HomeMy WebLinkAboutAGENDA REPORT 2000 0301 CC REG ITEM 10CTO:
FROM:
DATE:
MOORPARK CITY COUNCIL
AGENDA REPORT
Honorable City Council
III /a. C.
CITY OF 7�100RP:1RK, CALAFORNIA
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BY:
John E. Nowak, Assistant City Manager -=Jec)
Marshall F. Linn, Urban Futures, Inc.
24 February 2000 (Meeting of 03- 01 -00)
SUBJECT: Consider Adoption of Resolution No. 2000 -
Authorizing the Issuance of Not to Exceed $16,000,000
Aggregate Principal Amount of City of Moorpark Mobile
Home Park Revenue Bonds (Villa Del Arroyo), Approving
Certain Documents and Authorizing Certain Actions in
Connection Therewith.
DISCUSSION: On January 5,
hearing on the issuance of
"Bonds ") to fund a loan
California
"Borrower ").
finance the
constituting
"Project ").
non - profit,
The Borrower
acquisition by
the Villa
2000 the City Council held a public
the above - referenced bond bonds (the
(the "Loan ") to Augusta Homes, a
public benefit corporation (the
will use the proceeds of the Loan to
the Borrower of certain real property
Del Arroyo Mobile Home Park (the
The Project is located at 15750 Los Angeles Avenue in the City.
The Project consists of a parcel of approximately 22 acres
containing approximately 240 mobile home park spaces, a
clubhouse, pool and spa, etc. As of November 1999, the Project
was 100 percent occupied. Monthly rents range from $445 to $600.
The site has been used as a mobile home park for more than 20
years and is able to accommodate 228 doublewide and 12 triplewide
manufactured units. All utilities are available to the site;
however, only gas and water are submetered to each individual
unit.
tD0002�:
Mobile Home Bond Sale
Meeting of 01 March 2000
Page 02
THE PROPOSED FINANCING
The proposed Bonds will be issued in two series, Series A and
Series B. The Series A Bonds in the approximate amount of
$13,200,000 will be issued concurrently with the Series B Bonds,
which are subordinate to the Series A Bonds. The Series B Bonds
will be issued in the approximate amount of $1,150,000.
The Bonds will be issued by the City pursuant to an Indenture of
Trust between the City and U.S. Bank Trust National Association
as the trustee (the "Trustee ") . Proceeds from the sale of the
Series A Bonds will be used to fund a loan to the Borrowers
pursuant to a Loan Agreement among the City, the Borrower and the
Trustee. The Borrower will then use the proceeds of the Loan to
finance the acquisition of the Project, to fund the Series A
Bonds Debt Service Reserve Account and to make deposits to the
Project Fund and the Series B Bond Debt Service Reserve Account.
The Series A and Series B Bonds are special limited obligations
of the City, payable solely from and secured as to the payment of
the interest and principal from pledged revenues which consist
primarily of the Net Operating Revenues of the Project. The
Series A and Series B Bonds are not a debt of the City, the
Redevelopment Agency, the State or any of its political
subdivisions. It is possible that a Series C might be issued,
which can be characterized as subordinated debt carried back by
the Seller. The Series C Bonds, if issued, would be subordinated
to both the Series A and Series B issues. It is anticipated that
the Series C Bonds would be in the approximate amount of
$485,000.
The City, the Borrower and the Trustee will enter into a
Regulatory Agreement and Declaration of Restrictive Covenants
(the "Regulatory Agreement ") with respect to the operation of the
Project. Under the Regulatory Agreement, the Borrower is to rent
not less than 20 percent of the spaces in the Project to very
low - income residents. The monthly rental rate that the Borrower
may charge very low - income residents is also restricted by the
Regulatory Agreement, as is the rate at which rental rates for
very low- income spaces may be increased. Rent increase
limitations and hardship assistance for tenants contained in the
000023
Mobile Home Bond Sale
Meeting of 01 March 2000
Page 03
Municipal Code must be adhered to by the new park owner. There
is no objection to these requirements by the new owner.
Presented with your Agenda package for this meeting are proposed
forms of the Indenture of Trust, a Loan Agreement, a Regulatory
Agreement and an Administration and Oversight Agreement, as well
as Preliminary Official Statements relating to the Bonds, and a
Contract of Purchase with respect to the Bonds.
Agency Counsel has reviewed the Regulatory Agreement and has
found it to be consistent with the City's Code and the interests
of the City and the tenants of the mobile home park. In
addition, the Regulatory Agreement contains appropriate language
that requires the dismissal of certain lawsuits currently filed
against the City. The proposed financing will provide enough
bond proceeds to reimburse the City for approximately $60,000 in
legal expenses incurred on the litigation. In addition the City
will receive an annual administration fee of approximately
$13,160 (10 basis points) for "oversight" and administrative
duties related to the continued operation of the Project.
STAFF RECOMMENDATION: (ROLL CALL VOTE REQUIRED)
Adopt Resolution No. 2000- and authorize the sales of the
Bonds subject to the following conditions:
a. That all legal matters between the present owner of the
Villa Del Arroyo Mobile Home Park and all parties be
resolved to the satisfaction of the City Attorney.
b. That the initial debt service coverage on all Bonds
secured by a senior lien on the Project be at least 125
percent; and that all Bonds secured by a junior lien be
at least 115 percent if any Seller financing is
provided (the Series C Bonds) or 110 percent if no
Seller financing is provided.
Attachments
00002
RESOLUTION NO. 2000-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
MOORPARK AUTHORIZING THE ISSUANCE OF NOT TO EXCEED
$16,000,000 AGGREGATE PRINCIPAL AMOUNT OF CITY OF
MOORPARK MOBILE HOME PARK REVENUE BONDS (VILLA DEL
ARROYO), AND APPROVING CERTAIN DOCUMENTS AND
AUTHORIZING CERTAIN ACTIONS IN CONNECTION
THEREWITH
WHEREAS, the City of Moorpark (the "City ") is authorized to
issue bonds pursuant to Section 52100 and following of the Health
and Safety Code of the State of California (the "Law ") to finance
the acquisition of mobile home parks by nonprofit organizations;
and
WHEREAS, Augusta Homes, a California nonprofit public
benefit corporation (the "Corporation ") qualified as an exempt
organization under Section 501(c)(3) of the Internal Revenue Code
of 1986, as amended (the "Code ") , has requested that the City
issue and sell revenue bonds for the purpose of providing for the
financing of the acquisition of a 241 -space mobile home park
located at 15750 East Los Angeles Street in the City and known as
Villa Del Arroyo Mobile Home Park (the "Project "); and
WHEREAS, the financing of the Project will lessen the
governmental burden of the City by preserving affordable housing
within the City; and
WHEREAS, the City proposes to issue its not to exceed
$16,000,000 aggregate principal amount City of Moorpark Mobile
Home Park Revenue Bonds (Villa Del Arroyo) in one or more series
(the "Bonds ") pursuant to the Law to finance the acquisition by
the Corporation of the Project; and
WHEREAS, there has been presented to the City Council at
this meeting proposed forms of an Indenture of Trust, a Loan
Agreement, a Regulatory Agreement and an Administration and
Oversight Agreement, as well as Preliminary Official Statements
relating to the Bonds and a Contract of Purchase with respect to
the Bonds by Miller & Schroeder Financial, Inc. and Kinsell,
Newcomb & De Dios, Inc. (collectively, the "Underwriters "); and
WHEREAS, notice of a public hearing for January 5, 2000 with
respect to the proposed issuance of the Bonds was published on at
least 14 days before January 5, 2000, in a newspaper of general
circulation in the City; and
000025
Resolution No. 2000 -
Page 2
WHEREAS, the City Council is the applicable elected
representative required to approve the issuance of the Bonds
within the meaning of and as required by Section 147(f) of the
Code; and
WHEREAS, the City Council on January 5, 2000 conducted a
public hearing on the issuance of the Bonds for purposes of the
Code; and
WHEREAS, all acts, conditions and things required by the
laws of the State of California to exist, to have happened and to
have been performed precedent to and in connection with the
issuance of the Bonds exist, have happened and have been
performed in due time, form and manner as required by law, and
the City is now duly authorized and empowered, pursuant to each
and every requirement of law, to issue the Bonds for the
purposes, in the manner and upon the terms herein provided.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF MOORPARK
DOES RESOLVE AS FOLLOWS:
SECTION 1. Recitals. The above recitals, and each of them,
are true and correct.
SECTION 2. Appointment of Trustee. U.S. Bank Trust National
Association is hereby appointed as the initial trustee (the
"Trustee ") under the Indenture of Trust (the "Indenture ")
relating to the Bonds, with the duties and powers of such Trustee
as are set forth in the Indenture.
SECTION 3. Indenture. The Indenture authorizing the issuance
of the Bonds, between the City and the Trustee, in the form
presented at this meeting, is hereby approved and the City
Manager or the Assistant City Manager, each acting alone, are
hereby authorized and directed, for and in the name and on behalf
of the City, to execute and deliver the Indenture in the form
hereby approved together with such additions or changes as the
officer executing the same, upon consultation with the City's
Financial Advisor and Bond Counsel, may approve (including but
not limited to those changes described in Section 10 below), such
approval to be conclusively evidenced by the execution and
delivery thereof by the City.
SECTION 4. Form of Bonds. The forms of the Bonds, each as
set forth in the Indenture, are hereby approved and the Mayor and
the City Clerk are hereby authorized and directed to execute by
manual or facsimile signature, for and in the name and on behalf
of the City, the Bonds in either temporary and /or definitive form
in the aggregate principal amounts and all in accordance with the
terms and provisions of the Indenture.
000026
Resolution No. 2000 -
Page 3
SECTION 5. Loan Agreement. The Loan Agreement (the "Loan
Agreement ") by and among the City, the Trustee and the
Corporation, whereby the proceeds of the Bonds are to be loaned
to the Corporation the for the purpose of providing permanent
financing for the acquisition of the Project, in the form
presented at this meeting, is hereby approved and the City
Manager or the Assistant City Manager, each acting alone, are
hereby authorized and directed, for and in the name and on behalf
of the City, to execute and deliver the Loan Agreement in the
form hereby approved together with such additions or changes as
the officer executing the same, upon consultation with the City's
Financial Advisor and Bond Counsel, may approve (including but
not limited to those changes described in Section 10 below), such
approval to be conclusively evidenced by the execution and
delivery thereof by the City.
SECTION 6. Regulatory Agreement. The Regulatory Agreement
and Declaration of Restrictive Covenants by and among the City,
the Trustee and the Corporation (the "Regulatory Agreement ") in
the form presented at this meeting, is hereby approved and the
City Manager or the Assistant City Manager, each acting alone,
are hereby authorized and directed, for and in the name and on
behalf of the City, to execute and deliver the Regulatory
Agreement in the form hereby approved together with such
additions or changes therein as the officer executing the same,
upon consultation with the City's Financial Advisor, the City
Attorney and Bond Counsel, may approve (including but not limited
to those changes described in Section 10 below), such approval to
be conclusively evidenced by the execution and delivery thereof
by the City.
SECTION 7. Official Statement. The two Preliminary Official
Statements relating to the Bonds (collectively, the "Preliminary
Official Statements ") in the forms presented at this meeting, are
hereby approved. The City Manager and the Assistant City Manager
are hereby authorized and directed to make changes to the forms
of the Preliminary Official Statements hereby approved, upon
consultation with the City's Financial Advisor and Bond Counsel
(including but not limited to those changes described in Section
10 below), as necessary or desireable to reflect the terms of the
financing and the documents with respect thereto.
The Preliminary Official Statements may be brought into the
form of final Official Statements which shall contain such
changes or modifications thereto as may be deemed necessary or
desireable by the City Manager or the Assistant City Manager,
upon consultation with the City's Financial Advisor and Bond
Counsel. The City Manager or the Assistant City Manager, each
acting alone, are hereby authorized and directed, for and in the
name and on behalf of the City, to execute and deliver the final
000027
Resolution No. 2000 -
Page 4
Official Statements. The City Manager or the Assistant City
Manager, each acting alone, are authorized and directed, on
behalf of the City, to certify the Preliminary Official
Statements as "near final" for purposes of Rule 15c2 -12 under the
Securities and Exchange Act of 1934, as amended ( "Rule 15c2 -12 "),
and to certify the Official Statements as "final" pursuant to
Rule 15c2 -12.
SECTION 8. Contract of Purchase. The Contract of Purchase
among the City, the Corporation and the Underwriters in the form
presented at this meeting, is hereby approved. The City Manager
or the Assistant City Manager, each acting alone, are hereby
authorized to execute the Contract of Purchase in said form
together with such additions or changes as the officer executing
the same, upon consultation with the City's Financial Advisor and
Bond Counsel, may approve (including but not limited to those
changes described in Section 10 below) , such approval to be
conclusively evidenced by the execution and delivery of the
Contract of Purchase by the City; provided that said execution
and delivery is expressly conditioned upon: (a) the determination
by the City's Financial Advisor, based upon information provided
by the Underwriters, that the reasonably expected initial debt
service coverage on (i) all Bonds secured by a senior lien on the
Project is at least 125 %, and (ii) all Bonds secured by a junior
lien on the Project is at least (A) 115% if any seller financing
is provided, or (B) 110% if no seller financing is provided; (b)
the aggregate principal amount of the Bonds to be sold pursuant
to the Contract of Purchase shall not exceed $16,000,000; and (c)
the discount at which the Bonds will be purchased (not including
original issue discount) shall not exceed 2.50 %.
SECTION 9. Administration and Oversight Agreement. The
Administration and Oversight Agreement (the "Administration
Agreement ") in the form presented at this meeting, by and among
the City, the Corporation and Urban Futures, Incorporated (or
such other entity as the City Manager shall select) as Program
Administrator and Oversight Agent, is hereby approved and the
City Manager or the Assistant City Manager, each acting alone,
are hereby authorized and directed, for and in the name and on
behalf of the City, to execute the Administration Agreement in
the form hereby approved, together with such additions or changes
as the officer executing the same, upon consultation with the
City's Financial Advisor and Bond Counsel, may approve, such
approval to be conclusively evidenced by the execution and
delivery thereof.
SECTION 10. Additional Series of Bonds. Subject to the
provisions of Section 8 above, the City Manager or the Assistant
City Manager are hereby expressly authorized to approve revisions
to the documents referenced in this Resolution to add a series of
000028
Resolution No. 2000 -
Page 5
Bonds the interest on which is taxable under federal tax law upon
the recommendation of the Underwriters and concurrence by the
City's Financial Advisor that such additional series is in the
best interests of the City in the circumstances, said
recommendation and concurrence to be conclusively evidenced by
the execution and delivery by the City of such documents which
included provisions for such additional series of the Bonds.
SECTION 11. Designation of Professionals. The law firms of
Quint & Thimmig LLP and Richards, Watson & Gershon are hereby
designated as Bond Counsel and Disclosure Counsel, respectively,
to the City with respect to the Bonds, in accordance with the
proposals of such firms on file with the City. Miller & Schroeder
Financial, Inc. is hereby designated as senior underwriter for
the Bonds, and Kinsell, Newcomb & DeDios, Inc. is hereby
designated as co- underwriter for the Bonds.
SECTION 12. Other Acts. The Mayor, members of the City
Council, City Manager, Assistant City Manager, Finance Director,
City Clerk, City Attorney and all other officers of the City are
hereby authorized and directed, for and in the name and on behalf
of the City, to do any and all things and take any and all
actions, including without limitation, obtaining bond insurance
and a rating for the Bonds, and including execution and delivery
of any and all assignments, certificates, requisitions,
agreements, notices, consents, instruments of conveyance,
warrants and other documents which they, or any of them, may deem
necessary or advisable in order to consummate the transactions as
described herein in connection with the issuance and sale of the
Bonds or to otherwise effectuate the purposes of this Resolution.
SECTION 13. Effective Date. This Resolution shall take
effect immediately upon adoption.
SECTION 14.
this resolution
filed in the book
The City Clerk shall certify to the adoption of
and shall cause a certified resolution to be
of original Resolutions.
PASSED AND ADOPTED this 1St day of March, 2000.
Patrick Hunter, Mayor
ATTEST:
Deborah S. Traffenstedt, City Clerk
000029
RE: ITEM 10.C.
PURCHASE CONTRACT
related to:
City of Moorpark City of Moorpark
Mobile Home Park Revenue Bonds Mobile Home Park Subordinate Revenue Bonds
(Villa Del Arroyo) (Villa Del Arroyo)
Series 2000A Series 2000B
March _, 2000
City of Moorpark
799 Moorpark Avenue
Moorpark, California 93021
Augusta Homes
925 Westridge Court
Upland, California 91786
Ladies and Gentlemen:
Miller & Schroeder Financial, Inc. and Kinsell, Newcomb & De Dios, Inc. (together, the
"Underwriter ") hereby offer to enter into the following agreement with the City of Moorpark,
California (the "Issuer ") and Augusta Homes, a California nonprofit public benefit corporation
(the "Borrower "). Upon the acceptance hereof by you, this offer will be binding upon the Issuer,
the Borrower and the Underwriter. This offer is made subject to (i) the written acceptance hereof
by you, and (ii) withdrawal by the Underwriter upon written notice (by telegraph or otherwise)
delivered to you at any time prior to the acceptance hereof by you.
1. Purchase and Sale. Upon the terms and conditions and upon the basis of the
representations, warranties and agreements set forth herein, the Issuer agrees to sell and deliver
to the Underwriter and the Underwriter hereby agrees to purchase from the Issuer, at the Closing
Time on the Closing Date (both as defined below), all of the: (a) $ aggregate
principal amount of City of Moorpark Mobile Home Park Revenue Bonds (Villa Del Arroyo)
Series 2000A (the "Series A Bonds "), and (b) $ aggregate principal amount of City
of Moorpark Mobile Home Park Subordinate Revenue Bonds (Villa Del Arroyo) Series 2000B
(the "Series B Bonds" and, together with the Series A Bonds, the "Bonds "). The Bonds shall be
dated the Closing Date, and the Bonds shall mature on March 15 in the years shown on Exhibit A
hereto, and shall bear interest at the rates shown on Exhibit A hereto. The Bonds shall be subject
to optional redemption, special redemption and mandatory redemption from sinking fund
payments in the amounts and on the dates shown in the applicable Official Statement (as
described below). Interest on the Bonds shall be payable on September 15, 2000 and
semiannually thereafter on March 15 and September 15 of each year to maturity.
The aggregate purchase price for the Series A Bonds shall be $ , being the
aggregate principal amount of the Series A Bonds, less original issue discount of
$ , and less an Underwriters' discount of $ . The date of such
payment and delivery is referred to herein as the "Closing Date," the hour and date of such
delivery and payment is referred to herein as the "Closing Time," and the other actions
contemplated hereby to take place at the time of such payment and delivery being herein
sometimes called the "Closing ". The aggregate purchase price for the Series B Bonds shall be
$ , being the aggregate principal amount of the Series B Bonds, less original issue
discount of $ , and less an Underwriters' discount of $
2. The Bonds. The Bonds shall be described in, and shall be issued and secured
pursuant to, the provisions of the Constitution and the laws of the State of California including
the provisions of Chapter 8 of Part 5 of Division 31 of the Health and Safety Code of the State of
California (the "Bond Law "). The Bonds shall be issued and secured pursuant to an Indenture of
Trust dated as of March 1, 2000 (the "Indenture "), by and between the Issuer and U.S. Bank
Trust National Association, as trustee (the "Trustee "). The Bonds are being issued for the
purpose of making a loan (the "Loan") to the Borrower in connection with its acquisition of a
mobile home park commonly known as Villa Del Arroyo (the "Project "), pursuant to a Loan
Agreement, dated as of March 1, 2000, by and among the Issuer, the Borrower and the Trustee
(the "Loan Agreement "). Proceeds of the Loan will be used acquire the Project, to make certain
deposits specified in the Indenture and described in the Official Statements (defined below), and
to pay the costs of issuance of the Bonds. The Project is to be operated pursuant to a Regulatory
Agreement and Declaration of Restrictive Covenants among the Issuer, the Trustee and the
Borrower, dated as of March 1, 2000 (the "Regulatory Agreement "). The Bonds are secured by a
pledge of Revenues (as defined in the Indenture). Compliance by the Borrower with certain
provisions of the Loan Agreement will be monitored for the Issuer by Urban Futures
Incorporated, acting as Oversight Agent under an Administration and Oversight Agreement,
dated as of March 1, 2000 (the "Administration Agreement "), by and among the City, said
Oversight Agent and the Borrower. The Indenture, the Loan Agreement, the Regulatory
Agreement, the Administration Agreement and this Purchase Contract are referred to collectively
herein as the "Basic Documents."
The Series A Bonds shall be payable and shall be subject to redemption as provided in
the Indenture and shall be as described in the Preliminary Official Statement of the Issuer dated
March _, 2000 and the Official Statement of the Issuer dated of even date herewith applicable
to the Series A Bonds. The Series B Bonds shall be payable and shall be subject to redemption
as provided in the Indenture and shall be as described in the Preliminary Official Statement of the
Issuer dated March _, 2000 and the Official Statement of the Issuer dated of even date
herewith applicable to the Series B Bonds. Such Official Statements, including the cover pages
and the appendices thereto, as amended to conform to the terms of this Purchase Contract and
with such changes and amendments thereto as have been mutually agreed to by the Issuer, the
Borrower and the Underwriter, are hereinafter referred to collectively as the "Official
Statements."
3. Offering by the Underwriter. It shall be a condition to the Issuer's and the
Underwriter's respective obligations to sell and deliver, and to purchase, accept delivery of and
pay for the Bonds that the entire principal amount of the Bonds shall be issued, sold and
delivered by the Issuer and purchased, accepted and paid for by the Underwriter at the Closing.
It is understood that the Underwriter proposes to offer the Bonds for sale to the public (which
may include selected dealers and special purchasers) at prices or yields as set forth in Exhibit A
hereto and on the cover pages of the Official Statements. Concessions from the public offering
price may be allowed to selected dealers and special purchasers. It is understood that the initial
public offering price and concessions set forth in the Official Statements may vary after the
initial public offering. It is further understood that the Bonds may be offered to the public at
prices other than the par value thereof. The net premium on the sale of the Bonds to the public, if
any, shall accrue to the benefit of the Underwriter.
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4. Official Statements, Delivery of Other Documents, Use of Documents.
(a) The Issuer and the Borrower hereby authorize the use by the Underwriter
of the Preliminary Official Statements and the Official Statements (including any
supplements or amendments to the Official Statements) and the Basic Documents and the
information therein contained, in connection with the public offering and sale of the
Bonds.
(b) The Issuer shall deliver to the Underwriter, within seven business days
from the date hereof, such number of copies of the final Official Statements executed on
behalf of and approved for distribution by the Issuer as the Underwriter may reasonably
request in order for the Underwriter to comply with the rules of the Municipal Securities
Rulemaking Board and Rule 15c2- 12(b)(4) under the Securities Exchange Act of 1934.
(c) As soon as practicable following receipt thereof, the Underwriter shall
deliver the Official Statements, and any supplements or amendments thereto, to a
nationally recognized municipal securities information repository.
5. Representations, Warranties and Agreements of the Issuer. The Issuer represents,
warrants and agrees as follows:
(a) The Issuer is a municipal corporation duly organized and validly existing
under the laws of the State of California.
(b) The Issuer has full legal right, power and authority (i) to enter into the
Basic Documents; (ii) to sell, issue and deliver the Bonds to the Underwriter as provided
herein; and (iii) to carry out and consummate the transactions on its part contemplated by
the Basic Documents.
(c) By all necessary official action, the Issuer has duly authorized and
approved the Basic Documents, has duly authorized and approved the Preliminary
Official Statements and the Official Statements, has duly authorized and approved the
execution and delivery of, and the performance by the Issuer of the obligations in
connection with the issuance of the Bonds on its part contained in the Bonds and the
Basic Documents and the consummation by it of all other transactions on its part
contemplated by the Basic Documents.
(d) The Issuer is not in any material respect in breach of or default under any
applicable constitutional provision, law or administrative regulation of any state or of the
United States, or any agency or instrumentality of either, or any applicable judgment or
decree, or any loan agreement, indenture, bond, note, resolution, agreement (including,
without limitation, the Indenture) or other instrument to which the Issuer is a party which
breach or default has or may have an adverse effect on the ability of the Issuer to perform
its obligations under the Basic Documents, and no event has occurred and is continuing
which with the passage of time or the giving of notice, or both, would constitute such a
default or event of default under any such instrument; and the authentication and delivery
of the Bonds, the execution and delivery of the Basic Documents, and compliance with
the provisions on the Issuer's part contained therein, will not conflict in any material way
with or constitute a material breach of or a material default under any constitutional
provision, law, administrative regulation, judgment, decree, loan agreement, indenture,
bond, note, resolution, agreement or other instrument to which the Issuer is a party nor
will any such execution, delivery, adoption or compliance result in the creation or
imposition of any lien, charge or other security interest or encumbrance of any nature
ki
whatsoever upon any of the property or assets of the Issuer or under the terms of any such
law, regulation or instrument, except as provided by the Bonds and the Basic Documents.
(e) All authorizations, approvals, licenses, permits, consents and orders of any
governmental authority, legislative body, board, agency or commission having
jurisdiction of the matter which are required for the due authorization by, or which would
constitute a condition precedent to or the absence of which would materially adversely
affect the due performance by, the Issuer of its obligations under this Purchase Contract
and the other Basic Documents have been duly obtained, except for such approvals,
consents and orders as may be required under the Blue Sky or securities laws of any state
in connection with the offering and sale of the Bonds; except as described in or
contemplated by the Official Statements, all authorizations, approvals, licenses, permits,
consents and orders of any governmental authority, board, agency or commission having
jurisdiction of the matter which are required for the due authorization by, or which would
constitute a condition precedent to or the absence of which would materially adversely
affect the due performance by, the Issuer of its obligations under the Basic Documents
have been duly obtained.
(f) The Bonds when issued will conform to the descriptions thereof contained
in the Official Statements; and the Indenture when executed will conform to the
descriptions thereof contained in the Official Statements.
(g) The Bonds, when issued, authenticated and delivered in accordance with
the Indenture, and sold to the Underwriter as provided herein, will be validly issued and
outstanding obligations of the Issuer, entitled to the benefits of the Indenture, and upon
such issuance and delivery, the Indenture will provide for the benefit of the owners from
time to time of the Bonds, the legally valid and binding pledges, liens and security
interests it purports to create.
(h) As of the date hereof, there is no action, suit, proceeding, inquiry or
investigation, notice of which has been served on the Issuer, at law or in equity before or
by any court, government agency, public board or body, pending or to the best knowledge
of the officer of the Issuer executing this Purchase Contract, threatened against the Issuer,
affecting the existence of the Issuer or the titles of its officers to their respective offices,
or affecting or seeking to prohibit, restrain or enjoin the sale, issuance or delivery of the
Bonds or the pledge and lien on the Revenues pursuant to the Indenture, or contesting or
affecting as to the Issuer the validity or enforceability of the Bonds or the Basic
Documents or contesting the tax- exempt status of interest on the Bonds, or contesting the
completeness or accuracy of the Preliminary Official Statements or the Official
Statements, or contesting the powers of the Issuer with respect to the issuance of the
Bonds, or the execution and delivery or performance by the Issuer of the Basic
Documents, or in any way contesting or challenging the consummation of the
transactions contemplated hereby or thereby; nor, to the best knowledge of the Issuer, is
there any basis for any such action, suit, proceeding, inquiry or investigation, wherein an
unfavorable decision, ruling or finding would materially adversely affect the validity, as
to the Issuer, or the authorization, execution, delivery or performance by the Issuer of the
Bonds or the Basic Documents.
(i) The Issuer will furnish such information, execute such instruments and
take such other action in cooperation with the Underwriter as the Underwriter may
reasonably request in order (i) to qualify the Bonds for offer and sale under the Blue Sky
or other securities laws and regulations of such states and other jurisdictions of the United
States as the Underwriter may designate and (ii) to determine the eligibility of the Bonds
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for investment under the laws of such states and other jurisdictions, and will use its best
efforts to continue such qualifications in effect so long as required for the distribution of
the Bonds (provided, however, that the Issuer shall not be required to execute a general or
special consent to service of process or qualify to do business in connection with any
such qualification or determination in any jurisdiction, and provided further, that the
Underwriter shall bear all costs in connection with the Issuer's action under (i) and (ii)
herein).
(j) As of the date thereof, the Preliminary Official Statements do not, except
for the omission of certain information permitted to be omitted in accordance with Rule
15c2 -12, contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein with respect to the Issuer, in light of the
circumstances under which they were made, not misleading.
(k) At the time of the Issuer's acceptance hereof, and (unless an event occurs
of the nature described in paragraph (n) of this Section 5) at all times subsequent thereto
up to and including the date of the Closing, the Official Statements do not and will not
contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that these representations and warranties of the Issuer
shall apply only to the information contained in the Official Statements relating to the
Issuer.
(1) If an Official Statement is supplemented or amended pursuant to
paragraph (n) of this Section 5, at the time of each supplement or amendment thereto and
(unless subsequently again supplemented or amended pursuant to such paragraph) at all
times subsequent thereto up to and including the date of the Closing, the Official
Statement as so supplemented or amended will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that these representations and warranties of the Issuer shall apply only to the
information contained in the Official Statements relating to the Issuer.
(m) If between the date of this Purchase Contract and that date which is 25
days after the end of the underwriting period (as determined in accordance with Section 7
hereof) any event known to the Issuer shall occur affecting the Issuer which might
adversely affect the marketability of the Bonds or the market prices thereof, or which
might cause the Official Statements, as then supplemented or amended, to contain any
untrue statement of a material fact or to omit to state a material fact necessary to make the
statements therein„ in light of the circumstances under which they were made, not
misleading, the Issuer shall notify the Underwriter thereof, and if in the opinion of the
Underwriter such event requires the preparation and publication of a supplement or
amendment to an Official Statement, the Issuer will at the expense of the Borrower
prepare and furnish to the Underwriter a reasonable number of copies of such supplement
to, or amendment of, such Official Statement in a form and in a manner approved by the
Underwriter.
(n) The Issuer will refrain from taking any action, or permitting any action to
be taken, with regard to which the Issuer may exercise control, that results in the loss of
the tax - exempt status of the interest on the Bonds.
(o) Any certificate signed by any officer of the Issuer and delivered to the
Underwriter pursuant to the Basic Documents or any document contemplated thereby,
shall be deemed a representation and warranty by the Issuer to the Underwriter as to the
statements made therein.
(p) The Issuer will cause the proceeds from the sale of the Bonds to be paid to
the Trustee for the purposes specified in the Indenture and the Official Statements. So
long as any of the Bonds are outstanding and except as may be authorized by the
Indenture, the Issuer will not issue or sell any bonds or other obligations, other than the
Bonds sold thereby, the interest on and premium, if any, or principal of which will be
payable from the payments to be made under the Indenture.
(q) The Issuer shall honor all other covenants on its part contained in the
Basic Documents which are incorporated herein and made a part of this Purchase
Contract.
6. Representations, Warranties and Agreements of the Borrower. The Borrower
represents, warrants and agrees as follows:
(a) The Borrower is a non - profit public benefit corporation duly organized,
validly existing and in good standing under the laws of the State of California.
(b) The Borrower has full legal right, power and authority to enter into and to
carry out the transactions on its part contemplated by: (i) the Basic Documents (other than
the Indenture), (ii) the Note (as defined in the Indenture), (iii) the Deed of Trust (as
defined in the Indenture), and (iv) the Continuing Disclosure Agreement, dated as of
March 1, 2000, between the Borrower and the Trustee, as Dissemination Agent (the
documents described in the preceding clauses (i) through (iv) being collectively referred
to herein as the "Borrower Documents "); and to approve the Official Statements.
(c) By all necessary corporate action, the Borrower has duly authorized and
approved the Borrower Documents, has duly authorized and approved the Preliminary
Official Statements and the Official Statements, has duly authorized and approved the
execution and delivery of, and the performance by the Borrower of the obligations on its
part contained in the Borrower Documents and the consummation by it of all other
transactions on its part contemplated by the Borrower Documents.
(d) At the Closing the Borrower Documents will have been duly executed and
delivered by the Borrower and will constitute the legal, valid and binding obligations of
the Borrower enforceable against the Borrower in accordance with their terms except as
enforcement of the Borrower Documents may be limited by bankruptcy, insolvency,
reorganization, arrangement, fraudulent conveyance, moratorium or other laws affecting
the enforcement of creditors' rights generally and by the application of equitable
principles if equitable remedies are sought.
(e) The Borrower is not in any material respect in violation or breach of or
default under any applicable constitutional provision, law or administrative regulation of
any state or of the United States, or any agency or instrumentality of either, or any
applicable judgment or decree, or any loan agreement, indenture, bond, note, resolution,
agreement (including, without limitation, the Loan Agreement) or other instrument to
which the Borrower is a party which breach or default has or may have an adverse effect
on the Borrower's financial position or the ability of the Borrower to perform its
obligations under the Borrower Documents, and no event has occurred and is continuing
which with the passage of time or the giving of notice, or both, would constitute such a
violation, default or event of default under any such instrument; and the execution and
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delivery of the Borrower Documents, and compliance with the provisions on the
Borrower's part contained therein, will not conflict in any material way with or constitute
a material breach of or a material default under the articles of incorporation or bylaws of
the Borrower, or any constitutional provision, law, administrative regulation, judgment,
decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument
to which the Borrower is a party nor will any such execution, delivery, adoption or
compliance result in the creation or imposition of any lien, charge or other security
interest or encumbrance of any nature whatsoever upon any of the property or assets of
the Borrower or under the terms of any such law, regulation or instrument, except as may
be contemplated or permitted by the Borrower Documents.
(f) All consents or approvals of any trustee or holder of indebtedness of the
Borrower, and authorizations, approvals, licenses, permits, consents and orders of any
governmental authority, legislative body, board, agency or commission having
jurisdiction of the matter which are required for the due authorization by, or which would
constitute a condition precedent to or the absence of which would materially adversely
affect the due performance by, the Borrower of its obligations under the Borrower
Documents have been duly obtained, except for such approvals, consents and orders as
may be required under the Blue Sky or securities laws of any state in connection with the
offering and sale of the Bonds.
(g) The Borrower is an organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended (the "Code "); and the Borrower is exempt
from federal income tax under Section 501(a) of the Code, except with respect to any
unrelated business income of the Borrower, which income is not expected to result from
the consummation of any transaction contemplated by the Borrower Documents. Such
status is based on a letter of determination from the Internal Revenue Service to the
Borrower. The Borrower is not a private foundation within the meaning of Section
509(a) of the Code; and the Borrower at all times will maintain its status as an
organization described in Section 501(c)(3) of the Code and its exemption from federal
income tax under Section 501(a) of the Code or corresponding provisions of future
federal income tax laws. The facts and circumstances which formed the basis of the
Borrower's status as an organization described in Section 501(c)(3) of the Code as
represented to the Internal Revenue Service continue substantially to exist.
(h) Between the date hereof and the Closing, the Borrower will not, without
the prior written consent of the Underwriter, except as described in or contemplated by
the Official Statements, incur any material liabilities, direct or contingent, other than in
the ordinary course of business.
(i) The Borrower Documents conform to the descriptions thereof contained in
the Official Statements.
0) At or prior to the Closing, the Borrower shall have duly authorized,
executed and delivered the Continuing Disclosure Agreement in the form described in the
Official Statements.
(k) The Borrower is in full compliance with all of its prior written continuing
disclosure undertakings entered into pursuant to the provisions of Rule 15c2- 12(b)(5) of
the Securities and Exchange Commission.
(1) As of the date hereof, there is no action, suit, proceeding, inquiry or
investigation, notice of which has been served on the Borrower, at law or in equity before
or by any court, government agency, public board or body, pending or to the best
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knowledge of the officer of the Borrower executing this Purchase Contract after inquiry
of all other officers and directors of the Borrower, threatened against the Borrower, in any
way contesting or affecting the corporate existence or powers of the Borrower or the titles
of its officers to their respective offices, or affecting or seeking to prohibit, restrain or
enjoin the sale, issuance or delivery of the Bonds or the pledge of and lien on the
Revenues pursuant to the Indenture, or contesting or affecting as to the Borrower the
validity or enforceability of the Bond Law, the Bonds, the Borrower Documents or
contesting the tax- exempt status of interest on the Bonds, or contesting the completeness
or accuracy of the Preliminary Official Statements or the Official Statements, or the
execution and delivery or performance by the Borrower of the Borrower Documents, or
in any way contesting or challenging the consummation of the transactions contemplated
hereby or thereby or contesting or affecting the Borrower's status as an organization
described in Section 501(c)(3) of the Code or which would subject any income of the
Borrower to federal income taxation to such extent as would result in loss of the
exclusion from gross income for federal income tax purposes of interest on any of the
Bonds under Section 103 of the Code.
(m) The Borrower: (i) is in compliance with all laws, ordinances,
governmental rules and regulations to which it is subject and which are material to its
properties, operations, finances or status as an organization described in Section 501(c)(3)
of the Code; and (ii) has obtained all licenses, permits, franchises or other governmental
authorizations necessary and material to the ownership of its property or to the conduct of
its activities, and agrees to obtain all such licenses, permits, franchises or other
governmental authorizations as may be required in the future for its operations in all cases
where failure to obtain such licenses, permits, franchises or other governmental
authorizations could reasonably be expected to materially and adversely affect the
condition (financial or otherwise) of the Borrower or its ability to perform its obligations
under the Borrower Documents.
(n) The Borrower will furnish such information, execute such instruments and
take such other action in cooperation with the Underwriter as the Underwriter may
reasonably request in order (i) to qualify the Bonds for offer and sale under the Blue Sky
or other securities laws and regulations of such states and other jurisdictions of the United
States as the Underwriter may designate, (ii) to determine the eligibility of the Bonds for
investment under the laws of such states and other jurisdictions, and will use its best
efforts to continue such qualifications in effect so long as required for the distribution of
the Bonds (provided, however, that the Borrower shall not be required to execute a
general or special consent to service of process or qualify to do business in connection
with any such qualification or determination in any jurisdiction and the Underwriter shall
bear all costs in connection with the Borrower's action under (i) and (ii) herein), and (iii)
assure or maintain the tax - exempt status of the interest on the Bonds.
(o) As of the date thereof, the Preliminary Official Statements did not, except
for the omission of certain information permitted to be omitted in accordance with Rule
15c2 -12 of the Securities and Exchange Commission, contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements therein with
respect to the Borrower and the Project, in light of the circumstances under which they
were made, not misleading.
(p) The operating and financial data presented in the Official Statements under
the headings "THE BORROWER," and "THE PROJECT," and in Appendix C and
Appendix G thereto present a fair and accurate summary, in all material respects, of the
matters set forth therein.
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(q) At the time of the Borrower's acceptance hereof, and (unless an event
occurs of the nature described in paragraph (s) of this Section 6) at all times subsequent
hereto up to and including the date of the Closing, the Official Statements do not and will
not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under which they
were made, not misleading; provided, however, that these representations and warranties
of the Borrower shall apply only to the information contained in the Official Statements
relating to the Borrower or the Project.
(r) If an Official Statement is supplemented or amended pursuant to
paragraph (s) of this Section 6, at the time of each supplement or amendment thereto and
(unless subsequently again supplemented or amended pursuant to such paragraph) at all
times subsequent thereto up to and including the date of the Closing, the Official
Statement as so supplemented or amended will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that these representations and warranties of the Borrower shall apply only to the
information contained in the Official Statements relating to the Borrower or the Project.
(s) If between the date of this Purchase Contract and that date which is 25
days after the end of the underwriting period (as determined in accordance with Section 7
hereof) any event known to the Borrower shall occur affecting the Borrower or the
Project which might adversely affect the marketability of the Bonds or the market prices
thereof, or which might cause an Official Statement, as then supplemented or amended, to
contain any untrue statement of a material fact or to omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they were made,
not misleading, the Borrower shall notify the Underwriter thereof, and if in the opinion of
the Underwriter such event requires the preparation and publication of a supplement or
amendment to such Official Statement, the Borrower will, at the expense of the Borrower,
prepare and furnish to the Underwriter a reasonable number of copies of such supplement
to, or amendment of, such Official Statement in a form and in a manner approved by the
Underwriter.
(t) The Borrower will refrain from taking any action, or permitting any action
to be taken, with regard to which the Borrower may exercise control, that results in the
loss of the tax- exempt status of the interest on the Bonds.
(u) Any certificate signed by any officer of the Borrower and delivered to the
Underwriter pursuant to any Borrower Document or otherwise contemplated thereby shall
be deemed a representation and warranty by the Borrower to the Underwriter as to the
statements made therein.
(v) None of the Borrower or any of its affiliated organizations has ever failed
to comply in all material respects with any previous undertakings with regard to
Securities and Exchange Commission Rule 15c2- 12(b)(5).
7. Determination of End of the Underwriting Period. For purposes of this Purchase
Contract, the End of the Underwriting Period for the Bonds shall mean the earlier of (a) the day
of the Closing unless the Issuer and the Borrower have been notified in writing by the
Underwriter, on or prior to the day of the Closing, that the "end of the underwriting period" for
the Bonds for all purposes of Rule 15c2 -12 of the Securities and Exchange Commission
promulgated under the Securities Exchange Act of 1934 (the "Rule ") will not occur on the day of
the Closing, or (b) the date on which notice is given to the Issuer and the Borrower by the
Underwriter in accordance with the following sentence. In the event that the Underwriter has
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given notice to the Issuer and the Borrower pursuant to clause (a) above that the "end of the
underwriting period" for the Bonds will not occur on the day of the Closing, the Underwriter
agrees to notify the Issuer and the Borrower in writing as soon as practicable following the "end
of the underwriting period" for the Bonds for all purposes of the Rule.
8. Closin . At 8:00 a.m., Los Angeles time, on March _, 2000, or on such earlier
or later date as may be mutually agreed upon by the Issuer, the Borrower and the Underwriter,
the Issuer will, subject to the terms and conditions hereof, cause the Trustee to deliver (i) to The
Depository Trust Company ( "DTC ") in New York, New York, on behalf of the Underwriter, the
Series A Bonds in definitive form, and (ii) to or at the direction of the Underwriter the Series B
Bonds, in each case duly executed by the Trustee, together with the other documents hereinafter
mentioned; and the Underwriter will accept such delivery and will pay the purchase price of the
Bonds as set forth in paragraph 1 hereof by delivering Federal or other immediately available
funds in the amount of such purchase price to the Trustee. The Bonds shall be prepared in fully
registered form without coupons in authorized denominations and the Series A Bonds shall be
registered in the name of Cede & Co. and the Series B Bonds shall be registered in such names as
directed by the Underwriter to the Issuer four Business Days prior to the Closing Date.
9. Closing Conditions. The Underwriter has entered into this Purchase Contract in
reliance upon the representations and warranties of the Issuer and the Borrower contained herein,
and in reliance upon the representations and warranties to be contained in the documents and
instruments to be delivered at the Closing and upon the performance by the Issuer and the
Borrower of their respective obligations hereunder, both as of the date hereof and as of the date
of the Closing. Accordingly, the Underwriter's obligations under this Purchase Contract to
purchase, to accept delivery of and to pay for the Bonds shall be conditioned upon the
performance by the Issuer and the Borrower of their obligations to be performed hereunder and
under such documents and instruments at or prior to the Closing, and shall also be subject to the
following additional conditions:
(a) The representations and warranties of the Issuer and the Borrower
contained herein shall be true, complete and correct on the date hereof and on and as of
the date of the Closing, as if made on the date of the Closing;
(b) At the time of the Closing, the Indenture shall be in full force and effect in
accordance with its terms and shall not have been amended, modified or supplemented
and the Official Statements shall not have been supplemented or amended, except in any
such case as may have been agreed to by the Underwriter;
(c) At the time of the Closing, all necessary official action of the Issuer, the
Borrower and of the other parties thereto relating to the Borrower Documents shall have
been taken and shall be in full force and effect and shall not have been amended,
modified or supplemented in any material respect;
(d) Subsequent to the date hereof, there shalt not have occurred any change in
or affecting particularly the Issuer, the Borrower or the Bonds, as the foregoing matters
are described in the Official Statements, which in the reasonable opinion of the
Underwriter materially impairs the investment quality of the Bonds;
(e) At or prior to the Closing, the Underwriter shall have received copies of
each of the following documents:
(1) The Official Statements and each supplement or amendment, if
any, thereto, executed by an authorized officer of the Issuer;
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(2) A copy of the Indenture, executed by the Issuer and the Trustee;
(3) A copy of the Loan Agreement, executed by the Borrower, the
Trustee and the Issuer and a copy of the Deed of Trust, executed by the Borrower;
(4) A copy of the Regulatory Agreement, executed by the Borrower,
the Trustee and the Issuer, and a copy of the Administration Agreement, executed
by the Borrower, the City and the Oversight Agent;
(5) A copy of the Continuing Disclosure Agreement, executed by the
Borrower and the Trustee, substantially in the form described in the Official
Statements;
(6) Certificates of the Issuer and the Borrower, respectively, with
respect to the matters described in Sections 5 and 6 hereof, and in paragraphs (a),
(b), (c) and (d) of this Section 9;
(7) An opinion (the "Final Approving Legal Opinion "), dated the date
of the Closing and addressed to the Issuer, of Quint & Thimmig LLP, Bond
Counsel, substantially in the form set forth in Appendix D of each of the Official
Statements, accompanied by a reliance letter from Bond Counsel to the effect that
such opinion may be relied upon by the Underwriter with the same effect as if
such opinion were addressed to them;
(8) An opinion, dated the date of the Closing and addressed to the
Underwriter of Bond Counsel, in substantially the form attached hereto as
Exhibit B;
(9) An opinion of Goldfarb & Lipman, Counsel to the Borrower, dated
the date of the Closing and addressed to the Underwriter, in substantially the form
attached hereto as Exhibit C;
(10) An opinion, dated the date of the Closing and addressed to the
Issuer and the Underwriter, of Richards Watson & Gershon, A Professional
Corporation, Los Angeles, California, Disclosure Counsel to the Issuer, in
substantially the form attached hereto as Exhibit D;
(11) An opinion, dated the date of the Closing and addressed to the
Underwriter, of the City Attorney, in substantially the form attached hereto as
Exhibit E; ,
(12) A certificate of the Trustee, to the effect that:
(i) Due Organization and Existence - the Trustee is duly
organized and existing as a national banking association in good standing
under the laws of the United States having the full power and authority to
enter into and perform its duties under the Indenture, the Loan Agreement,
the Continuing Disclosure Agreement and the Regulatory Agreement and
to authenticate and deliver the Bonds to the Underwriter pursuant to the
terms of the Indenture;
(ii) Due Authorization; Valid and Binding Obligations - the
Trustee is duly authorized to enter into the Indenture, the Loan Agreement,
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the Continuing Disclosure Agreement and the Regulatory Agreement and
to authenticate and deliver the Bonds; and
(iii) No Conflict - to the best of the knowledge of the Trustee,
after due investigation, the execution and delivery by the Trustee of the
Indenture, the Loan Agreement, the Continuing Disclosure Agreement and
the Regulatory Agreement and compliance with the terms thereof, and the
authentication and delivery of the Bonds, will not, in any material respect,
conflict with, or result in a violation or breach of, or constitute a default
under, any loan agreement, indenture, bond, note, resolution or any other
agreement or instrument to which the Trustee is a party or by which it is
bound, or any law or any rule, regulation, order or decree of any court or
governmental agency or body having jurisdiction over the Trustee or any
of its activities or properties, or (except with respect to the lien of the
Indenture) result in the creation or imposition of any lien, charge or other
security interest or encumbrance of any nature whatsoever upon any of the
property or assets of the Trustee;
(13) An opinion of counsel to the Trustee, to the effect that:
(i) Due Organization and Existence - the Trustee has been duly
organized and is validly existing and in good standing as a national
banking association under the laws of the United States of America with
full corporate power to undertake the trusts of the Indenture, and to
perform the obligations of the Trustee under the Loan Agreement, the
Continuing Disclosure Agreement and the Regulatory Agreement;
(ii) Corporate Action - the Trustee has duly authorized,
executed and delivered the Indenture, the Loan Agreement, the Continuing
Disclosure Agreement and the Regulatory Agreement, and by all proper
corporate action has authorized the acceptance of the duties and
obligations of the Trustee under the Indenture, the Loan Agreement, the
Continuing Disclosure Agreement and the Regulatory Agreement and to
authorize in such capacity the authentication and delivery of the Bonds;
(iii) Due Authorization, Execution and Delivery - assuming due
authorization, execution and delivery by the Issuer and the Borrower, as
applicable, the Indenture, the Loan Agreement, the Continuing Disclosure
Agreement and the Regulatory Agreement are the valid, legal and binding
agreements of the Trustee, enforceable in accordance with their respective
terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement
of creditors' rights in general and by general equity principles (regardless
of whether such enforcement is considered in a proceeding in equity or at
law);
(iv) Consents - exclusive of federal or state securities laws and
regulations, to the best of such counsel's knowledge after reasonable
inquiry and investigation, other than routine filings required to be made
with governmental agencies in order to preserve the Trustee's authority to
perform a trust business (all of which routine filings such counsel believes,
after reasonable inquiry and investigation, to have been made), no consent,
approval, authorization or other action by any governmental or regulatory
authority having jurisdiction over the Trustee is or will be required for the
12
execution and delivery by the Trustee of the Indenture or the execution
and delivery of the Bonds; and
(v) No Litigation - to the best of such counsel's knowledge,
there is no litigation pending or threatened against or affecting the Trustee
to restrain or enjoin the Trustee's participation in, or in any way contesting
the powers of the Trustee with respect to the transactions contemplated by
the Bonds, the Regulatory Agreement, the Loan Agreement, the
Continuing Disclosure Agreement and the Indenture;
(14) Two (2) certified copies of the general resolution of the Trustee
authorizing the execution and delivery of certain documents by certain officers of
the Trustee, which resolution authorizes the execution and delivery of the
Indenture, the Loan Agreement, the Continuing Disclosure Agreement and the
Regulatory Agreement, and the authentication and delivery of the Bonds;
(15) Transcripts of all proceedings relating to the authorization and
issuance of the Bonds certified by the City Clerk of the Issuer;
(16) An executed Tax Certificate of the Issuer with respect to the Bonds
in form and substance acceptable to Bond Counsel;
(17) The written consent of John P. Neat, MAI (the "Appraiser ") to use
the appraisal of the Project, dated September 2, 1999, and excerpts therefrom in
the Preliminary Official Statements and the Official Statements, along with a
certificate of the Appraiser to the effect that the information with respect to the
Appraisal in the Preliminary Official Statements and the Official Statements is
accurate;
(18) The written consent of certified
Public Accountants, to use their opinions and the Borrower's consolidated
financial statements in the Preliminary Official Statements and the Official
Statements;
(19) The written consent of Haynie & Company to use their Historical
and Forecasted Statements of Cash Receipts and Disbursements and Accountants'
Compilation Report in the Preliminary Official Statements and the Official
Statements;
(20), Evidence that all insurance for the Project required under the
Borrower Documents is in full force and effect; and
(21) Such additional legal opinions, certificates, instruments and other
documents as the Underwriter may reasonably request to evidence the truth and
accuracy, as of the date hereof and as of the date of the Closing, of the Issuer's and
the Borrower's representations and warranties contained herein and of the
statements and information contained in the Official Statements and the due
performance or satisfaction by the Issuer and the Borrower on or prior to the date
of the Closing of all the agreements then to be performed and conditions then to
be satisfied by it.
All the opinions, letters, certificates, instruments and other documents mentioned above
or elsewhere in this Purchase Contract shall be deemed to be in compliance with the provisions
hereof if, but only if, they are in form and substance satisfactory to Bond Counsel, Disclosure
13
Counsel and the Underwriter. The opinions and agreements set forth as exhibits hereto and as
appendices to the Official Statements shall be deemed satisfactory provided they are substantially
in the form of such attached exhibits or appendices.
If the Issuer or the Borrower shall be unable to satisfy the conditions to the obligations of
the Underwriter to purchase, to accept delivery of and to pay for the Bonds contained in this
Purchase Contract, or if the obligations of the Underwriter to purchase, to accept delivery of and
to pay for the Bonds shall be terminated for any reason permitted by this Purchase Contract, this
Purchase Contract shall terminate and none of the Underwriter, the Issuer or the Borrower shall
be under any further obligation hereunder.
10. Termination. The Underwriter shall have the right to terminate the Underwriter's
obligations under this Purchase Contract to purchase, to accept delivery of and to pay for the
Bonds by notifying the Issuer and the Borrower, in writing or by telegram, of its election to do
so, if, after the execution hereof and prior to the Closing: (a) the United States has become
engaged in hostilities which have resulted in a declaration of war or a national emergency; (b)
there shall have occurred the declaration of a general banking moratorium by any authority of the
United States or the States of New York or California; (c) an event shall have occurred or been
discovered as described in paragraph (n) of Section 5 and paragraph (s) of Section 6 hereof which
in the opinion of the Underwriter requires the preparation and publication of disclosure material
or a supplement or amendment to the Official Statements; (d) any legislation, ordinance, rule or
regulation shall be introduced in, or be enacted by any governmental body, department or agency
in the State of California, or a decision by any court of competent jurisdiction within the State of
California shall be rendered which, in the Underwriter's reasonable opinion, materially adversely
affects the market price of the Bonds; (e) legislation shall be introduced, by amendment or
otherwise, or be enacted by the House of Representatives or the Senate of the Congress of the
United States, or a decision by a court of the United States shall be rendered, or a stop order,
ruling, regulation or official statement by or on behalf of the Securities and Exchange
Commission or other governmental agency having jurisdiction of the subject matter shall be
made or proposed, to the effect that the issuance, offering or sale of obligations of the general
character of the Bonds, or the Bonds, as contemplated hereby or by the Official Statements, is or
would be in violation of any provision of the Securities Act of 1933, as amended and as then in
effect, or the Securities Exchange Act of 1934, as amended and as then in effect, or the Trust
Indenture Act of 1939, as amended and as then in effect, or with the purpose or effect of
otherwise prohibiting the issuance, offering or sale of obligations of the general character of the
Bonds or the Bonds, as contemplated hereby or by the Official Statements; (f) additional material
restrictions not in force as of the date hereof shall have been imposed upon trading in securities
generally by any governmental authority or by any national securities exchange; (g) the New
York Stock Exchange, or other national securities exchange or association or any governmental
authority, shall impose as to the Bonds, or obligations of the general character of the Bonds, any
material restrictions not now in force, or increase materially those now in force, with respect to
the extension of credit by or the charge to the net capital requirements of broker - dealers; (h)
trading in securities on the New York Stock Exchange or the American Stock Exchange shall
have been suspended or limited or minimum prices have been established on either such
exchange; or (i) any action shall have been taken by any government in respect of its monetary
affairs which, in the reasonable opinion of the Underwriter, has a material adverse effect on the
United States securities market.
If this Purchase Contract shall be terminated pursuant to Section 9 or this Section 10, or if
the purchase provided for herein is not consummated because any condition to the Underwriter's
obligation hereunder -is not satisfied or because of any refusal, inability or failure on the part of
the Issuer or the Borrower to comply with any of the terms or to fulfill any of the conditions of
this Purchase Contract, or if for any reason the Issuer or the Borrower shall be unable to perform
all of their respective obligations under this Purchase Contract, then neither the Issuer nor the
14
Borrower shall be liable to the Underwriter for damages on account of loss of anticipated profits
arising out of the transactions covered by this Purchase Contract.
11. Liquidated Damages. In the event that the Underwriter either fails to accept and
pay for the Bonds upon tender thereof by the Issuer at the Closing as herein provided or to satisfy
the conditions set forth and required under this Purchase Contract (other than for a reason
permitted hereunder), the Underwriter shall pay to the Issuer, for the benefit of the Issuer and the
Borrower, one half of one percent of the principal amount of the Bonds as and for full liquidated
damages for such failure and for any and all defaults hereunder on the part of the Underwriter.
The Underwriter, the Issuer and the Borrower understand that in such event the Issuer's and the
Borrower's actual damages may be greater or may be less than such sum, that the amount of such
damages would be impracticable to ascertain, and that the amount set forth above represents a
reasonable estimate, made in good faith, of such damages in accordance with California Civil
Code Section 1671. Accordingly, the Underwriter hereby waives any right to claim that the
Issuer's or the Borrower's actual damages are less than such sum, and the Issuer's and the
Borrower's acceptance of this offer shall constitute a waiver of any right the Borrower and the
Issuer may have to additional damages from the Underwriter.
12. Payment of Costs and Expenses. (a) From the proceeds of the Bonds, there shall
be paid all costs and expenses incident to the sale and delivery of the Bonds to the Underwriter,
including, but not limited to: (i) the fees and expenses of the Issuer, the City Attorney, the
Financial Advisor and Disclosure Counsel; (ii) the fees and expenses of the Borrower and its
Counsel; (iii) the fees and expenses of Bond Counsel; (iv) all costs and expenses incurred in
connection with the preparation and printing of the Bonds; (v) all expenses in connection with
the preparation, printing, distribution and delivery of the Preliminary Official Statements, the
Official Statements and any amendment or supplement thereto; and (vi) the fees and expenses of
the Trustee and its counsel.
(b) The Underwriter shall pay all advertising expenses in connection with the public
offering of the Bonds and all other expenses incurred by them in connection with their public
offering and distribution of the Bonds.
13. Representations, Warranties and Agreements to Survive Delivery. The
representations, warranties, indemnities, agreements and other statements of the Issuer, the
Borrower and the Underwriter or their officers set forth in, or made pursuant to, this Purchase
Contract will remain operative and in full force and effect regardless of any investigation made
by or on behalf of the Issuer, the Borrower or the Underwriter or any controlling person and will
survive delivery of and payment for the Bonds.
14. Notices. Any notice or other communication to be given under this Purchase
Contract maybe glen by delivering the same in writing:
To the Issuer: City of Moorpark
799 Moorpark Avenue
Moorpark, California 93021
Attention: John Nowak, Assistant City Manager
To the Borrower: Augusta Homes
925 Westridge Court
Upland, California 91786
Attention: Ms. Suzanne Taylor, Executive Director
15
To the Underwriter: Miller & Schroeder Financial, Inc.
505 Lomas Santa Fe Drive, Suite 100
Solana Beach, California 92075 -0946
Attention: Robin M. Thomas
and Kinsell, Newcomb & De Dios, Inc.
462 Stevens Avenue, Suite 308
Solana Beach, California 92075
Attention: Pamela Newcomb
15. Parties in Interest. This Purchase Contract is made solely for the benefit of the
Issuer, the Borrower and the Underwriter (including the successors or assigns of the Underwriter)
and no other person shall acquire or have any right hereunder or by virtue hereof. All of the
Issuer's and the Borrower's representations, warranties and agreements contained in this Purchase
Contract shall remain operative and in full force and effect, regardless of. (i) any investigations
made by or on behalf of the Underwriter; (ii) delivery of and payment for the Bonds pursuant to
this Purchase Contract; and (iii) any termination of this Purchase Contract.
16. Effectiveness. This Purchase Contract shall become effective upon the execution
of the acceptance hereof by the Issuer and the Borrower and shall be valid and enforceable from
and after the time of such acceptance.
17. Headings. The headings of the sections of this Purchase Contract are inserted for
convenience only and shall not be deemed to be a part hereof.
18. Governing Law. This Purchase Contract shall be construed in accordance with the
laws of the State of California, applicable to contracts made and performed in such State.
19. Counterparts. This Purchase Contract may be executed in any number of
counterparts, all of which shall constitute one and the same instrument, and each of which shall
be deemed to be an original.
Vol
If the foregoing is in accordance with your understanding of the Purchase Contract please
sign and return to us the enclosed duplicate copies hereof, whereupon it will become a binding
agreement among the Issuer, the Borrower and the Underwriter in accordance with its terms.
Accepted:
This _th day of March, 2000
CITY OF MOORPARK,
Issuer
By:
Its:
AUGUSTA HOMES,
Borrower
By:
Executive Director
17
Very truly yours,
MILLER & SCHROEDER FINANCIAL,
INC.
By:
Title: Senior Vice President
KINSELL, NEWCOMB & DE DIOS, INC.
By:
Title:
EXHIBIT A
City of Moorpark
Mobile Home Park Revenue Bonds
(Villa Del Arroyo)
Series 2000A
Maturity Date Principal
arch 15 Amount
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2025
2035
Cou on
City of Moorpark
Mobile Home Park Subordinate Revenue Bonds
(Villa Del Arroyo)
Series 2000B
Maturity Date Principal
arch 15 Amount
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2030
A -1
Coupon
Price
Price
EXHIBIT B
Form of Opinion of
Quint & Thimmig LLP,
Bond Counsel,
Addressed to the Underwriter
City of Moorpark
Mobile Home Park Revenue Bonds
(Villa Del Arroyo)
Series 2000A
and
City of Moorpark
Mobile Home Park Subordinate Revenue Bonds
(Villa Del Arroyo)
Series 2000B
March 52000
Miller & Schroeder Financial, Inc.
505 Lomas Santa Fe Drive, Suite 100
Solana Beach, California 92075 -0946
Kinsell, Newcomb & De Dios, Inc.
462 Stevens Avenue, Suite 308
Solana Beach, California 92075
Ladies and Gentlemen:
We have this day released to the City of Moorpark (the "City" or the "Issuer ") our final
approving legal opinion with respect to the captioned bonds (the 'Bonds "). You are authorized
to rely on such opinion as if the same were addressed to you.
In connection with rendering the above - described opinion, we examined the record of
proceedings submitted to us relative to the issuance of the Bonds and such other documents as
are in our opinion necessary to enable us to express an informed opinion with respect to the
following matters. Capitalized terms not otherwise defined herein shall have the meaning
ascribed to them in the Official Statements of the Issuer, each dated March 2000, one
relating to the Series 2000A and one relating to the Series 2000B Bonds.
Based upon the foregoing, in our opinion:
1. The Issuer has the right and power to perform all of its obligations under the Purchase
Contract dated as of March 2000 among the City, Augusta Homes (the 'Borrower ") and
Miller & Schroeder Financial, Inc., and Kinsell, Newcomb & De Dios, Inc. (together, the
"Underwriter ") (the "Purchase Contract "). The City has duly authorized the Purchase Contract,
and assuming due authorization, execution and delivery by the other parties thereto, as necessary,
the Purchase Contract constitutes a legal, valid and binding agreement of the City enforceable
against the City in accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, moratorium, insolvency, equitable remedies and other laws affecting creditors'
rights or remedies.
2. The Bonds are not required to be registered under the Securities Act of 1933, as
amended and the Indenture is exempt from qualification under the Trust Indenture Act of 1939,
as amended.
3. The statements contained in the Official Statements relating to the Basic Documents
(including the cover pages and the Appendices thereto, but excluding any statements relating to
financial or statistical information), insofar as such statements purport to summarize the
provisions of the Bonds, the Indenture, the Loan Agreement, the Regulatory Agreement, the
Deed of Trust, the Bond Law and federal tax law, are fair and accurate summaries of such
documents.
Respectfully submitted,
EXHIBIT C
Form of Opinion of Goldfarb & Lipman
Counsel for the Borrower,
Addressed to the Underwriter and the Issuer
City of Moorpark
Mobile Home Park Revenue Bonds
(Villa Del Arroyo)
Series 2000A
and
City of Moorpark
Mobile Home Park Subordinate Revenue Bonds
(Villa Del Arroyo)
Series 2000B
March , 2000
City of Moorpark
799 Moorpark Avenue
Moorpark, California 93021
Miller & Schroeder Financial, Inc.
505 Lomas Santa Fe Drive, Suite 100
Solana Beach, California 92075 -0946
Kinsell, Newcomb & De Dios, Inc.
462 Stevens Avenue, Suite 308
Solana Beach, California 92075
Ladies and Gentlemen:
We are counsel to Augusta Homes (the 'Borrower ") in connection with the issuance of
the above - captioned Bonds and in such capacity we have examined the original, certified copies,
or copies otherwise identified to our satisfaction as being true copies of such resolutions,
documents, certificates, and records as we have deemed relevant and necessary (except as we
have specifically limited, the scope of our investigation herein), including the Borrower
Documents and the Official Statements (as such terms are defined in the Purchase Contract dated
March 2000 among yourselves, the Borrower and City of Moorpark), as the basis for the
opinions set forth herein relying on such examination and pertinent law and subject to the
limitations and qualifications hereinafter set forth, we are of the opinion that:
1. The Borrower is a non - profit public benefit corporation duly incorporated, validly
organized and existing, in good standing under the laws of, and qualified to transact business in,
the State of California.
2. The Borrower has all requisite corporate power and corporate authority to enter
into the Borrower Documents and to consummate the transactions contemplated thereby and
otherwise to carry on its activities and own its properties.
C -1
3. The Resolutions of the Board of Directors of the Borrower approving and
authorizing the execution and delivery of the Borrower Documents were duly adopted at a
meeting of the Board of Directors of the Borrower with all notice required by law and at which a
quorum was present and acting throughout.
4. The Borrower Documents have been duly and validly authorized, executed and
delivered by the Borrower and, assuming due authorization, execution and delivery thereof by
the other respective parties thereto, will constitute the legal, valid and binding agreements of the
Borrower, enforceable in accordance with their respective terms, except as enforceability may be
limited by bankruptcy, reorganization, insolvency and other similar laws affecting enforcement
of creditors' rights generally and by the application of equitable principles if equitable remedies
are sought and except as the indemnification provisions may be limited by applicable securities
laws or by public policy.
5. To the best of our knowledge after due inquiry, no consent or approval of any
trustee or holder of any indebtedness of the Borrower, and no consent, permission, authorization,
order or license of or filing or registration with, any governmental authority, is necessary in
connection with the execution and delivery by the Borrower of the Borrower Documents, the
approval by the Borrower of the Official Statement or the consummation of any transaction by
the Borrower therein contemplated except as have been obtained or made and as are in full force
and effect and except such as may be required to acquire the Project which are expected to be
obtained in the ordinary course.
6. The execution and delivery of the Borrower Documents by the Borrower, and the
performance by the Borrower of its obligations thereunder, do not and will not (a) violate any
provisions of the Articles of Incorporation or Bylaws of the Borrower, (b) violate any law, rule or
regulation having applicability to the Borrower or any order, writ, judgment, injunction, decree,
determination or award to which the Borrower is a party and of which we are aware after
reasonable inquiry, or (c) result in the breach of, or constitute a default under, any indenture or
loan agreement or any other material agreement, lease or instrument to which the Borrower is a
party and of which we are aware after reasonable inquiry.
7. We have no knowledge, after due investigation, of any pending or threatened
actions, suits, proceedings, inquiries or investigations, before or by any court, regulatory agency,
public board or body affecting the Borrower or its assets or operations which, if determined
adversely to the Borrower or its interests, would materially adversely affect the consummation of
the transactions contemplated by, or the validity of, the Borrower Documents or the financial
condition, assets or operations of the Borrower. We have no knowledge after due inquiry that the
Borrower is in default with respect to any order or decree of any court or any order, regulation or
demand of any federal, state, municipal or governmental agency, which default might have
consequences that would materially and adversely affect the consummation of the transactions
contemplated by the Borrower Documents, or the financial condition, assets, or operations of the
Borrower.
8. The execution and delivery of the Borrower Documents by the Borrower and
performance by the Borrower of its obligations thereunder will not conflict with or result in
breach of any of the terms, conditions or provisions of any agreement or instrument to which the
Borrower is a party, or constitute a default thereunder.
9. All tax returns (federal, state and local) required to be filed by or on behalf of the
Borrower have been filed, and all taxes shown thereon to be due, including interest and penalties,
except such, if any, as are being actively contested by the Borrower in good faith, have been paid
and adequate reserves have been made for the payment thereof. To the best of our knowledge,
there are no pending tax contests by the Borrower.
C -2
10. To the best of our knowledge after due inquiry and investigation, the Borrower
has complied with all statutes, regulations and other laws of all governmental authorities,
including environmental regulations, applicable to the Borrower or the Project.
11. To the best of our knowledge after due inquiry and investigation, the Borrower is
in compliance with all laws, statutes, ordinances, regulations, covenants, conditions and
restrictions affecting it or its operations and has not committed, suffered or permitted any act to
be done in violation of any law, ordinance or regulation except where such noncompliance or act
would not have a material adverse effect on the business, property or financial condition of the
Borrower.
12. Nothing has come to our attention that would indicate that the description of the
Borrower or the Project contained in the Official Statements contains an untrue statement of a
material fact or omits to state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
13. There are no legal or governmental proceedings pending or, to the best of our
knowledge, threatened against the Borrower that are required to be disclosed in the Official
Statements.
14. It is our opinion based upon due inquiry and investigation that no information
furnished by the Borrower in connection with the Borrower Documents includes any untrue
statement of a material fact or omits to state a material fact necessary in order to make the
statements made in such information, in the light of the circumstances in which they were made,
not misleading in any material respect.
15. The Borrower is an organization described in § 501(c)(3) of the Internal Revenue
Code of 1986, as amended (the "Code "), as set forth in a determination letter issued by the
Internal Revenue Service; and the Borrower is in compliance with the terms, conditions and
limitations contained in said Section and in said determination letter, and is exempt from federal
income taxes under §501(a) of said Code. To the best of our knowledge, there is no pending or
threatened change in such status. No information has come to our attention that would indicate
that the Borrower is no longer eligible for said exemption, that the Borrower is not in compliance
with the terms, conditions and limitations in said determination and/or that the facts and
circumstances that form the basis of such determination as represented to the Internal Revenue
Service do not continue to exist in any material respects.
16. The Borrower is an organization described in § 23701(d) of the California
Revenue and Taxation Code, is in compliance with the terms, conditions and limitations
contained in the ruling of the California Franchise Tax Board as to the exempt status of the
Borrower under said Section and is exempt from all California Income and Franchise Taxes to
the extent provided in §23701 of said Code.
17. The Borrower is a corporation organized and operated exclusively for charitable
purposes (within the meaning of §501(c)(3) of the Code), and not for pecuniary profit. The
Project is in furtherance of the exempt purpose of the Borrower and the ownership and operation
by the Borrower of the Project, in the manner contemplated by the Borrower Documents, will not
result in any unrelated trade or business income for the Borrower.
Very truly yours,
C -3
EXHIBIT D
Opinion of Richards Watson & Gershon, Disclosure Counsel,
Addressed to the Issuer and the Underwriter
City of Moorpark
Mobile Home Park Revenue Bonds
(Villa Del Arroyo)
Series 2000A
and
City of Moorpark
Mobile Home Park Subordinate Revenue Bonds
(Villa Del Arroyo)
Series 2000B
March ^, 2000
City of Moorpark
799 Moorpark Avenue
Moorpark, California 93021
Miller & Schroeder Financial, Inc.
505 Lomas Santa Fe Drive, Suite 100
Solana Beach, California 92075 -0946
Kinsell, Newcomb & De Dios, Inc.
462 Stevens Avenue, Suite 308
Solana Beach, California 92075
Ladies and Gentlemen:
We have acted as Disclosure Counsel to the City of Moorpark, California (the "Issuer ") in
connection with the issuance of the above - captioned bonds (the 'Bonds ") pursuant to the
Purchase Contract dated March _, 2000 (the "Purchase Contract "), by and among the Issuer,
Miller & Schroeder Financial, Inc., and Kinsell, Newcomb & De Dios, Inc. (together, the
"Underwriter ") and Augusta Homes (the 'Borrower ") pursuant to which the Underwriter has
agreed to purchase the Bonds. The Bonds are being issued pursuant to the provisions of the
Constitution and the laws of the State of California including the provisions of Chapter 8 of Part
5 of Division 31 of the Health and Safety Code of the State of California (the 'Bond Law "). The
Bonds shall be issued and secured pursuant to an Indenture of Trust dated as of March 1, 2000
(the "Indenture ") between the Issuer and U.S. Bank Trust National Association (the "Trustee ").
The Bonds are more fully described in the final Official Statements of the Issuer dated
March _, 2000 (collectively, the "Official Statements ").
In rendering this opinion, we have reviewed such records, documents, certificates and
opinions, and made such other investigations of law and fact as we have deemed necessary or
appropriate.
D -1
We understand that with respect to the matters covered by the approving opinion of Quint
& Thimmig LLP, Bond Counsel to the Issuer ('Bond Counsel "), dated the date hereof, the
Underwriter has received a letter from Bond Counsel allowing you to rely on such opinion.
This opinion is limited to matters governed by the federal securities law of the United
States, and we assume no responsibility with respect to the applicability or effect of the laws of
any other jurisdiction.
In our capacity as Disclosure Counsel to the Issuer, we have rendered certain legal advice
and assistance to the Issuer in connection with the preparation of the Official Statements.
Rendering such legal advice and assistance involved, among other things, discussions and
inquiries concerning various legal matters, review of certain records, documents and
proceedings, and participation in conferences with, among others, representatives of the
Underwriter and representatives of the Issuer, Bond Counsel and the Borrower, at which
conferences the contents of the Official Statements and related matters were discussed. On the
basis of the information made available to us in the course of the foregoing (but without having
undertaken to determine or verify independently, or assuming any responsibility for, the
accuracy, completeness or fairness of any of the statements contained in the Official Statements),
no facts have come to the attention of the personnel in our firm directly involved in rendering
legal advice and assistance in connection with the preparation of the Official Statements which
cause us to believe that the Official Statements as of their date (excluding therefrom financial,
engineering and statistical data; forecasts, projections, estimates, assumptions and expressions of
opinions; statements relating to the treatment of the Bonds or the interest, discount or premium
related thereto for tax purposes under the law of any jurisdiction; and the statements contained in
the Official Statements under the caption "TAX MATTERS;" as to all of which we express no
view) contained any untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading.
During the period from the date of the Official Statements to the date of this opinion,
except for our review of the certificates and opinions regarding the Official Statements delivered
on the date hereof, we have not undertaken any procedures or taken any actions which were
intended or likely to elicit information concerning the accuracy, completeness or fairness of any
of the statements contained in the Official Statements.
We are furnishing this opinion to you, as Disclosure Counsel to the Issuer, pursuant to the
Purchase Contract, solely for your benefit as Underwriter and Issuer, as applicable, of the Bonds.
This opinion is rendered in connection with the transaction described herein, and may not be
relied upon by you or any other person or entity for any other purpose. This opinion shall not
extend to, and may not be used, circulated, quoted, referred to, or relied upon by, any other
person, firm, corporation or other entity without our prior written consent. Our engagement with
respect to this matter terminates upon the delivery of this opinion to you at the time of the
closing relating to the Bonds, and we have no obligation to update this opinion.
Very truly yours,
D -2
EXHIBIT E
Opinion of the City Attorney,
Addressed to the Issuer and the Underwriter
City of Moorpark
Mobile Home Park Revenue Bonds
(Villa Del Arroyo)
Series 2000A
and
City of Moorpark
Mobile Home Park Subordinate Revenue Bonds
(Villa Del Arroyo)
Series 2000B
March _, 2000
City of Moorpark
799 Moorpark Avenue
Moorpark, California 93021
Miller & Schroeder Financial, Inc.
505 Lomas Santa Fe Drive, Suite 100
Solana Beach, California 92075 -0946
Kinsell, Newcomb & De Dios, Inc.
462 Stevens Avenue, Suite 308
Solana Beach, California 92075
Ladies and Gentlemen:
In my capacity as City Attorney of the City of Moorpark (the "City "), in connection with
the issuance of the above - captioned Bonds by the City, I have examined the original, certified
copies, or copies otherwise identified to my satisfaction as being true copies of such documents,
certificates, and records as I have deemed relevant and necessary (except as I have specifically
limited the scope of our investigation herein) as the basis for the opinions set forth herein.
Capitalized terms not otherwise defined herein shall have the meanings given to such terms in
the Purchase Contract, dated March _, 2000 by and among you, Augusta Homes (the
"Borrower ") and the City. Relying on such examination and pertinent law and subject to the
limitations and qualifications hereinafter set forth I am of the opinion that:
1. The City is duly organized and validly existing under the laws of the State of
California;
2. The City has full legal right, power and authority (i) to conduct its business as
described in the Official Statement and (ii) to enter into and to carry out and consummate the
transactions contemplated by the Indenture, the Loan Agreement, the Regulatory Agreement, the
Purchase Contract and the Official Statement (the Indenture, the Loan Agreement, the
Regulatory Agreement, and the Purchase Contract being herein collectively referred to as the
'Basic Documents ").
E -1
3. By all necessary official action, the City has duly approved the execution and
delivery of, and the performance by the City of the obligations on its part contained in the Basic
Documents and the consummation by it of all other transactions on its part contemplated by the
Basic Documents.
4. The Basic Documents have been duly adopted, executed and delivered by the
City. The Basic Documents constitute legal, valid and binding obligations of the City
enforceable against the City in accordance with their respective terms, except to the extent that
the enforcement may hereafter be limited by bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally.
5. To the best of my knowledge, as of the Closing Date, the City is not in any
material respect in breach of or default under any applicable constitutional provision, law or
administrative regulation of any state or of the United States, or any agency or instrumentality of
either, or any applicable judgment or decree, or any loan agreement, indenture, bond, note,
resolution, agreement (including, without limitation, the Basic Documents) or other instrument to
which the City is a party or to which the City or any of its property or assets is otherwise subject,
and no event has occurred and is continuing which with the passage of time or the giving of
notice, or both, would constitute such a default or event of default under any such instrument;
and the execution and delivery of the Bonds and the Basic Documents, and the performance by
the City thereof and compliance with the provisions on the City's part contained therein, will not
conflict in any material way with or constitute a material breach of or material default under any
constitutional provision, law, administrative regulation, judgment, decree, loan agreement,
indenture, bond, note, resolution, agreement or other instrument to which the City is a party or to
which the City or any of its property or assets is otherwise subject, nor will any such execution,
delivery, adoption or compliance result in the creation or imposition of any lien, charge or other
security interest or encumbrance of any nature whatsoever upon any of the property or assets of
the City or under the terms of any such law, regulation or instrument, except as provided by the
Bonds or the Basic Documents;
6. To the best of my knowledge, as of the Closing Date, except as specified in the
Purchase Contract, all authorizations, approvals, licenses, permits, consents and orders of any
governmental authority, legislative body, board, agency or commission having jurisdiction of the
matter which are required for the due authorization by, or which would constitute a condition
precedent to, or the absence of which would materially adversely affect the due performance by,
the City of its obligations under the Basic Documents have been duly obtained.
7. To the best of my knowledge, as of the Closing Date, there is no action, suit,
proceeding, inquiry or investigation, notice of which has been served on the City, at law or in
equity before or by any court, government agency, public board or body, pending or threatened
against the City, affecting the existence of the City or the titles of its officers to their respective
offices (except as previously advised in writing to the Underwriter), or contesting or affecting as
to the City the validity or enforceability of the Bonds, any Basic Document or the execution and
delivery or performance by the City of the Bonds or any Basic Document or in any way
contesting or challenging the consummation of the transactions contemplated thereby.
This letter is furnished by me as City Attorney for the City. No attorney- client
relationship has existed or exists between me and you in connection with the Bonds or by virtue
of this letter. My engagement with respect to the Bonds has terminated as of the date hereof, and
I disclaim any obligation to update this letter.
Very truly yours,
E -2
Preliminary Official Statement Dated March_, 2000
NEW ISSUE (BOOK -ENTRY ONLY) NOT RATED
In the opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel, under existing law, and assuming, among other
things, compliance with certain covenants, interest on the Series B Bonds is excluded from gross income for federal income tax purposes
and is exempt from State of California personal income taxes. In the opinion of Bond Counsel, interest on the Series B Bonds is not a
specific preference item for purpor es of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes
that it is included in adjusted curre,it earnings. See "TAX MATTERS" herein.
CITY OF MOORPARK
MOBILE HOME PARK SUBORDINATE REVENUE BONDS
(VILLA DEL ARROYO)
SERIES 2000B
Dated: Date of Delivery Due: March 15, as shown below
The Series B Bonds will be delivered in fully registered form only and, when issued, will be registered in the name of Cede & Co. as
nominee of The Depository Trust Company, New York, New York ( "DTC "). DTC will act as securities depository of the Series B Bonds.
Ownership interests in the Series B Bonds may be purchased, in denominations of $5,000, or any integral multiple thereof, in book -entry
form only as described herein. Upon receipt of payments of principal of, premium, if any, and interest on the Series B Bonds, DTC will in
turn remit such principal, premium, if any, and interest to the participants in DTC (as described herein) for subsequent disbursement to the
beneficial owners of the Series B Bonds. Interest on the Series A Bonds is payable semiannually on March 15 and September 15 of each
year, commencing September 15, 2000.
The Series B Bonds are subject to optional, mandatory and special redemption prior to their respective maturity dates as described
herein.
The Series B Bonds are being issued concurrently with the issuance of the City's $ Mobile Home Park Revenue Bonds
(Villa Del Arroyo) Series 2000A (the "Series A Bonds" and, together with the Series B Bonds, the "Bonds "). The Bonds are being issued
pursuant to an Indenture of Trust, dated as of March 1, 2000 (the "Indenture "), between the City of Moorpark (the "City") and U.S. Bank
Trust National Association, as trustee (the "Trustee "). The proceeds of the Series A Bonds are to be used to fund a loan to Augusta
Homes, a California non - profit public benefit corporation (the "Borrower ") to (i) finance the acquisition by the Borrower of certain real
property constituting the Villa Del Arroyo Mobile Home Park (the "Project "), (ii) fund the Senior Bonds Debt Service Reserve Fund, and
(iii) make deposits to the Repair and Replacement Fund established under the Indenture. The proceeds of the Series B Bonds will be used
to make deposits to the Project Fund and the Series B Bonds Debt Service Reserve Fund.
The Series B Bonds are special limited obligations of the City, payable from Residual Revenues, Residual Net Proceeds and
Residual Prepayments (as such terms are hereinafter defined) and secured as to the payment of the interest on and the principal of the
Series B Bonds in accordance with their terms and the terms of the Indenture, on a basis fully subordinate to the Series A Bonds as
provided therefor in the Indenture. The Series B Bonds are not a debt of the City, or the State of California or any of its political
subdivisions, for purposes of any constitutional or statutory debt limitation or restriction, nor in any event shall the Series B Bonds be
payable out of funds or properties other than as described in the preceding sentence.
So long as any Series A Bonds remain outstanding, the owners of the Series B Bonds are prohibited from exercising remedies
under the Indenture in the event of a default in the payment of the Series B Bonds, and upon a foreclosure of the Deed of Trust which
secures the Bonds payment will only be made on the Series B Bonds following payment to full of the Series A Bonds. See "RISK
FACTORS" herein.
TIMELY PAYMENT OF DEBT SERVICE ON THE SERIES A BONDS IS SUBJECT TO CERTAIN RISKS, INCLUDING THE
RISK THAT THE PROJECT MAY NOT GENERATE NET OPERATING REVENUES SUFFICIENT TO PAY THE PRINCIPAL OF
AND INTEREST ON THE SERIES B BONDS. SEE THE SECTION HEREIN ENTITLED "RISK FACTORS" FOR A DISCUSSION
OF SPECIAL RISK FACTORS THAT SHOULD BE CONSIDERED M EVALUATING THE INVESTMENT QUALITY OF THE
SERIES B BONDS.
This cover page contains certain information for general reference only. It is not intended as a summary of this transaction. Investors
are advised to read the entire Official Statement to obtain information essential to making an informed investment decision with respect to
the Series B Bonds.
Maturity Schedule*
Maturity Date Principal Interest
Maturity Date Principal Interest
March 15 Amount Rate Price
March 15 Amount Rate Price
2001 ,;
2006
2002
2007
2003
2008
2004
2009
2005
2010
$ — % Term Bonds due March 15, 2030 Price %
The Series B Bonds are offered when, as and if executed and delivered, subject to the legal opinion of Quint & Thimmig LLP, San
Francisco, California, Bond Counsel, and certain other conditions. Certain legal matters will be passed upon for the City by the City
Attorney and by Richards Watson & Gershon, A Professional Corporation, Los Angeles, California, Disclosure Counsel, and for the
Borrower by Goldfarb & Lipman, San Francisco, California. It is anticipated that the Series B Bonds will be available for delivery
through the facilities of DTC in New York, New York on or about March _, 2000.
I
Miller& Schroeder Financial, Inc.
*Preliminary, subject to change.
KINSELL, NEWCOMB & DE DIOS, INC.
The date of this Official Statement is March _, 2000.
RE: ITEM 10.C.
CITY OF MOORPARK, CALIFORNIA
MAYOR AND CITY COUNCIL
Patrick Hunter, Mayor
John E. Wozniak, Mayor Pro Tern
Christopher Evans, Councilmember
Clint D. Harper, Councilmember
Deborah Rogers, Councilmember
NI9*& 1 ":1 - aFU
Steven Kueny, City Manager
Wayne Boyer, Accounting Manager
John Nowak, Assistant City Manager /City Treasurer
Deborah S. Traffenstedt, City Clerk
Cheryl Kane, City Attorney
SPECIAL SERVICES
Financial Advisor
Urban Futures Incorporated
Orange, California
Bond Counsel
Quint & Thimmig LLP
San Francisco, California
Trustee
U.S. Bank Trust National Association
Los Angeles, California
Underwriters
Miller & Schroeder Financial, Inc.
Solana Beach, California
Kinsell, Newcomb & De Dios, Inc.
Solana Beach, California
Disclosure Counsel
Richards Watson & Gershon
A Professional Corporation
Los Angeles, California
TABLE OF CONTENTS
INTRODUCTION...................................... ...............................
I
THE PLAN OF FINANCING :.' ................ ...............................
3
ESTIMATED SOURCES AND USES OF FUNDS ..................
3
DEBT SERVICE REQUIREMENTS ......... ...............................
4
THE SERIES B BONDS ............................ ...............................
5
General.................................................... ...............................
5
Redemption............................................. ...............................
6
Purchase of Series B Bonds .................... ...............................
8
Book -Entry System ................................. ...............................
8
SECURITY FOR THE SERIES B BONDS ............................
10
Residual Revenues ................................ ...............................
10
Pledge................................................... ...............................
I 1
The Loan Agreement and the Note ....... ...............................
11
Borrower Obligations Non- Recourse .... ...............................
12
ReserveFund ........................................ ...............................
12
THEINDENTURE ................................... ...............................
12
Application of Bond Proceeds .............. ...............................
12
ProjectFund .......................................... ...............................
13
Cost of Issuance Fund ........................... ...............................
13
Deposits................................................ ...............................
13
RevenueFund ....................................... ...............................
13
Series B Bonds Debt Service Fund ....... ...............................
14
Series B Bonds Redemption Fund ........ ...............................
16
Administration Fund ............................. ...............................
16
Repair and Replacement Fund .............. ...............................
17
Series B Bonds Debt Service Reserve Fund ........................
17
RebateFund .......................................... ...............................
17
SurplusFund ......................................... ...............................
17
Investment and Deposit of Funds .......... ...............................
18
Covenants of the City ........................... ...............................
19
Supplemental Indentures ....................... ...............................
24
Powers of Amendment .......................... ...............................
24
Series A Bonds Events of Default ......... ...............................
25
Series B Bonds Events of Default ......... ...............................
25
Remedies............................................... ...............................
26
Priority of Payments After Senior Bonds Event of
Default.............................................. ...............................
27
Priority of Payments After Series B Bonds Event of
66
Default.............................................. ...............................
28
Limitations of Rights of Bondowners ... ...............................
29
Remedies not Exclusive ........................ ...............................
29
Limited Liability of the City ................. ...............................
29
THE LOAN AGREEMENT ..................... ...............................
30
Amount and Source of Loan ................. ...............................
31
LoanRepayment ................................... ...............................
31
Nature of the Borrower's Obligations ... ...............................
32
Borrower Not to Dispose of Assets; Conditions Under
71
Which Exceptions Permitted ............. ...............................
33
Cooperation in Enforcement of Regulatory Agreement.......
34
Additional Instruments .......................... ...............................
34
Books and Records; Annual Reports .... ...............................
34
Notice of Certain Events ....................... ...............................
35
Consent to Assignment ......................... ...............................
35
Title to the Project ................................. ...............................
35
Operation of the Project ........................ ...............................
35
Continuing Disclosure .......................... ...............................
35
Minimum Rents; Coverage Requirement Certificate ...........
36
Public Liability and Workers' Compensation Insurance......
36
Casualty Insurance ................................ ...............................
37
Rental Interruption I nsurance ................ ...............................
37
Repair and Replacement ....................... ...............................
37
Events of Default ..................................... .............................38
Remedies............................................... ...............................
39
THE REGULATORY AGREEMENT ........ .............................41
Residential Rental Property; Qualified Residents .................41
Property Management and Maintenance ..............................
42
City Requirements ................................... .............................43
Qualified Residents ................................. .............................45
Sale or Transfer of the Project ................. .............................47
Term...................................................... ...............................
47
Enforcement.......................................... ...............................
47
THE BORROWER ...................................... .............................48
Operations............................................... .............................49
THEPROJECT ......................................... ...............................
50
Mobile Home Park Overview .................. .............................50
Vicinity Description .............................. ............................... 51
TheProject ............................................ ...............................
51
Environmental Site Assessment ............ ...............................
52
Physical Needs Assessment ................... ...............................
53
Historical Operating Results .................... .............................54
Competing Mobile Home Parks ............ ...............................
55
Management Agreement and Qualifications of Manager.....
56
Rents/Occupancy ................................... ...............................
58
Projected Operating Results .................... .............................58
Oversight Agent/Program Administrator .............................
59
THECITY ................................................... .............................59
RISKFACTORS ......................................... .............................59
Series B Bonds Are Limited Obligations of the City ........... 59
Limitations on Exercise of Remedies ...... .............................60
Loan Payments Non - Recourse .............. ...............................
60
Loan Payments Not Preference Proof ...... .............................61
Restrictions Under the Regulatory Agreement .....................
61
Risk of Taxability .................................. ...............................
61
Conditions Which May Affect Borrower's Ability to Pay....
61
Value of Project; Economic Feasibility ... .............................63
Competing Facilities ................................ .............................64
Risks of Ownership of Real Property ...... .............................64
Environmental Risks ............................. ...............................
65
Insufficient Insurance and Land Sale Proceeds ....................65
Enforceability and Bankruptcy ................ .............................66
Anti - Deficiency Laws of the State of California ..................
66
TAXMATTERS ....................................... ...............................
68
LEGALOPINIONS .................................. ...............................
69
OTHER PROFESSIONALS INVOLVED IN THE
OFFERING........................................... ...............................
70
CONTINUING DISCLOSURE ................. ...............................
70
LITIGATION ............................................ ...............................
70
NORATING ............................................. ...............................
71
UNDERWRITING .................................... ...............................
71
MISCELLANEOUS .................................. ...............................
71
APPENDIX A - SUPPLEMENTAL INFORMATION
REGARDING THE CITY OF MOORPARK ....................
A -I
APPENDIX B - DEFINITIONS ............ ...............................
B -I
APPENDIX C - HISTORICAL AND FORECASTED
PROJECT RECEIPTS AND DISBURSEMENTS .............
C -1
APPENDIX D - FORM OF OPINION OF
BOND COUNSEL .............................. ...............................
D- l
APPENDIX E - APPRAISAL ................ ...............................
E -1
APPENDIX F - FORM OF CONTINUING
DISCLOSURE AGREEMENT ........... ...............................
F -1
APPENDIX G - AUGUSTA HOMES
CONSOLIDATED FINANCIAL STATEMENTS ............
G-1
No broker, dealer, salesman or other person has been authorized by the City or the
Underwriters to give any information or to make any representations in connection with the offer
or sale of the Series $ Bonds other than as set forth herein and, if given or made, such
information or representation must not be relied upon as having been authorized by the City or
the Underwriters. This Official Statement does not constitute an offer to sell or the solicitation of
an offer to buy nor shall there be any sale of the Series B Bonds by a person in any jurisdiction in
which it is unlawful for such person to make such an offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers of the
Series B Bonds. Statements contained in this Official Statement which involve estimates,
forecasts or matters of opinion, whether or not expressly so described herein, are intended solely
as such and are not to be construed as a representation of facts.
The information set forth herein has been obtained from official and other sources and the
City, the Borrower and the Underwriter have a reasonable basis for believing that the information
set forth is accurate. The information and expressions of opinion stated herein are subject to
change without notice. Neither the delivery of this Official Statement nor the sale of any of the
Bonds implies that the information herein is correct as of any time subsequent to the date hereof.
The delivery of this Official Statement shall not, under any circumstances, create any implication
that there has been no change in the affairs of the City, the Borrower, or the major participants in
the Project. All summaries of the Bonds, the resolution authorizing their issuance, the Indenture
and the other documents discussed herein are made subject to the provisions of such documents
and do not purport to be complete statements of any or all of the provisions thereof. Reference is
hereby made to the Bonds, said resolution, the Indenture and such other documents on file with
the Secretary of the Borrower for further information.
The Underwriters have provided the following sentence for inclusion in this Official
Statement. The Underwriters have reviewed the information in this Official Statement in
accordance with, and as part of, their responsibilities to investors under the federal securities
laws as applied to the facts and circumstances of this transaction, but the Underwriters do not
guarantee the accuracy or completeness of such information.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY
OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICE OF THE SERIES A BONDS AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The Bonds have not been registered under the Securities Act of 1933, as amended, in
reliance upon an exemption contained in such act. The Bonds have not been registered or
qualified under the securities laws of any state. These securities have not been approved or
disapproved by the Securities and Exchange Commission or any State Securities
Commission nor has the Securities Exchange Commission or any State Securities
Commission passed upon the accuracy or adequacy of this Official Statement. Any
representation to the contrary is a criminal offense.
OFFICIAL STATEMENT
City of M ,orpar -T, California
Mobile Home Park Subordinate Revenue Bonds
(Villa Del Arroyo)
Series 2000B
INTRODUCTION
This Official Statement, including the cover page and Appendices hereto, provides
certain information concerning the sale and delivery of the City of Moorpark Mobile Home Park
Subordinate Revenue Bonds (Villa Del Arroyo), Series 2000B (the "Series A Bonds "), in the
initial aggregate principal amount of S
THE SERIES B BONDS ARE SUBJECT TO CERTAIN RISKS, INCLUDING THE
RISK THAT THE PROJECT MAY NOT GENERATE NET OPERATING REVENUES
SUFFICIENT TO PAY THE PRINCIPAL OF AND INTEREST ON THE SERIES A BONDS.
SEE THE SECTION HEREIN ENTITLED "RISK FACTORS" FOR A DISCUSSION OF
SPECIAL RISK FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING THE
INVESTMENT QUALITY OF THE SERIES B BONDS.
Concurrently with the issuance of the Series B Bonds, the City of Moorpark (the "City ")
will issue its $ Mobile Home Park Revenue Bonds (Villa Del Arroyo) Series 2000A
(the "Series A Bonds" and, together with the Series B Bonds, the "Bonds "). The Series A Bonds
are to be dated , 2000, and will be secured on a basis senior to the Series B Bonds,
as more fully described herein. The Series A Bonds are not being offered by means of this
Official Statement, which pertains only to the Series B Bonds.
The Bonds will be issued by the City pursuant to an Indenture of Trust, dated as of
March 1, 2000 (the "Indenture "), between the City and U.S. Bank Trust National Association, as
trustee (the "Trustee "). The proceeds of the sale of the Series A Bonds will be used to fund a
loan (the "Loan") to Augusta Homes, a California non -profit public benefit corporation (the
"Borrower ") pursuant to a Loan Agreement, dated as of March 1, 2000 (the "Loan Agreement ")
among the City, the Borrower and the Trustee. The Borrower will use the proceeds of the Loan
to (i) finance the acquisition by the Borrower of certain real property constituting the Villa Del
Arroyo Mobile Home Park (the "Project ") and any structures, site improvements, facilities, and
fixtures on the Project (inc luding an apartment adjacent to the clubhouse which will be acquired
by the Borrower for occupancy by a resident manager) (the "Improvements "), (ii) fund the Series
A Bonds Debt Reserve Fund, and (iii) make a deposit to the Repair and Replacement Fund. The
proceeds of the Series B Bonds will be used to make deposits to the Project Fund and the
Series B Bonds Debt Service Reserve Fund. See "THE PLAN OF FINANCING" and
"ESTIMATED SOURCES AND USES OF FUNDS."
The Borrower has no substantial assets other than its investment in the Project. See
"THE BORROWER — Operations" and APPENDIX G — Augusta Homes Consolidated Financial
Statements."
• Preliminary, subject to change.
The Series A Bonds are special limited obligations of the City, payable solely from and
secured as to the payment of the interest on and the principal of and the redemption premium, if
any, from Residual Revenues (as hereinafter defined) and other funds and property as provided
therefor in the Indenture. See "SECURITY FOR THE SERIES B BONDS" herein. "Residual
Revenues," in turn, consist primarily of the Net Operating Revenues of the Project, the principal
source of which is the monthly rental income for mobile home spaces (the "Spaces ") within the
Project remaining after payment of debt service on the Series A Bonds and certain other required
deposits under the Indenture. See "SECURITY FOR THE SERIES B BONDS" and "THE
PROJECT" herein.
The Series B Bonds are not a debt of the City, the State of California or any of its
political subdivisions for purposes of any constitutional or statutory debt limitation or restriction,
nor in any event shall the Series B Bonds be payable out of funds or properties other than as
pledged pursuant to the Indenture.
Pursuant to the Loan Agreement the City will agree to loan the proceeds of the Bonds to
the Borrower by causing such proceeds to be deposited with the Trustee and applied in
accordance with the Indenture. Under the Loan Agreement the Borrower is obligated to make
payments to the Trustee at such times and in such amounts as are required to enable the Trustee
to pay the principal and premium, if any, of and interest on the Bonds. The obligations of the
Borrower under the Loan Agreement and the Note (as defined herein) are limited recourse
obligations of the Borrower secured by a Deed of Trust on the Project. See "THE LOAN
AGREEMENT" and "SECURITY FOR THE SERIES B BONDS" herein.
The Project to be acquired with the proceeds of the Bonds has been appraised, as of
August 26 1999, at $13,200,000 and as of February 22, 2000, at $13,500,000 based upon an
income approach with support from a sales comparison approach (see "THE PROJECT" herein),
which amount is less than the principal amount of the Series A Bonds and the Series B Bonds.
So long as any Series A Bonds remain outstanding, the owners of the Series B Bonds are
prohibited from exercising remedies under the Indenture in the event of a default in the payment
of the Series B Bonds, and upon a foreclosure of the Deed of Trust which secures the Bonds,
payment will only be made on the Series B Bonds from foreclosure sale proceeds, if any, which
remain following payment in full of the Series A Bonds. See "RISK FACTORS" herein.
The City, the Borrower and the Trustee will also enter into a Regulatory Agreement and
Declaration of Restrictive Covenants dated as of March 1, 2000 (the "Regulatory Agreement ")
with respect to the operation of the Project. Under the Regulatory Agreement, the Borrower is to
rent not less than 20% of the Spaces in the Project to Very Low Income Residents (all as defined
in the Regulatory Agreement). The monthly rental rate which the Borrower may charge Very
Low Income Residents is,also restricted by the Regulatory Agreement, as is the rate at which
rental rates for Very Ldw Income Spaces may be increased. See "THE REGULATORY
AGREEMENT" and "RISK FACTORS" herein.
The Series A Bonds are special limited obligations of the City, payable solely from
Pledged Revenues (as hereinafter defined) and secured as to the payment of the interest on and
the principal of and the redemption premiums, if any, on the Series A Bonds in accordance with
their terms and the terms of the Indenture, from Pledged Revenues and other funds as provided
therefor in the Indenture. The Series A Bonds are not a debt of the City, or State of California or
any of its political subdivisions, for purposes of any constitutional or statutory debt limitation or
restriction, nor in any event shall the Series A Bonds be payable out of funds or properties other
than as described in the preceding sentence.
The summaries and references to documents, statutes, reports and other instruments
referred to herein do not purport to be complete, comprehensive or definitive, and each such
2
summary and reference is qualified in its entirety by reference to each document, statute, report
or instrument. Capitalized terms not defined elsewhere in this Official Statement or in Appendix
B hereto have the meanings assigned to such terms in the Indenture.
THE PLAN OF FINANCING
The proceeds of the Bonds will be used to fund the Loan to the Borrower pursuant to the
Loan Agreement. The proceeds of the Loan will be used by the Borrower to acquire the Project
and to make certain deposits required under the Indenture. The Project consists of certain real
property and the Improvements thereon (which consist of the structures, site improvements,
facilities and fixtures on the Project), commonly known as the Villa Del Arroyo Mobile Home
Park, located within the City. The Project does not include the mobile homes located on the
Project site. See "THE PROJECT."
ESTIMATED SOURCES AND USES OF FUNDS
Following are the estimated sources and uses of funds for the financing.
Sources
Principal Amount of Series A Bonds
Principal Amount of Series B Bonds
Total Sources of Funds
Uses
Underwriter's Discount
Original Issue Discount
Project Fund
Senior Bonds Debt Service Reserve Fund (1)
Cost of Issuance Fund (2)
Repair and Replacement Fund
Series B Bonds Debt Service Reserve Fund (3)
Total Uses of Funds
(1) Equal to the initial Senior Bonds Debt Service Reserve Fund Requirement.
(2) Includes Trustee, legal, financial advisory, printing, and other miscellaneous costs of
issuance.
(3) Established solely for the security of the Series B Bonds.
' Preliminary, subject to change.
DEBT SERVICE REQUIREMENTS
The following table sets forth the annual debt service requirements for the Series B
Bonds, assuming no redemptions other than Sinking Fund redemptions.
Year
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Total
Series B Bonds
Debt Service Schedule
Principal
Interest
(1) Based on an estimated net interest cost of %.
4
Total
Debt Service (1)
THE SERIES B BONDS
General
The Series B Bonds will be delivered in fully registered form only and, when issued, will
be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New
York, New York ( "DTC "). DTC will act as securities depository for the Series A Bonds.
Ownership interests in the Series B Bonds may be purchased, in denominations of $5,000, or any
integral multiple thereof, in book entry form only. See "Book -Entry System."
The Series B Bonds will mature on the respective dates and in the respective principal
amounts, and will bear interest at the respective rates, all as set forth on the cover page of this
Official Statement. The Series B Bonds will be dated their date of delivery. Interest on the
Series B Bonds will be computed on the basis of a 360 -day year consisting of twelve 30 -day
months and will be payable semiannually on March 15 and September 15 of each year,
commencing September 15, 2000 (each such date an "Interest Payment Date "), by check or draft
mailed on such Interest Payment Date to the Owners of Series B Bonds as they appear on the
registration books of the Trustee, or, upon the written request of a Bondowner of at least
$1,000,000 in principal amount of Bonds received by the Trustee not later than fifteen days prior
to the Record Date for such payment, by wire transfer to an account in the United States
designated by such Bondowner.
Each Series B Bond will bear interest from the Interest Payment Date next preceding the
date of authentication thereof to which interest has been duly paid or provided for, unless a
Series B Bond is authenticated before the first Record Date, in which case interest will accrue
from the Delivery Date, or unless authenticated as of a date during the period from the Record
Date to and including the next Interest Payment Date, in which case it shall bear interest from
such Interest Payment Date. Each Series B Bond shall bear interest on overdue principal at the
rate then in effect on such Series B Bond. In the event of any default in the payment of interest,
such defaulted interest shall be payable to the Bondowner of such Bond on a special Record Date
for the payment of such defaulted interest, which date shall be established by the Trustee, in
accordance with the Indenture.
Principal and premium, if any, due on the Series B Bonds shall be paid only upon
surrender of such Series B Bond at the office designated by the Trustee.
If the City shall fail to pay the interest due on a Series B Bond on an Interest Payment
Date from the Series B Bonds Trust Estate, such interest shall continue to accrue at the stated rate
of interest with respect to the Series B Bonds and shall, to the extent Residual Revenues are
payable, be paid to the G*ner in whose name such Series B Bonds is registered at the close of
business on the next succeeding Interest Payment Date from Residual Revenues. Any interest or
deferred interest not paid on an Interest Payment Date shall continue to accrue interest at the
stated rate of interest with respect to the Series B Bonds from such Interest Payment Date until
such Interest Payment Date on which such amounts are paid from Residual Revenues. The
payment of interest and principal on the Series B Bonds is secured solely to the extent of
Residual Revenues and the failure to make any payments on the Series B Bonds because of
insufficient Residual Revenues shall not constitute a Series B Bonds Event of Default,
except in the case of nonpayment of such amounts upon the maturity of the Series B Bonds.
See "THE INDENTURE - Series B Bonds Events of Default."
Redemption
Optional Redemption. The Series B Bonds are subject to optional redemption by the City
at the request oft-he Borrower in whole, or in part by lot, on any date, at a Redemption Price of
100% of the principal to be redeemed, without premium, subject to the availability of funds for
such purpose on the redemption date, plus accrued interest thereon to the date fixed for
redemption; provided that the Borrower shall have delivered to the Trustee and the City a
Coverage Requirement Certificate showing that (i) the coverage ratio for the Series A Bonds
prior to such redemption is at least equal to 1.25 times scheduled debt service on the Series A
Bonds in such fiscal year end, and (ii) the coverage ratio for the Bonds prior to such redemption
is at least 1.15 times the aggregate scheduled debt service on the Series A Bonds and the Series B
Bonds in such fiscal year. Such redemption will be effective only if, on the date of redemption,
the Trustee will hold money sufficient to pay the principal of, accrued interest on and any
premium due on all Outstanding Series B Bonds to be redeemed.
Special Redemption Generally. In accordance with and for purposes of the Indenture, the
Series B Bonds shall be subject to redemption, at the option of the City, at the request of the
Borrower, prior to the stated maturity thereof by lot, in whole or in part at any time, on the
earliest practicable date for which notice of redemption can be given as provided in the Indenture
at a Redemption Price equal to 100% of the Principal Amount of such Series B Bonds or portions
thereof to be redeemed, together with accrued interest thereon to the date of redemption, without
premium, in a Principal Amount having an aggregate Redemption Price equal to the amount of
moneys which are deposited in or transferred to the Redemption Fund, to the extent of any
amounts in the Series B Bonds Redemption Fund constituting Residual Net Proceeds or Residual
Prepayments. The Trustee shall apply any such amounts described above in accordance with
applicable provisions of the Indenture from time to time as directed by a certificate of a
Borrower's Representative, with notice to the City; provided, however, that such amount to be
applied to such redemption or purchase shall be rounded to the next lower authorized
denomination.
Targeted Mandatory Sinking Fund Redemption. The Series B Bonds maturing on
March 15, 2030 are also subject to targeted mandatory sinking fund redemption by lot on March
15 in each year beginning March 15, 2011, at a redemption price equal to 100% of the principal
amount to be redeemed, together with accrued interest thereon to the redemption date, without
premium, but only to the extent of Residual Revenues on deposit in the Series B Bonds
Redemption Fund and available for such purpose, on the respective dates and in the targeted
mandatory sinking fund amounts set forth in the following table, as follows:
Sinking Fund
Redemption Date
(March 15)
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Series A Bonds Maturing on March 15, 2030
Principal Amount Sinking Fund
To Be Redeemed Redemption Date
(March 15)
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030 (maturity)
G1
Principal Amount
To Be Redeemed
In the event that the Residual Revenues are not sufficient to pay any targeted mandatory
sinking fund redemption amount set forth above, any unpaid targeted mandatory sinking fund
redemption amount shall be deferred for payment on the following mandatory sinking fund
payment date and interest shall continue to accrue at the stated rate of interest on such Series B
Bonds on the amount so deferred until paid. Non - payment of a targeted mandatory sinking
fund redemption amount due to insufficient Residual Revenues shall not be an Event of
Default under the Indenture. On March 15, 2030, all such deferred targeted mandatory sinking
fund redemption amount, together with any deferred interest, if any, shall be due and payable and
the non - payment of such amount on March 15, 2030 shall be a Series B Bonds Event of Default,
all as set forth in the Indenture.
Redeemed Bonds as Satisfaction of Sinking Fund Installments. Upon any purchase or
redemption of Term Bonds (other than by application of Sinking Fund Installments) an amount
equal to the applicable Redemption Prices thereof shall be credited towards a part of all of any
one or more of the above - listed Sinking Fund Installments, as directed by a certificate of a
Borrower Representative, with a copy to the City or, failing such direction by February 1 of each
year, toward such Sinking Fund Installments pro rata. Such applicable Redemption Prices shall
be the respective Redemption Prices which would be applicable upon the redemption of such
Bonds from the respective Sinking Fund Installments on the due dates thereof. The portion of
any such Sinking Fund Installment remaining after the deduction of any such amounts credited
toward the same (or the original amount of any such Sinking Fund Installment if no such
amounts shall have been credited toward the same) shall constitute the unsatisfied balance of
such Sinking Fund Installment for the purpose of the calculation of Principal Installments due on
a future date.
Deemed Redemption of Series B Bonds. The Series B Bonds are subject to deemed
mandatory redemption upon the occurrence of a Senior Bonds Event of Default resulting
in a foreclosure or other sale of the Project pursuant to the Deed of Trust and application
of such proceeds and other moneys under the Indenture as provided in the default sections
of the Indenture (see "The Indenture - Priority of Payments After Senior Bonds Event of
Default "), such deemed redemption to be in the amount of any principal of and interest
remaining unpaid on the Series B Bonds whether or not there are sufficient funds to make
such payment in whole or in part. In such event, Series B Bonds remaining unpaid shall be
surrendered to the Trustee for cancellation without any further payment being made on
such Series B Bonds. Notice of such deemed redemption of the Series B Bonds shall be
promptly sent by the Trustee to the Owners of Outstanding Series B Bonds upon the occurrence
of the deemed redemption pursuant to the Indenture. By purchase and acceptance of the Series B
Bonds, the Owners thereof consent to the aforesaid provisions of the Indenture.
Selection of Serie §B Bonds to be Redeemed. In the event of redemption of less than all
of the Outstanding Sens B Bonds, Outstanding Series B Bonds shall be redeemed pro rata
among all such Outstanding Series B Bonds; provided that following any redemption, the
Outstanding principal amount of any Series B Bonds shall be in an integral multiple of $5,000.
For purposes of this Section, Series B Bonds, portions thereof, which have theretofore been
selected for redemption shall not be deemed Outstanding.
Notice of Redemption. When the Trustee shall receive notice from the City of its election
or direction to redeem Series B Bonds pursuant to the Indenture, and when redemption of Series
B Bonds is required pursuant to the Indenture, the Trustee shall give notice, which notice shall
specify the maturities of the Series B Bonds to be redeemed, the redemption date and the place or
places where amounts due upon such redemption will be payable, whether such redemption is
conditioned upon the availability of funds for such purpose on the redemption date (in the case of
optional redemption and special redemption pursuant to the Indenture) and, if less than all of the
Series B Bonds of any maturity are to be redeemed, the letters and numbers or other
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distinguishing marks of such Series B Bonds so to be redeemed, and, in the case of Series B
Bonds to be redeemed in part only, such notice shall also specify the respective portions of the
Principal Amount thereof to be redeemed. Such notice shall further state that on such date there
shall become due and payable upon each Series B Bond to be redeemed the Redemption Price
thereof, or the Redemption Price of the specified portion of the Principal Amount thereof in the
case of Series B Bonds to be redeemed in part only, together with interest accrued on such Series
B Bonds to the redemption date, and that from and after such date interest on such Series B
Bonds shall cease to accrue and be payable; provided, that, if the redemption is conditioned upon
funds being available therefor no later than the opening of business on the Business Day prior to
the redemption date, the notice shall so state. The Trustee shall mail a copy of such notice, by
first class mail, postage prepaid, not less than thirty (30) days (provided, however, in the case of
special redemption described in the Indenture, such notice shall be given not less than ten (10)
days) nor more than forty-five (45) days before the redemption date, to the Owners of any
Series B Bonds or portions of Series B Bonds which are to be redeemed, at their last addresses, if
any, appearing upon the registration book. Failure to give such notice which respect to any
Series B Bonds, or any defect therein, shall not affect the validity of the proceedings for
redemption of any other Series B Bonds.
Purchase of Series B Bonds
In lieu of redemption of Series B Bonds as provided in the Indenture, amounts held by the
Trustee for such redemption will, at the written request of the Borrower set forth in a certificate
of a Borrower Representative, with a copy to the City, received by the Trustee prior to the
selection of Series B Bonds for redemption, be applied by the Trustee to the purchase of Series B
Bonds at public or private sale as and when and at such prices (including brokerage, accrued
interest and other charges) as the Borrower may in its discretion direct, but not to exceed the
redemption price which would be payable if such Series B Bonds were redeemed. The aggregate
principal amount of Series B Bonds of the same maturity purchased in lieu of redemption may
not exceed the aggregate principal amount of Series B Bonds of such maturity which would
otherwise be subject to such redemption.
Book -Entry System
The Series B Bonds will be initially delivered in the form of one fully registered Series B
Bond for each of the maturities of the Series B Bonds, registered in the name of Cede & Co., as
nominee of DTC, as registered owner of all the Series B Bonds. The Series B Bonds will be
retained and immobilized in the custody of DTC. So long as the Series B Bonds are held in
book -entry only form, all references herein to the holders or owners of the Bonds shall mean
DTC, and shall not MEAN beneficial owners of the Series B Bonds.
DTC is a limited purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agent" registered pursuant to the provisions of Section 17A of
the Securities Exchange Act of 1934, as amended. DTC holds securities that its participants (the
"Participants ") deposit with DTC. DTC also facilitates the settlement among Participants of
securities transactions, such as transfers and pledges, in deposited securities through electronic
computerized book -entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is
owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly (the "Indirect Participants "). The rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
Purchases of the Series B Bonds under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Series B Bonds on DTC's records. The
ownership interest of each actual purchaser of each Series B Bond (the "Beneficial Owner ") is in
turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well as periodic statements
of their holdings, from the Indirect Participant through which the Beneficial Owner entered into
the transaction. Transfers of ownership interests in the Series B Bonds are to be accomplished
by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership interests in the Series B Bonds
except in the event that use of the book -entry system for the Series B Bonds is discontinued.
To facilitate subsequent transfers, all Series B Bonds deposited by Participants with DTC
are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Series B
Bonds with DTC and their registration in the name of Cede & Co. effect no change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the Series B Bonds.
DTC's records reflect only the identity of the Direct Participants to whose accounts such Series B
Bonds are credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by
Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
REDEMPTION NOTICES WILL BE SENT BY THE TRUSTEE TO CEDE & CO. IF
LESS THAN ALL OF THE SERIES B BONDS ARE BEING REDEEMED, DTC'S PRACTICE
IS TO DETERMINE BY LOT THE AMOUNT OF THE INTEREST OF EACH DIRECT
PARTICIPANT IN SUCH ISSUE TO BE REDEEMED. ANY FAILURE OF DTC TO
ADVISE ANY PARTICIPANT, OR OF ANY PARTICIPANT TO NOTIFY ANY
BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT
AFFECT THE VALIDITY OR SUFFICIENCY OF THE PROCEEDINGS RELATING TO
THE REDEMPTION OF THE SERIES B BONDS CALLED FOR REDEMPTION OR OF
ANY OTHER ACTION PREMISED ON SUCH NOTICE.
THE CITY, THE TRUSTEE AND THE UNDERWRITERS HAVE NO
RESPONSIBILITY OR 11ABILITY FOR ANY ASPECTS OF THE RECORDS RELATING
TO OR PAYMENTS MADE ON ACCOUNT OF BENEFICIAL OWNERSHIP, OR FOR
MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS RELATING TO
BENEFICIAL OWNERSHIP, OF INTERESTS IN THE SERIES B BONDS.
Neither DTC nor Cede & Co. will consent or vote with respect to the Series B Bonds.
Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after
the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those
Direct Participants to whose accounts the Series B Bonds are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on the Series B Bonds will be made to
DTC. DTC's practice is to credit Direct Participants' accounts on the payable date in accordance
with their respective holdings shown on DTC's records unless DTC has reason to believe that it
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will not receive payment on the payable date. Payments by Participants to Beneficial Owners
will be governed by standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street name ", and will be the
responsibility of such Participant and not of DTC, the Trustee, or the City, subject to any
statutory or regulatory requirements as may be in effect from time to time. Payment of principal
and interest to DTC is the responsibility of the Trustee, disbursement of such payments to Direct
Participants shall be the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect Participants.
THE CITY, THE TRUSTEE AND THE UNDERWRITERS CANNOT AND DO NOT
GIVE ANY ASSURANCES THAT DTC WILL DISTRIBUTE PAYMENTS TO DTC
PARTICIPANTS, OR THAT PARTICIPANTS OR OTHERS WILL DISTRIBUTE
PAYMENTS WITH RESPECT TO THE SERIES B BONDS RECEIVED BY DTC OR ITS
NOMINEES AS THE REGISTERED OWNER, ANY REDEMPTION NOTICES OR OTHER
NOTICES TO THE BENEFICIAL OWNERS, OR THAT THEY WILL DO SO ON A TIMELY
BASIS, OR THAT DTC WILL SERVICE AND ACT IN THE MANNER DESCRIBED IN
THIS OFFICIAL STATEMENT.
In the event the City and the Trustee determine not to continue the DTC book -entry only
system or DTC determines to discontinue its services with respect to the Series B Bonds and the
City does not select another qualified securities depository, the City and the Trustee will deliver
one or more Series B Bonds in such principal amount or amounts, in denominations of $5,000 or
any integral multiple thereof, and registered in whatever name or names, as DTC shall designate.
In such event, transfers and exchanges of Series B Bonds will be governed by the provisions of
the Indenture.
The information in this section concerning DTC and DTC's book -entry system has been
obtained from sources that the City and the Underwriters believe to be reliable, but they take no
responsibility for the accuracy thereof.
SECURITY FOR THE SERIES B BONDS
The Series A Bonds are special limited obligations of the City, payable solely from
Pledged Revenues (as hereinafter defined) and secured as to the payment of the interest on and
the principal of and the redemption premiums, if any, on the Series A Bonds in accordance with
their terms and the terms of the Indenture, from Pledged Revenues and other funds as provided
therefor in the Indenture. The Series A Bonds are not a debt of the City, or State of California or
any of its political subdivisions, for purposes of any constitutional or statutory debt limitation or
restriction, nor in any event shall the Series A Bonds be payable out of funds or properties other
than as described in the preceding sentence.
Residual Revenues
The Series B Bonds are secured principally by, and are payable principally from,
Residual Revenues of the Project, which constitute, in general, Net Operating Revenues of the
Project after provision for payment of the Series A Bonds, Rebate Payments, Administration
Fund deposits and deposits to the Repair and Replacement Fund. "Net Operating Revenues"
consist of all rents, income, receipts and other revenues derived by the Borrower arising from the
operation of the Project, including rental income from mobile home spaces determined in
accordance with Generally Accepted Accounting Principles, but not including resident security
deposits, less Operation and Maintenance Costs, consisting of the reasonable and necessary costs
and expenses of operating the common areas of the Project and of managing and repairing and
other expenses necessary to maintain and preserve the common areas of the Project in good
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repair and working order, determined in accordance with Generally Accepted Accounting
Principles. See "APPENDIX B — Definitions."
Pledge
Pursuant to the Indenture, the following are pledged to the payment of the principal of
and interest on the Series B Bonds: (i) Residual Revenues, (ii) Residual Net Proceeds and
Residual Prepayments, and (iii) on a basis expressly subordinate (both in terms of payment and
in terms of rights to exercise the remedies granted under the Indenture and the Loan Agreement)
to the Series A Bonds until all such Series A Bonds shall have been retired or such amounts have
been provided to effect redemption of Series A Bonds, all the rights and interests of the City in
and to the Loan, the Loan Agreement and the Deed of Trust, the proceeds and collections of the
City therefrom and all Funds and Accounts created or established by or maintained pursuant to
the Indenture for the benefit of the Series B Bonds and any other property pledged to the
payment of the Series B Bonds in the granting clauses of the Indenture. Pursuant to the "granting
clauses" referred to in the Indenture, the City pledges and assigns to the Trustee, for the benefit
of the Series B Bonds, the "Series B Bonds Trust Estate," which consists of all proceeds, Funds,
Accounts, Residual Revenues, Residual Net Proceeds, Residual Prepayments, rights, interests,
collections, and other property pledged to the payment of any Series B Bonds pursuant to the
Indenture. See "APPENDIX B — DEFINITIONS" for the definitions of Residual Revenues,
Residual Net Proceeds and Residual Prepayments.
See "THE INDENTURE - Covenants of the City - Enforcement and Foreclosure of Deed
of Trust," "- Remedies," and "- Priority of Payments After Senior Bonds Event of Default," and
"- Priority of Payment After Series B Bonds Event of Default" for descriptions of the limitations
imposed on the exercise of remedies and the ability to foreclose on the Series B Bonds Trust
Estate in the event of insufficient monies available under the Indenture to make scheduled
payments of debt service on the Series B Bonds.
Under the Regulatory Agreement, the Borrower is to rent not less than 20% of the Spaces
in the Project to Very Low Income Residents (all as defined in the Regulatory Agreement). The
monthly rental rate which the Borrower may charge Very Low Income Residents is also
restricted by the Regulatory Agreement, as is the rate at which rental rates for the Very Low
Income Spaces may be increased. The Affordable Housing Agreement requires that, in addition
to the restrictions under the Regulatory Agreement, 55% of the Spaces in the Project be rented to
80% households (as defined in the Affordable Housing Regulatory Agreement). These
provisions place a limit on the rental rates for some of the Spaces, and thus may limit the Net
Operating Revenues available to pay debt service on the Bonds. See "THE REGULATORY
AGREEMENT" and "RISK FACTORS" herein.
The Loan Agreement and the Note
Pursuant to the Loan Agreement, the City will make the Loan for the benefit of the
Borrower in an amount equal to the aggregate principal amount of the Bonds. The Borrower's
obligation to repay the Loan will be evidenced by the Note. The Borrower is obligated under the
Loan Agreement, notwithstanding the schedule of payments under the Loan Agreement and the
Note, to make such payments at such times as shall be sufficient, when added to the amounts
otherwise available under the Indenture, to pay the principal and premium, if any, of and interest
on the Series A Bonds and the Series B Bonds when due, whether at maturity, by optional or
mandatory redemption or by acceleration.
Under the Loan Agreement the Borrower agrees to pay, in repayment of the Loan, all Net
Operating Revenues for the immediately preceding calendar month to the Trustee until the
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principal of, premium (if any) and interest on the Bonds shall have been paid or provision for
payment shall have been made. As security for the repayment of the Loan, the Borrower grants
the City a security interest in the Project pursuant to the terms of the Deed of Trust. See "THE
LOAN AGREEMENT" herein.
The Project to be acquired with the proceeds of the Bonds has been appraised, as of
August 26, 1999, at $13,200,000, based upon an income approach (see "THE PROJECT"
herein), which amount is less than the principal amount of the Series A Bonds. So long as any
Series A Bonds remain outstanding, the owners of the Series B Bonds are prohibited from
exercising remedies under the Indenture in the event of a default in the payment of the Series B
Bonds, and upon a foreclosure of the Deed of Trust which secures the Bonds, payment will only
be made on the Series B Bonds from foreclosure sale proceeds, if any, which remain following
payment in full of the Series A Bonds. See "RISK FACTORS" herein.
Borrower Obligations Non - Recourse
Neither the Borrower's directors, officers, employees and agents, nor any of its other
affiliates, has or is intended to have any liabilities under or in respect of the Loan Agreement, the
Indenture, the Note, the Deed of Trust, the Regulatory Agreement, or any of the other documents
or transactions contemplated by any of them. See "RISK FACTORS."
Reserve Fund
For a discussion of the Reserve Fund, see "THE INDENTURE — Series B Bonds Debt
Service Reserve Fund." The Borrower intends to invest all or substantially all of the moneys
held in the Series B Bonds Debt Service Reserve Fund in a guaranteed investment contract or
other investment which satisfies the requirements of clause (i), 0) or (k), as applicable, of the
definition "Qualified Investments" in the Indenture. See "APPENDIX B - Definitions."
THE INDENTURE
The following is a summary of certain provisions of the Indenture relevant to the Series B
Bonds. The Indenture also contains provisions relating to the Series A Bonds. The summary
does not purport to be complete and is qualified in its entirety by reference to the Indenture
which is available from the City upon request, and to Appendix B for the definition of certain
terms used herein. Any capitalized terms not otherwise defined herein or in Appendix B are as
defined in the Indenture.
Application of Bond Proceeds
On the Closing Date, the City will cause the proceeds of the sale of the Series A Bonds to
be deposited with the Trustee in the Project Fund. The proceeds of the Series A Bonds on
deposit in the Project Fund will be disbursed in accordance with the Indenture and the Loan
Agreement as follows:
(a) The Trustee will deposit the amount of $ in the Senior
Bonds Debt Service Reserve Fund, equal (together with the deposit to such fund from the
proceeds of the Agency Loan described below) to the initial Senior Bonds Debt Service
Reserve Fund Requirement;
(b) The Trustee will deposit the amount of $200,000.00 in the Repair and
Replacement Fund; and
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(c) The balance of $ will be held in the Project Fund until
disbursed in accordance with the Indenture and the Loan Agreement.
From the proededs of the Series B Bonds, Trustee
$ in the Project Fund and the amount of $_
Bonds Debt Service Reserve Fund.
Project Fund
will deposit the amount of
in the Series B
The City will establish and maintain a special fund designated as the City of Moorpark
Villa Del Arroyo Mobile Home Park Project Fund (the "Project Fund "), which shall be held by
the Trustee. Amounts in the Project Fund will be expended and applied only to fund the Loan.
See "Application of Bond Proceeds," above. On the Closing Date, the Trustee will pay out
moneys,in the Project Fund for the purpose of making the Loan, upon receipt by the Trustee of a
written direction of the City signed by an Authorized Officer.
Cost of Issuance Fund
The Trustee will establish, maintain and hold in trust a separate fund designated as the
"Cost of Issuance Fund." Moneys in the Cost of Issuance Fund shall be applied to the payment
of Cost of Issuance, upon receipt of an Officer's Certificate stating the person to whom and the
purpose for which each payment is to be made, and the amount of such payment. Upon receipt
of an Officer's Certificate stating that the Cost of Issuance have been fully paid and in any event
within six months of the Closing Date, the Trustee shall transfer any remaining balance to the
Project Fund or to the Revenue Fund, as directed by such Officer's Certificate, and such Fund
shall be closed.
Deposits
Pursuant to the Loan Agreement, the City is to cause the Borrower to collect and deposit
or cause to be collected and deposited with the Trustee, on the date of receipt so far as
practicable, all Net Operating Revenues, and to forward promptly to the Trustee statements of
each amount deposited. The Trustee will notify the City and the Oversight Agent in the event
that Net Operating Revenues have not been deposited by the tenth (10th) day of each month.
The Trustee will be accountable only for moneys actually so deposited or held. All Net
Operating Revenues will be deposited for credit to the Revenue Fund. All Prepayments and Net
Proceeds with respect to the Loan will be transferred to the Series A Redemption Fund, and, to
the extent permitted by the Indenture to be applied as Residual Net Proceeds or Residual
Prepayments, shall be transferred and deposited in the Series B Bonds Redemption Fund for the
benefit of the owners of the Series B Bonds.
Revenue Fund
The Revenue Fund will be held by the Trustee for the benefit of the Series A Bonds,
except to the extent of the application of Residual Revenues for the benefit of the Series B Bonds
pursuant to the Indenture. All interest and other income from time to time received from the
deposit of moneys in the Revenue Fund will be retained in such fund and applied pursuant to the
Indenture. On or before the 15th day preceding each Interest Payment Date, the Trustee is to
provide written notice to the City and the Oversight Agent as to the amount deposited in the
Revenue Fund, the amount of the required deposits, and whether the deposited amount is
insufficient to satisfy the required deposit to the Senior Bonds Debt Service Fund and/or the
Series B Bonds Debt Service Fund. On or before the fifth Business Day preceding each Interest
Payment Date, the Trustee will withdraw from the Revenue Fund and transfer to the following
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Funds the amounts indicated in the following tabulation, in the following order of priority, or so
much thereof as remains after first making all prior transfers:
(a) irito the Senior Bonds Debt Service Fund, the amount needed to increase
the balance therein to the Series A Bonds Debt Service Requirement as of such date;
(b) into the Senior Bonds Debt Service Reserve Fund, the amount, if any,
needed to increase the balance therein to the Senior Bonds Debt Service Reserve Fund
Requirement;
(c) into the Rebate Fund, the amount, if any, required to be deposited therein
pursuant to the Indenture;
(d) into the General Account of the Administration Fund (i) the amount, if
any, necessary to pay or provide for the ordinary fees and expenses of the Fiduciaries,
including expenses in connection with the purchase or redemption of any Bonds, all as
provided and contemplated in the annual budget filed by the Borrower pursuant to the
Loan Agreement; and (ii) an amount equal to the Oversight Agent Fee and Program
Administrator Fee (if any) authorized under the Indenture and other Fees and Charges, if
any, all as provided and contemplated in the annual budget filed by the Borrower
pursuant to the Loan Agreement. Any fees and expenses of the Fiduciaries, Oversight
Agent or Program Administrator above and beyond the amount contemplated in the
annual budget filed by the Borrower pursuant to the Loan Agreement will be paid from
the Surplus Fund;
(e) into the Series B Bonds Debt Service Fund, the amount needed to increase
the balance therein to the Series B Bonds Debt Service Requirement at such date;
(f) into the General Account of the Administration Fund, an amount equal to
the City Annual Fee;
(g) into the Borrower Administration Fee Account of the Administration Fund
an amount equal to one half (1/2) the Administration Fee authorized under the Indenture
(such amounts to be paid to the Borrower on the first day of each month in increments
equal to 1/6 of the amount then on deposit);
(h) into the Series B Bonds Debt Service Reserve Fund, the amount, if any, to
increase the balance therein to the Series B Bonds Debt Service Reserve Requirement;
(i) into,the Surplus Fund, the amount remaining in the Revenue Fund.
Notwithstanding the foregoing, so long as the Borrower's monthly deposits of Net
Operating Revenues with the Trustee pursuant to the Loan Agreement are at least equal to said
month's portion of items (a) through (f) and item (h) above, then the Borrower may retain from
Net Operating Income for such month the Administration Fee for such month.
Series B Bonds Debt Service Fund
The Series B Bonds Debt Service Fund will be held by the Trustee. The Trustee will
withdraw from the Series B Bonds Debt Service Fund, on or prior to each Interest Payment Date,
an amount equal to the unpaid interest due on the Series B Bonds on that date and shall cause it
to be applied to the payment of such interest when due. If the withdrawals required in the
previous sentence on the same and every prior Interest Payment Date have been made, the
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Trustee will withdraw from the Series B Bonds Debt Service Fund, on or prior to each Principal
Payment Date, an amount equal to the Principal Amount of the Outstanding Series B Bonds, if
any, maturing on that date and will cause it to be applied to the payment of the principal of the
Series B Bonds when due. Each withdrawal from the Series B Bonds Debt Service Fund as
described above will be made on or immediately prior to the Interest Payment Date or Principal
Payment Date to which it relates, and the amount so withdrawn shall be deemed to be part of the
Series B Bonds Debt Service Fund until such Interest Payment Date or Principal Payment Date.
The Trustee shall apply money in the Series B Bonds Debt Service Fund to the purchase
or the redemption of the Series B Bonds in the manner provided in the Indenture, provided that
no such Series B Bonds shall be so purchased in lieu of redemption during the period of 45 days
next preceding each Sinking Fund Installment due date established for such Series B Bonds. The
price paid by the Trustee (including any brokerage and other charges) for any Series B Bond
purchased pursuant to this paragraph will not exceed the Redemption Price applicable on the next
date on which such Series B Bond could be redeemed in accordance with its terms as part of a
Sinking Fund Installment. Subject to the limitations set forth and referred to in the Indenture, the
Trustee shall purchase Series B Bonds at such times, for such prices, in such manner (whether
after advertisement for tenders or otherwise) as the Trustee will be directed by a certificate of a
Borrower Representative, with a copy to the City, and as may be possible with the amount of
money available in the Series B Bonds Debt Service Fund therefor.
As soon as practicable after the 45th day but not later than the 30th day prior to the due
date of any Sinking Fund Installment, the Trustee will proceed pursuant to the Indenture to call
for redemption on that date a Principal Amount of Series B Bonds subject to such Sinking Fund
Installment in such amount as shall be necessary to complete the retirement of the Principal
Amount of the Series B Bonds of such maturity specified for such Sinking Fund Installment.
The Trustee will withdraw from the Series B Bonds Debt Service Fund, on or prior to the due
date of the next Sinking Fund Installment, an amount equal to the Principal Amount of the
Series B Bonds called for redemption on such date pursuant to this paragraph, and will cause it to
be applied to the payment of the Redemption Price thereof to such date. If on any date there will
be moneys on deposit in such Sinking Fund Installment Account and no Series B Bonds subject
to redemption therefrom will then be Outstanding, such moneys will be transferred to the
Revenue Fund.
If, by application of moneys in the Series B Bonds Debt Service Fund, the Trustee will
purchase in any Bond Year Series B Bonds subject to redemption from moneys in the Series B
Bonds Debt Service Fund in excess of the aggregate Sinking Fund Installment in respect of such
Series B Bonds for such Bond Year, the Trustee shall file with the City and the Borrower not
later than the 20th day preceding the close of such Bond Year, a statement identifying such
Series B Bonds purchaseq,and called for redemption during such Bond Year. The Borrower will
thereafter cause a certificate of a Borrower Representative, with a copy to the City, to be filed
with the Trustee not later than the 10th day preceding the close of such Bond Year setting forth
with respect to the amount of such excess the years in which Sinking Fund Installments are to be
reduced and the respective amounts by which such Sinking Fund Installments are to be reduced;
provided that such reduction shall be as nearly as practicable pro rata among remaining Sinking
Fund Installments remaining with respect to Series B Bonds.
Upon the retirement of any Bonds by purchase or redemption pursuant to the Indenture,
the Trustee will file with the City a statement identifying such Bonds and setting forth the date of
their purchase or redemption, the amount of the purchase price or the Redemption Price of such
Bonds and the amount paid as interest thereon.
All interest and other income from time to time received from the deposit and investment
of moneys in the Series B Bonds Debt Service Fund will be transferred to the Revenue Fund.
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Upon the occurrence of an event described in the Repair and Replacement Fund
provisions of the Loan Agreement, all amounts deposited in the Series B Bonds Debt Service
Fund shall be applied to restore the Project for operation.
All moneys in the Series B Bonds Debt Service Fund applied pursuant to the Indenture
shall be applied pro rata among the Series B Bonds in the event there are insufficient moneys to
pay in full any interest or principal on the Series B Bonds under the Indenture.
Series B Bonds Redemption Fund
The Series B Bonds Redemption Fund shall be held by the Trustee. The Trustee shall
deposit into the Series B Bonds Redemption Fund any Residual Prepayments or Residual Net
Proceeds pursuant to the Indenture. Any moneys on deposit in the Series B Bonds Redemption
Fund shall be used and applied, as soon as practicable following the receipt thereof, but not later
than twelve months after such receipt, for either or both of the following purposes: (a) to the
redemption of Series B Bonds as may be designated in an Officer's Certificate; or (b) the
purchase of Series B Bonds at the most advantageous price obtainable with due diligence, but
only upon receipt of a certificate of a Borrower Representative, with a copy to the City, stating
the Principal Amounts and maturities of the Series B Bonds to be purchased; provided that no
such purchase shall be made at a price in excess of the Redemption Price applicable on the next
ensuing redemption date, and that no such purchase shall be made during the period of 45 days
next preceding a redemption date from moneys to be applied pursuant to clause (a) above to the
redemption of Series B Bonds on such date. All interest and other income from time to time
received from the deposit and investment of moneys in the Series B Bonds Redemption Fund
shall be transferred upon receipt to the Revenue Fund. To the extent Residual Prepayment or
Residual Net Proceeds remain after giving effect to the redemption or purchase of all
Outstanding Series B Bonds pursuant to (a) above, such amounts shall be transferred to the
Revenue Fund for application thereunder.
All moneys in the Series B Bonds Redemption Fund shall be applied pro rata among the
Series B Bonds in the event there are insufficient moneys to pay in full any interest or principal
then due on the Series B Bonds, under the Indenture.
Administration Fund
The Trustee shall establish the Administration Fund and establish therein the General
Account and the Borrower Administration Fee Account. Moneys deposited in the Accounts of
the Administration Fund shall be held therein in segregated Accounts until disbursed.
Moneys deposited in the General Account of the Administration Fund shall be applied by
the Trustee to the City Annual Fee, and from time to time as directed by a certificate of a
Borrower Representative, with a copy to the City, to the payment of ordinary fees and expenses
of Fiduciaries, including expenses of purchase or redemption of Bonds. Any fees and expenses
of the Fiduciaries and amounts payable to the City above and beyond the amount contemplated
in the final annual budget prepared by the Borrower shall be paid from the Surplus Fund, or if the
Surplus Fund is insufficient, shall be paid by the Borrower.
Moneys deposited in the Borrower Administration Fee Account of the Administration
Fund shall be applied by the Trustee, on a monthly basis, to the payment of the Administration
Fee. All interest and other income from time to time received from the deposit and investment of
moneys in the Accounts of the Administration Fund shall be transferred upon receipt to the
Revenue Fund.
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Repair and Replacement Fund
The Trustee shall establish and hold the Repair and Replacement Fund for the financial
benefit of the Project and shall deposit therein the amount provided in the Indenture and the
balance, if any, of the Net Operating Revenues paid to the Trustee by the Borrower pursuant to
the Indenture. Certain moneys deposited in the Repair and Replacement Fund shall be held
therein segregated from other funds held by the Trustee until disbursed. Expenditures from the
Repair and Replacement Fund which are not included in the annual budget and Exhibit C of the
Loan Agreement shall be subject to the Oversight Agent's approval. Disbursements from the
Repair and Replacement Fund shall be made upon the written request of the Borrower and
approved in writing by the Oversight Agent for the purpose of funding initial improvements of
the Project effecting the replacement of structural elements and mechanical equipment of the
Project as set forth in Exhibit C to the Loan Agreement or for any other purpose for the benefit of
the Project in accordance with the annual budget filed by the Borrower pursuant to the Loan
Agreement or for such other similar purposes which the Oversight Agent shall reasonably direct.
Series B Bonds Debt Service Reserve Fund
The Series B Bonds Debt Service Reserve Fund shall be held by the Trustee. If available
moneys in the Series B Bonds Debt Service Fund shall be insufficient to pay in full the interest
on and principal of any Series B Bonds becoming due on any Interest Payment Date, Principal
Payment Date or any date on which Series B Bonds have been called for redemption, the Trustee
shall transfer the deficiency from the Series B Bonds Debt Service Reserve Fund to the Series B
Bonds Debt Service Fund.
All interest and other income from time to time received from the deposit and investment
of moneys in the Series B Bonds Debt Service Reserve Fund shall be transferred upon receipt to
the Revenue Fund.
Rebate Fund
The Rebate Fund will be administered in accordance with the provisions of the Indenture.
The Rebate Fund will not be subject to the lien or encumbrance of the Indenture and will be held
in trust by the Trustee for the benefit of the United States of America. The amounts deposited in
the Rebate Fund will be subject to the claim of no other person, including that of the Trustee and
Bondowners. Moneys transferred to the Rebate Fund pursuant to the Indenture will be used for
no other purpose than to make payments to the United States Treasury, at the time and manner
and in the amount and as more fully provided in the Indenture.
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The Trustee will be deemed conclusively to have complied with the Rebatable Arbitrage
if it follows the directions of the Borrower as advised by Bond Counsel, and the Trustee will
have no independent responsibility to, or liability resulting from its failure to, enforce
compliance by the Borrower or the City with the Tax Certificate or the Rebatable Arbitrage.
Surplus Fund
The Surplus Fund shall be held by the Trustee. Annually, following computation and
deposit of the Rebatable Arbitrage for the preceding Bond Year in the Rebate Fund and provided
there is no deficiency in the Senior Bonds Debt Service Fund, the Senior Bonds Debt Service
Reserve Fund, the Rebate Fund, the Administration Fund, the Repair and Replacement Fund, the
Series B Debt Service Fund or the Series B Bonds Debt Service Reserve Fund, any moneys in
the Surplus Fund shall be released from the lien of the Indenture, not less frequently than
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annually, upon delivery to the Trustee of the Coverage Requirement Certificate and provided no
Event of Default has been declared under the Indenture or the Loan Agreement, the amounts on
deposit in the Surplus Fund as of the conclusion of the immediately preceding Bond Year shall
be released to the Borrower to be applied for any lawful purposes for the benefit of the Project.
In the event that no uses related to the Project shall be identified by the Borrower, such amounts
on deposit in the Surplus Fund shall be used to reduce rental payments of the occupants within
the Project. No amounts on deposit in the Surplus Fund shall be used for purposes other than for
the benefit of the Project.
If at any time there is a deficiency in the Senior Bonds Debt Service Fund, the Senior
Bonds Debt Service Reserve Fund, the Rebate Fund, the Administration Fund, the Repair and
Replacement Fund, the Series B Debt Service Fund or the Series B Bonds Debt Service Reserve
Fund, the Trustee shall withdraw from the Surplus Fund and deposit in such Fund, in the order
set forth for disposition of Revenues generally under the Indenture, the amount necessary to
remedy such deficiency and shall give written notice to the City of such withdrawal.
All interest and other income from time to time received from the deposit and investment
of moneys in the Surplus Fund shall be transferred upon receipt to the Revenue Fund.
Amounts deposited in the Surplus Fund are to be applied for any lawful purpose for the
benefit of the Project; provided, however, in the event that the application of moneys on deposit
in the Repair and Replacement Fund to the repair, replacement and capital improvements
necessitated by a natural disaster pursuant to the Loan Agreement, all amounts in the Surplus
Fund shall be deposited in the Repair and Replacement Fund and be applied solely to restore the
Project for operation.
Investment and Deposit of Funds
The Trustee will keep all money held by it, as continuously as reasonably possible,
invested and reinvested in Qualified Investments maturing at the times and in the amounts
required by the Indenture, as instructed in writing by a Borrower Representative. In the event
that written instructions of a Borrower Representative are not received by the Trustee in a timely
manner, the Trustee shall invest the amounts deposited in the Funds and Accounts in those
investments defined in clause (g) of the definition of "Qualified Investments." See "APPENDIX
B — DEFMTIONS." Except for Investment Agreements described in clause (i) of the definition
of "Qualified Investments," all investments made by the Trustee shall provide for payment of
principal and interest which will be payable no later than the earlier to occur of six (6) months
from the date of investment or the date on which it is estimated that such moneys will be
required by the Trustee.
Moneys in any Fund or Account created and established by, or maintained, pursuant to,
the Indenture and held by a Fiduciary may be invested in common with moneys held in any other
such Fund or Account; provided, however, that the common investments with such other moneys
constitute Qualified Investments and provided, further, that such investments are held by the
same Fiduciary acting in the same capacity.
Obligations purchased as an investment of moneys in any Fund or Account held by a
Fiduciary under the Indenture will be deemed at all times to be a part of such Fund or Account
and the income or interest earned by, or incremented to, any such Fund or Account due to the
investment and reinvestment thereof shall be retained in such Fund or Account as part thereof,
except as otherwise provided in the Indenture and subject to the required transfer thereof from
such Fund or Account pursuant to the Indenture. A Fiduciary will sell in any commercially
reasonable name, or present for redemption, any obligation purchased by it as an investment
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whenever it will be necessary in order to provide moneys to meet any payment or transfer from
the Fund or Account for which such investment was made; provided, however, that in lieu of
liquidating any such investment obligations and transferring the proceeds thereof, the Trustee
may transfer investment obligations which will mature and the proceeds of which will be
available on or before the date such proceeds are required for the purposes of the Indenture. The
City and the Borrower acknowledge that to the extent that regulations of the Comptroller of the
Currency or other applicable regulatory agency grant the City or the Borrower the right to receive
brokerage confirmations of security transactions, the City and the Borrower waive receipt of such
confirmations. The Trustee will furnish to the City and the Borrower periodic statements which
include detail of all investment transactions made by the Trustee. Each Fiduciary will advise the
City and the Borrower in writing, on or before the fifteenth (15th) day of each calendar month, of
the details of all investments held for the credit of each Account in its custody under the
provisions of the Indenture as of the end of the preceding month. The Trustee may act as
principal or agent in the acquisition or disposition of investments and purchase and sell
investments through its investment department or that of its affiliates.
In computing the amount in any Fund or Account held by a Fiduciary or the Trustee
under the provisions of the Indenture, the Trustee will value obligations purchased as an
investment of moneys therein at the Amortized Cost thereof, plus accrued interest. For the
purposes thereof, "Amortized Cost," when used with respect to obligations purchased at par, will
mean the par value thereof; and when used with respect to obligations purchased at a premium
above or at a discount below par, will mean the value as of any given date obtained by dividing
the total amount of the premium or discount at which such obligations were purchased by the
number of interest payments remaining to maturity (or total number of days remaining to
maturity, in the case of obligations with a term of less than one year) on such obligations after
such purchase and by multiplying the amount so calculated by the number of interest payment
dates having passed since the date of such purchase (or, if interest thereon shall not be payable
prior to maturity, the number of six -month periods having passed since the date of such purchase,
or in the case of obligations of less than one year, the number of days having passed since the
day of such purchase) and (i) in the case of obligations purchased at a premium, deducting the
product thus obtained from the purchase price or (ii) in the case of obligations purchased at a
discount, adding the product thus obtained to the purchase price.
No Fiduciary shall be liable or responsible for making or failing to make any investment
authorized by the provisions of the Indenture, in the manner provided in the Indenture, or for any
loss resulting from any such investment so made or failure to so make, except for its own
negligence. The Trustee may deem investments directed by a Borrower Representative as
Qualified Investments without independent investigation thereof.
Covenants of the City,
Payment of Series B Bonds. The City will duly and punctually pay or cause to be paid,
solely from the Series B Bonds Trust Estate, the principal or Redemption Price, if any, of every
Series B Bond and the interest thereon, at the dates and places and in the manner provided in the
Series B Bonds according to the true intent and meaning thereof.
Offices for Payment and Registration of Series B Bonds. The City may designate an
additional Paying Agent located within or out of the State where Series B Bonds may be
presented for payment.
Further Assurances. At any and all times the City will, so far as it may be authorized or
permitted by law, pass, make, do, execute, acknowledge and deliver, all and every such further
resolution, acts, deeds, conveyances, assignments, transfers and assurances as may be necessary
19
or desirable for the better assuring, conveying, granting, assigning, confirming and effecting all
and singular the proceeds, moneys, rights, interests and collections hereby pledged or assigned or
intended so to be, or which the City may hereafter become bound to pledge or assign.
Power to Issue Series B Bonds and Make Pledges. The City is duly authorized pursuant
to law to authorize and issue the Bonds and to adopt the Indenture and to pledge the Series B
Bonds Trust Estate in the manner and to the extent provided in the Indenture. Except as provided
in the Indenture, the Series B Bonds Trust Estate is and will remain free and clear of any pledge,
lien, charge or encumbrance thereon or with respect thereto prior to, or of equal rank with, the
pledge created by the Indenture. The Series B Bonds and the provisions of the Indenture are and
will be the valid and legally enforceable obligations of the City in accordance with the terms of
the Indenture. The City will at all times, to the extent permitted by law, defend, preserve and
protect said pledge of the Series B Bonds Trust Estate and all the rights of the Series B Bond
Owners under the Indenture against all claims and demands of all persons whomsoever.
Use of Proceeds. The City will use and apply the proceeds of Bonds, to the extent not
otherwise required by the Indenture to make the Loan for the purposes specified in the Act and
the Indenture, and will do all such acts and things necessary to receive and collect when due, all
Revenues, and will diligently enforce, and take all steps, actions and proceedings reasonably
necessary in the judgment of the City for the enforcement of all terms, covenants and conditions
of the Loan.
The Loan will be made by the City from the proceeds of the Bonds concurrently with the
issuance of the Bonds and the Deed of Trust securing the Loan will have been executed and
recorded either concurrently or prior to the issuance and delivery of the Bonds; provided that:
(a) the Deed of Trust and related financing statements and other necessary
documents will constitute and create a mortgage lien on the Project subject only to
Permitted Encumbrances, which further provides a valid security interest in the personal
property acquired with proceeds of the Loan and attached to or used or to be used in
connection with the operation of the Project, and in all rents, revenues, receipts, income
and other moneys received by or payable to the Borrower; and
(b) the Borrower shall have marketable title in fee simple to the Property, free
and clear of all liens and encumbrances which would materially affect the value or
usefulness of such Property, as set forth in the policy of title insurance delivered in
connection therewith and in a form which is satisfactory to the City.
Fees and Charges. The City will review and approve such Fees and Charges as will be
required by the Act or as,it shall deem appropriate. Subject to prior review by the City or its
Oversight Agent on the City's behalf, the Borrower will provide the Trustee with a schedule of
the Fees and Charges to be paid by the Borrower, and of each revision of such schedule, and
shall require the Borrower to make payment of such Fees and Charges directly to the Trustee.
The Trustee will promptly deposit all such Fees and Charges so collected in the Administration
Fund. The Trustee will promptly advise the City of each and every failure of the Borrower to
make payment of Fees and Charges when due.
Modification of Deed of Trust Terms. The City will not consent to the modification of,
or modify, the rate or rates of interest of, or the amount or time of payment of any installment of
principal of or interest on any Loan on the Project, or the amount or time of payment of any Fees
and Charges payable with respect to such Loan, or the security for or any terms or provisions of
the Loan on the Project or the Deed of Trust securing the same in a manner detrimental to the
Trustee or the Bondowners.
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Prepayments. The City shall not accept, nor permit the Trustee to accept a Prepayment
from the Borrower, unless a Coverage Requirement Certificate is provided to the Trustee which,
in addition to containing the requirements of the Loan Agreement, also shows that the proceeds
of such prepayment received by the City shall be in an amount not less than the aggregate of (i)
the amount to be prepaid; (ii) any interest and Fees and Charges on the Loan accrued through the
date of receipt of the proceeds of the Prepayment remaining unpaid; (iii) to the extent not
otherwise paid by the Borrower, the interest that would accrue on the Bonds of such maturity or
maturities as are to be designated by the City pursuant to the Indenture to be purchased or
redeemed with the proceeds of such Prepayment from the date of receipt thereof by the City until
the applicable optional redemption date of the Bonds so to be purchased or redeemed; (iv) the
redemption premium payable on the next applicable optional redemption date on the Bonds so to
be purchased or redeemed, if any; and (v) the costs and expenses of the City in effecting the
purchase or redemption of such Bonds, less the sum of (A) the amount of applicable moneys
available for withdrawal from the Senior Bonds Debt Service Reserve Fund and the Senior
Bonds Debt Service Fund and application to the purchase or redemption of such Series A Bonds
and the Series B Bonds Debt Service Fund with respect to the application to the purchase or
redemption of the Series B Bonds in accordance with the terms and provisions of the Indenture,
as determined by the City, and (B) the amount of any other legally available funds of the City
transferred or directed by the City to be transferred to the applicable Redemption Fund in
connection with such purchase or redemption.
Disposition of Net Proceeds and Prepayments. Net Proceeds constituting proceeds of a
condemnation award, sale of land, or casualty insurance claim with respect to the Project shall be
deposited in a special restoration account to be established and held by the Trustee for the Project
and the Trustee upon receipt of Net Proceeds shall give written notice to the City of such event.
Such amounts shall either be applied to the redemption of Bonds or the repair, replacement,
restoration or rebuilding of the Project or part thereof as determined in accordance with the
Indenture. Prior to the receipt of Net Proceeds by the Trustee, the Trustee will first receive a
written direction from the Borrower as to whether such proceeds shall be used to redeem the
Bonds or to rebuild the Project as set forth in the Loan Agreement. Upon receipt of such written
direction from the Borrower that such Net Proceeds will be used to redeem the Bonds, the
Trustee will notify the City and cause the Net Proceeds to be paid to the Trustee no more than 30
days from the date that such Net Proceeds will be used to redeem the Bonds.
Amounts in the special restoration account described above shall be applied to the repair,
replacement, restoration or rebuilding of the Project if the Borrower will deliver or cause to be
delivered to the Trustee within (90) days or such longer period as approved by the City of the
event giving rise to the Net Proceeds written notice of its determination that such proceeds may
be applied to the repair, replacement, restoration or rebuilding of the Project or part thereof in an
economical manner, and that such proceeds shall be sufficient, together with any other moneys
deposited into such special restoration account for such purpose together with (1) evidence of the
City's written consent thereto, and (2) a report of a management consultant to the effect that
following such repair or restoration, the tests set forth in the Loan Agreement with respect to
maximum coverage levels in the Coverage Requirement Certificate will be met. Upon
compliance with these conditions, the Trustee shall disburse the moneys so deposited for such
repair, replacement, restoration or rebuilding, but not in an aggregate amount exceeding the cost
thereof, upon receipt of a certificate of a Borrower Representative approved by the Oversight
Agent, with a copy to the City, stating (i) the amount to be paid, (ii) the name of the person to
which payment is to be made, and (iii) that such amount, together with all prior payments from
such account, do not exceed the cost of such repair, replacement, restoration or rebuilding;
provided that prior to making any such payments, the Trustee shall first have received a
certificate of a Borrower Representative approved by the Oversight Agent, with copies to the
City, stating (i) the estimated cost of such repair, replacement, restoration or rebuilding, (ii) that
such repair, replacement, restoration or rebuilding is, in the signer's opinion, economically
21
practicable with the proceeds of such condemnation award, sale of land or hazard insurance
claim, and other moneys, if any, deposited in such account, and (iii) that the plans and
specifications, if any, prepared for such repair, replacement, restoration and rebuilding have been
approved by the City. All disbursements made by the Trustee pursuant to such Borrower's
Certificates shall be presumed to be made properly, and the Trustee shall not be required to see to
the application of any payments so made or inquire into the purposes for which such
disbursements are made.
Any amounts remaining in a special restoration account and not required for the repair,
replacement, restoration or rebuilding of the Project for which such special restoration account
was established, all other Net Proceeds and Prepayments, less the cost and expenses of the City
incurred in collecting the same and in effecting the purchase or redemption of the Bonds to be
purchased or redeemed, shall be deposited in the Senior Bonds Redemption Fund or the Series B
Bonds Redemption Fund, as appropriate, and shall be applied to the purchase, payment,
retirement or redemption of Bonds in accordance with the provisions of the Indenture, provided,
however, that any portion of such Net Proceeds or Prepayment which represents due and unpaid
principal of, or interest on, or Fees and Charges with respect to, the Loan in each case as
determined by the City in an Officer's Certificate delivered to the Trustee, shall be deposited in
the Revenue Fund in such amount, if any, as shall be set forth in such Certificate.
Enforcement and Foreclosure of Deed of Trust. The City will diligently enforce, and take
all reasonable action necessary for the enforcement of all terms, covenants and conditions of the
Deed of Trust, including the prompt payment of Revenues.
Whenever it shall be necessary in order to protect and enforce the rights of the City under
the Deed of Trust securing the Loan and to protect and enforce the rights and interest of
Bondowners under the Indenture, the City shall commence foreclosure proceedings or pursue
other appropriate remedies against the Borrower in default under the provisions of the Deed of
Trust and, in protection and enforcement of its rights under the Deed of Trust, may bid for and
purchase the Project at any foreclosure or other sale thereof and pursuant thereto or otherwise
acquire and take possession of the Project.
The City (and the Trustee, if acting on behalf of the City in enforcing the Deed of Trust)
shall be entitled to payment of all of its costs incurred in connection with enforcement of the
Deed of Trust, including, but not limited to, legal fees and expenses, from Revenues prior to the
use of Revenues for any other purpose under the Indenture.
The covenants set forth in the preceding three paragraphs shall be for the benefit of the
Series A Bonds so long as any Series A Bonds remain Outstanding. After the Series A Bonds
have been paid in full, the covenants set forth in the preceding three paragraphs shall then benefit
the Series B Bonds. Tlie Trustee and all owners of Series B Bonds shall be deemed to have
expressly accepted this limitation with respect to being beneficiaries under the Deed of Trust as
set forth in the Indenture and the interests of the Series B Bonds Owners therein have been
expressly subordinated to the rights of the Series A Bonds, all as further described in the
Indenture.
Accounts and Reports. The Trustee will keep, or cause to be kept, proper books of record
and account in which complete and correct entries shall be made of its transactions and all Funds
and Accounts established by or maintained pursuant to the Indenture, which will at all times
during normal business hours be subject to inspection by the City, the Trustee, the Borrower and
the Owners of an aggregate of not less than five percent (5 %) in Principal Amount of the Series
A Bonds then Outstanding or their agents or representatives duly authorized in writing.
22
The City, or the Oversight Agent on behalf of the City, shall, upon receipt from the
Borrower of sufficient moneys shall furnish, without charge, upon written request of any
Bondowner, to such Bondowner, (i) a report showing, for the Fiscal Year, with respect to the
Bonds, outstanding balances by maturity, redemption history including redemption dates,
amount, source of funds, and distribution of the call to the maturities, (ii) a report showing the
current status of insurance coverages with respect to the Project, and (iii) the most currently
available annual report submitted by the Borrower. For the purposes of this paragraph,
" Bondowner" shall mean, in addition to the registered owner of any Bond, any person or entity
that claims in writing to the reasonable satisfaction of the City to be a beneficial holder of Bonds
and specifically requests that reports be sent to it.
Creation of Liens. The City will not issue any bonds or other evidences of indebtedness,
other than the Bonds, secured by a pledge of the proceeds, moneys, rights, interests and
collections pledged or held aside by the City or by a Fiduciary under the Indenture and, except as
may be otherwise provided in the Indenture or a Supplemental Indenture with respect to any
supplemental security, shall not create or cause to be created any lien or charge on proceeds,
moneys, rights, interests and collections or such moneys on a subordinate, parity or senior basis
to the lien created by the Indenture for the benefit of the Series A Bonds; provided, however, that
nothing in the Indenture will prevent the City from issuing evidences of indebtedness secured by
a pledge of such proceeds, moneys, rights, interests and collections to be derived on and after
such date as the Senior Bonds Trust Estate and the Series B Bonds Trust Estate shall be
discharged and satisfied as provided in the Indenture or from issuing notes or bonds of the City
secured by assets and revenues of the City other than the Trust Estate.
Tax Covenants. The City covenants that it will at all times do and perform all acts and
things permitted by law and necessary or desirable in order to assure that interest paid on the
Bonds be and remain excluded from gross income for federal income tax purposes.
The City covenants and agrees that it will not make or permit any use of the proceeds of
the Bonds or other funds of the City which would cause the Bonds to be "arbitrage bonds" within
the meaning of Section 148(a) of the Code, and further covenants that it will observe and not
violate the requirements of Sections 145 and 148 of the Code. The Trustee will be entitled to
receive and to rely upon a Counsel's Opinion as to the conformity of any use or proposed use of
the proceeds of the Bonds with the requirements of said Sections 145 and 148 of the Code.
Arbitrage Covenants; Rebate Fund. Moneys and securities held by the Trustee in the
Rebate Fund are not pledged or otherwise subject to any security interest in favor of the Trustee
to secure the Bonds or any other payments required to be made under the Indenture or any other
document executed and delivered in connection with the issuance of the Bonds.
H�
Moneys in the Rebate Fund shall be held separate and apart from all other Funds and
Accounts established under the Indenture and shall be separately invested and reinvested by the
Trustee, solely at the written direction of the City, in Qualified Investments. The interest
accruing thereon and any profit realized therefrom shall be credited to the Rebate Fund, and any
loss resulting therefrom shall be charged to the Rebate Fund. The Trustee shall sell and reduce to
cash a sufficient amount of such Qualified Investments whenever the cash balance in the Rebate
Fund is insufficient for its purposes.
Absent a Counsel's Opinion that the exclusion from gross income for federal income tax
purposes of interest on the Bonds will not be adversely affected, the City shall cause the
Borrower to deposit in the Rebate Fund such amounts as are required to be deposited therein
pursuant to the Indenture and the Tax Certificate. All money at any time deposited in the Rebate
Fund shall be held by the Trustee in trust for payment to the United States Treasury.
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In order to provide for the administration of the Arbitrage Covenants of the Indenture, the
Borrower shall provide for the employment of independent attorneys, accountants and
consultants (the "Rebate Analyst ") compensated on such reasonable basis as the Borrower may
deem appropriate (or in the absence of such Rebate Analyst, the Trustee shall cause to be
administered the requirements provided in the Indenture) and in addition and without limitation
of the provisions of the Indenture, the Trustee and the City may rely conclusively upon and be
fully protected from all liability in relying upon the opinions, determinations, calculations and
advice of such Rebate Analyst employed under the Indenture.
Supplemental Indentures
The City may adopt, without the consent of or notice to Bondowners, at any time or from
time to time Supplemental Indentures for any one or more of the following purposes, and any
such Indenture or Supplemental Indenture will become effective in accordance with its terms
upon the filing with the Trustee of a copy thereof certified by an Authorized Officer: (1) to add
additional covenants and agreements of the City for the purpose of further securing the payment
of the Bonds, provided such additional covenants and agreements are not contrary to or
inconsistent with the covenants and agreements of the City contained in the Indenture; (2) to
prescribe further limitations and restrictions upon the issuance of Bonds and the incurring of
indebtedness by the City; (3) to surrender any right, power or privilege reserved to or conferred
upon the City by the terms of the Indenture, provided that no such surrender is contrary to or
inconsistent with the covenants and agreements of the City contained in the Indenture; (4) to
confirm as further assurance any pledge under, and the subjection to any lien, claim or pledge
created or to be created by, the provisions of the Indenture; (5) to modify any of the provisions of
the Indenture or any previously adopted Supplemental Indenture in any other respects, provided
that such modifications shall not be effective until after all Bonds Outstanding as of the date of
adoption of such Indenture or Supplemental Indenture shall cease to be Outstanding, and all
Bonds issued after the date of adoption of such Indenture shall contain a specific reference to the
modifications contained in such Indenture; (6) to amend the Indenture to add such provisions as
may be necessary or advisable in connection with the substitution of any additional security;
provided that any such modification does not materially adversely affect interests of any
Bondholders; (7) to amend the Indenture in any and all respects as may be necessary or advisable
to implement any amendment of the Code or the provision of any tax legislation enacted in place
thereof, (8) to make such amendments to add such other provisions in regard to matters or
questions arising out of the Indenture which shall not materially adversely affect the interests of
the Owners of the Bonds affected thereby; or (9) with the consent of the Trustee, to cure any
ambiguity or defect or inconsistent provision in the Indenture or to insert such provisions
clarifying matters or questions arising under the Indenture as are necessary or desirable; provided
that any such modifications do not materially adversely affect the interests of any Bondowners.
Powers of Amendment
Any modification or amendments of the Indenture and of the rights and obligations of the
City and of the Owners of the Bonds in any particular may be made by a Supplemental
Indenture, with, except as set forth in the preceding section entitled "Supplemental Indentures ",
the written consent required by the Indenture, of the Owners of (i) at least two - thirds in Principal
Amount of the Bonds Outstanding at the time such consent is given; and (ii) at least two- thirds in
Principal Amount of the Series A Bonds Outstanding at the time such consent is given; provided,
however, that if any such modification or amendment will, by its terms, not take effect so long as
any series of Bonds of any maturity remain Outstanding, the consent of the Owners of such
series of the Bonds and maturity shall not be required and such series of Bonds shall not be
deemed to be Outstanding for the purpose of any calculation of the Principal Amount of
Outstanding Bonds under the Indenture. In the event that the Supplemental Indenture shall
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contain provisions which affect the rights and interest of one series of Bonds (but not the other),
then the Owners of not less than two- thirds of the Principal Amount of the series of Bonds which
are affected by such changes shall have the right from time to time to consent to and approve the
execution by the City of any Supplemental Indenture deemed necessary or desirable by the City
for the purposes of modifying, altering, amending, supplementing or rescinding, in any
particular, any of the terms or provisions contained in the Indenture and affecting only the Bonds
of such series; provided, however, unless approved by the Owners of all of the Bonds of all
affected series then Outstanding, nothing therein shall permit or be construed as permitting such
items as further provided in the Indenture. No such modification or amendment shall permit a
change in the terms of redemption or maturity of the principal of any Outstanding Bond or of any
installment of interest thereon or a reduction in the Principal Amount or the Redemption Price
thereof or in the rate of interest thereon without the consent of the Owner of such Bond, or shall
reduce the percentages of Bonds the consent of the Owners of which is required to effect any
such modification or amendment. The Trustee may in its discretion determine whether or not in
accordance with the foregoing provisions Bonds of any particular maturity would be affected by
any modification or amendment of the Indenture and any such determination shall be binding and
conclusive on the City and all Owners of Bonds. The Trustee may receive an opinion of counsel,
including a Counsel's Opinion, as conclusive evidence as to whether Bonds of any particular
maturity would be so affected by any such modification or amendment of the Indenture.
Series A Bonds Events of Default
Each of the following events is declared under the Indenture to be a "Senior Bonds Event
of Default," that is to say; if
(a) the City shall fail to make payment of the principal or Redemption Price
of, or Sinking Fund Installment on, any Series A Bond from the Series A Bond Trust
Estate after the same shall become due, whether at maturity or upon call for redemption,
or otherwise; or
(b) the City shall fail to make payment of interest on any Series A Bond from
the Series A Bond Trust Estate when and as the same will become due; or
(c) the City shall default in the performance or observance of any other of the
covenants, agreements or conditions on its part in the Indenture, any Supplemental
Indenture, or in the Series A Bonds contained, and such default shall continue for a
period of ninety (90) days after written notice thereof by the Trustee or the Owners of not
less than five percent (5 %) in Principal Amount of the Outstanding Series A Bonds.
Series B Bonds Events of Default
say; if
Each of the following events is declared a "Series B Bonds Event of Default," that is to
(i) Residual Revenues are not applied to the payment of the principal of,
Redemption Price of, or Sinking Fund Installment on, any Series B Bonds after the same
shall become due, whether at maturity or upon call for redemption or otherwise, to the
extent of such Residual Revenues available; or
(ii) Residual Revenues are not applied to the payment of interest on any
Series B Bonds when and as the same shall become due to the extent of such Residual
Revenues available; or
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(iii) the City shall default in the performance or observance of any other of the
covenants, agreements, or conditions on its part in the Series B Bonds contained, and
such default shall continue for a period of ninety (90) days after written notice thereof by
the Trustee or the Holders of not less than five percent (5 %) in Principal Amount of the
Outstanding Series B Bonds; or
(iv) the City shall fail to pay the principal of (including any deferred targeted
mandatory sinking fund redemption amount) or interest on the Series B Bonds on the
final maturity date thereof.
Remedies
Upon the happening and continuance of any Senior Bonds Event of Default or any Series
B Bonds Event of Default, then, and in each such case, the Trustee may proceed, and upon the
written request of (i) the Owners of not less than twenty -five percent (25 %) in Principal Amount
of the Outstanding Series A Bonds in the case of a Senior Bonds Event of Default, or (ii) the
Owners of not less than twenty -five percent (25 %) in Principal Amount of the Outstanding Series
B Bonds, together with the consent of the Owners of at least twenty-five percent (25 %) in
Principal Amount of the Series A Bonds, in the case of a Series B Bonds Event of Default, shall,
subject to the Indenture, proceed in its own name, to protect and enforce its rights and the rights
of the Bondowners by such of the following remedies as the Trustee shall deem most effectual to
protect and enforce such rights: (a) by suit, action or proceeding, enforce all rights of the
Bondowners, including the right to require the Borrower to receive and collect Pledged Revenues
adequate to carry out the covenants and agreements as to, and pledge of, such Pledged Revenues,
and to require the Borrower to carry out any other covenant or agreement with Bondowners and
to perform its duties under the Loan Agreement; (b) by bringing suit upon the Bonds; (c) by
action or suit, require the Borrower to account as if the Borrower were the trustee of an express
trust for the Owners of the Bonds; or (d) by action or suit, enjoin any acts or things which may be
unlawful or in violation of the rights of the Owners of the Bonds; provided, however, so long as
the Series A Bonds are Outstanding, the Trustee in so acting shall act solely for the benefit of the
Series A Bondholders and the Series B Bondholders shall have no interest in or right to direct
remedies with respect thereto.
Upon the happening and continuance of any Series B Bonds Event of Default specified in
clause (a) or (b) under the heading "Series B Bonds Events of Default" above, then, and in each
such case, the Trustee may, and upon the written request of the Owners of not less than twenty-
five percent (25 %) in Principal Amount of the Outstanding Series B Bonds, shall declare all
Series B Bonds due and payable, and if all defaults shall be made good, then, with the written
consent of the Owners of not less than twenty-five percent (25 %) in Principal Amount of the
Outstanding Series B Bonds, annul such declaration and its consequences.
If the Series A Bonds are no longer outstanding, upon the occurrence of a Series B Bonds
Event of Default specified in (i) or (ii) under the heading "Series B Bonds Events of Default"
above, then, and in each such case, the Trustee may, and upon the written request of the Owners
of not less than twenty-five percent (25 %) in Principal Amount of the Outstanding Series B
Bonds, shall declare all Series B Bonds due and payable, and if all defaults shall be made good,
then, with the written consent of the Owners of not less than twenty-five percent (25 %) in
Principal Amount of the Outstanding Series B Bonds, annual such declaration and its
consequences.
In the enforcement of any remedy under the Indenture, the Trustee will be entitled to sue
for, enforce payment on and receive any and all amounts then or during any default becoming,
and any time remaining, due from the Borrower for principal, Redemption Price, interest or
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otherwise, under any provision of the Indenture, the Loan Agreement or of Bonds, and unpaid,
with interest on overdue payments at the rate or rates of interest specified in the Bonds, together
with any and all costs and expenses of collection and of all proceedings thereunder and under the
Bonds, including reasonable attorneys' fees.
Priority of Payments After Senior Bonds Event of Default
In the event that the funds held by the Trustee and Paying Agents will be insufficient for
the payment of principal or Redemption Price of and interest then due on the Series A Bonds,
such funds (other than funds held for the payment or redemption of particular Series A Bonds
which have theretofore become due at maturity or by call for redemption) and any other moneys
received or collected by the Trustee acting pursuant to the Indenture, after making provision for
the payment of any expenses necessary in the opinion of the Trustee or the City to protect the
interests of the Owners of the Series A Bonds, and for the payment of the fees, charges and
expenses and liabilities incurred and advances made by the Trustee or the City in the
performance of their duties under the Indenture, including reasonable attorneys' fees, will be
applied as follows (provided that moneys in the Senior Bonds Debt Service Fund and the Senior
Bonds Debt Service Reserve Fund shall not be applied to make payments with respect to the
Series B Bonds, and provided further that moneys in the Series B Bonds Debt Service Fund shall
not be applied to make payments with respect to the Series A Bonds):
(a) Unless the principal of all the Series A Bonds shall not have become or
have been declared due and payable,
First: To the payment to the persons entitled thereto of all installments of
interest then due on the Series A Bonds in the order of the maturity of such
installments, and, if the amount available shall not be sufficient to pay in full any
installment, then to the payment thereof ratably, according to the amounts due on
such installment, to the persons entitled thereto, without any discrimination or
preference; and
Second: To the payment to the persons entitled thereto of the unpaid
Principal Amounts or Redemption Price of any Series A Bonds which shall have
become due, whether at maturity or by call for redemption, in the order of their
due dates and, if the amounts available shall not be sufficient to pay in full all the
Series A Bonds due on any date, then to the payment thereof ratably, according to
the amounts of Principal Amounts or Redemption Price due on such date, to the
persons entitled thereto, without any discrimination or preference.
Third: To the payment to the persons entitled thereto of all installments of
interest tlien due on the Series B Bonds in the order of the maturity of such
installments and pro rata among Series B Bonds with respect to installments with
the same maturity, and, if the amount available shall not be sufficient to pay in
full any installment, then to the payment thereof ratably, according to the amounts
due on such installment, to the persons entitled thereto, without any
discrimination or preference; and
Fourth: To the payment to the persons entitled thereto of the unpaid
Principal Amounts or Redemption Price of any Series B Bonds which shall have
become due, whether at maturity or by call for redemption, in the order of their
due dates and, if the amounts available shall not be sufficient to pay in full all the
Series B Bonds due on any date, then to the payment thereof ratably, according to
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the amounts of Principal Amounts or Redemption Price due on such date, to the
persons entitled, without any discrimination or preference.
(b) If the principal of all of the Series A Bonds shall have become or have
been declared due and payable, to the payment of the principal of and interest then due
and unpaid upon the Series A Bonds without preference or priority of principal over
interest or of interest over principal, or of any installment of interest over any other
installment of interest, or of any Series A Bond over any other Series A Bond, ratably,
according to the amounts due respectively for principal and interest, to the persons
entitled thereto without any discrimination or preference except as to any difference in the
respective rates of interest specified in the Series A Bonds. Moneys remaining after
satisfying the payments as provided in this paragraph (b) shall be applied proportionately
to the payment of the principal of and interest then due and unpaid upon the Series B
Bonds without preference or priority of principal, or of any installment of interest over
any other installment of interest, ratably, according to the amounts due respectively for
principal and interest, to the persons entitled thereto without any discrimination or
preference.
Money to be applied by the Trustee as set forth above shall be applied at such times as the
Trustee shall determine.
Priority of Payment After Series B Bonds Event of Default
In the event that the funds held by the Trustee shall be insufficient for the payment of
principal or Redemption Price of and interest then due on the Series B Bonds, such funds derived
from actions taken in connection with a Series B Bonds Event of Default only, and any other
moneys received or collected by the Trustee and the City acting pursuant to the Indenture, after
making provision for the payment of any expenses necessary in the opinion of the Trustee and
the City to protect the interests of the Holders of the Bonds, and for the payment of the fees,
charges and expenses and liabilities incurred and advances made by the Trustee or the City in the
performance of their duties under the Indenture, shall be applied as follows:
First: To the payment to the persons entitled thereto of all installments of interest
then due on the Series B Bonds in the order of the maturity of such installments, and, if
the amount available shall not be sufficient to pay in full any installment, then to the
payment thereof ratably, according to the amounts due on such installment, to the persons
entitled thereto, without any discrimination or preference; and
Second: To the payment to the person entitled thereto of the unpaid Principal
Amount or Redemption Price of any Series B Bonds which shall have become due,
whether at maturity or by call for redemption, in the order of their due dates and, if the
amounts available shall not be sufficient to pay in full all the Series B Bonds due on any
date, then to the payment thereof ratably, according to the amounts of Principal Amounts
or Redemption Price due on such date, to the persons entitled thereto, without any
discrimination or preference. Notwithstanding the foregoing provisions, the Series B
Bonds are subject to cancellation as a result of a deemed redemption pursuant to the
Indenture. See "The Series B Bonds Redemption — Deemed Redemption of Series B
Bonds" herein.
Whenever moneys are to be applied by the Trustee as set forth above, such moneys shall
be applied by the Trustee at such times, and from time to time, as the Trustee in its sole
discretion shall determine.
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Limitations of Rights of Bondowners
Anything in the.Indenture to the contrary notwithstanding, the Owners of a majority in
Principal Amount of the (i) Series A Bonds, so long as the Series A Bonds are Outstanding and
(ii) if the Series A Bonds are not Outstanding, then the Series B 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 to be taken by the
Trustee hereunder, provided that such direction shall not be otherwise than in accordance with
law or the provisions of the Indenture and that the Trustee shall have the right to decline to
follow any directions which in the opinion of the Trustee would be unjustly prejudicial to
Bondowners not parties to such direction.
No Owner of any Bond will have any right to institute any suit, action or other
proceedings hereunder, or for the protection or enforcement of any right under the Indenture or
any right under law, unless such Owner will have given to the Trustee written notice of the Event
of Default or breach of duty on account of which suit, action or proceeding is to be taken, and
unless the Owners of not less than twenty -five percent (25 %) in Principal Amount of the Bonds
of the series affected then Outstanding shall have made written request of the Trustee after the
right to exercise such powers or right of action, as the case may be, will have accrued, and will
have afforded the Trustee a reasonable opportunity either to proceed to exercise the powers in the
Indenture granted or granted under law or to institute such action, suit or proceeding in its name
and unless, also, there shall have been offered to the Trustee reasonable security and indemnity
against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee shall
have refused or neglected to comply with such request within a reasonable time; and such
notification, request and offer of indemnity are in every such case at the option of the Trustee
conditions precedent to the execution of the powers under the Indenture or for any other remedy
hereunder or under law.
It is understood and intended that no one or more Owners of the Bonds secured under the
Indenture shall have any right in any manner whatever by his or their action to affect, disturb or
prejudice the security of the Indenture, or to enforce any right hereunder or under law with
respect to the Bonds or the Indenture, except in the manner therein provided, and that all
proceedings shall be instituted, had and maintained in the manner herein provided and for the
benefit of all Owners of the Outstanding Bonds. The obligation of the City shall be absolute and
unconditional to pay the principal and Redemption Price of and interest on the Bonds to the
respective Owners thereof at the respective due dates thereof, and nothing in the Indenture will
affect or impair the right of action, which is absolute and unconditional, of such Owners to
enforce such payment.
Remedies Not Exclusive
No remedy conferred upon or reserved to the Trustee or to the Owners of the Bonds
under the Indenture is intended to be exclusive of any other remedy or remedies, and each and
every such remedy shall be cumulative and shall be in addition to any other remedy given under
the Indenture or now or hereafter existing at law or in equity or by statute.
Limited Liability of the City
The obligations of the City with respect to the Bonds and under the Indenture, the Loan
Agreement and the Regulatory Agreement are not general obligations of the City but are special,
limited obligations of the City payable by the City solely from the Trust Estate and are not a
debt, nor a loan of the credit, of the State or any of its political subdivisions, and the Bonds shall
not be construed to create any moral obligation on the part of the City, the State or any political
29
subdivision thereof with respect to the payment thereof; and the Bonds do not constitute an
indebtedness within the meaning of any constitutional or statutory debt limitation; and the
issuance of the Bonds shall not directly or indirectly or contingently obligate the City, the State
or any political subdivision thereof to levy or to pledge any form of taxation whatever therefor or
to make any appropriation for their payment, and no Bondholder has the right to compel any
exercise of any taxing power of the City or the State;
Nothing contained in the Bonds or in the Indenture shall be considered as assigning or
pledging any funds or assets of the City other than the Trust Estate; and neither the faith and
credit of the City, the State nor of any other political subdivision of the State are pledged to the
payment of the principal or of interest on the Bonds;
No failure of the City to comply with any term, condition, covenant or agreement in the
Indenture or in any document executed by the City in connection with the Project, or the
issuance, sale and delivery of the Bonds shall subject the City to liability for any claim for
damages, costs or other charge except to the extent that the same can be paid or recovered from
the Trust Estate; and the City shall not be required to advance any moneys derived from any
source other than the Trust Estate for any of the purposes of the Indenture, the Loan Agreement
or the Regulatory Agreement, whether for the payment of the principal or redemption price of, or
interest on, the Bonds, the payment of any fees or administrative expenses or otherwise.
It is recognized that, notwithstanding any other provision of the Indenture, neither the
Borrower, the Trustee nor any Bondholder shall look to the City for damages suffered by the
Borrower, the Trustee or such Bondholder as a result of the failure of the City to perform any
covenant, undertaking or obligation under the Indenture, the Loan Agreement, the Regulatory
Agreement, the Bonds or any of the other documents, or as a result of the incorrectness of any
representation made by the City in any of such documents, nor for any other reason. Although
the Indenture recognizes that such documents shall not give rise to any pecuniary liability of the
City, nothing contained in the Indenture shall be construed to preclude in any way any action or
proceeding (other than that element of any action or proceeding involving a claim for monetary
damages against the City) in any court or before any governmental body, agency or
instrumentality or otherwise against the City or any of its officers or employees to enforce the
provisions of any such documents which the City is obligated to perform and the performance of
which the City has not assigned to the Trustee or any other person; provided, however, that, as a
condition precedent to the City proceeding pursuant to the Indenture, the City shall have received
satisfactory indemnification.
No Recourse Under the Indenture or on the Bonds. All covenants, stipulations, promises,
agreements and obligations of the City contained in the Indenture shall be deemed to be
covenants, stipulations, promises, agreements and obligations of the City and not of any Council
member, officer or employee of the City in his individual capacity, and no recourse shall be had
for the payment of the principal or Redemption Price of or interest on the Bonds or for any claim
based thereon or on the Indenture by any Council member, officer or employee of the City or any
person executing the Bonds.
THE LOANAGREEMENT
The following is a summary of the Loan Agreement relating to the Loan. This summary
does not purport to be complete and is qualified in its entirety by reference to the Loan
Agreement, which is available from the City upon request, and to Appendix B for the definition
of certain terms used herein. Any capitalized terms not otherwise defined herein or in Appendix
B are as defined in the Indenture or the Loan Agreement.
30
Amount and Source of Loan
The City makes to the Borrower and agrees to fund, and the Borrower accepts from the
City, upon the terms and conditions set forth in the Loan Agreement and in the Indenture, the
Loan in an amount equal to the principal amount of the Bonds and agrees that the proceeds of the
Loan will be applied and disbursed in accordance with the Indenture and written instructions of
the City provided to the Trustee on the Closing Date and when the Trustee acknowledges receipt
of the proceeds of the Bonds and the conditions specified in the Loan Agreement and in the
Indenture have been satisfied.
Loan Repayment
The Loan will be evidenced by the Note which shall be executed by the Borrower in the
form attached to the Loan Agreement. The Borrower agrees to pay to the Trustee, on behalf of
the City, the principal of, premium (if any) and interest on the Loan at the times, in the manner,
in the amount and at the rates of interest provided in the Note and the Loan Agreement. To
secure its obligations to repay the Loan, the Borrower will grant the City a security interest in the
Project pursuant to the terms of the Deed of Trust and will take all actions necessary to perfect
such security interest. In order to satisfy its obligations under the Loan Agreement, the Borrower
agrees to pay the Trustee not later than the tenth day of each month, commencing April 10, 2000,
all Net Operating Revenues from each preceding month. Any Net Operating Revenues received
by the Borrower after the 10th day of each month shall be transferred to the Trustee on the 10th
day of the immediately following calendar month. Notwithstanding the foregoing, so long as
Borrower's monthly deposits of Net Operating Revenues with the Trustee are at least equal to
said month's portion of items (a) through (f) of Section 5.7 of the Indenture and items (h) and (i)
of Section 5.7 of the Indenture, then the Borrower may retain from Net Operating Income for
such month the Administration Fee for such month.
The Borrower agrees to pay, in repayment of the Loan, all Net Operating Revenues for
the immediately preceding calendar month to the Trustee for the account of the City until the
principal of, premium (if any) and interest on the Bonds shall have been paid or provision for
payment shall have been made in accordance with the Indenture, in federal or other immediately
available funds at the corporate trust office designated by the Trustee, on the tenth day of each
month an amount equal to (i) the interest on the Bonds which will become due on each Interest
Payment Date and (ii) the principal of and redemption premium, if any, on the Bonds which will
become due (whether at maturity, by prior redemption or otherwise) on each Interest Payment
Date. In addition, the Borrower agrees to repay the principal of the Loan, plus interest accrued
thereon until the date fixed for redemption of the Bonds to be redeemed with such repayment, in
the amounts and at the times specified in the Loan Agreement.
In the event the l Net Operating Revenues deposited with the Trustee in any two
consecutive months are less than 90% of the amount set forth in the annual budget as described
in the Loan Agreement, the Borrower shall, concurrently with its transfer of the amount of Net
Operating Revenues to the Trustee, provide notice of a written explanation for the variance to the
City and the Oversight Agent. In the event the Net Operating Revenues deposited in the
succeeding month are less than 90% of the amount set forth in the annual budget, then the
Oversight Agent shall notify the City and the Trustee and, upon written order of the City
determined in its discretion based on the advice of the Oversight Agent and such other
information as the City may determine to be appropriate, all Operating Revenues of the Project
shall be deposited and held by the Trustee and the Trustee shall deposit the budgeted Operation
and Maintenance Costs of the Project, as contemplated in the annual budget, in a depository
account for the benefit of the Borrower's operation and maintenance of the Project. The City,
based on such advice of the Oversight Agent as it may deem appropriate, or based on a request of
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a majority in Principal Amount of the Bonds then Outstanding, shall have the right to direct the
Borrower to remove the Project Manager and approve a new Project Manager acceptable to the
City. Upon receipt by the Trustee of a certificate from the Oversight Agent which certifies that
Net Operating Revenues in a subsequent month are either (i) at least equal to 90% or more of the
amount set forth in the annual budget described in the Loan Agreement or (ii) equal or greater
than the amount needed to make all payments on the Bonds for the immediately preceding
month, the Trustee shall no longer be required to hold the Operating Revenues as set forth above
and shall take all necessary action to transfer the receipt of Operating Revenues to another
financial institution as directed by the Borrower.
The Borrower further agrees to pay or cause to be paid all taxes and assessments, general
or special, including, without limitation, all ad valorem taxes, concerning or in any way related to
the Project, or any part thereof, and any other governmental charges and impositions whatsoever,
foreseen or unforeseen, and all utility and other charges and assessments; provided, however, that
the Borrower reserves the right to contest in good faith the legality of any tax or governmental
charge concerning or in any way related to the Project.
The Borrower agrees to timely pay the premiums or other amounts required to maintain
the insurance specified in the Loan Agreement.
The Borrower further agrees to pay, until the principal of and interest on all Outstanding
Bonds shall have been fully paid, to the Trustee for deposit in the Accounts of the Administration
Fund - stablished by the Indenture such amounts as the Trustee may from time to time request for
the fees and ordinary expenses of the Trustee, the annual fees and expenses of the Oversight
Agent and the Program Administrator as provided in the Administration Agreement, and into the
Borrower Administration Fee Account of the Administration Fund the Administration Fee,
pursuant to the Indenture; provided that the Trustee fees and expenses incurred in connection
with the enforcement of the Regulatory Agreement and reasonable compensation or
reimbursement for extraordinary services, indemnification and expenses of the Trustee, as
required by the Indenture, shall be paid upon demand of the Trustee. The Borrower agrees to pay
the cost of any Rebate Analyst in connection with the calculation of rebate (within the meaning
of Section 148(f) of the Code) and to pay to the City all amounts required to be remitted to the
United States.
The Borrower agrees to the establishment of the Surplus Fund into which all remaining
Net Operating Revenues will be deposited. Amounts deposited in the Surplus Fund shall be used
(i) until such time as the required deposits in the Repair and Replacement Fund are satisfied, to
satisfy the required funding in the Repair and Replacement Fund, (ii) to make the deposits to the
Series B Bonds Debt Service Fund; (iii) for the purposes set forth in the Affordable Housing
Agreement, and (iv) subs9quently to be applied for any lawful purposes for the benefit of the
Project.
Nature of the Borrower's Obligations
The Borrower shall repay the Loan pursuant to the terms of the Note irrespective of any
rights of set -off, recoupment or counterclaim the Borrower might otherwise have against the
City, the Trustee or any other person. The Borrower will not suspend, discontinue or reduce any
such payment or (except as expressly provided in the Loan Agreement) terminate the Loan
Agreement for any cause, including, without limiting the generality of the foregoing, (i) any
delay or interruption in the operation of the Project; (ii) the failure to obtain any permit, order or
action of any kind from any governmental agency relating to the Loan or the Project; (iii) any
event constituting force majeure; (iv) any acts or circumstances that may constitute commercial
frustration of purpose; (v) the termination of the Loan Agreement; (vi) any change in the laws of
32
the United States of America, the State or any political subdivision thereof; or (vii) any failure of
the City to perform or observe any covenant whether expressed or implied, or to discharge any
duty, liability or obligation arising out of or connected with the Note, the Loan Agreement, the
Regulatory Agreement or any other contract with the Borrower; it being the intention of the
parties that, as long as the Note or any portion thereof remains outstanding and unpaid, the
obligation of the Borrower to repay the Loan and provide such moneys shall continue in all
events. The provisions of Loan Agreement summarized in this paragraph shall not be construed
to release the City from any of its obligations under the Loan Agreement, the Trustee from any of
its obligations under the Indenture, or, except as provided in the Loan Agreement, to prevent or
restrict the City from asserting any rights which it may have against the Borrower under the Note
or the Indenture or under any provision of law or to prevent or restrict the Borrower, at its own
cost and expense, from prosecuting or defending any action or proceeding by or against the City
or the Trustee or taking any other action to protect or secure its rights.
Borrower Not to Dispose of Assets; Conditions Under Which Exceptions
Permitted
The Borrower agrees that during the term of the Loan Agreement it will not dispose of all
or substantially all of its assets nor consolidate with nor merge into any entity unless: (i) the
acquirer of its assets or the entity with which it shall consolidate or into which it shall merge
shall be an organization described in Section 501(c)(3) of the Code that agrees to operate the
Project in a manner that does not constitute an unrelated trade or business of such organization or
a governmental unit (as described in Section 145 of the Code); (ii) such acquiring or remaining
entity shall assume in writing all of the obligations of the Borrower under the Loan Agreement,
the Regulatory Agreement, the Continuing Disclosure Agreement, the Note and the Deed of
Trust; (iii) the City, after having consulted with such counsel or advisor as deemed by the City to
be necessary, shall have consented in writing to such transfer, such consent not to be
unreasonably withheld; and (iv) the written instrument or instruments evidencing such
assumption are promptly provided to the Trustee.
In lieu of foreclosure with respect to the Deed of Trust, the Borrower has the right, upon
30 days prior written notice to the City, to convey to the City fee title to the Project, and to assign
to the City all of its rights and delegate all of its duties under the agreements relating thereto.
Notwithstanding any provision of the Loan Agreement, the Regulatory Agreement, the
Continuing Disclosure Agreement, the Note, the Deed of Trust, or the Indenture to the contrary,
in lieu of foreclosure with respect to the Deed of Trust, the Borrower shall have the right, upon
30 days prior written notice to the City, to convey to a designee of the City which is a 501(c)(3)
corporation duly authorized and empowered to undertake ownership of the Project, fee title to the
Project, and to assign all 9f its rights and delegate all of its duties under the Loan Agreement, the
Regulatory Agreement, the Continuing Disclosure Agreement, the Note and the Deed of Trust to
the City's designee, and the City agrees to cause such designee to accept such conveyance,
assignment and delegation at no cost to the City. At the time of such deed in lieu of foreclosure,
the Borrower shall confirm and warrant to the City and its designee that the Project is not subject
to any additional encumbrances and liens, including but not limited to, mechanics liens and other
liens and encumbrances, other than such permitted encumbrances provided in the Loan
Agreement as set forth in the title policy provided to the City as required under the Loan
Agreement. In addition, the Borrower covenants to execute and deliver all such agreements,
estoppels and additional instruments and perform such additional acts as may be necessary or
may reasonably be requested by the City, its designee, the Trustee or their agent in connection
with a deed in lieu of foreclosure as contemplated under the Loan Agreement.
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Cooperation in Enforcement of Regulatory Agreement
The Borrower cpvenants and agrees as follows: (a) to comply with all provisions of the
Regulatory Agreement; (b) to advise the City, the Trustee and the Program Administrator in
writing promptly upon learning of any default with respect to the covenants, obligations and
agreements of the Borrower set forth in the Regulatory Agreement; (c) upon written direction by
the City, the Program Administrator or the Trustee, to cooperate fully and promptly with the
City, the Program Administrator and the Trustee in enforcing the terms and provisions of the
Regulatory Agreement; and (d) to file in accordance with the time limits established by the
Regulatory Agreement all reports and certificates required thereunder.
Neither the Trustee nor the City shall incur any liability in the event of any breach or
violation of the Regulatory Agreement by the Borrower, and the Borrower agrees to indemnify
and hold harmless the City and the Trustee from any claim or liability, joint or several, for such
breach pursuant to the Loan Agreement.
Additional Instruments
The Borrower covenants to execute and deliver such additional instruments and to
perform such additional acts as may be necessary, in the opinion of the City or the Trustee, to
carry out the intent of the Loan and the Note or to perfect or give further assurances of any of the
rights granted or provided for in the Loan and the Note.
Books and Records; Annual Reports
The Borrower covenants to permit the City, the Oversight Agent, the Program
Administrator and the Trustee, or their duly authorized representatives, access to the books and
records of the Borrower pertaining to the Loan and the Project during normal business hours and
upon prior notice, and to make such books and records available for audit and inspection to the
City, the Oversight Agent, the Program Administrator, the Trustee and their duly authorized
representatives at reasonable times and under reasonable conditions.
At least 60 days prior to the beginning of each fiscal year of the Borrower, the Borrower
agrees to prepare an annual budget (either on a fiscal year or calendar year basis) and to submit
such budget for approval by the City and the Oversight Agent. Such annual budget shall provide
for Net Operating Revenues at least equal to (i) 1.25 times scheduled debt service on the Series A
Bonds in such fiscal year, and (ii) 1.15 times the aggregate scheduled debt service on the Series
A Bonds and the Series B Bonds in such fiscal year. Within 20 days of receiving such annual
budget, the City and the Oversight Agent shall provide comments and objections, if any
(including any suggested,'ehanges acceptable to the Oversight Agent), in writing to the Borrower.
The Borrower shall attempt in good faith to address comments or concerns of the City in its final
budget. The Borrower shall prepare a revised annual budget and provide such revised budget to
the City and the Oversight Agent for their review and comment. The Borrower shall provide a
copy of the final annual budget to the Trustee, the City and the Oversight Agent prior to the
beginning of the Borrower's fiscal year. In the event the annual budget as adopted does not
provide for the coverage set forth in the second sentence of this paragraph, then: (a) in the case of
a failure to meet the coverage requirement set forth in subsection (i) of said sentence, the Owners
of a majority in Outstanding Principal Amount of the Series A Bonds shall have the right, in
addition to all other rights provided under the Loan Agreement and the Indenture, to direct the
Borrower to remove the Project Manager and appoint a Project Manager acceptable to such
Owners; or (b) in a case of a failure to meet the coverage requirement set forth in subsection (ii)
of said sentence, the Owners of a majority in Outstanding Principal Amount of Series B Bonds
shall have the right, in addition to all other rights provided under the Loan Agreement and the
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Indenture, to direct the Borrower to remove the Project Manager and appoint a Project Manager
acceptable to such Owners.
Within 20 days after the last day of each quarter, the Borrower shall prepare a statement
for the immediately preceding quarter for review by the City and the Oversight Agent, which
shall include statement of income, balance sheet, cashflow, budget variances, occupancy rates,
rental activity and rental rates for the Project.
Notice of Certain Events
The Borrower covenants to advise the City and the Trustee promptly in writing of the
occurrence of any Event of Default under the Loan Agreement or Regulatory Agreement or any
event which, with the passage of time or service of notice, or both, would constitute an Event of
Default under the Loan Agreement, specifying the nature and period of existence of such event
and the actions being taken or proposed to be taken with respect thereto. In addition, the
Borrower covenants to advise the City, the Oversight Agent and the Trustee promptly in writing
of the occurrence of any default under the Loan Agreement or of the occurrence of an Act of
Bankruptcy.
Consent to Assignment
The City has made an assignment to the Trustee under the Indenture for the benefit of the
owners of the Bonds of all rights and interest of the City in and to the Loan Agreement (except
its rights under the Loan Agreement to be indemnified and to be paid its fees and expenses), the
Note, and the Deed of Trust; and the Borrower consents to all such assignments.
Title to the Project
The Borrower has fee title to the Project free and clear of any lien or encumbrance except
for (i) liens for non - delinquent assessments and taxes not yet due or which are being contested in
good faith by appropriate proceedings; (ii) the Regulatory Agreement; (iii) the Deed of Trust;
and (iv) the Second Deed of Trust. On or prior to the Closing Date as required by the Loan
Agreement, the Borrower shall cause to be delivered to the Trustee and the City one or more
ALTA title policies, insuring the first lien interests of the City and the Trustee as the insureds, as
their respective interests may appear under the Deed of Trust.
Operation of the Project
The operation of the Project in the manner contemplated on the Closing Date and as
described in the Loan Agteement do not conflict with any zoning, water or air pollution or other
ordinance, order, law or regulation applicable thereto; the Borrower will cause the Project to be
operated in accordance with all applicable federal, state and local law or ordinances (including
rules and regulations) relating to zoning, building, safety, and environmental quality and will
obtain and maintain in effect any licenses, permits, franchises or other governmental
authorizations necessary for the operation of the Project.
Continuing Disclosure
The Borrower covenants and agrees that it will comply with and carry out all of the
provisions of the Continuing Disclosure Agreement. Notwithstanding any other provision of the
Loan Agreement, failure of the Borrower to comply with the Continuing Disclosure Agreement
shall not be considered an Event of Default under the Indenture; however, the Trustee may (and,
at the request of any Participating Underwriter (as defined in the Continuing Disclosure
35
Agreement), or the holders of at least 25% in aggregate principal amount of Outstanding Bonds,
subject to the payment of its fees and expenses, including reasonable attorneys' fees, shall, or any
Bondholder may, take such actions as may be necessary and appropriate, including seeking
specific performance by court order, to cause the Borrower to comply with its continuing
disclosure obligations under the Continuing Disclosure Agreement.
Minimum Rents; Coverage Requirement Certificate
The Borrower will, at all times while any of the Series A Bonds remain Outstanding, fix,
prescribe and collect rents, fees and charges in connection with the Project so as to yield (i) Net
Operating Revenues including any earnings on the Senior Bonds Debt Service Reserve Fund for
the immediately preceding 12 -month period that will result in a Coverage Ratio at least equal to
1.25 with respect to the Series A Bonds debt service, and (ii) Net Operating Revenues which will
result in a Coverage Ratio of at least 1.15 with respect to the aggregate of the Series A Bonds and
the Series B Bonds debt service. The Borrower shall file with the City and the Trustee on or
prior to the Closing Date and on March 15 of each year thereafter, a Coverage Requirement
Certificate demonstrating compliance with this requirement. In the event such coverage
requirements are not satisfied, then the City and the Owners of the Bonds shall have the right to
direct the Borrower to remove and replace the Project Manager in the same manner as set forth in
the Loan Agreement.
Public Liability and Workers' Compensation Insurance
Public Liability Insurance. The Borrower shall maintain or cause to be maintained so
long as Bonds are Outstanding under the Indenture, a commercial general liability coverage,
including products, completed operations, contractual, bodily injury, personal injury, and
property damage in the amount of at least Two Million Dollars ($2,000,000) combined single
limits, naming the City and its officers, officials, employees, volunteers, agents, and
representatives as additional insureds. All such insurance (i) shall be primary insurance and not
contributory with any other insurance which the City or its officers, officials, employees,
volunteers, agents, or representatives may have; (ii) shall contain no special limitations on the
scope of protection afforded to the City and its officers, officials, employees, volunteers, agents,
and representatives; (iii) shall be "per occurrence" rather than "claims made" insurance (in the
event the Borrower is unable to obtain such policy, or believes that such policy's premium is not
reasonable, the Borrower shall submit proof of such contention to the City, upon which event the
City may, after review of such information, authorize a "claims made" policy for the Project);
(iv) shall apply separately to each insured against whom claim is made or suit is brought, except
with respect to the limits of the insurer's liability; (v) shall provide that the policy will not be
canceled or limited in scope by the insurer or the Borrower's contractor unless there is a
minimum of thirty (30) dais prior written notice by certified mail, return receipt requested to the
City and the Oversight Agent; (vi) shall be written by a California licensed insurer with a Best
rating of not less than B +, Class X; and (vii) shall be endorsed to state that any failure to comply
with the reporting provisions of the policies shall not affect coverage provided to the City and its
officers, officials, employees, volunteers, agents and representatives.
None of the above - described policies shall include a deductible or self - insured retention
amount of more than Ten Thousand Dollars ($10,000) unless approved in writing by an
authorized representative of the City upon the advice of the Oversight Agent.
Such insurance may be maintained as part of or in conjunction with any other insurance
coverage carried by the Borrower. The Net Proceeds of such liability insurance shall be applied
by the Borrower toward extinguishment or satisfaction of the liability with respect to which the
Net Proceeds of such insurance shall have been paid.
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Workers' Compensation Insurance. The Borrower shall maintain or cause to be
maintained to the extent required by law so long as Bonds are Outstanding under this Indenture,
workers' compensation- insurance, including Employer's Liability Coverage, with limits not less
than $1,000,000 per accident, issued by a responsible carrier authorized under the laws of the
State to insure employers against liability for compensation under the Labor Code of the State, or
any act enacted as an amendment or supplement thereto or in lieu thereof, such workers'
compensation insurance to cover all persons (if any) employed by the Borrower in connection
with Project and to cover full liability for compensation under such act. Such insurance shall be
endorsed to include a waiver of subrogation rights against the City and its officers, officials,
employees, volunteers, agents and representatives. Such insurance shall be underwritten by
California licensed insurers with Best ratings of not less than B +, Class X. Such insurance may
be maintained as part of or in conjunction with any other insurance coverage carried by
Borrower.
Casualty Insurance
The Borrower will procure and maintain, or cause to be procured and maintained, so long
as Bonds are Outstanding under the Indenture, all risk casualty insurance against loss or damage
to the Improvements located on the Project, in an amount at least equal to one hundred percent
(100 %) of the replacement value of the Improvements. Such insurance will, as nearly as
practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke,
fire and such other hazards (excluding earthquake and flood coverage) as are normally covered
by such insurance. Such insurance will be subject to such deductibles as are customarily
maintained by municipalities with respect to works and properties of a like character, but in any
case will not exceed $100,000. Such insurance may be maintained as part of or in conjunction
with any other insurance coverage carried by the Borrower. The Net Proceeds of such insurance
will be applied as provided in the Indenture.
Rental Interruption Insurance
The Borrower will procure and maintain, or cause to be procured and maintained, so long
as Bonds are Outstanding under the Indenture, rental interruption or use and occupancy insurance
to cover the Borrower's loss, total or partial, of payments for the Loan resulting from the loss,
total or partial, of the use of the Improvements located on the Project as a result of any of the
hazards covered in the insurance required by the Indenture, in an amount at least equal to the
sums of (i) Maximum Annual Debt Service and (ii) budgeted Operation and Maintenance Costs
coming due and payable during the current Fiscal Year•, provided, however, that with respect to
budgeted Operation and Maintenance Costs, in the first Fiscal Year such amount will be as
agreed to by the Borrower and the Oversight Agent and that in any future Fiscal Year such
amount will be the greater of the budgeted Operation and Maintenance Costs or the prior Fiscal
Year's actual Operation and Maintenance Costs. Such insurance may be maintained as part of or
in conjunction with any other insurance coverage carried by the Borrower. The Net Proceeds of
such insurance, if any, will be paid to the Trustee and deposited in the Senior Bonds Debt
Service Fund under the Indenture, and will be credited towards the payment of the Bonds as the
same become due and payable in accordance with the Indenture.
Repair and Replacement
The Borrower agrees to cause to be performed a preliminary inspection by a reputable
independent structural engineer selected by the Borrower and approved by the City, of the
Project at such time or times as the Oversight Agent may reasonably determine to be necessary
based on information with respect to the Project available to the Oversight Agent, and, if it is
37
determined that further inspection is needed after a preliminary inspection, such further
inspection, providing a report of a licensed contractor qualified to do the type of work proposed
to be performed to identify any repairs, replacements or capital improvements required to
maintain the Project as a safe and sanitary mobile home park in accordance with the Loan
Agreement, the Regulatory Agreement and all associated agreements. Any such inspections
shall be at the expense of the Borrower. All such repairs, replacements or capital improvements
and costs of inspections will be paid for from moneys on deposit in the Repair and Replacement
Fund to the extent of the monies deposited in such Fund.
In the event that expenses are incurred, or in the opinion of the Borrower ought properly
be incurred for replacement or additional improvements on the Project, for other capital facilities
which may be of direct or indirect benefit to the Project which are not identified in a report of a
licensed contractor qualified to do the type of work proposed to be performed (pursuant to the
Loan Agreement), beyond ordinary and necessary maintenance and repairs which are paid as part
of the Operation and Maintenance Expenses, the Borrower shall submit to the Oversight Agent a
request for payment or reimbursement of such costs. The request shall (a) identify the total
amount of such costs to be paid pursuant to such requisition, including all items of cost in such
detail as may be available to the Borrower, (b) state with respect to such disbursement (i) the
amount to be disbursed for payment of such costs, and (ii) that each item of costs identified
therein has been properly incurred and has not been the basis of any previous disbursement; and
(c) be accompanied by an invoice, if any. Upon approval by the Oversight Agent of such a
request from the Borrower, the Oversight Agent shall submit or cause to be submitted the request
to the Trustee pursuant to the Indenture for payment of such costs from the Repair and
Replacement Fund.
Moneys deposited in the Repair and Replacement Fund on the Closing Date shall be
applied to pay for or reimburse the Borrower for initial improvements to the Project or expected
replacements to the Project as set forth in Exhibit C for the Loan Agreement, as said Exhibit C
may be amended from time to time with the approval of the Borrower and the Oversight Agent.
With respect to each expenditure from the Repair and Replacement Fund, the Borrower
will file with the Oversight Agent a request. The request shall (a) identify the total amount of
such costs to be paid pursuant to such requisition, including all items of cost in such detail as
may be available to the Borrower, (b) state with respect to such disbursement (i) the amount to be
disbursed for payment of such costs, and (ii) that each item of costs identified therein has been
properly incurred and has not been the basis of any previous disbursement, and (c) be
accompanied by an invoice, if any. Upon approval by the Oversight Agent of such a request
from the Borrower, the Oversight Agent shall submit or cause to be submitted the request to the
Trustee pursuant to the Indenture for payment of such costs from the Repair and Replacement
Fund.
Events of Default
Each of the following is an "Event of Default" under the Loan Agreement.
(a) The Borrower shall fail to pay when due the amounts required to be paid under
the Loan Agreement or the Note when the same shall become due and payable in accordance
with the terms of the Loan Agreement or the Note, including a failure to repay any amounts
which have been previously paid but are recovered, attached or enjoined pursuant to any
insolvency, receivership, liquidation or similar proceedings; or
0
(b) The Borrower shall fail to perform or observe any of its covenants or agreements
contained in the Loan Agreement, the Regulatory Agreement, the Indenture, the Note or the
Deed of Trust, other than as specified in paragraph (a) above, and such failure shall continue
during and after the period specified below; or
(c) Any representation or warranty of the Borrower shall be determined by the
Trustee or the City to have been false in any material respect when made; or
(d) The Borrower shall generally not pay its debts as they become due, or shall admit
in writing its inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors or shall institute any proceeding or voluntary case seeking to adjudicate it a
bankrupt or insolvent or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief or protection of debtors, or seeking the entry of
an order for relief or the appointment of a receiver, trustee, custodian or other similar official for
it or for any substantial part of its property; or the Borrower shall take any action to authorize any
of the actions described above in this paragraph (d), or any proceeding shall be instituted against
the Borrower seeking to adjudicate it a bankrupt or insolvent or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief or protection of debtors, or
seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or
other similar official for it or for any substantial part of its property, and, if such proceeding is
being contested by the Borrower in good faith, such proceeding shall remain undismissed or
unstayed for a period of 60 days; or
(e) An event of default shall have occurred under the Indenture and the Series A
Bonds have been declared due and payable pursuant to the Indenture.
No default under paragraph (b) above shall constitute an Event of Default until:
(i) The Trustee, by registered or certified mail, shall give notice to the
Borrower of such default specifying the same and stating that such notice is a "Notice of
Default "; and
(ii) The Borrower shall have 60 days after receipt of such notice to correct the
default and shall not have corrected it; provided, however, that if the default stated in the
notice is of such a nature that it cannot be corrected within 60 days, such default shall not
constitute an Event of Default under the Loan Agreement so long as (a) the Borrower
institutes corrective action within said 60 days and diligently pursues such action until the
default is correctefd, and (b) in the opinion of Bond Counsel, the failure to cure said
default within 60 days will not adversely affect the exclusion from gross income for
federal income tax purposes of interest on the Series B Bonds.
Remedies
Whenever any Event of Default under the Loan Agreement shall have happened and be
continuing, the following remedial steps shall be taken:
(a) Immediately upon the occurrence of any Event of Default under the Loan
Agreement the Trustee shall declare all amounts due under the Loan Agreement and the
Note to be immediately due and payable; provided, however, that in the case of an Event
of Default described in (b), (c) or (d) above, the amounts due under the Loan Agreement
and the Note shall not be accelerated unless the Trustee receives either (i) written notice
39
from the City to accelerate the Loan and declare all amounts due under the Loan
Agreement and the Note or (ii) an opinion of Bond Counsel that the failure to accelerate
the Loan under such circumstances will adversely affect the exclusion from gross income
for federal income tax purposes of interest on the Series A Bonds; provided, however, as
is set forth in the Indenture, if the Series A Bonds are Outstanding and there has been no
default with respect to the Series A Bonds under the Indenture, the Series B Bonds shall
not be subject to acceleration;
(b) Subject to the provisions of the Indenture, the Trustee shall take whatever
action at law or in equity may appear necessary or desirable to collect the payments
required to be made by the Borrower under the Loan Agreement, the Deed of Trust, and
the Note, or to enforce performance and observance of any obligation or agreement of the
Borrower under the Loan Agreement, the Note, the Deed of Trust or the Regulatory
Agreement, but in no event shall the Trustee be obligated to take any such action which
in its opinion will or might cause it to expend time or money or otherwise incur liability
unless and until an indemnity bond satisfactory to it has been furnished to it;
(c) The City may, upon consultation with the Oversight Agent, terminate the
Project Manager and shall upon the recommendation of the Oversight Agent or such
other advice as the City deems appropriate, select a new Project Manager;
(d) Upon an Event of Default under the Loan Agreement, either the City may
operate and administer, or cause to be operated and administered, the Project in the place
and stead of the Borrower and in the manner required by the terms and provisions of the
Regulatory Agreement. In so doing, the City or such party as it may appoint to operate
and administer the Project, to the extent it may have moneys available under the Loan
Agreement for such purposes, shall complete the rehabilitation and equipping of any
incomplete component of the Project to be funded with proceeds of the Bonds, and shall
pay from the Operating Revenues received with respect to such Project (to the extent
available) the Loan Repayments and Fees and Charges, if any, which the Borrower was
obligated to pay pursuant to the terms and provisions of the Loan Agreement and the
Deed of Trust. The Trustee or other depository shall be authorized to pay the City or its
designee as directed by an Officer's Certificate any moneys on deposit in the Project Fund
to the extent that the City shall certify in writing that such moneys are required by the
City or its designee to pay any items that would have been included in the Cost of Project
had the City or its designee not acquired the same;
(e) The City may, upon the recommendation of the Oversight Agent or such
other advice as it may deem appropriate, commence foreclosure proceedings as set forth
in the Indenture; artd
(f) The Trustee may, upon the advice of the Oversight Agent or such other
advice as it may deem appropriate, receive all Operating Revenues of the Project and
deposit such amounts to a depository account for the benefit of the Bond Owners and the
City.
Any amounts collected as payments made on the Note, or applicable to such payments,
and any other amounts which would be applicable to payment of principal of, premium, if any,
and interest on the Bonds collected pursuant to action taken under the foregoing provisions of the
Loan Agreement shall be applied in accordance with the provisions of the Indenture. Upon
payment in full of all amounts owing under the Indenture, including all fees and expenses of the
Trustee, the Oversight Agent and the City, the City and the Trustee shall transfer any remaining
right, title or interest that each has in the Indenture, the Loan Agreement, the Note and the Deed
ELI
of Trust to the Borrower, except any rights to receive payment of fees and expenses and to be
indemnified, as provided for in the Loan Agreement and the Indenture.
THE REG ULA TORY AGREEMENT
The following is a summary of certain provisions of the Regulatory Agreement and does
not purport to be complete. Reference is hereby made to the Regulatory Agreement which is
available from the City upon request, and to Appendix B for the definition of certain terms used
herein. Any capitalized terms not otherwise defined herein or in Appendix B are as defined in
the Regulatory Agreement.
Residential Rental Property; Qualified Residents
The Borrower has agreed that the Project will be owned, managed and operated as a
"qualified residential rental project" (within the meaning of Section 142(d) of the Code) until the
expiration of the Qualified Project Period. To that end, and for the term of the Regulatory
Agreement, the Borrower represents, as of the date of the Regulatory Agreement, and warrants,
covenants and agrees as follows:
(a) The Project is being owned and operated for the purpose of providing
residential rental housing, consisting of one mobile home Space for each household,
together with related facilities.
(b) All of the mobile homes in the Project will contain separate facilities for
living, sleeping, eating, cooking and sanitation, including a sleeping area, bathing and
sanitation facilities and cooking facilities equipped with a cooking range, refrigerator and
sink.
(c) All of the Spaces will be available for rental on a continuous basis to
members of the general public, and the Borrower will not give preference to any
particular class or group in renting the Spaces in the Project, except to the extent that
Spaces are to be leased or rented to Qualified Residents.
(d) The Project comprises a single geographically and functionally integrated
project for residential rental property, as evidenced by the ownership, management,
accounting and operation of the Project.
(e) No part of the Project will at any time be owned or used as a condominium
or by a cooperative housing corporation, and the Borrower shall not take any steps toward
such conversion vuithout an opinion of Bond Counsel that interest on the Bonds will not
thereby become includable in gross income for federal income tax purposes.
(f) Should involuntary noncompliance with the provisions of the Regulatory
Agreement be caused by fire, seizure, requisition, foreclosure, transfer of title by deed in
lieu of foreclosure, change in a federal law or an action of a federal agency after the
Closing Date which prevents the City from enforcing the requirements of the
Regulations, or condemnation or similar event, the Borrower covenants that, within a
"reasonable period" determined in accordance with the Regulations, it will either prepay
the Note or apply any proceeds received as a result of any of the preceding events to
reconstruct the Project to meet the requirements hereof.
(g) There shall be no discrimination against or segregation of any person or
group of persons on account of race, color, religion, sex, marital status, ancestry, national
41
origin, source of income (e.g. AFDC or SSI) or disability in the sale, lease, sublease,
transfer, use occupancy tenure or enjoyment of the Project nor shall the transferee or any
person claiming.under or through the transferee, establish or permit any such practice or
practices of discrimination or segregation with reference to the selection, location,
number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the
Project.
(h) The Very Low Income Spaces shall be intermingled with, and shall be of
comparable quality to, all other Spaces in the Project. Tenants in all Spaces shall have
equal access to and enjoyment of all common facilities of the Project.
(i) In the aggregate, no more than two persons per bedroom, plus one person
shall occupy any Space in the Project, not including children born after the date of initial
occupancy by a household. For example, with respect to a two bedroom mobilehome,
maximum occupancy shall be 5 persons (exclusive of post- occupancy children described
above).
(j) Pursuant to the Municipal Code, rents on Qualified Spaces shall not be
increased more than once every year upon at least ninety (90) days written notice to the
tenant and, in addition to complying with the requirements of subsection (c) above, and
subject to the provisions of the Regulatory Agreement, rent increases for these units shall
not exceed the amount necessary to comply with the coverage requirement set forth in the
Loan Agreement. Rents for all spaces shall be set forth in the annual budget submitted by
the Borrower pursuant to the Loan Agreement.
(k) The Borrower will accept as tenants, on the same basis as all other
prospective tenants, persons who are recipients of federal certificates for rent subsidies
pursuant to the existing housing program under Section 8 of the United States Housing
Act, or its successor. The Borrower shall not apply selection criteria to Section 8
certificate or voucher holders that is more burdensome than criteria applied to all other
prospective tenants, nor shall the Borrower apply or permit the application of
management policies or lease provisions with respect to the Project which have the effect
of precluding occupancy of Spaces by such prospective Tenants.
(1) The Borrower shall submit to the Secretary of the Treasury annually on the
anniversary date of the start of the Qualified Project Period or such other date as is
required by the Secretary, a certification that the Project continues to meet the
requirements of Section 142(d) of the Code, and shall provide a copy of such certification
to the Program Administrator.
Property Management and Maintenance
The following provisions shall apply during the term of the Regulatory Agreement,
irrespective of whether any Bonds are outstanding.
(a) Management Responsibilities. The Borrower is responsible for all management
functions with respect to the Project including without limitation the selection of tenants,
certification and recertification of household size and income, evictions, collection of rents and
deposits, maintenance, landscaping, routine and extraordinary repairs, replacement of capital
items, and security. The City shall not have responsibility over management of the Project. The
Borrower may delegate its duties under the Regulatory Agreement to a property management
company. A resident manager shall also be required. In no instance shall the Borrower delegate
42
or forego its responsibility to manage and operate the park in the manner set forth in the
Regulatory Agreement and the Loan Agreement.
(b) Management and Operation of Project. The Borrower will manage and operate
the Project in accordance with the requirements of the Regulatory Agreement.
(c) Management Agent; Periodic Reports. The Project shall at all time be managed
by Borrower or by an experienced management agent appointed by the Borrower ( "Management
Agent "). The initial Management Agent shall be Bessire & Casenhiser, Inc. Any subsequent
Management Agent shall be selected by the Borrower after first taking into consideration any
recommendations with respect to such management arrangement of the Tenant Advisory Board.
The Management Agent will have demonstrated ability to operate residential facilities like the
Project in a manner that will provide decent, safe, and sanitary housing. Prior to the selection of
the Management Agent by the Borrower as outlined in this paragraph, the Borrower shall submit
to the City the identity of or a list of qualified Management Agents and the Borrower shall also
submit such additional information about the background, experience and financial condition of
any proposed Management Agent as is reasonably available.
(d) Property Maintenance. The Borrower agrees, for the entire Term of the
Regulatory Agreement, to maintain all common area interior and exterior improvements and
common buildings on the Project (exclusive of the mobile homes and tenant spaces), including
landscaping and common buildings on the Project in good condition and repair (and, as to
landscaping, in a healthy condition) and in accordance with all applicable laws, rules, ordinances,
orders and regulations of all federal, state, county, municipal, and other governmental agencies
and bodies having or claiming jurisdiction and all their respective departments, bureaus, and
officials.
City Requirements
The following provisions shall apply during the term of the Regulatory Agreement,
irrespective of whether any bonds are outstanding.
(a) The Borrower shall comply with
shall not challenge any provisions of the City
Borrower understands and agrees that by the
waiving its constitutional rights.
all provisions of the City Law. The Borrower
Law as it exists on the Closing Date, and the
provisions of the Regulatory Agreement it is
(b) Annual rent increases for the Spaces shall be limited to the requirements of
Sections 5.52.050 and 5.52.060 of the City Law.
(c) The Borrower shall establish a procedure and funding for a hardship assistance
program for tenants of the Project. The program shall have the intent of waiving rent increases
for tenants eligible under Housing and Urban Development Section 8 programs. Neither the City
nor the Moorpark Redevelopment Agency shall be called upon to fund such a program.
(d) The Borrower shall not at any time request the City or the Moorpark
Redevelopment Agency provide any funding assistance for repairs, rent assistance, financing or
refinancing costs, except as a program may have first been established by the City or Moorpark
Redevelopment Agency and for which the Project may otherwise be qualified to participate in.
(e) The Borrower shall cause the entity from which it is purchasing the Project to
dismiss all pending litigation against the City, its employees, agents and servants and shall use its
best efforts to cause such seller not file any future litigation against same. If such seller
continues its litigation against CalTrans or the County related to storm drain matters, the
43
Borrower hereby agrees to indemnify, hold harmless and defend the City, its employees, agents
and servants against any and all counterclaims by CalTrans or the County.
(f) The Borrower shall pay all legal fees incurred and projected to be incurred by the
City and the Moorpark Redevelopment Agency as a result of the litigation brought against the
City by the current owner (i.e., Villa Del Arroyo, LTD. vs. City of Moorpark (Case No.
SCO230521, Villa Del Arroyo, LTD., a limited partnership vs. City of Moorpark {Case No.
SCO21503) and Villa Del Arroyo, a limited partnership, dba Villa Del Arroyo Mobilehome Park
vs. City of Moorpark, California Department of Transportation, and Ventura County Flood
Control District {Case No. 022015)). The amount to be paid shall be provided to the Borrower
by the City on or before the Closing Date. The entire amount shall be paid by the Borrower to
the City within ten (10) business days of the Closing Date.
(g) The Borrower shall reimburse the City for its administrative costs to negotiate and
direct the preparation of appropriate matters related to the Bonds and the transactions
contemplated by the Indenture, the Loan Agreement and the Regulatory Agreement. The amount
of $5,000 shall be paid to the City within ten (10) business days of the Closing Date to be applied
against such costs, and shall, in any event be nonrefundable to the Borrower.
(h) To monitor compliance with the provisions of the City Law, the Borrower shall
pay the City Annual Fee to the City on the Closing Date and on each December 1 thereafter.
(i) Any proposed sale of the Project by the Borrower shall be noticed to the City no
less than ninety (90) days prior to the proposed date of the sale. The City's consent to any
transfer of the Project shall be subject to the provisions of the Regulatory Agreement.
0) The Borrower shall notify the City of the operations /management company it will
employ for the Project no less than thirty (30) days prior to the signing of a contract with any
such entity. Qualifications of the firm(s) shall also be provided at that time and the City shall
have the right to submit comments on the qualifications of the firm, which shall be considered by
Borrower prior to execution of a contract.
(k) The Borrower is responsible for all management functions with respect to the
Project including without limitation the selection of tenants, certification and recertification of
household size and income, evictions, collection of rents and deposits, maintenance, landscaping,
routine and extraordinary repairs, replacement of capital items, and security. The City shall not
have responsibility over management of the Project. In no instance shall the Borrower delegate
or forego its responsibility to operate the Project in the manner set forth in the Regulatory
Agreement and the Loan Agreement.
The City, through its Authorized Officer, reserves the right to conduct on or about
December 1 of each year, commencing December 1, 2000, an annual (or more frequently, if
deemed necessary by the City) review of the management practices and financial status of the
Project. The purpose of each periodic review will be to enable the City to determine if the
Project is being operated and managed in accordance with the requirements and standards of the
Regulatory Agreement and the City Law. The Borrower shall cooperate with the City in such
reviews.
(m) The Borrower agrees, for the entire term of the Regulatory Agreement, to
maintain all common area interior and exterior improvements and common buildings on the
Project (exclusive of the mobile homes and tenant spaces), including landscaping and common
buildings on the Project in good condition and repair (and, as to landscaping, in a healthy
condition) and in accordance with all applicable laws, rules, ordinances, orders and regulations of
44
all federal, state, county, municipal, and other governmental agencies and bodies having or
claiming jurisdiction and all their respective departments, bureaus, and officials.
The City places prime importance on quality maintenance to ensure that all City- assisted
affordable housing projects within the City are not allowed to deteriorate due to below- average
maintenance. Normal wear and tear of the Project will be acceptable to the City assuming the
Borrower agrees to provide all necessary improvements to assure the Project is maintained in
good condition. The Borrower shall make all repairs and replacements necessary to keep the
Project in good condition and repair.
In the event that the Borrower breaches any of the covenants contained in the Regulatory
Agreement and such default continues for a period of ten (10) days after written notice from the
City with respect to graffiti, debris, waste material, and general maintenance or thirty (30) days
after written notice from the City with respect to landscaping and building improvements, then
the City, in addition to whatever remedy it may have at law or in equity, shall have the right to
enter upon the Project and perform or cause to be performed all such acts and work necessary to
cure the default. Pursuant to such right of entry, the City shall be permitted (but is not required)
to enter upon the Project and perform all acts and work necessary to protect, maintain, and
preserve the improvements and landscaped areas on the Project, and to attach a lien on the
Project, or to assess the Project, in the amount of the expenditures arising from such acts and
work of protection, maintenance, and preservation by the City and/or costs of such cure,
including a fifteen percent (15 %) administrative charge, which amount shall be promptly paid by
the Borrower to the City upon written demand.
Qualified Residents
Pursuant to the requirements of the Code and the Act, the Borrower covenants and agrees
as follows:
(a) During the Qualified Project Period: not less than twenty percent (20 %) of
the Spaces in the Project shall be designated as Very Low Income Spaces and shall be
continuously occupied by Very Low Income Residents. The monthly rent charged for 1/2
the Very Low Income Spaces (i.e., 10% of the Spaces) shall not be greater than as
follows:
(A) where a Very Low Income Resident is both the registered and legal
owner of the mobile home and is not making mortgage payments for the purchase
of that mobile home, the total rental charge for occupancy of the Space (excluding
a reasonable allowance for other related housing costs determined at the time of
acquisitiou,,of the Project by the Borrower and excluding any supplemental rental
assistance from the State, the federal government, or any other public agency to
the Very Low Income Resident or on behalf of the Space and the mobile home)
shall not exceed one - twelfth of 30 percent of 50 percent of Median Income for the
Area, adjusted for household size in the manner set forth in the definition of Very
Low Income Resident in the Regulatory Agreement.
(B) where a Very Low Income Resident is the registered owner of the
mobile home and is making mortgage payments for the purchase of that mobile
home, the total rental charge for occupancy of the Space (excluding any charges
for utilities and storage and excluding any supplemental rental assistance from the
State, the federal government, or any other public agency to the Very Low Income
Resident or on behalf of the Space and mobile home), shall not exceed one-
twelfth of 15 percent of 50 percent of Median Income for the Area, as adjusted for
45
household size in the manner set forth in the definition of Very Low Income
Resident in the Regulatory Agreement.
(C) where a Very Low Income Resident rents both the mobile home
and the Space occupied by the mobile home, the total rental payments paid by the
Very Low Income Resident on the mobile home and the Space occupied by the
mobile home (excluding any supplemental rental assistance from the State, the
federal government, or any other public agency to that Very Low Resident or on
behalf of that Space and mobile home) shall not exceed one - twelfth of 30 percent
of very low income households as established by the U.S. Department of Housing
and Urban Development for the Area adjusted for household size in the manner
set forth in the definition of Very Low Income Resident in the Regulatory
Agreement.
(b) In the event a recertification of such tenant's income in accordance with
paragraph (d) below demonstrates that such tenant no longer qualifies as a Qualified
Resident the Space occupied by such Resident shall continue to be treated as a Qualified
Space unless and until any Space in the Project thereafter is occupied by a new tenant that
is a Qualified Resident. Moreover, a Space previously occupied by a Qualified Resident
and then vacated shall be considered occupied by a Qualified Resident until reoccupied,
other than for a temporary period, at which time the character of the Space shall be
redetermined. In no event shall such temporary period exceed thirty -one (31) days.
Notwithstanding anything in the Regulatory Agreement to the contrary, if at any time the
number of Qualified Residents falls below the number required by the Regulatory
Agreement, the next available vacant Space shall be rented to a Qualified Resident.
(c) Immediately prior to a Qualified Resident's occupancy of a Qualified
Space (or prior to the Closing Date with respect to Very Low Income Spaces previously
occupied), the Borrower will obtain and maintain on file an Income Certification form
from each Qualified Resident occupying a Qualified Space, dated immediately prior to
the initial occupancy of such Qualified Resident in the Project (or prior to the Closing
Date in the case of existing Very Low Income Residents). In addition, the Borrower will
provide such further information as may be required in the future by the State of
California, and by the Act, as the same may be amended from time to time as requested
by the City or the Program Administrator. The Borrower shall verify the income
provided by an applicant with respect to a Space to be occupied after the Closing Date in
the manner described by the Regulatory Agreement.
(d) Immediately prior to the first anniversary date of the issuance of the
Bonds, and on eac4 anniversary date thereafter, the Borrower shall recertify the income of
the occupants of §uch Qualified Spaces by obtaining a completed Income Certification
based upon the current income of each occupant of the Space. In the event the
recertification demonstrates that such household's income exceeds 140% of the income at
which such household would qualify as Qualified Residents, such household will no
longer qualify as a Qualified Resident, and the Borrower will either (i) designate another
qualifying Tenant and Space in the Project as a Qualified Resident and a Qualified Space,
respectively, or (ii) rent the next available vacant Space to one or more Qualified
Residents.
(e) The Borrower agrees to provide to the Oversight Agent, the Program
Administrator and the City, a copy of the form of application and lease to be provided to
prospective Qualified Residents and any amendments thereto. Resident rules and
regulations will be developed with participation and representation by existing residents,
formed as a review committee in order to provide input.
46
(f) In the event, despite Borrower's exercise of best efforts to comply with the
provisions of Section 4 of the Regulatory Agreement, the Borrower shall have been out of
compliance with any of the restrictions of Section 4 of the Regulatory Agreement relative
to Qualified Residents (other than those provisions required under Section 3 of the
Regulatory Agreement to comply with the requirements of Section 142(d) of the Code as
applicable to the Project) for a period in excess of six months, then at the sole option of
the City the term of the Regulatory Agreement shall be automatically extended for the
period of non - compliance upon written notice to the Borrower, the Trustee and the
Oversight Agent from the City, such extension to relate to the Qualified Spaces and
Qualified Residents as to which such noncompliance relate.
Sale or Transfer of the Project
The Borrower intends to hold the Project for its own account, has no current plans to sell,
transfer or otherwise dispose of the Project, and covenants and agrees not to sell, transfer or
other -wise dispose of the Project, or any portion thereof (other than for individual tenant use as
contemplated under the Regulatory Agreement), without obtaining the prior consent of the City
and satisfaction of the other requirements of the Regulatory Agreement.
Term
The Regulatory Agreement and all and several of the terms will become effective upon its
execution and delivery and will remain in full force and effect during the Qualified Project
Period, it being expressly agreed and understood that the provisions are intended to survive the
retirement of the Bonds and expiration of the Indenture, the Loan Agreement and the Note.
Enforcement
If the Borrower defaults in the performance or observance of any covenant, agreement or
obligation of the Borrower set forth in the Regulatory Agreement, and if such default remains
uncured for a period of 60 days after notice thereof shall have been given by the City or the
Trustee to the Borrower (provided, however, that the City may at its sole option extend such
period if the Borrower provides the City with an opinion of Bond Counsel to the effect that such
extension will not adversely affect the exclusion from gross income for federal income tax
purposes of interest on the Bonds, and provided further, in the event any default relates to
Section 4 of the Regulatory Agreement and the Borrower is exercising best efforts to comply
with such restrictions as determined by the City in its sole discretion, then the cure period
described above shall be 6 months and shall be subject to the extension of the Qualified Project
Period as provided in the Regulatory Agreement). If the Borrower fails to cure within the
specified period then the Trustee, subject to the provisions of the Regulatory Agreement and
acting on its own behalf or on behalf of the City, shall declare an "Event of Default" to have
occurred, and, at its option, may take any one or more of the following steps:
(i) by mandamus or other suit, action or proceeding at law or in equity,
require the Borrower to perform its obligations and covenants under the Regulatory
Agreement or enjoin any acts or things which may be unlawful or in violation of the
rights of the City or the Trustee under the Regulatory Agreement;
(ii) have access to and inspect. examine and make copies of all of the books
and records of the Borrower pertaining to the Project; and
47
(iii) take such other action at law or in equity as may appear necessary or
desirable to enforce the obligations, covenants and agreements of the Borrower under the
Regulatory Agrepment.
In addition to the enforcement remedies set forth above, upon the Borrower's default
under the Regulatory Agreement, the City will have the right (but not the obligation) to lease up
to 20% of the Spaces in the Project for a rental of $1 per Space per year. The City shall sublease
such units to Very Low Income Residents to the extent necessary to comply with the provisions
of the Regulatory Agreement. Any rent paid under such a sublease shall be paid to the Borrower
after the City has been reimbursed for any expenses incurred by it in connection with the
sublease; provided that, if the Borrower is in default under the Loan, such rent shall be used to
make payments under the Loan.
The Trustee shall have the right, in accordance with the Regulatory Agreement and the
provisions of the Indenture, without the consent or approval of the City, to exercise any or all of
the rights or remedies of the City under the Regulatory Agreement; provided that prior to taking
any such act the Trustee shall give the City written notice of its intended action. All fees, costs
and expenses of the Trustee, the City and the Oversight Agent (including, without limitation,
reasonable attorneys' fees) reasonably incurred in taking any action pursuant to the Regulatory
Agreement shall be the sole responsibility of the Borrower; provided the Trustee will not be
obligated to take any action under the Regulatory Agreement that results in expenses or liability
to the Trustee unless it is compensated and reimbursed for its expenses, including reasonable
attorneys' fees, and indemnified to its satisfaction against liability.
After the Indenture has been discharged, or if the Trustee fails to act under the Regulatory
Agreement, the City may act in its own behalf to declare an "Event of Default" to have occurred
and to take any one or more of the steps specified above to the same extent and with the same
effect as if taken by the Trustee.
THE BORROWER
The Borrower is organized exclusively under the California Nonprofit Benefit
Corporation Law for charitable purposes. The general purpose of this corporation is to have and
exercise all rights and powers conferred on nonprofit corporations under the laws of California.
This corporation shall not, except to an insubstantial degree, engage in any activities or exercise
any powers that are not in furtherance of the primary purposes of this corporation.
The Borrower is a California non -profit public benefit corporation whose goal is to
develop, construct, acquire, rehabilitate, own and provide decent, safe and sanitary housing
affordable to persons and families of low and moderate income, including the aged and
handicapped; to assist low income households buy enabling them to secure the basic human need
of decent shelter; to combat blight and deterioration in communities and contribute to their
physical improvement; to promote social welfare through community-based housing activities; to
lessen the burdens of government by assisting local governments, their redevelopment agencies,
authorities, board or commissions through the undertaking of housing activities, including
program administration and management activities, targeted to low and moderate income persons
and families; and to assist local governments in the preservation of affordable housing
acquisition of mobile home parks.
The Borrower was established on January 22, 1999 and received a determination letter
form the Internal Revenue Service as to its status as an organization described in Section
501(c)(3) of the Code in September 24, 1999, and a letter form the State of California Franchise
Tax Board confirming its exemption from State franchise or income tax on
The Board Members of Augusta Homes also serve on the board of its sister organization,
Augusta Homes Villa Montclair Corporation. Augusta Homes Villa Montclair Corporation is a
tax- exempt California non - profit public benefit corporation that owns Villa Montclair, a 97 -space
park located in Montclair, California.
Board Members
Gary T. Limon, President
Laura Muna Landa, Vice President
Lee C. McDougal, Secretary
Robin J. Aspinall, Treasurer
Gary T. Limon, President. Mr. Limon has held the position of President/General
Manager for various Southern California medical products companies since 1986. Mr. Limon
currently serves as Chairman of the Board for Circaid Medical Products, San Diego, California, a
privately- funded medical products start up company, and General Manager for Anatomic
Concepts, Inc. of Corona, California, a manufacturer of
Laura Muna Landa, Vice President. Ms. Landa has over eleven years of experience in
municipal government, redevelopment, and public affairs in public and private sector
organizations. For the past five years she has worked for the City of Anaheim in charge of
downtown development and on citywide projects including Sportstown, Angels Stadium and the
Disneyland resort area. Active in community service Ms. Landa has served as a Board Member
for the Rancho Cucamonga Youth Accountability Board; Vice -Chair of the Rancho Cucamonga
Library Board of Trustees; Board Member and Chairman of the Community Baptist Church and
as a member of the Missions Task Force of the Community Baptist Church.
Robin J. Aspinall, Treasurer. Ms. Aspinall has been the Controller and Assistant
Treasurer for Pomona College, a private non - profit college located in Claremont, California. Ms.
Aspinall is responsible for the business office, overseeing 20 employees and supervising all
accounting and financial activities including investments in excess of $750 million. In addition
to her position as Treasurer of Augusta Homes and Augusta Homes Villa Montclair, Ms.
Aspinall also serves as Treasurer for Padua Hills Management Corporation, as a Board Member
of New Hope Community Church, Member of the American Businesswomen's Association,
Upland Charter, and is Chairperson for fundraising activities for St. Lucy's Priory High School.
Lee C. McDougal, Secretary. Mr. McDougal has been the City Manager and
Redevelopment Agency Executive Director for the City of Montclair, in Montclair, California
since 1992. In this position, Mr. McDougal serves as the Chief Executive Officer of a full -
service city and redevelopment agency managing and supervising all operations of city staff and
police and fire personnel. Mr. McDougal is an active member of his community and has held
board positions in thirteen education -, housing -, public safety -, and service- oriented
philanthropic organizations such as the University of California at Riverside Alumni
Association, Montclair Kiwanis Club, Mt. Baldy United Way and the West End
Communications Authority.
Operations
The day to day operations of Augusta Homes are conducted by its Executive Director,
Suzanne Taylor. Ms. Taylor is currently the only full time staff member of Augusta and its sister
non - profit, Augusta Homes Villa Montclair. Ms. Taylor is a consulting professional with
eighteen years of public and private sector experience in economic development, redevelopment,
49
housing, finance, non - profit development and public outreach. Ms. Taylor has worked on over
ten mobile home park projects as consultant to the borrower, the issuer or the seller. Ms. Taylor
also serves as Executive Director to Augusta Homes Villa Montclair Corporation and as
Oversight Agent for the $29 million City of Irvine mobile home park revenue bond financing.
Augusta Homes' legal counsel is Goldfarb and Lipman, a leading San Francisco law firm in the
field of real estate law, with special strengths in affordable housing, redevelopment and
municipal law. Haney and Company, a Newport Beach accounting firm with an emphasis on
mobile home work, provides audit and general accounting services for Augusta Homes.
The Borrower is organized exclusively for charitable purposes within the meaning of
Section 501(c)(3) of the Code. Notwithstanding any other provisions of its bylaws, the Borrower
shall not, except to an insubstantial degree, engage in any activities or exercise any powers that
are not in furtherance of the purposes of the Borrower, and the Borrower shall not carry on any
other activities not permitted to be carried on (i) by a corporation exempt from federal income
taxes under Section 501(c)(3) of the Code or (ii) by a corporation, contributions to which are
deductible under Section 170(c)(2) of the Code.
THE PROJECT
Neither the City nor the Underwriters have made any independent investigation of the
information presented herein as to the Project. Such information has been provided solely by the
Borrower and certain professionals as specifically noted, and neither the City nor the
Underwriters have verified the accuracy or completeness of such information, nor do they
assume any responsibility or liability therefor.
Mobile Home Park Overview
General. Ventura County is home to a large number of mobile home parks. Most of
these parks were built in the 1950's and 1960's. Many of the mobile home parks established
during that era were envisioned as short-term "land banks" rather than as long -term land uses.
The idea was to derive some income from the land until it was ready to develop with more
intensive uses. For many reasons, however, including the legal difficulty and expense of closing
down a mobile home park and relocating the residents, many of these mobile home parks remain
in existence.
Mobile homes are sometimes referred to as an intermediate step between apartments and
owner occupied housing (condominiums and detached homes). Mobile homes are generally
considered more desirable than apartments because they afford greater privacy. At the same
time, those with sufficient income and cash for down payments typically prefer to buy a
traditional home, rather than rent space in a mobile home park. Thus, the space rent plus the
mobile home (coach) mortgage payment must generally be less than the mortgage payment on
traditional housing in the area.
Increasing land values near urban areas (especially during the 1980's) significantly
curtailed the development of new parks. Also affecting new park construction was the advent of
rent control during the 1980's. Many cities throughout the State have enacted rent control
ordinances as a result of previous rent increases.
Because of the lack of supply and a growing demand for affordable housing in urban
areas, mobile home parks were able to steadily increase space rents even during the recession
years of the early 1990's. While rents for most types of real estate in California dropped during
the recession, mobile home park rents have continued to rise, although not at their historic rates.
No assurance can be given that such trends will continue.
50
Stable Resident Base. Residents of mobile home parks are homeowners and make
significant investments in their homes and in on -site improvements. Moving a mobile home
from one community to another requires substantial cost and effort and often requires
abandonment of on -site improvements such as landscaping, decks and carports. Because of the
loss of equity in site improvements, the high cost of moving and the limited availability of vacant
mobile home park spaces, mobile homes are seldom moved from their original locations.
Instead, mobile homes are usually sold in place when the homeowner wants to move.
The high costs associated with moving a mobile home also serve to reduce rent
delinquencies and collection losses. Pursuant to Section 798 et seq. of the California Civil Code
(the "Mobile Home Residency Law "), a mobile home park owner (after complying with the
notice, cure period and other procedural requirements of the Mobile Home Residency Law) has
the right to cause the removal of a mobile home if a resident fails to pay rent. Since the loss in
value caused by the removal of the mobile home would usually far exceed the amount of the rent
delinquency the mobile home owner, or the holder of a lien on the mobile home, has a strong
incentive to cure the rent default.
P"Icinity Description
The Project is located in the City of Moorpark, in the northeastern portion of Ventura
County, California. Ventura County is located along the Pacific coastline, north of Los Angeles
County. It is part of the 5 county (Los Angeles, Orange, Riverside, San Bernardino, and
Ventura) Los Angeles market area.
The Project is in the eastern portion of the City, on the south side of Los Angeles Avenue
and east of Collins Drive, near the boundaries of Moorpark with unincorporated County areas
and the City of Simi Valley. Simi Valley is considered a part of the market for this
neighborhood, especially for mobile home parks, as the nearest competitive alternatives to the
Project are to be found at the eastern end of that city. There are no truly competitive properties
within the City of Moorpark.
The Project
The Project is located in the City at 15750 Los Angeles Avenue and consists of a parcel
of approximately 67.22 acres, containing 240 mobile home park spaces, a clubhouse, pool, spa,
tennis courts, R.V. storage, one mobile home for the use of a resident manager, horseshoes court
and bike /walking trail. As of November, 1999, the occupancy rate of the Project was 100 %.
Monthly rental for spaces generally ranges from $445 to $600. The Project site has been used as
a mobile home park for ire than 20 years.
The site is improved with a 240 -space mobile home park, containing spaces for both
doublewide (228) and triplewide (12) manufactured homes. All utilities (water, sewer, gas and
electric) are available to the site, but only gas and water are submetered to the individual sites.
Electric service is provided directly to the sites by the utility company.
The park, according to an appraisal dated September 2, 1999 (the "Appraisal ") performed
by John P. Neet, MAI, Lake Elsinore, California (the "Appraiser "), on behalf of the City, had a
value as of August 26, 1999 of $13,200,000 and as of February 22, 2000 of $13,500,000
determined by the income approach, with additional support from the sales comparison approach.
As of the date of the Appraisal, the coach mix consisted primarily of double wide units. See
APPENDIX E hereto for the complete text of the Appraisal. The City makes no representation
as to the accuracy of the Appraisal.
51
The Westridge Group, L.L.C. ( "Westridge ") entered into an Agreement of Purchase and
Sale and Joint Escrow Instructions to purchase the Project from the current owners for a purchase
price of $13,200,000. The price included one resident manager's unit. George Turk, a principal
of Westridge, will receive compensation for its assistance to the Borrower in acquiring the
Project in the amount of $ . In the past, Westridge provided administrative
services to the Borrower and its parent and has assisted such entities in connection with the
acquisition of other mobile home parks.
Environmental Site Assessment
According to a Phase I Site Assessment of the Project prepared for Westridge by DCI
Services, Burbank, California, the Project site does not appear to have been significantly
impacted by the presence or use of hazardous materials on the site or in the surrounding area,
with the possible exception of asbestos and lead - containing building materials used in certain site
buildings.
52
Physical Needs Assessment
According to a .Physical Needs Assessment Report prepared for Westridge by Meterman,
Inc., Anaheim, California, dated October 11, 1999 (the "Needs Assessment "), the Project will
need $34,150.00 of repairs within one year from the date of the Needs Assessment, and some
additional repairs within a longer time frame, as summarized in the following table:
Physical Needs Assessment
Estimated Cost Summary
Description
Sites:
Asphalt double slurry sealing
Asphalt "fill -ins" reconstruction
Tree trimming common areas
Sewer hydro flushing (mains and laterals)
Pool area iron gate repairs
Cool deck topping at pool
Key valve maintenance
Gas operations manual compliance
RN cyclone chained link repairs
Retainer wall repairs
Gas and water maters replaced (per year)
Buildings:
Installation of pool equipment drain to curb
Ornamental iron fencing repainted (club.)
Acoustic ceilings re- sprayed
Repainting all interior building finishes
TOTAL ESTIMATED COST (YEAR 1):
TOTAL ESTIMATED COST (YEAR 2 -10):
Immediate Year Long Term Years
(1) (2 to 10)
$11,000
4,000
500
2,500
800
1,000
1,900
2,500
2,500
2,500
1,250
1,500
2,200
$34,150
$16,000
5,500
M
25,000
$49,500
(1) Items in the one -year .category are items which pose a safety threat, code violations, or are
those which, if left uncorrected, will result in significant damage losses to the Project.
(2) Items in the 2 to 10 year category are items based upon anticipated costs for building
components and/or systems, which will reach or exceed their anticipated service life within
the term.
An amount equal to $150,000 will be deposited from the proceeds of the Series A Bonds
on the Closing Date into the Repair and Replacement Fund, to be used to make the repairs
identified in the Needs Assessment. See "THE INDENTURE— Repair and Replacement Fund."
53
Historical Operating Results
The following tiles summarize operating results for the Project for the last three Fiscal
Years. The results shown below are in conformance with the definitions of Operating Revenues,
Operation and Maintenance Costs and Net Operating Revenues contained in the Indenture. The
financial statements of the Project used to prepare the following tables have not been audited and
were not prepared in accordance with generally accepted accounting principles. The operating
results shown below could differ significantly from those that would have been obtained if audits
had been performed and if such statements had been prepared in accordance with such principles.
Villa Del Arroyo Mobile Home Park
Summary of Historical Operating Results
Fiscal Years 1997 -1999
Operating Revenues
Rental Income
Utility Income
Other Income
Total Receipts
Operation and Maintenance Costs
Accounting
Advertising - Tenant Activities
Auto
Cable TV
Insurance - Property
Landscape
Legal and Professional
Licenses and Permits
Management Fees - 3%
Miscellaneous
Office, General and Administrative
Property Taxes
Pool & Spa
Repairs and Maintenance
On -Site Management
Telephone
Utilities
Total Disbursements
Net Operating Income
Source: Haynie & Company.
1997
$1,302,664
200,411
14,350
1998
$1,347,714
221,033
14,036
1999
$1,375,956
210,641
19,391
$1,517,425 $1,582,783 $1,605,988
$ 3,602
1,116
8,283
289
1,351
10,782
8,830
1,975
50,661
1,736
5,046
6,304
71,652
15,499
68,198
3,166
208,448
$ 3,355
1,439
6,849
370
11,933
8,844
932
1,513
52,999
3,102
3,756
2,059
72,908
17,319
70,816
2,689
211,078
$ 3,498
450
2,732
321
9,399
3,110
1,118
2,487
53,267
1,556
3,689
1,685
60,882
9,365
69,550
2,628
207,148
$ 466,938 $ 471,961 $ 432,885
$1,050,487
54
$1,110,822
$1,173,103
Competing Mobile Home Parks
The following table prepared by the Appraiser compares certain characteristics of the
Project and several other local mobile home parks.
The Project and Competing Mobile Home Parks
Comparable Attributes - As of November 12, 1998
Data No.
Park Name
Address
City
Spaces
Singlewide
Spaces
Park
Services,
Amenities
Rental Rates
Lessor
Paid
Services
Adjusted
Rental
Rates
Comments
Singlewide
Units
Age
Vehicle
Storage
Fee
Avg. Rent
Services
Adjust-
meat
occup.
Age
Restrict.
Transfer Rates
New .move -Ins
1. (Subject)
Villa Del Arroyo MHP
15750 E. Los Angeles Ave.
Moorpark
240
0%
Pool, Spa
Rec. Center
Tennis
Laundry
RV Storage
$445 to
$600
None
$445 to
$600
Subject to Moorpark rent
control. No park owned
rentals. 5 year lease and
month to month agreements
used Annual increases of
2.3% reported Excellent
condition.
20
0%
$484
$484
100%
$445 to
$600
$0
$445 to
$600
None
$600
$600
545
2. Simi Country MH Estates
1550 Rory Lane
Simi Valley
274
0%
2 Pools
2 Spas
Rec. Center
Laundry
RV Storage
$315 to
$475
None
$315 to
$475
No park owned units.
Subject to Simi Valley rent
control. Has both month to
month and 5 year teases.
Many new units placed
after Northridge earthquake.
Good condition.
+1-30
20%
$390
$390
1000/0
$475
50
5475
None
$475
5475
$25
3. Susana Woods
6840 Katherine Road
Simi Valley
139
0%
Pool, Spa
Rec. Center
Laundry
RV Storage
$332 to
5475
None
$332 to
$475
No park owned coaches.
Subject to Simi Valley rent
control. Month to month
rental agreements used.
Recent increase was 1.8%
(CPI based). Good
I condition.
+1 -30
10%
5390
$390
100%
$475
$0
5475
None
$475
$475
NA
4. Chatsworth Imperial MHP
20652 Lassen Street
Chatsworth
184
0%
Pool
Rec. Center
Shuffleboard
Laundry
$300 to
$550
None
$300 to
$550
Subject to Los Angeles rent
control. Annual 3% increase
permitted. No park owned
rentals. Good condition.
32
13%
5450
$450
100%
$330 to
$605
50
$330 to
5605
None
$425
5425
5. Chatsworth MHP
21500 Lassen Blvd.
Chatsworth
198
0%
Pool
Rec. Center
Shuffleboard
Laundry
$390 to
$550
Water
$380 to
$540
Subject to Los Angeles rent
control. Annual 3% increase
permitted. No park owned
rentals. Average condition.
31
20%
99.5%
$429 to
$605
-$10
$495 to
$595
None
$550
$540
6. Mountain View Estates
24303 Woolsey Canyon Road
Chatsworth
156
0%
Pool, Spa
Sauna
Rec. Center
RV Storage
$678 to
$963
Trash
$668 to
$953
4 new move -ins in last year. Most
recent increase in August 1999
for Sao per month. 23 park
owned units, currently rented
for average of 5900 /month,
acquired during recession, will
now be selling at turnover.
20
00/0
$764
$754
100%
$678 to
5963
-510
5668 to
$953
None
NA
$25
7. Tradewinds MHP
5150 Los Angeles Avenue
Simi Valley
100
0%
Pool
Rec. Center
Shuffleboard
Horseshoes
Laundry
Vehicle Storage
$295 to
$464
None
$295 to
$464
No park owned coaches.
Subject to Simi Valley rent
control. Month to month
rental agreements used No
recent increases. Transfers
to $464. Good condition.
39
75%
$359
t$464 $359
100%
$464
None
5464
$464
$]0
55
Management Agreement and Qualifications of Manager
The Project will be managed by Bessire & Casenhiser, Inc. ( "B &C ") pursuant to a
Property Management Agreement (the "Management Agreement "), between the Borrower and
B &C. The term of the Management Agreement is for one year, and thereafter for annual periods
unless on or before sixty days prior to the expiration of any such period, either party thereto
notifies the other in writing of its intention to terminate the Management Agreement in which
case the Management Agreement will be terminated at the end of such one year period. Either
party may terminate the Management Agreement upon thirty days written notice. Pursuant to the
Management Agreement, B &C will be paid an amount equal to three and one -half percent (3-
1/2%) of gross revenue of the Project collected per month for its property management services.
The following paragraphs provide background information regarding qualifications of B &C;
however no assurance can be given that B &C will continue to manage the Project during the
term of the Bonds.
The Company. B &C is a full service real estate company specializing in mobilehome
parks. Though the primary business is managing mobilehome parks, B &C also provides
consulting, marketing, and brokerage services. The company is currently forming Limited
Partnerships and Limited Liability Companies to acquire mobilehome parks in the western states.
Founded in 1979, the company currently manages 49 properties in California, Idaho and
Arizona, totaling 8,351 spaces. Clients include individuals, partnerships, corporations, and
syndications, so management must be flexible and geared to each separate project. The company
philosophy of "hands -on management" requires property managers to spend considerable time in
the field.
B &C's employees are active in three major industry organizations: The Western
Mobilehome Association (WMA), the Idaho Manufactured Housing Association, and the
Institute of Real Estate Management (IREM). The WMA is primarily concerned with
mobilehome park issues in California. IREM is a national organization encompassing all forms
of real estate management. It emphasizes professionalism in property management and offers
educational courses leading to the Certified Property Manager (CPM) designation.
The company also maintains membership in the Orange County Manufactured Housing
Education Trust (MHET) and the Mobilehome Park Owners Association (MPA).
Management Team. R. C. "Dick" Bessire — President Director CPM. Dick has been
involved in the park industry since 1959. Prior to founding the company, he was regional Vice
President for Fox and Carskadon with responsibilities for 30 parks in four western states. In
addition to mobilehome.,, parks, he has managed several shopping centers and apartment
complexes.
Dick has been active in the Western Mobilehome Association (WMA) since early 1970,
serving on the Board of Directors and currently serving on WMA Committees. During the past
years, he has conducted numerous management seminars and has testified before the State
Legislature on behalf of the organization. Dick also has been involved in several lease
negotiations and has testified as an expert witness before rent review boards.
He is a recipient of the prestigious Wallace E. Carr Memorial Award for extraordinary
service to the mobilehome park industry.
Mr. Bessire is a Certified Property Manager (CPM) and a licensed real estate salesman.
M
Keith Casenhiser — Executive Vice President, Director, CPM. Keith's real estate career
began in 1971 as a property manager for a Southern California developer. Later, he managed a
portfolio of mobilehome parks, shopping centers and apartment complexes for the Fox and
Carskadon Managemenf Corporation. He has been involved with development, construction and
management of parks.
Keith is also active in the WMA, serving on committees and as a speaker at management
education seminars. He holds a California real estate broker's license and is a Certified Property
Manager (CPM). He has served on the board of the Idaho Manufactured Housing Association
and the Western Mobilehome Association.
Richard Elias — Vice President, Director of Property Management, CPM. Richard has
over 20 years experience managing income properties. He joined the company in 1987 after ten
years with the Carlsberg Corporation. While at Carlsberg, Richard had been promoted to
Regional Manager in charge of different properties in seven states, the majority being
mobilehome communities. He currently manages parks throughout the State of California.
Richard has considerable experience with rent review boards, rent hearings and lease
negotiations.
Richard is a licensed California real estate salesman and is a Certified Property Manager
(CPM).
Norma Johnson — Property Manager, CPM. Norma has been with Bessire & Casenhiser,
Inc. since 1982. Beginning as a resident manager, she helped turn around a very difficult family
park. In 1986, she joined the property management staff and now supervises properties
throughout California. Norma has experience with rent control hearings and lease negotiations.
Norma is a California licensed real estate salesperson and is a Certified Property Manager
(CPM).
Patrick Coughlin — Property Manager. Patrick has recently joined Bessire & Casenhiser,
Inc., bringing with him over 25 years of managerial experience with the State of California,
where he utilized his mediation and negotiation skills. More recently, he worked for Century 21
Beachside Office, which was one of their top producing offices in the county.
Patrick is a California licensed real estate salesperson and has a Master's Degree from the
University of Southern California.
Scott Bessire — Property Manager. Scott has recently joined our staff, starting with a
small management portfglio in Southern California. At the same time he continues to manage
onsite a 500 -space upscale manufactured housing community in Covina, California.
Scott is a California licensed real estate salesperson.
Kathy Miller — Accounting Supervisor. Kathy joined the company in 1986 after several
years with the Bank of America. She is responsible for the project and corporate accounting and
performs project audits to ensure accurate onsite accounting.
57
Rents /Occupancy
The average renLper space in the Project was $468.42 in 1998, $452.51 in 1997, $436.01
in 1996, $434.20 in 1995 and $417.10 in 1994 and the occupancy for the Project for the past
eight calendar years is one hundred percent (100 %) as reported to The Westridge Group, L.L.C.
by the seller of the Project.
Projected Operating Results
Set forth below is a table which projects income and expenses for the Project, and
provides estimated Series A Bonds debt service coverage, for the Bond Years ending March 15,
2001 through March 15, 2005:
Projected Operating Results
(Bond Years Ending March 15, 2001 -2005)
Bond Year
1
2
3
4
5
Potential Income (Increased by 1.50 %)
Receipts:
Rental Income
$1,405,536
$1,437,863
$1,470,934
$1,504,765
$1,539,375
Utility Income
222,486
227,603
232,838
238,193
243,671
Other Income
19,837
20,293
20,760
21,237
21,725
Total Receipts
$1,647,859
$1,685,759
$1,724,532
$1,764,195
$1,804,771
Disbursements:
Accounting
$ 3,565
$ 3,647
$ 3,731
$ 3,817
$ 3,905
Advertising - Tenant Activities
1,025
1,049
1,073
1,098
1,123
Auto
2,795
2,859
2,925
2,992
3,061
Cable TV
328
336
344
352
360
Insurance - Property
5,000
5,115
5,233
5,353
5,476
Landscape
7,753
7,931
8,113
8,300
8,491
Legal and Professional
3,710
3,795
3,882
3,971
4,062
Licenses and Permits
2,544
2,603
2,663
2,724
2,787
Management Fees - 3%
49,436
50,573
51,736
52,926
54,143
Miscellaneous
2,180
2,230
2,281
2,333
2,387
Office, General and Administrative
4,259
4,357
4,457
4,560
4,665
Pool & Spa
3,426
3,505
3,586
3,668
3,752
Property Taxes
67,000
68,541
70,117
71,730
73,380
Repairs and Maintenance
14,384
14,715
15,053
15,399
15,753
On Site Management
71,150
72,786
74,460
76,173
77,925
Telephone
2,688
2,750
2,813
2,878
2,944
Utilities
220,912
225,993
231,191
236,508
241,948
t.
Total Disbursements
$ 462,155
$ 472,785
$ 483,658
$ 494,782
$ 506,162
Net Operating Revenues
$1,185,704
$1,212,974
$1,240,874
$1,269,413
$1,298,609
Debt Service Reserve Fund Earnings
Pledged Revenues
Bonds Annual Debt Service
Debt Service Coverage
Source: Haynie & Company report dated
February 11, 2000.
58
Appendix C contains the Historical and Forecasted Statements of Cash Receipts and
Disbursements and Accountants' Compilation Report (the "Report") prepared by Haynie &
Company, Certified Public Accounts and Management Consultants, Costa Mesa, California,
which provided the bigis for the foregoing table. The Statements are compilations and the
historical information has not been audited. See the Report for other limiting conditions and
assumptions. Neither the City nor the Underwriters have verified the information or assumptions
in the Report and no assurance can be given as to the accuracy of the information set forth
therein or as to the ability of the Project to achieve the projected operating levels assumed
thereby.
Oversight AgentlProgram Administrator
The City has engaged Urban Futures Incorporated ( "UFI ") to serve as the initial
Oversight Agent under the Indenture, the Loan Agreement and the Regulatory Agreement. UFI
has provided redevelopment and community development consulting services since 1979. For
the last 18 years, they have assisted communities in creating redevelopment project areas,
implementing specific redevelopment programs, overseeing and monitoring program
requirements including revenue verification and eligibility monitoring. UFI has assisted in the
conversion of five mobile home parks to resident or nonprofit ownership over the last three
years. UFI's familiarity with redevelopment law, low and moderate income housing
requirements, as well as mobile home park operations qualify them to serve as Oversight Agent.
THE CITY
The City is authorized under the Act to issue the Bonds as provided in the Indenture and
to loan the proceeds of the Bonds to the Borrower, as provided in the Loan Agreement. For
further information regarding the City, see "APPENDIX A— SUPPLEMENTAL
INFORMATION REGARDING THE CITY."
The Series B Bonds are not a debt of the City, the State of California or any of its
political subdivisions for purposes of any constitutional or statutory debt limitation or restriction,
nor in any event shall the Series B Bonds be payable out of funds or properties other than as
pledged pursuant to the Indenture.
RISK FACTORS
The following factors, which represent major risk factors that have been identified at this
time, should be considered along with all other information in this Official Statement by
potential investors in evaluating the Series B Bonds. There can be no assurance made that other
major risk factors will ngbecome evident at any future time. Potential investors are advised to
consider the following factors along with all other information in this Official Statement in
evaluating the investment quality of the Series B Bonds.
Series B Bonds Are Limited Obligations of the City
The Series B Bonds are special limited obligations of the City, payable solely from and
secured as to the payment of the interest on, and the principal of, and the redemption premiums,
if any, in accordance with their terms and the terms of the Indenture, from Residual Revenues
and other funds as provided therefor in the Indenture. The Series B Bonds are not a debt of the
City, the State or any of its political subdivisions within the meaning of any constitutional or
statutory debt limitation, nor in any event shall the Series B Bonds be payable out of funds or
properties other than as described in the preceding sentence.
ilie
Residual Revenues consist primarily of payments to be made by the Borrower under the
Loan Agreement and Note, after provision for payment of debt service on the Series A Bonds
and other deposits required under the Indenture. See "THE INDENTURE — Revenue Fund."
The obligations of the Borrower (or any future owner of the Project) under the Loan Agreement
and Note are not enforceable personally against the Borrower and such obligations are secured
only by the properties and liens specifically conveyed or encumbered as security therefor,
consisting of the Project. No representation or assurance can be given that the Project will
generate sufficient revenues to enable the Borrower to meet its payment obligations under the
Loan Agreement and Note. In the event that the Borrower defaults in its obligations, payment of
the principal of and interest on the Series B Bonds will be payable from amounts on deposit in
the Series B Bonds Debt Service Reserve Fund and from amounts, if any, available in certain
other funds held by the Trustee after provision for payment of obligations related to the Series A
Bonds. See "THE INDENTURE" herein.
Limitations on Exercise of Remedies
So long as the Series A Bonds remain outstanding, the Series B Bondholders are
prohibited from exercising remedies under the Indenture, the Loan Agreement and the Deed of
Trust. See "THE INDENTURE — Covenants of the City — Enforcement and Foreclosure of
Deed of Trust." In the event that revenues of the Project are sufficient to pay debt service on the
Series A Bonds and make other deposits required for the benefit of the Series A Bonds under the
Indenture, but are insufficient to pay debt service on the Series B Bonds, the Trustee will be
prohibited from exercising remedies under the Indenture and the Loan Agreement. See "THE
INDENTURE — Remedies," "THE SERIES B BONDS — Redemption — Targeted Mandatory
Sinking Fund Redemption." In such event, the Series B Bonds may be subject to discharge,
without payment. See "THE SERIES B BONDS — Redemption — Deemed Redemption of Series
B Bonds." Notwithstanding the foregoing, amounts in the Series B Bonds Debt Service Reserve
Fund may be available to cover a portion of amounts due on the Series B Bonds in a situation
where there are insufficient Residual Revenues available for such payment. See "THE
INDENTURE — Series B Bonds Debt Service Reserve Fund."
In the event of the occurrence of a Senior Bonds Event of Default, the City is obligated to
foreclose under the Deed of Trust. Any amounts realized from such a foreclosure sale would
first be used to retire all of the Series A Bonds then outstanding, with any residual amounts paid
to the owners of the Series B Bonds. See "THE SERIES B BONDS — Redemption — Deemed
Redemption of Series B Bonds." The appraised value of the Project, as of November 12, 1998,
was less than the aggregate principal amount of the Series A Bonds and the Series B Bonds. See
"THE PROJECT."
Loan Payments Non- hecourse
The Borrower agrees to repay the Loan from Net Operating Revenues. The Loan is
secured by a pledge of Net Operating Revenues and a security interest in the Project pursuant to
the terms of the Deed of Trust. Neither the Borrower's directors, officers, employees and agents,
nor any of its other affiliates, has or is intended to have any liabilities under or in respect of the
Loan Agreement, the Indenture, the Note, the Deed of Trust, the Regulatory Agreement, or any
of the other documents or transactions contemplated by any of them.
W
Loan Payments Not Preference Proof
Payments by the Borrower on the Loan are not subject to aging requirements for purposes
of satisfying the preference- proofing requirements of federal bankruptcy laws. In the event of
bankruptcy of the Borrower, payments to Bondholders within 123 days (one year in certain
cases) prior to the date of such bankruptcy may be subject to preference restrictions.
Restrictions Under the Regulatory Agreement
Under the Regulatory Agreement, the Borrower is to rent not less than 20% of the Spaces
in the Project to Very Low Income Residents (all as defined in the Regulatory Agreement). The
monthly rental rate which the Borrower may charge Very Low Income Residents is also
restricted in some cases by the Regulatory Agreement, as is the rate at which rental rates for Very
Low Income Residents may be increased. See "THE REGULATORY AGREEMENT" herein.
These provisions place a limit on the rental rates for the Spaces, and thus may limit the Net
Operating Revenues available to pay debt service on the Bonds. See "THE REGULATORY
AGREEMENT." These restrictions have the effect of limiting the market for restricted Spaces in
the Project in that certain otherwise eligible tenants are excluded on the basis of the restrictions,
and also limit the monthly rental and rental increases which may be charged for restricted
Spaces. In the event of an economic downturn, the "Median Income for the Area," on the basis
of which certain rent ceilings are to be calculated, is likely to decline, causing a decline in the
monthly rental which the Project is able to realize for certain restricted Spaces. See "THE
REGULATORY AGREEMENT" and "THE PROJECT" herein.
Risk of Taxability
The failure of the Borrower or the Management Agent to abide by the covenants and
conditions of either the Regulatory Agreement or the Loan Agreement may cause the interest on
the Series A Bonds to become includable for federal income tax purposes in the gross income of
holders of such Bonds, in some cases retroactive to the date of issuance of the Series A Bonds.
There is no provision in the Series A Bonds or the Indenture for an acceleration of the Series A
Bonds or the payment of additional interest in the event interest becomes so includable, and the
City is not liable for any claims or damages resulting from any such includability in gross
income. While failure to comply with the tax covenants of the Loan Agreement and the
Regulatory Agreement is an event of default which will entitle the City to accelerate the
Borrower's indebtedness and commence foreclosure proceedings, pursuit of such remedies is
subject to delays as a result of bankruptcy, limits on creditor's remedies and other practical
considerations. There can be no assurance that such remedies will be achieved or proceeds of
such remedies will be adequate to fund a redemption of all or part of the Series A Bonds
following the Borrower's noncompliance with such tax covenants, or that the City will be able to
compel compliance in a timely manner to avoid an event of taxability described above. See
"THE REGULATORY AGREEMENT" and "TAX MATTERS" herein.
In the event of foreclosure and sale of the Project, there can be no assurance that the
purchaser thereof will not render the Series A Bonds ineligible for tax- exempt status.
Conditions Which May Affect Borrower's Ability to Pay
Numerous conditions, which are not accurately predictable, could have an impact upon
the revenues and expenses of the Borrower and, as a result, upon its ability to make timely
payment under the Loan Agreement and the Note. In particular, the ability of the Project to
generate revenues and sufficient rental income to pay all interest on and principal of the Series A
Bonds as due will depend on maintaining a high occupancy rate, and sustaining the rental rates,
61
in the Project. Factors that may affect the ability of the Borrower to lease the mobile home sites
of the Project and thus generate sufficient income include the demand for mobile home facilities
in the market area, the availability and costs of other competing housing facilities and the ability
of potential residents to meet payments.
The ability of the Borrower to generate sufficient income in the future will also depend
upon other factors which cannot be predicted with any assurance. Such factors include general
and local economic conditions which may affect demand for mobile home units. Units such as
those which form the Project are subject to rising operating costs, fluctuating occupancy levels,
adverse economic conditions and changes in neighborhood preferences. The ability of the
Borrower to generate sufficient income will depend on its ability to lease the Project units
promptly and maintain occupancy.
The Appraisal. The Appraisal is based upon certain assumptions, limiting conditions,
certifications and definitions set forth therein. An appraisal is only an estimate as to value as of
the specific date stated therein. As an estimate, an appraisal is not a measure of realizable value
and may not reflect the amount which would be received if the property which is the subject of
the appraisal is sold. The Appraisal should be read in its entirety for an understanding of the
assumptions and rationale which underlie its conclusions.
Leasing and Income Risks. The availability of sufficient operating income to pay the
obligation of the Borrower with respect to the Loan Agreement is subject to the ability of the
Borrower to establish appropriate rental rates for, and the continuing ability to rent units in, the
Project, subject to the limitations of the Regulatory Agreement. Any constraint on rental
increases due to regulatory (including, but not limited to, rent control) or market demand factors
that inhibit annual rent increases may adversely affect the Borrower's ability to cover expenses
and financing costs of the Project.
Projected Operating Results of the Project. The cash flow projections of the Project (see
APPENDIX C —HISTORICAL AND FORECASTED PROJECT RECEIPTS AND
DISBURSEMENTS) are based upon certain assumptions, limiting conditions, certifications and
definitions as set forth under such captions. There can be no assurance that the projected results
contained therein will approximate actual results or that any projected results will continue
beyond the projection period.
Operation of the Project. The primary source of payment of the Loan are the Project
revenues available after payment of operating expenses of the Project. Accordingly, the
Bondholders are exposed to the risk that, if the expected operating cash flow is not achieved,
actual payments of the Borrower pursuant to the Loan Agreement may be insufficient to timely
pay all amounts due on thq,Loan. In the event that interest and principal are not paid with respect
to the Loan Agreement, ' or only partially paid, there will be insufficient Revenues to make
scheduled principal and interest payments to Bondholders and the Trustee may be required to
draw on amounts in the Senior Bonds Debt Service Fund to make up such deficiencies. Once
amounts in the Senior Bonds Debt Service Fund have been depleted, estimated payments of
principal and interest on the Bonds may be delayed or unpaid.
The availability of revenues of the Project to make payments under the Loan could be
adversely affected by a failure or inability to (i) continue to rent or lease the Project at the rental
rates expected by the Borrower, and (ii) to maintain the operating expenses and capital expenses
at or below the level expected by the Borrower.
Risks Associated with Operating Expenses. An extended period of inflation may cause
the rate of increases in operating expenses to outpace the ability to raise rents. In addition, any
underestimation by the Borrower in the operating expenses of the Project may materially affect
62
its projections of the operating income of the Project. The consequences of this risk are similar
to a deterioration in the base rental income and would adversely affect Project revenues. The
Borrower has committed no other resources outside of the revenues generated from the Project to
repay the Loan and to pay increased operating expenses.
Property reserves are an important consideration for long -term borrowers who will have
to replace major capital items to maintain the quality of the property over time. See "THE
INDENTURE— Revenue Fund" and "THE LOAN AGREEMENT— Repair and Replacement"
herein. The deterioration and replacement of capital items is not predictable with certainty, and
real estate properties such as the Project may encounter a periodic need for capital for
replacement and repair of capital items in excess of budgeted amounts.
In the event that additional capital is needed for the replacement of capital items, it is
likely that the Borrower will either have to seek additional debt capital from third party lenders
or pay for such capital replacement and improvement out of residual cash flow from the Project,
if any. The City has no obligation with respect to any operating, reserve or capital expenses of
the Project and no assurance can be given that such moneys will be obtained. If not, the viability
of the Project may be adversely affected over time.
Risks Associated with Other Expenses. To the extent there are any expenditures required
to maintain the Project that are not foreseen by the Borrower, any uninsured losses, or additional
property taxes due on the Project as a result of a change in the law, regulation or interpretation of
a court of competent jurisdiction, the only source of moneys to pay such expenses would be
additional resources available to the Borrower. The Borrower has pledged no assets, other than
the Project revenues, to make debt service payments and to pay for operating expenses.
Accordingly, the Borrower may be unwilling or unable to pay for such additional expenditures.
Risks Associated with the Management of the Project. A disruption in management
continuity may temporarily impact the operations of the Project. In addition, a new manager of
the Project may not have the same ability to realize rental increases or to contain operating
expenses as the current manager. If authorized compensation to the management agent proves to
be inadequate, the Borrower may have difficulty securing quality management. If no other
money than approved amounts are available to pay such increased costs, the quality and revenues
of the Project could be adversely affected.
The Deed of Trust. The Borrower has executed the Deed of Trust on the Project in favor
of the City and the Trustee to secure the Borrower's obligations under the Loan Agreement.
Because the Borrower may have limited financial assets, and because the Borrower is not
personally liable for the amounts owing under the Loan Agreement (other than the indemnity and
for certain fees as provided thereunder), if there is a default under the Loan Agreement, the
primary remedy of the 'f ustee and the City is to foreclose on the real and personal property
security granted pursuant to the Deed of Trust and related documents. All amounts collected
upon foreclosure of the Project pursuant to any of the Deed of Trust will be used to pay amounts
owing under the Loan Agreement pursuant to the provisions of such Deed of Trust and, under the
Indenture, will be applied to the payment of the Series A Bonds in full, prior to the use of any
such monies to pay the Series B Bonds.
Value of Project; Economic Feasibility
The economic feasibility of the Project depends in large part upon its being substantially
occupied. The Borrower is required by the Regulatory Agreement, among other things, to
maintain the Project as a "qualified residential rental housing project," and to have at least 20%
of the Spaces in the Project occupied (or treated as occupied) by persons whose income for
rev
federal tax law purposes does not exceed 50% of area median gross income adjusted for family
size, as published by HUD. In addition, other income and rental rate restrictions apply. See
"THE REGULATORY AGREEMENT" and "RISK FACTORS — Restrictions Under the
Regulatory Agreement' " herein. There can be no assurance that the Borrower will be able to rent
units to comply with these requirements or at rentals which will enable it to make timely
payments under the Loan Agreement and the Note.
There can be no assurance that the appraised value would be realized upon sale of the
Project. In the event of a forced sale of the Project due to economic distress, the amount realized
upon such distress sale would likely be less than the fair market value. Furthermore, there can be
no assurance that funds sufficient to pay the principal amount of the Series A Bonds at maturity
or earlier redemption could be obtained through the sale or refinancing of the Project.
The Borrower believes that proceeds from the foreclosure of the Project would be
sufficient to pay the principal of and interest on the Series A Bonds. Such payments will,
however, be additionally secured by the Senior Bonds Debt Service Reserve Fund and by certain
other funds held by the Trustee, if available.
Competing Facilities
The City may finance, own and operate other facilities and other facilities may be
financed, developed, constructed and operated by any party that could compete with the Project
for tenants. The existence of competing facilities could adversely affect occupancy and revenues
of the Project.
Risks of Ownership of Real Property
The Bondholders will be subject to the risks generally incident to an investment in real
estate, including, without limitation: (i) the uncertainty that the Project will produce sufficient
revenues to enable the Borrower to make timely payments pursuant to the terms of the Loan
Agreement; (ii) adverse changes in local market conditions, such as changes in the market value
of real property in the vicinity of the Project, the supply of or demand for competitive properties
in such area, and the market value of the Project in the event of sale or foreclosure; (iii) changes
in interest rates and the availability of financing moneys that may render any refinancing or sale
of the Project difficult, unattractive, or impossible; (iv) changes in real estate tax rates and other
operating expenses, governmental rules (including, without limitation, zoning laws) and fiscal
policies; and (v) natural disasters (including, without limitations, earthquakes and floods), which
may result in uninsured losses.
The Bondholders will be subject to the risk that the Project will be unable to attract and
retain tenants as a result of adverse changes affecting the Project, the local real estate market or
other factors, including the restrictions on the Project imposed under the Regulatory Agreement.
Such inability to attract and retain tenants would result in a decline in rental income and may
affect the ability and willingness of the Borrower to make timely payments due with respect to
the Loan Agreement. There can be no assurance that the Project will generate sufficient revenue
to cover operating expenses and meet required payments due under the Loan Agreement.
Residential real estate, including the Project, can be subject to adverse housing pattern
changes and uses, vandalism (resulting in extra security costs), vacancies, rent controls, rising
operating costs, and adverse changes in local market conditions, such as a decrease in demand for
residential housing due to a decline of the local economy and a decrease in employment.
Rationing or other restrictions with respect to the availability or use of utilities could
significantly affect the profitability of operating the Project. Similarly, governmental or
64
administrative entities may impose restrictions requiring structural alterations of or capital
improvements to residential buildings, resulting in significant additional costs to the Borrower
that the Borrower may be unwilling or unable to finance, and which would significantly impact
the Project's cash flow's. If the local regulatory bodies having jurisdiction over the Project
restrict or limit rent increases imposed by the Borrower to offset increased costs, the Project's
cash flows may be reduced. Any future organization of the tenants of the Project could also
result in resistance against rent increases, in the form of rent strikes, litigation or other action. If
rental receipts after operating expenses (other than debt service) are insufficient to service the
debt with respect to the Loan, foreclosure and sale of the Project is possible. Some of the risks
mentioned in this subsection are more particularly described in the following subsections.
Environmental Risks
The Borrower knows of no environmental problems or liabilities in or on the real
property or on adjacent properties which would adversely affect the value of the Project as
security. Since certain environmental problems are hidden by time, nature, or both, it is possible
that there could exist soil or groundwater contamination on site, which at some point in time
might require remediation. However, the Environmental Site Assessment did not reveal any
evidence of significant soil or groundwater contamination.
In the event the Project is determined at some future time to require environmental
remediation, the result could be a substantial or total loss of market value. Further, under the
Comprehensive Environmental Response, Compensation and Liability Act ( "CERCLA "), the
owner or operator of property is potentially liable for the full amount of the costs of cleanup of
hazardous substances, and, in certain cases, secured creditors can incur liability as an operator by
participating or having the capacity to participate in the management of a facility prior to
foreclosure, and after foreclosure may have absolute liability as an owner.
Insufficient Insurance and Land Sale Proceeds
The Indenture requires that in the event of damage to, destruction of or a title defect
relating to the Project and the Improvements which the Borrower determines not to repair or
replace, the Borrower will notify the Trustee of such events and the Trustee shall promptly
exercise its remedies under the Deed of Trust and as soon as practicable, sell the real and
personal property acquired through or in lieu of such exercise. The proceeds together with any
Net Proceeds are to be used to redeem all or a pro rata share of the Series A Bonds, as described
in the Indenture, and then with any remaining funds to redeem Series B Bonds. The Borrower is
required to maintain casualty insurance only in the amount equal to the replacement value of the
Improvements (see the discussion under the heading "THE LOAN AGREEMENT "). In
addition, the Borrower could violate its covenant to maintain insurance by allowing the insurance
on the Project to lapse; or an insurance company providing such insurance could become
insolvent or otherwise not honor claims on policies. In such event, if such a loss occurs, a
default in payment of the Bonds would almost certainly result and, if such loss is substantial, a
non - payment of all or a portion of the Bonds could occur.
Based on current value of the real property comprising the Project, the Borrower expects
that there would be sufficient revenues available from the sale of the real and personal property
and Net Proceeds to redeem the Series A Bonds; however, if real property values decline, or the
Project can not be sold at an adequate price, the Net Proceeds may not be sufficient to redeem
Series A Bonds in a principal amount sufficient to reduce debt service to a level that can be
supported by the Revenues from the remaining Project and Improvements.
W
Neither the Indenture nor the Loan Agreement requires, and the Borrower does not intend
to obtain, earthquake insurance on the Project.
Enforceability and'kankruptcy
The remedies available upon a default are in many respects dependent upon regulatory
and judicial actions which are often subject to discretion and delay. Under existing laws and
judicial decisions, the remedies provided under the financing documents described herein may
not readily be available or may be limited. Recent revisions of the federal bankruptcy laws may
have an adverse effect on the ability of the Trustee to enforce its claim to the security granted by
the Deed of Trust. The bankruptcy court may also have the power to invalidate certain
provisions of the Loan Agreement and the Deed of Trust that make bankruptcy and related
proceedings by the Borrower an event of default thereunder. The various legal opinions to be
delivered concurrently with the delivery of the Series B Bonds and the aforesaid documents will
be qualified to the extent that the enforceability of certain rights related to the Series B Bonds is
subject to limitations imposed by bankruptcy, reorganization, insolvency or other similar laws
affecting the rights of creditors generally and by equitable remedies and proceedings generally.
Despite the subordinate position of the Series B Bonds, attempted enforcement by the Series B
Bondholders of the lien of the Series B Bonds upon the revenues of the Project could result in
delay of recovery by Series A Bondholders.
Anti - Deficiency Laws of the State of California
Section 726 of the California Code of Civil Procedure provides (among other matters)
essentially that any suit to recover a debt or to assert other rights secured by a deed of trust on
real property must be an action to foreclose that deed of trust, thus prohibiting a direct action on
the debt or the exercise of other rights by the holder of that deed of trust (commonly called the
"one form of action rule "). This Section has been interpreted by the California courts to require a
lender to exhaust all collateral security on a debt in a single action and to limit a lender's right to
set -off. This Section also specifies the procedures for the sale of the encumbered property, the
application of proceeds, the availability in certain cases of a deficiency judgment, the limitation
on the amount thereof, and other related matters.
In the event of an action in violation of the one form of action rule, it is virtually certain
that the benefit of the real property security would be lost. Further, in the event that an action
were taken by the Trustee with regard to funds or other security other than with regard to the
application of funds pursuant to the Indenture other than the real property security prior to a
"trustee's sale" of the real property security (as discussed below) it is possible that the sanctions
contained in the one form of action rule would thereby be incurred.
Sections 2924 and 2924(c) of the California Civil Code require the following of certain
procedures by the holder of a deed of trust or mortgage before exercising a power of sale
included under a deed of trust or mortgage, which procedures are designed to protect the rights of
the borrower and certain other persons and under certain circumstances to reinstate the
obligations secured by such deed of trust. Section 2924(c) of the California Civil Code provides
that whenever the maturity of an obligation secured by a deed of trust is accelerated by reason of
a default in the payment of interest or of any installment of principal or other sum secured
thereby, the trustor and certain other entitled persons have the right, at any time within the period
remaining with the date of recordation of the notice of default until five business days prior to the
date of sale set forth in the notice of default if the power of sale under such deed of trust is to be
exercised or, otherwise, at any time prior to the entry of the decree of foreclosure, to cure such
default by paying the entire amount then due (including certain reasonable costs and expenses
incurred in enforcing such obligations, but excluding any amount that would not otherwise be
:.
due but for such acceleration) and thereby reinstate such deed of trust and the obligations secured
thereby to the same effect as if no such acceleration had occurred.
California Code of Civil Procedure Section 580(d) prohibits the rendering of any
deficiency judgment after a trustee's sale. Paradoxically, California Civil Procedure Section
580(a) essentially limits the amount of a deficiency judgment after a trustee's sale to the
difference between the appraised value of the secured property sold and the sales price at the
trustee's sale. Although on their face these Code Sections do not limit the Trustee's rights to
recover a deficiency under the Note, at least with respect to the Borrower, since the Loan is non-
recourse, these Code Sections could limit or hamper the enforcement of certain rights of the
Bondholders since the combined effect of these Code Sections has been held to cut off the
subrogation rights of guarantors. Therefore, in effect, California courts have refused to enforce
guarantees where guarantors have lost their rights of subrogation through the secured party's
conduct of a trustee's sale.
Under California law, guarantees by corporate shareholders may not be given effect if the
corporation is found to be a mere instrumentality or "alter ego ". However, the mere fact that
guarantors are shareholders, officers or directors will not be grounds for applying anti- deficiency
protections absent a showing that adherence to a separate existence would promote an injustice
or fraud.
Section 9501 of the Uniform Commercial Code as adopted in California is intended to
facilitate the employment of remedies permitted under the Uniform Commercial Code with
regard to personal property used as security for a debt also secured by real property. Such
remedies would include a deficiency judgment after the sale of personal property security and
multiple, as opposed to unitary sales of security.
It is the opinion of leading California legal scholars that the employment of Code Section
9501 is subject to a commercial reasonableness test which could impair a creditor's right to
proceed against real property security after a sale or other action under the Uniform Commercial
Code. Therefore, prudence dictates that all collateral be sold in a single sale when a debt is
secured by mixed collateral. Any other course of action, such as a sale of personal property or
seizure of funds or the use of an offset of funds, might invoke the sanctions of Civil Code
Section 726.
The Deed of Trust provides for an absolute assignment of rents to the Trustee as the
assignee thereunder. Although these provisions are absolute in form, until the assignee perfects
its assignment by taking possession pursuant to the Indenture or by receivership, it may have no
claim to the rents as against either the Borrower or a junior lienor with a similar assignment of
rents clause who earlier perfected its own lien through possession or receivership. Further, it is
probable that a judgment 'appointing a receiver to enforce a rents and profits clause or the use of
such proceeds to service or satisfy a debt would invoke the sanctions of the one form of action
rule.
The provisions for penalties, late charges or additional interest in the event of a default by
the Borrower under the Loan Documents will be subject to factual determinations required under
California law in the evaluation of late payments and liquidated damages provisions.
67
TAX MA TTERS
The tax- exempt status of the interest on the Bonds is based on the continued compliance
by the Borrower and the City with certain covenants contained in the Tax Certificate of the City
and the Borrower and Regulatory Agreement and the reporting of certain information to the
Department of the Treasury. These covenants relate generally to use and operation of the
Project, maintenance of use of the Project by tax- exempt users, compliance with the
requirements of Section 501(c)(3) of the Code, arbitrage limitations, rebate of certain excess
investment earnings to the federal government, restrictions on the amount of issuance costs
which can be financed with the proceeds of the Bonds and requirements regarding the timely and
proper use of proceeds of the Bonds. Failure to comply with any of these covenants may result
in the treatment of interest on the Bonds as taxable retroactive to the date of issuance.
In order to assist compliance with the Code, the City will require, among other things,
that the Borrower enter into the Regulatory Agreement. The Borrower will enter into the
Regulatory Agreement containing provisions designed to ensure compliance with certain
restrictions under the Code. In addition, the City and the Borrower have covenanted in the
Indenture and the Loan Agreement, as applicable, to comply with all applicable requirements of
the Code. In the event of noncompliance with such requirements, remedies available to the City
and/or the Bondholders may be limited by applicable provisions of law and may, therefore, be
inadequate to prevent the loss of the tax- exempt status of interest on the Bonds.
The Borrower has been determined by the Internal Revenue Service to be a tax- exempt
organization described in Section 501(c)(3) of the Code. The tax- exempt status of the Series A
Bonds depends upon the Borrower's maintenance of its status as an organization described in
Section 501(c)(3) of the Code. To maintain such status, the Borrower must conduct its
operations in a manner consistent with representations previously made to the IRS and with
current and future IRS regulations and rulings governing its tax- exempt status. In order to
maintain its tax- exempt status under federal law, the Borrower must not be operated to any
substantial degree for the benefit of private individuals or allow its earnings or assets to inure to
the benefit of private persons. If the Borrower should lose its status as an exempt organization, a
reduced amount of after -tax revenue would remain available to pay debt service on the Bonds,
and the interest on the Bonds could become taxable retroactive to the date of issuance of the
Bonds.
Developments affecting the federal or state tax- exempt status of nonprofit organizations
such as the Borrower may impose financial or other burdens on the operations of the Borrower.
For example, taxing authorities in certain jurisdictions have sought to impose or increase taxes
related to the property and operations of nonprofit organizations. In addition, compliance with
current and future regulations and rulings of the IRS could adversely affect the ability of the
Borrower to charge and collect revenues, finance or refinance indebtedness on a tax- exempt
basis, or otherwise generate revenues necessary to provide for payment of the Series A Bonds.
In the opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel, under
existing law and assuming continuing compliance by the City and the Borrower with certain
covenants in the documents relating to the Bonds and requirements of the Internal Revenue Code
of 1986, as amended (the "Code ") regarding the use, expenditure and investment of the Bond
proceeds and the timely payment of certain investment earnings to the United States Treasury,
interest on the Bonds is not includable in the gross income of the owners of the Bonds for the
purposes of federal income taxation. Failure to comply with such covenants in the documents
relating to the Bonds and requirements of the Code may cause interest on the Bonds to be
includable in gross income retroactively to the date of issue. Bond Counsel has not undertaken
to determine (or to inform any person) whether any actions taken (or not taken) or events
.:
occurring (or not occurring) after the date of issuance of the Bonds may affect the tax status of
interest on the Bonds. The proposed form of opinion of Bond Counsel is set forth in Exhibit D.
Interest on the fonds will not be treated as an item of tax preference in calculating the
alternative minimum taxable income of individuals or corporations; however, interest on the
Bonds will be included as an adjustment in the calculation of a corporation's alternative
minimum taxable income and may therefore affect such corporation's alternative minimum tax
liabilities.
The difference between the initial offering prices to the public (excluding bond houses
and brokers) at which the Series B Bonds are sold and the amount payable at maturity thereof
constitutes "original issue discount" for purposes of federal income taxes and State of California
personal income taxes. Such discount is treated as interest excluded from federal gross income
and exempt from State of California personal income taxes to the extent properly allocable to
each owner thereof subject to the limitations described in the paragraphs above. The original
issue discount accrues over the term to maturity of each such maturity of each Series B Bond on
the basis of a constant interest rate compounded on each interest or principal payment date (with
straightline interpolations between compounding dates). The amount of original issue discount
accruing during each period is added to the adjusted basis of such Series B Bonds to determine
taxable gain upon disposition (including sale, redemption, or payment at maturity) of such Series
B Bonds. The Code contains certain provisions relating to the accrual of original issue discount
in the case of purchasers of the Series B Bonds who purchase the Series B Bonds after the initial
offering of a substantial amount of such maturity. Owners of such Series B Bonds should
consult their own tax advisors with respect to the tax consequences of ownership of Series B
Bonds with original issue discount, including the treatment of purchasers who do not purchase in
the original offering, the allowance of a deduction for any loss on a sale or other disposition, and
the treatment of accrued original issue discount on such Series B Bonds under federal individual
and corporate alternative minimum taxes.
Bond Counsel expresses no opinion regarding other income tax consequences caused by
ownership of, or receipt of interest on, the Bonds.
In the further opinion of Bond Counsel, interest on the Bonds is exempt from State
personal income tax.
Ownership of tax- exempt obligations may result in collateral income tax consequences to
certain taxpayers, including, without limitation, financial institutions, property and casualty
insurance companies, certain foreign corporations doing business in the United States, certain S
Corporations with excess passive income, individual recipients of Social Security or Railroad
Retirement benefits and,, taxpayers that may be deemed to have incurred or continued
indebtedness to purchase'or carry tax- exempt obligations. Prospective purchasers of the Bonds
should consult their tax advisors as to applicability of any such collateral consequences.
LEGAL OPINIONS
The opinion of the Bond Counsel firm of Quint & Thimmig LLP, San Francisco,
California, approving the validity of the Series A Bonds and stating that interest on the Series B
Bonds is excludable from gross income under Section 103 of the Code and such interest is also
exempt from personal income taxes of the State of California, will be rendered simultaneously
with the issuance of the Series B Bonds, in substantially the form shown in Appendix D hereto.
The legal opinion is only as to legality and tax- exemption, and is not intended to be nor is it to be
interpreted or relied upon as a disclosure document or an express or implied recommendation as
to the investment quality of the Series B Bonds.
.•
Certain matters will be passed upon for the City by its Disclosure Counsel, Richards
Watson & Gershon, A Professional Corporation, Los Angeles, California, and for the Borrower
by its counsel, Goldfarb'& Lipman, San Francisco, California.
Compensation for the services of Bond Counsel, Disclosure Counsel and the City's
financial advisor is contingent upon the sale and delivery of the Bonds.
OTHER PROFESSIONALS INVOLVED IN THE OFFERING
Urban Futures, Inc., Orange, California, is the City's financial advisor with respect to the
Bonds.
CONTINUING DISCLOSURE
Pursuant to a Continuing Disclosure Agreement between the Borrower and the Trustee,
acting as dissemination agent thereunder (the "Disclosure Agreement "), the Borrower, as an
"obligated person" under paragraph (f)(10) of SEC Rule 15c2 -12 (the "Rule "), has agreed to
provide, or cause to be provided, to each nationally recognized municipal securities information
repository and any public or private repository or entity designated by the State as a state
repository for purposes of the Rule (each, a "Repository") certain annual financial information
and operating data, including its audited financial statements and for annual reports following the
initial annual report information of the type set forth in this Official Statement under the heading
"THE PROJECT — Projected Operating Results." In addition, the Borrower has agreed to
provide, or cause to be provided, to each Repository in a timely manner notice of the following
"Listed Events" if material: (1) principal and interest payment delinquencies; (2) non - payment
related defaults; (3) modifications to rights of Owners of Bonds; (4) Bond calls; (5) defeasances;
(6) rating changes; (7) adverse tax opinions or events adversely affecting the tax- exempt status of
the Series A Bonds; (8) unscheduled draws on the Senior Bonds Debt Service Reserve Fund
reflecting financial difficulties; (9) unscheduled draws on credit enhancements reflecting
financial difficulties; (10) substitution of credit or liquidity providers, or their failure to perform;
and (11) release, substitution or sale of property securing repayment of the Bonds. These
covenants have been made in order to assist the Underwriter in complying with paragraph (b)(5)
of the Rule.
The Borrower may amend the Disclosure Agreement, and waive any provision thereof,
by written agreement of the parties, subject to the provisions of Section 8 of the Disclosure
Agreement. In addition, the Borrower's obligations under the Disclosure Agreement shall
terminate upon the defeasance or payment in full of all of the Bonds. The provisions of the
Disclosure Agreement arpintended to be for the benefit of the Owners and shall be enforceable
by the Trustee on behalf of such Owners, provided that any enforcement action by any such
person shall be limited to a right to obtain specific enforcement of the Borrower's obligations
under the Disclosure Agreement and any failure by the Borrower to comply with the provisions
thereof shall not be an event of default under the Indenture or the Loan Agreement.
Neither the Borrower, as a newly established entity, nor Augusta Homes has ever failed
to comply in all material respects with any previous undertakings with regard to the Rule.
LITIGATION
At the time of delivery of and payment for the Series A Bonds, the City will certify that
there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any
court or governmental or public entity pending or, to the best knowledge of the City, threatened
70
against the City (i) which affects or seeks to prohibit, restrain or enjoin the issuance of the Bonds
or the execution or delivery of the Indenture or the Loan Agreement, (ii) contesting the validity
of the Indenture or the Loan Agreement, the powers of the City to enter into or perform its
obligations under the Indenture or the Loan Agreement, or the existence or powers of the City, or
(iii) which, if determined adversely to the City, would materially impair the City's ability to meet
its obligations under the Indenture or the Loan Agreement or materially and adversely affect the
City's financial condition.
NO RATING
No rating has been applied for or granted by a nationally recognized rating agency in
connection with the Series B Bonds.
UNDER WRITING
The Series B Bonds are to be purchased by Miller & Schroeder Financial, Inc. and
Kinsell, Newcomb & De Dios, Inc. (collectively, the "Underwriters ") at an original issue
discount of $ and an Underwriters' discount of $ . The purchase agreement
pursuant to which the Series A Bonds are being purchased provides that the Underwriters will
purchase all of the Bonds if any are purchased, the obligation to make such purchase being
subject to certain terms and conditions set forth in the purchase agreement, to the approval of
certain legal matters by counsel and to certain other conditions.
The Underwriters may offer and sell Series B Bonds to certain dealers, banks and others
at a price lower than the offering price stated on the cover page hereof. The offering price may
be changed from time to time by the Underwriters.
MISCELLANEOUS
All of the summaries of the Indenture and other agreements and documents contained
herein are made subject to the provisions of such documents respectively and do not purport to
be complete statements of any or all such provisions. Reference is hereby made to such
documents on file with the City for further information in connection therewith.
Any statements made in the Official Statement involving matters of opinion or estimates,
whether or not expressly stated, are set forth as such and not as representations of fact, and no
representation is made that any of the estimates will be realized.
The preparation and distribution of this Official Statement have been authorized by the
City.
CITY OF MOORPARK
By: /s/
City Manager
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APPENDIX A
SUPPLEMENTAL INFORMATION
REGARDING THE CITY OF MOORPARK
m
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SUPPLEMENTAL INFORMATION
THE CITY OF MOORPARK
The following information concerning the City of Moorpark, California (the "City') and
surrounding areas is included for the purpose of supplying general information regarding the
community. The Bonds are not a debt of the City, the State of California (the State') or any of its
political subdivisions, and neither the City, the State nor any of its political subdivisions is liable
therefor.
General Description
The City is a general law city incorporated on July 1, 1983. Located in the southeastern
part of Ventura County (the "County "), the City consists of approximately 12.44 square miles
and is located 50 miles northeast of downtown Los Angeles.
Government
The City adopted a Council - Manager form of government consisting of four Council
Members elected to four -year overlapping terms. The Mayor is elected at large for a two -year
term.
Population
The City's population, as of January 1, 1999 was approximately 29,600. An historical
summary of the City's population (as of January 1 of each year) is shown below.
City of Moorpark
1990 ....................
25,252
1991 ....................
25,050
1992 ....................
26,173
1993 ....................
26,450
1994 ....................
26,950
1995 ..............
27,100
1996 ..............
27,650
1997 ..............
28,550
1998 ..............
29,400
1999 ..............
29,600
Source: City of Moorpark- Public Relations Department and the Demographic Research Unit,
California State Department of Finance.
Assessed Valuation and Property Taxes
Property in the City is assessed by the County Assessor. All ad valorem taxes levied on
property in the City by the County, schools and special districts are due at the same time as and
are based on the same rolls as county taxes. The valuation of secured property is established as
of March 1 of each year and is equalized for purposes of establishing tax rates in August. Ad
valorem taxes on secured and utility property are payable on November 1 and March 1 of each
fiscal year and become delinquent on December 10 and April 10, respectively. Taxes on
unsecured property (personal property and leasehold) are due on April 13 of each year based on
the preceding year's tax rate.
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A summary of the City's assessed valuation is as follows:
Source: California Municipal Statistics, Inc.
Secured Tax Charge and Delinquencies
After
Redevelopment Increment
$1,604,950,347
1,644,090,858
1,718,443,610
1,777,760,799
1,840,560,742
1,925,195,462
2,027,175,651
The City's secured tax charges and delinquencies for fiscal years 1993 -94 through
1997 -98 are as follows:
Before
Year
' 'Redevelopment Increment
1993 -94
$1,723,396,978
1994 -95
1,790,098,690
1995 -96
1,848,514,590
1996 -97
1,918,641,532
1997 -98
1,991,089,015
1998 -99
2,094,911,418
1999 -00
2,221,432,867
Source: California Municipal Statistics, Inc.
Secured Tax Charge and Delinquencies
After
Redevelopment Increment
$1,604,950,347
1,644,090,858
1,718,443,610
1,777,760,799
1,840,560,742
1,925,195,462
2,027,175,651
The City's secured tax charges and delinquencies for fiscal years 1993 -94 through
1997 -98 are as follows:
(1) 1 % General Fund levy. Delinquency reflects county -wide rate.
Source: California Municipal Statistics, Inc.
Commerce
Percent
Delinquent
June 30
4.73%
3.44
2.38
2.13
1.83
2.05
The number of establishments selling merchandise subject to sales tax and the valuation
of taxable transactions is presented in the following table.
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions
Retail Stores
Amount
Fiscal
Secured Tax
Delinquent
Year
Charge (1)
June 30
1993 -94
$1,014,558.85
$47,974.26
1994 -95
1,071,364.40
36,880.27
1995 -96
1,109,404.41
26,389.78
1996 -97
1,158,953.38
24,705.17
1997 -98
1,191,917.96
21,806.83
1998 -99
1,320,917.61
27,052.34
(1) 1 % General Fund levy. Delinquency reflects county -wide rate.
Source: California Municipal Statistics, Inc.
Commerce
Percent
Delinquent
June 30
4.73%
3.44
2.38
2.13
1.83
2.05
The number of establishments selling merchandise subject to sales tax and the valuation
of taxable transactions is presented in the following table.
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions
Source: State Board of Equalization.
(1) Through third quarter, 1998.
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Total All Outlets
No. of
Retail Stores
Permits
No. of
Taxable
Year
Permits
Transactions
1993
132
$46,470,000
1994
133
63,365,000
1995
133
64,086,000
1996
138
68,613,000
1997
139
77,312,000
1998(l)
154
56,339,000
Source: State Board of Equalization.
(1) Through third quarter, 1998.
A -2
Total All Outlets
No. of
Taxable
Permits
Transactions
640
$ 76,373,000
692
97,431,000
665
103,082,000
689
119,727,000
687
125,312,000
693
88,463,000
Employment and Industry
The City is located in Ventura County and is part of the Ventura labor market area. The
distribution of employment in the Ventura labor market is as follows:
Employment by Industry
(1) Average employment reported for the years indicated by place of work excluding self -
employed, unpaid families and workers involved in labor disputes. Columns may not add
due to rounding.
(2) Annual average total labor force (and components) by location of residence; includes
workers involved in trade disputes.
(3) The unemployment rate is computed from unrounded data; therefore, it may differ from
rates using rounded figures.
(4) For July, 1999 only.
Source: State Development Department, Employment and Data Research.
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Ventura Labor Market Area
(1)
1996
1997
1998
1999 (4)
Manufacturing
30,700
32,800
34,500
35,400
Wholesale & retail trade
59,100
59,200
60,000
61,200
Services
71,000
72,400
76,500
80,300
Government
43,400
43,300
43,000
44,200
Finance, insurance & real estate
11,700
12,600
13,500
13,600
Transportation & public utilities
9,700
9,700
10,300
10,400
Construction
10,500
11,100
12,300
15,500
Mining
1,700
1,500
1,300
1,100
Agriculture
17,500
17,300
16,700
15,500
Total All Industries
255,300
260,000
268,100
277,200
Total Civilian Labor Force (2)
377,800
381,500
387,400
403,800
Total Unemployment
26,900
25,000
21,600
23,400
Unemployment Rate (3)
7.1%
6.6%
5.6%
5.8%
(1) Average employment reported for the years indicated by place of work excluding self -
employed, unpaid families and workers involved in labor disputes. Columns may not add
due to rounding.
(2) Annual average total labor force (and components) by location of residence; includes
workers involved in trade disputes.
(3) The unemployment rate is computed from unrounded data; therefore, it may differ from
rates using rounded figures.
(4) For July, 1999 only.
Source: State Development Department, Employment and Data Research.
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A -3
Major Employers
The following is a list of the major manufacturing and non - manufacturing employers in
the community area.
Employer
Kavlico
Litton Aero Products
Moorpark College
Egg City
SDI
Moorpark Unified School Dist.
Teledyne /Laars
KD1 American Products
Axius /Auto - Shades
Aquaria
Terminal Data Corp.
Transit Mix
Accelerated Networks, Inc.
Hughes Market
Variflex
Allied Signal Bearing
Boething Tree Farms
Air Dry Corporation
General Optics
Durotech
City of Moorpark
Prudential Overall Supply
Semiconductor Equipment Corp.
Iron Fabricators
CalMat Company
G. T. Water Products
M.G.I.
Conejo Ready Mix
Product/Service
Employment
Aerospace /Auto. Electronics
750
Navigation Systems Research
600
Education
600
Egg Ranch
460
Automotive Electronic Component Mfg.
400
Education
388
Machinery Manufacturer
300
Lighting Equipment
252
Automotive Accessory Wholesaler
250
Aquarium Product Mfg.
210
Information Management Systems
175
Concrete, Sand & Gravel
150
Data Communications Equipment
150
Major Supermarket
125
Sporting & Athletic Goods Mfg.
120
Aerospace Parts Mfg.
100
Wholesale Nursery
99
Dehydrator Mfg.
79
Industrial Optics
50
Mfg. /Airless Sprayer
50
City Government
50
Industrial Laundry
45
Electronic Equipment Mfg.
35
Welding/Metal Fabrication
30
Ready Mixed Concrete
28
Drainage Devices Mfg.
25
Machine Shop
25
Ready Mixed Concrete
24
Source: Employment Data and Research Employment Development Department, State of
California; City of Moorpark Records.
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Construction Activity
The following table is a five year summary of the valuation of building permits issued in
the City.
City of Moorpark
Building Permit Valuation
(Valuation in Thousands of Dollars)
Source: "California Building Permit Activity," Economic Sciences Corporation.
(1) Through September, 1999.
A -5
1995
1996
1997
1998
1999 (1)
Residential
New single - dwelling
$27,161
$21,477
$14,098
$2,358
7,787
New multi - dwelling
4,621
6,496
7,272
650
0
Additions, alterations
422
0
0
0
0
Total Residential
$32,204
$27,973
$21,370
$3,008
7,787
No. of New Dwelling Units
Single - dwelling
130
110
66
11
31
Multi- dwelling
43
68
68
6
0
Total Units
173
178
134
17
31
Source: "California Building Permit Activity," Economic Sciences Corporation.
(1) Through September, 1999.
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Direct and Overlapping Bonded Debt
The following taple shows the direct and overlapping bonded debt for the City.
1999 -00 Assessed Valuation: $2,221,432,867
Redevelopment Incremental Valuation: 194,257,216
Adjusted Assessed Valuation: $2,027,175,651
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT:
Ventura County Flood Control District, Zone No. 3
Metropolitan Water District
Ventura County Waterworks District No. 1
Conejo Valley Unified School District
City of Moorpark
City of Moorpark Community Facilities District No 97 -1
City of Moorpark 1915 Act Bonds
TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT
OVERLAPPING GENERAL FUND OBLIGATION DEBT:
Ventura County General Fund Obligations
Ventura County Pension Obligations
Ventura County Superintendent of Schools Certificates of Participation
Ventura County Community College District Certificates of Participation
Moorpark Unified School District Certificates of Participation
Ventura County Library District Authority
TOTAL OVERLAPPING GENERAL FUND OBLIGATION DEBT
COMBINED TOTAL DEBT
Percent
Armlicable Debt 10/1/99
8.317%
$ 285,689
0.225
1,300,579
100.000
180,000
0.003
900
100.000
0 (2)
100.000
7,630,000
100.000
2 430 000
TI '1, i2f, 168
Ratios to 1998 -99 Assessed Valuation:
DirectDebt .................. ............................... ..........................0.00%
Total Direct and Overlapping Tax and Assessment Debt .....0.56%
Ratios to Adjusted Assessed Valuation:
Combined Total Debt ... ............................... ..........................1.37%
State School Building Aid Repayable as of 6/30/99: $0
4.235% $ 2,557,093
4.235
5,710,686
4.235
137,849
4.238
663,459
90.932
5,451,373
6.829
52,92
$14,573,385
$26,400,553 (3)
(1) Based on 1997 -98 ratios.
(2) Excludes issue to be' sold.
(3) Excludes tax and revenue anticipation notes, revenue, mortgage revenue and tax allocation
bonds and non - bonded capital lease obligations.
Source: California Municipal Statistics, Inc.
FM
Utilities
Gas is provided by Southern California Gas Company. Southern California Edison
Company provides electric power. Telephone service is provided by General Telephone.
Community Facilities
Three banks, medical groups, chiropractors, dentists, orthodontists, physical therapists,
podiatrists, doctors, and three hospitals are within 4 to 7 miles of the City and three pharmacies
are located in and around the City of Moorpark.
Educational facilities within the City include five elementary schools, one middle school,
one high school, one continuation high school and one community college. The University of
California, Los Angeles and the University of Southern California are within 50 miles of the
City.
Cultural and recreational activities in Moorpark include 20 churches and one library. The
City is also served by two daily newspapers, two cable television systems, seven neighborhood
parks, one community center, four golf courses and one dramatic theater.
M
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APPENDIX B
DEFINITIONS
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m
APPENDIX B
DEFINITIONS
The following are definitions of certain terms contained in the Indenture, the Loan
Agreement and the Regulatory Agreement and used in this Official Statement.
"Account" means an Account created and established by the Indenture.
"Accountant's Certificate" means a certificate or opinion signed by an independent
certified public accountant of recognized national standing or a firm or accountants of recognized
national standing, selected by the City upon consultation with the Borrower, who may be the
accountant or firm of accountants who regularly audit the books of the City.
"Act" means Chapter 8 of Part 5 of Division 31 of the Health and Safety Code of the
State of California, as amended and supplemented from time to time.
"Act of Bankruptcy" means any proceeding instituted under Title 11 of the United States
Code, entitled "Bankruptcy" as in effect now and in the future, or any successor statute, or other
applicable insolvency law by or against the Borrower.
"Adjusted Income" means the adjusted income of all persons who intend to occupy a
Space, calculated in the manner determined by the Secretary of the Treasury pursuant to Section
142(d)(2)(B) of the Code.
"Administration Agreement" means the Administration and Oversight Agreement, dated
as of March 1, 2000, by and between the Issuer and the Program Administrator.
"Administration Fee" means an amount to be retained by the Borrower from the
Operating Revenues equal to the amount set forth in the Indenture per month per space included
in the Project, subject to a consumer price based index form of adjustment annually on March 1,
commencing March 1, 2001, in accordance with the provisions of the Indenture.
"Administration Fund" means the Administration Fund created and established by the
Indenture.
"Area" means the Ventura, California Primary Metropolitan Statistical Area.
"Authorized Denpminations" means $5,000 or any integral multiple thereof, as provided
in the Indenture.
"Authorized Officer" means the City Manager or any person designated in writing by the
City Manager to act as an Authorized Officer under the Indenture.
"Bond" or "Bonds" means any bond or bonds including the Series A Bonds and the Series
B Bonds, authorized and issued pursuant to the Indenture.
"Bond Counsel" means a nationally recognized law firm specializing in the area of tax -
exempt municipal finance.
"Bondowner" or "Owner" or "Owner of Bonds" or any similar term (when used with
respect to Bonds) means the registered owner of any Outstanding Bond or Bonds.
"Bond Register" means the registration books of the Trustee with respect to the Bonds.
"Bond Year" means a twelve -month period ending on March 15, except that the first
Bond Year shall begin on the date on which the Bonds are initially delivered and end on the next
succeeding March 15.
"Borrower" means Augusta Homes, a California non - profit public benefit corporation,
and permitted successors and assigns.
"Borrower Representative" means the person or persons at the time designated by the
Borrower to act on the behalf of the Borrower by written certificate furnished to the City, the
Oversight Agent, the Project Administrator and the Trustee containing the specimen signatures
of such person or persons and signed by the Borrower Representative. Such certificate may
designate an alternate or alternates.
"Business Day" means a day other than a Saturday, Sunday, legal holiday or day on
which the New York Stock Exchange is closed, on which banking institutions are not closed in
the State of California, or in any state in which the principal office of the Trustee is located.
"Certificate of Continuing Program Compliance" means the certificate with respect to the
Project to be filed by the Borrower with the City, the Program Administrator, and the Trustee
which shall be substantially in the form attached to the Regulatory Agreement.
"Closing Date" means the date when the Bonds are delivered to the Original Purchaser.
"Code" means the Internal Revenue Code of 1986, as amended, and the regulations in
effect thereunder.
"Continuing Disclosure Agreement" means that certain Continuing Disclosure Agreement
between the Borrower and the Dissemination Agent dated the Closing Date as originally
executed and as it may be amended from time to time in accordance with the terms thereof.
"Costs of Issuance" means all items of expense payable or reimbursable directly or
indirectly by the City relating to the authorization, issuance and sale of the Bonds, which
expenses shall include, but not be limited to, printing costs, costs of reproducing documents,
filing and recording fees, initial fees and charges of the Trustee and other Fiduciaries, legal fees
and disbursements, professional consultants, fees and disbursements, reimbursements to the City
and its agents for administrative, travel and overhead expenses, bond discount, underwriting fees
and other financing cosh (if not otherwise provided for), fees and charges for execution,
transportation and safekeeping of Bonds, and all other costs, charges, fees and expenses in
connection with the foregoing.
"Cost of Issuance Fund" means the Cost of Issuance Fund established pursuant to the
Indenture.
"Cost of Project" means, to the extent authorized by the Code, the Regulations and the
Act, any and all costs incurred by the Borrower with respect to the acquisition, including,
without limitation, costs for the acquisition of property and all costs of financing, including,
without limitation, the cost of consultant, accounting and legal services, other expenses necessary
or incident to determining the feasibility of the Project, contractors' and developers' overhead and
supervisors' fees and costs directly allocable to the Project, administrative and other expenses
necessary or incident to the Project and the financing thereof (including reimbursement to any
I:
municipality, county or other entity for expenditures made, with the approval of the City, for the
Project), and all other costs approved by Bond Counsel.
"Coverage Ratio" means, for any period of time, (i) with respect to the Series A Bonds,
the ratio derived by dividing the sum of the Net Operating Revenues received by the City plus
the earnings on the Senior Bonds Debt Service Reserve Fund and the Series B Bonds Reserve
Fund by the annual debt service payable on the Series A Bonds; (ii) with respect to the Series B
Bonds, the ratio derived by dividing the Net Operating Revenues received by the City (after
provision for Series A Bonds debt service) by the annual debt service payable on the Series B
Bonds; and with respect to the Series A Bonds and the Series B Bonds, the ratio derived by
dividing the Net Operating Revenues received by the City plus the earnings in the Senior Bonds
Debt Service Reserve Fund and the Series B Bonds Reserve Fund and the debt service payable
on the Series A Bonds and Series B Bonds.
"Coverage Requirement Certificate" means the certificate filed by the Borrower as
required by the Loan Agreement.
"Counsel's Opinion" shall mean an opinion signed by a nationally recognized attorney or
firm of attorneys who may be selected by the City, and shall be acceptable to the Trustee. Any
such attorney may be in the regular employment of the City.
"County" means the County of Ventura.
"Debt Service Requirement" means, as of any date of calculation with respect to the
Bonds, the sum of (i) all interest due or to become due on such date on all Outstanding Bonds of
each series plus (ii) all Principal Installments due or to become due on such date on all
Outstanding Bonds of each series or, if no Principal Installment is due and payable on such date
on any Outstanding Bonds of each series, one -half of the Principal Installments, if any, due and
payable on all Outstanding Bonds of each series on the next succeeding Interest Payment Date.
"Deed of Trust" means the certain Deed of Trust with Assignment of Leases and Rents,
Security Agreement and Fixture Filing, executed as of the Closing Date, by the Borrower, which
secures the Borrower's obligations to repay the Loan and constitutes a lien on real property.
"Depository" means (a) initially, DTC, and (b) any other Securities Depositories acting as
Depository pursuant to the Indenture.
"Depository System Participant" means any participant in the Depository's book -entry
system.
"DTC" means The Depository Trust Company, New York, New York, and its successors
and assigns.
"80% household" has the meaning given such term in the Affordable Housing
Agreement.
"Event of Default" means, with respect to the Indenture, a Senior Bonds Event of Default
or a Series B Bonds Event of Default, as set forth in the Indenture; and, with respect to the Loan
Agreement, an Event of Default as described in the Loan Agreement.
"Fees and Charges" means all fees and charges authorized to be received by the City from
the Borrower pursuant to the terms and provisions of the Loan Agreement for the purpose of
paying the City Annual Fee and the fees and expenses of the Fiduciaries.
IM
"Fiduciary" means the Trustee, each Paying Agent, the Rebate Analyst, the Program
Administrator and the Oversight Agent.
"Fiscal Year" or"fiscal year" means the twelve -month period ending on June 30 or such
other fiscal year of the City which may be adopted.
"Fund" means a fund created and established by the Indenture.
"Generally Accepted Accounting Principles" or "GAAP" means the uniform accounting
and reporting procedures set forth in publications of the American Institute of Certified Public
Accountants or its successor and the Governmental Accounting Standards Board or its successor,
or by any other generally accepted authority on such procedures, and includes, as applicable, the
standards set forth by the Financial Accounting Standards Board or its successor.
"Government Obligations" means bonds or other obligations which as to principal and
interest constitute direct obligations of the United States of America and which are not subject to
redemption prior to their maturity at the option of any person other than the holder thereof.
"Improvements" means, as of the Closing Date or at any time thereafter, any structures
(other than mobile homes not owned by the Borrower), site improvements, facilities and fixtures
located on the Property.
"Income Certification" means the Income Computation and Certification attached to the
Regulatory Agreement.
"Indenture" means the Indenture of Trust, dated as of March 1, 2000, as from time to time
amended or supplemented by Supplemental Indentures in accordance with the terms and
provisions of the Indenture.
"Information Services" means Financial Information, Inc.'s "Daily Called Bond Service ",
30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Editor; Kenny
Information Services' "Called Bond Service," 65 Broadway, 16th Floor, New York, New York
10006; Moody's Investors Service "Municipal and Government," 5250 77 Center Drive, Suite
150, Charlotte, North Carolina 28217, Attention: Called Bond Department; Standard & Poor's
Rating Group "Called Bond Record," 25 Broadway, 3rd Floor, New York, New York 10004;
and, in accordance with then current guidelines of the Securities and Exchange Commission,
such other addresses and/or such other services providing information with respect to called
bonds as the City may designate in a written request delivered to the Trustee.
"Interest Payment Date" means March 15 and September 15 of each year, commencing
September 15, 2000, in which interest on any Bonds is due and payable.
"Loan" means the loan made by the City, pursuant to the Loan Agreement, to the
Borrower with respect to the Project and secured by the Deed of Trust with respect to the Project.
"Loan Agreement" means the Loan Agreement dated as of March 1, 2000, by and among
the Borrower, the City and the Trustee.
"Loan Documents" means the Loan Agreement, the Note and the Deed of Trust, as each
item may be amended and supplemented from time to time.
"Maximum Annual Debt Service" means at any point in time, with respect to the Bonds
then Outstanding, the maximum amount of principal (assuming sinking fund payments) and
interest becoming due in the then current or any future Bond Year.
EM
"Median Income for the Area" means the median income for the Area as most recently
determined pursuant to Section 142(d)(2)(B) of the Code.
"Net Operating Revenues" means Operating Revenues less the Operation and
Maintenance Costs during such fiscal year or period.
"Net Proceeds" means any proceeds resulting from the City's enforcement of its rights
under the Deed of Trust, insurance or condemnation proceeds paid with respect to the Project
which are available after payment therefrom of all expenses incurred in the collection thereof.
"Note" means the promissory note executed by the Borrower in accordance with the Loan
Agreement.
"Officer's Certificate" means a certificate executed by an Authorized Officer.
"Operating Revenues" means, for any Fiscal Year or other period, all rents, income,
receipts, and other revenues derived by the Borrower arising from the operation of the Project,
including rental income from mobile home spaces, determined in accordance with Generally
Accepted Accounting Principles and all other money howsoever derived by the Borrower from
the operation of the Project or arising from the Project, but not including resident security
deposits.
"Operation and Maintenance Costs" means, for any fiscal year or other period, the
reasonable and necessary costs and expenses of operating the common areas of the Project and of
managing and repairing and other expenses necessary to maintain and preserve the common
areas of the Project in good repair and working order, calculated in accordance with Generally
Accepted Accounting Principles, including, but not limited to, (a) utility services supplied to the
Project, which may include, without limitation, janitor service, security, power, gas, telephone,
light, heating, water and all other utility services, (b) permitted compensation to the Management
Agent, salaries and wages of employees, payments to employee retirement systems, fees of
auditors, accountants, attorneys or engineers, and (c) all other reasonable and necessary costs of
the Borrower or charges required to be paid by it related to the operation and maintenance of the
common areas of the Project, including, but not limited to, costs of insurance and property taxes,
if any, but excluding in all cases (i) depreciation, replacement and obsolescence charges or
reserves therefor, (ii) amortization of intangibles or other bookkeeping entries of a similar nature,
(iii) costs of capital additions, replacements, betterments, extensions or improvements to the
common areas of the Project, which under Generally Accepted Accounting Principles are
chargeable to a capital account or to a reserve for depreciation, (iv) debt service on the Loan, and
(v) the amount deposited ilp the Administration Fund.
"Original Purchaser" means Miller & Schroeder Financial, Inc. and Kinsell, O'Neal,
Newcomb & De Dios, Inc.
"Outstanding," when used with reference to an applicable series of Bonds, means, as of
any date, Bonds of such series theretofore or then being delivered under the provisions of the
Indenture, except: (i) any Bonds of such series canceled by the Trustee or any Paying Agent at or
prior to such date, (ii) Bonds of such series for the payment or redemption of which moneys
equal to the Principal Amount or Redemption Price thereof, as the case may be, with interest to
the date of maturity or redemption date, shall be held by the Trustee or the Paying Agent in trust
(whether at or prior to the date of maturity or redemption date), provided that if such Bonds are
to be redeemed, notice of such redemption shall have been given as in the Indenture provided or
provision satisfactory to the Trustee shall have been made for the giving of such notice, (iii)
Bonds in lieu of or in substitution for which other Bonds shall have been delivered pursuant to
the Indenture, and (iv) Bonds deemed to have been paid as provided in the Indenture.
"Oversight Agdrit" means, initially, Urban Futures Incorporated or any successor thereto,
which entity shall also act as the initial Oversight Agent under the Administration Agreement.
"Participants" mean those broker - dealers, banks and other financial institutions from time
to time for which DTC holds Bonds as securities depository.
"Participating Underwriter" has the meaning ascribed thereto in the Continuing
Disclosure Agreement.
"Paying Agent" means the Trustee, acting as paying agent, or any other bank, trust
company or national banking association designated or appointed pursuant to the Indenture to act
as a paying agent for the Bonds, and each successor or successors and any other bank, trust
company or national banking association at any time substituted in its place pursuant to the
Indenture.
"Permitted Encumbrances" means, as of any particular time: (a) liens for general ad
valorem taxes and assessments, if any, not then delinquent; (b) the Deed of Trust; (c) the
Regulatory Agreement; (d) the Second Deed of Trust; (e) the Affordable Housing Regulatory
Agreement; (f) any right or claim of any mechanic, laborer, materialman, supplier or vendor filed
or perfected in a manner prescribed by law after the Closing Date; (g) easements, rights of way,
mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions
which exist of record as of Closing Date and which, in the opinion of the Oversight Agent, will
not materially impair the use of the Project as contemplated in the Regulatory Agreement and the
Accord; and (h) easements, rights of way, mineral rights, drilling rights and other rights,
reservations, covenants, conditions or restrictions established following the date of recordation of
the Deed of Trust and to which the City and the Trustee consent in writing.
"Pledged Revenues" means Revenues but excluding therefrom, amounts on deposit in the
Repair and Replacement Fund, the Administration Fund and the Rebate Fund.
"Prepayment" means any moneys received or recovered by the City representing any
voluntary payment of principal of or interest (including any penalty, fee, premium, or other
additional charge for Prepayment which may be provided by the terms of the Deed of Trust) on
the Loan prior to the scheduled payments of principal and interest called for by such Loan.
"Principal Amount" means, with respect to any Bond and at any date of computation, the
stated principal amount thereof.
"Principal Installment" means, as of any date of computation, the amount payable in any
Bond Year on account of: (i) the Principal Amount of Bonds of a particular series maturing in
such Bond Year net of the aggregate of Sinking Fund Installments, if any, established and paid
for in the prior Bond Years with respect to the Bonds of such series; plus (ii) the amount of any
Sinking Fund Installments due in such Bond Year with respect to Bonds of such series.
"Principal Payment Date" means March 15 in each year, commencing March 15, 2001.
"Program Administrator" means, initially, the City, and thereafter any successor Program
Administrator under the Administration and Oversight Agreement.
"Program Administrator's Fee" means such amount to be paid to the Program
Administrator pursuant to the Administration Agreement. So long as the Program Administrator
:.
shall be the City, the City shall receive the City Annual Fee and shall not charge a separate
Program Administrator's Fee.
"Project" shall e6nsist of the Property and the Improvements.
"Project Fund" means the Project Fund established pursuant to the Indenture and
administered under and pursuant to the Loan Agreement.
"Property" means real properties commonly known as the Villa Del Arroyo Mobile Home
Park, located within the City, all as more particularly described in the Regulatory Agreement.
"Qualified Investments" means and includes any of the following, if and to the extent the
same are at the time contracted for, made or purchased legal for investment of City funds:
(a) Cash (insured at all times by the Federal Deposit Insurance Corporation or
otherwise collateralized with obligations described in paragraph (b) below), and if not so
insured or collateralized, then held by a Fiduciary which is rated by all Rating Agencies
at a level sufficient to maintain the ratings or shadow ratings of all Rating Agencies in
any of the three highest ratings categories (without regard to modifiers); or
(b) Direct obligations of (including obligations issued or held in book entry form
on the books of) the Department of Treasury of the United States of America, or any
obligations of the Resolution Trust Corporation which are unconditionally guaranteed by
the Department of the Treasury of the United States of America;
(c) Obligations of any of the following federal agencies which obligations
represent a pledge of the full faith and credit of the United States of America:
- Export Import Bank
- Farm Credit System Financial Assistance Corporation
- General Services Administration
- Government National Mortgage Association (GNMAs)
- Federal Housing Administration
- Any other agency or instrumentality of the United States of America
created by act of the United States Congress (the "Government Sponsored Agencies ");
provided that the obligations of such Government Sponsored Agencies are
unconditionally guaranteed as to the full and timely payment of principal and interest by
the United States of America;
(d) Senior debt obligations rated by one of the Rating Agencies in any of the
three highest ratings categories (without regard to modifiers) issued by Fannie Mae, the
Federal Home Loan Mortgage Corporation ( "FHLMCs ") or any other Government
Sponsored Agencies:
(e) U.S. dollar denominated deposit accounts, federal funds and banker's
acceptances with domestic commercial banks (including those of the Trustee) having at
least $25,000,000 in capital and surplus, and which have a rating on the bank's short term
certificates of deposit on the date of purchase by all Rating Agencies in any of the three
highest ratings categories (without regard to modifiers) and maturing no more than 360
days after the date of purchase;
Mffi
(f) Commercial paper which is rated at the time of purchase by one of the
Rating Agencies in any of the three highest ratings categories (without regard to
modifiers) and which matures not more than 270 days after the date of purchase;
(g) Investments in a money market fund where such fund: (1) is registered
under the Investment Company Act of 1940, (2) maintains a constant net asset value per
share, and (3) is rated by all Rating Agencies in any of the three highest ratings categories
(without regard to modifiers), including funds for which the Trustee or its affiliates and
subsidiaries derive a fee for investment advisory or other services, including the U.S.
Trust Money Market Fund;
(h) Corporate debt obligations which have a fixed par value and/or whose
terms provide for a fixed dollar amount payable at maturity or earlier redemption;
provided that such obligations are rated at time of purchase by one of the Rating
Agencies in any of the three highest ratings categories (without regard to modifiers);
(i) Investment agreements entered into with an entity whose senior unsecured
long term obligations, other senior long term obligations or claims - paying ability or
whose payment obligations are guaranteed by an entity whose senior unsecured long term
obligations, other senior long term obligations or claims- paying ability are rated by any
of the Rating Agencies in any of the three highest ratings categories (without regard to
modifiers) provided, however, that if the rating of any such entity is downgraded by
either S &P or Moody's below "AA -" or "Aa3", respectively, the provider shall, at its
option, within ten (10) days of receipt of publication of such downgrade, either (1)
collateralize the investment agreement by delivering or transferring in accordance with
applicable state and federal laws (other than by means of entries on the Provider's books)
to the Trustee or a third party acting solely as agent therefor (the "Custodian") collateral
free and clear of any third -party liens or claims the market value of which collateral is
maintained at levels and upon such conditions as would be acceptable to S &P and
Moody's to maintain and "A" rating in an "A" rated structured financing (with a market
value approach) with weekly valuations, but in no event at a level less than 104 %; or (2)
repay the principal of an accrued but unpaid interest on the investment. Should collateral
not be pledged (or during the term of the investment agreement restored) to the required
levels, the Trustee will have the right to immediately withdraw funds without penalty or
breakage fee; notwithstanding the foregoing, should the provider's rating by either S &P
or Moody's be withdrawn or suspended or falls below "A -" or "A3 ", respectively, the
provider must, at the direction of the City or the Trustee, within 10 days of receipt of such
direction, repay the principal of and accrued but unpaid interest on the investment, in
either case with no penalty or premium to the Trustee;
(j) Repurchase agreements which satisfy the following criteria: (1) the
counterparty is rated by all Rating Agencies in any of the three highest ratings categories
(without regard to modifiers); (2) the term of the agreement must be less than one year, or
if longer, shall be terminable upon demand by the City, (3) the securities covered by the
agreement may include only Government Obligations or obligations of Government
Sponsored Agencies unconditionally guaranteed by the United States; (4) the form of the
agreement must be the PSA Master Repurchase Agreement; and (5) the market value of
the securities covered by the agreement shall be no less than 102% of the amount
invested in the agreement, which market value must be redetermined on at least a
monthly basis; and
(k) Other financial investment vehicles approved in writing prior to purchase
by an Authorized Officer of the City;
IM
provided that all of the above - described investments must be limited to those instruments that
have a predetermined fixed dollar amount of principal due at maturity that cannot vary or change.
If the investments described above are rated, such investments shall not have an "r" highlighter
affixed to its rating. Interest on the investments shall be tied to a single interest rate index plus a
single fixed spread, if any, and move proportionately with such index.
"Qualified Project Period" means the period as defined in Section 142(d)(2) (A) of the
Code; provided, such period shall not be shorter than the period ending 30 years from the
execution date of the Regulatory Agreement and is subject to extension in accordance with the
Regulatory Agreement.
"Qualified Residents" means residents who are Very Low Income Residents.
"Qualified Space" means a Very Low Income Space.
"Rating Agencies" means any Standard & Poor's Ratings Services, a division of
McGraw -Hill Companies, Inc., or Moody's Investors Service, Inc., and such others as may be
designated by the City from time to time.
"Rebatable Arbitrage" means the amount (determinable as of the last day of each fifth
Bond Year and upon retirement of the last Bond Outstanding) of arbitrage profits payable to the
United States at all times and in the amounts specified in Section 148(f) of the Code and any
applicable Regulations.
"Rebate Analyst" means the entity engaged by the Borrower or the City to compute the
Rebatable Arbitrage annually pursuant to the Indenture.
"Rebate Fund" means the Rebate Fund created and established by the Indenture.
"Rebate Regulations" means those final, temporary, and proposed Treasury Regulations
promulgated under Section 148(f) of the Code.
"Regulations" means the Income Tax Regulations promulgated or proposed under the
Code by the Department of the Treasury, as the same may hereafter be amended, including
regulations promulgated by the Department of the Treasury to implement the requirements of
Section 148 of the Code.
"Regulatory Agreement" means the Regulatory Agreement and Declaration of Restrictive
Covenants, dated as of March 1, 2000, by and among the City, the Trustee and the Borrower.
"Repair and Replacement Fund" means the Repair and Replacement Fund established
pursuant to the Indenture.
"Representation Letter" means the representation letter from the City to DTC.
"Required Rebate Deposit" means an amount determinable as of the end of each fifth
Bond Year and as of the date of retirement of the last Bond, which when added to amounts then
on deposit in the Rebate Fund, if any, equals the aggregate amount of Rebatable Arbitrage for the
Bonds less the amount of Rebatable Arbitrage theretofore paid to the United States with respect
to the Bonds, if any.
"Residual Net Proceeds" shall mean (i) so long as the Series A Bonds shall remain
Outstanding, such Net Proceeds as are available after redeeming all the then Outstanding Series
..
A Bonds, and (ii) after giving effect to such redemption as provided in (i), all such Net Proceeds
which would have been available for the redemption of Series A Bonds.
"Residual Prepayments" means (i) so long as the Series A Bonds shall remain
Outstanding, such Prepayments as are available after redeeming all the then Outstanding Series
A Bonds, and (ii) after giving effect to such redemption as provided in (i), all such Prepayments
which would have been available for the redemption of Series A Bonds.
"Residual Revenues" means (i) so long as the Series A Bonds shall remain Outstanding,
such Pledged Revenues as are deposited in the Series B Bonds Debt Service Fund, and (ii) on
and after such date the Series A Bonds are no longer Outstanding, all such Pledged Revenues
which would have been available for the payment of principal of and interest on the Series A
Bonds.
"Revenue Fund" means the Revenue Fund created and established by the Indenture.
"Revenues" means (i) Net Operating Revenues; (ii) Prepayments; (iii) the proceeds of any
insurance, including the proceeds of any self - insurance covering loss relating to the Project;
provided, however, that the Net Proceeds of any public liability insurance, casualty insurance or
title insurance required to be maintained pursuant to the Loan Agreement shall be applied as
specified in the Loan Agreement and the Indenture; (iv) all amounts on hand from time to time in
the funds and accounts established by the Trustee under the Indenture; (v) all proceeds of rental
interruption insurance policies, if any, carried with respect to the Project pursuant to the Loan
Agreement; (vi) any proceeds derived from the exercise of remedies under a Deed of Trust; and
(vii) any additional property that may from time to time, by delivery or by writing of any kind,
be subjected to the lien of the Indenture by the City or by anyone on its behalf, subject only to
the provisions of the Indenture.
"Securities Depositories" means The Depository Trust Company, 711 Stewart Avenue,
Garden City, New York 11530, Fax -(516) 227 -4039 or 4190; Midwest Securities Trust
Company, Capital Structures -Call Notification, 440 South LaSalle Street, Chicago, Illinois
60605, Fax -(312) 663 -2343; Philadelphia Depository Trust Company, Reorganization Division,
1900 Market Street, Philadelphia, Pennsylvania 19103, Attention: Bond Department, Fax -(215)
496 -5058; and, in accordance with then current guidelines of the Securities and Exchange
Commission, such other addresses and/or such other securities depositories as the City may
designate in a written request of the City delivered to the Trustee.
"Serial Bonds" means all Series A Bonds not constituting Term Bonds.
"Senior Bonds Dek t Service Fund" means the Senior Bonds Debt Service Fund created
and established by the Indenture.
"Senior Bonds Debt Service Reserve Fund" means the Senior Bonds Debt Service
Reserve Fund created and established by the Indenture.
"Senior Bonds Debt Service Reserve Fund Requirement" means, as of any date of
determination by the City, an amount equal to Maximum Annual Debt Service on the Series A
Bonds.
"Senior Bonds Event of Default" means each of the following events: (i) the City shall
fail to make payment of the principal or Redemption Price of, or Sinking Fund Installment on,
any Series A Bond from the Series A Bond Trust Estate after the same shall become due,
whether at maturity or upon call for redemption, or otherwise; or (ii) the City shall fail to make
payment of interest on any Series A Bond from the Series A Bond Trust Estate when and as the
same shall become due; or (iii) the City shall fail or refuse to comply with the provisions of the
Act or shall default in the performance or observance of any other of the covenants, agreements
or conditions on its part in the Indenture, any Supplemental Indenture, or in the Series A Bonds
contained, and such default shall continue for a period of ninety (90) days after written notice
thereof by the Trustee or the Owners of not less than five percent (5 %) in Principal Amount of
the Outstanding Series A Bonds.
"Series A Bond Redemption Fund" means the Series A Bond Redemption Fund created
and established by the Indenture.
"Series A Bond Trust Estate" means all proceeds, Funds, Accounts, Revenues,
Prepayments, the Loan, the Loan Agreement, the Deed of Trust, rights, interests, collections, and
other property pledged to the payment of any Series A Bonds pursuant to the Indenture and in the
granting clauses of the Indenture.
"Series B Bonds Debt Service Fund" means the Series B Bonds Debt Service Fund
created and established by the Indenture.
"Series B Bonds Event of Default" means each of the following events: (i) the Residual
Revenues are not applied to the payment of the principal of, Redemption Price of, or Sinking
Fund Installment on, any Series B Bonds after the same shall become due, whether at maturity or
upon call for redemption or otherwise, to the extent of such Residual Revenues available; or (ii)
the Residual Revenues are not applied to the payment of interest on any Series B Bonds when
and as the same shall become due to the extent of such Residual Revenues available; or (iii) the
City shall default in the performance or observance of any other of the covenants, agreements, or
conditions on its part in the Series B Bonds contained, and such default shall continue for a
period of ninety (90) days after written notice thereof by the Trustee or the Holders of not less
than five percent (5 %) in Principal Amount of the Outstanding Series B Bonds; or (iv) the City
shall fail to pay the principal of (including any deferred targeted mandatory sinking fund
redemption amount) or interest on the Series B Bonds on the final maturity date thereof.
"Series B Redemption Fund" means the Series B Bond Redemption Fund created and
established by the Indenture.
"Series B Bonds Trust Estate" means all proceeds, Funds, Accounts, Residual Revenues,
Residual Net Proceeds, Residual Prepayments, rights, interests, collections, and other property
pledged to the payment of any Series B Bond pursuant to the Indenture and the granting clauses
of the Indenture.
"Sinking Fund Installment" means the amount required to be applied by the City to the
payment of the principal" portion of the Redemption Price of Term Bonds (other than at the
option or election of the City) on any one date as specified in the Indenture.
"Space" means a mobile home space within the Project upon which a mobile home may
be placed.
"State" means the State of California.
"Supplemental Indenture" means any indenture amendatory of or supplemental to the
Indenture adopted by the City in accordance with the Indenture.
"Surplus Fund" means the Surplus Fund created and established by the Indenture.
B -11
"Tax Certificate" means that certain certificate of the City and the Borrower executed on
the Closing Date with respect to the Bonds.
"Term Bonds" means the Series A Bonds maturing on March 15, 2030.
"Trustee" shall mean the bank or trust company or national banking association appointed
pursuant to the Indenture to act as trustee, and its successor or successors and any other bank or
trust company or national banking association at any time substituted in its place pursuant to the
Indenture.
"Trustee Fee" shall have the meaning set forth in the Indenture.
"Trust Estate" means Revenues and all rights, title and interest of the Borrower or the
City in the Project as provided in the Deed of Trust and other property pledged to the payment of
any Bonds in the granting clauses of the Indenture.
"Very Low Income Residents" means individuals or families with an Adjusted Income
which does not exceed the amount promulgated by the U.S. Department of Housing and Urban
Development for very low income households for the Area as adjusted for household size as set
forth below. In no event, however, will the occupants of a Space be considered to be Very Low
Income Residents if all the occupants are students, as defined in Section 151 (c)(4) of the Code,
as such may be amended, no one of which is entitled to file a joint federal income tax return.
Currently, Section 151(c)(4) defines a student as an individual enrolled as a full -time student
during each of 5 calendar months during the calendar year in which occupancy of the unit begins
at an educational organization which normally maintains a regular faculty and curriculum and
normally has a regularly enrolled body of students in attendance or is an individual pursuing a
full -time course of institutional on -farm training under the supervision of an accredited agent of
such an educational organization or of a state or political subdivision thereof.
Household Size
Adjustment
1
70%
2
80%
3
90%
4
100%
5
108%
6
116%
7
124%
8
132%
"Very Low Income Spaces" means the Spaces in the Project designated for occupancy by
Very Low Income Residents pursuant to the Regulatory Agreement.
B -12
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APPENDIX C
HISTORICAL AND FORECASTED
PROJECT RECEIPTS AND DISBURSEMENTS
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APPENDIX D
FORM OF OPINION OF BOND COUNSEL
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APPENDIX E
APPRAISAL
0
(This Page Left Intentionally Blank)
APPENDIX F
FORM OF
CONTINUING DISCLOSURE AGREEMENT
m
(This Page Left Intentionally Blank)
z
APPENDIX G
AUGUSTA HOMES
CONSOLIDATED FINANCIAL STATEMENTS
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m
Preliminary Official Statement Dated March 2000
NEW ISSUE (BOOK -ENTRY ONLY) NOT RATED
In the opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel, under existing law, and assuming, among other
things, compliance with certain covenants, interest on the Series A Bonds is excluded from gross income for federal income tax purposes
and is exempt from State of California personal income taxes. In the opinion of Bond Counsel, interest on the Series A Bonds is not a
specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes
that it is included in adjusted current earnings. See "TAX M47TERS" herein.
CITY OF MOORPARK
MOBILE HOME PARK REVENUE BONDS
(VILLA DEL ARROYO)
SERIES 2000A
Dated: Date of Delivery
Due: March 15, as shown below
The Series A Bonds will be delivered in fully registered form only and, when issued, will be registered in the name of Cede & Co. as
nominee of The Depository Trust Company, New York, New York ( "DTC "). DTC will act as securities depository of the Series A Bonds.
Ownership interests in the Series A Bonds may be purchased, in denominations of $5,000, or any integral multiple thereof, in book -entry
form only as described herein. Upon receipt of payments of principal of, premium, if any, and interest on the Series A Bonds, DTC will in
turn remit such principal, premium, if any, and interest to the participants in DTC (as described herein) for subsequent disbursement to the
beneficial owners of the Series A Bonds. Interest on the Series A Bonds is payable semiannually on March 15 and September 15 of each
year, commencing September 15, 2000.
The Series A Bonds are subject to optional, mandatory and special redemption prior to their respective maturity dates as described
herein.
The Series A Bonds are being issued concurrently with the issuance of the City's $ Mobile Home Park Subordinate
Revenue Bonds (Villa Del Arroyo) Series 2000B (the "Series B Bonds" and, together with the Series A Bonds, the "Bonds "). The Bonds
are being issued pursuant to an Indenture of Trust, dated as of March 1, 2000 (the "Indenture "), between the City of Moorpark (the "City")
and U.S. Bank Trust National Association, as trustee (the "Trustee "). The proceeds of the Series A Bonds are to be used to fund a loan to
Augusta Homes, a California non - profit public benefit corporation (the "Borrower ") to (i) finance the acquisition by the Borrower of
certain real property constituting the Villa Del Arroyo Mobile Home Park (the "Project "), (ii) fund the Senior Bonds Debt Service Reserve
Fund, and (iii) make deposits to the Repair and Replacement Fund established under the Indenture. The proceeds of the Series B Bonds
will be used to make deposits to the Project Fund and the Series B Bonds Debt Service Reserve Fund.
The Series A Bonds are special limited obligations of the City, payable solely from Pledged Revenues (as hereinafter defined) and
secured as to the payment of the interest on and the principal of and the redemption premiums, if any, on the Series A Bonds in accordance
with their terms and the terms of the Indenture, from Pledged Revenues and other funds as provided therefor in the Indenture. The Series
A Bonds are not a debt of the City, or State of California or any of its political subdivisions, for purposes of any constitutional or statutory
debt limitation or restriction, nor in any event shall the Series A Bonds be payable out of funds or properties other than as described in the
preceding sentence.
Pledged Revenues consist of Revenues, except for amounts on deposit in the Repair and Replacement Fund, the Administration Fund
and the Rebate Fund created under the Indenture. Revenues consist of Net Operating Revenues (as defined in the Indenture), Prepayments
(as defined in the Indenture), the proceeds of certain insurance required to be maintained under the Loan Agreement, the amounts in the
funds and accounts held by the Trustee under the Indenture, all proceeds of rental interruption insurance policies, if any, required to be
maintained under the Loan Agreement, any proceeds derived from the exercise of remedies under the Deed of Trust and any additional
property that may be subjected to the lien of the Indenture by the City, all as more fully set forth in the Indenture.
TIMELY PAYMENT OF DEBT SERVICE ON THE SERIES A BONDS IS SUBJECT TO CERTAIN RISKS, INCLUDING THE
RISK THAT THE PROJECT MAY NOT GENERATE NET OPERATING REVENUES SUFFICIENT TO PAY THE PRINCIPAL OF
AND INTEREST ON THE SERIES A BONDS. SEE THE SECTION HEREIN ENTITLED "RISK FACTORS" FOR A DISCUSSION
OF SPECIAL RISK FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING THE INVESTMENT QUALITY OF THE
SERIES A BONDS.
This cover page contains certain information for general reference only. It is not intended as a summary of this transaction. Investors
are advised to read the entire Official Statement to obtain information essential to making an informed investment decision with respect to
the Series A Bonds.
Maturity Schedule*
Maturity Date
Principid' Interest
Maturity Date Principal Interest
March 15
Amount Rate
Price March 15 Amount Rate Price
2001
2006
2002
2007
2003
2008
2004
2009
2005
2010
$ —
% Term Bonds due March 15, 2025 Price %
$ —
% Term Bonds due March 15, 2035 Price
The Series A Bonds are offered when, as and if executed and delivered, subject to the legal opinion of Quint & Thimmig LLP, San
Francisco, California, Bond Counsel, and certain other conditions. Certain legal matters will be passed upon for the City by the City
Attorney and by Richards Watson & Gershon, A Professional Corporation, Los Angeles, California, Disclosure Counsel, and for the
Borrower by Goldfarb & Lipman, San Francisco, California. It is anticipated that the Series A Bonds will be available for delivery
through the facilities of DTC in New York, New York on or about March _, 2000.
ig Miller & Schroeder Financial, Inc.
KINSELL, NEWCOMB & DE DIOS, INC.
The date of this Official Statement is March . 2000.
*Preliminary, subject to change.
RE: ITEM 10.C.
CITY OF MOORPARK, CALIFORNIA
MAYOR AND CITY COUNCIL
Patrick Hunter, Mayor
John E. Wozniak, Mayor Pro Tem
Christopher Evans, Councilmember
Clint D. Harper, Councilmember
Deborah Rogers, Councilmember
CITY STAFF
Steven Kueny, City Manager
Wayne Boyer, Accounting Manager
John Nowak, Assistant City Manager /City Treasurer
Deborah S. Traffenstedt, City Clerk
Cheryl Kane, City Attorney
SPECIAL SERVICES
Financial Advisor
Urban Futures Incorporated
Orange, California
Bond Counsel
Quint & Thimmig LLP
San Francisco, California
Trustee
U.S. Bank Trust National Association
Los Angeles, California
Underwriters
' Miller & Schroeder Financial, Inc.
Solana Beach, California
Kinsell, Newcomb & De Dios, Inc.
Solana Beach, California
Disclosure Counsel
Richards Watson & Gershon
A Professional Corporation
Los Angeles, California
TABLE OF CONTENTS
INTRODUCTION...................................... ...............................
1
THE PLAN OF FINANCING .................... ...............................
3
ESTIMATED SOURCES AND USES OF FUNDS ..................
3
DEBT SERVICE REQUIREMENTS ......... ...............................
4
THE SERIES A BONDS ............................ ...............................
5
General.................................................... ...............................
5
Redemption_ ..... ...................................................................
5
Purchase of Series A Bonds .................... ...............................
8
Book -Entry System ................................. ...............................
8
SECURITY FOR THE SERIES A BONDS ............................
10
Net Operating Revenues ....................... ...............................
10
Pledge................................................... ...............................
11
The Loan Agreement and the Note ....... ...............................
11
Borrower Obligations Non- Recourse .... ...............................
12
Reserve Fund ........................................ ...............................
12
THE INDENTURE ................................... ...............................
12
Application of Bond Proceeds .............. ...............................
12
ProjectFund .......................................... ...............................
13
Cost of Issuance Fund ........................... ...............................
13
Deposits................................................ ...............................
13
RevenueFund ....................................... ...............................
13
Senior Bonds Debt Service Fund .......... ...............................
14
Senior Bonds Redemption Fund ........... ...............................
15
Administration Fund ............................. ...............................
16
Repair and Replacement Fund .............. ...............................
16
Senior Bonds Debt Service Reserve Fund ...........................
16
RebateFund .......................................... ...............................
17
SurplusFund ......................................... ...............................
17
Investment and Deposit of Funds .......... ...............................
18
Covenants of the City ........................... ...............................
19
Supplemental Indentures ....................... ...............................
24
Powers of Amendment .......................... ...............................
24
Series A Bonds Events of Default ......... ...............................
25
Series B Bonds Events of Default ......... ...............................
25
Remedies............................................... ...............................
25
Priority of Payments After Senior Bonds Event of
OTHER PROFESSIONALS INVOLVED IN THE
Default.............................................. ...............................
26
Limitations of Rights of Bondowners ... ...............................
27
Remedies not Exclusive ........................ ...............................
28
Limited Liability of the City ................. ...............................
28
THE LOAN AGREEMENT ..................... ...............................
29
Amount and Source of Loan ................. ...............................
29
Loan Repayment ................................... ...............................
30
Nature of the Borrower's Obligations ... ...............................
31
Borrower Not to Dispose of Assets; Conditions Under
B -1
Which Exceptions Permitted. .......... ...............................
32
Cooperation in Enforcement of Regulatory Agreement.......
32
Additional Inst ruments .......................... ...............................
33
Books and Records; Annual Reports .... ...............................
33
Notice of Certain Events ....................... ...............................
34
Consent to Assignment ......................... ...............................
34
Title to the Project ................................. ...............................
34
Operation of the Project ........................ ...............................
34
Continuing Disclosure .......................... ...............................
34
Minimum Rents; Coverage Requirement Certificate...........
35
Public Liability and Workers' Compensation Insurance......
35
Casualty Insurance ................................ ...............................
36
Rental Interruption I nsurance ................ ...............................
36
Repair and Replacement ....................... ...............................
36
Eventsof Default .................................. ...............................
37
Remedies............................................... ............................... 38
THE REGULATORY AGREEMENT ........ .............................40
Residential Rental Property; Qualified Residents .................40
Property Management and Maintenance . .............................41
City Requirements ................................... .............................42
Qualified Residents ................................. .............................44
Sale or Transfer of the Project ................. .............................46
Term...................................................... ...............................
46
Enforcement............................................ .............................46
THEBORROWER ...................................... .............................47
Operations............................................... .............................48
THEPROJECT ......................................... ...............................
49
Mobile Home Park Overview .................. .............................49
Vicinity Description .............................. ...............................
50
TheProject ............................................ ...............................
50
Environmental Site Assessment .............. .............................51
Physical Needs Assessment ..................... .............................52
Historical Operating Results .................... .............................53
Competing Mobile Home Parks ............ ...............................
54
Management Agreement and Qualifications of Manager..... 55
Rents/ Occupancy ................................... ............................... 57
Projected Operating Results .................. ...............................
57
Oversight Agent/Program Administrator ............................. 58
THECITY ................................................... .............................58
RISKFACTORS ......................................... .............................58
Series A Bonds Are Limited Obligations of the City ........... 58
Loan Payments Non - Recourse .............. ............................... 59
Loan Payments Not Preference Proof .... ............................... 59
Restrictions Under the Regulatory Agreement .....................
59
Risk of Taxability. ................................................................
59
Conditions Which May Affect Borrower's Ability to Pay....
60
Value of Project; Economic Feasibility ... .............................62
Competing Facilities ................................ .............................62
Risks of Ownership of Real Property .... ............................... 62
Environmental Risks ............................. ...............................
63
Insufficient Insurance and Land Sale Proceeds ....................63
Enforceability and Bankruptcy ................ .............................64
Anti- Deficiency Laws of the State of California ..................64
TAXMATTERS ....................................... ............................... 66
LEGALOPINIONS .................................. ...............................
68
OTHER PROFESSIONALS INVOLVED IN THE
OFFERING........................................... ...............................
68
CONTINUING DISCLOSURE ................... .............................68
LITIGATION.............................................. .............................69
NORATING.. ..........................................................................
69
UNDERWRITING .................................... ...............................
69
MISCELLANEOUS.................................. ...............................
70
APPENDIX A - SUPPLEMENTAL INFORMATION
REGARDING THE CITY OF MOORPARK ....................A
-1
APPENDIX B - DEFINITIONS ............ ...............................
B -1
APPENDIX C - HISTORICAL AND FORECASTED
PROJECT RECEIPTS AND DISBURSEMENTS .............
C -1
APPENDIX D - FORM OF OPINION OF
BONDCOUNSEL ................................. ............................D
-1
APPENDIX E - APPRAISAL ................ ...............................
E -1
APPENDIX F - FORM OF CONTINUING
DISCLOSURE AGREEMENT ........... ...............................
F -1
APPENDIX G - AUGUSTA HOMES
CONSOLIDATED FINANCIAL STATEMENTS ............G
-1
No broker, dealer, salesman or other person has been authorized by the City or the
Underwriters to give any information or to make any representations in connection with the offer
or sale of the Series A Bonds other than as set forth herein and, if given or made, such
information or representation must not be relied upon as having been authorized by the City or
the Underwriters. This Official Statement does not constitute an offer to sell or the solicitation of
an offer to buy nor shall there be any sale of the Series A Bonds by a person in any jurisdiction in
which it is unlawful for such person to make such an offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers of the
Series A Bonds. Statements contained in this Official Statement which involve estimates,
forecasts or matters of opinion, whether or not expressly so described herein, are intended solely
as such and are not to be construed as a representation of facts.
The information set forth herein has been obtained from official and other sources and the
City, the Borrower and the Underwriter have a reasonable basis for believing that the information
set forth is accurate. The information and expressions of opinion stated herein are subject to
change without notice. Neither the delivery of this Official Statement nor the sale of any of the
Bonds implies that the information herein is correct as of any time subsequent to the date hereof.
The delivery of this Official Statement shall not, under any circumstances, create any implication
that there has been no change in the affairs of the City, the Borrower, or the major participants in
the Project. All summaries of the Bonds, the resolution authorizing their issuance, the Indenture
and the other documents discussed herein are made subject to the provisions of such documents
and do not purport to be complete statements of any or all of the provisions thereof. Reference is
hereby made to the Bonds, said resolution, the Indenture and such other documents on file with
the Secretary of the Borrower for further information.
The Underwriters have provided the following sentence for inclusion in this Official
Statement. The Underwriters have reviewed the information in this Official Statement in
accordance with, and as part of, their responsibilities to investors under the federal securities
laws as applied to the facts and circumstances of this transaction, but the Underwriters do not
guarantee the accuracy or completeness of such information.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY
OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICE OF THE SERIES A BONDS AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The Bonds have not been registered under the Securities Act of 1933, as amended, in
reliance upon an exempxion contained in such act. The Bonds have not been registered or
qualified under the securities laws of any state. These securities have not been approved or
disapproved by the Securities and Exchange Commission or any State Securities
Commission nor has the Securities Exchange Commission or any State Securities
Commission passed upon the accuracy or adequacy of this Official Statement. Any
representation to the contrary is a criminal offense.
OFFICIAL STATEMENT
W
City of Moorpark, California
Mobile Home Park Revenue Bonds
(Villa Del Arroyo)
Series 2000A
INTRODUCTION
This Official Statement, including the cover page and Appendices hereto, provides
certain information concerning the sale and delivery of the City of Moorpark Mobile Home Park
Revenue Bonds (Villa Del Arroyo), Series 2000A (the "Series A Bonds "), in the initial aggregate
principal amount of $
THE SERIES A BONDS ARE SUBJECT TO CERTAIN RISKS, INCLUDING THE
RISK THAT THE PROJECT MAY NOT GENERATE NET OPERATING REVENUES
SUFFICIENT TO PAY THE PRINCIPAL OF AND INTEREST ON THE SERIES A BONDS.
SEE THE SECTION HEREIN ENTITLED "RISK FACTORS" FOR A DISCUSSION OF
SPECIAL RISK FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING THE
INVESTMENT QUALITY OF THE SERIES A BONDS.
Concurrently with the issuance of the Series A Bonds, the City of Moorpark (the "City ")
will issue its $ Mobile Home Park Subordinate Revenue Bonds (Villa Del Arroyo)
Series 2000B (the "Series B Bonds" and, together with the Series A Bonds, the 'Bonds "). The
Series B Bonds are to be dated , 2000, and will be secured on a basis subordinate
to the Series A Bonds, as more fully described herein. The Series B Bonds are not being offered
by means of this Official Statement, which pertains only to the Series A Bonds.
The Bonds will be issued by the City pursuant to an Indenture of Trust, dated as of
March 1, 2000 (the "Indenture "), between the City and U.S. Bank Trust National Association, as
trustee (the "Trustee "). The proceeds of the sale of the Series A Bonds will be used to fund a
loan (the "Loan") to Augusta Homes, a California non -profit public benefit corporation (the
"Borrower ") pursuant to a Loan Agreement, dated as of March 1, 2000 (the "Loan Agreement ")
among the City, the Borrower and the Trustee. The Borrower will use the proceeds of the Loan
to (i) finance the acquisition by the Borrower of certain real property constituting the Villa Del
Arroyo Mobile Home Park (the "Project ") and any structures, site improvements, facilities, and
fixtures on the Project ( inOuding an apartment adjacent to the clubhouse which will be acquired
by the Borrower for occupancy by a resident manager) (the "Improvements "), (ii) fund the Series
A Bonds Debt Reserve Fund, and (iii) make a deposit to the Repair and Replacement Fund. The
proceeds of the Series B Bonds will be used to make deposits to the Project Fund and the
Series B Bonds Debt Service Reserve Fund. See "THE PLAN OF FINANCING" and
"ESTIMATED SOURCES AND USES OF FUNDS."
The Borrower has no substantial assets other than its investment in the Project. See
"THE BORROWER — Operations" and APPENDIX G — Augusta Homes Consolidated Financial
Statements."
' Preliminary, subject to change.
The Series A Bonds are special limited obligations of the City, payable solely from and
secured as to the payment of the interest on and the principal of and the redemption premium, if
any, from Pledged Revenues (as hereinafter defined) and other funds and property as provided
therefor in the Indenture. See "SECURITY FOR THE SERIES A BONDS" herein. "Pledged
Revenues," in turn, consist primarily of the Net Operating Revenues of the Project, the principal
source of which is the monthly rental income for mobile home spaces (the "Spaces ") within the
Project. See "SECURITY FOR THE SERIES A BONDS" and "THE PROJECT" herein.
The Series A Bonds are not a debt of the City, the State of California or any of its
political subdivisions for purposes of any constitutional or statutory debt limitation or restriction,
nor in any event shall the Series A Bonds be payable out of funds or properties other than as
pledged pursuant to the Indenture.
Pursuant to the Loan Agreement the City will agree to loan the proceeds of the Bonds to
the Borrower by causing such proceeds to be deposited with the Trustee and applied in
accordance with the Indenture. Under the Loan Agreement the Borrower is obligated to make
payments to the Trustee at such times and in such amounts as are required to enable the Trustee
to pay the principal and premium, if any, of and interest on the Bonds. The obligations of the
Borrower under the Loan Agreement and the Note (as defined herein) are limited recourse
obligations of the Borrower secured by a Deed of Trust on the Project. See "THE LOAN
AGREEMENT" and "SECURITY FOR THE SERIES A BONDS" herein.
The Project to be acquired with the proceeds of the Bonds has been appraised, as of
August 26 1999, at $13,200,000 and as of February 22, 2000, at $13,500,000 based upon an
income approach with support from a sales comparison approach (see "THE PROJECT" herein),
which amount is less than the principal amount of the Series A Bonds.
The City, the Borrower and the Trustee will also enter into a Regulatory Agreement and
Declaration of Restrictive Covenants dated as of March 1, 2000 (the "Regulatory Agreement ")
with respect to the operation of the Project. Under the Regulatory Agreement, the Borrower is to
rent not less than 20% of the Spaces in the Project to Very Low Income Residents (all as defined
in the Regulatory Agreement). The monthly rental rate which the Borrower may charge Very
Low Income Residents is also restricted by the Regulatory Agreement, as is the rate at which
rental rates for Very Low Income Spaces may be increased. See "THE REGULATORY
AGREEMENT" and "RISK FACTORS" herein.
The Series A Bonds are special limited obligations of the City, payable solely from
Pledged Revenues (as hereinafter defined) and secured as to the payment of the interest on and
the principal of and the redemption premiums, if any, on the Series A Bonds in accordance with
their terms and the terms 9f the Indenture, from Pledged Revenues and other funds as provided
therefor in the Indenture.' The Series A Bonds are not a debt of the City, or State of California or
any of its political subdivisions, for purposes of any constitutional or statutory debt limitation or
restriction, nor in any event shall the Series A Bonds be payable out of funds or properties other
than as described in the preceding sentence.
The summaries and references to documents, statutes, reports and other instruments
referred to herein do not purport to be complete, comprehensive or definitive, and each such
summary and reference is qualified in its entirety by reference to each document, statute, report
or instrument. Capitalized terms not defined elsewhere in this Official Statement or in Appendix
B hereto have the meanings assigned to such terms in the Indenture.
FA
THE PLAN OF FINANCING
The proceeds of the Bonds will be used to fund the Loan to the Borrower pursuant to the
Loan Agreement. The proceeds of the Loan will be used by the Borrower to acquire the Project
and to make certain deposits required under the Indenture. The Project consists of certain real
property and the Improvements thereon (which consist of the structures, site improvements,
facilities and fixtures on the Project), commonly known as the Villa Del Arroyo Mobile Home
Park, located within the City. The Project does not include the mobile homes located on the
Project site. See "THE PROJECT."
ESTIMATED SOURCES AND USES OF FUNDS
Following are the estimated sources and uses of funds for the financing.
Sources
Principal Amount of Series A Bonds
Principal Amount of Series B Bonds
Total Sources of Funds
Uses
Underwriter's Discount
Original Issue Discount
Project Fund
Senior Bonds Debt Service Reserve Fund (1)
Cost of Issuance Fund (2)
Repair and Replacement Fund
Series B Bonds Debt Service Reserve Fund (3)
Total Uses of Funds
(1) Equal to the initial Senior Bonds Debt Service Reserve Fund Requirement.
(2) Includes Trustee, legal, financial advisory, printing, and other miscellaneous costs of
issuance.
(3) Established solely for the security of the Series B Bonds.
0
* Preliminary, subject to change.
DEBT SER VICE REQUIREMENTS
The following table sets forth the annual debt service requirements for the Series A
Bonds, assuming no redemptions other than Sinking Fund redemptions.
Year
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
Total
Series A Bonds
Debt Service Schedule
Principal
(1) Based on an estimated net interest cost of
4
Interest
Total
Debt Service (1)
THE SERIES A BONDS
General
The Series A Bonds will be delivered in fully registered form only and, when issued, will
be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New
York, New York ( "DTC "). DTC will act as securities depository for the Series A Bonds.
Ownership interests in the Series A Bonds may be purchased, in denominations of $5,000, or any
integral multiple thereof, in book entry form only. See "Book -Entry System."
The Series A Bonds will mature on the respective dates and in the respective principal
amounts, and will bear interest at the respective rates, all as set forth on the cover page of this
Official Statement. The Series A Bonds will be dated their date of delivery. Interest on the
Series A Bonds will be computed on the basis of a 360 -day year consisting of twelve 30 -day
months and will be payable semiannually on March 15 and September 15 of each year,
commencing September 15, 2000 (each such date an "Interest Payment Date "), by check or draft
mailed on such Interest Payment Date to the Owners of Series A Bonds as they appear on the
registration books of the Trustee, or, upon the written request of a Bondowner of at least
$1,000,000 in principal amount of Bonds received by the Trustee not later than fifteen days prior
to the Record Date for such payment, by wire transfer to an account in the United States
designated by such Bondowner.
Each Series A Bond will bear interest from the Interest Payment Date next preceding the
date of authentication thereof to which interest has been duly paid or provided for, unless a
Series A Bond is authenticated before the first Record Date, in which case interest will accrue
from the Delivery Date, or unless authenticated as of a date during the period from the Record
Date to and including the next Interest Payment Date, in which case it shall bear interest from
such Interest Payment Date. Each Series A Bond shall bear interest on overdue principal at the
rate then in effect on such Series A Bond. In the event of any default in the payment of interest,
such defaulted interest shall be payable to the Bondowner of such Bond on a special Record Date
for the payment of such defaulted interest, which date shall be established by the Trustee, in
accordance with the Indenture.
Principal and premium, if any, due on the Series A Bonds shall be paid only upon
surrender of such Series A Bond at the office designated by the Trustee.
Redemption
Optional Redemption. The Series A Bonds maturing after March 15, 2010 are subject to
optional redemption by the City at the request of the Borrower in whole, or in part from among
maturities as may be directed by the City at the request of the Borrower, on any date on or after
March 15, 2010, at the following Redemption Prices (expressed as a percentage of the principal
amount to be redeemed) subject to the availability of funds for such purpose on the redemption
date, plus accrued interest thereon to the date fixed for redemption, during the following
respective periods:
Redemption Period (dates inclusive) Redemption Price
March 15, 2010 through March 14, 2011 102%
March 15, 2011 through March 14, 2012 101
March 15, 2012 and thereafter 100
Such redemption will be effective only if, on the date of redemption, the Trustee will hold
money sufficient to pay the principal of, accrued interest on and any premium due on all
Outstanding Series A Bonds to be redeemed.
Special Redemption Generally. In accordance with and for purposes of the Indenture, the
Series A Bonds shall be subject to redemption, at the option of the City, at the request of the
Borrower, prior to the stated maturities thereof on a pro rata basis, in whole or in part at any time,
on the earliest practicable date for which notice of redemption can be given as provided in the
Indenture at a Redemption Price equal to 100% of the Principal Amount of such Series A Bonds
or portions thereof to be redeemed, together with accrued interest thereon to the date of
redemption, without premium, in a Principal Amount having an aggregate Redemption Price
equal to the amount of moneys which are deposited in or transferred to the Redemption Fund, (i)
from any Net Proceeds or any Prepayment made by the Borrower in order to fully retire the Loan
in connection with a condemnation or casualty loss which results in Net Proceeds, and (ii) from
excess amounts in the Senior Bonds Debt Service Reserve Fund resulting from a reduction in the
Senior Bonds Debt Service Reserve Fund Requirement after giving effect to any special
redemption under the aforementioned provisions of the Indenture. The Trustee shall apply any
such amounts described above in accordance with applicable provisions of the Indenture from
time to time as directed by a certificate of a Borrower's Representative, with notice to the City;
provided, however, that (i) such amount to be applied to such redemption or purchase shall be
rounded to the next lower authorized denomination, and (ii) unless otherwise directed by a
certificate of a Borrower's Representative, with notice to the City, no such redemption shall be
effected unless the total amount to be applied to redeem Series A Bonds on such date shall be at
least $25,000.
Mandatory Sinking Fund Redemption. The Series A Bonds maturing on March 15, 2025
and March 15, 2035 are also subject to mandatory sinking fund redemption by lot on March 15
in each year beginning March 15, 2011 for the 2025 Term Bonds and 2026 for the 2035 Term
Bonds, at a redemption price equal to 100% of the principal amount to be redeemed, together
with accrued interest thereon to the redemption date, without premium, as follows:
Sinking Fund
Redemption Date
(March 15)
2011
2012
2013
2014
2015
2016
2017
2018
Series A Bonds Maturing on March 15, 2025
Principal Amount
To Be Redeemed
2
Sinking Fund
Redemption Date
(March 15)
2019
2020
2021
2022
2023
2024
2025 (maturity)
Principal Amount
To Be Redeemed
Series A Bonds Maturing on March 15, 2035
Sinking Fund
Redemption Date
(March 15)
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035 (maturity)
Principal Amount
To Be Redeemed
Redeemed Bonds as Satisfaction of Sinking Fund Installments. Upon any purchase or
redemption of Term Bonds (other than by application of Sinking Fund Installments) an amount
equal to the applicable Redemption Prices thereof shall be credited towards a part of all of any
one or more of the above - listed Sinking Fund Installments, as directed by a certificate of a
Borrower Representative, with a copy to the City or, failing such direction by February 1 of each
year, toward such Sinking Fund Installments pro rata. Such applicable Redemption Prices shall
be the respective Redemption Prices which would be applicable upon the redemption of such
Bonds from the respective Sinking Fund Installments on the due dates thereof. The portion of
any such Sinking Fund Installment remaining after the deduction of any such amounts credited
toward the same (or the original amount of any such Sinking Fund Installment if no such
amounts shall have been credited toward the same) shall constitute the unsatisfied balance of
such Sinking Fund Installment for the purpose of the calculation of Principal Installments due on
a future date.
Selection of Series A Bonds to be Redeemed by Lot. Except as may be otherwise
provided in the Indenture, in the event of redemption o less than all of the Outstanding Series A
Bonds of like maturity, the Trustee shall assign to each such Outstanding registered Series A
Bond of the maturity to be redeemed a distinctive number for each $5,000 of the Principal
Amount of such Series A Bond and shall select by lot, using such method of selection as it shall
deem proper in its discretion, from the numbers assigned to such Series A Bonds as many
numbers as, at $5,000 for each number, shall equal the Principal Amount of such Series A Bonds
to be redeemed. The Series A Bonds to be redeemed shall be the Series A Bonds to which were
assigned numbers so selected; provided, however, that only so much of the Principal Amount of
each such registered SeriG$ A Bond of a denomination of more than $5,000 shall be redeemed as
shall equal $5,000 for each number assigned to it and so selected. For purposes of this
paragraph, Series A Bonds which have theretofore been selected by lot for redemption shall not
be deemed Outstanding.
Notice of Redemption. When the Trustee shall receive notice from the City of its election
or direction to redeem Series A Bonds pursuant to the Indenture, and when redemption of Series
A Bonds is required pursuant to the Indenture, the Trustee shall give notice, which notice shall
specify the maturities of the Series A Bonds to be redeemed, the redemption date and the place or
places where amounts due upon such redemption will be payable, whether such redemption is
conditioned upon the availability of funds for such purpose on the redemption date (in the case of
optional redemption and special redemption pursuant to the Indenture) and, if less than all of the
Series A Bonds of any maturity are to be redeemed, the letters and numbers or other
distinguishing marks of such Series A Bonds so to be redeemed, and, in the case of Series A
7
Bonds to be redeemed in part only, such notice shall also specify the respective portions of the
Principal Amount thereof to be redeemed. Such notice shall further state that on such date there
shall become due and payable upon each Series A Bond to be redeemed the Redemption Price
thereof, or the Redemption Price of the specified portion of the Principal Amount thereof in the
case of Series A Bonds to be redeemed in part only, together with interest accrued on such Series
A Bonds to the redemption date, and that from and after such date interest on such Series A
Bonds shall cease to accrue and be payable; provided, that, if the redemption is conditioned upon
funds being available therefor no later than the opening of business on the Business Day prior to
the redemption date, the notice shall so state. The Trustee shall mail a copy of such notice, by
first class mail, postage prepaid, not less than thirty (30) days (provided, however, in the case of
special redemption described in the Indenture, such notice shall be given not less than ten (10)
days) nor more than forty -five (45) days before the redemption date, to the Owners of any
Series A Bonds or portions of Series A Bonds which are to be redeemed, at their last addresses, if
any, appearing upon the registration book. Failure to give such notice which respect to any
Series A Bonds, or any defect therein, shall not affect the validity of the proceedings for
redemption of any other Series A Bonds.
Purchase of Series A Bonds
In lieu of redemption of Series A Bonds as provided in the Indenture, amounts held by
the Trustee for such redemption will, at the written request of the Borrower set forth in a
certificate of a Borrower Representative, with a copy to the City, received by the Trustee prior to
the selection of Series A Bonds for redemption, be applied by the Trustee to the purchase of
Series A Bonds at public or private sale as and when and at such prices (including brokerage,
accrued interest and other charges) as the Borrower may in its discretion direct, but not to exceed
the redemption price which would be payable if such Series A Bonds were redeemed. The
aggregate principal amount of Series A Bonds of the same maturity purchased in lieu of
redemption may not exceed the aggregate principal amount of Series A Bonds of such maturity
which would otherwise be subject to such redemption.
Book -Entry System
The Series A Bonds will be initially delivered in the form of one fully registered Series A
Bond for each of the maturities of the Series A Bonds, registered in the name of Cede & Co., as
nominee of DTC, as registered owner of all the Series A Bonds. The Series A Bonds will be
retained and immobilized in the custody of DTC. So long as the Series A Bonds are held in
book -entry only form, all references herein to the holders or owners of the Bonds shall mean
DTC, and shall not MEAN beneficial owners of the Series A Bonds.
DTC is a limited ptupose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agent" registered pursuant to the provisions of Section 17A of
the Securities Exchange Act of 1934, as amended. DTC holds securities that its participants (the
"Participants ") deposit with DTC. DTC also facilitates the settlement among Participants of
securities transactions, such as transfers and pledges, in deposited securities through electronic
computerized book -entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is
owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with a Direct Participant,
E:3
either directly or indirectly (the "Indirect Participants "). The rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
Purchases of the Series A Bonds under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Series A Bonds on DTC's records. The
ownership interest of each actual purchaser of each Series A Bond (the "Beneficial Owner ") is in
turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well as periodic statements
of their holdings, from the Indirect Participant through which the Beneficial Owner entered into
the transaction. Transfers of ownership interests in the Series A Bonds are to be accomplished
by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership interests in the Series A Bonds
except in the event that use of the book -entry system for the Series A Bonds is discontinued.
To facilitate subsequent transfers, all Series A Bonds deposited by Participants with DTC
are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Series A
Bonds with DTC and their registration in the name of Cede & Co. effect no change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the Series A Bonds.
DTC's records reflect only the identity of the Direct Participants to whose accounts such Series A
Bonds are credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by
Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
REDEMPTION NOTICES WILL BE SENT BY THE TRUSTEE TO CEDE & CO. IF
LESS THAN ALL OF THE SERIES A BONDS ARE BEING REDEEMED, DTC'S
PRACTICE IS TO DETERMINE BY LOT THE AMOUNT OF THE INTEREST OF EACH
DIRECT PARTICIPANT IN SUCH ISSUE TO BE REDEEMED. ANY FAILURE OF DTC
TO ADVISE ANY PARTICIPANT, OR OF ANY PARTICIPANT TO NOTIFY ANY
BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT
AFFECT THE VALIDITY OR SUFFICIENCY OF THE PROCEEDINGS RELATING TO
THE REDEMPTION OF THE SERIES A BONDS CALLED FOR REDEMPTION OR OF
ANY OTHER ACTION PREMISED ON SUCH NOTICE.
THE CITY, THE TRUSTEE AND THE UNDERWRITERS HAVE NO
RESPONSIBILITY OR LIABILITY FOR ANY ASPECTS OF THE RECORDS RELATING
TO OR PAYMENTS MADE ON ACCOUNT OF BENEFICIAL OWNERSHIP, OR FOR
MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS RELATING TO
BENEFICIAL OWNERSHIP, OF INTERESTS IN THE SERIES A BONDS.
Neither DTC nor Cede & Co. will consent or vote with respect to the Series A Bonds.
Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after
the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those
Direct Participants to whose accounts the Series A Bonds are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on the Series A Bonds will be made to
DTC. DTC's practice is to credit Direct Participants' accounts on the payable date in accordance
with their respective holdings shown on DTC's records unless DTC has reason to believe that it
will not receive payment on the payable date. Payments by Participants to Beneficial Owners
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will be governed by standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street name ", and will be the
responsibility of such Participant and not of DTC, the Trustee, or the City, subject to any
statutory or regulatory requirements as may be in effect from time to time. Payment of principal
and interest to DTC is the responsibility of the Trustee, disbursement of such payments to Direct
Participants shall be the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect Participants.
THE CITY, THE TRUSTEE AND THE UNDERWRITERS CANNOT AND DO NOT
GIVE ANY ASSURANCES THAT DTC WILL DISTRIBUTE PAYMENTS TO DTC
PARTICIPANTS, OR THAT PARTICIPANTS OR OTHERS WILL DISTRIBUTE
PAYMENTS WITH RESPECT TO THE SERIES A BONDS RECEIVED BY DTC OR ITS
NOMINEES AS THE REGISTERED OWNER, ANY REDEMPTION NOTICES OR OTHER
NOTICES TO THE BENEFICIAL OWNERS, OR THAT THEY WILL DO SO ON A TIMELY
BASIS, OR THAT DTC WILL SERVICE AND ACT IN THE MANNER DESCRIBED IN
THIS OFFICIAL STATEMENT.
In the event the City and the Trustee determine not to continue the DTC book -entry only
system or DTC determines to discontinue its services with respect to the Series A Bonds and the
City does not select another qualified securities depository, the City and the Trustee will deliver
one or more Series A Bonds in such principal amount or amounts, in denominations of $5,000 or
any integral multiple thereof, and registered in whatever name or names, as DTC shall designate.
In such event, transfers and exchanges of Series A Bonds will be governed by the provisions of
the Indenture.
The information in this section concerning DTC and DTC's book -entry system has been
obtained from sources that the City and the Underwriters believe to be reliable, but they take no
responsibility for the accuracy thereof.
SECURITY FOR THE SERIES A BONDS
The Series A Bonds are special limited obligations of the City, payable solely from
Pledged Revenues (as hereinafter defined) and secured as to the payment of the interest on and
the principal of and the redemption premiums, if any, on the Series A Bonds in accordance with
their terms and the terms of the Indenture, from Pledged Revenues and other funds as provided
therefor in the Indenture. The Series A Bonds are not a debt of the City, or State of California or
any of its political subdivisions, for purposes of any constitutional or statutory debt limitation or
restriction, nor in any event shall the Series A Bonds be payable out of funds or properties other
than as described in the preceding sentence.
Net Operating Revenues
The Series A Bonds are secured principally by a pledge of, and are payable principally
from, Net Operating Revenues of the Project. "Net Operating Revenues" consist of all rents,
income, receipts and other revenues derived by the Borrower arising from the operation of the
Project, including rental income from mobile home spaces, determined in accordance with
Generally Accepted Accounting Principles, but not including resident security deposits, less
Operation and Maintenance Costs, consisting of the reasonable and necessary costs and expenses
of operating the common areas of the Project and of managing and repairing and other expenses
necessary to maintain and preserve the common areas of the Project in good repair and working
order, determined in accordance with Generally Accepted Accounting Principles. See
"APPENDIX B — Definitions."
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Pledge
Pursuant to the Indenture, the following are pledged to the payment of the principal of,
Redemption Price, if any, and interest on the Series A Bonds: (i) the Pledged Revenues, and (ii)
all the rights, title and interest of the City in the Loan, the Loan Agreement and the Deed of
Trust, all Funds and Accounts created under the Indenture for the benefit of the Series A Bonds,
and any other property pledged to the payment of the Series A Bonds in the granting clauses of
the Indenture. Pursuant to the "granting clauses" referred to in the Indenture, the City pledges and
assigns to the Trustee, for the benefit of the Series A Bonds, the "Senior Bonds Trust Estate,"
which consists of all proceeds, Funds, Accounts, Revenues, Prepayments, the Loan, the Loan
Agreement (other than certain rights to fees and indemnity reserved by the City), the Deed of
Trust, rights, interests, collections, and other property pledged to the payment of the Series A
Bonds pursuant to the Indenture.
"Pledged Revenues" by definition consist of the Revenues, but excluding therefrom
amounts on deposit in the Repair and Replacement Fund, the Administration Fund and the
Rebate Fund. "Revenues," in turn, by definition consist of (i) Net Operating Revenues;
(ii) Prepayments; (iii) the proceeds of any insurance, including the proceeds of any self-insurance
covering loss relating to the Project; provided, however, that the Net Proceeds of any public
liability insurance, casualty insurance or title insurance required to be maintained pursuant the
Loan Agreement will be applied as specified in the Loan Agreement and the Indenture; (iv) all
amounts on hand from time to time in the funds and accounts established by the Trustee under
the Indenture; (v) all proceeds of rental interruption insurance policies, if any, carried with
respect to the Project pursuant to the Loan Agreement; (vi) any proceeds derived from the
exercise of remedies under the Deed of Trust; and (vii) any additional property that may from
time to time, by delivery or by writing of any kind, be subjected to the lien of the Indenture by
the City or by anyone on its behalf, subject only to the provisions of the Indenture.
Under the Regulatory Agreement, the Borrower is to rent not less than 20% of the Spaces
in the Project to Very Low Income Residents (all as defined in the Regulatory Agreement). The
monthly rental rate which the Borrower may charge Very Low Income Residents is also
restricted by the Regulatory Agreement, as is the rate at which rental rates for the Very Low
Income Spaces may be increased. These provisions place a limit on the rental rates for some of
the Spaces, and thus may limit the Net Operating Revenues available to pay debt service on the
Bonds. See "THE REGULATORY AGREEMENT" and "RISK FACTORS" herein.
The Loan Agreement and the Note
Pursuant to the Loan Agreement, the City will make the Loan for the benefit of the
Borrower in an amount equal to the aggregate principal amount of the Bonds. The Borrower's
obligation to repay the Loan will be evidenced by the Note. The Borrower is obligated under the
Loan Agreement, notwithstanding the schedule of payments under the Loan Agreement and the
Note, to make such payments at such times as shall be sufficient, when added to the amounts
otherwise available under the Indenture, to pay the principal and premium, if any, of and interest
on the Series A Bonds and the Series B Bonds when due, whether at maturity, by optional or
mandatory redemption or by acceleration.
Under the Loan Agreement the Borrower agrees to pay, in repayment of the Loan, all Net
Operating Revenues for the immediately preceding calendar month to the Trustee until the
principal of, premium (if any) and interest on the Bonds shall have been paid or provision for
payment shall have been made. As security for the repayment of the Loan, the Borrower grants
the City a security interest in the Project pursuant to the terms of the Deed of Trust. See "THE
LOAN AGREEMENT" herein.
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The Project to be acquired with the proceeds of the Bonds has been appraised, as of
August 26, 1999, at $13,200,000, based upon an income approach (see "THE PROJECT"
herein), which amount is less than the principal amount of the Series A Bonds.
Borrower Obligations Non - Recourse
Neither the Borrower's directors, officers, employees and agents, nor any of its other
affiliates, has or is intended to have any liabilities under or in respect of the Loan Agreement, the
Indenture, the Note, the Deed of Trust, the Regulatory Agreement, or any of the other documents
or transactions contemplated by any of them. See "RISK FACTORS."
Reserve Fund
For a discussion of the Reserve Fund, see "THE INDENTURE — Senior Bonds Debt
Service Reserve Fund." The Borrower intends to invest all or substantially all of the moneys
held in the Senior Bonds Debt Service Reserve Fund in a guaranteed investment contract or other
investment which satisfies the requirements of clause (i), 6) or (k), as applicable, of the
definition "Qualified Investments" in the Indenture. See "APPENDIX B - Definitions."
THE INDENTURE
The following is a summary of certain provisions of the Indenture relevant to the Series A
Bonds. The Indenture also contains provisions relating to the Series B Bonds. The summary
does not purport to be complete and is qualified in its entirety by reference to the Indenture
which is available from the City upon request, and to Appendix B for the definition of certain
terms used herein. Any capitalized terms not otherwise defined herein or in Appendix B are as
defined in the Indenture.
Application of Bond Proceeds
On the Closing Date, the City will cause the proceeds of the sale of the Series A Bonds to
be deposited with the Trustee in the Project Fund. The proceeds of the Series A Bonds on
deposit in the Project Fund will be disbursed in accordance with the Indenture and the Loan
Agreement as follows:
(a) The Trustee will deposit the amount of $ in the Senior
Bonds Debt Service Reserve Fund, equal (together with the deposit to such fund from the
proceeds of the Agency Loan described below) to the initial Senior Bonds Debt Service
Reserve Fund Requirement;
(b) The Trustee will deposit the amount of $200,000.00 in the Repair and
Replacement Fund; and
(c) The balance of $ will be held in the Project Fund until
disbursed in accordance with the Indenture and the Loan Agreement.
From the proceeds of the Series B Bonds, Trustee
$ in the Project Fund and the amount of $_
Bonds Debt Service Reserve Fund.
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will deposit the amount of
in the Series B
Project Fund
The City will establish and maintain a special fund designated as the City of Moorpark
Villa Del Arroyo Mobile Home Park Project Fund (the "Project Fund "), which shall be held by
the Trustee. Amounts in the Project Fund will be expended and applied only to fund the Loan.
See "Application of Bond Proceeds," above. On the Closing Date, the Trustee will pay out
moneys in the Project Fund for the purpose of making the Loan, upon receipt by the Trustee of a
written direction of the City signed by an Authorized Officer.
Cost of Issuance Fund
The Trustee will establish, maintain and hold in trust a separate fund designated as the
"Cost of Issuance Fund." Moneys in the Cost of Issuance Fund shall be applied to the payment
of Cost of Issuance, upon receipt of an Officer's Certificate stating the person to whom and the
purpose for which each payment is to be made, and the amount of such payment. Upon receipt
of an Officer's Certificate stating that the Cost of Issuance have been fully paid and in any event
within six months of the Closing Date, the Trustee shall transfer any remaining balance to the
Project Fund or to the Revenue Fund, as directed by such Officer's Certificate, and such Fund
shall be closed.
Deposits
Pursuant to the Loan Agreement, the City is to cause the Borrower to collect and deposit
or cause to be collected and deposited with the Trustee, on the date of receipt so far as
practicable, all Net Operating Revenues, and to forward promptly to the Trustee statements of
each amount deposited. The Trustee will notify the City and the Oversight Agent in the event
that Net Operating Revenues have not been deposited by the tenth (10th) day of each month.
The Trustee will be accountable only for moneys actually so deposited or held. All Net
Operating Revenues will be deposited for credit to the Revenue Fund. All Prepayments and Net
Proceeds with respect to the Loan will be transferred to the Series A Redemption Fund, and, to
the extent permitted by the Indenture to be applied as Residual Net Proceeds or Residual
Prepayments, shall be transferred and deposited in the Series B Bonds Redemption Fund for the
benefit of the owners of the Series B Bonds.
Revenue Fund
The Revenue Fund will be held by the Trustee for the benefit of the Series A Bonds,
except to the extent of the application of Residual Revenues for the benefit of the Series B Bonds
pursuant to the Indenture. All interest and other income from time to time received from the
deposit of moneys in the Revenue Fund will be retained in such fund and applied pursuant to the
Indenture. On or before the 15th day preceding each Interest Payment Date, the Trustee is to
provide written notice to the City and the Oversight Agent as to the amount deposited in the
Revenue Fund, the amount of the required deposits, and whether the deposited amount is
insufficient to satisfy the required deposit to the Senior Bonds Debt Service Fund and/or the
Series B Bonds Debt Service Fund. On or before the fifth Business Day preceding each Interest
Payment Date, the Trustee will withdraw from the Revenue Fund and transfer to the following
Funds the amounts indicated in the following tabulation, in the following order of priority, or so
much thereof as remains after first making all prior transfers:
(a) into the Senior Bonds Debt Service Fund, the amount needed to increase
the balance therein to the Series A Bonds Debt Service Requirement as of such date;
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(b) into the Senior Bonds Debt Service Reserve Fund, the amount, if any,
needed to increase the balance therein to the Senior Bonds Debt Service Reserve Fund
Requirement;
(c) into the Rebate Fund, the amount, if any, required to be deposited therein
pursuant to the Indenture;
(d) into the General Account of the Administration Fund (i) the amount, if
any, necessary to pay or provide for the ordinary fees and expenses of the Fiduciaries,
including expenses in connection with the purchase or redemption of any Bonds, all as
provided and contemplated in the annual budget filed by the Borrower pursuant to the
Loan Agreement; and (ii) an amount equal to the Oversight Agent Fee and Program
Administrator Fee (if any) authorized under the Indenture and other Fees and Charges, if
any, all as provided and contemplated in the annual budget filed by the Borrower
pursuant to the Loan Agreement. Any fees and expenses of the Fiduciaries, Oversight
Agent or Program Administrator above and beyond the amount contemplated in the
annual budget filed by the Borrower pursuant to the Loan Agreement will be paid from
the Surplus Fund;
(e) into the Series B Bonds Debt Service Fund, the amount needed to increase
the balance therein to the Series B Bonds Debt Service Requirement at such date;
(f) into the General Account of the Administration Fund, an amount equal to
the City Annual Fee;
(g) into the Borrower Administration Fee Account of the Administration Fund
an amount equal to one half (1/2) the Administration Fee authorized under the Indenture
(such amounts to be paid to the Borrower on the first day of each month in increments
equal to 1/6 of the amount then on deposit);
(h) into the Series B Bonds Debt Service Reserve Fund, the amount, if any, to
increase the balance therein to the Series B Bonds Debt Service Reserve Requirement;
(i) into the Surplus Fund, the amount remaining in the Revenue Fund.
Notwithstanding the foregoing, so long as the Borrower's monthly deposits of Net
Operating Revenues with the Trustee pursuant to the Loan Agreement are at least equal to said
month's portion of items (a) through (f) and item (h) above, then the Borrower may retain from
Net Operating Income for such month the Administration Fee for such month.
Senior Bonds Debt Service Fund
The Senior Bonds Debt Service Fund will be held by the Trustee. The Trustee will
withdraw from the Senior Bonds Debt Service Fund, on or prior to each Interest Payment Date,
an amount equal to the unpaid interest due on the Series A Bonds on that date and shall cause it
to be applied to the payment of such interest when due. If the withdrawals required in the
previous sentence on the same and every prior Interest Payment Date have been made, the
Trustee will withdraw from the Senior Bonds Debt Service Fund, on or prior to each Principal
Payment Date, an amount equal to the Principal Amount of the Outstanding Series A Bonds, if
any, maturing on that date and will cause it to be applied to the payment of the principal of the
Series A Bonds when due. Each withdrawal from the Senior Bonds Debt Service Fund as
described above will be made on or immediately prior to the Interest Payment Date or Principal
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Payment Date to which it relates, and the amount so withdrawn shall be deemed to be part of the
Senior Bonds Debt Service Fund until such Interest Payment Date or Principal Payment Date.
The Trustee shall apply money in the Senior Bonds Debt Service Fund to the purchase or
the redemption of the Term Bonds in the manner provided in the Indenture, provided that no
such Series A Bonds shall be so purchased in lieu of redemption during the period of 45 days
next preceding each Sinking Fund Installment due date established for such Term Bonds. The
price paid by the Trustee (including any brokerage and other charges) for any Term Bond
purchased pursuant to this paragraph will not exceed the Redemption Price applicable on the next
date on which such Term Bond could be redeemed in accordance with its terms as part of a
Sinking Fund Installment. Subject to the limitations set forth and referred to in the Indenture, the
Trustee shall purchase Term Bonds at such times, for such prices, in such manner (whether after
advertisement for tenders or otherwise) as the Trustee will be directed by a certificate of a
Borrower Representative, with a copy to the City, and as may be possible with the amount of
money available in the Senior Bonds Debt Service Fund therefor.
As soon as practicable after the 45th day but not later than the 30th day prior to the due
date of any Sinking Fund Installment, the Trustee will proceed pursuant to the Indenture to call
for redemption on that date a Principal Amount of Term Bonds subject to such Sinking Fund
Installment in such amount as shall be necessary to complete the retirement of the Principal
Amount of the Bonds of such maturity specified for such Sinking Fund Installment. The Trustee
will withdraw from the Senior Bonds Debt Service Fund, on or prior to the due date of the next
Sinking Fund Installment, an amount equal to the Principal Amount of the Term Bonds called for
redemption on such date pursuant to this paragraph, and will cause it to be applied to the
payment of the Redemption Price thereof to such date. If on any date there will be moneys on
deposit in such Sinking Fund Installment Account and no Series A Bonds subject to redemption
therefrom will then be Outstanding, such moneys will be transferred to the Revenue Fund.
If, by application of moneys in the Senior Bonds Debt Service Fund, the Trustee will
purchase in any Bond Year Term Bonds subject to redemption from moneys in the Senior Bonds
Debt Service Fund in excess of the aggregate Sinking Fund Installment in respect of such Term
Bonds for such Bond Year, the Trustee shall file with the City and the Borrower not later than
the 20th day preceding the close of such Bond Year, a statement identifying such Term Bonds
purchased and called for redemption during such Bond Year. The Borrower will thereafter cause
a certificate of a Borrower Representative, with a copy to the City, to be filed with the Trustee
not later than the 10th day preceding the close of such Bond Year setting forth with respect to the
amount of such excess the years in which Sinking Fund Installments are to be reduced and the
respective amounts by which such Sinking Fund Installments are to be reduced; provided that
such reduction shall be as nearly as practicable pro rata among remaining Sinking Fund
Installments so as to be irk increments of $5,000.
All interest and other income from time to time received from the deposit and investment
of moneys in the Senior Bonds Debt Service Fund will be transferred upon receipt to the
Revenue Fund.
Senior Bonds Redemption Fund
The Senior Bonds Redemption Fund shall be held by the Trustee. The Trustee shall
deposit into the Senior Bonds Redemption Fund any Prepayments or Net Proceeds pursuant to
the Indenture. Any moneys on deposit in the Senior Bonds Redemption Fund shall be used and
applied, as soon as practicable following the receipt thereof, but not later than twelve months
after such receipt, for either or both of the following purposes: (a) to the redemption of Series A
Bonds as may be designated in an Officer's Certificate; or (b) the purchase of Series A Bonds at
15
the most advantageous price obtainable with due diligence, but only upon receipt of a certificate
of a Borrower Representative, with a copy to the City, stating the Principal Amounts and
maturities of the Series A Bonds to be purchased; provided that no such purchase shall be made
at a price in excess of the Redemption Price applicable on the next ensuing redemption date, and
that no such purchase shall be made during the period of 45 days next preceding a redemption
date from moneys to be applied pursuant to clause (a) above to the redemption of Series A Bonds
on such date. All interest and other income from time to time received from the deposit and
investment of moneys in the Senior Bonds Redemption Fund shall be transferred upon receipt to
the Revenue Fund. To the extent Prepayment or Net Proceeds remain after giving effect to the
redemption or purchase of all Outstanding Series A Bonds pursuant to (a) above, such amounts
shall be transferred to the Series B Bonds Redemption Fund for application thereunder.
Administration Fund
The Trustee shall establish the Administration Fund and establish therein the General
Account and the Borrower Administration Fee Account. Moneys deposited in the Accounts of
the Administration Fund shall be held therein in segregated Accounts until disbursed.
Moneys deposited in the General Account of the Administration Fund shall be applied by
the Trustee to the City Annual Fee, and from time to time as directed by a certificate of a
Borrower Representative, with a copy to the City, to the payment of ordinary fees and expenses
of Fiduciaries, including expenses of purchase or redemption of Bonds. Any fees and expenses
of the Fiduciaries and amounts payable to the City above and beyond the amount contemplated
in the final annual budget prepared by the Borrower shall be paid from the Surplus Fund, or if the
Surplus Fund is insufficient, shall be paid by the Borrower.
Moneys deposited in the Borrower Administration Fee Account of the Administration
Fund shall be applied by the Trustee, on a monthly basis, to the payment of the Administration
Fee. All interest and other income from time to time received from the deposit and investment of
moneys in the Accounts of the Administration Fund shall be transferred upon receipt to the
Revenue Fund.
Repair and Replacement Fund
The Trustee shall establish and hold the Repair and Replacement Fund for the financial
benefit of the Project and shall deposit therein the amount provided in the Indenture and the
balance, if any, of the Net Operating Revenues paid to the Trustee by the Borrower pursuant to
the Indenture. Certain moneys deposited in the Repair and Replacement Fund shall be held
therein segregated from other funds held by the Trustee until disbursed. Expenditures from the
Repair and Replacement fund which are not included in the annual budget and Exhibit C of the
Loan Agreement shall be subject to the Oversight Agent's approval. Disbursements from the
Repair and Replacement Fund shall be made upon the written request of the Borrower and
approved in writing by the Oversight Agent for the purpose of funding initial improvements of
the Project effecting the replacement of structural elements and mechanical equipment of the
Project as set forth in Exhibit C to the Loan Agreement or for any other purpose for the benefit of
the Project in accordance with the annual budget filed by the Borrower pursuant to the Loan
Agreement or for such other similar purposes which the Oversight Agent shall reasonably direct.
Senior Bonds Debt Service Reserve Fund
The Senior Bonds Debt Service Reserve Fund shall be held by the Trustee. If available
moneys in the Senior Bonds Debt Service Fund shall be insufficient to pay in full the interest on
and principal of any Series A Bonds becoming due on any Interest Payment Date, Principal
16
Payment Date or any date on which Series A Bonds have been called for redemption, the Trustee
shall transfer the deficiency from the Senior Bonds Debt Service Reserve Fund to the Senior
Bonds Debt Service Fund for such purpose unless the City shall, by an Officer's Certificate
delivered to the Trustee prior to the Interest Payment Date, designate one or more Funds or
Accounts from which an amount equal to the deficiency in the Senior Bonds Debt Service Fund
is required to be transferred to the Senior Bonds Debt Service Fund.
All interest and other income from time to time received from the deposit and investment
of moneys in the Senior Bonds Debt Service Reserve Fund shall be transferred upon receipt to
the Revenue Fund.
If, at any time, the amount in the Senior Bonds Debt Service Reserve Fund exceeds the
Senior Bonds Debt Service Reserve Fund Requirement, the Borrower may, by a certificate of a
Borrower Representative, with a copy to the City, direct the Trustee to withdraw any amount
therein in excess of the Senior Bonds Debt Service Reserve Fund Requirement and transfer such
amount in accordance with such certificate to the Revenue Fund.
Whenever the City shall receive a Prepayment or Net Proceeds and shall transfer the
proceeds thereof to the Senior Bonds Redemption Fund, which in any such case would result in
the reduction of the Senior Bonds Debt Service Reserve Fund Requirement upon application of
the moneys so transferred to the purchase or redemption of Series A Bonds, the Trustee shall,
immediately prior to and in connection with each such purchase or redemption, withdraw from
the Senior Bonds Debt Service Reserve Fund and deposit in the Senior Bonds Redemption Fund
an amount of moneys equal to the reduction of the Senior Bonds Debt Service Reserve Fund
Requirement which would result upon the purchase or redemption of such Series A Bonds
(including the purchase or redemption of such Series A Bonds utilizing the moneys being
transferred from the Senior Bonds Debt Service Reserve Fund and deposited in the Senior Bonds
Redemption Fund pursuant to the provisions of this paragraph), but only to the extent that any
such withdrawal would not reduce the amount of the Senior Bonds Debt Service Reserve Fund
below the Senior Bonds Debt Service Reserve Fund Requirement. The amount of moneys to be
withdrawn from the Senior Bonds Debt Service Reserve Fund in each instance pursuant to the
provisions of this paragraph shall be as determined by a certificate of a Borrower Representative,
with a copy to the City.
Rebate Fund
The Rebate Fund will be administered in accordance with the provisions of the Indenture.
The Rebate Fund will not be subject to the lien or encumbrance of the Indenture and will be held
in trust by the Trustee for the benefit of the United States of America. The amounts deposited in
the Rebate Fund will be $object to the claim of no other person, including that of the Trustee and
Bondowners. Moneys transferred to the Rebate Fund pursuant to the Indenture will be used for
no other purpose than to make payments to the United States Treasury, at the time and manner
and in the amount and as more fully provided in the Indenture.
The Trustee will be deemed conclusively to have complied with the Rebatable Arbitrage
if it follows the directions of the Borrower as advised by Bond Counsel, and the Trustee will
have no independent responsibility to, or liability resulting from its failure to, enforce
compliance by the Borrower or the City with the Tax Certificate or the Rebatable Arbitrage.
Surplus Fund
The Surplus Fund shall be held by the Trustee. Annually, following computation and
deposit of the Rebatable Arbitrage for the preceding Bond Year in the Rebate Fund and provided
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there is no deficiency in the Senior Bonds Debt Service Fund, the Senior Bonds Debt Service
Reserve Fund, the Rebate Fund, the Administration Fund, the Repair and Replacement Fund, the
Series B Debt Service Fund or the Series B Bonds Debt Service Reserve Fund, any moneys in
the Surplus Fund shall be released from the lien of the Indenture, not less frequently than
annually, upon delivery to the Trustee of the Coverage Requirement Certificate and provided no
Event of Default has been declared under the Indenture or the Loan Agreement, the amounts on
deposit in the Surplus Fund as of the conclusion of the immediately preceding Bond Year shall
be released to the Borrower to be applied for any lawful purposes for the benefit of the Project.
In the event that no uses related to the Project shall be identified by the Borrower, such amounts
on deposit in the Surplus Fund shall be used to reduce rental payments of the occupants within
the Project. No amounts on deposit in the Surplus Fund shall be used for purposes other than for
the benefit of the Project.
If at any time there is a deficiency in the Senior Bonds Debt Service Fund, the Senior
Bonds Debt Service Reserve Fund, the Rebate Fund, the Administration Fund, the Repair and
Replacement Fund, the Series B Debt Service Fund or the Series B Bonds Debt Service Reserve
Fund, the Trustee shall withdraw from the Surplus Fund and deposit in such Fund, in the order
set forth for disposition of Revenues generally under the Indenture, the amount necessary to
remedy such deficiency and shall give written notice to the City of such withdrawal.
All interest and other income from time to time received from the deposit and investment
of moneys in the Surplus Fund shall be transferred upon receipt to the Revenue Fund.
Amounts deposited in the Surplus Fund are to be applied for any lawful purpose for the
benefit of the Project; provided, however, in the event that the application of moneys on deposit
in the Repair and Replacement Fund to the repair, replacement and capital improvements
necessitated by a natural disaster pursuant to the Loan Agreement, all amounts in the Surplus
Fund shall be deposited in the Repair and Replacement Fund and be applied solely to restore the
Project for operation.
Investment and Deposit of Funds
The Trustee will keep all money held by it, as continuously as reasonably possible,
invested and reinvested in Qualified Investments maturing at the times and in the amounts
required by the Indenture, as instructed in writing by a Borrower Representative. In the event
that written instructions of a Borrower Representative are not received by the Trustee in a timely
manner, the Trustee shall invest the amounts deposited in the Funds and Accounts in those
investments defined in clause (g) of the definition of "Qualified Investments." See "APPENDIX
B — DEFINITIONS." Except for Investment Agreements described in clause (i) of the definition
of "Qualified Investment;" all investments made by the Trustee shall provide for payment of
principal and interest which will be payable no later than the earlier to occur of six (6) months
from the date of investment or the date on which it is estimated that such moneys will be
required by the Trustee.
Moneys in any Fund or Account created and established by, or maintained, pursuant to,
the Indenture and held by a Fiduciary may be invested in common with moneys held in any other
such Fund or Account; provided, however, that the common investments with such other moneys
constitute Qualified Investments and provided, further, that such investments are held by the
same Fiduciary acting in the same capacity.
Obligations purchased as an investment of moneys in any Fund or Account held by a
Fiduciary under the Indenture will be deemed at all times to be a part of such Fund or Account
and the income or interest earned by, or incremented to, any such Fund or Account due to the
18
investment and reinvestment thereof shall be retained in such Fund or Account as part thereof,
except as otherwise provided in the Indenture and subject to the required transfer thereof from
such Fund or Account pursuant to the Indenture. A Fiduciary will sell in any commercially
reasonable name, or present for redemption, any obligation purchased by it as an investment
whenever it will be necessary in order to provide moneys to meet any payment or transfer from
the Fund or Account for which such investment was made; provided, however, that in lieu of
liquidating any such investment obligations and transferring the proceeds thereof, the Trustee
may transfer investment obligations which will mature and the proceeds of which will be
available on or before the date such proceeds are required for the purposes of the Indenture. The
City and the Borrower acknowledge that to the extent that regulations of the Comptroller of the
Currency or other applicable regulatory agency grant the City or the Borrower the right to receive
brokerage confirmations of security transactions, the City and the Borrower waive receipt of such
confirmations. The Trustee will furnish to the City and the Borrower periodic statements which
include detail of all investment transactions made by the Trustee. Each Fiduciary will advise the
City and the Borrower in writing, on or before the fifteenth (15th) day of each calendar month, of
the details of all investments held for the credit of each Account in its custody under the
provisions of the Indenture as of the end of the preceding month. The Trustee may act as
principal or agent in the acquisition or disposition of investments and purchase and sell
investments through its investment department or that of its affiliates.
In computing the amount in any Fund or Account held by a Fiduciary or the Trustee
under the provisions of the Indenture, the Trustee will value obligations purchased as an
investment of moneys therein at the Amortized Cost thereof, plus accrued interest. For the
purposes thereof, "Amortized Cost," when used with respect to obligations purchased at par, will
mean the par value thereof; and when used with respect to obligations purchased at a premium
above or at a discount below par, will mean the value as of any given date obtained by dividing
the total amount of the premium or discount at which such obligations were purchased by the
number of interest payments remaining to maturity (or total number of days remaining to
maturity, in the case of obligations with a term of less than one year) on such obligations after
such purchase and by multiplying the amount so calculated by the number of interest payment
dates having passed since the date of such purchase (or, if interest thereon shall not be payable
prior to maturity, the number of six -month periods having passed since the date of such purchase,
or in the case of obligations of less than one year, the number of days having passed since the
day of such purchase) and (i) in the case of obligations purchased at a premium, deducting the
product thus obtained from the purchase price or (ii) in the case of obligations purchased at a
discount, adding the product thus obtained to the purchase price.
No Fiduciary shall be liable or responsible for making or failing to make any investment
authorized by the provisions of the Indenture, in the manner provided in the Indenture, or for any
loss resulting from any such investment so made or failure to so make, except for its own
negligence. The Trustee may deem investments directed by a Borrower Representative as
Qualified Investments without independent investigation thereof.
Covenants of the City
Payment of Series A Bonds. The City will duly and punctually pay or cause to be paid,
solely from the Senior Bonds Trust Estate, the principal or Redemption Price, if any, of every
Series A Bond and the interest thereon, at the dates and places and in the manner provided in the
Series A Bonds according to the true intent and meaning thereof.
Offices for Payment and Registration of Series A Bonds. The City may designate an
additional Paying Agent located within or out of the State where Series A Bonds may be
presented for payment.
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Further Assurances. At any and all times the City will, so far as it may be authorized or
permitted by law, pass, make, do, execute, acknowledge and deliver, all and every such further
resolution, acts, deeds, conveyances, assignments, transfers and assurances as may be necessary
or desirable for the better assuring, conveying, granting, assigning, confirming and effecting all
and singular the proceeds, moneys, rights, interests and collections hereby pledged or assigned or
intended so to be, or which the City may hereafter become bound to pledge or assign.
Power to Issue Series A Bonds and Make Pledges. The City is duly authorized pursuant
to law to authorize and issue the Bonds and to adopt the Indenture and to pledge the Senior
Bonds Trust Estate in the manner and to the extent provided in the Indenture. Except as provided
in the Indenture, the Senior Bonds Trust Estate is and will remain free and clear of any pledge,
lien, charge or encumbrance thereon or with respect thereto prior to, or of equal rank with, the
pledge created by the Indenture. The Bonds and the provisions of the Indenture are and will be
the valid and legally enforceable obligations of the City in accordance with the terms of the
Indenture. The City will at all times, to the extent permitted by law, defend, preserve and protect
said pledge of the Senior Bonds Trust Estate and all the rights of the Series A Bond Owners
under the Indenture against all claims and demands of all persons whomsoever.
Use of Proceeds. The City will use and apply the proceeds of Bonds, to the extent not
otherwise required by the Indenture to make the Loan for the purposes specified in the Act and
the Indenture, and will do all such acts and things necessary to receive and collect when due, all
Revenues, and will diligently enforce, and take all steps, actions and proceedings reasonably
necessary in the judgment of the City for the enforcement of all terms, covenants and conditions
of the Loan.
The Loan will be made by the City from the proceeds of the Bonds concurrently with the
issuance of the Bonds and the Deed of Trust securing the Loan will have been executed and
recorded either concurrently or prior to the issuance and delivery of the Bonds; provided that:
(a) the Deed of Trust and related financing statements and other necessary
documents will constitute and create a mortgage lien on the Project subject only to
Permitted Encumbrances, which further provides a valid security interest in the personal
property acquired with proceeds of the Loan and attached to or used or to be used in
connection with the operation of the Project, and in all rents, revenues, receipts, income
and other moneys received by or payable to the Borrower; and
(b) the Borrower shall have marketable title in fee simple to the Property, free
and clear of all liens and encumbrances which would materially affect the value or
usefulness of such Property, as set forth in the policy of title insurance delivered in
connection therewith and in a form which is satisfactory to the City.
Fees and Charges. The City will review and approve such Fees and Charges as will be
require(!-by the Act or as it shall deem appropriate. Subject to prior review by the City or its
Oversight Agent on the City's behalf, the Borrower will provide the Trustee with a schedule of
the Fees and Charges to be paid by the Borrower, and of each revision of such schedule, and
shall require the Borrower to make payment of such Fees and Charges directly to the Trustee.
The Trustee will promptly deposit all such Fees and Charges so collected in the Administration
Fund. The Trustee will promptly advise the City of each and every failure of the Borrower to
make payment of Fees and Charges when due.
Modification of Deed of Trust Terms. The City will not consent to the modification of,
or modify, the rate or rates of interest of, or the amount or time of payment of any installment of
principal of or interest on any Loan on the Project, or the amount or time of payment of any Fees
P
and Charges payable with respect to such Loan, or the security for or any terms or provisions of
the Loan on the Project or the Deed of Trust securing the same in a manner detrimental to the
Trustee or the Bondowners.
Prepayments. The City shall not accept, nor permit the Trustee to accept a Prepayment
from the Borrower, unless a Coverage Requirement Certificate is provided to the Trustee which,
in addition to containing the requirements of the Loan Agreement, also shows that the proceeds
of such prepayment received by the City shall be in an amount not less than the aggregate of (i)
the amount to be prepaid; (ii) any interest and Fees and Charges on the Loan accrued through the
date of receipt of the proceeds of the Prepayment remaining unpaid; (iii) to the extent not
otherwise paid by the Borrower, the interest that would accrue on the Bonds of such maturity or
maturities as are to be designated by the City pursuant to the Indenture to be purchased or
redeemed with the proceeds of such Prepayment from the date of receipt thereof by the City until
the applicable optional redemption date of the Bonds so to be purchased or redeemed; (iv) the
redemption premium payable on the next applicable optional redemption date on the Bonds so to
be purchased or redeemed, if any; and (v) the costs and expenses of the City in effecting the
purchase or redemption of such Bonds, less the sum of (A) the amount of applicable moneys
available for withdrawal from the Senior Bonds Debt Service Reserve Fund and the Senior
Bonds Debt Service Fund and application to the purchase or redemption of such Series A Bonds
and the Series B Bonds Debt Service Fund with respect to the application to the purchase or
redemption of the Series B Bonds in accordance with the terms and provisions of the Indenture,
as determined by the City, and (B) the amount of any other legally available funds of the City
transferred or directed by the City to be transferred to the applicable Redemption Fund in
connection with such purchase or redemption.
Disposition of Net Proceeds and Prepayment . Net Proceeds constituting proceeds of a
condemnation award, sale of land, or casualty insurance claim with respect to the Project shall be
deposited in a special restoration account to be established and held by the Trustee for the Project
and the Trustee upon receipt of Net Proceeds shall give written notice to the City of such event.
Such amounts shall either be applied to the redemption of Bonds or the repair, replacement,
restoration or rebuilding of the Project or part thereof as determined in accordance with the
Indenture. Prior to the receipt of Net Proceeds by the Trustee, the Trustee will first receive a
written direction from the Borrower as to whether such proceeds shall be used to redeem the
Bonds or to rebuild the Project as set forth in the Loan Agreement. Upon receipt of such written
direction from the Borrower that such Net Proceeds will be used to redeem the Bonds, the
Trustee will notify the City and cause the Net Proceeds to be paid to the Trustee no more than 30
days from the date that such Net Proceeds will be used to redeem the Bonds.
Amounts in the special restoration account described above shall be applied to the repair,
replacement, restoration qr rebuilding of the Project if the Borrower will deliver or cause to be
delivered to the Trustee 'within (90) days or such longer period as approved by the City of the
event giving rise to the Net Proceeds written notice of its determination that such proceeds may
be applied to the repair, replacement, restoration or rebuilding of the Project or part thereof in an
economical manner, and that such proceeds shall be sufficient, together with any other moneys
deposited into such special restoration account for such purpose together with (1) evidence of the
City's written consent thereto, and (2) a report of a management consultant to the effect that
following such repair or restoration, the tests set forth in the Loan Agreement with respect to
maximum coverage levels in the Coverage Requirement Certificate will be met. Upon
compliance with these conditions, the Trustee shall disburse the moneys so deposited for such
repair, replacement, restoration or rebuilding, but not in an aggregate amount exceeding the cost
thereof, upon receipt of a certificate of a Borrower Representative approved by the Oversight
Agent, with a copy to the City, stating (i) the amount to be paid, (ii) the name of the person to
which payment is to be made, and (iii) that such amount, together with all prior payments from
such account, do not exceed the cost of such repair, replacement, restoration or rebuilding;
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provided that prior to making any such payments, the Trustee shall first have received a
certificate of a Borrower Representative approved by the Oversight Agent, with copies to the
City, stating (i) the estimated cost of such repair, replacement, restoration or rebuilding, (ii) that
such repair, replacement, restoration or rebuilding is, in the signer's opinion, economically
practicable with the proceeds of such condemnation award, sale of land or hazard insurance
claim, and other moneys, if any, deposited in such account, and (iii) that the plans and
specifications, if any, prepared for such repair, replacement, restoration and rebuilding have been
approved by the City. All disbursements made by the Trustee pursuant to such Borrower's
Certificates shall be presumed to be made properly, and the Trustee shall not be required to see to
the application of any payments so made or inquire into the purposes for which such
disbursements are made.
Any amounts remaining in a special restoration account and not required for the repair,
replacement, restoration or rebuilding of the Project for which such special restoration account
was established, all other Net Proceeds and Prepayments, less the cost and expenses of the City
incurred in collecting the same and in effecting the purchase or redemption of the Bonds to be
purchased or redeemed, shall be deposited in the Senior Bonds Redemption Fund or the Series B
Bonds Redemption Fund, as appropriate, and shall be applied to the purchase, payment,
retirement or redemption of Bonds in accordance with the provisions of the Indenture, provided,
however, that any portion of such Net Proceeds or Prepayment which represents due and unpaid
principal of, or interest on, or Fees and Charges with respect to, the Loan in each case as
determined by the City in an Officer's Certificate delivered to the Trustee, shall be deposited in
the Revenue Fund in such amount, if any, as shall be set forth in such Certificate.
Enforcement and Foreclosure of Deed of Trust. The City will diligently enforce, and take
all reasonable action necessary for the enforcement of all terms, covenants and conditions of the
Deed of Trust, including the prompt payment of Revenues.
Whenever it shall be necessary in order to protect and enforce the rights of the City under
the Deed of Trust securing the Loan and to protect and enforce the rights and interest of
Bondowners under the Indenture, the City shall commence foreclosure proceedings or pursue
other appropriate remedies against the Borrower in default under the provisions of the Deed of
Trust and, in protection and enforcement of its rights under the Deed of Trust, may bid for and
purchase the Project at any foreclosure or other sale thereof and pursuant thereto or otherwise
acquire and take possession of the Project.
The City (and the Trustee, if acting on behalf of the City in enforcing the Deed of Trust)
shall be entitled to payment of all of its costs incurred in connection with enforcement of the
Deed of Trust, including, but not limited to, legal fees and expenses, from Revenues prior to the
use of Revenues for any other purpose under the Indenture.
The covenants set forth in the preceding three paragraphs shall be for the benefit of the
Series A Bonds so long as any Series A Bonds remain Outstanding. After the Series A Bonds
have been paid in full, the covenants set forth in the preceding three paragraphs shall then benefit
the Series B Bonds. The Trustee and all owners of Series B Bonds shall be deemed to have
expressly accepted this limitation with respect to being beneficiaries under the Deed of Trust as
set forth in the Indenture and the interests of the Series B Bonds Owners therein have been
expressly subordinated to the rights of the Series A Bonds, all as further described in the
Indenture.
Accounts and Reports. The Trustee will keep, or cause to be kept, proper books of record
and account in which complete and correct entries shall be made of its transactions and all Funds
and Accounts established by or maintained pursuant to the Indenture, which will at all times
during normal business hours be subject to inspection by the City, the Trustee, the Borrower and
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the Owners of an aggregate of not less than five percent (5 %) in Principal Amount of the Series
A Bonds then Outstanding or their agents or representatives duly authorized in writing.
The City, or the Oversight Agent on behalf of the City, shall, upon receipt from the
Borrower of sufficient moneys shall furnish, without charge, upon written request of any
Bondowner, to such Bondowner, (i) a report showing, for the Fiscal Year, with respect to the
Bonds, outstanding balances by maturity, redemption history including redemption dates,
amount, source of funds, and distribution of the call to the maturities, (ii) a report showing the
current status of insurance coverages with respect to the Project, and (iii) the most currently
available annual report submitted by the Borrower. For the purposes of this paragraph,
" Bondowner" shall mean, in addition to the registered owner of any Bond, any person or entity
that claims in writing to the reasonable satisfaction of the City to be a beneficial holder of Bonds
and specifically requests that reports be sent to it.
Creation of Liens. The City will not issue any bonds or other evidences of indebtedness,
other than the Bonds, secured by a pledge of the proceeds, moneys, rights, interests and
collections pledged or held aside by the City or by a Fiduciary under the Indenture and, except as
may be otherwise provided in the Indenture or a Supplemental Indenture with respect to any
supplemental security, shall not create or cause to be created any lien or charge on proceeds,
moneys, rights, interests and collections or such moneys on a subordinate, parity or senior basis
to the lien created by the Indenture for the benefit of the Series A Bonds; provided, however, that
nothing in the Indenture will prevent the City from issuing evidences of indebtedness secured by
a pledge of such proceeds, moneys, rights, interests and collections to be derived on and after
such date as the Senior Bonds Trust Estate and the Series B Bonds Trust Estate shall be
discharged and satisfied as provided in the Indenture or from issuing notes or bonds of the City
secured by assets and revenues of the City other than the Trust Estate.
Tax Covenants. The City covenants that it will at all times do and perform all acts and
things permitted by law and necessary or desirable in order to assure that interest paid on the
Bonds be and remain excluded from gross income for federal income tax purposes.
The City covenants and agrees that it will not make or permit any use of the proceeds of
the Bonds or other funds of the City which would cause the Bonds to be "arbitrage bonds" within
the meaning of Section 148(a) of the Code, and further covenants that it will observe and not
violate the requirements of Sections 145 and 148 of the Code. The Trustee will be entitled to
receive and to rely upon a Counsel's Opinion as to the conformity of any use or proposed use of
the proceeds of the Bonds with the requirements of said Sections 145 and 148 of the Code.
Arbitrage Covenants; Rebate Fund. Moneys and securities held by the Trustee in the
Rebate Fund are not pledged or otherwise subject to any security interest in favor of the Trustee
to secure the Bonds or any other payments required to be made under the Indenture or any other
document executed and delivered in connection with the issuance of the Bonds.
Moneys in the Rebate Fund shall be held separate and apart from all other Funds and
Accounts established under the Indenture and shall be separately invested and reinvested by the
Trustee, solely at the written direction of the City, in Qualified Investments. The interest
accruing thereon and any profit realized therefrom shall be credited to the Rebate Fund, and any
loss resulting therefrom shall be charged to the Rebate Fund. The Trustee shall sell and reduce to
cash a sufficient amount of such Qualified Investments whenever the cash balance in the Rebate
Fund is insufficient for its purposes.
Absent a Counsel's Opinion that the exclusion from gross income for federal income tax
purposes of interest on the Bonds will not be adversely affected, the City shall cause the
Borrower to deposit in the Rebate Fund such amounts as are required to be deposited therein
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pursuant to the Indenture and the Tax Certificate. All money at any time deposited in the Rebate
Fund shall be held by the Trustee in trust for payment to the United States Treasury.
In order to provide for the administration of the Arbitrage Covenants of the Indenture, the
Borrower shall provide for the employment of independent attorneys, accountants and
consultants (the "Rebate Analyst ") compensated on such reasonable basis as the Borrower may
deem appropriate (or in the absence of such Rebate Analyst, the Trustee shall cause to be
administered the requirements provided in the Indenture) and in addition and without limitation
of the provisions of the Indenture, the Trustee and the City may rely conclusively upon and be
fully protected from all liability in relying upon the opinions, determinations, calculations and
advice of such Rebate Analyst employed under the Indenture.
Supplemental Indentures
The City may adopt, without the consent of or notice to Bondowners, at any time or from
time to time Supplemental Indentures for any one or more of the following purposes, and any
such Indenture or Supplemental Indenture will become effective in accordance with its terms
upon the filing with the Trustee of a copy thereof certified by an Authorized Officer: (1) to add
additional covenants and agreements of the City for the purpose of further securing the payment
of the Bonds, provided such additional covenants and agreements are not contrary to or
inconsistent with the covenants and agreements of the City contained in the Indenture; (2) to
prescribe further limitations and restrictions upon the issuance of Bonds and the incurring of
indebtedness by the City; (3) to surrender any right, power or privilege reserved to or conferred
upon the City by the terms of the Indenture, provided that no such surrender is contrary to or
inconsistent with the covenants and agreements of the City contained in the Indenture; (4) to
confirm as further assurance any pledge under, and the subjection to any lien, claim or pledge
created or to be created by, the provisions of the Indenture; (5) to modify any of the provisions of
the Indenture or any previously adopted Supplemental Indenture in any other respects, provided
that such modifications shall not be effective until after all Bonds Outstanding as of the date of
adoption of such Indenture or Supplemental Indenture shall cease to be Outstanding, and all
Bonds issued after the date of adoption of such Indenture shall contain a specific reference to the
modifications contained in such Indenture; (6) to amend the Indenture to add such provisions as
may be necessary or advisable in connection with the substitution of any additional security;
provided that any such modification does not materially adversely affect interests of any
Bondholders; (7) to amend the Indenture in any and all respects as may be necessary or advisable
to implement any amendment of the Code or the provision of any tax legislation enacted in place
thereof; (8) to make such amendments to add such other provisions in regard to matters or
questions arising out of the Indenture which shall not materially adversely affect the interests of
the Owners of the Bonds affected thereby; or (9) with the consent of the Trustee, to cure any
ambiguity or defect or inconsistent provision in the Indenture or to insert such provisions
clarifying matters or questions arising under the Indenture as are necessary or desirable; provided
that any such modifications do not materially adversely affect the interests of any Bondowners.
Powers ofAmendment
Any modification or amendments of the Indenture and of the rights and obligations of the
City and of the Owners of the Bonds in any particular may be made by a Supplemental
Indenture, with, except as set forth in the preceding section entitled "Supplemental Indentures ",
the written consent required by the Indenture, of the Owners of (i) at least two- thirds in Principal
Amount of the Bonds Outstanding at the time such consent is given; and (ii) at least two- thirds in
Principal Amount of the Series A Bonds Outstanding at the time such consent is given; provided,
however, that if any such modification or amendment will, by its terms, not take effect so long as
any series of Bonds of any maturity remain Outstanding, the consent of the Owners of such
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series of the Bonds and maturity shall not be required and such series of Bonds shall not be
deemed to be Outstanding for the purpose of any calculation of the Principal Amount of
Outstanding Bonds under the Indenture. In the event that the Supplemental Indenture shall
contain provisions which affect the rights and interest of one series of Bonds (but not the other),
then the Owners of not less than two- thirds of the Principal Amount of the series of Bonds which
are affected by such changes shall have the right from time to time to consent to and approve the
execution by the City of any Supplemental Indenture deemed necessary or desirable by the City
for the purposes of modifying, altering, amending, supplementing or rescinding, in any
particular, any of the terms or provisions contained in the Indenture and affecting only the Bonds
of such series; provided, however, unless approved by the Owners of all of the Bonds of all
affected series then Outstanding, nothing therein shall permit or be construed as permitting such
items as further provided in the Indenture. No such modification or amendment shall permit a
change in the terms of redemption or maturity of the principal of any Outstanding Bond or of any
installment of interest thereon or a reduction in the Principal Amount or the Redemption Price
thereof or in the rate of interest thereon without the consent of the Owner of such Bond, or shall
reduce the percentages of Bonds the consent of the Owners of which is required to effect any
such modification or amendment. The Trustee may in its discretion determine whether or not in
accordance with the foregoing provisions Bonds of any particular maturity would be affected by
any modification or amendment of the Indenture and any such determination shall be binding and
conclusive on the City and all Owners of Bonds. The Trustee may receive an opinion of counsel,
including a Counsel's Opinion, as conclusive evidence as to whether Bonds of any particular
maturity would be so affected by any such modification or amendment of the Indenture.
Series A Bonds Events of Default
Each of the following events is declared under the Indenture to be a "Senior Bonds Event
of Default," that is to say; if
(a) the City shall fail to make payment of the principal or Redemption Price
of, or Sinking Fund Installment on, any Series A Bond from the Series A Bond Trust
Estate after the same shall become due, whether at maturity or upon call for redemption,
or otherwise; or
(b) the City shall fail to make payment of interest on any Series A Bond from
the Series A Bond Trust Estate when and as the same will become due; or
(c) the City shall default in the performance or observance of any other of the
covenants, agreements or conditions on its part in the Indenture, any Supplemental
Indenture, or in the Series A Bonds contained, and such default shall continue for a
period of ninety (W) days after written notice thereof by the Trustee or the Owners of not
less than five percent (5 %) in Principal Amount of the Outstanding Series A Bonds.
Series B Bonds Events of Default
See "APPENDIX B— DEFINITIONS" for the events which constitute "Series B Bonds
Events of Default" under the Indenture.
Remedies
Upon the happening and continuance of any Senior Bonds Event of Default or any Series
B Bonds Event of Default, then, and in each such case, the Trustee may proceed, and upon the
written request of (i) the Owners of not less than twenty-five percent (25 %) in Principal Amount
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of the Outstanding Series A Bonds in the case of a Senior Bonds Event of Default, or (ii) the
Owners of not less than twenty -five percent (25 %) in Principal Amount of the Outstanding Series
B Bonds, together with the consent of the Owners of at least twenty -five percent (25 %) in
Principal Amount of the Series A Bonds, in the case of a Series B Bonds Event of Default, shall,
subject to the Indenture, proceed in its own name, to protect and enforce its rights and the rights
of the Bondowners by such of the following remedies as the Trustee shall deem most effectual to
protect and enforce such rights: (a) by suit, action or proceeding, enforce all rights of the
Bondowners, including the right to require the Borrower to receive and collect Pledged Revenues
adequate to carry out the covenants and agreements as to, and pledge of, such Pledged Revenues,
and to require the Borrower to carry out any other covenant or agreement with Bondowners and
to perform its duties under the Loan Agreement; (b) by bringing suit upon the Bonds; (c) by
action or suit, require the Borrower to account as if the Borrower were the trustee of an express
trust for the Owners of the Bonds; or (d) by action or suit, enjoin any acts or things which may be
unlawful or in violation of the rights of the Owners of the Bonds; provided, however, so long as
the Series A Bonds are Outstanding, the Trustee in so acting shall act solely for the benefit of the
Series A Bondholders and the Series B Bondholders shall have no interest in or right to direct
remedies with respect thereto.
Upon the happening and continuance of any Senior Bonds Event of Default specified in
clause (a) or (b) under the heading "Series A Bonds Events of Default" above, then, and in each
such case, the Trustee may, and upon the written request of the Owners of not less than twenty -
five percent (25 %) in Principal Amount of the Outstanding Series A Bonds, shall declare all
Series A Bonds due and payable, and if all defaults shall be made good, then, with the written
consent of the Owners of not less than twenty -five percent (25 %) in Principal Amount of the
Outstanding Series A Bonds, annul such declaration and its consequences.
In the enforcement of any remedy under the Indenture, the Trustee will be entitled to sue
for, enforce payment on and receive any and all amounts then or during any default becoming,
and any time remaining, due from the Borrower for principal, Redemption Price, interest or
otherwise, under any provision of the Indenture, the Loan Agreement or of Bonds, and unpaid,
with interest on overdue payments at the rate or rates of interest specified in the Bonds, together
with any and all costs and expenses of collection and of all proceedings thereunder and under the
Bonds, including reasonable attorneys' fees.
Priority of Payments After Senior Bonds Event of Default
In the event that the funds held by the Trustee and Paying Agents will be insufficient for
the payment of principal or Redemption Price of and interest then due on the Series A Bonds,
such funds (other than funds held for the payment or redemption of particular Series A Bonds
which have theretofore become due at maturity or by call for redemption) and any other moneys
received or collected by the Trustee acting pursuant to the Indenture, after making provision for
the payment of any expenses necessary in the opinion of the Trustee or the City to protect the
interests of the Owners of the Series A Bonds, and for the payment of the fees, charges and
expenses and liabilities incurred and advances made by the Trustee or the City in the
performance of their duties under the Indenture, including reasonable attorneys' fees, will be
applied as follows (provided that moneys in the Senior Bonds Debt Service Fund and the Senior
Bonds Debt Ser-, ice Reserve Fund shall not be applied to make payments with respect to the
Series B Bonds, and provided further that moneys in the Series B Bonds Debt Service Fund shall
not be applied to make payments with respect to the Series A Bonds):
(a) Unless the principal of all the Series A Bonds shall not have become or
have been declared due and payable,
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First: To the payment to the persons entitled thereto of all installments of
interest then due on the Series A Bonds in the order of the maturity of such
installments, and, if the amount available shall not be sufficient to pay in full any
installment, then to the payment thereof ratably, according to the amounts due on
such installment, to the persons entitled thereto, without any discrimination or
preference; and
Second: To the payment to the persons entitled thereto of the unpaid
Principal Amounts or Redemption Price of any Series A Bonds which shall have
become due, whether at maturity or by call for redemption, in the order of their
due dates and, if the amounts available shall not be sufficient to pay in full all the
Series A Bonds due on any date, then to the payment thereof ratably, according to
the amounts of Principal Amounts or Redemption Price due on such date, to the
persons entitled thereto, without any discrimination or preference.
Third: To the payment to the persons entitled thereto of all installments of
interest then due on the Series B Bonds in the order of the maturity of such
installments and pro rata among Series B Bonds with respect to installments with
the same maturity, and, if the amount available shall not be sufficient to pay in
full any installment, then to the payment thereof ratably, according to the amounts
due on such installment, to the persons entitled thereto, without any
discrimination or preference; and
Fourth: To the payment to the persons entitled thereto of the unpaid
Principal Amounts or Redemption Price of any Series B Bonds which shall have
become due, whether at maturity or by call for redemption, in the order of their
due dates and, if the amounts available shall not be sufficient to pay in full all the
Series B Bonds due on any date, then to the payment thereof ratably, according to
the amounts of Principal Amounts or Redemption Price due on such date, to the
persons entitled, without any discrimination or preference.
(b) If the principal of all of the Series A Bonds shall have become or have
been declared due and payable, to the payment of the principal of and interest then due
and unpaid upon the Series A Bonds without preference or priority of principal over
interest or of interest over principal, or of any installment of interest over any other
installment of interest, or of any Series A Bond over any other Series A Bond, ratably,
according to the amounts due respectively for principal and interest, to the persons
entitled thereto without any discrimination or preference except as to any difference in the
respective rates of interest specified in the Series A Bonds. Moneys remaining after
satisfying the payrpents as provided in this paragraph (b) shall be applied proportionately
to the payment of the principal of and interest then due and unpaid upon the Series B
Bonds without preference or priority of principal, or of any installment of interest over
any other installment of interest, ratably, according to the amounts due respectively for
principal and interest, to the persons entitled thereto without any discrimination or
preference.
Money to be applied by the Trustee as set forth above shall be applied at such times as the
Trustee shall determine.
Limitations of Rights of Bondowners
No Owner of any Bond will have any right to institute any suit, action or other
proceedings hereunder, or for the protection or enforcement of any right under the Indenture or
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any right under law, unless such Owner will have given to the Trustee written notice of the Event
of Default or breach of duty on account of which suit, action or proceeding is to be taken, and
unless the Owners of not less than twenty-five percent (25 %) in Principal Amount of the Bonds
of the series affected then Outstanding shall have made written request of the Trustee after the
right to exercise such powers or right of action, as the case may be, will have accrued, and will
have afforded the Trustee a reasonable opportunity either to proceed to exercise the powers in the
Indenture granted or granted under law or to institute such action, suit or proceeding in its name
and unless, also, there shall have been offered to the Trustee reasonable security and indemnity
against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee shall
have refused or neglected to comply with such request within a reasonable time; and such
notification, request and offer of indemnity are in every such case at the option of the Trustee
conditions precedent to the execution of the powers under the Indenture or for any other remedy
hereunder or under law.
It is understood and intended that no one or more Owners of the Bonds secured under the
Indenture shall have any right in any manner whatever by his or their action to affect, disturb or
prejudice the security of the Indenture, or to enforce any right hereunder or under law with
respect to the Bonds or the Indenture, except in the manner therein provided, and that all
proceedings shall be instituted, had and maintained in the manner herein provided and for the
benefit of all Owners of the Outstanding Bonds. The obligation of the City shall be absolute and
unconditional to pay the principal and Redemption Price of and interest on the Bonds to the
respective Owners thereof at the respective due dates thereof, and nothing in the Indenture will
affect or impair the right of action, which is absolute and unconditional, of such Owners to
enforce such payment.
Remedies Not Exclusive
No remedy conferred upon or reserved to the Trustee or to the Owners of the Bonds
under the Indenture is intended to be exclusive of any other remedy or remedies, and each and
every such remedy shall be cumulative and shall be in addition to any other remedy given under
the Indenture or now or hereafter existing at law or in equity or by statute.
Limited Liability of the City
The obligations of the City with respect to the Bonds and under the Indenture, the Loan
Agreement and the Regulatory Agreement are not general obligations of the City but are special,
limited obligations of the City payable by the City solely from the Trust Estate and are not a
debt, nor a loan of the credit, of the State or any of its political subdivisions, and the Bonds shall
not be construed to create any moral obligation on the part of the City, the State or any political
subdivision thereof with respect to the payment thereof; and the Bonds do not constitute an
indebtedness within the meaning of any constitutional or statutory debt limitation; and the
issuance of the Bonds shall not directly or indirectly or contingently obligate the City, the State
or any political subdivision thereof to levy or to pledge any form of taxation whatever therefor or
to make any appropriation for their payment, and no Bondholder has the right to compel any
exercise of any taxing power of the City or the State;
Nothing contained in the Bonds or in the Indenture shall be considered as assigning or
pledging any funds or assets of the City other than the Trust Estate; and neither the faith and
credit of the City, the State nor of any other political subdivision of the State are pledged to the
payment of the principal or of interest on the Bonds;
No failure of the City to comply with any term, condition, covenant or agreement in the
Indenture or in any document executed by the City in connection with the Project, or the
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issuance, sale and delivery of the Bonds shall subject the City to liability for any claim for
damages, costs or other charge except to the extent that the same can be paid or recovered from
the Trust Estate; and the City shall not be required to advance any moneys derived from any
source other than the Trust Estate for any of the purposes of.the Indenture, the Loan Agreement
or the Regulatory Agreement, whether for the payment of the principal or redemption price of, or
interest on, the Bonds, the payment of any fees or administrative expenses or otherwise.
It is recognized that, notwithstanding any other provision of the Indenture, neither the
Borrower, the Trustee nor any Bondholder shall look to the City for damages suffered by the
Borrower, the Trustee or such Bondholder as a result of the failure of the City to perform any
covenant, undertaking or obligation under the Indenture, the Loan Agreement, the Regulatory
Agreement, the Bonds or any of the other documents, or as a result of the incorrectness of any
representation made by the City in any of such documents, nor for any other reason. Although
the Indenture recognizes that such documents shall not give rise to any pecuniary liability of the
City, nothing contained in the Indenture shall be construed to preclude in any way any action or
proceeding (other than that element of any action or proceeding involving a claim for monetary
damages against the City) in any court or before any governmental body, agency or
instrumentality or otherwise against the City or any of its officers or employees to enforce the
provisions of any such documents which the City is obligated to perform and the performance of
which the City has not assigned to the Trustee or any other person; provided, however, that, as a
condition precedent to the City proceeding pursuant to the Indenture, the City shall have received
satisfactory indemnification.
No Recourse Under the Indenture or on the Bonds. All covenants, stipulations, promises,
agreements and obligations of the City contained in the Indenture shall be deemed to be
covenants, stipulations, promises, agreements and obligations of the City and not of any Council
member, officer or employee of the City in his individual capacity, and no recourse shall be had
for the payment of the principal or Redemption Price of or interest on the Bonds or for any claim
based thereon or on the Indenture by any Council member, officer or employee of the City or any
person executing the Bonds.
THE LOAN AGREEMENT
The following is a summary of the Loan Agreement relating to the Loan. This summary
does not purport to be complete and is qualified in its entirety by reference to the Loan
Agreement, which is available from the City upon request, and to Appendix B for the definition
of certain terms used herein. Any capitalized terms not otherwise defined herein or in Appendix
B are as defined in the Indenture or the Loan Agreement.
Amount and Source of Loan
The City makes to the Borrower and agrees to fund, and the Borrower accepts from the
City, upon the terms and conditions set forth in the Loan Agreement and in the Indenture, the
Loan in an amount equal to the principal amount of the Bonds and agrees that the proceeds of the
Loan will be applied and disbursed in accordance with the Indenture and written instructions of
the City provided to the Trustee on the Closing Date and when the Trustee acknowledges receipt
of the proceeds of the Bonds and the conditions specified in the Loan Agreement and in the
Indenture have been satisfied.
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Loan Repayment
The Loan will be evidenced by the Note which shall be executed by the Borrower in the
form attached to the Loan Agreement. The Borrower agrees to pay to the Trustee, on behalf of
the City, the principal of, premium (if any) and interest on the Loan at the times, in the manner,
in the amount and at the rates of interest provided in the Note and the Loan Agreement. To
secure its obligations to repay the Loan, the Borrower will grant the City a security interest in the
Project pursuant to the terms of the Deed of Trust and will take all actions necessary to perfect
such security interest. In order to satisfy its obligations under the Loan Agreement, the Borrower
agrees to pay the Trustee not later than the tenth day of each month, commencing April 10, 2000,
all Net Operating Revenues from each preceding month. Any Net Operating Revenues received
by the Borrower after the 10th day of each month shall be transferred to the Trustee on the 10th
day of the immediately following calendar month. Notwithstanding the foregoing, so long as
Borrower's monthly deposits of Net Operating Revenues with the Trustee are at least equal to
said month's portion of items (a) through (f) of Section 5.7 of the Indenture and items (h) and (i)
of Section 5.7 of the Indenture, then the Borrower may retain from Net Operating Income for
such month the Administration Fee for such month.
The Borrower agrees to pay, in repayment of the Loan, all Net Operating Revenues for
the immediately preceding calendar month to the Trustee for the account of the City until the
principal of, premium (if any) and interest on the Bonds shall have been paid or provision for
payment shall have been made in accordance with the Indenture, in federal or other immediately
available funds at the corporate trust office designated by the Trustee, on the tenth day of each
month an amount equal to (i) the interest on the Bonds which will become due on each Interest
Payment Date and (ii) the principal of and redemption premium, if any, on the Bonds which will
become due (whether at maturity, by prior redemption or otherwise) on each Interest Payment
Date. In addition, the Borrower agrees to repay the principal of the Loan, plus interest accrued
thereon until the date fixed for redemption of the Bonds to be redeemed with such repayment, in
the amounts and at the times specified in the Loan Agreement.
In the event the Net Operating Revenues deposited with the Trustee in any two
consecutive months are less than 90% of the amount set forth in the annual budget as described
in the Loan Agreement, the Borrower shall, concurrently with its transfer of the amount of Net
Operating Revenues to the Trustee, provide notice of a written explanation for the variance to the
City and the Oversight Agent. In the event the Net Operating Revenues deposited in the
succeeding month are less than 90% of the amount set forth in the annual budget, then the
Oversight Agent shall notify the City and the Trustee and, upon written order of the City
determined in its discretion based on the advice of the Oversight Agent and such other
information as the City may determine to be appropriate, all Operating Revenues of the Project
shall be deposited and hgId by the Trustee and the Trustee shall deposit the budgeted Operation
and Maintenance Costs bf the Project, as contemplated in the annual budget, in a depository
account for the benefit of the Borrower's operation and maintenance of the Project. The City,
based on such advice of the Oversight Agent as it may deem appropriate, or based on a request of
a majority in Principal Amount of the Bonds then Outstanding, shall have the right to direct the
Borrower to remove the Project Manager and approve a new Project Manager acceptable to the
City. Upon receipt by the Trustee of a certificate from the Oversight Agent which certifies that
Net Operating Revenues in a subsequent month are either (i) at least equal to 90% or more of the
amount set forth in the annual budget described in the Loan Agreement or (ii) equal or greater
than the amount needed to make all payments on the Bonds for the immediately preceding
month, the Trustee shall no longer be required to hold the Operating Revenues as set forth above
and shall take all necessary action to transfer the receipt of Operating Revenues to another
financial institution as directed by the Borrower.
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The Borrower further agrees to pay or cause to be paid all taxes and assessments, general
or special, including, without limitation, all ad valorem taxes, concerning or in any way related to
the Project, or any part thereof, and any other governmental charges and impositions whatsoever,
foreseen or unforeseen, and all utility and other charges and assessments; provided, however, that
the Borrower reserves the right to contest in good faith the legality of any tax or governmental
charge concerning or in any way related to the Project.
The Borrower agrees to timely pay the premiums or other amounts required to maintain
the insurance specified in the Loan Agreement.
The Borrower further agrees to pay, until the principal of and interest on all Outstanding
Bonds shall have been fully paid, to the Trustee for deposit in the Accounts of the Administration
Fund established by the Indenture such amounts as the Trustee may from time to time request for
the fees and ordinary expenses of the Trustee, the annual fees and expenses of the Oversight
Agent and the Program Administrator as provided in the Administration Agreement, and into the
Borrower Administration Fee Account of the Administration Fund the Administration Fee,
pursuant to the Indenture; provided that the Trustee fees and expenses incurred in connection
with the enforcement of the Regulatory Agreement and reasonable compensation or
reimbursement for extraordinary services, indemnification and expenses of the Trustee, as
required by the Indenture, shall be paid upon demand of the Trustee. The Borrower agrees to pay
the cost of any Rebate Analyst in connection with the calculation of rebate (within the meaning
of Section 148(f) of the Code) and to pay to the City all amounts required to be remitted to the
United States.
The Borrower agrees to the establishment of the Surplus Fund into which all remaining
Net Operating Revenues will be deposited. Amounts deposited in the Surplus Fund shall be used
(i) until such time as the required deposits in the Repair and Replacement Fund are satisfied, to
satisfy the required funding in the Repair and Replacement Fund, (ii) to make the deposits to the
Series B Bonds Debt Service Fund; (iii) for the purposes set forth in the Affordable Housing
Agreement, and (iv) subsequently to be applied for any lawful purposes for the benefit of the
Project.
Nature of the Borrower's Obligations
The Borrower shall repay the Loan pursuant to the terms of the Note irrespective of any
rights of set -off, recoupment or counterclaim the Borrower might otherwise have against the
City, the Trustee or any other person. The Borrower will not suspend, discontinue or reduce any
such payment or (except as expressly provided in the Loan Agreement) terminate the Loan
Agreement for any cause, including, without limiting the generality of the foregoing, (i) any
delay or interruption in the, operation of the Project; (ii) the failure to obtain any permit, order or
action of any kind from �nny governmental agency relating to the Loan or the Project; (iii) any
event constituting force majeure; (iv) any acts or circumstances that may constitute commercial
frustration of purpose; (v) the termination of the Loan Agreement; (vi) any change in the laws of
the United States of America, the State or any political subdivision thereof; or (vii) any failure of
the City to perform or observe any covenant whether expressed or implied, or to discharge any
duty, liability or obligation arising out of or connected with the Note, the Loan Agreement, the
Regulatory Agreement or any other contract with the Borrower; it being the intention of the
parties that, as long as the Note or any portion thereof remains outstanding and unpaid, the
obligation of the Borrower to repay the Loan and provide such moneys shall continue in all
events. The provisions of Loan Agreement summarized in this paragraph shall not be construed
to release the City from any of its obligations under the Loan Agreement, the Trustee from any of
its obligations under the Indenture, or, except as provided in the Loan Agreement, to prevent or
restrict the City from asserting any rights which it may have against the Borrower under the Note
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or the Indenture or under any provision of law or to prevent or restrict the Borrower, at its own
cost and expense, from prosecuting or defending any action or proceeding by or against the City
or the Trustee or taking any other action to protect or secure its rights.
Borrower Not to Dispose of Assets; Conditions Under Which Exceptions
Permitted
The Borrower agrees that during the term of the Loan Agreement it will not dispose of all
or substantially all of its assets nor consolidate with nor merge into any entity unless: (i) the
acquirer of its assets or the entity with which it shall consolidate or into which it shall merge
shall be an organization described in Section 501(c)(3) of the Code that agrees to operate the
Project in a manner that does not constitute an unrelated trade or business of such organization or
a governmental unit (as described in Section 145 of the Code); (ii) such acquiring or remaining
entity shall assume in writing all of the obligations of the Borrower under the Loan Agreement,
the Regulatory Agreement, the Continuing Disclosure Agreement, the Note and the Deed of
Trust; (iii) the City, after having consulted with such counsel or advisor as deemed by the City to
be necessary, shall have consented in writing to such transfer, such consent not to be
unreasonably withheld; and (iv) the written instrument or instruments evidencing such
assumption are promptly provided to the Trustee.
In lieu of foreclosure with respect to the Deed of Trust, the Borrower has the right, upon
30 days prior written notice to the City, to convey to the City fee title to the Project, and to assign
to the City all of its rights and delegate all of its duties under the agreements relating thereto.
Notwithstanding any provision of the Loan Agreement, the Regulatory Agreement, the
Continuing Disclosure Agreement, the Note, the Deed of Trust, or the Indenture to the contrary,
in lieu of foreclosure with respect to the Deed of Trust, the Borrower shall have the right, upon
30 days prior written notice to the City, to convey to a designee of the City which is a 501(c)(3)
corporation duly authorized and empowered to undertake ownership of the Project, fee title to the
Project, and to assign all of its rights and delegate all of its duties under the Loan Agreement, the
Regulatory Agreement, the Continuing Disclosure Agreement, the Note and the Deed of Trust to
the City's designee, and the City agrees to cause such designee to accept such conveyance,
assignment and delegation at no cost to the City. At the time of such deed in lieu of foreclosure,
the Borrower shall confirm and warrant to the City and its designee that the Project is not subject
to any additional encumbrances and liens, including but not limited to, mechanics liens and other
liens and encumbrances, other than such permitted encumbrances provided in the Loan
Agreement as set forth in the title policy provided to the City as required under the Loan
Agreement. In addition, the Borrower covenants to execute and deliver all such agreements,
estoppels and additional instruments and perform such additional acts as may be necessary or
may reasonably be requested by the City, its designee, the Trustee or their agent in connection
with a deed in lieu of foreclosure as contemplated under the Loan Agreement.
Cooperation in Enforcement of Regulatory Agreement
The Borrower covenants and agrees as follows: (a) to comply with all provisions of the
Regulatory Agreement; (b) to advise the City, the Trustee and the Program Administrator in
writing promptly upon learning of any default with respect to the covenants, obligations and
agreements of the Borrower set forth in the Regulatory Agreement; (c) upon written direction by
the City, the Program Administrator or the Trustee, to cooperate fully and promptly with the
City, the Program Administrator and the Trustee in enforcing the terms and provisions of the
Regulatory Agreement; and (d) to file in accordance with the time limits established by the
Regulatory Agreement all reports and certificates required thereunder.
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Neither the Trustee nor the City shall incur any liability in the event of any breach or
violation of the Regulatory Agreement by the Borrower, and the Borrower agrees to indemnify
and hold harmless the City and the Trustee from any claim or liability, joint or several, for such
breach pursuant to the Loan Agreement.
Additional Instruments
The Borrower covenants to execute and deliver such additional instruments and to
perform such additional acts as may be necessary, in the opinion of the City or the Trustee, to
carry out the intent of the Loan and the Note or to perfect or give further assurances of any of the
rights granted or provided for in the Loan and the Note.
Books and Records; Annual Reports
The Borrower covenants to permit the City, the Oversight Agent, the Program
Administrator and the Trustee, or their duly authorized representatives, access to the books and
records of the Borrower pertaining to the Loan and the Project during normal business hours and
upon prior notice, and to make such books and records available for audit and inspection to the
City, the Oversight Agent, the Program Administrator, the Trustee and their duly authorized
representatives at reasonable times and under reasonable conditions.
At least 60 days prior to the beginning of each fiscal year of the Borrower, the Borrower
agrees to prepare an annual budget (either on a fiscal year or calendar year basis) and to submit
such budget for approval by the City and the Oversight Agent. Such annual budget shall provide
for Net Operating Revenues at least equal to (i) 1.25 times scheduled debt service on the Series A
Bonds in such fiscal year, and (ii) 1.15 times the aggregate scheduled debt service on the Series
A Bonds and the Series B Bonds in such fiscal year. Within 20 days of receiving such annual
budget, the City and the Oversight Agent shall provide comments and objections, if any
(including any suggested changes acceptable to the Oversight Agent), in writing to the Borrower.
The Borrower shall attempt in good faith to address comments or concerns of the City in its final
budget. The Borrower shall prepare a revised annual budget and provide such revised budget to
the City and the Oversight Agent for their review and comment. The Borrower shall provide a
copy of the final annual budget to the Trustee, the City and the Oversight Agent prior to the
beginning of the Borrower's fiscal year. In the event the annual budget as adopted does not
provide for the coverage set forth in the second sentence of this paragraph, then: (a) in the case of
a failure to meet the coverage requirement set forth in subsection (i) of said sentence, the Owners
of a majority in Outstanding Principal Amount of the Series A Bonds shall have the right, in
addition to all other rights provided under the Loan Agreement and the Indenture, to direct the
Borrower to remove the Project Manager and appoint a Project Manager acceptable to such
Owners; or (b) in a case pf a failure to meet the coverage requirement set forth in subsection (ii)
of said sentence, the Owners of a majority in Outstanding Principal Amount of Series B Bonds
shall have the right, in addition to all other rights provided under the Loan Agreement and the
Indenture, to direct the Borrower to remove the Project Manager and appoint a Project Manager
acceptable to such Owners.
Within 20 days after the last day of each quarter, the Borrower shall prepare a statement
for the immediately preceding quarter for review by the City and the Oversight Agent, which
shall include statement of income, balance sheet, cashflow, budget variances, occupancy rates,
rental activity and rental rates for the Project.
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Notice of Certain Events
The Borrower covenants to advise the City and the Trustee promptly in writing of the
occurrence of any Event of Default under the Loan Agreement or Regulatory Agreement or any
event which, with the passage of time or service of notice, or both, would constitute an Event of
Default under the Loan Agreement, specifying the nature and period of existence of such event
and the actions being taken or proposed to be taken with respect thereto. In addition, the
Borrower covenants to advise the City, the Oversight Agent and the Trustee promptly in writing
of the occurrence of any default under the Loan Agreement or of the occurrence of an Act of
Bankruptcy.
Consent to Assignment
The City has made an assignment to the Trustee under the Indenture for the benefit of the
owners of the Bonds of all rights and interest of the City in and to the Loan Agreement (except
its rights under the Loan Agreement to be indemnified and to be paid its fees and expenses), the
Note, and the Deed of Trust; and the Borrower consents to all such assignments.
Title to the Project
The Borrower has fee title to the Project free and clear of any lien or encumbrance except
for (i) liens for non - delinquent assessments and taxes not yet due or which are being contested in
good faith by appropriate proceedings; (ii) the Regulatory Agreement; (iii) the Deed of Trust;
and (iv) the Second Deed of Trust. On or prior to the Closing Date as required by the Loan
Agreement, the Borrower shall cause to be delivered to the Trustee and the City one or more
ALTA title policies, insuring the first lien interests of the City and the Trustee as the insureds, as
their respective interests may appear under the Deed of Trust.
Operation of the Project
The operation of the Project in the manner contemplated on the Closing Date and as
described in the Loan Agreement do not conflict with any zoning, water or air pollution or other
ordinance, order, law or regulation applicable thereto; the Borrower will cause the Project to be
operated in accordance with all applicable federal, state and local law or ordinances (including
rules and regulations) relating to zoning, building, safety, and environmental quality and will
obtain and maintain in effect any licenses, permits, franchises or other governmental
authorizations necessary for the operation of the Project.
Continuing Disclosure
The Borrower covenants and agrees that it will comply with and carry out all of the
provisions of the Continuing Disclosure Agreement. Notwithstanding any other provision of the
Loan Agreement, failure of the Borrower to comply with the Continuing Disclosure Agreement
shall not be considered an Event of Default under the Indenture; however, the Trustee may (and,
at the request of any Participating Underwriter (as defined in the Continuing Disclosure
Agreement), or the holders of at least 25% in aggregate principal amount of Outstanding Bonds,
subject to the payment of its fees and expenses, including reasonable attorneys' fees, shall, or any
Bondholder may, take such actions as may be necessary and appropriate, including seeking
specific performance by court order, to cause the Borrower to comply with its continuing
disclosure obligations under the Continuing Disclosure Agreement.
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Minimum Rents; Coverage Requirement Certificate
The Borrower will, at all times while any of the Series A Bonds remain Outstanding, fix,
prescribe and collect rents, fees and charges in connection with the Project so as to yield (i) Net
Operating Revenues including any earnings on the Senior Bonds Debt Service Reserve Fund for
the immediately preceding 12 -month period that will result in a Coverage Ratio at least equal to
1.25 with respect to the Series A Bonds debt service, and (ii) Net Operating Revenues which will
result in a Coverage Ratio of at least 1.15 with respect to the aggregate of the Series A Bonds and
the Series B Bonds debt service. The Borrower shall file with the City and the Trustee on or
prior to the Closing Date and on March 15 of each year thereafter, a Coverage Requirement
Certificate demonstrating compliance with this requirement. In the event such coverage
requirements are not satisfied, then the City and the Owners of the Bonds shall have the right to
direct the Borrower to remove and replace the Project Manager in the same manner as set forth in
the Loan Agreement.
Public Liability and Workers' Compensation Insurance
Public Liability Insurance. The Borrower shall maintain or cause to be maintained so
long as Bonds are Outstanding under the Indenture, a commercial general liability coverage,
including products, completed operations, contractual, bodily injury, personal injury, and
property damage in the amount of at least Two Million Dollars ($2,000,000) combined single
limits, naming the City and its officers, officials, employees, volunteers, agents, and
representatives as additional insureds. All such insurance (i) shall be primary insurance and not
contributory with any other insurance which the City or its officers, officials, employees,
volunteers, agents, or representatives may have; (ii) shall contain no special limitations on the
scope of protection afforded to the City and its officers, officials, employees, volunteers, agents,
and representatives; (iii) shall be "per occurrence" rather than "claims made" insurance (in the
event the Borrower is unable to obtain such policy, or believes that such policy's premium is not
reasonable, the Borrower shall submit proof of such contention to the City, upon which event the
City may, after review of such information, authorize a "claims made" policy for the Project);
(iv) shall apply separately to each insured against whom claim is made or suit is brought, except
with respect to the limits of the insurer's liability; (v) shall provide that the policy will not be
canceled or limited in scope by the insurer or the Borrower's contractor unless there is a
minimum of thirty (30) days prior written notice by certified mail, return receipt requested to the
City and the Oversight Agent; (vi) shall be written by a California licensed insurer with a Best
rating of not less than B +, Class X; and (vii) shall be endorsed to state that any failure to comply
with the reporting provisions of the policies shall not affect coverage provided to the City and its
officers, officials, employees, volunteers, agents and representatives.
None of the above=described policies shall include a deductible or self - insured retention
amount of more than Ten Thousand Dollars ($10,000) unless approved in writing by an
authorized representative of the City upon the advice of the Oversight Agent.
Such insurance may be maintained as part of or in conjunction with any other insurance
coverage carried by the Borrower. The Net Proceeds of such liability insurance shall be applied
by the Borrower toward extinguishment or satisfaction of the liability with respect to which the
Net Proceeds of such insurance shall have been paid.
Workers' Compensation Insurance. The Borrower shall maintain or cause to be
maintained to the extent required by law so long as Bonds are Outstanding under this Indenture,
workers' compensation insurance, including Employer's Liability Coverage, with limits not less
than $1,000,000 per accident, issued by a responsible carrier authorized under the laws of the
State to insure employers against liability for compensation under the Labor Code of the State, or
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any act enacted as an amendment or supplement thereto or in lieu thereof, such workers'
compensation insurance to cover all persons (if any) employed by the Borrower in connection
with Project and to cover full liability for compensation under such act. Such insurance shall be
endorsed to include a waiver of subrogation rights against the City and its officers, officials,
employees, volunteers, agents and representatives. Such insurance shall be underwritten by
California licensed insurers with Best ratings of not less than B +, Class X. Such insurance may
be maintained as part of or in conjunction with any other insurance coverage carried by
Borrower.
Casualty Insurance
The Borrower will procure and maintain, or cause to be procured and maintained, so long
as Bonds are Outstanding under the Indenture, all risk casualty insurance against loss or damage
to the Improvements located on the Project, in an amount at least equal to one hundred percent
(100 %) of the replacement value of the Improvements. Such insurance will, as nearly as
practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke,
fire and such other hazards (excluding earthquake and flood coverage) as are normally covered
by such insurance. Such insurance will be subject to such deductibles as are customarily
maintained by municipalities with respect to works and properties of a like character, but in any
case will not exceed $100,000. Such insurance may be maintained as part of or in conjunction
with any other insurance coverage carried by the Borrower. The Net Proceeds of such insurance
will be applied as provided in the Indenture.
Rental Interruption Insurance
The Borrower will procure and maintain, or cause to be procured and maintained, so long
as Bonds are Outstanding under the Indenture, rental interruption or use and occupancy insurance
to cover the Borrower's loss, total or partial, of payments for the Loan resulting from the loss,
total or partial, of the use of the Improvements located on the Project as a result of any of the
hazards covered in the insurance required by the Indenture, in an amount at least equal to the
sums of (i) Maximum Annual Debt Service and (ii) budgeted Operation and Maintenance Costs
coming due and payable during the current Fiscal Year; provided, however, that with respect to
budgeted Operation and Maintenance Costs, in the first Fiscal Year such amount will be as
agreed to by the Borrower and the Oversight Agent and that in any future Fiscal Year such
amount will be the greater of the budgeted Operation and Maintenance Costs or the prior Fiscal
Year's actual Operation and Maintenance Costs. Such insurance may be maintained as part of or
in conjunction with any other insurance coverage carried by the Borrower. The Net Proceeds of
such insurance, if any, will be paid to the Trustee and deposited in the Senior Bonds Debt
Service Fund under the Indenture, and will be credited towards the payment of the Bonds as the
same become due and pay,able in accordance with the Indenture.
Repair and Replacement
The Borrower agrees to cause to be performed a preliminary inspection by a reputable
independent structural engineer selected by the Borrower and approved by the City, of the
Project at such time or times as the Oversight Agent may reasonably determine to be necessary
based on information with respect to the Project available to the Oversight Agent, and, if it is
determined that further inspection is needed after a preliminary inspection, such further
inspection, providing a report of a licensed contractor qualified to do the type of work proposed
to be performed to identify any repairs, replacements or capital improvements required to
maintain the Project as a safe and sanitary mobile home park in accordance with the Loan
Agreement, the Regulatory Agreement and all associated agreements. Any such inspections
shall be at the expense of the Borrower. All such repairs, replacements or capital improvements
9M
and costs of inspections will be paid for from moneys on deposit in the Repair and Replacement
Fund to the extent of the monies deposited in such Fund.
In the event that expenses are incurred, or in the opinion of the Borrower ought properly
be incurred for replacement or additional improvements on the Project, for other capital facilities
which may be of direct or indirect benefit to the Project which are not identified in a report of a
licensed contractor qualified to do the type of work proposed to be performed (pursuant to the
Loan Agreement), beyond ordinary and necessary maintenance and repairs which are paid as part
of the Operation and Maintenance Expenses, the Borrower shall submit to the Oversight Agent a
request for payment or reimbursement of such costs. The request shall (a) identify the total
amount of such costs to be paid pursuant to such requisition, including all items of cost in such
detail as may be available to the Borrower, (b) state with respect to such disbursement (i) the
amount to be disbursed for payment of such costs, and (ii) that each item of costs identified
therein has been properly incurred and has not been the basis of any previous disbursement; and
(c) be accompanied by an invoice, if any. Upon approval by the Oversight Agent of such a
request from the Borrower, the Oversight Agent shall submit or cause to be submitted the request
to the Trustee pursuant to the Indenture for payment of such costs from the Repair and
Replacement Fund.
Moneys deposited in the Repair and Replacement Fund on the Closing Date shall be
applied to pay for or reimburse the Borrower for initial improvements to the Project or expected
replacements to the Project as set forth in Exhibit C for the Loan Agreement, as said Exhibit C
may be amended from time to time with the approval of the Borrower and the Oversight Agent.
'- ith respect to each expenditure from the Repair and Replacement Fund, the Borrower
will file with the Oversight Agent a request. The request shall (a) identify the total amount of
such costs to be paid pursuant to such requisition, including all items of cost in such detail as
may be available to the Borrower, (b) state with respect to such disbursement (i) the amount to be
disbursed for payment of such costs, and (ii) that each item of costs identified therein has been
properly incurred and has not been the basis of any previous disbursement, and (c) be
accompanied by an invoice, if any. Upon approval by the Oversight Agent of such a request
from the Borrower, the Oversight Agent shall submit or cause to be submitted the request to the
Trustee pursuant to the Indenture for payment of such costs from the Repair and Replacement
Fund.
Events of Default
Each of the following is an 'Event of Default" under the Loan Agreement.
(a) The BorrgWer shall fail to pay when due the amounts required to be paid under
the Loan Agreement or the Note when the same shall become due and payable in accordance
with the terms of the Loan Agreement or the Note, including a failure to repay any amounts
which have been previously paid but are recovered, attached or enjoined pursuant to any
insolvency, receivership, liquidation or similar proceedings; or
(b) The Borrower shall fail to perform or observe any of its covenants or agreements
contained in the Loan Agreement, the Regulatory Agreement, the Indenture, the Note or the
Deed of Trust, other than as specified in paragraph (a) above, and such failure shall continue
during and after the period specified below; or
(c) Any representation or warranty of the Borrower shall be determined by the
Trustee or the City to have been false in any material respect when made; or
37
(d) The Borrower shall generally not pay its debts as they become due, or shall admit
in writing its inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors or shall institute any proceeding or voluntary case seeking to adjudicate it a
bankrupt or insolvent or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief or protection of debtors, or seeking the entry of
an order for relief or the appointment of a receiver, trustee, custodian or other similar official for
it or for any substantial part of its property; or the Borrower shall take any action to authorize any
of the actions described above in this paragraph (d), or any proceeding shall be instituted against
the Borrower seeking to adjudicate it a bankrupt or insolvent or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief or protection of debtors, or
seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or
other similar official for it or for any substantial part of its property, and, if such proceeding is
being contested by the Borrower in good faith, such proceeding shall remain undismissed or
unstayed for a period of 60 days; or
(e) An event of default shall have occurred under the Indenture and the Series A
Bonds have been declared due and payable pursuant to the Indenture.
No default under paragraph (b) above shall constitute an Event of Default until:
(i) The Trustee, by registered or certified mail, shall give notice to the
Borrower of such default specifying the same and stating that such notice is a "Notice of
Default "; and
(ii) The Borrower shall have 60 days after receipt of such notice to correct the
default and shall not have corrected it; provided, however, that if the default stated in the
notice is of such a nature that it cannot be corrected within 60 days, such default shall not
constitute an Event of Default under the Loan Agreement so long as (a) the Borrower
institutes corrective action within said 60 days and diligently pursues such action until the
default is corrected, and (b) in the opinion of Bond Counsel, the failure to cure said
default within 60 days will not adversely affect the exclusion from gross income for
federal income tax purposes of interest on the Series A Bonds.
Remedies
Whenever any Event of Default under the Loan Agreement shall have happened and be
continuing, the following remedial steps shall be taken:
(a) Immediately upon the occurrence of any Event of Default under the Loan
Agreement the Trustee shall declare all amounts due under the Loan Agreement and the
Note to be immediately due and payable; provided, however, that in the case of an Event
of Default described in (b), (c) or (d) above, the amounts due under the Loan Agreement
and the Note shall not be accelerated unless the Trustee receives either (i) written notice
from the City to accelerate the Loan and declare all amounts due under the Loan
Agreement and the Note or (ii) an opinion of Bond Counsel that the failure to accelerate
the Loan under such circumstances will adversely affect the exclusion from gross income
for federal income tax purposes of interest on the Series A Bonds; provided, however, as
is set forth in the Indenture, if the Series A Bonds are Outstanding and there has been no
default with respect to the Series A Bonds under the Indenture, the Series B Bonds shall
not be subject to acceleration;
38
(b) Subject to the provisions of the Indenture, the Trustee shall take whatever
action at law or in equity may appear necessary or desirable to collect the payments
required to be made by the Borrower under the Loan Agreement, the Deed of Trust, and
the Note, or to enforce performance and observance of any obligation or agreement of the
Borrower under the Loan Agreement, the Note, the Deed of Trust or the Regulatory
Agreement, but in no event shall the Trustee be obligated to take any such action which
in its opinion will or might cause it to expend time or money or otherwise incur liability
unless and until an indemnity bond satisfactory to it has been furnished to it;
(c) The City may, upon consultation with the Oversight Agent, terminate the
Project Manager and shall upon the recommendation of the Oversight Agent or such
other advice as the City deems appropriate, select a new Project Manager;
(d) Upon an Event of Default under the Loan Agreement, either the City may
operate and administer, or cause to be operated and administered, the Project in the place
and stead of the Borrower and in the manner required by the terms and provisions of the
Regulatory Agreement. In so doing, the City or such party as it may appoint to operate
and administer the Project, to the extent it may have moneys available under the Loan
Agreement for such purposes, shall complete the rehabilitation and equipping of any
incomplete component of the Project to be funded with proceeds of the Bonds, and shall
pay from the Operating Revenues received with respect to such Project (to the extent
available) the Loan Repayments and Fees and Charges, if any, which the Borrower was
obligated to pay pursuant to the terms and provisions of the Loan Agreement and the
Deed of Trust. The Trustee or other depository shall be authorized to pay the City or its
designee as directed by an Officer's Certificate any moneys on deposit in the Project Fund
to the extent that the City shall certify in writing that such moneys are required by the
City or its designee to pay any items that would have been included in the Cost of Project
had the City or its designee not acquired the same;
(e) The City may, upon the recommendation of the Oversight Agent or such
other advice as it may deem appropriate, commence foreclosure proceedings as set forth
in the Indenture; and
(f) The Trustee may, upon the advice of the Oversight Agent or such other
advice as it may deem appropriate, receive all Operating Revenues of the Project and
deposit such amounts to a depository account for the benefit of the Bond Owners and the
City.
Any amounts collected as payments made on the Note, or applicable to such payments,
and any other amounts which would be applicable to payment of principal of, premium, if any,
and interest on the Bondstollected pursuant to action taken under the foregoing provisions of the
Loan Agreement shall be applied in accordance with the provisions of the Indenture. Upon
payment in full of all amounts owing under the Indenture, including all fees and expenses of the
Trustee, the Oversight Agent and the City, the City and the Trustee shall transfer any remaining
right, title or interest that each has in the Indenture, the Loan Agreement, the Note and the Deed
of Trust to the Borrower, except any rights to receive payment of fees and expenses and to be
indemnified, as provided for in the Loan Agreement and the Indenture.
39
THE REGULATORY AGREEMENT
The following is a summary of certain provisions of the Regulatory Agreement and does
not purport to be complete. Reference is hereby made to the Regulatory Agreement which is
available from the City upon request, and to Appendix B for the definition of certain terms used
herein. Any capitalized terms not otherwise defined herein or in Appendix B are as defined in
the Regulatory Agreement.
Residential Rental Property; Qualified Residents
The Borrower has agreed that the Project will be owned, managed and operated as a
to residential rental project" (within the meaning of Section 142(d) of the Code) until the
expiration of the Qualified Project Period. To that end, and for the term of the Regulatory
Agreement, the Borrower represents, as of the date of the Regulatory Agreement, and warrants,
covenants and agrees as follows:
(a) The Project is being owned and operated for the purpose of providing
residential rental housing, consisting of one mobile home Space for each household,
together with related facilities.
(b) All of the mobile homes in the Project will contain separate facilities for
living, sleeping, eating, cooking and sanitation, including a sleeping area, bathing and
sanitation facilities and cooking facilities equipped with a cooking range, refrigerator and
sink.
(c) All of the Spaces will be available for rental on a continuous basis to
members of the general public, and the Borrower will not give preference to any
particular class or group in renting the Spaces in the Project, except to the extent that
Spaces are to be leased or rented to Qualified Residents.
(d) The Project comprises a single geographically and functionally integrated
project for residential rental property, as evidenced by the ownership, management,
accounting and operation of the Project.
(e) No part of the Project will at any time be owned or used as a condominium
or by a cooperative housing corporation, and the Borrower shall not take any steps toward
such conversion without an opinion of Bond Counsel that interest on the Bonds will not
thereby become includable in gross income for federal income tax purposes.
(f) Shquld involuntary noncompliance with the provisions of the Regulatory
Agreement be caused by fire, seizure, requisition, foreclosure, transfer of title by deed in
lieu of foreclosure, change in a federal law or an action of a federal agency after the
Closing Date which prevents the City from enforcing the requirements of the
Regulations, or condemnation or similar event, the Borrower covenants that, within a
"reasonable period" determined in accordance with the Regulations, it will either prepay
the Note or apply any proceeds received as a result of any of the preceding events to
reconstruct the Project to meet the requirements hereof.
(g) There shall be no discrimination against or segregation of any person or
group of persons on account of race, color, religion, sex, marital status, ancestry, national
origin, source of income (e.g. AFDC or SSI) or disability in the sale, lease, sublease,
transfer, use occupancy tenure or enjoyment of the Project nor shall the transferee or any
person claiming under or through the transferee, establish or permit any such practice or
40
practices of discrimination or segregation with reference to the selection, location,
number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the
Project.
(h) The Very Low Income Spaces shall be intermingled with, and shall be of
comparable quality to, all other Spaces in the Project. Tenants in all Spaces shall have
equal access to and enjoyment of all common facilities of the Project.
(i) In the aggregate, no more than two persons per bedroom, plus one person
shall occupy any Space in the Project, not including children born after the date of initial
occupancy by a household. For example, with respect to a two bedroom mobilehome,
maximum occupancy shall be 5 persons (exclusive of post- occupancy children described
above).
(j) Pursuant to the Municipal Code, rents on Qualified Spaces shall not be
increased more than once every year upon at least ninety (90) days written notice to the
tenant and, in addition to complying with the requirements of subsection (c) above, and
subject to the provisions of the Regulatory Agreement, rent increases for these units shall
not exceed the amount necessary to comply with the coverage requirement set forth in the
Loan Agreement. Rents for all spaces shall be set forth in the annual budget submitted by
the Borrower pursuant to the Loan Agreement.
(k) The Borrower will accept as tenants, on the same basis as all other
prospective tenants, persons who are recipients of federal certificates for rent subsidies
pursuant to the existing housing program under Section 8 of the United States Housing
Act, or its successor. The Borrower shall not apply selection criteria to Section 8
certificate or voucher holders that is more burdensome than criteria applied to all other
prospective tenants, nor shall the Borrower apply or permit the application of
management policies or lease provisions with respect to the Project which have the effect
of precluding occupancy of Spaces by such prospective Tenants.
(1) The Borrower shall submit to the Secretary of the Treasury annually on the
anniversary date of the start of the Qualified Project Period or such other date as is
required by the Secretary, a certification that the Project continues to meet the
requirements of Section 142(d) of the Code, and shall provide a copy of such certification
to the Program Administrator.
Property Management and Maintenance
The following provisions shall apply during the term of the Regulatory Agreement,
irrespective of whether any Bonds are outstanding.
(a) Management Responsibilities. The Borrower is responsible for all management
functions with respect to the Project including without limitation the selection of tenants,
certification and recertification of household size and income, evictions, collection of rents and
deposits, maintenance, landscaping, routine and extraordinary repairs, replacement of capital
items, and security. The City shall not have responsibility over management of the Project. The
Borrower may delegate its duties under the Regulatory Agreement to a property management
company. A resident manager shall also be required. In no instance shall the Borrower delegate
or forego its responsibility to manage and operate the park in the manner set forth in the
Regulatory Agreement and the Loan Agreement.
41
(b) Management and Operation of Project. The Borrower will manage and operate
the Project in accordance with the requirements of the Regulatory Agreement.
(c) Management Agent; Periodic Reports. The Project shall at all time be managed
by Borrower or by an experienced management agent appointed by the Borrower ( "Management
Agent "). The initial Management Agent shall be Bessire & Casenhiser, Inc. Any subsequent
Management Agent shall be selected by the Borrower after first taking into consideration any
recommendations with respect to such management arrangement of the Tenant Advisory Board.
The Management Agent will have demonstrated ability to operate residential facilities like the
Project in a manner that will provide decent, safe, and sanitary housing. Prior to the selection of
the Management Agent by the Borrower as outlined in this paragraph, the Borrower shall submit
to the City the identity of or a list of qualified Management Agents and the Borrower shall also
submit such additional information about the background, experience and financial condition of
any proposed Management Agent as is reasonably available.
(d) Property Maintenance. The Borrower agrees, for the entire Term of the
Regulatory Agreement, to maintain all common area interior and exterior improvements and
common buildings on the Project (exclusive of the mobile homes and tenant spaces), including
landscaping and common buildings on the Project in good condition and repair (and, as to
landscaping, in a healthy condition) and in accordance with all applicable laws, rules, ordinances,
orders and regulations of all federal, state, county, municipal, and other governmental agencies
and bodies having or claiming jurisdiction and all their respective departments, bureaus, and
officials.
City Requirements
The following provisions shall apply during the term of the Regulatory Agreement,
irrespective of whether any bonds are outstanding.
(a) The Borrower shall comply with all provisions of the City Law. The Borrower
shall not challenge any provisions of the City Law as it exists on the Closing Date, and the
Borrower understands and agrees that by the provisions of the Regulatory Agreement it is
waiving its constitutional rights.
(b) Annual rent increases for the Spaces shall be limited to the requirements of
Sections 5.52.050 and 5.52.060 of the City Law.
(c) The Borrower shall establish a procedure and funding for a hardship assistance
program for tenants of the Project. The program shall have the intent of waiving rent increases
for tenants eligible under Housing and Urban Development Section 8 programs. Neither the City
nor the Moorpark Redevelopment Agency shall be called upon to fund such a program.
(d) The Borrower shall not at any time request the City or the Moorpark
Redevelopment Agency provide any funding assistance for repairs, rent assistance, financing or
refinancing costs, except as a program may have first been established by the City or Moorpark
Redevelopment Agency and for which the Project may otherwise be qualified to participate in.
(e) The Borrower shall cause the entity from which it is purchasing the Project to
dismiss all pending litigation against the City, its employees, agents and servants and shall use its
best efforts to cause such seller not file any future litigation against same. If such seller
continues its litigation against CalTrans or the County related to storm drain matters, the
Borrower hereby agrees to indemnify, hold harmless and defend the City, its employees, agents
and servants against any and all counterclaims by CalTrans or the County.
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(f) The Borrower shall pay all legal fees incurred and projected to be incurred by the
City and the Moorpark Redevelopment Agency as a result of the litigation brought against the
City by the current owner (i.e., Villa Del Arroyo, LTD. vs. City of Moorpark (Case No.
SCO23052), Villa Del Arroyo, LTD., a limited partnership vs. City of Moorpark {Case No.
SCO215031 and Villa Del Arroyo, a limited partnership, dba Villa Del Arroyo Mobilehome Park
vs. City of Moorpark, California Department of Transportation, and Ventura County Flood
Control District {Case No. 022015)). The amount to be paid shall be provided to the Borrower
by the City on or before the Closing Date. The entire amount shall be paid by the Borrower to
the City within ten (10) business days of the Closing Date.
(g) The Borrower shall reimburse the City for its administrative costs to negotiate and
direct the preparation of appropriate matters related to the Bonds and the transactions
contemplated by the Indenture, the Loan Agreement and the Regulatory Agreement. The amount
of $5,000 shall be paid to the City within ten (10) business days of the Closing Date to be applied
against such costs, and shall, in any event be nonrefundable to the Borrower.
(h) To monitor compliance with the provisions of the City Law, the Borrower shall
pay the City Annual Fee to the City on the Closing Date and on each December 1 thereafter.
(i) Any proposed sale of the Project by the Borrower shall be noticed to the City no
less than ninety (90) days prior to the proposed date of the sale. The City's consent to any
transfer of the Project shall be subject to the provisions of the Regulatory Agreement.
0) The Borrower shall notify the City of the operations /management company it will
employ for the Project no less than thirty (30) days prior to the signing of a contract with any
such entity. Qualifications of the fu-m(s) shall also be provided at that time and the City shall
have the right to submit comments on the qualifications of the firm, which shall be considered by
Borrower prior to execution of a contract.
(k) The Borrower is responsible for all management functions with respect to the
Project including without limitation the selection of tenants, certification and recertification of
household size and income, evictions, collection of rents and deposits, maintenance, landscaping,
routine and extraordinary repairs, replacement of capital items, and security. The City shall not
have responsibility over management of the Project. In no instance shall the Borrower delegate
or forego its responsibility to operate the Project in the manner set forth in the Regulatory
Agreement and the Loan Agreement.
(1) The City, through its Authorized Officer, reserves the right to conduct on or about
December 1 of each year, commencing December 1, 2000, an annual (or more frequently, if
deemed necessary by the City) review of the management practices and financial status of the
Project. The purpose of each periodic review will be to enable the City to determine if the
Project is being operated and managed in accordance with the requirements and standards of the
Regulatory Agreement and the City Law. The Borrower shall cooperate with the City in such
reviews.
(m) The Borrower agrees, for the entire term of the Regulatory Agreement, to
maintain all common area interior and exterior improvements and common buildings on the
Project (exclusive of the mobile homes and tenant spaces), including landscaping and common
buildings on the Project in good condition and repair (and, as to landscaping, in a healthy
condition) and in accordance with all applicable laws, rules, ordinances, orders and regulations of
all federal, state, county, municipal, and other governmental agencies and bodies having or
claiming jurisdiction and all their respective departments, bureaus, and officials.
43
The City places prime importance on quality maintenance to ensure that all City- assisted
affordable housing projects within the City are not allowed to deteriorate due to below- average
maintenance. Normal wear and tear of the Project will be acceptable to the City assuming the
Borrower agrees to provide all necessary improvements to assure the Project is maintained in
good condition. The Borrower shall make all repairs and replacements necessary to keep the
Project in good condition and repair.
In the event that the Borrower breaches any of the covenants contained in the Regulatory
Agreement and such default continues for a period of ten (10) days after written notice from the
City with respect to graffiti, debris, waste material, and general maintenance or thirty (30) days
after written notice from the City with respect to landscaping and building improvements, then
the City, in addition to whatever remedy it may have at law or in equity, shall have the right to
enter upon the Project and perform or cause to be performed all such acts and work necessary to
cure the default. Pursuant to such right of entry, the City shall be permitted (but is not required)
to enter upon the Project and perform all acts and work necessary to protect, maintain, and
preserve the improvements and landscaped areas on the Project, and to attach a lien on the
Project, or to assess the Project, in the amount of the expenditures arising from such acts and
work of protection, maintenance, and preservation by the City and/or costs of such cure,
including a fifteen percent (15 %) administrative charge, which amount shall be promptly paid by
the Borrower to the City upon written demand.
Qualified Residents
Pursuant to the requirements of the Code and the Act, the Borrower covenants and agrees
as follows:
(a) During the Qualified Project Period: not less than twenty percent (20 %) of
the Spaces in the Project shall be designated as Very Low Income Spaces and shall be
continuously occupied by Very Low Income Residents. The monthly rent charged for 1/2
the Very Low Income Spaces (i.e., 10% of the Spaces) shall not be greater than as
follows:
(A) where a Very Low Income Resident is both the registered and legal
owner of the mobile home and is not making mortgage payments for the purchase
of that mobile home, the total rental charge for occupancy of the Space (excluding
a reasonable allowance for other related housing costs determined at the time of
acquisition of the Project by the Borrower and excluding any supplemental rental
assistance from the State, the federal government, or any other public agency to
the Very Low Income Resident or on behalf of the Space and the mobile home)
shall not eltceed one - twelfth of 30 percent of 50 percent of Median Income for the
Area, adjusted for household size in the manner set forth in the definition of Very
Low Income Resident in the Regulatory Agreement.
(B) where a Very Low Income Resident is the registered owner of the
mobile home and is making mortgage payments for the purchase of that mobile
home, the total rental charge for occupancy of the Space (excluding any charges
for utilities and storage and excluding any supplemental rental assistance from the
State, the federal government, or any other public agency to the Very Low Income
Resident or on behalf of the Space and mobile home), shall not exceed one-
twelfth of 15 percent of 50 percent of Median Income for the Area, as adjusted for
household size in the manner set forth in the definition of Very Low Income
Resident in the Regulatory Agreement.
44
(C) where a Very Low Income Resident rents both the mobile home
and the Space occupied by the mobile home, the total rental payments paid by the
Very Low Income Resident on the mobile home and the Space occupied by the
mobile home (excluding any supplemental rental assistance from the State, the
federal government, or any other public agency to that Very Low Resident or on
behalf of that Space and mobile home) shall not exceed one - twelfth of 30 percent
of very low income households as established by the U.S. Department of Housing
and Urban Development for the Area adjusted for household size in the manner
set forth in the definition of Very Low Income Resident in the Regulatory
Agreement.
(b) In the event a recertification of such tenant's income in accordance with
paragraph (d) below demonstrates that such tenant no longer qualifies as a Qualified
Resident the Space occupied by such Resident shall continue to be treated as a Qualified
Space unless and until any Space in the Project thereafter is occupied by a new tenant that
is a Qualified Resident. Moreover, a Space previously occupied by a Qualified Resident
and then vacated shall be considered occupied by a Qualified Resident until reoccupied,
other than for a temporary period, at which time the character of the Space shall be
redetermined. In no event shall such temporary period exceed thirty-one (3 1) days.
Notwithstanding anything in the Regulatory Agreement to the contrary, if at any time the
number of Qualified Residents falls below the number required by the Regulatory
Agreement, the next available vacant Space shall be rented to a Qualified Resident.
(c) Immediately prior to a Qualified Resident's occupancy of a Qualified
Space (or prior to the Closing Date with respect to Very Low Income Spaces previously
occupied), the Borrower will obtain and maintain on file an Income Certification form
from each Qualified Resident occupying a Qualified Space, dated immediately prior to
the initial occupancy of such Qualified Resident in the Project (or prior to the Closing
Date in the case of existing Very Low Income Residents). In addition, the Borrower will
provide such further information as may be required in the future by the State of
California, and by the Act, as the same may be amended from time to time as requested
by the City or the Program Administrator. The Borrower shall verify the income
provided by an applicant with respect to a Space to be occupied after the Closing Date in
the manner described by the Regulatory Agreement.
(d) Immediately prior to the first anniversary date of the issuance of the
Bonds, and on each anniversary date thereafter, the Borrower shall recertify the income of
the occupants of such Qualified Spaces by obtaining a completed Income Certification
based upon the current income of each occupant of the Space. In the event the
recertification demonstrates that such household's income exceeds 140% of the income at
which such household would qualify as Qualified Residents, such household will no
longer qualify as a Qualified Resident, and the Borrower will either (i) designate another
qualifying Tenant and Space in the Project as a Qualified Resident and a Qualified Space,
respectively, or (ii) rent the next available vacant Space to one or more Qualified
Residents.
(e) The Borrower agrees to provide to the Oversight Agent, the Program
Administrator and the City, a copy of the form of application and lease to be provided to
prospective Qualified Residents and any amendments thereto. Resident rules and
regulations will be developed with participation and representation by existing residents,
formed as a review committee in order to provide input.
(f) In the event, despite Borrower's exercise of best efforts to comply with the
provisions of Section 4 of the Regulatory Agreement, the Borrower shall have been out of
45
compliance with any of the restrictions of Section 4 of the Regulatory Agreement relative
to Qualified Residents (other than those provisions required under Section 3 of the
Regulatory Agreement to comply with the requirements of Section 142(d) of the Code as
applicable to the Project) for a period in excess of six months, then at the sole option of
the City the term of the Regulatory Agreement shall be automatically extended for the
period of non - compliance upon written notice to the Borrower, the Trustee and the
Oversight Agent from the City, such extension to relate to the Qualified Spaces and
Qualified Residents as to which such noncompliance relate.
Sale or Transfer of the Project
The Borrower intends to hold the Project for its own account, has no current plans to sell,
transfer or otherwise dispose of the Project, and covenants and agrees not to sell, transfer or
other -wise dispose of the Project, or any portion thereof (other than for individual tenant use as
contemplated under the Regulatory Agreement), without obtaining the prior consent of the City
and satisfaction of the other requirements of the Regulatory Agreement.
Term
The Regulatory Agreement and all and several of the terms will become effective upon its
execution and delivery and will remain in full force and effect during the Qualified Project
Period, it being expressly agreed and understood that the provisions are intended to survive the
retirement of the Bonds and expiration of the Indenture, the Loan Agreement and the Note.
Enforcement
If the Borrower defaults in the performance or observance of any covenant, agreement or
obligation of the Borrower set forth in the Regulatory Agreement, and if such default remains
uncured for a period of 60 days after notice thereof shall have been given by the City or the
Trustee to the Borrower (provided, however, that the City may at its sole option extend such
period if the Borrower provides the City with an opinion of Bond Counsel to the effect that such
extension will not adversely affect the exclusion from gross income for federal income tax
purposes of interest on the Bonds, and provided further, in the event any default relates to
Section 4 of the Regulatory Agreement and the Borrower is exercising best efforts to comply
with such restrictions as determined by the City in its sole discretion, then the cure period
described above shall be 6 months and shall be subject to the extension of the Qualified Project
Period as provided in the Regulatory Agreement). If the Borrower fails to cure within the
specified period then the Trustee, subject to the provisions of the Regulatory Agreement and
acting on its own behalf or on behalf of the City, shall declare an 'Event of Default" to have
occurred, and, at its optiop, may take any one or more of the following steps:
(i) by mandamus or other suit, action or proceeding at law or in equity,
require the Borrower to perform its obligations and covenants under the Regulatory
Agreement or enjoin any acts or things which may be unlawful or in violation of the
rights of the City or the Trustee under the Regulatory Agreement;
(ii) have access to and inspect. examine and make copies of all of the books
and records of the Borrower pertaining to the Project; and
(iii) take such other action at law or in equity as may appear necessary or
desirable to enforce the obligations, covenants and agreements of the Borrower under the
Regulatory Agreement.
46
In addition to the enforcement remedies set forth above, upon the Borrower's default
under the Regulatory Agreement, the City will have the right (but not the obligation) to lease up
to 20% of the Spaces in the Project for a rental of $1 per Space per year. The City shall sublease
such units to Very Low Income Residents to the extent necessary to comply with the provisions
of the Regulatory Agreement. Any rent paid under such a sublease shall be paid to the Borrower
after the City has been reimbursed for any expenses incurred by it in connection with the
sublease; provided that, if the Borrower is in default under the Loan, such rent shall be used to
make payments under the Loan.
The Trustee shall have the right, in accordance with the Regulatory Agreement and the
provisions of the Indenture, without the consent or approval of the City, to exercise any or all of
the rights or remedies of the City under the Regulatory Agreement; provided that prior to taking
any such act the Trustee shall give the City written notice of its intended action. All fees, costs
and expenses of the Trustee, the City and the Oversight Agent (including, without limitation,
reasonable attorneys' fees) reasonably incurred in taking any action pursuant to the Regulatory
Agreement shall be the sole responsibility of the Borrower; provided the Trustee will not be
obligated to take any action under the Regulatory Agreement that results in expenses or liability
to the Trustee unless it is compensated and reimbursed for its expenses, including reasonable
attorneys' fees, and indemnified to its satisfaction against liability.
After the Indenture has been discharged, or if the Trustee fails to act under the Regulatory
Agreement, the City may act in its own behalf to declare an "Event of Default" to have occurred
and to take any one or more of the steps specified above to the same extent and with the same
effect as if taken by the Trustee.
THE BORROWER
The Borrower is organized exclusively under the California Nonprofit Benefit
Corporation Law for charitable purposes. The general purpose of this corporation is to have and
exercise all rights and powers conferred on nonprofit corporations under the laws of California.
This corporation shall not, except to an insubstantial degree, engage in any activities or exercise
any powers that are not in furtherance of the primary purposes of this corporation.
The Borrower is a California non - profit public benefit corporation whose goal is to
develop, construct, acquire, rehabilitate, own and provide decent, safe and sanitary housing
affordable to persons and families of low and moderate income, including the aged and
handicapped; to assist low income households buy enabling them to secure the basic human need
of decent shelter; to combat blight and deterioration in communities and contribute to their
physical improvement; to promote social welfare through community -based housing activities; to
lessen the burdens of government by assisting local governments, their redevelopment agencies,
authorities, board or commissions through the undertaking of housing activities, including
program administration and management activities, targeted to low and moderate income persons
and families; and to assist local governments in the preservation of affordable housing
acquisition of mobile home parks.
The Borrower was established on January 22, 1999 and received a determination letter
form the Internal Revenue Service as to its status as an organization described in Section
501(c)(3) of the Code in September 24, 1999, and a letter form the State of California Franchise
Tax Board confirming its exemption from State franchise or income tax on
47
The Board Members of Augusta Homes also serve on the board of its sister organization,
Augusta Homes Villa Montclair Corporation. Augusta Homes Villa Montclair Corporation is a
tax - exempt California non -profit public benefit corporation that owns Villa Montclair, a 97 -space
park located in Montclair, California.
Board Members
Gary T. Limon, President
Laura Muna Landa, Vice President
Lee C. McDougal, Secretary
Robin J. Aspinall, Treasurer
Gary T. Limon President. Mr. Limon has held the position of President/General
Manager for various Southern California medical products companies since 1986. Mr. Limon
currently serves as Chairman of the Board for Circaid Medical Products, San Diego, California, a
privately - funded medical products start up company, and General Manager for Anatomic
Concepts, Inc. of Corona, California, a manufacturer of
Laura Muna Landa, Vice President. Ms. Landa has over eleven years of experience in
municipal government, redevelopment, and public affairs in public and private sector
organizations. For the past five years she has worked for the City of Anaheim in charge of
downtown development and on citywide projects including Sportstown, Angels Stadium and the
Disneyland resort area. Active in community service Ms. Landa has served as a Board Member
for the Rancho Cucamonga Youth Accountability Board; Vice -Chair of the Rancho Cucamonga
Library Board of Trustees; Board Member and Chairman of the Community Baptist Church and
as a member of the Missions Task Force of the Community Baptist Church.
Robin J. Aspinall, Treasurer. Ms. Aspinall has been the Controller and Assistant
Treasurer for Pomona College, a private non -profit college located in Claremont, California. Ms.
Aspinall is responsible for the business office, overseeing 20 employees and supervising all
accounting and financial activities including investments in excess of $750 million. In addition
to her position as Treasurer of Augusta Homes and Augusta Homes Villa Montclair, Ms.
Aspinall also serves as Treasurer for Padua Hills Management Corporation, as a Board Member
of New Hope Community Church, Member of the American Businesswomen's Association,
Upland Charter, and is Chairperson for fundraising activities for St. Lucy's Priory High School.
Lee C. McDougal, Secretary. Mr. McDougal has been the City Manager and
Redevelopment Agency Executive Director for the City of Montclair, in Montclair, California
since 1992. In this position, Mr. McDougal serves as the Chief Executive Officer of a full -
service city and redevelopment agency managing and supervising all operations of city staff and
police and fire personnel. Mr. McDougal is an active member of his community and has held
board positions in thirteen education -, housing -, public safety-, and service- oriented
philanthropic organizations such as the University of California at Riverside Alumni
Association, Montclair Kiwanis Club, Mt. Baldy United Way and the West End
Communications Authority.
Operations
The day to day operations of Augusta Homes are conducted by its Executive Director,
Suzanne Taylor. Ms. Taylor is currently the only full time staff member of Augusta and its sister
non - profit, Augusta Homes Villa Montclair. Ms. Taylor is a consulting professional with
eighteen years of public and private sector experience in economic development, redevelopment,
housing, finance, non - profit development and public outreach. Ms. Taylor has worked on over
48
ten mobile home park projects as consultant to the borrower, the issuer or the seller. Ms. Taylor
also serves as Executive Director to Augusta Homes Villa Montclair Corporation and as
Oversight Agent for the $29 million City of Irvine mobile home park revenue bond financing.
Augusta Homes' legal counsel is Goldfarb and Lipman, a leading San Francisco law firm in the
field of real estate law, with special strengths in affordable housing, redevelopment and
municipal law. Haney and Company, a Newport Beach accounting firm with an emphasis on
mobile home work, provides audit and general accounting services for Augusta Homes.
The Borrower is organized exclusively for charitable purposes within the meaning of
Section 501(c)(3) of the Code. Notwithstanding any other provisions of its bylaws, the Borrower
shall not, except to an insubstantial degree, engage in any activities or exercise any powers that
are not in furtherance of the purposes of the Borrower, and the Borrower shall not carry on any
other activities not permitted to be carried on (i) by a corporation exempt from federal income
taxes under Section 501(c)(3) of the Code or (ii) by a corporation, contributions to which are
deductible under Section 170(c)(2) of the Code.
THE PROJECT
Neither the City nor the Underwriters have made any independent investigation of the
information presented herein as to the Project. Such information has been provided solely by the
Borrower and certain professionals as specifically noted, and neither the City nor the
Underwriters have verified the accuracy or completeness of such information, nor do they
assume any responsibility or liability therefor.
Mobile Home Park Overview
General. Ventura County is home to a large number of mobile home parks. Most of
these parks were built in the 1950's and 1960's. Many of the mobile home parks established
during that era were envisioned as short-term "land banks" rather than as long -term land uses.
The idea was to derive some income from the land until it was ready to develop with more
intensive uses. For many reasons, however, including the legal difficulty and expense of closing
down a mobile home park and relocating the residents, many of these mobile home parks remain
in existence.
Mobile homes are sometimes referred to as an intermediate step between apartments and
owner occupied housing (condominiums and detached homes). Mobile homes are generally
considered more desirable than apartments because they afford greater privacy. At the same
time, those with sufficient income and cash for down payments typically prefer to buy a
traditional home, rather than rent space in a mobile home park. Thus, the space rent plus the
mobile home (coach) mortgage payment must generally be less than the mortgage payment on
traditional housing in the *area.
Increasing land values near urban areas (especially during the 1980's) significantly
curtailed the development of new parks. Also affecting new park construction was the advent of
rent control during the 1980's. Many cities throughout the State have enacted rent control
ordinances as a result of previous rent increases.
Because of the lack of supply and a growing demand for affordable housing in urban
areas, mobile home parks were able to steadily increase space rents even during the recession
years of the early 1990's. While rents for most types of real estate in California dropped during
the recession, mobile home park rents have continued to rise, although not at their historic rates.
No assurance can be given that such trends will continue.
..
Stable Resident Base. Residents of mobile home parks are homeowners and make
significant investments in homes and in on -site improvements. Moving a mobile home
from one community to another requires substantial cost and effort and often requires
abandonment of on -site improvements such as landscaping, decks and carports. Because of the
loss of equity in site improvements, the high cost of moving and the limited availability of vacant
mobile home park spaces, mobile homes are seldom moved from their original locations.
Instead, mobile homes are usually sold in place when the homeowner wants to move.
The high costs associated with moving a mobile home also serve to reduce rent
delinquencies and collection losses. Pursuant to Section 798 et seq. of the California Civil Code
(the "Mobile Home Residency Law "), a mobile home park owner (after complying with the
notice, cure period and other procedural requirements of the Mobile Home Residency Law) has
the right to cause the removal of a mobile home if a resident fails to pay rent. Since the loss in
value caused by the removal of the mobile home would usually far exceed the amount of the rent
delinquency the mobile home owner, or the holder of a lien on the mobile home, has a strong
incentive to cure the rent default.
Vicinity Description
The Project is located in the City of Moorpark, in the northeastern portion of Ventura
County, California. Ventura County is located along the Pacific coastline, north of Los Angeles
County. It is part of the 5 county (Los Angeles, Orange, Riverside, San Bernardino, and
Ventura) Los Angeles market area.
The Project is in the eastern portion of the City, on the south side of Los Angeles Avenue
and east of Collins Drive, near the boundaries of Moorpark with unincorporated County areas
and the City of Simi Valley. Simi Valley is considered a part of the market for this
neighborhood, especially for mobile home parks, as the nearest competitive alternatives to the
Project are to be found at the eastern end of that city. There are no truly competitive properties
within the City of Moorpark.
The Project
The Project is located in the City at 15750 Los Angeles Avenue and consists of a parcel
of approximately 67.22 acres, containing 240 mobile home park spaces, a clubhouse, pool, spa,
tennis courts, R.V. storage, one mobile home for the use of a resident manager, horseshoes court
and bike /walking trail. As of November, 1999, the occupancy rate of the Project was 100 %.
Monthly rental for spaces generally ranges from $445 to $600. The Project site has been used as
a mobile home park for more than 20 years.
The site is improved with a 240 -space mobile home park, containing spaces for both
doublewide (228) and triplewide (12) manufactured homes. All utilities (water, sewer, gas and
electric) are available to the site, but only gas and water are submetered to the individual sites.
Electric service is provided directly to the sites by the utility company.
The park, according to an appraisal dated September 2, 1999 (the "Appraisal ") performed
by John P. Neet, MAI, Lake Elsinore, California (the "Appraiser "), on behalf of the City, had a
value as of August 26, 1999 of $13,200,000 and as of February 22, 2000 of $13,500,000
determined by the income approach, with additional support from the sales comparison approach.
As of the date of the Appraisal, the coach mix consisted primarily of double wide units. See
APPENDIX E hereto for the complete text of the Appraisal. The City makes no representation
as to the accuracy of the Appraisal.
50
The Westridge Group, L.L.C. ( "Westridge ") entered into an Agreement of Purchase and
Sale and Joint Escrow Instructions to purchase the Project from the current owners for a purchase
price of $13,200,000. The price included one resident manager's unit. George Turk, a principal
of Westridge, will receive compensation for its assistance to the Borrower in acquiring the
Project in the amount of $ In the past, Westridge provided administrative
services to the Borrower and its parent and has assisted such entities in connection with the
acquisition of other mobile home parks.
Environmental Site Assessment
According to a Phase I Site Assessment of the Project prepared for Westridge by DCI
Services, Burbank, California, the Project site does not appear to have been significantly
impacted by the presence or use of hazardous materials on the site or in the surrounding area,
with the possible exception of asbestos and lead - containing building materials used in certain site
buildings.
'0 ',
51
Physical Needs Assessment
According to a Physical Needs Assessment Report prepared for Westridge by Meterman,
Inc., Anaheim, California, dated October 11, 1999 (the "Needs Assessment "), the Project will
need $34,150.00 of repairs within one year from the date of the Needs Assessment, and some
additional repairs within a longer time frame, as summarized in the following table:
Physical Needs Assessment
Estimated Cost Summary
Description
Sites:
Asphalt double slurry sealing
Asphalt "fill -ins" reconstruction
Tree trimming common areas
Sewer hydro flushing (mains and laterals)
Pool area iron gate repairs
Cool deck topping at pool
Key valve maintenance
Gas operations manual compliance
RN cyclone chained link repairs
Retainer wall repairs
Gas and water maters replaced (per year)
Buildings:
Installation of pool equipment drain to curb
Ornamental iron fencing repainted (club.)
Acoustic ceilings re- sprayed
Repainting all interior building finishes
TOTAL ESTIMATED COST (YEAR 1):
TOTAL ESTIMATED COST (YEAR 2 -10):
Immediate Year Long Term Years
(1) (2 to 10)
$11,000
4,000
500
2,500
800
1,000
1,900
2,500
2,500
2,500
1,250
1,500
2,200
$34,150
$16,000
5,500
3,000
25,000
$49,500
(1) Items in the one -year, category are items which pose a safety threat, code violations, or are
those which, if left uncorrected, will result in significant damage losses to the Project.
(2) Items in the 2 to 10 year category are items based upon anticipated costs for building
components and/or systems, which will reach or exceed their anticipated service life within
the term.
An amount equal to $150,000 will be deposited from the proceeds of the Series A Bonds
on the Closing Date into the Repair and Replacement Fund, to be used to make the repairs
identified in the Needs Assessment. See "THE INDENTURE— Repair and Replacement Fund."
52
Historical Operating Results
The following tables summarize operating results for the Project for the last three Fiscal
Years. The results shown below are in conformance with the definitions of Operating Revenues,
Operation and Maintenance Costs and Net Operating Revenues contained in the Indenture. The
financial statements of the Project used to prepare the following tables have not been audited and
were not prepared in accordance with generally accepted accounting principles. The operating
results shown below could differ significantly from those that would have been obtained if audits
had been performed and if such statements had been prepared in accordance with such principles.
Villa Del Arroyo Mobile Home Park
Summary of Historical Operating Results
Fiscal Years 1997 -1999
Operating Revenues
Rental Income
Utility Income
Other Income
Total Receipts
Operation and Maintenance Costs
Accounting
Advertising - Tenant Activities
Auto
Cable TV
Insurance - Property
Landscape
Legal and Professional
Licenses and Permits
Management Fees - 3%
Miscellaneous
Office, General and Administrative
Property Taxes
Pool & Spa
Repairs and Maintenance
On -Site Management
Telephone
Utilities
Total Disbursements
Net Operating Income
Source: Haynie & Company.
1997
$1,302,664
200,411
14,350
1998
$1,347,714
221,033
14,036
1999
$1,375,956
210,641
19,391
$1,517,425 $1,582,783 $1,605,988
$ 3,602
1,116
8,283
289
1,351
10,782
8,830
1,975
50,661
1,736
5,046
6,304
71,652
15,499
68,198
3,166
208,448
$ 3,355
1,439
6,849
370
11,933
8,844
932
1,513
52,999
3,102
3,756
2,059
72,908
17,319
70,816
2,689
211,078
$ 3,498
450
2,732
321
9,399
3,110
1,118
2,487
53,267
1,556
3,689
1,685
60,882
9,365
69,550
2,628
207,148
$ 466,938 $ 471,961 $ 432,885
$1,050,487
53
$1,110,822
$1,173,103
Competing Mobile Home Parks
The following table prepared by the Appraiser compares certain characteristics of the
Project and several other local mobile home parks.
The Project and Competing Mobile Home Parks
Comparable Attributes - As of November 12, 1998
Data No.
Park Name
Address
-City
Spaces
Singlewide
Spaces
Park
Services,
Amenities
Rental Rates
Lessor
Paid
Services
Adjusted
Rental
Rates
Comments
Singlewide
Units
Alte
Vehicle
Storage
Fee
Avit. Rent
Services
Adjust-
meat
occup.
Age
Restrict.
Transfer Rates
New Move -Ins
1. (Subject)
Villa Del Arroyo MHP
15750 E. Los Angeles Ave.
Moorpark
240
0%
Pool, Spa
Rec. Center
Tennis
Laundry
RV Storage
$445 to
$600
None
$445 to
$600
Subject to Moorpark rent
control. No park owned
rentals. 5 year lease and
month to month agreements
used Annual increases of
2.3% reported Excellent
condition.
20
0%
$484
$484
100%
$445 to
$600
$0
$445 to
$600
None
$600
$600
S45
2. Simi Country MH Estates
1550 Rory Lane
Simi Valley
274
0%
2 Pools
2 Spas
Rec. Center
Laundry
RV Storage
$315 to
$475
None
No park owned units.
Subject to Simi Valley rent
control. Has both month to
month and 5 year leases.
Many new units placed
after Northridge earthquake.
Good condition.
+/ -30
20%
$390
E$390
100%
$475
$0
None
5475
$475
$25
3. Susana Woods
6840 Katherine Road
Simi Valley
139
0%
Pool, Spa
Rec. Center
Laundry
RV Storage
$332 to
$475
None
$332 to
$475
No park owned coaches.
Subject to Simi Valley rent
control. Month to month
rental agreements used.
Recent increase was 1.8%
(CPI based). Good
I condition.
+/ -30
10%
$390
$390
1000/0
$475
$0
$475
None
$475
$475
NA
4. Chatsworth Imperial MHP
20652 Lassen Street
Chatsworth
184
0%
Pool
Rec. Center
Shuffleboard
Laundry
$300 to
$550
None
$300 to
$550
Subject to Los Angeles rent
control. Annual 3% increase
permitted. No park owned
rentals. Good condition.
32
13%
$450
$450
100%
$330 to
$605
$0
$330 to
$605
None
$425
$425
5. Chatsworth MHP
21500 Lassen Blvd.
Chatsworth
198
00/0
Pool
Rec. Center
Shuffleboard
Laundry
$390 to
$550
Water
$380 to
$540
Subject to Los Angeles rent
control. Annual 3% increase
permitted No park owned
rentals. Average condition.
31
20%
99.5%
$429 to
$605
-$i0
$495 to
$595
None
•'
$550
6. Mountain View Estates
24303 Woolsey Canyon Road
Chatsworth
156
0%
Pool, Spa
Sauna
Rec. Center
RV Storage
$678 to
$963
to
4 new move -ins in last year. Most
recent increase in August 1999
for $30 per month. 23 park
owned units currently rented
for average of $900/month.
acquired during recession, will
now be selling at turnover.
20
0%
$764
4
100%
$678 to
$963
8 to
3
None
NA
tNone$359
$25
7. Tradewinds MHP
5150 Los Angeles Avenue
Simi Valley
100
0%
Pool
Rec. Center
Shuffleboard
Horseshoes
Laundry
Vehicle Stora a
$295 to
$464
5 to
No park owned coaches.
Subject to Simi Valley rent
control. Month to month
rental agreements used No
recent increases. Transfers
to $464. Good condition.
39
75%
$359
9
100%
$464
None
$464
$10
54
Management Agreement and Qualifications of Manager
The Project will be managed by Bessire & Casenhiser, Inc. ( "B &C ") pursuant to a
Property Management Agreement (the "Management Agreement "), between the Borrower and
B &C. The term of the Management Agreement is for one year, and thereafter for annual periods
unless on or before sixty days prior to the expiration of any such period, either party thereto
notifies the other in writing of its intention to terminate the Management Agreement in which
case the Management Agreement will be terminated at the end of such one year period. Either
party may terminate the Management Agreement upon thirty days written notice. Pursuant to the
Management Agreement, B &C will be paid an amount equal to three and one -half percent (3-
1/2%) of gross revenue of the Project collected per month for its property management services.
The following paragraphs provide background information regarding qualifications of B &C;
however no assurance can be given that B &C will continue to manage the Project during the
term of the Bonds.
The Company. B &C is a full service real estate company specializing in mobilehome
parks. Though the primary business is managing mobilehome parks, B &C also provides
consulting, marketing, and brokerage services. The company is currently forming Limited
Partnerships and Limited Liability Companies to acquire mobilehome parks in the western states.
Founded in 1979, the company currently manages 49 properties in California, Idaho and
Arizona, totaling 8,351 spaces. Clients include individuals, partnerships, corporations, and
syndications, so management must be flexible and geared to each separate project. The company
philosophy of "hands -on management" requires property managers to spend considerable time in
the field.
B &C's employees are active in three major industry organizations: The Western
Mobilehome Association (WMA), the Idaho Manufactured Housing Association, and the
Institute of Real Estate Management (IREM). The WMA is primarily concerned with
mobilehome park issues in California. IREM is a national organization encompassing all forms
of real estate management. It emphasizes professionalism in property management and offers
educational courses leading to the Certified Property Manager (CPM) designation.
The company also maintains membership in the Orange County Manufactured Housing
Education Trust (MHET) and the Mobilehome Park Owners Association (MPA).
Management Team. R. C. "Dick" Bessire — President, Director CPM. Dick has been
involved in the park industry since 1959. Pnor to ounding the company, he was regional Vice
President for Fox and Carskadon with responsibilities for 30 parks in four western states. In
addition to mobilehome- parks, he has managed several shopping centers and apartment
complexes.
Dick has been active in the Western Mobilehome Association (WMA) since early 1970,
serving on the Board of Directors and currently serving on WMA Committees. During the past
years, he has conducted numerous management seminars and has testified before the State
Legislature on behalf of the organization. Dick also has been involved in several lease
negotiations and has testified as an expert witness before rent review boards.
He is a recipient of the prestigious Wallace E. Carr Memorial Award for extraordinary
service to the mobilehome park industry.
Mr. Bessire is a Certified Property Manager (CPM) and a licensed real estate salesman.
55
Keith Casenhiser — Executive Vice President, Director, CPM. Keith's real estate career
began in 1971 as a property manager for a Southern California developer. Later, he managed a
portfolio of mobilehome parks, shopping centers and apartment complexes for the Fox and
Carskadon Management Corporation. He has been involved with development, construction and
management of parks.
Keith is also active in the WMA, serving on committees and as a speaker at management
education seminars. He holds a California real estate broker's license and is a Certified Property
Manager (CPM). He has served on the board of the Idaho Manufactured Housing Association
and the Western Mobilehome Association.
Richard Elias — Vice President, Director of Property Management, CPM. Richard has
over 20 years experience managing income properties. He joined the company in 1987 after ten
years with the Carlsberg Corporation. While at Carlsberg, Richard had been promoted to
Regional Manager in charge of different properties in seven states, the majority being
mobilehome communities. He currently manages parks throughout the State of California.
Richard has considerable experience with rent review boards, rent hearings and lease
negotiations.
Richard is a licensed California real estate salesman and is a Certified Property Manager
(CPM).
Norma Johnson — Property Manager, CPM. Norma has been with Bessire & Casenhiser,
Inc. since 1982. Beginning as a resident manager, she helped turn around a very difficult family
park. In 1986, she joined the property management staff and now supervises properties
throughout California. Norma has experience with rent control hearings and lease negotiations.
Norma is a California licensed real estate salesperson and is a Certified Property Manager
(CPM).
Patrick Coughlin — Property Manager. Patrick has recently joined Bessire & Casenhiser,
Inc., bringing with him over 25 years of managerial experience with the State of California,
where he utilized his mediation and negotiation skills. More recently, he worked for Century 21
Beachside Office, which was one of their top producing offices in the county.
Patrick is a California licensed real estate salesperson and has a Master's Degree from the
University of Southern California.
Scott Bessire — Pro pert Manager. Scott has recently joined our staff, starting with a
small management port qho in Southern California. At the same time he continues to manage
onsite a 500 -space upscale manufactured housing community in Covina, California.
Scott is a California licensed real estate salesperson.
Kathy Miller — Accounting Supervisor. Kathy joined the company in 1986 after several
years with the Bank of America. She is responsible for the project and corporate accounting and
performs project audits to ensure accurate onsite accounting.
56
Rents /Occupancy
The average rent per space in the Project was $468.42 in 1998, $452.51 in 1997, $436.01
in 1996, $434.20 in 1995 and $417.10 in 1994 and the occupancy for the Project for the past
eight calendar years is one hundred percent (100 %) as reported to The Westridge Group, L.L.C.
by the seller of the Project.
Projected Operating Results
Set forth below is a table which projects income and expenses for the Project, and
provides estimated Series A Bonds debt service coverage, for the Bond Years ending March 15,
2001 through March 15, 2005:
Projected Operating Results
(Bond Years Ending March 15, 2001 -2005)
Bond Year 1 2 3 4 5
Potential Income (Increased by 1.50 %)
Receipts:
Rental Income
Utility Income
Other Income
Total Receipts
Disbursements:
Accounting
Advertising - Tenant Activities
Auto
Cable TV
Insurance - Property
Landscape
Legal and Professional
Licenses and Permits
Management Fees - 3%
Miscellaneous
Office, General and Administrative
Pool & Spa
Property Taxes
Repairs and Maintenance
On Site Management
Telephone
Utilities
Total Disbursements
Net Operating Revenues
Debt Service Reserve Fund Earnings
Pledged Revenues
Bonds Annual Debt Service
Debt Service Coverage
$1,405,536 $1,437,863 $1,470,934 $1,504,765 $1,539,375
222,486 227,603 232,838 238,193 243,671
19,837 20,293 20,760 21,237 21,725
$1,647,859 $1,685,759 $1,724,532 $1,764,195 $1,804,771
$ 3,565
$ 3,647
$ 3,731
$ 3,817
$ 3,905
1,025
1,049
1,073
1,098
1,123
2,795
2,859
2,925
2,992
3,061
328
336
344
352
360
5,000
5,115
5,233
5,353
5,476
7,753
7,931
8,113
8,300
8,491
3,710
3,795
3,882
3,971
4,062
2,544
2,603
2,663
2,724
2,787
49,436
50,573
51,736
52,926
54,143
2,180
2,230
2,281
2,333
2,387
4,259
4,357
4,457
4,560
4,665
3,426
3,505
3,586
3,668
3,752
67,000
68,541
70,117
71,730
73,380
14,384
14,715
15,053
15,399
15,753
71,150
72,786
74,460
76,173
77,925
2,688
2,750
2,813
2,878
2,944
220,912
225,993
231,191
236,508
241,948
$ 462,155
$ 472,785
$ 483,658
$ 494,782
$ 506,162
$1,185,704
$1,212,974
$1,240,874
$1,269,413
$1,298,609
Source: Haynie & Company report dated February 11, 2000.
Appendix C contains the Historical and Forecasted Statements of Cash Receipts and
Disbursements and Accountants' Compilation Report (the "Report") prepared by Haynie &
57
Company, Certified Public Accounts and Management Consultants, Costa Mesa, California,
which provided the basis for the foregoing table. The Statements are compilations and the
historical information has not been audited. See the Report for other limiting conditions and
assumptions. Neither the City nor the Underwriters have verified the information or assumptions
in the Report and no assurance can be given as to the accuracy of the information set forth
therein or as to the ability of the Project to achieve the projected operating levels assumed
thereby.
Oversight Agent/Program Administrator
The City has engaged Urban Futures Incorporated ( "UFI ") to serve as the initial
Oversight Agent under the Indenture, the Loan Agreement and the Regulatory Agreement. UFI
has provided redevelopment and community development consulting services since 1979. For
the last 18 years, they have assisted communities in creating redevelopment project areas,
implementing specific redevelopment programs, overseeing and monitoring program
requirements including revenue verification and eligibility monitoring. UFI has assisted in the
conversion of five mobile home parks to resident or nonprofit ownership over the last three
years. UFI's familiarity with redevelopment law, low and moderate income housing
requirements, as well as mobile home park operations qualify them to serve as Oversight Agent.
THE CITY
The City is authorized under the Act to issue the Bonds as provided in the Indenture and
to loan the proceeds of the Bonds to the Borrower, as provided in the Loan Agreement. For
further information regarding the City, see "APPENDIX A— SUPPLEMENTAL
INFORMATION REGARDING THE CITY."
The Series A Bonds are not a debt of the City, the State of California or any of its
political subdivisions for purposes of any constitutional or statutory debt limitation or restriction,
nor in any event shall the Series A Bonds be payable out of funds or properties other than as
pledged pursuant to the Indenture.
RISK FACTORS
The following factors, which represent major risk factors that have been identified at this
time, should be considered along with all other information in this Official Statement by
potential investors in evaluating the Series A Bonds. There can be no assurance made that other
major risk factors will not become evident at any future rime. Potential investors are advised to
consider the following factors along with all other information in this Official Statement in
evaluating the investmenG quality of the Series A Bonds.
Series A Bonds Are Limited Obligations of the City
The Series A Bonds are special limited obligations of the City, payable solely from and
secured as to the payment of the interest on, and the principal of, and the redemption premiums,
if any, in accordance with their terms and the terms of the Indenture, from Pledged Revenues and
other funds as provided therefor in the Indenture. The Series A Bonds are not a debt of the City,
the State or any of its political subdivisions within the meaning of any constitutional or statutory
debt limitation, nor in any event shall the Series A Bonds be payable out of funds or properties
other than as described in the preceding sentence.
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Pledged Revenues consist primarily of payments to be made by the Borrower under the
Loan Agreement and Note. The obligations of the Borrower (or any future owner of the Project)
under the Loan Agreement and Note are not enforceable personally against the Borrower and
such obligations are secured only by the properties and liens specifically conveyed or
encumbered as security therefor, consisting of the Project. No representation or assurance can be
given that the Project will generate sufficient revenues to enable the Borrower to meet its
payment obligations under the Loan Agreement and Note. In the event that the Borrower
defaults in its obligations, payment of the principal of and interest on the Series A Bonds will be
payable from amounts on deposit in the Senior Bonds Debt Service Reserve Fund and from
amounts, if any, available in certain other funds held by the Trustee. See "THE INDENTURE"
herein.
Loan Payments Non - Recourse
The Borrower agrees to repay the Loan from Net Operating Revenues. The Loan is
secured by a pledge of Net Operating Revenues and a security interest in the Project pursuant to
the terms of the Deed of Trust. Neither the Borrower's directors, officers, employees and agents,
nor any of its other affiliates, has or is intended to have any liabilities under or in respect of the
Loan Agreement, the Indenture, the Note, the Deed of Trust, the Regulatory Agreement, or any
of the other documents or transactions contemplated by any of them.
Loan Payments Not Preference Proof
Payments by the Borrower on the Loan are not subject to aging requirements for purposes
of satisfying the preference - proofing requirements of federal bankruptcy laws. In the event of
bankruptcy of the Borrower, payments to Bondholders within 123 days (one year in certain
cases) prior to the date of such bankruptcy may be subject to preference restrictions.
Restrictions Under the Regulatory Agreement
Under the Regulatory Agreement, the Borrower is to rent not less than 20% of the Spaces
in the Project to Very Low Income Residents (all as defined in the Regulatory Agreement). The
monthly rental rate which the Borrower may charge Very Low Income Residents is also
restricted in some cases by the Regulatory Agreement, as is the rate at which rental rates for Very
Low Income Residents may be increased. See "THE REGULATORY AGREEMENT" herein.
These provisions place a limit on the rental rates for the Spaces, and thus may limit the Net
Operating Revenues available to pay debt service on the Bonds. See "THE REGULATORY
AGREEMENT." These restrictions have the effect of limiting the market for restricted Spaces in
the Project in that certain,6therwise eligible tenants are excluded on the basis of the restrictions,
and also limit the monthly rental and rental increases which may be charged for restricted
Spaces. In the event of an economic downturn, the "Median Income for the Area," on the basis
of which certain rent ceilings are to be calculated, is likely to decline, causing a decline in the
monthly rental which the Project is able to realize for certain restricted Spaces. See "THE
REGULATORY AGREEMENT" and "THE PROJECT" herein.
Risk of Taxability
The failure of the Borrower or the Management Agent to abide by the covenants and
conditions of either the Regulatory Agreement or the Loan Agreement may cause the interest on
the Series A Bonds to become includable for federal income tax purposes in the gross income of
holders of such Bonds, in some cases retroactive to the date of issuance of the Series A Bonds.
There is no provision in the Series A Bonds or the Indenture for an acceleration of the Series A
59
Bonds or the payment of additional interest in the event interest becomes so includable, and the
City is not liable for any claims or damages resulting from any such includability in gross
income. While failure to comply with the tax covenants of the Loan Agreement and the
Regulatory Agreement is an event of default which will entitle the City to accelerate the
Borrower's indebtedness and commence foreclosure proceedings, pursuit of such remedies is
subject to delays as a result of bankruptcy, limits on creditor's remedies and other practical
considerations. There can be no assurance that such remedies will be achieved or proceeds of
such remedies will be adequate to fund a redemption of all or part of the Series A Bonds
following the Borrower's noncompliance with such tax covenants, or that the City will be able to
compel compliance in a timely manner to avoid an event of taxability described above. See
"THE REGULATORY AGREEMENT" and "TAX MATTERS" herein.
In the event of foreclosure and sale of the Project, there can be no assurance that the
purchaser thereof will not render the Series A Bonds ineligible for tax- exempt status.
Conditions Which May Affect Borrower's Ability to Pay
Numerous conditions, which are not accurately predictable, could have an impact upon
the revenues and expenses of the Borrower and, as a result, upon its ability to make timely
payment under the Loan Agreement and the Note. In particular, the ability of the Project to
generate revenues and sufficient rental income to pay all interest on and principal of the Series A
Bonds as due will depend on maintaining a high occupancy rate, and sustaining the rental rates,
in the Project. Factors that may affect the ability of the Borrower to lease the mobile home sites
of the Project and thus generate sufficient income include the demand for mobile home facilities
in the market area, the availability and costs of other competing housing facilities and the ability
of potential residents to meet payments.
The ability of the Borrower to generate sufficient income in the future will also depend
upon other factors which cannot be predicted with any assurance. Such factors include general
and local economic conditions which may affect demand for mobile home units. Units such as
those which form the Project are subject to rising operating costs, fluctuating occupancy levels,
adverse economic conditions and changes in neighborhood preferences. The ability of the
Borrower to generate sufficient income will depend on its ability to lease the Project units
promptly and maintain occupancy.
The Appraisal. The Appraisal is based upon certain assumptions, limiting conditions,
certifications and de nitions set forth therein. An appraisal is only an estimate as to value as of
the specific date stated therein. As an estimate, an appraisal is not a measure of realizable value
and may not reflect the amount which would be received if the property which is the subject of
the appraisal is sold. The Appraisal should be read in its entirety for an understanding of the
assumptions and rationale which underlie its conclusions.
Leasing and Income Risks. The availability of sufficient operating income to pay the
obligation of the Borrower with respect to the Loan Agreement is subject to the ability of the
Borrower to establish appropriate rental rates for, and the continuing ability to rent units in, the
Project, subject to the limitations of the Regulatory Agreement. Any constraint on rental
increases due to regulatory (including, but not limited to, rent control) or market demand factors
that inhibit annual rent increases may adversely affect the Borrower's ability to cover expenses
and financing costs of the Project.
Projected Operating Results of the Project. The cash flow projections of the Project (see
APPENDIX — _HISTORICAL AND F RECASTED PROJECT RECEIPTS AND
DISBURSEMENTS) are based upon certain assumptions, limiting conditions, certifications and
.E
definitions as set forth under such captions. There can be no assurance that the projected results
contained therein will approximate actual results or that any projected results will continue
beyond the projection period.
Operation of the Project. The primary source of payment of the Loan are the Project
revenues available after payment of operating expenses of the Project. Accordingly, the
Bondholders are exposed to the risk that, if the expected operating cash flow is not achieved,
actual payments of the Borrower pursuant to the Loan Agreement may be insufficient to timely
pay all amounts due on the Loan. In the event that interest and principal are not paid with respect
to the Loan Agreement, or only partially paid, there will be insufficient Revenues to make
scheduled principal and interest payments to Bondholders and the Trustee may be required to
draw on amounts in the Senior Bonds Debt Service Fund to make up such deficiencies. Once
amounts in the Senior Bonds Debt Service Fund have been depleted, estimated payments of
principal and interest on the Bonds may be delayed or unpaid.
The availability of revenues of the Project to make payments under the Loan could be
adversely affected by a failure or inability to (i) continue to rent or lease the Project at the rental
rates expected by the Borrower, and (ii) to maintain the operating expenses and capital expenses
at or below the level expected by the Borrower.
Risks Associated with Operating Expenses. An extended period of inflation may cause
the rate of increases in operating expenses to outpace the ability to raise rents. In addition, any
underestimation by the Borrower in the operating expenses of the Project may materially affect
its projections of the operating income of the Project. The consequences of this risk are similar
to a deterioration in the base rental income and would adversely affect Project revenues. The
Borrower has committed no other resources outside of the revenues generated from the Project to
repay the Loan and to pay increased operating expenses.
Property reserves are an important consideration for long -term borrowers who will have
to replace major capital items to maintain the quality of the property over time. See "THE
INDENTURE— Revenue Fund" and "THE LOAN AGREEMENT — Repair and Replacement"
herein. The deterioration and replacement of capital items is not predictable with certainty, and
real estate properties such as the Project may encounter a periodic need for capital for
replacement and repair of capital items in excess of budgeted amounts.
In the event that additional capital is needed for the replacement of capital items, it is
likely that the Borrower will either have to seek additional debt capital from third party lenders
or pay for such capital replacement and improvement out of residual cash flow from the Project,
if any. The City has no obligation with respect to any operating, reserve or capital expenses of
the Project and no assurange can be given that such moneys will be obtained. If not, the viability
of the Project may be adversely affected over time.
Risks Associated with Other Expenses. To the extent there are any expenditures required
to maintain the Project that are not foreseen by the Borrower, any uninsured losses, or additional
property taxes due on the Project as a result of a change in the law, regulation or interpretation of
a court of competent jurisdiction, the only source of moneys to pay such expenses would be
additional resources available to the Borrower. The Borrower has pledged no assets, other than
the Project revenues, to make debt service payments and to pay for operating expenses.
Accordingly, the Borrower may be unwilling or unable to pay for such additional expenditures.
Risks Associated with the Management of the Project. A disruption in management
continuity may temporarily impact the operations of the Project. In addition, a new manager of
the Project may not have the same ability to realize rental increases or to contain operating
expenses as the current manager. If authorized compensation to the management agent proves to
61
be inadequate, the Borrower may have difficulty securing quality management. If no other
money than approved amounts are available to pay such increased costs, the quality and revenues
of the Project could be adversely affected.
The Deed of Trust. The Borrower has executed the Deed of Trust on the Project in favor
of the City and the Trustee to secure the Borrower's obligations under the Loan Agreement.
Because the Borrower may have limited financial assets, and because the Borrower is not
personally liable for the amounts owing under the Loan Agreement (other than the indemnity and
for certain fees as provided thereunder), if there is a default under the Loan Agreement, the
primary remedy of the Trustee and the City is to foreclose on the real and personal property
security granted pursuant to the Deed of Trust and related documents. All amounts collected
upon foreclosure of the Project pursuant to any of the Deed of Trust will be used to pay amounts
owing under the Loan Agreement pursuant to the provisions of such Deed of Trust.
Value of Project; Economic Feasibility
The economic feasibility of the Project depends in large part upon its being substantially
occupied. The Borrower is required by the Regulatory Agreement, among other things, to
maintain the Project as a "qualified residential rental housing project," and to have at least 20%
of the Spaces in the Project occupied (or treated as occupied) by persons whose income for
federal tax law purposes does not exceed 50% of area median gross income adjusted for family
size, as published by HUD. In addition, other income and rental rate restrictions apply. See
"THE REGULATORY AGREEMENT" and "RISK FACTORS — Restrictions Under the
Regulatory Agreement" herein. There can be no assurance that the Borrower will be able to rent
units to comply with these requirements or at rentals which will enable it to make timely
payments under the Loan Agreement and the Note.
There can be no assurance that the appraised value would be realized upon sale of the
Project. In the event of a forced sale of the Project due to economic distress, the amount realized
upon such distress sale would likely be less than the fair market value. Furthermore, there can be
no assurance that funds sufficient to pay the principal amount of the Series A Bonds at maturity
or earlier redemption could be obtained through the sale or refinancing of the Project.
The Borrower believes that proceeds from the foreclosure of the Project would be
sufficient to pay the principal of and interest on the Series A Bonds. Such payments will,
however, be additionally secured by the Senior Bonds Debt Service Reserve Fund and by certain
other funds held by the Trustee, if available.
Competing Facilities
The City may finance, own and operate other facilities and other facilities may be
financed, developed, constructed and operated by any party that could compete with the Project
for tenants. The existence of competing facilities could adversely affect occupancy and revenues
of the Project.
Risks of Ownership of Real Property
The Bondholders will be subject to the risks generally incident to an investment in real
estate, including, without limitation: (i) the uncertainty that the Project will produce sufficient
revenues to enable the Borrower to make timely payments pursuant to the terms of the Loan
Agreement; (ii) adverse changes in local market conditions, such as changes in the market value
of real property in the vicinity of the Project, the supply of or demand for competitive properties
in such area, and the market value of the Project in the event of sale or foreclosure; (iii) changes
62
in interest rates and the availability of financing moneys that may render any refinancing or sale
of the Project difficult, unattractive, or impossible; (iv) changes in real estate tax rates and other
operating expenses, governmental rules (including, without limitation, zoning laws) and fiscal
policies; and (v) natural disasters (including, without limitations, earthquakes and floods), which
may result in uninsured losses.
The Bondholders will be subject to the risk that the Project will be unable to attract and
retain tenants as a result of adverse changes affecting the Project, the local real estate market or
other factors, including the restrictions on the Project imposed under the Regulatory Agreement.
Such inability to attract and retain tenants would result in a decline in rental income and may
affect the ability and willingness of the Borrower to make timely payments due with respect to
the Loan Agreement. There can be no assurance that the Project will generate sufficient revenue
to cover operating expenses and meet required payments due under the Loan Agreement.
Residential real estate, including the Project, can be subject to adverse housing pattern
changes and uses, vandalism (resulting in extra security costs), vacancies, rent controls, rising
operating costs, and adverse changes in local market conditions, such as a decrease in demand for
residential housing due to a decline of the local economy and a decrease in employment.
Rationing or other restrictions with respect to the availability or use of utilities could
significantly affect the profitability of operating the Project. Similarly, governmental or
administrative entities may impose restrictions requiring structural alterations of or capital
improvements to residential buildings, resulting in significant additional costs to the Borrower
that the Borrower may be unwilling or unable to finance, and which would significantly impact
the Project's cash flows. If the local regulatory bodies having jurisdiction over the Project
restrict or limit rent increases imposed by the Borrower to offset increased costs, the Project's
cash flows may be reduced. Any future organization of the tenants of the Project could also
result in resistance against rent increases, in the form of rent strikes, litigation or other action. If
rental receipts after operating expenses (other than debt service) are insufficient to service the
debt with respect to the Loan, foreclosure and sale of the Project is possible. Some of the risks
mentioned in this subsection are more particularly described in the following subsections.
Environmental Risks
The Borrower knows of no environmental problems or liabilities in or on the real
property or on adjacent properties which would adversely affect the value of the Project as
security. Since certain environmental problems are hidden by time, nature, or both, it is possible
that there could exist soil or groundwater contamination on site, which at some point in time
might require remediation. However, the Environmental Site Assessment did not reveal any
evidence of significant soil or groundwater contamination.
In the event the Project is determined at some future time to require environmental
remediation, the result could be a substantial or total loss of market value. Further, under the
Comprehensive Environmental Response, Compensation and Liability Act ( "CERCLA "), the
owner or operator of property is potentially liable for the full amount of the costs of cleanup of
hazardous substances, and, in certain cases, secured creditors can incur liability as an operator by
participating or having the capacity to participate in the management of a facility prior to
foreclosure, and after foreclosure may have absolute liability as an owner.
Insufficient Insurance and Land Sale Proceeds
The Indenture requires that in the event of damage to, destruction of or a title defect
relating to the Project and the Improvements which the Borrower determines not to repair or
replace, the Borrower will notify the Trustee of such events and the Trustee shall promptly
63
exercise its remedies under the Deed of Trust and as soon as practicable, sell the real and
personal property acquired through or in lieu of such exercise. The proceeds together with any
Net Proceeds are to be used to redeem all or a pro rata share of the Series A Bonds, as described
in the Indenture, and then with any remaining funds to redeem Series B Bonds. The Borrower is
required to maintain casualty insurance only in the amount equal to the replacement value of the
Improvements (see the discussion under the heading "THE LOAN AGREEMENT "). In
addition, the Borrower could violate its covenant to maintain insurance by allowing the insurance
on the Project to lapse, or an insurance company providing such insurance could become
insolvent or otherwise not honor claims on policies. In such event, if such a loss occurs, a
default in payment of the Bonds would almost certainly result and, if such loss is substantial, a
non - payment of all or a portion of the Bonds could occur.
Based on current value of the real property comprising the Project, the Borrower expects
that there would be sufficient revenues available from the sale of the real and personal property
and Net Proceeds to redeem the Series A Bonds; however, if real property values decline, or the
Project can not be sold at an adequate price, the Net Proceeds may not be sufficient to redeem
Series A Bonds in a principal amount sufficient to reduce debt service to a level that can be
supported by the Revenues from the remaining Project and Improvements.
Neither the Indenture nor the Loan Agreement requires, and the Borrower does not intend
to obtain, earthquake insurance on the Project.
Enforceability and Bankruptcy
The remedies available upon a default are in many respects dependent upon regulatory
and judicial actions which are often subject to discretion and delay. Under existing laws and
judicial decisions, the remedies provided under the financing documents described herein may
not readily be available or may be limited. Recent revisions of the federal bankruptcy laws may
have an adverse effect on the ability of the Trustee to enforce its claim to the security granted by
the Deed of Trust. The bankruptcy court may also have the power to invalidate certain
provisions of the Loan Agreement and the Deed of Trust that make bankruptcy and related
proceedings by the Borrower an event of default thereunder. The various legal opinions to be
delivered concurrently with the delivery of the Series A Bonds and the aforesaid documents will
be qualified to the extent that the enforceability of certain rights related to the Series A Bonds is
subject to limitations imposed by bankruptcy, reorganization, insolvency or other similar laws
affecting the rights of creditors generally and by equitable remedies and proceedings generally.
Despite the subordinate position of the Series B Bonds, attempted enforcement by the Series B
Bondholders of the lien of the Series B Bonds upon the revenues of the Project could result in
delay of recovery by Series A Bondholders.
Anti - Deficiency Lawiof the State of California
Section 726 of the California Code of Civil Procedure provides (among other matters)
essentially that any suit to recover a debt or to assert other rights secured by a deed of trust on
real property must be an action to foreclose that deed of trust, thus prohibiting a direct action on
the debt or the exercise of other rights by the holder of that deed of trust (commonly called the
"one form of action rule "). This Section has been interpreted by the California courts to require a
lender to exhaust all collateral security on a debt in a single action and to limit a lender's right to
set -off. This Section also specifies the procedures for the sale of the encumbered property, the
application of proceeds, the availability in certain cases of a deficiency judgment, the limitation
on the amount thereof, and other related matters.
64
In the event of an action in violation of the one form of action rule, it is virtually certain
that the benefit of the real property security would be lost. Further, in the event that an action
were taken by the Trustee with regard to funds or other security other than with regard to the
application of funds pursuant to the Indenture other than the real property security prior to a
"trustee's sale" of the real property security (as discussed below) it is possible that the sanctions
contained in the one form of action rule would thereby be incurred.
Sections 2924 and 2924(c) of the California Civil Code require the following of certain
procedures by the holder of a deed of trust or mortgage before exercising a power of sale
included under a deed of trust or mortgage, which procedures are designed to protect the rights of
the borrower and certain other persons and under certain circumstances to reinstate the
obligations secured by such deed of trust. Section 2924(c) of the California Civil Code provides
that whenever the maturity of an obligation secured by a deed of trust is accelerated by reason of
a default in the payment of interest or of any installment of principal or other sum secured
thereby, the trustor and certain other entitled persons have the right, at any time within the period
remaining with the date of recordation of the notice of default until five business days prior to the
date of sale set forth in the notice of default if the power of sale under such deed of trust is to be
exercised or, otherwise, at any time prior to the entry of the decree of foreclosure, to cure such
default by paying the entire amount then due (including certain reasonable costs and expenses
incurred in enforcing such obligations, but excluding any amount that would not otherwise be
due but for such acceleration) and thereby reinstate such deed of trust and the obligations secured
thereby to the same effect as if no such acceleration had occurred.
California Code of Civil Procedure Section 580(d) prohibits the rendering of any
deficiency judgment after a trustee's sale. Paradoxically, California Civil Procedure Section
580(a) essentially limits the amount of a deficiency judgment after a trustee's sale to the
difference between the appraised value of the secured property sold and the sales price at the
trustee's sale. Although on their face these Code Sections do not limit the Trustee's rights to
recover a deficiency under the Note, at least with respect to the Borrower, since the Loan is non-
recourse, these Code Sections could limit or hamper the enforcement of certain rights of the
Bondholders since the combined effect of these Code Sections has been held to cut off the
subrogation rights of guarantors. Therefore, in effect, California courts have refused to enforce
guarantees where guarantors have lost their rights of subrogation through the secured party's
conduct of a trustee's sale.
Under California law, guarantees by corporate shareholders may not be given effect if the
corporation is found to be a mere instrumentality or "alter ego ". However, the mere fact that
guarantors are shareholders, officers or directors will not be grounds for applying anti - deficiency
protections absent a showing that adherence to a separate existence would promote an injustice
or fraud.
Section 9501 of the Uniform Commercial Code as adopted in California is intended to
facilitate the employment of remedies permitted under the Uniform Commercial Code with
regard to personal property used as security for a debt also secured by real property. Such
remedies would include a deficiency judgment after the sale of personal property security and
multiple, as opposed to unitary sales of security.
It is the opinion of leading California legal scholars that the employment of Code Section
9501 is subject to a commercial reasonableness test which could impair a creditor's right to
proceed against real property security after a sale or other action under the Uniform Commercial
Code. Therefore, prudence dictates that all collateral be sold in a single sale when a debt is
secured by mixed collateral. Any other course of action, such as a sale of personal property or
seizure of funds or the use of an offset of funds, might invoke the sanctions of Civil Code
Section 726.
65
The Deed of Trust provides for an absolute assignment of rents to the Trustee as the
assignee thereunder. Although these provisions are absolute in form, until the assignee perfects
its assignment by taking possession pursuant to the Indenture or by receivership, it may have no
claim to the rents as against either the Borrower or a junior lienor with a similar assignment of
rents clause who earlier perfected its own lien through possession or receivership. Further, it is
probable that a judgment appointing a receiver to enforce a rents and profits clause or the use of
such proceeds to service or satisfy a debt would invoke the sanctions of the one form of action
rule.
The provisions for penalties, late charges or additional interest in the event of a default by
the Borrower under the Loan Documents will be subject to factual determinations required under
California law in the evaluation of late payments and liquidated damages provisions.
TAX MATTERS
The tax- exempt status of the interest on the Bonds is based on the continued compliance
by the Borrower and the City with certain covenants contained in the Tax Certificate of the City
and the Borrower and Regulatory Agreement and the reporting of certain information to the
Department of the Treasury. These covenants relate generally to use and operation of the
Project, maintenance of use of the Project by tax- exempt users, compliance with the
requirements of Section 501(c)(3) of the Code, arbitrage limitations, rebate of certain excess
investment earnings to the federal government, restrictions on the amount of issuance costs
which can be financed with the proceeds of the Bonds and requirements regarding the timely and
proper use of proceeds of the Bonds. Failure to comply with any of these covenants may result
in the treatment of interest on the Bonds as taxable retroactive to the date of issuance.
In order to assist compliance with the Code, the City will require, among other things,
that the Borrower enter into the Regulatory Agreement. The Borrower will enter into the
Regulatory Agreement containing provisions designed to ensure compliance with certain
restrictions under the Code. In addition, the City and the Borrower have covenanted in the
Indenture and the Loan Agreement, as applicable, to comply with all applicable requirements of
the Code. In the event of noncompliance with such requirements, remedies available to the City
and/or the Bondholders may be limited by applicable provisions of law and may, therefore, be
inadequate to prevent the loss of the tax- exempt status of interest on the Bonds.
The Borrower has been determined by the Internal Revenue Service to be a tax- exempt
organization described in Section 501(c)(3) of the Code. The tax- exempt status of the Series A
Bonds depends upon the Borrower's maintenance of its status as an organization described in
Section 501(c)(3) of the,- Code. To maintain such status, the Borrower must conduct its
operations in a manner consistent with representations previously made to the IRS and with
current and future IRS regulations and rulings governing its tax- exempt status. In order to
maintain its tax- exempt status under federal law, the Borrower must not be operated to any
substantial degree for the benefit of private individuals or allow its earnings or assets to inure to
the benefit of private persons. If the Borrower should lose its status as an exempt organization, a
reduced amount of after -tax revenue would remain available to pay debt service on the Bonds,
and the interest on the Bonds could become taxable retroactive to the date of issuance of the
Bonds.
Developments affecting the federal or state tax- exempt status of nonprofit organizations
such as the Borrower may impose financial or other burdens on the operations of the Borrower.
For example, taxing authorities in certain jurisdictions have sought to impose or increase taxes
related to the property and operations of nonprofit organizations. In addition, compliance with
..
current and future regulations and rulings of the IRS could adversely affect the ability of the
Borrower to charge and collect revenues, finance or refinance indebtedness on a tax - exempt
basis, or otherwise generate revenues necessary to provide for payment of the Series A Bonds.
In the opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel, under
existing law and assuming continuing compliance by the City and the Borrower with certain
covenants in the documents relating to the Bonds and requirements of the Internal Revenue Code
of 1986, as amended (the "Code ") regarding the use, expenditure and investment of the Bond
proceeds and the timely payment of certain investment earnings to the United States Treasury,
interest on the Bonds is not includable in the gross income of the owners of the Bonds for the
purposes of federal income taxation. Failure to comply with such covenants in the documents
relating to the Bonds and requirements of the Code may cause interest on the Bonds to be
includable in gross income retroactively to the date of issue. Bond Counsel has not undertaken
to determine (or to inform any person) whether any actions taken (or not taken) or events
occurring (or not occurring) after the date of issuance of the Bonds may affect the tax status of
interest on the Bonds. The proposed form of opinion of Bond Counsel is set forth in Exhibit D.
Interest on the Bonds will not be treated as an item of tax preference in calculating the
alternative minimum taxable income of individuals or corporations; however, interest on the
Bonds will be included as an adjustment in the calculation of a corporation's alternative
minimum taxable income and may therefore affect such corporation's alternative minimum tax
liabilities.
The difference between the initial offering prices to the public (excluding bond houses
and brokers) at which the Series A Bonds are sold and the amount payable at maturity thereof
constitutes "original issue discount" for purposes of federal income taxes and State of California
personal income taxes. Such discount is treated as interest excluded from federal gross income
and exempt from State of California personal income taxes to the extent properly allocable to
each owner thereof subject to the limitations described in the paragraphs above. The original
issue discount accrues over the term to maturity of each such maturity of each Series A Bond on
the basis of a constant interest rate compounded on each interest or principal payment date (with
straightline interpolations between compounding dates). The amount of original issue discount
accruing during each period is added to the adjusted basis of such Series A Bonds to determine
taxable gain upon disposition (including sale, redemption, or payment at maturity) of such Series
A Bonds. The Code contains certain provisions relating to the accrual of original issue discount
in the case of purchasers of the Series A Bonds who purchase the Series A Bonds after the initial
offering of a substantial amount of such maturity. Owners of such Series A Bonds should
consult their own tax advisors with respect to the tax consequences of ownership of Series A
Bonds with original issue discount, including the treatment of purchasers who do not purchase in
the original offering, the allowance of a deduction for any loss on a sale or other disposition, and
the treatment of accrued driginal issue discount on such Series A Bonds under federal individual
and corporate alternative minimum taxes.
Bond Counsel expresses no opinion regarding other income tax consequences caused by
ownership of, or receipt of interest on, the Bonds.
In the further opinion of Bond Counsel, interest on the Bonds is exempt from State
personal income tax.
Ownership of tax- exempt obligations may result in collateral income tax consequences to
certain taxpayers, including, without limitation, financial institutions, property and casualty
insurance companies, certain foreign corporations doing business in the United States, certain S
Corporations with excess passive income, individual recipients of Social Security or Railroad
Retirement benefits and taxpayers that may be deemed to have incurred or continued
67
indebtedness to purchase or carry tax- exempt obligations. Prospective purchasers of the Bonds
should consult their tax advisors as to applicability of any such collateral consequences.
LEGAL OPINIONS
The opinion of the Bond Counsel firm of Quint & Thimmig LLP, San Francisco,
California, approving the validity of the Series A Bonds and stating that interest on the Series A
Bonds is excludable from gross income under Section 103 of the Code and such interest is also
exempt from personal income taxes of the State of California, will be rendered simultaneously
with the issuance of the Series A Bonds, in substantially the form shown in Appendix D hereto.
The legal opinion is only as to legality and tax- exemption, and is not intended to be nor is it to be
interpreted or relied upon as a disclosure document or an express or implied recommendation as
to the investment quality of the Series A Bonds.
Certain matters will be passed upon for the City by its Disclosure Counsel, Richards
Watson & Gershon, A Professional Corporation, Los Angeles, California, and for the Borrower
by its counsel, Goldfarb & Lipman, San Francisco, California.
Compensation for the services of Bond Counsel, Disclosure Counsel and the City's
financial advisor is contingent upon the sale and delivery of the Bonds.
Bonds.
OTHER PROFESSIONALS INVOLVED IN THE OFFERING
Urban Futures, Inc., Orange, California, is the City's financial advisor with respect to the
CONTINUING DISCLOSURE
Pursuant to a Continuing Disclosure Agreement between the Borrower and the Trustee,
acting as dissemination agent thereunder (the "Disclosure Agreement "), the Borrower, as an
"obligated person" under paragraph (0(10) of SEC Rule 15c2 -12 (the "Rule "), has agreed to
provide, or cause to be provided, to each nationally recognized municipal securities information
repository and any public or private repository or entity designated by the State as a state
repository for purposes of the Rule (each, a "Repository") certain annual financial information
and operating data, including its audited financial statements and for annual reports following the
initial annual report information of the type set forth in this Official Statement under the heading
"THE PROJECT — Projected Operating Results." In addition, the Borrower has agreed to
provide, or cause to be provided, to each Repository in a timely manner notice of the following
"Listed Events" if material: (1) principal and interest payment delinquencies; (2) non - payment
related defaults; (3) modifications to rights of Owners of Bonds; (4) Bond calls; (5) defeasances;
(6) rating changes; (7) adverse tax opinions or events adversely affecting the tax- exempt status of
the Series A Bonds; (8) unscheduled draws on the Senior Bonds Debt Service Reserve Fund
reflecting financial difficulties; (9) unscheduled draws on credit enhancements reflecting
financial difficulties; (10) substitution of credit or liquidity providers, or their failure to perform;
and (11) release, substitution or sale of property securing repayment of the Bonds. These
covenants have been made in order to assist the Underwriter in complying with paragraph (b)(5)
of the Rule.
The Borrower may amend the Disclosure Agreement, and waive any provision thereof,
by written agreement of the parties, subject to the provisions of Section 8 of the Disclosure
Agreement. In addition, the Borrower's obligations under the Disclosure Agreement shall
terminate upon the defeasance or payment in full of all of the Bonds. The provisions of the
Disclosure Agreement are intended to be for the benefit of the Owners and shall be enforceable
m
by the Trustee on behalf of such Owners, provided that any enforcement action by any such
person shall be limited to a right to obtain specific enforcement of the Borrower's obligations
under the Disclosure Agreement and any failure by the Borrower to comply with the provisions
thereof shall not be an event of default under the Indenture or the Loan Agreement.
Neither the Borrower, as a newly established entity, nor Augusta Homes has ever failed
to comply in all material respects with any previous undertakings with regard to the Rule.
LITIGATION
At the time of delivery of and payment for the Series A Bonds, the City will certify that
there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any
court or governmental or public entity pending or, to the best knowledge of the City, threatened
against the City (i) which affects or seeks to prohibit, restrain or enjoin the issuance of the Bonds
or the execution or delivery of the Indenture or the Loan Agreement, (ii) contesting the validity
of the Indenture or the Loan Agreement, the powers of the City to enter into or perform its
obligations under the Indenture or the Loan Agreement, or the existence or powers of the City, or
(iii) which, if determined adversely to the City, would materially impair the City's ability to meet
its obligations under the Indenture or the Loan Agreement or materially and adversely affect the
City's financial condition.
NO RATING
No rating has been applied for or granted by a nationally recognized rating agency in
connection with the Series A Bonds.
UNDERWRITING
The Series A Bonds are to be purchased by Miller & Schroeder Financial, Inc. and
Kinsell, Newcomb & De Dios, Inc. (collectively, the "Underwriters ") at an original issue
discount of $ and an Underwriters' discount of $ . The purchase agreement
pursuant to which the Series A Bonds are being purchased provides that the Underwriters will
purchase all of the Bonds if any are purchased, the obligation to make such purchase being
subject to certain terms and conditions set forth in the purchase agreement, to the approval of
certain legal matters by counsel and to certain other conditions.
The Underwriters may offer and sell Series A Bonds to certain dealers, banks and others
at a price lower than the offering price stated on the cover page hereof. The offering price may
be changed from time to time by the Underwriters.
m:
MISCELLANEOUS
All of the summaries of the Indenture and other agreements and documents contained
herein are made subject to the provisions of such documents respectively and do not purport to
be complete statements of any or all such provisions. Reference is hereby made to such
documents on file with the City for further information in connection therewith.
Any statements made in the Official Statement involving matters of opinion or estimates,
whether or not expressly stated, are set forth as such and not as representations of fact, and no
representation is made that any of the estimates will be realized.
City.
The preparation and distribution of this Official Statement have been authorized by the
CITY OF MOORPARK
By: /s/
City Manager
70
APPENDIX A
SUPPLEMENTAL INFORMATION
REGARDING THE CITY OF MOORPARK
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SUPPLEMENTAL INFORMATION
THE CITY OF MOORPARK
Ae following information concerning the City of Moorpark, California (the "City') and
surrounding areas is included for the purpose of supplying general information regarding the
community. The Bonds are not a debt of the City, the State of California (the State ") or any of its
political subdivisions, and neither the City, the State nor any of its political subdivisions is liable
therefor.
General Description
The City is a general law city incorporated on July 1, 1983. Located in the southeastern
part of Ventura County (the "County "), the City consists of approximately 12.44 square miles
and is located 50 miles northeast of downtown Los Angeles.
Government
The City adopted a Council - Manager form of government consisting of four Council
Members elected to four -year overlapping terms. The Mayor is elected at large for a two -year
term.
Population
The City's population, as of January 1, 1999 was approximately 29,600. An historical
summary of the City's population (as of January 1 of each year) is shown below.
City of Moorpark
1990 ....................
25,252
1995..............
27,100
1991 ....................
25,050
1996..............
27,650
1992 ....................
26,173
1997..............
28,550
1993 ....................
26,450
1998..............
29,400
1994 ....................
26,950
1999..............
29,600
Source: City of Moorpark- Public Relations Department and the Demographic Research Unit,
California State Department of Finance.
Assessed Valuation and Property Taxes
Property in the City is assessed by the County Assessor. All ad valorem taxes levied on
property in the City by ttie County, schools and special districts are due at the same time as and
are based on the same rolls as county taxes. The valuation of secured property is established as
of March 1 of each year and is equalized for purposes of establishing tax rates in August. Ad
valorem taxes on secured and utility property are payable on November 1 and March 1 of each
fiscal year and become delinquent on December 10 and April 10, respectively. Taxes on
unsecured property (personal property and leasehold) are due on April 13 of each year based on
the preceding year's tax rate.
A -1
A summary of the City's assessed valuation is as follows:
Source: California Municipal Statistics, Inc.
Secured Tax Charge and Delinquencies
After
Redevelopment Increment
$1,604,950,347
1,644,090,858
1,718,443,610
1,777,760,799
1,840,560,742
1,925,195,462
2,027,175,651
The City's secured tax charges and delinquencies for fiscal years 1993 -94 through
1997 -98 are as follows:
Before
Year
Redevelopment Increment
1 993 -94
$1,723,396,978
1994 -95
1,790,098,690
1995 -96
1,848,514,590
1996 -97
1,918,641,532
1997 -98
1,991,089,015
1998 -99
2,094,911,418
1999 -00
2,221,432,867
Source: California Municipal Statistics, Inc.
Secured Tax Charge and Delinquencies
After
Redevelopment Increment
$1,604,950,347
1,644,090,858
1,718,443,610
1,777,760,799
1,840,560,742
1,925,195,462
2,027,175,651
The City's secured tax charges and delinquencies for fiscal years 1993 -94 through
1997 -98 are as follows:
(1) 1 % General Fund levy. Delinquency reflects county -wide rate.
Source: California Municipal Statistics, Inc.
Commerce
Percent
Delinquent
June 30
4.73%
3.44
2.38
2.13
1.83
2.05
The number of establishments selling merchandise subject to sales tax and the valuation
of taxable transactions is presented in the following table.
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions
Retail Stores
Amount
Fiscal
Secured Tax
Delinquent
Year
Charge (1)
June 30
1993 -94
$1,014,558.85
$47,974.26
1994 -95
1,071,364.40
36,880.27
1995 -96
1,109,404.41
26,389.78
1996 -97
1,158,953.38
24,705.17
1997 -98
1,191,917.96
21,806.83
1998 -99
1,320,917.61
27,052.34
(1) 1 % General Fund levy. Delinquency reflects county -wide rate.
Source: California Municipal Statistics, Inc.
Commerce
Percent
Delinquent
June 30
4.73%
3.44
2.38
2.13
1.83
2.05
The number of establishments selling merchandise subject to sales tax and the valuation
of taxable transactions is presented in the following table.
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions
Source: State Board of Equalization.
(1) Through third quarter, 1998.
A -2
Retail Stores
Total All Outlets
No. of
Taxable
No. of
Taxable
Year
Permits
Transactions
Permits
Transactions
1993
132
$46,470,000
640
$ 76,373,000
1994
133
63,365,000
692
97,431,000
1995
133
64,086,000
665
103,082,000
1996
138
68,613,000
689
119,727,000
1997
139
77,312,000
687
125,312,000
1998(l)
154
56,339,000
693
88,463,000
Source: State Board of Equalization.
(1) Through third quarter, 1998.
A -2
Employment and Industry
The City is located in Ventura County and is part of the Ventura labor market area. The
distribution of employment in the Ventura labor market is as follows:
Employment by Industry
(1) Average employment reported for the years indicated by place of work excluding self -
employed, unpaid families and workers involved in labor disputes. Columns may not add
due to rounding.
(2) Annual average total labor force (and components) by location of residence; includes
workers involved in trade disputes.
(3) The unemployment rate is computed from unrounded data; therefore, it may differ from
rates using rounded figures.
(4) For July, 1999 only.
Source: State Development Department, Employment and Data Research.
A -3
Ventura Labor Market Area
(1)
1996
1997
1998
1999 (4)
Manufacturing
30,700
32,800
34,500
35,400
Wholesale & retail trade
59,100
59,200
60,000
61,200
Services
71,000
72,400
76,500
80,300
Government
43,400
43,300
43,000
44,200
Finance, insurance & real estate
11,700
12,600
13,500
13,600
Transportation & public utilities
9,700
9,700
10,300
10,400
Construction
10,500
11,100
12,300
15,500
Mining
1,700
1,500
1,300
1,100
Agriculture
17,500
17,300
16,700
15,500
Total All Industries
255,300
260,000
268,100
277,200
Total Civilian Labor Force (2)
377,800
381,500
387,400
403,800
Total Unemployment
26,900
25,000
21,600
23,400
Unemployment Rate (3)
7.1%
6.6%
5.6%
5.8%
(1) Average employment reported for the years indicated by place of work excluding self -
employed, unpaid families and workers involved in labor disputes. Columns may not add
due to rounding.
(2) Annual average total labor force (and components) by location of residence; includes
workers involved in trade disputes.
(3) The unemployment rate is computed from unrounded data; therefore, it may differ from
rates using rounded figures.
(4) For July, 1999 only.
Source: State Development Department, Employment and Data Research.
A -3
Major Employers
The following is a list of the major manufacturing and non - manufacturing employers in
the community area.
Employer
Kavlico
Litton Aero Products
Moorpark College
Egg City
SDI
Moorpark Unified School Dist.
Teledyne /Laars
KDI American Products
Axius /Auto- Shades
Aquaria
Terminal Data Corp.
Transit Mix
Accelerated Networks, Inc.
Hughes Market
Variflex
Allied Signal Bearing
Boething Tree Farms
Air Dry Corporation
General Optics
Durotech
City of Moorpark
Prudential Overall Supply
Semiconductor F-quipment Corp.
Iron Fabricators
CalMat Company
G. T. Water Products
M.G.I.
Conejo Ready Mix
Product/Service
Employment
Aerospace /Auto. Electronics
750
Navigation Systems Research
600
Education
600
Egg Ranch
460
Automotive Electronic Component Mfg.
400
Education
388
Machinery Manufacturer
300
Lighting Equipment
252
Automotive Accessory Wholesaler
250
Aquarium Product Mfg.
210
Information Management Systems
175
Concrete, Sand & Gravel
150
Data Communications Equipment
150
Major Supermarket
125
Sporting & Athletic Goods Mfg.
120
Aerospace Parts Mfg.
100
Wholesale Nursery
99
Dehydrator Mfg.
79
Industrial Optics
50
Mfg. /Airless Sprayer
50
City Government
50
Industrial Laundry
45
Electronic Equipment Mfg.
35
Welding/Metal Fabrication
30
Ready Mixed Concrete
28
Drainage Devices Mfg.
25
Machine Shop
25
Ready Mixed Concrete
24
Source: Employment Data and Research Employment Development Department, State of
California; City of Moorpark Records.
A -4
Construction Activity
The following table is a five year summary of the valuation of building permits
issued in
the City.
City of Moorpark
Building Permit Valuation
(Valuation in Thousands of Dollars)
1995 1996
1997
1998
1999 (1)
Residential
New single - dwelling
$27,161 $21,477
$14,098
$2,358
7,787
New multi - dwelling
4,621 6,496
7,272
650
0
Additions, alterations
422 0
0
0
0
Total Residential
$32,204 $27,973
$21,370
$3,008
7,787
No. of New Dwelling Units
Single- dwelling
130 110
66
11
31
Multi - dwelling
43 68
68
6
0
Total Units
173 178
134
17
31
Source: "California Building Permit Activity," Economic Sciences Corporation.
(1) Through September, 1999.
A -5
Direct and Overlapping Bonded Debt
The following table shows the direct and overlapping bonded debt for the City.
1999 -00 Assessed Valuation: $2,221,432,867
Redevelopment Incremental Valuation: 194,257 216
Adjusted Assessed Valuation: 2,027,175,651
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT:
Ventura County Flood Control District, Zone No. 3
Metropolitan Water District
Ventura County Waterworks District No. 1
Conejo Valley Unified School District
City of Moorpark
City of Moorpark Community Facilities District No 97 -1
City of Moorpark 1915 Act Bonds
TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT
OVERLAPPING GENERAL FUND OBLIGATION DEBT:
Ventura County General Fund Obligations
Ventura County Pension Obligations
Ventura County Superintendent of Schools Certificates of Participation
Ventura County Community College District Certificates of Participation
Moorpark Unified School District Certificates of Participation
Ventura County Library District Authority
TOTAL OVERLAPPING GENERAL FUND OBLIGATION DEBT
COMBINED TOTAL DEBT
Percent
ADDlicable Debt 10/1/99
8.317%
$ 285,689
0.225
1,300,579
100.000
180,000
0.003
900
100.000
0 (2)
100.000
7,630,000
100.000
2 430 000
$11!827! 1
Ratios to 1998 -99 Assessed Valuation:
DirectDebt ................... ............................... ..............:...........0.00%
Total Direct and Overlapping Tax and Assessment Debt .....0.56%
Ratios to Adjusted Assessed Valuation:
Combined Total Debt ... ............................... ..........................1.37%
State School Building Aid Repayable as of 6/30/99: $0
4.235% $ 2,557,093
4.235
5,710,686
4.235
137,849
4.238
663,459
90.932
5,451,373
6.829
52 925
$26,400,553 (3)
(1) Based on 1997 -98 ratios.
(2) Excludes issue to be sold.
(3) Excludes tax and revenue anticipation notes, revenue, mortgage revenue and tax allocation
bonds and non - bonded capital lease obligations.
Source: California Municipal Statistics, Inc.
A -6
Utilities
Gas is provided by Southern California Gas Company. Southern California Edison
Company provides electric power. Telephone service is provided by General Telephone.
Community Facilities
Three banks, medical groups, chiropractors, dentists, orthodontists, physical therapists,
podiatrists, doctors, and three hospitals are within 4 to 7 miles of the City and three pharmacies
are located in and around the City of Moorpark.
Educational facilities within the City include five elementary schools, one middle school,
one high school, one continuation high school and one community college. The University of
California, Los Angeles and the University of Southern California are within 50 miles of the
City.
Cultural and recreational activities in Moorpark include 20 churches and one library. The
City is also served by two daily newspapers, two cable television systems, seven neighborhood
parks, one community center, four golf courses and one dramatic theater.
A -7
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APPENDIX B
DEFINITIONS
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APPENDIX B
DEFINITIONS
The following are definitions of certain terms contained in the Indenture, the Loan
Agreement and the Regulatory Agreement and used in this Official Statement.
"Account" means an Account created and established by the Indenture.
"Accountant's Certificate" means a certificate or opinion signed by an independent
certified public accountant of recognized national standing or a firm or accountants of recognized
national standing, selected by the City upon consultation with the Borrower, who may be the
accountant or firm of accountants who regularly audit the books of the City.
"Act" means Chapter 8 of Part 5 of Division 31 of the Health and Safety Code of the
State of California, as amended and supplemented from time to time.
"Act of Bankruptcy" means any proceeding instituted under Title 11 of the United States
Code, entitled "Bankruptcy" as in effect now and in the future, or any successor statute, or other
applicable insolvency law by or against the Borrower.
"Adjusted Income" means the adjusted income of all persons who intend to occupy a
Space, calculated in the manner determined by the Secretary of the Treasury pursuant to Section
142(d)(2)(B) of the Code.
"Administration Agreement" means the Administration and Oversight Agreement, dated
as of March 1, 2000, by and between the Issuer and the Program Administrator.
"Administration Fee" means an amount to be retained by the Borrower from the
Operating Revenues equal to the amount set forth in the Indenture per month per space included
in the Project, subject to a consumer price based index form of adjustment annually on March 1,
commencing March 1, 2001, in accordance with the provisions of the Indenture.
"Administration Fund" means the Administration Fund created and established by the
Indenture.
"Area" means the Ventura, California Primary Metropolitan Statistical Area.
"Authorized Denominations" means $5,000 or any integral multiple thereof, as provided
in the Indenture.
"Authorized Officer" means the City Manager or any person designated in writing by the
City Manager to act as an Authorized Officer under the Indenture.
"Bond" or "Bonds" means any bond or bonds including the Series A Bonds and the Series
B Bonds, authorized and issued pursuant to the Indenture.
"Bond Counsel" means a nationally recognized law firm specializing in the area of tax -
exempt municipal finance.
"Bondowner" or "Owner" or "Owner of Bonds" or any similar term (when used with
respect to Bonds) means the registered owner of any Outstanding Bond or Bonds.
"Bond Register" means the registration books of the Trustee with respect to the Bonds.
"Bond Year" means a twelve -month period ending on March 15, except that the first
Bond Year shall begin on the date on which the Bonds are initially delivered and end on the next
succeeding March 15.
"Borrower" means Augusta Homes, a California non - profit public benefit corporation,
and permitted successors and assigns.
"Borrower Representative" means the person or persons at the time designated by the
Borrower to act on the behalf of the Borrower by written certificate furnished to the City, the
Oversight Agent, the Project Administrator and the Trustee containing the specimen signatures
of such person or persons and signed by the Borrower Representative. Such certificate may
designate an alternate or alternates.
"Business Day" means a day other than a Saturday, Sunday, legal holiday or day on
which the New York Stock Exchange is closed, on which banking institutions are not closed in
the State of California, or in any state in which the principal office of the Trustee is located.
"Certificate of Continuing Program Compliance" means the certificate with respect to the
Project to be filed by the Borrower with the City, the Program Administrator, and the Trustee
which shall be substantially in the form attached to the Regulatory Agreement.
"Closing Date" means the date when the Bonds are delivered to the Original Purchaser.
"Code" means the Internal Revenue Code of 1986, as amended, and the regulations in
effect thereunder.
"Continuing Disclosure Agreement" means that certain Continuing Disclosure Agreement
between the Borrower and the Dissemination Agent dated the Closing Date as originally
executed and as it may be amended from time to time in accordance with the terms thereof.
"Costs of Issuance" means all items of expense payable or reimbursable directly or
indirectly by the City relating to the authorization, issuance and sale of the Bonds, which
expenses shall include, but not be limited to, printing costs, costs of reproducing documents,
filing and recording fees, initial fees and charges of the Trustee and other Fiduciaries, legal fees
and disbursements, professional consultants, fees and disbursements, reimbursements to the City
and its agents for administrative, travel and overhead expenses, bond discount, underwriting fees
and other financing cost4 (if not otherwise provided for), fees and charges for execution,
transportation and safekeeping of Bonds, and all other costs, charges, fees and expenses in
connection with the foregoing.
"Cost of Issuance Fund" means the Cost of Issuance Fund established pursuant to the
Indenture.
"Cost of Project" means, to the extent authorized by the Code, the Regulations and the
Act, any and all costs incurred by the Borrower with respect to the acquisition, including,
without limitation, costs for the acquisition of property and all costs of financing, including,
without limitation, the cost of consultant, accounting and legal services, other expenses necessary
or incident to determining the feasibility of the Project, contractors' and developers' overhead and
supervisors' fees and costs directly allocable to the Project, administrative and other expenses
necessary or incident to the Project and the financing thereof (including reimbursement to any
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municipality, county or other entity for expenditures made, with the approval of the City, for the
Project), and all other costs approved by Bond Counsel.
"Coverage Ratio" means, for any period of time, (i) with respect to the Series A Bonds,
the ratio derived by dividing the sum of the Net Operating Revenues received by the City plus
the earnings on the Senior Bonds Debt Service Reserve Fund and the Series B Bonds Reserve
Fund by the annual debt service payable on the Series A Bonds; (ii) with respect to the Series B
Bonds, the ratio derived by dividing the Net Operating Revenues received by the City (after
provision for Series A Bonds debt service) by the annual debt service payable on the Series B
Bonds; and with respect to the Series A Bonds and the Series B Bonds, the ratio derived by
dividing the Net Operating Revenues received by the City plus the earnings in the Senior Bonds
Debt Service Reserve Fund and the Series B Bonds Reserve Fund and the debt service payable
on the Series A Bonds and Series B Bonds.
"Coverage Requirement Certificate" means the certificate filed by the Borrower as
required by the Loan Agreement.
"Counsel's Opinion" shall mean an opinion signed by a nationally recognized attorney or
firm of attorneys who may be selected by the City, and shall be acceptable to the Trustee. Any
such attorney may be in the regular employment of the City.
"County" means the County of Ventura.
"Debt Service Requirement" means, as of any date of calculation with respect to the
Bonds, the sum of (i) all interest due or to become due on such date on all Outstanding Bonds of
each series plus (ii) all Principal Installments due or to become due on such date on all
Outstanding Bonds of each series or, if no Principal Installment is due and payable on such date
on any Outstanding Bonds of each series, one -half of the Principal Installments, if any, due and
payable on all Outstanding Bonds of each series on the next succeeding Interest Payment Date.
"Deed of Trust" means the certain Deed of Trust with Assignment of Leases and Rents,
Security Agreement and Fixture Filing, executed as of the Closing Date, by the Borrower, which
secures the Borrower's obligations to repay the Loan and constitutes a lien on real property.
"Depository" means (a) initially, DTC, and (b) any other Securities Depositories acting as
Depository pursuant to the Indenture.
"Depository System Participant" means any participant in the Depository's book -entry
system.
"DTC" means Th6 Depository Trust Company, New York, New York, and its successors
and assigns.
"80% household" has the meaning given such term in the Affordable Housing
Agreement.
"Event of Default" means, with respect to the Indenture, a Senior Bonds Event of Default
or a Series B Bonds Event of Default, as set forth in the Indenture; and, with respect to the Loan
Agreement, an Event of Default as described in the Loan Agreement.
"Fees and Charges" means all fees and charges authorized to be received by the City from
the Borrower pursuant to the terms and provisions of the Loan Agreement for the purpose of
paying the City Annual Fee and the fees and expenses of the Fiduciaries.
"Fiduciary" means the Trustee, each Paying Agent, the Rebate Analyst, the Program
Administrator and the Oversight Agent.
"Fiscal Year" or "fiscal year" means the twelve -month period ending on June 30 or such
other fiscal year of the City which may be adopted.
"Fund" means a fund created and established by the Indenture.
"Generally Accepted Accounting Principles" or "GAAP" means the uniform accounting
and reporting procedures set forth in publications of the American Institute of Certified Public
Accountants or its successor and the Governmental Accounting Standards Board or its successor,
or by any other generally accepted authority on such procedures, and includes, as applicable, the
standards set forth by the Financial Accounting Standards Board or its successor.
"Government Obligations" means bonds or other obligations which as to principal and
interest constitute direct obligations of the United States of America and which are not subject to
redemption prior to their maturity at the option of any person other than the holder thereof.
"Improvements" means, as of the Closing Date or at any time thereafter, any structures
(other than mobile homes not owned by the Borrower), site improvements, facilities and fixtures
located on the Property.
"Income Certification" means the Income Computation and Certification attached to the
Regulatory Agreement.
"Indenture" means the Indenture of Trust, dated as of March 1, 2000, as from time to time
amended or supplemented by Supplemental Indentures in accordance with the terms and
provisions of the Indenture.
"Information Services" means Financial Information, Inc.'s "Daily Called Bond Service ",
30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Editor; Kenny
Information Services' "Called Bond Service," 65 Broadway, 16th Floor, New York, New York
10006; Moody's Investors Service "Municipal and Government," 5250 77 Center Drive, Suite
150, Charlotte, North Carolina 28217, Attention: Called Bond Department; Standard & Poor's
Rating Group "Called Bond Record," 25 Broadway, 3rd Floor, New York, New York 10004;
and, in accordance with then current guidelines of the Securities and Exchange Commission,
such other addresses and/or such other services providing information with respect to called
bonds as the City may designate in a written request delivered to the Trustee.
"Interest Payment Date" means March 15 and September 15 of each year, commencing
September 15, 2000, in which interest on any Bonds is due and payable.
"Loan" means the loan made by the City, pursuant to the Loan Agreement, to the
Borrower with respect to the Project and secured by the Deed of Trust with respect to the Project.
"Loan Agreement" means the Loan Agreement dated as of March 1, 2000, by and among
the Borrower, the City and the Trustee.
"Loan Documents" means the Loan Agreement, the Note and the Deed of Trust, as each
item may be amended and supplemented from time to time.
"Maximum Annual Debt Service" means at any point in time, with respect to the Bonds
then Outstanding, the maximum amount of principal (assuming sinking fund payments) and
interest becoming due in the then current or any future Bond Year.
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"Median Income for the Area" means the median income for the Area as most recently
determined pursuant to Section 142(d)(2)(B) of the Code.
"Net Operating Revenues" means Operating Revenues less the Operation and
Maintenance Costs during such fiscal year or period.
"Net Proceeds" means any proceeds resulting from the City's enforcement of its rights
under the Deed of Trust, insurance or condemnation proceeds paid with respect to the Project
which are available after payment therefrom of all expenses incurred in the collection thereof.
"Note" means the promissory note executed by the Borrower in accordance with the Loan
Agreement.
"Officer's Certificate" means a certificate executed by an Authorized Officer.
"Operating Revenues" means, for any Fiscal Year or other period, all rents, income,
receipts, and other revenues derived by the Borrower arising from the operation of the Project,
including rental income from mobile home spaces, determined in accordance with Generally
Accepted Accounting Principles and all other money howsoever derived by the Borrower from
the operation of the Project or arising from the Project, but not including resident security
deposits.
"Operation and Maintenance Costs" means, for any fiscal year or other period, the
reasonable and necessary costs and expenses of operating the common areas of the Project and of
managing and repairing and other expenses necessary to maintain and preserve the common
areas of the Project in good repair and working order, calculated in accordance with Generally
Accepted Accounting Principles, including, but not limited to, (a) utility services supplied to the
Project, which may include, without limitation, janitor service, security, power, gas, telephone,
light, heating, water and all other utility services, (b) permitted compensation to the Management
Agent, salaries and wages of employees, payments to employee retirement systems, fees of
auditors, accountants, attorneys or engineers, and (c) all other reasonable and necessary costs of
the Borrower or charges required to be paid by it related to the operation and maintenance of the
common areas of the Project, including, but not limited to, costs of insurance and property taxes,
if any, but excluding in all cases (i) depreciation, replacement and obsolescence charges or
reserves therefor, (ii) amortization of intangibles or other bookkeeping entries of a similar nature,
(iii) costs of capital additions, replacements, betterments, extensions or improvements to the
common areas of the Project, which under Generally Accepted Accounting Principles are
chargeable to a capital account or to a reserve for depreciation, (iv) debt service on the Loan, and
(v) the amount deposited in the Administration Fund.
"Original Purchaser" means Miller & Schroeder Financial, Inc. and Kinsell, O'Neal,
Newcomb & De Dios, Inc.
"Outstanding," when used with reference to an applicable series of Bonds, means, as of
any date, Bonds of such series theretofore or then being delivered under the provisions of the
Indenture, except: (i) any Bonds of such series canceled by the Trustee or any Paying Agent at or
prior to such date, (ii) Bonds of such series for the payment or redemption of which moneys
equal to the Principal Amount or Redemption Price thereof, as the case may be, with interest to
the date of maturity or redemption date, shall be held by the Trustee or the Paying Agent in trust
(whether at or prior to the date of maturity or redemption date), provided that if such Bonds are
to be redeemed, notice of such redemption shall have been given as in the Indenture provided or
provision satisfactory to the Trustee shall have been made for the giving of such notice, (iii)
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Bonds in lieu of or in substitution for which other Bonds shall have been delivered pursuant to
the Indenture, and (iv) Bonds deemed to have been paid as provided in the Indenture.
"Oversight Agent" means, initially, Urban Futures Incorporated or any successor thereto,
which entity shall also act as the initial Oversight Agent under the Administration Agreement.
"Participants" mean those broker - dealers, banks and other financial institutions from time
to time for which DTC holds Bonds as securities depository.
"Participating Underwriter" has the meaning ascribed thereto in the Continuing
Disclosure Agreement.
"Paying Agent" means the Trustee, acting as paying agent, or any other bank, trust
company or national banking association designated or appointed pursuant to the Indenture to act
as a paying agent for the Bonds, and each successor or successors and any other bank, trust
company or national banking association at any time substituted in its place pursuant to the
Indenture.
"Permitted Encumbrances" means, as of any particular time: (a) liens for general ad
valorem taxes and assessments, if any, not then delinquent; (b) the Deed of Trust; (c) the
Regulatory Agreement; (d) the Second Deed of Trust; (e) the Affordable Housing Regulatory
Agreement; (f) any right or claim of any mechanic, laborer, materialman, supplier or vendor filed
or perfected in a manner prescribed by law after the Closing Date; (g) easements, rights of way,
mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions
which exist of record as of Closing Date and which, in the opinion of the Oversight Agent, will
not materially impair the use of the Project as contemplated in the Regulatory Agreement and the
Accord; and (h) easements, rights of way, mineral rights, drilling rights and other rights,
reservations, covenants, conditions or restrictions established following the date of recordation of
the Deed of Trust and to which the City and the Trustee consent in writing.
"Pledged Revenues" means Revenues but excluding therefrom, amounts on deposit in the
Repair and Replacement Fund, the Administration Fund and the Rebate Fund.
"Prepayment" means any moneys received or recovered by the City representing any
voluntary payment of principal of or interest (including any penalty, fee, premium, or other
additional charge for Prepayment which may be provided by the terms of the Deed of Trust) on
the Loan prior to the scheduled payments of principal and interest called for by such Loan.
"Principal Amount" means, with respect, to any Bond and at any date of computation, the
stated principal amount thereof.
"Principal Installment" means, as of any date of computation, the amount payable in any
Bond Year on account of: (i) the Principal Amount of Bonds of a particular series maturing in
such Bond Year net of the aggregate of Sinking Fund Installments, if any, established and paid
for in the prior Bond Years with respect to the Bonds of such series; plus (ii) the amount of any
Sinking Fund Installments due in such Bond Year with respect to Bonds of such series.
"Principal Payment Date" means March 15 in each year, commencing March 15, 2001.
"Program Administrator" means, initially, the City, and thereafter any successor Program
Administrator under the Administration and Oversight Agreement.
"Program Administrator's Fee" means such amount to be paid to the Program
Administrator pursuant to the Administration Agreement. So long as the Program Administrator
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shall be the City, the City shall receive the City Annual Fee and shall not charge a separate
Program Administrator's Fee.
"Project" shall consist of the Property and the Improvements.
"Project Fund" means the Project Fund established pursuant to the Indenture and
administered under and pursuant to the Loan Agreement.
"Property" means real properties commonly known as the Villa Del Arroyo Mobile Home
Park, located within the City, all as more particularly described in the Regulatory Agreement.
"Qualified Investments" means and includes any of the following, if and to the extent the
same are at the time contracted for, made or purchased legal for investment of City funds:
(a) Cash (insured at all times by the Federal Deposit Insurance Corporation or
otherwise collateralized with obligations described in paragraph (b) below), and if not so
insured or collateralized, then held by a Fiduciary which is rated by all Rating Agencies
at a level sufficient to maintain the ratings or shadow ratings of all Rating Agencies in
any of the three highest ratings categories (without regard to modifiers); or
(b) Direct obligations of (including obligations issued or held in book entry form
on the books of) the Department of Treasury of the United States of America, or any
obligations of the Resolution Trust Corporation which are unconditionally guaranteed by
the Department of the Treasury of the United States of America;
(c) Obligations of any of the following federal agencies which obligations
represent a pledge of the full faith and credit of the United States of America:
- Export Import Bank
- Farm Credit System Financial Assistance Corporation
- General Services Administration
- Government National Mortgage Association (GNMAs)
- Federal Housing Administration
- Any other agency or instrumentality of the United States of America
created by act of the United States Congress (the "Government Sponsored Agencies ");
provided that the obligations of such Government Sponsored Agencies are
unconditionally guaranteed as to the full and timely payment of principal and interest by
the United States of America;
(d) Senior debt obligations rated by one of the Rating Agencies in any of the
three highest ratings categories (without regard to modifiers) issued by Fannie Mae, the
Federal Home Loan Mortgage Corporation ( "FHLMCs ") or any other Government
Sponsored Agencies:
(e) U.S. dollar denominated deposit accounts, federal funds and banker's
acceptances with domestic commercial banks (including those of the Trustee) having at
least $25,000,000 in capital and surplus, and which have a rating on the bank's short term
certificates of deposit on the date of purchase by all Rating Agencies in any of the three
highest ratings categories (without regard to modifiers) and maturing no more than 360
days after the date of purchase;
(f) Commercial paper which is rated at the time of purchase by one of the
Rating Agencies in any of the three highest ratings categories (without regard to
modifiers) and which matures not more than 270 days after the date of purchase;
(g) Investments in a money market fund where such fund: (1) is registered
under the Investment Company Act of 1940, (2) maintains a constant net asset value per
share, and (3) is rated by all Rating Agencies in any of the three highest ratings categories
(without regard to modifiers), including funds for which the Trustee or its affiliates and
subsidiaries derive a fee for investment advisory or other services, including the U.S.
Trust Money Market Fund;
(h) Corporate debt obligations which have a fixed par value and/or whose
terms provide for a fixed dollar amount payable at maturity or earlier redemption;
provided that such obligations are rated at time of purchase by one of the Rating
Agencies in any of the three highest ratings categories (without regard to modifiers);
(i) Investment agreements entered into with an entity whose senior unsecured
long term obligations, other senior long term obligations or claims - paying ability or
whose payment obligations are guaranteed by an entity whose senior unsecured long term
obligations, other senior long term obligations or claims - paying ability are rated by any
of the Rating Agencies in any of the three highest ratings categories (without regard to
modifiers) provided, however, that if the rating of any such entity is downgraded by
either S &P or Moody's below "AA -" or "Aa3", respectively, the provider shall, at its
option, within ten (10) days of receipt of publication of such downgrade, either (1)
collateralize the investment agreement by delivering or transferring in accordance with
applicable state and federal laws (other than by means of entries on the Provider's books)
to the Trustee or a third party acting solely as agent therefor (the "Custodian") collateral
free and clear of any third -party liens or claims the market value of which collateral is
maintained at levels and upon such conditions as would be acceptable to S &P and
Moody's to maintain and "A" rating in an "A" rated structured financing (with a market
value approach) with weekly valuations, but in no event at a level less than 104 %; or (2)
repay the principal of an accrued but unpaid interest on the investment. Should collateral
not be pledged (or during the term of the investment agreement restored) to the required
levels, the Trustee will have the right to immediately withdraw funds without penalty or
breakage fee; notwithstanding the foregoing, should the provider's rating by either S &P
or Moody's be withdrawn or suspended or falls below "A -" or "A3 ", respectively, the
provider must, at the direction of the City or the Trustee, within 10 days of receipt of such
direction, repay the principal of and accrued but unpaid interest on the investment, in
either case with no penalty or premium to the Trustee;
0) Repurchase agreements which satisfy the following criteria: (1) the
counterparty is rated by all Rating Agencies in any of the three highest ratings categories
(without regard to modifiers); (2) the term of the agreement must be less than one year, or
if longer, shall be terminable upon demand by the City, (3) the securities covered by the
agreement may include only Government Obligations or obligations of Government
Sponsored Agencies unconditionally guaranteed by the United States; (4) the form of the
agreement must be the PSA Master Repurchase Agreement; and (5) the market value of
the securities covered by the agreement shall be no less than 102% of the amount
invested in the agreement, which market value must be redetermined on at least a
monthly basis; and
(k) Other financial investment vehicles approved in writing prior to purchase
by an Authorized Officer of the City;
provided that all of the above - described investments must be limited to those instruments that
have a predetermined fixed dollar amount of principal due at maturity that cannot vary or change.
If the investments described above are rated, such investments shall not have an "r" highlighter
affixed to its rating. Interest on the investments shall be tied to a single interest rate index plus a
single fixed spread, if any, and move proportionately with such index.
"Qualified Project Period" means the period as defined in Section 142(d)(2) (A) of the
Code; provided, such period shall not be shorter than the period ending 30 years from the
execution date of the Regulatory Agreement and is subject to extension in accordance with the
Regulatory Agreement.
"Qualified Residents" means residents who are Very Low Income Residents.
"Qualified Space" means a Very Low Income Space.
"Rating Agencies" means any Standard & Poor's Ratings Services, a division of
McGraw -Hill Companies, Inc., or Moody's Investors Service, Inc., and such others as may be
designated by the City from time to time.
"Rebatable Arbitrage" means the amount (determinable as of the last day of each fifth
Bond Year and upon retirement of the last Bond Outstanding) of arbitrage profits payable to the
United States at all times and in the amounts specified in Section 148(f) of the Code and any
applicable Regulations.
"Rebate Analyst" means the entity engaged by the Borrower or the City to compute the
Rebatable Arbitrage annually pursuant to the Indenture.
"Rebate Fund" means the Rebate Fund created and established by the Indenture.
"Rebate Regulations" means those final, temporary, and proposed Treasury Regulations
promulgated under Section 148(f) of the Code.
"Regulations" means the Income Tax Regulations promulgated or proposed under the
Code by the Department of the Treasury, as the same may hereafter be amended, including
regulations promulgated by the Department of the Treasury to implement the requirements of
Section 148 of the Code.
"Regulatory Agreement" means the Regulatory Agreement and Declaration of Restrictive
Covenants, dated as of March 1, 2000, by and among the City, the Trustee and the Borrower.
"Repair and Replacement Fund" means the Repair and Replacement Fund established
pursuant to the Indenture.
"Representation Letter" means the representation letter from the City to DTC.
"Required Rebate Deposit" means an amount determinable as of the end of each fifth
Bond Year and as of the date of retirement of the last Bond, which when added to amounts then
on deposit in the Rebate Fund, if any, equals the aggregate amount of Rebatable Arbitrage for the
Bonds less the amount of Rebatable Arbitrage theretofore paid to the United States with respect
to the Bonds, if any.
"Residual Net Proceeds" shall mean (i) so long as the Series A Bonds shall remain
Outstanding, such Net Proceeds as are available after redeeming all the then Outstanding Series
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A Bonds, and (ii) after giving effect to such redemption as provided in (i), all such Net Proceeds
which would have been available for the redemption of Series A Bonds.
"Residual Prepayments" means (i) so long as the Series A Bonds shall remain
Outstanding, such Prepayments as are available after redeeming all the then Outstanding Series
A Bonds, and (ii) after giving effect to such redemption as provided in (i), all such Prepayments
which would have been available for the redemption of Series A Bonds.
"Residual Revenues" means (i) so long as the Series A Bonds shall remain Outstanding,
such Pledged Revenues as are deposited in the Series B Bonds Debt Service Fund, and (ii) on
and after such date the Series A Bonds are no longer Outstanding, all such Pledged Revenues
which would have been available for the payment of principal of and interest on the Series A
Bonds.
"Revenue Fund" means the Revenue Fund created and established by the Indenture.
"Revenues" means (i) Net Operating Revenues; (ii) Prepayments; (iii) the proceeds of any
insurance, including the proceeds of any self - insurance covering loss relating to the Project;
provided, however, that the Net Proceeds of any public liability insurance, casualty insurance or
title insurance required to be maintained pursuant to the Loan Agreement shall be applied as
specified in the Loan Agreement and the Indenture; (iv) all amounts on hand from time to time in
the funds and accounts established by the Trustee under the Indenture; (v) all proceeds of rental
interruption insurance policies, if any, carried with respect to the Project pursuant to the Loan
Agreement; (vi) any proceeds derived from the exercise of remedies under a Deed of Trust; and
(vii) any additional property that may from time to time, by delivery or by writing of any kind,
be subjected to the lien of the Indenture by the City or by anyone on its behalf, subject only to
the provisions of the Indenture.
"Securities Depositories" means The Depository Trust Company, 711 Stewart Avenue,
Garden City, New York 11530, Fax -(516) 227 -4039 or 4190; Midwest Securities Trust
Company, Capital Structures -Call Notification, 440 South LaSalle Street, Chicago, Illinois
60605, Fax -(312) 663 -2343; Philadelphia Depository Trust Company, Reorganization Division,
1900 Market Street, Philadelphia, Pennsylvania 19103, Attention: Bond Department, Fax -(215)
496 -5058; and, in accordance with then current guidelines of the Securities and Exchange
Commission, such other addresses and/or such other securities depositories as the City may
designate in a written request of the City delivered to the Trustee.
"Serial Bonds" means all Series A Bonds not constituting Term Bonds.
"Senior Bonds Debt Service Fund" means the Senior Bonds Debt Service Fund created
and established by the Indenture.
"Senior Bonds Debt Service Reserve Fund" means the Senior Bonds Debt Service
Reserve Fund created and established by the Indenture.
"Senior Bonds Debt Service Reserve Fund Requirement" means, as of any date of
determination by the City, an amount equal to Maximum Annual Debt Service on the Series A
Bonds.
"Senior Bonds Event of Default" means each of the following events: (i) the City shall
fail to make payment of the principal or Redemption Price of, or Sinking Fund Installment on,
any Series A Bond from the Series A Bond Trust Estate after the same shall become due,
whether at maturity or upon call for redemption, or otherwise; or (ii) the City shall fail to make
payment of interest on any Series A Bond from the Series A Bond Trust Estate when and as the
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same shall become due; or (iii) the City shall fail or refuse to comply with the provisions of the
Act or shall default in the performance or observance .of any other of the covenants, agreements
or conditions on its part in the Indenture, any Supplemental Indenture, or in the Series A Bonds
contained, and such default shall continue for a period of ninety (90) days after written notice
thereof by the Trustee or the Owners of not less than five percent (5 %) in Principal Amount of
the Outstanding Series A Bonds.
"Series A Bond Redemption Fund" means the Series A Bond Redemption Fund created
and established by the Indenture.
"Series A Bond Trust Estate" means all proceeds, Funds, Accounts, Revenues,
Prepayments, the Loan, the Loan Agreement, the Deed of Trust, rights, interests, collections, and
other property pledged to the payment of any Series A Bonds pursuant to the Indenture and in the
granting clauses of the Indenture.
"Series B Bonds Debt Service Fund" means the Series B Bonds Debt Service Fund
created and established by the Indenture.
"Series B Bonds Event of Default" means each of the following events: (i) the Residual
Revenues are not applied to the payment of the principal of, Redemption Price of, or Sinking
Fund Installment on, any Series B Bonds after the same shall become due, whether at maturity or
upon call for redemption or otherwise, to the extent of such Residual Revenues available; or (ii)
the Residual Revenues are not applied to the payment of interest on any Series B Bonds when
and as the same shall become due to the extent of such Residual Revenues available; or (iii) the
City shall default in the performance or observance of any other of the covenants, agreements, or
conditions on its part in the Series B Bonds contained, and such default shall continue for a
period of ninety (90) days after written notice thereof by the Trustee or the Holders of not less
than five percent (5 %) in Principal Amount of the Outstanding Series B Bonds; or (iv) the City
shall fail to pay the principal of (including any deferred targeted mandatory sinking fund
redemption amount) or interest on the Series B Bonds on the final maturity date thereof.
"Series B Redemption Fund" means the Series B Bond Redemption Fund created and
established by the Indenture.
"Series B Bonds Trust Estate" means all proceeds, Funds, Accounts, Residual Revenues,
Residual Net Proceeds, Residual Prepayments, rights, interests, collections, and other property
pledged to the payment of any Series B Bond pursuant to the Indenture and the granting clauses
of the Indenture.
"Sinking Fund Installment" means the amount required to be applied by the City to the
payment of the principal ^portion of the Redemption Price of Term Bonds (other than at the
option or election of the City) on any one date as specified in the Indenture.
"Space" means a mobile home space within the Project upon which a mobile home may
be placed.
"State" means the State of California.
"Supplemental Indenture" means any indenture amendatory of or supplemental to the
Indenture adopted by the City in accordance with the Indenture.
"Surplus Fund" means the Surplus Fund created and established by the Indenture.
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"Tax Certificate" means that certain certificate of the City and the Borrower executed on
the Closing Date with respect to the Bonds.
"Term Bonds" means the Series A Bonds maturing on March 15, 2030.
"Trustee" shall mean the bank or trust company or national banking association appointed
pursuant to the Indenture to act as trustee, and its successor or successors and any other bank or
trust company or national banking association at any time substituted in its place pursuant to the
Indenture.
"Trustee Fee" shall have the meaning set forth in the Indenture.
"Trust Estate" means Revenues and all rights, title and interest of the Borrower or the
City in the Project as provided in the Deed of Trust and other property pledged to the payment of
any Bonds in the granting clauses of the Indenture.
"Very Low Income Residents" means individuals or families with an Adjusted Income
which does not exceed the amount promulgated by the U.S. Department of Housing and Urban
Development for very low income households for the Area as adjusted for household size as set
forth below. In no event, however, will the occupants of a Space be considered to be Very Low
Income Residents if all the occupants are students, as defined in Section 151 (c)(4) of the Code,
as such may be amended, no one of which is entitled to file a joint federal income tax return.
Currently, Section 151(c)(4) defines a student as an individual enrolled as a full -time student
during each of 5 calendar months during the calendar year in which occupancy of the unit begins
at an educational organization which normally maintains a regular faculty and curriculum and
normally has a regularly enrolled body of students in attendance or is an individual pursuing a
full -time course of institutional on -farm training under the supervision of an accredited agent of
such an educational organization or of a state or political subdivision thereof.
Household Size
Adjustment
1
70%
2
80%
3
90%
4
100%
5
108%
6
116%
7
124%
8
132%
"Very Low Income Spaces" means the Spaces in the Project designated for occupancy by
Very Low Income Residents pursuant to the Regulatory Agreement.
B -12
APPENDIX C
HISTORICAL AND FORECASTED
PROJECT RECEIPTS AND DISBURSEMENTS
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APPENDIX D
FORM OF OPINION OF BOND COUNSEL
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APPENDIX E
APPRAISAL
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APPENDIX F
FORM OF
CONTINUING DISCLOSURE AGREEMENT
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APPENDIX G
AUGUSTA HOMES
CONSOLIDATED FINANCIAL STATEMENTS
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