HomeMy WebLinkAboutItem 02 - b - Council Reading File - Indenture San Luis Obispo Water Revenue Refunding 2018 4165-3907-6113 2OH&S
DRAFT
05/08/18
4165-3907-6113.2
INDENTURE
Dated as of [Dated Date]
by and between the
CITY OF SAN LUIS OBISPO, CALIFORNIA
and
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
Relating to the
CITY OF SAN LUIS OBISPO, CALIFORNIA
WATER REVENUE REFUNDING BONDS, SERIES 2018
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS; EQUAL SECURITY
SECTION 1.01. Definitions ...................................................................................................... 1
SECTION 1.02. Interpretation ................................................................................................. 14
SECTION 1.03. Equal Security ............................................................................................... 15
ARTICLE II
AUTHORIZATION AND ISSUANCE OF BONDS
SECTION 2.01. Authorization and Purpose of Bonds. ........................................................... 15
SECTION 2.02. Registration and Denominations of Bonds ................................................... 16
SECTION 2.03. Date and Maturity Dates of and Interest Rates on Bonds ............................. 16
SECTION 2.04. Interest Payment Dates of Bonds .................................................................. 16
SECTION 2.05. Form of Bonds .............................................................................................. 17
SECTION 2.06. Payment of Bonds ......................................................................................... 17
SECTION 2.07. Execution of Bonds ....................................................................................... 17
SECTION 2.08. Transfer and Exchange of Bonds .................................................................. 17
SECTION 2.09. Mutilated, Destroyed, Stolen or Lost Bonds ................................................ 18
SECTION 2.10. Temporary Bonds ......................................................................................... 18
SECTION 2.11. Issuance of Bonds; Application of Proceeds of Sale of Bonds .................... 18
SECTION 2.12. Use of Securities Depository ........................................................................ 19
ARTICLE III
REDEMPTION OF BONDS
SECTION 3.01. Redemption of Bonds. .................................................................................. 21
SECTION 3.02. Partial Redemption of Bonds ........................................................................ 22
SECTION 3.03. Notice of Redemption ................................................................................... 22
SECTION 3.04. Effect of Redemption .................................................................................... 23
ARTICLE IV
PLEDGE OF NET REVENUES AND OTHER AMOUNTS; ALLOCATION OF REVENUES;
FUNDS AND ACCOUNTS; PAYMENT OF BONDS;
ADDITIONAL PARITY OBLIGATIONS
SECTION 4.01. Pledge of Net Revenues and Other Amounts ............................................... 23
SECTION 4.02. Allocation of Revenues ................................................................................. 23
SECTION 4.03. Debt Service Fund ........................................................................................ 24
SECTION 4.04. Rate Stabilization Fund ................................................................................. 24
SECTION 4.05. Additional Parity Obligations ....................................................................... 25
SECTION 4.06. Deposit and Investments of Money in Accounts and Funds ........................ 27
SECTION 4.07. Accounting Records and Statements ............................................................ 27
TABLE OF CONTENTS
(continued)
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ARTICLE V
COVENANTS OF THE CITY
SECTION 5.01. Punctual Payment ......................................................................................... 28
SECTION 5.02. Extension of Payment of Bonds ................................................................... 28
SECTION 5.03. Accounting Records and Reports ................................................................. 28
SECTION 5.04. Tax Covenants and Matters; Rebate Fund .................................................... 28
SECTION 5.05. Protection of Security and Rights of Holders ............................................... 29
SECTION 5.06. Against Encumbrances ................................................................................. 29
SECTION 5.07. Against Sale of Other Disposition of Property ............................................. 29
SECTION 5.08. Against Competitive Facilities ..................................................................... 29
SECTION 5.09. Operation and Maintenance of the Water System ........................................ 30
SECTION 5.10. Payment of Claims ........................................................................................ 30
SECTION 5.11. Compliance with Contracts ........................................................................... 30
SECTION 5.12. Insurance ....................................................................................................... 30
SECTION 5.13. Payment of Taxes and Compliance with Governmental
Regulations ................................................................................................... 30
SECTION 5.14. Amount of Rates and Charges ...................................................................... 30
SECTION 5.15. Collection of Rates and Charges................................................................... 31
SECTION 5.16. Eminent Domain and Insurance Proceeds .................................................... 31
SECTION 5.17. Continuing Disclosure .................................................................................. 31
SECTION 5.18. Waiver of Laws ............................................................................................. 31
SECTION 5.19. Further Assurances ....................................................................................... 32
ARTICLE VI
THE TRUSTEE
SECTION 6.01. The Trustee ................................................................................................... 32
SECTION 6.02. Compensation of the Trustee ........................................................................ 33
SECTION 6.03. Protection of the Trustee ............................................................................... 33
SECTION 6.04. Indemnification of Trustee ........................................................................... 36
ARTICLE VII
AMENDMENT OF THE INDENTURE
SECTION 7.01. Amendment of the Indenture ........................................................................ 36
SECTION 7.02. Disqualified Bonds ....................................................................................... 37
SECTION 7.03. Effect of Supplemental Bond Indenture ....................................................... 37
SECTION 7.04. Endorsement or Replacement of Bonds After Amendment ......................... 37
SECTION 7.05. Amendment by Mutual Consent ................................................................... 38
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01. Events of Default .......................................................................................... 38
TABLE OF CONTENTS
(continued)
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SECTION 8.02. Application of Funds Upon Acceleration ..................................................... 39
SECTION 8.03. Trustee to Represent Holders........................................................................ 39
SECTION 8.04. Holders’ Direction of Proceedings ............................................................... 40
SECTION 8.05. Limitation on Holders’ Right to Sue ............................................................ 40
SECTION 8.06. Absolute Obligation of City.......................................................................... 40
SECTION 8.07. Termination of Proceedings .......................................................................... 40
SECTION 8.08. Remedies Not Exclusive ............................................................................... 41
SECTION 8.09. No Waiver of Default ................................................................................... 41
ARTICLE IX
DEFEASANCE
SECTION 9.01. Discharge of Indenture ................................................................................. 41
SECTION 9.02. Discharge of Liability on Bonds ................................................................... 42
SECTION 9.03. Deposit of Money or Securities with Bond Trustee ..................................... 42
SECTION 9.04. Unclaimed Money ........................................................................................ 42
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Liability of City Limited to Net Revenues and Certain Other Funds ........... 43
SECTION 10.02. Benefits of the Indenture Limited to Parties ................................................. 43
SECTION 10.03. Successor Is Deemed Included in All References to Predecessor ................ 43
SECTION 10.04. Execution of Documents by Holders ............................................................ 44
SECTION 10.05. Waiver of Personal Liability ......................................................................... 44
SECTION 10.06. Acquisition of Bonds by City ....................................................................... 44
SECTION 10.07. Content of Certificates .................................................................................. 44
SECTION 10.08. Accounts and Funds; Business Days ............................................................ 45
SECTION 10.09. Notices .......................................................................................................... 45
SECTION 10.10. Governing Law ............................................................................................. 45
SECTION 10.11. Partial Invalidity ........................................................................................... 45
SECTION 10.12. Execution in Several Counterparts ............................................................... 46
EXHIBIT A FORM OF BOND ....................................................................................... A-1
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INDENTURE
This Indenture, dated as of [Dated Date] (this “Indenture”), by and between the City
of San Luis Obispo, California, charter city and municipal corporation organized and existing
under and by virtue of the laws of the State of California (the “City”), and U.S. Bank National
Association, a national banking association duly organized and existing under and by virtue of the
laws of the United States of America and authorized to accept and execute trusts of the character
herein set forth, as Trustee (the “Trustee”);
WITNESSETH:
WHEREAS, the City has previously issued its City of San Luis Obispo 2006 Water
Revenue Bonds in the original aggregate principal amount of $16,905,000 (the “Prior Bonds”) for
the purpose of paying for the design, engineering, permitting and construction of certain additions,
betterments, extensions and improvements to the City’s Water System; and
WHEREAS, the City is authorized by law to issue refunding revenue bonds to
refinance any obligations theretofore incurred by it; and
WHEREAS, the City has determined that it is in the best interests of the City and
its customers and is necessary and proper for City purposes that the City issue its City of San Luis
Obispo, California Water Revenue Refunding Bonds, Series 2018 (the “Bonds”), to refund its
payment obligations under the Prior Bonds in the manner described herein; and
WHEREAS, the City has determined that all things necessary to cause the Bonds,
when duly executed by the City and authenticated and delivered by the Trustee as provided herein,
to be legal and valid limited obligations of the City enforceable in accordance with their terms,
and to constitute the Indenture a valid agreement for the purposes and uses herein set forth in
accordance with its terms, have been done and taken, and the execution and delivery hereof and
the execution, authentication and delivery of the Bonds, subject to the terms hereof, have in all
respects been duly authorized;
NOW THEREFORE, THE INDENTURE WITNESSETH, that in order to declare
the conditions and terms upon and subject to which the Bonds are to be issued, and to secure the
payment of the interest on and principal of all Bonds at any time executed, authenticated and
delivered hereunder according to their tenor, and to secure the observance and performance of all
the agreements, conditions, covenants and terms contained herein and therein, and in consideration
of the premises and of the mutual agreements and covenants contained herein and of the purchase
and acceptance of the Bonds by the respective registered Holders thereof from time to time, and
for other valuable consideration, the receipt whereof is hereby acknowledged, the City does hereby
agree and covenant with the Trustee, for the benefit of the respective registered Holders from time
to time of the Bonds, as follows:
ARTICLE I
DEFINITIONS; EQUAL SECURITY
SECTION 1.01. Definitions. Unless the context otherwise requires, the terms
defined in this section shall for all purposes hereof and of the Bonds and of any certificate, opinion,
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report, request or other document herein or therein mentioned have the meanings herein specified,
the following definitions to be equally applicable to both the singular and plural forms of any of
the terms defined herein:
Accountant’s Report
“Accountant’s Report” means a report signed by an Independent Certified Public
Accountant.
Accreted Value
“Accreted Value” means, with respect to any Capital Appreciation Obligation, the
principal amount thereof plus the interest accrued thereon, compounded at the approximate interest
rate thereon on each date specified therein. The Accreted Value of any Capital Appreciation
Obligation at any date shall be the amounts set forth in the accreted value table for the Capital
Appreciation Obligation as of such date, if such date is a compounding date, and if not, as of the
immediately preceding compounding date.
Adjusted Net Revenues
“Adjusted Net Revenues” means, for any period, Net Revenues for such period less,
to the extent included in the calculation of Net Revenues for such period, all Subsidy Payments
received or expected to be received in such period.
Annual Debt Service
“Annual Debt Service” means, with respect to any Parity Obligations and for any
Fiscal Year, the aggregate amount of Debt Service on such Parity Obligations becoming due and
payable during such Fiscal Year.
Average Annual Debt Service
“Average Annual Debt Service” means with respect to any Parity Obligations and
as of any date of calculation, the quotient obtained by dividing (1) the sum of the Annual Debt
Service on such Parity Obligations for all Fiscal Years during the period commencing with the
Fiscal Year in which such calculation is made (or, if appropriate, the first full Fiscal Year following
the issuance, incurrence or creation of such Parity Obligations) and terminating in the last Fiscal
Year in which any Debt Service on such Parity Obligations is due by (2) the number of such Fiscal
Years.
Balloon Indebtedness
“Balloon Indebtedness” means, with respect to the Bonds or Parity Obligations
twenty-five percent (25%) or more of the principal or other similar amount of which matures or
becomes due on the same date or within a 12-month period (with mandatory sinking fund payments
deemed to be payments of matured principal), that portion of the principal or other similar amount
of the Bonds or Parity Obligations which matures or becomes due on such date or within such 12-
month period.
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Beneficial Owner
“Beneficial Owner” means any Person which has or shares the power, direct ly or
indirectly, to make investment decisions concerning ownership of any of the Bonds (including any
Person holding Bonds through nominees, depositories or other intermediaries).
Board of Directors
“Board of Directors” means the Board of Directors of the City.
Bonds
“Bonds” means the City of San Luis Obispo, California Water Revenue Refunding
Bonds, Series 2018, authorized, executed, issued and delivered by the City under and pursuant to
the Law and under and pursuant hereto and that are secured hereby.
Business Day
“Business Day” means any day (other than a Saturday or a Sunday) on which banks
in New York, New York, are open for business and on which the Trustee is open for business at
its Principal Corporate Trust Office.
Capital Appreciation Obligation
“Capital Appreciation Obligation” means any Parity Obligation designated as such
in the Parity Obligation Contract providing for the creation of such Parity Obligation and on which
interest is compounded and paid at maturity or on prior redemption.
Certificate of the City
“Certificate of the City” means an instrument in writing signed by City
Administrative Officer, the Finance Director, or by any other officer of the City duly authorized
by the Board of Directors for that purpose.
Code
“Code” means the Internal Revenue Code of 1986, as amended, and all then
applicable regulations of the United States Department of the Treasury issued thereunder, and in
this regard reference to any particular section of the Code shall include reference to all successors
to such section of the Code.
Consultant
“Consultant” means the consultant, consulting firm, engineer, architect,
engineering firm, architectural firm, accountant or accounting firm retained by the City to perform
acts or carry out the duties provided for such consultant hereunder.
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Continuing Disclosure Certificate
“Continuing Disclosure Certificate” means that certain Continuing Disclosure
Certificate, dated the date of delivery of the Bonds, executed by the City, as originally executed
and as it may be amended in accordance with its terms.
Costs of Issuance
“Costs of Issuance” means all items of expense directly or indirectly payable by or
reimbursable to the City and related to the authorization, execution and delivery of this Indenture
and the related sale of the Bonds, including, but not limited to, costs of preparation and
reproduction of documents, filing fees, initial fees and charges of the Trustee, legal fees and
charges, fees and expenses of consultants and professionals, fees and expenses of the financial
advisor, fees and charges for preparation, execution and safekeeping of the Bonds and any other
charge, cost or fee in connection with the original issuance, sale and delivery of the Bonds.
Costs of Issuance Fund
“Costs of Issuance Fund” means the fund by that name established pursuant to
Section 2.11(b).
Coverage Requirement
“Coverage Requirement” means, with respect to any specified period, an amount
of Adjusted Net Revenues for the specified period equal, in each case, to at least (1) 125% of the
Debt Service for all Outstanding Bonds and Parity Obligations for the specified period and (2)
100% of all obligations of the City payable from Net Revenues in the specified period.
Debt Service
“Debt Service,” when used with respect to the Outstanding Bonds and Parity
Obligations, means, for any period, the sum of (1) the interest payable during such period on the
Outstanding Bonds and Parity Obligations, (2) the principal or mandatory sinking fund payments
to be paid with respect to the Outstanding Bonds and Parity Obligations during such period, and
(3) any other scheduled payments coming due on Outstanding Parity Obligations in such period
and not otherwise included in clauses (1) and (2) of this definition, all of which are to be computed
on the assumption that no portion of the Outstanding Bonds or Parity Obligations shall cease to be
Outstanding during such period except by reason of the application of scheduled payments;
provided that, for purposes of such computation:
(a) unless a different subsection of this definition applies for purposes of
determining maturities or amortization, in determining the amount due in any period, payment
shall be assumed to be made in accordance with any amortization schedule established for the
Bonds or Parity Obligations, including any mandatory sinking fund payments or any scheduled
redemption or payment of Parity Obligations on the basis of Accreted Value, and for such purpose,
the redemption payment or payment of Accreted Value shall be deemed a principal payment and
interest that is compounded and paid as Accreted Value shall be deemed due on the scheduled
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redemption or payment date and any contingencies that may result in a request for earlier payment
shall be disregarded;
(b) Balloon Indebtedness may, at the option of the City, be treated as if it were
to be amortized with substantially level debt service over a term of up to 40 years (which period
shall be designated by the City), from the date of calculation, and the interest rate used for such
computation shall be assumed by the City to be equal to (i) the interest rate in effect for such
Balloon Indebtedness on the date of calculation, if the interest rate determination method in effect
for such Balloon Indebtedness on the date of calculation provides for interest rates that are fixed
for at least 12 months from the date such interest rates are determined or (ii) if the interest rate
determination method in effect for such Balloon Indebtedness on the date of calculation provides
for interest rates that are not fixed for at least 12 months from the date such interest rates are
determined, the average of (x) the SIFMA Swap Index if the interest on such Balloon Indebtedness
is excluded or expected to be excluded from gross income for federal income tax purposes or (y)
the One Month USD LIBOR Rate if the interest on such Balloon Indebtedness is included or
expected to be included in gross income for federal income tax purposes, in each case over the 12
months preceding the date of calculation (provided, however, that if any such index is no longer
published, the interest rate to be used by the City for such computation shall be calculated based
upon such similar index as is determined by the City);
(c) if any Parity Obligations bear, or if any Parity Obligations proposed to be
issued, incurred or created will bear, interest at a variable interest rate for which a Hedge
Agreement is not in place and the interest on which is excluded or expected to be excluded from
gross income for federal income tax purposes, the interest rate on such Parity Obligations for
periods when the actual interest rate cannot yet be determined shall be assumed to be equal to the
average of the SIFMA Swap Index for the 12 months preceding such date of calculation (provided,
however, that if such index is no longer published, the interest rate on such Parity Obligations shall
be calculated based upon such similar index as is determined by the City);
(d) if any Parity Obligations bear, or if any Parity Obligations proposed to be
issued, created or incurred will bear, interest at a variable interest rate for which a Hedge
Agreement is not in place and the interest on which is included or expected to be included in gross
income for federal income tax purposes, the interest rate on such Parity Obligations for periods
when the actual interest rate cannot yet be determined shall be assumed to be equal to 100% of the
average One Month USD LIBOR Rate during the 12 months preceding such date of calculation
(provided, however, that if such index is no longer published, the interest rate on such Obligations
shall be calculated based upon such similar index as is determined by the City);
(e) with respect to any Parity Obligations bearing interest, or expected to bear
interest, at a variable interest rate for which a Hedge Agreement is in place providing for a synthetic
fixed interest rate to maturity or for a specific term with respect to such Parity Obligations, the
interest rate on such Parity Obligations shall be assumed to be the synthetic fixed interest rate
specified in such Hedge Agreement for such term;
(f) with respect to any Bonds or Parity Obligations bearing interest, or expected
to bear interest, at a fixed interest rate for which a Hedge Agreement is in place providing for a net
variable interest rate with respect to such Bonds or Parity Obligations for a specific term, the
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interest rate on such Bonds or Parity Obligations shall be assumed to be equal for such term to the
sum of (i) the fixed interest rate or rates to be paid on such Bonds or Parity Obligations, minus (ii)
the fixed interest rate or rates receivable by the City under such Hedge Agreement, plus (iii) the
variable interest rate to be paid by the City under the Hedge Agreement, calculated, for periods in
which the actual variable rate under the Hedge Agreement cannot be determined, at the average
interest rate of the index on which the Hedge Agreement is based, or, if not based on an identifiable
index, then the average of (x) the SIFMA Swap Index if the interest on the related Bonds or Parity
Obligations is excluded or expected to be excluded from gross income for federal income tax
purposes or (y) the One Month USD LIBOR Rate if the interest on the related Bonds or Parity
Obligations is included or expected to be included in gross income for federal income tax purposes,
in each case over the 12 months preceding the date of calculation (provided, however, that if any
such index is no longer published, the variable interest rate to be paid by the City under the Hedge
Agreement shall be calculated based upon such similar index as is determined by the City);
(g) if any Parity Obligations feature an option, on the part of the owners or a
requirement under the terms of such Parity Obligations, to tender all or a portion of such Parity
Obligations to the City, or other fiduciary or agent, and to purchase such Parity Obligations or
portion thereof if properly presented, then for purposes of determining the amounts due in any
period with respect to such Parity Obligations, the options or obligations of the owners of such
Parity Obligations to tender the same for purchase or payment shall be ignored;
(h) payments on the Bonds and Parity Obligations shall be excluded to the
extent such payments are to be paid from amounts on deposit with a trustee or other fiduciary in
escrow specifically therefor, and interest payments shall be excluded to the extent that such interest
payments are (1) to be paid from the proceeds of the Bonds or Parity Obligations, including any
investment earnings thereon, held by a trustee or other fiduciary as capitalized interest specifically
to pay such interest or (2) paid or expected to be paid from Subsidy Payments;
(i) with respect to Parity Obligations for which a reserve fund is in place, the
calculation of Debt Service for such Parity Obligations for any period shall be reduced by the
amount of investment earnings on amounts on deposit in such reserve fund used or expected to be
used to pay Debt Service on such Parity Obligations during such period, as estimated by the City;
(j) with respect to Parity Obligations for which a reserve fund is in place, the
amount on deposit in such reserve fund on any date of calculation of Debt Service shall be deducted
from the amount due on the final maturity or due date of such Parity Obligations if such amount
on deposit in such reserve fund would be released at such maturity or due date and, to the extent
the amount on deposit in such reserve fund is in excess of the amount due on the final maturity or
due date of such Parity Obligations, such excess shall be applied to the full amount due on each
preceding payment date for such Parity Obligations, in inverse order, until such amount on deposit
in such reserve fund is exhausted;
(k) Reimbursement Obligations or potential Reimbursement Obligations shall
be ignored; and
(l) payments or potential payments under Hedge Agreements may, at the
option of the City, be ignored except as provided in clauses (e) and (f) of this definition.
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Debt Service Fund
“Debt Service Fund” means the fund by that name established pursuant to
Section 4.03.
City
“City” means the City of San Luis Obispo, California a charter city and municipal
corporation duly organized and existing under and pursuant to the laws of the State of California,
and any successor thereto.
Event of Default
“Event of Default” means an event described as such in Section 8.01.
Fiscal Year
“Fiscal Year” means the period beginning on July 1 of each year and ending on the
last day of June of the succeeding calendar year, or any other twelve-month period selected and
designated as the official fiscal year of the City.
Hedge Agreement
“Hedge Agreement” means an interest rate swap, cap, collar, option, floor, forward,
derivative, or other hedging agreement, arrangement, or security, however denominated, entered
into between the City and a counterparty, in connection with or incidental to the issuance,
incurrence, or carrying of the Bonds or Parity Obligations, including an interest rate swap, cap,
collar, option, floor, forward, derivative, or other hedging agreement, arrangement, or security
entered into in advance of the issuance, incurrence or carrying of any Parity Obligations.
Holder
“Holder,” whenever used herein with respect to a Bond means the Person in whose
name such Bond is registered.
Indenture
“Indenture” means this Indenture and all Supplemental Indentures.
Independent Certified Public Accountant
“Independent Certified Public Accountant” means any firm of certified public
accountants appointed and paid by the City, and each of whom --
(1) is in fact independent and not under the domination of the City;
(2) does not have a substantial financial interest, direct or indirect, in the
operations of the City; and
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(3) is not connected with the City as a member of the Board of Directors or an
officer or employee of the City, but may be regularly retained to audit the accounting records of
and make reports thereon to the City.
Interest Payment Date
“Interest Payment Date” means June 1 and December 1 of each year, commencing
[December 1, 2018].
Law
“Law” means Articles 10 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of
the Government Code of the State.
Net Proceeds
“Net Proceeds” means, when used with respect to any casualty insurance or
condemnation award, the proceeds from such insurance or condemnation award remaining after
payment of all expenses (including attorneys’ fees) incurred in the collection of such proceeds.
Net Revenues
“Net Revenues” means, for any period, the Revenues for such period less the
Operation and Maintenance Costs for such period.
One Month USD LIBOR Rate
“One Month USD LIBOR Rate” means the rate for deposits in U.S. dollars for a
one-month maturity that appears on Reuters Screen LIBOR01 Page (or such other page as may
replace that page on that service, or such other service as may be nominated by the British Bankers
Association, for the purpose of displaying London interbank offered rates for U.S. dollar deposits)
as of 11:00 a.m., London time on the date of determination of such rate.
Operation and Maintenance Costs
“Operation and Maintenance Costs” means costs spent or incurred by the City for
maintaining and operating the Water System, calculated in accordance with generally accepted
accounting principles consistently applied, including but not limited to (a) the reasonable expenses
of management and repair and other costs and expenses necessary to maintain and preserve the
Water System in good repair and working order and (b) the reasonable administrative costs of the
City attributable to the operation and maintenance of the Water System; but in all cases excluding
(i) the interest expense relating to subordinate obligations and unsecured obligations of the City,
(ii) depreciation, replacement and obsolescence charges or reserves therefor, and (iii) amortization
of intangibles or other bookkeeping entries of a similar nature.
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Opinion of Counsel
“Opinion of Counsel” means a written opinion of counsel of recognized national
standing in the field of law relating to municipal bonds, appointed and paid by the City.
Outstanding
“Outstanding,” when used as of any particular time with reference to Bonds, means
(subject to the provisions of Section 7.02) all Bonds theretofore, or thereupon being, authenticated
and delivered by the Trustee under this Indenture except --
(1) Bonds theretofore cancelled by the Trustee or surrendered to the Trustee for
cancellation;
(2) Bonds with respect to which all liability of the City shall have been
discharged in accordance with Section 9.02; and
(3) Bonds for the transfer or exchange of or in lieu of or in substitution for
which other Bonds shall have been authenticated and delivered by the Trustee pursuant to this
Indenture.
“Outstanding” when used as of any particular time with reference to Parity
Obligations, means (subject to the terms of the related Parity Obligation Contract) all Parity
Obligations theretofore issued, incurred or created by the City, except --
(1) Parity Obligations theretofore cancelled or terminated or surrendered for
cancellation or termination;
(2) Parity Obligations paid or deemed to be paid within the meaning of the Parity
Obligation Contract providing for the issuance, incurrence or creation of such Parity Obligations;
(3) Parity Obligations owned or held by or for the City; and
(4) Parity Obligations in lieu of or in substitution for which other Parity Obligations
have been issued, incurred or created pursuant to the terms of the Parity Obligation Contract
providing for the issuance, incurrence or creation of such Parity Obligations.
Parity Obligation Contract
“Parity Obligation Contract” means any indenture, trust agreement, installment
purchase agreement, lease, contract or other instrument or agreement (including any Hedge
Agreement), which is designated as such by the City and pursuant to which Parity Obligations are
created.
Parity Obligation
“Parity Obligation” means (a) the City of San Luis Obispo 2012 Water Revenue
Refunding Bonds issued by the City in the aggregate principal amount of $4,960,000, (b) the SRF
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Loan, and (c) any other bond, note, warrant or other evidence of indebtedness, installment
payment, lease payment or other payment obligation of the City payable from Net Revenues on a
parity with the Bonds and any other Parity Obligations, which are issued, incurred or created in
accordance with Sections 4.05(a), (b) or (c) hereof.
Permitted Investments
“Permitted Investments” means any of the following which at the time are legal
investments under the laws of the State for moneys held hereunder and then proposed to be
invested therein (the Trustee is entitled to rely upon any investment direction from the City as a
certification that such investment constitutes a Permitted Investment):
(A) for all purposes, including defeasance investments in refunding escrow
accounts:
(1) cash, or
(2) 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,
(B) for all purposes other than defeasance investments in refunding escrow
accounts:
(1) obligations of any of the following federal agencies which obligations
represent the full faith and credit of the United States of America, including the Export-Import
Bank; Farm Credit System Financial Assistance Corporation; Farmers Home Administration;
General Services Administration; United States Maritime Administration; Small Business
Administration; Government National Mortgage Association (GNMA); United States Department
of Housing & Urban Development (PHA’s); and Federal Housing Administration;
(2) senior debt obligations rated “AAA” by Standard & Poor’s Ratings
Services, a Standard & Poor’s Financial Services LLC business; (“S&P”) and “Aaa” by Moody’s
Investors Service, Inc. (“Moody’s”) issued by the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation;
(3) U.S. dollar denominated deposit accounts, federal funds and banker’s
acceptances with domestic commercial banks (including the Trustee or any of its affiliates) which
have a rating on their short-term certificates of deposit on the date of purchase of “A-1” or “A-1+”
or “P-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);
(4) 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;
(5) investments in a money market fund rated “AAAm” or “AAAm-G” or
better by S&P, including such funds for which the Trustee, its affiliates or subsidiaries provide
investment advisory or other management services or for which the Trustee or an affiliate of the
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Trustee serves as investment administrator, shareholder servicing agent, and/or custodian or
subcustodian, notwithstanding that (i) the Trustee or an affiliate of the Trustee receives fees from
funds for services rendered, (ii) the Trustee collects fees for services rendered pursuant to this
Indenture, which fees are separate from the fees received from such funds, and (iii) services
performed for such funds and pursuant to this Indenture may at times duplicate those provided to
such funds by the Trustee or an affiliate of the Trustee;
(6) pre-refunded Municipal Obligations defined as follows: any bonds or other
obligations of any state of the United States of America or of any agency, instrumentality or local
governmental unit of any such state which are not callable at the option of, the obligor prior to
maturity or as to which irrevocable instructions have been given by the obligor to call on the date
specified in the notice; and (a) which are rated, based on an irrevocable 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 (A)(2) 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 (i i) 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;
(7) The State of California Local Agency Investment Fund, a pooled
investment fund managed by the State of California Treasurer’s office meeting all legal guidelines
and requirements for the investment of California public agency funds, provided, as to any
investment made by the Trustee, the Trustee shall be entitled to make investments and withdrawals
directly in its own name as Trustee; and
(8) any investment agreement by a provider, supported by appropriate opinions
of counsel, provided that, without limiting the foregoing, any such Investment Agreement shall
(i) be from a provider rated by S&P or Moody’s at AA or Aa2 or above, and (ii) expressly permit
the withdrawal, without penalty, of any amounts necessary at any time to fund any deficiencies on
account of debt service requirements with respect to the Bonds, together with such amendments
as may be approved by the City and the Trustee from time to time.
Person
“Person” means an individual, corporation, firm, association, partnership, limited
liability company, trust or other legal entity or group of entities, including a governmental entity
or any agency or political subdivision thereof.
Principal Corporate Trust Office
“Principal Corporate Trust Office” means the corporate trust office of the Trustee
in Los Angeles, California, at which at any particular time its corporate trust business is being
administered, except that with respect to presentation of Bonds for registration, payment,
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redemption, transfer or exchange, such term shall mean the corporate trust operations office of the
Trustee in St. Paul, Minnesota, or such other office designated by the Trustee from time to time.
Prior Bonds
“Prior Bonds” means the City of San Luis Obispo Water Revenue Bonds issued by
the City in the original aggregate principal amount of $16,905,000.
Rate Stabilization Fund
“Rate Stabilization Fund” means the fund by that name established pursuant to
Section 4.04.
Rebate Fund
“Rebate Fund” means the fund by that name established pursuant to Section 5.04.
Record Date
“Record Date” means the fifteenth day (whether or not a Business Day) preceding
each Interest Payment Date.
Refunding Fund
“Refunding Fund” means the fund by that name established pursuant to
Section 2.11(a).
Reimbursement Obligations
“Reimbursement Obligations” means any obligation of the City to repay, from Net
Revenues, amounts provided by a credit enhancement provider or a liquidity facility provider as
credit or liquidity support relating to any Parity Obligations.
Revenues
“Revenues” means all income, rents, rates, fees, charges and other moneys derived
from the ownership or operation of the Water System determined in accordance with generally
accepted accounting principles, consistently applied, including, without limiting the generality of
the foregoing, (1) all income, rents, rates, fees, charges, business interruption insurance proceeds,
connection fees and charges or other moneys derived by the City from the Water Service or other
services, facilities, and commodities sold, furnished or supplied through the facilities of or in the
conduct or operation of the business of the Water System; (2) the earnings on and income derived
from the investment of amounts described in clause (1) above and from City reserves held for the
Water System; and (3) the proceeds derived by the City directly or indirectly from the sale, lease
or other disposition of a part of the Water System; but excluding (a) the proceeds of taxes; (b)
customers’ deposits or any other deposits or advances subject to refund until such deposits or
advances have become the property of the City; and (c) advances or contributions in aid of
construction. Notwithstanding the foregoing, there shall be deducted from current Revenues any
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amounts transferred into the Rate Stabilization Fund from current Revenues as provided in Section
4.04 hereof and there shall be added to current Revenues any amounts transferred out of the Rate
Stabilization Fund as provided in Section 4.04 hereof.
Securities Depository
“Securities Depository” means The Depository Trust Company and its successors
and assigns, or any other securities depository selected as set forth in Section 2.12.
SIFMA Swap Index
“SIFMA Swap Index” means, on any date, a rate determined on the basis of the
seven-day high grade market index of tax-exempt variable rate demand obligations, as produced
by Municipal Market Data and published or made available by the Securities Industry & Financial
Markets Association (formerly the Bond Market Association) (“SIFMA”) or by any person acting
in cooperation with or under the sponsorship of SIFMA and effective from such date.
SRF Loan
“SRF Loan” means the loan made to the City by the California State Water
Resources Control Board with respect to the Water System in the aggregate principal amount of
not to exceed $8,114,137, under an agreement executed by the City on February 24, 2004, as
amended.
State
“State” means the State of California.
State Water Board
“State Water Board” means the California State Water Resources Control Board.
Subsidy Payments
“Subsidy Payments” means payments with respect to Parity Obligations made by
the United States Treasury to the City or a trustee or fiduciary pursuant to Section 54AA of the
Code, Section 6431 of the Code, or Section 1400U-2 of the Code or any successor to or extension
or replacement of any of such provisions of the Code, or any provisions of the Code that create
similar direct-pay subsidy programs.
Supplemental Indenture
“Supplemental Indenture” means any indenture then in full force and effect which
has been executed by the City and the Trustee, amendatory hereof or supplemental hereto; but only
if and to the extent that such Supplemental Indenture is specifically authorized hereunder.
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Tax Certificate
“Tax Certificate” means the Tax Certificate delivered by the City at the time of the
issuance and delivery of the Bonds, as the same may be amended or supplemented in accordance
with its terms.
Trustee
“Trustee” means U.S. Bank National Association, a national banking association
duly organized and existing under and by virtue of the laws of the United States of America and
authorized to accept and execute trusts of the character herein set forth, at its Principal Corporate
Trust Office, acting in its capacity as trustee under and pursuant hereto, and its successors or
assigns, or any other bank or trust company or national banking association at its Principal
Corporate Trust Office which may at any time be substituted in its place as provided in
Section 6.01.
Water Fund
“Water Fund” means the Water Fund of the City, and such other funds as the City
Council shall establish and designate as a part of the Water Fund which shall constitute the Water
Fund established pursuant to Section 4.02.
Water Service
“Water Service” means the water collection, supply, treatment and distribution
services made available or provided by the Water System.
Water System
“Water System” means all facilities, properties and improvements at any time
owned, controlled or operated by the City for the collection, supply, treatment and distribution of
water to residents of the City and adjacent areas, and any necessary lands, rights, entitlements and
other property useful in connection therewith, together with all extensions thereof and
improvements thereto hereafter acquired, constructed or installed by the City.
Written Request of the City
“Written Request of the City” means an instrument in writing signed by the City
Administrative Officer, the Finance Director, or by any other officer of the City duly authorized
by the Board of Directors for that purpose.
SECTION 1.02. Interpretation.
(a) Unless the context otherwise indicates, words expressed in the singular shall
include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for
convenience only and shall be deemed to mean and include the neuter, masculine o r feminine
gender, as appropriate.
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(b) Headings of articles and sections herein and the table of contents hereof are
solely for convenience of reference, do not constitute a part hereof and shall not affect the meaning,
construction or effect hereof.
(c) All references herein to “Articles,” “Sections” and other subdivisions are to
the corresponding Articles, Sections or subdivisions of this Indenture; the words “herein,”
“hereof,” “hereby,” “hereunder” and other words of similar import refer to this Indenture as a
whole and not to any particular Article, Section or subdivision hereof.
SECTION 1.03. Equal Security. In consideration of the acceptance of the
Bonds by the Holders thereof, this Indenture shall be deemed to be and shall constitute a contract
between the City and the Trustee for the benefit of the Holders from time to time of all of the
Bonds executed, authenticated and delivered hereunder and then Outstanding to secure the full and
final payment of the interest on and the principal of and the redemption premiums, if any, on all
such Bonds, subject to the agreements, conditions, covenants and terms contained herein; and all
agreements, conditions, covenants and terms contained herein required to be observed or
performed on behalf of the City shall be for the equal and proportionate benefit, security and
protection of the Holders from time to time of all Bonds without preference, priority or distinction
as to security or otherwise of any Bonds over any other Bonds.
ARTICLE II
AUTHORIZATION AND ISSUANCE OF BONDS
SECTION 2.01. Authorization and Purpose of Bonds.
(a) The City has reviewed all proceedings heretofore taken relative to the
authorization of the Bonds and has found, as a result of such review, and hereby finds and
determines that all acts, conditions and things required by the Law to exist, happen and be
performed precedent to the issuance of the Bonds do exist, have happened and have been
performed in due time, form and manner as required by the Law, and that the City is now
authorized, pursuant to each and every requirement of the Law and hereof, to issue the Bonds
under the Law in the aggregate principal amount of [principal amount in words] dollars
($[principal amount]) in the form and manner provided herein. The Bonds shall be entitled to the
benefit, protection and security of the provisions hereof, shall be designated the “City of San Luis
Obispo, California Water Revenue Refunding Bonds, Series 2018” and shall be issued by the City
under and pursuant to the Law and under and pursuant hereto. The Bonds may contain or have
endorsed thereon such descriptive provisions, specifications and words not inconsistent with the
provisions hereof as may be desirable or necessary to comply with custom or the rules of any
securities exchange or commission or brokerage board or otherwise as may be determined by the
City prior to the delivery thereof.
(b) The purpose for which the Bonds are to be issued is to provide funds to the
City which, together with other available funds of the City, will be sufficient to provide for the
refunding of the City’s obligations under the Prior Bonds and to pay Costs of Issuance.
(c) From and after the issuance of the Bonds the findings and determinations of
the Board of Directors respecting the Bonds shall be conclusive evidence of the existence of the
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facts so found and determined in any action or proceeding in any court in which the validity of
such Bonds is at issue, and no bona fide purchaser of any of the Bonds shall be required to see to
the existence of any fact or to the performance of any condition or to the taking of any proceeding
required prior to such issuance or to the application of the purchase price paid for the Bonds. The
validity of the issuance of the Bonds shall not be dependent on or affected in any way by any
proceedings taken by the City for the payment and refunding of any of the City’s obligations under
the Prior Bonds, and the recital contained in the Bonds that the Bonds are issued under and pursuant
to the Law and under and pursuant hereto shall be conclusive evidence of their validity and of the
regularity of their issuance, and all Bonds shall be incontestable from and after their issuance. The
Bonds shall be deemed to be issued, within the meaning hereof, whenever the definitive Bonds (or
any temporary Bonds exchangeable therefor) have been delivered to the purchaser thereof and the
purchase price thereof received.
SECTION 2.02. Registration and Denominations of Bonds. The Bonds shall
be issued as fully registered bonds in denominations of $5,000 or any integral multiple thereof.
The Bonds shall be initially registered in the name of Cede & Co., as nominee of the Securities
Depository and shall be evidenced by one Bond for each maturity of the Bonds in the principal
amount of the respective maturities of the Bonds. The Bonds shall be numbered in consecutive
numerical order from R-1 upwards. Registered ownership of the Bonds, or any portion thereof,
may not thereafter be transferred except as set forth in this Article II.
SECTION 2.03. Date and Maturity Dates of and Interest Rates on Bonds.
The Bonds shall be dated the date of the initial delivery thereof. The Bonds shall mature on the
following dates in the following amounts (subject to the right of prior redemption set forth in
Article III) and shall bear interest at the following rates per annum:
Maturity Date
(June 1)
Principal
Amount
Interest
Rate
$ %
SECTION 2.04. Interest Payment Dates of Bonds. The interest on the Bonds
shall be computed on the basis of a 360-day year of twelve (12) 30-day calendar months and shall
be payable on each Interest Payment Date. The Bonds shall bear interest from the Interest Payment
Date next preceding the date of authentication thereof, unless they are authenticated on a day
during the period from the day after a Record Date for an Interest Payment Date to such Interest
Payment Date, both dates inclusive, in which event they shall bear interest from such Interest
Payment Date, or unless they are authenticated on a day on or before the Record Date for the first
Interest Payment Date, in which event they shall bear interest from their date ; provided, that if at
the time of authentication of any Bond interest is then in default on the Outstanding Bonds, such
Bond shall bear interest from the Interest Payment Date to which interest has previously been paid
or made available for payment on the Outstanding Bonds.
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SECTION 2.05. Form of Bonds. The Bonds and the authentication
endorsement and assignment to appear thereon shall be substantially in the form set forth in Exhibit
A hereto attached and by this reference herein incorporated.
SECTION 2.06. Payment of Bonds. The interest on and principal of the
Bonds shall be payable in lawful money of the United States of America at the Principal Corporate
Trust Office of the Trustee, and the City and the Trustee may deem and treat the Holder of any
Bond as the absolute owner of such Bond for all purposes hereof, whether such Bond shall be
overdue or not, and neither the City nor the Trustee shall be affected by any notice or knowledge
to the contrary. Payment of interest on the Bonds due on or before the maturity or prior redemption
thereof shall be made only to the Person whose name appears in the registration books required to
be kept by the Trustee pursuant to Section 2.08 as the Holder thereof at the close of business as of
the Record Date next preceding each Interest Payment Date, such interest to be paid by check
mailed by first class mail on each Interest Payment Date to such registered Holder at such Holder’s
address as it appears on such books, except that payment shall be made at a Holder’s option by
wire transfer on each Interest Payment Date of immediately available funds to an account in a bank
or trust company or savings bank that is a member of the Federal Reserve System and that is
located in the United States of America according to written instructions given by su ch Holder to
the Trustee by the applicable Record Date. Payment of the principal of the Bonds shall be made
only to the Person whose name appears in the registration books required to be kept by the Trustee
pursuant to Section 2.08 as the Holder thereof, such principal to be paid upon surrender of the
Bonds at the Principal Corporate Trust Office of the Trustee at maturity or upon prior redemption.
All such payments of interest on and principal of the Bonds shall be valid and effectual to satisfy
and discharge the liability on such Bonds to the extent of the sum or sums so paid.
SECTION 2.07. Execution of Bonds. The Bonds shall be signed on behalf of
the City by the manual or facsimile signature of the Mayor or the Finance Director and attested by
the manual or facsimile signature of the City Clerk, whereupon they shall be delivered to the
Trustee for authentication and delivery by the Trustee to the purchaser thereof upon receipt of a
Written Request of the City; provided, that in case any officer of the City who shall have signed
any of the Bonds shall cease to be such officer before the Bonds so signed shall have been delivered
to the purchaser or purchasers thereof by the Trustee, such Bonds may nevertheless be delivered
by the Trustee, and upon such delivery shall be as binding upon the City as though such officer
who signed the same had continued to be such officer until such delivery; and provided further,
that any Bond may be signed on behalf of the City by any person who on the actual date of the
execution of such Bond shall be the proper officer of the City, although on the nominal date of
such Bond such person shall not have been such officer of the City. Only those Bonds that bear
thereon a certificate of authentication manually executed by the Trustee shall be entitled to any
benefit, protection or security hereunder or be valid or obligatory for any purpose, and such
certificate of authentication of the Trustee shall be conclusive evidence that the Bonds so
authenticated have been duly authorized, sold, executed and delivered hereunder and are entitled
to the benefits hereof.
SECTION 2.08. Transfer and Exchange of Bonds. The Trustee shall keep at
its Principal Corporate Trust Office sufficient books for the registration of the transfer and
exchange of the Bonds, which books shall at all times during normal business hours and upon
reasonable prior notice be open to inspection by the City. Subject to Section 2.12. any Bond may,
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in accordance with its terms, be transferred or exchanged on such books by the Person in whose
name it is registered, in person or by such Person’s duly authorized attorney, upon payment by the
Person requesting such transfer or exchange of any tax or other governmental charge required to
be paid with respect to such transfer or exchange and upon surrender of such Bond for cancellation
accompanied by delivery of a duly executed written instrument of transfer or exchange in the form
attached to the Bonds or in such other form reasonably acceptable to the Trustee. Whenever any
Bond or Bonds shall be surrendered for transfer or exchange, the City shall execute and the Trustee
shall authenticate and deliver a new Bond or Bonds in authorized denominations in the same
aggregate principal amount.
SECTION 2.09. Mutilated, Destroyed, Stolen or Lost Bonds. In case any
Bond shall become mutilated or shall be believed by the City to have been destroyed, stolen or
lost, upon proof of ownership satisfactory to the City and the Trustee and upon the surrender of
such mutilated Bond at the Principal Corporate Trust Office of the Trustee, or upon the receipt of
evidence reasonably satisfactory to the Trustee of such destruction, theft or loss and upon receipt
of indemnity reasonably satisfactory to the Trustee, and also upon payment of all expenses incurred
by the City and the Trustee in the premises, the City shall execute and the Trustee shall authenticate
and deliver at such office a new Bond or Bonds for the same aggregate principal amount in
authorized denominations of like tenor and date and bearing such numbers and notations as the
Trustee shall determine in exchange and substitution for and upon cancellation of the mutilated
Bond or in lieu of and in substitution for the Bond so destroyed, stolen or lost; provided, that if
any such destroyed, stolen or lost Bond shall have matured, payment of the amount due thereon
may be made by the Trustee upon receipt of like proof, indemnity and payment of expenses.
Any replacement Bonds issued pursuant to this section shall be entitled to equal
and proportionate benefits with all other Bonds issued hereunder, and the City and the Trustee
shall not be required to treat both the original Bond and any replacement Bond as being
Outstanding for the purpose of determining the principal amount of Bonds which may be issued
hereunder or for the purpose of determining any percentage of Bonds Outstanding hereunder, but
both the original and the replacement Bond shall be treated as one and the same.
SECTION 2.10. Temporary Bonds. The Bonds may be initially issued in
temporary form exchangeable for definitive Bonds when ready for delivery, which temporary
Bonds shall be printed, lithographed or typewritten, shall be of such denominations as may be
determined by the City, shall be issued in fully registered form and shall contain such reference to
any of the provisions hereof as may be appropriate, and each temporary Bond shall be executed
by the City upon the same conditions and in substantially the same manner as the definitive Bonds.
If the City issues temporary Bonds, it will execute and furnish definitive Bonds without delay, and
thereupon the temporary Bonds may be surrendered in exchange therefor at the Principal Corporate
Trust Office of the Trustee, and the Trustee shall authenticate and deliver in exchange for such
temporary Bonds an equal aggregate principal amount of definitive Bonds in authorized
denominations of the same maturity date or dates, and until so exchanged, the temporary Bonds
shall be entitled to the same benefits as definitive Bonds issued hereunder.
SECTION 2.11. Issuance of Bonds; Application of Proceeds of Sale of
Bonds. At any time after the execution of this Indenture, the City may execute and the Trustee
shall authenticate and, upon Written Request of the City, deliver the Bonds in the aggregate
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principal amount of [principal amount in words] dollars ($[principal amount]). Upon the receipt
of the proceeds of the sale of the Bonds in the amount of $[_______] (consisting of the aggregate
principal amount of the Bonds of $[principal amount], [plus/less] [net] original issue
[premium/discount] of $[________] and less the underwriter’s discount of $[_______]), the
Trustee shall (upon receipt of a Written Request of the City) set aside and deposit such proceeds
in the following funds, in the following order:
(a) The Trustee shall deposit in the “Refunding Fund” (which fund the Trustee
shall establish and maintain) an amount of such proceeds equal to $[_________]; and on the date
of such deposit, the Trustee shall such amount from the Refunding Fund to the U.S. Bank National
Association, as trustee for the Prior Bonds, for deposit to the related “Redemption Fund” and the
redemption of the Prior Bonds (and thereupon the Trustee shall close the Refunding Fund);
(b) The Trustee shall deposit in the “Costs of Issuance Fund” (which fund the
Trustee shall establish and maintain) the remainder of such proceeds, being the amount of
$[________]. All money in the Costs of Issuance Fund shall be used and withdrawn by the Trustee
to pay the Costs of Issuance upon receipt of a Written Request of the City filed with the Trustee,
each of which shall be sequentially numbered and shall state the person to whom payment is to be
made, the amount to be paid, the purpose for which the obligation was incurred and that such
payment is a proper charge against such fund; provided, that on [________], or upon a prior
determination by the City that all Costs of Issuance have been paid (as set forth in a Certificate of
the City so determining filed with the Trustee), any balance of money remaining in the Costs of
Issuance Fund shall be withdrawn from the Costs of Issuance Fund by the Trustee and deposited
in the Debt Service Fund and the Costs of Issuance Fund shall be closed. Each such Written
Request of the City shall be sufficient evidence to the Trustee of the facts stated therein and the
Trustee shall have no duty to confirm the accuracy of such facts.
(c) The Trustee may, in its discretion, establish a temporary fund or account in
its books and records to facilitate any such transfers.
SECTION 2.12. Use of Securities Depository.
(a) The Bonds shall initially be issued as provided in Section 2.02. Registered
ownership of the Bonds, or any portion thereof, may not thereafter be transferred except:
(i) To any successor to the Securities Depository or its nominee, or to
any substitute Securities Depository designated pursuant to clause (ii) of this subsection (a)
(“substitute Securities Depository”); provided that the successor to the Securities Depository or
substitute Securities Depository shall be qualified under any applicable laws to provide the service
proposed to be provided by it;
(ii) To any substitute Securities Depository designated by the City and
not objected to by the Trustee, upon (1) the resignation of the Securities Depository or its successor
(or any substitute Securities Depository or its successor); or (2) a determin ation by the City that
the Securities Depository or its successor (or any substitute Securities Depository or its successor)
is no longer able to carry out its functions as Securities Depository; provided, that any such
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substitute Securities Depository shall be qualified under any applicable laws to provide the services
proposed to be provided by it; or
(iii) To any Person as provided below, upon (1) the resignation of the
Securities Depository (or substitute Securities Depository or its successor) from its functions as
Securities Depository; provided, that no substitute Securities Depository which is not objected to
by the Trustee can be obtained or (2) a determination by the City that it is in the best interests of
the City to remove the Securities Depository (or any substitute Securities Depository or its
successor) from its functions as Securities Depository.
(b) In the case of any transfer pursuant to clause (i) or clause (ii) of subsection
(a) of this Section 2.12, upon receipt of the Outstanding Bonds by the Trustee, together with a
Certificate of the City to the Trustee, a single new Bond for each maturity shall be executed and
delivered in the aggregate principal amount of the Bonds of such maturity then Outstanding,
registered in the name of the Securities Depository or such substitute Securities Depository, or
their nominees, as the case may be, all as specified in such Certificate of the City. In the case of
any transfer pursuant to clause (iii) of subsection (a) of this Section 2.12, upon receipt of the
Outstanding Bonds by the Trustee, new Bonds shall be executed and delivered in such
denominations numbered in consecutive order from R-1 up and registered in the names of such
Persons as are requested in such a Certificate of the City, subject to the limitations of Section 2.02,
provided the Trustee shall not be required to deliver such new Bonds within a period less than
sixty (60) days from the date of receipt of such Certificate of the City.
(c) If the Bonds are registered in the name of a Securities Depository as
provided herein, in the case of partial redemption or an advance refunding of the Bonds evidencing
all or a portion of the principal amount then Outstanding, the Securities Depository shall make an
appropriate notation on the Bonds indicating the date and amounts of such reduction in principal,
in form acceptable to the Trustee.
(d) The City and the Trustee shall be entitled to treat the Person in whose name
any Bond is registered as the Holder thereof for all purposes of this Indenture and any applicable
laws, notwithstanding any notice to the contrary received by an officer of the City or the Trustee;
and the City and the Trustee shall have no responsibility for transmitting payments to,
communication with, notifying, or otherwise dealing with any Beneficial Owners of the Bonds.
Neither the City nor the Trustee shall have any responsibility or obligation, legal or otherwise, to
the Beneficial Owners or to any other party including the Securities Depository or its successor
(or substitute Securities Depository or its successor), except to the Holder of any Bond.
(e) Notwithstanding any other provision of this Indenture to the contrary, so
long as all Bonds are registered in the name of any nominee of the Securities Depository, any
requirement for transfer or delivery of the Bonds, with respect to redemption or otherwise, may be
effectuated by providing appropriate transfer instructions to the Securities Depository.
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ARTICLE III
REDEMPTION OF BONDS
SECTION 3.01. Redemption of Bonds.
(a) The Bonds maturing on and after June 1, 20[__] shall be subject to
redemption prior to their respective stated maturity dates at the option of the City, from any source
of available funds, as a whole or in part (in such amounts and maturities as may be specified by
the City, or if the City fails to specify such maturities, in inverse order of maturity) on any date on
or after June 1, 20[__], at a redemption price equal to the principal amount of the Bonds called for
redemption, together with accrued interest thereon to the date fixed for redemption, without
premium. The City shall give the Trustee (unless waived by the Trustee) written notice at least
twenty-five (25) days (or such lesser time period acceptable to the Trustee) before any date fixed
for the redemption of any Bonds pursuant to this subsection designating the amounts and maturities
called for redemption and the date of such redemption.
(b) The Bonds shall be subject to extraordinary redemption prior to their
respective stated maturity dates at the option of the City, from Net Proceeds, as a whole or in part
(in such amounts and maturities as may be specified by the City, or if the City fails to specify such
maturities, in inverse order of maturity) on any date, at a redemption price equal to the principal
amount of the Bonds called for redemption, together with accrued interest thereon to the date fixed
for redemption, without premium. The City shall give the Trustee (unless waived by the Trustee)
written notice at least twenty-five (25) days (or such lesser time period acceptable to the Trustee)
before any date fixed for the redemption of any Bonds pursuant to this subsection designating the
amounts and maturities called for redemption and the date of such redemption.
(c) The Bonds maturing on June 1, 20[__] are subject to mandatory redemption
in part (by lot) or payment at maturity, as the case may be, on each June 1 on and after June 1,
20[__], from mandatory sinking fund payments which are here established therefore as set forth in
the following schedule, at a redemption price equal to the principal amount of the Bonds called for
redemption, together with accrued interest thereon to the date fixed for redemption, without
premium.
Mandatory Sinking Fund
Payment Date
(June 1)
Mandatory Sinking Fund
Payment
$
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Mandatory Sinking Fund
Payment Date
(June 1)
Mandatory Sinking Fund
Payment
(Maturity)
(d) In the event of any redemption of the Bonds maturing on June 1, 20[__]
pursuant to subsections (a) or (b) of this Section, the schedule of mandatory sinking fund payments
in subsection (c) of this Section shall be adjusted in a manner determined by the City to reflect
such redemption, as set forth in a Written Request of the City delivered to the Trustee.
SECTION 3.02. Partial Redemption of Bonds. If less than all Bonds of any
maturity or any given portion thereof are to be redeemed at any one time, the Trustee shall select
the Bonds of such maturity or any given portion thereof to be redeemed, by lot, in any manner that
the Trustee in its sole discretion deems appropriate and fair. For purposes of such selection, Bonds
or portions thereof shall be in integral multiples of $5,000 and, in selecting Bonds for redemption,
each Bond shall be treated as representing that number of Bonds as is obtained by dividing the
principal amount of such Bond by $5,000 any such $5,000 multiple may be separately redeemed.
SECTION 3.03. Notice of Redemption. Notice of redemption shall be mailed
by first-class mail by the Trustee, not less than twenty (20) nor more than sixty (60) days prior to
the redemption date to the respective Holders of the Bonds designated for redemption at their
addresses appearing on the registration books of the Trustee. Each notice of redemption shall state
the date of such notice, the redemption price, the place of redemption (including the name and
appropriate address of the Trustee), and, if less than all of the Bonds are to be redeemed, the
maturities of the Bonds to be redeemed and, in the case of Bonds to be redeemed in part only, the
respective portions of the principal amount thereof to be redeemed. Each such notice shall also
state that on said date there will become due and payable on each of said Bonds the redemption
price thereof and in the case of a Bond to be redeemed in part only, the specified portion of the
principal amount thereof to be redeemed, together with interest accrued thereon to the redemption
date, and that from and after such redemption date interest thereon shall cease to accrue, and shall
require that such Bonds be then surrendered at the address of the Trustee specified in the
redemption notice. Neither failure to receive any such notice nor any defect therein shall affect
the validity of the proceedings for redemption of such Bonds or the cessation of the accrual of
interest on the redemption date.
In the case of redemption described in Section 3.01(a) or (b), the notice may state
(i) that it is conditioned upon the deposit of money, in an amount equal to the amount necessary to
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effect the redemption, with the Trustee no later than the redemption date or (ii) that the City retains
the right to rescind such notice on or prior to the scheduled redemption date (in either case, a
“Conditional Redemption”), and such notice and optional redemption shall be of no effect if such
money is not so deposited or if the notice is rescinded.
Any Conditional Redemption may be rescinded in whole or in part at any time prior
to the redemption date if the City delivers a Certificate of the City to the Trustee instructing the
Trustee to rescind the redemption notice. The Trustee shall give prompt notice of such rescission
to the affected Holders. Any Bonds subject to Conditional Redemption where redemption has
been rescinded shall remain Outstanding, and the rescission shall not constitute an Event of
Default. Further, in the case of a Conditional Redemption, the failure of the City to make funds
available in part or in whole on or before the redemption date shall not constitute an Event of
Default, and the Trustee shall give prompt notice to the affected Holders that the redemption did
not occur and that the Bonds called for redemption and not so paid remain Outstanding.
SECTION 3.04. Effect of Redemption. If notice of redemption has been duly
given as aforesaid and money for the payment of the redemption price of the Bonds called for
redemption is held by the Trustee, then on the redemption date designated in such notice the Bonds
so called for redemption shall become due and payable, and from and after the date so designated
interest on such Bonds shall cease to accrue, and the Holders of such Bonds shall have no rights
in respect thereof.
All Bonds redeemed pursuant to the provisions of this section shall be cancelled by
the Trustee and shall be destroyed with a certificate of destruction furnished to the City, if it so
requests, and shall not be reissued.
ARTICLE IV
PLEDGE OF NET REVENUES AND OTHER AMOUNTS; ALLOCATION OF REVENUES;
FUNDS AND ACCOUNTS; PAYMENT OF BONDS;
ADDITIONAL PARITY OBLIGATIONS
SECTION 4.01. Pledge of Net Revenues and Other Amounts. The City
hereby irrevocably pledges the Net Revenues to the payment of the Bonds and the Parity
Obligations without priority or distinction of one over the other and the Net Revenues shall not be
used for any other purpose while any of the Bonds remain Outstanding; provided that out of the
Net Revenues there may be apportioned such sums for such purposes as are expressly permitted
herein. This pledge shall constitute a first and exclusive lien on Net Revenues. In addition, the
City hereby irrevocably pledges all amounts (including proceeds of the sale of the Bonds) held by
the Trustee in any fund or account established hereunder (other than amounts on deposit in the
Rebate Fund) to the payment of the interest on and principal of the Bonds as provided herein and
such amounts shall not be used for any other purpose while any of the Bonds remain Outstanding;
provided, however, that out of such amounts there may be applied such sums for such purposes as
are permitted hereunder.
SECTION 4.02. Allocation of Revenues. In order to carry out and effectuate
the pledge of and lien on Net Revenues contained in Section 4.01, the City agrees and covenants
that all Revenues shall be received by the City in trust and shall be deposited when and as received
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in a special fund designated as the “Water Fund”, which fund the City has previously established
and which the City agrees and covenants to maintain and to hold separate and apart from other
funds so long as any Bonds remain Outstanding. Moneys in the Water Fund shall be used and
applied by the City only in the following order as provided herein:
(a) The City shall pay all Operation and Maintenance Costs (including amounts
reasonably required to be set aside in contingency reserves for Operation and Maintenance Costs,
the payment of which is not then immediately required) as they become due and payable and shall
make such deposits to the Rate Stabilization Fund as it may determine from time to time in
accordance with Section 4.04; and
(b) The City shall pay the principal of and interest on the Bonds and pay all
Parity Obligations and make any deposits or transfers required to be made by the City pursuant to
this Indenture and all Parity Obligation Contracts, in each case at the times and in the amounts
required by this Indenture and each Parity Obligation Contract.
As long as all payments required to be paid by the City pursuant to this Section 4.02
have been paid and all deposits or transfers required to be made by the City pursuant to this Section
4.02 have been made at the times and in the amounts required by this Section 4.02, Revenues on
deposit in the Water Fund may be applied and used by the City for any lawful purpose.
SECTION 4.03. Debt Service Fund. On or before each Interest Payment
Date, the City, from amounts in the Water Fund, shall transfer to the Trustee pursuant to Section
4.02(b) for deposit in the “Debt Service Fund”, which fund the Trustee shall establish, maintain
and hold in trust so long as any Bonds remain Outstanding, a sum equal to the amount of interest
on and principal of and mandatory sinking fund payments for the Bonds becoming due on such
Interest Payment Date; provided, no such transfer need be made if the amount on deposit in the
Debt Service Fund is at least equal to the amount of interest on and principal of and mandatory
sinking fund payments for the Bonds becoming due on such Interest Payment Date.
All money on deposit in the Debt Service Fund shall be used and withdrawn by the
Trustee solely for the purpose of paying the interest on and principal of and mandatory sinking
fund payments for the Bonds as such interest, principal and mandatory sinking fund payments
become due and payable.
SECTION 4.04. Rate Stabilization Fund. The City may establish a fund
designated as the “Rate Stabilization Fund” to be held by the City. From time to time the City
may deposit into the Rate Stabilization Fund, from current Revenues, such amounts as the City
shall determine and the amount of available current Revenues shall be reduced by the amount so
transferred. The City may also deposit amounts in the Rate Stabilization Fund from any lawfully
available source other than current Revenues and the amount of available current Revenues shall
not be reduced by the amounts so transferred. Amounts may be transferred from the Rate
Stabilization Fund and deposited in the Water Fund, and any amounts so transferred shall be
deemed Revenues when so transferred. Deposits to and transfers from the Rate Stabilization Fund
for each Fiscal Year shall be made within 270 days after the end of such Fiscal Year. All interest
or other earnings upon amounts in the Rate Stabilization Fund may be withdrawn therefrom and
accounted for as Revenues.
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SECTION 4.05. Additional Parity Obligations.
(a) After the issuance of the Bonds, the City may at any time and from time to
time issue, incur or create any Parity Obligations; provided:
(i) there shall not have occurred and be continuing an Event of Default
under the terms of this Indenture (or the issuance, incurrence or creation of such Parity Obligations
will cure any such Event of Default); and
(ii) the issuance of such Parity Obligations shall comply with all
conditions to the issuance thereof as set forth in the applicable provisions of the Parity Obligation
Contracts; and
(iii) the City obtains or provides a certificate or certificates prepared by
the City or at the City’s option by a Consultant showing that either:
(1) the Adjusted Net Revenues for either the most recent Fiscal
Year for which audited financial statements are available or any 12 consecutive
calendar month period (selected by the City) during the 18 consecutive calendar
month period ending immediately prior to the issuance, incurrence or creation of
such additional Parity Obligations were at least equal to the Coverage Requirement
for the most recently completed Fiscal Year, including in the calculation of the
Coverage Requirement for this purpose the Average Annual Debt Service for the
additional Parity Obligations to be issued, incurred or created; and for the purpose
of providing such certificate or certificates, the City or the City’s Consultant, as
applicable, may adjust the Adjusted Net Revenues for such Fiscal Year or 12
calendar month period, as the case may be, to reflect:
(A) an allowance for Net Revenues that would have been
derived from each new connection to the Water System that was made prior
to the issuance, incurrence or creation of such additional Parity Obligations
but which was not in existence during all or any part of such Fiscal Year or
12 calendar month period under consideration, in an amount equal to the
estimated additional Net Revenues that would have been derived from each
such connection if it had been made prior to the beginning of such Fiscal
Year or 12 calendar month period; provided that such certificate or
certificates shall show that the amount of Adjusted Net Revenues for the
Fiscal Year or 12 calendar month period under consideration was equal to
at least 100% of the Debt Service for all Outstanding Bonds and Parity
Obligations for such Fiscal Year or 12 calendar month period before making
any allowance for new connections to the Water System pursuant to this
subparagraph (A), and
(B) an allowance for Net Revenues that would have been
derived from any increase in the rates, fees and charges fixed and prescribed
for Water Service which became effective prior to the issuance, incurrence
or creation of such additional Parity Obligations but which was not in effect
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during all or any part of such Fiscal Year or 12 calendar month period, in
an amount equal to the estimated additional Net Revenues that would have
been derived from such increase in rates, fees and charges if it had been in
effect prior to the beginning of such Fiscal Year or 12 calendar month
period; or
(2) the estimated Adjusted Net Revenues for each of the five full
Fiscal Years next following the earlier of (x) the end of the period during which
interest on such additional Parity Obligations is to be capitalized or, if no interest
is capitalized, the Fiscal Year in which such additional Parity Obligations are
issued, incurred or created, or (y) the date on which substantially all projects
financed with the proceeds of such additional Parity Obligations plus all projects
financed with all existing Parity Obligations are expected to commence operations,
will be at least equal to the Coverage Requirement for each such Fiscal Year; and
for the purpose of providing such certificate or certificates, the City or the City’s
Consultant, as applicable, may adjust the foregoing estimated Adjusted Net
Revenues to reflect:
(A) an allowance for Net Revenues that are estimated to
be derived from any increase in the rates, fees and charges for Water Service
which have been adopted and which will be in effect during all or any
portion of the period for which such estimates are provided; and
(B) an allowance for Net Revenues that are estimated to
be derived from new connections to the Water System reasonably expected
during all or any portion of the period for which such estimates are provided
in an amount equal to the additional Net System Revenues that are estimated
to be derived from such connections; provided that such certificate or
certificates shall show that the estimated Adjusted Net Revenues for each
of the five Fiscal Years for which such estimates are provided will be equal
to at least 100% of the Debt Service for all Outstanding Bonds and Parity
Obligations for each such Fiscal Year before making any allowance for new
connections to the Water System pursuant to this subparagraph (B).
For purposes of clause (2) above, with respect to Operation and Maintenance Costs,
the City or the City’s Consultant, as applicable, shall use such assumptions (which shall be set
forth in such certificate or certificates) as such believes to be reasonable, taking into account: (i)
historical Operation and Maintenance Costs, (ii) Operation and Maintenance Costs associated with
any additions, improvements or betterments to or extensions or replacements of the Water System
to be financed with the proceeds of such additional Parity Obligations and any other new additions,
improvements or betterments to or extensions or replacements of the Water System during the
period for which such estimates are provided and (iii) such other factors, including inflation and
changing operations or policies, as the City or the City’s Consultant, as applicable, believes to be
appropriate.
(b) Without regard to Section 4.05(a), the City may at any time issue, incur or
create Parity Obligations that are Reimbursement Obligations or issue, incur or create Parity
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Obligations under a Hedge Agreement provided that such Reimbursement Obligations or Hedge
Agreement relate to Parity Obligations or anticipated Parity Obligations.
(c) Without regard to Section 4.05(a), the City may at any time issue, incur or
create Parity Obligations for the purpose of refunding, refinancing or prepaying any obligation
payable from Net Revenues (including the payment of any costs incurred in connection with such
refunding, refinancing or prepayment and the creation of such Parity Obligations and the creation
of reserve funds, if any, for such Parity Obligations).
(d) Nothing contained in this Indenture shall limit the ability of the City to
issue, incur or create obligations payable from the Net Revenues on a basis that is subordinate in
both payment and lien priority to the Bonds and any other Parity Obligations.
SECTION 4.06. Deposit and Investments of Money in Accounts and Funds.
Subject to Section 5.04, all money held by the Trustee in any of the accounts or funds established
pursuant hereto shall be invested in Permitted Investments at the Written Request of the City. Such
investments shall mature on or before the dates on which such money is anticipated to be needed
for disbursement hereunder. Subject to Section 5.04, all interest or profits received from the
investment of the money held by the Trustee in any of the accounts or funds hereunder shall be
deposited in the Debt Service Fund.
The Trustee may commingle the funds and accounts established hereunder for
investment purposes, but shall account for each separately. The Trustee or an affiliate may act as
principal or agent in the acquisition or disposition of any investment and shall be entitled to its
customary fees therefor. In the absence of written investment instructions from the City, the
Trustee shall (i) notify the City in writing that it does not have investment instructions, and (ii) until
such instructions are received, such funds shall be held uninvested. The Trustee shall not be liable
for any loss for any investment made in accordance with this Section 4.06.
The City acknowledges that to the extent regulations of the Comptroller of the
Currency or other applicable regulatory entity grant the City the right to receive brokerage
confirmations of security transactions as they occur, the City specifically waives receipt of such
confirmations to the extent permitted by law. The Trustee will furnish the City periodic cash
transaction statements which shall include detail for all investment transactions made by the
Trustee hereunder.
SECTION 4.07. Accounting Records and Statements. The Trustee shall keep
proper books of record and account in accordance with corporate trust industry standards in which
complete and correct entries shall be made of all transactions made by the Trustee relating to the
receipt, investment, disbursement, allocation and application of the amounts held by the Trustee
hereunder. Such records shall be open to inspection by the City and by any Holder at any
reasonable time during regular business hours on reasonable notice. Not later than the
fifteenth (15th) day of each month, commencing on [______ 15, 2018], and continuing so long as
any Bonds are Outstanding, the Trustee will furnish to the City a complete statement (which may
be in the form of its regular account statements) covering the receipts, deposits and disbursements
of the funds held by the Trustee hereunder for the preceding month.
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ARTICLE V
COVENANTS OF THE CITY
SECTION 5.01. Punctual Payment. The City will punctually pay the interest
on and principal of the Bonds in strict conformity with the terms hereof and of the Bonds, and will
faithfully observe and perform all the agreements, conditions, covenants and terms contained
herein and in the Bonds required to be observed and performed by it.
SECTION 5.02. Extension of Payment of Bonds. The City shall not directly
or indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of
payment of any claims for interest by the purchase or funding of such Bonds or claims for interest
or by any other arrangement and in case the maturity of any of the Bonds or the time of payment
of any such claims for interest shall be extended, such Bonds or claims for interest shall not be
entitled, in case of any default hereunder, to the benefits of this Indenture, except subject to the
prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for
interest thereon that shall not have been so extended. Nothing in this Section shall be deemed to
limit the right of the City to issue, incur or create Parity Obligations for the purpose of refunding
any Outstanding Bonds, and such issuance, incurrence or creation shall not be deemed to constitute
an extension of maturity of Bonds.
SECTION 5.03. Accounting Records and Reports.
(a) The City will keep or cause to be kept proper books of record and accounts
in which complete and correct entries shall be made of all transactions relating to the receipts,
disbursements, allocation and application of the Revenues, and such books shall be available for
inspection by the Trustee, at reasonable hours and under reasonable conditions. The City shall
also keep or cause to be kept such other information as required under the Tax Certificate.
(b) The City will prepare (commencing with the Fiscal Year ending June 30,
2018), within 270 days after the end of each Fiscal Year, financial statements of the City (which
shall include the Water Fund) for the preceding Fiscal Year and prepared in accordance with
generally accepted accounting principles, together with an Accountant’s Report thereon.
SECTION 5.04. Tax Covenants and Matters; Rebate Fund.
(a) The City shall at all times do and perform all acts and things permitted by
law and this Indenture that are necessary or desirable in order to assure that interest paid on the
Bonds will be excluded from gross income for purposes of federal income taxes and shall take no
action that would result in such interest not being excluded from gross income for federal income
taxes. Without limiting the generality of the foregoing, the City agrees to comply with the
provisions of the Tax Certificate.
(b) In addition to the funds established pursuant to Article IV, the City hereby
agrees and covenants to establish and maintain with the Trustee a fund separate from any other
fund established and maintained hereunder to be known as the “Rebate Fund.” Upon receipt of a
Written Request of the City, there shall be deposited in the Rebate Fund such amounts furnished
by the City as are required to be deposited therein pursuant to the Tax Certificate, and all money
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at any time deposited in the Rebate Fund shall be held by the Trustee in trust, to the extent required
to satisfy the Rebate Requirement (as that term is defined in the Tax Certificate), for payment to
the United States of America. All amounts required to be deposited into or on deposit in the Rebate
Fund shall be governed exclusively by this section and by the Tax Certificate (which is
incorporated herein by reference) and by all Written Requests of the City related thereto filed with
the Trustee, and the Trustee shall follow all such Written Requests of the City, and shall have no
liability or responsibility to enforce compliance by the City with the terms of the Tax Certificate;
provided, that notwithstanding any provisions of this section, if the City shall provide to the
Trustee an Opinion of Counsel that any specified action required under this section is no longer
required or that some further or different action is required to maintain the exclusion from federal
income tax of interest with respect to the Bonds, the City and the Trustee may conclusively rely
on such opinion in complying with the requirements of this section, and, notwithstanding anything
to the contrary contained herein, the agreements and covenants hereunder shall be deemed to be
modified to that extent.
(c) The covenants contained in this Section shall survive payment in full or
defeasance of the Bonds.
SECTION 5.05. Protection of Security and Rights of Holders. The City will
preserve and protect the security of the Bonds and the rights of the Holders hereunder, and will
warrant and defend such rights against all claims and demands of all persons.
SECTION 5.06. Against Encumbrances. The City will not make any pledge
of or place any lien on the Net Revenues (or any portion thereof) having priority over or having
parity with the pledge and lien created pursuant to this Indenture except as provided herein;
provided, that nothing contained herein shall limit the ability of the City to create obligations that
are secured by a pledge, lien or other encumbrance on Net Revenues that is subordinate to the
pledge and lien on Net Revenues created pursuant hereto.
SECTION 5.07. Against Sale of Other Disposition of Property. The City will
not enter into any agreement or lease which impairs the operation of the Water System or any part
thereof necessary to secure adequate Net Revenues for the payment of the principal of and interest
on the Bonds, or which would otherwise impair the rights of the Holders hereunder or the operation
of the Water System. Any real or personal property which has become non-operative or which is
not needed for the efficient and proper operation of the Water System, or any material or equipment
which has become worn out, may be sold if such sale will not impair the ability of the City to pay
the principal and interest on the Bonds. Nothing herein shall restrict the ability of the City to sell
any portion of the Water System if such portion is immediately repurchased by the City and if such
arrangement cannot by its terms result in the purchaser of such portion of the Water System
exercising any remedy which would deprive the City of or otherwise interfere with its right to own
and operate such portion of the Water System or interfere with its right to collect the Revenues
therefrom.
SECTION 5.08. Against Competitive Facilities. The City will not, to the
extent permitted by law, acquire, construct, maintain or operate and will not, to the extent permitted
by law and within the scope of its powers, permit any other public or private agency, corporation,
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city or political subdivision or any person whomsoever to acquire, construct, maintain or operate
within the City any Water System competitive with the Water System.
SECTION 5.09. Operation and Maintenance of the Water System. The City
will maintain and preserve the Water System in good repair and working order at all times and
will operate the Water System in an efficient and economical manner and will pay all Operation
and Maintenance Costs as they become due and payable.
SECTION 5.10. Payment of Claims. The City will pay and discharge any
and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien on the
Revenues or the funds or accounts created hereunder or on any funds in the hands of the City
pledged to pay principal and interest on the Bonds or to the Holders or which might impair the
security of the Bonds.
SECTION 5.11. Compliance with Contracts; Parity Obligation Contracts.
The City will comply with, keep, observe and perform all agreements, conditions, covenants and
terms, express or implied, required to be performed by it contained in all contracts for the use of
the Water System and all other contracts affecting or involving the Water System, to the extent
that the City is a party thereto. The City will observe and perform all of the covenants, agreements
and conditions on its part required to be observed and performed under the Parity Obligation
Contracts. The City will not take or omit to take any action within its control which would, or
which if not corrected with the passage of time would, constitute an event of default under and
within the meaning of the Parity Obligation Contracts.
SECTION 5.12. Insurance. The City will procure and maintain or cause to
be procured and maintained insurance on the Water System in such amounts and against such risks
(including accident to or destruction of the Water System) as are usually covered in connection
with water systems similar to the Water System; provided that the City shall not be required to
procure or maintain or cause to be procured or maintained any such insurance unless such
insurance is commercially available at reasonable cost. Any insurance required to be maintained
pursuant to this paragraph may be maintained under a self-insurance program so long as such self-
insurance is maintained in the amounts and manner usually maintained in connection with water
systems similar to the Water System.
SECTION 5.13. Payment of Taxes and Compliance with Governmental
Regulations. The City will pay and discharge all taxes, assessments and other governmental
charges which may hereafter be lawfully imposed upon the Water System, or any part thereof or
upon the Revenues when the same shall become due. The City will duly observe and conform
with all valid regulations and requirements of any governmental authority relative to the operation
of the Water System, or any part thereof, but the City shall not be required to comply with any
regulations or requirements so long as the validity or application thereof shall be contested in good
faith.
SECTION 5.14. Amount of Rates and Charges. The City shall, to the extent
permitted by law (including, without limitation, Section 6 of Article XIIID of the California
Constitution), fix, prescribe and collect rates and charges for the Water Service in each Fiscal Year
that are reasonably estimated to yield during each Fiscal Year Adjusted Net Revenues for such
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Fiscal Year equal to the Coverage Requirement for such Fiscal Year. The City may make
adjustments from time to time in such rates and charges and may make such classification thereof
as it deems necessary, but shall not reduce the rates and charges then in effect unless the Adjusted
Net Revenues from such reduced rates and charges will at all times be sufficient to meet the
requirements of this Section. So long as the City has complied with its obligations set forth this
Section, the failure of the Adjusted Net Revenues for any Fiscal Year to be equal to at least the
Coverage Requirement for such Fiscal Year shall not constitute an Event of Default under this
Indenture.
SECTION 5.15. Collection of Rates and Charges. The City will have in
effect at all times bylaws, rules and regulations requiring each customer to pay the rates and
charges applicable to the Water Service to such customer and providing for the billing thereof and
for a due date and a delinquency date for each bill. In each case where such bill remains unpaid
in whole or in part after it becomes delinquent, the City may discontinue such service from the
Water System, and such service shall not thereafter be recommenced except in accordance with
City rules and regulations governing such situations of delinquency.
SECTION 5.16. Eminent Domain and Insurance Proceeds. If all or any part
of the Water System shall be taken b y eminent domain proceedings, or if the City receives any
insurance proceeds (excluding any rental interruption insurance) resulting from a casualty loss to
the Water System, the Net Proceeds of any eminent domain award or insurance proceeds
(excluding any rental interruption insurance) shall, at the option of the City, be applied either to
(A) in the following order of priority, the prepayment of (1) Outstanding Bonds and Parity
Obligations, ratably, in accordance with their respective terms and (2) any other obligation payable
from Net Revenues or (B) to acquire and construct additions, betterments or improvements to the
Water System.
SECTION 5.17. Continuing Disclosure. The City hereby covenants and
agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure
Certificate. Notwithstanding any other provision of this Indenture, failure of the City to comply
with the provisions of the Continuing Disclosure Certificate shall not be considered an Event of
Default; however, the Trustee shall, at the written request of any Participating Underwriter (as
defined in the Continuing Disclosure Certificate) or of the Holders of at least 25% in aggregate
principal amount of the Bonds then Outstanding (but only to the extent funds in an amount
satisfactory to the Trustee have been provided to it or it has been otherwise indemnified to its
satisfaction from any cost, liability, expense, or additional charges and fees of the Trustee
whatsoever, including reasonable fees and expenses of its attorneys), or any Holder or Beneficial
Owner may, take such actions as may be necessary and appropriate, including seeking mandate or
specific performance by court order, to cause the City to comply with its obligations under this
Section 5.17.
SECTION 5.18. Waiver of Laws. The City shall not at any time insist upon
or plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or
extension law now or at any time hereafter in force that may affect the covenants and agreements
contained in this Indenture or in the Bonds, and all benefit or advantage of any such law or laws
is hereby expressly waived by the City to the extent permitted by law.k
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SECTION 5.19. Further Assurances. The City will adopt, deliver, execute
and make any and all further assurances, instruments and resolutions as may be reasonably
necessary or proper to carry out the intention or to facilitate the performance hereof and for the
better assuring and confirming unto the Holders of the rights and benefits provided herein.
ARTICLE VI
THE TRUSTEE
SECTION 6.01. The Trustee. U.S. Bank National Association, shall serve as
the Trustee for the Bonds for the purpose of receiving all money which the City is required to
deposit with the Trustee hereunder and for the purpose of allocating, applying and using such
money as provided herein and for the purpose of paying the interest on and principal of the Bonds
presented for payment, with the rights and obligations provided herein at the Principal Corporate
Trust Office of the Trustee. The City agrees that it will at all times maintain a Trustee having a
principal corporate trust office in the United States of America.
The City may at any time, unless there exists any Event of Default as defined in
Section 8.01, remove the Trustee initially appointed and any successor thereto and may appoint a
successor or successors thereto by an instrument in writing; provided that any such successor shall
be a bank, national banking association or trust company doing business and having a principal
corporate trust office in the United States of America, having a combined capital (exclusive of
borrowed capital) and surplus of at least fifty million dollars ($50,000,000) and subject to
supervision or examination by federal or state agency. If such bank, national banking association
or trust company publishes a report of condition at least annually, pursuant to law or to the
requirements of any supervising or examining agency above referred to, then for the purpose of
this section the combined capital and surplus of such bank, national banking association or trust
company shall be deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. The Trustee may at any time resign by giving written notice of
such resignation to the City and by mailing to the Holders notice of such resignation. Upon
receiving such notice of resignation, the City shall promptly appoint a successor Trustee by an
instrument in writing. Any removal or resignation of a Trustee and appointment of a successor
Trustee shall become effective only upon the acceptance of appointment by the successor Trustee.
If, within thirty (30) days after notice of the removal or resignation of the Trustee no successor
Trustee shall have been appointed and shall have accepted such appointment, the removed or
resigning Trustee may petition any court of competent jurisdiction for the appointment of a
successor Trustee, which court may thereupon, after such notice, if any, as it may deem proper and
prescribe and as may be required by law, appoin t a successor Trustee having the qualifications
required hereby.
Any company into which the Trustee may be merged or converted or with which it
may be consolidated or any company resulting from any merger, conversion or consolidation to
which it shall be a party or any company for which the Trustee may sell or transfer all or
substantially all of its corporate trust business, provided such company shall be eligible under this
Section 6.01, shall be the successor to such Trustee, without the execution or filing of any paper
or any further act, anything herein to the contrary notwithstanding.
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The Trustee is hereby authorized to pay or redeem the Bonds when duly presented
for payment at maturity or on redemption prior to maturity. The Trustee shall cancel all Bonds
upon payment thereof or upon the surrender thereof by the City and shall destroy such Bonds and
a certificate of destruction shall be delivered to the City. The Trustee shall keep accurate records
of all Bonds paid and discharged and cancelled by it.
The Trustee shall, prior to an Event of Default, and after the curing or waiver of all
Events of Default that may have occurred, perform such duties and only such duties as are
specifically set forth in this Indenture and no implied duties or obligations shall be read into this
Indenture. The Trustee shall, during the existence of any Event of Default (that has not been cured
or waived), exercise such of the rights and powers vested in it by this Indenture, and use the same
degree of care and skill in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
SECTION 6.02. Compensation of the Trustee. The City shall from time to
time, subject to any agreement in effect with the Trustee, pay to the Trustee reasonable
compensation for its services and shall reimburse the Trustee for all its advances and expenditures,
including but not limited to advances to and fees and expenses of independent appraisers,
accountants, consultants, counsel, agents and attorneys-at-law or other experts employed by it in
the exercise and performance of its powers and duties hereunder. Such compensation and
reimbursement shall be paid by the City. The obligations of the City under this Section shall
survive resignation or removal of the Trustee and payment of the Bonds and discharge of this
Indenture.
SECTION 6.03. Protection of the Trustee. The Trustee shall be protected and
shall incur no liability in acting or refraining from acting or proceeding in good faith upon any
resolution, notice, telegram, request, order, consent, waiver, certificate, statement, facsimile
transmission, electronic mail, affidavit, voucher, bond, requisition or other paper or document
which it shall in good faith believe to be genuine and to have been adopted, executed or delivered
by the proper party or pursuant to any of the provisions of this Indenture, and the Trustee shall be
under no duty to make any investigation or inquiry as to any statements contained or matters
referred to in any such instrument, but may accept and rely upon the same as conclusive evidence
of the truth and accuracy of such statements. The Trustee shall not be bound to recognize any
person as a Holder of any Bonds or to take any action at the request of any such person unless such
Bond shall be deposited with the Trustee or satisfactory evidence of the ownership of such Bonds
shall be furnished to the Trustee.
Whenever in the administration of its duties under this Indenture, the Trustee shall
deem it necessary or desirable that a matter be proved or established prior to taking or suffering
any action hereunder, such matter (unless other evidence in respect thereof be herein specifically
prescribed) shall be deemed to be conclusively proved and established by a certificate of the City
and such certificate shall be full warranty to the Trustee for any action taken or suffered under the
provision of this Indenture upon the faith thereof, but in its discretion the Trustee may (but shall
have no duty), in lieu thereof, accept other evidence of such matter or may require such additional
evidence as to it may seem reasonable.
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The Trustee may buy, sell, own, hold and deal in any of the Bonds provided
pursuant to this Indenture, and may join in any action which any Holder may be entitled to take
with like effect as if the Trustee were not a party to this Indenture. The Trustee, either as principal
or agent, may also engage in or be interested in any financial or other transaction with the City,
and may act as depositary, trustee, or agent for any committee or body of Holders of Bonds or of
obligations of the City as freely as if it were not Trustee hereunder.
The Trustee may, to the extent reasonably necessary, execute any of the trusts or
powers hereof and perform the duties required of it hereunder by or through attorneys, agents, or
receivers, and shall be entitled to advice of counsel concerning all matters of trust and its duties
hereunder, and the Trustee shall not be answerable for the default or misconduct of any such
attorney, agent or receiver selected by it with reasonable care. The Trustee shall not be answerable
for the exercise of any discretion or power under this Indenture or in the performance of its duties
hereunder or for anything whatever in connection with the funds and accounts established
hereunder, except only for its own willful misconduct or negligence.
The recitals, statements and representations by the City contained in this Indenture
or in the Bonds shall be taken and construed as made by and on the part of the City and not by the
Trustee does not assume, and shall not have, any responsibility or obligations for the correctness
of any thereof.
The Trustee undertakes to perform such duties, and only such duties as are
specifically set forth in this Indenture and no implied duties or obligations shall be read into this
Indenture against the Trustee.
No provision in this Indenture shall require the Trustee to risk or expend its own
funds or otherwise incur any financial liability in the performance of any of its duties hereunder.
In accepting the trust hereby created, the Trustee acts solely as Trustee for the
Holders and not in its individual capacity and all persons, including without limitation the Holders
and the City having any claim against the Trustee arising from this A greement shall look only to
the funds and accounts held by the Trustee hereunder for payment except for the Trustee ’s gross
negligence or willful misconduct or as otherwise provided herein. Under no circumstances shall
the Trustee be liable in its individual capacity for the payment of principal of or interest on Bonds.
The Trustee shall not be deemed to have knowledge of any Event of Default
hereunder unless and until it shall have actual knowledge thereof or have received notice thereof
at its corporate trust office at the address set forth in Section 10.09 hereof. The Trustee shall,
during the existence of any Event of Default (which has not been cured) use the same degree of
care and skill in their exercise, as a prudent man would exercise or use under the circumstances in
the conduct of his own affairs.
The Trustee shall not be accountable for the use or application by the City or any
other party of any funds which the Trustee has released in accordance with the terms of this
Indenture. The Trustee shall have no responsibility with respect to any information, statement, or
recital in any official statement, offering memorandum or any other disclosure material prepared
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or distributed with respect to the Bonds, except for information with respect to the Trustee and
supplied to the City by or on behalf of the Trustee.
The Trustee shall not be liable for any action taken or not taken by it in accordance
with the direction of the Holders of a majority (or other percentage provided for herein) in
aggregate principal amount of Bonds Outstanding relating to the exercise of any right, power or
remedy available to the Trustee.
The Trustee shall not be considered in breach of or in default in its obligations
hereunder or progress in respect thereto in the event of delay in the performance of such obligations
due to unforeseeable causes beyond its control and without its fault or negligence, including, but
not limited to, acts of God or of the public enemy or terrorists, acts of a government, acts of the
other party, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes,
earthquakes, explosion, mob violence, riot, inability to procure or general sabotage or rationing of
labor, equipment, facilities, sources of energy, material or supplies in the open market, litigation
or arbitration involving a party or others relating to zoning or other governmental action or inaction
pertaining to the project, malicious mischief, condemnation, and unusually severe weather or
delays of suppliers or subcontractors due to such causes or any similar event and/or occurrences
beyond the control of the Trustee.
The Trustee agrees to accept and act upon instructions or directions pursuant to this
Indenture sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic
methods, provided, however, that, the Trustee shall have received an incumbency certificate listing
persons designated to give such instructions or directions and containing specimen signatures of
such designated persons, which such incumbency certificate shall be amended and replaced
whenever a person is to be added or deleted from the listing. If the City elects to give the Trustee
e-mail or facsimile instructions (or instructions by a similar electronic method) and the Trustee in
its discretion elects to act upon such instructions, the Trustee’s understanding of such instructions
shall be deemed controlling. The Trustee shall not be liable for any losses, costs or expenses
arising directly or indirectly from the Trustee’s reliance upon and compliance with such
instructions notwithstanding such instructions conflict or are inconsistent with a subsequent
written instruction. The City agrees to assume all risks arising out of the use of such electronic
methods to submit instructions and directions to the Trustee, including without limitation the risk
of the Trustee acting on unauthorized instructions, and the risk of interception and misuse by third
parties.
The permissive right of the Trustee to do things enumerated in this Indenture shall
not be construed as a duty and it shall not be answerable for other than its negligence or willful
misconduct.
The Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the
provisions of this Indenture unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be incurred therein or
thereby.
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The Trustee may consult with counsel, who may be counsel of the City with regard
to legal questions, and the opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken or suffered by it hereunder in good faith and in accordance
therewith.
SECTION 6.04. Indemnification of Trustee. To the extent permitted by law,
the City shall indemnify the Trustee and hold it harmless against any loss, liability, expenses or
advances, including but not limited to fees and expenses of counsel and other experts, incurred or
made without negligence or willful misconduct on the part of the Trustee, (i) in the exercise and
performance of any of the powers and duties hereunder by the Trustee, or (ii) arising out of or
relating to any untrue statement or alleged untrue statement of any material fact or omission or
alleged omission to state a material fact necessary to make the statements made, in light of the
circumstances under which they were made, not misleading in any official statement or other
offering circular utilized in connection with the sale of the Bonds, including the costs and expenses
of defending itself against any claim of liability arising under this Indenture. Such indemnity shall
survive payment of the Bonds and discharge of this Indenture or resignation or removal of the
Trustee.
ARTICLE VII
AMENDMENT OF THE INDENTURE
SECTION 7.01. Amendment of the Indenture. This Indenture and the rights
and obligations of the City, the Trustee and of the Holders may be modified or amended from time
to time and at any time by a Supplemental Indenture which shall become binding when the written
consents of the Holders of a majority in aggregate principal amount of the Bonds then Outstanding,
exclusive of Bonds disqualified as provided in Section 7.02, are filed with the Trustee. No such
modification or amendment shall (1) extend the maturity of or reduce the interest rate on or amount
of interest on or principal of or mandatory sinking fund payment for any Bond without the express
written consent of the Holder of such Bond, (2) reduce the aforesaid percentage of Bonds the
consent of the Holders of which is required to effect any such modification or amendment, or
permit the creation of any lien on the Net Revenues and other assets pledged under this Indenture
prior to or on a parity with the lien created by this Indenture (except as expressly provided in this
Indenture), or deprive the Holders of the Bonds of the lien created by this Indenture on such Net
Revenues and other assets, without the consent of the Holders of all Bonds then Outstanding, or
(3) modify any rights or obligations of the Trustee or the City without their prior written assent
thereto, respectively. It shall not be necessary for the consent of the Holders to approve the
particular form of any Supplemental Indenture, but it shall be sufficient if such consent shall
approve the substance thereof.
This Indenture and the rights and obligations of the City and of the Holders may
also be modified or amended from time to time and at any time by a Supplemental Indenture which
shall become binding upon execution and delivery without the consent of any Holders, but only to
the extent permitted by law and only for any one or more of the following purposes --
(a) to add to the agreements and covenants required herein to be performed by
the City other agreements and covenants thereafter to be performed by the City, to pledge or assign
additional security for the Bonds (or any portion thereof) or to surrender any right or power
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reserved herein to or conferred herein on the City, provided, that no such covenant, agreement,
pledge, assignment or surrender shall materially adversely affect the interests of the Holders of the
Bonds;
(b) to make such provisions for the purpose of curing any ambiguity or of
correcting, curing or supplementing any defective provision contained herein or in regard to
questions arising hereunder which the City may deem desirable or necessary or desirable and not
inconsistent herewith, and which shall not materially adversely affect the interests of the Holders
of the Bonds;
(c) to modify, amend or supplement this Indenture in such manner as to permit
the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal
statute hereafter in effect, and to add such other terms, conditions and provisions as may be
permitted by said act or similar federal statute, and which shall not materially adversely affect the
interests of the Holders of the Bonds;
(d) to maintain the exclusion from gross income for federal income tax
purposes of the interest on the Bonds, including the amendment of the Tax Certificate; or
(e) to make any other changes which will not materially adversely affect the
interests of the Holders of the Bonds.
SECTION 7.02. Disqualified Bonds. Bonds owned or held by or for the
account of the City shall not be deemed Outstanding for the purpose of any consent or other action
or any calculation of Outstanding Bonds provided in this Article, and shall not be entitled to
consent to or take any other action provided in this Article.
SECTION 7.03. Effect of Supplemental Bond Indenture. Upon the execution
of any Supplemental Indenture pursuant to this Article, this Indenture shall be deemed to be
modified and amended in accordance therewith, and the respective rights, duties and obligations
under this Indenture of the City, the Trustee and all Holders of Bonds Outstanding shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such modification and
amendment, and all the terms and conditions of any such Supplemental Indenture shall be deemed
to be part of the terms and conditions of this Indenture for any and all purposes.
SECTION 7.04. Endorsement or Replacement of Bonds After Amendment.
Bonds delivered after the execution of any Supplemental Indenture pursuant to this Article may,
and if the City so determines shall, bear a notation by endorsement or otherwise in form approved
by the City and the Trustee as to any modification or amendment provided for in such
Supplemental Indenture, and, in that case, upon demand of the Holder of any Bond Outstanding at
the time of such execution and presentation of such Holder’s Bond for the purpose at the Principal
Corporate Trust Office of the Trustee or at such additional offices as the Trustee may select and
designate for that purpose, a suitable notation shall be made on such Bond. If the Supplemental
Indenture shall so provide, new Bonds so modified as to conform, in the opinion of the City, to
any modification or amendment contained in such Supplemental Indenture, shall be prepared by
the Trustee at the expense of the City, executed by the City and authenticated by the Trustee, and
upon demand of the Holders of any Bonds then Outstanding shall be exchanged at the Principal
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Corporate Trust Office of the Trustee, without cost to any Holder, for Bonds then Outstanding,
upon surrender for cancellation of such Bonds, in equal aggregate principal amounts of the same
maturity.
SECTION 7.05. Amendment by Mutual Consent. The provisions of this
Article shall not prevent any Holder from accepting any amendment as to the particular Bonds
held by such Holder, provided that due notation thereof is made on such Bonds.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01. Events of Default. Each of the following events shall
constitute an Event of Default hereunder:
(1) the City shall default in the due and punctual payment of the interest on or
principal of any Bonds when and as the same shall become due and payable (whether at maturity,
by proceedings for redemption, by acceleration or otherwise);
(2) the City shall default in any material respect in the performance of any of
the agreements or covenants contained herein required to be performed by it, and such default shall
have continued for a period of sixty (60) days after the City shall have been given notice in writing
of such default by the Trustee; or
(3) the City shall file a petition or answer seeking arrangement or
reorganization under the federal bankruptcy laws or any other applicable law of the United States
of America or any state therein, or if a court of competent jurisdiction shall approve a petition filed
with or without the consent of the City seeking arrangement or reorganization under the federal
bankruptcy laws or any other applicable law of the United States of America or any state therein,
or if under the provisions of any other law for the relief or aid of debtors any court of competent
jurisdiction shall assume custody or control of the City or of the whole or any substantial part of
its property.
In each and every such case during the continuance of an Event of Default, the Trustee may
and by notice in writing to the City declare the entire principal amount of the Bonds and the accrued
interest thereon to be due and payable immediately, and upon any such declaration the same shall
become immediately due and payable, anything contained herein to the contrary notwithstanding.
This section, however, is subject to the condition that if at any time after the principal amount of
the Bonds and the accrued interest thereon shall have been so declared due and payable and before
any judgment or decree for the payment of the moneys due shall have been obtained or entered the
City shall deposit with the Trustee a sum sufficient to pay the unpaid principal amount of the Bonds
due prior to such declaration and the accrued interest thereon, with interest on such overdue
installments, at the rate or rates applicable to the principal balance of the Bonds if paid in
accordance with their terms, and the reasonable expenses of the Trustee, and any and all other
defaults known to the Trustee (other than in the payment of the entire principal amount of the
unpaid Bonds and the accrued interest thereon due and payable solely by reason of such
declaration) shall have been made good or cured to the satisfaction of the Trustee or provision
deemed by the Trustee to be adequate shall have been made therefor, then and in every such case
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the Trustee, by written notice to the City may rescind and annul such declaration and its
consequences; but no such rescission and annulment shall extend to or shall affect any subsequent
default or shall impair or exhaust any right or power consequent thereon.
SECTION 8.02. Application of Funds Upon Acceleration. Upon the date of
the declaration of acceleration as provided in Section 8.01, all Revenues thereafter received by the
City shall be applied in the following order --
First, to the payment of the fees, costs and expenses necessary to protect the interests of
the Holders of the Bonds and the holders of Parity Obligations, including the fees, costs and
expenses of the Trustee, the Holders of the Bonds and any trustee, paying agent or holder of Parity
Obligations in connection with such declaration, including reasonable compensation to their
respective agents, advisors, accountants and counsel;
Second, to the payment of the Operation and Maintenance Costs; and
Third, to the payment of the entire principal amount of the unpaid Bonds and the accrued
interest thereon and the unpaid Parity Obligations, with interest on the overdue payments at the
rate or rates of interest applicable to the Bonds and such Parity Obligations if paid in accordance
with their respective terms, and, if the amount available shall not be sufficient to pay in full the
whole amount so due and unpaid, then to the payment thereof ratably, without preference or
priority, according to the amounts due respectively, to the Persons entitled thereto without any
discrimination or preference.
SECTION 8.03. Trustee to Represent Holders. The Trustee is hereby
irrevocably appointed (and the successive respective Holders of the Bonds, by taking and holding
the same, shall be conclusively deemed to have so appointed the Trustee) as trustee and true and
lawful attorney-in-fact of the Holders of the Bonds for the purpose of exercising and prosecuting
on their behalf such rights and remedies as may be available to such Holders under the provisions
of the Bonds, this Indenture, the Law and applicable provisions of any other law. Upon the
occurrence and continuance of an Event of Default or other occasion giving rise to a right in the
Trustee to represent the Holders, the Trustee in its discretion may, and upon the written request of
the Holders of not less than a majority in aggregate principal amount of the Bonds then
Outstanding, and upon being indemnified to its satisfaction therefor, shall, proceed to protect or
enforce its rights or the rights of such Holders by such appropriate action, suit, mandamus or other
proceedings as it shall deem most effectual to protect and enforce any such right, at law or in
equity, either for the specific performance of any covenant or agreement contained herein, or in
aid of the execution of any power herein granted, or for the enforcement of any other appropriate
legal or equitable right or remedy vested in the Trustee, in such Holders under this Indenture, the
Law or any other law; and upon instituting such proceeding, the Trustee shall be entitled, as a
matter of right, to the appointment of a receiver of the Net Revenues and other assets pledged
under this Indenture, pending such proceedings. All rights of action under this Indenture or the
Bonds or otherwise may be prosecuted and enforced by the Trustee without the possession of any
of the Bonds or the production thereof in any proceeding relating thereto, and any such suit, action
or proceeding instituted by the Trustee shall be brought in the name of the Trustee for the benefit
and protection of all the Holders of such Bonds, subject to the provisions of this Indenture.
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SECTION 8.04. Holders’ Direction of Proceedings. Anything in this
Indenture to the contrary notwithstanding, the Holders of a majority in aggregate principal amount
of the Bonds then Outstanding, shall have the right, by an instrument or concurrent instruments in
writing executed and delivered to the Trustee, to direct the method of conducting all remedial
proceedings taken by the Trustee hereunder, provided that such direction shall not be otherwise
than in accordance with law and the provisions of this Indenture, and that the Trustee shall have
the right to decline to follow any such direction that in the opinion of the Trustee would be unjustly
prejudicial to Holders not parties to such direction.
SECTION 8.05. Limitation on Holders’ Right to Sue. No Holder of any Bond
shall have the right to institute any suit, action or proceeding at law or in equity, for the protection
or enforcement of any right or remedy under this Indenture, the Law or any other applicable law
with respect to such Bond, unless (1) such Holder shall have given to the Trustee written notice of
the occurrence of an Event of Default; (2) the Holders of not less than a majority in aggregate
principal amount of the Bonds then Outstanding shall have made written request upon the Trustee
to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its
own name; (3) such Holder or said Holders shall have tendered to the Trustee reasonable indemnity
against the costs, expenses and liabilities to be incurred in compliance with such request; and (4)
the Trustee shall have refused or omitted to comply with such request for a period of thirty (30)
days after such written request shall have been received by, and said tender of indemnity shall have
been made to, the Trustee.
Such notification, request, tender of indemnity and refusal or omission are hereby declared,
in every case, to be conditions precedent to the exercise by any Holder of Bonds of any remedy
hereunder or under law; it being understood and intended that no one or more Holders of Bonds
shall have any right in any manner whatever by such Holder’s or Holders’ action to affect, disturb
or prejudice the security of this Indenture or the rights of any other Holders of Bonds, or to enforce
any right under this Indenture, the Law or other applicable law with respect to the Bonds, except
in the manner herein provided, and that all proceedings at law or in equity to enforce any such
right shall be instituted, had and maintained in the manner herein provided and for the benefit and
protection of all Holders of the Outstanding Bonds, subject to the provisions of this Bond
Indenture.
SECTION 8.06. Absolute Obligation of City. Nothing contained in Section
8.05 or in any other provision of this Indenture or in the Bonds shall affect or impair the obligation
of the City, which is absolute and unconditional, to pay the principal of and interest on the Bonds
to the respective Holders of the Bonds at their respective dates of maturity, or upon call for
redemption, as herein provided, but only out of the Net Revenues and other assets herein pledged
therefor, or affect or impair the right of such Holders, which is also absolute and unconditional, to
enforce such payment by virtue of the contract embodied in the Bonds.
SECTION 8.07. Termination of Proceedings. In case any proceedings taken
by the Trustee or any one or more Holders on account of any Event of Default shall have been
discontinued or abandoned for any reason or shall have been determined adversely to the Trustee
or the Holders, then in every such case the City, the Trustee and the Holders, subject to any
determination in such proceedings, shall be restored to their former positions and rights hereunder,
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severally and respectively, and all rights, remedies, powers and duties of the City, the Trustee and
the Holders shall continue as though no such proceedings had been taken.
SECTION 8.08. Remedies Not Exclusive. No remedy herein conferred upon
or reserved to the Trustee or the Holders is intended to be exclusive of any other remedy or
remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative and
in addition to every other remedy given hereunder or now or hereafter existing, at law or in equity
or otherwise.
SECTION 8.09. No Waiver of Default. No delay or omission of the Trustee
or of any Holder of the Bonds to exercise any right or power arising upon the occurrence of any
default shall impair any such right or power or shall be construed to be a waiver of any such default
or an acquiescence therein; and every power and remedy given by this Indenture to the Trustee or
the Holders of the Bonds may be exercised from time to time and as often as may be deemed
expedient.
ARTICLE IX
DEFEASANCE
SECTION 9.01. Discharge of Indenture. The Bonds may be paid by the City
or the Trustee on behalf of the City in any of the following ways:
(a) by paying or causing to be paid the principal or redemption price of and
interest on all Bonds Outstanding, as and when the same become due and payable;
(b) by depositing with the Trustee, in trust, at or before maturity, moneys or
securities in the necessary amount (as provided in Section 9.03) to pay when due or redeem all
Bonds then Outstanding; or
(c) by delivering to the Trustee, for cancellation by it, all Bonds then
Outstanding.
If the Authority shall pay all Bonds Outstanding and shall also pay or cause to be paid all
other sums payable hereunder by the City, then and in that case at the election of the City
(evidenced by a Certificate of the City filed with the Trustee signifying the intention of the City to
discharge all such indebtedness and this Indenture), and notwithstanding that any Bonds shall not
have been surrendered for payment, this Indenture and the pledge of Net Revenues and other assets
made under this Indenture and all covenants, agreements and other obligations of the City under
this Indenture (except as otherwise specifically provided herein) shall cease, terminate, become
void and be completely discharged and satisfied. In such event, upon the request of the City, the
Trustee shall cause an accounting for such period or periods as may be requested by the City to be
prepared and filed with the City and shall execute and deliver to the City all such instruments as
may be necessary to evidence such discharge and satisfaction, and the Trustee shall pay over,
transfer, assign or deliver to the City all moneys or securities or other property held by it pursuant
to this Indenture that are not required for the payment or redemption of Bonds not theretofore
surrendered for such payment or redemption; provided that in all events moneys in the Rebate
Fund shall be subject to the provisions of Section 5.04.
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SECTION 9.02. Discharge of Liability on Bonds. Upon the deposit with the
Trustee, in trust, at or before maturity, of money or securities in the necessary amount (as provided
in Section 9.03) to pay or redeem any Outstanding Bond (whether upon or prior to its maturity or
the redemption date of such Bond), provided that, if such Bond is to be redeemed prior to maturity,
notice of such redemption shall have been given as in Article III provided or provision satisfactory
to the Trustee shall have been made for the giving of such notice, then all liability of the City in
respect of such Bond shall cease, terminate become void and be completely discharged and
satisfied, except only that thereafter the Holder thereof shall be entitled to payment of the principal
of and interest on such Bond by the City, and the City shall remain liable for such payments, but
only out of such money or securities deposited with the Trustee as aforesaid for their payment,
subject, however, to the provisions of Section 9.04.
The City may at any time surrender to the Trustee for cancellation by it any Bonds
previously issued and delivered, which the City may have acquired in any manner whatsoever, and
such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired.
SECTION 9.03. Deposit of Money or Securities with Bond Trustee.
Whenever in this Indenture it is provided or permitted that there be deposited with or held in trust
by the Trustee money or securities in the necessary amount to pay or redeem any Bonds, the money
or securities so to be deposited or held may include money or securities held by the Trustee in the
funds and accounts established pursuant to this Indenture (other than the Rebate Fund) and shall
be:
(a) lawful money of the United States of America in an amount equal to the
principal amount of such Bonds and all unpaid interest thereon to maturity, except that, in the case
of Bonds which are to be redeemed prior to maturity and in respect of which notice of such
redemption shall have been given as in Article III provided or provision satisfactory to the Trustee
shall have been made for the giving of such notice, the amount to be deposited or held shall be the
principal amount or redemption price of such Bonds and all unpaid interest thereon to the
redemption date; or
(b) Permitted Investments described in clause (A) of the definition thereof (not
callable by the issuer thereof prior to maturity), the principal of and interest on which when due
(without any income from the reinvestment thereof) will provide money sufficient to pay the
principal or redemption price of and all unpaid interest to maturity, or to the redemption date, as
the case may be, on the Bonds to be paid or redeemed, as such principal or redemption price and
interest become due; provided that, in the case of Bonds which are to be redeemed prior to the
maturity thereof, notice of such redemption shall have been given as in Article III provided or
provision satisfactory to the Trustee shall have been made for the giving of such notice;
provided, in each case, that the Trustee shall have been irrevocably instructed to apply such money
to the payment of such principal or redemption price and interest with respect to such Bonds.
SECTION 9.04. Unclaimed Money. Anything contained herein to the
contrary notwithstanding, any money held by the Trustee in trust for the payment and discharge
of the interest on or the principal of an y of the Bonds which remains unclaimed for two (2) years
after the date when such payments have become due and payable, if such money was held by the
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Trustee at such date, or for two (2) years after the date of deposit of such money if deposited with
the Trustee after the date when such payments became due and payable, shall be repaid by the
Trustee to the City as its absolute property and free from trust, and the Trustee shall thereupon be
released and discharged with respect thereto and the Holders shall look only to the City for the
making of such payments; provided, that before being required to make any such payment to the
City, the Trustee shall mail by first class mail to the Holders of such Bonds (at the expense of the
City) at their addresses as they appear in the registration books maintained by the Trustee pursuant
to Section 2.08 a notice that such money remains unclaimed and that, after a date named in such
notice, which date shall not be less than thirty (30) days after the date of the mailing of such notice,
the balance of such money then unclaimed will be returned to the City.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Liability of City Limited to Net Revenues and Certain Other
Funds. Notwithstanding anything contained herein, the City shall not be required to advance any
money derived from any source of income other than the Net Revenues and the other funds
provided herein for the payment of the interest on or the principal or redemption price of the Bonds
or for the observance or performance of any agreements, conditions, covenants or terms contained
herein; provided, that the City may advance funds for any such payment as long as such funds are
derived from a source legally available for such purpose.
The Bonds are limited obligations of the City and are payable, as to the interest
thereon and the principal and redemption price thereof, solely from the Net Revenues and such
other funds, and the City is not obligated to pay them except from the Net Revenues and such other
funds. The Bonds are not a debt of the State or any of its political subdivisions (other than the
City), and neither the State nor any of its political subdivisions (other than the City) is liable
therefor, nor in any event shall the Bonds or any interest thereon payable out of any funds or
properties other than those of the City. The Bonds do not constitute an indebtedness of the City
within the meaning of any constitutional or statutory limitation or restriction, and no persons
executing the Bonds shall be liable personally on the Bonds by reason of their issuance.
SECTION 10.02. Benefits of the Indenture Limited to Parties. Nothing herein,
expressed or implied, is intended to give to any person other than the City, the Trustee and the
Holders any right or remedy under or by reason hereof, and any agreements, conditions, covenants
or terms hereof required to be observed or performed by and on behalf of the City or any officer
or employee thereof shall be for the sole and exclusive benefit of the Trustee and the Holders.
SECTION 10.03. Successor Is Deemed Included in All References to
Predecessor. Whenever herein either the City or any officer or employee thereof is named or
referred to, such reference shall be deemed to include the successor to the powers, duties and
functions, with respect to the management, administration and control of the Water System, that
are presently vested in the City or such officer or employee, and all the agreements, conditions,
covenants and terms contained herein required to be observed or performed by or on behalf of the
City or any officer or employee thereof shall bind and inure to the benefit of the respective
successors thereof whether so expressed or not.
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SECTION 10.04. Execution of Documents by Holders. Any consent,
declaration, request or other instrument which this Indenture may require or permit to be executed
by Holders may be in one or more instruments of similar tenor and shall be executed by Holders
in person or by their attorneys appointed in writing.
Except as otherwise herein expressly provided, the fact and date of the execution
by any Holder or his attorney of such consent, declaration, request or other instrument, or of such
writing appointing such attorney, may be proved by the certificate of any notary public or other
officer authorized to take acknowledgments of deeds to be recorded in the state, territory or
commonwealth in which he purports to act that the person signing such consent, declaration,
request or other instrument or writing acknowledged to him the execution thereof, or by an
affidavit of a witness of such execution, duly sworn to before such notary public or other officer.
Any consent, declaration, request or other instrument or writing of the Holder of
any Bond shall bind all future Holders of such Bond in respect of anything done or suffered to be
done by the City in good faith and in accordance therewith.
SECTION 10.05. Waiver of Personal Liability. No member of the Board of
Directors or officer or employee of the City shall be individually or personally liable for the
payment of the interest on or the principal or redemption price of the Bonds; but nothing contained
herein shall relieve any member of the Board of Directors or officer or employee of the City from
the performance of any official duty provided by law or provided herein.
SECTION 10.06. Acquisition of Bonds by City. All Bonds acquired by the
City, whether by purchase or gift or otherwise, shall be surrendered to the Trustee for cancellation
and destruction.
SECTION 10.07. Content of Certificates. Every Certificate of the City with
respect to compliance with any agreement, condition, covenant or provision provided herein shall
include (a) a statement that the person or persons making or giving such certificate have read such
agreement, condition, covenant or provision and the definitions herein relating thereto; (b) a brief
statement as to the nature and scope of the examination or investigation upon which the statements
contained in such certificate are based; (c) a statement that, in the opinion of the signers, they have
made or caused to be made such examination or investigation as is necessary to enable them to
express an informed opinion as to whether or not such agreement, condition, covenant or provision
has been complied with; and (d) a statement as to whether, in the opinion of the signers, such
agreement, condition, covenant or provision has been complied with.
Any Certificate of the City may be based, insofar as it relates to legal matters, upon
an Opinion of Counsel unless the person making or giving such certificate knows that the Opinion
of Counsel with respect to the matters upon which his certificate may be based, as aforesaid, is
erroneous, or in the exercise of reasonable care should have known that the same was erroneous.
Any Opinion of Counsel may be based, insofar as it relates to factual matters information with
respect to which is in the possession of the City, upon a representation by an officer or officers of
the City unless the counsel executing such Opinion of Counsel knows that the representation with
respect to the matters upon which his opinion may be based, as aforesaid, is erroneous, or in the
exercise of reasonable care should have known that the same was erroneous.
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SECTION 10.08. Accounts and Funds; Business Days. Any account or fund
required herein to be established and maintained by the Trustee may be established and maintained
in the accounting records of the Trustee either as an account or a fund, and may, for the purposes
of such accounting records, any audits thereof and any reports or statements with respect thereto,
be treated either as an account or a fund; but all such records with respect to all such accounts and
funds shall at all times be maintained in accordance with sound corporate trust accounting practice
and with due regard for the protection of the security of the Bonds and the rights of the Holders.
If any date specified herein shall not be a Business Day, any action required on such date may be
made on the next succeeding Business Day with the same effect as if made on such date.
SECTION 10.09. Notices. All written notices to be given hereunder shall be
delivered personally, by facsimile or by mail to the party entitled thereto at its address set forth
below, or at such other address as such party may provide to the other party in writing from time
to time, namely:
If to the Trustee:
U.S. Bank National Association
633 W. Fifth Street, 24th Floor
Los Angeles, CA 90071
Attention: Global Corporate Trust Services
If to the City:
City of San Luis Obispo, California
990 Palm Street
San Luis Obispo, California 93401
Attention: City Clerk
SECTION 10.10. Governing Law. This Indenture shall be governed and
construed in accordance with the Law and the laws of the State.
SECTION 10.11. Partial Invalidity. If any one or more of the agreements,
conditions, covenants or terms or portions thereof provided herein to be observed or performed on
the part of the City or of the Trustee should be contrary to law, then such agreement or agreements,
such condition or conditions, such covenant or covenants, such term or terms or such portions
thereof shall be null and void and shall be deemed separable from the remaining agreements,
conditions, covenants and terms or portions thereof and shall in no way affect the validity hereof
or of the Bonds, and the Holders shall retain all the rights and benefits accorded to them under the
Law or any other applicable provisions of law. The City hereby declares that it would have
executed this Indenture and each and every other section, paragraph, subdivision, sentence, clause
and phrase hereof and would have authorized the issuance of the Bonds pursuant hereto
irrespective of the fact that any one or more sections, paragraphs, subdivisions, sentences, clauses
or phrases of this Indenture or the application thereof to any person or circumstance may be held
to be unconstitutional, unenforceable or invalid.
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SECTION 10.12. Execution in Several Counterparts. This Indenture may be
executed in any number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original; and all such counterparts, or as many of them as the City and the Trustee
shall preserve undestroyed, shall together constitute but one and the same instrument.
4165-3907-6113.2
IN WITNESS WHEREOF, the City of San Luis Obispo, California has caused this
Indenture to be executed in its name and on its behalf by its Finance Director and U.S. Bank
National Association, as Trustee, in token of its acceptance of the trusts created hereunder, has
caused this Indenture to be executed in its corporate name by its duly authorized officer, all as of
the date and year first above written.
CITY OF SAN LUIS OBISPO, CALIFORNIA
By
Finance Director
U.S. BANK NATIONAL ASSOCIATION, as
Trustee
By
Authorized Officer
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EXHIBIT A
FORM OF BOND
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE CITY OF SAN LUIS OBISPO,
CALIFORNIA OR THE TRUSTEE FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND
ANY CERTIFICATE 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.
No. R-__ $_________
CITY OF SAN LUIS OBISPO, CALIFORNIA
WATER REVENUE REFUNDING BOND, SERIES 2018
INTEREST
RATE
MATURITY
DATE
BOND
DATE
CUSIP
NUMBER
___% June 1, 20__ _____ __, 2018
REGISTERED HOLDER: CEDE & CO.
PRINCIPAL AMOUNT: __________________ DOLLARS
The City of San Luis Obispo, California, a charter city and municipal corporation
duly organized and existing under and pursuant to the laws of the State of California (the “City”),
for value received hereby promises to pay (but only from the Net Revenues and the other funds
hereinafter referred to) to the registered Holder set forth above on the maturity date set forth above
the principal amount set forth above (subject to any right of prior redemption hereinafter provided
for), together with interest thereon computed on the basis of a 360-day year of twelve (12) 30-day
calendar months from the interest payment date next preceding the date of authentication of this
Bond (unless this Bond is authenticated on a day during the period from the day after a Record
Date (as that term is hereinafter defined) for an interest payment date to such interest payment
date, both dates inclusive, in which event it shall bear interest from such interest payment date, or
unless it is authenticated on a day on or before the Record Date for the first interest payment date,
in which event it shall bear interest from its date) until the principal hereof shall have been paid,
at the interest rate per annum set forth above, payable on [December 1, 2018], and semiannually
thereafter on June 1 and December 1 in each year. The interest on this Bond due on or before the
maturity or prior redemption hereof shall be payable only to the person whose name appears in the
registration books required to be kept by U.S. Bank National Association (the “Trustee”) at its
Principal Corporate Trust Office (as that term is defined in the Indenture hereinafter referred to,
and herein the “Principal Corporate Trust Office”) as the registered Holder hereof at the close of
business as of the fifteenth day (whether or not a Business Day) preceding each interest payment
date (each, a “Record Date”), with such interest to be paid by check mailed by first class mail on
each interest payment date to such registered Holder at his address as it appears on such books,
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4165-3907-6113.2
except that payment shall be made at a registered Holder’s option by wire transfer on each interest
payment date of immediately available funds to an account in a bank or trust company or savings
bank that is a member of the Federal Reserve System and that is located in the United States of
America according to written instructions given by such registered Holder to the Trustee by the
applicable Record Date. The principal of this Bond shall be payable only to the person whose
name appears in such registration books as the registered Holder hereof, such principal to be paid
upon surrender of this Bond to the Trustee at its Principal Corporate Trust Office at maturity or
upon prior redemption. The interest on and principal of this Bond are payable in lawful money of
the United States of America.
This Bond is one of a duly authorized issue of Bonds of the City in the aggregate
principal amount of [principal amount in words] dollars ($[principal amount]) designated the “City
of San Luis Obispo, California Water Revenue Refunding Bonds, Series 2018” (the “Bonds”)
issued by the City to provide funds to the City which, together with other available funds of the
City, will be sufficient to provide for the refunding certain obligations of the City, which Bonds
are issued under and pursuant to Articles 10 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5
of the Government Code of the State of California (the “Law”), and under and pursuant to the
provisions of an Indenture, dated as of [Dated Date] (the “Indenture”), by and between the City
and the Trustee, all of like tenor and date (except for such variations, if any, as may be required to
designate varying numbers, denominations, maturities, interest rates or redemption provisions).
All the Bonds are equally and ratably secured in accordance with the terms and conditions of the
Indenture (copies of which are on file at the Principal Corporate Trust Office of the Trustee), and
reference is hereby made to the Law and to the Indenture and any and all amendments thereof and
supplements thereto for a description of the terms on which the Bonds are issued and for the rights
of the registered Holders of the Bonds; and all the terms of the Law and the Indenture are hereby
incorporated herein and constitute a contract between the City and the registered Holder from time
to time of this Bond, to all the provisions of which the registered Holder of this Bond, by its
acceptance hereof, agrees and consents; and each registered Holder hereof shall have recourse to
all the provisions of the Law and the Indenture and shall be bound by all the terms and conditions
thereof.
The Bonds are subject to redemption prior to maturity as provided in the Indenture.
The Bonds are limited obligations of the City and are payable, as to the interest
thereon and the principal thereof, solely from the Net Revenues (as that term is defined in the
Indenture) and certain other funds provided in the Indenture, and the City is not obligated to pay
them except from the Net Revenues and such other funds. All the Bonds are equally secured by a
pledge of, and charge and lien upon, the Net Revenues and such other funds, and the Net Revenues
and such other funds constitute a trust fund for the security and payment of the interest on and the
principal of the Bonds as provided in the Indenture. The Bonds are not a debt of the State of
California or any of its political subdivisions (other than the City), and neither the State of
California nor any of its political subdivisions (other than the City) is liable hereon, nor in any
event shall the Bonds or any interest thereon be payable out of any funds or properties other than
those of the City. The Bonds do not constitute an indebtedness of the City within the meaning of
any constitutional or statutory limitation or restriction, and no persons executing the Bonds are
liable on the Bonds personally by reason of their issuance.
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4165-3907-6113.2
The Bonds are issuable in the form of fully registered Bonds in denominations of
$5,000 or any integral multiple thereof. The registered Holder of any Bond or Bonds may
surrender the same (together with a written instrument of exchange satisfactory to the Trustee duly
executed by the registered Holder or his duly authorized attorney) in exchange for an equal
aggregate principal amount of Bonds of authorized denominations in the same aggregate principal
amount, subject to the conditions and upon payment of the charges provided in the Indenture.
The registration of this Bond is transferable on the registration books kept by the
Trustee by the registered Holder hereof or by his duly authorized attorney upon surrender of this
Bond, together with a written instrument of transfer in the form attached hereto or in such other
form reasonably satisfactory to the Trustee duly executed by the registered Holder or his duly
authorized attorney, and thereupon a new Bond or Bonds of the same maturity date of authorized
denominations in the same aggregate principal amount will be issued to the transferee in exchange
therefor in the manner, subject to the conditions and terms and upon payment of the charges
provided in the Indenture. The City and the Trustee may deem and treat the person in whose name
this Bond is registered as the absolute Holder hereof for the purpose of receiving payment of, or
on account of, the interest hereon and principal hereof and for all other purposes.
The rights and obligations of the City and of the registered Holders of the Bonds
may be amended or supplemented at any time in the manner, to the extent and upon the terms
provided in the Indenture, and in certain circumstances without the consent of certain registered
owners, but no such amendment or supplement shall (1) extend the maturity of or reduce the
interest rate on or amount of interest on or principal of or mandatory sinking fund payment for any
Bond without the express written consent of the Holder of such Bond, (2) reduce the percentage
of Bonds the consent of the Holders of which is required to effect any such modification or
amendment, or permit the creation of any lien on the Net Revenues and other assets pledged under
the Indenture prior to or on a parity with the lien created by the Indenture (except as expressly
provided in the Indenture), or deprive the Holders of the Bonds of the lien created by the Indenture
on such Net Revenues and other assets, without the consent of the Holders of all Bonds then
Outstanding, or (3) modify any rights or obligations of the Trustee or the City without their prior
written assent thereto, respectively; all as more fully set forth in the Indenture.
This Bond shall not be entitled to any benefits under the Indenture or become valid
or obligatory for any purpose until the certificate of authentication hereon endorsed shall have
been manually signed by an authorized signatory of the Trustee.
It is hereby certified that all acts, conditions and things required by law to exist, to
have happened and to have been performed precedent to and in the issuance of this Bond do exist,
have happened and have been performed in due time, form and manner as required by law and that
the amount of this Bond, together with all other obligations of the City, does not exceed any limit
prescribed by the laws of the State of California and is not in excess of the principal amount of the
Bonds permitted to be issued under the Indenture.
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4165-3907-6113.2
IN WITNESS WHEREOF, the City of San Luis Obispo, California has caused this
Bond to be executed in its name and on its behalf by the manual or facsimile signature of the
[Mayor/Finance Director] of the City and attested by the manual or facsimile signature of the City
Clerk of the City, and has caused this Bond to be dated the Bond Date set forth above.
CITY OF SAN LUIS OBISPO, CALIFORNIA
By:_____________________________________
[Mayor/Finance Director]
Attested:
By:____________________________________
City Clerk
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[FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION
TO APPEAR ON BONDS]
This is one of the Bonds described in the within-mentioned Indenture which has
been authenticated on ____________________.
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By ______________________________________
Authorized Signatory
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4165-3907-6113.2
[FORM OF ASSIGNMENT TO APPEAR ON BONDS]
For value received the undersigned do(es) hereby sell, assign and transfer unto
____________________ the within Bond and do(es) hereby irrevocably constitute and appoint
____________________ attorney to transfer the same on the Bond register of the Trustee, with
full power of substitution in the premises.
Dated: ____________________ __________________________________________
SIGNATURE GUARANTEED BY:
___________________________________
NOTE: The signature(s) to this Assignment must correspond with the name(s) as written
on the face of the within Bond in every particular, without alteration or enlargement
or any change whatsoever, and the signature(s) must be guaranteed by an eligible
guarantor institution.
Social Security Number, Taxpayer Identification Number or other identifying
number of Assignee: ___________________________________