interval permitted in accordance
with Section 5.04 hereof and when otherwise required hereby, including the
payment in full of all Outstanding Bonds), the Authorized Officer of the Company
shall engage, and furnish information to, the Rebate Consultant to calculate the
Rebate Amount as of the end of the relevant computation period or the date of
such payment in full and shall provide to the Trustee copies of such
calculations. Upon the occurrence of an Event of Default and at the request of
the Trustee, the Rebate Consultant shall calculate the Rebate Amount as of the
date requested by the Trustee and provide such calculation to the Trustee on or
before the date so requested. In either event, the Trustee shall then notify the
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Authorized Officer of the Company in writing of the amount then on deposit in
the applicable account in the Rebate Fund.
If the Rebate Consultant fails to make the calculation of Rebate Amount
by the 30th day after the end of each Computation Date, including the date of
payment in full of the Bonds, the Trustee shall retain an Independent certified
public accounting firm or other qualified Independent Person, at the expense of
the Company, to make or cause to be made such calculation and shall provide to
such Authorized Officer copies of such calculations.
If the amount then on deposit in the Rebate Fund is in excess of the
Rebate Amount as computed by the Rebate Consultant, the Trustee shall forthwith
pay that excess amount to the Company. If the amount then on deposit in the
Rebate Fund is less than the Rebate Amount, the Company shall, within five days
after receipt of the aforesaid notice from the Trustee, pay to the Trustee for
deposit in the Rebate Fund an amount sufficient to cause the Rebate Fund to
contain an amount equal to the Rebate Amount.
If at any time when the Trustee is required to retain or pay a Rebate
Consultant, there is an insufficient amount of money in the Rebate Fund to
retain or pay for the fees and expenses of the Rebate Consultant, the Trustee,
after delivering to the Company a demand for payment of an amount sufficient to
pay the Rebate Consultant and the Company having failed to do so promptly, shall
withdraw, with the prior consent of the Bond Insurer, from the Debt Service
Reserve Fund, and second from any other fund established hereunder, such amount
as may be needed to pay for the fees and expenses of the Rebate Consultant. If
at any time when the Trustee is required to withdraw money from the Rebate Fund
to make a payment to the United States of America the amount held by the Trustee
in the Rebate Fund is insufficient to permit such withdrawal and payment, then
the Trustee, after delivering a demand for such deficiency to the Company, shall
withdraw, first, from the Debt Service Reserve Fund, and second, from any other
fund established hereunder and transfer the amount so withdrawn in each case to
the Rebate Fund in such amounts as may be needed to make the amount held for the
credit of the Rebate Fund, after such transfers, equal to the amount required to
be withdrawn and paid to the United States of America.
This Section shall supersede all other sections of this Agreement, to
the end that the interest on the Bonds shall not be included in gross income for
federal income tax purposes as a result of the inadequacy at any time of the
Rebate Fund, unless the total amount held by the Trustee in all Funds
established hereunder is insufficient, and no money for such purpose is provided
by the Company.
Within 60 days after the end of the first Computation Date (which shall
not be later than the end of the fifth Bond Year) and every Computation Date
thereafter, the Trustee, acting on behalf of the Issuer, shall pay to the United
States in accordance with Section 148(f) of the Code from the moneys then on
deposit in the Rebate Fund an amount equal to 90% (or such greater percentage
not in excess of 100% as the Company may direct the Trustee to pay) of the
Rebate Amount earned during the relevant computation period.
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Within 60 days after the payment in full of all Outstanding Bonds, the
Trustee shall pay to the United States in accordance with Section 148(f) of the
Code from the moneys then on deposit in the Rebate Fund an amount equal to 100%
of the Rebate Amount earned during the relevant computation period. Any moneys
remaining in the Rebate Fund following such payment shall be paid to the
Company.
The Trustee shall comply with any written instructions relating to this
Section 3.05 furnished after the issuance of the Bonds from the Company and
accompanied by an Opinion of Bond Counsel addressed to the Issuer and the
Trustee to the effect that compliance with such instructions will not adversely
affect any exclusion of interest on any of the Bonds from gross income for
federal income tax purposes (the "Subsequent Rebate Instructions"), even if such
Instructions are different from or inconsistent with this Section. The Company,
the Issuer, and the Trustee shall be entitled to rely conclusively on the
calculations made pursuant to this Section and any Subsequent Rebate
Instructions and shall not be responsible for any loss or damage resulting from
any action taken or omitted to be taken in reliance upon those calculations.
The Trustee shall obtain and keep records of the computations made
pursuant to this Section and all original source documents and other information
necessary to, or from, such computations for a period ending six years after the
last of the Bonds is retired.
The Trustee shall keep and make available to the Company such records
concerning the investments of the gross proceeds of the Bonds and the
investments of earnings from those investments as may be required by the Rebate
Consultant in order to enable the Rebate Consultant to make the aforesaid
computations as are required under Section 148(f) of the Code. The Company shall
obtain and keep such records of the computations made pursuant to this Section
as are required under Section 148(f) of the Code.
The Trustee shall establish in the Rebate Fund and any other Fund such
accounts and subaccounts as it deems desirable in order to assist it in
determining applicable accounting for tax purposes and record keeping activities
in connection therewith.
All computations and determinations pursuant to this Section shall be
made in accordance with Section 148(f) of the Code and the Rebate Instructions.
Notwithstanding any provision of this Agreement to the contrary, the
undertaking of the Issuer to pay money to the United States shall be limited to
the obligation to cause, when required by Code Section 148, funds held in the
Rebate Fund to be paid to the United States.
Section 3.06. Refunding Fund. A Refunding Fund is hereby established to
be held by the Trustee and proceeds of the Series 1997B Bonds shall be deposited
therein as provided in Section 3.02. The moneys in the Refunding Fund shall be
applied solely to reimburse certain amounts to the issuer of the letter of
credit supporting the 1985 Bonds, which letter of credit will be drawn on to
redeem the 1985 Bonds on December 11, 1997.
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Section 3.07. Project Fund.
(a) The Project Fund is hereby established to be held by the Trustee and
proceeds of the Series 1997A Bonds shall be deposited therein as provided in
Section 3.02 hereof. Any moneys received by the Trustee from any other source
for the payment of costs of the 1997 Project also shall be deposited to the
credit of the Project Fund. The moneys in the Project Fund shall be held by the
Trustee and shall pursuant to Section 3.09 be applied to the payment of the
costs of the 1997 Project.
(b) The Authorized Officer of the Company may revise the definition of
the 1997 Project by filing with the Issuer, the Trustee and the Bond Insurer;
(i) a revised description of the 1997 Project and an Opinion of
Bond Counsel that such revised 1997 Project constitutes a "project"
within the meaning of the Act and was included within the project
described in the TEFRA notice published pursuant to Section 147(f) of
the Code; and
(ii) a certificate of such Authorized Officer that the average
reasonably expected economic life of the facilities being financed by
the Series 1997A Bonds (after giving effect to such change or
disbursement) is not less than 5/6ths of the average maturity of the
Series 1997A Bonds or, if such certificate is not presented with the
changes or disbursement or at the request of the Trustee, an Opinion of
Bond Counsel addressed to the Issuer, the Trustee and the Bond Insurer
to the effect that such change or disbursement will not cause the
interest on the Series 1997A Bonds to be included in the gross income
of the Holders for federal income tax purposes.
(c) Moneys in the Project Fund may be invested in Permitted Investments
pursuant to Section 3.15 hereof.
Section 3.08. Costs of 1997 Project. For the purposes of this Agreement,
the costs of the 1997 Project shall embrace the costs of acquiring,
constructing, furnishing, renovating, remodeling, improving and equipping the
1997 Project as generally described in Schedule E hereto. Without intending to
limit restrict any proper definition of costs under the Act, costs may include
the following:
(a) obligations incurred for labor, materials and services and to
contractors, builders and others in connection with the acquisition,
construction and installation of the 1997 Project, for machinery, equipment and
furnishings, for necessary water lines and connections, utilities and
landscaping, for the restoration or relocation of any property damaged or
destroyed in connection with such construction and installation, for the removal
or relocation of any structures, and for the clearing of lands and further
including such utilities and improvements as the Company determines to be
reasonably necessary in connection with the 1997 Project;
(b) the cost of acquiring by purchase, if such purchase shall be deemed
expedient, such other lands, property, rights, rights of way, easements,
franchises and other interests as may be deemed necessary or convenient by the
Company for the construction and installation
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of the 1997 Project and options and partial payments thereon, the cost of
demolishing or removing any buildings or structures on lands so acquired,
including the cost of acquiring any lands to which such buildings or structures
may be moved and the amount of any damages incident to or consequent upon the
acquisition, construction and installation of the 1997 Project;
(c) Capitalized Interest and the reasonable fees of the Trustee and any
other Paying Agent for the payment of such Capitalized Interest;
(d) the reasonable fees and expenses of the Trustee and Paying Agent,
for its services prior to and during the construction, premiums on builder's
risk insurance (if any) in connection with the 1997 Project during construction;
(e) the cost of borings and other preliminary investigations to
determine foundation or other conditions, expenses necessary or incident to
determining the feasibility or practicability of constructing and installing the
1997 Project and fees and expenses of engineers, architects and management and
other consultants for making studies, surveys and estimates of costs and of
revenues and other estimates, fees and expenses of engineers and architects for
preparing plans and specifications and supervising construction, as well as for
the performance of all other duties of engineers and architects set forth herein
and the fees and expenses of construction managers or project supervisors, all
in relation to the acquisition, construction, improvement, installation and
equipping of the 1997 Project and the issuance of Bonds therefor;
(f) legal expenses and fees, and all other items of expense not
specified elsewhere in this Section and incident to the acquisition,
construction, remodeling, furnishing and equipping of the 1997 Project, the
financing thereof and the acquisition of lands, property, rights, rights of way,
easements, franchises and interests in or relating to lands, including
abstracts of title, title insurance, title guaranty, cost of surveys and other
expenses in connection with such acquisition, and expenses of administration
properly chargeable to the acquisition, construction, remodeling, furnishing and
equipping of the 1997 Project;
(g) any obligation or expense hereafter incurred or paid by the Company
for any of the foregoing purposes;
(h) any other costs which may, pursuant to the Act, be paid from the
Project Find;
(i) payment or reimbursement of Costs of Issuance of the Bonds upon
receipt by the Trustee of a written requisition in substantially the form of
Schedule B, signed by an Authorized Officer of the company; and
(j) on the date of original issuance of the Bonds, the bond insurance
premium payable to the Bond Insurer for the issuance of the Bond Insurance
Policy.
Section 3.09. Disbursements from and Records of the Project Fund. (a)
Except with respect to the disbursement to be made pursuant to subparagraph (j)
of Section 3.08, any disbursements from the Project Fund shall be made by the
Trustee only upon the written order of the Authorized Officer of the Company.
Except with respect to disbursements made pursuant
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to subparagraph (e) of this Section 3.09, each such written order shall be in
the form attached as Schedule B hereto consecutively numbered.
(b) Except with respect to disbursements made pursuant to subparagraph
(e) of this Section 3.09, any disbursement for any item not described in the
description of the 1997 Project attached hereto as Schedule E as of the original
delivery of this Agreement shall be accompanied by items described in Section
3.07(b).
(c) Except with respect to disbursements made pursuant to subparagraph
(e) of this Section 3.09, in the case of any contract providing for the
retention of a portion of the contract price, the Officer's Certificate shall
request disbursement from the Project Fund of only the net amount remaining
after deduction of any such portion, and when the amount of any such retention
is due and payable, then such retention may be paid upon such a written order
from the Project Fund.
(d) Except with respect to disbursements made pursuant to subparagraph
(e) of this Section 3.09, all requisitions, certificates and opinions received
by the Trustee, as required in this Article as conditions of payments from the
Project Find, may be relied upon by the Trustee, and shall be retained by the
Trustee until the 60th month following certification of the substantial
completion of the 1997 Project pursuant to Section 3.10, subject at all
reasonable times to examination by the Issuer, and the Holders of not less than
25 percent (25%) in aggregate principal amount of the Parity Bonds then
Outstanding.
(e) In the case of payment of Costs of Issuance and subject to the
limitations set forth in Section 5.03 hereof, the Trustee shall disburse from
the Project Fund, to each payee set forth on Schedule D hereto, moneys to pay
Costs of Issuance upon receipt of an invoice (a copy of each such invoice shall
also be provided by the Trustee to the Company) provided that the amount of each
payment shall not exceed the amount for each payee set forth in Schedule D
hereto, unless otherwise directed and agreed to by the Authorized Officer of the
Company, and provided further the amount to be paid to the Bond Insurer for the
premium for the Bond Insurance Policy shall be released by the Trustee without
the need for such an invoice pursuant to the provisions of Section 3.02 hereof.
(f) Prior to any disbursement from the Project Fund, other than
disbursements made pursuant to Sections 3.08(i) and 3.08(j), the Company shall
deliver, or cause to be delivered, an opinion reasonably satisfactory in form
and substance to Ambac Assurance addressed to Ambac Assurance relating to
certain matters under the laws of the State of Arizona set forth in paragraphs 1
through 7 of the opinion dated December 11, 1997, delivered by Erik Eriksson,
Managing Counsel of the Company, to the extent such matters are not covered by
such opinion under Arizona law as a result of the third to last paragraph of
such opinion; provided that, if such opinion is not rendered by January 15, 1998
the Company shall pay to Ambac Assurance an additional premium with respect to
the Bond Insurance Policy in the amount of $134,083,46.
Section 3.10. Substantial Completion. When in its determination the 1997
Project shall be substantially completed and ready for use and operation, the
Authorized Officer of the Company shall submit to the Issuer and the Trustee a
signed certificate stating that (i) the
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acquisition, construction, furnishing, renovating, remodeling, improving and
equipping of the 1997 Project have been substantially completed and all costs
then due and payable in connection therewith have been paid, (ii) such
acquisition, construction, furnishing, renovating, remodeling, improving and
equipping have been accomplished in such a manner as to conform in all material
respects with all applicable zoning, planning, building, environmental and other
regulations of all governmental authorities having jurisdiction, including,
without limitation, the Arizona Corporation Commission, and (iii) such
acquisition, construction, furnishing, renovating, remodeling, improving and
equipping have been accomplished in all material respects to its satisfaction so
as to permit efficient operation of the 1997 Project as a "project." Said
certificate also shall specify the date by which the foregoing three events had
occurred. Notwithstanding the foregoing, such certificate shall state that it is
given without prejudice to any rights of or against third parties which then
exist or subsequently may come into being.
The balance in the Project Fund not reserved by the Company for the
payment of any remaining part of the costs of the 1997 Project shall be
transferred by the Trustee first to the Debt Service Reserve Fund to the extent
necessary to make the balance in the Debt Service Reserve Fund equal to the Debt
Service Reserve Fund Requirement, then used upon an Officer's Certificate for
payment of costs of any extension or improvement to the property of the Company,
which costs were incurred subsequent to original delivery of the Bonds; provided
that any such use shall be accompanied by the items described in Section 3.07(b)
hereof. To the extent use of such balance is not so used within 60 days of
delivery of the certificate described in the first paragraph this Section, the
balance shall then be transferred to the Bond Fund.
Section 3.11. Issuance of Parity Debt. Although the Issuer shall be
under no obligation to issue Parity Bonds, Parity Bonds may be issued by the
Issuer and Additional Parity Indebtedness may be issued or incurred by the
Company for the purpose of financing or refinancing projects to be owned or used
by the Company, or for refunding of obligations previously issued, whether by
the Issuer or another entity, or for any other use or purpose permitted by
applicable law. Any Parity Bonds issued shall comply with the Issuer's
procedures in effect at the time of issuance of such Parity Bonds. Parity Debt,
to the extent applicable, shall bear such date or dates, interest rate or rates,
maturities, redemption dates, redemption prices and other terms as shall be
specified in the resolution or documents authorizing the issuance or incurrence
thereof, or as provided in a Supplemental Agreement, which Supplemental
Agreement shall not include the Issuer as a party if (i) the Parity Debt is not
Parity Bonds and (ii) no provision of this Agreement which affects the Issuer is
amended except with its written consent.
Parity Debt may be issued subsequent to the issuance of the Bonds only
if:
(a) the Trustee receives an Officer's Certificate that the
Indebtedness incurred by the Company in connection with such Parity
Debt does not violate the covenants with respect to Indebtedness set
forth in Section 5.13;
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(b) the Trustee receives the following:
(1) in the case of Parity Bonds, (i) executed counterparts of a
Supplemental Agreement providing for the payment of and terms of the
Parity Bonds, and assigning to the Trustee the Issuer's rights under the
Supplemental Agreement, which Supplemental Agreement may amend this
Agreement to the extent permitted by Section 11.01(a)(3);
(2) in the case of Parity Bonds that the Company intends to be
secured by the Debt Service Reserve Fund, as set forth in the related
Supplemental Agreement, the Trustee shall hold in the Debt Service
Reserve Fund upon the issuance of such Parity Debt, an amount of money,
Permitted Investments or Credit Facility, which collectively are
sufficient to make the Value of the Debt Service Reserve Fund at least
equal to the lesser of (A) 10% of the original principal amount of such
Parity Bends plus the maximum Annual Debt Service on the Bonds or (B)
the maximum Annual Debt Service on the Outstanding Bonds and such Parity
Bonds in the current or any future Fiscal Year.
(3) In the case of Parity Bonds, a copy or copies duly certified
by an Authorized Officer of the Issuer, of the resolution or resolutions
of the Issuer authorizing the execution and delivery on behalf of the
Issuer of such Supplemental Agreement, any bond purchase agreement and
the issuance of the Parity Bonds and the principal amount, interest
rates, maturities, redemption provisions and other matters with respect
to the Parity Bonds;
(4) A copy or copies of resolutions duly certified by an
Authorized Officer of the Company authorizing the execution and delivery
of the Supplemental Agreement, any bond purchase agreement, and the
issuance of the Parity Debt;
(5) An Opinion of Counsel in form and substance acceptable to the
Trustee substantially to the effect that (i) any Supplemental Agreement
has been properly authorized and is or creates a valid, binding
obligation of the Company, enforceable in accordance with its terms
(subject to creditor's rights generally and other customary
qualifications) and (ii) the issuance of Parity Debt have been duly
authorized;
(8) In the case of Parity Bonds, an Opinion of Bond Counsel
substantially to the effect that (i) the Parity Bonds constitute legal,
valid and binding special limited obligations of the Issuer, and (ii)
the issuance of Parity Debt is in conformity with the requirements of
this Agreement;
(7) An Officer's Certificate that upon the issuance and delivery
of the Parity Debt and the application of its proceeds, no Event of
Default, or event which with the giving of notice or passage of time or
both would become an Event of Default, will exist under this Agreement;
(8) An Opinion of Counsel in form and substance acceptable to the
Trustee (and in the case of Parity Bonds, the Issuer) substantially to
the effect that the documents
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submitted to the Trustee in connection with the issuance of the Parity
Debt comply with the requirements of this Agreement;
(9) An Opinion of Bond Counsel substantially to the effect that
the issuance of the Parity Debt will not result in the interest of any
Bond then Outstanding becoming included in gross income for federal
income tax purposes; and
(10) Such other certificates, documents, instruments and
opinions relating to the issuance of the Parity Debt or the security
therefor as the Trustee (and in the case of Parity Bonds, the Issuer)
may reasonably request, addressing, but not limited to compliance with
the Act, tax exemption (the extent applicable), and compliance with
applicable laws;
(c) the instrument evidencing such Parity Debt (which may be a
Supplemental Agreement or other document satisfactory to the Trustee)
shall include, to the reasonable satisfaction of the Trustee, (a) a
cross default provision with this Agreement, (b) provisions under which
the Trustee is advised as to whom the Trustee may conclusively treat as
the Owners of such Parity Debt for purposes of this Agreement, and (c)
provisions (which may be contained in a separate agreement to which the
Trustee is a party) to the effect that the Holders of the Parity Debt
(or a representative of their interests who shall be acceptable to the
Trustee) shall agree to be bound by those provisions of this Agreement
relating to the Collateral and enforcement thereof, including rights and
obligations of the Trustee relating thereto, including, but not limited
to, such provisions contained in Sections 3.16, Articles V, VI, VII and
XI and in the Mortgage; provided, however, the Trustee shall not be
obligated to assume additional duties or incur additional expenses or
liabilities under such instrument except upon such terms and conditions
as may be acceptable to the Trustee; and
(d) the Company shall provide to the Trustee and the Issuer, as
necessary, direction to take such actions (including amending or
supplementing this Agreement and any other collateral agreement or debt
instrument entitled to be paid from the proceeds of such Collateral
document) and the Company, the Trustee and the Issuer, if necessary,
shall execute and deliver, and the Company and the Trustee shall file
and record, such instruments of security as are required by this
Agreement, the instrument evidencing the Parity Debt, or by law, or as
the Company, the Trustee or Opinion of Counsel determines to be
necessary or appropriate, to grant to or otherwise secure for the
holders of the Parity Debt a security interest in or mortgage lien on
(as applicable) the Collateral securing the Parity Debt so that the
Holders of Parity Debt shall be entitled to be paid from the proceeds of
such Collateral on a parity (subject to Permitted Encumbrances and other
intervening Liens) with that of all other holders of Parity Debt; and
the Trustee may rely upon an Opinion of Counsel that such actions and
instruments are permitted under this Agreement.
Any Supplemental Agreement shall provide for the creation of separate
funds and accounts and other security to be maintained for such Parity Debt.
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If the Trustee shall determine that all the foregoing conditions have
been satisfied, it shall certify in writing to the Company that the proposed
indebtedness is Parity Debt for purposes of this Agreement, and upon such
certification, such Indebtedness shall be so deemed. In making this
determination the Trustee may rely upon an Opinion of Counsel.
Within 10 days following the incurrence of any Parity Debt, the Company
shall file with the Trustee conformed copies of all documents and instruments
supporting or evidencing such Parity Debt.
The Company may, but shall not be obligated to, provide a credit
enhancement for one or more issues of Parity Debt or one or more maturities
within one or more issues of Parity Debt. Credit enhancement provided for one or
more issues of Parity Debt may but need not extend to the Bonds or a maturity
thereof or to any other issue, or maturity within any other issue, of Parity
Debt.
Parity Debt may, but need not, be issued in a manner that the interest
thereon will be excludable from gross income for federal income tax purposes.
Section 3.12. Payments by the Company.
(a) Payments of Debt Service and Fund Requirements. The payments made by
the Company shall be applied in the following offer of priority:
(i) The Company shall pay or cause to be paid to the Trustee for
deposit in the Bond Fund on or before the fourth business day preceding
each Interest Payment Date, (i) commencing prior to the June 1, 1998
Interest Payment Date, not less than one half of the amount necessary to
pay the principal (including sinking fund installments) of and premium,
if any, coming due on the next payment date on the Bonds (whether by
stated maturity, redemption or otherwise), and (ii) commencing prior to
June 1, 1998, not less than the amount necessary to pay the interest
then coming due on the next Interest Payment Date on the Bonds, less the
amount, if any, then held in the Bond Fund and available to pay the
same. The Company may make payments to the Bond Fund earlier than
required by this section, but such payments shall not affect the accrual
of interest except to the extent that Bonds are redeemed.
(ii) The Company shall pay to the Trustee for deposit in the
Rebate Fund the amounts required by Section 3.05 at the times required
thereby ("Rebate Payments").
(iii) The Company shall pay to the Trustee for deposit in the
Debt Service Reserve Fund the amounts required by Section 3.04 at the
times required thereby.
(iv) At any time when any principal of the Bonds is overdue, the
Company shall also have a continuing obligation to pay to the Trustee
for deposit in the Bond Fund an amount equal to interest on the overdue
principal (including sinking fund installments). Redemption premiums
shall not bear interest.
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(v) Notwithstanding anything herein to the contrary, the Company
shall provide to the Trustee sufficient funds to pay all principal and
interest on the Bonds, when and as due, whether or not provided for in
the prior paragraphs.
The Company hereby acknowledges and agrees that payments made by the
Bond Insurer for principal of and interest on the Bonds do not discharge the
Company's responsibility to pay such principal and interest.
(b) Additional Payments. The Company shall make the following payments
("Additional Payments") within 30 days after demand:
(i) To the Issuer, reimbursement for any and all costs,
reasonable expenses and liabilities paid or incurred by the Issuer,
including, but not limited to, reasonable fees and disbursements of
counsel and financial advisors which relate directly or indirectly to
the 1997 Project or are in satisfaction of any obligations of the
Company to the Issuer hereunder which are not performed in accordance
with the terms hereof by the Company;
(ii) To the Issuer, reimbursement for or prepayment of any and
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 and agents, including, but not limited to, reasonable fees
and disbursements of counsel and financial advisors, and requested by
the Company or required by this Agreement or by the Act in connection
with the Issuer's rights and obligations hereunder;
(iii) the fees and expenses of the Rebate Consultant;
(iv) all attorneys' fees and disbursements or indemnity payments
required under Section 5.20 or Article VIII hereof;
(v) a fee to the Issuer in an annual amount not in excess of
0.1% of the original principal amount of the Bonds for the purpose of
defraying a portion of the Issuer's administrative expenses, with such
obligation to be invoiced by the Issuer on a quarterly, semi-annual, or
annual basis in the Issuer's sole discretion and continuing while any
portion of the Bonds are outstanding; provided that the Borrower shall
notify the Issuer if the Borrower's payment under this item would
violate any applicable law, including, without limitation, any
applicable law relative to arbitrage;
(vi) To the Trustee and the Paying Agent the reasonable fees,
charges and expenses of the Trustee and Paying Agent under this
Agreement, as well as reimbursement for any and all reasonable costs,
expenses (including, without limitation, reasonable attorneys' fees)
and liabilities paid or incurred by the Trustee or Paying Agent in
satisfaction of any obligations of the Company hereunder which are not
performed in accordance with the terms hereof by the Company; and
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(vii) To the Trustee and the Paying Agent, all reasonable costs
and expenses, whether ordinary or extraordinary (including, without
limitation, reasonable attorneys' fees) incurred in the preparation,
negotiation, execution, interpretation and administration of this
Agreement, any amendments to any of the foregoing, as well as all costs
and expenses (including, without limitation, reasonable attorneys' fees)
related to or in respect of the Trustee's and/or any Bondholder's
efforts to collect and/or enforce any of the Trustee's and/or such
Bondholders' rights and remedies hereunder (whether or not legal action
is instituted in connection with such efforts).
Section 3,13. Redemption of the Bonds. The Bonds shall be subject to
redemption in denominations of $5,000 or multiples thereof prior to maturity
under the circumstances, in the manner and subject to the conditions provided in
this section and in the form of Bonds. Whenever Bonds of a series are called for
redemption, the accrued interest on that series shall become due on the
redemption date.
If less than all of the Bonds of a series are to be called for optional
or extraordinary optional redemption, the Bonds to be redeemed shall be redeemed
in the maturities designated in an Officer's Certificate, and if less than an
entire maturity is redeemed, whether by mandatory, optional or extraordinary
optional redemption, the Bonds to be redeemed within such maturity will be
selected by the Trustee by lot or in any customary manner as determined by the
Trustee.
(a) Mandatory Redemption from Sinking Fund Installments.
(i) The Series 1997A Bonds maturing on December 1, 2011 shall be
redeemed at their principal amounts without premium, on each December 1,
commencing December 1, 2008, in each of the years and in the amounts as follows:
Year Principal Amount
---- ----------------
2008 $255,000
2009 265,000
2010 280,000
2011* 200,000
* final maturity
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The Series 1997A Bonds maturing on December 1, 2022
shall be redeemed at their principal amounts without premium, on each December
1, commencing December 1, 2011, in each of the years and in the amounts as
follows:
Year Principal Amount
---- ----------------
2011 $ 95,000
2012 310,000
2013 330,000
2014 345,000
2015 365,000
2016 385,000
2017 405,000
2018 425,000
2019 450,000
2020 475,000
2021 500,000
2022* 525,000
* final maturity
(ii) The Series 1997B Bonds maturing on December 1, 2006 shall be
redeemed at their principal amounts without premium, on each December 1,
commencing December 1, 1998, in each of the years and in the amounts as follows:
Year Principal Amount
---- ----------------
1998 $30,000
1999 30,000
2000 30,000
2001 30,000
2002 35,000
2003 35,000
2004 35,000
2005 40,000
2006* 40,000
* final maturity
The Series 1997B Bonds maturing on December 1, 2022 shall be
redeemed at their principal amounts without premium, on each December 1,
commencing December 1, 2007, in each of the years and in the amounts as follows:
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Year Principal Amount
---- ----------------
2007 $40,000
2008 45,000
2009 45,000
2010 50,000
2011 50,000
2012 55,000
2013 60,000
2014 60,000
2015 65,000
2016 65,000
2017 70,000
2018 75,000
2019 80,000
2020 80,000
2021 85,000
2022* 90,000
* final maturity
In lieu of redeeming Bonds pursuant to this Section 3.13(a) the Trustee
may, at the written request of the Company, use such funds otherwise available
hereunder for redemption of Bonds to purchase Bonds then subject to mandatory
sinking fund redemption in the open market at a price not exceeding par plus
accrued interest, such Bonds to be delivered to the Trustee for the purpose of
cancellation. The Company may deliver to the Trustee any Bond then subject to
mandatory sinking fund redemption for cancellation. It is understood that in the
case of any such purchase of Bonds or any such Bonds so delivered, the Issuer
and the Company shall receive credit against its required mandatory sinking fund
payments in the manner specified in a certificate of the Company or, if no
certificate is delivered, in the inverse order thereof.
In the event of a partial redemption of Bonds within a maturity, whether
through optional redemption or extraordinary optional redemption, the amount of
future sinking fund redemptions with respect to such maturity will be reduced as
specified in a Company Officer's Certificate to take into account such partial
redemption.
(b) Optional Redemption. Each series of the Bonds may be redeemed by the
Trustee on behalf of the Issuer at the times and prices as provided in the form
of Bond, at the option of the Company upon written notice given by the
Authorized Officer of the Company to the Trustee at least 30 days before mailing
of the notice of redemption required under subsection (f)(i).
(c) Extraordinary Optional Redemption. If proceeds derived from
insurance or condemnation awards for damage, destruction or taking of any single
item of property of the Company exceeds $50,000, then the Company may apply such
proceeds to the redemption of
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Bonds Outstanding in whole or pro rata between series in part, at any time on
the earliest practicable date after receipt by the Trustee of an Officer's
Certificate for which notice of redemption can practicably be given, at a
redemption price equal to 100% of the principal amount of the Bonds redeemed,
plus accrued interest to the redemption date, without premium.
(d) Payment of Accrued Interest. Whenever Bonds are called for
redemption, the accrued interest thereon shall become due on the redemption
date.
(e) Application of Moneys for Redemption. Notwithstanding any other
provisions of this Agreement, if at any time the amounts held for the Parity
Bonds in the Bond Fund and the Debt Service Reserve Fund are sufficient to pay
the principal or redemption price of all Outstanding Parity Bonds and the
interest accruing to such Parity Bonds to maturity or the next date of
redemption when such Parity Bonds are redeemable pursuant to this Section 3.13,
the Trustee shall so notify the Issuer and the Company. Upon receipt of such
notice, the Company may request the Trustee to apply such amounts to pay or
redeem all such Outstanding Parity Bonds, as the case may be, on the next date
when such Parity Bonds are redeemable pursuant to Section 3.13(b). The Trustee
shall, upon receipt of such notice, proceed to pay or redeem all such
Outstanding Parity Bonds in the manner provided by this Section 3.13, and shall
transfer to the Bond Fund from the Debt Service Reserve Fund such amounts as are
needed in connection therewith.
(f) Notice of Redemption.
(i) The Trustee shall cause notice of any redemption of Bonds
hereunder to be (A) mailed at the expense of the Company to the Holders
of all Bonds to be redeemed at the registered addresses appearing in
the Register kept for such purpose pursuant to Section 3.01 hereof, and
(B) transmitted electronically to the Depository and to one or more
national information services such as Financial Information, Inc.'s
Financial Daily Called Bond Service, Kenny Information Service's Called
Bond Service and Moody's Investors Service, Inc. Municipal and
Government; provided, however, failure to deliver notice as described
in (i)(B) shall not affect the validity of the redemption of any Bond.
Each such notice shall (1) be mailed no more than 45 nor fewer than 30
calendar days prior to the redemption date, (2) identify the Bonds to
be redeemed (specifying the CUSIP numbers, if any, assigned to the
Bonds), (3) specify the Bonds being redeemed, their date of issue,
their maturity date, redemption date and the redemption price, (4) set
forth the name, address and telephone number of the person from whom
information pertaining to the redemption may be obtained, and (S) state
that on the redemption date the Bonds called for redemption will be
payable at the designated corporate trust office of the Trustee, that
from that date interest will cease to accrue, that no representation is
made as to the accuracy or correctness of the CUSIP numbers printed
therein or on the Bonds. No defect affecting any Bond, whether in the
notice of redemption or mailing thereof (including any failure to mail
such notice), shall affect the validity of the redemption proceedings
for any other Bonds. In addition, failure to mail notice as described
in (i)(B) shall not affect the validity of the redemption of any Bond.
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(ii) If at any time of mailing of notice of an optional or
extraordinary optional redemption of Bonds there has not been deposited
with the Trustee moneys or Government Obligations sufficient to redeem
all Bonds called for such redemption, such notice shall state that the
redemption is conditional upon the deposit of moneys or Governmental
Obligations sufficient for the redemption with the Trustee not later
than the opening of business on the redemption date, and such notice
will be of no effect and such Bonds shall not be redeemed unless such
moneys are so deposited.
(iii) Any notice of redemption shall be mailed by first class
mail, postage prepaid; provided that any notice of redemption given to
any holder of $1,000,000 or more in aggregate principal amount of Bonds
shall be transmitted electronically or mailed by certified mail, return
receipt requested.
A certificate of the Trustee shall conclusively establish the mailing of any
such notice for all purposes.
(g) Payment of Redeemed Bonds, Notice having been mailed in the manner
provided in (f) above, the Bonds and portions thereof called for redemption
shall become due and payable on the redemption date, and upon presentation and
surrender thereof at the place or places specified in that notice, shall be paid
at the redemption price, plus interest accrued to the redemption date.
If money or Government Obligations for the redemption of all of the
Bonds and portions thereof to be redeemed, together with interest accrued
thereon to the redemption date, is held by the Trustee or any Paying Agent on
the redemption date, so as to be available therefor on that date and if notice
of redemption has been deposited in the mail as aforesaid, then from and after
the redemption date those Bonds and portions thereof called for redemption shall
cease to bear interest and no longer shall be considered to be Outstanding
hereunder. If those moneys shall not be so available on the redemption date, or
that notice shall not have been deposited in the mail as aforesaid, those Bonds
and portions thereof shall continue to bear interest, until they are paid, at
the same rate as they would have borne had they not been called for redemption.
All moneys deposited in the Bond Fund and held by the Trustee or a
Paying Agent for the redemption of particular Bonds shall be held in trust for
the account of the Holders thereof and shall be paid to them, respectively, upon
presentation and surrender of those Bonds.
Section 3.14. Paying. The Trustee, and any other banks or trust
companies designated as paying agent in any Supplemental Agreement, shall be the
Paying Agent for the Bonds.
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 Agreement. If the position of Paying Agent shall
become vacant for any reason, the Trustee shall, within 30 days thereafter,
appoint a bank or trust company to fill such vacancy. Notwithstanding anything
in this Section 3.14 to the contrary, no successor Paying Agent shall be
appointed (or be deemed
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to have succeeded to such function), unless Ambac Assurance approves such
successor (or deemed successor) in writing.
The Paying Agent shall enjoy the same protective provisions in the
performance of its duties hereunder as are specified in this Agreement,
including but not limited to Section 7.01, with respect to the Trustee, insofar
as such provisions may be applicable.
Section 3.15. Investments.
(a) Pending their use under this Agreement, moneys in all funds held by
the Trustee, subject to the requirements set forth in the Tax Compliance
Certificate and applicable federal tax laws, shall be invested by the Trustee in
Permitted Investments maturing or redeemable at the option of the holder at or
before the time when such moneys are expected to be needed and shall be so
invested at the oral or written request of an Authorized Officer of the Company
if there is not then an Event of Default known to the Trustee. Moneys in the
Debt Service Reserve Fund shall be invested by the Trustee in Permitted
Investments (a) of a type (i) customarily sold in a recognized market or (ii)
subject to liquidation or prepayment to the extent required to meet draws on the
Debt Service Reserve Fund and (b) with an average aggregate weighted term to
maturity not greater than five years. In the event that the Trustee is not
provided with such direction by an Authorized Officer of the Company, the
Trustee shall invest moneys in any Fund on hand from time to time in Permitted
Investments described in clause (g) of the definition thereof. Any investments
pursuant to this subsection shall be held by the Trustee as a part of the
applicable fund or account and shall be sold or redeemed to the extent necessary
to make payments or transfers or anticipated payments or transfers from such
fund.
(b) Except as set forth below, any interest realized on investments in
any fund or account and any profit realized upon the sale or other disposition
thereof shall be credited to the fund or account with respect to which they were
earned and any loss shall be charged thereto. Earnings (which for such purposes
include net profit and are after deduction of net loss) on moneys deposited in
the Hoed Fund shall, subject to the provisions of Section 3.05 of this
Agreement, be retained in the Bond Find. Earnings on moneys deposited in the
Debt Service Reserve Fund shall, subject to Section 3.04(b) and (c), be retained
in that Fund. Earnings on moneys in the Project Fund shall, subject to the
provisions of Section 3.07, be retained in that Fund.
(c) The Trustee may hold undivided interests in Permitted Investments
for more than one Fund (for which they are eligible) and may make interfund
transfers in kind.
(d) Investments in all Funds shall be valued by the trustee in
accordance with subparagraph (ii) of the definition of "Value" set forth in
Section 1.02 hereof, plus accrued interest where applicable.
(e) Any investment made by the Trustee may be purchased from the Trustee
or any of its affiliates.
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(f) The Trustee shall sell and reduce to cash a sufficient portion of
investments, whenever the cash balance in any Fund or Account is insufficient to
pay the current requirements from that Fund or Account.
(g) The Trustee shall not be liable for any loss or the amount of any
gain resulting from the making of any investment made in accordance with the
provisions hereof except for its own negligence, willful misconduct or breach of
trust.
The Trustee shall comply with the Tax Compliance Certificate and any
subsequent written instructions from the Authorized Officer of the Company
accompanied by an Opinion of Bond Counsel and addressed to the Issuer and the
Trustee, to the effect that compliance with such subsequent written instructions
will not adversely affect any exclusion of interest on any of the Bonds from
gross income for federal and Arizona income tax purposes.
Section 3.16. Release of and Liens on Property.
(a) Anything herein to the contrary notwithstanding, any sale, transfer,
other disposition, encumbrance or pledge of Property in compliance with Section
5.14 hereof, shall be made free and clear of any Lien or security interest
granted hereby or by the Mortgage, by any Supplemental Agreement, and by any
other instrument encumbering Collateral to secure the payment of Parity Debt.
(b) The Trustee is expressly authorized and directed, upon receipt of an
Officer's Certificate, to execute and deliver all instruments and other
documents as may be necessary or appropriate, in the judgment of the Company, to
effectuate the releases and subordinations required under (c) and (d) above,
including, without limitation, UCC amending or termination statements, requests
for release and reconveyance, deeds of release, subordination agreements, and
similar such documents.
(c) The Company, at its expense, shall cause any financing statements,
including all necessary amendments, supplements and appropriate continuation
statements, to be recorded and filed, and to be kept recorded and filed, in such
manner and in such places as may be required in order to perfect the security
interest granted by the Mortgage or in any Supplemental Agreement, subject only
to Permitted Encumbrances, to the extent that such perfection can be
accomplished by filing and recording. Within the period beginning six months
prior to and ending 90 days prior to the expiration of six years after December
1, 1997, and within six months prior to but in no event less than 90 days prior
to the expiration of each six year period following a filing with the Trustee
pursuant to this Section 3.16(c) until this Agreement has been discharged, the
Company will cause to be filed with the Issuer and the Trustee an Opinion of
Counsel to the effect that steps requisite to continue the perfection of the
security interests granted by the Mortgage or under this Agreement or in any
Supplemental Agreement, to the extent that such perfection can be accomplished
under applicable law by filing and recording, have been taken.
Section 3.17. Moneys to be Held in Trust. Except where moneys have been
deposited with or paid to the Trustee or any Paying Agent pursuant to an
instrument restricting their
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application to particular Parity Bonds (including the Bond Insurance which
restricts the application of the proceeds thereof solely to the payment of
principal of and interest on the Bonds), all moneys required or permitted to be
deposited with or paid to the Trustee or any Paying Agent under any provision of
this Agreement and any investments thereof, shall be held by the Trustee or that
Paying Agent in trust. Except for (i) moneys deposited with or paid to the
Trustee or any Paying Agent for the redemption of Parity Bonds, notice of the
redemption of which shall have been duly given or arrangements satisfactory to
the Trustee made, and (ii) moneys held by the Trustee pursuant to Section
3.03(b) hereof and (iii) moneys in the Rebate Fund, all moneys described in the
preceding sentence held by the Trustee or any Paying Agent shall be subject to
the provisions hereof while so held.
Section 3.18. Rights to Funds. The Company agrees that all moneys held
in the Funds and accounts created under the Agreement (other than amounts held
in the Refunding Fund and Rebate Fund), including moneys in the Debt Service
Reserve Fund and the Project Fund, are specifically pledged as security for the
Holders of the Parity Bonds and the Bond Insurer, shall be under the control of
the Trustee and, to the extent permitted by law, are not subject to attachment
or any other lien by any creditor of the Company in the event the Company files
a proceeding under the United States Bankruptcy Code, nor shall these movies be
used for general operations of the Company in the event of such a filing.
(End of Article III)
ARTICLE IV
THE PROJECT
Section 4.01. Acquisition, Construction, Installation, Equipment and
Improvement. The Company (a) has acquired the sites of the 1997 Project or
rights of use and access therein and shall construct and equip the 1997 Project
on those sites with all reasonable dispatch, and (b) shall pay when due all
fees, costs and expenses incurred in connection with that construction,
installation, equipment and improvement from funds made available therefor in
accordance with this Agreement or otherwise. It is understood that the 1997
Project is that of the Company and any contracts made by the Company with
respect thereto, whether acquisition contracts, construction contracts or
otherwise, or any work to be done by the Company on the 1997 Project are made or
done by the Company in its own behalf and not as agent or contractor for the
Issuer.
Section 4.02. Company Required to Pay Costs in Event Project Fund
Insufficient. If moneys in the Project Fund are not sufficient to pay all costs
of the 1997 Project, the Company, nonetheless, will complete the 1997 Project
and, unless Parity Bonds or other permitted Parity Debt shall have been issued
for that purpose, shall pay all such additional costs of the 1997 Project from
its own funds or other amounts made available to it for such purposes. The
limitation of Section 147(g) of the Code notwithstanding, the Company shall pay
all Costs of Issuance of the Bonds. The Company shall not be entitled to any
reimbursement for any such additional costs of the 1997 Project or payment of
Costs of Issuance from the Issuer, the Trustee
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or any Holder; nor shall it be entitled to any abatement, diminution or
postponement of the payments to be made in respect of the Bonds or otherwise.
(End of Article IV)
ARTICLE V
COVENANTS AND WARRANTIES OF THE COMPANY AND OF THE ISSUER
Section 5.01. Corporate Organization, Authorization and Powers. The
Company represents and warrants that:
(a) it is a corporation duly organized, validly existing and in good
standing under the laws of the State, with the power to enter into and perform
this Agreement, and, that by proper corporate action it has duly authorized the
execution and delivery of this Agreement;
(b) the Agreement is a valid and binding obligation of the Company
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) the execution and delivery of this Agreement and the consummation of
the transactions contemplated herein, including the application of the proceeds
of the Bonds as so contemplated, is in compliance with the Order of the Arizona
Corporation Commission, Decision No. 60473 (the "ACC Order"), will not conflict
with or constitute a material breach of or default under any bond, indenture,
note or other evidence of indebtedness of the Company, or any contract, lease or
other instrument to which the Company is a party or by which it or its
properties are bound or cause the Company to be in material violation of any
applicable statute or order, rule or regulation of any court or governmental
authority which breach, default, or violation would materially and adversely
affect the consummation of the transactions contemplated hereby or the ability
of the Company to perform its obligations hereunder;
(d) No consent of any other party and no consent, license, approval or
authorization of, exemption by, or registration with any governmental body,
authority, bureau or agency (other than those that have been obtained,
including, without limitation, the ACC Order) is required in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein, including, the application of the proceeds of
the Bonds as so contemplated, and the construction, installation, equipment and
improvement of the 1997 Project, except for governmental permits required in
connection with commencement and during construction of the 1997 Project; and
(e) it is not in breach, default, or in violation of any indenture,
mortgage, deed of trust, note, loan agreement, or other agreement or instrument
which would allow the obligee or
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obligees thereof to take any action which would materially and adversely affect
its performance under this Agreement or its compliance with the requirements and
conditions of the ACC Order.
Section 5.02. Payment of Principal, Premium and Interest on Parity Debt;
Interest on Overdue Payments. The Company covenants, so long as any Parity Debt
is Outstanding, that it shall duly and punctually pay the principal of, the
premium, if any, and the interest on each Parity Debt obligation at or prior to
the due date thereof and at the times and at the place and in the manner
provided therein when and as the same become payable, whether at maturity, upon
call for redemption, by acceleration of maturity or otherwise, according to the
true intent and meaning hereof. If any such payment is not so received, the
Trustee upon actual notice of such nonpayment shall notify the Company by
telephone, telegram, express mail or other expeditious means.
To the extent permitted by law, the Company hereby waives any
requirement that the Trustee or any holder thereof protect, secure, perfect or
insure any security interest or lien on any Property subject thereto or exhaust
any right or take any action against the Company or any other Person or any
collateral including, without limitation, rights under A.R.S. Section 12-1641,
et seq., if applicable.
The obligations of the Company created pursuant to this section shall
continue to be effective or be reinstated, as the case may be, if at any time
any payments of any of the Parity Debt are rescinded or may otherwise be
returned by the trustee or any holder thereof upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, all as though such payment had not
been made.
To the extent permitted by law, the obligation of the Company to make
payments on Parity Debt shall be absolute and unconditional, shall be binding
and enforceable in all circumstances whatsoever, shall not be subject to setoff,
recoupment or counterclaim and the Company agrees to make payment from all
lawfully available sources.
Section 5.03. Covenants.
(a) The Issuer, to the extent within its control, covenants that it will
not take any action, or fail to take any action, upon receipt of an Officer's
Certificate and at the expense of the Company, if any such action or failure to
take action would adversely affect the exclusions from gross income of the
interest on the Bonds under Section 103(a) of the Code or cause the interest on
the Series 1997B Bonds, or any portion thereof, to become as item of tax
preference for purposes of the alternative minimum tax imposed on individuals
and corporations under the Code.
The Issuer does not have the power to make or direct investments, but
the Issuer, to the extent within its control, will not directly or indirectly
use or permit the use of any Proceeds of the Bonds or any other funds of the
Issuer or the Company, or take or omit to take any action, that would cause the
Bonds to be or become "arbitrage bonds" within the meaning of Section 148(a) of
the Code or to fail to meet any other applicable requirements of Sections 141
through 150 (or their statutory predecessor) of the Code or cause the interest
on the Series 1997B Bonds,
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or any portion thereof, to become an item of tax preference for purposes of the
alternative minimum tax imposed on individuals and corporations under the Code.
To that end, the Issuer will comply with all requirements of Sections 141, 142,
146, 147, 148, 149 and 150 (or their statutory predecessor) of the Code to the
extent applicable to the Bonds. The Issuer is deemed to have complied with this
paragraph if the Issuer complies with the Tax Compliance Certificate and any
subsequent Officer's Certificate, accompanied by an Opinion of Bond Counsel, to
the effect that compliance with such subsequent written instructions will not
adversely affect any exclusions of interest on any of the Bonds from gross
income for federal income tax purposes or cause the interest on the Series 1997B
Bonds, or any portion thereof, to become an item of tax preference for purposes
of the alternative minimum tax imposed on individuals and corporations under the
Code.
The Company covenants that it will not take any action, or fail to take
any action, if any such action or failure to take action would adversely affect
the exclusions from gross income of the interest on the Bonds under Section
103(a) of the Code or cause the interest on the Series 1997B Bonds, or any
portion thereof, to become an item of tax preference for purposes of the
alternative minimum tax imposed on individuals and corporations under the Code.
The Company will not directly or indirectly (by parties within its
control) use or permit the use of any Proceeds of the Bonds or any other funds
of the Company, or take or omit to take any action, that would cause the Bonds
to be or become "arbitrage bonds" within the meaning of Section 148(a) of the
Code or to fail to meet any other applicable requirements of Sections 141
through 150 (or their statutory predecessor) of the Code or cause the interest
on the Series 1997B Bonds, or any portion thereof, to become an item of tax
preference for purposes of the alternative minimum tax imposed on individuals
and corporations under the Code. To that end, the Company will comply with all
requirements of Sections 141, 142, 146, 147, 148, 149 and 150 (or their
statutory predecessor) of the Code to the extent applicable to the Bonds. In the
event that at any time the Company is of the opinion that for purposes of this
Section 5.03 it is necessary to restrict or limit the yield on the investment of
any moneys held by the Trustee under this Agreement or otherwise, the Company
shall so instruct the Trustee in writing, and the Trustee shall take such action
as may be necessary in accordance with such instructions.
The Issuer and the Company each hereby covenant and agree that it shall
not enter into any arrangement, formal or informal, pursuant to which the
Company (or any "related party," as defined in Treasury Regulations Section
1.150-1(b)) shall purchase the Bonds. This covenant shall not prevent
the Company from purchasing Bonds in the open market for the purpose of
tendering them to the Trustee for purchase and retirement.
(b) The Company represents and warrants that the Aggregate Project is
and will be located entirely within the limits of the County.
(c) The Company represents and warrants that the construction of the
1997 Project was not commenced prior to the adoption of the resolution of the
Issuer on July 8, 1997, with respect to the 1997 Project. The Company represents
and warrants that the construction of the 1985 Project was not commenced prior
to the adoption of the resolution of the Issuer on November 13, 1984, with
respect to the 1985 Project.
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(d) The Company represents and warrants that it presently intends to use
or operate the Aggregate Project in a manner consistent with its purposes as
water furnishing facilities until the date on which the Bonds have been fully
paid and knows of no reason why the Aggregate Project will not be so operated.
If, in the future, there is a cessation of that operation, the Company will use
its best efforts to resume that operation or accomplish an alternate use by the
Company or others which will be consistent with the Act; provided, however, that
this provision does not require the Company to operate any portion of the
Aggregate Project after the Company shall determine in its discretion that such
operations are no longer economic and does not prohibit the Company from selling
the Aggregate Project in accordance with Section 5.14 or from merging into or
consolidating with another corporation in accordance with Section 5.15.
(e) The use of the Aggregate Project as it is proposed to be operated,
complies with all currently applicable material requirements of zoning,
development, pollution control, water conservation, environmental, and other
laws, regulations, rules and ordinances of the federal government and the State
and the respective agencies thereof and the political subdivisions in which the
Aggregate Project is to be located.
(f) The Company has obtained, or will obtain when required, all
necessary approvals of and licenses, permits, consents and franchises from
federal, state, county, municipal or other governmental authorities having
jurisdiction over the Aggregate Project to acquire, construct, improve and equip
the Aggregate Project, and to enter into, and execute and perform its
obligations under this Agreement, in each case under presently applicable law
and regulations, other than permits and licenses which are not now required and
as otherwise provided in Section 5.11.
(g) To the best of the Company's actual knowledge, none of the current
Indemnified Parties (as hereinafter defined) has any significant or conflicting
interest, financial, employment or otherwise, in the Company, the Aggregate
Project or in any of the transactions contemplated under this Agreement.
(h) There has been no material adverse change in the financial
condition; prospects or business affairs of the Company or the feasibility or
physical condition of the Aggregate Project subsequent to the date on which the
Issuer granted its resolution approving the issuance of the Bonds.
(i) The Company acknowledges, represents, warrants and agrees that the
Company (a) understands the nature of the structure of the transactions related
to the financing of the Aggregate Project; (b) is familiar with all of the
provisions of this Agreement and all documents and instruments related to such
financing to which the Company or the Issuer is a party or to which the Company
is a beneficiary; (c) understands the risk inherent in such transactions,
including without limitation, the risk of loss of the Aggregate Project; and (d)
has not relied upon the Issuer for any guidance or expertise in analyzing the
financial consequences of such financing transactions or otherwise relied upon
the Issuer in any manner, except to issue the Bonds.
(j) [RESERVED.]
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(k) All representations of the Company contained herein or in any
certificate or other instrument delivered by the Company pursuant hereto, to
this Agreement or in connection with the transactions contemplated hereby, shall
survive the execution and delivery hereof and thereof and the issuance, sale and
delivery of the Bonds as representations of facts existing as of the date of
execution and delivery of the instrument containing such representations.
(l) The Company represents and warrants that at least 95% of the
net proceeds of the Series 1997A Bonds (as defined in Section 150 of the Code)
will be used to provide land or property of a character subject to the allowance
for depreciation under Section 167 of the Code and which constitute "facilities
for the furnishing of water" within the meaning of Section 142(a)(4) of the
Code. The Company will not request or authorize any disbursement pursuant to
Section 3.07 hereof, which, if paid, would result in less than 95% of the net
proceeds of the Series 1997A Bonds being used to provide land or property of a
character subject to the allowance for depreciation under Section 167 of the
Code and which constitute "facilities for the furnishing of water" within the
meaning of Section 142(a)(4) of the Code. The Company represents and warrants
that at least 90% of the net proceeds of the 1985 Bonds was used to provide land
or property of a character subject to the allowance for depreciation under
Section 167 of the Code and to provide facilities which constitute "facilities
for the furnishing of water" within the meaning of Section 103(b)(4)(G) of the
1954 Code.
The Company is a public service corporation as defined in Article 15,
Section 2 of the Constitution of the State of Arizona, and as such is authorized
to furnish domestic water delivery services to all members of the public within
its service area as set forth in its certificate of convenience and necessity
issued by the Arizona Corporation Commission. The Company's rates and charges
for such water furnishing services are regulated by the Arizona Corporation
Commission. The Company, pursuant to regulations promulgated by the Arizona
Corporation Commission, has responsibility for and control over the maintenance
and repair of the Aggregate Project.
The 1985 Project is, and the 1997 Project will be, owned and operated by
the Company and the 1985 Project is, and the 1997 Project will be, a part of
the water furnishing facilities owned and operated by the Company, and the water
furnished thereby is, and will be, made available to members of the general
public (including electric utility, industrial, agricultural, or commercial
users). The Company makes and will make available to residential users within
its service areas, municipal water districts within its service area, or any
combination thereof, at least 25% of the capacity of the Aggregate Project. The
Company has not and will not enter into any contract or contracts which,
individually or in the aggregate, will guarantee the right of any person to
receive or an obligation of any person to take or pay for more than 75% of the
maximum daily capacity of the Aggregate Facility.
(m) The Company represents and warrants that the costs of issuance
financed by the Series 1997A Bonds will not exceed 2% of the proceeds of the
Series 1997A Bonds (within the meaning of Section 147(g) of the Code), and the
Company will not request or authorize any disbursement pursuant to Section 3.06
hereof or otherwise, which, if paid, would result in more than 2% of the
aggregate face amount of the Series 1997A Bonds being so used. The Company
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represents and warrants that no costs of issuance will be financed with proceeds
of the Series 1997B Bonds. None of the proceeds of the Bonds will be used to
provide working capital.
(n) The Company represents and warrants that in accordance with Section
147(b) of the Code, (1) the average maturity of the Series 1997A Bonds does not
exceed 120% of the average reasonably expected economic life of the facilities
being financed by the Series 1997A Bonds, and (2) the average maturity of the
Series 1997B Bonds does not exceed 120% of the average reasonably
expected economic life of the facilities being refinanced by the Series 1997B
Bonds, in each case determined as of the later of the date the Bonds are issued
or the date the facilities are expected to be placed in service.
(o) The Company represents and warrants that none of the proceeds of the
Series 1997A Bonds will be, and none of the proceeds of the 1985 Bonds were,
used to provide any airplane, skybox or other private luxury box, or health club
facility; any facility primarily used for gambling; or any store the principal
business of which is the sale of alcoholic beverages for consumption off
premises.
(p) The Company represents and warrants that not more than 25% of the
proceeds of the Series 1997A Bonds will be, and not more than 25% of the
proceeds of the Series 1997B Bonds were, used directly or indirectly to acquire
land or any interest therein, and such land has not been, and is not to be, used
for farming purposes.
(q) The Company represents and warrants that no portion of the proceeds
of the Series 1997A Bonds will be, and no portion of the proceeds of the 1985
Bonds were, used to acquire existing property or any interest therein unless
such acquisition meets the rehabilitation requirements of Section 147(d) of the
Code or met the rehabilitation requirements of Section 103(b)(17) of the 1954
Code, as appropriate.
(r) The information furnished by the Company and used by the Issuer in
preparing the certification pursuant to Section 148 of the Code and information
statement pursuant to Section 149(e) of the Code as well as the federal tax
election referred to in the Tax Compliance Certificate of the Company, is
accurate and complete as of the date of the issuance of the Bonds.
(s) The Aggregate Project does not include any offices except for
offices (i) located at the site of the Aggregate Project and (ii) not more than
a de minimis amount of the functions to be performed at which is not directly
related to the day-to-day operations at the Aggregate Project.
(t) The Company represents and warrants that at no time will any funds
constituting gross proceeds of the Bonds be used in any fashion as would
constitute failure of compliance with Section 148 of the Code.
(u) The Company represents and warrants that the Bonds are not
"federally guaranteed" within the meaning of Section 149(b) of the Code.
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(v) The Issuer represents and warrants that the Authorized Officer of
the Issuer having responsibility for issuing the Bonds is authorized and
directed, alone or in conjunction with any other officer, employee, consultant
or agent of the Issuer, Company or any officer, employee, consultant or agent of
the Company, to give an appropriate Tax Compliance Certificate of the Issuer,
for inclusion in the transcript of proceedings for the Bonds, setting forth the
reasonable expectations of the Issuer regarding the amount and use of all the
Proceeds of the Bonds and the facts, estimates and circumstances on which those
expectations are based, such Certificate to be premised on the reasonable
expectations and the facts, estimates and circumstances on which those
expectations are based and other facts and circumstances relevant to the tax
treatment of interest on the Bonds, as provided by the Company, all as of the
date of delivery of and payment for the Bonds.
(w) Notwithstanding any provision of this Section 5.03 hereof, if the
Company provides to the Issuer and the Trustee an Opinion of Bond Counsel to the
effect that any action required under this Section is no longer required, or to
the effect that some further action is required, to maintain the exclusions from
gross income of the interest on the Bonds pursuant to Section 103(a) of the Code
or to prevent interest on the Series 1997B Bonds, or any portion thereof, from
becoming an item of tax preference for purposes of the alternative minimum tax
imposed on individuals and corporations, the Company, the Issuer and the Trustee
may rely conclusively on such opinion in complying with the provisions hereof,
and the covenants hereunder shall be deemed to be modified to that extent.
(x) Tax Covenants Survive Termination of the Agreement. All covenants
and obligations of the Issuer and the Company contained in this Section 5.03
shall remain in effect and be binding upon the Issuer and the Company until all
of the Bonds have been paid, notwithstanding any earlier termination of this
Agreement or any provision for payment of principal of and premium, if any, and
interest on the outstanding Bonds.
Section 5.04. Annual Reports and Other Current Information. Within one
hundred twenty (120) days after the close of each Fiscal Year, the Company shall
furnish to the Trustee and the Bend Insurer, copies of audited financial
statements of the Company prepared by an Accountant, together with a calculation
of the ratios described in Section 5.12(a). The Company shall furnish to the
Trustee and the Bond Insurer within one hundred twenty (120) days after the
close of each Fiscal Year, a certificate signed by an Authorized Officer stating
that the Company hag caused its operations for the year to be reviewed, that he
is familiar with this Agreement, and that in the course of that review, the
Company is in compliance with Section 5.12 and no default under this Agreement
has come to its attention or, if such a default has appeared, a description of
the default.
Within ninety (90) days after the close of the first, second and third
quarters of its Fiscal Year, the Company shall furnish to the Bond Insurer
copies of the quarterly unaudited Financial Statements of the Company, together
with the calculations by an Authorized Officer of the Company of the ratios
described in Section 5.12(a). In addition, the Company shall from time to time
render such reports concerning compliance with this Agreement as the Trustee or
the Bond Insurer (in order to ascertain compliance of the Company or the Trustee
with this Agreement) may reasonably request.
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Within sixty (60) days after the end of each Bond Year, the Trustee, in
reliance upon a report of the Rebate Consultant, shall deliver to the Issuer and
the County a certificate stating that all necessary actions have been taken as
required by this Agreement and the Tax Compliance Certificate in order to ensure
that all necessary actions have been taken, including, but not limited to, (a)
the required annual arbitrage rebate calculations, (b) the transfer of funds to
the Rebate Fund to reserve for the anticipated rebate requirement, and (c)
payment of the Rebate Amount, if any, in accordance with Section 148(f) of the
Internal Revenue Code of 1986; provided, however, that after delivery of the
completion certificate pursuant to Section 3.10, the Company may request the
Issuer to permit the Company to have the calculation of the Rebate Amount made
on each Computation Date (rather than at the end of each Bond Year).
The Company will deliver to the Trustee, the Issuer and the Bond Insurer
within one hundred twenty (120) days after the end of each of the Company's
Fiscal Years a certificate executed by an Authorized Officer of the Company
stating that:
(1) A review of the activities of the Company during such Fiscal
Year and of performance hereunder has been made under such officer's
supervision; and
(2) Such officer is familiar with the provisions of this
Agreement and the Tax Compliance Certificate, and to the best of such
officer's knowledge, based on such review and familiarity, the Company
has fulfilled all its obligations hereunder and thereunder throughout
such Fiscal Year, and there have been no defaults under thin Agreement
or the Tax Compliance Certificate or, if there has been a default in the
fulfillment of any such obligation in such Fiscal Year, specifying each
such default known to such officer and the nature and status thereof and
the actions taken or being taken to correct such default.
Section 5.05. Corporate Reorganization. The Company may cause a portion
of its operations to be separately incorporated or otherwise organized or
reorganized, but all such operations, whether separately incorporated or not,
shall remain bound by this Agreement; provided, however, that prior to effecting
any such reorganization, the Company shall deliver to the Issuer, the Trustee
and the Bond Insurer, an Opinion of Bond Counsel that such reorganization will
not affect the validity of the Bonds or the exclusions from gross income under
Section 103 of the Code of interest paid on the Bonds. The Company shall
preserve all its rights and licenses to the extent reasonably necessary or
desirable in the operation of its business affairs, provided that the Company
shall not be obligated hereby to retain or preserve any rights or licenses no
longer used or, in the judgment of its Governing Body, reasonably useful in the
conduct of its business.
Section 5.06. Right Notice. The Company shall, within 10 Business Days
of the occurrence, give notice to the Trustee and the Bond Insurer of any Event
of Default or occurrence which, with the passage of time or the giving of
notice, may ripen into an Event of Default pursuant to this Agreement.
Section 5.07. Maintenance of Property. The Company shall at all times
cause its business to be carried on and conducted in an efficient manner and its
Property to be maintained,
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preserved and kept in good repair, working order and condition and all necessary
and proper repairs, renewals and replacement thereof to be made; provided,
however, that nothing in the Agreement shall be construed (i) to prevent it from
ceasing to operate any portion of its Property, if in the judgment of the
Company, it is advisable not to operate the same for the time being, or if it
intends to sell or otherwise dispose of the same as permitted hereunder and
within a reasonable time endeavors to effect such sale or other disposition, or
(ii) to obligate it to retain, preserve, repair, renew or replace any property,
leases, rights, privileges or licenses that are no longer used or, in the
judgment of the Company, useful in the conduct of its business or that may be
sold, pledged, encumbered or transferred pursuant to this Agreement.
Section 5.08. Compliance With Laws. The Company shall do all things
reasonably necessary to conduct its affairs and carry on its business and
operations in such manner as to comply with any and all applicable laws of the
United States and the several states thereof and duly observe and conform to all
valid orders, regulations or requirements of any governmental authority relative
to the conduct of its business and the ownership of its Property; provided,
nevertheless, that nothing in the Agreement shall require it to comply with,
observe and conform to any such law, order, regulation or requirement of any
governmental authority so long as the validity thereof shall be contested in
good faith.
Section 5.09. Payment of Taxes. The Company shall promptly pay all
lawful taxes, governmental charges and assessments at any time levied or
assessed upon or against it or any of its Property; provided, however, that it
shall have the right to contest in good faith by appropriate proceedings any
such taxes, charges or assessments or the collection of any such sums and
pending such contest may delay or defer payment thereof, provided that, if by
non-payment of any such sums, the security interest of the Trustee in the
Collateral will be impaired or any Property of the Company will be subject to
imminent material loss or forfeiture, such sum shall be paid immediately.
Section 5.10. Compliance with Covenants. The Company shall at all times
comply with all material terms, covenants and provisions contained in any
document or Lien at such time existing upon its Property or any part thereof or
securing any of its Indebtedness and pay or cause to be paid, or to be renewed,
refunded or extended, all of its Indebtedness secured by a Lien, as and when the
same become due and payable.
Section 5.11. Licenses and Permits. The Company shall procure and
maintain all licenses, permits, approvals, certifications and accreditations
issued by any regulatory bodies which are reasonably necessary or desirable for
the maintenance of its Property, conduct of its operations and performance of
its obligations under the Agreement, including, without limitation, the ACC
Order; provided, however, that it need not comply with this section if and to
the extent that its Governing Body shall have determined in good faith,
evidenced by an Officer's Certificate, that such compliance is not in the best
interest of the Company and that lack of such compliance would not materially
impair the ability of the Company to pay its Indebtedness when due.
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Section 5.12. Financial Covenants.
(a) The Company covenants, unless waived by the Bond Insurer, that:
(1) At the end of each quarter of its Fiscal Year, its Capitalization
Ratio shall not exceed sixty-five percent (65%).
(2) For its Fiscal Year ending December 31, 1998, its Debt Service
Coverage Ratio shall be at least 1.7, for the Fiscal Year ending December 31,
1999 shall be at least 1.9 and for each Fiscal Year ending December 31, 2000 and
thereafter its Debt Service Coverage Ratio shall be at least 2.0.
(b) Company covenants that it shall make no cash distribution to its
shareholders during any period when its Capitalization Ratio, as computed for
the quarter ended immediately prior to such distribution, exceeds 55%, except
with the prior approval of the Bond Insurer.
Section 5.13. Limitations on Incurrence of Additional Indebtedness.
(a) The Company agrees that it shall not incur any Additional
Indebtedness without meeting the financial tests set forth in (b) below;
provided that, except as otherwise provided in this Agreement, at the time of
incurrence thereof no Event of Default (or event which with notice or lapse of
time, or both; would constitute an Event of Default) under this Agreement shall
have occurred and shall be continuing unless such event will be cured upon
incurrence of such Indebtedness and application of the proceeds thereof and the
placing in service of any facilities financed thereby; and provided, further,
that this requirement concerning no Event of Default shall not apply to
Indebtedness incurred with the consent of the Bond Insurer.
(b) Prior to incurrence of any Indebtedness, the Company shall deliver
to the Trustee an Officer's Certificate certifying the Debt Service Coverage
Ratio and Capitalization Ratio for the Historic Test Period, taking into account
the aggregate of (i) the current aggregate Outstanding principal amount of all
existing Indebtedness to be Outstanding after the issuance of the proposed
Additional Indebtedness and (ii) the proposed Additional Indebtedness, is not
less than 2.0 times and 65%, respectively.
For the purpose of computing such Debt Service Coverage Ratio, the
amount of Annual Debt Service on the proposed Additional Indebtedness shall be
the amount of scheduled principal and interest to be paid thereon from the date
of incurrence thereof to the end of the then Fiscal Year. For the purpose of
computing Debt Service Coverage Ratio on any Additional Indebtedness to be
incurred as Variable Rate Indebtedness, the amount of Annual Debt Service on
such Variable Rate Indebtedness shall be deemed to be the average interest rate
on such Variable Rate Indebtedness had it been outstanding and calculated
during the 12 months prior to its incurrence.
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Section 5.14. Sale, Lease or other Disposition of Property.
(a) The Company agrees that it will not, in any Fiscal Year sell, lease
or otherwise dispose of Property, Plant and Equipment the Value of which would
cause the aggregate Value of Property, Plant and Equipment so transferred in
such Fiscal Year to exceed 5% of the total assets of the Company as shown on
the financial statements for the Historic Test Period, except for the transfers,
sales or leases of Property, Plant and Equipment as set forth in (b) below,
provided, however, that the Company shall not sell, lease or otherwise dispose
of the Aggregate Project, nor any portion thereof, without obtaining an Opinion
of Bond Counsel that such sale, lease or other disposition will not adversely
affect the validity of the Bonds or the exclusions from gross income under
Section 103 of the Code of interest paid on the Bonds, and provided further that
the following transfers, sales or leases as set forth in (b) below shall not be
permitted without the prior written consent of the Trustee and the Bond Insurer
in any period during which a Default has occurred and is continuing;
(b) In addition to transfers permitted under (a), and provided that for
any sale, lease or other disposal of Property under subparagraphs (i) and (iii)
below, the Company shall grant for the benefit of the beneficiary under the
Mortgage a lien in such Property to be purchased, released or otherwise acquired
similar to and in replacement of the lien in the Property to be sold, leased or
otherwise disposed of, the Company may sell, lease or otherwise dispose of
Property as follows:
(i) in return for other Property of equal or greater value and
usefulness;
(ii) to any Person, if prior to such sale, lease or other
disposition there is delivered to the Trustee an Officer's Certificate stating
that, in the judgment of the signer, such Property has, or within the next
succeeding 24 calendar months is reasonably expected to, become inadequate,
obsolete, worn out, unsuitable, unprofitable, undesirable or unnecessary and the
sale, lease or other disposition thereof will not impair the structural
soundness, efficiency or economic value of the remaining Property;
(iii) upon fair and reasonable terms no less favorable to the
Company than would obtain in a comparable arm's-length transaction, if following
such transfer the proceeds received by the Company are applied to acquire
Property or to repay the principal of Indebtedness; or
(iv) are distributions of cash to shareholders permitted under
Section 5.12(c) of this Agreement.
Section 5.15. Consolidation, Merger, Sale or Conveyance. The Company may
merge or consolidate with any other Person and may sell or convey all or
substantially all of its assets to any Person, provided that any merger or
consolidation pursuant to which the Company would cease to exist as a separate
corporate entity, or any sale or conveyance of all or substantially all of the
assets of the Company, shall be subject to an Opinion of Bond Counsel that such
merger, consolidation, sale or conveyance will not adversely affect the validity
of the Bonds or the exclusions from gross income under Section 103 of the Code
of interest paid on the Bonds.
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The Company covenants that it will not merge or consolidate with any
other Person or sell or convey all or substantially all of its assets unless:
(a) either it will be the continuing corporation, or the successor
corporation shall be a corporation organized and existing under the laws of the
United States of America or a state thereof and such Person shall expressly
assume in writing the due and punctual payment of the principal of and premium,
if any, and interest on all Outstanding Bonds and Parity Debt, and the due and
punctual performance and observance of all of the covenants and conditions of
this Agreement, which document shall be executed and delivered to the Issuer,
the Trustee and the Bond Insurer by such Person; and
(b) either it or the successor Person shall not immediately after such
merger or consolidation, or such sale or conveyance, have failed to meet any of
the covenants or agreements contained in this Agreement which could be an Event
of Default in the performance or observance of any such covenant or agreement;
and
(c) there shall have been delivered to the Trustee, the Bond Insurer and
the Issuer an Opinion of Bond Counsel to the effect that under then existing law
the consummation of such merger, consolidation, sale or conveyance would not
adversely affect the validity of the Bonds or the exclusions from gross income
under Section 103 of the Code of interest paid on the Bonds; and
(d) there is delivered to the Issuer, the Trustee and the Bond Insurer
an Officer's Certificate demonstrating that immediately after such
consolidation, merger, sale or conveyance, such Person could incur one dollar or
more of Indebtedness under Section 5.13, taking into account such
consolidation, merger, sale or conveyance;
(e) there is delivered to the Issuer, the Trustee and the Bond Insurer
an Opinion of Counsel to the effect that such consolidation, merger, sale or
conveyance complies with the requirements of this Agreement, and all conditions
precedent have been satisfied, and that such consolidation, merger, sale or
conveyance is legal, valid and binding and enforceable, subject to reasonable
exceptions for bankruptcy, insolvency and similar laws and the application of
equitable principles; and
(f) the Bond Insurer consents, which consent shall not be unreasonably
withheld.
Section 5.16. Restrictions on Guaranties.
The Company agrees that it will not enter into, or become liable after
the date of this Agreement in respect of, any Guaranty unless such Guaranty
could then be incurred as Indebtedness under this Agreement of the type
represented by the obligation guaranteed.
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Section 5.17. Limitations on Creation of Liens.
(a) The Company agrees that it will not create or suffer to be created
or exist any Lien upon Collateral, now owned or hereafter acquired by it other
than Permitted Encumbrances.
(b) Permitted Encumbrances shall consist of the following:
(i) Liens arising by reason of good faith deposits with the
Company in connection with leases of real estate, bids or contracts
(other than contracts for the payment of money), deposits by the Company
to secure public or statutory obligations, or to secure, or in lieu of,
surety, stay or appeal bonds, and deposits as security for the payment
of taxes or assessments or other similar charges;
(ii) Any lien arising by reason of deposits with, or the giving
of any form of security to, any governmental agency or any body created
or approved by law or governmental regulation for any purpose at any
time as required by law or governmental regulation as a condition to the
transaction of any business or the exercise of any privilege or license,
or to enable the Company to maintain self-insurance or to participate in
any funds established to cover any insurance risks or in connection with
worker's compensation, unemployment insurance, pension or profit sharing
plans or other social security, or to share in the privileges or
benefits required for companies participating in such arrangements;
(iii) Any judgment lien against the Company so long as such
judgment is being contested and execution thereon is stayed or, in the
absence of such contest and stay, such judgment lien will not materially
impair the Property or subject the Property to material loss or
forfeiture;
(iv) (A) Rights reserved to or vested in any municipality or
public authority by the terms of any right, power, franchise, grant,
license, permit or provision of law, affecting any Property to (1)
terminate such right, power, franchise, grant, license or permit,
provided that the reasonable exercise of such right as a result of a
default by the Company thereunder has not or would not materially
altered or alter the use of such Property or materially and adversely
affected or affect the value thereof, or (2) purchase, condemn,
appropriate or recapture, or designate a purchaser of, such Property;
(B) any liens on any Property for taxes, assessments, levies, fees,
sewer charges, and other governmental and similar charges and any liens
of mechanics, materialmen, laborers, suppliers or vendors for work or
services performed or materials furnished in connection with such
Property which are not due and payable or which are not delinquent or
the amount or validity of which are being contested and execution
thereon is stayed (or with respect to liens of mechanics, materialmen
and laborers, have been due for less than 60 days) or the existence of
which will not subject the Property to material loss or forfeiture; (C)
easements, rights-of-way, servitudes, restrictions and other minor
defects, encumbrances, and irregularities in the title to any Property
which do not materially impair the use of such Property or materially
and adversely affect the value thereof; (D)
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rights reserved to or vested in any municipality or public authority to
control or regulate any Property or to use such Property in any manner,
the reasonable exercise of which rights as a result of a default by the
Company thereunder have not or would not materially impaired or impair
the use of such Property or materially and adversely affected or affect
the value thereof; and (E) to the extent that it affects title to the
Property, this Agreement;
(v) The Mortgage or Existing Liens on Property described in
Schedule A hereto which are existing on the date of authentication and
delivery of the Bonds, including renewals thereof, provided that no such
Existing Lien may be extended or modified to apply to any Property of
the Company not subject to such Existing Lien on such date, unless such
Existing Lien as so extended or modified otherwise qualifies as a
Permitted Encumbrance hereunder;
(vi) Any lease of Property which, in the judgment of the Company,
is reasonably necessary or appropriate for or incidental to the use of
such Property, taking into account the nature and terms of the lease and
the nature and purposes of the Property;
(vii) any Lien in favor of a trustee or other representative of
the creditor on the proceeds of Indebtedness deposited with such
representative (including earnings thereon) prior to the application
of such proceeds;
(viii) any Lien on Collateral securing all Parity Debt incurred
in accordance with Section 5.13 on a parity (subject to any intervening
Liens);
(ix) any lease, sale or similar agreement entered into in
connection with the issuance of and providing for or securing the
payment of Parity Debt; and
(x) Any Lien arising by reason of deposit in trust of cash (or
securities permitted for such purpose pursuant to the terms of the
documents governing the payment of or discharge of Indebtedness) in an
amount the principal of, premium, if any, and interest on which will be
sufficient to pay, without reinvestment, all or a portion of the
principal of, premium, if any, and interest on, as the same shall become
due (at maturity or earlier redemption), any Indebtedness which would
otherwise be considered Outstanding.
Section 5.18. Insurance. The Company agrees that it will maintain, or
cause to be maintained, insurance (including one or more self-insurance or
captive insurance company programs) covering such risks of an insurable nature
and of the character usually insured by persons with property and operations
similar to the Property and operations of the Company. Insurance in effect on
the date hereof shall be subject to the review and approval by the Bond Insurer.
The insurance required to be maintained pursuant hereto shall be subject to the
review of an insurance Consultant within 120 days after December 31, 1998 and
the completion of every second Fiscal Year thereafter. Insurance shall be
provided by carriers rated "A" or better by S&P or, if not rated by S&P, then
rated at least "A" by Moody's.
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The Company may self-insure if:
(1) The self-insurance program has been reviewed by an Insurance
Consultant;
(2) The self-insurance program includes an actuarially sound
claims reserve fund out of which each self-insured claim shall be paid;
the adequacy of such fund shall be evaluated on an annual basis by an
Insurance Consultant; and any deficiencies in any self-insured claims
reserve fund will be remedied in accordance with the recommendation of
the Insurance Consultant;
(3) The self-insured claims reserve fund shall be held in the
United States of America in a separate trust fund by an independent
corporate trustee; and
(4) In the event the self-insurance program shall be
discontinued, the actuarial soundness of its claims reserve fund, as
determined by an Insurance Consultant, shall be maintained.
The Company agrees that it shall not self-insure (except for deductibles
determined not unreasonable by the Insurance Consultant) any Property, Plant and
Equipment other than that of the Company.
The Company covenants that any self-insurance trust funds established by
it with respect to comprehensive general liability insurance shall be subject to
review by an Insurance Consultant on an annual basis, and that the Consultant's
report thereon shall be delivered to the Trustee as soon as is practicable.
Section 5.19. Compliance with Laws an Regulations.
(a) The Company has, after reasonable inquiry, no knowledge and has not
given or received any written notice indicating that its Property, or the past
or present use thereof or any practice, procedure or policy employed by it in
the conduct of its business materially violates any applicable law, regulation,
code, order, rule, judgment or consent agreement, including, without limitation,
those relating to the ACC Order, zoning, building, use and occupancy, fire
safety, health, sanitation, air pollution, hazardous or toxic materials,
substances or wastes, parking, architectural barriers to the handicapped, or
restrictive covenants or other agreements affecting title to the Property
(collectively, "Laws and Regulations"). Without limiting the generality of the
foregoing, neither the Company nor to the best of its knowledge, after
reasonable inquiry, any prior or present owner, tenant or subtenant of any of
the Property has, other than as set forth in subsections (a) and (b) of this
Section or as may have been remediated in accordance with Laws and Regulations,
(i) used, treated, stored, transported or disposed of any material amount of
flammable explosives, polychlorinated biphenyl compounds, heavy metals,
chlorinated solvents, cyanide, radon, petroleum products, methane, radioactive
materials, pollutants, hazardous materials, hazardous wastes, hazardous, toxic,
or regulated substances or related materials, as defined in CERCLA, RCRA, CWA,
CAA, TSCA AND Title III, and the regulations promulgated pursuant thereto, and
in all other Environmental Regulations applicable to the Company, any of the
Property or the business operations conducted by the Company
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thereon (collectively, "Hazardous Materials") on, from or beneath any of the
Property, (ii) pumped, spilled, leaked, disposed of, emptied, discharged or
released (hereinafter collectively referred to as "Release") any material amount
of Hazardous Materials on, from or beneath any of the Property, or (iii) stored
any material amount of petroleum products at its Property in underground storage
tanks.
(b) Excluded from the representations and warranties in subsection (a)
hereof with respect to Hazardous Materials are those Hazardous Materials in
those amounts ordinarily found in the inventory of or used in the maintenance of
a water furnishing company, the use, treatment, storage, transportation and
disposal of which has been and shall be in compliance with all Laws and
Regulations.
(c) The Company has not received any notice from any insurance company
which has issued a policy with respect to any of the Property or from the
applicable state or local government agency responsible for insurance standards
(or any other body exercising similar functions) requiring the performance of
any repairs, alterations or other work, which repairs, alterations or other work
have not been completed on any of the Property. Notwithstanding the foregoing,
the Company acknowledges that it has undertaken, at the request of the Fountain
Hills Fire District, to study (i) alternative means of storing chlorine gas used
in connection with its operations, and (ii) alternative means of conducting such
operations in order to discontinue the use of chlorine gas. The Company has not
received any notice of default or breach which has not been cured under any
covenant, condition, restriction, right-of-way, reciprocal easement agreement or
other easement affecting its Property which is to be performed or complied with
by it.
Section 5.20. Environmental Compliance.
(a) The Company shall not use or permit any of the Property or any part
thereof to be used to generate, manufacture, refine, treat, store, handle,
transport or dispose of, transfer, produce or process Hazardous Materials,
except, and only to the extent, if necessary to maintain the improvements on any
of the Property and then, only in compliance with all Environmental Regulations,
and any state equivalent laws and regulations, nor shall it permit, as a result
of any intentional or unintentional act or omission on its part or by any
tenant, subtenant, licensee, contractor, employee and agent, the storage,
transportation, disposal or use of Hazardous Materials or the Release or threat
of Release of Hazardous Materials on, from or beneath any of the Property or
onto any other property excluding, however, those Hazardous Materials in those
amounts ordinarily found in the inventory of or used in the maintenance of water
furnishing facilities. Upon the occurrence of any Release or threat of Release
of Hazardous Materials, the Company shall promptly commence and perform, or
cause to be commenced and performed promptly, without cost to the Issuer, all
investigations, studies, sampling and testing, and all reasonable remedial,
removal and other actions necessary to properly address all Hazardous Materials
so released, on, from or beneath any of the Property or other property, in
compliance with all Environmental Regulations. Notwithstanding anything to the
contrary contained herein, underground storage tanks shall only be permitted
subject to compliance with subsection (d) and only to the extent necessary to
maintain the improvements on any of the Property.
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(b) The Company shall comply with, and shall cause its tenants,
subtenants, licensees, contractors, employees and agents to comply with, all
Environmental Regulations, and shall keep all of the Property free and clear of
any Liens imposed pursuant thereto (provided, however, that any such Liens, if
not discharged, may be bonded). The Company shall cause each tenant under any
lease, and use its best efforts to cause all of such tenant's subtenants,
agents, licensees, employees and contractors to comply with all Environmental
Regulations with respect to the Property; provided, however, that
notwithstanding that a portion of this covenant is limited to the Company's use
of its best efforts, the Company shall remain solely responsible for ensuring
such compliance and such limitation shall not diminish or affect in any way the
Company's obligations contained in subsection (c) hereof as provided in
subsection (c) hereof. Upon receipt of any notice from any Person with regard to
the Release of Hazardous Materials on, from or beneath any of the Property, the
Company shall give written notice thereof within a reasonable time to the
Trustee and the Bond Insurer.
(c) The Company shall defend, indemnify and hold harmless each
Indemnified Party, the Bondholders and the Bond Insurer, its partners,
depositors and each of its and their employees, agents, officer, directors,
trustees, successors and assigns, for, from and against any claim, demands,
penalties, fines, reasonable attorneys' fees (including, without limitation,
attorneys' fees incurred to enforce the indemnification contained in this
Section 5.20, consultants' fees, investigation and laboratory fees, liabilities,
reasonable settlements, after the Company's failure to defend (five (5) Business
Days' prior notice of which the Indemnified Party or the Bond Insurer, as
appropriate, shall have delivered to the Company), court costs, damages, losses,
costs or expenses of whatever kind or nature, known or unknown, contingent or
otherwise, occurring in whole or in part, arising out of, or in any way related
to: (i) the presence, disposal, Release, threat of Release, removal, discharge,
storage or transportation of any Hazardous Materials on, from or beneath any of
the Property, (ii) any personal injury (including wrongful death) or property
damage (real or personal) arising out of or related to such Hazardous Materials,
(iii) any lawsuit brought or threatened, reasonable settlement reached, after
the Company's failure to defend (five (5) Business Days' prior notice of which
the Indemnified Party or the Bond Insurer, as appropriate, shall be delivered to
the Company), or governmental order relating to Hazardous Materials on, from or
beneath any of the Property, (iv) any violation of Environmental Regulations or
subsection (a) or (b), or (e) hereof by it or any of its agents, tenants,
employees, contractors, licensees or subtenants, and (v) the imposition of any
governmental Lien for the recovery of environmental cleanup or removal costs. To
the extent that the Company is strictly liable under any Environmental
Regulation, its obligation to the Indemnified Party, Bondholders and the Bond
Insurer and the other indemnitees under the foregoing indemnification shall
likewise be without regard to fault on its part with respect to the violation of
any Environmental Regulation which results in liability to any indemnitee. Its
obligations and liabilities under this Section 5.20(c) shall survive any
foreclosure of the security interest in the Property or the delivery of any
instrument in lieu of foreclosure, and the satisfaction of all Parity Bonds.
(d) The Company shall conform to and carry out a reasonable program of
maintenance and inspection of all underground storage tanks, and shall maintain,
repair, and replace such tanks only in accordance with Laws and Regulations,
including but not limited to Environmental Regulations.
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Notwithstanding the foregoing, no indemnification herein shall extend to
the negligent action, or failure to act, or willful misconduct by the
Indemnified Party, the Bondholders or the Bond Insurer.
Section 5.21. Survival of Representations. All representations of the
parties hereto contained herein or in any certificate or other instrument
delivered pursuant hereto or in connection with the transactions contemplated
hereby, shall survive the execution and delivery hereof and the issuance, sale,
and delivery of the Bonds as representations of facts existing as of the date of
execution and delivery of the instrument containing such representation.
(End of Article V)
ARTICLE VI
DEFAULT AND REMEDIES
The provisions of this Article VI are subject to the provisions of
Section 6.11.
Section 6.01. Default by the Company.
(a) Events of Default; Default. "Event of Default" in this Agreement
means any one of the events set forth below and "Default" means any event that
with the lapse of time or the giving of notice, or both, would be an Event of
Default:
(i) Debt Service on Bonds. Any principal (including sinking fund
installments) of, premium, if any, or interest on any Bond shall not be
paid when due, whether at maturity, by acceleration, upon redemption or
otherwise. In determining whether debt service payments have been paid
for purposes of an Event of Default under this subparagraph (i), no
payment from the Bond Insurer shall be taken into account.
(ii) Payments of Debt Service by the Company. The Company shall
fail to make any payment required of it under subsections 3.12(a)(i) and
(iii) when the same becomes due and payable.
(iii) Rebate Payments. Any amounts owed to the United States
pursuant to Section 3.05 shall not be paid when due.
(iv) Parity Debt Defaults. An event of default shall occur with
respect to any agreement securing Parity Debt and continue beyond any
applicable grace period.
(v) Certain Violation. The Company shall make any distribution
to shareholders in violation of Section 5.12(b) hereof.
(vi) Other Obligations. The Company shall fail to make any other
required payment to the Trustee, Bond Insurer or the Issuer under this
Agreement, and such
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failure is not remedied within twenty (20) days after written notice
thereof is given by the Issuer, the Bond Insurer or the Trustee to the
Company; or the Company shall fail to observe or perform any of its
other agreements, covenants or obligations under this Agreement or any
Related Bond Document and such failure is not remedied within sixty (60)
days after written notice thereof is given by the Issuer, the Bond
Insurer or the Trustee to the Company, unless the breach is not curable
within sixty (60) days and the Company notifies the Issuer, the Bond
Insurer and the Trustee within such sixty (60) days that it is
proceeding diligently in its efforts to cure said breach, in which event
it shall be an Event of Default if said breach is not cured within
ninety (90) days after such notice is given by the Company to the
Issuer, the Bond Insurer and the Trustee.
(vii) Warranties. There shall be a material breach of warranty
made herein by the Company as of the date it was intended to be
effective and the breach is not cured within sixty (60) days after
written notice thereof is given by the Issuer, the Bond Insurer or the
Trustee to the Company, unless the breach is not curable within sixty
(60) days and the Company notifies the Issuer, the Bond Insurer and the
Trustee within such sixty (60) days that it is proceeding diligently in
its efforts to cure said breach, in which event it shall be an Event of
Default if said breach is not cured within ninety (90) days after such
notice is given by the Company to the Issuer, the Bond Insurer and the
Trustee.
(viii) Bankruptcy. An Event of Bankruptcy shall occur, provided
that, in the event of a filing of an involuntary case in bankruptcy
under the United States Bankruptcy Code or the commencement of a
proceeding under any other applicable law concerning bankruptcy,
insolvency or reorganization against the Company, such event shall not
be an Event of Default unless such petition or proceeding remains
undismissed for a period of ninety (90) days.
(ix) Breach of Other Agreements. A breach shall occur (and
continue beyond any applicable grace period) with respect to the
performance of any agreement securing Additional Indebtedness or other
Indebtedness of the Company with an outstanding principal amount of at
least equal to twenty percent (20%) of total operating revenues for the
Historic Test Period or pursuant to which the same was issued or
incurred, so that a holder or holders of such Indebtedness or a trustee
or trustees under any such agreement accelerates such Indebtedness; but
an Event of Default shall not be deemed to be in existence or to be
continuing under this clause (ix) if (A) the Company is in good faith
contesting the existence of such breach or event and if such
acceleration is being stayed by judicial proceedings, (B) the power of
acceleration is not exercised and the power of acceleration ceases to
be in effect, or (C) such breach or event is remedied and the
acceleration, if any, is wholly annulled. The Company shall notify the
Issuer, the Bond Insurer and the Trustee of any such breach or event
immediately upon the Company becoming aware of its occurrence and shall
from time to time furnish such information as the Issuer, the Bond
Insurer or the Trustee may reasonably request for the purpose of
determining whether a breach or event described in this clause (ix) has
occurred and whether such power of acceleration has been exercised or
continues to be in effect.
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(b) Waiver. If the Trustee determines that an Event of Default has been
cured before the entry of any final judgment or decree with respect to it, the
Trustee, with written consent of the Bond Insurer, shall, subject to Section
6.02(b), waive the Event of Default and its consequences, including any
acceleration, by written notice to the Company.
(c) Notice. Under the circumstances set forth in Section 7.01(g), the
Trustee shall give prompt written notice of all Events of Default to the Bond
Insurer. The Trustee shall give written notice by first class mail to the
Company and the Holders of Parity Debt, of all Events of Default known to the
Trustee, unless such Events of Default have been cured within 30 days after the
occurrence thereof. Such notices shall be mailed no later than 60 days following
notice thereof to the Trustee of any such Event of Default.
Section 6.02. Remedies Upon Events of Default.
(a) Acceleration. If an Event of Default occurs and is continuing, the
Trustee may, with the consent of Ambac Assurance, and shall, at the direction of
Ambac Assurance or 25% of the Bondholders with the consent of Ambac Assurance,
by written notice to the Issuer, the Company and Ambac Assurance, declare the
principal of the Bonds to be immediately due and payable, whereupon that portion
of the principal of the Bonds thereby coming due and the interest thereon
accrued to the date of payment shall, without further action, become and be
immediately due and payable, anything in this Agreement or in the Bonds to the
contrary notwithstanding.
Such acceleration shall be automatic upon the occurrence of the Event of
Default described in paragraph (vii) of subsection 6.01(a).
If an Event of Default occurs and is continuing, the Trustee shall
accelerate the Bonds for payment (if not previously accelerated as provided
herein) on a date not less than 10 days after the Trustee's receipt of money
from the Bond Insurer upon the written direction of the Bond Insurer and the
concurrent deposit by the Bond Insurer with the Trustee of sufficient money to
pay all principal and interest due and payable upon such acceleration.
The Trustee shall give or cause to be given notice of acceleration of
the Bonds by first-class mail to the Bondholders and of such date for payment
upon acceleration, at least 8 days before such date for payment. The Trustee
shall not be required to make payment to the Owner of any Bond until such Bond
shall be presented to the Trustee for appropriate endorsement or for
cancellation if fully paid.
(b) Annulment of Acceleration. At any time after the principal of the
Parity Debt shall have been so declared to be due and payable and before the
entry of final judgment or decree on any suit, action or proceeding instituted
on account of such default, if (i) the Company has paid or caused to be paid or
deposited with the Trustee (or with respect to Additional Parity Indebtedness,
the representative of the holder thereof), moneys sufficient to pay all matured
installments of interest and interest on unpaid installments of interest and
principal and interest and principal or redemption prices then due (other than
the principal then due only because of such declaration) of all Parity Debt
Outstanding; (ii) the Company has paid or caused to be paid
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or deposited with the Trustee moneys sufficient to pay the charges,
compensation, expenses, disbursements, advances and liabilities of the Trustee
and any paying agents in connection therewith; (iii) all other amounts then
payable by the Company hereunder and under any Supplemental Agreement shall have
been paid or a sum sufficient to pay the same shall have been deposited with the
Trustee or other representative of the holders of Additional Parity
Indebtedness; and (iv) every Event of Default (other than a default in the
payment of the principal of such Parity Indebtedness then due only because of
such declaration) shall have been remedied, then the Trustee shall annul such
declaration and its consequences with respect to any Parity Debt or portions
thereof not then due by its terms. No such annulment shall extend to or affect
any subsequent Event of Default or impair any right consequent thereon.
(c) Court Proceedings; Mortgage. Upon the occurrence and continuance of
any Event of Default, the Trustee may, and upon the written request of the
Holders of not less than 25% in aggregate principal amount of the Parity Debt
Outstanding, together with indemnification of the Trustee to its satisfaction
therefor, shall proceed forthwith to protect and enforce its rights and the
rights of such Holders by such suits, actions or proceedings as the Trustee,
being advised by counsel, shall deem expedient, including but not limited to:
(i) enforcement of the right of the Holders to collect and
enforce the payment of amounts due or becoming due under the Parity
Debt;
(ii) suit upon all or any part of the Parity Debt;
(iii) civil action to enjoin any acts or things, which may be
unlawful or in violation of the rights of the Holders of Parity Debt;
and
(iv) enforcement of any other right of the Holders of Parity
Debt conferred by law or hereby.
Upon occurrence of any Event of Default as defined in the Mortgage, the
Trustee may, and upon written request of holders of not less than 25% in
aggregate principal amount of the Parity Debt, together with indemnification of
the Trustee to its reasonable satisfaction therefor, shall proceed to exercise
such remedies under the Mortgage as directed by such holders or, in the absence
of such direction, as the Trustee, being advised by counsel, shall deem
expedient.
Notwithstanding anything else herein to the contrary, the Trustee shall
have no obligation to institute or conduct any proceedings to realize on the
Mortgage, to take any action regarding any activity or condition on the
Mortgaged Property, or to exercise any remedy provided for or described herein
or in the Mortgage upon the occurrence of any Event of Default if the Trustee,
after investigation, reasonably determines that to do so may expose the Trustee
to the risk of liability under any federal, state or local law, regulation or
requirement now or hereafter in effect relating to human health or safety, or
the protection of the environment. Such investigation shall constitute no active
participation in any activity or condition on the Mortgaged Property. Failure to
exercise any remedy provided for or described herein shall not waive the
authority of the Trustee to exercise such remedy in its discretion at a later
time.
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(d) Payment of Parity Debt on Default. The Company covenants that in
case any Event of Default under Section 6.01(a)(i), (ii), (iii), (iv) or (v)
shall occur, upon demand of the Trustee, it will pay to the Trustee, for the
benefit of the holders of the Parity Debt, the whole amount that then shall have
become due and payable on all such Parity Debt for principal or interest, or
both, as the case may be, with interest upon the overdue principal and
installments of interest (to the extent permitted by law) at the rate of
interest provided in the applicable Parity Debt; and, in addition thereto, such
further amount (to the extent permitted by law) as shall be sufficient to cover
the costs and expenses of collection, including a reasonable compensation to the
Trustee, its agents, attorneys and counsel, and any expenses incurred by the
Trustee other than as a result of its negligence or bad faith.
Section 6.03. Application of Moneys after Default. Proceeds from the
exercise of the rights and remedies of the Trustee under subsection 6.02(c) and
(d) with respect to any Collateral, after payment or reimbursement of the
reasonable fees and expenses of the Trustee and the Issuer in connection
therewith, including reasonable attorneys fees, shall be applied (without
consideration of application of Debt Service Reserve Fund for payment of the
Bonds and any other security for a particular series of Parity Debt) as follows:
(a) Subject to (d) below, unless the principal of all Outstanding Parity
Debt and any holders of Permitted Encumbrances which by their terms are on a
parity with the holders of Parity Debt (collectively "Permitted Parity
Obligations") shall have become or have been declared due and payable:
First: To the payment to the persons entitled thereto of all
installments of interest then due on Permitted Parity Obligations in the
order of the maturity of such installments, and, if the amount available
shall not be sufficient to pay in full any installment or installments
maturing on the same date, then to the payment thereof ratably,
according to the amounts due thereon to the persons entitled thereto,
without any discrimination or preference; and
Second: To the payment to the persons entitled thereto of the unpaid
principal installments of any Permitted Parity Obligations which shall
have become due, whether at maturity or by call for redemption, in the
order of their due dates, and if the amounts available shall not be
sufficient to pay in full all Permitted Parity Obligations due on any
date, then to the payment thereof ratably, according to the amounts of
principal installments due on such date, to the persons entitled
thereto, without any discrimination or preference.
(b) Subject to (d) below, if the principal of all Outstanding Permitted
Parity Obligations shall have become or have been declared due and payable, to
the payment of the principal and interest then due and unpaid upon Permitted
Parity Obligations without preference or priority of principal over interest or
of interest over principal, or of any installment of interest, or of any
Permitted Parity Obligations over any other Permitted Parity Obligations,
ratably, according to the amounts due respectively for principal and interest,
to the persons entitled thereto without any discrimination or preference.
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(c) If the principal of all Outstanding Permitted Parity Obligations
shall have been declared due and payable, and if such declaration shall
thereafter have been rescinded and annulled under the provisions of this
Article, then, subject to the provisions of paragraph (b) of this Section in the
event that the principal of all Outstanding Permitted Parity Obligations shall
later become due or be declared due and payable, the moneys shall be applied in
accordance with the provisions of paragraph (a) of this Section.
(d) Notwithstanding the provisions of Section 6.03(a) and (b) above, the
payment of the Permitted Parity Obligations is subject, as provided in this
subsection (d), to the rights of holders of Liens on the Collateral that are
prior to the Liens of the Permitted Parity Obligations. If the Trustee
reasonably believes that prior Liens exist (without regard to whether such,
prior Liens constitute Permitted Encumbrances), the Trustee may withhold
payments until the relative rights of the claimants are determined. If the
rights to Collateral of holders of Liens that do not constitute Permitted
Encumbrances intervene in priority between the Liens and rights of the holders
of the Permitted Parity Obligations granted under this Agreement or the
documents creating the Collateral, then the Trustee shall itself or shall employ
an accountant to perform the following calculations (and upon which the Trustee
may conclusively rely): (i) calculate the ratio (the "Distribution Ratio") of
(I) the aggregate amount payable on the Permitted Parity Obligations in
accordance with (a) or (b) above, as applicable, to (II) the proceeds then
available for distribution with respect to the Permitted Parity Obligations and
the amount available for distribution (by the Trustee or otherwise) to the
holders of intervening prior Liens known to the Trustee; and (ii) distribute
such proceeds as follows; (A) first, the Holders of the Permitted Parity
Obligations whose Lien or right to Collateral is superior to the intervening
Liens shall be paid a sum determined by multiplying the amount calculated in
accordance with Section 6.03(a) or (b), as applicable, times the Distribution
Ratio; (B) second, the Holders of the Permitted Parity Obligations whose Liens
or rights are inferior to intervening prior Liens shall be paid the difference
between the sum determined by multiplying the amount calculated in accordance
with Section 6.03(a) or (b), as applicable, times the Distribution Ratio, less
the amount payable to holders of intervening prior Liens subject to any order of
a court enters against the Trustee.
If the intervening Lien constitutes a Permitted Encumbrance that
pursuant to Section 5.17 may be prior to rights of Holders of all Parity Debt,
then the Trustee shall distribute such proceeds as follows: (A) first, the
Trustee shall calculate the Distribution Ratio using only the aggregate proceeds
available for distribution to the holders of Parity Debt, and (B) second, the
Holders of all Parity Debt shall be paid an amount equal to the aggregate
proceeds available to Holders of Parity Debt and, multiplied by the Distribution
Ratio calculated in accordance with (A).
To illustrate the application of (d), assume the following: $15 million
Bonds outstanding, $10 million Additional Parity Debt issued after the Bonds, $1
million of Liens that are prior to such Additional Parity Debt and that do not
constitute Permitted Encumbrances, $20 million proceeds available for
distribution and the Parity Debt has been accelerated. Under these assumptions,
the Distribution Ratio (ignoring any interest payable) is 80% (20 (divided by)
25). Distribution of $20 million proceeds would be as follows: (1) the holder of
the Bonds would share $12 million ($15m x 80%); (2) holders of intervening Lien
prior to Additional Parity Debt
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would get $1m; and (3) holders of Additional Parity Debt would get $7m (($10m x
80%) - $1m).
If, however, the $1 million intervening Lien constituted a Permitted
Encumbrance that may be prior to rights of holders of Parity Debt, then the
holder of the intervening Permitted Encumbrance would receive $1 million (so
long as such proceeds were derived from Property subject to such prior Permitted
Encumbrances), and the Distribution Ratio would be calculated with respect to
the remaining proceeds of $19 million. Ignoring any interest payable, the
Distribution Ratio would then be 76% (19 (divided by) 25). Distribution of the
$19 million remaining proceeds would then be as follows: (1) the holder of Bonds
would share the $11.4 million ($15m x 76%); and (2) holders of Additional Parity
Debt would share the $7.6 million ($10m x 76%).
Whenever moneys are to be applied pursuant to this Section, the Trustee
shall fix the date (which shall be the first of a month unless the Trustee shall
deem another date more suitable) upon which such application is to be made, and
upon such date interest on the amounts of principal paid on such date shall
cease to accrue. The Trustee shall give or cause to be given notice of such
payment, by fast-class mail, to the holders of Parity Debt at least 8 days
before such date. The Trustee shall not be required to make payment to the Owner
of any Bond until such Bond shall be presented to the Trustee for appropriate
endorsement or for cancellation if fully paid. Any surplus thereof shall be paid
to the Company as directed by an Officer's Certificate.
Section 6.04. Remedies Cumulative. The rights and remedies under this
Agreement shall be cumulative and shall not exclude any other rights and
remedies allowed by law, provided there is no duplication of recovery. The
failure to insist upon a strict performance of any of the obligations of the
Company or of the Issuer or to exercise any remedy for any violation thereof
shall not be taken as a waiver for the future of the right to insist upon strict
performance or of the right to exercise any remedy for the violation.
Section 6.05. Performance of the Company's Obligations. If the Company
shall fail to pay or perform any obligation under this Agreement, the Trustee
may pay or perform such obligation in its own name or in the Company's name and
is hereby irrevocably appointed the Company's attorney-in-fact for such purpose.
Unless an Event of Default exists, the Trustee shall give at least five (5)
Business Days' notice to the Company before taking action under this Section,
except that in the case of emergency as reasonably determined by the Trustee or
the Holders of at least a majority in principal amount of the Outstanding Bonds,
it may act on lesser notice or give the notice promptly after rather than before
taking the action. The reasonable cost of any such action by the Trustee shall
be paid or reimbursed by the Company with interest at the interest rate publicly
announced by the Trustee as its prime rate.
Section 6.06. Holders' Control of Proceedings. If an Event of Default
shall have occurred and be continuing, notwithstanding anything herein to the
contrary, the Holders of at least 25% in aggregate principal amount of Parity
Debt shall, with the consent of the Bond Insurer, have the tight, at any time,
by an instrument in writing executed and delivered to the Trustee, to direct the
time, method and place of conducting any proceeding to be taken in
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connection with the enforcement of the terms and conditions hereof or, to the
extent permitted by law, for the appointment of a receiver or any other
proceedings hereunder, provided that such direction is not in conflict with any
applicable law or the provisions hereof (including indemnity to the Trustee as
provided herein) and provided further that nothing in this Section shall impair
the right of the Trustee in its discretion to take any other action hereunder
which it may deem proper and which is not inconsistent with such direction by
Holders of the Parity Debt.
Section 6.07. Remedies Subject to Provision of Law. All rights, remedies
and powers provided by this Article may be exercised only to the extent that the
exercise thereof does not violate any applicable provision of law, and all of
the provisions of this Article are intended to be subject to all applicable
mandatory provisions of law which may be controlling and to be limited to the
extent necessary so that they will not render this instrument or the provisions
hereof invalid or unenforceable under the provisions of any applicable law.
Section 6.08. Limitation on Suits by Holders. No Holder of any
Outstanding Parity Debt has any right to institute any proceeding, judicial or
otherwise, with respect to this Agreement, or, to the extent permitted by law,
for the appointment of a receiver or trustee, or for any other remedy hereunder
unless all of the following conditions are satisfied:
(a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% in aggregate principal
amount of Outstanding Parity Debt shall have made written request to
the Trustee to institute proceedings in respect of such Event of
Default is its own name as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of the Outstanding Parity Debt.
It being understood and intended that no one or more Holders of Outstanding
Parity Debt shall have any right in any manner whatever by virtue of, or by
availing of, any provision of this Agreement to affect, disturb or prejudice the
rights of any other such Holders of Outstanding Parity Debt, or to obtain or to
seek to obtain priority or preference over any other such Holders or to enforce
any right under this Agreement, except in the manner herein provided and for the
equal and ratable benefit of all the Holders of Outstanding Parity Debt.
Notwithstanding any other provisions in this Agreement, including
Section 6.11, the right of a holder of any Parity Debt to receive payment of the
principal of and interest on such Parity Debt, on or after the respective due
dates expressed is such Parity Debt, or to institute suit for
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the enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of such holder.
Section 6.09. Waiver of Certain Defenses. The Company hereby waives, to
the extent permitted by law, any right to claim that any payment made pursuant
to this Agreement is a "fraudulent conveyance" or "fraudulent transfer" pursuant
to the fraudulent conveyance provisions of State law or that any such payment is
a "voidable preference" or a "fraudulent transfer" under the Federal Bankruptcy
Code.
Section 6.10. Opportunity to Cure. Any other provision of this Agreement
notwithstanding, no event described in subsections (a)(iv), (v), (vi), (vii) and
(viii) of Section 6.01 hereof shall constitute an Event of Default until the
following conditions shall have been satisfied:
(a) All notices required under Section 6.01 shall have been
given to the Company;
(b) The Company shall not have cured such default within the
required cure period; and
(c) As to the events described in subsections (a)(vii) and
(viii) of Section 6.01, the Company shall have failed to deposit with
the Trustee within fifteen days of the Company's receipt of the required
written notice, the amount sufficient to pay the amount then owed with
respect to such Indebtedness or judgment, writ or warrant.
If the Company shall take the actions described in subsections (b) and
(c) of this Section 6.10 within the period required, then the default shall be
deemed to have been cured and no Event of Default shall result therefrom.
Section 6.11. Right of Bond Insurer Upon an Event of Default. Subject to
Section 10.01, but otherwise notwithstanding anything in this Agreement to the
contrary, upon the occurrence and continuance of an Event of Default, Ambac
Assurance shall be entitled to control and direct the enforcement of all rights
and remedies granted to the Bondholders or the Trustee for the benefit of the
Bondholders under this Agreement, including, without limitation: (i) the right
to accelerate the principal of the Bonds as described in Section 6.02(a) of this
Agreement, and (ii) the right to annul any declaration of acceleration in
accordance with Section 6.02(b) hereof, and Ambac Assurance shall also be
entitled to approve all waivers of Events of Default.
(End of Article VI)
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ARTICLE VII
THE TRUSTEE
Section 7.01. Rights and Duties of the Trustee.
(a) Moneys to be Held in Trust. All moneys received by the Trustee under
this Agreement shall be held by the Trustee in trust and applied subject to the
provisions of this Agreement.
(b) Accounts. The Trustee shall keep proper accounts of its transactions
hereunder (separate from its other accounts), which shall be open to inspection
by the Issuer and the Company and their representatives duly authorized in
writing and shall provide monthly reports of such transactions to the Company.
(c) Certain Dues and Responsibilities.
(1) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Agreement; but in the case of any such certificates or opinions which by
any provisions hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Agreement.
(2) In case an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by
this Agreement, and use the same degree of care and skill in their
exercise, as a prudent corporate trustee would exercise or use under
similar circumstances.
(3) No provision of this Agreement shall be construed to relieve
the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct or breach of
trust, except that;
(i) this subsection shall not be construed to limit the effect
of subsection (1) of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a chairman or vice chairman of the board of
directors, the chairman or vice chairman of the executive committee of
the board of directors, the president, any vice
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president, the secretary, any assistant secretary, the treasurer, any
assistant treasurer, the cashier, any assistant cashier, any trust
officer or assistant trust officer, the controller and any assistant
controller or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated
officers or with respect to a particular matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity
with the particular subject, unless it shall be proved that the Trustee
was negligent or acted in bad faith or with gross misconduct;
(iii) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of the majority in principal amount of the
Outstanding Parity Debt or in connection with an action only relating to
Bonds and/or Parity Bonds at the direction of the Holders of a majority
thereof, relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under this Agreement; and
(iv) except for sending notices under Section 6.01(c) and taking
actions under Section 10.02, no provision of this Agreement shall
require the Trustee to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such funds
or adequate indemnity against such risk or liability is not reasonably
assured to it.
(4) Whether or not therein expressly so provided, every
provision of this Agreement relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to
the provisions of this Section.
(d) Certain Rights of Trustee. Subject to (c) above:
(1) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, obligation, note or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties.
(2) Any request or direction of the Company mentioned herein
shall be sufficiently evidenced by an Officer's Certificate and any
action of the Governing Body may be sufficiently evidenced by a copy of
a resolution certified by the secretary or an assistant secretary of the
Company to have been duly adopted by the Governing Body and to be in
full force and effect on the date of such certification and delivered to
the Trustee.
(3) Whenever, in the administration of this Agreement, the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the Trustee
(unless other evidence be herein specifically
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prescribed) may, in the absence of bad faith on its part, rely upon an
Officer's Certificate.
(4) The Trustee may consult with counsel and the written advice
of such counsel (unless an Opinion of Counsel or Bond Counsel is
required hereunder) shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
(5) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement at the request or
direction of any of the Holders pursuant to this Agreement except
actions taken in accordance with Section 10.02 and except for draws
under the Bond Insurance Policy under Section 10.02 hereof, unless such
Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction.
(6) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, note or other paper or document, but the Trustee,
in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company,
personally or by agent or attorney.
(7) The Trustee may execute any of the trusts or powers
hereunder or perform any dudes hereunder either directly or by or
through agents, attorneys, receivers or employees (but shall be
answerable therefor only in accordance with the standard specified
above), and shall be entitled to the advice of counsel concerning all
matters of trust hereof and duties hereunder. The Trustee may in all
cases pay such reasonable compensation to any and all such attorneys,
agents, receivers and employees as may reasonably be employed in
connection with the trusts hereof. The Trustee may act upon the opinion
or advice of any attorney approved by the Trustee in the exercise of
reasonable care. The Trustee shall not be responsible for any loss or
damage resulting from any action taken or omitted to be taken in good
faith in reliance upon that opinion or advice.
(8) The Trustee shall not be responsible for arty recital
herein, the Bond Insurance Policy or in the Parity Bonds (except with
respect to the certificates of the Trustee endorsed on the Parity
Bonds), or for the recording or rerecording, filing or refiling of this
Agreement, or for the validity or sufficiency of this Agreement or any
other instruments executed in connection herewith (including but not
limited to any financing statements), or for the sufficiency of the
security for the Parity Bonds issued hereunder or intended to be secured
hereby. The Trustee shall not be responsible or liable for any loss or
delay suffered in connection with any investment of funds made by it in
accordance herewith, including, without limitation, any loss suffered in
connection with the sale of any investment pursuant hereto.
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(9) The Trustee shall not be accountable for the use of the
proceeds of any Parity Bonds after such proceeds are paid or disbursed
as provided herein.
(10) The Trustee may reasonably demand any showings,
certificates, reports, opinions, appraisals and other information, and
any corporate action and evidence thereof, in addition to that required
by the terms hereof, as a condition to the authentication of any Bonds
or the taking of any action whatsoever within the purview hereof, if the
Trustee reasonably deems it to be desirable for the purpose of
establishing the right of the Issuer to the authentication of any Parity
Bonds or the right of any Person to the taking of any other action by
the Trustee; provided, that the Trustee shall not be required to make
that demand. Any action taken by the Trustee pursuant hereto 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 Owner of any
Parity Bond shall be conclusive or giving and binding upon all future
Owners of the same Parity Bond and upon Parity Bonds issued in exchange
therefor or upon transfer or in place thereof.
(11) As to the existence or nonexistence of any fact or as to
the sufficiency or validity of any instrument, paper or proceeding, the
Trustee shall be entitled to rely, in the absence of bad faith, upon a
certificate signed on behalf of the Issuer by the Chairman, any
Vice-Chairman, the Secretary, the Treasurer or any Assistant Secretary
or Assistant Treasurer of the Issuer or a certificate signed upon behalf
of the Company by an Authorized Officer thereof as sufficient evidence
of the facts therein contained, and prior to the occurrence of an Event
of Default of which the Trustee has been notified or, is deemed to have
notice as provided in subsection (g) of this Section, or subsequent to
the waiver, rescission or annulment of such a default as provided in
Article VI hereof, shall also be at liberty to accept a similar
certificate to the effect that any particular dealing, transaction or
action is necessary or expedient, but may at its discretion secure such
further evidence deemed necessary or advisable, but shall in no case be
bound to secure the same. The Trustee may accept a certificate signed on
behalf of the Issuer by the Chairman, any Vice-Chairman, the Secretary,
the Treasurer or any Assistant Secretary or Assistant Treasurer of the
Issuer or a certificate signed upon behalf of the Company by an
Authorized Officer thereof to the effect that a resolution in the form
therein set forth has been adopted by the Issuer or the Company, as
applicable, as conclusive evidence that such resolution has been duly
adopted, and is in full force and effect.
(12) The permissive right of the Trustee to do things enumerated
herein shall not be construed as a duty, and the Trustee shall not be
liable in the performance of its obligations hereunder except for its
negligence, willful misconduct or breach of trust.
(13) All moneys received by the Trustee or any Paying Agent
shall, until used or applied or invested as herein provided, be held in
trust for the purposes for which they were received but need not be
segregated from other funds except to the extent required by law or by
the express terms of this Agreement.
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(e) Ownership of Bonds. The Trustee may be or become the owner of or
trade in Bonds with the same rights as if it were not the Trustee.
(f) Surety Bond. The Trustee shall not be required to furnish any bond
or surety.
(g) Notice of Event of Default. The Trustee shall not be required to
take notice, and shall not be deemed to have notice, of any Event of Default,
except Events of Default described is Section 6.01(a)(i), (ii) and (iii), unless
the Trustee shall be notified specifically of the Event of Default in a written
instrument or document delivered to it by the Company, the Issuer, the Bond
Insurer or by the Holders of at least ten percent of the aggregate principal
amount of the Outstanding Parity Debt. In the absence of delivery of a notice
satisfying those requirements, the Trustee may assume conclusively that there is
no Event of Default, except as noted above.
Section 7.02. Fees and Expenses of the Trustee: Indemnification. Except
to the extent the Trustee has been paid or reimbursed from the Project Fund, the
Company shall pay to the Trustee reasonable compensation for its services and
pay or reimburse the Trustee (within thirty (30) days after notice) for its
reasonable expenses and disbursements, including attorneys' fees, hereunder. Any
fees, expenses, reimbursements or other charges which the Trustee may be
entitled to receive from the Company hereunder, if not paid when due, shall bear
interest at the interest rate publicly announced by the Trustee as its prime
rate.
The Company shall indemnify and save the Trustee and its agents and
employees harmless for, from and against any reasonable expenses and liabilities
which such person may incur in the exercise of its duties hereunder or under any
documents related to the exercise of any duties hereunder and which are not due
to its negligence, willful misconduct or breach of trust.
In addition, the indemnification obligation of the Company hereunder
shall not include any loss, liability or expense incurred by the Trustee because
the Trustee was held by a court of competent jurisdiction, to have acted in bad
faith with respect to any action, omission or judgment described in Sections
7.01(c)(1)(ii), 7.01(c)(3)(ii) and (iii), 7.01(d)(3), 7.01(d)(4), and the first
sentence of 7.01(d)(11).
Section 7.03. Resignation or Removal of the Trustee. The Trustee may
resign on not fewer than sixty (60) days' notice given in writing to the Issuer,
the Holders, the Bond Insurer and the Company. The Trustee will promptly certify
to the Issuer that it has mailed or caused to be mailed such notice to all
Holders and such certificate will be conclusive evidence that such notice was
given iii the manner required hereby. The Trustee may be removed at any time by
written notice from the Bond Insurer or Holders of a majority in principal
amount of the Outstanding Parity Debt to the Trustee or, so long as no Event of
Default has occurred and is continuing hereunder, by written notice from the
Company to the Trustee. No removal or resignation shall take effect until a
successor, acceptable to Ambac Assurance, has been appointed.
Section 7.04. Successor Trustee. Any corporation or association which
succeeds to the corporate trust business of the Trustee as a whole or
substantially as a whole, whether by sale,
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merger, consolidation or otherwise, shall thereby become vested with all the
property, rights and powers of the Trustee under this Agreement, without any
further act or conveyance.
In case the Trustee resigns or is removed or becomes incapable of
acting, or becomes bankrupt or insolvent, or if a receiver, liquidator or
conservator of the Trustee or of its property is appointed, or if a public
officer takes charge or control of the Trustee, or of its property or affairs, a
successor shall be appointed by the Company. The Company shall notify the
Holders of the appointment in writing within twenty (20) days from the
appointment. The Company will promptly certify to the successor Trustee that it
has mailed or caused to be mailed such notice to all Holders and such
certificate will be conclusive evidence that such notice was given in the manner
required hereby. If no appointment of a successor is made within sixty (60) days
after the giving of written notice in accordance with Section 7,03 or after the
occurrence of any other event requiring or authorizing such appointment, the
outgoing Trustee or any Holder may apply to any court of competent jurisdiction
for the appointment of such a successor, and such court may thereupon, after
such notice, if any, as such court may deem proper, appoint such successor. Any
successor Trustee appointed under this Section shall be a trust company or a
bank having the powers of a trust company, exercisable in the State, having a
capital and surplus of not less than $75,000,000 and be acceptable to Ambac
Assurance. Any such successor Trustee shall notify the Issuer and the Company of
its acceptance of the appointment and, upon giving such notice, shall become
Trustee, vested with all the property, rights and powers of the Trustee
hereunder, without any further act or conveyance. Such successor Trustee shall
execute, deliver, record and file such instruments as are required to confirm or
perfect its succession hereunder and any predecessor Trustee shall from time to
time execute, deliver, record and file such instruments as the incumbent Trustee
may reasonably require to confirm or perfect any succession hereunder, subject,
however, to the terms and conditions herein set forth including, without
limitation, the right of the predecessor Trustee to be paid and reimbursed in
full for its reasonable charges and expenses (including reasonable fees and
disbursements of its counsel) and to indemnification under Sections 7.02 and
8.05 hereof.
(End of Article VII)
ARTICLE VIII
THE ISSUER
SECTION 8.01. Rights and Duties of the Issuer.
(a) Remedies of the Issuer. Notwithstanding any contrary provision in
this Agreement, the Issuer shall have the right to take any action or make any
decision with respect to proceedings for indemnity against the liability of the
Issuer, the members of its Board of Directors, its officers, counsel, financial
advisors and agents and for collection or reimbursement from sources other than
moneys or property held under this Agreement or subject to the lien hereof. The
Issuer may enforce its rights under this Agreement which have not been assigned
to the Trustee by legal proceedings for the specific performance of any
obligation contained herein or for the enforcement of any other appropriate
legal or equitable remedy, and may
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recover damages caused by any breach by the Company of its obligations to the
Issuer under this Agreement, including court costs, reasonable attorneys' fees
and other costs and expenses incurred in enforcing such obligations.
(b) Limitation on Actions. The Issuer shall not be required to monitor
the financial condition of the Company and, except as specifically provided
herein, shall not have any responsibility with respect to notices, certificates
or other documents filed with it hereunder, The Issuer shall not be required to
take notice of any breach or default except when given notice thereof by the
Trustee, the Bond Insurer or the Bondholders, as the case may be. The Issuer
shall not be required to take any action unless indemnity reasonably
satisfactory to it is furnished for expenses or liability to be incurred therein
(other than the giving of notice). The Issuer, upon written request of the
Bondholders or the Trustee, shall cooperate to the extent reasonably necessary
to enable the Trustee to exercise any power granted to the Trustee by this
Agreement. The Issuer shall be entitled to reimbursement pursuant to Section
8.02.
(c) Responsibility. The Issuer shall be entitled to the advice of
counsel (who may be counsel for any parry or for any Bondholder unless an
Opinion of Counsel or Opinion of Bond Counsel is required hereunder) and shall
be wholly protected as to any actions taken or omitted to be taken in good faith
in reliance on such advice. The Issuer may rely conclusively on any notice,
certificate or other document furnished to it hereunder or pursuant to the Bond
Purchase Agreement and reasonably believed by it to be genuine. The Issuer shall
not be liable for any action taken by it in good faith and reasonably believed
by it to be within the discretion or power conferred upon it, or in good faith
omitted to be taken by it because it was reasonably believed to be beyond the
discretion or power conferred upon it or taken by it pursuant to any direction
or instruction by which it is governed hereunder or omitted to be taken by it by
reason of the lack of direction or instruction required for such action
hereunder, or be responsible for the consequences of any error of judgment
reasonably made by it, and when any payment, consent or other action by the
Issuer is called for by this Agreement, the Issuer may defer such action pending
such investigation or inquiry or receipt of such evidence, if any, as it may
require in support thereof. A permissive right or power to act shall not be
construed as a requirement to act, and no delay in the exercise of a right or
power shall affect the subsequent exercise thereof. The Issuer shall in no event
be liable for the application or misapplication of funds, or for other acts or
defaults by any person or entity except by its own directors, officers and
employees. No recourse shall be had by the Company, the Trustee or any
Bondholder for any claim based on this Agreement or the Bonds against any of the
Issuer's directors, officers, counsel, financial advisors or agents unless such
claim is based upon the willful dishonesty or intentional violation of law of
such person.
(d) Financial Obligations. The Issuer shall have no liability or
obligation with respect to the payment of the purchase price of the Bonds. None
of the provisions of this Agreement shall require the Issuer to expend or risk
its own funds or to otherwise incur financial liability in the performance of
any of its duties or in the exercise of any of its rights or powers hereunder,
unless payable from the revenues pledged hereunder, or the Issuer shall first
have been adequately indemnified to its satisfaction against the cost, expense,
and liability which may be incurred thereby. The Issuer shall not be under any
obligation hereunder to perform any record keeping or to provide any legal
services, it being understood that such services shall be
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performed or provided by the Trustee or the Company. The Issuer covenants that
it will faithfully perform at all times any and all covenants, undertakings,
stipulations, and provisions expressly contained in this Agreement, in any and
every Bond executed, authenticated, and delivered hereunder; provided, however,
that (a) the Issuer shall not be obligated to take any action or execute any
instrument pursuant to any provision hereof until it shall have been requested
to do so by the Company or the Trustee, and (b) the Issuer shall have received
the instrument to be executed, and, at the Issuer's option, shall have received
from the Company assurance satisfactory to the Issuer that the Issuer shall be
reimbursed for its reasonable expenses incurred or to be incurred in connection
with taking such action or executing such instrument.
(e) Reliance by Issuer on Pacts or Certificates. Anything in this
Agreement to the contrary notwithstanding, it is expressly understood and agreed
by the parties hereto that the Issuer may rely conclusively on the truth and
accuracy of any certificate, opinion, notice, or other instrument furnished to
the Issuer or the Trustee as to the existence of any fact or state of affairs
required hereunder to be noticed by the Issuer.
(f) Immunity of Issuer's Directors, Officers, Counsel, Financial
Advisors, and Agents. No recourse shall be had for the enforcement of any
obligation, covenant, promise, or agreement of the Issuer contained in this
Agreement, any other Issuer Documents, or in any Bond or for any claim based
hereon or otherwise in respect hereof or upon any obligation, covenant, promise,
or agreement of the Issuer contained in any agreement, instrument, or
certificate executed in connection with the 1997 Project or the issuance and
sale of the Bonds, against any Indemnified Party (except for the Issuer and the
Trustee), whether by virtue of any Arizona Constitutional provision, statute, or
rule of law, or by the enforcement of any assessment or penalty or otherwise;
it being expressly agreed and understood that no personal liability whatsoever
shall attach to, or be incurred by, any Indemnified Party (except for the
Issuer and the Trustee), either directly or by reason of any of the obligations,
covenants, promises, or agreements entered into by the Issuer, the Company or
the Trustee, or to be implied therefrom as being supplemental hereto or thereto,
and that all personal liability of that character against every Indemnified
Party (except for the Issuer and the Trustee), is, by the execution of the Bonds
and this Agreement, and as a condition of, and as part of the consideration for,
the execution of the Bonds and this Agreement, is expressly waived and released.
Section 8.02. Expenses of the Issuer. Except to the extent paid or
reimbursed from the Project Fund, the Company shall pay or reimburse the Issuer
upon demand for all administrative fees and expenses (including, but not limited
to, reasonable attorneys' and financial advisory fees and disbursements) charged
or incurred by the Issuer in connection with the issuance of the Bonds and all
expenses reasonably incurred or advances reasonably made in the exercise of the
Issuer's rights or the performance of its obligations hereunder or under the
Bond Purchase Agreement. Any fees, expenses, reimbursements or other charges
which the Issuer may be entitled to receive from the Company hereunder, if not
paid when due, shall bear interest at the rate publicly announced by the Trustee
as its prime rate plus 5%.
Section 8.03. Limitation on Recourse and Liability. No agreements or
provisions contained herein, nor any agreement, covenant, or undertaking by the
Issuer in connection with
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the 1997 Project or the issuance, sale, and/or delivery of the Bonds shall give
rise to any pecuniary liability of the Issuer or a charge against its general
credit, or shall obligate the Issuer financially in any way, except as may be
payable from the revenues pledged hereby for the payment of the Bonds and their
application as provided in this Agreement. No failure of the Issuer to comply
with any term, covenant, or agreement contained in the Bonds, this Agreement, or
in any document executed by the Issuer in connection with the 1997 Project or
the issuance and sale of the Bonds, shall subject the Issuer to liability for
any claim for damages, costs, or other financial or pecuniary charge, except to
the extent the same can be paid or recovered from the revenues pledged for the
payment of the Bonds or other revenues derived under the Agreement. Nothing
herein shall preclude a proper party in interest from seeking and obtaining, to
the extent permitted by law, specific performance against the Issuer for any
failure to comply with any term, condition, covenant, or agreement herein;
provided that no costs, expenses, or other monetary relief shall be recoverable
from the Issuer, except as may be payable from the revenues pledged under this
Agreement for the payment of the Bonds or other revenue derived under this
Agreement. No provision, covenant, or agreement contained herein, or any
obligations imposed upon the Issuer, or the breach, thereof, shall constitute an
indebtedness of the Issuer within the meaning of any State constitutional or
statutory limitation or shall constitute or give rise to a charge against the
Issuer's general credit. In making the agreements, provisions, and covenants
set forth in this Agreement, the Issuer has not obligated itself, except with
respect to the application of the revenues pledged in this Agreement for the
payment of the Bonds or other revenues derived under this Agreement.
The County shall not in any event be liable for the payment of the
principal of, premium, if any, or interest on any of the Bonds issued, or for
the performance of any pledge, mortgage, obligation or agreement of any kind
whatsoever herein or indebtedness by the Issuer, and none of the Bonds of the
Issuer of any of its agreements or obligations herein or otherwise shall be
construed to constitute an indebtedness of the County within the meaning of any
constitutional or statutory provision whatsoever.
Section 8.04. Unrelated Bond Issues. Prior to the issuance of the Bonds,
the Issuer has issued, and subsequent to the issuance of the Bonds the Issuer
expects to issue various series of bonds in connection with the financing of
other projects (said bonds together with any bonds issued by the Issuer between
the date hereof and issuance of the Bonds shall be referred to herein as the
"Other Bonds"). Any pledge, mortgage, or assignment made in connection with any
Other Bonds shall be protected, and no funds pledged or assigned for the payment
of principal, premium, if any, or interest on the Other Bonds shall be used for
the payment of principal, premium, if any, or interest on the Bonds. Any pledge,
mortgage, or assignment made in connection with the Bonds shall be protected,
and no funds pledged or assigned for the payment of the Bonds shall be used for
the payment of principal, premium, if any, or interest on the Other Bonds.
Section 8.05. Indemnification.
(a) The Company will pay, defend, protect, indemnify, and hold harmless
each of the Indemnified Parties for, from and against all liabilities, losses,
damages, costs, expenses (including, without limitation, legal fees and
expenses), causes of action (whether in contract,
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tort, or otherwise), suits, claims, demands, and judgments of every kind,
character and nature whatsoever (collectively referred to herein as the
"Liabilities") directly or indirectly arising from or relating to the
authorization, issuance, sale or delivery of the Bonds, this Agreement, the 1997
Project or in any way relating to or arising out of the administration of the
trust estate or the issuance and sale of the Bonds created pursuant to this
Agreement including, but not limited to, the following: (i) any injury to or
death of any person or damage to the Property or growing out of or connected
with the use, non-use, condition, or occupancy of the Property or any part
thereof; (ii) violation of any agreement, covenant or condition of the Company
Documents; (iii) violation by the Company of any contract, agreement or
restriction relating to the Property, including, without limitation, the ACC
Order; (iv) violation of any law, ordinance, or regulation affecting the
Property or any part thereof or the ownership, occupancy, or use thereof; (v)
the issuance and sale of the Bonds or any of them; and (vi) any statement,
information, or certificate furnished by the Company to the Issuer which is
misleading, incomplete, untrue, or incorrect in any material respect.
(b) The Company also agrees to pay, defend, protect, indemnify and hold
harmless each of the Indemnified Parties for, from and against the Liabilities
directly or indirectly arising from or relating to (i) any errors or omissions
of any nature whatsoever contained in any legal proceedings or other official
representation or inducement made by the Issuer or the County pertaining to the
Bonds (provided, however, nothing in this subsection shall be deemed to provide
the Issuer with indemnification for the Issuer's omissions or misstatements
contained in the official statement under the captions "the Issuer" or
"Litigation" as it relates to the Issuer) and (ii) any fraud or
misrepresentations or omissions contained in the proceedings of the Issuer or
the County relating to the issuance of the bonds or pertaining to the financial
condition of the Company which, if known to the Original Purchaser and the
investors initially purchasing the Bonds from the Original Purchaser, might be
considered a material factor in such person's decision to purchase the Bonds.
(c) Provided, however, that nothing in subsections (a) and (b) shall be
deemed to provide indemnification to the Indemnified Parties with respect to
liabilities arising from the fraud, gross negligence, or willful misconduct of
the Indemnified Parties and, in the case of the Trustee, its officers, agents,
attorneys and employees, also successfully alleged to have arisen from the
negligence or breach of trust of the Trustee, its officers, agents, attorney or
employees.
(d) Any party entitled to indemnification hereunder shall, notify the
Company in writing of the existence of any claim, demand or other matter to
which the Company's indemnification obligation applies and shall give the
Company a reasonable opportunity to defend the same at its own expense and with
counsel satisfactory to such Indemnified Party; provided that the Indemnified
Parties shall at all times also have the right to participate in the defense of
such action. If the Indemnified Party is advised in an opinion of counsel that
there may be legal defenses available to it which are different from or in
addition to those available to the Company, or if the Company shall, after
notice and within a period of time necessary to preserve any and all defenses to
any claim asserted, fail to assume the defense or to employ counsel for that
purpose satisfactory to the indemnified party, the indemnified party shall have
the right, but not the obligation, to undertake the defense of, and to
compromise or settle the claim or other matter on behalf of, for the account of,
and at the risk of, the Company, and the
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Company shall be responsible for the reasonable fees, costs, and expenses of the
Indemnified Party in conducting its defense.
(e) Each of the Indemnified Parties, other than the Issuer and the
Trustee, shall be considered to be intended third party beneficiaries of this
Agreement. Nothing in this Agreement shall confer any right upon any person
other than the parties hereto and the specifically designated third party
beneficiaries of this Agreement.
Section 8.06. Representations and Warranties of the Issuer. The Issuer
hereby represents and warrants for the benefit of the Trustee, the Bond Insurer
and the Company as follows:
(a) The Issuer is a nonprofit corporation designated as a political
subdivision of the State, created and existing under the Arizona Constitution
and laws of the State;
(b) The Issuer has found and hereby declares that the issuance of the
Bonds to assist the refunding of the outstanding portion of the 1985 Bonds, the
financing of the 1997 Project and the financing of certain operating expenses
associated with the 1997 Project is in furtherance of the public purposes set
forth in the Act;
(c) In order to refund the outstanding portion of the 1985 Bonds,
finance the costs of the 1997 Project, and the refinancing of certain operating
expenses associated with the 1997 Project in an amount estimated by the Company,
the Issuer has duly authorized the execution, delivery, and performance on its
part of the Bond Purchase Agreement and this Agreement;
(d) To accomplish the foregoing, the Issuer proposes to issue the Bonds
immediately following the execution and delivery of this Agreement. The date,
denomination or denominations, interest rate or rates, maturity schedule,
redemption provisions and other pertinent provisions with respect to the Bonds
are set forth in this Agreement;
(e) The Issuer makes no representation or warranty that the amount of
the Loan will be adequate or sufficient to refund the outstanding portion of the
1985 Bonds, to finance the 1997 Project and to refinance certain operating
expenses associated with the 1997 Project or that the 1997 Project will be
adequate or sufficient for the purposes of the Company; and
(f) The Issuer has not pledged, assigned, or granted, and will not
pledge, assign, or grant any of its rights or interest in or under this
Agreement for any purpose other than as provided for in this Agreement.
(End of Article VIII)
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ARTICLE IX
THE BONDHOLDERS
Section 9.01. Action by Bondholders. Any requests, authorization,
direction, notice, consent, waiver or other action provided pursuant to this
Agreement to be given or taken by Bondholders may be contained in and evidenced
by one or more writings of substantially the same tenor signed by the requisite
number of Bondholders or their attorneys duly appointed in writing. Proof of the
execution of any such instrument, or of an instrument appointing any such
attorney, shall be sufficient for any purpose of this Agreement (except as
otherwise herein expressly provided) if made in the following manner, but the
Issuer or the Trustee may nevertheless in its discretion require further or
other proof in cases where it deems the same desirable.
The fact and date of the execution by any Bondholder or its attorney of
such instrument may be proved by the certificate, which need not be acknowledged
or verified, of an officer of a bank or trust company satisfactory to the Issuer
or to the Trustee or of any notary public or other officer authorized to take
acknowledgments of deeds to be recorded in the state in which the Trustee
purports to act, that the person signing such request or other instrument
acknowledged to him the execution thereof, or by an affidavit of a witness of
such execution, duly sworn to before such notary public or other officer. The
authority of the person or persons executing any such instrument on behalf of a
corporate Bondholder may be established without further proof if such instrument
is signed by a person purporting to be the president or a vice president of such
corporation with a corporate seal affixed and attested by a person purporting to
be its clerk or secretary or an assistant clerk or secretary.
The ownership of bonds and the amount, numbers and other identification,
and date of holding the same shall be proved by the registration books.
Any request, consent or vote of the Bondholder of any Bond shall bind
all future Bondholders of such Bond. Bonds owned or held by or for the account
of the Issuer or the Company shall not be deemed Outstanding Bonds for the
purpose of any consent or other action by Bondholders.
(End of Article IX)
ARTICLE X
THE BOND INSURER
Section 10.01. Provisions Regarding the Bond Issurer. All provisions
herein regarding rights, consents, approvals, directions, appointments or
requests by Ambac Assurance or the Bond Insurer shall be deemed to not require
or permit such consents, approvals, directions, appointments or requests by
Ambac Assurance or the Bond Insurer and shall be read as if Ambac Assurance or
the Bond Insurer were not mentioned therein during any time in which (a)
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Ambac Assurance or the Bond Insurer is in default in its obligation to make
payments under the Bond Insurance, (b) Ambac Assurance or the Bond Insurance
shall at any time for any reason cease to be valid and binding on Ambac
Assurance or the Bond Insurer, or shall be declared to be null and void, or the
validity or enforceability of any provision thereof is being contested by Ambac
Assurance or the Bond Insurer or any governmental agency or authority, or if
Ambac Assurance or the Bond Insurer is denying further liability or obligation
under Ambac Assurance or the Bond Insurance, (c) a petition has been filed and
is pending against Ambac Assurance or the Bond Insurer under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect, and has
not been dismissed within 90 days after such filing, (d) Ambac Assurance or the
Bond Insurer has filed a petition, which is still pending, in voluntary
bankruptcy or seeking relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect, or
consented to the filing of any petition against it under any such law or (e) the
Bonds are no longer Outstanding and any amounts due or to become due to Ambac
Assurance or the Bond Insurer have been paid in full; provided, however, that
any rights of Ambac Assurance or the Bond Insurer arising as a result of a
payment made pursuant to the Bond Insurance Policy shall continue to exist and
be unaffected by any limitations on rights of Ambac Assurance or the Bond
Insurer set forth in or arising as a result of this Section 10.01.
Section 10.02. Claims Upon the Bond Insurance Policy. As long as the
Bond Insurance Policy shall be in full force and effect, subject to Section
10.01 hereof, the Issuer, the Trustee and any Paying Agent agree to comply with
the following provisions:
(a) at least one (1) day prior to all Interest Payment Dates the Trustee
or Paying Agent, if any, will determine whether there will be sufficient funds
in the Funds to pay the principal of or interest on the Bonds on such Interest
Payment Date. If the Trustee or Paying Agent, if any, determines that there will
be insufficient funds in such Funds, the Trustee or Paying Agent, if any, shall
so notify Ambac Assurance. Such notice shall specify the amount of the
anticipated deficiency, the Bonds to which such deficiency is applicable and
whether such Bonds will be deficient as to principal or interest, or both. If
the Trustee or Paying Agent, if any, has not so notified Ambac Assurance at
least one (1) day prior to an Interest Payment Date, Ambac Assurance will make
payments of principal or interest due on the Bonds on or before the first (1st)
day next following the date on which Ambac Assurance shall have received notice
of nonpayment from the Trustee or Paying Agent, if any.
(b) the Trustee or Paying Agent, if any, shall, after giving notice to
Ambac Assurance as provided in (a) above, make available to Ambac Assurance and
at Ambac Assurance's direction, to the United States Trust Company of New York,
as insurance trustee for Ambac Assurance or any successor insurance trustee (the
"Insurance Trustee"), the Register maintained by the Trustee or Paying Agent, if
any, and all records relating to the Funds maintained under this Agreement.
(c) the Trustee or Paying Agent, if any, shall provide Ambac Assurance
and the Insurance Trustee with a list of registered owners of Bonds entitled to
receive principal or interest payments from Ambac Assurance under the terms of
the Bond Insurance Policy, and
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shall make arrangements with the Insurance Trustee (i) to mail checks or drafts
to the registered owners of Bonds entitled to receive full or partial interest
payments from Ambac Assurance and (ii) to pay principal upon Bonds surrendered
to the Insurance Trustee by the registered owners of Bonds entitled to receive
full or partial principal payments from Ambac Assurance.
(d) the Trustee or Paying Agent, if any, shall, at the time it provides
notice to Ambac Assurance pursuant to (a) above, notify registered owners of
Bonds entitled to receive the payment of principal or interest thereon from
Ambac Assurance (i) as to the fact of such entitlement, (ii) that Ambac
Assurance will remit to them all or a part of the interest payments next coming
due upon proof of Bondholder entitlement to interest payments and delivery to
the Insurance Trustee, in form satisfactory to the Insurance Trustee, of an
appropriate assignment of the registered owner's right to payment, (iii) that
should they be entitled to receive full payment of principal from Ambac
Assurance, they must surrender their Bonds (along with an appropriate instrument
of assignment in form satisfactory to the Insurance Trustee to permit ownership
of such Bonds to be registered in the name of Ambac Assurance) for payment to
the Insurance Trustee, and not the Trustee or Paying Agent, if any, and (iv)
that should they be entitled to receive partial payment of principal from Ambac
Assurance, they must surrender their Bonds for payment thereon first to the
Trustee or Paying Agent, if any, who shall note on such Bonds the portion of the
principal paid by the Trustee or Paying Agent, if any, and then, along with an
appropriate instrument of assignment in form satisfactory to the Insurance
Trustee, to the Insurance Trustee, which will then pay the unpaid portion of
principal.
(e) in the event that the Trustee or Paying Agent, if any, has notice
that any payment of principal of or interest on a Bond which has become Due for
Payment (as defined in the Bond Insurance Policy) and which is made to a
Bondholder by or on behalf of the Issuer has been deemed a preferential
transfer and theretofore recovered from its registered owner pursuant to the
United States Bankruptcy Code by a trustee in bankruptcy in accordance with the
final, nonappealable order of a court having competent jurisdiction, the Trustee
or Paying Agent, if any, shall, at the time Ambac Assurance is notified pursuant
to (a) above, notify all registered owners that in the event that any registered
owner's payment is so recovered, such registered owner will be entitled to
payment from Ambac Assurance to the extent of such recovery if sufficient funds
are not otherwise available, and the Trustee or Paying Agent, if any, shall
furnish to Ambac Assurance its records evidencing the payments of principal of
and interest on the Bonds which have been made by the Trustee or Paying Agent,
if any, and subsequently recovered from registered owners and the dates on which
such payments were made.
(f) in addition to those rights granted Ambac Assurance under this
Agreement, Ambac Assurance shall, to the extent it makes payment of principal of
or interest on the Bonds, become subrogated to the rights of the recipients of
such payments in accordance with the terms of the Bond Insurance Policy, and to
evidence such subrogation (i) in the case of subrogation as to claims for past
due interest, the Trustee or Paying Agent, if any, shall note Ambac Assurance's
rights as subrogee on the Register maintained by the Trustee or Paying Agent, if
any, upon receipt from Ambac Assurance of proof of the payment of interest
thereon to the registered owners of the bonds, and (ii) in the case of
subrogation as to claims for past due principal, the Trustee or Paying Agent, if
any, shall note Ambac Assurance's rights as subrogee
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on the Register maintained by the Trustee or Paying Agent, if any, upon
surrender of the Bonds by the registered owners thereof together with proof of
the payment of principal thereof.
Section 10.03. Indemnification. The Company hereby agrees to protect,
indemnify, pay and save the Bond Insurer harmless for, from and against any and
all claims, demands, liabilities, damages, losses, costs, charges, fees and
expenses (including reasonable attorneys' fees) which the Bond Insurer may,
other than as a result of fraud, misrepresentation, negligence or willful
misconduct of the Bond Insurer or failure of the Bond Insurer to comply with its
payment obligations under the Bond Insurance Policy, incur or be subject to as a
consequence, direct or indirect, of (i) the issuance of the Bond Insurance
Policy, (ii) any breach by any party thereto or hereto of any representation or
warranty, covenant, term or condition in, or the occurrence of any default
under, this Agreement or any Related Bond Documents, and the pursuit of any
remedies thereunder, including all reasonable fees or expenses resulting from
the settlement or defense of any claims or liabilities arising as a result of
any such breach or default, (iii) the holding or owning by the Bond Insurer or
its nominee of any Bond, (iv) involvement in any legal suit, investigation,
proceeding, inquiry or action as to which the Bond Insurer is involved as a
consequence, direct or indirect, of its issuance of the Bond Insurance Policy,
its holding or owning of any Bond, the holding or owning of any Bond by its
nominee, or any other event or transaction contemplated by any of the foregoing.
The Bond Insurer reserves the right to charge a reasonable fee as a condition to
executing any amendment, waiver or consent proposed in respect of this Agreement
or any Related Bond Document.
Section 10.04. Information to and Rights of Bond Insurer. While the Bond
Insurance Policy is in effect, the Company or the Trustee, as appropriate, shall
furnish to Ambac Assurance (to the attention of the Surveillance Department,
unless otherwise indicated):
(g) as soon as practicable after the filing thereof, a copy of any
financial statement of the Company and a copy of any audit and,
if then prepared, annual report of the Company;
(h) a copy of any notice to be given to the registered owners of the
Bonds, including, without limitation, notice of any redemption
of or defeasance of Bonds, acrd any certificate rendered
pursuant to this Agreement relating to the security for the
Bonds; and
(i) such additional information it may reasonably request.
The Trustee or the Company, as appropriate, shall notify Ambac Assurance
of any failure of the Company to provide relevant notices, certificates, reports
and other like materials required under this Agreement.
The Company will permit Ambac Assurance to discuss the affairs,
finances and accounts of the Company or any information Ambac Assurance may
reasonably request regarding the security for the Bonds with appropriate
officers of the Company. The Trustee or Company, as appropriate, will permit
Ambac Assurance to have access to the Property and have access to and to make
copies of all books and records relating to the Bonds at any reasonable time.
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Ambac Assurance shall have the right to direct an accounting at the
Company's expense, and the Company's failure to comply with such direction
within thirty (30) days after receipt of written notice of the direction from
Ambac Assurance shall be deemed a default hereunder; provided, however, that if
compliance cannot occur within such period, then such period will be extended so
long as compliance is begun within such period and diligently pursued, but only
if such extension would not materially adversely affect the interests of any
registered owner of the Bonds.
Notwithstanding any other provisions of this Agreement, the Trustee or
the Company, as appropriate, shall immediately notify Ambac Assurance if at any
time there are insufficient moneys to make any payments of principal and/or
interest as required and immediately upon the occurrence of any Event of Default
hereunder.
Ambac Assurance shall be a recipient of all filings made and/or notices
given pursuant to the Continuing Disclosure Agreement.
Section 10.05. Consent of Bond Insurer.
(a) Any provision of this Agreement expressly recognizing or granting
rights in or to Ambac Assurance may not be amended in any manner which affects
the rights of Ambac Assurance hereunder without the prior written consent of
Ambac Assurance.
(b) Unless otherwise provided in a section of this Agreement, Ambac
Assurance's consent shall be required in addition to Bondholder consent, when
required, for the following purposes: (i) execution and delivery of any
amendment, supplement, change to or modification of this Agreement (other than
pursuant to Section 11.01(a)(3)); (ii) removal of the Trustee or Paying Agent
and selection and appointment of any successor trustee or paying agent in
accordance with Sections 7.04 and 3.14 hereof, respectively, or otherwise; and
(iii) initiation or approval of any action not described in (i) or (ii) above
which requires Bondholder consent.
(c) Any reorganization or liquidation plan with respect to the Company
must be acceptable to Ambac Assurance. In the event of any reorganization or
liquidation, Ambac Assurance shall have the right to vote on behalf of all
Bondholders who hold Ambac Assurance insured bonds absent a default by Ambac
Assurance under the applicable Bond Insurance Policy insuring such Bonds.
(End of Article X)
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ARTICLE XI
MISCELLANEOUS
Section 11.01. Amendment.
(a) This Agreement may be amended by the Company, the Trustee and the
Issuer, with the prior written consent of the Bond Insurer (exclusive of
amendments described in (3) below) but without Holder consent for any of the
following purposes and the Bond Insurer and Trustee agree not to unreasonably
withhold their consent to such amendments for such purposes upon the request of
the Company, and the Issuer, the Bond Insurer and Trustee may rely upon an
Opinion of Counsel that such amendment is permitted without consent of the
Holders under this subparagraph (a):
(1) to add to the covenants and agreements of the Company or to
surrender or limit any right or power of the Company;
(2) to cure any ambiguity or defect, or to add provisions which are not
inconsistent therewith and which do not, in the judgment of the Trustee,
materially impair the security for the Parity Debt;
(3) to provide for the issuance and establish the terms and provisions
of additional Parity Debt, and provide for all other matters in connection with
the issuance of Parity Debt, including, without limitation, provisions relating
to, or required by the issuer of, any Credit Facility applicable to Parity Debt
which is issued in accordance with Section 5.13 and 5.17 hereof, provided that
no such amendment shall have a material adverse effect upon the security for the
Bonds other than that implicit in the authorization of Parity Debt and shall not
affect the restrictions applicable to the issuance of Parity Debt under Section
5.13 hereof;
(4) to amend the provisions of Section 3.05 as permitted therein;
(5) to permit the transfer of Bonds from one Depository to another and
the succession of Depositories and to permit the withdrawal of Bonds issued to
a Depository for use in a Book-Entry System and the issuance of replacement
Bonds in fully registered form to other than a Depository;
(6) to permit the Trustee to comply with any duties imposed upon it by
law;
(7) to achieve compliance of this Agreement with any applicable federal
securities or tax law;
(8) to provide for the appointment of a successor trustee or co-trustee
pursuant to the terms of Article VII; and
(9) to maintain or obtain a rating on Parity Debt from Moody's or S&P.
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(b) In addition, this Agreement may be amended by the parties with the
consent of the Bond Insurer but without Holder consent to modify, amend, change
or remove any covenant, agreement, term or provision of the Agreement other than
a modification of the type described in subsection (c) requiring the unanimous
written consent of the affected Bondholders; provided that: (1) at the time of
the proposed amendment the Bonds are rated by S&P or Moody's, and written notice
of the substance of such proposed amendment is given by the Company not less
than thirty days prior to the date such amendment is to take effect to any such
rating agency that has rated the Bonds, and (2) the Company provides (i)
evidence satisfactory to the Trustee that the ratings on the Bonds shall not be
lowered or withdrawn by either S&P or Moody's as a result of such proposed
amendment; or (ii) if the Bonds are then rated by either S&P or Moody's in one
of their three highest rating categories, that the ratings on the Bonds will not
be lowered to a rating category less than one of the three highest categories as
a result of such proposed amendment; or (iii) with respect to the Bonds, if
after written notice has been given to S&P and Moody's, and neither S&P nor
Moody's has responded to such notice within thirty days of delivery, then (A) a
Consultant's opinion or report is delivered to the Trustee prior to the date
such amendment is to take effect, to the effect that the proposed amendment is
consistent with then current industry standards for comparable utilities and
demonstrating that the ratio of Income Available for Debt Service for the
Historic Test Period to highest Annual Debt Service for the current or any
future Fiscal Year immediately after the effective date of such proposed
amendment is not less than 1.5, assuming the maximum implementation (or such
lower implementation certified to the Trustee by the Company as being a
reasonable basis for assumption) by the Company of the proposed amendment if the
proposed amendment or supplement is to a provision of the Agreement that
contains a quantitative restriction or covenant; or (H) a Consultant's opinion
or report is delivered to the Trustee prior to the date such amendment is to
take effect, to the effect that the proposed amendment is consistent with then
current industry standards for comparable utilities and demonstrating that the
average of the projected Debt Service Coverage Ratios for the two full Fiscal
Years immediately after the effective date of such proposed amendment or
supplement will be greater than the average of the Debt Service Coverage Ratios
for such period had the proposed amendment not been implemented assuming the
maximum implementation (or such lower implementation certified to the Trustee by
the Company as being a reasonable basis for assumption) by the Company of the
proposed amendment if the proposed amendment is to a provision of the Agreement
that contains a quantitative restriction or covenant; or (C) a Consultant's
opinion or report is delivered to the Trustee prior to the date such amendment
is to take effect that the proposed amendment is consistent with then current
industry standards for comparable utilities and demonstrating that (1) the
average of the projected Debt Service Coverage Ratios for the two full Fiscal
Years immediately after, the effective date of such proposed amendment will not
be less than 1.5, and (a) the average of the projected Debt Service Coverage
Ratios for the two full Fiscal Years immediately after the effective date of
such proposed amendment will not be more than thirty-five percent lower than the
average of the Debt Service Coverage Ratios had the proposed amendment not been
implemented, assuming with respect to the projections made under (1) and (2) the
maximum implementation (or such lower implementation certified to the Trustee by
the Company as being a reasonable basis for assumption) by the Company of the
proposed amendment if the proposed amendment is to a provision of the Agreement
that contains a quantitative restriction or covenant. No amendment of this
Agreement may be made pursuant to this paragraph unless there shall also be
delivered to the Trustee an Opinion of Bond Counsel
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to the effect that under then existing law the execution of the amendment
contemplated in this paragraph, in and of itself, would not adversely affect the
validity of the Bonds or the exclusion from gross income under Section 103 of
the Code of interest paid on the Bonds. No amendment may be made in accordance
with this paragraph unless the Bonds are rated by S&P or Moody's at the time
such amendment is sought to be made. If the requirements of this paragraph have
been met, neither the Trustee nor the Issuer shall withhold their consent to an
amendment requested by the Company; however, the Issuer, acting through its
Board of Directors, and Trustee may withhold their consent to any amendment
which it reasonably determines affects the rights or responsibilities of the
Issuer and Trustee.
(c) Except as provided in the foregoing subparagraphs (a) and (b), this
Agreement may be amended only with the written consent of the Holders of a
majority in principal amount of the affected Outstanding Parity Debt; provided,
however, that no amendment of this Agreement may be made without the unanimous
written consent of the affected Bondholders (in addition to the Bond Insurer)
for any of the following purposes; (1) to extend the maturity of any Bond
including any sinking fund redemption date therefor; (2) to reduce the principal
amount or interest rate of any Bond; (3) to make any Bond redeemable other than
in accordance with its terms; (4) to create a preference or priority of any Bond
or Bonds over any other Bond or Bonds; or (5) to reduce the percentage of the
Bonds required to be represented by the Bondholders giving their consent to any
amendment.
The Bond Insurer shall be deemed to be the Holder of all Bonds for
purposes of giving the consents required under this subsection (c) of this
Agreement, other than consent to any amendment described in clauses (1) through
(S) hereof.
When the Trustee determines that the requisite number of consents have
been obtained for an amendment which requires Holder consent, it shall, within
ninety (90) days, file a certificate to that effect in its records and mail, or
cause to be mailed, notice to the Holders. The Trustee will promptly certify to
the Issuer that it has mailed or caused to be mailed such notice to all Holders
and such certificate will be conclusive evidence that such notice was given in
the manner required hereby. A consent to an amendment may be revoked by a notice
given by the Holder and received by the Trustee prior to the Trustee's
certification that the requisite consents have been obtained. Notwithstanding
any other provision of this Agreement, in determining whether the rights of the
Bondholders will be adversely affected by any action taken pursuant to the terms
and provisions of this Agreement, the Trustee shall consider the effect on the
Bondholders as if there were no Bond Insurance Policy.
The Bond Insurer shall be provided with a full original transcript of
all proceedings relating to the execution of any amendatory or supplemental
Trust Agreement.
Section 11.02. Successors and Assign. The rights and obligations of the
parties to this Agreement shall inure to their respective successors and
assigns.
Section 11.03. Notices. Unless otherwise expressly provided, all
notices, demands, requests, approvals and consents provided for in this
Agreement of or to the Issuer, the Trustee, the Bond Insurer and the Company
shall be in writing, including bank wire, Telex or similar
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writing, and shall be deemed sufficiently given if sent by registered or
certified mail, postage prepaid, or delivered during business hours as follows:
(i) to the Issuer at The Industrial Development Authority of the County
of Maricopa, c/o Kutak Rock, 3300 North Central Avenue, 16th Floor, Phoenix,
Arizona 85012, Attention: Charles W. Lotzar;
(ii) to the Trustee at Bank One, Arizona, NA, Corporate Trust Services,
AZ1-1128, 201 N. Central Avenue, Phoenix, Arizona 85004;
(iii) to the Company at Chaparral City Water Company, 12021 Panorama
Drive, Fountain Hills, Arizona 85269, Attention: Robert Laak, with a copy to the
Company at 5847 San Felipe, Suite 2600, Houston, Texas 77057, Attention: Erik
Eriksson; and
(iv) to the Bond Insurer at Ambac Assurance Corporation, One State
Street Plaza, New York, New York 10004, Attention: Surveillance Department.
or as to all of the foregoing, to such other address as the addressee shall have
indicated by prior written notice to the one giving notice. All notices to a
Bondholder shall be in writing and shall be deemed sufficiently given if sent by
mail, postage prepaid, to the Bondholder at the address shown on the
registration books maintained by the Trustee. A Bondholder may direct the
Trustee to change its address as shown on the registration books by written
notice to the Trustee.
Notice hereunder may be waived prospectively or retroactively by the
person entitled to the notice, but no waiver shall affect any notice requirement
as to other persons.
Section 11.04. Business Days. Except as otherwise required herein, if
this Agreement requires any party to act on a specific day and such day is not
a Business Day, such party need not perform such act until the next succeeding
Business Day, and such act shall be deemed to have been performed on the day
required.
Section 11.05. Agreement Not for the Benefit of Other Parties; Bond
Insurer is Third Party Beneficiary. Except as set forth in Section 5.20 and
Article VIII hereof, nothing in this Agreement expressed or implied is intended
or shall be construed to confer upon, or to give or grant to, any person or
entity, other than the Issuer, the Company, the Trustee, Ambac Assurance, the
Paying Agent, if any, and the registered owners of the Bonds, any right, remedy
or claim under or by reason of this Agreement or any covenant, condition or
stipulation hereof, and all covenants; stipulations, promises and agreements in
this Agreement contained by and on behalf of the Issuer or the Company shall be
for the sole and exclusive benefit of the Issuer, the Company, the Trustee,
Ambac Assurance, the Paying Agent, if any, and the registered owners of the
Bonds.
To the extent that this Agreement confers upon or gives or grants to
Ambac Assurance (individually or as Bond Insurer) any right, remedy or claim
under or by reason of this Agreement, Ambac Assurance is hereby explicitly
recognized as being a third-party beneficiary
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hereunder and may enforce any such right, remedy or claim conferred, given or
granted hereunder.
Section 11.06. Severability. In the event that any provision of this
Agreement shall be held to be invalid in any circumstance, such invalidity shall
not affect any other provisions or circumstances.
Section 11.07. Counterparts. This Agreement may be executed and
delivered in any number of counterparts, each of which shall be deemed to be an
original, but such counterparts together shall constitute one and the same
instrument.
Section 11.08. Captions. The captions and table of contents of this
Agreement are for convenience only and shall not affect the construction hereof.
Section 11.09. Governing Law. This instrument shall be governed by the
laws of the State of Arizona.
Section 11.10. Suspension of Publications or Mail. If, because of the
temporary or permanent suspension of publication of any newspaper or financial
journal, the suspension of delivery of first-class mail or, for any other
reason, the Trustee shall be unable to publish in a newspaper or financial
journal or mail first-class any notice required to be published or mailed by the
provisions of this Agreement, the Trustee shall give such notice in such other
manner as in the judgment of the Trustee shall most effectively approximate such
publication or mailing thereof, and the giving of such notice in such manner
shall be deemed for all purposes of this Agreement to be in compliance with the
requirement for the publication or mailing thereof.
Except as otherwise provided herein, for all purposes of this Agreement,
anything required to be mailed shall be deemed mailed upon the deposit of the
item with the U.S. Postal Service, first-class postage paid and addressed to the
addressee and the giving of any notice by any other means of delivery shall be
deemed complete upon receipt of the notice by the delivery service.
Section 11.11. Conflict of Interest. To the extent A.R.S. Section 38-511
is applicable, all parties acknowledge that this Agreement is subject to
cancellation without penalty or further obligation by the Issuer pursuant to
A.R.S. Section 38-511, as amended, the provisions of which are incorporated
herein. All parties represent that to the best of their knowledge, the parties
are not in violation of A.R.S. Section 38-511 as of the date hereof. The Trustee
and the Company each covenant not to employ as an employee, an agent or, with
respect to the subject matter of this Agreement, a consultant, any person
significantly involved in initiating, negotiating, securing, drafting or
creating this Agreement on behalf of the Issuer within 3 years from execution of
this Agreement, unless a waiver of A.R.S. Section 38-511 is provided by the
Board of Directors of the Issuer.
Section 11.12. Continuing Disclosure. The Company acknowledges and
agrees that the Issuer is not an "obligated person" (as defined in the
Continuing Disclosure Agreement) with respect to the Bonds and represents that
the Company is the only obligated person with respect
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thereto. The Issuer and the Trustee hereby acknowledge the entry by the Company
into the Continuing Disclosure Agreement under which the Company has assumed
certain obligations for the benefit of the Holders and beneficial owners of the
Bonds. The Company agrees to perform its obligations under the Continuing
Disclosure Agreement. Notwithstanding any other provision of this Agreement, any
failure by the Company to comply with any provision of the Continuing Disclosure
Agreement shall not be a failure or a default, or an Event of Default, under
this Agreement.
[Remainder of page left blank intentionally.]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed all as of the date first above written,
THE INDUSTRIAL DEVELOPMENT AUTHORITY OF
THE COUNTY OF MARICOPA
/s/ ROBERT K. WEXLER
------------------------------------------
By: Robert K. Wexler
Title: President
CHAPARRAL CITY WATER COMPANY
/s/ Erik Eriksson, Jr.
------------------------------------------
By: ERIK ERIKSSON, JR.
---------------------------------------
Title: ASSISTANT SECRETARY
------------------------------------
BANK ONE, ARIZONA, NA, as Trustee
/s/ D. D. Melendez
------------------------------------------
By: D. D. Melendez
---------------------------------------
Title: Vice President
------------------------------------
99
SCHEDULE A
EXISTING ENCUMBRANCES
1. Any action, by the Maricopa County Assessor and/or Treasurer, altering
the current or prior tax assessment, subsequent to the date of the
Policy of Title Insurance.
2. Taxes for the second half of 1997, a lien, payable on or before March 1,
1998 and delinquent May 1, 1998.
3. Mineral rights, water rights, reservations and exclusions as contained
is the Patent conveying said land.
4. Inclusion within the following Special Districts:
A. FOUNTAIN HILLS SANITARY DISTRICT
B. FOUNTAIN HILLS FIRE DISTRICT
C. FOUNTAIN HILLS ROAD DISTRICTS 9, 10 & 11
D. NO FENCE DISTRICT NO. 62
E. McDOWELL MOUNTAIN IRRIGATION AND DRAINAGE
5. The Right of Entry to prospect for, mine and remove all minerals in said
land, as reserved in Patent to said land, as limited by Public Law
87-754 of the 87th Congress (76 Stat. 750) withdrawing said land from
entry, a copy of which is recorded in Docket 6286, page 61. (Parcel Nos.
4, 5, 6. 7, 8, 9 and 10)
6. Covenant running with the land regarding special road districts recorded
March 15, 1971 in Docket 8578, pages 707 through 715. (Affects all)
Continued an next Page
STEWART TITLE
GUARANTY COMPANY
100
7. Covenant running with land regarding special flood control districts
recorded July 13, 1971 in Docket 545, page 553. (Affects all)
8. Restrictions contained in instrument recorded July 15, 1971 in Docket
8821, pages 72 through 120, except that any restrictions based upon
race, color, or religion are unenforceable.
9. Easements shown on the recorded plate in Book 149 of Maps, page 3; Book
155 of Maps, page 11, Book 164 of Maps, page 12; Book 164 of Maps,
pages 41, 43 and 44; Book 373 of Maps, page 42; Book 156 of Maps, Page
45; Book 387 of Maps, page 30 and Book 142 of Maps, page 10.
10. Easement and rights incident thereto for cable television and related
facilities as set forth in instrument recorded February 1, 1972 in
Docket 9213, pages 469 through 472. (Affects all).
11. Easement and rights incident thereto for electric lines as set forth in
instrument recorded March 22, 1972 in Docket 9317, pages 390 and 391.
(Affects Parcels 9 and 10)
12. Restrictions contained in instrument recorded May 19, 1972 in Docket
9446, pages 963 through 965, except that any restrictions based upon
race, color, or religion are unenforceable. (Affects Parcel 8)
13. Easement and rights incident thereto for communication and related
facilities as set forth in instrument recorded March 15, 1973 in Docket
10045, pages 225 through 228. (Affects Parcels 6, 7, 9 and 10)
14. Restrictions contained in instrument recorded July 17, 1973 in Docket
10225, pages 789 through 791 and amended January 12, 1978 in Docket
12650, page 1335, except that any restrictions based upon race, color,
or religion are unenforceable. (Affects Parcel 5)
15. Restrictions contained in instrument recorded September 5, 1973 in
Docket 10298, pages 618 through 621, except that any restrictions based
upon race, color, or religion are unenforceable. (Affects Parcel 3)
16. Restrictions contained in instrument recorded September 5, 1973 in
Docket l0298, pages 642 through 645, except that any restrictions based
upon race, color, or religion are unenforceable. (Affects Parcel 1)
Continued on next page
STEWART TITLE
GUARANTY COMPANY
101
17. The Right of Entry to prospect for, mine and remove the gas, coal and
minerals in said land, as implied by the reservation of same, all as set
forth in Deeds recorded October 17, 1977 in Docket 12489, pages 876
(Parcel 1), 877 (Parcel 2); 879 (Parcel 3); 881 (Parcel 4); 883 (Parcel
5); 884 (Parcel 6); 886 (Parcel 7); 888 (Parcel 8); 892 (Parcel 9); 894
(Parcel 10) and thereafter the right of surface entry to a depth of 100
feet was relinquished by instrument recorded September 15, 1980 in
Docket 14688, pages 133 through 138 affecting Parcel Nos. 1, 3 and 8.
18. Easement and rights incident thereto for electric lines as set forth in
instrument recorded June 24, 1980 in Docket 14502, page 593. (Affects
Parcel 1)
19. Easement and rights incident thereto for electric lines as set forth in
instrument recorded October 29, 1981 in Docket 15610, page 806.
(Affects Parcel 6)
20. The Rights of Entry to prospect for, mine and remove the oil, gases and
other hydrocarbon substances, coal, stone, metals, minerals, fossils and
fertilizers of every name and description, together with all uranium,
thorium, or any other material which is or may be determined to be
peculiarly essential to the production of fissionable materials, and all
underground water in said land, as implied by reservation of the same,
in instruments recorded February 25, 1985 at Recorders No. 85-079357
(Parcel 11); Recorders No. 85-079358 (Parcel 12) and Recorders No.
85-079359 (Parcel 13).
21. Easement and rights incident thereto for underground electrical
facilities as set forth in instrument recorded October 9, 1987 at
Recorders No. 87-625979, (Affects Parcel 4)
22. Easement and rights incident thereto for underground electrical
facilities as set forth in instrument recorded October 17, 1995 at
Recorders No. 95-0633235 and re-recorded December 27, 1995 at Recorders
No. 95-0797077. (Affects Parcel 5)
23. Discrepancies, conflicts in boundary lines, shortage in area,
encroachments or any other facts which a correct survey would disclose,
and which are not shown by the public records.
24. Covenants, conditions and restrictions, easements, charges, assessments
and other obligations contained in instrument recorded January 6, 1989
at Recorders No. 89-007564; Amended at Recorders No. 89-564872 and
thereafter a Declaration of Annexation recorded at Recorders No.
94-0855305. (Affects Fountain Hills Final Plat 513 in Book 387 of Maps,
page 30)
Continued on next page
STEWART TITLE
GUARANTY COMPANY
102
25. Restrictions contained in instrument recorded December 14, 1972 in
Docket 9881, page 443 and recorded June 37, 1974 in Docket 10716, page
731, exempt that any restrictions based upon race, color, or religion
are unenforceable. (Affects Fountain Hills Final Plat 302 in Book 156 of
Maps, page 45)
36. Restrictions contained in instrument recorded February 16, 1972 in
Docket 9243, page 850 and thereafter as Addendum recorded April 6, 1993
at Recorders No. 93-0204469, except that any restrictions based upon
race, color, or religion are unenforceable. (Affects Fountain Hills
Final Plat 204 in Book 142 of Maps, page 10)
STEWART TITLE
GUARANTY COMPANY
103
SCHEDULE B
FORM OF PROJECT FUND REQUISITION
STATEMENT NO.___ REQUESTING DISBURSEMENT OF FUNDS FROM PROJECT
FUND PURSUANT TO SECTION 3.09 OF THE LOAN AND TRUST AGREEMENT
DATED AS OF DECEMBER 1, 1997 AMONG THE INDUSTRIAL DEVELOPMENT
AUTHORITY OF THE COUNTY OF MARICOPA, CHAPARRAL CITY WATER
COMPANY AND HANK ONE, ARIZONA, NA
Pursuant to Section 3.09 of the Loan and Trust Agreement (the
"Agreement") among The Industrial Development Authority of the County of
Maricopa (the "Issuer"), Chaparral City Water Company (the "Company") and Hank
One, Arizona, NA, as trustee (the "Trustee"), dated as of December 1, 1997, the
undersigned Authorized Officer of the Company hereby requests and authorizes the
Trustee, as depository of the Project Fund created by the Agreement, to pay to
the Company or to the person(s) listed on the Disbursement Schedule attached
hereto out of the moneys deposited in the Project Fund the aggregate sum of $
to pay such persons) or to reimburse the Company in full, as indicated in the
Disbursement Schedule, for the advances, payments and expenditures ~ made by it
in connection with the items listed in the Disbursement Schedule.
In connection with the foregoing request and authorization, the
undersigned hereby certifies that:
(a) Each item for which disbursement is requested
hereunder is properly payable out of the Project Fund in
accordance with the terms and conditions of the Agreement and
none of those items has formed the basis for any disbursement
heretofore made from said Project Fund.
(b) Each such item is or was necessary in connection with
the construction, installation, equipment or improvement of the
1997 Project, as defined in the Agreement, or costs related
thereto as permitted by the Agreement,
(c) Each item for which disbursement is requested
hereunder, and the cost for each such item, is as described in
the information statement Form 8038 filed by the Issuer in
connection with the issuance of the Series 1997A Bonds (as
defined in the Agreement), as required by Section 149(e) of the
Code; provided that if any such item is not as described in that
information statement, attached hereto is the additional
information required to be submitted herewith in accordance with
Section 3,09 of the Agreement.
(d) This statement and all exhibits hereto, including the
Disbursement Schedule, shall be conclusive evidence of the facts
and statements set forth herein
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104
and shall constitute full warrant, protection and authority to the
Trustee for its actions taken pursuant hereto.
(e) This statement constitutes the approval of the Company of
each disbursement hereby requested and authorized.
This________ day of___________,________.
------------------------------------------
Authorized Officer
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105
DISBURSEMENT SCHEDULE
TO STATEMENT NO._____ REQUESTING AND AUTHORIZING DISBURSEMENT OF FUNDS FROM
PROJECT FUND PURSUANT TO SECTION 3.09 OF THE LOAN AND TRUST AGREEMENT DATED AS
OF DECEMBER 1, 1997 AMONG THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF
MARICOPA, CHAPARRAL CITY WATER COMPANY AND BANK ONE, ARIZONA, NA.
PAYEE AMOUNT PURPOSE
----- ------ -------
B-3
106
SCHEDULE C
CREDIT FACILITY REQUIREMENTS
In the event the Company desires to obtain a credit instrument to
fulfill the Debt Service Reserve Fund Requirement in lieu of funding such Debt
Service Reserve Fund Requirement with cash or Permitted Investments, the
following requirements shall be fulfilled to the satisfaction of the Bond
Insurer:
1. A surety bond or insurance policy issued to the Trustee by a company
licensed to issue an insurance policy guaranteeing the timely payment of debt
service on the Bonds (a "municipal bond insurer") may be deposited in the Debt
Service Reserve Fund to meet the Debt Service Reserve Fund Requirement if the
claims paying ability of the issuer thereof shall be rated "Am" and "Aaa" by S&P
and Moody's, respectively.
2. A surety bond or insurance policy issued to the Trustee by an entity
other than a municipal bond insurer may be deposited in the Debt Service Reserve
Fund to meet the Debt Service Reserve Fund Requirement if the form and substance
of such instrument and the issuer thereof shall be approved by the Bond Insurer.
3. An unconditional irrevocable letter of credit issued to the Trustee
by a bank may be deposited in the Debt Service Reserve Fund to meet the Debt
Service Reserve Fund Requirement if the issuer thereof is rated at least "AA" by
S&P. The letter of credit shall be payable in one or more draws upon
presentation by the Trustee of a sight draft accompanied by its certificate that
it then holds insufficient funds to make a required payment of principal or
interest on the Bonds. The letter of credit shall be for a term of not less than
three years. The issuer of the letter of credit shall be required to notify the
Trustee, not later than 12 months prior to the stated expiration date of the
letter of credit, as to whether such expiration date shall be extended, and if
so, shall indicate the new expiration date.
If such notice indicates that the expiration date shall not be extended,
the Company shall deposit in the Debt Service Reserve Fund an amount sufficient
to cause the cash or Permitted Investments on deposit in the Debt Service
Reserve Fund, together with any other qualifying Credit Facility, to equal the
Debt Service Reserve Fund Requirement on all outstanding Bonds, such deposit to
be paid in equal installments on at least a semi-annual basis over the remaining
term of the letter of credit, unless such letter of credit is replaced by a
Credit Facility meeting the requirements in any of 1, 2 or 3 above. The letter
of credit shall permit a draw in full not less than two weeks prior to the
expiration or termination of such letter of credit if the letter of credit has
not been replaced or renewed. The Trustee is hereby directed to draw upon such
letter of credit prior to its expiration or termination unless an acceptable
replacement is in place or the Debt Service Reserve Fund is fully funded in its
required amount.
4. The use of any Credit Facility shall be subject to receipt of an
Opinion of Counsel of the issuer thereof (addressed to the Issuer, the Trustee
and the Bond Insurer) as to the due authorization, execution, delivery and
enforceability of such instrument in accordance
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with its terms, subject to applicable laws affecting creditors' rights
generally, and, in the event the issuer of such Credit Facility is not a
domestic entity, an opinion of foreign counsel in form and substance
satisfactory to the Bond Insurer. In addition, the use of an irrevocable letter
of credit shall be subject to receipt of an Opinion of Counsel (addressed to the
Issuer, the Trustee and the Bond Insurer) to the effect that payments under such
letter of credit would not constitute avoidable preferences under Section 547 of
the U.S. Bankruptcy Code or similar state laws with avoidable preference
provisions in the event of the filing of a petition for relief under the U.S.
Bankruptcy Code or similar state laws by or against the Issuer or the Company
(or any other account party under the letter of credit).
5. The obligation to reimburse the issuer of a Credit Facility for
any fees, expenses, claims or draws upon such Credit Facility shall be
subordinate to the payment of debt service on the Bonds. The right of the issuer
of a Credit Facility to payment or reimbursement of its fees, expenses, claims
or draws may be on a parity with the cash replenishment of the Debt Service
Reserve Fund. The Credit Facility shall provide for a revolving feature under
which the amount available thereunder will be reinstated to the extent of any
reimbursement of draws or claims paid. If the revolving feature is suspended or
terminated for and reason, the right of the issuer of the Credit Facility to
reimbursement will be subordinated to cash replenishment of the Debt Service
Reserve Fund to an amount equal to the difference between the full original
amount available under the Credit Facility and the amount then available for
further draws or claims. If (a) the issuer of a Credit Facility becomes
insolvent or (b) the issuer of a Credit Facility defaults in its payment
obligations thereunder or (c) the claims-paying ability of the issuer of the
insurance policy or surety bond falls below "A+" by S&P or "A1" by Moody's or
(d) the rating of the issuer of the letter of credit falls below "A+" by S&P or
"A1" by Moody's, then the obligation to reimburse the issuer of the Credit
Facility shall be subordinate to the cash replenishment of the Debt Service
Reserve Fund.
6. If (a) the revolving reinstatement feature described in the preceding
paragraph is suspended or terminated or (b) the rating of the claims paying
ability of the issuer of the surety bond or insurance policy falls below "A+" by
S&P or "Al" by Moody's or (c) the rating of the issuer of the letter of credit
falls below "A+" by S&P or "A1 " by Moody's, the Company shall either (i)
deposit into the Debt Service Reserve Fund an amount sufficient to cause the
cash or Permitted Investments on deposit in the Debt Service Reserve Fund to
equal the Debt Service Reserve Fund Requirement on all outstanding Bonds, such
amount to be paid over the ensuing five years in equal installments deposited at
least semi-annually or (ii) replace such Credit Facility with a surety bond,
insurance policy or letter of credit meeting the requirements in any of (1), (2)
or (3) above within six months of such occurrence.
7. Where applicable, the amount available for draws or claims under the
Credit Facility may be reduced by the amount of cash or Permitted Investments
deposited in the Debt Service Reserve Fund pursuant to clause (i) of the
preceding subparagraph 6.
8. If the Company chooses the above described alternatives to a
cash-funded Debt Service Reserve Fund, any amounts owed by the Company to the
issuer of such credit instrument as a result of a draw thereon or a claim
thereunder, as appropriate, shall be included
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in any calculation of Long-Term Indebtedness Service Requirement, Annual Debt
Service and maximum Annual Debt Service under Sections 5.13 and 5.14 of the
Agreement.
9. The Trustee is required to ascertain the necessity for a claim or
draw upon the Credit Facility and to provide notice to the issuer of the Credit
Facility in accordance with its terms not later than three days (or such longer
period as may be necessary depending on the permitted time period for honoring a
draw under the Credit Facility) prior to each Interest Payment Date.
10. Cash on deposit in the Debt Service Reserve .Fund shall be used (or
investments purchased with such cash shall be liquidated and the proceeds
applied as required) prior to any drawing on any Credit Facility. If and to the
extent that more than one Credit Facility is deposited in the Debt Service
Reserve Fund, drawings thereunder and repayments of costs associated therewith
shall be made on a pro rata basis, calculated by referee to the maximum amounts
available thereunder.
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SCHEDULE D
COSTS OF ISSUANCE
Payee Amount
----- ------
Kutak Rock (Issuer's Counsel) $ 16,000
Kutak Rock (Issuer's Counsel Expenses) 1,000
Squire, Sanders & Dempsey L.L.P. (Bond Counsel) 75,000
Bank One, Arizona, NA (Trustee Initial & 1st Yr. Admin.) 5,000
Jennings, Strauss & Solomon, P.L.C. (Trustee Counsel) 1,000
Kutak Rock (Blue Sky) 2.000
Banc One Capital Corporation (Preliminary & Final Official Statement) 3,750
Banc One Capital Corporation (Underwriter) 111,500
Banc One Capital Corporation for Lewis & Roca LLP (Underwriter Counsel) 7,500
Banc One Capital Corporation for Kutak Rock (Disclosure Counsel) 25,000
Banc One Capital Corporation for Kutak Rock (Disclosure Counsel Expenses) 5,000
Banc One Capital Corporation (Bond Clearance/CUSIP/IPSA) 4,460
Stewart Title (Title Insurance) 8,635
Stewart Title (Title Recording) 27
Banc One Capital Corporation for Standard & Poor's (Rating Agency) 6,000
Arthur Andersen 5,000
Bank One, Arizona, NA (Miscellaneous) 5,000
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SCHEDULE E
DESCRIPTION OF 1997 PROJECT
The 1997 Project is expected to be undertaken within the entire area
covered by the Company's certificate of convenience and necessity as approved by
the Arizona Corporation Commission on April 20, 1971 (the "Service Area"). The
Company's Service Area covers approximately 12,000 acres which encompass all of
the Town of Fountain Hills as well as selected parcels located within
unincorporated Maricopa County and the City of Scottsdale. The Service Area
includes all of the master planned community known as Fountain Hills. The 1997
Project is expected to encompass a comprehensive capital improvements program
for the Company that will include the construction of new reservoir and
distribution lines necessary to accommodate the continued growth in the Company
Service Area population as well as the replacement of equipment and those
distribution lines, constructed as part of the Company's initial system, which
have reached the end of their useful lives.
Without limiting the foregoing, portions of the 1997 Project include the
following items, together with related and ancillary equipment and work,
constituting portions of the Company's water service system, to be installed or
performed within the Service Area:
CAP Filtration Expansion:
The Central Arizona Project ("CAP") water filtration expansion work
includes a 5 million gallon per day clarifier/filter treatment system which will
service the current demands, and a portion of the future demands, of the Service
Area. This addition is expected to bring the Company's total treatment capacity
for CAP water to approximately 10 million gallons per day. This expansion will
also include a 200,000 gallon clear well which is being sized for the projected
buildout population of the Service Area.
CAP Solids Disposal Expansion:
In connection with the expansion of the CAP water filtration plant,
enhancements to the plant's filter backwash water system are required. The
existing solids disposal facilities consists of a 150,000 gallon decant tank and
a settling pond. This portion of the 1997 Project will include the design and
construction of a second matching decant tank and necessary improvements to the
settling pond to meet the needs of the expanded filter system.
Direct Zone 2 Pumping Project:
This portion of the 1997 Project includes the design and installation of
a high-service pumping station and associated piping, so that finished water
from the water filtration plant may be transmitted directly into pressure zone 2
of the Service Area.
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Reservoir #7, pressure zone 2:
This portion of the 1997 Project includes a 1.25 million gallon
above-ground welded steel storage tank which will service pressure zone 2 of the
Service Area. The installation is needed to meet the current and projected
demand of the southwest area of the zone.
Computer System Upgrade:
This will include upgrades to the software and hardware of the
accounting, billing, telemetric and customer servicing computer systems.
Water Meter Replacement Program:
The water meter replacement program would replace old, inoperable and
unreadable meters. It is anticipated that the Company will replace approximately
1,200 meters.
Service and Distribution Line Replacement Program:
Service Lines:
The replacement of approximately 3,600 residential unit service lines is
a portion of the 1997 Project. This portion will include material and
installation work including design, labor, material, pavement
replacement and other items. The existing lines, which were made of a
polyethylene material, are being replaced with copper lines, which are
expected to be better capable of withstanding pressure and temperature
changes within the water system.
Distribution Lines:
The replacement of approximately 35,500 linear feet of 4 inch
distribution lines is another portion of the 1997 Project. The existing
lines, made of a PVC material, are being replaced by an improved,
thicker walled PVC material better capable of withstanding pressure and
temperature changes within the water system.
Vehicle Replacement:
The 1997 Project is expected to include the periodic replacement of five
half ton and over trucks, with varying necessary attachments.
Hydrant Replacement:
The Company expects to replace approximately 80 hydrants as a portion of
the 1997 Project.
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Miscellaneous portions of the 1997 Project will include, but not be
limited to, the following:
(a) Various office equipment replacement/additions.
(b) Office renovation/expansion required in connection with other
portions of the 1997 Project.
(c) New maintenance building within the Service Area. This building is
expected to be a metal storage facility designed to store various equipment and
materials used in the operations of the Company.
(d) Disinfection system upgrade.
(e) Equipment additions/replacements as reasonably needed by the Company
are expected to include, but not be limited to, a backhoe, compressors, valve
exercisers, meter read data loggers, compactors, replacement valves, well
equipment, generators, controls and other electrical gear, and other water
system equipment as needed in the operations of the water system.
DESCRIPTION OF 1985 PROJECT
The "1985 Project" consisted of various portions of a potable water
treatment, transmission and distribution system, which included the acquisition,
construction and equipping of a 9,000 gallon per minute pump station, 23,500
lineal feet of 24-inch diameter mortar lined and coated steel pipe, a 3.5
million gallon steel reservoir and water treatment plant and an interconnecting
pipeline from the treatment plant to the then existing distribution systems of
the Company to be used for the transportation, treatment and storage of Central
Arizona Project water.
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EXHIBIT I
FORM OF SERIES 1997A BOND
Registered No.
THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF MARICOPA
WATER SYSTEM IMPROVEMENT REVENUE BOND
(CHAPARRAL CITY WATER COMPANY PROJECT)
SERIES 1997A
REGISTERED OWNER: CEDE & CO., as nominee of The Depository CUSIP:
Trust Company
PRINCIPAL AMOUNT: DOLLARS
INTEREST PAYMENT DATES: June 1 and December 1, commencing June 1, 1998
INTEREST RATE PER ANNUM: _____%
MATURITY DATE: December 1, ____
DATE OF THIS BOND: December 1, 1997
The Industrial Development Authority of the County of Maricopa (the
"Issuer"), for value received, promises to cause to be paid to the Registered
Owner of this Bond, or registered assigns, but solely from the money to be
provided under the Agreement (defined below), upon presentation and surrender
hereof, in lawful money of the United States of America, the Principal Amount on
the Maturity Date, unless paid earlier as provided below, with interest from the
most recent Interest Payment Date to which interest has been paid or duly
provided for or, if no interest has been paid, from the Date of this Bond, until
paid in full at the Interest Rate, payable on each Interest Payment Date.
THE BONDS AND THE INTEREST THEREON ARE SPECIAL LIMITED OBLIGATIONS OF
THE ISSUER PAYABLE EXCLUSIVELY FROM REVENUES AND RECEIPTS UNDER THE AGREEMENT.
THE BONDS DO NOT CONSTITUTE A DEBT OR A LOAN OF CREDIT OR A PLEDGE OF THE FULL
FAITH AND CREDIT OR TAXING POWER OF THE ISSUER, MARICOPA COUNTY, OR OF THE STATE
OF ARIZONA, OR OF ANY POLITICAL SUBDIVISION THEREOF, WITHIN THE MEANING OF ANY
STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION AND SHALL NEVER
CONSTITUTE NOR GIVE RISE TO A PECUNIARY LIABILITY OF THE STATE OF ARIZONA OR
MARICOPA COUNTY, ARIZONA. THE BONDS SHALL NOT CONSTITUTE, DIRECTLY OR
INDIRECTLY, OR CONTINGENTLY OBLIGATE OR OTHERWISE CONSTITUTE A GENERAL
OBLIGATION OF OR A CHARGE AGAINST THE GENERAL CREDIT OF THE STATE OF ARIZONA,
MARICOPA COUNTY,
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ARIZONA, OR THE ISSUER, BUT SHALL BE A SPECIAL LIMITED OBLIGATION OF THE ISSUER
PAYABLE SOLELY FROM THE SOURCES DESCRIBED HEREIN AND IN THE AGREEMENT, BUT NOT
OTHERWISE. THE ISSUER HAS NO TAXING POWER.
Interest on this Bond shall be computed on the basis of a 360-day year
consisting of twelve 30-day months. From and after the date on which this Bond
becomes due, any unpaid principal will bear interest at the same rate until paid
or duly provided for.
The principal of and premium, if any, on this Bond are payable to the
Registered Owner hereof upon presentation of this Bond at the designated
corporate trust office of Bank One, Arizona, NA, or its successor as the Trustee
and Paying Agent (the "Trustee"), and as provided below may be paid by wire
transfer to any account in the United States of America if written instructions
satisfactory to the Trustee in its sole discretion are delivered to the Trustee
upon or prior to the presentation of this Bond. Interest on this Bond is payable
by check or draft mailed by the Trustee to the Registered Owner, determined as
of the close of business on the applicable record date, at its address as shown
on the registration books, or, at the option of any such Registered Owner who
owns at least $1,000,000 in principal amount of Bonds, as hereinafter defined,
by wire transfer to any account in the United States if written instructions
satisfactory to the Trustee in its sole discretion are delivered to the Trustee
at its designated corporate trust office not later than five Business Days prior
to the applicable record date.
The record date for payment of interest is the fifteenth day of the
month preceding the Interest Payment Date. With respect to overdue interest or
interest payable on redemption of this Bond other than on an Interest Payment
Date or interest on any overdue amount, the Trustee may establish a special
record date. The Trustee will mail notice of a special record date to the
Bondholders at least 10 days before the special record date.
This Bond is one of a series of bonds consisting of the Issuer's
$7,600,000 Water System Improvement Revenue Bonds (Chaparral City Water Company
Project), Series 1997A (the "Bonds") issued pursuant to Title 35, Chapter 5,
Arizona Revised Statutes (as amended from time to time, the "Act") and secured
by a Loan and Trust Agreement (as amended from time to time in accordance with
its terms, the "Agreement"), dated as of December 1, 1997, among Chaparral City
Water Company (the "Company"), the Issuer and the Trustee. Pursuant to the
Agreement, the Company has agreed to repay the borrowing in the amounts and at
the times necessary to enable the Issuer to cause to be paid the principal of,
premium, if any, and interest on the Bonds. The Company has secured its
obligations under the Agreement by a Deed of Trust from the Company for the
benefit of the Trustee, dated of even date herewith (the "Mortgage"). Reference
is hereby made to the Agreement for a description of the funds pledged and for
the provisions thereof with respect to the rights, limitations of rights,
duties, obligations and immunities of the Company, the Issuer, the Trustee and
the Bondholders, including conditions upon which Additional Parity Indebtedness
may be secured on a parity with the Bonds under the Agreement and the Mortgage,
the order of payments in the event of insufficient funds and restrictions on the
rights of the Bondholders to bring suit, provisions for providing for the
payments of the Bonds and conditions which must be satisfied before the Bonds
are considered no longer Outstanding under the Agreement. The Agreement and the
Mortgage may be amended to the extent and in the manner provided therein.
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In case any Event of Default (as defined in the Agreement) occurs, the
principal amount of this Bond together with accrued interest may, and, under
certain circumstances, must, be declared due and payable in the manner and with
the effect provided in the Agreement.
The Registered Owner of each Bond has only those remedies provided in
the Agreement.
If the specified date for any payment hereon shall be a date other than
a Business Day, then such payment may be made on the next Business Day without
additional interest and with the same force and effect as if made on the
specified date for such payment.
"Business Day" shall mean a day on which banks located in the city in
which the principal corporate offices of the Trustee and the Paying Agent are
located are not required or authorized to remain closed and on which the New
York Stock Exchange is not closed.
The Bonds maturing after December 1, 2007 are redeemable pursuant to the
Agreement prior to maturity beginning on December 1, 2007 at the written
direction of the Company, as a whole at any time, or in part on any Interest
Payment Date, at the following prices expressed in percentages of their
principal amount, plus accrued interest to the redemption date:
Period During Which Redeemed Redemption Price
---------------------------- ----------------
December 1, 2007 to November 30, 2008 102%
December 1, 2008 to November 30, 2009 101%
December 1, 2009 and thereafter 100%
The Bonds maturing on December 1, 2011 are subject to mandatory
redemption at a redemption price equal to 100% of the Bonds redeemed, plus
accrued interest to the redemption date, on each December 1, commencing December
1, 2008, from sinking fund installments in each of the years and in the amounts
as follows:
YEAR Principal Amount
---- ----------------
2008 $255,000
2009 265,000
2010 280,000
2011* 200,000
* final maturity
The Bonds maturing on December 1, 2022 are subject to mandatory
redemption at a redemption price equal to 100 of the Bonds redeemed, plus
accrued interest to the redemption date, on each December 1, commencing December
1, 2012, from sinking fund installments in each of the years and in the amounts
as follows:
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YEAR Principal Amount
---- ----------------
2011 $ 95,000
2012 310,000
2013 330,000
2014 345,000
2015 365,000
2016 385,000
2017 405,000
2018 425,000
2019 450,000
2020 475,000
2021 500,000
2022* 525,000
* final maturity
In the event of a partial redemption of Bonds within a maturity, whether
through optional redemption or extraordinary optional redemption, the amount of
future mandatory sinking fund redemptions will be reduced as specified by the
Company to take into account such partial redemption.
The Bonds are subject to extraordinary optional redemption, in whole at
any time or in pro rata part on any Interest Payment Date, at a redemption price
equal to 100% of the principal amount of the Bonds redeemed, plus accrued
interest to the redemption date, upon the occurrence of damage to or destruction
or taking of the Property as provided in the Agreement.
If less than all of the outstanding Bonds are to be called for
redemption, the Bond (or portions thereof) to be redeemed will be redeemed in
the maturities designated by the Company and, if less than an entire maturity is
redeemed, the Bonds to be redeemed within such maturity will be selected by the
Trustee by lot or in any customary manner as determined by the Trustee.
Redemption shall be in denominations of $5,000 or any integral multiple thereof,
provided that Bonds must remain in authorized denominations after redemption.
In the event this Bond (or any portion thereof) is selected for
redemption, notice will be mailed no more than 45 nor fewer than 30 calendar
days prior to the redemption date to the Registered Owner. Failure to mail
notice to the owner of any other Bond or any defect in the notice to such owner
shall not affect the redemption of this Bond.
The Trustee shall give notice of any redemption of this Bond as provided
above to the Registered Owner at its address shown on the registration books
maintained by the Trustee. A certificate of the Trustee shall conclusively
establish the mailing of any such notice for all purposes. Notice of redemption
having been duly mailed, this Bond, or the portion called for redemption, will
become due and payable on the redemption date at the applicable redemption price
and, moneys for the redemption having been deposited with the Trustee, from and
after the date fixed for redemption, interest on this Bond (or such portion)
will no longer accrue.
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This Bond is transferable by the Registered Owner, in person or by its
attorney duly authorized in writing, at the designated corporate trust office of
the Trustee, upon surrender of this Bond to the Trustee for cancellation. Upon
the transfer, a new Bond or Bonds in authorized denominations of the same
aggregate principal amount will be issued to the transferee at the same office.
This Bond may also be exchanged at the designated corporate trust office of the
Trustee for a new Bond or Bonds in authorized denominations of the same
aggregate principal amount without transfer to a new registered owner. Exchanges
and transfers will be without expense to the owner except for applicable taxes
or other governmental charges, if any. The Trustee will not be required to make
an exchange or transfer of this bond (i) if this Bond (or any portion thereof)
has been selected for redemption, (ii) during the 10 days preceding any date
fixed for selection for redemption if this Bond (or any portion thereof) is
eligible to be selected for redemption, or (iii) during the period of 15 days
preceding any Interest Payment Date.
The Bonds are initially to be issued in book entry form in the
denominations of $5,000 and integral multiples of $5,000.
The Issuer, the Trustee, and the Company may treat the Registered Owner
as the absolute owner of this Bond for all purposes, notwithstanding any notice
to the contrary.
No recourse under or upon any obligation, covenant, or agreement or in
any Bond, or under any judgment obtained against the Issuer, or by the
enforcement of any assessment or by any legal or equitable proceeding by virtue
of any constitution or statute or otherwise or under any circumstances, shall be
had for the payment of the principal of or premium, if any, or interest on this
Bond against any director, officer, counsel, financial advisor or agent, as
such, past, present, or future, of the Issuer, either directly or through the
Issuer, or any successor to the Issuer, and all liability of every nature,
whether at common law or in equity, or by statute or by constitution or
otherwise, of any such director, officer, counsel, financial advisor or agent,
as such, is hereby expressly waived and released as a condition of and
consideration for the execution of the Agreement and the issue of such Bonds.
The County of Maricopa, Arizona shall not in any event be liable for the
payment of the principal of, premium, if any, or interest on any of the Bonds
issued, or for the performance of any pledge, mortgage, obligation or agreement
of any kind whatsoever herein or indebtedness by the Issuer, and none of the
Bonds of the Issuer issued or any of its agreements or obligations herein or
otherwise shall be construed to constitute an indebtedness of Maricopa County,
Arizona within the meaning of any constitutional or statutory provision
whatsoever.
This Bond shall not be entitled to any security or benefit under the
Agreement or be valid until the Certificate of Authentication has been signed by
the Trustee.
It is certified and recited that there have been performed and have
happened in regular and due form, as required by law, all acts and conditions
necessary to be done or performed by the Issuer or to have happened (i)
precedent to and in the issuing of the Bonds in order to make them legal, valid
and binding special limited obligations of the Issuer, and (ii) precedent to and
in the execution and delivery of the Agreement; that payment in full for the
Bonds has been received; and that the Bonds do not exceed or violate any
constitutional or statutory limitation.
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IN WITNESS WHEREOF, The Industrial Development Authority of the County
of Maricopa has caused this Bond to be executed in its name by the manual or
facsimile signature of its authorized officers.
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF MARICOPA
By: Robert K. Wexler
President
Attest: Myra L.T. Jefferson
Secretary/Treasurer
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Certificate of Authentication
This bond is one of the Bonds described in the Loan and Trust Agreement
referred to herein.
BANK ONE, ARIZONA, NA, as Trustee
Date of
Authentication: By
--------------------- --------------------------------
Authorized Signature
Legal Opinion
The following is a true copy of the text of the opinion rendered to the
Issuer by Squire, Sanders & Dempsey L.L.P. in connection with the issuance of
the Bonds. That opinion is dated as of and premised on the transcript of
proceedings examined and the law in effect on the date of the original delivery
of the Bonds. A signed copy is on file in the office of the Trustee.
The Industrial Development Authority,
of the County of Maricopa.
Myra L.T. Jefferson
Secretary/Treasurer
The Industrial Development Authority
of the County of Maricopa
Phoenix, Arizona
We have examined the transcript of proceedings (the "Transcript")
relating to the issuance by The Industrial Development Authority of the County
of Maricopa (the "Issuer") of its $7,600,000 Water System Improvement Revenue
Bonds (Chaparral City Water Company Project), Series 1997A (the "Series 1997A
Bonds") and its $1,320,000 Water System Refunding Revenue Bonds (Chaparral City
Water Company Project), Series 1997B (the "Series 1997B Bonds" and together with
the Series 1997A Bonds, the "Bonds"), both dated as of December 1, 1997,
pursuant to the provisions of Title 35, Chapter 5 of the Arizona Revised
Statutes, as amended. The Series 1997A Bonds are being issued to pay a portion
of the costs of acquiring, constructing, improving and equipping certain water
furnishing facilities (the "1997 Project") to be owned and operated by Chaparral
City Water Company (the "Company"). The Series 1997B Bonds are being issued to
refund certain outstanding bonds issued by the Issuer in 1985
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to finance a portion of the costs of certain water furnishing facilities (the
"1985 Project") owned and operated by the Company. The 1997 Project and the 1985
Project are more particularly described in the Loan and Trust Agreement, dated
as of December 1, 1997 (the "Agreement"), by and among the Issuer, the Company
and Bank One, Arizona, NA, as trustee (the "Trustee"). The documents in the
Transcript examined include an executed counterpart of the Agreement. We have
also examined a conformed copy of a Bond of each series.
Based on such examination, we are of the opinion that, under existing
law:
1. The Bonds and the Agreement are legal, valid, binding and enforceable
in accordance with their respective terms subject to bankruptcy laws and other
laws affecting creditors' rights and to the exercise of judicial discretion.
2. The Bonds constitute special, limited obligations of the Issuer, and
the principal of and premium, if any, and interest (collectively, "debt
service") on the Bonds are payable by the Issuer solely from the revenues to be
derived by the Issuer under the Agreement and the other security pledged and
assigned by the Agreement to secure that payment, including the payments
required to be made by the Company under the Agreement. The Bonds and the
payment of debt service are not secured by any obligation or pledge of any
moneys raised by taxation and the Bonds do not represent or constitute a debt or
pledge of the faith and credit of the Issuer, the County of Maricopa, the State
of Arizona, or any political subdivision thereof.
3. The interest on the Bonds is excluded from gross income for federal
income tax purposes under Section 103(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), or its statutory predecessor under the Internal Revenue
Code of 1954, as amended (the "1954 Code"), except for interest on any Bond for
any period during which it is held by a "substantial user" or a "related person"
as those terms are used in Section 147(a) of the Code or its statutory
predecessor under the 1954 Code. The interest on the Series 1997A Bonds, but not
on the Series 1997B Bonds, is an item of tax preference under Section 57 of the
Code and, therefore, may be subject to the alternative minimum tax imposed by
the Code on individuals and corporations. Interest on the Bonds is exempt from
Arizona state income tax. We express no opinion as to any other tax consequences
regarding the Bonds.
Under Code provisions applicable only to corporations (as defined for
federal income tax purposes), a portion of the excess of adjusted current
earnings (which includes interest on all tax-exempt bonds including the Series
1997B Bonds) over other alternative minimum taxable income may be subject to a
corporate alternative minimum tax. Further, interest on the Bonds may be subject
to a branch profits tax imposed on certain foreign corporations doing business
in the United States and to a tax imposed on excess net passive income of
certain S corporations.
In giving the foregoing opinions, we have assumed and relied upon
compliance with the covenants of the Issuer and the Company and the accuracy,
which we have not independently verified, of the representations and
certifications of the Issuer and of the Company contained in the Transcript. The
accuracy of certain of those representations and certifications, and compliance
by the Issuer and the Company with certain of those covenants, may be necessary
for the interest on the Bonds to be and to remain excluded from gross income for
federal income
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tax purposes and for certain of the other tax effects stated above. Failure to
comply with certain requirements subsequent to the date hereof could cause
interest on the Bonds to be included in gross income for federal income tax
purposes retroactively to the date hereof.
We have also relied, without independent investigation, upon the opinion
of in-house counsel for the Company, contained in the Transcript with respect to
all matters relating to the Company contained in the Transcript. We have also
assumed for the purposes of this opinion the due authorization, execution and
delivery by and the binding effect upon and enforceability against the Trustee
of the Agreement.
We have not been retained to pass upon, and express no opinion
concerning, the 1997 Project, the 1985 Project, the Company, including its
financial condition or its ability to pay debt service on the Bonds
(collectively, "Company Matters"), or any matters describing or concerning the
1997 Project, the 1985 Project, the Company or Company Matters.
We express no opinion as to the statement printed on the Bonds referring
to the municipal bond insurance policy issued by Ambac Assurance Corporation or
as to the insurance referred to in that statement.
Respectfully submitted,
SQUIRE, SANDERS & DEMPSEY L. L. P.
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Statement of Insurance
Municipal Bond Insurance Policy No. 14546 BE (the "Policy") with respect
to payments due for principal of and interest on this bond has been issued by
Ambac Assurance Corporation ("Ambac Assurance"). The Policy has been delivered
to the United States Trust Company of New York, New York, New York, as the
Insurance Trustee under said Policy and will be held by such Insurance Trustee
or any successor insurance trustee. The Policy is on file and available for
inspection at the principal office of the Insurance Trustee arid a copy thereof
may be secured from Ambac Assurance or the Insurance Trustee. All payments
required to be made under the Policy shall be made in accordance with the
provisions thereof. The owner of this bond acknowledges and consents to the
subrogation rights of Ambac Assurance as more fully set forth in the Policy.
Assignment
The following abbreviations when used in the inscription on the face of
this Bond, shall be construed as though they were written out in full according
to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants in common
UNIF GIFTITRANS MIN ACT -____________Custodian for___________ under
(Cust. ) (Minor)
Uniform Gifts/Transfers to Minors Act of__________________________
(State)
Additional abbreviations may also be used though not in list above.
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto
_________________________________________________________ whose address is and
______________________________whose social security number (or other federal tax
identification number) is
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF TRANSFEREE
----------------------------------------------
----------------------------------------------
the within Bond and does hereby irrevocably constitute and
appoint________________________ as attorney to transfer the said Bond on the
books kept for registration thereof, with full power of substitution in the
premises.
Date:
-------------------------------------
SIGNATURE(S) GUARANTEED BY:
-----------------------------------------------
Signature guarantee should be made by an
eligible guarantor institution pursuant to
S.E.C. Rule 17Ad-15
-----------------------------------------------
NOTICE: The signature to this assignment must
correspond with the name of the Registered Owner
as it appears upon the face of the within Bond
in every particular, without alteration or
enlargement or any change whatever.
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FORM OF SERIES 1997B BOND
Registered No.
THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF MARICOPA
WATER SYSTEM REFUNDING REVENUE BOND
(CHAPARRAL CITY WATER COMPANY PROJECT)
SERIES 1997B
REGISTERED OWNER: CEDE & CO., as nominee of The Depository CUSIP:
Trust Company
PRINCIPAL AMOUNT: DOLLARS
INTEREST PAYMENT DATES: June 1 and December 1, commencing June 1, 1998
INTEREST RATE PER ANNUM:________%
MATURITY DATE: December 1, ____
DATE OF THIS BOND: December 1, 1997
The Industrial Development Authority of the County of Maricopa
(the "Issuer"), for value received, promises to cause to be paid to the
Registered Owner of this Bond, or registered assigns, but solely from the money
to be provided under the Agreement (defined below), upon presentation and
surrender hereof, in lawful money of the United States of America, the Principal
Amount on the Maturity Date, unless paid earlier as provided below, with
interest from the most recent Interest Payment Date to which interest has been
paid or duly provided for or, if no interest has been paid, from the Date of
this Bond, until paid in full at the Interest Rate, payable on each Interest
Payment Date.
THE BONDS AND THE INTEREST THEREON ARE SPECIAL LIMITED
OBLIGATIONS OF THE ISSUER PAYABLE EXCLUSIVELY FROM REVENUES AND RECEIPTS UNDER
THE AGREEMENT. THE BONDS DO NOT CONSTITUTE A DEBT OR A LOAN OF CREDIT OR A
PLEDGE OF THE FULL FAITH AND CREDIT OR TAXING POWER OF THE ISSUER, MARICOPA
COUNTY, OR OF THE STATE OF ARIZONA, OR OF ANY POLITICAL SUBDIVISION THEREOF,
WITHIN THE MEANING OF ANY STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION
AND SHALL NEVER CONSTITUTE NOR GIVE RISE TO A PECUNIARY LIABILITY OF THE STATE
OF ARIZONA OR MARICOPA COUNTY, ARIZONA. THE BONDS SHALL NOT CONSTITUTE, DIRECTLY
OR INDIRECTLY, OR CONTINGENTLY OBLIGATE OR OTHERWISE CONSTITUTE A GENERAL
OBLIGATION OF OR A CHARGE AGAINST THE GENERAL CREDIT OF THE STATE OF ARIZONA,
MARICOPA COUNTY, ARIZONA, OR THE ISSUER, BUT SHALL BE A SPECIAL LIMITED
OBLIGATION OF
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THE ISSUER PAYABLE SOLELY FROM THE SOURCES DESCRIBED HEREIN AND IN THE
AGREEMENT, BUT NOT OTHERWISE. THE ISSUER HAS NO TAXING POWER.
Interest on this Bond shall be computed on the basis of a 360-day
year consisting of twelve 30-day months. From and after the date on which this
Bond becomes due, any unpaid principal will bear interest at the same rate until
paid or duly provided for.
The principal of and premium, if any, on this Bond are payable to
the Registered Owner hereof upon presentation of this Bond at the designated
corporate trust office of Bank One, Arizona, NA, or its successor as the Trustee
and Paying Agent (the "Trustee"), and as provided below may be paid by wire
transfer to any account in the United States of America if written instructions
satisfactory to the Trustee in its sole discretion are delivered to the Trustee
upon or prior to the presentation of this Bond. Interest on this Bond is payable
by check or draft mailed by the Trustee to the Registered Owner, determined as
of the close of business on the applicable record date, at its address as shown
on the registration books, or, at the option of any such Registered Owner who
owns at least $1,000,000 in principal amount of Bonds, as hereinafter defined,
by wire transfer to any account in the United States if written. instructions
satisfactory to the Trustee in its sole discretion are delivered to the Trustee
at its designated corporate trust office not, later than five Business Days
prior to the applicable record date.
The record date for payment of interest is the fifteenth day of
the month preceding the Interest Payment Date. With respect to overdue interest
or interest payable on redemption of this Bond other than on an Interest Payment
Date or interest on any overdue amount, the Trustee may establish a special
record date. The Trustee will mail notice of a special record date to the
Bondholders at least 10 days before the special record date.
This Bond is one of a series of bonds consisting of the Issuer's
$1,320,000 Water System Refunding Revenue Bonds (Chaparral City Water Company
Project), Series 1997B (the "Bonds") issued pursuant to Title 35, Chapter 5,
Arizona Revised Statutes (as amended from time to time, the "Act") and secured
by a Loan and Trust Agreement (as amended from time to time in accordance with
its terms, the "Agreement"), dated as of December 1, 1997, among Chaparral City
Water Company (the "Company"), the Issuer and the Trustee. Pursuant to the
Agreement, the Company has agreed to repay the borrowing in the amounts and at
the times necessary to enable the Issuer to cause to be paid the principal of,
premium, if any, and interest on the Bonds. The Company has secured its
obligations under the Agreement by a Deed of Trust from the Company for the
benefit of the Trustee, dated of even date herewith (the "Mortgage"). Reference
is hereby made to the Agreement for a description of the funds pledged and for
the provisions thereof with respect to the rights, limitations of rights,
duties, obligations and immunities of the Company, the Issuer, the Trustee and
the Bondholders, including conditions upon which Additional Parity Indebtedness
may be secured on a parity with the Bonds under the Agreement and the Mortgage,
the order of payments in the event of insufficient funds and restrictions on the
rights of the Bondholders to bring suit, provisions for providing for the
payments of the Bonds and conditions which must be satisfied before the Bonds
are considered no longer Outstanding under the Agreement. The Agreement and the
Mortgage may be amended to the extent and in the manner provided therein.
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In case any Event of Default (as defined in the Agreement)
occurs, the principal amount of this Bond together with accrued interest may,
and, under certain circumstances, must, be declared due and payable in the
manner and with the effect provided in the Agreement.
The Registered Owner of each Bond has only those remedies
provided in the Agreement.
If the specified date for any payment hereon shall be a date
other than a Business Day, then such payment may be made on the next Business
Day without additional interest and with the same force and effect as if made on
the specified date for such payment.
"Business Day" shall mean a day on which banks located in the
city in which the principal corporate offices of the Trustee and the Paying
Agent are located are not required or authorized to remain closed and on which
the New York Stock Exchange is not closed.
The Bonds maturing after December 1, 2007 are redeemable pursuant
to the Agreement prior to maturity beginning on December 1, 2007 at the written
direction of the Company, as a whole at any time, or in part on any Interest
Payment Date, at the following prices expressed in percentages of their
principal amount, plus accrued interest to the redemption date:
Period During Which Redeemed Redemption Price
---------------------------- ----------------
December 1, 2007 to November 30, 2008 102%
December 1, 2008 to November 30, 2009 101%
December 1, 2009 and thereafter 100%
The Bonds maturing on December 1, 2006 are subject to mandatory
redemption at a redemption price equal to 100% of the Bonds redeemed, plus
accrued interest to the redemption date, on each December 1, commencing December
1, 1998, from sinking fund installments in each of the years and in the amounts
as follows:
YEAR Principal Amount
---- ----------------
1998 $30,000
1999 30,000
2000 30,000
2001 30,000
2002 35,000
2003 35,000
2004 35,000
2005 40,000
2006* 40,000
* final maturity
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The Bonds maturing on December 1, 2022 are subject to mandatory
redemption at a redemption price equal to 100% of the Bonds redeemed, plus
accrued interest to the redemption date, on each December 1, commencing December
1, 2007, from sinking fund installments in each of the years and in the amounts
as follows:
YEAR Principal Amount
---- ----------------
2007 $40,000
2008 45,000
2009 45,000
2010 50,000
2011 50,000
2012 55,000
2013 60,000
2014 60,000
2015 65,000
2016 65,000
2017 70,000
2018 75,000
2019 80,000
2020 80,000
2021 85,000
2022* 90,000
* final maturity
In the event of a partial redemption of Bonds within a maturity,
whether through optional redemption or extraordinary optional redemption, the
amount of future mandatory sinking fund redemptions will be reduced as specified
by the Company to take into account such partial redemption.
The Bonds are subject to extraordinary optional redemption, in
whole at any time or pro rata in part on any Interest Payment Date, at a
redemption price equal to 100% of the principal amount of the Bonds redeemed,
plus accrued interest to the redemption date, upon the occurrence of damage to
or destruction or taking of the Property as provided in the Agreement.
If less than all of the outstanding Bonds are to be called for
redemption, the Bonds (or portions thereof) to be redeemed will be redeemed in
the maturities designated by the Company and, if less than an entire maturity is
redeemed, the Bonds to be redeemed within such maturity will be selected by the
Trustee by lot or in any customary manner as determined by the Trustee.
Redemption shall be in denominations of $5,000 or any integral multiple thereof,
provided that Bonds must remain in authorized denominations after redemption.
In the event this Bond (or any portion thereof) is selected for
redemption, notice will be mailed no more than 45 nor fewer than 30 calendar
days prior to the redemption date
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128
to the Registered Owner. Failure to mail notice to the owner of any other Bond
or any defect in the notice to such owner shall not affect the redemption of
this Bond.
The Trustee shall give notice of any redemption of this Bond as
provided above to the Registered Owner at its address shown on the registration
books maintained by the Trustee. A certificate of the Trustee shall conclusively
establish the mailing of any such notice for all purposes. Notice of redemption
having been duly mailed, this Bond, or the portion called for redemption, will
become due and payable on the redemption date at the applicable redemption price
and, moneys for the redemption having been deposited with the Trustee, from and
after the date fixed for redemption, interest on this Bond (or such portion)
will no longer accrue.
This Bond is transferable by the Registered Owner, in person or
by its attorney duly authorized in writing, at the designated corporate trust
office of the Trustee, upon surrender of this Bond to the Trustee for
cancellation. Upon the transfer, a new Bond or Bonds in authorized denominations
of the same aggregate principal amount will be issued to the transferee at the
same office. This Bond may also be exchanged at the designated corporate trust
office of the Trustee for a new Bond or Bonds in authorized denominations of the
same aggregate principal amount without transfer to a new registered owner.
Exchanges and transfers will be without expense to the owner except for
applicable taxes or other governmental charges, if any. The Trustee will not be
required to make an exchange or transfer of this Bond (i) if this Bond (or any
portion thereof) has been selected for redemption, (ii) during the 10 days
preceding any date fixed for selection for redemption if this Bond (or any
portion thereof) is eligible to be selected for redemption, or (iii) during the
period of 15 days preceding any Interest Payment Date.
The Bonds are initially to be issued in book entry form in the
denominations of $5,000 and integral multiples of $5,000.
The Issuer, the Trustee, and the Company may treat the Registered
Owner as the absolute owner of this Bond for all purposes, notwithstanding any
notice to the contrary.
No recourse under or upon any obligation, covenant, or agreement
or in any Bond, or under any judgment obtained against the Issuer, or by the
enforcement of any assessment or by any legal or equitable proceeding by virtue
of any constitution or statute or otherwise or under any circumstances, shall be
had for the payment of the principal of or premium, if any, or interest on this
Bond against any director, officer, counsel, financial advisor or agent, as
such, past, present, or future, of the Issuer, either directly or through the
Issuer, or any successor to the Issuer, and all liability of every nature,
whether at common law or in equity, or by statute or by constitution or
otherwise, of any such director, officer, counsel, financial advisor or agent,
as such, is hereby expressly waived and released as a condition of and
consideration for the execution of the Agreement and the issue of such Bonds.
The County of Maricopa, Arizona shall not in any event be liable
for the payment of the principal of, premium, if any, or interest on any of the
Bonds issued, or for the performance of any pledge, mortgage, obligation or
agreement of any kind whatsoever herein
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129
or indebtedness by the Issuer, and none of the Bonds of the Issuer issued or any
of its agreements or obligations herein or otherwise shall be construed to
constitute an indebtedness of Maricopa County, Arizona within the meaning of any
constitutional or statutory provision whatsoever.
This Bond shall not be entitled to any security or benefit under
the Agreement or be valid until the Certificate of Authentication has been
signed by the Trustee.
It is certified and recited that there have been performed and
have happened in regular and due form, as required by law, all acts and
conditions necessary to be done or performed by the Issuer or to have happened
(i) precedent to and in the issuing of the Bonds in order to make them legal,
valid and binding special limited obligations of the Issuer, and (ii) precedent
to and in the execution and delivery of the Agreement; that payment in full for
the Bonds has been received; and that the Bonds do not exceed or violate any
constitutional or statutory limitation.
IN WITNESS WHEREOF, The Industrial Development Authority of the
County of Maricopa has caused this Bond to be executed in its name by the manual
or facsimile signature of its authorized officers.
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF MARICOPA
By: Robert K. Wexler
President
Attest: Myra L.T. Jefferson
Secretary/Treasurer
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130
Certificate of Authentication
This bond is one of the Bonds described in the Loan and Trust
Agreement referred to herein.
BANK ONE, ARIZONA, NA, as Trustee
Date of
Authentication: By
--------------------- --------------------------------
Authorized Signature
Legal Opinion
The following is a true copy of the text of the opinion rendered
to the Issuer by Squire, Sanders & Dempsey L.L.P. in connection with the
issuance of the Bonds. That opinion is dated as of and premised on the
transcript of proceedings examined and the law in effect on the date of the
original delivery of the Bonds. A signed copy is on file in the office of the
Trustee.
The Industrial Development Authority of
the County of Maricopa
Myra L.T. Jefferson
Secretary/Treasurer
The Industrial Development Authority of
the County of Maricopa
Phoenix, Arizona
We have examined the transcript of proceedings (the "Transcript")
relating to the issuance by The Industrial Development Authority of the County
of Maricopa (the "Issuer") of its $7,600,000 Water System Improvement Revenue
Bonds (Chaparral City Water Company Project), Series 1997A (the "Series 1997A
Bonds") and its $1,320,000 Water System Refunding Revenue Bonds (Chaparral City
Water Company Project), Series 1997B (the "Series 19978 Bonds" and together with
the Series 1997A Bonds, the "Bonds"), both dated as of December 1, 1997,
pursuant to the provisions of Title 35, Chapter 5 of the Arizona Revised
Statutes, as amended. The Series 1997A Bonds are being issued to pay a portion
of the costs of acquiring,
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131
constructing, improving and equipping certain water furnishing facilities (the
"1997 Project") to be owned and operated by Chaparral City Water Company (the
"Company"). The Series 1997B Bonds are being issued to refund certain
outstanding bonds issued by the Issuer in 1985 to finance a portion of the costs
of certain water furnishing facilities (the "1985 Project") owned and operated
by the Company. The 1997 Project and the 1985 Project are more particularly
described in the Loan and Trust Agreement, dated as of December 1, 1997 (the
"Agreement"), by and among the Issuer, the Company and Bank One, Arizona, NA, as
trustee (the "Trustee"). The documents in the Transcript examined include an
executed counterpart of the Agreement. We have also examined a conformed copy of
a Bond of each series.
Based on such examination, we are of the opinion that, under
existing law:
1. The Bonds and the Agreement are legal, valid, binding and
enforceable in accordance with their respective terms subject to bankruptcy laws
and other laws affecting creditors' rights and to the exercise of judicial
discretion.
2. The Bonds constitute special, limited obligations of the
Issuer, and the principal of and premium, if any, and interest (collectively,
"debt service") on the Bonds are payable by the Issuer solely from the revenues
to be derived by the Issuer under the Agreement and the other security pledged
and assigned by the Agreement to secure that payment, including the payments
required to be made by the Company under the Agreement. The Bonds and the
payment of debt service are not secured by any obligation or pledge of any
moneys raised by taxation and the Bonds do not represent or constitute a debt or
pledge of the faith and credit of the Issuer, the County of Maricopa, the State
of Arizona, or any political subdivision thereof.
3. The interest on the Bonds is excluded from gross income for
federal income tax purposes under Section 103(a) of the Internal Revenue Code of
1986, as amended (the "Code"), or its statutory predecessor under the Internal
Revenue Code of 1954, as amended (the "1954 Code"), except for interest on any
Bond for any period during which it is held by a "substantial user" or a
"related person" as those terms are used in Section 147(a) of the Code or its
statutory predecessor under the 1954 Code. The interest on the Series 1997A
Bonds, but not on the Series 1997B Bonds, is an item of tax preference under
Section 57 of the Code and, therefore, may be subject to the alternative minimum
tax imposed by the Code on individuals and corporations. Interest on the Bonds
is exempt from Arizona state income tax. We express no opinion as to any other
tax consequences regarding the Bonds.
Under Code provisions applicable only to corporations (as defined
for federal income tax purposes), a portion of the excess of adjusted current
earnings (which includes interest on all tax-exempt bonds including the Series
19978 Bonds) over other alternative minimum taxable income may be subject to a
corporate alternative minimum tax. Further, interest on the Bonds may be subject
to a branch profits tax imposed on certain foreign corporations doing business
in the United States and to a tax imposed on excess net passive income of
certain S corporations.
In giving the foregoing opinions, we have assumed and relied upon
compliance with the covenants of the Issuer and the Company and the accuracy,
which we have not
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independently verified, of the representations and certifications of the Issuer
and of the Company contained in the Transcript. The accuracy of certain of those
representations and certifications, and compliance by the Issuer and the Company
with certain of those covenants, may be necessary for the interest on the Bonds
to be and to remain excluded from gross income for federal income tax purposes
and for certain of the other tax effects stated above. Failure to comply with
certain requirements subsequent to the date hereof could cause interest on the
Bonds to be included in gross income for federal income tax purposes
retroactively to the date hereof.
We have also relied, without independent investigation, upon the
opinion of in-house counsel for the Company, contained in the Transcript with
respect to all matters relating to the Company contained in the Transcript. We
have also assumed for the purposes of this opinion the due authorization,
execution and delivery by and the binding effect upon and enforceability against
the Trustee of the Agreement.
We have not been retained to pass upon, and express no opinion
concerning, the 1997 Project, the 1985 Project, the Company, including its
financial condition or its ability to pay debt service on the Bonds
(collectively, "Company Matters"), or any matters describing or concerning the
1997 Project, the 1985 Project, the Company or Company Matters.
We express no opinion as to the statement printed on the Bonds
referring to the municipal bond insurance policy issued by Ambac Assurance
Corporation or as to the insurance referred to in that statement.
Respectfully submitted,
SQUIRE, SANDERS & DEMPSEY L.L.P.
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Statement of Insurance
Municipal Bond Insurance Policy No. 14546 BE (the "Policy") with
respect to payments due for principal of and interest on this bond has been
issued by Ambac Assurance Corporation ("Ambac Assurance"). The Policy has been
delivered to the United States Trust Company of New York, New York, New York, as
the Insurance Trustee under said Policy and will be held by such Insurance
Trustee or any successor insurance trustee. The Policy is on file and available
for inspection at the principal office of the Insurance Trustee and a copy
thereof may be secured from Ambac Assurance or the Insurance Trustee. All
payments required to be made under the Policy shall be made in accordance with
the provisions thereof. The owner of this bond acknowledges and consents to the
subrogation rights of Ambac Assurance as more fully set forth in the Policy.
Assignment
The following abbreviations when used in the inscription on the
face of this Bond, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
IT TEN - as joint tenants with right of survivorship
and not as tenants in common
UNIF GIFT/TRANS MIN ACT -____________Custodian for___________ under
(Cust. ) (Minor)
Uniform Gifts/Transfers to Minors Act of__________________________.
(State)
Additional abbreviations may also be used though not in list above.
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED IS
REGISTERED IN THE NAME OF CEDE 8t CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto
____________________________________________________________ whose address is
_________________________ and whose social security number (or other federal tax
identification number) is
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF TRANSFEREE
----------------------------------------------
----------------------------------------------
the within Bond and does hereby irrevocably constitute and
appoint ________________________ as attorney to transfer the said Bond on the
books kept for registration thereof, with full power of substitution in the
premises.
Date:
-------------------------------------
SIGNATURE(S) GUARANTEED BY:
-----------------------------------------------
Signature guarantee should be made by an
eligible guarantor institution pursuant to
S.E.C. Rule 17Ad-15
-----------------------------------------------
NOTICE: The signature to this assignment must
correspond with the name of the Registered Owner
as it appears upon the face of the within Bond
in every particular, without alteration or
enlargement or any change whatever.
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