HomeMy WebLinkAbout2002-05-14; City Council; 16749; Santa Fe Ranch Apts Revenue Refunding BondsCITY OF CARLSBAD -AGENDA BILL
AB# 16,749 E: AUTHORIZATION TO EXECUTE AND DELIVER DEPT. H
AMENDED DOCUMENTS AND TAKE RELATED
CARLSBAD MULTIFAMILY HOUSING REVENUE
APARTMENTS.
MTG, 5-14-02 ACTIONS WITH RESPECT TO $15,92o,ooa CITY OF
DEPT. HlRED REFUNDING BONDS - SANTA FE RANCH ..
RECOMMENDED ACTION:
Adopt City Council No. 2002-143 authorizing the execution and delivery of amended documents and
related actions with respect to the $15,920,000 City of Carlsbad Multifamily Housing Revenue
Refunding Bonds for the Santa Fe Ranch Apartments.
ITEM EXPLANATION:
Backaround:
In 1985, the City Council issued Multifamily Housing Revenue Bonds to provide financing for a 320-unit
multifamily residential rental project, known as the Santa Fe Ranch Apartments (originally known as the
Park La Costa Apartments), located at 3393 Calle Cancuna in southwestern portion of the City. The
subject apartment units. The incentive to the City to participate in this project was the restriction of
proceeds of the bonds were used to make a loan to La Costa Partners to fund the construction of the
twenty percent (20%) of the units, or 64 units total, to rents affordable to lower income households
(80% of County area median or below). In addition, the affordable monthly rent cannot exceed 90% of
the lowest rent charged for a comparable market-rate unit in the project.
In May of 1993, the City Council agreed to assist with the refinancing of the outstanding bonds for the
subject project and allow the owner to take advantage of lower interest rates. In May of 1998, the
property was sold to Northwestern Mutual Life Insurance Company. As part of the transaction, the City
Council approved Northwestern as the new owner.
PROPOSED SALE OF THE PROJECT
The property is again in the process of being sold to a new owner, Santa Fe Ranch, LLC a Delaware
limited liability company. This partnership group is comprised of the Utah State Retirement Investment
Fund, the Public Employees’ Retirement Association of Colorado, and Pearl (CASA II) USA, Inc., an
affiliate of Pearl Assurance plc., a large United Kingdom insurance company. If approved as the new
owner, Santa Fe Ranch, LLC, will be assuming the obligations of Northwestern Mutual with respect to
the bonds. The primary obligation is to make the principal and interest payments on the bonds as they
a credit instrument from an approved institution (such as a surety bond or a letter of credit). In the event come due. In order to secure the payment of these amounts, the new owner of the project must provide
of any future default, the credit provider will draw on the credit instrument to make any and all debt
service payments. The City is not obligated to repay the bonds. The bonds are fully insured during the
entire period they are outstanding.
The new owners have requested that the City make certain amendments to the bond agreements to
allow the sale of the project and the assumption of the bond obligations by Santa Fe Ranch, LLC. The
bond debt is currently secured by a letter of credit provided by Bank of America. The Bank of America
letter of credit has an A rating. The new owner is requesting to obtain a new credit instrument provided
by the Federal Home Loan Mortgage Company (Freddie Mac). The new Freddie Mac credit instrument
will have a rating of AAA. The new rating is superior to the current rating, and meets the requirements
for a credit facility issuer as specified in the bond indenture.
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Agenda Bill # 16,749
Page 2
In addition to the change in ownership and credit instrument, there are two other substantial
modifications to the bond documents. The new owner would like to replace the current bond
remarketing agent, USB Paine Webber, with Stern Brothers. City staff has reviewed the qualifications
of this company, and finds them acceptable. The second change is to the term of the bonds. The new
owners are requesting that the term of the bonds be extended for five years. In addition to receiving
the Council's approval to extend the term, the new owner must also receive 100% consent of the
current bond holders. The new owner has not yet received the 100% consent. If 100% consent is not
the term at a later date and the attached documents will be revised to delete the extension provision. In
reached prior to the completion of this sales transaction, the new owners will likely seek an extension of
addition, minor modifications have been made to various bond documents. The modifications to the
various bond documents will in no way limit or reduce any of the rights that the City currently possesses
in the current bond documents. The City's bond counsel, Robert Whalen of Stradling Yocca Carlson &
Rauth, has reviewed and approved all of the bond documents. Mr. Whalen represented the City when
the ownership of this property changed in 1998.
In addition to retaining all of our current rights, the City will receive two additional benefits from this
transaction. These benefits include a five-year guaranteed extension of the property Regulatory
Agreement. The extension of the Regulatory Agreement insures that the low income units will remain
affordable for an additional five-year period. As it stands now, the bonds could be paid off at any time,
and the requirement to provide the affordable units would be removed. A second benefit to the City is
the proposed change in the credit enhancement instrument. While the current Bank of America Letter of
Credit is acceptable to the City, the new Freddie Mac credit enhancement instrument will posses the
highest credit rating offered by Standard and Poor's.
CITY COUNCIL ACTION:
Staff recommends that the City Council adopt the attached resolution that will approve the following
actions: 1) Approval of the new ownership group, remarketing agent and credit enhancement
instrument; 2) Approve the extension of the term of the bonds for a period of five years; 3) Approve the
form of the revised bond documents and authorize certain officers to take the actions necessary to
implement the terms of the documents and the remarketing of the bonds.
FISCAL IMPACT:
The sale of the Santa Fe Ranch Apartment Project and the assumption of the obligations by Santa Fe
Ranch, LLC does not impose a fiscal obligation on the City of Carlsbad. The City is not obligated in any
way to repay the bonds. The City will continue to receive an annual payment of $36,616 (0.23% of the
principal amount of the refunded bonds) to cover ongoing administrative costs. In addition, the new
owners will reimburse the City for all time spent by staff and the Council in completing this transaction,
as well as the costs incurred by the City's bond counsel.
EXHIBITS:
1. City Council Resolution No. 2002-143 authorizing the execution and delivery of amended
documents and related actions with respect to the $15,920,000 Carlsbad Multifamily Housing
Revenue Bonds, Series A, of 1993 (Santa Fe Ranch Apartments).
2. Second Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants
(on file in the City Clerks Office).
3. Amended and Restated Indenture of Trust, Amended and Restated Loan Agreement, lntercreditor
Agreement, Assignment and Assumption Agreement, and Remarketing Memorandum. (on file in
the City Clerks Office).
4. Vicinity Map
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RESOLUTION NO.
A RESOLUTION OF THE CITY OF CARLSBAD, CALIFORNIA
APPROVING AND AUTHORIZING THE EXECUTION OF
VARIOUS DOCUMENTS AND THE TAKING OF ‘VARIOUS
ACTIONS TO EFFECT THE DELIVERY OF A SUBSTITUTE
CREDIT FACILITY FOR THE SANTA FE APARTMENTS
PROJECT
WHEREAS, on March 19, 1985, pursuant to Chapter 7 of Part 5 of Division 3 1 of the Healtt
nd Safety Code of the State of California (the “Act”), the City of Carlsbad, California (the “City”)
dopted its Resolution No. 7939 authorizing the issuance of the City’s $15,920,000 Multifamily
Iousing Revenue Bonds, Series A of 1985 (La Costa Apartments Project) (the “Original Bonds”)
ecured by an Indenture of Trust dated as of April 1, 1985 between the City and The Bank of
:alifornia, N.A., the predecessor in interest to First Trust of California, National Association, as
vstee for the Original Bonds, to provide financing for a 320-unit multifamily residential rental
‘roject known as “La Costa Apartments’’ located in the City (the “Project”), which was constructed
,y La Costa Partners, a California general partnership (the “Prior Owner”); and
WHEREAS, on May 27, 1993, the City issued its Variable Rate Demand Multifamily
Iousing Revenue Refunding Bonds, Series A of 1993 (La Costa Apartments Project) (the “Bonds”),
ursuant to an Indenture of Trust dated as of May 1, 1993 between the City and First Trust of
:alifornia, National Association, whose successor-in-interest, US. Bank, N.A., now acts as trustee
lereunder (the “Trustee”), the proceeds of which were used to refund all of the outstanding Original
londs; and
WHEREAS, on June 23, 1998, the ownership of the Project was transferred by the Prior
)wner to The Northwestern Mutual Life Insurance Company (the “Current Owner”); and
WHEREAS, the Current Owner has entered into a contract to sell the Project to Santa Fe
:anch, LLC (the “New Owner”) and the City desires to authorize the approval of the sale; and
WHEREAS, the New Owner has requested that, in connection with the delivery of a
ubstitute Credit Facility (as defined in the Indenture) by the Federal Home Loan Mortgage
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CC Resolution No.--143
Page 2
Corporation (“Freddie Mac”), various amendments be made to the Indenture and other documents
related to the Bonds; and
WHEREAS, the City desires to authorize the amendments to the existing documents related
to the Bonds in order to effect the delivery of the Substitute Credit Facility by Freddie Mac; and
WHEREAS, the forms of the various documents necessary to effect the delivery of the
Substitute Credit Facility by Freddie Mac have been submitted to this City Council for approval;
NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Carlsbad as
follows:
1. The above recitals, and each of them, are true and correct.
2. The proposed forms of Amended and Restated Indenture of Trust (the “Amended
Indenture”), Amended and Restated Loan Agreement (the “Amended Loan Agreement”), Second
Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants (the
“Amended Regulatory Agreement”), Amended and Restated Promissory Note (the “Amended
Note”), Assignment and Assumption Agreement and Intercreditor Agreement (collectively, the
“Amended Financing Documents”) presented at this meeting are hereby each approved as the forms
of said respective documents to be used in connection with the amendment of various existing
financing documents relating to the Bonds and the delivery of the Substitute Credit Facility. Each of
the Mayor, the City Clerk, the City Manager and his written designee (collectively, the “Authorized
Officers”) are hereby authorized and directed, for and in the name of the City, to execute and deliver
each of the Amended Financing Documents in substantially the form hereby approved, with such
additions thereto and changes therein as may be approved by the Authorized Officer or Authorized
Officers of the City executing the same, upon consultation with the City Attorney. Approval of such
additions and changes shall be conclusively evidenced by the execution and delivery of such
documents by one or more of the Authorized Officers. The sale of the Project to the New Owner is
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LXXSOC\893245~3U2062.0028 ‘i
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CC Resolution No.32-143
Page 3
3. hereby approved subject to the execution and delivery of the Amended Financing
Documents and the satisfaction of the preconditions to the sale set forth therein.
4. The form of the Bonds as being amended (the “Amended Bonds”) and as set forth in
the Amended Indenture (as the Amended Indenture may be modified pursuant to the provisions of
Section 2 hereof) is hereby approved. The Mayor and the City Clerk are hereby authorized and
iirected to execute, by manual or facsimile signature in the name and on behalf of the City and under
Its seal, Amended Bonds in the aggregate principal amount outstanding under the Indenture in order
:o exchange the Amended Bonds for the form of the Bonds outstanding prior to the delivery of the
Substitute Credit Facility.
5. The form of the Remarketing Memorandum relating to the Bonds presented at this
neeting is hereby approved in the form presented, and Stem Brothers & Co. (the “Remarketing
4gent”) is hereby authorized to distribute the Remarketing Memorandum to prospective purchasers
If the Amended Bonds in the form hereby approved, together with such changes therein or additions
hereto as are determined necessary by the City Manager, or his designee, upon consultation with the
Zity Attorney, to make such Remarketing Memorandum accurate in all respects as of its date, and
:ach of the Authorized Officers is hereby authorized and directed to execute the Remarketing
Memorandum. Approval of any additions and changes to the form of Remarketing Memorandum
,resented herein shall be conclusively evidenced by the execution and delivery of the Remarketing
Memorandum by one of the Authorized Officers. The Remarketing Agent is further authorized to
listribute the final Remarketing Memorandum to the purchasers of the Bonds upon its execution as
lescribed above.
6. Stradling Yocca Carlson & Rauth, a Professional Corporation (“Bond Counsel”), is
lereby appointed as bond counsel to the City with respect to the transfer of the Project and the
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delivery of the Substitute Credit Facility, and.the City Manager or his designee is hereby authorized
to execute an agreement for services with Bond Counsel. All actions heretofore taken by the officer!
and agents of the City with respect to the delivery of the Substitute Credit Facility by Freddie Mac
are hereby approved, confirmed and ratified, and the Authorized Officers, the Finance Director and
the City Attorney each is hereby authorized and directed, jointly and severally, for and in the name
and behalf of the City, to do any and all things and take any and all actions, including granting all
required consents of and waivers from the City, and execute and deliver any and all certificates,
agreements and other documents necessary to accomplish the delivery of the Substitute Credit
Facility by Freddie Mac in accordance with the provisions of this Resolution.
7. If any section, paragraph or provision of this Resolution shall be heid to be invalid or
unenforceable for any reason, the invalidity or unenforceability of such section, paragraph or
provision shall not affect any remaining provisions of the resolution.
8. This Resolution shall take effect on the date of its adoption.
PASSED, APPROVED AND ADOPTED at a regular meeting of the City Council of the
City of Carlsbad, California on the 141h day of May, 2002, by the following vote, to wit:
AYES: Council Members Lewis, Kulchin, Finnila, Nygaard, Hall
NOES: None
ABSENT: None
ATTEST:
(SEAL)
CC Resolution No.=-143
Page 4
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Exhibit 4
Vicinity Map
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
ROBERT J. WHALEN, ESQ.
STRADLING, YOCCA, CARLSON & RAUTH
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
SECOND AMENDED AND RESTATED
REGULATORY AGREEMENT
AND DECLARATION OF RESTRICTIVE COVENANTS
By and Among
CITY OF CARLSBAD
and
U.S. BANK, N.A.,
as Trustee
and
SANTA FE RANCH, LLC
DATED AS OF MAY 1,2002
Relating to
$15,920,000
CITY OF CARLSBAD, CALIFORNIA
VARIABLE RATE DEMAND
MULTIFAMILY HOUSING REVJ3NUE REFUNDING BONDS
SERIES A OF 1993
(SANTA FE RANCH APARTMENTS fMa LA COSTA APARTMENTS PROJECT)
SECOND AMENDED AND RESTATED
REGULATORY AGREEMENT AND
DECLARATION OF RESTRICTIVE COVENANTS
THIS SECOND AMENDED AND RESTATED REGULATORY AGREEMENT AND
DECLARATION OF RESTRICTIVE COVENANTS (the “Regulatory Agreement”) is made and
entered into as of May 1,2002, by and among CITY OF CARLSBAD, a municipal corporation
organized and existing under the Constitution and laws of the State of California (together with any
successor to its rights, duties and obligations, the “City”), US. BANK, N.A., a national banking
association organized and existing under the laws of the United States authorized to accept and
execute trusts of the type contemplated by the Indenture (as hereinafter defined), with its principal
corporate trust office in San Francisco, California, as Trustee (the “Trustee”), and SANTA FE
RANCH, LLC, a Delaware limited liability company (the “Owner”), and amends and restates in its
entirety (except for Section 7 thereof, which is hereby continued) that certain Amended and Restated
Regulatory Agreement and Declaration of Restrictive Covenants dated as of May 1, 1993 recorded
on May 26, 1993 as Document No. 1993-0332834 in the Official Records of the County of San
Diego, California, as amended (the “Prior Regulatory Agreement”).
YITNESSETH:
WHEREAS, the City has adopted a program to finance the construction of multifamily rental
housing pursuant to Chapter 7 of Part 5 of Division 3 1 of the Health and Safety Code of the State of
California (the “Act”); and
WHEREAS, the City is a political subdivision within the meaning of that term in the
Regulations of the Department of Treasury and the rulings of the Internal Revenue Service
prescribed and promulgated pursuant to the Internal Revenue Code of 1986, as amended (the
“Code”); and
WHEREAS, on March 19, 1985, the City Council of the City adopted a resolution (the
“Resolution”) authorizing the issuance of revenue bonds in connection with the multifamily rental
housing project of the Owner; and
WHEREAS, in furtherance of the purposes of the Act and the Resolution and as a part of the
City’s plan of financing residential rental housing, the City issued $15,920,000 aggregate principal
amount of its revenue bonds designated “City of Carlsbad, California, Multifamily Housing Revenue
Bonds, Series A of 1985 (La Costa Apartments Project)” (the “Prior Bonds”), secured by an
Indenture of Trust dated as of April 1,1985, between the City and The Bank of California, N.A. (the
“Prior Bonds Trustee”) to finance the cost of a 320-unit multifamily residential rental development
(the “Project”), for the public purpose of providing decent, safe and sanitary housing, the proceeds of
which were loaned to La Costa Partners, a California general partnership (the “Original Owner”); and
WHEREAS, on May 27, 1993, the City issued refunding bonds (the “Bonds”) to refund the
Prior Bonds and make a mortgage loan (the “Loan”) to the Original Owner to refinance the Project;
and
WHEREAS, on June 25,1998, the Original Owner sold the Project to The Northwestern
Mutual Life Insurance Company (the “Prior Owner”), who, concurrently with the recordation of this
Regulatory Agreement, is selling the Project to the Owner; and
WHEREAS, at the time of issuance of the Bonds, the City determined that the issuance of the
Bonds and the consequent refinancing of the Prior Loan would accomplish a valid public purpose of
the City by assuring that housing continues to be available to lower income persons and families
within the meaning of the Act; and
WHEREAS, the City has determined that, in order to ensure continued availability to lower
income persons of at least 20% of the units in the Project, it is necessary to enter into this Regulatory
Agreement; and
WHEREAS, all things necessary to make the Bonds the valid, binding, and legal special
obligations of the City according to the import thereof, and to constitute the Indenture as a valid
assignment of the amounts pledged to the payment of the principal of, premium, if any, and interest
on the Bonds have been done and performed, and the creation, execution, and delivery of the
Indenture and the execution and issuance of the Bonds, subject to the terms thereof, in all respects
have been duly authorized; and
WHEREAS, the Code and the Internal Revenue Code of 1954, as amended (the “Prior
Code”) and the regulations and rulings promulgated with respect thereto and the Act prescribe that
the use and operation of the Project be restricted in certain respects and in order to ensure that the
Project will continue to be owned and operated in accordance with the Code, the Prior Code and the
Act, the City, the Trustee and the Owner have determined to enter into this Regulatory Agreement in
order to set forth certain terms and conditions relating to the operation of the Project.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings set forth
herein, and other good and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the City, the Trustee and the Owner hereby agree as follows:
1. DEFINITIONS AND INTERPRETATION. The following terms shall have the
respective meanings assigned to them in this Section 1 unless the context in which they are used
clearly requires otherwise:
“Adjusted Income” - The adjusted income of a person (together with the adjusted
income of all persons of the age of 18 years or older who intend to reside with such person in one
residential unit) as calculated in the manner prescriked in Regulation Section 1.167(k)-3@)(3) in
effect as of the date of issuance of the Prior Bonds.
“Affordable Rent” - A monthly rent which does not exceed 30 percent of one-twelfth
of the maximum adjusted annual income if the household is deemed to be a “lower income” family in
the County of San Diego for purposes of the leased housing program established under Section 8 of
the United States Housing Act of 1937, as amended, based upon the following appropriate household
sizes for various types of residential units in the Project and assuming 80 percent as the percentage of
median gross income which qualifies as “lower income:”
Residential Unit
One Bedroom
Two Bedroom
Number of Persons in Family
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Such amounts shall be further reduced by a reduction for tenant-paid utilities based on the “Utility
Allowance Schedule” established for the Carlsbad Housing Agency’s Section 8 Tenant-Based Rental
DocSOC\8910%v3V2062.0028
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Assistance Program. In no event shall the monthly rent exceed 90% of rents charged for units in the
Project other than Lower Income Units.
“Alternate Credit Facility’’ shall have the meaning set forth in the Indenture.
“Area” - The San Diego, California Metropolitan Statistical Area.
“Certificate of Continuing Program Compliance” - The Certificate to be filed by the
Owner with the City, the Program Admimistrator and the Trustee which shall be substantially in the
form attached hereto as Exhibit C.
“City” - The City of Carlsbad, California.
“Credit Facility Provider” - So long as the Credit Enhancement Agreement is in
effect, Freddie Mac, or so long as any Alternate Credit Facility is in effect, the Credit Facility
Provider then obligated under the Alternate Credit Facility.
“Financing Agreement” - The Amended and Restated Loan Agreement dated as of
May 1,2002 by and among the City, the Trustee and the Owner, as amended from time to time.
“Freddie Mac” - The Federal Home Loan Mortgage Corporation, a shareholder
owned government-sponsored enterprise organized and existing under the laws of the United States
of America, and its successors and assigns.
“Income Certification” - The Income Computation and Certification attached hereto
as Exhibit C.
“Indenture” - The Amended and Restated Indenture of Trust dated as of May 1,2002
by and between the City and the Trustee, as amended &om time to time.
“Intercreditor Agreement” - The Intercreditor Agreement dated as of May 1,2002
among the City, the Trustee and Freddie Mac, as the same may be amended or supplemented.
“Loan” - The loan made to the Owner under the Financing Agreement.
“Lower Income Units” - The dwelling units in the Project designated for occupancy
by Lower-Income Tenants pursuant to Section 4(a) of this Regulatory Agreement.
“Lower-Income Tenants” - Persons or families with an Adjusted Income which does
not exceed 80 percent of the Median Income for the Area. In no event will the occupants of a
dwelling unit be considered to be Lower-Income Tenants if all of such occupants are students (as
defined in Section 151(e)(4) of the Code), no one of whom is entitled to file a joint retum under
Section 6013 ofthe Code.
“Median Income for the Area” - The median income for the Area as most recently
determined by the Secretary of Housing and Urban Development under Section 8 of the United
States Housing Act of 1937, as amended, or, if programs under Section 8 are terminated, median
income for the Area determined under the method used by the Secretary prior to such termination.
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“Note” - The Amended and Restated Promissory Note from the Owner to the City
evidencing the Loan.
“Owner’s Use of Proceeds Certificate” - The Certificate of the Owner, dated as of the
date of issuance of the Bonds, with respect to certain Project Costs delivered to the City by the
Original Owner.
“Prior Code” -The Internal Revenue Code of 1954, as amended.
“Program Administrator” - U.S. Bank, N.A. or any successor thereto appointed by
the City under the Administration Agreement dated as of May 1, 1993.
“Project Costs” - To the extent authorized by the Internal Revenue Code of 1954, as
amended, the Regulations and the Act, any and all costs incurred by the City or the Owner with
respect to the acquisition of land and the construction and equipping, as the case may be, of the
Project, including, without limitation, costs for site preparation, the planning of housing and
improvements, the acquisition of property, the removal or demolition of existing structures, the
construction and purchase of housing, related facilities and improvements, and all other work in
connection therewith, 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 supervisory 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 municipality, county or entity for expenditures
made, with the approval of the City, for the Project), interest allocable to the financing of the Project
paid or incurred prior to the Completion Date and all other costs approved by Bond Counsel.
“Project Facilities” - The buildings, structures and other improvements constructed
on the Project Site, and all fixtures and other property owned, leased or licensed by the Owner and
located on, or used in connection with, such buildings, structures and other improvements.
“Project Site” - The parcel or parcels of real property described in Exhibit “A”, which
is attached hereto and by this reference incorporated herein, and all rights and appurtenances
thereunto appertaining.
“Qualified Project Costs” - The Project Costs (i) incurred after October 2, 1984, the
date of the first official action by the City declaring its intent to issue Bonds for the Project,
(ii) which are chargeable to a capital account with respect to the Project for federal income tax and
financial accounting purposes, or would be so chargeable either with a proper election by the Owner
or but for the proper election by the Owner to deduct those amounts; provided, however, that only
such portion of the interest accrued prior to the Completion Date shall constitute a Qualified Project
Cost as bears the same ratio to all such interest as the Qualified Project Costs bear to all Project
Costs; and, provided fuaher, that such interest shall cease to be a Qualified Project Cost on the
Completion Date; and, provided further, that if any portion of the Project has been constructed by an
Affiliated Party (whether as a general contractor or a subcontractor), “Qualified Project Costs” shall
include only the actual out-of-pocket costs incurred by such Affiliated Party in constructing the
Project (or any portion thereof).
“Qualified Project Period” - The period beginning on January 15,1987, and ending
on the latest of (a) the date which is 10 years after the date on which at least 50 percent of the
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dwelling units in the Project were first occupied (June 3,1997), (b) the date which is a Qualified
Number of Days after the date on which any of the dwelling units in the Project was first occupied,
(c) the date on which any assistance provided with respect to the Project under Section 8 of the
United States Housing Act of 1937 terminates, (d) June 1,2007, or (e) the date on which no Bonds
remain Outstanding. For purposes of clause (b), the term “Qualified Number of Days” means, 50
percent of the number of days comprising the term from the date of issuance of the Prior Bonds
(April 26,1985) until the final maturity of the Bonds (including any refunding bonds).
“Regulatory Agreement” - This Second Amended and Restated Regulatory
Agreement and Declaration of Restrictive Covenants, together with any amendments or supplements
hereof.
“Very Low Income Tenants” - Lower-Income Tenants whose Adjusted Income does
not exceed 50 percent of Median Income for the Area.
Unless the context clearly requires otherwise, as used in this Regulatory Agreement,
words of the masculine, feminine or neuter gender shall be construed to include each other gender
when appropriate and words of the singular number shall be construed to include the plural number,
and vice versa, when appropriate. This Regulatory Agreement and all the terms and provisions
hereof shall be construed to effectuate the purposes set forth herein and to sustain the validity hereof.
The defined terms used in the preamble and recitals of this Regulatory Agreement
have been included for convenience of reference only, and the meaning, construction and
interpretation of all defined terms shall be determined by reference to this Section 1 notwithstanding
any contrary definition in the preamble or recitals hereof. The titles and headings of the sections of
this Regulatory Agreement have been inserted for convenience of reference only, and are not to be
considered a part hereof and shall not in any way modify or restrict any of the terms or provisions
hereof or be considered or given any effect in construing this Regulatory Agreement or any
provisions hereof or in ascertaining intent, if any question of intent shall arise.
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned to such terms in Section 1 .I of the Indenture.
2. ACQUISITION, CONSTRUCTION, EQUIPPING AND COMPLETION OF
THE PROJECT. The Owner hereby represents as of the date hereof, covenants and agrees as
follows:
(a) To its knowledge, within six months of the date of issuance of the Prior
Bonds, the Original Owner incurred a substantial binding obligation to commence the construction of
the Project, pursuant to which the Original Owner was obligated to expend at least the lesser of (i) 2-
1/2% of the principal amount of the Prior Bonds or (ii) $100,000.
(b) To its knowledge, the statements made in the Original Owner’s Use of
Proceeds Certificate were true and correct.
(c) To its knowledge, at all times since the issuance of the Prior Bonds, the
Original Owner and the Prior Owner have been in compliance with the provisions of the Prior
Regulatory Agreement.
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(d) Money on deposit in any fund or account in connection with the Bonds,
whether or not such money was derived from other sources, shall not be used by or under the
direction of the Owner, in a manner which would cause the Prior Bonds or the Bonds to be “arbitrage
bonds” within the meaning of Section 148 of the Code, and the Owner specifically agrees that the
investment of money in any such fimd shall be restricted as may be necessary to prevent the Prior
Bonds or the Bonds from being “arbitrage bonds” under the Code.
(e) The Owner (and any person related to it within the meaning of Section 147(a)
of the Code) will not take or omit to take, as is applicable, any action if such action or omission
would in any way cause the proceeds from the sale of the Bonds to be applied in a manner contrary
to the requirements of the Indenture, the Financing Agreement or this Regulatory Agreement.
3. RESIDENTIAL RENTAL PROPERTY. The Owner hereby acknowledges and
agrees that the Project is currently and will continue to be owned, managed and operated as a project
for “residential rental property” (within the meaning of Section 103@)(4)(A) of the Prior Code) for a
term equal to the Qualified Project Period determined with respect to the Project. To that end, and
for the term of this Regulatory Agreement, the Owner hereby represents, covenants, warrants and
agrees as follows:
(a) The Project has been constructed for the purpose of providing multifamily
residential rental property, and the Owner shall own, manage and operate the Project as a project to
provide multifamily residential rental property comprised of a building or structure or several
interrelated buildings or structures, together with any functionally related and subordinate facilities,
and no other facilities, in accordance with Section 103@)(4)(A) of the Prior Code and Section 1.103-
8(b) of the Regulations, and the Act, and in accordance with such requirements as may be imposed
thereby on the Project from time to time.
(b) All of the dwelling units in the Project are and will remain similarly
constructed units, and each dwelling unit in the Project will contain complete separate and distinct
facilities for living, sleeping, eating, cooking and sanitation for a single person or a family, including
a sleeping area, bathing and sanitation facilities and cooking facilities equipped with a cooking range,
refrigerator and sink.
(c) None of the dwelling units in the Project have been or will at any time be
utilized on a transient basis, or will ever be used as a hotel, motel, dormitory, fraternity house,
sorority house, rooming house, nursing home, hospital, sanitarium, rest home or trailer court or park.
(d) No part of the Project has been or will at any time be owned or used as a
cooperative housing corporation or a community apartment project or a stock cooperative. Other
than obtaining and recording a condominium plan and map on the Project, and obtaining a white
report from the California Department of Real Estate, the Owner shall not take any steps in
connection with a conversion to such ownership or uses except with the prior written approving
opinion of Bond Counsel acceptable to the City and the Trustee, that the interest on the Bonds will
not become taxable thereby. The final subdivision map to be recorded for the Project shall state the
restriction against transfemng individual condominium ownership interests in the Project during the
term of the Regulatory Agreement.
(e) All of the dwelling units in the Project have been and will be available for
rental on a continuous basis to members of the general public. The Owner shall not discriminate on
wCSOC\891096v3\22062.w28
6
the basis of race, creed, color, sex, age or national origin in the lease, use or occupancy of the Project
or in connection with the employment or the application for employment of persons for the operation
and management of the Project. The Owner will not give preference to any particular class or group
in renting the dwelling units in the Project, except to the extent that dwelling units are required to be
leased or rented to Lower-Income Tenants or to be available for occupancy on a priority basis by
Very Low Income Tenants as set forth in Section 4 below.
(Q The Lower Income Units will be intermingled with all other dwelling units in
the Project and shall be of comparable quality, shall contain similar amenities and offer a range of
sizes and number of bedrooms comparable to the other units in the Project. Tenants in the Lower
Income Units will continue to have equal access to and enjoyment of all common facilities of the
Project.
(g) The Project Site consists of a parcel or parcels that are contiguous except for
the interposition of a road, street or stream, and all of the Project Facilities comprise a single
geographically and functionally integrated project for residential rental property, as evidenced by the
ownership, management, accounting and operation of the Project.
(h) No unit in any building or structure in the Project which contains fewer than 5
units shall be occupied by the Owner or any person related to or affiliated with the Owner, such as a
resident manager or maintenance personnel.
(i) The Project was completed on September 16, 1986. The date on which any
of the units in the Project was first occupied was December 1,1986. The date on which 10 percent
of the units in the Project was first occupied was January 15,1987. The date on which 50 percent of
the units in the Project was first occupied was June 3, 1987.
4. LOWER-INCOME TENANTS. Pursuant to the requirements of
Section 103(b)(4)(A) of the Prior Code and Section 52080 of the Act, the Owner hereby represents,
warrants and covenants that throughout the Qualified Project Period
(a) Not less than twenty percent (20%) of the units in the Project shall be
continuously occupied by or held available for occupancy by Lower Income Tenants at an
Affordable Rent. For this purpose, a unit occupied by a Lower-Income Tenant who at the
commencement of the occupancy is a Lower-Income Tenant shall be treated as occupied by such
individual or family during their tenancy in such unit, even though they subsequently cease to be a
Lower-Income Tenant. Moreover, a unit previously occupied by a Lower-Income Tenant and then
vacated shall be considered occupied by a Lower-Income Tenant until reoccupied, other than for a
temporary period, at whch time the character of the unit shall be redetermined. In no event shall
such temporary period exceed thirty-one (31) days.
(b) Upon the commencement of the Qualified Project Period, and on the first day
of each month thereafter during the term of this Regulatory Agreement, the Owner shall advise the
City, the Trustee, the Credit Facility Provider and the Program Administrator of the status of the
occupancy of the Project by delivering to such parties a Certificate of Continuing Program
Compliance.
(c) The Owner will obtain and maintain on file an Income Certification from
each Lower-Income Tenant, dated immediately prior to the initial occupancy of such Lower-Income
7
15
Tenant in the Project. The Owner agrees to provide such additional information as may be required
in the future by the State of California, the City, the Program Administrator and by
Section 103(b)(4)(A) of the Prior Code and the Regulations, as the same may be amended from time
to time, or in such other form and manner as may be required by applicable rules, rulings, policies,
procedures or other official statements now or hereafter promulgated, proposed or made by the
Department of the Treasury or the Internal Revenue Service with respect to obligations transitioned
under Section 1313(a) of the Tax Reform Act of 1986. A copy of each such Income Certification
will be attached to the monthly Certificate of Continuing Program Compliance filed with the
Program Administrator pursuant to subsection (b). The Owner shall make a good faith effort to
verify that the income provided by an applicant in an Income Certification is accurate by taking one
or more of the following steps as a part of the verification process: (i) obtaining a copy of a Lower-
Income Tenant’s federal income tax return for the tax year immediately prior to the commencement
of such Lower-Income Tenant’s occupancy, (ii) obtaining an employer’s verification of such Lower-
Income Tenant’s current income, or, (iii) if the Lower-Income Tenant is unemployed or if the tax
return is unavailable, obtaining other satisfactory evidence of income for such year.
(d) The Owner will (i) maintain a list of persons who have notified the Owner
of their desire to rent a unit in the Project and who have Adjusted Incomes which would qualify them
as Very Low Income Tenants, and (ii) offer to rent at least half of the Lower-Income Units (subject
to the availability thereof at any time) on a priority basis to the persons on such list prior to offering
to rent such units to any other persons and in choosing such Very Low Income Tenants shall use
selection criteria no more burdensome than shall be applied to other prospective tenants. To fulfill its
obligation under this subparagraph (d), the Owner shall place on its waiting list persons referred by
the Carlsbad Housing Agency. The Owner agrees to make the units coming vacant available on a
priority basis, first, to any Very Low Income Tenants who are Section 8 Housing Choice Voucher
holders or the recipients of another rent subsidy, second, to Very Low Income Tenants who are on
the Section 8 Rental Assistance waiting list of the Carlsbad Housing Agency, and third, to other Very
Low Income Tenants. Nothing contained in this Section shall require the Owner to offer to rent such
units to such persons on terms and conditions which are more favorable than the terms and
conditions on which such units will be offered to Lower Income Tenants generally. Provided that the
Owner has complied with the foregoing to attract Very Low Income Tenants to the Project, nothing
herein shall be construed as requiring the Owner to keep units vacant for occupancy by Very Low
Income Tenants where no Very Low Income Tenants have applied for occupancy.
(e) The Owner will maintain complete and accurate records pertaining to the
Lower Income Units, and will permit any duly authorized representative of the City, the Program
Administrator, the Trustee, the Credit Facility Provider, the Department of the Treasury or the
Internal Revenue Service to inspect the books and records of the Owner pertaining to the Project,
including those records pertaining to the occupancy of the Lower Income Units.
(f) The Owner shall accept as tenants on the same basis as all other prospective
tenants persons who are recipients of federal funds for rent subsidies pursuant to the Housing Choice
Voucher tenant-based rental assistance program under Section 8 of the United States Housing Act of
1937, or its successor. The Owner shall not apply selection criteria to Section 8 Housing Choice
Voucher holders which are more burdensome than criteria applied to any other prospective tenants.
(g) The form of lease to be utilized by the Owner in renting any units in the
Project to any person other than a Section 8 tenant who is intended to qualify as a Lower-Income
Tenant shall provide for termination of the lease and consent by such person to immediate eviction
DOCSoC\891096v3V2062.0028
8
for failure to qualify as a Lower-Income Tenant as a result of any material misrepresentation made
by such person with respect to the Income Certification.
(h) The Owner shall provide a 60-day notice of intent to increase the rent on any
Lower Income Unit and provide a copy of such notice to the City and the Carlsbad Housing Agency.
(i) The Owner shall establish a written policy on the tenant-paid utilities for the
Lower Income Units, and provide a copy of said policy to the City and the Carlsbad Housing
Agency.
5. TAX EXEMPT STATUS OF THE BONDS. The Owner and the City each hereby
represents, warrants and agrees that:
(a) it will not knowingly take or permit, or omit to take or cause to be taken, as is
appropriate, any action that would adversely affect the exclusion from gross income for federal
income tax purposes or the exemption from California personal income taxes of interest on the Prior
Bonds or the Bonds and, if it should take or permit, or omit to take or cause to be taken, any such
action, it will take all lawful actions necessary to rescind or correct such actions or omissions
promptly upon obtaining knowledge thereofi
(b) it will take such action or actions as may be necessary, in the written opinion
of Bond Counsel filed with the City and the Trustee, (i) to comply fully with all applicable rules,
rulings, policies, procedures, Regulations or other official statements promulgated, proposed or made
by the Department of the Treasury or the Internal Revenue Service pertaining to obligations issued
under Section 103@)(4)(A) ofthe Prior Code and transitioned under Section 1313(a) ofthe Tax
Reform Act of 1986, and (ii) to comply with the Act; and
(c) it will file andor record such documents and take such other steps as are
necessary, in the written opinion of Bond Counsel filed with the City and the Trustee, in order to
insure that the requirements and restrictions of this Regulatory Agreement will be binding upon all
owners of the Project, including, but not limited to, the execution and recordation of this Regulatory
Agreement in the real property records of the County of San Diego.
The Owner hereby covenants to include the requirements and restrictions contained in this
Regulatory Agreement in any documents transferring any interest (other than a leasehold interest) in
the Project to another person to the end that such transferee has notice of, and is bound by, such
restrictions, and to obtain the agreement from any transferee to abide by all requirements and
restrictions of this Regulatory Agreement.
6. MODIFICATION OF SPECIAL TAX COVENANTS. The Owner, the Trustee
and the City hereby agree as follows:
(a) To the extent any amendments to the Act, the Regulations, the Prior Code or
the Code shall, in the written opinion of Bond Counsel filed with the City, the Trustee and the
Owner, impose requirements upon the ownership or operation of the Project more restrictive than
those imposed by this Regulatory Agreement which must be complied with in order to maintain the
exclusion from gross income for federal income tax purposes of interest on the Bonds, this
Regulatory Agreement shall be deemed to be automatically amended to impose such additional or
more restrictive requirements.
9 17
(b) To the extent any amendments to the Act, the Regulations, the Prior Code or
the Code shall, in the written opinion of Bond Counsel filed with the City, the Trustee and the
Owner, impose requirements upon the ownership or operation of the Project less restrictive than
imposed by this Regulatory Agreement, this Regulatory Agreement may be amended or modified to
provide such less restrictive requirements should the City, in its sole discretion, decide that such
requirements should he made applicable to the Project.
(c) The Owner, the City and, if applicable, the Trustee, upon the written direction
of the City, shall execute, deliver and, if applicable, file of record any and all documents and
instruments, necessary to effectuate the intent of this Section 6, and each of the Owner and the City
hereby appoints the Trustee as its true and lawful attorney-in-fact to execute, deliver and, if
applicable, file of record on behalf of the Owner or the City, as is applicable, any such document or
instrument (in such form as may be approved in writing by Bond Counsel) if either the Owner or the
City defaults in the performance of its obligations under this subsection (c); provided, however, that
the Trustee shall take no action under this subsection (c) without first notifying the Owner or the
City, or each of them, as is applicable, unless directed in writing by the City or the Owner, and
without first providing the Owner or the City, or each of them, as is applicable, an opportunity to
comply with the requirements of this Section 6.
7. INDEMNIFICATION. The Owner hereby covenants and agrees that it shall
indemnify and hold harmless the City, the Trustee and their respective officers, councilmembers, and
employees from and against (i) any and all claims by or on behalf of any person arising from any
cause whatsoever in connection with the provision of tax-exempt financing for the Project or the
making of the Loan; (ii) any and all claims arising from any act or omission of the Owner or any of
its agents, servants, employees or licensees, in connection with the Loan or the Project; (iii) all
reasonable costs, attorneys’ fees of counsel selected by the indemnified party, expenses or liabilities
incurred in connection with any such claim or proceeding brought thereon; provided, however, that
this provision shall not require the Owner to indemnify the Trustee from any claims, costs, fees,
expenses or liabilities arising from the negligence or willful misconduct of the Trustee. Upon the
sale or transfer of the Project, the acquiring person or entity shall indemnify and hold harmless the
City, the Trustee and their respective officers, councilmembers and employees as provided herein,
and upon such indemnification, and only upon such indemnification, by the acquiring party, the
Owner shall thereafter have no further liability hereunder except for claims arising from any act or
omission of the Owner occurring while the Project was owned by the Owner. In the event that any
action or proceeding is brought against the City or the Trustee or any of their officers or employees,
with respect to which indemnity may be sought hereunder, the Owner, upon written notice from the
indemnified party, shall assume the investigation and defense thereof, including the employment of
counsel and the payment of all expenses. The indemnified party shall have the right to employ
separate counsel in any such action or proceeding and to participate in the defense thereof; but unless
such separate counsel is employed with the approval and consent of the Owner, or pursuant to a court
order, the Owner shall not be required to pay the fees and expenses of such separate counsel.
The Owner also shall pay and discharge and shall indemnify and hold harmless the
City and the Trustee from (x) any lien or charge upon payments by the Owner to the City and the
Trustee hereunder and (y) any taxes (including, without limitation, all ad valorem taxes and sales
taxes), assessments, impositions and other charges in respect of any portion of the Project. If any
such claim is asserted, or any such lien or charge upon payments, or any such taxes, assessments,
impositions or other charges, are sought to be imposed, the City or the Trustee shall give prompt
10
notice to the Owner and the Owner shall have the sole right and duty to assume, and will assume, the
defense thereof, with full power to litigate, compromise or settle the same in its sole discretion.
In addition thereto, the Owner will pay upon demand all of the fees and expenses paid
or incurred by the Trustee and/or the City in enforcing the provisions hereof.
This Section 7 shall survive termination of this Regulatory Agreement.
8. CONSIDERATION. The City has issued the Bonds to provide funds to make the
Loan to refund the Prior Bonds, the proceeds of which Prior Bonds have been used to construct and
equip the Project. The Trustee has entered into the Indenture and assumed duties and obligations
thereunder which facilitate the issuance of the Bonds. In consideration of the issuance of the Bonds
by the City and the execution of the Indenture by the Trustee, and the City’s acceptance of the Credit
Enhancement Agreement in replacement of the letter of credit previously securing the Bonds, the
Owner has entered into this Regulatory Agreement and has agreed to continue to restrict the uses to
which this Project can be put on the terms and conditions set forth herein.
9. RELIANCE. The City, the Trustee and the Owner hereby recognize and agree that
the representations by the City and the Owner and the covenants of the City, Trustee, and Owner set
forth herein may be relied upon by all persons interested in the legality and validity of the Bonds, and
in the exclusion from gross income for federal income tax purposes and the exemption from State of
California personal income taxes of interest on the Bonds and the Prior Bonds. In performing their
duties and obligations hereunder, the City and the Trustee may rely upon statements and certificates,
or the absence thereof, of the Owner, Lower-Income Tenants and Very Low Income Tenants and the
Program Administrator, and upon audits of the books and records of the Owner pertaining to the
Project. In addition, the City and the Trustee may consult with counsel, and the opinion of such
counsel shall be full and complete authorization and protection in respect of any action taken or
suffered by the City or the Trustee hereunder in good faith and in conformity with such opinion. In
determining whether any default or lack of compliance by the Owner exists under ths Regulatory
Agreement, the Trustee shall not be required to conduct any investigation into or review of the
operations or records of the Owner and may rely solely on any notice or certificate delivered to the
Trustee by the Owner, the Program Administrator or the City with respect to the occurrence or
absence of a default unless it actually knows, or in the exercise of reasonable care should have
known from the face of such notice or certificate, that the notice or certificate is erroneous or
misleading.
In accepting its obligations hereunder, the Trustee acts solely as trustee for the benefit
of the Bondholders and not in its individual capacity, and all persons, including, without limitation,
the City and the Owner, seeking payment from the Trustee for any liability arising by reason of the
transactions contemplated hereby shall look only to such Trust Estate for payment, except where
such liability arises from the negligence or willful misconduct of the Trustee.
10. PROJECT IN THE CITY. The Owner hereby represents and warrants that the
Project is located entirely within the territorial boundaries of the City.
11. SALE OR TRANSFER OF THE PROJECT. The Owner hereby covenants and
agrees not to sell, transfer or otherwise dispose of the Project, or any portion thereof (other than for
individual tenant use as contemplated hereunder), without obtaining the prior written consent of the
City, the Credit Facility Provider and the Trustee, which consent shall be deemed given upon receipt
DOCSOC\891096v3UZ062.0028
11
by the City, the Credit Facility Provider and the Trustee of (i) evidence reasonably satisfactory to the
City, the Credit Facility Provider and the Trustee that the Owner’s purchaser or transferee has
assumed in writing the Owner’s duties and obligations under this Regulatory Agreement; (ii) an
opinion of counsel of the transferee that the transferee has duly assumed the obligations of the Owner
under this Regulatory Agreement and that such obligations and this Regulatory Agreement are
binding on the transferee; and (iii) an opinion of Bond Counsel that such transfer will not adversely
affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or
the Prior Bonds. It is hereby expressly stipulated and agreed that any voluntary sale, transfer or other
disposition of the Project in violation of this Section 1 1 shall be null, void and without effect, shall
cause a reversion of title to the Owner, and shall be ineffective to relieve the Owner of its obligations
under this Regulatory Agreement. Nothing contained in this Section 11 shall affect any provision of
any other document or instrument between the Owner and the Credit Facility Provider which requires
the Owner to obtain the consent of the Credit Facility Provider as a precondition to the voluntary
sale, transfer or other disposition of the Project.
12. TERM. This Regulatory Agreement and all and several of the terms hereof shall
become effective upon its execution and delivery and shall remain in full force and effect for the
Qualified Project Period, it being expressly agreed and understood that the provisions hereof are
intended to survive the retirement of the Bonds and expiration of the Indenture, the Financing
Agreement, the Loan, the Bond Mortgage and the Note. Notwithstanding any other provisions of
this Regulatory Agreement, this entire Regulatory Agreement, or any of the provisions or sections
hereof, may be terminated upon agreement by the City, the Trustee, the Credit Facility Provider and
the Owner if there shall have been received an opinion of Bond Counsel that such termination will
not adversely affect the exclusion from gross income for federal income tax purposes or the
exemption from State of California personal income taxes of interest on the Bonds or the Prior
Bonds. The Owner shall provide notice of any termination of this Regulatory Agreement to the
Credit Facility Provider.
The terms of this Regulatory Agreement to the contrary notwithstanding, this
Regulatory Agreement, and all and several of the terms hereof, shall terminate and be of no further
force and effect in the event of (i) a foreclosure or delivery of a deed in lieu of foreclosure whereby a
third party shall take possession of the Project or involuntary non-compliance with the provisions of
this Regulatory Agreement caused by fire, seizure, requisition, change in a federal law or an action of
a federal agency after the date of execution hereof which prevents the City and the Trustee from
enforcing the provisions hereof or condemnation or a similar event and (ii) the payment in full and
retirement of the Bonds within a reasonable period thereafter; provided, however, that the preceding
provisions of this sentence shall not apply to any foreclosure or delivery of a deed in lieu of
foreclosure prior to June 1,2007 and shall cease to apply and the restrictions contained herein shall
be reinstated if, at any time subsequent to the termination of such provisions as the result of an event
described in (i) above, the Owner or any related person to it (within the meaning of Section 1.103-
lO(e) of the Regulations) obtains an ownership interest in the Project for federal income tax
purposes. Upon the termination of the terms of this Regulatory Agreement, the parties hereto agree
to execute, deliver and record appropriate instruments of release and discharge of the terms herme
provided, however, that the execution and delivery of such instruments shall not be necessary or a
prerequisite to the termination of this Regulatory Agreement in accordance with its terms.
13. COVENANTS TO RUN WITH THE LAND. The Owner hereby subjects the
Project (including the Project Site) to the covenants, reservations and restrictions set forth in this
Regulatory Agreement. The City, the Trustee and the Owner hereby declare their express intent that
wCSoC\891096v3VZ062.0028
12
the covenants, reservations and restrictions set forth herein shall be deemed covenants running with
the land and shall pass to and be binding upon the Owner’s successors in title to the Project;
provided, however, that on the termination of this Regulatory Agreement said covenants, reservations
and restrictions shall expire. Each and every contract, deed or other instrument hereafter executed
covering or conveying the Project or any portion thereof shall conclusively be held to have been
executed, delivered and accepted subject to such covenants, reservations and restrictions, regardless
of whether such covenants, reservations and restrictions are set forth in such contract, deed or other
instruments.
14. BURDEN AND BENEFIT. The City, the Trustee and the Owner hereby declare
their understanding and intent that the burden of the covenants set forth herein touch and concern the
land in that the Owner’s legal interest in the Project is rendered less valuable thereby. The City, the
Trustee and the Owner hereby further declare their understanding and intent that the benefit of such
covenants touch and concern the land by enhancing and increasing the enjoyment and use of the
Project by Lower-Income Tenants, and by furthering the public purposes for which the Bonds were
issued.
15. UNIFORMITY; COMMON PLAN. The covenants, reservations and restrictions
hereof shall apply uniformly to the entire Project in order to establish and carry out a common plan
for the use, development and improvement of the Project Site.
16. ENFORCEMENT. Subject to the provisions of the Intercreditor Agreement, if the
Owner defaults in the performance or observance of any covenant, agreement or obligation of the
Owner set forth in this Regulatory Agreement, and if such default remains uncured for a period of
sixty (60) days after notice thereof shall have been given by the City or the Trustee to the Owner and
the Credit Facility Provider (provided that said period may be extended if the Owner has commenced
to cure such default and is diligently pursuing such cure and delivers to the City and the Trustee 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), then the City or the
Trustee, acting on its own behalf or on behalf of the City, shall declare an “Event of Default” to.have
occurred hereunder, and, at its option, 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 Owner to perform its obligations and covenants hereunder or enjoin any
acts or things which may be unlawful or in violation of the rights of the City or the
Trustee hereunder;
(ii) have access to and inspect, examine and make copies of all of the
books and records of the Owner pertaining to the Project;
(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 Owner
hereunder; or
(iv) require the City to declare a default under the Loan and accelerate the
indebtedness evidenced by the Note, and thereafter exercise all other rights and
remedies under the Financing Agreement and proceed to redeem Bonds in
accordance with the Indenture.
13
The Trustee shall have the right, in accordance with this Section 16 and the provisions of the
Indenture, without the consent, approval or knowledge of the City, to exercise any or all of the rights
or remedies of the City hereunder; provided that prior to taking any such act the Trustee shall give
the City reasonable written notice, which shall not be less than 15 days in advance of its intended
action. All fees, costs and expenses of the Trustee incurred in taking any action pursuant to this
Section 16 shall be the sole responsibility of the Owner.
After the Indenture has been discharged, the City may act on its own behalf to declare
an “Event of Default” hereunder and to exercise any of the enforcement remedies set forth above to
the same extent and with the same effect as if taken by the Trustee.
Notwithstanding any provisions in this Regulatory Agreement, the liability of the
Owner under this Regulatory Agreement is limited as provided in Section 8.15 of the Loan
Agreement.
17. RECORDING AND FILING. The Owner shall cause this Regulatory Agreement
and all amendments and supplements hereto and thereto, to be recorded and filed in the real property
records of the County of San Diego and in such other places as the City or the Trustee may
reasonably request. The Owner shall pay all fees and charges incurred in connection with any such
recording.
18. PAYMENT OF FEES. In the event that a party to this Regulatory Agreement
brings an action against any other party to this Regulatory Agreement by reason of the breach of any
condition or covenant, representation or warranty in this Regulatory Agreement, or otherwise arising
out of this Regulatory Agreement, the prevailing party in such action shall be entitled to recover from
the other reasonable attorneys’ fees to be fixed by the court which shall render a judgment, as well as
the costs of suit.
Notwithstanding any prepayment of the Loan and notwithstanding a discharge of the
Indenture, throughout the term of this Regulatory Agreement, the Owner shall pay the City’s fee of
.23 percent of the principal amount of the Bonds outstanding on their date of issuance on June 1 of
each year and shall also reimburse the City and the Trustee for all expenses reasonably incurred by
them in connection with enforcement of their rights and remedies hereunder.
19. GOVERNING LAW. This Regulatory Agreement shall be governed by the laws of
the State of California. The Trustee’s rights, duties and obligations hereunder are governed in their
entirety by the terms and provisions of the Indenture.
20. AMENDMENTS. Except as provided in Section 6(a) hereof, this Regulatory
Agreement shall be amended only by a written instrument executed by the parties hereto or their
successors in title, and duly recorded in the real property records of the County of San Diego. The
parties hereto acknowledge that, for so long as the Bonds are outstanding, the Credit Facility
Provider is a third party beneficiary to this Regulatory Agreement, and that, except as provided in
Section 6(a) hereof, no amendment affecting the rights of the Credit Facility Provider may occur
without the prior written consent of the Credit Facility Provider.
21. NOTICE. Any notice required to be given hereunder shall be made in writing and
shall be given by personal delivery, certified or registered mail, postage prepaid, return receipt
14
requested, at the addresses specified below, or at such other addresses as may be specified in writing
by the parties hereto:
City: City of Carlsbad
2965 Roosevelt Street, Suite B
Carlsbad, California 92008-2389
Attn: Housing and Redevelopment Director
Credit Facility Provider: Federal Home Loan Mortgage Corporation
8100 Jones Branch Drive, Mail Stop B4Q
McLean, Virginia 22102
Attention: Multifamily Management and
Facsimile: (703) 714-3273
Telephone: (703) 903-2000
Information Control
with a copy to:
with a copy to:
Trustee and
Program
Administrator:
Owner:
Federal Home Loan Mortgage Corporation
8200 Jones Branch Drive
McLean, Virginia 22 102
Attention: Associate General Counsel - Multifamily
Facsimile: (703) 903-2885
Telephone: (703) 903-2000
Federal Home Loan Mortgage Corporation
8100 Jones Branch Drive, Mail Stop B4F
McLean, Virginia 22 102
Attention: Multifamily Loan Servicing
Facsimile: (703) 714-3003
Telephone: (703) 903-2000
U.S. Bank, N.A.
One California Street, Suite 2550
San Francisco, California 941 11
Attn: Multifamily Housing
Santa Fe Ranch, LLC
c/o Henderson Global Investors (North America) Inc.
One Financial Plaza, 19th Floor
Hartford, Connecticut 06103
Attention: James G. Martha
Telephone: (860) 723-8701
Telecopier: (860) 723-8601
Legal Department
Notice shall be deemed given three business days after the date of mailing, by certified mail, postage
prepaid, return receipt requested, or, if personally delivered, when received.
15
22. SEVERABILITY. If any provision of this Regulatory Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the remaining portions hereof
shall not in any way be affected or impaired thereby.
23. INCORPORATION OF FREDDIE MAC RIDER. The Freddie Mac Rider
attached hereto as Exhibit D is incorporated herein by reference and constitutes an integral part of
this Regulatory Agreement. In the event that an Alternate Credit Facility has been delivered, the
Freddie Mac Rider shall terminate and be of no further effect.
24. MULTIPLE COUNTERPARTS. This Regulatory Agreement may be
simultaneously executed in multiple counterparts, all of which shall constitute one and the same
instrument, and each of which shall be deemed to be an original.
IN WITNESS WHEREOF, the City, the Trustee and the Owner have executed this
Regulatory Agreement by duly authorized representatives, all on the Bond Issuance Date.
CITY OF CARLSBAD
By:
Mayor
ATTEST:
City Clerk
US. BANK, N.A., as Trustee
By:
Authorized Signatory
ATTEST:
Authorized Signatory
16
SANTA FE RANCH, LLC, a Delaware limited
liability company
By: CASA Partners 11, L.P., an Illinois limited
partnership, its sole member
By: Henderson Global Investors GP, L.L.C., a
Delaware limited liability company, its
general partner
By:
Teny D. Senger
Director, Acquisitions & Dispositions
17
c 75
STATE OF CALIFORNIA
COUNTY OF
On , before me, , Notary Public,
personally appeared
(Pent Name ofNofary public)
0 personally known to me
-or- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) idan
subscribed to the within instrument and acknowledged to me that he/she/they executed the sam
in hiskerltheir authorized capacity(ies), and that by hisiherhheir signature(s) on the instrument thi
person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signamre Of Notary
OPTIONAL
Though the data below is not required by law, it may prove valuable to persons relying on the document and could prever
fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
0 Individual 0 Corporate Officer
Tifle(s) Tifle Or Type Of Document
0 Partner(s) 0 0
Limited
General
0 Anorney-In-Fact 1 0 Trustee($ 0 GuardidConservator
0 Other:
Number Of Pages
Signer is representing:
Name Of P-n(s) Or Enfity(ies)
Date Of Donunents
Signer@) Other Than Named Above
18
EXHIBIT A
LEGAL DESCRIPTION
Lots 1 through 4 inclusive of Carlsbad Tract No. 84-7 in the City of Carlsbad, County of San
Diego, State of California, according to map thereof No. 11391, filed in the Office of the County
Recorder of San Diego County, December 17,1985.
Excepting therefrom, all minerals, mineral rights, oil, oil rights, natural gas, natural gas
rights, petroleum, petroleum rights, other hydrocarbon substances, geothermal steam, all
underground water, and all products derived from any of the foregoing, in or under or which may be
produced from the property which underlies a plane parallel to and 500 feet below the present surface
of the property together with the perpetual right of drilling, mining, exploring and operating therefor
and storing in and removing the same from the property or any other land, including the right to
whipstock or directionally drill and mine from lands other than the property, oil, water, or gas wells,
tunnels and shafts into, through or across the subsurface of the property, and to bottom such
whipstocked or directionally drilled wells, tunnels and shafts under the beneath or beyond the
exterior limits thereof, and to rednll, retunnel, equip, maintain, repair, deepen, and operate any such
wells or mines, without, however, the right to drill, mine, store, explore, and operate through the
surface or the upper five hundred (500) feet of the subsurface of the property; as reserved to Daon
Corporation in Grant Deed recorded October 29, 1984, Official Records, FileRage No. 84-407544.
A- 1 27
EXHIBIT B
CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE
The undersigned, , being duly authorized to execute this certificate on
behalf of Santa Fe Ranch, LLC, a Delaware limited liability company (the “Owner”), hereby
represents and warrants that:
1. He has read and is thoroughly familiar with the provisions of the various Loan
Documents associated with the Owner’s participation in the City of Carlsbad’s (the “City”) Variable
Rate Demand Multifamily Housing Revenue Refunding Bonds, Series A of 1993 (La Costa
Apartments Project), such documents including:
(a) the Second Amended and Restated Regulatory Agreement and Declaration of
Restrictive Covenants dated as of May 1,2002 (the “Regulatory Agreement’) among the
Owner, the City and U.S. Bank, N.A., (the “Trustee”);
(b) the Amended and Restated Loan Agreement dated as of May 1,2002 among
the Owner, the City and the Trustee; and
(c) the Note dated as of May 1,2002 from the Owner to the City representing the
Owner’s obligation to repay the Loan.
2. As of the date of this certificate, the following percentages of completed residential
units in the Project (i) are occupied by Lower-Income Tenants (as such term is defined in the
Regulatory Agreement) or (ii) are currently vacant and being held available for such occupancy and
have been so held continuously since the date a Lower-Income Tenant vacated such unit; as
indicated
Occupied by Lower-Income
Tenants (including Very
Low Income Tenants):
Occupied by Very Low Income
Tenants:
Held vacant for occupancy
continuously since last
occupied by Lower-Income
Tenant:
-% Unit Nos.
-Yo Unit NOS.
Yo Unit NOS.
B- 1
3. To the best knowledge of the Owner, (i) the Owner is not in default under the terms
of the Regulatory Agreement, and (ii) no Determination of Taxability has occurred with respect to
the Bonds.
SANTA FE RANCH, LLC, a Delaware limited
liability company
By: CASA Partners 11, L.P., an Illinois limited
partnership, its sole member
By: Henderson Global Investors GP, L.L.C., a
Delaware limited liability company, its
general partner
By:
Teny D. Senger
Director, Acquisitions & Dispositions
B-2
EXHIBIT C
INCOME COMPUTATION AND CERTIFICATION
NOTE TO APARTMENT OWNER. This form is designed to assist you in computing Annual
Income in accordance with the method set forth in the Department of Housing and Urban
Development (“HUD”) Regulations (24 CFR 5.609). You should make certain that this form is at all
times up to date with the HUD Regulations. All capitalized terms used herein shall have the meaning
set forth in the Regulatory Agreement.
Re: [Address of Apartment Building]
me, the undersigned state that I/we have read and answered fully, frankly and personally
each of the following questions for all persons who are to occupy the unit being applied for in the
above apartment project. Listed below are the names of all persons who intend to reside in the unit:
1
Name of Members
of the
Household
2
Relationship to
Head of
Household
HEAD
SPOUSE
3 4
Social Security
Number Age
5
Place of
Employment
c-1
Income Comuutation
6. The total anticipated income, calculated in accordance with this paragraph 6, of all persons
(except children under 18 years) listed above for the 12-month period beginning the earlier of
the date that I/we plan to move into a unit or sign a lease for a unit is $
Included in the total anticipated income listed above are:
The full amount, before any payroll deductions, of wages and salaries, overtime pay,
commissions, fees, tips and bonuses, and other compensation for personal services;
The net income from the operation of a business or profession. Expenditures for
business expansion or amortization of capital indebtedness shall not be used as
deductions in determining net income. An allowance for depreciation of assets used
in a business or profession may be deducted, based on straight line depreciation, as
provided in Internal Revenue Service regulations. Any withdrawal of cash or assets
from the operation of a business or profession will be included in income, except to
the extent the withdrawal is reimbursement of cash or assets invested in the operation
by the family;
Interest, dividends, and other net income of any kind from real or personal property.
Expenditures for amortization of capital indebtedness shall not be used as deductions
in determining net income. An allowance for depreciation is permitted only as
authorized in paragraph (6)(b) of this section. Any withdrawal of cash or assets from
an investment will be included in income, except to the extent the withdrawal is
reimbursement of cash or assets invested by the family. Where the family has net
family assets in excess of $5000, annual income shall include the greater of the actual
income derived from all net family assets or a percentage of the value of such assets
based on the current passbook savings rate, as determined by the Department of
Housing and Urban Development;
The full amount of periodic amounts received from Social Security, annuities,
insurance policies, retirement funds, pensions, disability or death benefits, and other
similar types of periodic receipts, including a lump-sum amount or prospective
monthly amounts for the delayed start of a periodic amount except deferred periodic
amounts from supplemental security income and social security benefits that are
received in a lump sum amount or in prospective monthly amounts;
Payments in lieu of earnings, such as unemployment and disability compensation,
worker’s compensation and severance pay except lump-sum additions to family
assets, such as inheritances, insurance payments (including payments under health
and accident insurance and worker’s compensation), capital gains and settlement for
personal or property losses (excluding payments in lieu of earnings, such as
unemployment and disability compensation, worker’s compensation and severance
Pay);
Werfare assistance. If the welfare assistance payment includes an amount
specifically designated for shelter and utilities that is subject to adjustment by the
c-2
31
welfare assistance agency in accordance with the actual cost of shelter and utilities,
the amount of welfare assistance income to be included as income shall consist of:
(1) The amount of the allowance or grant exclusive of the amount specifically
designated for shelter or utilities; plus
(2) The maximum amount that the welfare assistance agency could in fact allow
the family for shelter and utilities. If the family’s welfare assistance is ratably
reduced from the standard of need by applying a percentage, the amount
calculated under this paragraph shall be the amount resulting from one
application of the percentage;
Periodic and determinable allowances, such as alimony and child support payments,
and regular contributions or gifts received from organizations or from persons not
residing in the dwelling;
All regular pay, special pay and allowances of a member of the Armed Forces except
the special pay to a family member serving in the Armed Forces who is exposed to
hostile fire.
Excluded from such anticipated income are:
Income from employment of children (including foster children) under the age of 18
years;
Payments received for the care of foster children or foster adults (usually persons
with disabilities, unrelated to the tenant family, who are unable to live alone);
Lump-sum additions to family assets, such as inheritances, insurance payments
(including payments under health and accident insurance and worker’s
compensation), capital gains and settlement for personal or property losses except
payments in lieu of earnings, such as unemployment and disability compensation,
worker’s compensation and severance pay;
Amounts received by the family that are specifically for, or in reimbursement of, the
cost of medical expenses for any family member;
Income of a live-in aide, as defined by 24 CF’R 45.403;
The full amount of student financial assistance paid directly to the student or to the
educational institution;
The special pay to a family member serving in the Armed Forces who is exposed to
hostile fire;
(1) Amounts received under training programs hded by the Department of
Housing and Urban Development;
(2) Amounts received by a person with a disability that are disregarded for a
limited time for purposes of Supplemental Security Income eligibility and
c-3
benefits because they are set aside for use under a Plan to Attain Self-
Suficiency (PASS):
Amounts received by a participant in other publicly assisted programs which
are specifically for or in reimbursement of out-of-pocket expenses incurred
(special equipment, clothing, transportation, child care, etc.) and which are
made solely to allow participation in a specific program;
Amounts received under a resident service stipend. A resident service stipend
is a modest amount (not to exceed $200 per month) received by a resident for
performing a service for the Public Housing Authority or Owner, on apart-
time basis, that enhances the quality of life in the development. Such services
may include, but are not limited to, fire patrol, hall monitoring, lawn
maintenance, and resident initiatives coordination. No resident may receive
more than one such stipend during the same period of time;
Incremental earnings and benefits resulting to any family member from
participation in qualifying State or local employment training programs
(including training programs not affiliated with a local government) and
training of a family member as resident management staff. Amounts
excluded by this provision must be received under employment training
programs with clearly defined goals and objectives, and are excluded only for
the period during which the family member participates in the employment
training program;
Temporary, nonrecurring or sporadic income (including gifts);
Reparation payments paid by a foreign government pursuant to claims filed under the
laws of that government by persons who were persecuted during the Nazi era;
Earnings in excess of $480 for each full-time student 18 years old or older (excluding
the head of household and spouse);
Adoption assistance payments in excess of $480 per adopted child;
Deferred periodic amounts from supplemental security income and social security
benefits that are received in a lump sum amount or in prospective monthly amounts.
Amounts received by the family in the form of refimds or rebates under State or local
law for property taxes paid on the dwelling unit;
Amounts paid by a State agency to a family with a member who has a developmental
disability and is living at home to offset the cost of services and equipment needed to
keep the developmentally disabled family member at home; or
Amounts specifically excluded by any other Federal statute from consideration as
income for purposes of determining eligibility or benefits under a category of
assistance programs that includes assistance under any program to which the
exclusions set forth in 24 CFR $5.609(c) apply.
C-4 33
7. Do the persons whose income or contributions are included in item 6 above
have savings, stocks, bonds, equity in real property or other form of capital
investment (excluding the values of necessary items of personal property such as
furniture and automobiles and interests in Indian trust land)?
- Yes __ No; or
have they disposed of any assets (other than at a foreclosure or bankruptcy sale)
during the last two years at less than fair market value?
If the answer to (a) or (b) above is yes, does the combined total value of all such
assets owned or disposed of by all such persons total more than $5,000?
- Yes - No
If the answer to (c) above is yes, state:
(1) the combined total value of all such assets: $
(2) the amount of income expected to be derived from such assets in the
12-month period beginning on the date of initial occupancy in the unit that
you propose to rent: $ , and
(3) the amount of such income, if any, that was included in item 6 above:
$-
Are all of the individuals who propose to reside in the unit Ill-time students*?
- Yes - No
*A full-time student is 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.
If the answer to 8(a) is yes, is at least 2 of the proposed occupants of the unit a
husband and wife entitled to file a joint federal income tax return?
- Yes - No
9. Neither myself nor any other occupant of the unit I/we propose to rent is the Owner of the
rental housing project in which the unit is located (hereinafter the “Owner”), has any family
relationship to the Owner; or owns directly or indirectly any interest in the Owner. For
c-5
wCSOC\891096v3U2062.0028
purposes of this paragraph, indirect ownership by an individual shall mean ownership by a
family member, ownership by a corporation, parhership, estate or trust in proportion to the
ownership or beneficial interest in such corporation, partnership, estate or trustee held by the
individual or a family member; and ownership, direct or indirect, by a partner of the
individual.
10. This certificate is made with the knowledge that it will be relied upon by the Owner to
determine maximum income for eligibility to occupy the unit; and I/we declare that all
information set forth herein is true, correct and complete and based upon information I/we
deem reliable and that the statement of total anticipated income contained in paragraph 6 is
reasonable and based upon such investigation as the undersigned deemed necessary.
11. I/we will assist the Owner in obtaining any information or documents required to verify the
statements made herein, including either an income verification from my/our present
employer(s) or copies of federal tax returns for the immediately preceding calendar year.
12. I/we acknowledge that I/we have been advised that the making of any misrepresentation or
misstatement in this declaration will constitute a material breach of my/our agreement with
the Owner to lease the unit and will entitle the Owner to prevent or terminate my/our
occupancy of the unit by institution of an action for ejection or other appropriate proceedings.
I/we declare under penalty of perjury that the foregoing is true and correct.
Executed this - day of in the City of Carlsbad, California.
Applicant ~~
Applicant
[Signature of all persons (except children under the
age of 18 years) listed in number 2 above required].
C-6
FOR COMPLETION BY OWNER ONLY
1. Calculation of eligible income:
a. Enter amount entered for entire household in 6 above: $
If the answer to 7(c) above is yes, enter the total
amount entered in 7(d)(2), subtract from that
figure the amount entered in 7(d)(3) and enter the
remaining balance ($ )
Multiply the amount entered in 7(d)(l) times the
current passbook savings rate as determined by
HUD to determine what the total annual earnings
on the amount in 7(d)(l) would be if invested in
passbook savings ($ ), subtract from
that figure the amount entered in 7(d)(3) and enter
the remaining balance ($ );
Enter at right the greater of the amount calculated
under (1) or (2) above:
c. TOTAL ELIGIBLE INCOME
(Line 1 .a plus line 1 .b(3)):
2. The amount entered in line 1 .c:
__ Qualifies the applicant(s) as a Very Low Income
Tenant(s)
__ Does not qualify the applicant(s) as a Very Low Income
~ Qualifies the applicant(s) as a Low Income Tenant(s)
__ Does not qualify the applicant(s) as a Low Income
Tenant(s).
Tenant(s)
3. Number of apartment unit assigned -
4. This apartment unit [wadwas not] last occupied for a period of 31
Bedroom Size - Rent: $
or more consecutive days by persons whose aggregate anticipated
annual income as certified in the above manner upon their initial
occupancy of the apartment unit qualified them as Very Low
Income Tenants or Lower Income Tenants, as applicable.
c-7
5. Method used to verify applicant(s) income:
Employer income verification.
Copies of tax returns.
other( )
~
C-8
37
INCOME VERIFICATION
(for emuloved uersons)
The undersigned employee has applied for a rental unit located in a project financed under the City of
Carlsbad Multifamily Housing Mortgage Revenue Bond Program for persons of lower income.
Every income statement of a prospective tenant must be stringently verified. Please indicate below
the employee’s current annual income from wages, overtime, bonuses, commissions or any other
form of compensation received on a regular basis.
Annual wages
Overtime
Bonuses
Commissions
Other Income
Total current income
I hereby certify that the statements above are true and complete to the best of my knowledge.
Signature Date Title
I hereby grant you permission to disclose my income to in order that
they may determine my income eligibility for rental of an apartment located in their project which
has been financed under the City of Carlsbad Multifamily Housing Mortgage Revenue Bond
Program.
Signature Date
Please send to:
c-9
3%
INCOME VERIFICATION
(for self-employed persons)
I hereby attach copies of my individual federal and state income tax returns for the immediately
preceding calendar year and certify that the information shown in such income tax returns is true and
complete to the best of my knowledge.
Signature Date
c-10
EXHIBIT D
FREDDIE MAC RIDER
This Freddie Mac Rider (the “Rider”) is attached to and forms a part of that Second Amended
and Restated Regulatory Agreement and Declaration of Restrictive Covenants, dated as of May 1,
2002, by and among the City of Carlsbad, California (the “Issuer”), US. Bank, N.A. (together with
any successor in such capacity, the “Trustee”), and Santa Fe Ranch, LLC (and any successor to its
rights, duties and obligations hereunder and as owner of the Project identified therein, the “Owner”)
(the “Regulatory Agreement”),
1. Definitions. Terms used in this Rider as defined terms and not otherwise defined
herein shall have the meanings given those terms in the Regulatory Agreement. In addition, the
following terms shall have the following meanings:
“Bonds” means the City of Carlsbad, California’s Variable Rate Demand
Multifamily Housing Revenue Refunding Bonds Series A of 1993 (Santa Fe Ranch Apartments fMa
La Costa Apartments Project), in the aggregate principal amount of $15,920,000.
“Bond Financing Documents” has the meaning given that term in the Indenture.
“Bond Mortgage” means the First Deed of Trust and Assignment of Rents and
Fixture Filing dated as of May 1, 1993, together with all riders, securing the Bond Mortgage Loan
with respect to the Project, as it may be amended, modified, supplemented or restated from time to
time.
“Bond Mortgage Loan” means the loan to the Owner pursuant to the Bond
Mortgage Loan Documents, which Bond Mortgage Loan is to be assigned to the Trustee and Freddie
Mac, as their interests may appear.
“Bond Mortgage Loan Documents” means the Bond Mortgage Note, the Bond
Mortgage, the Regulatory Agreement, any Custodial Escrow Agreement, the Credit Enhancement
Agreement, the Reimbursement Agreement, the Reimbursement Mortgage, the Intercreditor
Agreement, the Pledge Agreement and any and all other instruments documenting, evidencing,
securing or otherwise relating to the Bond Mortgage Loan or any portion thereof.
“Bond Mortgage Note” means the Amended and Restated Promissory Note dated as
of ,2002 in the amount of $15,920,000, including applicable addenda, to be executed by
the Owner in favor of the Issuer, evidencing the Owner’s financial obligations under the Bond
Mortgage Loan, and to be endorsed by the Issuer, without recourse, to the order of the Trustee, as the
same may be amended, modified, supplemented or restated from time to time.
“Freddie Mac” means the Federal Home Loan Mortgage Corporation, a shareholder-
owned government-sponsored enterprise organized and existing under the laws of the United States.
“Indenture” means the Amended and Restated Indenture of Trust, dated as of May
1,2002 between the Issuer and the Trustee, as amended, modified, supplemented or restated from
time to time.
D- 1
2. ADulicabilitv. The provisions of this Rider shall amend and supplement the
provisions of, and in the event of a conflict shall supersede the conflicting provisions of, the
Regulatory Agreement.
3. Indemnification. Inasmuch as the covenants, reservations and restrictions of the
Regulatory Agreement run with the land, the indemnification obligations of the Owner contained in
the Regulatory Agreement will be deemed applicable to any successor in interest to the Owner, but, it
is acknowledged and agreed, notwithstanding any other provision of the Regulatory Agreement to
the contrary, that neither Freddie Mac nor any successor in interest to Freddie Mac will assume or
take subject to any liability for the indemnification obligations of the Owner for acts or omissions of
the Owner prior to any transfer of title to Freddie Mac, whether by foreclosure, deed in lieu of
foreclosure or comparable conversion of the Bond Mortgage Loan; the Owner shall remain liable
under the indemnification provisions for its acts and omissions prior to any transfer of title to Freddie
Mac. Freddie Mac shall indemnify the Issuer following acquisition of the Project by Freddie Mac,
by foreclosure, deed in lieu of foreclosure or comparable conversion of the Bond Mortgage Loan,
during, and only during, any ensuing period that Freddie Mac owns and operates the Project,
provided that Freddie Mac’s liability shall be strictly limited to acts and omissions of Freddie Mac
occurring during the period of ownership and operation of the Project by Freddie Mac. Freddie Mac
shall have no indemnification obligations with respect to the Bonds or the Bond Mortgage Loan
Documents. The Owner shall remain liable under the Regulatory Agreement for its actions and
omissions prior to any transfer of title to Freddie Mac.
4. Sale or Transfer. The Issuer’s consent provided for under Section 11 of the
Regulatory Agreement shall not apply to any transfer of title to the Project to Freddie Mac.or to a
third party by foreclosure, deed in lieu of foreclosure or comparable conversion of the Bond
Mortgage Loan or to any subsequent transfer by Freddie Mac following foreclosure, deed-in-lieu of
foreclosure or comparable conversion of the Bond Mortgage Loan. No transfer of the Project shall
operate to release the Owner from its obligations under the Regulatory Agreement. Nothing
contained in the Regulatory Agreement shall affect my provision of the Bond Mortgage or any of the
other Bond Mortgage Loan Documents which requires the Owner to obtain the consent of Freddie
Mac as a precondition to sale, transfer or other disposition of, or any direct or indirect interest in, the
Project or of any direct or indirect interest in the Owner, excluding transfers permitted by the Bond
Mortgage. Any written consent to a sale or transfer obtained kom the Issuer shall be deemed to
constitute conclusive evidence that the sale or transfer is not a violation of the transfer provisions of
the Regulatory Agreement.
5. Enforcement. Notwithstanding anything contained in the Regulatory Agreement or
the Indenture to the contrary, except as set forth in the Intercreditor Agreement:
(i) the occurrence of an event of default under the Regulatory Agreement shall
not be deemed or constitute a default under the Bond Mortgage Loan Documents, except as
may be otherwise specified in the Bond Mortgage Loan Documents; and
(ii) neither the Issuer nor the Trustee may, upon the occurrence of an event of
default under the Regulatory Agreement, seek, in any manner, to (a) cause or direct
acceleration of the Bond Mortgage Loan, (b) enforce the Bond Mortgage Note, (c) foreclose
on the Bond Mortgage, (d) cause the Trustee to redeem the Bonds or to declare the principal
of the Bonds and the interest accrued on the Bonds to be immediately due and payable or (e)
cause the Trustee to take any other action under any of the Bond Mortgage Loan Documents,
D-2
any of the Bond Financing Documents or any other documents which action would or could
have the effect of achieving any one or more of the actions, events or results described in the
preceding clauses (a) through (d); and
(iii) the occurrence of an event of default under this Regulatory Agreement shall
not impair, defeat or render invalid the lien of the Bond Mortgage.
The foregoing prohibitions and limitations are not intended to limit the rights of the Issuer or
the Trustee to specifically enforce the Regulatory Agreement or to seek injunctive relief in order to
provide for the operation of the Project in accordance with the requirements of the Internal Revenue
Code and state law. Accordingly, upon any default by the Owner, the Issuer or the Trustee may seek
specific performance of the Regulatory Agreement or enjoin acts which may be in violation of the
Regulatory Agreement or unlawful.
The obligations of any owner under the Regulatory Agreement shall be personal to the person
who was the owner at the time that an event, including, without limitation, any default or breach of
the Regulatory Agreement, occurred or was alleged to have occurred, and such person shall remain
liable for any and all such obligations, including damages occasioned by a default or breach, even
after such person ceases to be the owner of the Project. Accordingly, no subsequent owner of the
Project shall be liable or obligated for the obligation of any prior owner (including the Owner),
including, but not limited to, any obligation for payment, indemnification or damages, for default or
breach of the Regulatory Agreement or otherwise. The owner of the Project at the time the
obligation was incurred, including any obligation arising out of a default or breach of the Regulatory
Agreement, shall remain liable for any and all payments and damages occasioned by the owner even
after such person ceases to be the owner of the Project, and no person seeking such payments or
damages shall have recourse against the Project.
6. Notice of Violations. Promptly upon determining that a violation of the Regulatory
Agreement has occurred, the Issuer or the Trustee shall, by notice in writing to the Owner, the
Freddie Mac Servicer and Freddie Mac, inform the Owner, the Freddie Mac Servicer and Freddie
Mac that such violation has occurred, the nature of the violation and that the violation has been cured
or has not been cured, but is curable within a reasonable period of time, or is incurable;
notwithstanding the occurrence of such violation, neither the Issuer nor the Trustee shall have, and
each of them acknowledge that they shall not have, any right to cause or direct acceleration of the
Bond Mortgage Loan, to enforce the Bond Mortgage Note or to foreclose on the Bond Mortgage.
7. Amendments. The Regulatory Agreement shall not be amended without the prior
written consent of Freddie Mac.
8. Fees: Penalties. Freddie Mac shall not be liable for the payment of any compensation
or any accrued unpaid fees, costs, expenses or penalties otherwise owed by the Owner or any
subsequent owner of the Project prior to the date of acquisition of the Project by Freddie Mac,
whether such acquisition is by foreclosure, deed-in-lieu of foreclosure or comparable conversion of
the Bond Mortgage Loan.
9. Third-Partv Beneficiary. The parties to the Regulatory Agreement recognize and
agree that the terms of the Regulatory Agreement and the enforcement of those terms are essential to
the security of Freddie Mac and are entered into for the benefit of various parties, including Freddie
Mac. Freddie Mac shall accordingly have contractual rights in the Regulatory Agreement and shall
D-3
be entitled (but not obligated) to enforce, separately or jointly with the Issuer and/or the Trustee, or to
cause the Issuer or the Trustee to enforce, the terms of the Regulatory Agreement. In addition,
Freddie Mac is intended to be and shall be a third-party beneficiary of the Regulatory Agreement.
10. Notices. Copies of all notices under the Regulatory Agreement shall be sent to the
Freddie Mac Servicer at the address set forth below or to such other address as the Freddie Mac
Servicer may from time to time designate:
Reilly Mortgage Group, Inc.
2000 Corporate Ridge, Suite 925
McLean, VA 22101
Attention: Servicing Department
Any notice to be given to Freddie Mac shall be sent to Freddie Mac at the address set forth
below or to such other address as Freddie Mac may from time to time designate:
Federal Home Loan Mortgage Corporation
Mail Stop BFQ
81 00 Jones Branch Drive
McLean, VA 221 02
Attention: Multifamily Management and Control
Telephone: (703) 903-2000
Facsimile: (703) 714-3273
with a copy to:
with a copy to:
Federal Home Loan Mortgage Corporation
McLean, VA 22102
8200 Jones Branch Drive
Attention: Associate General Counsel-Multifamily
Telephone: (703) 903-2000
Facsimile: (703) 903-3693
Federal Home Loan Mortgage Corporation
8200 Jones Branch Drive
Mail Stop B4F
McLean, VA 22102
Attention: Director of Multifamily Loan Servicing
Telephone: (703) 903-2000
Facsimile: (703) 714-3003
Legal Department
D-4 43
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Table of Contents
&
DEFINITIONS AND INTERPRETATION .............................................................................. 2
ACQUISITION. CONSTRUCTION. EQUIPPING AND COMPLETION OF THE
PROJECT .................................................................................................................................. 5
RESIDENTIAL RENTAL PROPERTY ................................................................................... 6
LOWER-NCOME TENANTS ................................................................................................. 7
TAX EXEMPT STATUS OF THE BONDS ............................................................................. 9
MODIFICATION OF SPECIAL TAX COVENANTS ............................................................ 9
NDEMNIFICATION ............................................................................................................. 10
CONSIDERATION ................................................................................................................. 11
RELIANCE ............................................................................................................................. 11
PROJECT IN THE CITY ........................................................................................................ 11
SALE OR TRANSFER OF THE PROJECT ............................... ; ........................................... 11
TERM ...................................................................................................................................... 12
COVENANTS TO RUN WITH THE LAND ......................................................................... 12
BURDEN AND BENEFIT ...................................................................................................... 13
UNIFORMITY; COMMON PLAN ........................................................................................ 13
ENFORCEMENT .................................................................................................................... 13
RECORDING AND FILING .................................................................................................. 14
PAYMENT OF FEES ............................................................................................................. 14
GOVERNING LAW ............................................................................................................... 14
AMENDMENTS ..................................................................................................................... 14
NOTICE ................................................................................................................................... 14
SEVERABILITY ..................................................................................................................... 16
INCORPORATION OF FREDDIE MAC RIDER .................................................................. 16
24. MULTIPLE COUNTERPARTS ............................................................................................. 16
Exhibit A LEGAL DESCRIPTION
Exhibit B CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE
Exhibit C INCOME COMPUTATION AND CERTIFICATION
ii
Exhibit 3
AMENDED AND RESTATED INDENTURE OF TRUST
between
CITY OF CARLSBAD, CALIFORNIA
and
US. BANK, N.A.,
as Trustee
Relating to
$15,920,000
CITY OF CARLSBAD, CALIFORNIA
Variable Rate Demand Multifamily Housing Revenue Refunding Bonds
Series A of 1993
(Santa Fe Ranch Apartments fMa La Costa Apartments Project)
Dated as of May 1,2002
1
Table of Contents
ARTICLE I
DEFINITIONS
Section 1.01. Definitions ....................................................................................................................... 21
ARTICLE I1
THE BONDS
Section 2.01. Basic Terms .................................................................................................................... 22
Section 2.02. Determination of Interest Rate ....................................................................................... 23
Section 2.03. Limited Obligations ........................................................................................................ 28
Section 2.04. Indenture Constitutes Contract ....................................................................................... 29
Section 2.05. Execution ........................................................................................................................ 29
Section 2.06. Authentication ................................................................................................................. 29
Section 2.07. Mufilated. Lost. Stolen or Destroyed .............................................................................. 29
Section 2.08. Transfer and Exchange; Persons Treated as Owners .................................................... 30
Section 2.09. Temporary Bonds ................................................................................... ; ........................ 30
Section 2.1 1 . Deposit to Cost of Issuance Fund ................................................................................... 32
Section 2.10. Remarketing of Bonds ..................................................................................................... 31
Section 2.13. Mandatory Tender of Bonds on Substitution Date 33 Section 2.12. Book-Entry Only System of Registration 32
ARTICLE I11
REDEMPTION OF BONDS PRIOR TO MATURITY
Section 3.01. Redemption of Bonds Prior to Maturity ......................................................................... 35
........................................................................
.........................................................
Section 3.02. Selection of Bonds for Redemption ................................................................................. 38
Section 3.03. Notice of Redemption ...................................................................................................... 38
Section 3.04. Cancellation .................................................................................................................... 39
Section 3.05. Eflect of Notice of Redemption ....................................................................................... 39
Section 3.06. Purchase ofBonds in WhoIe in Lieu ofRedemption ...................................................... 39
Section 3.07. Cancellation of Purchased Bonds ................................................................................... 40
ARTICLE IV
REVENUESANDFUNDS
Section 4.01, Pledge of Revenues and Assets ....................................................................................... 41
Section 4.02. Establishment of Funds ................................................................................................... 41
Section 4.03. Application ofRevenues .................................................................................................. 41
Section 4.04. Application of Bond Fund ............................................................................................... 43
Section 4.05. Application of Redemption Fund .................................................................................... 43
Table of Contents
(continued)
Section 4.06. Application ofAdministration Fund ............................................................................... 44
Section 4.09. Moneys Held for Particular Bonds; Funds Held in Trust .............................................. 46
Section 4.07. Principal Reserve Fund .................................................................................................. 44
Section 4.08. Investment of Funds ........................................................................................................ 45
Section 4.10. Accounting Records ........................................................................................................ 46
Section 4.11. Amounts Remaining in Funds ......................................................................................... 46
Section 4.12. Rebate Fund .................................................................................................................... 41
Section 4.13. Cost of Issuance Fund .................................................................................................... 48
Section 4.14. Reports From the Trustee ............................................................................................... 48
Section 4.15. Payments Under Bond Mortgage Loan .......................................................................... 48
Section 4.16. Drawings Under Credit Facility ..................................................................................... 49
Section 4.17. Notices Under Credit Enhancement Agreement ............................................................. 49
ARTICLE V
GENERAL COVENANTS AND REPRESENTATIONS
Section 5.01. Payment of Principal and Interest .................................................................................. 50
Section 5.02. Performance of Covenants ............................................................................................. 50
Section 5.03. Instruments of Further Assurance .................................................................................. 50
Section 5.04. Inspection of Project Books ............................................................................................ 50
Section 5.05. No Modifcation of Security; Additional Indebtedness ................................................... 50
Section 5.06. Damage. Destruction or Condemnation ......................................................................... 50
Section 5.08. Representations and Warranties of the Issuer 51
Section 5.07. Tax Covenant 51
ARTICLE VI
DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND BONDHOLDERS
Section 6.01. Events of Default ............................................................................................................. 53
Section 6.02. Acceleration; Other Remedies Upon Event of Default .................................................. 53
Section 6.03. Rights of Bondholders ..................................................................................................... 55
Section 6.04. Waiver by the Issuer ....................................................................................................... 55
Section 6.05. Application of Moneys Afrer Default. ............................................................................. 56
Section 6.06. Rights of the Credit Facility Provider ............................................................................ 57
Section 6.07. Remedies Vested in Trustee ............................................................................................ 57
Section 6.08. Remedies of Bondholders ............................................................................................... 57
Section 6.09. Termination ofproceedings ............................................................................................ 58
Section 6.10. Waivers of Events of Default .......................................................................................... 58
Section 6.1 1 . Notice to Bondholders ifDefault Occurs ........................................................................ 59
..................................................................................................................
................................................................
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Table of Contents
(continued)
ARTICLE VI1
CONCERNING THE TRUSTEE .
Section 7.01. Standard of Care ............................................................................................................. 60
Section 7.04. Trustee May Hold Bonds ................................................................................................ 63
Section 7.06. Compensation of Trustee ................................................................................................ 63
Section 7.02. Reliance Upon Documents .............................................................................................. 61
Section 7.03. Use of Proceeds .............................................................................................................. 63
Section 7.05. Trust Imposed ................................................................................................................. 63
Section 7.07. Maintenance of Ofice ..................................................................................................... 63
Section 7.08. Successor Trustee ........................................................................................................... 64
Section 7.09. Resignation by the Trustee .............................................................................................. 64
Section 7.10. Removal of the Trustee ..................... ~ ............................................................................. 64
Section 7.1 1 . Appointment of Successor Trustee .................................................................................. 65
Section 7.12. Concerning Any Successor Trustee ................................................................................ 65 Section 7.13. Successor Trustee as Trustee, Paying Agent and Bond Registrar .................................. 65
Section 7.14. Servicing the Bond Mortgage Loan ................................................................................ 65
Section 7.15. Co-Trustee or Separate Trustee ...................................................................................... 66
Section 7.16. Compliance of Borrower Under Tax Regulatory Agreement ......................................... 67
Section 7.17. Record of Freddie Mac Credit Enhancement Payments and Freddie Mac
Section 7.18. Limitation on Action by Trustee ...................................................................................... 68
ARTICLE VI11
SUPPLEMENTAL INDENTURES AND AMENDMENTS OF CERTAIN DOCUMENTS
Section 8.01. Supplemental Indentures Not Requiring Consent of Bondholders ................................. 69
Section 8.02. Supplemental Indentures Requiring Consent of Bondholders ........................................ 69
Section 8.04. Amendments to Financing Agreement Requiring Consent of Bondholders .................... 71
Section 8.05. Amendments to the Credit Facility ................................................................................. 72
ARTICLE IX
SATISFACTION AND DISCHARGE OF INDENTURE
Section 9.01. Discharge of Lien ........................................................................................................... 73
Section 9.02. Discharge of Liability ..................................................................................................... 74
Section 9.03. Payment after Discharge of Indenture ............................................................................ 74
Section 9.04. Deposit of Money or Securities with Trustee .................................................................. 74
Reimbursement Amounts ................................................................................................ 67
Section 8.03. Amendments to Financing Agreement Not Requiring Consent ofBondholders ............. 71
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Table of Contents
(continued)
ARTICLE X
REMARKETING AND PURCHASE OF BONDS
Section 10.01. DemandforandMandatoryPurchaseofBonds .......................................................... 76
Section 10.02. Mandatory TenderofBonds ......................................................................................... 77
Section 10.03. RemarketingofBonds ................................................................................................... 77
Section 10.04. Purchase of Bonds not Remarketed .............................................................................. 78
Section 10.05, RemarketingAgent ........................................................................................................ 79
Section 10.06. Qualifications andResignation or Removal ofRemarketing Agent ............................. 80
Section 10.07. TenderAgent ................................................................................................................. 80
Section 10.08. Qualifications of TenderAgent ..................................................................................... 82
Section 10.09. DealinginBonds .......................................................................................................... 82
Section 10.10, PurchasedBonds .......................................................................................................... 83
ARTICLE XI
MISCELLANEOUS
Section 11.01. Consents and Other Instruments of Bondholders ......................................................... 84
Section 11.02, Limitation OfRights ...................................................................................................... 84
Section 1 1.03. Construction of Conflicts; Severability ......................................................................... 84
Section 11.04. Notices .......................................................................................................................... 85
Section 1 1.05. Trustee as Paying Agent and Bond Registrar ............................................................... 87
Section 11.06, Payments fie on Non-Business Days .......................................................................... 88
Section 11.07. Counterparts ................................................................................................................. 88
Section 11 .O 8. Laws Governing Indenture and Administration of Trust .............................................. 88
Section 11.09. NoRecourse .................................................................................................................. 88
Section 11.11). SuccessorsandAssigns ................................................................................................. 88
EXHIBIT A . FORM OF BOND
EXHIBIT B . FORM OF TENDER NOTICE
EXHIBIT C . FORM OF PURCHASERS LETTER
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AMENDED AND RESTATED INDENTURE OF TRUST
THIS AMENDED AND RESTATED INDENTURE OF TRUST (this “Indenture”), made
and entered into as of May 1, 2002, by and between the CITY OF CARLSBAD, CALIFORNIA, a
municipal corporation duly organized and existing under the laws of the State of California (together
with any successor to its rights, duties and obligations hereunder, (the “Issuer”), and, US. BANK,
N.A., (as successor to First Trust of California, National Association, the “Prior Trustee”) a national
banking association duly organized and existing under the laws of the United States of America, and
authorized to accept and execute trusts of the character herein set out, with a corporate trust office in
Los Angeles, California, as trustee (the “Trustee”),
WITNESSETH
WHEREAS, Chapter 7 of Part 5 of Division 31 (commencing with Section 52075) of the
Health and Safety Code of the State of California (herein called the “Act”) authorizes the Issuer to
issue revenue bonds for the purpose of financing the construction or development of multifamily
rental housing and for the provision of capital improvements in connection with and determined
necessary to such multifamily housing; and
WHEREM, the Issuer has previously issued the City of Carlsbad, California Variable Rate
Demand Multifamily Housing Revenue Refimding Bonds, Series A of 1993 (La Costa Apartments
Project) in the principal amount of $15,920,000 (the “Bonds”) pursuant to that certain Indenture of
Trust, dated as of May 1, 1993 (as amended, supplemented or otherwise modified to the date hereof,
the “Original Indenture”); and
WHEREAS, the Bonds in the aggregate principal amount of $15,920,000 remain
outstanding on the Closing Date (as herein defined); and
WHEREAS, the proceeds of the Bonds were used by the Issuer to fund a loan (the “Loan”)
to La Costa Partners (the “Original Developer”) in order to refinance a multifamily rental housing
development (the “Project”) constructed by the Original Developer; and
WHEREAS, the Bonds were issued for the purpose of refunding the Issuer’s $15,920,000
Multifamily Housing Revenue Bonds, Series A of 1985 (La Costa Apartments Project), the proceeds
of which financed the construction of the Project by the Original Developer; and
WHEREAS, in connection with the provision of the Loan, the Original Developer executed
that certain First Deed of Trust and Assignment of Rents and Fixture Filing dated as of May 1, 1993
(as amended, supplemented or otherwise modified to the date hereof, the “Bond Mortgage”); and
WHEREAS, the Original Developer, the Issuer, the Trustee, and The Northwestern Mutual
Life Insurance Company (the “Prior Developer”) entered into an Assignment and Assumption
Agreement (Bond Documents) dated as of June 23, 1998, whereby the Prior Developer agreed to
purchase, acquire and assume all of the Original Developer’s right, title and interest in the Project;
and
2
WHEREAS, the Prior Developer intends to sell, dispose of, assign, convey and transfer all
of its right, title and interest in and to the Project to Santa Fe Ranch, LLC, a Delaware limited
liability company (the “Borrower”), pursuant to a purchase contract dated as of February 25,2002, as
amended; and
WHEREAS, the Bonds are currently secured by an irrevocable letter of credit in an initial
stated amount of $16,085,743 issued by Bank of America, N.A. expiring on (the
“Letter of Credit”); and
WHEREAS, simultaneously with the sale and transfer of the Project, the Borrower desires to
provide for the substitution of the Letter of Credit by a Credit Enhancement Agreement (the “Credit
Enhancement Agreement”) by and between the Trustee and the Federal Home Loan Mortgage
Corporation (“Freddie Mac”) which will provide for (i) draws in an amount equal to Guaranteed
Payments with respect to the Bond Mortgage Loan and (ii) liquidity draws by the Trustee to the
extent remarketing proceeds are insufficient to pay the Purchase Price of the Bonds (other than
Purchased Bonds) while the Bonds bear interest at a Variable Rate; and
WHEREAS, to evidence the Borrower’s reimbursement obligations to Freddie Mac for
draws made under the Credit Enhancement Agreement, the Borrower and Freddie Mac will enter into
a Reimbursement and Security Agreement dated as of even date herewith (the “Reimbursement
Agreement”); and
WHEREAS, to secure the Borrower’s reimbursement obligations to Freddie Mac under the
Reimbursement Agreement, the Borrower will execute and deliver to Freddie Mac on the Closing
Date a Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing
dated as of May 1,2002 (the “Reimbursement Mortgage”) with respect to the Project; and
WHEREAS, the Bonower desires to extend the maturity of the Bonds by five (5) years to
June1,2016fromthecurrentmaturitydateofJune1,2011;and
WHEREAS, the Issuer may, with the approval of the Borrower, the Trustee and the Bank, as
defined in the Original Indenture, from time to time and at any time, with the consent of the owners
of all Outstanding Bonds, enter into supplemental indentures provided that the Trustee receives an
opinion of Bond Counsel stating that such supplemental indenture (i) is authorized or permitted by
the Original Indenture and complies with its terns, (ii) will be valid and binding upon the Issuer in
accordance with its terms after its execution by the Issuer and the Trustee, and (iii) will comply with
the Refunding Law and the Act and will not impair the exclusion from gross income for federal
income tax purposes of interest on the Bonds; and
WHEREAS, Stem Brothers &. Co. (the “Bondholder”) is, as of the date of execution hereof,
the registered owner of one hundred percent (100%) of the Bonds Outstanding; and
WHEREAS, the Issuer, the Trustee, the Bondholder and Freddie Mac are consenting to the
amendment of the Original Indenture as hereinafter provided, and simultaneously with the execution
and delivery of this Indenture, Bond Counsel is rendering the opinion required by Section 10.2 of the
Original Indenture; and
3
WHEREAS, Reilly Mortgage Group, Inc. (the “Freddie Mac Servicer”) shall act as initial
servicer for the Bond Mortgage Loan with respect to payments made thereunder by the Borrower and
for the Reimbursement Agreement and the Reimbursement Mortgage; and
WHEREAS, pursuant to the Assignment and Assumption Agreement dated as of May 1,
2002 by and between the Prior Developer, the Borrower and the Issuer, the Prior Developer will
assign its rights and obligations to the Borrower and the Borrower will .assume the indebtedness,
obligations and liabilities of the Prior Developer; and
WHEREAS, the Issuer, the Trustee and Freddie Mac have also entered into an Intercreditor
Agreement dated as of May 1, 2002 (the “Intercreditor Agreement”) in connection with the delivery
of the Credit Enhancement Agreement; and
WHEREAS, all things necessary to make the Bonds valid, binding and legal obligations of
the Issuer according to the import thereof, and to constitute this Indenture a valid lien on the
properties, interests, revenues and payments herein pledged to the payment of the Bonds, have been
done and performed, and the creation, execution and delivery of this Indenture, and the execution and
delivery of the Bonds, subject to the terms hereof, have in all respects been duly authorized.
NOW, THEREFORE, the Issuer, in consideration of the premises and the acceptance by the
Trustee of the trusts hereby created and of the purchase and acceptance of the Bonds by the
Bondholders thereof, and of the sum of one dollar, lawful money of the United States of America, to
it duly paid by the Trustee at or before the execution and delivery of these presents, and for other
good and valuable consideration, the receipt of which is hereby acknowledged, in order to secure the
payment of the principal of, premium, if any, and interest on the Bonds according to their tenor and
effect, the payment to Freddie Mac of the Freddie Mac Reimbursement Amount and Freddie Mac
Credit Enhancement Fee (as such terms are hereinafter defined) in accordance with the provisions
hereof and of the Credit Enhancement Agreement and the Reimbursement Agreement, or the
payment of amounts due and owing to any other Credit Facility Provider following termination of the
Credit Enhancement Agreement, and the performance and observance by the Issuer of all the
covenants expressed or implied herein and in the Bonds, does hereby grant, bargain, sell, convey,
pledge and assign a security interest, unto the Trustee, and its successors in trust and its and their
assigns in and to the following property described under “GRANTING CLAUSES - TRUST
ESTATE” to secure the Bonds (said property being herein referred to as the “Trust Estate”), to wit
GRANTING CLAUSES -TRUST ESTATE
1.
Except for amounts in the Rebate Fund, the Specified Fees Account and the Cost of Issuance
Fund, all right, title and interest of the Issuer in and to all Revenues.
TI.
All right, title and interest of the Issuer in and to the Financing Agreement, the Bond
Mortgage Note, the Bond Mortgage and the Credit Facility (other than the Reserved Rights),
including all extensions and renewals of the terms thereof, if any, including, but without limiting the
4
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generality of the foregoing, the present and continuing right to receive, receipt for, collect or make
claim for any of the moneys, income, revenues, issues, profits and other amounts payable or
receivable thereunder, whether payable under the above-referenced documents or otherwise, to bring
actions and proceedings thereunder or for the enforcement thereof, and to do any and all things which
the Issuer or any other person is or may become entitled to do under said documents, subject in all
events to the Issuer’s Reserved Rights.
III.
Excluding moneys or securities in the Cost of Issuance Fund, the Principal Reserve Fund, the
Specified Fees Account, the Rebate Fund, and the Bond Purchase Fund, all other funds or accounts
established hereby, and all money and securities held therein or investments thereof, and any and all
other rights and interests in property whether tangible or intangible from time to time hereafter by
delivery or by writing of any kind, conveyed, mortgaged, pledged, assigned or transferred as and for
additional security hereunder for the Bonds by the Issuer or by anyone on its behalf or with its
written consent to the Trustee, which is hereby authorized to receive any and all such property at any
and all times and to hold and apply the same subject to the terms hereof.
TO HAVE AND TO HOLD, all the same with all privileges and appurtenances hereby
conveyed and assigned, or agreed or intended so to be, to the Trustee and its successors in said trust
and to them and their assigns forever;
IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for the equal and
proportionate benefit, security and protection of all Bondholders of the Bonds, issued under and
secured by this Indenture without privilege, priority or distinction as to lien or otherwise of any of the
Bonds over any of the other Bonds, except as set forth in this Indenture, and for the benefit, security
and protection of the Credit Facility Provider to the extent of its interests hereunder and under the
Credit Facility and the Reimbursement Agreement;
PROVIDED, HOWEVER, that if the Issuer shall pay or cause to be paid to the Bondholders
the principal, interest and premium, if any, to become due thereon at the times and in the manner
provided in Article IX hereof and shall discharge or cause to be discharged any and all obligations to
the Credit Facility Provider hereunder and under the Credit Facility and the Reimbursement
Agreement, and if the Issuer shall keep, perform and observe, or cause to be kept, performed and
observed, all of its covenants, warranties and agreements contained herein, then these presents and
the estate and rights hereby granted shall, at the option of the Issuer, cease, terminate and be void,
and thereupon the Trustee shall cancel and discharge the lien of this Indenture and execute and
deliver to the Issuer such instruments in writing as shall be requisite to satisfy the lien hereof, and,
subject to the provisions of Sections 4.09, 4.11 and 4.12 hereof and Article IX hereof, reconvey to
the Issuer the estate hereby conveyed, and assign and deliver to the Issuer any property at the time
subject to the lien of this Indenture which may then be in its possession, except for the Rebate Fund
and cash held by the Tender Agent for the payment of the Purchase Price of Bonds tendered pursuant
to the terms of this Indenture or held by the Trustee for the payment of interest on and principal of
the Bonds or for payment of amounts payable to the Credit Facility Provider; otherwise this
Indenture to be and remain in full force and effect and upon the trusts and subject to the covenants
and conditions hereinafter set forth.
5
AND IT IS HEREBY COVENANTED AND AGREED by and between the parties hereto,
that the terms and provisions upon which the Bonds are to be issued, executed, authenticated,
delivered and secured, and the trusts and conditions upon which the Trust Estate is to be held and
disposed of, which said trusts and conditions the said Trustee hereby accepts and agrees to discharge,
are as follows (except that in the performance of the agreements of the Issuer herein contained, any
obligation it may thereby incur for the payment of money shall not be a general obligation of the
Issuer or a pledge of the faith and credit of the Issuer, but shall be payable solely from the revenues
and funds pledged for its payment in accordance with this Indenture):
(Remainder of page intentionally lefl blank)
6 55
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. The terms used in this Indenture (except as herein otherwise
expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of
any indenture supplemental hereto shall have the respective meanings specified below:
“Act” means Chapter 7 of Part 5 of Division 31 (commencing with Section 52075) of the
Health and Safety Code of the State of California, as amended.
“Administration Fun8 means the Administration Fund established by the Trustee pursuant to
Section 4.02 hereof.
“Administrative Expense Account” means the Administrative Expense Account within the
Administration Fund established by the Trustee pursuant to Section 4.02 hereof.
“Alternate Credit Facility” means a Credit Facility (other than the Credit Enhancement
Agreement), including, without limitation, a letter of credit, surety bond, insurance policy, standby
purchase agreement, guaranty, mortgage-backed security or other credit facility, collateral purchase
agreement or similar agreement issued by a financial institution (including without litation Freddie
Mac) which provides security for payment of (i) the principal of and interest on the Bonds and the
purchase price of the Bonds while the Bonds bear interest at a Variable Rate (but in no case less than
all of the Outstanding Bonds) when due or (ii) the Bond Mortgage Loan in an amount not less than
the Guaranteed Payment, provided in accordance with Section 5.4 of the Financing Agreement.
“Alternate Credit Fucilify Provider” means the provider of an Alternate Credit Facility.
“Assignment and Assumption Agreement” means that certain Assignment and Assumption
Agreement dated as of May 1, 2002 among the Prior Developer, the Borrower, the Issuer and the
Trustee.
“Authorized Denomination” means (A) with respect to Bonds in a Variable Period, $100,000
principal amount or any integral multiple of $5,000 greater than $100,000, and (B) with respect to
Bonds during any Reset Period or the Fixed Rate Period, $5,000 principal amount or any integral
multiple thereof.
“Authorized Oflcer” means (A) when used with respect to the Issuer, the Mayor, the City
Clerk or the City Manager of the Issuer and such additional person or persons, if any, duly designated
by the Issuer in writing to act on its behalf, (B) when used with respect to the Borrower, the
managing member of the Borrower and such additional person or persons, if any, duly designated by
the Borrower in writing to act on its behalf, (C) when used with respect to the Trustee, any
authorized signatory of the Trustee, or any person who is authorized in writing to take the action in
question on behalf of the Trustee, (D) when used with respect to the Freddie Mac Servicer, any duly
authorized officer of the Freddie Mac Servicer and such additional person or persons, if any, duly
designated by the Freddie Mac Servicer in writing to act on its behalf, (E) when used with respect to
the Remarketing Agent, any Vice President of the Remarketing Agent and such additional person or
persons, if any, duly designated by the Remarketing Agent in writing to act on its behalf, (F) when
I
used with respect to the Tender Agent, any authorized signatory of the Tender Agent and such
additional person or persons, if any, duly designated by the Tender Agent in writing to act on its
behalf, and (G) when used with respect to the Credit Facility Provider, any Vice President or any
person who is authorized in writing to take the action in question on behalf of the Credit Facility
Provider.
“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy,” as now
and hereafter in effect, or any successor federal statute.
‘‘BMA Index Rate” means a rate equal to the index of the weekly index rate resets of tax-
exempt variable rate issues included in a database maintained by Municipal Market Data, a Thomson
Financial Services Company, or its successors, which meet specific criteria established by the Bond
Market Association, such index currently known as the Bond Market Associationm Municipal Swap
Index.
“Bond Counsel” means any firm of attorneys appointed by the Issuer experienced in matters
relating to the issuance of obligations by states and their political subdivisions who are listed as
municipal bond attorneys in The Bond Buyer’s Municipal Marketplace and reasonably acceptable to
the Credit Facility Provider.
“Bond Fee Component” means the regular, ongoing fees from time to time of the Tender
Agent, the Custodian, and the Counterparty (as defined in the Reimbursement Agreement) expressed
in terms of a percentage of the principal amount of Outstanding Bonds (including Purchased Bonds)
on an annual basis.
“Bond Financing Documents” means, collectively, this Indenture, the Bonds, the Financing
Agreement, the Remarketing Agreement and the Bond Mortgage Loan Documents.
“Bond Fund” means the Bond Fund established by the Trustee pursuant to Section 4.02
hereof
“Bond Mortgage” means the First Deed of Trust and Assignment of Rents and Fixture Filing
dated as of May 1, 1993, together with all riders and addenda thereto, from the Borrower to the
Trustee, securing payment of the Bond Mortgage Loan, as such Bond Mortgage may from time to
time be amended, modified or supplemented.
“Bond Mortgage Loan” means the mortgage loan in the original amount of $15,920,000
made to the Borrower pursuant to the Financing Agreement and the Bond Mortgage Loan
Documents.
“Bond Mortgage Loan Documents’’ means the Bond Mortgage, the Bond Mortgage Note, the
Tax Regulatory Agreement, any Custodial Escrow Agreement, the Credit Enhancement Agreement,
the Reimbursement Agreement, the Reimbursement Mortgage, the Intercreditor Agreement, the
Pledge Agreement, and any and all other instruments and other documents evidencing, securing, or
otherwise relating to the Bond Mortgage Loan or any portion thereof.
“Bond Mortgage Loan Purchase Notice” shall have the meaning set forth in the Credit
Enhancement Agreement.
8 57
“Bond Mortgage Note” means the Amended and Restated Promissory Note dated as of May
-3 2002 from the Borrower to the Issuer, and subsequently assigned to the Trustee in the principal
amount of $15,920,000, together with all riders and addenda thereto, evidencing the Bond Mortgage
Loan, as such Bond Mortgage Note may be amended, supplemented or restated from time to time.
“Bond Purchase Funs’ means the Bond Purchase Fund established by the Trustee pursuant
to Section 10.03.
“Bond Register” means the books or other records maintained by the Bond Registrar setting
forth the registered Bondholders from time to time of the Bonds.
“Bond Registrar” means the Trustee acting as such, and any other bond registrar appointed
pursuant to this Indenture.
“Bond Yeur” means the period commencing on June 1 of each year and ending on May 31 of
the following year, so long as the Bonds are Outstanding.
“Bondholder,” “Owner,” or “Holder” means any person who shall be the registered owner of
any Outstanding Bond.
“Bonds” means the $15,920,000 City of Carlsbad, California Variable Rate Demand
Multifamily Housing Revenue Refunding Bonds Series A of 1993 (Santa Fe Ranch Apartments Wa
La Costa Apartments Project) issued pursuant to the provisions of the Original Indenture, as
amended and restated by this Indenture.
“Borrower” means Santa Fe Ranch, LLC, a Delaware limited liability company, or any of its
successors as owner of the Project.
“Business Duy” means any day other than (i) a Saturday, (ii) a Sunday, (iii) a day on which
the Federal Reserve Bank of New York (or other agent acting as the Credit Facility Provider’s fiscal
agent identified to the Trustee) is authorized or obligated by law or executive order to remain closed,
(iv) a day on which the western regional office or the permanent home office of the Credit Facility
Provider is closed and (v) a day on which (a) banking institutions in the City of New York or in the
city in which the Principal Office of the Trustee, the Tender Agent, the Remarketing Agent or the
western regional office or the permanent home office of the Credit Facility Provider is located are
closed or @) the New York Stock Exchange is closed.
“Cup AgreemenP‘ means that certain Rate Cap Agreement dated ,20 ,between
the Borrower and the counterparty named therein, as such agreement may be amended, modified,
supplemented or restated from time to time and any successor interest rate cap agreement approved
in writing by the Credit Facility Provider
“Cup Provider” means the “Counterparty” named in the Cap Agreement.
“Commitment” means that commitment letter dated ,2002 by Freddie Mac to the
Freddie Mac Servicer regarding the Bond Mortgage Loan.
“CertiJcate of the Issuer,” “Statement of the Issuer,” “Request of the Issuer” and
“Requisition of the Issuer” mean, respectively, a written certificate, statement, request or requisition
9
signed in the name of the Issuer by an Authorized Officer of the Issuer or such other person as may
be designated and authorized to sign for the Issuer. Any such instrument and supporting opinions or
representations, if any, may, but need not, be combined in a single instrument with any other
instrument, opinion or representation, and the two or more so combined shall be read and construed
as a single instrument.
“Closing Date” means the date on which this Indenture takes effect as an amendment to and
restatement of the Original Indenture.
“Conversion” means the establishment of the interest rate on the Bonds at the Fixed Rate,
pursuant to Section 2.02(c) hereof.
“Conversion Date” means the date on which the Fixed Rate for the Bonds becomes effective.
“Cost of Issuance Fund” means the Cost of Issuance Fund established by the Trustee
pursuant to Section 4.02 hereof.
“Counterparty” has the meaning given that term in the Reimbursement Agreement.
“Credit Enhancement Agreement” means the Credit Enhancement Agreement dated as of
May 1, 2002 between Freddie Mac and the Trustee, as such Credit Enhancement Agreement may
from time to time be amended or supplemented.
“Credit Facility” means the Credit Enhancement Agreement or any Alternate Credit Facility
at the time in effect.
“Credit Facility Provider” means, so long as the Credit Enhancement Agreement is in effect,
Freddie Mac, or so long as any Alternate Credit Facility is in effect, the Credit Facility Provider then
obligated under the Alternate Credit Facility.
“Custodial Escrow Account” means, collectively, the account or accounts established by the
Freddie Mac Servicer, in accordance with the Guide (as amended from time to time) or otherwise, for
the purpose of funding a debt service reserve for the Bond Mortgage Loan, if required by Freddie
Mac.
“Custodial Escrow Agreement” means any agreement (which agreement may be the Guide or
Commitment as applicable) pursuant to which a Custodial Escrow Account is established and
maintained pursuant to the Guide.
“Custodian” means US. Bank, N.A., not in its individual capacity but solely in its capacity
as collateral agent for the Credit Facility Provider.
“Determination of Taxability” means (1) the failure of the Credit Facility Provider or the
Borrower to consent in writing within forty-five (45) days to any amendment to the Indenture, the
Financing Agreement or the Tax Regulatory Agreement which in the written opinion of Bond
Counsel addressed to the Issuer, the Trustee and the Credit Facility Provider is necessary to preserve
the exclusion from gross income of interest on the Bonds for federal income tax purposes, or (2)
enactment of legislation or a final judgment or order of a court of original jurisdiction, a final order
of any other court of competent jurisdiction, or a final ruling or decision of the Internal Revenue
10 .57
Service, in any such case to the effect that the interest on any of the Bonds (other than interest on any
Bond for any period during which such Bond is held by a “substantial user” of any facility financed
with the proceeds of the Bonds or a “related person,” as such terms are used in Section 103(b)(13) of
the Internal Revenue Code of 1954 and except for any alternative minium or preference tax) is not
excludable for federal income tax purposes from the gross income of the recipients thereof subject to
federal income taxes as a result of action or inaction of the Borrower while the Bonds bear interest at
a Variable Rate and as a result of any action during a Reset Period or after the Conversion Date.
With respect to clause (2) above, a judgment or order of a court or a ruling or decision of the Internal
Revenue Service shall be considered final only if no appeal or action for judicia1 review has been
filed and the time for filing such appeal or action has expired.
“Disclosure Agreement” means the Continuing Disclosure Agreement dated as of
2002, between the Borrower and the Trustee as dissemination agent.
“DTC‘ means The Depository Trust Company, New York, New York, as securities
depository for the Bonds pursuant to Section 2.12 hereof.
“Eligible Funds” means (a) remarketing proceeds received hm the Remarketing Agent or
any purchaser (other than funds provided by the Borrower, any general partner or guarantor of the
Borrower or the Issuer), (b) proceeds received pursuant to the Credit Facility, (c) proceeds of the
Bonds received contemporaneously with the issuance and sale of the Bonds, (d) proceeds of an issue
of refunding bonds received contemporaneously with the issuance and sale of such refunding bonds,
(e) proceeds from the investment or reinvestment of moneys described in clauses (a), (b), (c) and (d)
above, or (Q moneys delivered to the Trustee and accompanied by a written opinion of nationally
recognized counsel experienced in bankruptcy matters acceptable to the Rating Agency to the effect
that if the Borrower, any general partner or guarantor of the Borrower, or the Issuer were to become a
debtor in a proceeding under the Bankruptcy Code: (i) payment of such moneys to Bondholders
would not constitute a voidable preference under Section 547 of the Bankruptcy Code and (ii) the
automatic stay provisions of Section 362(a) of the Bankruptcy Code would not prevent application of
such moneys to the payment of the Bonds.
“Event of Default” or “event of default“ means any of those events specified in and defined
by the applicable provisions of Article VI hereof to constitute an event of default.
“Extraordinary Services” means and includes, but not by way of limitation, services, actions
and things carried out and all expenses incurred by the Trustee in respect of or to prevent default
under this Indenture, the Financing Agreement and the Bond Mortgage Loan Documents, including
any attorneys’ fees and other litigation costs that are entitled to reimbursement under the terms of the
Financing Agreement, and other actions taken and carried out which are not expressly set forth in this
Indenture.
“Extraordinary Servicing Fees and Expenses” means all fees and expenses of the Freddie
Mac Servicer under the Guide during any Bond Year in excess of Ordinary Servicing Fees and
Expenses.
“Extraordinary Trustee’s Fees and Expenses” means all those fees, expenses and
disbursements earned or incurred by the Trustee as described under Section 7.06 during any Bond
Year for Extraordinary Services.
11
“Financing Agreement” means the Amended and Restated Loan Agreement dated as of May
1, 2002, among the Borrower, the Issuer and the Trustee, as such Financing Agreement may from
time to time be amended or supplemented.
“Fixed Rate” means the interest rate borne by the Bonds from and after Conversion and until
the maturity date of the Bonds, determined in accordance with Section 2.02(c) hereof.
“Fixed Rate Period” means the period during which the Bonds bear interest at the Fixed
Rate.
“Freddie Mac” means the Federal Home Loan Mortgage Corporation, a shareholder owned
government-sponsored enterprise organized and existing under the laws of the United States of
America, and its successors and assigns.
“Freddie Mac Credit Enhancement Fee” shall have the meaning set forth in the
Reimbursement Agreement.
“Freddie Mac Credit Enhancement PaymenY‘ shall have the meaning set forth in the Credit
Enhancement Agreement.
“Freddie Mac Reimbursement Amount” shall have the meaning set forth in the
Reimbursement Agreement.
“Freddie Mac Service? means the eligible servicing institution designated by Freddie Mac
from time to time (which may be Freddie Mac if Freddie Mac elects to service the Bond Mortgage
Loan), or its successor, as Freddie Mac Servicer of the Bond Mortgage Loan (with respect to
payments made by the Borrower thereunder) and the Reimbursement Agreement and the
Reimbursement Mortgage. Initially, the Freddie Mac Servicer shall be Reilly Mortgage Group, Inc.
“Government Obligations” means Qualified Investments described in (a) and (b) of the
defintion of “Qualified Investments” herein.
“Guaranteed Pa+vment“ shall have the meaning set forth in the Credit Enhancement
Agreement.
“Guide” means the Freddie Mac Multifamily Seller/Servicer Guide, as amended and
supplemented from time to time.
“Indenture” means this Amended and Restated Indenture of Trust, together with any other
indentures supplemental hereto.
“Information Services” means any of the following services: Financial Information, Inc.
“Daily Called Bond Service,” 30 Montgomery Street, loth Floor, Jersey City, New Jersey 07302
Attention: Editor; Kenny Information Services, “Called Bond Service,” 55 Water Street, 45th Floor,
New York, New York 10041; Moody’s Investors Service “Municipal and Government,” 99 Church
Street, 8th Floor, New York, New York 10007, Attention: Municipal News Reports; and EXCITE,
INC. Called Bonds Dept., 5 Hanover Square, New York, New York 10004; The Bond Buyer, Muni-
Facts Secondary Market, Disclosure Services, Attention: Municipal Redemption Notices, One State
Street Plaza, 31st Floor, New York, New York 10004-1549; Bloomberg Financial Markets,
wCSoc\892810v3U2062.0028
12
Attention: Reporting-Disclosure Documents, 100 Business Park Drive, Skillman, New Jersey 08558;
or such other services providing information with respect to called bonds as the Issuer may designate
in a certificate of the Issuer delivered to the Trustee.
“Initial Rate” means, with respect to the Bonds, the interest rate determined by the
Remarketing Agent which is in effect as of the Closing Date.
“Intercreditor Agreement” means the Intercreditor Agreement dated as of May 1, 2002
among the Issuer, the Trustee and Freddie Mac, as the same may be amended or supplemented.
“Interest Payment Date” means (i) for interest accrued during any Variable Period, the first
Business Day of each month thereafter for the preceding calendar month, (ii) for interest accrued
during any Reset Period, June 1 and December 1 of each year, commencing on the June 1 or
December 1 next following the applicable Reset Adjustment Date and (iii) for interest accrued on and
after the Conversion Date, June 1 and December 1 of each year, commencing on the June 1 or
December 1 next following the Conversion Date and the Maturity Date.
“Interest Requirement” means (a) during the Variable Period, 34 days interest computed at
the Maximum Rate and (b) during a Reset Period or the Fixed Rate Period, 189 days’ interest
computed at the Reset Rate or the Fixed Rate, as applicable or in the case of either (a) or (b), such
lesser number of days as is acceptable to the Rating Agency.
“Issue?‘ means the City of Carlsbad, California, a municipal corporation of the State of
California, and any successor to its rights, duties and obligations hereunder.
‘‘Issuer Fee” means the fee owed to the Issuer from the Borrower, accruing from the date of
issuance of the Bonds, equal to 23 basis points (.23%) per annum of the aggregate principal amount
of Bonds Outstanding as of the date of issue and each June 1 thereafter (prior to any principal
reduction on that date), payable annually in arrears on each June 1 commencing June 1, 2002; and
provided, however, that such fee does not include amounts due, if any, for extraordinary services
and expenses of the Issuer, the Trustee, Bond Counsel or the Trustee’s counsel to be paid by the
Borrower pursuant to the Financing Agreement.
“Liquidity Advance” shall have the meaning provided in the Reimbursement Agreement.
“Liquidity Commitment” shall have the meaning provided in the Credit Enhancement
Agreement.
“Market Risk Event” means (a)(i) legislation enacted by the Congress or (ii) a final non-
appealable decision rendered by a court established under Article I11 of the Constitution of the United
States, or the United States Tax Court, or (iii) an order, ruling or regulation issued by the United
States Department of the Treasury or the Internal Revenue Service, with the purpose or effect,
directly or indirectly, of causing interest received by any Bondholder to be included in the gross
income of such Bondholder for purposes of federal income taxation; or (b) legislation enacted or any
action taken by the Securities and Exchange Commission which, in the opinion of counsel to the
Remarketing Agent, has the effect of requiring the remarketing of the Bonds to be registered under
the Securities Act of 1933, as amended (the “Securities Act”), or any other “security,” as defined in
the Securities Act, issued in connection with or as part of the remarketing of the Bonds to be so
13 caz
registered or this Indenture to be qualified as an indenture under the Trust Indenture Act of 1939, as
amended; or (c) any event shall have occurred or shall exist which, in the reasonable judgment of the
Remarketing Agent, makes or has made untrue or incorrect in any material respect any statement or
information contained in a reoffering circular or other disclosure document distributed in connection
with the Conversion or Reset Adjustment Date or is not or was not reflected in such reoffering
circular or other disclosure document but should be or should have been reflected therein in order to
make the statements or information contained therein not misleading in any material respect; or (d) in
the reasonable judgment of the Remarketing Agent, any event which makes it impractical or
inadvisable for the Remarketing Agent to remarket or enforce agreements to remarket Bonds because
trading in securities generally shall have been suspended on the New York Stock Exchange, Inc., or a
general banking moratorium shall have been established by federal, New York or State authorities.
“Mafurity Date” means the maturity date of the Bonds set forth in Section 2.01(c) hereof.
“Muximum Rate” means twelve percent (12%) per annum; provided that the Maximum Rate
may be increased to a specified higher Maximum Rate if there shall have been delivered to the
Trustee (a) an Opinion of Bond Counsel to the effect that such higher Maximum Rate is permitted
under applicable law and will not, in itself, cause the interest on the Bonds to be included in the gross
income of the Bondholders for federal tax purposes and @) either (1) the written consent of the
Credit Facility Provider to the specified higher Maximum Rate and evidence that the Credit Facility
will cover the Interest Requirement at such Maximum Rate, or (2) a new or amended Credit Facility
in an amount equal to the sum of (i) the then outstanding principal amount of the Bonds and (ii) the
new Interest Requirement calculated using the new Maximum Rate; provided that the Maximum
Rate shall never exceed the maximum rate permitted by law to be paid on the Bonds or to be charged
on the Bond Mortgage Loan.
“Moody’s” means Moody’s Investors Service, Inc., its successors and assigns, if such
successors and assigns shall continue to perform the functions of a securities rating agency.
“Net Proceeds” when used witlrrespect to any insurance or condemnation award, means the
gross proceeds from the insurance or condemnation award with respect to which that term is used
remaining after payment of all reasonable expenses incurred in the collection of such gross proceeds,
including reasonable attorney fees.
“1954 Code” means the Internal Revenue Code of 1954, as amended, and the regulations
promulgated thereunder, as such 1954 Code shall have been in effect immediately preceding the
enactment of the 1986 Code.
“1986 Code” means the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder.
‘‘Ordinary Servicing Fees and Expenses” means the ordinary fees payable to the Freddie Mac
Servicer in connection with the servicing of the Bond Mortgage Loan under the Guide, payable
monthly in arrears on the first day of each month in an amount equal to one-twelfth (1/12) of 0.
% of the principal balance of the Bond Mortgage Loan outstanding on the day before such payment
is due.
“Original Developer” means La Costa Partners and its successors and assigns.
14
DOCSOC\892810v3\22062.~28 63
“Outstanding” when used with respect to the Bonds, means, as of any date, all Bonds that
have been duly authenticated and delivered by the Trustee under this Indenture, except:
(a) Bonds surrendered and replaced upon exchange or transfer, or cancelled because of
payment or redemption, at or prior to such date;
(b) Bonds for the payment, redemption or purchase for cancellation of which sufficient
money has been deposited prior to such date with the Trustee (whether upon or prior to the maturity,
amortization or redemption date of the same), or which are deemed to have been paid and discharged
pursuant to the provisions of Section 9.01 hereof; provided that if such Bonds are to be redeemed
prior to the maturity thereof, other than by scheduled amortization, notice of such redemption shall
have been given or arrangements satisfactory to the Trustee shall have been made therefor, or waiver
of such notice satisfactory in form to the Trustee shall have been filed with the Trustee;
(c) Bonds in lieu of which others have been authenticated (or payment, when due, of
which is made without replacement) under Section 2.07 hereof; and also except that; and
(d) For the purpose of determining whether the Bondholders of the requisite amount of
Bonds Outstanding have made or concurred in any notice, request, demand, direction, consent,
approval, order, waiver, acceptance, appointment or other instrument or communication under or
pursuant to this Indenture, Purchased Bonds and Bonds owned by or for the account of the Borrower
or any Person owned, controlled by, under common control with or controlling the Borrower shall be
disregarded and deemed to be not Outstanding unless all Bonds shall be so owned; the term “control”
(including the terms “controlling”, “controlled by” and “under common control with”) means the
possession, directly or indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.
Beneficial ownership of 5% or more of a class of securities having general voting power to elect a
majority of the board of directors of a corporation shall be conclusive evidence of control of such
corporation.
“Paying Agent” means the Trustee acting as such, and any other paying agent appointed
pursuant to this Indenture.
“Person” means an individual, estate, trust, corporation, partnership, limited liability
company or any other organization or entity (whether governmental or private).
“Pledge Agreement‘ means that certain Pledge, Security and Custody Agreement dated as of
May 1,2002, by and between the Custodian and the Borrower, as further modified or amended kom
time to time.
“Principal Component” shall have the meaning set forth in the Credit Enhancement
Agreement.
“Principal Office of the Credit Facility Provider” means the office of the Credit Facility
Provider located at 8100 Jones Branch Drive, McLean, Virginia 22102 or such other office or offices
as the Credit Facility Provider may designate from time to time, or the office of any successor Credit
Facility Provider where it principally conducts its business of serving as credit facility provider under
indentures pursuant to which municipal or governmental obligations are issued.
15
“Principal Office of the Remarketing Agent” means the ofice of the Remarketing Agent
located at 8000 Maryland, Suite 1020, St. Louis, Missouri 63105, or such other office or offices as
the Remarketing Agent may designate from time to time, or the office of any successor Remarketing
Agent where it principally conducts its business of serving as remarketing agent under indentures
pursuant to which municipal or governmental obligations are issued.
“Principal Ofice of the Tender Agent“ means the office of the Tender Agent located at , San Francisco, California -, or such other office or offices as the Tender
Agent may designate from time to time, or the office of any successor Tender Agent where it
principally conducts its business of serving as tender agent under indentures pursuant to which
municipal or governmental obligations are issued.
“Principal oftice ofthe Trustee” means the office of the Trustee located at
San Francisco, California -, or such other office or offices as the Trustee may designate from
time to time, or the office of any successor Trustee where it principally conducts its business of
serving as trustee under indentures pursuant to which municipal or governmental obligations are
issued.
“Principal Reserve Fund” means the Principal Reserve Fund established by the Trustee
pursuant to Section 4.02 hereof.
“Principal Reserve Schedule Payments” means the payments to be made by the Borrower in
accordance with the Principal Reserve Schedule attached to the Reimbursement Agreement.
“Prior Credit Facility” means the Letter of Credit from Bank of America, N.A. originally
issued on June 25,1998, in the amount of $16,085,743, and expiring on
“Prior Developer” means The Northwestern Mutual Life Insurance Company and its
successors and assigns.
“Project” means the land and 320 residential rental apartment units, and related fixtures,
equipment, furnishings and site improvements known as Santa Fe Ranch Apartments (fMa La Costa
Apartments), located at , Carlsbad, California, in San Diego County, California,
including the real estate descrikd in the Bond Mortgage.
“Purchased Eons’ means any Bond during the period from and including the date of its
purchase by the Trustee on behalf of and as agent for the Borrower with amounts provided by the
Credit Facility Provider under the Credit Facility, to, but excluding, the date on which such Bond is
remarketed to any Person other than the Credit Facility Provider, the Borrower, any general partner
or guarantor of the Borrower or the Issuer.
“Purchase Price,” with respect to any Bond required to be purchased pursuant to Sections
2.02, 2.13, 10.01 and 10.02 hereof, means the principal amount of such Bond plus interest accrued
thereon to the Settlement Date and with respect to any Bond to be purchased pursuant to Section 3.06
hereof means the principal amount of such Bond plus any redemption premium due thereon plus
interest accrued thereon to the Settlement Date.
16
“Qualified Investments’’ means any of the following if and to the extent permitted by law: (a)
direct and general obligations of the United States of America; (b) obligations of any agency or
instrumentality of the United States the payment of the principal of and interest on which are
unconditionally guaranteed by the full faith and credit of the United States of America; (c) senior
debt obligations of Freddie Mac; (d) senior debt obligations of Fannie Mae; (e) demand deposits or
time deposits with, or certificates of deposit issued by, the Trustee or its affiliates or any bank
organized under the laws of the United States or any state or the District of Columbia which has
combined capital, surplus and undivided profits of not less than $50,000,000; provided that the
Trustee or such other institution has been rated at least P-1 by Moody’s, which deposits or
certificates are fully insured by the Federal Deposit Insurance Corporation; (q investment
agreements with Freddie Mac or a bank or any insurance company or other financial institution
which has a rating assigned by Moody’s to its outstanding long-term unsecured debt which is the
highest rating (as defined below) for long-term unsecured debt obligations assigned by Moody’s, and
which are approved by the Credit Facility Provider; (9) shares or units in any money market mutual
fund (including mutual funds of the Trustee or its affiliates) registered under the Investment
Company Act of 1940, as amended, whose investment portfolio consists solely of direct obligations
of the United States government, and which fund has been rated Aaa by Moody’s; or (h) any other
investments that have been previously approved in writing by the Credit Facility Provider. For
purposes of this definition, the “highest rating” shall mean a rating of at least P-1 for obligations with
less than one year maturity; at least Aa2P-1 for obligations with a maturity of one year or greater but
less than three years; and at least Aaa for obligations with a maturity of three years or greater.
Qualified Investments must be limited to instruments that have a predetermined fixed-dollar amount
of principal due at maturity that cannot vary or change ‘and interest, if tied to an index, shall be tied to
a single interest rate index plus a single fixed spread, if any, and move proportionately with such
index.
“Rating Agency” means each national rating agency then maintaining a rating on the Bonds,
or any successor or assign thereof.
“Rebate Analyst” means a certified public accountant, financial analyst or bond counsel, or
any firm of the foregoing or financial institution experienced in making the arbitrage and rebate
calculations required pursuant to Section 148 of the 1986 Code and retained to make the
computations and give directions required under the Arbitrage Rebate Agreement among the Issuer,
the Trustee and the Borrower with respect to the Bonds. The Issuer shall inform the Trustee in
writing of the name of the Rebate Analyst.
“Rebate Analyst Fee” means the annual fee of the Rebate Analyst.
“Rebate Funs’ means the Rebate Fund established by the Trustee pursuant to Section 4.02
hereof.
“Record Date” means during any Variable Period, the Business Day immediately preceding
an Interest Payment Date and during any Reset Period or the Fixed Rate Period, the 15th day
preceding any Interest Payment Date.
“‘Redemption Funs’ means the Redemption Fund established by the Trustee pursuant to
Section 4.02 hereof.
17
“Refunding Law” means Article 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the
Government Code .of the State of California, as now in effect and as it may from time to time
hereafter be amended or supplemented.
“Reimbursement Agreement” means the Reimbursement and Security Agreement dated as of
May 1, 2002, between the Borrower and Freddie Mac, as such Reimbursement Agreement may be
amended or supplemented from time to time, and upon the effectiveness of any Alternate Credit
Facility, any similar agreement between the Borrower and the Alternate Credit Facility Provider
pursuant to which the Borrower agrees to reimburse the Alternate Credit Facility Provider for
payments made under the Alternate Credit Facility, as such agreement may be amended or
supplemented.
“Reimbursement Mortgage” means the Multifamily Deed of Trust, Assignment of Rents
Security Agreement and Fixture Filing dated as of May 1,2002, from the Borrower to Freddie Mac,
as the same may be amended or supplemented from time to time.
“Remarketing Agent” means the remarketing agent appointed pursuant to Section 10.05
hereof, initially Stem Brothers & Co.
“Remarketing Agreement‘ means the Remarketing Agreement dated as of May 1, 2002,
among the Issuer, the Remarketing Agent and the Borrower, or any similar agreement between the
Remarketing Agent and the Borrower, in each case as originally executed or as it may be amended or
supplemented from time to time in accordance with its terms.
“Remarketing Date” means each date on which the Remarketing Agent is required to notify
the Trustee, the Tender Agent, the Borrower and the Credit Facility Provider of the Bonds for which
it has found purchasers, as set forth in Section 10.03 hereof.
“Remarketing Memorandum” means the Remarketing Memorandum dated May -, 2002,
relating to the remarketing of the Bonds, as the same may be supplemented or amended.
“Reserved Rights” means those certain rights of the Issuer under the Bond Financing
Documents to indemnification and to payment or reimbursement of fees and expenses of the Issuer,
including the Issuer Fee as well as the fees and expenses of counsel, assumption fees and indemnity
payments, its right to give and receive notices and to enforce notice and reporting requirements and
restrictions on transfer of ownership of the Project, its right to inspect and audit the books, records
and premises of the Borrower and of the Project, its right to collect legal fees and related expenses,
its right to specifically enforce the terms of the Tax Regulatory Agreement, including the Borrower’s
covenant to comply with applicable federal tax law and State law (including the Act and the rules and
regulations of the Issuer), its right to receive notices under the Bond Financing Documents and its
right to receive notices and reports under the Bond Financing Documents and its rights to give or
withhold consent to amendments, changes, modifications and alterations to the Bond Financing
Documents and to such other matters where, hereunder or under the Bond Financing Documents, the
Issuer’s consent or approval is required.
“Reset Adjustment Date” means any date on which the interest rate on the Bonds is adjusted
to a Reset Rate or to a different Reset Rate. During a Variable Period, a Reset Adjustment Date may
18
occur only on any Interest Payment Date, or if such Interest Payment Date is not a Business Day, the
next succeeding Business Day.
“Reset Perios’ means each period during which the Bonds bear interest at a Reset Rate.
“Reset Rate” means the rate of interest borne by the Bonds as determined in accordance with
Section 2.02(b) hereof.
“Responsible Officer” means any officer of the Trustee employed within or otherwise having
regular responsibility in connection with the corporate trust department of the Trustee and who is
located at the Principal Office of the Trustee.
“Revenue Funs’ means the Revenue Fund established by the Trustee pursuant to Section
4.02 hereof.
“Revenues” means (i) all payments made with respect to the Bond Mortgage Loan pursuant
to the Financing Agreement, the Bond Mortgage Note or the Bond Mortgage (except Principal
Reserve Schedule Payments), including all casualty or other insurance benefits and condemnation
awards paid in connection therewith (subject in all events to the interests of the Credit Facility
Provider therein under the terms of the Credit Facility and the Reimbursement Agreement), (ii)
payments made by the Credit Facility Provider pursuant to the Credit Facility and (iii) all moneys
and securities held by the Trustee in the funds and accounts established pursuant to this Indenture
(excluding moneys or securities in the Cost of Issuance Fund, the Rebate Fund, the Principal Reserve
Fund, the Specified Fees Account, and the Bond Purchase Fund), together with all investment
earnings thereon.
“SP means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., and its successors and assigns if such successors and assigns shall continue to
perform the functions of a securities rating agency.
“Securities Depositories” means The Depository Trust Company, 71 1 Stewart Avenue,
Garden City, New York 11530, Fax: (516) 2274039 or 4190, or such other securities depositories as
the Issuer may designate in a certificate of the Issuer delivered to the Trustee and the Credit Facility
Provider.
“Settlement Date” means any date on which any Bond is purchased pursuant to Sections 2.02,
2.13,3.06, 10.01 or 10.02 hereof.
“SpeciJied Fees Account” means the Specified Fees Account within the Administration Fund
created under Section 4.02.
“State” means the State of California.
“Substitution Date” means the date established for the mandatory tender and purchase of the
Bonds in connection with the delivery to the Trustee of an Alternate Credit Facility pursuant to
Section 2.13 hereof.
“Tax Certificate” means that Tax Certificate executed by the Issuer and dated the Closing
Date.
DOCSoc\89281Ov3U2062.w28
19
“Tax Regulatory Agreement” means the Second Amended and Restated RegulatoIy
Agreement and Declaration of Restrictive Covenants dated as of May 1, 2002 among the Issuer, the
Trustee and the Borrower, as the same may be amended, supplemented or restated from time to time.
“Tender Agent” means the Tender Agent appointed in accordance with Section 10.07.
“Tender Notice” means a notice of demand for purchase of Bonds given by any Bondholder
pursuant to Section 10.01 hereof.
“Trustee” means US. Bank, N.A. and its successors in trust hereunder.
“Trustee’s Fees” means the ongoing compensation and expenses payable to the Trustee as
follows:
(a) the annual administration fees of the Trustee, as Trustee, Registrar and Paying Agent,
for the ordinary services of the Trustee rendered under this Indenture during each twelve month
period which shall be ( ) basis points per annum of the principal amount of
Bonds Outstanding payable semiannually on each 1 and 1, commencing
1,2002, subject to an annual minimum fee of $
(b) the reasonable fees and charges of the Trustee for necessary extraordinary services
rendered by it and reasonable extraordmuy expenses incurred by it under this Indenture as and when
the same become due, including reasonable counsel fees (including fees prior to litigation, at trial or
for appellate proceedings); provided, however, that the Trustee shall not be required to undertake any
such extraordinary services unless provision for payment of extraordinary expenses satisfactory to
the Trustee shall have been made;
(c) for purposes of the Financing Agreement, indemnification of the Trustee by the
Borrower; and
(d) the $250 annual fee of the Trustee, as Dissemination Agent.
“Trust Estate” shall have the meaning set forth under “GRANTING CLAUSES - TRUST
ESTATE”.
“Variable Interest Accrual Period” means, during any Variable Period, a period beginning on
the date following any Variable Interest Computation Date and ending on the next succeeding
Variable Interest Computation Date, except that the first Variable Interest Accrual Period for any
Variable Period shall begin on the first day of such Variable Period and end on the next succeeding
Variable Interest Computation Date.
“Variable Interest Computation Date” means, with respect to any Variable Interest Accrual
Period, each Wednesday during such period, or if any such Wednesday is not a Business Day, the
next succeeding Business Day.
“Variable PerioP means each period during which the Bonds bear interest at a Variable
Rate.
20 b4
“Variable Rate” means the variable rate of interest borne by the Bonds as determined in
accordance with Section 2.02(a) hereof.
“Variable Rate Adjustment Date” means any date upon which the Bonds begin to bear
interest at a Variable Rate for the succeeding Variable Period.
Section 1.02. Interpretation. The words “hereof,” “herein,” “hereunder,” and other words
of similar import refer to this Indenture as a whole. Words of the masculine gender shall be deemed
and construed to include correlative words of the feminine and neuter genders. Words importing the
singular number shall include the plural number and vice versa unless the context shall otherwise
indicate. References to Articles, Sections, and other subdivisions of this Indenture are to the
designated Articles, Sections and other subdivisions of this Indentiwe as originally executed. The
headings of this Indenture are for convenience only and shall not define or limit the provisions
hereof.
(End of Article I)
21
ARTICLE I1
THE BONDS
Section 2.01. Basic Terms.
(a) The Bonds and the Trustee’s Certificate of Authentication to be endorsed on
such Bonds are to be substantially in the form of Exhibit A attached hereto, with necessary and
appropriate variations, omissions and insertions as permitted or required by this Indenture. The
Bonds shall be issued in the original aggregate principal amount of $15,920,000 and shall be
designated “City of Carlsbad, California Variable Rate Demand Multifamily Housing Revenue
Refunding Bonds, Series A of 1993 (Santa Fe Ranch Apartments fk/a La Costa Apartments
Project)”. All of the Bonds are equally and ratably secured. The Bonds shall be issued only as fully
registered bonds, without coupons. The Bonds shall be numbered from R-1 upward. The Bonds
delivered on the Closing Date shall be dated such date. The Bonds delivered after the Closing Date
shall be dated the date they are authenticated by the Trustee.
(b) The Bonds shall bear interest payable on each Interest Payment Date, in each
case from the Interest Payment Date next preceding the date of authentication thereof to which
interest has been paid or duly provided for, unless the date of authentication is an Interest Payment
Date to which interest has been paid or duly provided for, in which case from the date of
authentication thereof, until payment of the principal thereof has been made or duly provided for.
Notwithstanding the foregoing, if a Bond is authenticated after a Record Date and before the
following Interest Payment Date, such Bond shall bear interest from such Interest Payment Date;
provided, however, that if there shall be a default as to the Bonds in the payment of interest due on
such Interest Payment Date, then the Bonds shall bear interest from the next preceding Interest
Payment Date to which interest has been paid or duly provided for.
(c) The Bonds shall be issued in Authorized Denominations and shall bear
interest payable on each Interest Payment Date at the rate per annum determined as provided in
Section 2.02 below. The Bonds shall mature, subject to redemption prior to maturity as provided
herein, on June 1,201 6.
(d) The Person in whose name any Bond is registered on the Record Date with ’
respect to an Interest Payment Date shall be entitled to receive the interest payable on such Interest
Payment Date (unless such Bond has been called for redemption on a redemption date which is prior
to such Interest Payment Date) notwithstanding the cancellation of such Bond upon any registration
of transfer or exchange thereof subsequent to such Record Date and prior to such Interest Payment
Date; provided, however, that if and to the extent a default exists in the payment of the interest due
on any Bond or any Interest Payment Date, such defaulted interest shall be paid as provided in the
next paragraph.
(e) Any interest on any Bond that is due and payable, but is not punctually paid
or duly provided for, on any Interest Payment Date (herein called “Defaulted Interest”) shall
forthwith cease to be payable to the Bondholder on the relevant Record Date by virtue of having been
paid to such Bondholder in the manner set forth in this paragraph. The Trustee may elect to make
payment of any Defaulted Interest to the Persons in whose names the Bonds (or their respective
predecessor Bonds) are registered at the close of business on a special record date for the payment of
LL
such Defaulted Interest (a “Special Record Date”), which shall be fixed in the following manner.
The Trustee shall determine the amount of Defaulted Interest proposed to be paid on each Bond and
the date of the proposed payment, shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 nor less than 10 days prior to the date of the proposed
payment and shall cause notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to be mailed, first class, postage prepaid, to each Bondholder at such
Bondholder’s address as it appears in the Bond Register not less than 10 days prior to such Special
Record Date; notice of the proposed payment of such Defaulted Interest and the Special Record Date
therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the persons in
whose names the Bonds (or their respective predecessor Bonds) are registered on such Special
Record Date.
(f) Payment of principal, premium, if any, and interest on the Bonds shall be paid
by check mailed to the registered owner thereof at such registered owner’s address as it appears on
the Bond Register on the Record Date. Upon written request of a registered owner of at least
$1,000,000 in principal amount of Bonds Outstanding received by the Trustee at least five (5) days
prior to such Record Date, all payments of principal, premium, if any, and interest on the Bonds, less
any reasonable wire transfer fees imposed by the Trustee, shall be paid by wire transfer in
immediately available funds to an account within the continental United States designated by such
registered owner. Payment of the Purchase Price of any Bonds tendered for purchase on a Settlement
Date shall be payable in lawful money of the United States of America only upon presentation
thereof at the Principal Office of the Tender Agent.
(g) Before the date fvted for redemption, moneys shall be deposited with the
Trustee to pay, and the Trustee is hereby authorized and directed to apply such moneys to the
payment of, the Bonds or portions thereof called, together with accrued interest thereon to the
redemption date. CUSIP number identification with appropriate dollar amounts for each CUSIP
number must accompany all payments of principal, redemption price, premium, if any, and interest,
whether by check or by wire transfer.
(h) No Bonds may be issued under the provisions of this Indenture except in
accordance with this Article. The total principal amount of Bonds that may be issued hereunder or in
substitution for other Bonds pursuant to Section 2.07 is expressly liited to $15,920,000.
Section 2.02. Determination oflnterest Rote. The Bonds shall bear interest at a Variable
Rate, determined as set forth in subsection (a) of this Section, until the first Reset Adjustment Date or
Conversion Date, if any, and thereafter shall bear interest at the applicable rate set forth in this
Section.
Purchased Bonds shall bear interest at the rate established pursuant to the Reimbursement
Agreement, provided that in no event shall any such rate exceed the Maximum Rate.
(a) Variable Rate. The Bonds shall bear interest at a Variable Rate until
converted to a Reset Rate or Fixed Rate as provided herein. Following any Reset Adjustment Date,
the interest rate on the Bonds may be converted again to a Variable Rate at the election or deemed
election of the Borrower in accordance with Section 2.02(b) hereof, which date of conversion to a
Variable Rate shall be the Variable Rate Adjustment Date. The Variable Rate of interest borne by
the Bonds during each Variable Period for each Variable Interest Accrual Period shall be the
wCSoC\892810~3UZ062.0028
23 72-
Variable Rate determined by the Remarketing Agent and reported to the Trustee, the Tender Agent,
the Borrower and the Credit Facility Provider as provided in Section 10.05 hereof, on the Variable
Interest Computation Date for such Variable Interest Accrual Period. Any Bondholder may obtain
information on the Variable Rate by request to the Trustee.
The Variable Rate determined by the Remarketing Agent on each Variable Interest
Computation Date shall be that rate of interest which, if borne by the Bonds, would, in its reasonable
professional judgment, on the basis of prevailing financial market conditions, be the interest rate
necessary, but which would not exceed the interest rate necessary, to be borne by the Bonds in order
for the market value of the Bonds on such Variable Interest Computation Date to be 100% of the
principal amount thereof (disregarding accrued interest) if the Bonds were sold on such Variable
Interest Computation Date; provided, however, that in no event shall the Variable Rate at any time
exceed the Maximum Rate. If the Remarketing Agent shall fail or refuse to determine the Variable
Rate on any Variable Interest Computation Date, then the Variable Rate shall be the BMA Index
Rate published on each Variable Interest Computation Date until the Remarketing Agent determines
the Variable Rate as provided above.
The determination of the Variable Rate by the Remarketing Agent shall (in the
absence of manifest error) be conclusive and binding on the Bondholders, the Issuer, the Borrower,
the Credit Facility Provider, the Remarketing Agent, the Tender Agent and the Trustee, and each
shall be protected in relying on it.
(b) Reset Rate. Provided no Event of Default shall have occurred and be
continuing, at the written request of the Borrower with the prior written consent of the Credit Facility
Provider or at the written request of the Credit Facility Provider on behalf of the Borrower if the
Borrower has not provided the Credit Facility Provider proof satisfactory to it of the extension or
substitution of a cap agreement satisfymg the requirements of the Reimbursement Agreement not
later than sixty (60) days prior to the expiration of the Cap Agreement, the rate of interest on the
Bonds may be established at a Reset Rate on any Interest Payment Date during a Variable Period or
on any Reset Adjustment Date, in accordance with the procedures set forth in this subsection (b). In
order to effect establishment of a Reset Rate, the Borrower must deliver such written consent and a
written request and notice to the Trustee, the Issuer, the Credit Facility Provider, the Tender Agent
and the Remarketing Agent (or, if applicable, the Credit Facility Provider on behalf of the Borrower
must deliver such request) specifylng (i) (if the Bonds then bear interest at a Variable Rate) the Reset
Adjustment Date, which shall be not less than forty (40) days after notice. is received by the parties,
(ii) any sinking fund redemption amounts for each Interest Payment Date at a price equal to the
principal amount of Bonds subject to redemption plus interest accrued thereon to the date fixed for
redemption, without premium, pursuant to Section 3.01(b)(v) hereof and any applicable optional
redemption provisions pursuant to Section 3.01(a) hereof, (iii) the proposed duration of the Reset
Period, which shall be at least five (5) years or more or such shorter period as may be approved by
the Credit Facility Provider and shall terminate on the Business Day before the last Interest Payment
Date preceding the (x) “Termination Date” (as defined in the Credit Enhancement Agreement) if the
Credit Enhancement Agreement is the Credit Facility, to be effective with respect to the Bonds
during such Reset Period or (y) the expiration of the Credit Facility if the Credit Enhancement
Agreement is not the Credit Facility to be effective with respect to the Bonds during such Reset
Period, and (iv) the date on which the Reset Rate will be determined by the Remarketing Agent,
which date shall be not later than the Business Day immediately prior to the Reset Adjustment Date.
Such notice must be accompanied by (i) an opinion of Bond Counsel to the effect that the
24 73
establishment of the Reset Rate in accordance with the procedure described in this subsection (b) is
permitted by this Indenture and the Act and will not adversely affect the exclusion from gross income
for federal income tax purposes of interest on the Bonds, (ii) if Bonds are to be held publicly after the
Reset Adjustment Date, either an irrevocable commitment (which commitment may be subject to
customary commercial conditions) of an Alternate Credit Facility Provider to issue an Alternate
Credit Facility, together with accompanying documentation required by Section 5.4 of the Financing
Agreement or the written commitment of the Credit Facility Provider for an amendment to the Credit
Facility to fulfill the Interest Requirement and, if applicable, to extend the maturity date of the Credit
Facility, (iii) the form of notice to be given by the Trustee to the Bondholders with respect to the
establishment of a Reset Rate, (iv) payment to the Trustee of such amount as the Trustee reasonably
determines may be required in connection with the establishment of the Reset Rate, including, but
not limited to, its own fees and expenses and the cost of printing Bonds, (v) the proposed form of
disclosure document to be distributed in connection with the remarketing of the Bonds on the Reset
Adjustment Date, which disclosure document must be approved in form and substance by the Issuer,
and an undertaking of the Borrower which satisfies any applicable requirements of Rule 15~2-12 of
the Securities Exchange Act of 1934, and (vi) if Bonds are to be held publicly after the Reset
Adjustment Date, written evidence from the Rating Agency to the effect that the Bonds will be rated
at least “A”l“P-1” by Moody’s or “AA”/”A-1” by S&P, without regard to pluses or minuses (or such
lower ratings as shall be approved by the Issuer) on such Reset Adjustment Date.
If (i) the Credit Facility to be in effect upon and after a Reset Adjustment Date or (ii)
an irrevocable commitment described in (ii) above is not delivered to the Trustee in escmw at least
fifteen (15) days before the applicable Reset Adjustment Date, or if on any Business Day within ten
(1 0) days before the applicable Reset Adjustment Date the Trustee receives notice from the Borrower
that it no longer wishes to proceed with an adjustment to a Reset Rate or from Remarketing Agent
that a Market Risk Event has occurred, the Trustee shall not give the notice specified in the next
paragraph to the Bondholders. In the event that the Trustee receives notice from the Remarketing
Agent that a Market Risk Event has occurred after giving the notice specified in the next paragraph to
the Bondholders, the Trustee shall notify the Bondholders that the Reset Adjustment Date has been
cancelled. In such event, the Bonds shall (i) continue to bear interest at a Variable Rate if the Bonds
then bear interest at a Variable Rate, or (ii) if the Bonds then bear interest at a Reset Rate, on the day
following the Reset Period, the Bonds shall be redeemed (or purchased in lieu thereof) pursuant to
Section 3.Ol(b)(vi) or 3.06 hereof, as applicable.
The Trustee shall give notice to the Bondholders, by first class mail not less than nine
(9) days before the Reset Adjustment Date specifymg: (i) the Reset Adjustment Date, and that the
interest rate on the Bonds will be established at the Reset Rate on the Reset Adjustment Date; and (ii)
that all Bonds must be tendered for purchase at the Purchase Price and surrendered to the Tender
Agent for purchase not later than 9:30 a.m., Washington, D.C. time, on the Reset Adjustment Date.
Any Bond not tendered to the Tender Agent for purchase in accordance with the
provisions of this Section 2.02(b) on a Reset Adjustment Date shall be deemed to have been tendered
for purchase on such Reset Adjustment Date pursuant to Section 10.01 hereof for all purposes of this
Indenture, including particularly Article X hereof; provided, however, payment on such Bonds shall
only be made upon presentation thereof.
From and after each Reset Adjustment Date until the last day of the related Reset
Period, the Bonds will bear interest at the applicable Reset Rate, payable on each Interest Payment
DocSOC\892810v3UZ062.W28
25
Date of each year, commencing on the Interest Payment Date next following the Reset Adjustment
Date, computed on the basis of a 360-day year of twelve 30-day months. The Reset Rate shall be
that rate, determined by the Remarketing Agent on the date specified in the notice from the Borrower
referred to in the first paragraph of this subsection (b), which, in the reasonable professional
judgment of the Remarketing Agent, on the basis of prevailing financial market conditions, would be
the interest rate necessary, but which would not exceed the interest rate necessary, to be borne by the
Bonds in order for the market value of the Bonds on said date to be 100% of the principal amount
thereof (disregarding accrued interest), provided that the Reset Rate on any Bond shall never exceed
the Maximum Rate.
The determination of a Reset Rate by the Remarketing Agent in accordance with the
provisions of this subsection (b) shall (in the absence of manifest error) be conclusive and binding
upon the Bondholders, the Issuer, the Credit Facility Provider, the Remarketing Agent, the Borrower,
the Tender Agent and the Trustee, and each shall be protected in relying on it.
At least 40 and not more than 50 days prior to the final Interest Payment Date of a
Reset Period, the Borrower shall elect to have the Bonds bear interest from and after such Interest
Payment Date at a Reset Rate for a new Reset Period or at a Variable Rate or Fixed Rate by giving
written notice of such election to the Trustee, the Tender Agent, the Issuer, the Credit Facility
Provider and the Remarketing Agent. If the Borrower fails to make such election, the Borrower shall
be deemed to have elected to have the Bonds bear interest at a Variable Rate determined in
accordance with the procedures set forth in subsection (a) of this Section commencing on the day
immediately following the last day of the Reset Period. Notwithstanding the election of the
Borrower to have the Bonds bear interest at a new Reset Rate, a Fixed Rate or a Variable Rate as the
case may be, at the end of a Reset Period or the deemed election of the Borrower to have the Bonds
bear interest at a Variable Rate, if the Borrower fails to supply the items required by subsections (a),
(b) or (c), as applicable, of this Section 2.02, the Bonds shall be redeemed (or purchased in lieu
thereof) on the day following such Reset Period pursuant to Section 3.01(b)(vi) or 3.06 hereof, as
applicable.
(c) Fixed Rate. At the written request of the Borrower, with the written consent
of the Credit Facility Provider, or at the written request of the Credit Facility Provider on behalf of
the Borrower if the Borrower has not provided the Credit Facility Provider proof satisfactory to it of
the extension or substitution of a cap agreement satisfying the requirements of the Reimbursement
Agreement not later than sixty (60) days prior to the expiration of the Cap Agreement, the rate of
interest on the Bonds may be established at a Fixed Rate on any Interest Payment Date during a
Variable Period or on the day following any Reset Period, in accordance with the procedures set forth
in this subsection (c). In order to effect Conversion, the Borrower must deliver such written consent
and a written request and notice to the Trustee, the Issuer, the Credit Facility Provider, the Tender
Agent and the Remarketing Agent (or, if applicable, the Credit Facility Provider on behalf of the
Borrower must deliver such request) specifying (i) the Conversion Date, which shall be not less than
forty (40) days after such notice is received by such parties, (ii) any sinking fund redemption
amounts for each Interest Payment Date at a price equal to the principal amount of Bonds subject to
redemption plus interest accrued thereon to the date fixed for redemption, without premium, pursuant
to Section 3.01(b)(v) hereof and any applicable optional redemption provision pursuant to Section
3.01(a) hereof, and (iii) the date on which the Fixed Rate will be determined by the Remarketing
Agent, which date shall be not later than the Business Day immediately prior to the Conversion Date.
Such notice must be accompanied by (i) an opinion of Bond Counsel to the effect that Conversion in
wCSoC\892810v3122062.W28
26
accordance with the procedures described in this subsection (c) is permitted by this Indenture and
will not adversely affect the exclusion of interest on the Bonds from gross income for federal income
tax purposes, (ii) if Bonds are to be held publicly after the Conversion Date, an irrevocable
commitment (which commitment may be subject to customary commercial conditions) of an
Alternate Credit Facility Provider to issue the Credit Facility to be in effect upon and after
Conversion, together with accompanying documentation required by Section 5.4 of the Financing
Agreement or the irrevocable written commitment of the Credit Facility Provider for an amendment
to the Credit Facility to fulfill the Interest Requirement and, if applicable, to extend the maturity date
of the Credit Facility, (iii) the form of notice to be given by the Trustee to the Bondholders with
respect to Conversion, (iv) payment to the Trustee of such amount as the Trustee reasonably
determines may be required in connection with Conversion, including, but not limited to, its own fees
and expenses and the cost of printing Bonds, (v) the proposed form of disclosure document to be
distributed in connection with the remarketing of the Bonds on the Conversion Date, which
disclosure document must be approved in form and substance by the Issuer, and an undertaking of
the Borrower which satisfies any applicable requirements of Rule 15~2-12 of the Securities Exchange
Act of 1934, and (vi) if Bonds are to be held publicly after the Conversion Date, written evidence
from the Rating Agency to the effect that the Bonds will be rated at least “A” by Moody’s or “A” by
S&P, without regard to pluses or minuses (or such lower ratings as shall be approved by the Issuer)
on the Conversion Date.
If (i) the Credit Facility to be in effect upon and after Conversion is or (ii) an
irrevocable commitment descrilxd in (ii) in the paragraph above is not delivered (such delivery may
be in escrow) to the Trustee at least fifteen (15) days before the Conversion Date, or if on any
Business Day at least ten (10) days before the Conversion Date, the Trustee receives notice from the
Borrower to the effect that it no longer wishes to proceed with the Conversion, or the Trustee
receives written notice from the Remarketing Agent that a Market Risk Event has occurred, the
Trustee shall not give the notice specified in the next paragraph to the Bondholders. In the event that
the Trustee receives notice from the Remarketing Agent that a Market Risk Event has occurred after
giving the notice specified in the next paragraph to the Bondholders, the Trustee shall notify the
Bondholders that the Conversion has been cancelled. In such event (i) if the Bonds bear interest at a
Variable Rate prior to the proposed Conversion Date, they shall continue to bear interest at a
Variable Rate, and (ii) if the proposed Conversion Date was to be the day following a Reset Period,
then the Bonds shall be redeemed (or purchased in lieu thereof) on the day following such Reset
Period pursuant to Section 3.01@)(vi) or Section 3.06 hereof, as applicable.
The Trustee shall give notice to the Bondholders, by first class mail not less than nine
(9) days before the Conversion Date, specifying: (i) that the interest rate on the Bonds will be
established at the Fixed Rate through the final maturity of the Bonds and the date the Fixed Rate will
become effective; and (ii) that all Bonds must be tendered for purchase and surrendered to the Tender
Agent for purchase not later than 9:30 a.m., Washington, D.C. time, on the Conversion Date.
Any Bond not tendered to the Tender Agent for purchase in accordance with the
provisions of this Section 2.02(c) on the Conversion Date shall be deemed to have been tendered for
purchase on such Conversion Date pursuant to Section 10.01 hereof for all purposes of this
Indenture, including particularly Article X hereof; provided, however, payment on such Bonds shall
only be made upon presentation thereof.
21 76
From and after Conversion and until maturity, the Bonds will bear interest at the
Fixed Rate, payable on each Interest Payment Date, commencing on the Interest Payment Date next
following the Conversion Date, computed on the basis of a 360-day year of twelve 30-day months.
The Fixed Rate shall be that rate, determined by the Remarketing Agent on the date specified in the
notice from the Borrower referred to in the first paragraph of this subsection (c) which, in the
reasonable professional judgment of the Remarketing Agent, on the basis of prevailing financial
market conditions, would be the interest rate necessary, but which would not exceed the interest rate
necessary, to be borne by the Bonds in order for the market value of the Bonds on such date to be
100% of the principal amount thereof (disregarding accrued interest), provided that in no event shall
the Fixed Rate exceed the Maximum Rate.
The determination of the Fixed Rate by the Remarketing Agent shall (in the absence
of manifest error) be conclusive and binding on the Bondholders, the Issuer, the Tender Agent, the
Trustee, the Credit Facility Provider and the Remarketing Agent, and each shall be protected by
relying.on the rate. The Trustee shall, upon written request of any Bondholder, notify such
Bondholder of the Fixed Rate to be in effect on and after the Conversion Date.
Upon Conversion, the Trustee (with the cooperation of the Issuer) shall cause to be
prepared, at the expense of the Borrower, new Bonds substantially in the form set forth in Exhibit A
hereto and stating the Fixed Rate. Any such Bonds shall be executed and authenticated as provided
in Section 2.06, and shall be delivered to Bondholders on the Conversion Date without charge in
exchange for any outstanding Bonds.
Section 2.03. Limited Obligations. The Bonds and the interest thereon are lited
obligations of the Issuer, payable solely from the Trust Estate under the Indenture, including, without
limitation, its interest in payments received under the Bond Mortgage Note and the Credit Facility
and give rise to no pecuniary liability of the Issuer. THE BONDS SHALL NOT BE A DEBT,
EITHER GENERAL OR SPECIAL, OF THE STATE OR ANY POLITICAL SUBDIVISION
THEREOF, AND NEITHER THE STATE NOR ANY POLITICAL SUBDIVISION THEREOF
SHALL BE LIABLE THEREON. NEITHER THE FAITH, REVENUES, CREDIT NOR TAXING
POWER OF THE ISSUER, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF
SHALL BE PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM (IF ANY), OR
INTEREST ON THE BONDS. THE BONDS ARE PAYABLE, AS TO PRINCIPAL, PREMIUM
(IF ANY), AND INTEREST, SOLELY OUT OF THE TRUST ESTATE WHICH ARE THE SOLE
ASSETS OF THE ISSUER PLEDGED THEREFOR, AND THEN ONLY TO THE EXTENT
HEREIN PROVIDED. NEITHER THE MEMBERS OF THE CITY COUNCIL OF THE ISSUER
NOR ANY PERSONS EXECUTING THE BONDS SHALL BE LIABLE PERSONALLY ON THE
BONDS BY REASON OF THEIR ISSUANCE. THE ISSUER HAS NO TAXING POWER.
No agreement or obligation contained herein shall be deemed to be an agreement or
obligation of any councilmember, officer, employee, commissioner, servant or agent of the Issuer in
his or her individual capacity, and neither the councilmembers of the Issuer nor any officer thereof
executing any Bond shall be liable personally on such Bond or be subject to any personal liability or
accountability by reason of the issuance thereof. No councilmember, officer, employee,
commissioner, servant or agent of the Issuer shall incur any personal liability with respect to any
other action taken by him or her pursuant to this Indenture.
28 77
THE BONDS ARE NOT A DEBT OF THE UMTED STATES OF AMERICA, OR ANY
AGENCY OF THE UNITED STATES OF AMERICA, OR FREDDIE MAC, AND ARE! NOT
GUARANTEED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF
AMERICA OR BY FREDDIE MAC. PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY,
OR INTEREST ON THE BONDS IS NOT GUARANTEED BY FREDDIE MAC. THE
OBLIGATIONS OF FREDDIE MAC UNDER THE CREDIT ENHANCEMENT AGREEMENT
ARE OBLIGATIONS SOLELY OF FREDDIE MAC AND ARE NOT BACKED BY THE FULL
FAITH AND CREDIT OF THE UNITED STATES OF AMERICA.
Section 2.04. Indenture Constitutes Contract. In consideration of the purchase and
acceptance of the Bonds issued hereunder by those who shall hold them from time to time, the
provisions of this Indenture shall be part of the contract of the Issuer with the Bondholders and shall
be deemed to be a contract between the Issuer and the Bondholders from time to time.
Section 2.05. Execution. The Bonds shall be executed on behalf of the Issuer by the
manual or facsimile signature of the Mayor of the Issuer, and attested by the manual or facsimile
signature of the City Clerk of the Issuer. Any facsimile signatures shall have the same force and
effect as if said officers had manually signed the Bonds. Any reproduction of the official seal of the
Issuer on the Bonds shall hawthe same force and effect as if the official seal of the Issuer had been
impressed on the Bonds.
In case any officer whose manual or facsimile signature shall appear on any Bond shall cease
to be such officer before the delivery of the same, such signature or such facsimile shall nevertheless
be valid and sufficient for all purposes, the same as if he had remained in office until delivery, and
also any Bond may bear the facsimile signatures of, or may be signed by, such persons as at the
actual time of the execution of such Bond shall be the proper officers to sign such Bond although at
the date of such Bond such persons may not have been such officers.
Section 2.06. Authentication. Only such Bonds as shall have endorsed thereon a certificate
of authentication substantially in the form set forth in Exhibit A hereto, duly executed by the Trustee
shall be entitled to any right or benefit under this Indenture. No Bond shall be valid or obligatory for
any purpose unless and until such certificate of authentication shall have been duly executed by the
Trustee; and such executed certificate shall be conclusive evidence that such Bond has been
authenticated and delivered under this Indenture. The Trustee’s certificate of authentication on any
Bond shall be deemed to have been executed by it if signed by an authorized signatory of the Trustee,
but it shall not be necessary that the same person sign the certificate of authentication on all of the
Bonds.
Section 2.07. Mutilafed, Lost, Stolen or Destroyed. In the event any Bond is mutilated,
lost, stolen or destroyed, the Issuer shall execute and the Trustee shall authenticate a new Bond of
like date, series, maturity and denomination as that mutilated, lost, stolen or destroyed. Any
mutilated Bond shall first be surrendered to the Trustee; and in the case of any lost, stolen or
destroyed Bond, there shall first be hished to the Trustee evidence of such loss, theft or destruction
reasonably satisfactory to it together with indemnity reasonably satisfactory to it. In the event any
such Bond shall have matured, instead of issuing a duplicate the Issuer may pay the same without
surrender thereof. The Trustee may charge the Bondholder of such Bond with its reasonable fees and
expenses.
29
Section 2.08. Transfer and Exchange; Persons Treated as Owners. The Trustee as Bond
Registrar shall cause a Bond Register to be kept for the registration of transfers of Bonds. Any Bond
may be transferred only upon an assignment duly executed by the registered owner or such registered
owner’s duly authorized representative in such form as shall be satisfactory to the Bond Registrar and
upon surrender of such Bond to the Trustee for cancellation. Whenever any Bonds shall be
surrendered for transfer, the Issuer shall execute and the Trustee shall authenticate and deliver to the
transferee replacement fully registered Bonds, of Authorized Denomination or Denominations and
for the amount of such Bonds so surrendered.
Any Bond may, in accordance with its terms, be exchanged, at the office of the Trustee, for
new fully registered Bonds, respectively, of the same maturity, of any Authorized Denomination or
Denominations and for the aggregate amount of such Bond then Outstanding.
In all cases in which Bonds shall be transferred or exchanged hereunder, the Trustee may
make a charge sufficient to reimburse it for any tax, fee or other governmental charge required to be
paid with respect to such transfer or exchange.
The person in whose name any Bond shall be registered shall be deemed and regarded as the
absolute owner thereof for all purposes and payment of or on account of the principal of and
premium, if any, and interest on any such Bond shall be made only to or upon the order of the
registered owner thereof, or such registered owner’s legal representative, and neither the Issuer nor
the Trustee shall be affected by any notice to the contrary. All such payments shall be valid and
effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums to be
paid.
Neither the Issuer nor the Trustee shall be required to make any such exchange, registration
or transfer of Bonds during the period of fifteen (15) days immediately preceding an Interest
Payment Date, or, in the case of any proposed redemption of Bonds, during the period of fifteen (15)
days immediately preceding the selection of Bonds for such redemption and after the giving of notice
of redemption the Trustee is not required to transfer or exchange any Bond or portion thereof which
has been called for redemption.
Section 2.09. Temporary Bonds. Until definitive Bonds are ready for delivery, there may
be executed, and upon the request of the Issuer the Trustee shall authenticate and deliver, in lieu of
definitive Bonds temporary printed, typewritten, engraved or lithographed Bonds, in such
denomination or denominations as shall be determined by the Issuer, in fully registered form, in
substantially the form hereinabove set forth and with such appropriate omissions, insertions and
variations as may be required.
If temporary Bonds shall be issued, the Issuer shall cause the definitive Bonds to be prepared
and to be executed and delivered to the Trustee, and the Trustee, upon presentation to it at its
principal trust office of any temporary Bond shall cancel the same and authenticate and deliver in
exchange therefor, without charge to the owner thereof, a detinitive Bond or Bonds, as the case may
be, of an equal aggregate principal amount, of the same maturities and bearing interest at the same
rates as the temporary Bond surrendered. Until so exchanged the temporary Bonds shall in all
respects be entitled to the same benefit and security of this Indenture as the definitive Bonds to be
issued and authenticated hereunder. Interest on temporary Bonds, when due and payable, if the
30
wCSoc\89281Ov3UZ062.0028 79
definitive Bonds shall not be ready for exchange, shall be paid on presentation of such temporary
Bonds and notation of such payment shall be endorsed thereon by the Trustee.
Section 2.10. Remarketing ofBonds. Upon the execution and delivery of this Indenture,
the Issuer shall execute and deliver to the Trustee, and the Trustee shall authenticate the Bonds in
exchange for the form of Bonds outstanding under the Original Indenture and deliver them to or upon
the order of the Issuer upon receipt by the Trustee of the following:
(a) executed counterparts of this Indenture, the Financing Agreement, the Tax
Regulatory Agreement, the Disclosure Agreement, the Remarketing Agreement, the Assignment and
Assumption Agreement, the Intercreditor Agreement, the Pledge Agreement, the Credit
Enhancement Agreement, the Reimbursement Agreement and the Reimbursement Mortgage;
(b) an opinion of Bond Counsel or counsel to the Issuer to the effect that the
Issuer is duly organized and existing under the laws of the State and has duly authorized, executed
and delivered this Indenture, the Financing Agreement, the Intercreditor Agreement, the Tax
Regulatory Agreement and the Bonds, and that the Bonds are entitled to the benefits of this Indenture
and are valid and binding obligations of the Issuer;
(c) the executed Bond Mortgage Note;
(d) an opinion of counsel to the Borrower to the effect that the Borrower is duly
organized and validly existing and in good standing under the laws of the state in which it has been
organized and in good standing under the laws of each other state in which the Borrower transacts
business and has full power and authority to enter into the agreements described herein to which it is
a party, that its execution and delivery of and performance of its covenants in such agreements do not
contravene law or any provision of any other agreement to which it is a party or by which it or such
property is bound or affected, and that all such agreements are legal, valid and binding agreements of
the Borrower enforceable against the Borrower in accordance with their respective terms;
(e) an opinion of Bond Counsel to the effect that the Indenture (i) is authorized or
permitted by the Original Indenture and complies with its terms, (ii) will be valid and binding upon
the Issuer in accordance with its terms after their execution by the Issuer and the Trustee, and (iii)
will comply with the Refunding Law and will not impair the exclusion of interest on the Bonds from
gross income for federal income tax purposes;
(r) an opinion of Bond Counsel to the effect that the Financing Agreement is
authorized or permitted by the Original Loan Agreement and will not adversely affect the exclusion
of interest on the Bonds from gross income for federal income tax purposes;
(g) a certified copy of the Issuer’s Bond Resolution;
(h) the written request and authorization to the Trustee by the Issuer to
authenticate and deliver the Bonds to the purchasers thereof upon payment to the Trustee, for the
account of the Issuer, of the sum specified as the purchase price therefor in such request and
authorization; and
31
(i) receipt of the Trustee of the amounts specified in Section 2.1 1 of this
Indenture and Section 3.3 of the Financing Agreement.
Section 2.11. Deposit to Cost of Issuance Fund. The Issuer shall cause the Borrower to
deliver to the Trustee, on or prior to the Closing Date, $ for deposit to the credit of the Cost
of Issuance Fund.
Section 2.12. Book-Entry Only System of Registration.
(a) Notwithstanding the foregoing provisions of this Article II, the Bonds shall
initially be issued in the form of one fully-registered bond for the aggregate principal amount of the
Bonds of each maturity, which Bonds shall be registered in the name of Cede & Co., as nominee of
DTC. Except as provided in paragraph (f) below, all of the Bonds shall be registered in the Bond
Register in the name of Cede & Co., as nominee of DTC; provided that if DTC shall request that the
Bonds be registered in the name of a different nominee, the Trustee shall exchange all or any portion
of the Bonds for an equal aggregate principal amount of Bonds registered in the name of such
nominee or nominees of DTC. No person other than DTC or its nominee or any "FAST" agent for
DTC shall be entitled to receive from the Issuer or the Trustee either a Bond or any other evidence of
ownership of the Bonds, or any right to receive any payment in respect thereof unless DTC or its
nominee shall transfer record ownership of all or any portion of the Bonds on the Bond Register in
connection with discontinuing the book entry system as provided in paragraph (f) below or
otherwise.
(b) So long as the Bonds or any portion thereof are registered in the name of
DTC or any nominee thereof, all payments of the principal or redemption price of or interest on such
Bonds shall be made to DTC or its nominee in same day funds on the dates provided for such
payments under this Indenture. Each such payment to DTC or its nominee shall be valid and
effective to fully discharge all liability of the Issuer or the Trustee with respect to the principal or
redemption price of or interest on the Bonds to the extent of the sum or sums so paid. In the event of
the redemption of less than all of the Bonds Outstanding of any maturity, the Trustee shall not
require surrender by DTC or its nominee of the Bonds so redeemed, but DTC (or its nominee) may
retain such Bonds and make an appropriate notation on the Bond certificate as to the amount of such
partial redemption; provided that DTC shall deliver to the Trustee, upon request, a written
confirmation of such partial redemption and thereafter the records maintained by the Trustee shall be
conclusive as to the amount of the Bonds of such maturity which have been redeemed.
(c) The Issuer and the Trustee may treat DTC (or its nominee) as the sole and
exclusive owner of the Bonds registered in its name for the purposes of payment of the principal or
redemption price of or interest on the Bonds, selecting the Bonds or portions thereof to be redeemed,
giving any notice permitted or required to be given to Bondholders under this Indenture, registering
the transfer of Bonds, obtaining any consent or other action to be taken by Bondholders and for all
other purposes whatsoever; and neither the Issuer nor the Trustee shall be affected by any notice to
the contrary. Neither the Issuer nor the Trustee shall have any responsibility or obligation to any
participant in DTC, any person claiming a beneficial ownership interest in the Bonds under or
through DTC or any such participant, or any other person which is not shown on the Bond Register
as being a Bondholder, with respect to either: (1) the Bonds; or (2) the accuracy of any records
maintained by DTC or any such participant; or (3) the payment by DTC or any such participant of
any amount in respect of the principal or redemption price of or interest on the Bonds; or (4) any
Dc€soc\892810v3u2062.0(128
32
notice which is permitted or required to be given to Bondholders under this Indenture; or (5) the
selection by DTC or any such participant of any Person to receive payment in the event of a partial
redemption of the Bonds; or (6) any consent given or other action taken by DTC as Bondholder.
(d) So long as the Bonds or any portion thereof are registered in the name of
DTC or any nominee thereof, a11 notices required or permitted to be given to the Bondholders under
this Indenture shall be given to DTC as provided in DTC’s procedures, as the same may be amended
from time to time.
(e) In connection with any notice or other communication to be provided to
Bondholders pursuant to this Indenture by the Issuer or the Trustee with respect to any consent or
other action to be taken by Bondholders, DTC shall consider the date of receipt of notice requesting
such consent or other action as the record date for such consent or other action, provided that the
Issuer or the Trustee may establish a special record date for such consent or other action. The Issuer
or the Trustee shall give DTC notice of such special record date not less than 15 calendar days in
advance of such special record date to the extent possible.
(t) The book-entry system for registration of the ownership of the Bonds may be
discontinued at any time if either: (1) DTC determines to resign as securities depository for the
Bonds; or (2) the Issuer determines that continuation of the system of book-entry transfers through
DTC (or through a successor securities depository) is not in the best interests of the Issuer. In either
of such events (unless, in the case described in clause (2) above, the Issuer appoints a successor
securities depository), the Bonds shall be delivered in registered certificate form to such Persons, and
in such maturities and principal amounts, as may be designated by DTC, but without any liability on
the part of the Issuer or the Trustee for the accuracy of such designation. Whenever DTC requests
the Issuer and the Trustee to do so, the Issuer and the Trustee shall cooperate with DTC in taking
appropriate action after reasonable notice to arrange for another securities depository to maintain
custody of certificates evidencing the Bonds.
Section 2.13. Mandatory Tender of Bonds on Substitution Date. The Borrower, pursuant
to Section 5.4 of the Financing Agreement, is permitted with the prior consent of the Credit Facility
Provider to provide an Alternate Credit Facility to replace the then outstanding Credit Facility at the
times specified in the Financing Agreement.
The Bonds shall be subject to mandatory tender for purchase on any Substitution Date from
the sources available pursuant to Sections 10.03 and 10.04, at a Purchase Price equal to the principal
amount thereof plus accrued interest to the Substitution Date.
Upon receipt by the Trustee of (i) notice from the Borrower of a planned substitution
specifymg the Substitution Date (which may OCCUT only on a date specified in Section 5.4 of the
Financing Agreement), (ii) the consent of the Credit Facility Provider, and (iii) the form of Alternate
Credit Facility to be in effect on and after the Substitution Date, the written approval of the Issuer of
the form and substance of the disclosure document to be used in connection with the remarketing of
the Bonds on the Substitution Date, and forms of the other documents required pursuant to Section
5.4 of the Financing Agreement (except the rating letter specified therein), the Trustee shall establish
the Substitution Date for the mandatory tender and purchase of the Bonds.
33
The Trustee shall give notice to the Bondholders and the Rating Agency, by first class mail
not less than nine (9) days before the Substitution Date specifjmg: (i) the Substitution Date; (ii) that
all Bonds must be surrendered to the Tender Agent for purchase not later than 9:30 a.m.,
Washington, D.C. time, on the Substitution Date; and (iii) that the tender is subject to the receipt by
the Tender Agent of remarketing proceeds and by the Trustee of the Alternate Credit Facility and
other required documentation.
(a) Any Bond not tendered to the Tender Agent for purchase in accordance with
the provisions of this Section 2.13 on the Substitution Date shall be deemed to have been tendered
for purchase on such Substitution Date pursuant to Section 10.01 hereof for all purposes of this
Indenture, including particularly Article X hereoc provided, however, payment on such Bonds shall
only be made upon presentation thereof.
(End of Article 11)
34
ARTICLE 111
REDEMPTION OF BONDS PRIOR TO MATURITY
Section 3.01. Redemption of Bonds Prior to Maturity.
(a) Optional Redemption.
(i) With the prior written consent of the Credit Facility Provider, the
Bonds are subject to optional redemption in whole or in part fiom optional
prepayments on the Bond Mortgage Loan in accordance with the prepayment
restrictions set forth in the Bond Mortgage Note or fiom Eligible Funds deposited
with the Trustee at the redemption prices set forth below:
1. During the Variable Period, on any Interest Payment Date, at a redemption
price of 100% of the principal amount thereof, plus accrued interest thereon
to the redemption date.
2. During a Reset Period or the Fixed Rate Period, on any Business Day during
the periods set forth in the table below and at the respective redemption prices
set forth below expressed as percentages of the principal amounts of the
Bonds called for redemption, such redemption prices decliniig as set forth
below until such redemption price equals 100% of the principal amount of the
Bonds, plus accrued interest, if any, to the redemption date:
Earliest Call Date
provided that, notwithstanding the foregoing, the Borrower and the Remarketing
Agent may, not later than fifteen (15) days before the Reset Adjustment Date,
Variable Rate Adjustment Date or Conversion Date, as applicable, give notice to the
Issuer, the Credit Facility Provider, the Freddie Mac Servicer, and the Trustee setting
forth a redemption schedule different from that set forth in this paragraph,
accompanied by (A) the written consent of the Credit Facility Provider, if any, to be
in effect for the ensuing Reset Period or Fixed Rate Period, as applicable, and (B) an
Opinion of Bond Counsel to the effect that such change will not adversely affect the
35 wCSoc\89281Ov3\22062.0028
exclusion of interest on the Bonds from gross income for federal income tax
purposes; and upon such notice and delivery of the consent and the opinion, such
different redemption schedule shall apply to any redemption pursuant to this
paragraph for such Reset Period or Fixed Rate Period, as applicable, without further
action by any party.
(ii) While the Bonds are registered in the name of the Borrower pursuant
to the Pledge Agreement, or on behalf of Freddie Mac in such other name as Freddie
Mac shall have directed, as a result of a mandatory tender for purchase of the Bonds
pursuant to Section 3.06 hereof, the Bonds are subject to redemption in whole or in
part on any date, at the option of Freddie Mac, at a redemption price equal to the
principal amount thereof plus accrued interest to the redemption date, without
premium, from moneys constituting Eligible Funds deposited with the Trustee.
(iii) Optional redemption of Bonds at a premium may only be made if the
Trustee shall have received Eligible Funds (not consisting of hds drawn under the
Credit Facility) in an amount sufficient to pay the applicable redemption premium.
(iv) The Trustee shall effect a redemption of Bonds pursuant to this
Section 3.01(a) not later than 35 days following its receipt of moneys representing an
optional prepayment of the Bond Mortgage Loan.
(b) Mandatory Redemption. The Bonds are subject to mandatory redemption
on any date, at a redemption price equal to the principal amount thereof plus accrued interest to the
redemption date, without premium, at the earliest practicable date from payments made under the
Credit Facility or receipt by the Trustee of Eligible Funds upon the occurrence of any of the
following:
(i) in whole or in part (and if in part, in Authorized Denominations),
upon receipt by the Trustee of (1) proceeds of a draw under the Credit Facility, (2)
Net Proceeds representing casualty insurance proceeds or condemnation awards paid
as a prepayment of the Bond Mortgage Loan, such amount to be applied to reimburse
the Credit Facility Provider for the draw under the Credit Facility as a result of
casualty or condemnation of the Project and (3) a written direction by the Credit
Facility Provider to redeem such Bonds pursuant to the Credit Facility; or
(ii) in whole, upon receipt by the Trustee of amounts from the Credit
Facility Provider pursuant to the Credit Facility as a result of the occurrence of a
default under any Bond Mortgage Loan Document and receipt by the Trustee of a
written direction by the Credit Facility Provider to redeem the Bonds pursuant to the
Credit Facility; or
(iii) in whole, on the last Business Day which is not less than five days
before the date of expiration of any Credit Facility unless the Trustee receives a
renewal or extension of or replacement for such Credit Facility meeting the
requirements of Section 5.4 of the Financing Agreement or, in the case of a
replacement of the Credit Facility in connection with a Reset Adjustment Date or the
Conversion Date pursuant to Section 2.02(b) or (c), an irrevocable commitment of an
36
entity to issue an Alternate Credit Facility to be in effect upon and after such Reset
Adjustment Date or Conversion Date, in each case not less than thnty (30) days
before the expiration of the then-existing Credit Facility; or
(iv) in part in Authorized Denominations, at the written direction of the
Credit Facility Provider (1) on a Reset Adjustment Date, Variable Rate Adjustment
Date or the Conversion Date in an amount not greater than the amount in the
Principal Reserve Fund on the first day of the month prior to the Conversion Date,
Variable Rate Adjustment Date or Reset Adjustment Date, as applicable, or (2) on
any Interest Payment Date during a Variable Period, in an amount not greater than the
amount in the principal Reserve Fund on the first day of the month prior to such
Interest Payment Date; or
(v) in part, in Authorized Denominations on each Interest Payment Date,
during any Reset Period or Fixed Rate Period, with respect to the Bonds that have
term maturities occurring during such Reset Period or Fixed Rate Period commencing
on the first sinking fund mandatory redemption date established for the Bonds for
such Reset Period or Fixed Rate Period as provided in subsection (c) below; provided
that if less than all the Bonds shall have been redeemed pursuant to Section 3.01(a) or
3,0I(b)(i), the amount of Bonds to be redeemed in each year from sinking fund
installments as provided in this Section 3.01(b)(v) shall be decreased by an amount,
in proportion, as nearly as practicable, to the decrease in the payments on the Bond
Mortgage Loan in such year; or
(vi) in whole, on the day following any Reset Period if the Trustee has not
received the items required by Sections 2.02(a), (b) or (c), as applicable, to effect a
new Variable Period, Reset Period or a Conversion or upon cancellation of a rate
adjustment on a Reset Adjustment Date or upon cancellation of a conversion to a
Fixed Rate; or
(vii) in whole, upon receipt by the Trustee of notice from the Issuer of a
Determination of Taxability, or subject to the provisions of the Intercreditor
Agreement, upon acceleration of the Bond Mortgage Loan pursuant to Section 7.3 of
the Financing Agreement following a default by the Borrower under the Financing
Agreement or the Tax Regulatory Agreement.
(c) At least fifteen (15) days before a Reset Adjustment Date, a Variable Rate
Adjustment Date or the Conversion Date, the Borrower shall, with the prior written consent of the
Credit Facility Provider, determine whether the Bonds shall have serial maturities, term maturities
with sinking fimd redemptions, term maturities without sinking fund redemptions or any combination
thereof; provided, that in all events the maturity structure shall be based upon the Principal Reserve
Schedule Payments made by the Borrower under the Bond Mortgage Loan for deposit to the
Principal Reserve Fund. The Borrower shall deliver to the Trustee an Opinion of Bond Counsel to
the effect that such determination of maturities and/or sinking fund redemption schedule will not
adversely affect the exclusion of interest on the Bonds from gross income for federal income tax
purposes.
37
Section 3.02. Selection of Bonds for Redemption.
(a) The Trustee shall select Bonds subject to mandatory sinking fund redemption
pursuant to Section 3.01(b)(v) hereof by lot within the appropriate maturity. If less than all the
Bonds then outstanding shall be called for redemption other than as a result of mandatory sinking
fund redemption pursuant to Section 3.01(b)(v) hereof, the Trustee shall redeem an amount of Bonds
so that the resulting decrease in debt service on the Bonds in each semiannual period ending on an
Interest Payment Date is proportional, as nearly as practicable, to the decrease in the payments on the
Bond Mortgage Note in each such semiannual period, and the Bonds shall be selected by lot within
each maturity, the cost of such selection being at the Borrower’s expense.
@) Bonds shall be redeemed pursuant to this Article III only in Authorized
Denominations.
Section 3.03. Notice of Redemption. Notice of the intended redemption of each Bond shall
be given by the Trustee by first class mail, postage prepaid, to the registered owner at the address of
such owner shown on the Bond Register. All such redemption notices shall be given not less than ten
(10) days (not less than thirty (30) days in the case of optional or mandatory sinking fund
redemptions) nor more than sixty (60) days prior to the date fixed for redemption. The Trustee may
provide a conditional notice of redemption upon the direction of the Credit Facility Provider or the
Borrower (with the prior written consent of the Credit Facility Provider).
Notices of redemption shall state the redemption date and the redemption price, the place or
places where amounts due upon such redemption will be payable, and, if less than all of the then
Outstanding Bonds are called for redemption, shall state (i) the numbers of the Bonds to be redeemed
by giving the individual certificate of each Bond to be redeemed or shall state that all Bonds between
two stated certificate numbers, both inclusive, are to be redeemed or that all of the Bonds of one or
more maturities have been called for redemption; (ii) the CUSIP numbers of all Bonds being
redeemed if available; (iii) the amount of each Bond being redeemed (in the case of a partial
redemption); (iv) the date of issue of the Bond as originally issued; (v) the rate of interest borne by
each Bond being redeemed; (vi) the maturity date of each Bond being redeemed; (vii) the possibility
of a purchase of Bonds in lieu of redemption, if applicable; (viii) the conditions, if any, which must
be satisfied in order for the redemption to take place on the scheduled date of redemption; and (ix)
any other descriptive information needed to identify accurately the Bonds being redeemed.
Each notice of redemption shall state that further interest on such Bonds will not accrue from
and after the redemption date and that payment of the principal amount and premium, if any, will be
made upon presentation and surrender of the Bonds endorsed in blank unless the Bonds are then held
in a book-entry only system of registration.
Notice of such redemption shall also be sent by certified mail, overnight delivery service,
facsimile transmission or other secure means, postage prepaid, to the Credit Facility Provider, to the
Rating Agency, to all municipal registered Securities Depositories and to at least two of the national
Information Services that disseminate securities redemption notices, when possible, at least five (5)
days prior to the mailing of notices required by the first paragraph above, and in any event no later
than simultaneously with the mailing of notices required by the first paragraph above; provided, that
neither failure to receive such notice nor any defect in any notice so mailed shall affect the
sufficiency of the proceedings for the redemption of such Bonds.
wCSOC\892810v3U2062.w28 38
In addition to providing notice of redemption as set forth above, the Trustee shall send a
second notice of redemption within sixty (60) days following the redemption date, by certified mail,
overnight delivery service, or other secure means, postage prepaid to the registered owners of any
Bonds called for redemption, at their addresses appearing on the Bond Register, who have not
surrendered their Bonds for redemption within th.ty (30) days following the redemption date.
Failure to give notice by mailing to the registered owner of any Bond designated for
redemption or tender or to any depository or information service shall not affect the validity of the
proceedings for the redemption of any other Bond if notice of such redemption shall have been
mailed as herein provided.
Section 3.04. Cancellation. All Bondsthat have been redeemed shall be marked cancelled
by the Trustee, and shall not be reissued. A counterpart of the certificate of cancellation evidencing
such cancellation shall, upon request, be furnished by the Trustee to the Issuer.
Section 3.05. Effect ofNotice of Redempfion. If a conditional notice of redemption has
been provided pursuant to the terms of this Indenture and the conditions are not satisfied, such notice
of redemption shall be of no force and effect and the Bondholders shall be restored to their former
positions as though no such notice of redemption had been delivered. Notice of redemption having
been given in the manner provided in this Article I11 and if either there were no conditions to such
redemption or the conditions have been satisfied (or in the event no such notice is required under
Section 3.03), and money for the redemption being held by the Trustee or Paying Agent for that
purpose, thereupon the Bonds so called for redemption shall become due and payable on the
redemption date, and interest thereon shall cease to accrue on such date; and such Bonds shall
thereafter no longer be entitled to any security or benefit under this Indenture except to receive
payment of the redemption price thereof.
Section3.06. Purchase of Bonds in Whole in Lieu of Redemption. Notwithstanding
anything in this Indenture to the contraxy, at any time the Bonds are subject to redemption in whole
pursuant to the provisions of this Indenture, all (but not less than all) of the Bonds to be redeemed
may be purchased by the Trustee (for the account of the Borrower or the Credit Facility Provider or
their respective designee, as directed by such party) on the date which would be the redemption date
at the direction of the Credit Facility Provider or the Borrower, with the prior written consent of the
Credit Facility Provider (which direction shall specify that such purchase is pursuant to this Section
3.06), who shall give the Trustee at least one Business Day’s notice prior to such redemption date, at
a purchase price equal to the redemption price which would have been applicable to such Bonds on
the redemption date. The Bonds shall be purchased in lieu of redemption only from amounts
provided by the Credit Facility Provider or from other Eligible Funds. In the event the Trustee is so
directed to purchase Bonds in lieu of redemption, no notice to the holders of the Bonds to be so
purchased (other than the notice of redemption otherwise required hereunder) shall be required, and
the Trustee shall be authorized to apply to such purpose the funds in the Redemption Account which
would have been used to pay the redemption price, for such Bonds if such Bonds had been redeemed
rather than purchased. Such Bonds so purchased for the account of the Borrower shall for all
purposes under this Indenture constitute Purchased Bonds held by the Custodian pursuant to the
Pledge Agreement and may be remarketed by the Remarketing Agent in accordance with the
provisions of Section 10.03. Such Purchased Bonds, if not remarketed or transferred as provided
herein, shall be redeemed and cancelled automatically by the Trustee on the date which is not later
than five years from the date of purchase, unless an opinion of Bond Counsel is delivered to the
DocSOC\892810v3U2062.0028
39
Trustee to the effect that not redeeming and canceling such Purchased Bonds will not adversely
affect the exclusion from gross income for federal income tax purposes of interest on the Bonds.
Section 3.07. Cancellation of Purchased Bonds. Upon a redemption date on which all
Bonds (other than Purchased Bonds) are redeemed or on a date on which all Bonds (other than
Purchased Bonds) are presented to the Trustee for cancellation, all Purchased Bonds shall be deemed
cancelled. No further moneys shall be required to be paid by the Issuer or the Credit Facility
Provider in connection with such cancellation; provided, however, that such cancellation shall not
release the obligation of the Borrower to reimburse the Credit Facility Provider for payments made in
respect of principal of, interest on or Purchase Price of the Bonds, including Purchased Bonds.
(End of Article III)
40
ARTICLE IV
REVENUES AND FUNDS
Section 4.01. Pledge of Revenues and Assets. The pledge and assignment of and the
security interest granted in the Trust Estate pursuant to the Granting Clauses hereof shall attach, be
perfected and be valid and binding from and after the time of the delivery of the Bonds by the
Trustee or by any person authorized by the Trustee to deliver the Bonds. The Trust Estate so pledged
and then or thereafter received by the Trustee shall immediately be subject to the lien of such pledge
and security interest without any physical delivery thereof or further act, and the lien of such pledge
and security interest shall be valid and binding and prior to the claims of any and all parties having
claims of any kind in tort, contract or otherwise against the Issuer irrespective of whether such parties
have notice thereof.
Section 4.02. Establishment of Funds. In addition to the Bond Purchase Fund established
pursuant to Section 10.03 hereof, the Trustee shall establish, maintain and hold in trust the following
funds and accounts, each of which shall be disbursed and applied only as herein authorized:
(a) Revenue Fund, and withii the Revenue Fund a General Account and a Credit
Facility Account;
(b) Bond Fund and withii the Bond Fund a Purchased Bonds Account;
(c) Redemption Fund;
(d) Administration Fund and within the Administration Fund a Specified Fees
Account and an Administration Expense Account;
(e) Cost of Issuance Fund;
(0 Principal Reserve Fund; and
(8) Rebate Fund.
Section 4.03. Application of Revenues.
(a) There shall be deposited in the Credit Facility Account of the Revenue Fund
all amounts received pursuant to draws on the Credit Facility. Moneys received From the Freddie
Mac Servicer or the Borrower representing monthly payments by the Borrower in accordance with
the Principal Reserve Schedule shall be deposited directly to the Principal Reserve Fund as provided
in Section 4.07. AI1 Revenues (other than amounts paid under the Credit Facility or received as
Principal Reserve Schedule Payments) shall be deposited by the Trustee, promptly upon receipt
thereof, to the General Account of the Revenue Fund, except as otherwise specifically provided in
Section 4.03(b) hereof with respect to certain deposits into the Redemption Fund; (iii) the Bond Fee
Component shall be deposited to the Administration Expense Account and the Issuer Fee shall be
deposited to the Specified Fees Account; (iv) as otherwise specifically provided in the second
paragraph of Section 4.06(b) hereof with respect to deficiencies in the Administration Fund; (v) with
respect to investment earnings to the extent required under the terms hereof to be retained in the
funds and accounts to which they are attributable (vi) as otherwise specifically provided in Section
41
DOCSOC\89281oV3\2202.0028
4.03(c) or 4.07 with respect to certain deposits to the Principal Reserve Fun& and (vii) with respect
to amounts required to be transferred between funds and accounts as provided in this Article IV.
On each Interest Payment Date or any other date on which payment of principal of or interest
on the Bonds becomes due and payable, the Trustee, out of moneys in the Credit Facility Account
and the General Account of the Revenue Fund, shall credit the following amounts to the following
funds, but in the order and within the limitations hereinafter indicated with respect thereto, as
follows:
m: To the Bond Fund from moneys in the Credit Facility Account of the Revenue
Fund, an amount equal to the principal of and interest due on the Bonds on such Interest
Payment Date (excluding principal or interest on any Purchased Bonds and excluding the
principal constituting a mandatory sinlung fund payment on any Bonds on such Interest
Payment Date); and
SECOND: To the Bond Fund from moneys in the Credit Facility Account of the Revenue
Fund, an amount equal to the principal amount due and payable on the Bonds with respect to
mandatoly sinking fund redemption (excluding principal of any Purchased Bonds) on such
Interest Payment Date; and
THIRD: To the Redemption Fund from moneys in the Credit Facility Account (i) amounts
paid to the Trustee under the Credit Facility to be applied to the mandatory redemption of all
or a portion of the Bonds pursuant to Section 3.01(b) hereof (other than a mandatoly sinking
fund redemption) and (ii) amounts paid to the Trustee under the Credit Facility to be applied
to the optional redemption of all or a portion of the Bonds pursuant to Section 3.01(a)(i)
hereof; and
FOURTH To the Purchased Bonds Account in the Bond Fund from moneys in the General
Account, an amount equal to the interest due on the Purchased Bonds on such Interest
Payment Date.
(b) Immediately upon receipt, the Trustee shall deposit directly to the
Redemption Fund (i) Net Proceeds representing casualty insurance proceeds or condemnation awards
paid as a prepayment of the Bond Mortgage Loan, such amount to be applied to reimburse the Credit
Facility Provider for a draw under the Credit Facility in such amount to provide for extraordinary
mandatory redemption of all or a portion of the Bonds pursuant to Section 3.01(b)(i); and (ii) Eligible
Funds (other than draws under the Credit Facility) paid to the Trustee to be applied to the optional
redemption of all or a portion of the Bonds pursuant to Section 3.01(a)(i); provided, however, any
premium paid in connection with an optional redemption of the Bonds shall not be paid from
amounts drawn on the Credit Facility.
(c) Immediately upon receipt the Trustee shall deposit directly to the Principal
Reserve Fund all Principal Reserve Schedule Payments received from the Freddie Mac Servicer or
the Borrower.
(d) Immediately upon receipt, the Trustee shall deposit directly to the
Administration Fund the Bond Fee Component received from the Freddie Mac Servicer or the
Borrower and to the Specified Fees Account, the Issuer Fee.
DocSOCu19281Ov3\22062.0028
42
(e) Should the amount in the Bond Fund or in the Redemption Fund, as
applicable, be insufficient to pay the amount due on the Bonds on any given Interest Payment Date or
other payment date after the transfers from the Credit Facility Account, the Trustee shall credit to the
Bond Fund the amount of such deficiency by charging the following Funds and Accounts in the
following order of priority: (1) the General Account of the Revenue Fund; (2) the Administration
Expense Account; (3) the Redemption Fund, except no such charge to the Redemption Fund shall be
made from moneys to be used to effect a redemption for which notice of redemption has been
provided for or from moneys which are held for payment of Bonds which are no longer Outstanding
hereunder; and (4) the Principal Reserve Fund.
Section 4.04. Application ofBond Fund. The Trustee shall charge the Bond Fund, on each
Interest Payment Date, an amount equal to the unpaid interest and principal due on the Bonds on
such Interest Payment Date, and shall cause the same to be applied to the payment of such interest
and principal when due (excluding principal on any Purchased Bond). Any moneys remaining in the
Bond Fund on any Interest Payment Date after application as provided in the preceding sentence
may, to the extent there shall exist any deficiency in the Redemption Fund to redeem Bonds called
for mandatory sinking fund redemption on such Interest Payment Date, be transferred to the
Redemption Fund to be applied for such purpose. Any balance remaining in the Bond Fund on the
Business Day immediately succeeding an Interest Payment Date shall be transferred to the Freddie
Mac Servicer for payment to the Credit Facility Provider to be applied in accordance with the
Reimbursement Agreement.
Income realized from the investment or deposit of moneys in the Bond Fund shall be
deposited by the Trustee upon receipt thereof in the General Account of the Revenue Fund.
No amount shall he charged against the Bond Fund except as expressly provided in this
Article IV.
Section 4.05. Application of Redemption Fund. Any moneys credited to the Redemption
Fund and not otherwise restricted shall be applied FIRST, to reimburse the Credit Facility Provider to
the extent of any draw made under the Credit Facility for redemption of the Bonds pursuant to
Section 3,0I(b)(i); SECOND, to pay the redemption price of Bonds called for redemption pursuant to
Sections 3.01(a)(i), or 3.01(b); and THIRD, to make up any deficiency in the Bond Fund on any
Interest Payment Date, to the extent moneys then available in accordance with Section 4.03(e) hereof
in the General Account of the Revenue Fund and the Administration Fund are insufficient to make up
such deficiency, provided that no moneys to be used to effect a redemption for which a conditional
notice of redemption, the conditions of which have been satisfied, or an unconditional notice of
redemption has been provided or moneys which are held for payment of Bonds which are no longer
Outstanding hereunder shall be so transferred to the Bond Fund.
On or before each Interest Payment Date, the income realized from the investment of moneys
in the Redemption Fund shall be credited by the Trustee to the General Account of the Revenue
Fund.
No amount shall be charged against the Redemption Fund except as expressly provided in
this Article IV.
43
Section 4.06. AppIicatwn of Administration Fund.
(a) Amounts in the Specified Fees Account shall be withdrawn or maintained, as
appropriate, by the Trustee to pay (i) on each June 1, commencing June 1, 2003, to, or at the
direction of, the Issuer, the Issuer Fee, (ii) on each June 1 and December 1, commencing December
1, 2002, to the Trustee amounts due pursuant to subparts (a) and (d) of the Trustee’s Fee, (iii) upon
receipt, to the Trustee, any amounts due to the Trustee which have not been paid, other than amounts
paid in accordance with clause (ii) hereof and (iv) upon receipt, to, or at the direction of, the Issuer,
any portion of the Issuer Fee due and unpaid, other than amounts paid in accordance with clause (i)
hereof.
(b) Amounts in the Administration Expense Account shall be withdrawn or
maintained, as appropriate, by the Trustee and used m, in accordance with Section 4.03(e), to
make up any deficiency in the Bond Fund on any Interest Payment Date, to the extent moneys then
available in the General Account of the Revenue Fund are insufficient to make up such deficiency;
SECOND, to pay to Freddie Mac any unpaid portion of the Freddie Mac Credit Enhancement Fee
and Liquidity Use Fee, as certified in writing by Freddie Mac to the Bomwer and the Trustee;
THIIY), to pay to the Trustee any Extraordinary Trustee’s Fees and Expenses due and payable from
time to time, as set forth in an invoice submitted to the Borrower, the Issuer and Freddie Mac;
FOURTH, to pay to the Freddie Mac Servicer any unpaid portion of the Ordinary Servicing Fees
and Expenses and any Extraordinary Servicing Fees and Expenses due and owing from time to time,
as set forth in an invoice submitted to the Borrower, the Trustee and Freddie Mac; m, to pay to
the Issuer any extraordinary expenses it may incur in connection with the Bonds or this Indenture
from time to time, as set forth in an invoice submitted to the Borrower, Trustee and Freddie Mac; m, to make up any deficiency in the Redemption Fund on any redemption date of Bonds, to the
extent moneys then available in accordance with Section 4.03(e) hereof in the Redemption Fund are
insufficient to redeem Bonds called for redemption on such redemption date; SEVENTH, to pay to
the Rating Agency the annual rating maintenance fee, if any, of the Rating Agency; EIGHTH, to pay
the Counterparty ongoing fees owed to such Counterparty, if any; and NINTH, to transfer any
remaining balance after application as aforesaid to the General Account of the Revenue Fund.
In the event that the amounts on deposit in the Administration Fund are not equal to the
amounts payable from the Administration Fund as provided in the preceding paragraph on any date
on which such amounts are due and payable, the Trustee shall give notice to the Borrower of such
deficiency and of the amount of such deficiency and request payment within two Business Days to
the Trustee of the amount of such deficiency. Upon payment by the Borrower of such deficiency, the
amounts for which such deficiency was requested shall be paid.
On or before each Interest Payment Date, the income realized fhm the investment of moneys
in the Administration Fund shall be credited by the Trustee to the General Account of the Revenue
Fund.
this Article IV.
No amount shall be charged against the Administration Fund except as expressly provided in
Section4.07. PrincipaI Reserve Fund. During any Variable Period, there shall be
deposited into the Principal Reserve Fund that portion of the monthly payments made by the
Borrower in accordance with the Principal Reserve Schedule attached to the Reimbursement
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44 43
Agreement as Exhibit A, and designated for deposit to the Principal Reserve Fund as required by the
Financing Agreement and the Reimbursement Agreement. Any interest earned on or profits realized
from amounts on deposit in the Principal Reserve Fund shall be deposited into the Principal Reserve
Fund and, provided that there is no deficiency in the Principal Reserve Fund, the Adrmnistmtion
Expense Account, the Specified Fees Account or the Rebate Fund, and that no Event of Default
exists under any of the Bond Mortgage Loan Documents, shall be paid to the Borrower on the
Interest Payment Date next succeeding receipt of such interest or profits by the Trustee. In addition,
remarketing proceeds shall be deposited in the Principal Reserve Fund and used to reimburse Freddie
Mac in an amount equal to the amount of any Liquidity Advance paid to the Trustee to purchase
Bonds on any Settlement Date. At the direction of Freddie Mac, amounts on deposit in the Principal
Reserve Fund shall be used by the Trustee (1) to pay any amounts owed to Freddie Mac in
connection with any unreimbursed draw against the Credit Facility for the Principal Component (as
defined in the Credit Facility), (or in the case of a failed remarketing, any unreimbursed draw for
principal andor interest in connection with a failed remarketing) and (2) in the event of a default by
the Borrower under any of the Bond Mortgage Loan Documents, to pay any amounts required to be
paid to Freddie Mac pursuant to the Reimbursement Agreement or to pay amounts due under any
other Bond Mortgage Loan Document or to pay any other sum as directed in writing by Freddie Mac.
(a) On each Reset Adjustment Date, Variable Rate Adjustment Date and on the
Conversion Date, amounts on deposit in the Principal Reserve Fund shall be used to reimburse
Freddie Mac in an amount equal to the Principal Component (as defined in the Credit Facility) of any
Guaranteed Payment made by Freddie Mac to the Trustee under the Credit Enhancement Agreement
to redeem Bonds in Authorized Denominations pursuant to Section 3.0l(b)(iv).
(b) On the fmt day of the month in which an Interest Payment Date falls during a
Reset Period or the Fixed Rate Period, amounts on deposit in the Principal Reserve Fund shall be
used to reimburse Freddie Mac in an amount equal to the Principal Component of any Guaranteed
Payment made by Freddie Mac to the Trustee under the Credit Enhancement Agreement to redeem
Bonds in Authorized Denominations pursuant to Section 3.01(b)(v).
(c) On any Interest Payment Date, to the extent of any deficiency in the Bond
Fund, to the extent moneys then available in accordance with Section 4.03(e) in the General Account
of the Revenue Fund, the Administration Expense Account and the Redemption Fund are insufficient
to make up such deficiency, at the direction of Freddie Mac amounts on deposit in the Principal
Reserve Fund shall be transferred to the Bond Fund in the amount of such deficiency.
(d) Any amounts remaining in the Principal Reserve Fund after payment in full
of the principal of and interest on the Bonds shall be applied as provided in Section 4.1 1 hereof.
Section 4.08. Investment of Funds. The moneys held by the Trustee shall constitute trust
hds for the purposes hereof. Any moneys attributable to each of the funds and accounts hereunder
shall be invested by the Trustee, at the written direction of the Borrower, with respect to all other
Funds and Accounts, in Qualified Investments which mature on the earlier of (i) six months from the
date of investment and (ii) the date such moneys are needed; provided, that if the Trustee shall have
entered into any investment agreement requiring investment of moneys in any fund or account
hereunder in accordance with such investment agreement and if such investment agreement
constitutes a Qualified Investment, such moneys shall be invested in accordance with such
requirements. Such investments may be made through the investment or securities department of the
4Y
Trustee. All such Qualified Investments purchased with money in any fund or account hereunder
shall mature, or shall be subject to redemption or withdrawal without discount or penalty at the
option of the Trustee, prior to the next succeeding Interest Payment Date.
Qualified Investments representing an investment of moneys attributable to any fund or
account shall be deemed at all times to be a part of said fund or account, and, except as otherwise
may be provided expressly in other Sections hereof, the interest thereon and any profit arising on the
sale thereof shall be credited to the General Account of the Revenue Fund, and any loss resulting on
the sale thereof shall be charged against the General Account of the Revenue Fund. Such
investments shall be sold at the best price obtainable (at least par) whenever it shall be necessary so
to do in order to provide moneys to make any transfer, withdrawal, payment or disbursement from
said fund or account. In the case of any required transfer of moneys to another such hd or account,
such investments may be transferred to that fund or account in lieu of the required moneys if
permitted hereby as an investment of moneys in that fund or account.
The Trustee shall not be liable or responsible for any loss resulting from any investment
made in accordance herewith.
In computing for any purpose hereunder the amount in any fund or account on any date,
obligations so purchased shall be valued at the lower of cost or par exclusive of accrued interest.
Amounts on deposit in the Principal Reserve Fund shall be invested and reinvested by the
Trustee in (A) (i) non AMT tax-exempt obligations rated in the highest short term rating category by
Moody’s or S&P or (ii) with the approval of the Freddie Mac Servicer and Bond Counsel, other
investments permitted under the Indenture which, in either case, shall mature or be subject to tender
or redemption at par on or prior to the earlier of (1) thirty-five (35) days from the date of investment
or (2) the date such monies are needed for the purposes hereof or (B) with the approval of the Freddie
Mac Servicer, Bond Counsel and Freddie Mac, a guaranteed investment contract rated in the highest
short term rating category by Moody’s or S&P.
Section 4.09. Moneys Held for Particular Bonds; Funds Held in Trust. The amounts held
by the Trustee for the payment of the interest, principal or redemption price due on any date with
respect to particular Bonds pending such payment, shall be set aside and held in trust by it for the
holders of the Bonds entitled thereto, and for the purposes hereof such interest, principal or
redemption price, after the due date thereof, shall no longer be considered to be unpaid.
All moneys held by the Trustee, as such, at any time pursuant to the terms of this Indenture
shall be and hereby are assigned, transferred and set over unto the Trustee in trust for the purposes
and under the terms and conditions of this Indenture.
Section 4.10. Accounting Records. The Trustee shall maintain accurate books and records
for all funds and accounts established hereunder.
Section4.11. Amounts Remaining in Funds. After full payment of the Bonds (or
provision for payment thereof having been made in accordance with Section 9.01 hereof) and 111
payment of the fees, charges and expenses of the Trustee and other amounts required to be paid
hereunder or under any Bond Mortgage Loan Document, the Credit Facility or the Reimbursement
Agreement, including fees and expenses payable to the Issuer and the Credit Facility Provider, any
DOcSCC\892810~3K!2062.0028
46
amounts remaining in any fund or account hereunder other than the Rebate Fund shall be paid to the
Borrower; provided however, that if a default shall have occurred and remain uncured under any
Bond Mortgage Loan Document of which the Trustee shall have received written notice from the
Credit Facility Provider or the Freddie Mac Servicer, then any such amounts remaining in any find
or account hereunder shall be paid to the Credit Facility Provider in accordance with the
Reimbmement Agreement.
Section 4.12. Rebate Fund. The Rebate Fund shall be established by the Trustee and be
held and applied as provided in this Section. All money at any time deposited in the Rebate Fund
shall be held by the Trustee in trust, to the extent required to satisfy the Rebatable Arbitrage (as
defined below) and as calculated by the Rebate Analyst, for payment to the United States
Government, and neither the Issuer, the Borrower, the Credit Facility Provider nor the Bondholders
shall have any rights in or claim to such moneys. All amounts deposited into or on deposit in the
Rebate Fund shall be governed by this Section and the Tax Certificate. The Trustee shall
conclusively be deemed to have complied with such provisions if it follows the written instructions
of the Issuer, Bond Counsel or the Rebate Analyst, and shall not be required to take any actions
under this Section 4.12 or the Tax Certificate in the absence of written instructions from the Issuer,
Bond Counsel or the Rebate Analyst.
Within 55 days of the end of each fifth Bond Year, the Trustee shall cause the Rebate Analyst
to calculate the amount of rebatable arbitrage, in accordance with Section 148(f)(2) of the 1986 Code
and Treasury Regulations Section 1.148-3 (taking into account any exceptions with respect to the
computation of the rebatable arbitrage, if applicable (e.& the temporary investments exceptions of
Section 148(f)(4)(B) and (C) of the 1986 Code)), for this purpose treating the last day of the
applicable Bond Year as a (computation) date, within the meaning of Treasury Regulations Section
1.148-1@) (the “Rebatable Arbitrage”).
Withiin 55 days of the end of each fifth Bond Year, upon the written direction of the Issuer,
Bond Counsel or the Rebate Analyst, an amount shall be deposited to the Rebate Fund by the Trustee
from amounts provided by the Borrower, if and to the extent required so that the balance in the
Rebate Fund shall equal the amount of Rebatable Arbitrage so calculated in accordance with the
preceding paragraph.
The Trustee shall pay, as directed by the Borrower or the Rebate Analyst, to the United States
Treasury, out of amounts in the Rebate Fund
(i) Not later than 60 days after the end of (A) the fifth Bond Year, and
(B) each applicable fifth Bond Year thereafter, an amount equal to at least 90% of the
Rebatable Arbitrage calculated as of the end of such Bond Year; and
(ii) Not later than 60 days after the payment of all the Bonds, an amount
equal to 100% of the Rebatable Arbitrage calculated as of the end of such applicable
Bond Year, and any income attributable to the Rebatable Arbitrage, computed in
accordance with Section 148(f) of the 1986 Code.
Each payment required to be made under this Section shall be made to the Internal Revenue
Service Center, Ogden, Utah 84201 on or before the date on which such payment is due, and shall be
41
accompanied by Internal Revenue Service Form 8038-T, which shall be prepared by the Rebate
Analyst and provided to the Trustee.
Notwithstanding any provision of this Indenture to the contrary, the obligation to remit
payment of the Rebatable Arbitrage to the United States and to comply with all other requirements of
this Section 4.12, Sections 2.4 and 4.3 of the Financing Agreement shall survive the defeasance or
payment in full of the Bonds.
Any funds remaining in the Rebate Fund after redemption and payment of all of the Bonds
and payment and satisfaction of any Rebatable Arbitrage, or provision made therefor satisfactory to
the Trustee, shall be withdrawn and remitted to the Borrower.
The Trustee shall keep such records of the computations made pursuant to this Section 4.12
as are required under Section 148(f) of the 1986 Code to the extent furnished to the Trustee. The
Trustee shall or shall cause the Rebate Analyst to provide to the Issuer copies of all rebate
computations made pursuant to this Section 4.12. The Trustee shall keep and make available to the
Borrower such records concerning the investments of the gross proceeds of the Bonds and the
investments of earnings from those investments made by the Trustee as may be requested by the
Borrower in order to enable the Borrower to cause the Rebate Analyst to make the aforesaid
computations as are required under Section 148(f) of the 1986 Code.
not
any
Notwithstanding the foregoing, the computations and payments of Rebatable Arbitrage need
be made to the extent that neither the Issuer nor the Borrower will thereby fail to comply with . requirements of Section 148(f) of the 1986 Code based on an opinion of Bond Counsel that such
failure will not adversely affect the exclusion from gross income for federal income tax purposes of
interest on the Bonds, a copy of which shall be provided to the Trustee, at the expense of the
Borrower.
Section 4.13. Cost of Issuance Fund. The Trustee shall use moneys on deposit to the
credit of the Cost of Issuance Fund to pay on the Closing Date, or as soon as practicable thereafter,
the costs related to effecting the delivery of the Credit Enhancement Agreement in accordance with
written instructions to be given to the Trustee by the Borrower and approved by Freddie Mac, upon
delivery to the Trustee of appropriate invoices for such expenses. Amounts remaining on deposit in
the Cost of Issuance Fund six (6) months after the Closing Date shall be transferred to the Borrower.
Upon such final disbursement, the Trustee shall close the Cost of Issuance Fund.
Section 4.14. Reports From the Trustee. The Trustee shall furnish to the Borrower, the
Issuer and the Credit Facility Provider, upon request, monthly statements of the activity and assets
held in each of the Funds and Accounts maintained by the Trustee hereunder.
Section 4.15. Payments Under Bond Mortgage Loan. The Trustee and the Issuer hereby
expressly acknowledge that, so long as a Credit Facility is in place and no Wronghl Dishonor has
occurred and is continuing thereunder, references in this Indenture to payments or prepayments of the
Bond Mortgage Loan shall, for all purposes of this Indenture, refer solely to such portion of such
payments or prepayments actually paid by the Credit Facility Provider to the Trustee as Guaranteed
Payments pursuant to the Credit Facility for which the Borrower has correspondingly reimbursed the
Credit Facility Provider in an amount equal to the Guaranteed Payments. Without in any way
limiting the foregoing, the Trustee and the Issuer hereby acknowledge that, pursuant to the Guide, the
wCSoc\89281oV3\22062.0028
48
Freddie Mac Servicer will pay the Freddie Mac Credit Enhancement Fee, the Freddie Mac
Reimbursement Amount and the Ordinary Servicing Fees and Expenses from payments under the
Bond Mortgage Loan made by the Borrower prior to remitting the balance of such payments or
prepayments.to the Trustee for application as provided in this Indenture.
Section 4.16. Drawings Under Credit Fad@. The Credit Facility shall be held by the
Trustee and drawn upon in accordance with its terms and the provisions of this Indenture. Moneys
derived from draws upon the Credit Facility shall be deposited in the Credit Facility Account of the
Revenue Fund and applied by the Trustee to pay the principal of and interest on the Bonds and, in the
event of a purchase of the Bonds, to pay, to the extent provided in the Credit Facility, the Purchase
Price of the Bonds in accordance with this Indenture.
The Trustee shall draw moneys under the Credit Facility in accordance with the terms thereof
in an amount sufficient to make timely payments of the principal of and interest, but not premium, on
the Bonds required to be made from the Bond Fund and the Redemption Fund.
While the Bonds bear interest at the Variable Rate, should any Variable Interest Computation
Date fall between the date of the draw on the Credit Facility and the next Interest Payment Date on
the Bonds, the Trustee shall assume that the Bonds will bear interest at a rate equal to the previously-
determined rate plus 200 basis points from such Variable Interest Computation Date to the next
Interest Payment Date and shall draw on the Credit Facility accordingly. In the event that the
amounts drawn pursuant to the previous sentence exceeds the actual interest rate during such period,
the excess interest shall be returned to the Credit Facility Provider.
Should the Credit Facility Provider become the owner of the Project by foreclosure or
otherwise, the Trustee shall nevertheless continue to make payments on the Bonds only from draws
on the Credit Facility or from Eligible Funds.
The Trustee shall send to the Borrower a copy of any documents which are presented to the
Credit Facility Provider in connection with a drawing on the Credit Facility concurrently with its
submission of those documents to the Credit Facility Provider. The Borrower shall be permitted to
provide the Trustee with an Alternate Credit Facility in accordance with this Indenture and the
Financing Agreement.
Section 4.17. Notices Under Credit Enhancement Agreement. The Trustee hereby agrees
to provide to the Credit Facility Provider all such notices, including any notice of failure to receive a
payment, as shall be required under the Credit Facility in the manner and withii the periods of time
provided therein and the Trustee and the Issuer each hereby acknowledges that certain notices
constitute a condition precedent to payment by Freddie Mac under the Credit Facility.
(End of Article IV)
49
ARTICLE V
GENERAL COVENANTS AND REPRESENTATIONS
Section 5.01. Payment of Principal and Interest. The Issuer covenants that it shall
promptly pay or cause to be paid, but only from the sources provided herein, the principal of,
including any applicable redemption premiums, the Purchase Price of and interest on every Bond
issued under this Indenture at the place, on the dates and in the manner provided herein and in the
Bonds, according to the true intent and meaning thereof.
Section 5.02. Performance of Covenants. The Issuer covenants that it shall faithfully
perform at all times any and all of its covenants, undertakings, stipulations and provisions contained
in this Indenture, in any and every Bond executed, authenticated and delivered hereunder and in all
proceedings pertaining thereto.
Section 5.03. Instruments of Further Assurance. The Issuer covenants that it will do,
execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, such
indentures supplemental hereto, and such further acts, instruments and transfers as may be reasonably
required for the better assuring, transferring, conveying, pledging, assigning and confuming unto the
Trustee all and singular its interest in the property herein described and the revenues, receipts and
other amounts pledged hereby to the payment of the principal of, premium, if any, and interest on the
Bonds. Any and all interest in property hereafter acquired which is of any kind or nature herein
provided to be and become subject to the lien hereof shall and without any further conveyance,
assignment or act on the part of the Issuer or the Trustee, become and be subject to the lien of this
Indenture as fully and completely as though specifically described herein, but nothing in this
sentence contained shall be deemed to modify or change the obligations of the Issuer under this
Section of this Indenture. The Issuer covenants and agrees that, except as herein otherwise expressly
provided, it has not and will not sell, convey, mortgage, encumber or otherwise dispose of any part of
its interest in the Trust Estate, or the revenues or receipts therefrom.
Section 5.04. Inspection of Projecf Books. The Issuer covenants and agrees that all books
and documents in its possession relating to the Project shall at all times be open to inspection and
copying by such accountants or other agents as the Trustee or the Credit Facility Provider may from
time to time reasonably designate.
Section 5.05. No Modification of Security; Additional Indebtedness. The Issuer covenants
that it will not, without the written consent of the Trustee and the Credit Facility Provider, alter,
modify or cancel, or agree to consent to alter, modify or cancel any agreement to which the Issuer is
a party, or which has been assigned to the Issuer, and which relates to or affects the security for the
Bonds or the payment of any amount owed to the Credit Facility Provider. The Issuer further
covenants not to incur any additional indebtedness prior to or on a parity with the lien of this
Indenture.
Section 5.06. Damage, Destruction or Condemnation. Net Proceeds resulting from
casualty to or condemnation of the Project shall be applied as provided in the Bond Mortgage Loan
Documents and, to the extent consistent therewith, Section 3.01(b)(i) hereof.
50
Section 5.07. Tax Covenant.
(a) The Issuer shall at all times do and perform all acts and things permitted by
law and necessary or desirable in order to assure that the interest paid on the Bonds shall be excluded
from gross income for federal income tax purposes. Notwithstanding any other provisions hereof or
of any other instrument, the Issuer will neither make nor cause to be made any investment or other
use of the proceeds of the Bonds that would cause the Bonds to be arbitrage bonds under Section 148
of the 1986 Code and the regulations thereunder or otherwise cause the interest on the Bonds to
become included in gross income for federal income tax purposes. This covenant shall extend
throughout the term of the Bonds, to all funds and accounts created hereunder and all money on
deposit to the credit of any such fund or account.
(b) The Trustee agrees that it will invest funds held under this Indenture in
accordance with the terms of this Indenture (this covenant shall extend throughout the term of the
Bonds to all Funds and Accounts created under this Indenture and all moneys on deposit to the credit
of any Fund or Account). The Trustee further covenants that should the Issuer or the Borrower file
with the Trustee (it being understood that neither the Issuer nor the Borrower has an obligation to so
file), or should the Trustee receive, an Opinion of Bond Counsel to the effect that any proposed
investment or other use of proceeds of the Bonds would cause the Bonds to become “arbitrage
bonds,” then the Trustee will comply with any written instructions of the Borrower or Bond Counsel
regarding such investment’or use so as to prevent the Bonds from becoming “arbitrage bonds,” and
the Trustee will bear no liability to the Issuer, the Borrower, the holders of the Bonds or the Credit
Facility Provider for investments made in accordance with such instructions. Notwithstanding the
foregoing, the Trustee shall have no responsibility or liability with respect to the tax status of the
Bonds.
Section 5.08. Representations and Warranties ofthe Issuer. The Issuer hereby represents
and warrants as follows:
(a) The Issuer is a municipal corporation duly created, organized and existing
under the laws of the State. The Issuer has all necessary power and authority to issue the Bonds and
to execute and deliver this Indenture, the Financing Agreement and the other Bond Financing
Documents to which it is a party, and to perform its duties and discharge its obligations hereunder
and thereunder. The revenues and assets pledged for the repayment of the Bonds are. and will be free
and clear of any pledge, lien or encumbrance prior to, or equal with, the pledge created by this
Indenture, and all action on the part of the Issuer to that end has been duly and validly taken. The
Bond Financing Documents to which the Issuer is a party have been validly authorized, executed and
delivered by the Issuer, and assuming due authorization, execution and delivery by the other parties
thereto, constitute valid and binding obligations of the Issuer, enforceable against the Issuer in
accordance with their respective terms, except as enforceability may be limited by bankruptcy,
insolvency, moratorium or other laws affecting creditors’ rights generally and the application of
equitable principles.
(b) Subject to the Intercreditor Agreement, the Issuer agrees that it will cooperate
with the Trustee to enforce all obligations of the Borrower under the Financing Agreement, the Tax
Regulatory Agreement, the Bond Mortgage and the Bond Mortgage Note. Subject to the
Intercreditor Agreement, the Trustee, acting jointly with or independently of, but, if necessary, in the
name of the Issuer, shall have, and is hereby assigned and granted the full and complete right and
51
power to enforce all obligations of the Borrower under the Financing Agreement and all other
documents and instruments relating to the issuance, payment and security of the Bonds, and to act in
the name, place and stead of the Issuer for that purpose, subject to the Reserved Rights; provided,
however, that the Issuer reserves the right to enforce the Tax Regulatory Agreement through
foreclosure of the Bond Mortgage if it deems necessary, subject in all events to the Intercreditor
Agreement.
(End of Article V)
52
ARTICLE VI
DEFAULT PROVISIONS AND
REMEDIES OF TRUSTEE AND BONDHOLDERS
Section 6.01. Events of Default. Each of the following shall be an “event of default” with
respect to the Bonds (an “Event of Default”) under this Indenture:
(a) failure to pay the principal or Purchase Price of, premium, if any, or interest
on any Bond (other than Purchased Bonds) when due, whether at the stated maturity thereof, or on
proceedings for redemption thereof, or on the maturity thereof by declaration;
(b) failure by the Credit Facility Provider to make when due a required payment
under the Credit Facility; or
(c) failure to observe or perform any of the covenants, agreements or conditions
on the part of the Issuer (other than those set forth in Section 5.01 hereof) in this Indenture or in the
Bonds and the continuance thereof for a period of thirty (30) days after written notice to the Issuer
from the Trustee or the Bondholders of more than 51% of the aggregate principal amount of Bonds
then Outstanding at such time specifjmg such default and requiring the same to be remedied;
provided that the Credit Facility Provider shall have directed in writing that the same shall have .
constituted an Event of Default.
The Trustee and the Issuer agree that, notwithstanding the provisions hereof, no default under
the terms of this Indenture shall be construed as resulting in a default under the Bond Mortgage Note,
the Bond Mortgage or any other Bond Mortgage Loan Document, unless such event also constitutes
a default thereunder.
The Trustee will immediately notify the Issuer, the Borrower, the Freddie Mac Servicer and
the Credit Facility Provider after a Responsible Officer obtains actual knowledge of the occurrence
of an Event of Default or obtains actual knowledge of the Occurrence of an event which would
become an Event of Default with the passage of time or the giving of notice or both.
Section 6.02. Acceleration; Other Remedies Upon Event of Default. Upon the occurrence
of an Event of Default as provided in Section 6.01(a) hereof, the Trustee shall, but so long as no
Event of Default has occurred and is then continuing under Section 6.01(b) hereof, only upon receipt
from the Credit Facility Provider of a notice directing such acceleration (which notice may be given
in the sole discretion of the Credit Facility Provider), by notice in writing delivered to the Issuer,
declare the principal of all Bonds then Outstanding and the interest accrued thereon immediately due
and payable, and such principal and interest shall thereupon become and be immediately due and
payable and interest shall cease to accrue. Upon the occurrence of an Event of Default as provided in
Section 6.01(c) hereof, the Trustee may, but so long as no Event of Default has occurred and is then
continuing under Section 6.01(b) hereof, only upon receipt of the written consent of the Credit
Facility Provider (which consent may be given in the sole discretion of the Credit Facility Provider),
by notice in writing delivered to the Issuer, declare the principal of all Bonds then Outstanding and
the interest accrued thereon immediately due and payable, and such principal and interest shall
thereupon become and be immediately due and payable and interest shall cease to accrue. Upon the
occurrence of an Event of Default under Section 6.01(b) hereof, the Trustee may, and upon the
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53
written request of the Bondholders of more than 51% of the Bonds then Outstanding and receipt of
indemnity satisfactory to it shall, by notice in writing delivered to the Issuer, declare the principal of
all Bonds then Outstanding and the interest accrued thereon immediately due and payable, and such
principal and interest shall thereupon become and be immediately due and payable and interest shall
cease to accrue. The payment on the Bonds resulting from a declaration of acceleration on the Bonds
as the result of an Event of Default occurring under Section 6.01(a) or (c) shall be made from the
Credit Facility.
If at any time after the Bonds shall have been so declared due and payable, and before any
judgment or decree for the payment of the money due shall have been obtained or entered, the Issuer,
the Borrower or the Credit Facility Provider, as applicable, shall pay to or deposit with the Trustee a
sum sufficient to pay all principal of the Bonds then due (other than solely by reason of such
declaration) and all unpaid installments of interest (if any) upon all the Bonds then due, with interest
at the rate borne by the Bonds on such overdue principal and (to the extent legally enforceable) on
such overdue installments of interest, and the reasonable expenses of the Trustee shall have been
made good or cured or adequate provision shall have been made therefor, and all outstanding
amounts then due and unpaid under the Reimbursement Agreement (including, with respect to
Freddie Mac, all outstanding Freddie Mac Reimbursement Amounts and all Freddie Mac Credit
Enhancement Fees and all amounts owing to the Issuer and the Trustee, then due and unpaid) shall
have been paid in full, and all other defaults hereunder shall have been made good or cured or waived
in writing by the Credit Facility Provider (or, if an Event of Default under Section 6.01(b) hereof has
occurred and is then continuing, by the Bondholders of more than 51% of the aggregate principal
amount of the Bonds then Outstanding), then and in every case, the Trustee on behalf of the
Bondholders of all the Outstanding Bonds shall rescind and annul such declaration and its
consequences; but no such rescission and annulment shall extend to or shall affect any subsequent
default, nor shall it impair or exhaust any right or power consequent thereon.
Upon the happening and continuance of an Event of Default, the Trustee in its own name and
as trustee of an express trust, on behalf and for the benefit and protection of the Bondholders of all
Bonds with respect to which such an Event of Default has occurred and of the Credit Facility
Provider (if no Event of Default has occurred and is continuing under Section 6.01(b)), may also
proceed to protect and enforce any rights of the Trustee and, to the full extent that the Bondholders of
such Bonds themselves might do, the rights of such Bondholders under the laws of the State or under
this Indenture by such of the following remedies as the Trustee shall deem most effectual to protect
and enforce such rights; provided that, so long as no Event of Default has occurred and is then
continuing under Section 6.01(b) hereof, the Trustee may undertake any such remedy only upon the
receipt of the prior written consent of the Credit Facility Provider (which consent may be given in the
sole discretion of the Credit Facility Provider) or in accordance with the provisions of the
Intercreditor Agreement:
(1) by mandamus or other suit, action or proceeding at law or in equity,
to enforce the payment of the principal of, premium, if any, or interest on the Bonds
then outstanding, or for the specific performance of any covenant or agreement
contained herein or in the Credit Facility, the Financing Agreement or the Tax
Regulatory Agreement, or to require the Issuer to ca& out any other covenant or
agreement with Bondholders and to perform its duties under the Act;
wCSoc\892810v3U2062.0028
54
(2) by pursuing any available remedies under the Financing Agreement,
the Tax Regulatory Agreement or the Credit Facility;
(3) by realizing or causing to be realized through sale or otherwise upon
the security pledged hereunder; and
(4) by action or suit in equity, to enjoin any acts or things that may be
unlawful or in violation of the rights of the Bondholders and to execute any other
papers and documents and do and perform any and all such acts and things as may be
necessary or advisable in the opinion of the Trustee in order to have the respective
claims of the Bondholders against the Issuer allowed in any bankruptcy or other
proceeding..
No remedy by the terms of this Indenture conferred upon or reserved to the Trustee or to the
Bondholders is intended to be exclusive of any other remedy, but each and every such remedy shall
be cumulative and shall be in addition to any other remedy given to the Trustee, the Credit Facility
Provider or the Bondholders hereunder or under the Financing Agreement, the Tax Regulatory
Agreement, the Credit Facility or the Reimbursement Agreement, as applicable, or now or hereafter
existing at law or in equity or by statute. No delay or omission to exercise any right or power
accruing upon any Event of Default shall impair any such right or power or shall be construed to be a
waiver of any such Event of Default or acquiescence therein, and every such right and power may be
exercised from time to time and as often as may be deemed expedient. No waiver of any Event of
Default hereunder, whether by the Trustee, the Credit Facility Provider or the Bondholders, shall
extend to or shall affect any subsequent default or event of default or shall impair any rights or
remedies consequent thereto.
Section 6.03. Rights ofBondholders. If an Event of Default under Section 6.01@) hereof
shall have occurred and is then continuing, and if requested in writing so to do by the Bondholders of
more than 51% of the aggregate principal amount of the Bonds then Outstanding with respect to
which there is a default, and if indemnified to its satisfaction, the Trustee shall exercise one or more
of the rights and powers conferred by this Article as the Trustee, being advised by counsel, shall
deem most expedient in the interest of the affected Bondholders. If an Event of Default under
Section 6.01@) hereof shall have occurred and is then continuing, the Bondholders of more than 51%
of the aggregate principal amount of the Bonds then Outstanding with respect to which an Event of
Default has occurred shall have the right at any time, subject to the provisions of Section 6.08 hereof,
by an instrument in writing executed and delivered to the Trustee, to direct the time, method and
place of conducting all proceedings to be taken in connection with the enforcement of the terms and
conditions of this Indenture, or for the appointment of a receiver or any other proceedings hereunder,
in accordance with the provisions of law and of this Indenture.
Section 6.04. Waiver by the Issuer. Upon the occurrence of an Event of Default, to the
extent that such right may then lawfully be waived, neither the Issuer nor anyone claiming through or
under it shall set up, claim or seek to take advantage of any appraisal, valuation, stay, extension or
redemption laws now or hereinafter in force, in order to prevent or hinder the enforcement of the
Indenture; and the Issuer, for itself and all who may claim through or under it, hereby waives, to the
extent that it lawfully may do so, the benefit of all such laws and all right of appraisement and
redemption to which it may be entitled under the laws of the State and the United States.
55
Section 6.05. Application of Moneys Afer Default. All moneys collected by the Trustee at
any time pursuant to this Article shall, except to the extent, if any, otherwise directed by a court of
competent jurisdiction, be credited by the Trustee to the General Account of the Revenue Fund.
Such moneys so credited to the General Account of the Revenue Fund and all other moneys from
time to time credited to the General Account of the Revenue Fund shall at all times be held,
transferred, withdrawn and applied as prescribed by the provisions of Article IV hereof and this
Section 6.05.
In the event that at any time the moneys credited to the Revenue Fund, the Bond Fund, the
Redemption Fund, the Principal Reserve Fund and the Administration Expense Account available for
the payment of interest or principal then due with respect to the Bonds shall be insufficient for such
payment, such moneys (other than moneys held for the payment or redemption of particular Bonds as
provided in Section 4.09 hereof) shall be applied as follows and in the following order of priority:
(a) For payment of costs and expenses of suit or settlement, if any, and the
reasonable compensation of the Trustee and the Issuer, their agents, attorneys, experts and advisors
actually incurred, and of all proper expenses, liability and advances incurred or made hereunder by
the Trustee and of all taxes, assessments or liens superior to the lien of these presents.
(b) So long as no Event of Default has occurred and is then continuing under
Section 6.01@) hereof, for the payment to the Credit Facility Provider of all amounts then due and
unpaid under the Reimbursement Agreement (including, with respect to Freddie Mac, all Freddie
Mac Credit Enhancement Fees and Freddie Mac Reimbursement Amounts).
(c) Unless the principal of all Bonds shall have become or have been declared
due and payable:
FIRST, to the payment to the persons entitled thereto of all installments of
interest then due in the order of the maturity of such installments, and, if the
amount available is not 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 of and premiuq if any (which payment of premium shall not be
restricted to Eligible Funds), on any Bonds which shall have become due,
whether at maturity or by call for redemption, in the order in which they
became due and payable, and, if the amount available is not sufficient to pay
in full all the principal of and premium, if any, on the Bonds so due on any
date, then to the payment of principal ratably, according to the amounts due
on such date, to the persons entitled thereto, without any discrimination or
preference, and then to the payment of any premium due on the Bonds,
ratably, according to the amounts due on such date, to the persons entitled
thereto, without any discrimination or preference.
(d) If the principal of all of the Bonds shall have become or have been declared
due and payable, to the payment of the principal of, premium, if any (which payment of premium
shall not be restricted to Eligible Funds), and interest then due and unpaid upon the Bonds without
56
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 Bond over any other Bond, ratably, according
to the amounts due, respectively, for principal, premium and interest, to the persons entitled thereto
without any discrimination or preference except as to any differences in the respective rates of
interest specified in the Bonds.
(e) If an Event of Default has occurred and is then continuing under Section
6.01(b) hereof, for the payment to the Credit Facility Provider of all amounts then due and unpaid
under the Reimbursement Agreement to the date of such Event of Default.
(f) To the payment of the amounts payable from the Specified Fees Account
including, without limitation, the Issuer Fee and all other unpaid fees, costs and expenses incurred by
the Trustee and the Issuer or their respective counsel or representatives.
Section 6.06. Rights of the Credir Fuciliry Provider. If an Event of Default under Section
6.01(a) or (c) shall have occurred and so long as no Event of Default has occurred and is then
continuing under Section 6.01(b) hereof, upon receipt of the written direction of the Credit Facility
Provider (which direction may be given in the sole discretion of the Credit Facility Provider),'the
Trustee shall be obligated to exercise any right or power conferred by this Article in the manner set
forth in such written direction of the Credit Facility Provider. If such written direction expressly
states that the Trustee may exercise one or more of the rights and powers conferred in this Article as
the Trustee shall deem to be in the interest of the Bondholders and the Credit Facility Provider, the
Trustee shall exercise one or more of such rights and powers as the Trustee shall deem to be in the
best interests of the Bondholders and the Credit Facility Provider; provided, however, that in any
event, so long as no Event of Default has occurred and is then continuing under Section 6.01@)
hereof, the Trustee may not undertake any action to realize, through sale or otherwise, upon the Bond
Mortgage Loan without the express written direction of the Credit Facility Provider. So long as no
Event of Default has occurred and is then continuing under Section 6.01@) hereof, in the case of an
Event of Default under Section 6.01(a) or (c) hereof, the Credit Facility Provider shall have the right,
by an instrument in writing executed and delivered to the Trustee, to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee.
Section 6.07. Remedies Vested in Trustee. All rights of action, including the right to file
proof of claims, under this Indenture or under any of the Bonds may be enforced by the Trustee
without the possession of any of the Bonds or the production thereof in any trial or other proceedings
relating thereto and any such suit or proceeding instituted by the Trustee shall be brought in its name
as Trustee without the necessity of joining as plaintiffs or defendants any Bondholders, and any
recovery or judgment shall be for the mutual benefit as provided herein of all of the Bondholders of
the Outstanding Bonds.
Section 6.08. Remedies ofBondholders. No Bondholder shall have any right to institute
any suit, action or proceeding in equity or at law for the enforcement of this Indenture or for the
execution of any trust hereunder or for the appointment of a receiver or any other remedy hereunder,
unless (a) a default shall have occurred of which the Trustee shall have been notified as provided
herein; (b) such default shall have become an Event of Default under Section 6.01@) hereofi (c) the
Bondholders of more than 5 1% of the Bonds then Outstanding with respect to which there is such an
Event of Default shall have made written request to the Trustee and shall have offered reasonable
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51
opportunity to the Trustee either to proceed to exercise the powers hereinbefore granted or to institute
such action, suit or proceeding in its own name; (d) such Bondholders shall have offered to the
Trustee indemnity as provided in this Indenture; and (e) the Trustee shall within sixty (60) days
thereafter fail or refuse to exercise the powers hereinbefore granted, or to institute such action, suit or
proceeding; it being understood and intended that no one or more Bondholders shall have any right in
any manner whatsoever to affect, disturb or prejudice the lien of this Indenture or the rights of any
other Bondholders or to obtain priority or preference over any other Bondholders or to enforce any
right under this Indenture, except in the manner herein provided with respect to the equal and ratable
benefit of all Bondholders with respect to which there is a default. Nothing contained in this
Indenture shall, however, affect or impair the right of any Bondholder to enforce the payment of the
principal of, the premium, if any, and interest on any Bond at the maturity thereof or the obligation of
the Issuer to pay the principal of, premium, if any, and interest on the Bonds issued hereunder to the
respective holders thereof, at the time, in the place, from the sources and in the manner expressed in
said Bonds.
Section 6.09. Termination of Proceedings. In case the Trustee shall have proceeded to
enforce any right under this Indenture by the appointment of a receiver, by entry or otherwise, and
such proceedings shall have been discontinued or abandoned for any reason, or shall have been
determined adversely, then and in every such case the Issuer, the Trustee, the Credit Facility
Provider, the Borrower and the Bondholders shall be restored to their former positions and rights
hereunder with respect to the Trust Estate herein conveyed, and all rights, remedies and powers of
the Trustee shall continue as if no such proceedings had been taken.
Section 6.10. Waivers of Events of Default So long as no Event of Default has occurred
and is then continuing under Section 6.01(b) hereof, the Trustee shall waive any Event of Default
hereunder and its consequences and rescind any declaration of maturity of principal of, premium, if
any, and interest on the Bonds upon the written direction of the Credit Facility Provider. If there
shall have occurred and is then continuing an Event of Default under Section 6.01@) hereof, the
Trustee shall waive any Event of Default hereunder and its consequences and rescind any declaration
of maturity of principal of, premium, if any, and interest on the Bonds upon the written request of the
Bondholders of 100% of the Bonds then Outstanding with respect to which there is a default;
provided, however, that there shall not be waived (a) any Event of Default in the payment of the
principal of any Bonds (other than Purchased Bonds) at the date of maturity specified therein, or
upon proceedings for mandatory redemption or in the Purchase Price of any Bonds (other than
Purchased Bonds), (b) any default in the payment when due of the interest or premium on any such
Bonds (other than Purchased Bonds), unless prior to such waiver or rescission all arrears of interest,
with interest (to the extent permitted by law) at the rate borne by the Bonds in respect of which such
default shall have occurred on overdue installments of interest, or all arrears of payments of principal
or premium, if any, when due (whether at the stated maturity thereof or upon proceedings for
mandatory redemption), as the case may be, and the Issuer Fee then due, and all expenses of the
Trustee in connection with such default shall have been paid or provided for, and in case of any such
waiver or rescission, or in case any proceeding taken by the Trustee on account of any such default
shall have been discontinued or abandoned or determined adversely, then and in every such case the
Issuer, the Trustee, the Credit Facility Provider and the Bondholders shall be restored to their former
positions and rights hereunder, respectively, but no such waiver or rescission shall extend to any
subsequent or other default, or impair any right consequent thereto.
58
Section 6.11. Notice to Bondholders $Default Occurs. Upon the occurrence of an Event
of Default, or if an event occurs which could lead to a default with the passage of time and of which
the Trustee is required to take notice pursuant to Section 6.01 hereof, the Trustee shall, within thirty
(30) days, give written notice thereof by first class mail to the registered Bondholders of all Bonds
then Outstanding. Notwithstanding the foregoing, except in the case of Event of Default with respect
to the payment of principal of or premium, if any, and interest on the Bonds, the Trustee shall be
protected in withholding such notice if and so long as the board of directors of the Trustee, the
executive committee, or a trust committee of directors or of€icers of the Trustee in good faith
determines that the Withholding of such notice is in the best interests of the Bondholders.
(End of Article VI)
59
ARTICLE VI1
CONCERNING THE TRUSTEE
Section 7.01. Stundurd of Cure. The Trustee, prior to an Event of Default as defined in
Section 6.01 and after the curing or waiver of all such events which may have occurred, shall
perform such duties and only such duties as are specifically set forth in this Indenture. The Trustee,
during the existence of any such Event of Default (which shall not have been cured or waived), shall
exercise such rights and powers vested in it by this Indenture and use the same degree of care and
skill in their exercise as a prudent person would exercise or use under the circumstances in the
conduct of such person’s own affairs.
No provision of this Indenture shall be construed to relieve the Trustee from liability for its
own negligence or willful misconduct, except that:
(a) prior to an Event of Default hereunder, and after the curing of all such Events
of Default which may have occurred
(i) the duties and obligations of the Trustee shall be determined solely by
the express provisions of this Indenture, and the Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set forth in this
Indenture;
(ii) in the absence of bad faith on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon any certificate or opinion furnished to the Trustee by the
person or persons authorized to furnish the same; and
(iii) the Trustee shall be under no obligation to exercise those rights or
powers vested in it by this Indenture, other than such rights and powers which it shall
be obliged to exercise in the ordinary course of its trusteeship under the terms and
provisions of this Indenture, at the request or direction of any of the Bondholders
pursuant to Sections 6.03 and 6.08 of this Indenture, unless such Bondholders shall
have offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in the compliance with such
request or direction;
exist:
(b) at all times, regardless of whether or not any such Event of Default shall
(i) the Trustee shall not be liable for any error of judgment made in good
faith by an officer or employee of the Trustee; and
(ii) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the Credit
Facility Provider or the Bondholders of more than 51% of the aggregate principal
amount of the Bonds then Outstanding (or such lesser or greater percentage as is
specifically required or permitted by this Indenture) relating to the time, method and
60
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee under this Indenture.
Section 7.02. Reliance Upon Documents. Except as otherwise provided in Section 7.01:
(a) the Trustee may rely upon the authenticity or truth of the statements and the
correctness of the opinions expressed in, and shall be protected in acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, notarial seal, stamp, acknowledgment,
verification, request, consent, order, bond, or other paper or document of the proper party or parties;
@) any notice, request, direction, election, order or demand of the Issuer
mentioned herein shall be sufficiently evidenced by an instrument signed in the name of the Issuer by
an Authorized Officer of the Issuer (unless other evidence in respect thereof be herein specifically
prescribed), and any resolution of the Issuer may be evidenced to the Trustee by a copy of such
resolution duly certified by the [Clerk] of the Issuer;
(c) any notice, request, direction, election, order or demand of the Borrower
mentioned herein shall be sufficiently evidenced by an instrument purporting to be signed in the
name of the Borrower by any Authorized Officer of the Borrower (unless other evidence in respect
thereof be herein specifically prescribed), and any resolution or certification of the Borrower may be
evidenced to the Trustee by a copy of such resolution duly certified by a secretary or other authorized
representative of the Borrower;
(d) any notice, request, direction, election, order or demand of the Freddie Mac
Servicer mentioned herein shall be sufficiently evidenced by an instrument signed in the name of the
Freddie Mac Servicer by an Authorized Officer of the Freddie Mac Servicer (unless other evidence in
respect thereof be herein specifically prescribed);
(e) any notice, request, direction, election, order or demand of the Credit Facility
Provider mentioned herein shall be sufficiently evidenced by an instrument purporting to be signed in
the name of the Credit Facility Provider by any Authorized Officer of the Credit Facility Provider
(unless other evidence in respect thereof be herein specifically prescribed);
(0 any notice, request, direction, election, order or demand of the Remarketing
Agent mentioned herein shall be sufficiently evidenced by an instrument purporting to be signed in
the name of the Remarketing Agent by any Authorized Officer of the Remarketing Agent (unless
other evidence in respect thereof be herein specifically prescribed);
(g) any notice, request, direction, election, order or demand of the Tender Agent
mentioned herein shall be sufficiently evidenced by an instrument purporting to be signed in the
name of the Tender Agent by any Authorized Officer of the Tender Agent (unless other evidence in
respect thereof be herein specifically prescribed);
(h) in the administration of the trusts of this Indenture, the Trustee may execute
any of the trusts or powers hereby granted directly or through its agents or attorneys, and the Trustee
may consult with counsel (who may be counsel for the Issuer, the Freddie Mac Servicer or the Credit
Facility Provider) and the opinion or advice of such counsel shall be full and complete authorization
61
and protection in respect of any action taken or permitted by it hereunder in good faith and in
accordance with the opinion of such counsel;
(i) whenever in the administration of the trusts of this Indenture, the Trustee
shall deem it necessary or desirable that a matter be proved or. established prior to taking or
permitting any action hereunder, such matters (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or willful misconduct on the part of the
Trustee, be deemed to be conclusively proved and established by a certificate of an officer or
authorized agent of the Issuer or the Borrower and such certificate shall in the absence of bad faith on
the part of the Trustee be full warrant to the Trustee for any action taken or permitted by it under the
provisions of this Indenture, but in its discretion the Trustee may in lieu thereof accept other evidence
of such matter or may require such further or additional evidence as it may deem reasonable;
6) the recitals herein and in the Bonds (except the Trustee’s Certificate of
Authentication thereon) shall be taken as the statements of the Issuer and the Borrower and shall not
be considered as made by or imposing any obligation or liability upon the Trustee. The Trustee
makes no representations as to the value or condition of the Trust Estate, or any part thereof, or as to
the title of the Issuer or the Borrower to the same, or as to the security of this Indenture, or of the
Bonds issued hereunder, and the Trustee shall incur no liability or responsibility in respect of any of
such matters;
(k) the Trustee shall not be personally liable for debts contracted or for damages
incurred in the management or operation of the Trust Estate; and every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this subsection (k);
(1) the Trustee shall not be required to ascertain or inquire as to the performance
or observance of any of the covenants or agreements herein or in any contracts or securities assigned
or conveyed to or pledged with the Trustee hereunder, except defaults that are evident under Section
6.01(a) or Section 6.01(b) hereof. The Trustee shall not be required to take notice or be deemed to
have notice or actual knowledge of any default or Event of Default specified in Section 6.01(c)
hereof unless the Trustee shall receive from the Credit Facility Provider, the Issuer, or the
Bondholders of more than 51% of the aggregate principal amount of the Bonds then Outstanding
written notice stating that a default or Event of Default has occurred and specifying the same, and in
the absence of such notice the Trustee may conclusively assume that there is no such default. Every
provision contained in this Indenture or related instruments or in any such contract or security
wherein the duty of the Trustee depends on the occurrence and continuance of such default shall be
subject to the provisions of this subsection (1); and
(m) the Trustee shall be under no duty to confirm or verify any financial or other
statements or reports or certificates finished pursuant to any provisions hereof, and shall be under
no other duty in respect of the same except to retain the same in its files and permit the inspection of
the same at reasonable times by the Bondholder of any Bond.
None of the provisions contained in this Indenture shall require the Trustee to expend or risk
its own funds or otherwise incur personal financial liability in the performance of any of its duties or
in the exercise of any of its rights or powers.
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The Trustee is authorized and directed to execute in its capacity as Trustee the Financing
Agreement, the Intercreditor Agreement and the Tax Regulatory Agreement and shall have no
responsibility or liability with respect to any information, statement or recital in any offering
memorandum or other disclosure material prepared or distributed with respect to the issuance of the
Bonds.
The Trustee or any of its affiliates may act as advisor or sponsor with respect to any
Qualified Investments.
Section 7.03. Use of Proceeds. The Trustee shall not be accountable for the use or
application by the Issuer of any proceeds of the Bonds except as provided in Articles I1 and V hereof.
Section 7.04. Trustee May Hold Bonds. The Trustee and its officers and directors may
acquire and hold, or become the .pledgee of Bonds and otherwise deal with the Issuer and the
Borrower in the manner and to the same extent and lie effect as though it were not Trustee
hereunder.
Section 7.05. Trust Imposed. All money received by the Trustee shall, until used or
applied as herein provided, be held in trust for the purposes for which they were received, but need
not be segregated from other moneys except to the extent required by law.
Section 7.06. Cornpensadon of Trustee. The Trustee shall be entitled to its Trustee’s Fees
and expenses in connection with the services rendered by it in the execution of the trusts hereby
created and in the exercise and performance of any of the powers and duties hereunder of the Trustee
to the extent moneys are available therefor, in accordance with Section 4.06 hereof, exclusive of
Extraordinary Services. The Trustee shall be entitled to Extraordinary Trustee’s Fees and Expenses
in connection with any Extraordinary Services performed; provided the Trustee shall not incur any
Extraordinary Trustee’s Fees and Expenses without the consent of the Credit Facility Provider. If
any property, other than cash, shall at any time be held by the Trustee subject to this Indenture, or
any supplemental indenture, as security for the Bonds, the Trustee, if and to the extent authorized by
a receivership, bankruptcy, or other court of competent jurisdiction or by the instrument subjecting
such property to the provisions of this Indenture as such security for the Bonds, shall be entitled to
make advances for the purpose of preserving such property or of discharging tax liens or other liens
or encumbrances thereon. The Trustee shall also be indemnified by the Borrower for, and held
harmless against, any loss, liability, expense or advance incurred or made without negligence or
willful misconduct on the part of the Trustee, arising out of or in connection with the acceptance of
this trust, including the costs and expenses of defending itself against any claim or liability in
connection with the Project. Payment to the Trustee for its services and reimbursement to the
Trustee for its expenses, disbursements, liabilities and advances, shall be limited to the sources
described in Section 4.06 hereof and in the Financing Agreement. The Issuer shall have no liability
for Trustee’s fees, costs or expenses. Subject to the provisions of Section 7.09 hereof, the Trustee
agrees. that it shall continue to perform its duties hereunder even in the event that moneys designated
for payment of its fees shall be insufficient for such purposes or in the event that the Borrower fails
to pay the Trustee’s Fees and expenses, as required by the Financing Agreement.
Section 7.07. Maintenance of Offce. There shall at all times be a Trustee hereunder which
shall be a corporation or association organized and doing business under the laws of the United
States of America or any state thereof, authorized under such laws to exercise corporate trust powers,
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having its principal oflice and place of business in any state, having a combined capital and surplus
of at least Fifty Million Dollars (%SO,OOO,OOO), and subject to supervision or examination by federal
or state authority. If such corporation or association publishes reports of condition at least annually,
pursuant to law or to the requirements of any supervising or examining authority above referred to,
then for the purposes of this Section the combined capital and surplus of such corporation or
association shall be deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect specified in Section 7.09 hereof,
Section 7.08. Successor Trustee. Any corporation or association into which the Trustee
may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer
its trust business and assets as a whole or substantially as a whole, or any corporation or association
resulting from any such conversion, sale, merger, consolidation or transfer to which it is a party shall,
ipso facto, be and become successor Trustee hereunder and vested with all the title to the Trust
Estate, and all other property contemplated hereby, and all the trusts, powers, discretions,
immunities, privileges and all other matters as was its predecessor, without the execution or filing of
any instruments or any further act, deed or conveyance on the part of any of the parties hereto,
anything herein to the contrary notwithstanding, and shall also be and become successor Trustee in
respect of the beneficial interest of the Trustee in the Bond Mortgage Loan.
Section 7.09. Resignation by the Trustee. The Trustee and any successor Trustee may at
any time resign from the trusts hereby created by giving written notice to the Issuer, the Borrower,
the Tender Agent, the Remarketing Agent and the Credit Facility Provider, and by giving notice by
certified mail or overnight delivery service to each Bondholder of the Bonds then Outstanding. Such
notice to the Issuer, the Borrower, the Tender Agent, the Remarketing Agent and the Credit Facility
Provider may be served personally or sent by certified mail. The Trustee shall not resign until a
successor Trustee has been appointed. If no successor Trustee shall have been appointed and have
accepted appointment within sixty (60) days following delivery of all required notices of resignation,
the resigning Trustee may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
Section 7.10. Removal ofthe Trustee. The Trustee may be removed at any time, by an
instrument in writing signed by the Issuer with the consent of the Credit Facility Provider (which
consent shall not be unreasonably withheld) and delivered to the Trustee, the Borrower, the Tender
Agent, the Remarketing Agent and the Credit Facility Provider, and if an Event of Default shall have
occurred and be continuing, if other than an Event of Default under Section 6.01@) by a written
instrument signed by the Credit Facility Provider and delivered to the Trustee, the Issuer, the
Borrower, the Tender Agent and the Remarketing Agent. If an Event of Default under Section
6.01@) shall have occurred and be continuing the Trustee may be removed, by a written instrument
or concurrent instruments in writing signed by the Bondholders of more than 51% of the aggregate
principal amount of the Bonds then Outstanding and delivered to the Trustee, the Issuer, the
Borrower, the Tender Agent, the Remarketing Agent and the Credit Facility Provider. The Trustee
may also be removed for cause, at the direction of the Credit Facility Provider, by an instrument in
writing signed by the Issuer consenting to such removal (which consent of the Issuer shall not be
unreasonably withheld) and delivered to the Trustee and the Borrower. The Trustee may not be
removed until a successor Trustee has been appointed and has accepted such appointment.
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Section 7.11. Appointment of Successor Trustee. In case the Trustee hereunder shall
resign or be removed, or be dissolved, or shall be in course of dissolution or liquidation, or otherwise
become incapable of acting hereunder, or in case it shall be taken under the control of any public
officer or officers, or of a receiver appointed by a court, a successor may be appointed by the Issuer
with the approval of the Credit Facility Provider, or if the Issuer is then in default hereunder, by the
Bondholders of more than 51% of the aggregate principal amount of the Bonds then Outstanding,
with the approval of the Credit Facility Provider, by an instrument or concurrent instruments in
writing signed by such Bondholders, or by their duly authorized attorneys, delivered to the Issuer, the
Borrower, the Credit Facility Provider and such successor Trustee; provided, nevertheless, that in
case of vacancy the Issuer may appoint a temporary Trustee to fill such vacancy until a successor
Trustee shall be appointed by such Bondholders in the manner above provided; and any such
temporary Trustee so appointed by the Issuer shall immediately and without further act be
superseded by the Trustee so appointed by such Bondholders. Every such Trustee appointed
pursuant to the provisions of this Section shall be a trust company or bank with existing contractual
relationships with the Issuer to serve as Trustee organized under the laws of the United States of
America or any state thereof and which is in good standing, within or outside the State, having a
reported capital and surplus of not less than $50,000,000 and at least $50,000,000 in trust assets
under management if there be such an institution willing, qualified and able to accept the trust upon
reasonable or customary terms. Such successor Trustee shall agree to be the successor beneficiary
under the Bond Mortgage.
Section 7.12. Concerning Any Successor Trustee. Every successor Trustee appointed
hereunder .shall execute, acknowledge and deliver to its predecessor and also to the Issuer an
instrument in writing accepting such appointment hereunder, accepting assignment of the beneficial
interest in the Bond Mortgage, and thereupon such successor, without any further act, deed or
conveyance, shall become fully vested with all the estates, properties, rights, powers, trusts, duties
and obligations of its predecessor; but such predecessor shall, nevertheless, on the written request of
the Issuer, the Borrower or the Credit Facility Provider, or of its successor, and upon payment of all
amounts due such predecessor, including but not limited to fees and expenses of counsel, execute and
deliver such instruments as may be appropriate to transfer to such successor Trustee all the estates,
properties, rights, powers and trusts of such predecessor hereunder; and every predecessor Trustee shall deliver all securities and money held by it as Trustee hereunder to its successor. Should any
instrument in writing from the Issuer be required by a successor Trustee for more fully and certainly
vesting in such successor the estate, rights, powers and duties hereby vested or intended to be vested
in the predecessor, any and all such instruments in writing shall, on request, be executed,
acknowledged and delivered by the Issuer. The resignation of any Trustee and the instrument or
instruments removing any Trustee and appointing a successor hereunder, together with all other
instruments provided for in this Article, shall be filed and/or recorded by the successor Trustee in
each recording office where the Indenture shall have been filed and/or recorded.
Section 7.13. Successor Trustee as Trustee, Paying Agent and Bond Registrar. In the
event of a change in the office of Trustee, the predecessor Trustee which shall have resigned or shall
have been removed shall cease to be trustee and paying agent on the Bonds and Bond Registrar, and
the successor Trustee shall become such Trustee, Paying Agent and Registrar.
Section 7.14. Servicing the Bond Mortgage Loan. There shall be engaged at all times that
Freddie Mac is the Credit Facility Provider an eligible servicing institution designated by Freddie
Mac as the Freddie Mac Servicer (which may be Freddie Mac if Freddie Mac elects to service the
DocSOC\892810v3UZ062.0028
65
Bond Mortgage Loan) to service the Bond Mortgage Loan with respect to payments made thereunder
by the Borrower.
Section 7.15. Co-Trustee or Separate Trustee. It is the purpose of this Indenture that there
shall be no violation of any law of any jurisdiction (including particularly the laws of the State)
denying or restricting the right of banking corporations or associations to transact business as Trustee
in such jurisdiction. It is recognized that in case of litigation under or connected with this Indenture,
the Financing Agreement or any of the other Bond Financing Documents, and in particular in case of
the enforcement thereof upon an Event of Default, or in case the Trustee deems that by reason of any
present or future law of any jurisdiction it may not exercise any of the powers, rights or remedies
herein or therein granted to the Trustee or hold title to the properties, in trust, as herein granted, or
take any other action which may be desirable or necessary in connection therewith, the Issuer and the
Trustee shall have power to appoint an institution or individual as a co-trustee or separate trustee, and
upon the request of the Trustee or of the Bondholders of at least ten percent (10%) of the aggregate
principal amount of the Bonds then Outstanding, the Issuer shall for such purpose join with the
Trustee in the execution, delivery and performance of all instruments and agreements necessary or
proper to appoint such institution or individual to act as co-trustee jointly with the Trustee or as a
separate trustee of all or any part of the Trust Estate, and to vest in such person or institution, in such
capacity, such title to the Trust Estate, or any part thereof, and such rights, powers, duties, trusts or
obligations as the Issuer and the Trustee may consider necessary or desirable, subject to the
remaining provisions of this Section.
If the Issuer shall not have made such appointment within thuty (30) days after the receipt by
it of a request so to do, or in case an Event of Default shall have occurred and be continuing, the
Trustee alone shall have the power to make such appointment.
The Trustee, the Issuer and the Borrower shall execute, acknowledge and deliver all such
instnunents as may be required by any such co-trustee or separate trustee for more fully confirming
such title, rights, powers, trusts, duties and obligations to such co-trustee or separate trustee.
Every co-trustee or separate trustee sha1l;to the extent permitted by law, but to such extent
only, be appointed subject to the following terms, namely:
(a) all rights, powers, trusts, duties and obligations by this Indenture conferred
upon the Trustee in respect of the custody, control or management of money, papers, securities and
other personal property shall be exercised solely by the Trustee;
(b) all rights, powers, trusts, duties and obligations conferred or imposed upon
the Trustee shall be conferred or imposed upon or exercised or performed by the Trustee, or by the
Trustee and such co-trustee, or separate trustee jointly, as shall be provided in the instrument
appointing such co-trustee or separate trustee, except to the extent that under the law of any
jurisdiction in which any particular act or acts are to be performed the Trustee shall be incompetent
or unqualified to perform such act or acts, in which event such act or acts shall be performed by such
co-trustee or separate trustee;
(c) any request in writing by the Trustee to any co-trustee or separate trustee to
take or to refrain from taking any action hereunder shall be sufficient warrant for the taking or the
refraining from taking of such action by such co-trustee or separate trustee;
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(d) any co-trustee or separate trustee to the extent permitted by law shall delegate
to the Trustee the exercise of any right, power, trust, duty or obligation, discretionary or otherwise;
(e) the Trustee at any time by an instrument in writing with the concurrence of
the Issuer evidenced by a certified resolution may accept the resignation of or remove any co-trustee
or separate trustee appointed under this Section and in case an Event of Default shall have occurred
and be continuing, the Trustee shall have power to accept the resignation of or remove any such co-
trustee or separate trustee without the concurrence of the Issuer, and upon the request of the Trustee,
the Issuer shall join with the Trustee in the execution, delivery and performance of all instruments
and agreements necessary or proper to effectuate such resignation or removal. A successor to any
co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in
this Section;
(f) no Trustee hereunder shall be personally liable by reason of any act or
omission of any other Trustee hereunder;
(g) any demand, request, direction, appointment, removal, notice, consent, waiver
or other action in writing executed by the Bondholders and delivered to the Trustee shall be deemed
to have been delivered to each such co-trustee or separate trustee; and
(h) any money, papers, securities or other items of personal property received by
any such co-trustee or separate trustee hereunder shall forthwith, so far as may be permitted by law,
be tumed over to the Trustee.
Upon the acceptance in writing of such appointment, any such co-trustee or separate trustee
shall be vested with such title to the Trust Estate or any part thereof, and with such rights, powers,
duties, trusts or obligations as shall be specified in the instrument of appointment jointly with the
Trustee (except insofar as local law makes it necessary for any such co-trustee or separate trustee to
act alone) subject to all the terms of this Indenture. Every such acceptance shall be filed with the
Trustee and the Issuer.
In case any co-trustee or separate trustee shall die, become incapable of acting, resign or be
removed, the title to the Trust Estate and all rights, powers, trusts, duties and obligations of said co-
trustee or separate trustee shall, so far as permitted by law, vest in and be exercised by the Trustee
unless and until a successor co-trustee or separate trustee shall be appointed in the manner herein
provided.
The total compensation of the Trustee and co-trustee or separate trustee shall be as provided
in (and may not exceed the amount provided in) Section 7.06 hereof.
Section 1.16. Compliance of Borrower Under Tax Regulatory Agreement. The Trustee
shall give written notice to the Issuer, the Freddie Mac Servicer and the Credit Facility Provider of
any failure by the Borrower to comply with the terms of the Tax Regulatory Agreement of which a
Responsible Officer of the Trustee has actual knowledge.
Section 1.17. Record of Freddie Mac Credit Enhancement Payments and Freddie Mac
Reimbursement Amounts. The Trustee shall maintain records of all Freddie Mac Credit
Enhancement Payments received by it from Freddie Mac under the Credit Enhancement Agreement
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and of all Freddie Mac Reimbursement Amounts paid to Freddie Mac or due to Freddie Mac but
unpaid from time to time. The Trustee hereby agrees, upon receipt of a written request from Freddie
Mac, to cooperate with Freddie Mac and the Freddie Mac Servicer in connection with the
reconciliation of the Trustee’s records maintained pursuant to this Section 7.17 and any similar
records maintained by Freddie Mac or the Freddie Mac Servicer.
Section 7.18. Limitution on Action by Trustee. Notwithstanding anything in this Indenture
to the contrary, the Trustee shall not initiate or commence any proceeding for a declaratory judgment,
interpleader or similar action to determine the rights and duties of the parties herewider or of the
Bondholders, without prior written notice to the Issuer and the Credit Facility Provider.
(End of Article VII)
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ARTICLE VIII
SUPPLEMENTAL INDENTURES AND
AMENDMENTS OF CERTAIN DOCUMENTS
Section 8.01. Supplemental Indentures Not Requiring Consent of Bondholders. The
Issuer and the Trustee may without the consent of, or notice to, any of the Bondholders, but with the
prior written consent of the Credit Facility Provider, and after written notice to the Rating Agency,
enter into an indenture or indentures supplemental to this Indenture as shall not be inconsistent with
the terms and provisions hereof or materially adverse to the Bondholders for any one or more of the
following purposes:
(a) to cure any ambiguity or formal defect or omission herein,
(b) to grant to or confer upon the Trustee for the benefit of the Bondholders any
additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the
Bondholders or the Trustee or either of them;
(c) to subject to the lien and pledge of this Indenture additional revenues,
properties or collateral;
(d) to modify, amend or supplement this Indenture or any indenture supplemental
hereto in such manner as to permit the qualification hereof and thereof under the Trust Indenture Act
of 1939, as amended, or any similar federal statute hereafter in effect or to permit the qualification of
the Bonds for sale under any state blue sky laws;
(e) in connection with any other change in this Indenture which will not
adversely affect the interest of the Trustee or the Bondholders;
(0 to insert such provisions as are, in the opinion of Bond Counsel, necessary to
maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds,
(9) to modify or amend the Indenture as necessary to maintain the then cant
rating on the Bonds, except no change may be made that will adversely affect the interests of the
Bondholders;
(h) during a Variable Period, to modify, alter, amend or supplement this
Indenture in any other respect, including amendments which would otherwise be described in Section
8.02 hereof, if notice of the proposed supplemental indenture is given to Bondholders (in the same
manner as notices of redemption are given) at least thii (30) days before the effective date thereof
and, on or before such effective date, the Bondholders have the right to demand purchase of their
Bonds pursuant to Section 10.01 hereof; or
(i) to modify, alter, amend or supplement this Indenture in connection with the
delivery of any Alternate Credit Facility.
Section 8.02. Supplemental Indentures Requiring Consent of Bondholders. With the
prior written consent of the Credit Facility Provider, the Bondholders of more than 51% of the
aggregate principal amount of the Bonds then Outstanding shall have the right, from time to time, to
69
consent to and approve the execution by the Issuer and the Trustee of such indenture or indentures
supplemental hereto as shall be deemed necessary and desirable by the Issuer for the purpose of
modifymg, altering, amending, adding to or rescinding, in any particular, any of the terms or
provisions contained in this Indenture; provided, however, that nothing in this Section contained shall
permit, or be construed as permitting, (a) an extension of the time for payment of or reduction in the
Purchase Price, or an extension of the time for payment of, or an extension of the stated maturity or
reduction in the principal amount or reduction in the rate of interest on or extension of the time of
payment of, interest on, or reduction of any premium payable on the redemption of, any Bonds, or a
reduction in the Borrower’s obligation on the Bond Mortgage Note, without the consent of the
Bondholders of all of the Bonds then Outstanding, or (b) the creation of any lien prior to or on a
parity with the lien of this Indenture, or (c) a reduction in the aforesaid percentage of the principal
amount of Bonds which is required in connection with the giving of consent to any such
supplemental indenture, without the consent of the Bondholders of all of the Bonds then Outstanding,
or (d) the modification of the rights, duties or immunities of the Trustee, without the written consent
of the Trustee, or (e) a privilege or priority of any Bond over any other Bonds or (f) any action that
results in the interest on the Bonds becoming included in gross income for federal income tax
purposes.
If at any time the Issuer shall request the Trustee to enter into any such supplemental
indenture for any of the purposes of this Section, the Trustee shall, upon being satisfactorily
indemnified with respect to expenses, cause notice of the proposed execution of such supplemental
indenture to be mailed, postage prepaid, to all registered Bondholders, the Rating Agency and to the
Credit Facility Provider. Such notice shall briefly set forth the nature of the proposed supplemental
indenture and shall state that copies thereof are on file at the corporate trust office of the Trustee for
inspection by all Bondholders. A copy of such supplemental indenture shall be delivered to the
Credit Facility Provider no less than forty-five (45) days prior to the proposed effective date of such
supplemental indenture. If, within sixty (60) days or such longer period as shall be prescribed by the
Issuer following the mailing of such notice, the Bondholders of more than 51% of the aggregate
principal amount of the Bonds then Outstanding at the time of the execution of any such
supplemental indenture shall have consented to and approved the execution thereof as herein
provided and the Credit Facility Provider shall have delivered to the Trustee its written consent to
such supplemental indenture., no Bondholder shall have any right to object to any of the terms and
provisions contained therein, or the operation thereof, or in any manner to question the propriety of
the execution thereof, or to enjoin or restrain the Trustee or the Issuer from executing the same or
from taking any action pursuant to the provisions thereof. Upon the execution of any such
supplemental indenture as in this Section permitted and provided, this Indenture shall be and be
deemed to be modified and amended in accordance therewith. The Trustee may rely upon an opinion
of counsel as conclusive evidence that execution and delivery of a supplemental indenture. has been
effected in compliance with the provisions of this Article.
Anything in this Article VI11 to the contrary notwithstanding, unless the Borrower shall then
be in default of any of its obligations under the Financing Agreement, the Reimbursement
Agreement, the Tax Regulatory Agreement, the Bond Mortgage Note or the Bond Mortgage, a
supplemental indenture under this Article which affects any rights of the Borrower shall not become
effective unless and until the Borrower shall have expressly consented in writing to the execution and
delivery of such supplemental indenture. In this regard, the Trustee shall cause notice of the
proposed execution and delivery of any such supplemental indenture to be mailed by certified or
70
registered mail to the Borrower or the Borrower’s attorney at least fifteen (15) days prior to the
proposed date of execution and deliveIy of any supplemental indenture.
Notwithstanding any other provision of this Indenture, the Issuer and the Trustee may
consent to any supplemental indenture upon receipt of the consent of the Credit Facility Provider and
of the Bondholders of all Bonds then Outstanding, and as applicable, the Borrower.
Section 8.03. Amendments to Financing Agreement Not Requiring Consent of
Bondholders. The Trustee shall, without the consent of, or notice to, the Bondholders, but with the
consent of the Borrower and the Credit Facility Provider, consent to any amendment, change or
modification of the Financing Agreement as follows:
(a) as may be required by the provisions of the Credit Enhancement Agreement,
by the Financing Agreement or by this Indenture;
(b) to cure any ambiguity or formal defect or omission in the Financing
Agreement;
(c) in connection with any other change in the Financing Agreement which will
not materially adversely affect the interest of the Trustee or the Bondholders;
(d) to modify or amend the Financing Agreement as necessary to maintain the
then current rating on the Bonds;
(e) to make such additions, deletions or modifications as may be necessary, in the
opinion of Bond Counsel delivered to the Issuer, the Trustee and the Credit Facility Provider to
maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds;
(Q during a Variable Period, to modify, alter, amend or supplement the Bond
Financing Documents in any other respect, if notice of the proposed amendments is given to
Bondholders (in the same manner as notices of redemption are given) at least thvty (30) days before
the effective date thereof and, on or before such effective date, the Bondholders have the right to
demand purchase of their Bonds pursuant to Section lO..Ol hereof; or
(g) to modify, alter, amend or supplement the Financing Agreement in
connection with the delivery of an Alternate Credit Facility to the extent such modification,
alteration, amendment or supplement will not materially adversely affect the interest of the
Bondholders.
Section 8.04. Amendments to Financing Agreement Requiring Consent of Bondholders.
Except for the amendments, changes or modifications of the Financing Agreement as provided in
Section 8.03 hereof, neither the Issuer nor the Trustee shall consent to any other amendment, change
or modification of the Financing Agreement without the consent of the Credit Facility Provider and
the Borrower and without the giving of notice and the written approval or consent of the Bondholders
of at least 51% of the aggregate principal amount of the Bonds then Outstanding given and procured
in accordance with the procedure set forth in Section 8.02 hereof; provided, however, that nothing
contained in this Section 8.04 shall permit, or be construed as permitting, any amendment, change or
modification of the Borrower’s obligation to make the payments required under the Financing
71
Agreement. If at any time the Issuer and the Borrower shall request the consent of the Trustee to any
such proposed amendment, change or modification of the Financing Agreement, the Trustee shall
cause notice of such proposed amendment, change or modification to be given in the same manner as
provided in Section 8.02 hereof. Such notice shall briefly set forth the nature of such proposed
amendment, change or modification and shall state that copies of the instrument embodying the same
are on file at the principal office of the Trustee for inspection by Bondholders.
Section 8.05. Amendments to the Credit Fucilify. The Trustee and the Issuer may, without
the consent of, or notice to, any of the Bondholders, enter into any amendment, change or
modification of the Credit Facility (a) as may be required by the provisions of the Credit Facility
(including, but not limited to Section 3.4 of the Credit Enhancement Agreement, (b) to cure any
ambiguity or formal defect or omission in the Credit Facility, (c) in a manner which is not prejudicial
to the interests of the Bondholders (which shall be conclusively evidenced by an opinion of counsel
delivered to the Trustee and the Issuer or by a written confirmation from the Rating Agency of the
then existing rating on the Bonds delivered to the Trustee and the Issuer), or (d) as may be required
to maintain the then current rating on the Bonds.
(End of Article VIII)
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ARTICLE IX
SATISFACTION AND DISCHARGE OF INDENTURE
Section 9.01. Discharge of Lien. If the Issuer shall pay or cause to be paid to the
Bondholders of the Bonds the principal, interest and premium, if any, to become due thereon at the
times and in the manner stipulated therein and herein, in any one or more of the following ways:
(a) by the payment of the principal of (including redemption premium, if any)
and interest on all Bonds outstanding; or
(b) by (i) the deposit or credit to the account of the Trustee, in trust, of money or
securities in the necessiuy amount (as provided in Section 9.04) to pay the principal, redemption
price or Purchase Price and interest to the date established for purchase or redemption (calculated at
the Maximum Rate to the extent the Bonds then bear interest at a Variable Rate) whether by
redemption, purchase or otherwise, and (ii) if the Bonds then bear interest at the Variable Rate, the
delivery to the Trustee of a written confirmation by the Rating Agency of the then existing rating on
the Bonds as of the date of such deposit or credit will not be withdrawn, qualified or reduced; or
(c) by the delivery to the Trustee, for cancellation by it, of all Bonds outstanding;
and shall have paid all amounts due and owing to the Credit Facility Provider hereunder and under
the Credit Enhancement Agreement and the Reimbursement Agreement, including but not limited to
the Freddie Mac Reimbumement Amount and the Freddie Mac Credit Enhancement Fee, and shall
have paid all fees and expenses of the Issuer, the Trustee, the Freddie Mac Servicer, the Tender
Agent, the Remarketing Agent and each Paying Agent, and if the Issuer shall keep, perform and
observe all and singular the covenants and promises in the Bonds and in th~s Indenture expressed as
to be kept, performed and observed by it or on its part, then these presents and the estates and rights
hereby granted shall cease, determine and be void, and thereupon the Trustee shall cancel and
discharge the lien of this Indenture and execute and deliver to the Issuer such instruments in writing
as shall be requisite to satisfy the lien hereof, and reconvey to the Issuer the estate hereby conveyed,
and assign and deliver to the Issuer any interest in property at the time subject to the lien of this
Indenture which may then be in its possession, except amounts held by the Trustee for the payment
of principal of, interest and premium, if any, on the Bonds, the payment of any amounts owed to the
United States pursuant to Section 4.12 or the payment of any amounts payable to the Credit Facility
Provider.
Any Outstanding Bond shall, prior to the maturity or redemption date thereof, be deemed to
have been paid within the meaning and with the effect expressed in the first paragraph of this Section
if, under circumstances which do not render interest on the Bonds subject to inclusion in the
Bondholders’ gross income for purposes of federal income taxation, the following conditions shall
have been hlfilled (a) in case such Bond is to be redeemed on any date prior to its maturity, the
Trustee shall have given to the Bondholder irrevocable notice of redemption on said date; (b) there
shall be on deposit with the Trustee either money or direct obligations of the United States of
America in an amount, together with anticipated earnings thereon (but not including any
reinvestment of such earnings), which will be sufficient to pay, when due, the principal or
redemption price, if applicable, and interest due and to become due on such Bond on the redemption
date or maturity date thereof, as the case may be; and (c) the Trustee shall have received an opinion
73
of nationally recognized bankruptcy counsel that payments from such moneys are not subject to
Sections 544, 547 or 550 of the United States Bankruptcy Code or any other applicable bankruptcy
provisions.
The Trustee shall in no event cause the Bonds to be optionally redeemed from moneys
deposited pursuant to this Article IX unless the requirements of Article 111 have been met with
respect to such redemption, including the requirements of Section 3.Ol(a)(iii) or (iv) hereof.
Section 9.02. Discharge of Liability. Upon the deposit with the Trustee, in trust, at or
before maturity, of money or securities in the necessary amount (as provided in Section 9.04) to pay
or redeem outstanding Bonds (whether upon or prior to their maturity or the redemption date thereof)
provided that, if Bonds are to be redeemed prior to the maturity thereof, notice of such redemption
shall have been given as required in Article 111 or provision satisfactory to the Trustee shall have
been made for the giving of such notice, all liability of the Issuer in respect of such Bonds shall
cease, terminate and be completely discharged, except only that thereafter the holders thereof shall be
entitled to payment by the Issuer, and the Issuer shall remain liable for such payment, but only out of
the money or securities deposited with the Trustee as aforesaid for their payment, subject, however,
to the provisions of Section 9.03.
Section 9.03. Puyment ufer Discharge oflndenture. Notwithstanding any provisions of
this Indenture, any moneys deposited with the Trustee or any paying agent in trust for the payment of
the principal of, or interest or premium on, any Bonds remaining unclaimed for five (5) years after
the principal of all the outstanding Bonds, or any interest thereon, has become due and payable
(whether at maturity or upon call for redemption or by declaration as provided in this Indenture),
shall then be paid to the Issuer, and the Bondholders of such Bonds shall thereafter be entitled to look
only to the Issuer for payment thereof, and only to the extent of the amount so paid to the Issuer, and
all liability of the Trustee or any paying agent with respect to such moneys shall thereupon cease. In
the event of the payment of any such moneys to the Issuer as aforesaid, the Bondholders in respect of
which such moneys were deposited shall thereafter be deemed to be unsecured creditors of the Issuer
for amounts equivalent to the respective amounts so paid to the Issuer and deposited for the payment
of such Bonds (without interest to such holders thereon).
Section 9.04. Deposit ofMonq or Securifies wlth Trustee. Whenever in this Indenture it
is provided or permitted that there be deposited with or credited to the account of or held in trust by
the Trustee money or securities in the necessary amount to pay or redeem any Bonds, the money or
securities so to be deposited or held shall be Eligible Funds (or Government Obligations purchased
with Eligible Funds) constituting:
(a) lawhl money of the United States of America in an amount equal to the
principal amount of such Bonds and all unpaid interest thereon to maturity, except that, in the case of
Bonds which are. to be redeemed prior to maturity and in respect of which there shall have been
furnished to the Trustee proof satisfactory to it that notice of such redemption on a specified
redemption date has been duly given or provision satisfactory to the Trustee shall be made for such
notice, the amount so to be deposited or held shall be the principal amount of such Bonds and interest
thereon to the redemption date, together with the redemption premium, if any; or
(b) noncallable and nonprepayable direct obligations of the United States of
America or noncallable and nonprepayable obligations which as to principal and interest constitute
74
full faith and credit obligations of the United States of America, in such amounts and maturing at
such times that the proceeds of said obligations received upon their respective maturities and interest
payment dates, without further reinvestment, will provide funds sufficient, in the opinion of a
nationally recognized firm of certified public accountants, to pay the principal, premium, if any, and
interest to maturity, or to the redemption date, as the case may be, with respect to all of the Bonds to
be paid or redeemed, as such principal, premium and interest become due; provided that the Trustee
shall have been irrevocably instructed by the Issuer to apply the proceeds of said obligations to the
payment of said principal, premium, if any, and interest with respect to such Bonds.
(End of Article E)
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ARTICLE X
REMARKETING AND PURCHASE OF BONDS
Section 10.01. Demand for and Mandatory Purchase ofBonds. Any Bonds (other than
Purchased Bonds), or any units of principal amount thereof in Authorized Denominations, shall be
purchased from the proceeds of remarketing thereof as described in Section 10.03 or from the
sources prescribed in Section 10.04 hereof, (i) on demand of the owner of such Bond (or, so long as
Bonds are in “book-entry only” form pursuant to Section 2.12, demand of a DTC Participant, as
defined in Section 2.12 hereof, with respect to such Bonds) on any Business Day during a Variable
Period, or (ii) upon being tendered or deemed tendered pursuant to Section 2.02, 2.13 or 10.02
hereof, on any Reset Adjustment Date, Variable Rate Adjustment Date, the Conversion Date and any
Substitution Date (even if such Reset Adjustment Date, Variable Rate Adjustment Date, the
Conversion Date or any Substitution Date fails to occur). Bonds shall be purchased for a Purchase
Price equal to the principal amount thereof, or of any units thereof purchased in Authorized
Denominations, plus interest accrued thereon, if any, to the Settlement Date. Bonds shall be
purchased upon (a) in the case of a purchase upon the demand of an owner or DTC Participant,
delivery to the Tender Agent, with a copy to the Trustee and the Remarketing Agent, of a written
notice in the form set forth as Exhibit B hereto (a “Tender Notice”) which states (i) the principal
amount of such Bond for which payment is demanded, (ii) that such demand is irrevocable and (iii)
the date on which such Bond or units of principal amount thereof in Authorized Denominations shall
be purchased pursuant to this Section 10.01, which date shall be a Business Day not prior to the
seventh (7th) day next succeeding the date of the receipt of the Tender Notice by the Tender Agent;
and (b) in all cases, delivery of such Bond (with an appropriate transfer of registration form executed
in blank and in form satisfactory to the Tender Agent) to the Tender Agent, at or prior to 9.30 a.m.,
Washington, D.C. time, on the Settlement Date. In the event that a depository is appointed pursuant
to Section 2.12 hereof and a “book-entry only” system is in effect with respect to the Bonds, delivery
of Bonds for purchase on the-Settlement Date may be effected in the manner set forth by such
depository.
Bonds not delivered to the Tender Agent on or prior to 930 a.m., Washington, D.C. time, on
the Settlement Date shall be deemed tendered and purchased for all purposes of this Indenture and
interest shall cease to accrue on such Bonds on the related Settlement Date.
Payment of the Purchase Price of any Bond shall be made on the Settlement Date by check or
by wire transfer (if requested in writing by the Bondholder) or as designated in the Tender Notice
with respect to such Bond, but only upon delivery and surrender of such Bond to the Tender Agent.
If the Trustee shall have received the items required by Sections 2.02 or 2.13, as the case may
be, the Trustee shall (i) not later than the fifteenth (15th) day before any such Reset Adjustment Date,
Variable Rate Adjustment Date, the Conversion Date or Substitution Date (or, if such day is not a
Business Day, then on the next succeeding Business Day), notify the Tender Agent by telephone,
promptly confirmed in writing, with a copy to the Remarketing Agent and (ii) not later than the ninth
(9th) day before any such Reset Adjustment Date, Variable Rate Adjustment Date, Conversion Date
or Substitution Date, notify the Bondholders by first class mail, that all outstanding Bonds (other than
Purchased Bonds) shall be subject to mandatory tender and if not so tendered, shall be deemed to
have been tendered for purchase on each such Reset Adjustment Date or Variable Rate Adjustment
Date as provided in Section 2.02(b), Conversion Date as provided in Section 2.02(c) or the
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Substitution Date as provided in Section 2.13, at the Purchase Price. Such notices from the Trustee
shall be treated as a Tender Notice for all purposes of this Indenture, including this Section and
Article X hereof.
If all of the Bonds shall have been called for redemption during any Variable Period, the
Bonds may continue to be remarketed until the redemption date, provided the purchasers of such
Bonds are given notice of the call for redemption prior to purchase of any Bonds.
Anything herein to the contraxy notwithstanding, no Bonds shall be purchased pursuant to
this Section or remarketed pursuant to Section 10.03 if an Event of Default hereunder (other than an
Event of Default under Section 6.01(c) hereof) shall have occurred and be continuing and would’qot
be cured as a result of such tender and remarketing of the Bonds; nor shall any Bond be purchasq
pursuant to this Section if such Bond is registered in the name of the Issuer, the Borrower or the\
Credit Facility Provider, or known by the Trustee (the Trustee shall have no duty to inquire as to any
such nominees) to be registered in the name of any general partner or guarantor of the Borrower or
any nominee of the Issuer, the Borrower, the Credit Facility Provider, or any such general partner or
guarantor unless the Credit Facility will be in full force and effect after such purchase with respect to
such Bonds.
Section 10.02. Mandatory Tender of Bonds.
(a) Bondholders shall be required to tender their Bonds to the Tender Agent on:
(i) any Reset Adjustment Date, Variable Rate Adjustment Date, or the
Conversion Date in accordance with the provisions of Section 2.02; and
(ii) any Substitution Date in accordance with and subject to the provisions
of Section 2.13.
(b) Any Bond required to be tendered on a Reset Adjustment Date, a Variable
Rate Adjustment Date, the Conversion Date or a Substitution Date which is not tendered as of such
date shall be deemed to have been tendered to the Tender Agent on such date and shall thereafter
cease to bear interest and no longer be considered to be Outstanding hereunder.
Section 10.03. Remarketing of Bonds. Upon the receipt by the Remarketing Agent of any
notice from the Tender Agent that any Bondholder (or DTC Participant, with respect to any Bonds in
“book-entry only” form) has delivered a Tender Notice pursuant to Section 10.01 hereof, or upon
receipt of any notice from the Trustee of Bonds deemed to have been tendered in accordance with the
provisions of Section 2.02(b), 2.02(c) or 2.13, the Remarketing Agent shall offer for sale and use its
best efforts to market the Bonds referred to in such Tender Notice or such notice from the Trustee
(which shall be deemed to be a Tender Notice as provided in Section 10.01) at a price of par plus
accrued interest to the Settlement Date, in accordance with the Remarketing Agreement; provided,
however, that the Remarketing Agent shall not offer for sale or sell such Bonds to the Issuer, the
Borrower or any general partner or any guarantor of the Borrower. The Remarketing Agent has no
obligation to remarket Bonds registered in the name of the Borrower, the Credit Facility Provider or
any general partner or guarantor of the Borrower unless the Credit Facility shall be in full force and
effect after such remarketing. On the Business Day immediately prior to each Settlement Date (each,
a “Remarketing Date”), the Remarketing Agent shall give telephonic notice, promptly confirmed in
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I1
writing and transmitted by facsimile, to the Trustee, the Tender Agent, the Borrower and the Credit
Facility Provider by 11:OO am., Washington, D.C. time, stating whether all tendered Bonds have
been remarketed successfully, specifyrng the names, addresses, and taxpayer identification numbers
of the purchasers of, and the principal amount and denominations of, such Bonds, if any, for which it
has found purchasers as of such Remarketing Date, and the Purchase Price at which the Bonds are to
be sold (which shall be par plus accrued interest to the Settlement Date). The Remarketing Agent
shall instruct such purchasers to deliver to the Tender Agent, no later than 9:30 a.m., Washington,
D.C. time, on the Settlement Date, in immediately available funds, the amount required to purchase
such Bonds. Upon receipt by the Tender Agent of such amount from such purchasers, the Tender
Agent as co-authenticating agent, shall transfer the registered ownership of the Bonds to the
respective new purchasers and deliver such Bonds to such purchasers upon deposit of the Purchase
Price with the Tender Agent. The Tender Agent shall hold all Bonds delivered to it in trust for the
benefit of the respective Bondholders which shall have so delivered such Bonds until moneys
representing the Purchase Price of such Bonds shall have been delivered to or for the account of or to
the order of such Bondholders. The Tender Agent shall remit the Purchase Price of such Bonds to
the tendering Bondholder or Bondholders entitled to the same as provided in Section 10.01. In the
event that any purchaser which shall have been identified by the Remarketing Agent to the Trustee
and the Tender Agent shall fail to pay the F‘urchase Price for any Bonds prior to 1O:OO a.m.,
Washington, D.C. time, on the Settlement Date, the Tender Agent shall not be obligated to accept
such amount after such time. The Tender Agent will immediately notify by telephone the Trustee,
the Credit Facility Provider, the Borrower and the Remarketing Agent of any such failure to receive
the Purchase Price for such Bonds. On the Settlement Date, the Tender Agent shall notify by
telephone the Trustee, the Credit Facility Provider, the Borrower and the Remarketing Agent of the
amount of funds held by the Tender Agent as of 1O:OO am., Washington, D.C. time, on such date
constituting the Purchase Price of the Bonds remarketed by the Remarketing Agent, promptly
confirmed in writing and transmitted by facsimile. The Tender Agent shall hold all moneys
delivered to it for the purchase of Bonds (including any remarketing proceeds or proceeds of draws
on the Credit Facility) in trust in a non-commingled account to be known as the “Bond Purchase
Fund” for the benefit of the person or entity which shall have so delivered such moneys until the
Bonds purchased with such moneys shall have been delivered to or for the account of such Person.
Such moneys shall be held uninvested except as directed in writing by the Credit Facility Provider
and then only in Qualified Investments of the type described in clauses (a) and (b) of the definition
thereof. The Issuer and the Borrower shall not have any right, title or interest in such moneys.
Except with respect to Bonds to be held under the terms of the Pledge Agreement and any
Bonds purchased in lieu of redemption or acceleration pursuant to the provisions hereof, the Issuer,
the Borrower or any general partner or any guarantor of the Borrower may not purchase any Bonds,
from the Remarketing Agent or otherwise.
Section 10.04. Purchase of Bonds not Remarkefed. In the event that either the Tender
Agent shall not have received notice of successful remarketing of tendered Bonds by the day which
is one (1) Business Day prior to the Settlement Date, or the proceeds of remarketing of any tendered
Bond have not been received by the Tender Agent on or prior to 1O:OO a.m., Washington, D.C. time
on the Settlement Date, the Trustee shall, within the time required by the terms of the Credit Facility,
draw on the then existing Credit Facility in an amount sufficient to enable the Tender Agent to pay
the Purchase Price of each such Bond. On each Settlement Date, the Trustee shall pay or cause to be
paid to the Tender Agent the Purchase Price of any Bonds for which it has received a Tender Notice
and which have not been remarketed pursuant to Section 10.03 hereof, but only from (i) moneys
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obtained by the Trustee pursuant to the Credit Facility then in effect to enable the Trustee to pay the
Purchase Price of such tendered Bonds, which amounts shall be transferred by the Trustee to the
Tender Agent at or before 3:OO p.m., Washington, D.C. time, on the Settlement Date; and (ii) Eligible
Funds from the Borrower to the extent that moneys obtained pursuant to (i) above are insufficient on
any date to pay the Purchase Price of tendered Bonds.
Upon receipt of such Purchase Price and upon receipt of the Bonds tendered for purchase
pursuant to Section 10.01 hereof, the Tender Agent shall pay such Purchase Price to the registered
owners thereof; provided, that if the Purchase Price was theretofore paid from the proceeds of a draw
on the Credit Facility, the Tender Agent shall pay such amount to the Credit Facility Provider. Any
amounts drawn under the Credit Facility to purchase Bonds shall be used solely for such purpose.
Any Bonds so purchased with amounts drawn under the Credit Facility by the Trustee shall be
purchased for the account of the Borrower and registered as provided in the Pledge Agreement.
Amounts drawn under the Credit Facility which are not used to purchase Bonds pursuant to this
Section 10.04 shall be remitted by the Trustee or the Tender Agent to the Credit Facility Provider
promptly upon payment of the Purchase Price of the Bonds.
Section 10.05. Remarketing Agent. The Issuer, with the approval of the Credit Facility
Provider and the Borrower, shall appoint a Remarketing Agent for the Bonds, subject to the
conditions set forth in this Section 10.05. The Remarketing Agent initially appointed hereunder is
Stem Brothers & Co. The Remarketing Agent shall designate to the Trustee its Principal Office and
signify its acceptance of the duties and obligations imposed upon it hereunder by execution of the
Remarketing Agreement. The Remarketing Agent shall, and shall agree in the Remarketing
Agreement to, do each of the following:
(a) act as agent for the Issuer in determining the interest rates to be bome by the
Bonds, act as agent for Bondholders in receiving and holding moneys to pay the Purchase Price
thereof;
(b) use its best efforts to remarket bonds tendered for purchase (including
Purchased Bonds) except in the circumstances described in the last paragraph of Section 10.01 and in
the Remarketing Agreement;
(c) notify the Trustee, the Credit Facility Provider, the Borrower and the Tender
Agent of the Variable Rate determined in accordance with Section 2.02(a) the Reset Rate determined
in accordance with Section 2.02(b) and the Fixed Rate determined in accordance with Section
2.02(c), on the Variable Interest Computation Date or other date required for such determination,
each such notification to be in writing or by telex or telecopier or other communication device which
produces a written record thereof, or by telephone confirmed within one Business Day by any such
written communication; and upon request by the Issuer, submit copies of any such notices to the
Issuer;
(d) hold all moneys delivered to it hereunder for the purchase of Bonds in trust
for the benefit of the Person which shall have so delivered such moneys until the Bonds purchased
with such moneys shall have been delivered to the Tender Agent, and not commingle such moneys
with other funds of the Remarketing Agent;
19
(e) keep such books and records with regard to the remarketing of the Bonds as
shall be consistent with prudent industry practice and make such books and records available for
inspection by the Issuer, the Trustee, the Borrower and the Credit Facility Provider at all reasonable
times;
(0 perform the duties and comply with the provisions set forth in Article X
hereof; and
(9) notify the Tender Agent, the Trustee, the Borrower and the Credit Facility
Provider of the status of the remarketing of tendered Bonds one (1) Business Day prior to the '
Settlement Date and if remarketing proceeds for all tendered Bonds have not been received by the
Remarketing Agent by 1O:OO a.m., Washington, D.C. time, on the Settlement Date.
Section 10.06. Qualifications and Resignation or Removal of Remarketing Agent.
(a) The initial and any successor Remarketing Agent shall be a commercial bank
or trust company or a member of the National Association of Securities Dealers, Inc., and authorized
by law to perform all the duties imposed upon it by this Indenture and the Remarketing Agreement.
(b) The Remarketing Agent may at any time resign and be discharged of the
duties and obligations created by this Indenture by giving at least sixty (60) days' written notice to
the Issuer, the Borrower, the Credit Facility Provider, the Trustee and the Tender Agent, but any such
resignation shall not be effective until a successor is appointed and has accepted such appointment.
(c) The Remarketing Agent may be removed (i) at any time by the Issuer with
the consent of the Credit Facility Provider (which consent shall not be unreasonably withheld,
conditioned or delayed), (ii) by direction of the Issuer at the request of the Credit Facility Provider
(which direction shall not be unreasonably withheld, conditioned or delayed) or (iii) by direction of
the Issuer at the request of the Borrower with the consent of the Credit Facility Provider (which
direction and consent shall not be unreasonably withheld, conditioned or delayed), in each case by an
instrument signed by an Authorized Officer of the Issuer filed with the Remarketing Agent, the
Borrower, the Credit Facility Provider, the Trustee and the Tender Agent (A) if the Remarketing
Agent suspends its remarketing efforts or (B) without cause, upon at least thirty (30) days' notice to
the Remarketing Agent. Any successor Remarketing Agent shall be selected by the Issuer with the
written consent of the Credit Facility Provider (unless the Credit Facility Provider shall have failed to
honor a properly presented and conforming draw under the Credit Facility) (which consent shall not
be unreasonably withheld, conditioned or delayed) and the written consent of the Borrower. No
removal of the Remarketing Agent shall be effective until a successor is appointed and has accepted
such appointment.
(d) In the event of the resignation or removal of the Remarketing Agent, the
Remarketing Agent shall pay over, assign and deliver any moneys held by it in such capacity to its
successor.
Section 10.07. Tender Agent. The Trustee, with the written consent of the Credit Facility
Provider, shall appoint the Tender Agent for the Bonds, subject to the conditions set forth in Section
10.08 hereof. The Trustee shall initially serve as the Tender Agent. The Tender Agent shall
designate to the Trustee its Principal Office and signify its acceptance of the duties and obligations
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80
imposed upon it hereunder by a written instrument of acceptance delivered to the Issuer, the Trustee
and the Remarketing Agent under which the Tender Agent acknowledges its qualifications and
authority to act as Tender Agent under this Indenture and agrees, particularly, as follows:
(1) The Tender Agent shall, upon receipt of a Tender Notice from any
Bondholder (or DTC Participant, with respect to a Bond in “book-entry only” form), give
prompt telephonic notice thereof to the Trustee and the Remarketing Agent, specifying the
amount of Bonds to be purchased and the Settlement Date, and shall, not later than the
following Business Day, confirm such telephonic notice in writing and deliver to the
Remarketing Agent, the Trustee and the Credit Facility Provider a copy of such Tender
Notice.
(2) On each Settlement Date, the Tender Agent shall give the Remarketing
Agent, the Credit Facility Provider and the Trustee telephonic notice, confirmed in writing by
the following Business Day, of the principal amount of Bonds delivered pursuant to Section
10.01.
(3) The Tender Agent shall hold all Bonds delivered to it pursuant to Section
10.01 in trust for the benefit of the respective Bondholders which shall have so delivered
such Bonds until such Bonds are required by this Indenture to be delivered to the respective
purchasers thereof.
(4) The Tender Agent shall cancel all Bonds for which it has received written
notice of remarketing from the Remarketing Agent and shall authenticate new Bonds in a like
aggregate principal amount in the names and in the denominations set forth in the written
notice given to the Tender Agent by the Remarketing Agent pursuant to Section 10.03 hereof.
(5) The Tender Agent shall deliver Bonds to the purchasers thereof in accordance
with Section 10.04 hereof. The Tender Agent shall remit the Purchase Price of tendered
Bonds to the tendering Bondholders in accordance with Section 10.03 hereof.
(6) The Tender Agent shall deliver to the Trustee all tendered Bonds canceled.
(7) The Tender Agent shall keep such books and records as shall be consistent
with prudent industry practice and shall make such books and records available for inspection
by the Issuer, the Trustee and the Credit Facility Provider at all reasonable times.
(8) The Tender Agent shall send to the Trustee a copy of its transfer journal
evidencing all changes in registration of the Bonds within two (2) days of making such
changes.
The Tender Agent shall pay to tendering Bondholders the Purchase Price of any Bonds for
which it has received a Tender Notice and which have not been remarketed pursuant to Section 10.03
hereof, but solely from the sources listed in Section 10.04 hereof; and the Tender Agent shall pay to
tendering Bondholders the Purchase Price of any Bonds for which it has received a Tender Notice
and which have been remarketed pursuant to Section 10.03 hereof, but solely from amounts received
from the Remarketing Agent.
wCSoC\89281Ov3\22062.0028
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I30
Section 10.08. Qualifications of Tender Agent. The Tender Agent shall be a commercial
bank or trust company with a principal office, or with an affiliate with an office, in New York, New
York, having a capitalization of at least $10,000,000 and authorized by law to perform all the duties
imposed upon it by this Indenture; provided that, in any event, the Trustee may serve as the Tender
Agent so long as the Bonds are in “book-entry-only” form. The Tender Agent shall be an affiliate of
the Trustee (unless the Tender Agent is the Trustee), unless the Trustee has no affiliate meeting the
requirements of the first sentence of this Section, in which case the selection of the Tender Agent
shall be an entity appointed by the Trustee with the written consent of the Credit Facility Provider
and the Borrower.
The Tender Agent may at any time resign and be discharged by giving at least sixty (60)
days’ notice to the Trustee, the Issuer, the Borrower and the Credit Facility Provider. The Tender
Agent may be removed at any time, with the written consent of the Credit Facility Provider, by an
instrument signed by the Trustee and filed with the Tender Agent, the Remarketing Agent and the
Issuer.
In the event of the resignation or removal of the Tender Agent, the Tender Agent shall pay
over, assign and deliver any moneys and Bonds held by it in such capacity, and shall deliver all
books and records relating thereto, to its successor or, if there be no successor, to the Trustee.
In the event that the Trustee shall fail to appoint a Tender Agent hereunder, or in the event
that the Tender Agent shall resign or be removed, or be dissolved, or if the property or affairs of the
Tender Agent shall be taken under the control of any state or federal court or administrative body
because of bankruptcy or insolvency, or for any other reason, and the Trustee shall not have
appointed its successor as Tender Agent, the Trustee, notwithstanding the provisions of the first
paragraph of this Section 10.08, shall be deemed to be the Tender Agent for all purposes of this
Indenture until the appointment by the Trustee of the Tender Agent or a successor Tender Agent, as
the case may be, notwithstanding the fact that the Trustee may not meet the qualifications set forth in
the first paragraph of this Section 10.08.
Insofar as such provisions may be applicable, the Tender Agent shall enjoy the same
protective provisions in the performance of its duties hereunder as are specified in Sections 7.01 and
7.02 with respect to the Trustee. The Tender Agent shall perform such duties, and only such duties,
as are specifically set forth in this Indenture and no implied covenants shall be read into this
Indenture against the Tender Agent.
Section 10.09. Dealing in Bonds. The Credit Facility Provider, the Trustee, the Tender
Agent or the Remarketing Agent, in its individual capacity, may each in good faith buy, sell, own,
hold and deal in any of the Bonds, and may join in any action which any Bondholder may be entitled
to take with like effect as if it did not act in any capacity hereunder. The Trustee, the Tender Agent,
the Credit Facility Provider or the Remarketing Agent, in its individual capacity, either as principal
or agent, may also engage in or be interested in any financial or other transaction with the Issuer or
the Credit Facility Provider, and may act as depository, trustee or agent for any committee or body of
Bondholders secured hereby or other obligations of the Issuer as freely as if it did not act in any
capacity hereunder. It is expressly understood that the Trustee and the Tender Agent in carrying out
their respective duties hereunder shall each be acting as a conduit with respect to deliveries of Bonds
for purchase pursuant to Section 10.01 hereof.
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131
Section 10.10. PurchasedBonds.
(a) Unremarketed Bonds as Purchased Bonds; No Credit Facility Support.
Bonds for which the Purchase Price is funded with moneys provided under the Credit Facility and
which are not remarketed in accordance with the Remarketing Agreement shall be deemed to be
Purchased Bonds. The Credit Facility shall not constitute security for or provide liquidity for
Purchased Bonds.
(b) Ownership and Pledge of Purchased Bonds. Purchased Bonds shall be
owned by the Borrower and pledged to the Custodian under the Pledge Agreement for the benefit of
the Credit Facility Provider pursuant to the Pledge Agreement. As set forth in Section 2.3 of the
Pledge Agreement, the Tender Agent shall either (i) ensure that Purchased Bonds are delivered to the
Custodian under the Pledge Agreement or (ii) if, and only if, delivery of the Bonds is not possible,
deliver a written entitlement order to the applicable financial intermediaries on whose records
ownership of the Purchased Bonds is reflected directing the intermediaries to credit the security
entitlement to the Purchased Bonds to the account of the Custodian for the benefit of the Credit
Facility Provider and deliver to the Custodian a written confirmation of such credit, whether or not
the Borrower notifies the Remarketing Agent to do so.
(c) Payment Failure Not a Default. Failure to pay interest on Purchased Bonds
when due or failure to pay principal and interest on Purchased Bonds upon any redemption date or
Settlement Date or the Maturity Date shall not constitute an Event of Default. Upon the Maturity
Date, any redemption date or Settlement Date, all Purchased Bonds shall be deemed canceled.
Purchased Bonds shall also be canceled upon direction of the Credit Facility Provider.
(d) Remarketing of Purchased Bonds. At such time as Purchased Bonds are
remarketed by the Remarketing Agent (i) the Trustee or the Tender Agent, as appropriate, shall remit
the proceeds of the remarketing to the Credit Facility Provider to reimburse the Credit Facility
Provider for amounts paid under the Credit Facility to purchase the Bonds, (ii) the Trustee or Tender
Agent, as appropriate, upon receipt of notice from the Credit Facility Provider that it has received
reimbursement for the amount provided under the Credit Facility (or notice from the Tender Agent
that the Tender Agent has received funds that it will immediately remit to the Credit Facility
Provider) and that the Credit Facility has been reinstated in accordance with its terms, the Custodian
shall release all remarketed Purchased Bonds in accordance with Section 2.4 of the Pledge
Agreement and (iii) the Trustee or the Tender Agent shall give written notice to the Remarketing
Agent, the Borrower and the Credit Facility Provider that such Bonds are no longer Purchased
Bonds.
(End of Article X)
83
ARTICLE XI
MISCELLANEOUS
Section 11.01. Consents and Other Instruments of Bondholders. Any consent, request,
direction, approval, waiver, objection, appointment or other instrument required by this Indenture to
be signed and executed by the Bondholders may be signed and executed in any number of concurrent
writings of similar tenor and may be signed or executed by such Bondholders in person or by agent
appointed in writing. Proof of the execution of any such instrument, if made in the following
manner, shall be sufficient for any of the purposes of this Indenture, and shall be conclusive in favor
of the Trustee with regard to any action taken under such instrument, namely:
(a) the fact and date of the execution by any person of any such instrument may
be proved by the affidavit of a witness of such execution or by the certificate of any notary public or
other officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds,
certifymg that the person signing such instrument acknowledged the execution thereof. Where such
execution is by an officer of a corporation or association or a member of a partnership on behalf of
such corporation, association or partnership, such affidavit or certificate shall also constitute
sufficient proof of such authority;
(b) the ownership of registered Bonds shall be proved by the Bond Register;
(c) any request, consent or vote of the Bondholder of any Bond shall bind every
future Bondholder of the same Bond and the Bondholder of every Bond issued in exchange therefor
or in lieu thereof, in respect of anything done or permided to be done by the Trustee or the Issuer in
pursuance of such request, consent or vote; and
(d) in determining whether the Bondholders of the requisite percentage of the
principal amount of Bonds then Outstanding have concurred in any demand, request, direction,
consent or waiver under this Indenture, Bonds which are owned by the Issuer or the Borrower or by
any person directly or indirectly controlling or controlled by or under direct or indirect common
control with the Issuer or the Borrower shall be disregarded and deemed not to be Outstanding for the
purpose of determining whether the Trustee shall be protected in relying on any such demand,
request, direction, consent or waiver unless all Outstanding Bonds shall be owned or controlled by
either the Issuer or the Borrower. Only Bonds which the Trustee knows to be so owned shall be
disregarded. Bonds so owned which have been pledged in good faith may be regarded as
Outstanding for the purposes of this Section if the pledgee shall establish to the satisfaction of the
Trustee the pledgee’s right to vote such Bonds. In case of a dispute as to such right, any decision by
the Trustee taken upon the advice of counsel shall be full protection to the Trustee.
Section 11.02. Limitation of Rights. With the exception of rights herein expressly
conferred, nothing expressed or to be implied from this Indenture or the Bonds is intended or shall be
construed to give to any person other than the Parties hereto, the Credit Facility Provider, the
Borrower and the Bondholders of the Bonds, any legal or equitable right, remedy or claim under or in
respect to this Indenture or any covenants, conditions and provisions hereof.
Section 11.03. Construction of Conflicts; Severabifiw. Notwithstanding an* provided
herein, or in any of the documents referred to herein, in the event that any contracts or other
DocSOC\892810v3\22062.W28
84
documents executed by the Borrower or any other arrangements agreed to by the Borrower in order
to finance or refinance the Project with the proceeds of the Bonds are inconsistent with the Bond
Mortgage Loan Documents, then the Bond Mortgage Loan Documents shall be controlling in all
respects. If any provision of this Indenture shall be held or deemed to be, or shall in fact be
inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions or in
all jurisdictions, or in all cases because it conflicts with any other provision or provisions hereof or
any constitution, statute, rule of law or public policy, or for any other reason, such circumstances
shall not have the effect of rendering the provision in question inoperative or unenforceable in any
other case or circumstance, or of rendering any other provision or provisions herein contained
invalid, inoperative, or unenforceable to any extent whatever.
The invalidity of any one or more phrases, sentences, clauses or sections in this Indenture
contained, shall not affect the remaining portions of this Indenture, or any part thereof.
Section 11.04. Notices.
(a) Any provision of this Indenture relating to the mailing of notice or other
communication to Bondholders shall be deemed fully complied with if such notice or other
communication is mailed, by first class mail, postage prepaid, to each registered owner of any Bonds
then Outstanding at the address of such registered owner as it appears on the Bond Register.
Whenever in this Indenture the giving of notice by mail or otherwise is required, the giving of such
notice may be waived in writing by the person entitled to receive such notice and in any such case the
giving or receipt of such notice shall not be a condition precedent to the validity of any action taken
in reliance upon such waiver.
Any notice, request, complaint, demand, communication or other paper required or permitted
to be delivered to the Issuer, the Trustee, the Credit Facility Provider, the Borrower or the Freddie
Mac Servicer shall be sufficiently given and shall be deemed given (unless another form of notice
shall be specifically set forth herein) on the Business Day following the date on which such notice or
other communication shall have been delivered to a national overnight delivery service (receipt of
which to be evidenced by a signed receipt from such overnight delivery service) addressed to the
appropriate party at the addresses set forth below. The Issuer, the Trustee, the Credit Facility
Provider, the Borrower or the Freddie Mac Servicer may, by notice given as provided in this
paragraph, designate any further or different address to which subsequent notices or other
communication shall be sent.
The Issuer: City of Carlsbad, California
2965 Roosevelt Street, Suite B
Carlsbad, California 92008-2389
Attn: Finance Director
Telephone: (760) 434-2810
Telecopy: (760) 720-2037
85
The Trustee:
The Borrower:
with a copy to:
Credit Facility
Provider:
with a copy to:
with a copy to:
US. Bank, N.A.
One California Street, Suite 2550
San Francisco, California 941 11
Telephone: (415) 273-4576
Attention: Multifamily Housing
Telecopy: (415) 273-4590
Santa Fe Ranch, LLC
c/o Henderson Global Investors (North America) Inc.
One Financial Plaza, 19th Floor
Hartford, Connecticut 06103
Attention: James G. Martha
Telephone: (860) 723-8701
Telecopier: (860) 723-8601
Locke Liddell & Sapp LLP
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
(which copy shall not constitute notice to
Borrower)
Attention: Mike Petersilia, Esq.
Telephone: (214) 740-8690
Telecopier: (214) 740-8800
Federal Home Loan Mortgage Corporation
8100 Jones Branch Drive, Mail Stop B4Q
McLean, Virginia 22102
Attention: Multifamily Management and
Facsimile: (703) 714-3273
Telephone: (703) 903-2000
Federal Home Loan Mortgage Corporation
8200 Jones Branch Drive
McLean, Virginia 22102
Attention: Associate General Counsel - Multifamily
Facsimile: (703) 903-2885
Telephone: (703) 903-2000
Federal Home Loan Mortgage Corporation
8100 Jones Branch Drive, Mail Stop B4F
McLean, Virginia 22102
Attention: Multifamily Loan Servicing
Facsimile: (703) 714-3003
Telephone: (703) 903-2000
Information Control
Legal Department
86
The Freddie Mac
Servicer:
Remarketing Agent:
S&P:
Reilly Mortgage Group, Inc.
2000 Corporate Ridge, Suite 925
McLean, Virginia 22102
Attention: Servicing Department
Facsimile: (703) 760-4700
Telephone: (703) 760-4750
Stem Brothers & Co.
8000 Maryland, Suite 1020
St. Louis, Missouri 63105
Attention: Bob Swanger
Telephone: (3 14) 743-4009
Telecopier: (3 14) 727-7313
Stem Brothers & Co.
1044 Main Street, Suite 900
Kansas City, Missouri 64105
Attention: Charles Gleason
Telephone: (816) 471-6460
Telecopier: (816) 842-2789
Standard & Poor’s
55 Water Street
New York, New York 10043
Attention: Housing Group Surveillance
Telephone: (212) 438-2063
Facsimile: (212) 438-2157
A duplicate copy of each notice or other communication given hereunder by any party to
Freddie Mac or the Freddie Mac Servicer shall also be given to the Freddie Mac Servicer or Freddie
Mac, respectively.
(b) The Trustee shall provide to the Credit Facility Provider (i) prompt notice of
the occurrence of any Event of Default pursuant to Section 6.01 hereof and (ii) any written
information or other communication received by the Trustee hereunder within ten (10) Business
Days of receiving a written request from the Credit Facility Provider for any such information or
other communication. The Trustee shall provide to the Rating Agency any information requested by
the Rating Agency needed to maintain the rating on the Bonds.
(c) The Trustee shall provide to the Rating Agency notice of (a) any change in
Trustee or Remarketing Agent hereunder, (b) any material amendment to any of the Bond Financing
Documents, (c) any substitution, termination, expiration or extension of the Credit Facility (d) any
change of the interest rate on the Bonds to a Reset Rate or the Fixed Rate, (e) any mandatory tender,
acceleration or redemption in whole or defeasance of the Bonds and (0 Conversion.
Section 11.05. Trustee as Paying Agent and Bond Regiktrar. The Trustee is hereby
designated and agrees to act as Paying Agent and Bond Registrar for and in respect to the Bonds.
87
Section 11.06. Payments Due on Non-Business Days. In any case where a date ofpayment
with respect to any Bonds shall be a day other than a Business Day, then such payment need not be
made on such date but may be made on the next succeeding Business Day with the same force and
effect as if made on such date, and no interest shall accrue for the period after such date providing
that payment is made on such next succeeding Business Day.
Section 11.07. Counterparts. This Indenture may be executed in several counterparts, each
of which shall be an original and all of which shall constitute but one and the same instrument.
Section 11.08. Laws Governing Indenture and Administration of Trust. The effect and
meanings of this Indenture and the rights of all parties hereunder shall be governed by, and construed
according to, the laws of the State without regard to conflicts of laws principles.
Section 11.09. No Recourse. No recourse under or upon any obligation, covenant or
agreement contained in the Indenture or in any Bond shall be had against any member, officer,
commissioner, director or employee (past, present or future) of the Issuer, either directly or through
the Issuer or its governing body or otherwise, for the payment for or to the Issuer or any receiver
thereof, or for or to the Bondholder of any Bond issued hereunder, or otherwise, of any sum that may
be due and unpaid by the Issuer or its governing body upon any such Bond. Any and all personal
liability of every nature whether at common law or in equity or by statute or by constitution or
otherwise of any such member, officer, commissioner, director or employee, as such, to respond by
reason of any act or omission on hisher part or otherwise, for the payment for or to the Bondholder
of any Bond issued hereunder or'otherwise of any sum that may remain due and unpaid upon any
Bond hereby secured is, by the acceptance hereof, expressly waived and released as a condition of
and in consideration for the execution of the Indenture and the issuance of the Bonds.
Section 11.10. Successors and Assigns. All the covenants and representations contained in
this Indenture by or on behalf of the parties hereto shall bind and inure to the benefit of their
successors and assigns, whether so expressed or not.
[Signatures follow]
88
137
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this Indenture of Trust to
be executed and delivered by duly authorized officers thereof as of the day and year first written
above.
CITY OF CARLSBAD, CALIFORNIA
(SEAL)
By:
Mayor
Attest:
City Clerk
U.S. BANK, N.A., as Trustee
By:
Name:
Title:
**********
s-1
Jonsenting Signature of One Hundred
F'ercent (100%) Bondholder(s) of all
3utstanding Bonds
Stem Brothers & Co.
Printed Name: Terrence M. Finn
ritle: Executive Vice President
:redit Facility
2EDERAL HOME LOAN MORTGAGE
3ORPORATION
'rinted Name: Douglas A. Westfall
ritle: Director, Multifamily Affordable Housin
Jonsenting Signature of Borrower:
SANTA FE RANCH, LLC, a Delaware limited
iability company
3y: CASA Partners 11, L.P., an Illinois
limited partnership, its sole member
By: Henderson Global Investors GP, L.L.C.,
a Delaware limited liability company, its
general partner
By:
Terry D. Senger
Director, Acquisitions &
Dispositions
s-2
EXHIBIT A
FORM OF BOND
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
CITY OF CARLSBAD, CALIFORNIA
VARIABLE RATE DEMAND
MULTIFAMILY HOUSING REVENUE BOND
SERIES A OF 1993
(SANTA FE RANCH APARTMENTS
F/K/A LA COSTA APARTMENTS PROJECT)
NO. R- $[AMOUNT]
NOTICE: Unless this bond certificate is presented by an authorized representative of
The Depository Trust Company to the Issuer or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of Cede &
Co. or such other name as requested by an authorized representative of The
Depository Trust Company and any payment is made to Cede & Co., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered
owners hereof, Cede & Co., has an interest herein.
INTEREST RATE VARIABLE
MATURITY DATE:
DATED DATE.
CUSIP NO.:
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: AND N0/100 WLLARS
The City of Carlsbad, California (the “Issuer”), a municipal corporation of the State of
California (the “State”), for value received, hereby promises @ut solely from the sources hereinafter
described) to pay to the registered owner identified above, or registered assigns, on the maturity date
set forth above, unless previously called for redemption, the principal sum as set forth above,
together with interest thereon at the rate provided in the hereinafter defined Indenture from the
Interest Payment Date (as defined below) next preceding the date of authentication of this Bond to
which interest has been paid or duly provided for, unless the date of authentication is an Interest
Payment Date to which interest has been paid or duly provided for, in which case fiom the date of
authentication of thls Bond, or unless no interest has been paid or duly provided for on this Bond, in
which case from the Dated Date set forth above, until the principal amount hereof shall have been
fully paid, at the rate per annum provided in the Indenture, payable (a) during the Variable Period, on
the first (1st) Business Day of each calendar month for the preceding calendar month, commencing
June 3, 2002 for the period from and including May 1, 2002 to and including May 31, 2002, @)
DocSoCu192810v3U2062.0028
A- 1
during a Reset Period or the Fixed Rate Period, on June 1 and December 1 of each year, (c) on each
Reset Adjustment Date, Variable Rate Adjustment Date or the Conversion Date and on the maturity
date of this Bond (the “Interest Payment Dates”), calculated as provided in the Indenture.
Notwithstanding the foregoing, if this Bond is authenticated after a Record Date and before the
following Interest Payment Date, this Bond shall bear interest from such Interest Payment Date;
provided, however, that if there shall be a default in the payment of interest due on such Interest
Payment Date, then this Bond shall bear interest from the next preceding Interest Payment Date to
which interest has been paid or duly provided for, or, if no interest has been paid or duly provided for
on this Bond, from the Dated Date set forth above. Payment of principal, premium, if any, and
interest on this Bond are payable in lawful money of the United States of America and shall be made
by check mailed to the registered owner of this Bond as such address shall appear on the registration
books for the Bonds (a) during the Variable Period, on the Business Day immediately preceding an
Interest Payment Date, and (b) during a Reset Period or the Fixed Rate Period, on the 15th day
preceding each Interest Payment Date (a “Record Date”) or, upon written request of a registered
owner of at least $1,000,000 aggregate principal amount of the Bonds received by U.S. Bank, N.A.,
as trustee (together with any successor trustee appointed in accordance with the terms of the
hereinafter defined Indenture, the “Trustee”), at least five (5) days prior to a Record Date, by wire
transfer of immediately available funds to an account designated by such owner, less any reasonable
wire transfer fees imposed by the Trustee. All capitalized terms not defined herein shall have the
meaning set forth in the Amended and Restated Indenture of Trust dated as of May 1,2002 by and
between the Issuer and the Trustee (the “Indenture”).
THE BONDS ARE NOT A DEBT OF THE UNITED STATES OF AMERICA, OR ANY
AGENCY OF THE UNITED STATES OF AMERICA, THE FEDERAL HOME LOAN
MORTGAGE CORPORATION (“FREDDIE MAC”), THE STATE, ANY SUBDIVISION
THEREOF OR THE ISSUER AND ARE NOT GUARANTEED BY THE FULL FAITH AND
CREDIT OF THE UNITED STATES OF AMERICA, FREDDIE MAC THE STATE OR THE
ISSUER. PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE
BONDS IS NOT GUARANTEED BY FREDDIE MAC. THE OBLIGATIONS OF FREDDIE
MAC UNDER THE CREDIT ENHANCEMENT AGREEMENT (AS HEREINAFTER DEFINED)
ARE OBLIGATIONS SOLELY OF FREDDIE MAC AND ARE NOT BACKED BY THE FULL
FAITH AND CREDIT OF THE UNITED STATES OF AMERICA.
This Bond is one of a duly authorized issue of bonds of the Issuer known as its Variable Rate
Demand Multifamily Housing Revenue Refunding Bonds Series A of 1993 (Santa Fe Ranch
Apartments fMa La Costa Apartments Project), issued in the aggregate principal amount of
$15,920,000 (the “Bonds”) ,under and pursuant to the Constitution and the laws of the State, and
resolutions adopted by the Issuer on May 11, 1993 and May 14, 2002 (collectively, the
“Resolution”). The Bonds are special, limited obligations of the Issuer payable solely from and
secured by the Trust Estate pledged therefor pursuant to the Indenture. The Bonds are issued to
provide funds to refinance a multifamily housing development (the “Project”) located in Carlsbad,
San Diego County, California, owned by Santa Fe Ranch, LLC, a Delaware limited liability company
(the “Borrower”).
The Bonds are issuable as fully registered bonds in Authorized Denominations of $100,000
or integral multiples of $5,000 in excess of $100,000 during any period the Bonds bear interest at a
rate determined weekly (the “Variable Rate”), and $5,000 or integral multiples thereof during any
period that the rate of interest on the Bonds is fixed for a period of five (5) years or more or such
msoc\892810v3u2062.0028
A-2
shorter period as may be approved by the Credit Facility Provider (a “Reset Period”) or fixed to the
maturity date of the Bonds (the “Fixed Rate Period”).
To secure its obligation to make payments on the Bond Mortgage Note in accordance with its
terms, the Borrower has caused to be delivered to the Trustee, a First Deed of Trust and Assignment
of Rents and Fixture Filing dated as of May 1, 1993 (the “Bond Mortgage”) and a Credit
Enhancement Agreement dated as of May 1, 2002 (the “Credit Enhancement Agreement”) between
Freddie Mac and the Trustee. Under the Credit Enhancement Agreement, Freddie Mac has agreed to
(i) make a Guaranteed Payment directly to the Trustee on each Interest Payment Date with respect to
payments due under the Bond Mortgage Loan and (ii) fund liquidity draws by the Trustee as
necessary to pay the Purchase Price of the Bonds during any period the Bonds bear interest at the
Variable Rate, to the extent there are insufficient remarketing proceeds to pay the Purchase Price of
the Bonds remarketed (other than Purchased Bonds). The Borrower and Freddie Mac have entered
. into a Reimbursement and Security Agreement dated as of May 1, 2002 (the “Reimbursement
Agreement”) to evidence the Borrower’s reimbursement obligations to Freddie Mac for draws made
under the Credit Enhancement Agreement.
Reference is hereby made to the Indenture and all indentures supplemental thereto for a
description of the trust estate under the Indenture, the nature and extent of the security, the terms and
conditions upon which the Bonds are issued and secured and the rights of the holders thereof, to all
of the provisions of which Indenture the registered owner of this Bond, by acceptance hereof, assents
and agrees. This Bond is equally and ratably secured under the Indenture with all other Bonds issued
thereunder.
Variable Interest Accrual Period. From the date of issuance of the Bonds to, but
excluding, the earlier of (a) the date of adjustment to a Reset Rate (a “Reset Adjustment Date”) or
the Fixed Rate (a “Conversion Date”) or (b) the maturity date specified above, this Bond shall bear
interest at the Variable Rate determined by the Remarketing Agent, as provided in the Indenture, for
each seven-day period from Thursday of a calendar week for which the Variable Rate is to be
determined. Interest on the Bonds during the Variable Period shall be computed on the basis of a
365- or 366-day year, as applicable, for the actual number of days elapsed. Bonds purchased with
proceeds made available under the Credit Facility shall bear interest at the rate established pursuant
to the Reimbursement Agreement, provided that in no event shall such rate exceed the Maximum
Rate of interest which may be charged pursuant to the terns of the Indenture.
Reset Period. The Borrower may, upon compliance with certain conditions of the Indenture,
cause the interest rate on the Bonds to be adjusted to a Reset Rate, which shall be determined by the
Remarketing Agent as provided in the Indenture. During the Reset Period, the Bonds shall bear
interest at the Reset Rate, payable on each Interest Payment Date (commencing on the first Interest
Payment Date occurring at least 30 days after the Reset Adjustment Date) to and including the next
succeeding Reset Adjustment Date. Such interest shall be computed on the basis of a year of three
hundred and sixty (360) days of twelve (12) thnty (30) day months. At the conclusion of a Reset
Period, the Borrower may, upon compliance with certain conditions of the Indenture, cause the
interest rate on the Bonds to be adjusted to a Variable Rate, a new Reset Date or a Fixed Rate, which
shall be determined and redetermined by the Remarketing Agent as provided in the Indenture
Fixed Rate Period. The Borrower may, upon compliance with certain conditions of the
Indenture, cause the interest rate on the Bonds to be adjusted to a Fixed Rate, which shall be
wCSOC\892810v3V.2062.0028
A-3
determined by the Remarketing Agent as provided in the Indenture. During the Fixed Rate Period,
the Bonds shall bear interest at the Fixed Rate, payable on each Interest Payment Date (commencing
on the first Interest Payment Date occurring at least 30 days after the Conversion Date) to and
including the maturity of the Bonds. Such interest shall be computed on the basis of a year of three
hundred and sixty (360) days of twelve (12) thirty (30) day months.
Redemption. The Bonds are subject to optional and mandatory redemption or purchase in
lieu of redemption in accordance with the provisions of the Indenture.
Purchase in Lieu of Redemption. At any time that Bonds are subject to redemption in
whole pursuant to the Indenture the Trustee may purchase such Bonds for the account of the
Borrower or the Credit Facility Provider. The Purchase Price of such Bonds, excluding accrued
interest, shall not exceed the applicable redemption price of the Bonds that would otherwise have
been redeemed.
Purchase of Bonds at Option of Registered Owner. During the Variable Period, this Bond
shall be purchased by the Trustee as Tender Agent (the “Tender Agent”), on behalf of and as agent
for the owner of this Bond, on the demand of the beneficial owner the Bond, on any Business Day at
a Purchase Price equal to one hundred percent (100?40) of the principal amount thereof plus accrued
interest, if any, to the date of purchase upon delivery to the Tender Agent, at its Principal Office
specified in the Indenture, of a notice as required by the Indenture (a “Tender Notice”). The date
stated in the Tender Notice on which such Bond shall be purchased shall be a Business Day not prior
to the seventh day next succeeding the date of delivery of such notice to the Tender Agent.
Mandatory Tender on Certain Dates. The registered owners of the Bonds shall be
required to tender their Bonds to the Tender Agent for purchase by the Trustee on behalf of and as
agent for the owner of the Bonds for a Purchase Price equal to one hundred percent (100%) of the
principal amount thereof plus accrued interest to the applicable Settlement Date on each Reset
Adjustment Date, each Variable Rate Adjustment Date, the Conversion Date, and on the date of any
substitution of any Alternate Credit Facility pursuant to the Indenture. Bonds shall be subject to
mandatory purchase on any date specified by the Trustee following a default under the Bond
Mortgage Loan or the Reimbursement Agreement and receipt by the Trustee of notice from the
Credit Facility Provider that the Bonds are to be tendered for purchase on the Settlement Date
selected by the Credit Facility Provider.
In the event of a redemption of less than all of the Bonds, the Bonds shall be selected by lot.
Bonds shall only be redeemed in Authorized Denominations.
Unless notice of redemption is not required under this Bond and the terms of the Indenture,
notice of redemption of this Bond shall be given by first class mail, postage prepaid, to the registered
owner hereof at the address of such owner shown on the registration books maintained by the
Trustee, as bond registrar. All such notices shall be given not less than ten (10) days (not less than
thirty (30) days in the case of optional or mandatory sinking fund redemptions) nor more than sixty
(60) days prior to the date fixed for redemption. Notice shall also be sent by certified mail, overnight
delivery service or other secure means, postage prepaid, to the Credit Facility Provider and to certain
information services as described in the Indenture. Failure to give notice by mailing to the registered
owner of any Bond designated for redemption shall not affect the validity of the proceedings for the
redemption of any other Bond if notice shall have been mailed as herein provided. The Trustee may
provide a conditional notice of redemption upon the direction of the Credit Facility Provider or the
Borrower (with the prior written consent of the Credit Facility Provider).
The owner of this Bond shall have no right to enforce the provisions of the Indenture or to
institute action to enforce the covenants therein, or to take any action with respect to any event of
default under the Indenture, or to institute, appear in or defend any suit or other proceeding with
respect thereto, except as provided in the Indenture.
Modifications or alterations of the Indenture or of any indenture supplemental thereto may be
made only to the extent and in the circumstances permitted by the Indenture.
This Bond is transferable by the registered owner hereof in person or by such owner’s
attorney duly authorized in writing at the principal corporate trust office of the Trustee, but only in
the manner, subject to the limitations and upon payment of the charges provided in the Indenture, and
upon surrender and cancellation of this Bond. Upon such transfer, a new registered Bond or Bonds
of the same series, maturity and interest rate and of authorized denomination or denominations for
the same aggregate principal amount will be issued to the transferee in exchange therefore. The
Bonds are issuable only as fully registered Bonds without coupons.
The Issuer and the Trustee may deem and treat the registered holder hereof as the absolute
owner hereof for the purpose of receiving payment of or on account of principal hereof and interest
due hereon and for all other purposes and neither the Issuer nor the Trustee shall be affected by any
notice to the contrary.
This Bond shall not be entitled to any benefit under the Indenture or become valid or
obligatory for any purpose until this Bond shall have been authenticated by the certificate of the
Trustee endorsed hereon.
In the event of a conflict between the terms of this Bond and the Indenture, the terms of the
Indenture shall control.
It is hereby certified, recited and declared that all acts, conditions and things required to exist,
happen and be performed precedent to and in the execution and delivery of the Indenture and the
issuance of this Bond do exist, have happened and have been performed in the time, form and
manner as required by law; that payment in 111 for this Bond has been received; and that this Bond
and the issue of which it forms a part does not exceed or violate any constitutional or statutory
limitation.
A-5
IN WITNESS WHEREOF, the Issuer has caused this Bond to be duly executed by the
facsimile signature of its Mayor and attested by the facsimile signature of its City Clerk.
[SEAL] CITY OF CARLSBAD, CALIFORNIA
By:
Mayor
ATTEST
By:
City Clerk
A-6
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds issued under the provisions of and described in the within-
mentioned Indenture.
Date of Authentication:
U.S. BANK. N.A.
By:
Authorized SignatoIy
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
(Please insert Social Security Number or other identifylng number of assignee)
(Please print or Typewrite Name and Address of Assignee)
the within bond and all rights thereunder, and hereby irrevocably constitutes and appoints
attorney to transfer the within Bond on the books kept for registration thereof,
with full power of substitution in the premises.
Dated
Signature Guaranteed
NOTICE: Signature(s) must be
guaranteed by an eligible guaranty
institution.
Signature
NOTICE The Signature to this assignment must
correspond with the name as it appears upon the face
of the within Bond in every particular, without
alteration or enlargement or any change whatever.
A-7
EXHIBIT B
FORM OF TENDER NOTICE
City of Carlsbad, California
Variable Rate Demand Multifamily Housing Revenue Refunding Bonds
Series A of 1993
(Santa Fe Apartments Wa
La Costa Apartments Project)
TO: U.S. Bank, N.A., as Tender Agent
Notice is hereby given pursuant to Section 10.01 of the Amended and Restated Indenture of
Trust dated as of 1, 2002 (the “Indenture”) pursuant to which the above-captioned bonds
(the “Bonds”) are issued and outstanding, that the undersigned Bondholder demands the purchase of
Business Day not prior to the seventh (7th) day next succeeding the date of your receipt of this
Notice. The demand for purchase is irrevocable.
Date:
$ in aggregate principal amount of Bonds, on , which date is a
Authorized Signature
Copies to: Stem Brothers & Co., Remarketing Agent
c- 1
AMENDED AND RESTATED LOAN AGREEMENT
among
CITY OF CARLSBAD, CALIFORNIA,
as Issuer
and
U.S. BANK, N.A.,
as Trustee
and
SANTA FE RANCH, LLC
as Borrower
Relating to
$15,920,000
CITY OF CARLSBAD, CALIFORNIA
Variable Rate Demand Multifamily Housing Revenue Refunding Bonds
Series A of 1993
(Santa Fe Ranch Apartments fMa La Costa Apartments Project)
Dated as of May 1,2002
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT (this “Financing Agreement”)
dated as of May 1,2002, among the CITY OF CARLSBAD, CALIFORNIA a municipal corporation
of the State of California (together with any successor to its rights, duties and obligations hereunder,
“Issuer”), US. BANK, N.A. (together with any successor trustee hereunder, the “Trustee”), a
national banking association duly organized and existing under the laws of the United States of
America having a corporate trust office located in San Francisco, California, and SANTA FE
RANCH, LLC, a limited liability company duly organized and existing under the laws of the State of
Delaware and authorized to do business in the State of California (together with its successors and
assigns permitted hereunder, the “Borrower”),
WITNESSETH:
WHEREAS, pursuant to the provisions of Chapter 7 of Part 5 of Division 3 1 (commencing
with Section 52075) of the Health and Safety Code of the State of California, as amended (the
“Act”), the Issuer may finance the costs of residential developments that will provide decent, safe
and sanitary housing for persons or families of low and moderate income in the State of California
(the “State”); and
WHEREAS, the Act authorizes the Issuer: (a) to make loans to provide financing for
residential developments located within the State, and intended to be occupied to the extent required
by applicable federal tax law by persons or families of low and moderate income, as determined by
the Issuer; (b) to authorize the issuance of revenue bonds by the Issuer for the purpose of obtaining
moneys to make such loans and provide such financing and to pay administrative costs and other
costs incurred in connection with the issuance of such bonds; and (c) to pledge all or any part of the
revenues and receipts to be received by the Issuer from or in connection with such loans, and to
mortgage, pledge or grant security interests in such loans in order to secure the payment of the
principal or redemption price of and interest on such bonds; and
WHEREAS, pursuant to an Indenture of Trust dated as of May 1, 1993 (the “Original
Indenture”), as amended and restated by the Amended and Restated Indenture of Trust dated as May
1,2002 (the ‘‘Indenture”), both between the Issuer and U.S. Bank, N.A. (successor in interest to First
Trust of California, National Association), the Issuer, has heretofore issued $15,920,000 in original
principal amount of its Variable Rate Demand Multifamily Housing Revenue Refunding Bonds
Series A of 1993 (Santa Fe Ranch Apartments fMa La Costa Apartments Project) (the “Bonds”) the
proceeds of which were loaned to La Costa Partners, a California general partnership (the “Original
Developer”) pursuant to a Loan Agreement, dated as of May 1, 1993 (the “Original Loan
Agreement”), as amended and restated by this Financing Agreement, for the purpose of refinancing
the construction of a multifamily rental housing development located in the City of Carlsbad,
California, as legally described in Exhibit “B and known as Santa Fe Ranch Apartments (the
“Project”); and
WHEREAS, the Bonds were issued for the purpose of refunding the Issuer’s $15,920,000
Multifamily Housing Revenue Bonds, Series A of 1985 (La Costa Apartments Project) the proceeds
of which financed the construction of the Project; and
WHEREAS, the Original Developer, the Issuer, the Trustee, and The Northwestem Mutual
Life Insurance Company (the “Prior Developer”) entered into an Assignment and Assumption
Agreement (Bond Documents) dated June 23, 1998, whereby the Prior Developer agreed to purchase,
acquire and assume all of the Original Developer’s right, title and interest in the Project; and
WHEREAS, the Prior Developer intends to sell, dispose of, assign, convey and transfer all
of its right, title and interest in and to the Project to Santa Fe Ranch, LLC, a Delaware limited
liability company (the “Borrower”) pursuant to a purchase contract dated February 25, 2002, as
amended; and
WHEREAS, the Bonds are currently secured by an irrevocable letter of credit in the stated
amount of $16,085,743 issued by Bank of America, N.A. on June 25, 1998, which expires on
(the “Letter of Credit”); and
WHEREAS, the Borrower desires to provide for the substitution of the Letter of Credit by a
Credit Enhancement Agreement (the “Credit Enhancement Agreement”) dated as of even date
herewith between the Trustee and the Federal Home Loan Mortgage Corporation (“Freddie Mac”);
and
WHEREAS, pursuant to Section 5.l(f) of the Original Loan Agreement and Section 2.14 of
the Original Indenture, the Borrower may provide for the substitution of a Substitute Credit Facility
upon the satisfaction of certain conditions, including the receipt of an opinion of Bond Counsel to the
effect that substitution of the Substitute Credit Facility will not cause interest on the Bonds to be
includable in gross income for federal income tax purposes; and
WHEREAS, pursuant to Section 8.6 of the Original Loan Agreement and Section 12.2 of the
Original Indenture, the Original Loan Agreement may be amended by the Financing Agreement with
the consent of owners of all Outstanding Bonds; and
WHEREAS, Stem Brothers & Co. (the “Bondholder”) is the registered owner of one
hundred percent (100%) of the Bonds Outstanding; and
WHEREAS, the Issuer, the Trustee, the Borrower, the Bondholder and Freddie Mac are
consenting to the amendment of the Original Loan Agreement as hereinafter provided, and,
simultaneously with the execution and delivery of this Financing Agreement, Bond Counsel is
rendering the opinion required by Section 12.3 of the Original Indenture; and
WHEREAS, the Issuer, the Borrower and the Trustee now desire to amend and restate the
Original Loan Agreement in the manner hereinafter provided to conform to and accommodate the
provision of the Credit Enhancement Agreement; and
WHEREAS, the Borrower’s repayment obligations in respect of the Bond Mortgage Loan
will be evidenced by an Amended and Restated Promissory Note dated as of , 2002,
(together with all riders and addenda thereto, the “Bond Mortgage Note”) in form attached hereto as
Exhibit “A” delivered upon the order of the Issuer pursuant to this Financing Agreement to the
Trustee; and
3
WHEREAS, the Borrower will cause to be delivered to the Trustee on the Closing Date the
Credit Enhancement Agreement which will provide for (i) draws in an amount equal to Guaranteed
Payments with respect to the Bond Mortgage Loan and (ii) liquidity draws by the Trustee to the
extent remarketing proceeds are insufficient to pay the Purchase Price of the Bonds (other than
Purchased Bonds) while the Bonds bear interest at a Variable Rate; and
WHEREAS, Reilly Mortgage Group, Inc. (the “Freddie Mac Service?) shall act as initial
servicer for the Bond Mortgage Loan; and
WHEREAS, to evidence the Borrower’s reimbursement obligations to Freddie Mac for
draws made under the Credit Enhancement Agreement, the Borrower and Freddie Mac will enter into
a Reimbursement and Security Agreement dated as of even date herewith (the “Reimbursement
Agreement”); and
WHEREAS, pursuant to the Assignment and Assumption Agreement dated as of
2002 by and among the Prior Developer, the Borrower, the Trustee and the Issuer, the Prior
Developer will assign its rights and obligations to the Borrower and the Borrower will assume the
indebtedness, obligation and liabilities of the Prior Developer with respect to the Bonds and the
Project; and
WHEREAS, to secure the Borrower’s reimbursement obligations to Freddie Mac under the
Reimbursement Agreement, the Borrower will execute and deliver to Freddie Mac on the Closing
Date an Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing
dated as of even date herewith (the “Reimbursement Mortgage”) with respect to the Project; and
WHEREAS, the Issuer, the Trustee and Freddie Mac have also entered into an Intercreditor
Agreement dated as of even date herewith (the “Intercreditor Agreement”) in connection with the
delivery of the Credit Enhancement Agreement; and
WHEREAS, the parties hereto acknowledge the matters set forth in the Recitals to the
Indenture; and
WHEREAS, this Financing Agreement shall be effective as of the date of execution and
delivery by the parties hereto; and
NOW, THEREFORE, for and in consideration of the mutual covenants and representations
hereinafter contained, the parties hereto agree to amend and restate the Original Loan Agreement as
follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. All words and phrases defined in the Indenture shall have the
same meanings for the purposes of this Financing Agreement. In addition to the words and terms
defined in the Indenture and elsewhere herein, the following words and phrases shall have the
following meanings:
“Cup Provider” means the “Counterparty” named in the Cap.
4
DOCSoChQ931Wv3V2062.0028
“Compliance Certificate” means the Certificate of Continuing Program Compliance,
substantially in the form of Exhibit “B” to the Tax Regulatory Agreement, as such form may be
revised by the Issuer from time to time and filed with the Issuer at the times and in the manner set
forth in the Tax Regulatory Agreement.
“Event ofDefauZf‘ means any event described as an Event of Default in Section 7.1.
“Financing Agreement” means this Amended and Restated Loan Agreement as amended,
supplemented or restated from time to time.
“Income Certification” means an Income Certification substantially in the form attached
hereto as Exhibit “C” to the Tax Regulatory Agreement, as such form may be revised by the Issuer
from time to time upon advice of Bond Counsel, filed with the Issuer at the times and in the manner
set forth in the Tax Regulatory Agreement.
“Indenture” means the Amended and Restated Indenture of Trust dated as of even date
herewith between the Issuer and the Trustee, as the same may be amended, supplemented or restated
from time to time.
“Liquidity Use Fee” shall have the meaning set forth in the Reimbursement Agreement,
“Original Indenture” means the Indenture of Trust dated as of May 1, 1993, between the
Issuer and First Trust of California, National Association, as now succeeded by U.S. Bank, N.A.,
pursuant to which the Bonds were issued.
“Original Loan Agreement” means the Loan Agreement dated as of May 1, 1993, among the
Issuer, the Trustee and the Original Developer.
“Wrongful Dishonor” shall have the meaning set forth in the Intercreditor Agreement.
Section 1.2. Interpretation. Words of the masculine gender shall be deemed and
construed to include correlative words of the feminine and neuter genders. Words importing the
singular number shall include the plural number and vice versa unless the context shall otherwise
indicate. Words importing persons include firms, partnerships, joint ventures, associations and
corporations. References to Articles, Sections and other subdivisions of this Financing Agreement
are the Articles, sections and other subdivisions of this Financing Agreement as originally executed.
The terms “herein”, “hereunder”, “hereby”, “hereto”, “hereof’ and any similar terms refer to
this Financing Agreement; the term “heretofore” means before the date of execution of this
Financing Agreement; and the term “hereafter” means after the date of execution of this Financing
Agreement.
(End of Article I)
5
I 52
ARTICLE Il
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.1. Representations, Warranties and Covenants of the Issuer. The Issuer makes
the following representations, warranties and covenants:
(a) The Issuer is a municipal corporation duly organized and validly existing
under the Constitution and laws of the State. The Issuer has full legal right, power and authority to
execute and deliver the Bonds and the Bond Financing Documents to which it is a party and to cany
out its obligations thereunder. By proper action, the Issuer has duly authorized the execution and
delivery of the Bond Financing Documents to which it is a party and the issuance, sale, execution and
delivery of the Bonds. Each of the Bond Financing Documents to which the Issuer is a party has
been duly executed and delivered by the Issuer and is a legal, valid and binding obligation of the
Issuer enforceable against the Issuer in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the rights of creditors generally and
general equitable principles.
(b) The Issuer has complied with the provisions of the Act and the laws of the
State which are prerequisites to the consummation of all transactions described or contemplated in
the Bond Financing Documents to which the Issuer is a party, and the execution and delivery of the
Bonds and the Bond Financing Documents, the consummation of the transactions contemplated
thereby and the fulfillment of or compliance with the terms and conditions or provisions of the Bonds
and the Bond Financing Documents do not conflict with or result in the breach of any of the terms,
conditions or provisions of any agreement or instrument or judgment, order or decree to which the
Issuer is now a party or by which it is bound, nor do they constitute a default under any of the
foregoing or result in the creation or imposition of any prohibited lien, charge or encumbrance of any
nature upon any property or assets of the Issuer under the terms of any instrument or agreement.
(c) No authorization or approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required for the due execution and delivery
by the Issuer of, and performance by the Issuer of its obligations under, any of the Bond Financing
Documents, which has not been obtained.
(d) There is no action, suit, proceeding, inquiry or investigation pending or
threatened against the Issuer by or before any court, governmental agency or public board or body,
nor, to the Issuer's knowledge, any basis therefor, which (i) affects or questions the existence or the
territorial jurisdiction of the Issuer or the title to office of any member of the governing body of the
Issuer; (ii) affects or seeks to prohibit, restrain or enjoin the execution and delivery of any Bond
Financing Documents or the issuance, sale, execution or delivery of the Bonds; (iii) affects or
questions the validity or enforceability of the Bonds or any Bond Financing Document; (iv) questions
the tax-exempt status of the Bonds; or (v) questions the power or authority of the Issuer to perform
its obligations under the Bonds or any Bond Financing Document, or to cany out the transactions
contemplated hy the Bonds and the Bond Financing Documents.
(e) No officer or other offkid of the Issuer has any personal financial interest in
the Project or the Borrower or in the transactions contemplated by this Financing Agreement.
6 ' 53
(q Upon the discovery by the Issuer of any noncompliance by the Borrower with
this Financing Agreement or the Tax Regulatory Agreement, the Issuer will notify the Trustee, the
Freddie Mac Servicer and the Credit Facility Provider of such noncompliance and will, subject to the
provisions of Article VI1 hereof, promptly institute action, or cause the Trustee to institute action, to
correct such noncompliance, will diligently pursue such action and will attempt to correct such
noncompliance within sixty (60) days after such discovery, subject to the provisions of the Indenture,
this Financing Agreement and the Tax Regulatory Agreement.
Section 2.2. Representations, Warranties and Covenants of the Borrower. The
Borrower makes the following representations, warranties and covenants, all of which, together with
the other representations and agreements of the Borrower contained in this Financing Agreement, are
relied upon by the Issuer, the Freddie Mac Servicer and the Trustee and serve as a basis for the
undertakings of the Issuer, the Freddie Mac Servicer and the Trustee contained in this Financing
Agreement:
(a) The Borrower (i) is a Delaware limited liability company duly organized,
validly existing and in good standing under the laws of the state in which it has been organized and
duly qualified to transact business under the laws of the State, (ii) has the power and authority to own
its properties and assets and to carry on its business as now being conducted and as contemplated by
the Bond Financing Documents to which the Borrower is a party, and (iii) has the power to execute
and perform under the Bond Financing Documents to which the Borrower is a party.
(b) The execution and performance by the Borrower of the Bond Financing
Documents to which the Borrower is a party and other instruments required pursuant to the Bond
Financing Documents to which the Borrower is a party (i) will not violate or, as applicable, have not
violated any provision of any law, rule or regulation or any order of any court or other agency or
government and (ii) will not violate or, as applicable, have not violated any provision of any
indenture, agreement or other instrument to which the Borrower is a party or is otherwise subject, or
result in the creation or imposition of any lien, charge or encumbrance of any nature other than the
liens created by the Bond Mortgage, the Reimbursement Mortgage, the Pledge Agreement, the Tax
Regulatory Agreement and by this Financing Agreement.
(c) The Borrower has good and marketable fee simple title to the Project, free
and clear of any lien or encumbrance (subject to encumbrances created pursuant to or permitted
under the Bond Mortgage Loan Documents).
(d) Unless and until the Project shall be sold and transferred to a new Borrower
as provided in Section 5.7 hereof and Section 11 of the Tax Regulatory Agreement, the Borrower
shall do or cause to be done all things necessary to retain in the Borrower its ownership of the
Project, to perfom its obligations under the Bond Financing Documents to which the Borrower is a
party and to maintain the tax-exempt status of the Bonds. The Borrower shall not cause or permit the
Project, or any interest therein, to be sold, assigned or transferred, except as hereinafter provided in
Section 5.7 and Section 11 of the Tax Regulatory Agreement.
(e) There is no action, suit or proceeding at law or in equity or by or before any
governmental instrumentality or other agency now pending or threatened against or affecting the
Borrower or any of its properties (including, without limitation, the Project) or rights, which, if
adversely determined, would (i) impair the right of the Borrower to carry on its business substantially
~SOC\8931!%v3\22062.0028
7
as now conducted and as contemplated by the Bond Financing Documents, (ii) adversely affect the
financial condition of the Borrower, (iii) prohibit, restrain or enjoin the issuance, sale or delivery of
the Bonds or the loaning of the proceeds of the Bonds to the Borrower or the execution and delivery
of the Bonds or any of the Bond Financing Documents, (iv) adversely affect the validity or
enforceability of the Bonds or any of the Bond Financing Documents or (v) adversely affect the
exclusion from gross income for federal income tax purposes of interest on the Bonds.
(q To the knowledge of Borrower, after reasonable inquiry of the Prior
Developer, the operation of the Project in the manner contemplated by the Bond Financing
Documents to which the Borrower is a party does not and will not conflict with any zoning, water or
air pollution or other ordinance, order, law or regulation applicable thereto, and the Project is being
operated in compliance with all federal, state and local laws or ordinances (including rules and
regulations) relating to zoning, building, safety and environmental quality.
(g) The Borrower has filed or caused to be filed all federal, state and local tax
returns which are required to be filed or has obtained appropriate extensions therefor, and has paid or
caused to he paid all taxes as shown on said returns or on any assessment received by it, to the extent
that such taxes have become due.
(h) The Borrower is not in default in the performance, observance or fulfillment
of any of the obligations, covenants or conditions contained in any agreement or instrument to which
it is a party which default would materially adversely affect the transactions contemplated by the
Bond Financing Documents or the operations of the Borrower or the enforceability of the Bond
Financing Documents to which the Borrower is a party or the ability of the Borrower to perform all
obligations thereunder.
(i) To the knowledge of the Borrower, after reasonable inquiry of the Prior
Developer, the acquisition, construction, equipping and installation of the Project as well as its use
and operation are in conformance with all applicable requirements set forth in the Act and the Project
will be utilized and maintained in such manner as to conform with all applicable zoning, planning,
building, environmental and other regulations of all governmental authorities having jurisdiction of
the Project, and all necessary permits, licenses, consents and permissions have been obtained as of
the date of execution of this Financing Agreement to the extent that the same are required and
obtainable as of such date.
(i) The remaining average reasonably expected economic life of the facilities of
the Project financed with the net proceeds of the Bonds is not less than 14 years.
(k) If the Borrower is a partnership, all of the partnership interests in the
Borrower are validly issued and are fully registered, if required, with the applicable governmental
authorities and/or agencies, and there are no outstanding options or rights to purchase or acquire
those interests. If the Borrower is a limited liability company, all of the ownership interests in the
Borrower are validly issued and are fully registered, if required, with the applicable governmental
authorities and/or agencies, and there are no outstanding options or rights to purchase or acquire
those interests. Nothmg in this Financing Agreement shall prevent the Borrower from issuing
additional partnership interests or ownership interests if such units are issued in accordance with all
applicable securities laws.
8
(1) The representations and warranties of the Borrower contained in the Tax
Regulatory Agreement are true and accurate.
(m) The Borrower has not and will not knowingly take or permit, or knowingly
omit to take or cause to be taken, any action within its control that would adversely affect the
exclusion of the interest on the Bonds from gross income for federal income tax purposes.
(n) If the Borrower becomes aware of any situation, event or condition which
would, to the best of its knowledge, result in the interest on the Bonds becoming includable in gross
income for purposes of federal income taxation, the Borrower shall promptly give written notice
thereof to the Issuer, the Trustee and the Credit Facility Provider.
(0) The information, statements or reports furnished in writing to the Issuer by
the Borrower in connection with this Financing Agreement or the consummation of the transactions
contemplated hereby (including, without limitation, any written information furnished by the
Borrower in connection with the preparation of the Remarketing Memorandum for the Bonds and of
any other materials related to the remarketing, delivery or offering of the Bonds on the Closing Date)
does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements contained therein, in light of the circumstances under which they were made, not
misleading; and the representations and warranties of the Borrower and the statements, information
and descriptions contained in the Borrower’s closing certificates, as of the Closing Date, are true and
correct in all material respects, do not contain any untrue statement of a material fact, and do not
omit to state a material fact necessary to make the certifications, representations, warranties,
statements, information and descriptions contained therein, in light of the circumstances under which
they were made, not misleading; and any estimates or the assumptions contained in any certificate of
the Borrower delivered as of the Closing Date are reasonable.
@) To the knowledge of the Borrower, no member, officer or employee of the
Issuer has been or is in any manner interested, directly or indirectly, in that person’s own name or in
the name of any other person, in the Bonds, the Tax Regulatory Agreement, the Bond Mortgage, the
Credit Enhancement Agreement, the Borrower or the Project, in any contract for property or
materials to be furnished or used in connection with the Project, or in any aspect of the transactions
contemplated by the Tax Regulatory Agreement, the Bond Mortgage, the Credit Enhancement
Agreement or this Financing Agreement.
(4) The Borrower has made certain representations to Freddie Mac in Section 18
of the Reimbursement Mortgage concerning environmental matters, which the Borrower agrees may
be relied upon by the Issuer, the Trustee and the Credit Facility Provider.
(r) The Borrower intends to hold the Project for its own account and has no
current plans to sell and has not entered into any agreement to sell all or any portion of the Project to
an entity unrelated to the Borrower.
(s) The Project is located wholly within the Issuer’s boundaries in San Diego
County, California.
(t) The Borrower shall make no changes to the Project or to the operation thereof
which would affect the qualification of the Project under the Act or impair the exclusion from gross
9
income for federal income tax purposes of the interest on the Bonds. The Borrower intends to utilize
the Project as required by the Tax Regulatory Agreement and will timely file the Income
Certification, Certificate of Continuing Program Compliance, attached hereto as Exhibits “C,” “D,”
and “E,” respectively, with the Issuer as required by such Tax Regulatory Agreement.
(u) The information contained in the Remarketing Memorandum, insofar as such
information relates to the Borrower and the Project, is accurate in all material respects and does not
contain any untrue statement of a material fact or omit to state a material fact pertaining to the
Borrower and the Project necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(v) The Indenture, the Credit Enhancement Agreement and the Reimbursement
Agreement have been submitted to the Borrower for examination, and the Borrower, by execution of
this Financing Agreement, acknowledges and agrees that it has participated in the drafting of the
Indenture and has reviewed the Credit Enhancement Agreement and the Reimbursement Agreement
and that it is bound by, shall adhere to the provisions of, and shall have the rights set forth by the
applicable terms and conditions of, the Indenture; and covenants and agrees to perform all
obligations required of the Borrower pursuant to the terms of the Indenture.
(w) It is hereby agreed by the Borrower, that the Issuer shall be entitled to an
annual fee as set forth in Section 18 of the Tax Regulatory Agreement.
(x) To the knowledge of the Borrower, after reasonable inquiry of the Prior
Developer, the Project has been in continuing material compliance with the Tax Regulatory
Agreement, which was executed, delivered and recorded with respect to the Bonds upon their
original issuance and delivery.
(y) To the knowledge of the Borrower, after reasonable inquiry of the Prior
Developer, upon issuance of the Bonds, the Original Developer incurred a substantial binding
obligation to commence acquisition and construction of the Project within the applicable period set
forth in Treasq Regulation 1.103-14(b)(3), pursuant to which the Original Developer expended an
amount equal to at least the lesser of $100,000 or 2-1/2% of the total cost of acquisition and
construction of the Project and proceeded with due diligence to complete the Project.
(z) To the knowledge of the Borrower, after reasonable inquiry of the Original
Developer andor the Prior Developer, substantially all (at least 90%) of the aggregate amount
disbursed fiom the proceeds of the Bonds (which amount is equal to the original principal amount of
the Bonds plus investment earnings less principal of the Bonds redeemed pursuant to Revenue
Procedure 79-3 (as supplemented), if any, and less underwriter’s discount, letter of credit fees and
costs of issuance of the Bonds (the “Original Net Proceeds”)) available to pay or reimburse costs
permitted by the Act and the 1954 Code and incurred by or on behalf of the Issuer or the Borrower
with respect to the Project (.‘Project Costs”) were applied to pay or reimburse Qualified Project Costs
(within the meaning of the 1954 Code) and that not more than an insubstantial portion (not more than
IOYO) of the Original Net Proceeds was applied to pay or reimburse Project Costs other than
Qualified Project Costs.
(aa) To the knowledge of the Borrower, after reasonable inquiry of the Prior
Developer, any and all contracts to acquire any part of the Project which were entered into prior to
WCSOC\893190~3U2062.0028
10
sixty days before the Issuer took action to permit reimbursement of the Original Developer from the
proceeds of the Bonds (with respect to which payments were made from the proceeds of the Bonds as
Qualified Project Costs) were, on such date, fully executory in nature, and the burdens or benefits of
ownership of any property which was the subject of such contracts had not accrued to or been
imposed upon the Original Developer or any “related person,” as such term is defined in the 1954
Code, prior to such date.
(bb) Money on deposit in any fund or account in connection with the Bonds,
whether or not such money was derived from other sources, has not been used by or under the
direction of the Borrower, in a manner which would cause the Bonds to be “arbitrage bonds” within
the meaning of Section 103(c) ofthe 1954 Code.
(cc) All material terms and conditions to the making of the loan of the proceeds of
the Bonds have been satisfied.
Section 2.3. Representations and Warranties of the Trustee. The Trustee makes the
following representations and warranties:
(a) The Trustee is a national banking association duly organized and existing
under and pursuant to the laws of the United States of America. The Trustee has duly authorized the
execution and delivery of the Bond Financing Documents to which it is a party.
(b) The Trustee has complied with the provisions of law which are prerequisite to
the consummation of, and has all necessary power (including trust powers) and authority to
consummate, all transactions described in and contemplated by the Bond Financing Documents.
Section 2.4. Arbitrage and Rebate Fund Calculations. The Borrower shall (a) take or
cause to be taken all actions necessary or appropriate in order to fully and timely comply with
Section 4.12 of the Indenture and (b) designate and retain at the Borrower’s expense, a Rebate
Analyst reasonably acceptable to the Issuer for the purpose of making any and all calculations
required under Section 4.12 of the Indenture. Such calculations, if required, shall be made in the
manner and at such times as specified in Section 4.12 of the Indenture. The Borrower shall cause the
Rebate Analyst to provide such calculations to the Trustee and the Issuer at such times and with such
Indenture and to comply fully with Section 148 of the 1986 Code, including the timely payment of
directions as are necessary to comply fully with the arbitrage and rebate requirements set forth in the
any arbitrage rebate owed.
Section 2.5. Tax Covenants. The Borrower hereby covenants and agrees not to use the
proceeds of the Bonds, any moneys transferred from the Original Indenture, the earnings thereon and
any other moneys on deposit in any hd or account maintained in respect of the Bonds (whether
such moneys were derived from the proceeds of the sale of the Bonds or from other sources) in a
manner which would cause the Bonds to be “arbitrage bonds” within the meaning of Section 148 of
the 1986 Code. The Borrower shall comply with the provisions of the Tax Agreement applicable to
the Borrower.
Section 2.6. Enforcement of Bond Financing Documents. The Issuer and the Trustee
may enforce and take all reasonable steps, actions and proceedings necessary for the enforcement of
11
all terms, covenants and conditions of the Bond Financing Documents as and to the extent set forth
therein.
(End of Article 11)
12
ARTICLE I11
THE BOND MORTGAGE LOAN
Section 3.1. Conditions to Effectiveness of Amendments. This Financing Agreement
shall amend and restate the Original Loan Agreement and the Indenture shall amend and restate the
Original Indenture once the following conditions have been met:
(a) The Borrower shall have executed and delivered to the Issuer for assignment
to Trustee the Bond Mortgage Note in the form attached hereto as Exhibit A, with only such changes
therein as shall be approved in writing by Freddie Mac;
(b) The Tax Regulatory Agreement as amended on the Closing Date shall have
been executed and delivered by the parties thereto and shall have been appropriately filed for
recording in the Recorder’s Office (as defined below), and the Trustee shall have received evidence
satisfactory to it of such filing;
(c) The Assignment and Assumption Agreement and the Reimbursement
Mortgage, with only such changes therein as shall be approved in writing by Freddie Mac, shall have
been executed and delivered by the Borrower and filed for recording in the appropriate office for
officially recording real estate documents in the jurisdiction in which the Project is located (the
“Recorder’s Office”);
(d) The Credit Enhancement Agreement and all other Bond Financing
Documents not listed above shall have been executed and delivered by all parties thereto and
delivered to the Trustee;
(e) The Borrower shall have delivered to the Trustee, the Issuer, the Freddie Mac
Servicer and Freddie Mac a certificate confirming, as of the Closing Date, the matters set forth in
Section 2.2 and an opinion of its counsel or other counsel satisfactory to the Trustee, the Issuer, the
Freddie Mac Servicer and Freddie Mac; and
(0 The consent of one hundred percent (100%) of the Owners of the Bonds to
the effectiveness of this Financing Agreement and the Indenture shall have been received.
Section 3.2. Bond Mortgage Loan Terms; Servicing.
(a) The Bond Mortgage Loan shall (i) be evidenced by the Bond Mortgage Note
payable to the Trustee as assignee of the Issuer; (ii) be initially secured by the Credit Enhancement
Agreement; (ii) be in the principal amount of $15,920,000; (iii) bear interest as provided in the Bond
Mortgage Note; (iv) provide for deposits into the Principal Reserve Fund as set forth in the schedule
attached to the Reimbursement Agreement; and (vi) be subject to optional and mandatory
prepayment at the times, in the manner and on the terms, and have such other terms and provisions,
as provided herein and in the Bond Mortgage Note.
(b) The Freddie Mac Servicer shall service the Bond Mortgage Loan pursuant to
the Guide, subject to the Issuer’s rights as set forth in the Intercreditor Agreement. The Issuer, the
Trustee and the Borrower acknowledge and agree that (i) selection or removal of any Freddie Mac
13
Servicer is in the sole and absolute discretion of the Credit Facility Provider; (ii) neither the Issuer
nor the Trustee shall terminate or attempt to terminate any Freddie Mac Servicer as the Freddie Mac
Servicer for the Bond Mortgage Loan or appoint or attempt to appoint a substitute Freddie Mac
Servicer for the Bond Mortgage Loan; (iii) the Commitment between the Credit Facility Provider and
the Freddie Mac Servicer and the Guide are subject to amendment or termination without the consent
of the Trustee, the Issuer or the Borrower; and (iv) none of the Trustee, the Issuer or the Borrower
shall have any rights under, or be a third party beneficiary of, the Commitment or the Guide. So long
as no Wrongful Dishonor has occurred and is continuing, the Freddie Mac Servicer shall have the
right to collect all payments made by the Borrower in connection with the Bond Mortgage Loan and
to receive copies of all reports and notices provided for by the Bond Financing Documents.
Section 3.3. Initial Deposits. On the Closing Date, $ shall be deposited to
the Cost of Issuance Fund by the Borrower. To the extent that amounts in the Cost of Issuance Fund
are insufficient to pay all costs of effecting the substitution of the Credit Enhancement Agreement,
the Borrower shall cause the payment of such additional costs of effecting the substitution of the
Credit Enhancement Agreement to be made on its behalf as such amounts become due.
Section 3.4. Assignment to Trustee. The parties hereto acknowledge, and the Borrower
consents to, the assignment by the Issuer to the Trustee pursuant to the Indenture of all of the Issuer’s
right, title and interest in the Bond Mortgage Note, this Financing Agreement (excluding the
Reserved Rights), the Credit Enhancement Agreement, the Bond Mortgage Loan and the Revenues
as security for the payment of the Purchase Price of, principal of, premium, if any, and interest on the
Bonds and the payment of the Freddie Mac Credit Enhancement Fee and Freddie Mac
Reimbursement Amount.
Section 3.5. Investment of Funds. Except as otherwise provided in the Indenture, any
moneys held as a part of any Fund or Account established under the Indenture shall be invested or
reinvested by the Trustee in Qualified Investments in accordance with Section 4.08 of the Indenture.
Any moneys held as a part of the Cap Fee Escrow (as defined in the Reimbursement Agreement)
shall be invested by the Freddie Mac Servicer as directed by the Borrower with the consent of
Freddie Mac pursuant to the Reimbursement Agreement.
Section 3.6. Damage: Destruction and Eminent Domain. If the Project or any portion
thereof is destroyed or damaged in whole or in part by fire or other casualty, or title to, or the
temporary use of, the Project or any portion thereof shall have been taken by the exercise of the
power of eminent domain, and the Issuer, the Borrower, the Trustee or the Freddie Mac Servicer
receives Net Proceeds from insurance or any condemnation award in connection therewith, such Net
Proceeds shall be utilized as provided in the Bond Mortgage Loan Documents and the Indenture.
Section 3.7. Compliance with Usury Laws. Notwithstanding any other provision of this
Financing Agreement, it is agreed and understood that in no event shall this Financing Agreement,
the Bond Mortgage Note or other instrument of indebtedness, be construed as requiring the Borrower
or any other person to pay interest and other costs or considerations that constitute interest under any
applicable law which are contracted for, charged or received pursuant to this Financing Agreement in
an amount in excess of the maximum amount of interest allowed under any applicable law.
In the event of any acceleration of the payment of the principal amount of the Bond Mortgage
Note or other evidence of indebtedness, that portion of any interest payment in excess of the
14
maximum legal rate of interest, if any, provided for in this Financing Agreement or related
documents shall be canceled automatically as of the date of such acceleration, or, if theretofore paid,
credited to the principal amount.
The provisions of this Section prevail over any other provision of this Financing Agreement.
(End of Article 111)
15
ARTICLE IV
LOAN PAYMENTS
Section 4.1. Payments Under the Bond Mortgage Note: Independent Obligation of
Borrower. The Borrower agrees to repay the Bond Mortgage Loan at the time and in the amounts
necessary to enable the Trustee, on behalf of the Issuer, to pay all amounts payable with respect to
the Bonds, when due, whether at maturity or upon redemption (with premium, if applicable),
acceleration, tender, purchase or otherwise. The obligation of the Borrower to make the payments
set forth in this Article IV shall be an independent and separate obligation of the Borrower from its
obligation to make payments under the Bond Mortgage Note, provided that in all events payments
made by the Borrower under and pursuant to the Bond Mortgage Note shall be credited against the
Borrower’s obligations hereunder. If for any reason the Bond Mortgage Note or any provision
thereof shall be held invalid or unenforceable against the Borrower by any court of competent
jurisdiction, the Bond Mortgage Note or such provision thereof shall be deemed to be the obligation
of the Borrower pursuant to this Financing Agreement to the full extent permitted by law and such
holding shall not invalidate or render unenforceable any of the provisions of this Article IV and shall
not serve to discharge any ofthe Borrower’s payment obligations hereunder.
The obligations of the Borrower to repay the Bond Mortgage Loan, to perform all of its
obligations under the Bond Mortgage Loan Documents, to provide indemnification pursuant to
Section 6.1, to pay costs, expenses and charges pursuant to Section 4.2 and to make any and all other
payments required by this Financing Agreement in accordance with the terms hereof, the Indenture
or any other documents contemplated by this Financing Agreement or by the Bond Mortgage Loan
Documents shall be absolute and unconditional and shall not be subject to diminution by set-off,
recoupment, counterclaim, abatement or otherwise.
Section 4.2. Payment of Certain Fees and Expenses Under the Bond Mortgage Note.
(a) In addition to payments of principal, premium, if any, and interest, the
Borrower shall make (or cause to be made through the Freddie Mac Servicer) certain other payments
in respect of, among others, the Bond Fee Component, the Issuer Fee, the Ordinary Servicing Fees
and Expenses, the Freddie Mac Credit Enhancement Fee, the fees and expenses of the Remarketing
Agent pursuant to the Remarketing Agreement, the Principal Reserve Schedule Payments pursuant to
Section 4.6 hereof and amounts, required to be deposited in the Custodial Escrow Account, if any,
pursuant to the Bond Mortgage Loan Documents, as set forth in subsection (b). The Ordinary
Servicing Fees and Expenses and the Freddie Mac Credit Enhancement Fee shall be deducted by the
Freddie Mac Servicer from the mortgage payments required to be made pursuant to the
Reimbursement Agreement, or any portion thereof, actually received by the Freddie Mac Servicer
from the Borrower. However, to the extent that any portion of the Ordinary Servicing Fees and
Expenses, Freddie Mac Credit Enhancement Fee, the Remarketing Agent’s fees or the annual rating
maintenance fees of the Rating Agency remain due and owing at any time, such amounts remaining
due and owing shall be payable from moneys on deposit in the Administration Expense Account of
the Administration Fund available for such purpose as provided in Section 4.06 of the Indenture or
from other moneys of the Borrower, to the extent that moneys in the Administration Expense
Account of the Administration Fund available for such purpose are insufficient for such purposes.
All other fees and expenses shall be payable from moneys of the Borrower as provided in subsection (b).
DC€Soc\893190v3V.Z062.0028
16
(b) The Borrower shall pay (or cause to be paid by the Trustee, to the extent paid
from moneys on deposit in the Administration Expense Account or the Cost of Issuance Fund, as
applicable), in consideration of the assumption of the Bond Mortgage Loan, the following fees,
expenses and other moneys payable in connection with the Bond Mortgage Loan and the substitution
of the Credit Enhancement Agreement:
(i) On the Closing Date, from moneys on deposit in the Cost of Issuance
Fund or, to the extent such moneys are insufficient for such purpose, from other
moneys of the Borrower, to Freddie Mac, the closing fee of Freddie Mac set forth in
Section 4.1 of the Credit Enhancement Agreement, together with all third party and
out-of-pocket expenses of Freddie Mac (including but not limited to the fees and
expenses of counsel to Freddie Mac) in connection with the Bond Mortgage Loan and
the Credit Enhancement Agreement.
(ii) [Intentionally omitted.]
(iii) [Intentionally omitted.]
(iv) On the Closing Date, from moneys on deposit in the Cost of Issuance
Fund or, to the extent such moneys are insufficient for such purpose, from other
moneys of the Borrower, to the Trustee, all third party and out-of-pocket expenses of
the Trustee (including but not limited to the fees and expenses of counsel to the
Trustee) in connection with the Bond Mortgage Loan and substitution of the Credit
Enhancement Agreement.
(v) From moneys of the Borrower, to the Trustee, within two (2)
Business Days of receipt from the Trustee of a notice of deficiency in the
Administration Expense Account or the Specified Fees Account of the
Administration Fund as provided in Section 4.06 of the Indenture, the amount of any
such deficiency in the Administration Expense Account or the Specified Fees
Account.
(vi) From moneys on deposit in the Specified Fees Account or, to the
extent such moneys are insufficient for such purpose, from other moneys of the
Borrower, to the Trustee, the Extraordinary Trustee’s Fees and Expenses when due
from time to time.
(vii) From moneys on deposit in the Specified Fees Account or, to the
extent such moneys are insufficient for such purpose, fiom other moneys of the
Borrower, to, or at the direction of, the Issuer, the Issuer Fee when due and any
extraordinary expenses not covered by the Issuer Fee, the Issuer may incur in
connection with the Bond Financing Documents or the Project from time to time,
including, but not limited to, expenses incurred in enforcing the terms of the Bond
Financing Documents. The Borrower agrees to reimburse the Issuer for advances
reasonably made, with interest at the Maximum Rate, to cover expenses, in the
enforcement of its rights or remedies against the Borrower under this Financing
Agreement, the Indenture, the Tax Regulatory Agreement or other Bond Financing
Documents to the extent that it acts without previously obtaining indemnity.
17
(viii) [Intentionally omitted.]
(ix) From amounts withheld by the Freddie Mac Servicer as provided in
subsection (a) and in the Guide or the Commitment, as applicable, to Freddie Mac,
the Freddie Mac Credit Enhancement Fee due and owing from time to time.
(x) From moneys on deposit in the Administration Expense Account
available for such purpose or, to the extent such moneys are insufficient for such
purpose, from other moneys of the Borrower, to Freddie Mac, the amount of any
Freddie Mac Reimbursement Amount due and owing from time to time but unpaid as
provided in Section 4.03(b) of the Indenture and any portion of the Freddie Mac
Credit Enhancement Fee remaining unpaid as provided in Section 4.06 of the
Indenture.
(xi) From amounts withheld by the Freddie Mac Servicer as provided in
subsection (a) and in the Guide or the Commitment, as applicable to the Freddie Mac
Servicer, the Ordinary Servicing Fees and Expenses due and owing from time to
time.
(xii) From moneys on deposit in the Administration Expense Account
available for such purpose or, to the extent such moneys are insufficient for such
purpose, from other moneys of the Borrower, to the Freddie Mac Servicer, the
amount of any portion of the Ordinary Servicing Fees and Expenses remaining
unpaid and any Extraordinary Servicing Fees and Expenses.
(xiii) From amounts withheld by the Freddie Mac Servicer as provided in
subsection (a), and in the Guide or the Commitment, as applicable to the Freddie Mac
Servicer, the amounts required to be deposited in the Custodial Escrow Account
pursuant to the Bond Mortgage Loan Documents from time to time.
(xiv) From moneys on deposit in the Administration Expense Account
available for such purpose or, to the extent such moneys are insufficient for such
purpose, from other moneys of the Borrower the amounts required to be deposited in
any Custodial Escrow Agreement and the Bond Mortgage Loan Documents
remaining unpaid.
(xv) From amounts withheld by the Freddie Mac Servicer as provided in
subsection (a) and pursuant to the Guide and the Commitment, if applicable, to the
Remarketing Agent the Remarketing Agent’s Fees due and owing from time to time.
(xvi) From moneys on deposit in the Administration Expense Account
available for such purpose or, to the extent such moneys are insufficient for such
purpose, from other moneys of the Borrower, to the Remarketing Agent the
Remarketing Agent’s Fees remaining unpaid.
(xvii) From moneys on deposit in the Administration Expense Account, or
to the extent such moneys are insufficient for such purpose, from other moneys of the
18
Borrower, to the Rating Agency the annual rating maintenance fee, if any, of the
Rating Agency.
(xviii) From moneys on deposit in the Administration Expense Account
available for such purpose or, to the extent such moneys are insufficient for such
purpose, from other moneys of the Borrower, to the Counterparty the ongoing fees
owed to the Counterparty.
Section 4.3. Payments to Rebate Fund. The Borrower shall pay when due to the Trustee
at its Principal Office any amount required to be deposited in the Rebate Fund in accordance with
Section 4.12 ofthe Indenture.
Section 4.4. Option to Prepay Bond Mortgage Loan. The Borrower shall have the option
to prepay the Bond Mortgage Loan in full or in part prior to the payment and discharge of all the
Outstanding Bonds only in accordance with the provisions of the Bond Mortgage Note. The Bonds
are subject to redemption in accordance with the terms and conditions set forth in the Indenture. In
connection with any prepayment, whether optional or mandatory, in addition to all other payments
required under the Bond Mortgage Note, the Borrower shall pay, or cause to be paid to the Freddie
Mac Servicer or otherwise, an amount sufficient to pay the redemption price of the Bonds to be
redeemed, including principal, interest and premium (if any), and further including any interest to
accrue with respect to the Bond Mortgage Loan and such Bonds between the prepayment date and
the redemption date, together with a sum sufflcient to pay all fees, costs and expenses in connection
with such redemption and, in the case of redemption in whole, to pay all other amounts payable
hereunder, under the Indenture and the Reimbursement Agreement. The Borrower shall provide
notice of the prepayment to the Trustee, the Credit Facility Provider, the Fredde Mac Servicer and
the Issuer in writing forty-five (45) days, or such shorter time as is possible in the case of involuntary
prepayments, prior to the date on which the Borrower will make the prepayment. Each such notice
shall state, to the extent such information is available (i) the amount to be prepaid, (ii) the date on
which the prepayment will be made by the Borrower, and (iii) the cause for the prepayment, if any.
Section 4.5. Borrower’s Obligations Upon Redemption or Tender. In the event of any
redemption, the Borrower will timely pay, or cause to be paid through the Freddie Mac Servicer, to
the Trustee an amount equal to the principal amount of such Bonds or portions thereof called for
redemption, together with interest accrued to the redemption date and premium, if any. The
Borrower will timely pay all fees, costs and expenses associated with any redemption of Bonds. In
the event that on any optional tender date or mandatory tender date under and as provided in Section
10.01, 2.02, 2.13 or 3.06 of the Indenture, Bonds are tendered and not remarketed by the
Remarketing Agent, and remarketing proceeds are not available for the purpose of paying the
purchase price of such Bonds, the Borrower will cause to be paid, under and subject to the terms of
the Credit Facility and the Reimbursement Agreement to the Trustee by the applicable times
provided in the Indenture an amount equal to the principal amount of such Bonds tendered and not
remarketed, together with interest accrued to the mandatory tender date or optional tender date, as the
case may be. The Borrower acknowledges that Purchased Bonds will be purchased by the Trustee
for and on behalf of, and registered in the name of, the Borrower and will be pledged to the Credit
Facility Provider pursuant to the Pledge Agreement.
Section 4.6. Principal Reserve Fund. The Borrower shall make payments for deposit by
the Trustee into the Principal Reserve Fund on the first day of each calendar month in accordance
wCSOC\893190~3U2062.M)28
19
with the Principal Reserve Schedule. Amounts on deposit in the Principal Reserve Fund shall be
applied as provided in the Indenture, provided that the amount on deposit in the Principal Reserve
Fund shall, upon the occurrence of an event of default under the Bond Mortgage Loan, be used in
any manner and for any purpose specified by the Credit Facility Provider in a written direction.
Amounts in the Principal Reserve Fund shall not be credited against the principal amount of
the Bond Mortgage Note or be deemed to be interest payments on the Bond Mortgage Loan until the
date such amounts are withdrawn from the Principal Reserve Fund and used to reimburse Freddie
Mac for amounts paid under the Credit Enhancement Agreement to redeem or otherwise pay
principal of or interest on the Bonds.
Section 4.1. Reserved.
Section 4.8. Mortgage Tares. The Borrower shall pay any and all taxes, assessments,
charges, filing, registration and recording fees, excises and levies imposed upon the Issuer by reason
of its interest in, or measured by amounts payable under, the Bond Mortgage Note, this Financing
Agreement, the Bond Mortgage, the Reimbursement Mortgage or any other Bond Financing
Document, and shall pay all stamp taxes and other taxes required to be paid on the Bond Mortgage
Note, this Financing Agreement, the Bond Mortgage, the Reimbursement Mortgage or the other
Bond Financing Documents. If the Borrower fails to make such payment within five (5) days after
notice thereof from the Issuer, the Issuer may (but shall not be obligated to), subject to the provisions
of the Intercreditor Agreement, pay the amount due, and the Borrower shall reimburse the Issuer on
demand for all such advances. The Issuer may direct the Trustee to advance such amount due from
amounts on deposit in any Fund or Account (other than the Rebate Fund) under the Indenture that is
not part of the Trust Estate; provided, however, no payment by the Issuer of any amounts due under
this Section shall be deemed to extinguish the Borrower’s obligation with respect hereto and such
amounts shall remain due and owing by the Borrower until paid by the Borrower. Upon request, the
Borrower shall furnish to the Issuer, the Trustee and the Credit Facility Provider proof of the
payment of any such tax, assessment or other governmental or similar charge or fee, or any other
charge which is payable by the Borrower as set forth above.
(End of Article IV)
20
ARTICLE V
SPECIAL COVENANTS OF BORROWER
Section 5.1. Performance of Obligations. The Borrower shall keep and faithfully perform
all of its covenants and undertakings contained herein and in the Bond Financing Documents to
which the Borrower is a party, including, without limitation, its obligations to make all payments set
forth herein and therein in the amounts, at the times and in the manner set forth herein and therein.
Except with respect to the obligations of the Borrower set forth in Sections 4.2, 5.8 and 6.1,
but otherwise notwithstanding any other provisions of this Financing Agreement, the obligations of
the Borrower under this Financing Agreement with respect to the Bond Mortgage Loan are non-
recourse liabilities of the Borrower. However, nothing in this Section shall limit the right of the
Issuer, the Trustee, the Freddie Mac Servicer or Freddie Mac to proceed against the Borrower to
recover any fees owing to any of them or any actual out-of-pocket expenses (including but not
limited to actual out-of-pocket attorneys’ fees incurred by any of them) incurred by any of them in
connection with the enforcement of any rights under this Financing Agreement or other Bond
Financing Documents. Nothing in this Section shall limit any right that the Freddie Mac Servicer,
Freddie Mac or the Issuer, subject to the terms of the Intercreditor Agreement, may have to enforce
the Bond Mortgage Note, the Bond Mortgage, or any other Bond Mortgage Loan Documents in
accordance with their terms.
Section 5.2. Compliance With Applicable Laws. All work performed in connection with
the Project shall be performed in strict compliance with all applicable federal, state, county and
municipal laws, ordinances, rules and regulations now in force or that may be enacted hereafter.
Section 5.3. Indenture Provisions. The execution of this Financing Agreement shall
constitute conclusive evidence of approval of the Indenture by the Borrower. Whenever the
Indenture by its terms imposes a duty or obligation upon the Borrower, such duty or obligation shall
be binding upon the Borrower to the same extent as if the Borrower were an express party to the
Indenture, and the Borrower shall carry out and perform all of its obligations under the Indenture as
fully as if the Borrower were a party to the Indenture.
Section 5.4. Credit Facility. With the prior written consent of the Credit Facility Provider
(but without the consent of Bondholders) the Borrower may, on any Interest Payment Date during a
Variable Period, on any Reset Adjustment Date, or any Variable Rate Adjustment Date and on the
Conversion Date (but no later than seventeen (17) days prior to the expiration date of the Credit
Facility unless a commitment to extend the existing Credit Facility has been delivered to the Trustee
satisfying the requirements of the Indenture, if applicable), and, following the beginning of a Reset
Period or the Fixed Rate Period, on any Interest Payment Date occurring after the Bonds may first be
optionally redeemed at a price of not greater than par plus accrued interest to the redemption date and
subject to the terms of the existing Credit Facility and Reimbursement Agreement, arrange for the
delivery to the Trustee of an Alternate Credit Facility in substitution for the Credit Facility then in
effect (referred to in this Section 5.4 as “credit support”) and, if applicable, for payment of the
Purchase Price of Bonds delivered or deemed delivered in accordance with Article X of the Indenture
(referred to in this Section 5.4 as “liquidity support”). The foregoing notwithstanding, with the prior
written consent of the Credit Facility Provider, a Substitution Date may be selected by the Borrower
to occur on a date other than the aforementioned dates, subject to the notice requirements of Section
wCSOC\893190v3\22062.0028
21
I
2.13 of the Indenture. In addition, without the consent of the Borrower (and without the consent of
the Bondholders), the Credit Facility Provider may provide any other form of “credit support” or
“liquidity support” (or combination thereof) issued by the Credit Facility Provider in substitution for
the Credit Enhancement Agreement (or any successor Credit Facility) if (A) the conditions of Section
8.05 of the Indenture are satisfied or (B)(i) the Rating Agency confms in writing that such
substitution will not result in a withdrawal, qualification or reduction of the then current rating of the
Bonds, (ii) the Credit Facility Provider delivers to the Issuer and the Trustee an Opinion of Counsel
satisfying the requirements of paragraph (c) of this Section 5.4 and (iii) such substitute “credit
support” or “liquidity support”(or combination thereof) does not increase the amounts required to be
paid by, or other obligations of, the Borrower. The Borrower acknowledges that it is required to pay
Freddie Mac an amount calculated in accordance with the provisions of the Reimbursement
Agreement upon the delivery of an Alternate Credit Facility during the period therein specified. Any
Alternate Credit Facility shall satisfy the following conditions, as applicable:
(a) An Alternate Credit Facility may be issued to provide only credit support or
only liquidity support so long as a separate Credit Facility provides, at all times while such Alternate
Credit Facility is in effect, complementary credit support or liquidity support, as the case may be, so
that at all times while any of the Bonds bear interest at the Variable Rate or the Reset Rate such
Bonds shall be entitled to credit support and to the liquidity support required by such mode; provided
that in no event shall Freddie Mac be obligated to provide only liquidity or credit support if any
Person other than Freddie Mac provides either liquidity or credit support. During the Fixed Rate
Period, the Bonds shall be entitled to credit support only. Notwithstanding the foregoing, prior to the
commencement of the Fixed Rate Period, the Issuer may, in its sole discretion, waive the requirement
that a Credit Facility be provided during such Fixed Rate Period.
(b) The Alternate Credit Facility shall (i) be in an amount equal to the aggregate
principal amount of the Bonds Outstanding fiom time to time plus the Interest Requirement or
otherwise provide coverage satisfactory to the Rating Agency; (ii) provide for payment in
immediately available funds to the Trustee upon receipt of the Trustee’s request for such payment
with respect to any Interest Payment Date, purchase date (if applicable) or extraordinary mandatory
redemption date pursuant to the Indenture; (iii) if the Alternate Credit Facility is provided to secure
Bonds during a Reset Period, provide an expiration date no earlier than the earliest of (1) the day
following the Reset Adjustment Date immediately succeeding the Reset Period; (2) ten (10) days
after the Trustee receives notice from the Credit Facility Provider of an Event of Default hereunder
or a default under and as defined in the Reimbursement Agreement and a direction to redeem all
Outstanding Bonds; (3) the date on which all Bonds are paid in full and the Indenture is discharged in
accordance with its terms; and (4) the date on which the Bonds become secured by an Alternate
Credit Facility in accordance with the terms of the Indenture and the Reimbursement Agreement; (iv)
unless waived by the Issuer in its sole discretion, result in the Bonds receiving a long-term rating or
short-term rating, or both, as applicable for the mode then in effect, for the long-term rating in one of
the two highest rating categories of the Rating Agency without regard to pluses or minuses, and for
the short-term rating in the highest rating category of the Rating Agency without regard to pluses or
minuses, and (v) have a stated expiration or termination date not sooner than one year following its
effective date.
(c) In connection with the delivery of an Alternate Credit Facility, the Trustee
must receive (i) an Opinion of Counsel to the Credit Facility Provider issuing the Alternate Credit
Facility, in form and substance satisfactory to the Issuer and the Trustee, relating to the due
22
wCSOC\893190v3\22062.0028
authorization and issuance of the Alternate Credit Facility, its enforceability, that the statements
made relating to the Alternate Credit Facility and Reimbursement Agreement contained in any
disclosure document related to the Bonds are true and correct, that the Alternate Credit Facility is not
required to be registered under the Securities Act of 1933, as amended (unless waived by the Issuer
with the consent of the Remarketing Agent) and if applicable, that payments made by the Credit
Facility Provider pursuant to the Alternate Credit Facility will not be voidable under Section 547 of
the Bankruptcy Code and would not be prevented by the automatic stay provisions of Section 362(a)
of the Bankruptcy Code, in the context of a case or proceeding by or against the Borrower, a general
partner of the Borrower or by the Issuer under the Bankruptcy Code; (ii) an Opinion of Bond Counsel
to the effect that the substitution of such Alternate Credit Facility will not adversely affect the
exclusion from gross income, for federal income tax purposes, of the interest payable on the Bonds;
(iii) the delivery of a continuing disclosure agreement if required by Rule 15c2-12 of the Securities
Exchange Commission or other applicable laws or regulations then in effect; and (iv) a rating letter
from the Rating Agency establishing a rating on the Bonds permitted by subsection 5.4(b) above.
Section 5.5. Borrower To Maintain Its Existence: Certification ofNo Default.
(a) The Borrower agrees to maintain its existence and maintain its current legal
status with authority to own and operate the Project. The Borrower agrees that during the term of
this Financing Agreement it will not dispose of all or substantially all of its assets nor consolidate
with nor merge into any entity unless (i) it shall have first filed with the Trustee an opinion of Bond
Counsel to the effect that such disposal of assets, consolidation or merger will not cause the interest
on the Bonds to become includable in gross income for federal income tax purposes; (ii) the acquirer
of the assets or the entity with which it shall consolidate or into which it shall merge shall be an
individual or a corporation, partnership or other legal entity organized and existing under the laws of
the United States of America or one of the states of the United States of America and shall be
qualified and admitted to do business in the State; (iii) such acquiring or remaining entity shall
assume in writing all of the obligations of the Borrower under the Bond Financing Documents; and
(iv) such disposal of assets, consolidation or merger shall be approved by the Issuer in accordance
with Section 11 of the Tax Regulatory Agreement.
(b) In addition to performing all other similar requirements under the Bond
Financing Documents to which the Borrower is a party, the Borrower shall, within sixty (60) days
after the end of each calendar year, render to the Trustee and the Issuer a certificate executed by an
Authorized Officer of the Borrower to the effect that the Borrower is not, as of the date of such
certificate, in default of any of its covenants, agreements, representations or warranties under any of
the Bond Financing Documents to which the Borrower is a party and that, to the best of the
Borrower’s knowledge after due inquiry, there has occurred no Event of Default (as such term is
defined in each respective Bond Financing Document) under any of the other Bond Financing
Documents.
Section 5.6. Borrower to Remain Qualified in State and Appoint Agent. The Borrower
will remain duly qualified to transact business in the State and will maintain an agent in the State on
whom service of process may be made in connection with any actions against the Borrower.
Section 5.1. Sale or Other Transfer of Project. The Borrower may convey and transfer
the Project only upon strict compliance with the provisions of the Bond Mortgage Loan Documents
and upon receipt of the prior written consent of the Issuer and the Credit Facility Provider.
wCSOc\893190~3\22062.0028
23
Section 5.8. Arbitrage and Rebate Coliections; Tax-Exempt Status of the Bonds.
(a) The Borrower covenants for the benefit of the Issuer, the Bondholders and the
Trustee that the proceeds of the Bonds, the earnings thereon and any other moneys on deposit in any
fund or account maintained in respect thereof (whether such moneys were derived from the proceeds
of the sale thereof or from other sources) will not be used in a manner which would cause the Bonds
to be “arbitrage bonds” within the meaning of Section 148 ofthe 1986 Code.
(b) The Borrower, for the benefit of the Issuer and each Bondholder, represents
that it has not taken, or permitted to be taken on its behalf, and agrees that it will not take, or permit
to be taken on its behalf, any action which would adversely affect the exclusion from gross income
for federal income tax purposes of the interest paid on the Bonds, and that, upon written request by
the Issuer or the Trustee, it will make and take, or require to be made and taken, such acts and filings
as may from time to time be required under the 1986 Code to maintain such exclusion.
Section 5.9. Right to Perform Borrower’s Obligations. In the event the Borrower fails to
perform any of its obligations under this Financing Agreement, the Issuer, the Trustee and/or the
Freddie Mac Servicer, after giving requisite notice, if any, may, but shall be under no obligation to,
perform such obligation and pay all costs related thereto, and all such costs so advanced by the
Issuer, the Trustee or the Freddie Mac Servicer shall become an additional obligation of the
Borrower hereunder, payable on demand with interest thereon at the default rate of interest payable
under the Bond Mortgage Loan Documents.
Section 5.10. Notice of Certain Events. The Borrower shall promptly advise the Issuer, the
Freddie Mac Servicer and a Responsible Officer of the Trustee in writing of the occurrence of any
Event of Default hereunder or any event which, with the passage of time or service of notice or both,
would constitute an Event of Default hereunder, specifying the nature and period of existence of such
event and the actions being taken or proposed to be taken with respect thereto.
Section 5.11. Survival of Covenants. The provisions of Sections 4.2 and 6.1 of this
Financing Agreement shall survive the expiration or termination of this Financing Agreement.
Section 5.12. Operating Statements. The Borrower agrees to prepare and submit to the
Freddie Mac Servicer, annually within one hundred twenty (120) days after the close of the
Borrower’s fiscal year, a Project operating statement and balance sheet. The Borrower further agrees
to prepare and submit to the Freddie Mac Servicer quarterly, within thiay (30) days after the close of
each fiscal quarter (a) a statement showing, separately, the percentage of occupied and unoccupied
units in the Project, (b) an unaudited Project operating statement certified by the Borrower as being
true, correct and complete and (c) a current rent roll for the most recent date available which has been
certified by the Borrower as being true, correct and complete in all material respects. In addition, the
Borrower will comply with the reporting requirements set forth in the Tax Regulatory Agreement
and as required by the Bond Financing Documents. Nothing contained in this Section 5.12 is
intended to modify or limit any provisions of the Bond Financing Documents. All operating
statements deliverable pursuant to this paragraph shall be prepared in a form approved by the Freddie
Mac Servicer.
24
Section 5.13. Access to Project and Records; Reports.
(a) Access to Proiect. Subject to reasonable notice, the Issuer, the Credit Facility
Provider, the Trustee and the Freddie Mac Servicer, and the respective duly authorized agents of
each, shall have the right at all reasonable times and during normal business hours to enter the
Project and any other location containing the records relating to the Borrower, the Project, the Bond
Mortgage Loan, and the Indenture and to inspect and audit any and all of the Borrower’s records or
accounts pertaining to the Borrower, the Project, the Bond Mortgage Loan, and the Borrower’s
compliance with the terms and conditions of the Bond Mortgage Loan, and the Reimbursement
Agreement and shall have the right to require the Borrower, at the Borrower’s sole expense, to
furnish such documents to the Issuer, the Trustee, the Freddie Mac Servicer, and the Credit Facility
Provider, as the Issuer, the Trustee, the Freddie Mac Servicer or the Credit Facility Provider, as the
case may be, from time to time, deems reasonably necessary in order to determine that the provisions
of the Bond Mortgage Loan, the Indenture, the Bond Financing Documents and the Reimbursement
Agreement have been complied with and to make copies of any records that the Credit Facility
Provider, the Trustee, the Issuer or the Freddie Mac Servicer or their respective duly authorized
agents, may reasonably require. The Borrower shall make available to the Issuer, the Trustee, the
Freddie Mac Servicer and the Credit Facility Provider, such information concerning the Project, the
Bond Mortgage Loan, the Indenture, the Bond Financing Documents and the Reimbursement
Agreement as any of them may reasonably request.
(b) Certificates and Reuorts. The Borrower shall file such certificates and other
reports with the Issuer, the Trustee, the Freddie Mac Servicer and the Credit Facility Provider, as are
required by the Tax Regulatory Agreement.
(c) Reporting. The Borrower agrees to provide to the Issuer all information
necessary to enable the Issuer to complete and file all forms and reports required by the laws of the
State and the Code in connection with the Project and the Bonds.
(d) Financial Statements. The Borrower agrees to provide at its expense to the
Trustee, the Freddie Mac Servicer and the Issuer annual financial statements of the Project certified
by an Authorized Officer of the Borrower. The Borrower also shall provide at its expense to the
Freddie Mac Servicer (i) at least thirty (30) days prior to the beginning of each fiscal year of the
Borrower the annual budget for the Project, and (ii) within forty-five (45) days after the end of the
Borrower’s mid-year and fiscal year, respectively, semiannual and annual operating results. The
budgets, financial statements and the operating statements shall be prepared in a form approved by
the Freddie Mac Servicer.
(e) Annual Review of Management. The Borrower hereby authorizes the Issuer
to conduct a review annually of the management and operation of the Project, which the Issuer shall
be under no obligation to perform but may elect to perform in its sole discretion. In the event that the
Issuer conducts such a review, the Issuer may, if it chooses, document its findings from such review
and if it does document the findings shall provide a copy of its findings to the Borrower, the Freddie
Mac Servicer and the Trustee, and the Borrower shall have thuty (30) days after receipt of such
findings to respond to the Issuer and the Freddie Mac Servicer with respect thereto. If the Freddie
Mac Servicer or the Issuer shall find that any aspect of the management or operation of the Project
may cause interest on the Bonds to be subject to federal income taxation or may constitute a violation
of the Act, the Issuer shall so notify the Borrower, the Credit Facility Provider, and the Freddie Mac
25 17 2
Servicer, and require remedy from the Borrower of such condition. The Credit Facility Provider and
the Issuer may require the Borrower to remove the management agent for the Project.
(End of Article V)
26
ARTICLE VI
INDEMNIFICATION
Section 6.1. Indemnification. The Borrower releases the Issuer, the Trustee and the
Credit Facility Provider, and their respective officers, directors, agents, officials, employees (and as
to the Issuer, members of its City Council) and any person who controls the Issuer, the Trustee (only
in its capacity as Trustee and not for the benefit of Bondholders) or the Credit Facility Provider
within the meaning of the Securities Act of 1933, as amended (collectively, “Indemnified Parties”
and, individually, each an “Indemnified Party”) and covenants and agrees, with respect to acts or
omissions occurring on or after the Closing Date, to indemnify, hold harmless and defend each
Indemnified Party from and against, any and all losses, claims, damages, demands, liabilities and
expenses (including but not limited to attorneys’ fees and expenses, whether or not suit is brought
and whether incurred in settlement negotiations, investigations of claims, at trial, on appeal or
otherwise), litigation and court costs, taxes, amounts paid in settlement, amounts paid to discharge
judgments, causes of action, suits, claims, demands and judgments of any nature, joint or several, by
or on behalf of any person directly or indirectly resulting from, arising out of or related to:
(i) the transactions provided for in the Indenture or the Bond Financing
Documents or otherwise in connection with the Project, the Bonds, the Bond
Mortgage Loan, or the execution and delivery or amendment of any other document
entered into in connection with the transactions provided for in the Indenture or the
Bond Financing Documents;
(ii) the approval of the financing for the Project or the making of the
Bond Mortgage Loan;
(iii) the issuance, sale or remarketing of the Bonds or any certifications or
representations made by any person other than the party seeking indemnification;
(iv) any and all claims arising in connection with the interpretation,
performance, enforcement, breach, default or amendment of the Indenture or the
Bond Financing Documents or any other documents relating to the Project or the
Bonds or in connection with any federal or state tax audit or investigation, any
securities investigation or enforcement action or any questions or other matters
arising under such documents;
(v) the carrying out by the Borrower of any of the transactions provided
for in the Indenture or the Bond Financing Documents;
(vi) the Trustee’s acceptance or administration of the trusts created by the
Indenture or the exercise of its powers or duties under the Indenture or under this
Financing Agreement, the Tax Regulatory Agreement or any other agreements to
which it is a party or otherwise in connection with the transactions provided for in the
Bond Financing Documents;
(vii) any and all claims arising in connection with the issuance, offering,
sale or delivery or remarketing or resale on the secondary market of the Bonds or any
21
certifications or representations made by any person other than the Indemnified Party
seeking indemnification, including, without limitation, any statement or information
made by the Borrower with respect to the Borrower or the Project in any offering
document or materials regarding the Bonds, the Project or the Borrower or any
certificate executed by the Borrower which, at the time made, is misleading, untrue or
incorrect in any material respect and any untrue statement or alleged untrue statement
of a material fact relating to the Borrower or the Project contained in any offering
material relating to the sale or remarketing of the Bonds, as from time to time
amended or supplemented, or arising out of or based upon the omission or alleged
omission to state in such offering material a material fact relating to the Borrower or
the Project required to be stated in such offering material or necessary in order to
make the statements in such offering material not misleading, or failure to properly
register or otherwise qualify the sale of the Bonds or failure to comply with any
licensing or other law or regulation which would affect the manner in which or to
whom the Bonds could be sold and the carrying out by the Borrower of any of the
transactions contemplated by the Indenture or the Bond Financing Documents;
(viii) the Borrower’s failure to comply with any requirement of this
Financing Agreement, the Bond Mortgage Note, the Bond Mortgage or the Tax
Regulatory Agreement;
(ix) any act or omission of the Borrower or any of its agents, servants,
employees or licensees in connection with the Bond Mortgage Loan, or the Project,
including violation of any law, ordinance, court order or regulation affecting the
Project or any part of it or the ownership, occupancy or use of it;
(x) any damage or injury, actual or claimed, of whatsoever kind, cause or
character, to property (including loss of use of property) or persons, occurring or
allegedly occurring in, on or about the Project or arising out of any action or inaction
of the Borrower, whether or not related to the Project, or resulting from or in any way
connected with specified events, including the construction or management of the
Project, the issuance of the Bonds or otherwise in connection with transactions
contemplated or otherwise in connection with the Project, the Bonds or the execution
or amendment of any document relating to the Project or the Bonds;
(xi) any violation of any environmental law, rule or regulation with
respect to, or the release of any toxic substance from, the Project;
(xii) taxes, charges, assessments, fees, excises and levies imposed upon the
Issuer by reason of its interest in, or measured by amounts payable under, or the
payment of which is a condition to the enforceability of, the Bond Mortgage Note,
this Financing Agreement, the Bond Mortgage or any other Bond Financing
Document, and any and all stamp taxes and other taxes required to be paid heron or
thereon; and
(xiii) any and all claims arising in connection with the operation of the
Project, or the conditions, environmental or otherwise, occupancy, use, possession,
conduct or management of work done in or about, or from the planning, design,
28
acquisition, construction or equipping of, the Project or any part of it, including, but
not limited to, the ADA (as evidenced by an architect’s certificate to such effect).
This indemnification shall extend to and include, without limitation, all reasonable costs,
counsel fees, expenses or liabilities incurred in connection with any such claim, or proceeding
brought with respect to such claim; except
(A) in the case of the indemnification of the Trustee or any of its
Indemnified Parties, to the extent such damages are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted from the
negligence or willful misconduct of such Indemnified Party; and
(B) in the case of the indemnification of the Issuer and the Credit Facility
Provider, or any of their respective Indemnified Parties, to the extent such damages
are determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the illegal or unlawful action of such Indemnified
Party.
In the event that any action or proceeding is brought against any Indemnified Party with
respect to which indemnity may be sought under this Financing Agreement, the Borrower, upon
written notice from the Indemnified Party (which notice shall be given within an appropriate time
period so as not to impair the ability of the Borrower to perform its obligations pursuant to this
Section), shall assume the investigation and defense of the action or proceeding, including the
employment of counsel selected by the Borrower, subject to the approval of the Indemnified Party in
such party’s reasonable discretion, and shall assume the payment of all expenses related to the action
or proceeding, with full power to litigate, compromise or settle the same in its sole discretion,
provided that the Issuer, Freddie Mac, the Freddie Mac Servicer and the Trustee, as appropriate, shall
have the right to review and approve or disapprove any such compromise or settlement (which
approval shall not be unreasonably withheld). If any claim is made hereunder and the Borrower does
not undertake the defense thereof, the Indemnified Parties shall be entitled to control such litigation
and settlement and shall be entitled to indemnity with respect thereto pursuant to the terms of this
Section. Each Indemnified Party shall have the right to employ separate counsel in any such action
or proceeding and participate in the investigation and defense of the action or proceeding, provided,
however, that unless (a) the Indemnified Party reasonably determines that a conflict of interest exists
between the interests of the Indemnified Party and the interests of the Borrower or (b) such separate
counsel is employed by court order or with the approval of the Borrower, which approval shall not be
unreasonably withheld, conditioned or delayed, the Borrower shall not be required to pay the fees
and expenses of such separate counsel.
Notwithstanding any transfer of the Project to another owner, the Borrower shall remain
obligated to indemnify each Indemnified Party pursuant to this Section 6.1 for all matters arising
prior to the date of such transfer, and, as a condition to the release of the transferor on and after the
transfer date, the transferee must assume the obligations of the Borrower under the Indenture and the
other Bond Financing Documents on and after such transfer date and indemnify each Indemnified
Party pursuant to this Section 6.1 for all matters arising on and after the date of such transfer. The
Indemnified Party’s rights under this Section 6.1 shall survive the termination of this Financing
Agreement and the payment or defeasance of the Bonds.
29
The obligations of the Borrower under this Section 6.1 are independent of any other
contractual obligation of the Borrower to provide indemnity to the Indemnified Parties, and the
obligations of the Borrower to provide indemnity hereunder shall not be interpreted, construed or
limited in light of any other separate indemnification obligation of the Borrower. An Indemnified
Party shall be entitled simultaneously to seek indemnity under this Section 6.1 and any other
provision under which it is entitled to indemnity.
Section 6.2. Limitation With Respect to the Credit FaciZity Provider. Notwithstanding
anything in this Financing Agreement to the contrary, in the event that the Credit Facility Provider
shall become the owner of the Project as a result of a foreclosure or a deed in lieu of foreclosure or
comparable conversion of the Bond Mortgage Loan the Credit Facility Provider shall not be liable for
any breach of or default of any prior owner of the Project under this Financing Agreement and shall
only be responsible for defaults and obligations incurred or occurring during the period that the
Credit Facility Provider is the owner of the Project. Accordingly, during any period that the Credit
Facility Provider owns the Project and that this Article VI is applicable to the Credit Facility
Provider, the Credit Facility Provider’s obligations under this Article VI shall be limited to acts and
omissions of the Credit Facility Provider occurring during the period of the Credit Facility Provider’s
ownership of the Project.
(End of Article VI)
30
I77
ARTICLE VI1
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default. The following shall be “Events of Default” under this
Financing Agreement and the terms “Event of Default” or “default” shall mean, whenever they are
used in this Financing Agreement, one or all of the following events:
(a) Failure by the Borrower to pay any amounts due under this Financing
Agreement, the Bond Mortgage Note or the Bond Mortgage at the times and in the amounts required
by this Financing Agreement, the Tax Regulatory Agreement, the Bond Mortgage Note or the Bond
Mortgage;
(b) The Borrower’s failure to observe and perform any of its other covenants,
conditions or agreements contained herein, other than as referred to in clause (a) above, for a period
of thirty (30) days after written notice specifjmg such failure and requesting that it be remedied is
given by the Issuer or the Trustee to the Borrower; provided, however, that if the failure shall be such
that it can be corrected but not withii such period, the Issuer and the Trustee will not unreasonably
withhold their consent to an extension of such time if corrective action is instituted by the Borrower
within such period and diligently pursued until the failure is corrected; or
(c) The occurrence of a default under the Reimbursement Agreement shall at the
discretion of the Credit Facility Provider constitute an Event of Default under this Financing
Agreement. The occurrence of a default under ths Financing Agreement shall in the discretion of
the Credit Facility Provider constitute a default under the Bond Mortgage Loan Documents and the
Reimbursement Agreement.
Nothing contained in this Section 7.1 is intended to amend or modify any of the provisions of
the Bond Mortgage Loan Documents or the Reimbursement Agreement or to bind the Freddie Mac
Servicer or Freddie Mac to any notice and cure periods other than as expressly set forth in the Bond
Mortgage Loan Documents and the Reimbursement Agreement.
Nothing contained in this Section is intended to amend or modify any of the provisions of the
Bond Financing Documents or to bind the Issuer, the Trustee, the Freddie Mac Servicer or Freddie
Mac to any notice and cure periods other than as expressly set forth in the Bond Financing
Documents.
Section 7.2. Remedies on Default. Subject to Section 7.6, whenever any Event of Default
under Section 7.1 of this Financing Agreement shall have happened and be existing, any one or more
of the following remedial steps may be taken; provided that in no event shall the Issuer be obligated
to take any step which in its opinion will or might cause it to expend time or money or otherwise
incur liability unless and until a satisfactory indemnity bond has been furnished to it:
(a) The Issuer shall cooperate with the Trustee as the Trustee acts pursuant to
Section 6.02 of the Indenture.
(b) In the event any of the Bonds shall at the time be Outstanding and not paid
and discharged in accordance with the provisions of the Indenture, the Issuer or the Trustee may have
31
access to and inspect, examine and make copies of the books and records and any and all accounts,
data and income tax and other tax returns of the Borrower.
(c) The Issuer may, without being required to give any notice (other than to the
Trustee), except as provided herein, pursue all remedies of a creditor under the laws of the State, as
supplemented and amended, or any other applicable laws.
(d) The Issuer or the Trustee may take whatever action at law or in equity may
appear necessary or desirable to collect the payments due under this Financing Agreement then due
and thereafter to become due, or to enforce performance and observance of any obligation,
agreement or covenant of the Borrower under this Financing Agreement.
(e) At the written request of the Issuer, declare all amounts due under this
Financing Agreement and the Bond Mortgage Loan to be immediately due and payable; provided,
however, that, in the case of an Event of Default described in (b) of Section 7.1 hereof, the amounts
due under this Financing Agreement and the Bond Mortgage Loan shall not be accelerated where (i)
the Trustee has received an opinion of Bond Counsel that the failure to accelerate the Bond Mortgage
Loan under such circumstances will not adversely affect the exclusion from gross income for federal
income tax purposes of interest on the Bonds, and (ii) the Credit Facility Provider has directed the
Trustee not to so declare such amounts due.
Any amounts collected pursuant to Article IV and any other amounts which would be
applicable to payment of principal of and interest and any premium on the Bonds collected pursuant
to action taken under this Section shall be applied in accordance with the provisions of the Indenture.
The provisions of this Section are subject to the further limitation that if, after any Event of
Default all amounts which would then be payable hereunder by the Borrower if such Event of
Default had not occurred and was not continuing shall have been paid by or on behalf of the
Borrower, and the Borrower shall have also performed all other obligations in respect of which it is
then in default hereunder, and shall have paid the reasonable charges and expenses of the Issuer, the
Trustee, the Freddie Mac Servicer and the Credit Facility Provider, including reasonable attorneys’
fees paid or incurred in connection with such default, and shall have paid the Issuer Fee, all Freddie
Mac Reimbursement Amounts and Freddie Mac Credit Enhancement Fees, and if there shall then be
no Event of Default existing under any of the Bond Financing Documents, then and in every such
case such Event of Default hereunder shall be waived and annulled, but no such waiver or annulment
shall affect any subsequent or other Event of Default or impair any right consequent thereon.
Section 7.3. No Remedy Exclusive. No remedy conferred upon or reserved to the Issuer
or the Trustee by this Financing Agreement is intended to be exclusive of any other available remedy
or remedies, but each and every such remedy shall be cumulative and shall be in addition to every
other remedy given under this Financing Agreement or now or hereafter existing at law or in equity
or by statute. No delay or omission to exercise any right or power accruing upon any default shall
impair any such right or power or shall be construed to be a waiver thereof, but any such right and
power may be exercised from time to time and as often as may be deemed expedient. In order to
entitle the Issuer or the Trustee to exercise any remedy reserved to it in this Article, it shall not be
necessary to give any notice, other than such notice as may be expressly required by this Agreement.
Section 7.4. Agreement to Pay Attorneys’ Fees and Expenses. In the event the Borrower
32
defaults under any of the provisions of this Financing Agreement and the Issuer, the Trustee, the
Freddie Mac Servicer or the Credit Facility Provider employs attorneys or incur other expenses for
the collection of loan payments or the enforcement of performance or observance of any obligation
or agreement on the part of the Borrower contained in this Financing Agreement or in or represented
by the Bond Mortgage Note, the Borrower shall on demand therefor reimburse the reasonable fee of
such attorneys and such other expenses so incurred.
Section 7.5. No Additional Waiver Implied by One Waiver. In the event any agreement
contained in this Financing Agreement should be breached by any party and thereafter waived by the
other parties, such waiver shall be limited to the particular breach so waived and shall not be deemed
to waive any other breach hereunder.
Section 7.6. Rights of Credit Faciriiy Provider. Notwithstanding anything herein to the
contrary, except as otherwise permitted by the Intercreditor Agreement, as long as a “Wrongful
Dishonor” (as defined in the Intercreditor Agreement) has not occurred and is continuing with
respect to the Credit Facility, neither the Issuer, the Trustee nor any other person shall, upon the
occurrence of an Event of Default hereunder or an event of default under the Bond Financing
Documents, take any action to accelerate or otherwise enforce payment or seek other remedies with
respect to the Bond Mortgage Loan, except at the written direction of the Credit Facility Provider;
provided that this prohibition shall not be construed to limit the rights of the Issuer or the Trustee to
specifically enforce the Tax Regulatory Agreement in order to provide for operation of the Project in
accordance with the 1954 Code and the 1986 Code, as applicable, and the Act; and provided fuaher
that this prohibition shall not be construed to limit the rights of the Issuer, the Trustee, the Freddie
Mac Servicer, the Credit Facility Provider or any other Indemnified Party under Section 6.1 to
enforce its rights against the Borrower under Sections 4.2, 5.8 and 6.1 by mandamus or other suit,
action or proceeding at law or in equity where such suit, action or proceeding does not seek any
remedies under or with respect to the Bond Mortgage or cause acceleration of the Bond Mortgage
Loan.
(End of Article VII)
33
ARTICLE VI11
MISCELLANEOUS
Section 8.1. Notices. Whenever in this Financing Agreement the giving of notice by mail
or otherwise is required, the giving of such notice may be waived in writing by the person entitled to
receive such notice and in any such case the giving or receipt of such notice shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
Any notice, request, complaint, demand, communication or other paper required or permitted
to be delivered to the Issuer, the Trustee, Freddie Mac, the Borrower or the Freddie Mac Servicer
shall be sufficiently given and shall be deemed given (unless another form of notice shall be
specifically set forth herein) on the Business Day following the date on which such notice or other
communication shall have been delivered to a national overnight delivery service (receipt of which to
be evidenced by a signed receipt from such overnight delivery service) addressed to the appropriate
party at the addresses set forth below. The Issuer, the Trustee, Freddie Mac, the Borrower or the
Freddie Mac Servicer may, by notice given as provided in this paragraph, designate any further or
different address to which subsequent notices or other communication shall be sent.
The Issuer:
The Trustee and
Tender Agent:
The Borrower:
with a copy to:
City of Carlsbad, California
2965 Roosevelt Street, Suite B
Carlsbad, California 92008-2389
Am: Housing and Redevelopment Director
Telephone: (760) 434-2810
Telecopy: (760) 720-2037
U.S. Bank, N.A.
One California Street, Suite 2550
San Francisco, California 941 11
Attention: Multifamily Housing
Telephone: (415) 273-4576
Telecopy: (415) 273-4590
Santa Fe Ranch, LLC
c/o Henderson Global Investors (North America) Inc.
One Financial Plaza, 19th Floor
Hartford, Connecticut 06103
Attention: James J. Martha
Telephone: (860) 723-8701
Telecopy: (860) 723-8601
Locke Liddell & Sapp LLP
2200 Ross Avenue, Suite 2200
Dallas, Delaware 75201
Attention: Mike Petersilia, Esq,
Telephone: (214) 740-8690
Telecopy: (214) 740-8800
34
To Freddie Mac:
with a copy to:
with a copy to:
Federal Home Loan Mortgage Corporation
8 100 Jones Branch Drive
Mail Stop B4Q
McLean, Virginia 22102
Attention: Multifamily Management and Information
Facsimile: (703) 714-3273
Telephone: (703) 903-2000
Federal Home Loan Mortgage Corporation
8200 Jones Branch Drive
McLean, Virginia 22102
Attention: Associate General Counsel Multifamily Legal
Facsimile: (703) 903-2885
Telephone: (703) 903-2000
Federal Home Loan Mortgage Corporation
8100 Jones Branch Drive
Mail Stop B4F
McLean, Virginia 22102
Attention: Multifamily Loan Servicing
Facsimile: (703) 714-3003
Telephone: (703) 903-2000
Control
Department
The Freddie Mac Servicer: Reilly Mortgage Group, Inc.
2000 Corporate Ridge, Suite 925
McLean, Virginia 22102
Attention: Servicing Department
Telephone: (703) 760-4700
Telecopy: (703) 760-4750
Remarketing Agent: Stem Brothers & Co.
8000 Maryland, Suite 1020
St. Louis, Missouri 63105
Attention: Remarketing Desk
Telephone: (313) 743-4010
Telecopier: (314) 727-7313
Stem Brothers & Co.
1044 Main Street, Suite 900
Kansas City, Missouri 64105
Attention: Remarketing Desk
Telephone: (816) 471-6460
Telecopier: (816) 842-2789
Freddie Mac Servicer shall also be given to Freddie Mac.
A duplicate copy of each notice or other communication given hereunder by any party to the
35
(a) The Trustee shall provide to the Credit Facility Provider and the Freddie Mac
Servicer (i) prompt notice of the occurrence of any Event of Default pursuant to Section 7.1 and (ii)
any written information or other communication received by the Trustee hereunder within ten (1 0)
Business Days of receiving a written request from the Credlt Facility Provider for any such
information or other communication. In addition, the Trustee shall, in accordance with the terms and
conditions of the Credit Enhancement Agreement, timely give all notices required by the Credit
Enhancement Agreement, including, without limitation, notice to Freddie Mac and the Freddie Mac
Servicer of the Trustee’s failure to receive any regularly scheduled payment under the Bond
Mortgage Note.
Section 8.2. Concerning Successors and Assigns. All covenants, agreements,
representations and warranties made herein and in the certificates delivered pursuant hereto shall
survive the financing herein contemplated and shall continue in full force and effect so long as the
obligations hereunder are outstanding. Whenever in this Financing Agreement any of the parties
hereto is referred to, such reference shall be deemed to include the successors and assigns of such
party; and all covenants, promises and agreements by or on behalf of the Borrower which are
contained in this Financing Agreement shall bind its successors and assigns and inure to the benefit
of the successors and assigns of the Issuer, the Trustee, the Freddie Mac Servicer and the Credit
Facility Provider.
Section 8.3. Governing Law. This Financing Agreement and the Exhibits attached hereto
shall be construed in accordance with and governed by the laws of the State and, where applicable,
the laws of the United States of America.
Section 8.4. Modifications in Writing. Modification or the waiver of any provisions of
this Financing Agreement or consent to any departure by the Borrower therefrom, shall in no event be effective unless the same shall be in writing executed by the parties hereto, with respect to any
modification shall also be subject to the requirements of the Indenture, and shall require the prior
written consent of the Credit Facility Provider. Any such waiver or consent shall be effective only in
the specific instance and for the purpose for which given and so long as the interests of any
Bondholders are not adverseb affected and the Trustee consents in writing thereto. No notice to or
demand on the Borrower in any case shall entitle it to any other or further notice or demand in the
same circumstances.
Section 8.5. Further Assurances and Corrective Instruments. The Issuer, the Trustee
and Borrower agree that they will, from time to time, execute, acknowledge and deliver, or cause to
be executed, acknowledged and delivered, such supplements hereto and such further instruments as
may reasonably be required (including such supplements or further instruments requested by the
Credit Facility Provider) for correcting any inadequate or incorrect description of the performance of
this Financing Agreement.
Section 8.6. Captions. The section headings contained herein are for reference purposes
only and shall not in any way affect the meaning or interpretation of this Financing Agreement.
Section 8.7. Severabilily. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity of any other provision, and all other provisions shall remain in
full force and effect.
36
Section 8.8. Counterparts. This Financing Agreement may be signed in any number of
counterparts with the same effect as if the signatures thereto and hereto were upon the same
instrument.
Section 8.9. Amounts Remaining in Bond Fund or Other Funds. It is agreed by the
parties hereto that any amounts remaining in the Bond Fund or other funds and accounts established
under the Indenture upon expiration or sooner termination of the term hereof, shall be paid in
accordance with the Indenture.
Section 8.10. Effective Date and Term. This Financing Agreement shall become effective
upon its execution and delivery by the parties hereto, shall be effective and remain in full force from
the date hereof, and, subject to the provisions hereof, shall expire on such date as the Indenture shall
terminate.
Section 8.11. No Liability of Oficers; Limited Liability of Issuer. No recourse under or
upon any obligation, covenant, or agreement or in any Bonds, or under any judgment obtained
against the Issuer, or by the enforcement of any assessment or by any legal or equitable proceeding
by virtue of any constitution or statute or otherwise or under any circumstances, shall be had against
any incorporator, member, director, commissioner or officer, as such, past, present, or future, of the
Issuer, either directly or through the Issuer, or otherwise, for the payment for or to the Issuer or any
receiver thereof, or for or to the holder of any Bonds, of any sum that may be due and unpaid by the
Issuer upon any of the Bonds, Any and all personal liability of every nature, whether at common law
or in equity, or by statute or by constitution or otherwise, of any such incorporator, member, director,
commissioner or officer, as such, to respond by reason of any act or omission on his part or
otherwise, for the payment for or to the Issuer or any receiver thereof, or for or to the holder of any
Bonds, of any sum that may remain due and unpaid upon the Bonds or any of them, is hereby
expressly waived and released as a condition of and consideration for the execution of this Financing
Agreement and the issuance of the Bonds.
All obligations of the Issuer incurred hereunder shall be special obligations of the Issuer,
payable solely and only from the Trust Estate. The Bonds, and the interest thereon, do not constitute
a debt, liability, general or moral obligation or pledge of the faith or loan of the credit of the Issuer,
the State or any other political subdivision of the State, within the meaning of any constitutional or
statutory limitation or provisions. Neither the faith and credit nor the taxing power of the Issuer, the
State or any other political subdivision of the State is pledged to the payment of the principal of,
premium, if any, or interest on the Bonds or any other costs incident thereto.
Section 8.12. Cross References. Any reference in this Financing Agreement to an
“Exhibit”, an “Article”, a “Section”, a “subsection” or a “Paragraph” shall, unless otherwise
explicitly provided, be construed as referring, respectively, to an exhibit attached to this Financing
Agreement, an article of this Financing Agreement, a section of this Financing Agreement, a
subsection of the section of this Financing Agreement in which the reference appears and a paragraph
of the subsection within this Financing Agreement in which the reference appears. All exhibits
attached to or referred to in this Financing Agreement are incorporated by reference into this
Financing Agreement.
Section 8.13. Credit Facility Provider and Freddie Mac Servicer as Third-Par@
Beneficiaries. The parties hereto agee and acknowledge that the Credit Facility Provider and
Freddie Mac Servicer are third-party beneficiaries of this Financing Agreement.
Section 8.14. Credit Facilily Provider. Following the release of the Credit Enhancement
Agreement by the Trustee pursuant to the terms of the Indenture and the provision of an Alternate
Credit Facility, all notices to be provided to Freddie Mac hereunder shall be provided to the Credit
Facility Provider and payments to be made to Freddie Mac by the Freddie Mac Servicer or from the
Administration Expense Account shall be paid to the successor Credit Facility Provider.
Section 8.15. Non-Recoume, Limited Recourse and Recourse Provisions of Mortgage
Loan.
(a) Notwithstanding anything to the contrary herein, the Issuer expressly agrees
that the personal liability of the Borrower and the members in the Borrower shall be strictly and
absolutely limited to the property encumbered by the Bond Mortgage and other Bond Mortgage Loan
Documents, and the leases, rents, profits and issues thereof and any other collateral securing the
Bond Loan, except as provided in paragraph (b) herein below. If an Event of Default under this
Financing Agreement or under the Indenture shall occur, the Issuer shall not and may not seek any
judgment for a deficiency against the Borrower or any members of the Borrower (in their capacity as
members) in any action to foreclose, to exercise a power of sale, to confm any foreclosure or sale
under power of sale, or to exercise any other rights or power under or by reason of the Bond
Mortgage or any other security documents evidencing or securing the obligations of the Borrower
hereunder or with respect to the Bond ban; provided, however, that nothing herein shall prohibit to
the extent necessary judicial proceedings to foreclose the Bond Mortgage or other security
documents securing the obligations of the Borrower hereunder or to the extent necessary a judgment
or decree of specific performance of agreements and covenants hereunder (or the exercise of any
remedy available under the Tax Regulatory Agreement), excluded from the limitations of this
paragraph (a) by the first sentence hereof (other than a remedy for the payment of principal and
interest on the Bond Mortgage Note, if any), other than Bond Mortgage Loan payment covenants. In
the event any suit is brought on this Financing Agreement, or concerning the Bond Mortgage Loan or
any amount secured by the Bond Mortgage or other Bond Financing Documents as part of judicial
proceedings to foreclose the Bond Mortgage liens andor security interests, or to confirm any
foreclosure or sale pursuant to power of sale thereunder, any judgment obtained in such suit shall
constitute a lien on and will be and can be enforced only against, the property encumbered by the
Bond Mortgage and other Bond Financing Documents, and the leases, rents, profits and issues
thereof and not against any other asset of the Borrower or the member in the Borrower, and the terms
of such judgment shall expressly so provide.
(b) Notwithstanding paragraph (a) herein above, or anything to the contrary in
this Financing Agreement or any other Bond Financing Documents, the Borrower (but not the
member of the Borrower) shall be personally liable for, and the Issuer and the Trustee shall have the
right to seek a judgment for money damages (including a deficiency judgment) to enforce, payment
Of:
(i) The Issuer Fee and the Trustee’s Fees and reasonable extraordinary
costs and expenses of the Issuer and the Trustee, including but not limited to
reasonable legal fees and reasonable out-of-pocket costs and expenses of Bond
Counsel, counsel to the Issuer incurred in connection with the interpretation or
enforcement of the Indenture, this Financing Agreement or the other Bond Financing
38 I85
Documents and Extraordinary Trustee’s Fees and Expenses;
(ii) Indemnification under Article VI hereof and under equivalent
provisions of the other Bond Financing Documents; provided, however, said
indemnification provisions shall not be deemed to alter the nonrecourse obligation of
the Borrower or its member for the payment of principal and interest under the Bond
Mortgage Note;
(iii) Intentional misapplication of Project leases, rents, profits and issues
following any payment default (without regard to the expiration of any cure period, if
any) to the extent misapplied;
(iv) Liability for intentional waste, destruction or damage to the Project or
any part thereof;
(v) Tenant security deposits, to the extent not properly accounted for, or
prepaid rent, to the extent misapplied;
(vi) Any obligations under the Tax Regulatory Agreement (for purposes
of federal income taxation, the foregoing shall not be deemed to create any personal
liability for the payment of principal and interest due under the Bond Mortgage
Note);
(vii) Misapplication of any Net Proceeds;
all of which foregoing obligations shall bear interest at a rate equal to the lesser of (i) the maximum
rate of interest permitted under applicable law or (ii) eighteen percent (1 8%) per annum from the due
date thereof (or, in the case of liability and indemnification for removal or cleanup of environmental
hazards, from the date demand for payment thereof is made) until the date paid in full.
Nothing in this Section shall limit the right of the Issuer, the Trustee, Freddie Mac Servicer or
Freddie Mac to proceed against the Borrower to recover any fees owing to any of them or any actual
out-of-pocket expenses (including but not limited to actual out-of-pocket attorneys’ fees incurred by
any of them) incurred by any of them in connection with the enforcement of any rights under this
Financing Agreement. Nothing in this Section shall limit any right that Freddie Mac may have to
enforce any Bond Financing Document personally against the Borrower.
(c) As among the Issuer, the Trustee and Freddie Mac, the provisions of this
Section 8.15 are subject in all events to the provisions of the Intercreditor Agreement.
(End of Article VI11 - Signatures to follow)
39 tBb
IN WITNESS WHEREOF, the parties hereto have executed this Financing Agreement
through their duly authorized officers, all as of the date first set forth above.
CITY OF CARLSBAD, CALIFORNIA
By:
Name:
Title:
Attest:
City Clerk
s-1
IN WITNESS WHEREOF, the parties hereto have executed this Financing Agreement
through their duly authorized officers, all as of the date first set forth above.
U.S. BANK, N.A., as Trustee
By:
Name:
Title:
s-2
IN WITNESS WHEREOF, the parties hereto have executed this Financing Agreement
through their duly authorized officers, all as of the date first set forth above.
SANTA FE RANCH, LLC, a Delaware limited
liability company
By: CASA Partners 11, L.P., an Illinois limited
partnership, its sole member
By: Henderson Global Investors GP, L.L.C., a
Delaware limited liability company, its
general partner
By:
Terry D. Senger
Director, Acquisitions & Dispositions
s-3
IN WITNESS WHEREOF, the parties hereto have executed this Financing Agreement
through their duly authorized officers, all as of the date first set forth above.
FEDERAL HOME LOAN MORTGAGE
CORPORATION
By:
Douglas A. Westfall
Director, Multifamily Affordable Housing
EXHIBIT A
FORM OF AMENDED AND RESTATED PROMISSORY NOTE
$15,920,000
CITY OF CARLSBAD, CALIFORNIA
VARIABLE RATE DEMAND MULTIFAMILY
HOUSING REVENUE REFUNDING BONDS
SERIES A OF 1993
(SANTA FE RANCH APARTMENTS
FIKIA LA COSTA APARTMENTS PROJECT)
AMENDED AND RESTATED PROMISSORY NOTE
As of ,2002 $15,920,000
FOR VALUE RECEIVED, SANTA FE RANCH, LLC, a Delaware limited liability company
(the “Borrower”), does hereby promise to pay to the order of the CITY OF CARLSBAD,
CALIFORNIA (the “Issuer”) at the principal office of U.S. BANK, N.A., in San Francisco,
California or any successor thereto (the “Trustee”) designated as such by that certain Amended and
Restated Indenture of Trust, dated as of May 1,2002, by and between the Issuer and the Trustee (the
“Indenture”), relating to the issuance of the Issuer’s Variable Rate Demand Multifamily Housing
Revenue Refunding Bonds Series A of 1993 (Santa Fe Ranch Apartments fMa La Costa Apartments
Project) (the “Bonds”), in lawful money of the United States of America, the principal sum of
$15,920,000, to pay all other amounts due and owing under the Financing Agreement (hereinafter
defined) and to make payments with respect to principal of, premium, if any, and interest on this
Note, and to prepay the principal balance hereof, in like money, in the amounts and at the times
specified in the Indenture and in Article IV of that certain Amended and Restated Loan Agreement
dated as of May 1, 2002, by and among the Issuer, the Trustee and the Borrower (the “Financing
Agreement”). All capitalized terms used in this Note and not otherwise defined herein shall have the
meanings as set forth in the Indenture and in that Reimbursement and Security Agreement dated as of
Mortgage Corporation (“Freddie Mac”). - 1,2002 (the “Reimbursement Agreement”) between the Borrower and The Federal Home Loan
THIS NOTE AMENDS AND RESTATES IN FULL THAT PROMISSORY NOTE DATED
AS OF MAY 1, 1993 IN THE AMOUNT OF $15,920,000 BY LA COSTA PARTNERS
(PREDECESSOR IN INTEREST TO THE BORROWER) IN FAVOR OF THE ISSUER.
Interest (‘Note Interest”) shall accrue on the unpaid principal of this Note from, and
including, the Closing Date until paid in full at an annual rate as follows:
(a) Variable Rate. If the interest rate on the Bonds is a Variable Rate, a variable
rate of interest which floats and changes with, and is equal to, the Variable Rate. The
Borrower shall pay upon receipt of invoice therefor from the Servicer: (i) interest accrued for
those days of the month for which the Servicer knows the Note Interest rate; and (ii) the most
A- 1 (4
recently determined Note interest rate plus two percentage points (2%) for those days of the
month for which Servicer does not know the Note Interest rate; or
(b) Reset Rate. If the interest rate on the Bonds is a Reset Rate, the Reset Rate;
or
(c) Fixed Rate. If the interest rate on the Bonds is the Fixed Rate, the Fixed Rate
adjusted to include additional interest, if any, necessary to ensure that monthly payments of
Note Interest are sufficient to provide for payment of regularly scheduled interest on the
Bonds.
Note Interest shall automatically and simultaneously change with each corresponding change in the
interest rate on the Bonds under the Indenture. Notwithstanding any other provision of this Note to
the contrary, Note Interest shall not exceed the Maximum Rate, as the Maximum Rate may change in
accordance with the Indenture. During the Variable Rate Period, Note Interest shall be computed on
the basis of the actual number of days elapsed over a year of 365 or 366 days, as applicable. During
any other period, Note Interest shall be computed on the basis of a 360-day year comprised of twelve
30-day months.
The Borrower’s repayment obligations under the Financing Agreement shall be reduced from
time to time by and to the extent of any amounts drawn under the Credit Facility (as defined in the
Indenture) and applied to the payment of debt service on the Bonds, provided that the Borrower has
reimbursed the Credit Facility Provider (as defined in the Indenture) fully for such amounts. This
Note matures on June 1, 2016, unless prepaid in accordance with the terms hereof and of the
Financing Agreement. This Note shall be secured by that First Deed of Trust and Assignment of
Rents and Fixture Filing, dated as of May 1, 1993, from La Costa Partners to First Trust of
California, National Association, as originally executed as it may be from time to time assigned,
supplemented and amended.
In addition to the payment of the Borrower’s obligations under the Financing Agreement this
Note evidences the. Borrower’s obligation to pay the following amounts as due under the
Reimbursement Agreement:
(a) Interest on Credit Advances and Non-Liquidity Withdrawals. Accrued but
unpaid interest on any Outstanding Credit Advances and Non-Liquidity Withdrawals, from
the date such Credit Advance was made by Freddie Mac or the date of the Non-Liquidity
Withdrawal to the date on which the Credit Advance is reimbursed or the Non-Liquidity
Withdrawal is replenished, as applicable, at the Default Rate.
(b) Interest on. Liquidity Advances. Accrued but unpaid interest on each
outstanding Freddie Mac Liquidity Advance, from the date such Liquidity Advance was
made, at the Liquidity Rate to the date on which reimbursement of such Liquidity Advance is
due, and thereafter at the Default Rate until such Liquidity Advance is reimbursed.
(c) Liquidity Use Fee. A Liquidity Use Fee with respect to Liquidity
Withdrawals not yet replenished (after as well as before judgment).
A-2
(d) Freddie Mac Credit Facility Fee. One-twelfth of the Freddie Mac Credit
Facility Fee as calculated in accordance with Section 3.7 of the Reimbursement Agreement.
(e) Freddie Mac Liquidity Facility Fee. One-twelfth of the Freddie Mac
Liquidity Facility Fee, if applicable, as calculated in accordance with Section 3.7 of the
Reimbursement Agreement.
(f) Servicing Fee. One-twelfth of the annual Servicing Fee.
(g) Bond-Related Fees. One-twelfth of the Bond Fee Component payable
pursuant to the Financing Agreement, for application to fees payable by the Borrower to: (i)
U.S. Bank, N.A., as Trustee for the Bonds;(ii) Stem Brothers & Co. as Remarketing Agent;
and (iii) the City of Carlsbad, California, as Issuer.
(h) Principal Reserve Fund Deposit. The scheduled monthly deposit to the
Principal Reserve Fund as specified in the Principal Reserve Schedule attached to the
Reimbursement Agreement as Exhibit A.
This Note is subject to all of the terms, conditions, and provisions of the Financing
Agreement, including those respecting prepayment and the acceleration of maturity. The outstanding
principal hereof is subject to acceleration at the same time or times and .under the same terms and
conditions, and with the same notice, if any, as provided under the Indenture for the acceleration of
payment of the Bonds. Notwithstanding anything to the contrary contained .herein or in the
Financing Agreement, the payments in respect of the loan evidenced hereby shall be suffkient to
pay, when due (whether at stated maturity, upon redemption before maturity, upon acceleration of
stated maturity, upon tender and purchase or otherwise), the principal of and premium, if any, and
interest on the Bonds at any time outstanding.
Any prepayment of the principal of this Note will result in a redemption of a corresponding
amount of the Bonds. A redemption premium may be payable in connection with such redemption.
If this Note is prepaid by a voluntary prepayment or a mandatory prepayment, the Borrower shall
pay, in addition to the other amounts due under this Note, a prepayment premium equal to the
premium, if any, due upon redemption of the corresponding Bonds as provided in the Indenture. The
Borrower shall pay any prepayment premium with Eligible Funds (as defined in the Indenture) other
than from a draw under the Credit Facility. The Borrower acknowledges that the Credit Facility
Provider is not credit enhancing the payment of any prepayment premium on the Mortgage Loan or
premium on the redemption or purchase in lieu of redemption of any of the Bonds.
No payment to be applied as a prepayment (whether voluntary or mandatory) of principal of
this Note shall be credited against the unpaid principal of this Note until the date on which Bonds in a
like amount are redeemed or defeased pursuant to the Indenture. Until the Borrower’s payment is
credited as a prepayment, the amount of the intended prepayment shall continue to be unpaid
principal of this Note and shall continue to bear interest to the date of prepayment.
The Borrower may voluntarily prepay principal of this Note only during the periods or on the
dates, as appropriate, that the corresponding principal on the Bonds may be redeemed in accordance
with the terms of the Indenture.
wcSoc\893190v3UZ062.0028
A-3
\93
Notwithstanding anythmg to the contrary in this Note or the Financing Agreement, the
obligation of the Borrower evidenced by this Note shall be subject, in all cases, to the provisions of
Section 8.15 ofthe Financing Agreement.
The Borrower hereby acknowledges that, pursuant to the Indenture, the Issuer is assigning to
the Trustee all of the Issuer’s right, title and interest in and to this Note.
This Note is a contract made under and shall be construed in accordance with and governed
by the laws of the State of California.
[REMAINDER OF PAGE LEFT BLANK]
[Borrower’s Signature Page to Promissory Note]
SANTA FE RANCH, LLC, a Delaware limited
liability company
By: CASA Partners II, L.P., an Illinois limited
partnership, its sole member
By: Henderson Global Investors GP, L.L.C., a
Delaware limited liability company, its
general partner
By:
Terry D. Senger
Director, Acquisitions & Dispositions
A-5
Pay to the order of US. BANK, N.A., as Trustee, without recourse.
CITY OF CARLSBAD, CALIFORNIA
By:
Name:
Title:
[SIGNATURE PAGE TO ENDORSEMENT OF PROMISSORY NOTE]
A-6
EXHIBIT B
LEGAL DESCRIPTION
Table of Contents
ARTICLE I
DEFINITIONS
Definitions ............................................................................................................... 4
Interpretation .......................................................................................................... 5
ARTICLE I1
REPRESENTATIONS. WARRANTIES AND COVENANTS
Representations. Warranties and Covenants of the Issuer ..................................... 6
Representations. Warranties and Covenants of the Borrower ............................... 7
Arbitrage and Rebate Fund Calculations ............................................................. 11
Representations and Warranties of the Trustee .................................................... 11
Enforcement of Bond Financing Documents 11
Tax Covenants 11 ....................................................................................................... ........................................................
ARTICLE 111
THE BOND MORTGAGE LOAN
Conditions to Eflectiveness ofAmendments ......................................................... 13
Bond Mortgage Loan Terms: Servicing ................................................................ 13
Assignment to Trustee ........................................................................................... 14
Damage: Destruction and Eminent Domain ......................................................... 14
Compliance with Usuv Laws ............................................................................... 14
Initial Deposits ...................................................................................................... 14
Investment ofFunds .............................................................................................. 14
ARTICLE IV
LOAN PAYMENTS
Payments Under the Bond Mortgage Note: Independent Obligation of Borrower16
Payments to Rebate Fund ..................................................................................... 19
Option to Prepay Bond Mortgage Loan ............................................................... 19
Borrower's Obligations Upon Redemption or Tender ......................................... 19
Reserved ................................................................................................................ 20
Payment of Certain Fees and Expenses Under the Bond Mortgage Note ............ 16
Principal Reserve Fund ........................................................................................ 19
Mortgage Taxes .................................................................................................... 20
Section 1.1.
Section 1.2.
Section 2.1.
Section 2.2.
Section 2.3.
Section 2.4.
Section 2.5.
Section 2.6.
Section 3.1.
Section 3.2.
Section 3.3.
Section 3.4.
Section 3.5.
Section 3.6.
Section 3.7.
Section 4.1.
Section 4.2.
Section 4.3.
Section 4.4.
Section 4.5.
Section 4.6.
Section 4.7.
Section 4.8.
i
Table of Contents
(continued)
ARTICLE V
SPECIAL COVENANTS OF BORROWER
Section 5.1.
Section 5.2.
Section 5.3.
Section 5.4.
Section 5.5.
Section 5.6.
Section 5.7.
Section 5.8.
Section 5.9.
Section 5.10.
Section 5.1 1 .
Section 5.12.
Section 5.13.
Per$ormance of Oblrgatzons 21 .. ..................................................................................
Compliance With Applicable Laws ....................................................................... 21
Indenture Provisions ............................................................................................. 21
Borrower To Maintain Its Existence; Cert$cation of No Default ....................... 23
Credit Facility ....................................................................................................... 21
Borrower to Remain Qualified in State and Appoint Agent ................................. 23
Arbitrage and Rebate Collections; Tax-Exempt Status of the Bonds 24
Sale or Other Transfer ofproject 23
Right to Pe$orm Borrower’s Obligations ............................................................ 24
Notice of Certain Events ....................................................................................... 24
Survival of Covenants ........................................................................................... 24
Access to Project andRecords; Reports 25
Operating Statements 24
......................................................................... ...................
............................................................................................
...............................................................
ARTICLE VI
INDEMNIFICATION
Section 6.1. Indemnification: .................................................................................................... 27
Section 6.2. Limitation With Respect to the Credit Facility Provider ...................................... 30
ARTICLE VI1
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default ................................................................................................... 31
Section 7.3. No Remedy Exclusive ............................................................................................ 32
Section 7.4. Agreement to Pay Attorneys . Fees and Expenses ................................................. 32
Section 7.5. No Additional Waiver Implied by One Waiver ..................................................... 33
Section 7.6. Rights of Credit Facility Provider ........................................................................ 33
Section 7.2. Remedies on Default ............................................................................................. 31
ARTICLE VI11
MISCELLANEOUS
Section 8.1. Notices .................................................................................................................. 34
Section 8.2. Concerning Successors and Assigns ..................................................................... 36
Section 8.4. Modifications in Writing ....................................................................................... 36
Section 8.6. Captions ................................................................................................................ 36
Section 8.3. Governing Law ..................................................................................................... 36
Section 8.5. Further Assurances and Corrective Instruments .................................................. 36
ii
Table of Contents
(continued)
.. Severabrlrty ....................................................................... ..... ......... ........................
Counterparts ..................................................................... ..... ......... ...................... 31
Amounts Remaining in Bond Fund or Other Funds ...................................... ....... 31
EffectiveDate and Term ................................................................. ...... ........ ........37
NO Liability of Oficers; LimitedLiability oflssuer ......................................... .... 31
Cross References .....................................................................................................
Credit Facility Provider Provider and Freddie Mac Servicer as Third-party
Beneficiaries ......................................................................... .. ............ ....................
CreditFacility Provider .................................................................. ..... ........ .........38
Nan-Recourse, Limited Recourse and Recourse Provisions Of MOr@W han...38
Section 8.7.
Section 8.8.
Section 8.9.
Section 8.10.
Section 8.11.
Section 8.12.
Section 8.13.
Section 8.14.
Section 8.15.
EXHIBIT A - FORM OF AMENDED AND RESTATED PROMISSORY NOTE
EXHIBIT B - LEGAL DESCRIPTION
iii
WHEN RECORDED RETURN TO:
Troutman, Sanders, Mays & Valentine LLP
1 11 1 East Main Street,
Richmond, VA 23219
Attention: Vaughan Gibson Aaronson
KUTAK ROCK LLP DRAFT 5/1/02
INTERCREDITOR AGREEMENT
among
CITY OF CARLSBAD, CALIFORNIA,
as Issuer
U.S. BANK, N.A.
as Trustee
and
FEDERAL HOME LOAN MORTGAGE CORPORATION,
as Freddie Mac
$15,920,000
City of Carlsbad, California
Multifamily Housing Revenue Refunding Bonds,
Series A of 1993
(Santa Fe Ranch Apartments f/Wa
La Costa Apartments Project)
Dated as of May 1,2002
FHLMC LoanNo. 002694336
OI4W064.03
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT (this “Agreement”) is dated as of May 1,
2002, and is made among CITY OF CARLSBAD, CALIFORNIA, (the “Issuer”), U.S. BANK,
N.A., a national banking association (the “Trustee”), and FEDERAL HOME LOAN
MORTGAGE CORPORATION (“Freddie Mac”).
WITNESSETH:
WHEREAS, the Issuer has previously issued its Multifamily Housing Revenue
Refunding Bonds Series A of 1993 (La Costa Apartments Project) (the “Bonds”) in the principal
amount of $15,920,000, the proceeds of which were used to fund a loan pursuant to a Loan
Agreement dated as of May 1, 1993 (the “Prior Financing Agreement”) between the Issuer and
La Costa Partners, a California general partnership (the “Prior Owner’) (now succeeded in
interest by Santa Fe Ranch, LLC, the “Owner”) which Prior Financing Agreement has been
amended and restated by that certain Amended and Restated Loan Agreement dated as of May 1,
2002 (the “Financing Agreement”) among the Issuer, the Owner and the Trustee; and
WHEREAS, the Issuer issued the Bonds pursuant to an Indenture of Trust dated as of
May 1,1993 (the “Original Indenture”) between the Issuer and First Trust of California, National
Association (now succeeded in interest by the Trustee) which Original Indenture has been
amended and restated by that Amended and Restated Indenture of Indenture of Trust dated as of
May 1,2002 between the Issuer and the Trustee (the “Indenture”); and
WHEREAS, to provide for payment when due of the principal of and interest on, and the
purchase price of, the Bonds, the Prior Owner has previously caused Bank of America National
Trust and Savings Association (the “Bank”) to issue to the Trustee for the benefit of Bond
owners an Irrevocable Direct Pay Letter of Credit (the “Prior Letter of Credit”) pursuant to the
terms of a Reimbursement Agreement, dated as of May 1, 1993, between the Prior Owner and
the Bank, and
WHEREAS, the Owner decided to replace the Prior Letter of Credit and has caused to be
delivered to the Trustee on , 2002 (the “Delivery Date”) a Credit Enhancement
Agreement dated as of May 1, 2002 (the “Credit Enhancement Agreement”) between Freddie
Mac and the Trustee which will provide for (i) draws in an amount equal to Guaranteed
Payments with respect to the Bond Mortgage Loan and (ii) liquidity draws by the Trustee to the
extent remarketing proceeds are insufficient to pay the Purchase Price of the Bonds (other than
Purchased Bonds) while the Bonds bear interest at a Variable Rate; and
WHEREAS, Reilly Mortgage Group, Inc. (the “Servicer”) shall act as initial servicer for
the Bond Mortgage Loan; and
WHEREAS, to secure the Prior Owner’s obligations under the Financing Agreement, the
Bond Mortgage Note and the other Bond Mortgage Documents, the Prior Owner has caused to
be delivered to the Issuer and assigned to the Trustee a First Deed of Trust and Assignment of
Rents and Fixture Filing dated as of May 1, 1993, as amended (the “Bond Mortgage”) and an
Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants dated as
of May 1, 1993, as amended (the “Regulatory Agreement”); and
01-404064.03
WHEREAS, to evidence the Owner’s reimbursement obligations to Freddie Mac for
draws made under the Credit Enhancement Agreement, the Owner and Freddie Mac have entered
into a Reimbursement and Security Agreement dated as of even date herewith (the
“Reimbursement Agreement”); and
WHEREAS, to secure the Owner’s reimbursement obligations to Freddie Mac under the
Reimbursement Agreement, the Owner will execute and deliver to Freddie Mac on the Delivery
Date a Multifamily Deed of Trust, Assignment of Rents and Security Agreement dated as of
even date herewith (the “Reimbursement Mortgage”) with respect to the Project including the
real property described on Exhibit A hereto; and
WHEREAS, the lien of the Reimbursement Mortgage is subordinate in priority to the lien
of the Bond Mortgage and the Regulatory Agreement; and
NOW, THEREFORE, the Issuer, Trustee and Freddie Mac, in consideration of the
mutual promises contained herein and in connection with Freddie Mac’s delivery of the Credit
Enhancement Agreement and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
AGREEMENTS
Section 1. Defined Terms. Unless otherwise defined herein, or unless the context
clearly indicates otherwise, each term used in this Agreement including in the Recitals set forth
above, and which is defined in the Indenture or the Reimbursement Agreement, shall have the
meaning given to such term by the Indenture or the Reimbursement Agreement, as applicable.
As used herein, the following terms shall have the meanings set forth below:
“Bond Documents” means the Indenture, the Financing Agreement, Bond Mortgage, the
Bond Mortgage Note, the Regulatory Agreement (and any other agreement relating to rental
restrictions on the Project), the Remarketing Agreement, any Tender Agent agreement and this
Intercreditor Agreement, and any and all other documents, instruments and agreements executed
and delivered in connection with the issuance, sale, delivery and/or remarketing of the Bonds as
each such agreement or instrument may be or has been amended, modified or supplemented Erom
time to time.
“Cap Assignment” means (a) the Interest Rate Hedge Assignment and Security
Agreement dated as of May 1, 2002 between the Owner and Freddie Mac or @) and any
assignment by the Owner of any subsequent hedge to Freddie Mac, in each case as such may be
amended, modified or supplemented from time to time
“Credit Facility Documents” means the Reimbursement Agreement, the Reimbursement
Mortgage, the Pledge Agreement with respect to the Bonds, the Cap Agreement, the Cap
Assignment with respect to the Bonds and any other document evidencing or securing the
obligations of the Owner pursuant to the Reimbursement Agreement.
“Mortgagee” means the Trustee as beneficiary under the Bond Mortgage.
01404064.03 2
“Wrongful Dishonor” means the failure of Freddie Mac to honor a draw made in
accordance with the terms of the Credit Enhancement Agreement (which draw strictly complies
with, and conforms to, the terms and conditions of the Credit Enhancement Agreement).
Section 2. Rules of Construction. The words “hereof,” “herein,” “hereunder,” “hereto”
and other words of similar import refer to this Agreement in its entirety.
The terms “agree” and “agreements” contained herein are intended to include and mean
“covenant” and “covenants.”
References to Articles, Sections, and other subdivisions of this Agreement are to the
designated Articles, Sections and other subdivisions of this Agreement as originally executed.
The headings of this Agreement are for convenience only and shall not define or limit the
provisions hereof.
All references made (a) in the neuter, masculine or feminine gender shall be deemed to
have been made in all such genders, and (b) in the singular or plural number shall be deemed to
have been made, respectively, in the plural or singular number as well.
Section 3. Exercise of Rights and Remedies by Freddie Mac.
A. Until either (a) a Wrongful Dishonor has occurred and is continuing, or
(b) the Credit Enhancement Agreement terminates in accordance with its terms:
(i) Except as provided in Sections 3(C) and 3(D), without the prior
written consent of Freddie Mac, the Trustee may not exercise any of its rights and
remedies as Mortgagee under the Bond Mortgage or as a secured party with
respect to the liens and security interests created by the Financing Agreement or
take any action to declare the outstanding balance of the Bonds or the Bond
Mortgage Note to be due pursuant to the Indenture or the Financing Agreement or
to foreclose the lien of the Bond Mortgage, to seek the appointment of a receiver
or to collect rents or realize upon any other collateral held as security for the
Bonds or file or join in the filing of any judicial proceeding to collect the
indebtedness secured by the Bond Mortgage.
(ii) Any and all consents and approvals of the Trustee as Mortgagee
required under the Bond Mortgage shall be given only with the prior written
consent of Freddie Mac, in its sole discretion.
(iii) The application of the proceeds of insurance or condemnation
(“Insurance/Condemnation Proceeds”) shall be solely as directed in writing by
Freddie Mac, in accordance with the terms of the Reimbursement Mortgage and
subject to the requirement that excess proceeds remaining after the use of such
Insurance/Condemnation Proceeds as so directed by Freddie Mac for the repair,
restoration, rebuilding or alteration of the Project shall be used by the Trustee for
01404064.03 3 259
the purpose of redeeming the Bonds in accordance with the terms of the
Indenture.
(iv) Except as provided in Sections 3(C) and 3(D), any and all demands
permitted to be made by the Mortgagee under the terms of the Bond Mortgage
shall be made only by or at the written direction of Freddie Mac, in its sole
discretion, (the Mortgagee may request, however, that Freddie Mac, in its
discretion, provide such direction).
(v) Except as provided in Sections 3(C) and 3(D), Freddie Mac, in its
sole discretion, shall have the sole right to direct the Trustee to waive or forebear
any term, condition, covenant or agreement of the Bond Mortgage applicable to
the Owner as mortgagor, or any breach thereof, other than a covenant that might
adversely impact the tax-exempt status of the Bonds.
(vi) Except as provided in Sections 3(C) and 3(D), Freddie Mac shall
control all of the Mortgage Rights (as such term is defined below) and Freddie
Mac shall have the right, power and authority to direct the Trustee with respect to
all decisions in connection with the Bond Mortgage, which pursuant to its terms
may be made by the Mortgagee, except that Freddie Mac shall not have the right
to direct the Trustee to take or refrain from taking action that would adversely
impact the tax-exempt status of the Bonds. The parties hereto agree that the
Owner has agreed to make monthly Bond Mortgage Loan payments under the
Reimbursement Agreement to the Servicer by wiring such funds in immediately
available moneys in the manner and at the times set forth in the Reimbursement
Agreement. “Mortgage Rights” means, with respect to the Bond Mortgage Loan,
all rights of the Issuer, the Trustee and/or the Mortgagee under the Bond
Mortgage (other than those rights specifically excluded below) including without
limitation, the right to receive any and all Bond Mortgage Loan payments
thereunder and all of the rights and interests under the Bond Mortgage, and to vest
in its independent contractor, including the Servicer, such rights, powers and
authority as may be necessary to implement any of the foregoing; “Mortgage
Rights” does not mean, and expressly excludes (a) the Issuer’s rights under
Sections 4.2, 6.1 and 7.4 of the Financing Agreement with respect to payment of
fees and expenses and indemnification and includes the Issuer’s right to receive
notices, reports and other statements and its right to consent to certain matters;
(b) the right to receive payments relating to the redemption premium of a
redeemed Bond; (c) the Issuer’s and the Trustee’s right to require the Owner to
pay rebate, meet continuing disclosure requirements and the right to enforce the
Tax Regulatory Agreement; and (d) the Trustee’s rights to enforce the Owner’s
obligations to pay fees and expenses of the Trustee and to provide indemnification
to the Trustee pursuant to Sections 4.2, 6.1 and 7.4 of the Financing Agreement;
provided, however, that the enforcement of such rights of the Trustee or the Issuer
is limited as provided in Sections 3(C) and 3(D) (such rights of the Issuer and
Trustee are referred to as “Mortgagee Retained Rights”).
01404062.03 4
(vii) Trustee and Issuer covenant and agree neither to file nor join in the
filing of any involuntary petition involving the Owner under the federal
bankruptcy laws or other federal or state reorganization, receivership, insolvency
or similar proceeding without the prior written consent of Freddie Mac.
(viii) The Trustee shall not acquire by subrogation, contract or otherwise
any lien upon or other estate, right or interest in the Project or any rents or
revenues therefrom that are not subject to the terms of this Agreement.
(ix) Upon the initiation of any liquidation or reorganization of Owner
or any of the entities comprising Owner or any of the partners or beneficial
owners of any such entity (Owner and all such entities, partners and owners
hereinafter collectively referred to as the “Owner Parties”) in or by the filing of
any bankruptcy, insolvency or receivership proceeding or upon the initiation of
any involuntary liquidation, dissolution or reorganization proceeding involving an
Owner Party, then, in any such case, any payment or distribution, whether in cash,
property or securities, to which Trustee or Issuer would be entitled pursuant to the
Indenture, Bond Mortgage Note, Financing Agreement or Bond Mortgage, other
than payments made with respect to the Mortgagee Retained Rights, shall instead
be paid over to Freddie Mac for application as provided in the Reimbursement
Agreement until all amounts due to Freddie Mac under the Reimbursement
Agreement have been paid in full.
(x) Trustee and Issuer irrevocably authorize Freddie Mac to take any
action (but Freddie Mac has no obligation to take any such action, in which case
Trustee or Issuer may proceed), with respect to any payment or distribution, other
than payments made with respect to the Mortgagee Retained Rights, whether in
cash or securities, as described in Section (ix) above (in the name of Freddie Mac
or in the name of the Trustee and Issuer or otherwise, as Freddie Mac may deem
necessary or advisable for the enforcement of the provisions of this Agreement)
to:
(1) demand, sue for, collect and receive every such payment or
distribution described in Section (ix),
(2) file claims and proofs of claims in any statutory or
nonstatutory proceeding,
(3) vote the full amount of the Bond Mortgage Loan in its sole
discretion in connection with any resolution, arrangement, plan of
reorganization, compromise, settlement or extension, and
(4) take all such other action (including, without limitation, the
right to participate in any composition of creditors and the right to vote the
amount of the Bond Mortgage Loan at creditors’ meetings for the election
of trustees, acceptances of plans and otherwise), as Freddie Mac may
01404064.03 5 ZCb
deem necessary or advisable for the enforcement of the provisions of this
Agreement.
Trustee and Issuer agree, upon the initiation of any liquidation or
reorganization of any Owner Party by the filing of any bankruptcy, insolvency or
receivership proceeding or upon the initiation of any involuntary liquidation,
dissolution or reorganization proceeding involving an Owner Party, and at the
sole expense of the Owner or if the Owner fails to pay, at the expense of Freddie
Mac, promptly
(1) to take such action as may be requested at any time by
Freddie Mac to deliver any instruments required to collect the amount of
the Bond Mortgage Loan, on demand therefor, and
(2) to execute and deliver such powers of attorney,
assignments or other instruments as may be requested by Freddie Mac in
order to enable Freddie Mac to enforce any and all claims upon or in
respect of the Bond Mortgage Loan and to collect and receive any and all
payments or distributions which may be payable or deliverable at any time
upon or in respect of the Bond Mortgage Loan.
Nothing herein contained shall be deemed to preclude Trustee and Issuer
from appearing or being heard in any bankruptcy, insolvency or other similar
proceedings affecting an Owner Party, nor from collecting from an Owner Party
the full Bond Mortgage Loan amount due to Trustee and Issuer (through
subrogation to the rights of Freddie Mac or otherwise) after all amounts due to
Freddie Mac under the Reimbursement Agreement and the Reimbursement
Mortgage shall have been paid in full, nor from enforcing the Mortgagee Retained
Rights in accordance with this Agreement.
For purposes of this Agreement, Freddie Mac’s claim or entitlement in any
bankruptcy proceeding for post-petition interest shall be senior to the Bond
Mortgage Loan and subject to the rights, benefits, terms and provisions of this
Agreement as if it were part of the Reimbursement Agreement obligations.
Except as to its Mortgagee Retained Rights, Trustee and Issuer hereby agree not
to seek adequate protection payments in any Owner or Owner Party bankruptcy
proceeding without the prior written consent of Freddie Mac, which may be
granted or withheld by Freddie Mac in Freddie Mac’s sole discretion. Further, at
the sole expense of the Owner or if the Owner fails to pay, at the expense of
Freddie Mac, Trustee and Issuer agree to join, and not object to, or otherwise
contest any request for relief from the automatic stay of 11 U.S.C. § 362
requested by Freddie Mac in any bankruptcy proceeding of Owner, in order to
enable Freddie Mac to foreclose or exercise any of its rights or remedies under the
Reimbursement Mortgage with respect to the Project.
(xi) Upon the occurrence and during the continuation of a default under
the Reimbursement Mortgage, all amounts payable (including, but not limited to,
01404064.03 6
any payment pursuant to an assignment of rents) under the Reimbursement
Mortgage shall be paid in full before any payment or distribution, whether in cash
or in other property, shall be made to Trustee or Issuer for the purpose of making
Bond Mortgage Loan payments under the Financing Agreement. During the
continuation of any default under the Reimbursement Mortgage, any payment or
distribution, whether in cash or other property, which would otherwise (but for the
provisions contained in this Agreement) be payable or deliverable under the Bond
Mortgage, shall be paid or delivered directly to Freddie Mac in satisfaction of any
amounts payable (including, but not limited to, any payment pursuant to an
assignment of rents) under the Reimbursement Mortgage (including any interest
thereon accruing after the occurrence of any such default) until all such amounts
shall have been paid in full or the default shall have been cured or waived by
Freddie Mac.
(xii) If any payment of the rents or other revenues arising from an
assignment of rents contained in the Bond Mortgage or distribution of security or
the proceeds of any of the foregoing is collected or received by Issuer or Trustee
in contravention of any term, condition or provision of this Agreement, Issuer or
Trustee, as applicable, immediately will deliver the same to Freddie Mac, in
precisely the form received (except for the endorsement or the assignment by
Issuer or Trustee, as applicable, where necessary), and, until so delivered, the
same shall be held in trust by Issuer or Trustee, as applicable. Neither the Issuer
nor Trustee shall be required to deliver moneys to Freddie Mac paid by the Owner
pursuant to the Mortgagee Retained Rights or any rebate payments due under the
Indenture.
(xiii) Neither the Trustee nor Issuer shall have any right to contest any of
the procedures or actions taken by Freddie Mac to exercise its remedies under the
Reimbursement Agreement or the Reimbursement Mortgage so long as Freddie
Mac is in compliance with its agreements hereunder.
B. Freddie Mac shall have the right to delegate to the Servicer any of the
Mortgage Rights. Neither Freddie Mac, the Servicer, nor any of its respective officers,
directors, employees or agents shall be liable to the Trustee for any action taken or
omitted to be taken in good faith by Freddie Mac or the Servicer in connection with the
Bond Mortgage Loan by reason of Freddie Mac's control of the Mortgage Rights.
C. If the Owner defaults in the performance or observance of any covenant,
agreement or obligation of Owner set forth in the Regulatory Agreement, and if such
default remains uncured for a period of 60 days after Owner and Freddie Mac receive
written notice from the Trustee or Issuer stating that a default under the Regulatory
Agreement, Financing Agreement or Indenture has occurred, and specifying the nature of
the default, the Issuer and Trustee shall have the right to seek specific performance of the
provisions of the Regulatory Agreement, Indenture or Financing Agreement or to
exercise their other rights or remedies thereunder; including the right to accelerate the
Bond Mortgage Note or cause the mandatory redemption or tender of the Bonds or to
foreclose under the Bond Mortgage. The Trustee and the Issuer agree to refrain from the
01404064.03 7
exercise of any such remedies in all events if Freddie Mac cures any such default by the
Owner within 60 days after receipt by Freddie Mac of written notice of any such default,
if such default is capable of being cured by the payment of money or, in the event of any
other default, Freddie Mac commences to cure such default and thereafter diligently
proceeds with such cure, provided, that if any default shall last beyond 60 days, there
must be delivered to the Trustee and the Issuer an opinion of bond counsel that an
extension of the cure period to a date set forth in the opinion will not cause interest on the
Bonds to become includable in gross income for federal income tax purposes.
D. If the Owner defaults in the performance of its obligations to the Issuer
pursuant to the Mortgagee Retained Rights or the Owner’s obligations under the
Financing Agreement to make rebate payments or to comply with continuing disclosure
requirements or to make payments to the Trustee owed pursuant to Sections 4.2 or 6.1 of
the Financing Agreement for fees, expenses or indemnification, the Issuer or the Trustee
shall have the right to exercise all its rights and remedies thereunder; provided, however
that so long as the Credit Enhancement Agreement is in effect and no Wrongfd Dishonor
has occurred and is continuing, neither the Trustee nor the Issuer shall have the right to
accelerate the Bond Mortgage Note or the Bonds or cause mandatory tender or
redemption of the Bonds or to foreclose under the Bond Mortgage. So long as the Credit
Enhancement Agreement is in effect and no Wrongful Dishonor has occurred and is
continuing, the Trustee and Issuer agree to refrain from the exercise of any such remedies
if Freddie Mac cures any such default by the Owner within 60 days after receipt by
Freddie Mac of written notice of any such default, if such default is capable of being
cured by the payment of money or, in the event of any other default, Freddie Mac
commences to cure such default and thereafter diligently proceeds with such cure.
E. Trustee acknowledges that the Servicer and/or Freddie Mac may hold cash
or other collateral and reserves to secure the Reimbursement Agreement, which collateral
is not available as security for the Bonds. All cash collateral that is held by the Servicer
that is primarily held as security for the payment of principal and interest on the Bonds or
to reimburse Freddie Mac for payments made under the Credit Enhancement Agreement
shall be invested in obligations the interest on which is excludable from gross income for
federal income tax purposes and not a specific item of tax preference for purposes of
federal alternative minimum tax for individuals.
F. Trustee and the Issuer acknowledge that Freddie Mac may make advances
to the Owner pursuant to the terms of the Reimbursement Agreement and the
Reimbursement Mortgage or any extension, modification, amendment, renewal,
consolidation, increase, reinstatement or supplement thereto. Trustee acknowledges that
the obligations evidenced by the Reimbursement Agreement and secured by the
Reimbursement Mortgage, together with accrued interest thereon, plus fees, advances and
expenses due and owing by Owner thereunder may increase in the future and the
agreements of Trustee set forth in this Agreement shall extend to such amounts that are
currently, and that may become, due and owing under the Reimbursement Mortgage.
01-404061.03 8
Section 4. Exercise of Rights and Remedies by Trustee; Transfer of Loan.
A. Upon (a) the occurrence and during the continuation of a Wrongful
Dishonor, or @)upon the termination or replacement of the Credit Enhancement
Agreement in accordance with its terms and no further Obligations (as defined in the
Reimbursement Agreement) remaining outstanding, Freddie Mac shall not exercise the
rights and remedies referred to in Section 3 hereof without the prior written consent of
the Trustee and the Issuer, and the actions set forth in Section 3 shall be taken by the
Trustee or the Issuer in their sole discretion.
B. Unless a Wrongful Dishonor shall have occurred and be continuing,
neither the Trustee nor the Issuer shall, without the prior written consent of Freddie Mac,
dispose of the Bond Mortgage Loan, transfer the Financing Agreement, the Bond
Mortgage Note, the Bond Mortgage or any other related document or any right or interest
in the Bond Mortgage Loan, the Financing Agreement, the Bond Mortgage Note, the
Bond Mortgage or any other related document other than in the case of the Trustee, to a
successor Trustee pursuant to the terms of the Indenture.
Section 5. Application of Moneys Received Upon Exercise of Remedies Under the
Bond Mortgage. Any and all amounts received or collected by the Trustee or Freddie Mac in
payment of the Bond Mortgage Loan as a result of the exercise of setoff rights, the liquidation of
any security interest created by the Bond Documents or the other Borrower Documents, the sale
(by foreclosure, power of sale or otherwise) of the Project under the Bond Mortgage or the
exercise of any remedies under any of the Bond Documents or the other Borrower Documents
against the Owner or the Project (including rents received from the appointment of a receiver)
shall be held by the Trustee or Freddie Mac, as the case may be, for the benefit of the Trustee
and Freddie Mac and will be applied as follows:
(a) Until either (i) a Wrongful Dishonor has occurred and is continuing, or
(ii) the Credit Enhancement Agreement terminates or is replaced and the Owner has no
further Obligations (as defined in the Reimbursement Agreement), such moneys held by
the Trustee and Freddie Mac shall be applied in such manner and in such order as Freddie
Mac, in its sole discretion, determines, subject, however, to the terms of the
Reimbursement Mortgage and Reimbursement Agreement;
(b) Upon and following the occurrence and continuance of the event described
in clause (a)(i) or the occurrence of the event described in clause (a)(ii) above, such
moneys held by the Trustee and Freddie Mac shall be applied in such manner and in such
order (to the extent permitted by the Bond Documents, the Reimbursement Security
Documents and applicable law) as the Trustee, in its sole discretion, determines as
required under the terms of the Indenture.
Section 6. Assignment of Rights. Issuer and Trustee each hereby agree that, following
a total defeasance of the Bonds, an acceleration of the principal amount of the Bonds or the
calling of all Bonds for redemption, when Trustee holds Eligible Funds or proceeds of a draw
under the Credit Enhancement Agreement under the Indenture or in accordance with written
Ol-lwO64.03 9
instructions provided by Freddie Mac (whether as a result of the payment by Freddie Mac under
the Credit Enhancement Agreement or otherwise) in an amount which shall be sufficient to pay
(a) the principal of all Bonds then Outstanding, and
(b) all accrued and unpaid interest on the Bonds then Outstanding to the date
of redemption, acceleration or defeasance,
such that the obligation of Freddie Mac under the Credit Enhancement Agreement is deemed to
be retired in full in accordance with its terms, then in such event, the Issuer or the Trustee, as
applicable, shall promptly do all of the following:
(i) Use all funds drawn under the Credit Enhancement Agreement as may be
necessary to promptly redeem, retire or defease all Outstanding Bonds at their face
amount plus any accrued interest, and, in the event any excess funds were paid to the
Trustee pursuant to a drawing under the Credit Enhancement Agreement, return such
excess funds to Freddie Mac promptly;
(ii) At the option of Freddie Mac, either reconvey, release and cancel, or
assign to Freddie Mac, all of their right, title and interest (other than the Mortgagee
Retained Rights) under the Bond Documents, other than the Regulatory Agreement, and
execute, acknowledge and deliver to Freddie Mac such instruments and documents as
may be reasonably necessary in connection with such reconveyance, release, cancellation
or assignment;
(iii) Deliver to Freddie Mac, in such form and to such place, as Freddie Mac
shall designate, all property due Freddie Mac pursuant to the provisions of the Indenture;
and
(iv) Return the Credit Enhancement Agreement to Freddie Mac.
Section 7. Substitution of Obligor.
7.1 Issuer and Trustee agree that, should Freddie Mac succeed to the interest
of Owner in the Project pursuant to a foreclosure sale or otherwise without having
implemented the provisions of Section 6 above, then Freddie Mac shall be the successor
to Owner for all purposes of the Bond Documents and Freddie Mac acknowledges and
agrees to be so treated as successor to the Owner; provided, however, that any and all
liability of Freddie Mac as successor in interest to the Owner’s interest under the Bond
Documents shall be limited to the period it owns the Project.
7.2 Following any succession by Freddie Mac to the right, title and interest of
Owner in the Project pursuant to paragraph 7.1 above, Freddie Mac shall have the right to
sell, transfer and/or assign its interest in the Project to any person or entity, provided that
Freddie Mac or such transferee delivers or causes to be delivered to Issuer and Trustee
concurrently with such transfer:
01404064.03 10
(i) a letter of credit or other credit enhancement facility which
complies with all applicable terms of the Indenture, if required pursuant to the
terms of the Indenture;
(ii) a written instrument assuming and agreeing to perform all
obligations of Owner under the Bond Documents to which the Owner is a party
accruing from and after the date of such transfer; and
(iii) an opinion of counsel to the transferee that such transferee has duly
assumed the obligations of the Owner under the Bond Documents to which the
Owner is a party and that each of the Bond Documents to which the Owner is a
party is a binding obligation of the transferee.
(iv) an opinion of bond counsel that such transfer will not cause
interest on the Bonds to be included in gross income for federal income tax
purposes.
Upon completion of any transfer in accordance with this Section 7.2, the liability
of Freddie Mac shall be limited to the period it owned the Project and Freddie Mac shall
thereafter be relieved of any further liability for Owner’s obligations under the Bond
Documents accruing from and after the date of such transfer. Any environmental liability
that Freddie Mac may incur as a result of its ownership of the Project following a
foreclosure or deed in lieu of foreclosure shall be expressly limited by the provisions of
any federal, state or local environmental statutes, rules, regulations or administrative
procedures pertaining to “lender liability”.
7.3 Issuer and Trustee agree that a purchaser may succeed to the interest of the
Owner in the Project pursuant to a foreclosure sale or otherwise provided that such
purchaser delivers or causes the delivery of the documents described in Section 7.2(i)
through 7.2(iii).
Section 8. Mortgage Loan Servicing. The identity of the Servicer being of material
importance to Freddie Mac, this Agreement is accepted by Freddie Mac on the basis, and with
the understanding, that the Servicer will be determined solely by Freddie Mac. The term
“Servicer” as used in this Agreement shall mean a multi-family seller and servicer approved by
Freddie Mac, which initially shall be Reilly Mortgage Group, Inc., and any permitted successor
or assign performing under the Freddie Mac Multifamily Seller/Servicer Guide (the “Guide”) or
any other person designated by Freddie Mac to service the Bond Mortgage Loan. Accordingly,
so long as the Credit Enhancement Agreement is in effect or any Obligations (as defined in the
Reimbursement Agreement) remain outstanding and no Wrongful Dishonor has occurred and is
continuing, the Issuer and the Trustee agree that Freddie Mac shall, in its discretion, have the
sole and exclusive (a) right to appoint the Servicer and arrange for the servicing of the Bond
Mortgage Loan and the Bond Mortgage and Financing Agreement in accordance with the terms
and conditions of the Guide, and (b) right to remove the Servicer (for any reason), terminate its
right to service the Bond Mortgage Loan, and appoint a new Servicer.
01404064.03 11
The Issuer and Trustee further acknowledge and agree that the Guide is subject to
amendment or termination without the consent of the Issuer, the Trustee or the Owner and that
none of the Issuer, the Trustee or the Owner shall have any rights under or be a third party
beneficiary under the Guide. The Issuer and the Trustee further acknowledge and agree that the
Servicer shall have no duties or obligations to the Trustee, the Issuer or the Owner under the
Guide or otherwise except as expressly set forth in the Bond Documents. The Trustee and Issuer
acknowledge and agree that any Servicer designated by Freddie Mac shall be paid a fee by the
Owner for its services. None of the Issuer, the Trustee or Freddie Mac shall have the obligation
to pay such fees from their own funds. In the event the Owner fails to make any payment
relating to fees, expenses or indemnification obligations to the Issuer or Trustee as required
under the Financing Agreement, the party, which has not received such payment, shall
immediately notify the Servicer of such failure.
Section 9. Representations, Warranties and Covenants.
(A) The Issuer represents, warrants and covenants to the other parties hereto
that:
(a) The Issuer has not received a notice in writing from the Internal
Revenue Service alleging that any event or act has occurred in the operation and
management of the Project which would adversely affect the exclusion of the
interest on the Bonds from gross income for federal income tax purposes or a
notice in writing from the Trustee concerning any event of default under any
Bond Document.
(b) The Issuer has all necessary power and authority to execute,
deliver and perform its obligations under and has duly authorized the execution,
delivery and performance of this Agreement. This Agreement is a legal, valid and
binding obligation of the Issuer enforceable in accordance with its terms; subject
to (i) applicable limitations of bankruptcy or equitable principles affecting the
enforcement of creditors’ rights, the effect of general principles of equity,
including without limitation, concepts of materiality, reasonableness, good faith
or fair dealing, and the possibility of the unavailability of specific performance or
injunctive relief, (ii) the exercise of judicial discretion and (iii) the legal remedies
against public entities in the State of California.
(c) The Issuer will not knowingly take or permit, or knowingly omit to
take or cause to be taken any action within its control that would adversely affect
the exclusion of the interest on the Bonds from gross income for federal income
tax purposes.
(B) The Trustee represents, warrants and covenants to the other parties hereto
that:
(a) The Trustee has no knowledge of and has no reason to believe that
any event or act has occurred which would adversely affect the exclusion of
OI-404064.03 12
21 3
interest on the Bonds from gross income for federal income tax purposes or of any
event of default under any Bond Document.
(b) The Trustee has all necessary power and authority to execute,
deliver and perform its obligations under and has duly authorized the execution,
delivery and performance of this Agreement. This Agreement is a legal, valid and
bindmg obligation of the Trustee enforceable in accordance with its terms.
(c) The Trustee will not knowingly take or permit, or knowingly omit
to take or cause to be taken any action within its control that would adversely
affect the exclusion of the interest on the Bonds from gross income for federal
income tax purposes.
(d) The Trustee will comply with the provisions of the Indenture, any
other Bond Documents to which it is a party, the Pledge Agreement and this
Agreement.
(C) Freddie Mac represents, warrants and covenants to the other parties hereto
that:
(a) Freddie Mac has all necessary power and authority to execute,
deliver and perform its obligations under and has duly authorized the execution,
delivery and performance of this Agreement. This Agreement is a legal, valid and
binding obligation of Freddie Mac enforceable in accordance with its terms.
(b) Freddie Mac will not knowingly take or permit, or knowingly omit
to take or cause to be taken any action within its control that would adversely
affect the exclusion of the interest on the Bonds from gross income for federal
income tax purposes.
Section 10. Subrogation. Issuer and Trustee agree that Freddie Mac shall be subrogated
to their rights and remedies under the Bond Documents (except with respect to any Mortgagee
Retained Rights) upon and to the extent of Freddie Mac’s payment (whether pursuant to the
Credit Enhancement Agreement or otherwise) of the principal of or interest on the Bonds or the
payment (whether pursuant to the Credit Enhancement Agreement or otherwise) or performance
of any obligation under the Bond Documents. Issuer and Trustee agree to cooperate with
Freddie Mac at Freddie Mac’s sole expense and liability in connection with Freddie Mac’s
enforcement of any of such rights and remedies and except as permitted under the terms of this
Agreement, agree not to take any actions that would prejudice the exercise of such rights of
subrogation unless in the opinion of Bond Counsel delivered to Issuer, Trustee and Freddie Mac
such action is necessary to preserve the exclusion from, gross income for federal income tax
purposes of interest on the Bonds.
Section 11. Counterparts. This Agreement may be executed in any number of
counterparts and all of such counterparts shall together constitute one and the same instrument.
0144064.03 13
Section 12. Amendment and Waiver. This Agreement and each provision hereof may
be amended to the extent and upon the conditions that the Indenture may be amended by an
instrument in writing signed by the parties hereto.
Section 13. Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be construed in accordance with and be governed by the law of the State
of California.
Section 14. Notices. All notices, demands, requests, consents, approvals, certificates or
other communications (“Communications”) required under this Agreement shall be in writing,
mailed (registered or certified mail, return receipt requested and postage prepaid), hand
delivered, with signed receipt, or sent by nationally recognized overnight courier and shall be
sufficiently given and shall be deemed to have been properly given if given in the manner in
which notices are to be given and to the addresses as provided in the Indenture. All
communications which the Trustee, Issuer or Owner is required to send to any other person
pursuant to the Financing Agreement, Indenture, any other Bond Document or any other
Borrower Documents shall also be sent to the Servicer. All communications required to be sent
to Freddie Mac or the Servicer pursuant to the terms of any Bond Document and any other
Borrower Document shall be sent to the following addresses:
To Freddie Mac:
Federal Home Loan Mortgage Corporation
8 100 Jones Branch Drive
Mail Stop B4Q
McLean, VA 22102
Attention: Director of Multifamily Management
and Information Control
Facsimile: (703) 714-3273
Telephone: (703) 903-2000
with a copy to:
Federal Home Loan Mortgage Corporation
8200 Jones Branch Drive
McLean, VA 22102
Attention: Associate General Counsel - Multifamily
Facsimile: (703) 903-2885
Telephone: (703) 903-2000
Legal Department
014040M.03 14
To the Servicer:
Reilly Mortgage Group, Inc.
Suite 925
2000 Corporate Edge
McLean, VA 22102
Telephone: (703) 760-4700
Facsimile: (703) 760-4750
Attention: Loan Servicing
To the Trustee:
U.S. Bank, N.A.
Suite 2550
One California Street
San Francisco, CA 941 1 1
Attention: Multifamily Housing
To the Issuer:
City of Carlsbad, California
2965 Roosevelt Street, Suite B
Carlsbad, California 92008-2389
Attention: Finance Director
Section 15. Benefit of Agreement. This Agreement shall be binding upon and inure to
the benefit of the Issuer, the Trustee, the Servicer and Freddie Mac and their respective
successors and assigns. No other party shall be entitled to any benefits hereunder, whether as a
third party beneficiary or otherwise. This Agreement shall be deemed terminated without the
necessity for further or confirmatory instruments upon the earlier of (i) the date, if any, upon
which an Alternate Credit Facility is delivered to replace the Credit Enhancement Agreement
unless the Alternate Credit Facility Provider replaces Freddie Mac hereunder, (ii) the date the
Credit Enhancement Agreement terminates in accordance with its terms and all of the Owner’s
obligations to Freddie Mac under the Reimbursement Agreement have been paid in full, or (iii)
the date that the Indenture is released and terminated and all of the Owner’s obligations to
Freddie Mac under the Reimbursement Agreement have been paid in full.
Section 16. Counterparts. This Agreement may be executed in any number of
counterparts and all of such counterparts shall together constitute one and the same instrument.
Section 17. Acknowledgement and Consent. The Issuer and Trustee acknowledge and
consent to the granting by the Owner to Freddie Mac of the Reimbursement Mortgage, which
shall be a second priority deed of trust. The Issuer and Trustee acknowledge and agree that
Freddie Mac is a third-party beneficiary of the Financing Agreement, the Bond Mortgage Note
and the Bond Mortgage with the right to enforce the provisions of such Financing Agreement,
01404064.03 15
Bond Mortgage Note and Bond Mortgage subject to the terms of this Agreement. The Issuer and
Trustee agree and acknowledge that to the extent the Bond Mortgage grants or reserves to the
Owner any rights that are not granted or reserved to the Owner under the Reimbursement
Mortgage, the Owner must comply with the terms of the Reimbursement Mortgage and a failure
to do so shall be an Event of Default under the Reimbursement Agreement.
Section 18. Trustee. The Trustee accepts the duties imposed upon it by this Agreement
and agrees to perform those duties but only upon and subject to the following express terms and
conditions:
(a) the Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement and no implied covenants or obligations shall be
read into this Agreement against the Trustee;
(b) as to the existence. or nonexistence of any fact or as to the sufficiency or
validity of any instrument, paper or proceedings, the Trustee shall be entitled to rely in
good faith upon a certificate purportedly signed by an authorized signatory of Freddie
Mac as sufficient evidence of the facts contained in such certificate;
(c) the permissive right of the Trustee to do things enumerated in this
Agreement shall not be construed as a duty and the Trustee shall not be answerable for
other than its negligence or willful misconduct;
(d) none of the provisions contained in this Agreement shall require the
Trustee to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties or in the exercise of any of its rights or powers under this
Agreement except for any liability of the Trustee arising from its own negligence or
willful misconduct;
(e) the Trustee is entering into this Agreement solely in its capacity as Trustee
under the Indenture and not in its individual or corporate capacity; and
(r> all of the provisions of the Indenture related to the duties, obligations,
standard of care, protections and immunities from liability afforded the Trustee under the
Indenture shall apply to the Trustee under this Agreement.
Section 19. Invalidity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity of any other provision and all other provisions shall
remain in full force and effect.
Section 20. Effectiveness. This Agreement shall be effective as of the Closing Date.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
01404064.03 16
01404064.03 17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their respective duly authorized officers as of the date first above written.
CITY OF CARLSBAD, CALIFORNIA, as
Issuer
By:
Name:
Title:
[Signature Page to Santa Fe Ranch Intercreditor Agreement]
01-404064.03
01-404064.03
US. BANK, N.A., as Trustee
By:
Name:
Title: Corporate Trust Officer
[Signature Page to Santa Fe Ranch Intercreditor Agreement]
19
WITNESSES:
OI4040M.03
FEDERAL HOME LOAN MORTGAGE
CORPORATION, as Freddie Mac
By:
Name: Douglas A. Westfall
Title: Director. Multifamily Affordable Housina
[Signature Page to Santa Fe Ranch Intercreditor Agreement]
20
STATE OF CALIFORNIA )
COUNTY OF SAN DIEGO )
) ss:
The foregoing instrument was acknowledged before me this __ day of , 2002,
corporation duly created and existing under the laws of the State of California, on behalf of said
corporation. He/she is personally known to me or has produced a valid driver’s license as
identification.
by , as of CITY OF CARLSBAD, CALIFORNIA, a municipal
Notary Public, State of California
Print Name:
My Commission Expires:
My Commission Number:
01404064.03 21
STATE OF CALIFORNIA )
COUNTY OF )
) ss:
The foregoing instrument was acknowledged before me this __ day of
2002, by , as Corporate Trust Officer of U.S. BANK, N.A., a national banking
association organized under the laws of the United States of America, on behalf of the bank.
Said person is personally known to me or has produced a valid driver’s license as identification.
Notary Public, State of California
Print Name:
My Commission Expires:
My Commission Number:
01404061.03 22 2-23
COMMONWEALTH OF VIRGINIA
COUNTY OF FAIRFAX, to wit:
The foregoing instrument was acknowledged before me this __ day of
2002, by Douglas A. Westfall, as Director of FEDERAL HOME LOAN MORTGAGE
CORPORATION, a shareholder-owned government-sponsored enterprise organized and existing
under the laws of the United States, on behalf of said enterprise. Said person is personally
hown to me or has produced a valid driver’s license as identification.
Notary Public, Commonwealth of Virginia
Print Name:
My Commission Expires:
My Commission Number:
01404064.03 23
EXHIBIT A
LEGAL DESCRIPTION
01404064.03
AFTER RECORDING RETURN TO:
Robert J. Whalen, Esq.
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
For Recorder’s Use
ASSIGNMENT AND ASSUMPTION AGREEMENT
(BOND DOCUMENTS)
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (BOND DOCUMENTS) (this
“Agreement”) dated this - day of May, 2002, is by and among the CITY OF CARLSBAD,
CALIFORNIA, a municipal corporation (the “Issuer”), U.S. BANK, N.A. a national banlang
association, as Trustee (the “Trustee”), THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY, a Wisconsin corporation (the “Seller”) and SANTA FE RANCH, LLC, a Delaware
limited liability company (the “Purchaser”).
WHEREAS, pursuant to the terms of that certain Indenture of Trust dated as of May 1,1993 (the
“Prior Indenture”), between the Issuer and the Trustee (formerly known as “First Trust of California,
National Association and as US. Bank Trust National Association”), as trustee, and that certain Loan
Agreement dated as of May 1, 1993 (the “Prior Loan Agreement”), among the Issuer, the Trustee and
La Costa Partners, a California general partnership (the “Original Owner”), the Issuer issued its
Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, Series A of 1993 (La Costa
Apartments Project) (the “Bonds”), in the original aggregate principal amount of $1S,920,000, and
loaned the proceeds derived from the sale of the Bonds (the “Loan”) to the Original Owner to effect a
refimding of the Issuer’s Multifamily Housing Revenue Bonds, Series A of 1985 (La Costa
Apartments Project) (the “1985 Bonds”), the proceeds of which financed the acquisition,
construction, equipping and development of a multifamily residential rental development located in
the City of Carlsbad, California and more particularly described on Exhibit “A” attached hereto and
made a part hereof (the “Project”); and
WHEREAS, in connection with the Loan and the issuance of the Bonds, the Original Owner
executed and delivered that certain First Deed of Trust and Assignment of Rents and Fixture Filing
dated as of May 1,1993 and recorded on May 12,1993, as Instrument No. 1993-0332835 ofthe
Official Records (the “Of€icial Records”) of the County of San Diego, California (the “Bond
Mortgage”) and each of the other security, loan and financing documents, agreements, instruments
and certificates more particularly described on Exhibit “B attached hereto and incorporated herein
by reference, which evidence, secure or otherwise relate to the Loan or the Bonds, including the
Regulatory Agreement described below (collectively, the “Existing Bond Documents”); and
WHEREAS, the Issuer, the Original Owner and the Trustee executed and delivered that certain
Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants dated as of
May 1, 1993 and recorded on May 26,1993, as Instrument No. 1993-0332834 ofthe Official
Records which agreement was amended by that First Amendment to Amended and Restated
Regulatory Agreement and Declaration of Restrictive Covenants dated as of June 1,1998 and
recorded on June 25, 1998, as Instrument No. 1998-0391000 of the Offkial Records (collectively,
the “Prior Regulatory Agreement”) prescribing the use of the proceeds of the Loan in compliance
with Section 103(b)(4)(A) of the Internal Revenue Code of 1954, as amended, to protect the tax-
exempt status of the interest payable on the Bonds; and
1651SwO31 :DALLAS: 1033251.3
WHEREAS, as a condition precedent to the approval by the Issuer of the transfer of the Project from
the Original Owner to the Seller, the Issuer required that the Seller deliver or cause to be delivered to
the Trustee, for the benefit of the holders of the Bonds, an irrevocable letter of credit to secure the
payment of the principal of, and interest on, the Bonds and to provide for the payment of the
purchase price thereof in accordance with the terms of the Prior Indenture; and
WHEREAS, Bank of America National Trust and Savings Association (the “BW) issued Letter of
Credit No. 3010485, as amended (the “Current Letter of Credit”), for the account of the Seller and
delivered the Current Letter of Credit to the Trustee; and
WHEREAS, the Seller is conveying the Project to the Purchaser, as a result ofwhich the Seller
desires to assign its rights under the Existing Bond Documents listed in Exhibit B to the Purchaser,
and the Purchaser desires to assume the Existing Bond Documents, effective as of the date of such
conveyance, and to take certain other actions required for conveyance of the Project under the
Existing Bond Documents, subject in all respects to the provisions of this Agreement; and
WHEREAS, the Purchaser and Federal Home Loan Mortgage Corporation (“Freddie Mac”) have
entered into that certain Reimbursement and Security Agreement dated as of May 1,2002 (the
“Reimbursement Agreement”), pursuant to which Freddie Mac has agreed to issue a new Credit
Enhancement Agreement for the account of the Purchaser (the “Credit Enhancement Agreement”) to
provide credit enhancement and liquidity support for the Bonds and to deliver the Credit
Enhancement Agreement to the Trustee in substitution for the Current Letter of Credit; and
WHEREAS, at the request of the Freddie Mac, the Purchaser has agreed to execute and deliver a
Bond Pledge, Security and Custody Agreement dated as of May 1,2002 by and between Freddie
Mac and the Purchaser (the “New Pledge Agreement”) in consideration of Freddie Mac’s agreement
to issue and deliver the Credit Enhancement Agreement as security for the Bonds; and
WHEREAS, in connection with the transfer of the Project and the delivery of the Credit
Enhancement Agreement, (i) the Prior Indenture is being amended and restated by that Amended and
Restated Indenture of Trust dated as of May 1,2002 between the Issuer and the Trustee (the
“Indenture”), (ii) the Prior Loan Agreement is being amended and restated by that Amended and
Restated Loan Agreement dated as of May 1,2002 among the Issuer, the Trustee and the F’urchaser
(the “Loan Agreement“) and (iii) the Prior Regulatory Agreement is being amended and restated by
that Second Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants
dated as of May 1,2002 by and among the Issuer, the Trustee and the Purchaser (the ”Regulatory
Agreement”); and
WHEREAS, under the Prior Indenture and certain of the other Existing Bond Documents, the
consent of the Issuer and the Trustee are required for certain of the actions occurring with respect to
the transfer of the Project;
NOW, THEREFORE, in consideration of the conveyance of the Project, the assignment of certain
rights under the Existing Bond Documents, the assumption of the Existing Bond Documents, the
execution and delivery of the Indenture, the Loan Agreement and the Regulatory Agreement, the
foregoing premises and the mutual promises, covenants and agreements set forth herein and other
good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and
intending to be legally bound, the parties hereto agree as follows:
2
16515wO31 :DALLAS: 1033251.3
1. Recitals; Defined Terms. The recitals set forth herein are incorporated herein by reference.
Any capitalized terms not otherwise defined herein shall have the meaning set forth in the Prior
Indenture.
2. Agreement to Purchase. The Purchaser has agreed to purchase the Project pursuant to the
terms of that certain Real Estate Purchase and Sale Agreement dated February 25,2002 between the
Seller and the Purchaser (as amended, the “Purchase Agreement”). Simultaneously with the delivery
of this Agreement, the Purchaser is purchasing the Project subject to the Existing Bond Documents.
3. Assignment of Riehts of Seller. The Seller hereby grants, bargains, sells, conveys, assigns
and sets over to the Purchaser, its successors and assigns, all of the Seller’s rights and benefits in, to
and under the Existing Bond Documents from and after the date hereof (the “Effective Date”),
without recourse, representation or warranty, express or implied, except as may be set forth in the
Purchase Agreement. The Seller acknowledges and agrees that, under the terms of the Existing Bond
Documents, it remains responsible for all of Seller’s obligations, rights, responsibilities and liabilities
arising under the Existing Bond Documents prior to the Effective Date.
4. Assumution of Oblieations by Purchaser. The Purchaser acknowledges and accepts the terms
of the Prior Loan Agreement, the Bond Mortgage, the Prior Indenture, the Prior Regulatory
Agreement and each of the other Existing Bond Documents. The Purchaser hereby agrees to pay, at
the times, in the manner and in the amounts provided in the Existing Bond Documents, the principal
of, premium, if any, and interest on the Loan which are, by the terms of the Existing Bond
Documents, payable after the Effective Date. The Seller hereby delegates to the Purchaser, and the
Purchaser hereby assumes the Seller’s obligations, rights, responsibilities and liabilities set forth in
each of the Existing Bond Documents required to be observed or performed by the Seller from and
after the Effective Date. Further, the Purchaser agrees to observe and perform each and every term,
covenant, provision and condition required to be observed or performed by the Seller from and after
the Effective Date under each of the Existing Bond Documents. As of the date of tlus Agreement, (i)
the Purchaser has absolutely no defenses, offsets, claims or counterclaims to the payment and
performance of the obligations and duties assumed under this Section 4, and (ii) neither the Issuer nor
the Seller has any knowledge of the existence of any default or “Event of Default” (as defined
therein) under the Existing Bond Documents or the occurrence of any event which, with the giving of
notice or the passage of time, or both, would constitute such a default or Event of Default.
5. Consent to and ADuroval of Transfer. The Issuer and the Trustee by their execution of this
Agreement, [the Bank] and the Remarketing Agent by their execution of their respective consent
certificates attached hereto as Exhibits “D” and “E, respectively, each hereby consent to the transfer
of the Project from the Seller to the Purchaser, the assignment to Purchaser of Seller’s rights and
benefits under the Existing Bond Documents and the assumption by Purchaser of Seller’s obligations
under the Existing Bond Documents in accordance with the terms hereof. The Trustee, by execution
of this Agreement, hereby represents and warrants that the certifications made by it as set forth on
Exhibit “C” attached hereto are true and accurate. The Issuer and the Trustee each hereby
acknowledge and agree that all fees and expenses of the Issuer and the Trustee, respectively, which
accrued or became due prior to the date of this Agreement have been paid in full and that, relying
upon opinions of counsel and certificates furnished to them in connection with the transfer, all of the
other conditions precedent to transfer of the Project contained in the Prior Indenture and the other
Existing Bond Documents have been satisfied or duly and validly waived by the party entitled
thereto. The respective parties hereto represent that the proper officers or representatives of each of
the parties hereto are hereby, or by proper proceedings therefor, authorized and empowered, and each
3
1651SOOO31 :DALLAS: 1033251.3 2-2r
of the parties hereto agrees, to execute such further instruments as, in the opinion of counsel to the
respective parties, are necessary in order to effectuate the transfer herein authorized.
The parties agree that consent to this transfer by the Issuer and Trustee is not intended
to impair the security for repayment of the Loan or the security for the obligations under the Existing
Bond Documents, as the case may be, and the performance of the obligations thereunder. Purchaser
will not assert that such consent has impaired the ability of the Issuer or Trustee to enforce their
respective rights, remedies and recourse with respect to such security;
6. Representations of Purchaser. The Purchaser represents to the Seller, the Issuer, and the
Trustee that:
(a) The Purchaser has the management ability, or will retain a property manager
with the management ability, to operate the Project in the manner contemplated by the Existing Bond
Documents and the Indenture, the Loan Agreement and the Regulatory Agreement;
(b) The Purchaser will reimburse the Issuer and the Trustee for all reasonable
fees, costs and expenses incurred by such parties in connection with their consent to the sale and
transfer of the Project to the Purchaser;
(c) The Purchaser will pay the reasonable attorneys’ fees and expenses of the
Issuer and the Trustee in connection with their consent to the sale and transfer of the Project to the
Purchaser;
(d) The Purchaser agrees to execute such other modification agreements,
supplemental mortgage documents and financing statements which do not materially alter the terms
of this Agreement as the Issuer or the Trustee may reasonably request to further evidence the
Purchaser’s obligations assumed hereunder;
(e) The Purchaser agrees to acquire new title insurance policies to insure the
Issuer’s or the Trustee’s respective liens and security interests with respect to the Project; and
(f) The Purchaser is qualified to do business in the State of California.
7. Remesentations of Seller. The Seller represents that:
(a) The Project has been in compliance with all provisions of the Prior
Regulatory Agreement continuously since the date of issuance of the Bonds, and up to and including
the date of the Prior Regulatory Agreement with all provisions of the Regulatory Agreement and
Declaration of Restrictive Covenants dated as of April 1,1985 and recorded on April 26, 1985, as
Instrument No. 85-146610 in the Official Records; and
(b) The Seller is not in default under any of its obligations under the Existing
Bond Documents as of the date hereof.
8. Representations of Parties. Each of the parties hereto severally represents, each with respect
only to itself, as of the date hereof, as follows:
4
1651500031 :DALLAS: 1033251.3
(a) It is duly organized and existing under the laws of the jurisdiction of its
organization, with full power and authority to execute and deliver this Agreement, to enter into the
transactions contemplated hereby and to perform all the duties and obligations to be performed by it
hereunder;
(b) It has duly authorized this Agreement and the transactions contemplated
hereby and the performance of all the duties and obligations to be performed hereunder by all
necessary governmental, corporate andor limited liability company action;
(c) It has duly executed and delivered this Agreement, and this Agreement
constitutes its valid, legal and binding obligation; and
(d) The execution and delivery of this Agreement and the performance of the
transactions contemplated hereby will not violate any agreement by which it is bound or by which it
or any of its assets are affected, or its organizational documents or any statute, regulation, rule, order
or judgment applicable to it.
9. m. The parties hereto hereby agree that the address for notices to the “Purchaser,”
“Borrower,” “Developer,” “Mortgagor,” “Assignor” or any other term used to refer to the obligor
under the Existing Bond Documents, as the case may be, under the Existing Bond Documents is and
shall be as follows:
Santa Fe Ranch, LLC
c/o Henderson Global Investors (North America) Inc,
1 Financial Plaza, 19* Floor
Hartford, Connecticut 06103
Attention: James G. Martha
Telephone: (860) 723-8701
Telecopier: (860) 723-8601
With copies to:
Locke Liddell & Sapp LLP
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
Attention: Michael P. Petersilia
Telephone: (214) 740-8690
Telecopier: (214) 740-8800
10. Assumution of Fees. Costs. Etc. The Purchaser achowledges that from and after the
Effective Date, the Purchaser will be responsible for all fees, costs or payments due in accordance
with the Existing Bond Documents assumed hereunder.
11. Miscellaneous.
(a) Modifications and Amendments. This Agreement may only be modified,
altered or amended by an agreement in writing executed by all of the parties hereto.
5
1651500031 :DALLAS: 1033251.3
(b) Validitv of Provisions. Any provision of this Agreement which may prove
unenforceable under law shall not affect the validity of the other provisions hereof.
(c) Construction. This Agreement shall be construed in accordance with the laws
of the State of California without regard to the principles of conflicts of laws.
(d) Bindine. Effect. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
(e) Countemarts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which shall constitute one
and the same agreement.
(t) Recording. This Agreement shall be recorded in County of San Diego,
California. The recording of this Agreement is not intended to affect the priority of the Regulatory
Agreement or the Existing Bond Documents, and the Purchaser specifically agrees that the
Regulatory Agreement is senior in status and priority to any other claims or liens against the Project.
(9) Purchase Ameement to Control. The parties hereto agree that, without
affecting the rights of any other party hereunder, as between the Seller and the Purchaser, the
provisions of the Purchase Agreement shall control over any provision herein which is inconsistent
with the Purchase Agreement.
6
16515oW31 :DALLAS: 1033251.3
231
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by
their respective duly authorized representatives all as of the date and year first above written.
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY, a Wisconsin corporation
By: Northwestern Investment Management
Company, a Wisconsin corporation, its wholly
owned subsidiary and authorized
representative
By:
Name:
Title:
US. BANK, N.A., as Trustee
By:
Authorized Officer
SANTA FE RANCH, LLC, a Delaware limited
liability company
By: CASA Partners II, L.P., an Illinois limited
partnership, its sole member
By: Henderson Global Investors GP, L.L.C.,
a Delaware limited liability company, its
general partner
By:
Terry D. Senger
Director, Acquisitions &
Dispositions
7
1651SoOo31 :DALLAS: 1033251.3
1651500031 :DALLAS: 1033251.3
CITY OF CARLSBAD, CALIFORNIA
By:
City Manager
8
233
STATE OF CALIFORNIA )
>OUNTY OF
) ss.
)
3n , before me, , Notary Public,
)ersonally appeared
\-
0
0
personally known to me -or-
proved to me on the basis of satisfactory evidence to be the person(s) whose name(s)
islare subscribed to the within instrument and acknowledged to me that helshelthey
executed the same in hislherltheir authorized capacityQes), and that by hislherltheir
signature(s) on the instrument the person@), or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
3lgnature ut Notaly
OPTIONAL
rhough the data below is not required by law, it may prove valuable to persons relying on the document and could mvent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER
0 Individual 0 Corporate Officer
DESCRIPTION OF ATTACHED DOCUMENT
0 Partner(s)
0 Attorney-In-Fact Trustee@) 0 GuardianlConservator
fl Other:
Title@) 0 Limited 0 General
Title Or Type of DOcumenl
Number of Pages
Signer is representing:
Name Of Person(s) Or Entity(ies)
Date of DowmeM
Signer@) Other Than Named Above
1651SOOO31 :DALLAS: 1033251.3
EXHIBIT A
LEGAL DESCRIPTION
Lots 1 through 4 inclusive of Carlsbad Tract No. 84-7 in the City of Carlsbad, County of San Diego,
State of California, according to map thereof No. 1 1391, filed in the Office of the County Recorder
of San Diego County, December 17,1985.
Excepting therefrom, all minerals, mineral rights, oil, oil rights, natural gas, natural gas rights,
petroleum, petroleum rights, other hydrocarbon substances, geothermal steam, all underground water,
and all products derived from any of the foregoing, in or under or which may be produced from the
property which underlies a plane parallel to and 500 feet below the present surface of the property
together with the perpetual right of drilling, mining, exploring and operating therefor and storing in
and removing the same from the property or any other land, including the right to whipstock or
directionally drill and mine from lands other than the property, oil, water, or gas wells, tunnels and
shafts into, through or across the subsurface of the property, and to bottom such whipstocked or
directionally drilled wells, tunnels and shafts under the beneath or beyond the exterior limits thereof,
and to redrill, retunnel, equip, maintain, repair, deepen, and operate any such wells or mines, without,
however, the right to drill, mine, store, explore, and operate through the surface or the upper five
hundred (500) feet of the subsurface of the property; as reserved to Daon Corporation in Grant Deed
recorded October 29,1984, Official Records, Filepage No. 84-407544.
1
16515:Mx)31 :DALLAS: 1033251.3
EXHIBIT B
Existing Bond Documents
1.
2.
3.
4.
5.
6.
7.
8.
Indenture of Trust between the City of Carlsbad and US. Bank Trust National Association,
formerly known as “First Trust of California, National Association”, as Trustee, dated as of
May 1,-1993.
Loan Agreement among the Citv of Carlsbad. US. Bank Trust National Association. I formerlqknown as “First Trust of California, National Association”, and La Costa Partners, a
California general partnership, dated as of May 1, 1993.
First Deed of Trust and Assignment of Rents and Fixture Filing by La Costa Partners, a
California general partnership, as Trustor, to U.S. Bank Trust National Association, formerly
known as “First Trust of California, National Association”, as Beneficiary, dated as of May
1, 1993, and recorded on May 26, 1993, as Instrument No. 1993-0332835 of the Officials
Records of County of San Diego, California.
Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants by
and among the City of Carlsbad, La Costa Partners, a California general partnership, and U.S. Bank Trust National Association, formerly known as “First Trust of California, National
Association”, dated as of May 1, 1993 and recorded on May 26, 1993, as Instrument
No. 1993-9332734 of the Official Records of County of San Diego, California, as amended
by First Amendment to Amended and Restated Regulatory Agreement and Declaration of
No. 1998-0391000 of the Official Records of County of San Diego, California
Restrictive Covenants dated as of June 1,1998 and recorded on June 25, 1998, as InsmUnent
Developer Note dated as of May 26, 1993 from La Costa Partners, a California general
partnership, to the City of Carlsbad.
First Security Agreement dated as of May 1, 1993 by and between La Costa Partners and the
City of Carlsbad.
[Remarketing Agreement dated as of May 1,1993 by and between La Costa Partners
and Dean Witter Reynolds, Inc.]
Environmental Indemnity dated as of May 1, 1993 by and among the City of Carlsbad, La
Costa Partners and U.S. Bank Trust National Association, formerly known as “First Trust of
California, National Association.”
1
16515:Mx)31 :DALLAS: 1033251.3 23b
EXHIBIT C
EXISTING BONDS
The undersigned, a duly authorized officer of U.S. Bank, N.A. (the “Trustee”), hereby
certifies that, to the best of its knowledge:
(1) Neither the Prior Indenture, the Prior Loan Agreement, the Developer
Note, nor the Prior Regulatory Agreement has been amended, modified or rescinded, and
each such agreement remains in full force and effect.
(2) The principal amount of Bonds outstanding under the Prior Indenture is
(3) The Trustee is not aware of the existence of any “Event of Default” (as
respectively defined therein) under the Prior Indenture or the Prior Loan Agreement or
the occurrence of any event or the existence of any condition which, with the giving of
notice or the passage of time, or both, would constitute such an Event of Default. The
Trustee has not received notice from the Bank of an event of default under the
Application and Agreement for Direct Pay Letter of Credit dated as of June 1, 1998.
conversion of the interest rate on the Bonds from the Variable Rate.
$15,920,000.
(4) No proceedings have been commenced for the redemption of Bonds or the
(5) The Seller has filed with the Trustee all certificates and other documents
required to be so filed pursuant to the Prior Regulatory Agreement and the Prior Loan
Agreement.
(6) No amounts are currently due to the Trustee as fees or expenses.
(7) The Trustee consents to the sale of the Project by the Seller to the
Purchaser.
(8) The Administration Agreement has not been amended, modified or
rescinded, and remains in full force and effect and no amounts are due it under the
Administration Agreement.
1
16515Mx)31 :DALLAS: 1033251.3
EXHIBIT D
CONSENT CERTIFICATE OF THE BANK
Unless expressly defined herein, all capitalized terms used in this certificate (the “Consent
Certificate”) shall have the meanings ascribed to them in the Assignment and Assumption Agreement
(Bond Documents) dated as of May -, 2002 (the “Agreement”) to which this Consent Certificate is
attached. The undersigned hereby consents to the terms of the Agreement and the transfer of the
Project from the Seller to the Purchaser, the assignment to Purchaser of Seller’s rights and benefits
under the Existing Bond Documents and the assumption by Purchaser of Seller’s obligations under
the Existing Bond Documents in accordance with the terms of the Agreement.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:
Its:
Dated: May -, 2002
1651SoOo31 :DALLAS: 1033251.3
2-38
EXHIBIT E
CONSENT CERTIFICATE OF THE REMARKETING AGENT
The undersigned, a duly authorized officer of Stem Brothers & Co. hereby certifies as
follows:
1. Unless expressly defined herein, all capitalized terms used in this certificate
(the “Consent Certificate”) shall have the meanings ascribed to them in the Assignment and
Assumption Agreement (Bond Documents) dated as of May -, 2002 (the “Agreement”) to
which this Consent Certificate is attached.
2. The undersigned hereby consents to the terms of the Agreement and the
transfer of the Project from the Seller to the Purchaser, the assignment to Purchaser of
Seller’s rights and benefits under the Existing Bond Documents and the assumption by
Purchaser of Seller’s obligations under the Existing Bond Documents in accordance with the
terms of the Agreement.
3. Stem Brothers & Co. is now acting as the Remarketing Agent for the Bonds
pursuant to the terms of the Remarketing Agreement dated as of May 1, 1993, which has not
been amended, modified or rescinded and remains in full force and effect. No amounts are
due to it under the Remarketing Agreement.
STERN BROTHERS & CO.
Dated May -, 2002
By:
Its:
1651SOOO31 :DALLAS: 1033251.3
REMARKETING MEMORANDUM DATED MAY -, 2002
REMARKETING - NOT A NEW ISSUE
BOOK-ENTRY ONLY (See “RATING”) RATING: -
On May 27, 1993. in conneetion with the issuonce of the Bonds, Strodling Yocca Carlson & Rauth, a Pmfissionol Capomtion, Nemprl Beach, California, Bond Counsel, delivered its opinion thoi, based upon on analysis Of existing law4 regulations. rulings and court decirions and assuming. among other motters, continuing compliance subsequent lo the issuance of the Bonds with applicabieprovisions of the Internal Revenue Code of 1954. as amended (the
tarpurposes, except during any period tho1 such Bond is held by a “substantial wer” of the facilities o? re/inonced by the Bonds or by (I “relaledperson ” within “1954 Code’% and the Internal Revenue Code of 1986, os amended (the “1986 Code’y. interest on the Bonds is exeluded fmm gross income for/iderol income
the meoning ofSection 103(b)(13) of the 1954 Code. Bond Counsel’s opinion also stated that interest on the Bonds is exemptfrom personal income luxation by the State of CalKornia. See “TAX EXEMPTION herein. In the opinion of Bond Counsel. subject to the receipt of the cornem required der the Original Indenture, the replocement of the Letter of Credit securing the Bonds with the Credit Enhoncemmt Agreement and the execution and delivery of the Indenture. the Regulatory Agreement and the Financing Agreement (1) ore authorized and permitted by the Origlnd Indenture 08 heretofqle in effect, and (ii) will not adversely affect the exclusion fmm ~WSS income forfedend income tar purpose^ of interest on the Bond See “TMEXEMPTiON. **I
$15,920,000 City of Carlsbad, California
Variable Rate Demand Multifamily Housing Revenue Refunding Bonds Series A of 1993
(Santa Fe Ranch Apartments f/Wa/ LaCosta Apartments Project)
Issuance Date: May 27, 1993 Remarketing Date: May -, 2002
Due: June 1,2016
1993 (La Costa Apartments Project) in the principal amount of S15,920,000 (the “Bonds’7 pursuant to an Indenlure of Trust, dated as of May 1, 1993 (the The City of Carlsbad, California (the “Issuer“) has issued its Variable Rate Demand Multifamily Housing Revenue Refinding Bonds, Series A of
“nricinal Indenture*?. between the Citv of Carlsbad. California and U.S. Bank. N.A. (as successor in interest to First Trust of California National A&ation, the~“Tru;tke**). The proceeds of the Bonds were loaned (the “Bond Mortgag; Loan”) Io La Costa Parlners, a California general &&inenhip (the “Original Developer”), upon the terms and conditions of a Loan Agreement, dated as of May I, 1993 (the “Original Loan Agreement”), for the purpose of financing a multifamily rental apartment development located in the City of Carlsbad, California (the “Project”). The Original Developer’s right, title and interest in the Project was transferred to The Northwestem Mulual Life Insurance Company (the “Prior Developer”) on lune 23, 1998 pursuant to an Assignment and Assumption Agreement. The Prior Developer intends to transfer all of its right, title and interest in the Project to Santa Fe Ranch, L.L.C., a Delaware limited liability company (the “Bormwer”), pumt to a purchase contmct dated as of October 16, 2001, as amended. The Original Indenture and the Original Loan Agreement will be amended and restated by an Amended and Restated Indenture of TNSt dated as of May I, 2002 (the “Indenture”), between the Issuer and the Trustee, and an Amended and Restated Loan Agreement dated as of May I, 2002 (the “Financing Agreement”), between the Issuer, the TNStee and the Borrower.
issued on June 25, 1998 (the “Letter of Credit”). Simultaneously with the sale and transfer ofthe Project, the Letter of Credit is to be replaced by a Bank of America, N.A. is currently pmviding credit enhancement on the Bonds pursuant to the terms of an irrevocable letter of credit
direct pay Credit Enhancement Agreement (the “Credit Enhancement Agreement”) of Federal Home Loan Mortgage Corporation (“Freddie Mac”). The purpose of this Remarketing Memorandum is to provide information concerning the sale and transfer of the Project to the Borrower, the Borrower’s assumption of the Bond Mortgage Loan and the replacement of the Letter of Credit with the Credit Enhancement Agreement by Freddie Mac.
~
Freddie Mac
THE BONDS SHALL NOT BE A DEBT. EITHER GENERAL OR SPECIAL. OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF,AkD NErrHER-% STATE NORANYP6LiTICk SUfiIVISlON THEREOF SHALL BE L1-h THEREON. NEITHER THE FAITH, REVENUES, CREDIT NOR TAXING POWER OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF SHALL BE PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM (IF ANY), OR INTEREST ON THE BONDS. THE BONDS ARE PAYABLE, AS TO
PPINCIPAI.. PRRMIllM ill? ANY) AND INTEREST. SOLELY OIJT OF THE TRUST ESTATE WHICH ARE THE SOLE ASSETS OF THE ~ ”.” ISSUER PLEDGED THEREFOCAND THEN%NL.YO-THKEXTENT-HEREM PROV~~EDI NEITHER THE MEMBER^^ OF Tim ~- ~~~~ ~~~
BY REASON OF THEIR ISSUANCE. GOVERNING BODY OF THE ISSUER NOR ANY PERSONS EXECUTING THE BONDS SHALL BE LIABLE PERSONALLY ON THE BONDS
thereof registered in the name of Cede & Co., as nominee of the Depositary Trust Company, New York, New York. Individual purchasers will not The Bonds are to be remarketed as fully registered bonds in denominations of $100,000 or any integral multiple of $5,000 in excess
receive nhvsical deliverv of the Bands. The Bonds will bear interest at a Variable Rate until the earlier of their final rnaturitv Or redemotion Drior - r~~l~ ~~~ ~ to maturity or the occucenciifa Conversion Date:
The Bonds are subject to optional and mandatory redemption prior to stated maturity, purchase in lieu of redemption and optional and mandatory tender for purchase as described herein. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Indenture and the Financing Agreement.
Memorandum in its entirety to make an informed investment decision. This cover page contains cefiain information for quick reference only. It is not a summaw of this issue. Investors should read this Rdeling
The Bonds are offered. when as and if received by the Remarketinn Agent.
Legal matters incident to the sale and transfer of the Projecl lo the Borrower, the assumption of the Bond Mortgage Loan by the Borrower and the substitution of the Credit Enhancement Agreement for the Letter of Credit are subject to the approving opinion of Strsdling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Bond Counsel. Certain legal matters will be passed upon for the Issuer by its City Attorney, and for the Borrower by its counsel Lacke Liddell & S~DD LLP, Dallas. Texas. ; for Freddie Mac by its counsel Kutak Rock, LLP, Omaha, Nebraska,
..
Remarketing Agent
USE OF INFORMATION IN THIS REMARKETING MEMORANDUM
This Remarketing Memorandum, which includes the cover page and the Appendices, does not
constitute an offer to sell or the solicitation of an offer to buy any of the Bonds in any jurisdiction in
which it is unlawful to make such offer, solicitation, or sale. No dealer, salesperson, or other person has
been authorized to give any information or to make any representations other than those contained in this
Remarketing Memorandum in connection with the remarketing of the Bonds, and if given or made, such
information or representations must not be relied upon as having been authorized by the Issuer or the
Remarketing Agent.
The information set forth in this Remarketing Memorandum has been obtained from the
Borrower, from the sources referenced throughout this Remarketing Memorandum and from other
sources believed to be reliable. No representation or warranty is made, however, as to the accuracy or
completeness of information provided from sources other than the Borrower or the Remarketing Agent,
and nothing contained herein is or shall be relied upon as a guarantee of the Issuer, the Borrower or the
Remarketing Agent. This Remarketing Memorandum contains, in part, estimates and matters of opinion
which are not intended as statements of fact, and no representation or warranty is made as to the
correctness of such estimates and opinions, or that they will be realized.
Freddie Mac has not provided or approved any information in this Remarketing Memorandum
except with respect to the descriptions under the caption “FREDDIE MAC,” and takes no responsibility
for any other information contained in this Remarketing Memorandum. Freddie Mac makes no
representation as to the contents of this Remarketing Memorandum, the suitability of the Bonds for any
investor, the feasibility or performance of the Project, or compliance with any securities, tax or other laws
or regulations. Freddie Mac’s role is limited to entering into the Credit Enhancement Agreement
described herein.
The information, estimates, and expressions of opinion contained in this Remarketing
Memorandum are subject to change without notice, and neither the delivery of this Remarketing
Memorandum nor any remarketing of the Bonds shall, under any circumstances, create any implication
that there has been no change in the affairs of the Issuer, or in the information, estimates, or opinions set
prepared only in connection with the remarketing of the Bonds on March 21, 2002 and may not be
forth herein, since the date of this Remarketing Memorandum. This Remarketing Memorandum has been
reproduced or used in whole or in part for any other purpose.
Prospective investors are referred to the Indenture and the Financing Agreement (both as defined
herein) for additional descriptions of the Bonds and the Issuer.
The Bonds have not been registered with the Securities and Exchange Commission due to certain
exemptions contained in the Securities Act of 1933, as amended. In making an investment decision
investors must rely on their own examination of the Issuer, the Bonds, the Credit Enhancement
Agreement and the terms of the remarketing, including the merits and risks involved. The Bonds have
not been recommended by any federal or state securities commission or regulatory authority, and the
foregoing authorities have neither reviewed nor confirmed the accuracy of this document.
ONLY WHILE IN THE BONDS ARE IN A VARIABLE PERIOD. THIS REMARKETING MEMORANDUM CONTAINS INFORMATION ON TJ3E BONDS
TABLE OF CONTENTS w
INTRODUCTION .................................................. 1
THE ISSUER .......................................................... 3
THE BONDS .......................................................... 3
General ................................................................... 3
Variable Rate for the Bonds ................................... 4
Reset Adjustment Date ........................................... 4
Conversion Date ..................................................... 6
Book-Entry-Only System ....................................... 8
Demand for and Mandatory Purchase of the
Bonds ............................................................... 10
Purchase of Bonds Not Remarketed ..................... 11
Mandatory Tender of the Bonds on
Optional Redemption of the Bonds 12
Substitution Date 12
Mandatory Redemption ........................................ 14
Selection of Bonds for Redemption ...................... 15
Notice of Redemption ........................................... 15
Purchase of Bonds in Whole in Lieu of
SECURITY AND SOURCES OF
Redemption 16
PAYMENT FOR THE BONDS ...................... 17
Limited Obligations .............................................. 17
Alternate Credit Facility ....................................... 18
FREDDIE MAC ................................................... 20
SUMMARY OF THE CREDIT
SUMMARY OF CERTAIN PROVISIONS
ENHANCEMENT AGREEMENT 2 1
OF THE REIMBURSEMENT
AGREEMENT ................................................. 22
THE BORROWER AND THE PROJECT .......... 23
The Borrower ........................................................ 23
The Project ............................................................ 23
Unit Breakdown .................................................... 24
Amenities .............................................................. 24
Operating History ................................................. 25
CERTAIN BONDHOLDERS' RISKS ................. 25
No Borrower Personal Liability ........................... 25
No Acceleration or Earlv Redemution Uuon
Limited Security 25
............................................. ......................
......................................................
The Credit Enhancement Agreement ................... 18
.................
...................................................
&
..............................................
Rebate Fund; Rebate of Excess Investment
Investment of Funds 30
Earnings to United States ................................. 30
Cost of Issuance Fund ........................................... 31
Moneys Held in Trust ........................................... 31
Amounts Remaining in Funds ............................... 31
Events of Default; Acceleration; Remedies .......... 32
Rights of Bondholders .......................................... 34
Rights of the Credit Facility Provider ................... 34
Supplemental Indentures ....................................... 35
Trustee ................................................................... 36
Satisfaction and Discharge of Indenture ............... 38
SUMMARY OF THE FINANCING
Terms of the Bond Mortgage Loan;
AGREEMENT 39
Assignment ....................................................... 39
Bond Mortgage Loan Payments;
Independent Obligation of Borrower ............... 39
Payment of Certain Fees and Expenses
Under the Bond Note ....................................... 40
Prepayment ofthe Bond Mortgage Loan .............. 40
Borrower's Obligations Upon Redemption
or Tender .......................................................... 40
Tax Compliance .................................................... 41
Events of Default and Remedies ........................... 41
Remedies on Default ............................................. 41
Obligations of Borrower Are Non-Recourse ........ 42
THE REGULATORY AGREEMENT ................. 43
Residential Rental Property .................................. 43
Lower-Income Tenants and Eligible Persons ....... 44
Sale, Lease or Transfer of the Project ................... 46
Enforcement .......................................................... 46
SUMMARY OF CERTAIN PROVISIONS
OF THE INTERCREDITOR
AGREEMENT ................................................. 47
TAX EXEMPTION .............................................. 48
REMARKETING ................................................. 49
RATING ............................................................... 49
APPROVAL OF LEGAL PROCEEDINGS ......... 49
LITIGATION ........................................................ 50
.................................................
Loss ofTax Exemption on the BondsError! Bookmark .............................................................. 50
Early Redemption ................................................. 25 The Borrower ........................................................ 50 ... Economic Feaslbllltv ............................................ 25 MISCELLANEOUS ............................................. 50
Enforceability and Bankruptcy ............................. 25
SUMMARY OF THE INDENTURE ................... 26 APPENDIX A-CERTAIN DEFINITIONS
Establishment of Funds ........................................ 26 APPENDIX B-FORM OF OPINION OF BOND ~~ ........
Revenue Find ........................................................ 26 COUNSEL
Bond Fund ............................................................ 28
Administration Fund ............................................. 28
Principal Reserve Fund ......................................... 29
~ ~~ ~
Redemption Fund ................................................. 28
REMARKETING MEMORANDUM
$15,920,000
City of Carlsbad, California
Variable Rate Demand Multifamily Housing Revenue Refunding Bonds
Series A of 1993
(Santa Fe Ranch Apartments f/Ma/ LaCosta Apartments Project)
INTRODUCTION
This Remarketing Memorandum has been prepared in conjunction with the sale and transfer of
the Project to the Borrower, the Borrower’s assumption of the Bond Mortgage Loan, the replacement of
the Letter of Credit by a direct pay Credit Enhancement Agreement of Freddie Mac and the execution and
delivery of the Amended and Restated Indenture of Trust, the Amended and Restated Loan Agreement
and the Intercreditor Agreement.
On May 27, 1993, the City of Carlsbad, California issued $15,920,000 in aggregate principal
amount of the Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, Series A of 1993
(Santa Fe Ranch Apartments ma LaCosta Apartments Project) pursuant to an Indenture of Trust, dated
as of May 1, 1993 (the “Original Indenture”), as amended and restated by an Amended and Restated
Indenture of Trust dated as of May 1, 2002 (the “Indenture”), both between the City of Carlsbad,
California (the “Issuer”) and U.S. Bank, N.A., as trustee (as successor in interest to First Trust of
California, National Association, the “Trustee”). The proceeds of the Bonds were loaned (the “Bond
Mortgage Loan”) to La Costa Partners, a California general partnership (the “Original Developer”) upon
the terms and conditions of a Loan Agreement, dated as of May 1, 1993 (the “Original Loan
Agreement”), as amended and restated by an Amended and Restated Loan Agreement, dated as of May 1,
2002 (collectively, the “Financing Agreement”), between the Issuer, the Trustee and Santa Fe Ranch,
L.L.C., a Delaware limited liability company (the “Borrower”), for the purpose of providing financing for
a multi-family rental housing development located in the City of Carlsbad, San Diego County, California
(the “Project”). The Bonds refinanced Bonds issued by the Issuer in 1985, the proceeds of which were
used to construct the Project. See ‘THE BORROWER AND THE PROJECT” herein.
The Original Developer, the Issuer, the Trustee and The Northwestern Mutual Life Insurance
Company (the “Prior Developer”) entered into an Assignment and Assumption Agreement dated as of
June 23, 1998, transferring all of the Original Developer’s right, title and interest in the Project to the
Prior Developer. The Prior Developer intends to transfer all of its right, title and interest in the Project to
the Borrower pursuant to a Purchase and Sale Agreement dated as of October 16, 2001, as amended. In
accordance with the Purchase and Sale Agreement, the Borrower will assume the Prior Developer’s
obligations under the Bond Mortgage Loan arising on or after the Closing Date pursuant to an
Assignment and Assumption Agreement, between the Prior Developer, the Borrower, the Issuer and the
Trustee dated as of May 1,2002 (the “Assumption Agreement”).
Amended and Restated Promissory Note dated as of May -, 2002 from the Borrower to the Issuer, and
The Borrower’s repayment obligations under the Financing Agreement will be evidenced by an
subsequently assigned to the Trustee in the principal amount of $15,920,000, (the “Bond Note”) and
secured by a First Deed of Trust and Assignment of Rents and Fixture Filing dated as of May 1, 1993 (the
“Bond Mortgage”), executed by the Original Developer, which obligations are assumed by the Borrower
pursuant to the Assumption Agreement.
In connection with the issuance of the Bonds, the Original Developer, the Issuer and the Trustee
entered into an Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants
dated as of May 1, 1993 among the Issuer, the Trustee and the Original Developer, which contained
covenants of the Original Developer necessary to maintain the exclusion of interest on the Bonds from
gross income for federal income tax purposes and maintain compliance with certain policies of the Issuer.
Such instrument will be amended by the Second Amended and Restated Regulatory Agreement and
Declaration of Restrictive Covenants dated as of May 1, 2002, among the Issuer, the Trustee and the
Borrower (as amended, the “Regulatory Agreement”), which also contains covenants of the Borrower
necessary to maintain the exemption from federal income taxation of interest on the Bonds. See “THE
REGULATORY AGREEMENT.”
Bank of America, N.A. (the “Bank”) is currently providing credit enhancement on the Bonds
pursuant to the terms of a **Letter of Credit and Reimbursement Agreement** dated as of
199-, between the Bank and the Prior Developer (the “Original Reimbursement Agreement”). The Bank 1,
issued an irrevocable letter of credit in an initial stated amount of $
199- (the “Letter of Credit”) to provide for payment to the Trustee, an amount sufficient to pay (i) $
Purchase Price of the Bonds when due, whether upon maturity or as a result of acceleration or redemption
of the Bonds, (ii) the principal of the Bonds when due, whether upon maturity or as a result of
acceleration or redemption of the Bonds, and (iii) the interest on the Bonds, or the portion of the Purchase
Price of the Bonds corresponding to interest thereon.
on
The Borrower has exercised its right under the Indenture to replace the Letter of Credit by
providing a direct pay Credit Enhancement Agreement (the “Credit Enhancement Agreement”) executed
and delivered by Federal Home Loan Mortgage Corporation (“Freddie Mac”) on the Closing Date and in
accordance with the requirements of the Indenture. The Indenture does not require a mandatory tender of
the Bands in connection with such substitution. The Alternate Credit Facility provides payment for and
secures the payment of amounts owing under the Financing Agreement sufficient to pay the principal of
and interest on the Bonds, and the purchase price of the Bonds. See “SUMMARY OF THE CREDIT
ENHANCEMENT AGREEMENT.” To evidence the Borrower’s repayment obligations to Freddie Mac
as a result of payments made by Freddie Mac under the Credit Enhancement Agreement, the Borrower
(the “Reimbursement Agreement”). See “SUMMARY OF CERTAIN PROVISIONS OF THE
and Freddie Mac have entered into a Reimbursement and Security Agreement, dated as of May 1,2002
REIMBURSEMENT AGREEMENT” herein.
Freddie Mac, upon the execution and delivery of the Credit Enhancement Agreement, will
replace Bank of America, N.A. as the provider of the Credit Facility under the Indenture (the “Credit
Facility Provider”). Bank of America, N.A. will release its security interest in the Project and in all funds
held by the Trustee under the Indenture and the Original Reimbursement Agreement, concurrently with
the execution and delivery of the Credit Enhancement Agreement. The Borrower has executed and
delivered for the benefit of Freddie Mac a Multifamily Deed of Trust, Assignment of Rents, Security
Agreement and Fixture Filing, dated as of May 1, 2002 (the “Reimbursement Mortgage”), to secure the
obligations of the Borrower to Freddie Mac under the Reimbursement Agreement. The Issuer, the
Trustee and Freddie Mac have entered into an Intercreditor Agreement, dated as of May 1, 2002 (the
“Intercreditor Agreement”), to set forth the rights and obligations of the Issuer, the Trustee and Freddie
Mortgage and certain other related documents. See “BRIEF SUMMARY OF CERTAIN TERMS OF
Mac with respect to the Financing Agreement, the Bond Note, the Bond Mortgage, the Reimbursement
THE INTERCREDITOR AGREEMENT.”
Intercreditor Agreement are included herein. The descriptions and summaries of the Credit Enhancement
Brief descriptions of the Credit Enhancement Agreement, the Reimbursement Agreement and the
Agreement, the Reimbursement Agreement, the Intercreditor Agreement and other documents contained
-2- 2q5
herein do not purport to be comprehensive or definitive and are qualified in their entirety by reference to
those documents. Copies of such documents will be available at the corporate trust office of the Trustee.
THE ISSUER
The City of Carlsbad is a municipal corporation duly organized and existing under the laws of the
State of California. The Issuer is authorized, pursuant to the provisions of the Act to engage in certain
activities related to the provision of decent, safe and adequate housing for persons residing in the Issuer,
including the financing of multifamily housing through the issuance of obligations such as the Prior
Bonds and the Bonds. Issuance of the Bonds was approved by the Issuer pursuant to the Refunding Law.
The Issuer is governed by its City Council. Council members are elected at large to serve four-
year terms. The City Manager administers day-to-day affairs and is appointed by the City Council. The
current members of the City Council and the current primary officials of the Issuer are set forth in the list
of officials included at the beginning of this Remarketing Memorandum.
The Bonds are limited obligations of the Issuer and are payable only from the Trust Estate as
described in the Indenture and from no other source..
THE BONDS
General
owner and nominee of The Depository Trust Company, New York, New York (“DTC”). DTC acts as
The Bonds are in fully registered form and are registered in the name of Cede & Co., as registered
securities depository for the Bonds. Individual purchases are made in book-entry-only form. Purchasers
will not receive certificates representing their interest in the Bonds purchased. So long as Cede & Co. is
the registered owner of the Bonds, as nominee of DTC, references herein to the Bondholders or registered
owners of the Bonds shall mean Cede & Co., as aforesaid, and shall not mean the beneficial owners of the
Bonds.
So long as Cede & Co. is the registered owner of the Bonds, principal, premium, if any, and
interest on the Bonds are payable by the Trustee by wire transfer of New York clearing house or
equivalent next-day funds, to Cede & Co., as nominee for DTC. DTC will, in turn, remit such amounts to
the DTC Participants (as defined herein) for subsequent disbursement to the beneficial owners. See “THE
BONDS-Book-Entry-Only System” herein.
The Bonds are in the minimum denomination of $100,000 and any integral multiple of $5,000 in
excess thereof. The Bonds will be dated as of the Remarketing Date, and will mature on the date set forth
on the cover page of this Remarketing Memorandum. The Bonds will bear interest at a Variable Rate of
interest until the Conversion Date, if any. See “Variable Rate for the Bonds” below.
The Bonds are subject to mandatory purchase by the Trustee on any date on which an Alternate
Credit Facility is to be exchanged for the Credit Enhancement Agreement or other Credit Facility then in
effect if the conditions to such substitution are satisfied. See “Mandatory Tender of Bonds on
Substitution Date” below.
-3- 2%
Interest on the Bonds will be payable on the first Business Day of each month, commencing
June 3, 2002 (in each case, an “Interest Payment Date”). So long as the Bonds bear interest at the
Variable Rate interest shall be computed on the basis of a 365-day or 366-day year for the actual number
of days elapsed.
Principal of and premium, if any, and interest on the Bonds will be payable by check mailed on
the Interest Payment Date by first-class mail to the person whose name appears on the Bond Register on
the Record Date, provided that, upon written request of a registered owner of at least $1,000,000
aggregate principal amount of Bonds received by the Trustee at least five days prior to a Record Date,
payment shall be made to such owner by wire transfer pursuant to the provisions of the Indenture.
Any Bond may be transferred only upon an assignment duly executed by the registered owner or
his or her duly authorized representative in such form as shall he satisfactory to the Bond Registrar and
upon surrender of such Bond to the Trustee for cancellation. Any Bond may be exchanged at the
Principal Office of the Trustee for a new fully registered Bond or Bonds, of any authorized denomination
or denominations, for the aggregate amount of such Bond then Outstanding. In all cases in which Bonds
shall be transferred or exchanged, the Trustee may make a charge for any tax, fee or other governmental
charge required to be paid with respect to such transfer or exchange. Neither the Issuer nor the Trustee
shall be required to transfer or exchange Bonds during the period of fifteen (15) days immediately
preceding an Interest Payment Date or during the period of fifteen (15) days immediately preceding the
selection of Bonds for redemption and after the giving of notice of redemption.
Variable Rate for the Bonds
The Bonds will bear interest at a Variable Rate until converted to a Fixed Rate as provided in the
Indenture. The Variable Rate of interest borne by the Bonds during each Variable Period for each
Variable Interest Accrual Period shall be the Variable Rate determined by the Remarketing Agent and
reported to the Trustee, the Tender Agent, the Borrower and Freddie Mac as provided in the Indenture on
the Variable Interest Computation Date for such Variable Interest Accrual Period. Any Bondholder may
obtain information on the Variable Rate by request to the Trustee.
The Variable Rate determined by the Remarketing Agent on each Variable Interest Computation
Date shall be that rate of interest which, if borne by the Bonds, would, in its reasonable professional
judgment, on the basis of prevailing financial market conditions, be the interest rate necessary, but which
would not exceed the interest rate necessary, to be home by the Bonds in order for the market value of the
Bonds on such Variable Interest Computation Date to be 100% of the principal amount thereof
(disregarding accrued interest) if the Bonds were sold on such Variable Interest Computation Date;
provided, however, that in no event shall the Variable Rate at any time exceed the Maximum Rate. If the
Remarketing Agent shall fail or refuse to determine the Variable Rate on any Variable Interest
Computation Date, then the Variable Rate shall be the BMA Index Rate published on each Variable
Interest Computation Date (as provided to the Trustee by the Remarketing Agent) until the Remarketing
Agent determines the Variable Rate as described above.
The determination of the Variable Rate by the Remarketing Agent shall (in the absence of
manifest error) be conclusive and binding on the Bondholders, the Issuer, the Borrower, Freddie Mac, the
Remarketing Agent, the Tender Agent and the Trustee, and each shall be protected in relying on it.
Reset Adjustment Date
Provided no Event of Default shall have occurred and be continuing, at the written request of the
Borrower with the prior wriaen consent of the Credit Facility Provider or at the written request of the
4-
Credit Facility Provider on behalf of the Borrower if the Borrower has not provided the Credit Facility
Provider proof satisfactory to it of the extension or substitution of a cap agreement satisfying the
requirements of the Reimbursement Agreement not later than sixty (60) days prior to the expiration of the
Cap Agreement, the rate of interest on the Bonds may be established at a Reset Rate on any Interest
Payment Date during a Variable Period or on any Reset Adjustment Date, in accordance with the
procedures described below. In order to effect establishment of a Reset Rate, the Borrower must deliver
such written consent and a written request and notice to the Trustee, the Issuer, the Credit Facility
Provider, the Tender Agent and the Remarketing Agent (or, if applicable, the Credit Facility Provider on
behalf of the Borrower must deliver such request) specifying
(i) (if the Bonds then bear interest at a Variable Rate) the Reset Adjustment Date,
which shall be not less than forty (40) days after notice is received by the parties,
(ii) any sinking fund redemption amounts for each Interest Payment Date at a price
equal to the principal amount of Bonds subject to redemption plus interest accrued thereon to the
date fixed for redemption, without premium, pursuant to the Indenture and any applicable
optional redemption provisions pursuant to the Indenture,
(iii) the proposed duration of the Reset Period, which shall be at least five (5) years or
more or such shorter period as may be approved by the Credit Facility Provider and shall
terminate on the Business Day before the last Interest Payment Date preceding the
(x) “Termination Date” (as defined in the Credit Enhancement Agreement)
if the Credit Enhancement Agreement is the Credit Facility, to be effective with respect
to the Bonds during such Reset Period or
(y) the expiration of the Credit Facility if the Credit Enhancement
Agreement is not the Credit Facility to be effective with respect to the Bonds during such
Reset Period, and
(iv) the date on which the Reset Rate will be determined by the Remarketing Agent,
which date shall be not later than the Business Day immediately prior to the Reset Adjustment
Date.
Such notice must be accompanied by
(i) an opinion of Bond Counsel to the effect that the establishment of the Reset Rate
in accordance with the procedure described below is permitted by the Indenture and the Act and
will not adversely affect the exclusion from goss income for federal income tax purposes of
interest on the Bonds,
(ii) if Bonds are to be held publicly after the Reset Adjustment Date, either an
conditions) of an Alternate Credit Facility Provider to issue an Alternate Credit Facility, together
irrevocable commitment (which commitment may be subject to customary commercial
with accompanying documentation required by the Financing Agreement or the written
commitment of the Credit Facility Provider for an amendment to the Credit Facility to fulfill the
Interest Requirement and, if applicable, to extend the maturity date of the Credit Facility,
(iii) the form of notice to be given by the Trustee to the Bondholders with respect to
the establishment of a Reset Rate,
-5- 2Lf8
(iv) payment to the Trustee of such amount as the Trustee reasonably determines may
be required in connection with the establishment of the Reset Rate, including, but not limited to,
its own fees and expenses and the cost of printing Bonds,
(v) the proposed form of disclosure document to be distributed in connection with
the remarketing of the Bonds on the Reset Adjustment Date, which disclosure document must be
any applicable requirements of Rule 15c2-12 of the Securities Exchange Act of 1934, and
approved in form and substance by the Issuer, and an undertaking of the Borrower which satisfies
(vi) if Bonds are to be held publicly after the Reset Adjustment Date, written
evidence from the Rating Agency to the effect that the Bonds will be rated at least “A’T‘P-1” by
Moody’s or “AA”/”A-I” by S&P, without regard to pluses or minuses (or such lower ratings as
shall be approved by the Issuer) on such Reset Adjustment Date.
If (i) the Credit Facility to be in effect upon and after a Reset Adjustment Date or (ii) an
irrevocable commitment described in (ii) above is not delivered to the Trustee in escrow at least
fifteen (15) days before the applicable Reset Adjustment Date, or if on any Business Day within ten (10)
days before the applicable Reset Adjustment Date the Trustee receives notice from the Borrower that it no
longer wishes to proceed with an adjustment to a Reset Rate or from Remarketing Agent that a Market
Risk Event has occurred, the Trustee shall not give the notice described in the next paragraph to the
Bondholders. In the event that the Trustee receives notice from the Remarketing Agent that a Market
Risk Event has occurred after giving the notice described in the next paragraph to the Bondholders, the
Trustee shall notify the Bondholders that the Reset Adjustment Date has been cancelled. In such event,
the Bonds shall (i) continue to bear interest at a Variable Rate if the Bonds then bear interest at a Variable
Rate, or (ii) if the Bonds then bear interest at a Reset Rate, on the day following the Reset Period, the
Bonds shall be redeemed (or purchased in lieu thereon pursuant to the Indenture.
The Trustee shall give notice to the Bondholders, by first class mail not less than nine (9) days
before the Reset Adjustment Date specifying: (i) the Reset Adjustment Date, and that the interest rate on
the Bonds will he established at the Reset Rate on the Reset Adjustment Date; (ii) that all Bonds must be
tendered for purchase at the Purchase Price and surrendered to the Tender Agent for purchase not later
than 9:30 a.m., Washington, D.C. time, on the Reset Adjustment Date; and (iii) that the Reset Adjustment
Date is subject to cancellation upon the Trustee’s receipt of notice from the Remarketing Agent that a
Market Risk Event has occurred.
Any Bond not tendered to the Tender Agent for purchase in accordance with the provisions of the
Indenture on a Reset Adjustment Date shall be deemed to have been tendered for purchase on such Reset
Adjustment Date pursuant to the Indenture for all purposes of the Indenture; provided, however, payment
on such Bonds shall only be made upon presentation thereof.
Conversion Date
At the written request of the Borrower, with the written consent of the Credit Facility Provider, or
at the written request of the Credit Facility Provider on behalf of the Borrower if the Borrower has not
provided the Credit Facility Provider proof satisfactory to it of the extension or substitution of a cap
agreement satisfying the requirements of the Reimbursement Agreement not later than sixty (60) days
prior to the expiration of the Cap Agreement, the rate of interest on the Bonds may be established at a
Fixed Rate on any Interest Payment Date during a Variable Period or on the day following any Reset
Period, in accordance with the procedures described below. In order to effect Conversion, the Borrower
must deliver such written consent and a written request and notice to the Trustee, the Issuer, the Credit
-6-
Facility Provider, the Tender Agent and the Remarketing Agent (or, if applicable, the Credit Facility
Provider on behalf of the Borrower must deliver such request) specifying
(i) the Conversion Date, which shall be not less than forty (40) days after such
notice is received by such parties,
(ii) any sinking fund redemption amounts for each Interest Payment Date at a price
equal to the principal amount of Bonds subject to redemption plus interest accrued thereon to the
date fixed for redemption, without premium, pursuant to the Indenture and any applicable
optional redemption provision pursuant to the Indenture, and
(iii) the date on which the Fixed Rate will be determined by the Remarketing Agent,
which date shall be not later than the Business Day immediately prior to the Conversion Date.
Such notice must be accompanied by
(i) an opinion of Bond Counsel to the effect that Conversion in accordance with the
procedures described in the Indenture is permitted by the Indenture and will not adversely affect
the exclusion of interest on the Bonds from gross income for federal income tax purposes,
(ii) if Bonds are to be held publicly after the Conversion Date, an irrevocable
commitment (which commitment may be subject to customary commercial conditions) of an
Alternate Credit Facility Provider to issue the Credit Facility to be in effect upon and after
Conversion, together with accompanying documentation required by the Financing Agreement or
the irrevocable written commitment of the Credit Facility Provider for an amendment to the
Credit Facility to fulfill the Interest Requirement and, if applicable, to extend the maturity date of
the Credit Facility,
(iii) the form of notice to be given by the Trustee to the Bondholders with respect to
Conversion,
(iv) payment to the Trustee of such amount as the Trustee Kmnably determines may
be required in connection with Conversion, including, but not limited to, its own fees and
expenses and the cost of printing Bonds,
(v) the proposed form of disclosure document to be distributed in connection with
the remarketing of the Bonds on the Conversion Date, which disclosure document must be
approved in form and substance by the Issuer, and an undertaking of the Borrower which satisfies
any applicable requirements of Rule 15c2-12 of the Securities Exchange Act of 1934, and
(vi) if Bonds are to be held publicly after the Conversion Date, written evidence from
the Rating Agency to the effect that the Bonds will be rated at least “A” by Moody’s or “A” by
S&P, without regard to pluses or minuses (or such lower ratings as shall be approved by the
Issuer) on the Conversion Date.
If (i) the Credit Facility to be in effect upon and after Conversion is or (ii) an irrevocable
commitment described in (ii) in the paragraph above is not delivered (such delivery may be in escrow) to
the Trustee at least fifteen (15) days before the Conversion Date, or if on any Business Day at least
ten (10) days before the Conversion Date, the Trustee receives notice from the Borrower to the effect that
it no longer wishes to proceed with the Conversion, or the Trustee receives written notice from the
Remarketing Agent that a Market Risk Event has occurred, the Trustee shall not give the notice described
-1- 2 50
in the next paragraph to the Bondholders. In the event that the Trustee receives notice from the
paragraph to the Bondholders, the Trustee shall notify the Bondholders that the Conversion has been
Remarketing Agent that a Market Risk Event has occurred after giving the notice specified in the next
cancelled. In such event (i) if the Bonds bear interest at a Variable Rate prior to the proposed Conversion
Date, they shall continue to bear interest at a Variable Rate, and (ii) if the proposed Conversion Date was
to be the day following a Reset Period, then the Bonds shall be redeemed (or purchased in lieu thereof) on
the day following such Reset Period pursuant to the Indenture.
The Trustee shall give notice to the Bondholders, by first class mail not less than nine (9) days
before the Conversion Date, specifying: (i) that the interest rate on the Bonds will be established at the
Fixed Rate through the final maturity of the Bonds and the date the Fixed Rate will become effective;
(ii) that all Bonds must be tendered for purchase and surrendered to the Tender Agent for purchase not
later than 9: 30 a.m., Washington, D.C. time, on the Conversion Date; and (iii) that the Conversion is
subject to cancellation upon the Trustee’s receipt of notice from the Remarketing Agent that a Market
Risk Event has occurred or if the Borrower has notified the Trustee that it no longer wishes to proceed
with the Conversion.
Any Bond not tendered to the Tender Agent for purchase in accordance with the provisions of the
Indenture on the Conversion Date shall be deemed to have been tendered for purchase on such
Conversion Date pursuant to the Indenture for all purposes of the Indenture; provided, however, payment
on such Bonds shall only be made upon presentation thereof.
Book-Entry-Only System
The Bonds are available in book-entry form only Purchasers of the Bonds will not receive
certificates from the Issuer or the Trustee representing their interests in the Bonds purchased.
the Bonds. The Bonds have been issued as fully registered securities registered in the name of Cede &
The Depository Trust Company (“DTC”), New York, New York, acts as securities depository for
Co. (DTC’s partnership nominee). One fully registered Bond will be reissued for each maturity of the
Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC or the Trustee
as its agent.
General. When the Bonds are issued, ownership interests will be available to purchasers only through
a book-entry only system (the “Book-Entry Only System”) maintained by The Depository Trust Company
(“DTC”), New York, New York. DTC will act as securities depository for the Bonds. Initially, the Bonds will
be issued as fully-registered securities registered in the name of Cede & Co. (DTC’S partnemhip nominee).
One fully-registered Bond certificate will be issued for the Bonds, in the aggregate principal amount of such
issue, and will be deposited with DTC. The following discussion will not apply to any Bonds issued in certificate form due to the discontinuance of the DTC Book-Entry Only System, as described below.
organized under the New York Banking Law, a “banking organization” within the meaning of the New York DTC and its Participants. DTC, the world’s largest depository, is a limited-purpose trust company
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 agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds and provides asset servicing for over 2 million issues of US. and non-U.S. equity issues, corporate and municipal debt issues, and money
market instruments from over 85 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities
transactions in deposited securities, through electronic computerized book-entry transfers and pledges between
participants include both US. and non-US. securities brokers and dealers, banks, trust companies, clearing Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct
-8- 25 I
corporations and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust &
Clearing Corporation (“DTCC”). DTCC, in turn, is owned by a number of Direct Participants of DTC and
Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS
“EMCC,” also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Clearing Corporation and Emerging Markets Clearing Corporation (“NSCC,” “GSCC,” “MBSCC” and
Exchange LLC and the National Association of Securities Dealers, Inc. Access to the DTC system is also
available to others, such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and
clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either
directly or indirectly (the “Indirect Participants” and, collectively with the Direct Participants, the
Participants are on file with the Securities and Exchange Commission. More information about DTC can be
“Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its
found at www.dtcc.com.
Purchase of Ownership Interests. Purchases of the Bonds under the DTC system must be made by
or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership
interest of each actual purchaser of each Bond (the “Beneficial Owner”) is, in tum, to be recorded on the Direct
purchase. Beneficial Owners are, however, expected to receive written confmtions providing details of the and Indirect Participants’ records. Beneficial Owners will not receive written confinnation from DTC of their
transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to
be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interest in the
Bonds, except in the event that use of the book-enhy system for the Bonds is discontinued.
Beneficial Owners of such Bonds will not receive or have the right to receive physical delivery of the Bonds,
So long as Cede & Co., as nominee of DTC, is the registered owner of any of the Bonds, the
and references herein to the registered owners of such Bonds shall mean Cede & Co. and shall not mean the
Beneficial Owners of such Bonds.
registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by Transfers. To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are
an authorized representative of DTC. The deposit of the Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds. DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their
customers.
Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners
Notices. Conveyance of notices and other communications by DTC to Direct Participants, by Direct
will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be
in effect from time to time.
practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be
Redemption notices shall be sent to DTC. If less than all of the Bonds are being redeemed, DTC’s
redeemed.
Voting. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect
procedures, DTC mails an Omnibus Proxy to the issuer of securities as soon as possible after the record date. to the Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual
The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
-9- 253,
nominee, all payments of principal of, premium, if any, and interest on such Bond will be made to Cede & Co.,
Paymentg of Principal and Interest. So long as any Bond is registered in the name of DTC’s
or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to
the Issuer or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s
credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from
records. 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 cwtomers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC nor its nominee,
the Trustee or the Issuer, subject to any statutory and regulatory requirements as may be in effect from time to
time. Payment of principal of, premium, if any, and interest on the Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or the
Trustee, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement
of such payments to the Beneficial Owners is the responsibility ofDirect and Indirect Participants.
depository with respect to the Bonds at any time by giving reasonable notice to the Issuer or the Trustee.
Discontinuation of Book-Entry Only System. DTC may discontinue providing its services as
Under such circumstances, in the event that a successor depository is not obtained, the Bonds are required to
be printed and delivered as described in the Indenture.
The use of the system of book-entry transfers through DTC (or a successor securities depository) may be discontinued as described in the Indenture. In that event, the Bond certificates will be printed and delivered
as described in the Indenture.
to any Direct Participants or Indirect Participants or the persons for whom they act with respect to (i) the
None of the Remarketing Agent, the Trustee nor the Issuer will have any responsibility or obligations
accuracy of any records maintained by DTC or any such Direct Participant or Indirect Participant; (ii) the
premium, if any, or interest on the Bonds; (iii) the delivery by any such Direct Participant or Indirect
payment by any Participant of any amount due to any Beneficial Owner in respect of the principal of,
to be given to owners of the Bonds; (iv) the selection of the Beneficial Owners to receive payment in the event
Participant of any notice to any Beneficial Owner that is required or permitted under the terms of the Indenture
of any partial redemption of the Bonds, or (v) any consent given or other action taken by DTC as Bondholder.
sources that the Issuer believes to be reliable, but is not guaranteed as to accuracy or completeness by and is
The information above concerning DTC and DTCs book-enhy system has been obtained from
not to be construed as a representation by the Issuer, the Trustee or the Remarketing Agent. The Issuer, the
or other nominees of the Beneficial Owners will act in accordance with theprocedures described above or in a Trustee and the Remarketing Agent make no assurances that DTC, Direct Participants, Indirect ParticiFnts
timely manner.
Demand for and Mandatory Purchase of the Bonds
Any Bonds (other than Purchased Bonds), or any units of principal amount thereof in Authorized
Denominations, will be purchased from the proceeds of remarketing of the Bonds as described in the Indenture
or from the sources described in the Indenture, (a) on demand of the owner of such Bond (or, so long as
Bonds are in “book-entry-only” form, demand of a DTC Participant, with respect to such Bonds) on any
Business Day during a Variable Period, or (b) upon being tendered or deemed tendered pursuant to the
Indenture, on any Reset Adjustment Date, Variable Rate Adjustment Date, the Conversion Date and any
Substitution Date. The Bonds will be purchased for a Purchase Price equal to the principal amount
thereof, or of any units thereof purchased in Authorized Denominations, plus interest accrued thereon, if
any, to the Settlement Date. The Bonds will be purchased upon (i) in the case of a purchase upon the
demand of an owner or DTC Participant, delivery to the Tender Agent, with a copy to the Trustee and the
Remarketing Agent, of a written notice in the form set forth in the Indenture (a “Tender Notice”) which
states (A) the principal amount of such Bond for which payment is demanded, (B) that such demand is
-10-
irrevocable and (C) the date on which such Bond or units of principal amount thereof in Authorized
Denominations shall be purchased pursuant to the Indenture, which date shall be a Business Day not prior
to the seventh day next succeeding the date of the receipt of the Tender Notice by the Tender Agent; and
(ii) in all cases, delivery of such Bond (with an appropriate transfer of registration form executed in blank
and in form satisfactory to the Tender Agent) to the Tender Agent, at or prior to 9:30 am., Washington,
D.C. time, on the Settlement Date. In the event that a depository is appointed pursuant to the Indenture
and a “book-entry-only” system is in effect with respect to the Bonds, delivery of Bonds for purchase on
the Settlement Date may be effected in the manner set forth by such depository.
on the Settlement Date shall be deemed tendered and purchased for all purposes of the Indenture and
Any Bonds not delivered to the Tender Agent on or prior to 9:30 am., Washington, D.C. time,
interest shall cease to accrue on such Bonds on the related Settlement Date.
Payment of the Purchase Price of any Bond will be made on the Settlement Date by check or by
wire transfer (if requested in writing by the Bondholder) or as designated in the Tender Notice with
respect to such Bond, but only upon delivery and surrender of such Bond to the Tender Agent.
If all of the Bonds shall have been called for redemption during any Variable Period, the Bonds
may continue to be remarketed until the redemption date, provided the purchasers of such Bonds are
given notice of the call for redemption prior to purchase of any Bonds.
Anything in the Indenture to the contrary notwithstanding, no Bonds will be purchased or
remarketed pursuant to the Indenture if an Event of Default under the Indenture (other than a failure on
the part of the Issuer to observe or perform any of the covenants, agreements or conditions in the
Indenture or the Bonds and such default continues for a period of thirty (30) days after written notice to
the Issuer from the Trustee or 51% of the Bondholders and upon written direction from the Credit Facility
Provider as provided in the Indenture) shall have occurred and be continuing and would not be cured as a
result of such tender and remarketing of the Bonds; nor will any Bond be purchased pursuant to the
Indenture if such Bond is registered in the name of the Issuer, the Borrower or Freddie Mac, or known by
the Trustee (the Trustee shall have no duty to inquire as to any such nominees) to be registered in the
name of any general partner or guarantor of the Borrower or any nominee of the Issuer, the Borrower,
Freddie Mac, or any such general partner or guarantor unless the Credit Facility will be in full force and
effect after such purchase.
Purchase of Bonds Not Remarketed
In the event that either the Tender Agent has not received notice of successful remarketing of
tendered Bonds by the day which is one (1) Business Day prior to the Settlement Date, or the proceeds of
remarketing of any tendered Bond have not been received by the Tender Agent on or prior to 1000 am.,
Washington, D.C. time on the Settlement Date, the Trustee will, within the time required by the terms of
the Credit Facility, draw on the Credit Facility in an amount sufflcient to enable the Tender Agent to pay
to the Tender Agent the Purchase Price of any Bonds for which it has received a Tender Notice and which
the Purchase Price of each such Bond. On each Settlement Date, the Trustee will pay or cause to be paid
have not been remarketed pursuant to the Indenture, but only from (a) moneys obtained by the Trustee
pursuant to the Credit Facility then in effect to enable the Trustee to pay the Purchase Price of such
tendered Bonds, which amounts shall be transferred by the Trustee to the Tender Agent at or before 3:OO
p.m., Washington, D.C. time, on the Settlement Date; and (b) Eligible Funds from the Borrower to the
tendered Bonds.
extent that moneys obtained pursuant to (a) above are insufficient on any date to pay the Purchase Price of
-11- 25-9
Upon receipt of such Purchase Price and upon receipt of the Bonds tendered for purchase
pursuant to the Indenture, the Tender Agent shall pay such Purchase Price to the registered owners
thereof, provided, that if the Purchase Price was theretofore paid from the proceeds of a draw on the
Credit Facility, the Tender Agent will pay such amount to the Credit Facility Provider. Any amounts
drawn under the Credit Facility to purchase Bonds will be used solely for such purpose. Any Bonds so
purchased with amounts drawn under the Credit Facility by the Trustee will be purchased for the account
of the Borrower and registered as provided in the Pledge Agreement. Amounts drawn under the Credit
Facility which are not used to purchase Bonds pursuant to the Indenture will be remitted by the Trustee or
the Tender Agent to the Credit Facility Provider promptly upon payment of the Purchase Price of the
Bonds.
Mandatory Tender of the Bonds on Substitution Date
The Bonds will be subject to mandatory tender for purchase on any Substitution Date from the
sources available under the Indenture at a Purchase Price equal to the principal amount thereof plus
accrued interest to the Substitution Date; provided, however, such mandatory tender will be subject to (a)
the receipt by the Tender Agent on the Substitution Date of remarketing proceeds in an amount equal to
100% of the Purchase Price of the Outstanding Bonds, and (b) the receipt by the Trustee of the Alternate
Credit Facility and the other documents required by the Financing Agreement. If, for any reason, (i) the
Price of the Outstanding Bonds, or (ii) the Alternate Credit Facility and the other documents required by
Tender Agent does not receive remarketing proceeds in an amount sufficient to pay 100% of the Purchase
the Financing Agreement are not received by the Trustee by 200 p.m., Washington, D.C. time, on the
Substitution Date, the Bonds will be returned to the Bondholders thereof and such Bonds will continue to
be subject to the terms of the Indenture. Any required notice to Bondholders shall state that the tender is
subject to receipt by the Tender Agent of remarketing proceeds and the Alternate Credit Facility.
Upon receipt by the Trustee of (i) notice from the Borrower of a planned substitution specifying
the Substitution Date (which may occur only on a date specified in the Financing Agreement), (ii) the
consent of the'credit Facility Provider, and (iii) the form of Alternate Credit Facility to be in effect on and
after the Substitution Date, the written approval of the Issuer of the form and substance of the disclosure
document to he used in connection with the remarketing of the Bonds on the Substitution Date and forms
of the other documents required pursuant to the Financing Agreement (except the rating letter specified
therein), the Trustee will establish the Substitution Date for the mandatory tender and purchase of the
Bonds and will give notice to the owners of the Bonds and the Rating Agency, by first-class mail not less
than nine (9) days before the Substitution Date specifying: (a) the Substitution Date; (b) that all Bonds
must be surrendered to the Tender Agent for purchase not later than 9:30 a.m., Washington, D.C. time, on
the Substitution Date; and (c) the tender is subject to the receipt by the Tender Agent of remarketing
proceeds and by the Trustee of the Alternate Credit Facility and other required documentation.
Any Bond not tendered to the Tender Agent for purchase in accordance with the provisions of the
Indenture on the Substitution Date shall be deemed to have been tendered for purchase on such
Substitution Date for all purposes of the Indenture; provided, however, payment on such Bonds shall only
be made upon presentation thereof.
Optional Redemption of the Bonds
With the prior written consent of the Credit Facility Provider, the Bonds are subject to optional
redemption, in whole or in part from optional prepayments on the Bond Mortgage Loan in accordance
with the prepayment restrictions set forth in the Bond Note or from Eligible Funds deposited with the
Trustee at the redemption price set forth below:
-12- 25 5
(a) during the Variable Period, on any Interest Payment Date, at a redemption price
of 100% of the principal amount thereof, plus accrued interest thereon to the redemption date;
(b) during a Reset Period or the Fixed Rate Period, on any Business Day during the
periods set forth in the table below and at the respective redemption prices set forth below
expressed as percentages of the principal amounts of the Bonds called for redemption, such
redemption prices declining as set forth below until such redemption price equals 100% of the
principal amount of the Bonds, plus accrued interest, if any, to the redemption date:
Greater
Term of Reset Period or Fixed Rate Period
Redemption Prices as a
Percentage of Princioal 'than 10 years and less than 102% after 7 years declining 1% per 12
equal to 15 years to 100% Less than or equal to 10 years and 102% after 4 years declining %% per 12
greater than 7 years to 100%
Less than or equal to 7 years and 102% after 3 years declining 1 % per 12
than 5 years to 100%
Less than or equal to 5 years and 101% after 1 year declining %% per 6 months
than 2 years 100%
Less than or equal to 2 years and loo-%% after 1 year declining %% per 6
than 1 year to 100%
Equal to 1 year 100% after 6 months
Call Date Earliest
7 years
4 years
3 years
2 years
1 year
6 months
provided that, notwithstanding the foregoing, the Borrower and the Remarketing Agent may, not later
than 15 days before the Reset Adjustment Date, Variable Rate Adjustment Date or Conversion Date, as
applicable, give notice to the Issuer, the Credit Facility Provider, the Freddie Mac Servicer and the
Trustee setting forth a redemption schedule different from that set forth above, accompanied by (i) the
written consent of the Credit Facility Provider, if any, to be in effect for the ensuing Reset Period or Fixed
Rate Period, as applicable, and(ii) an Opinion of Bond Counsel to the effect that such change will not
adversely affect the exclusion of interest on the Bonds from gross income for federal income tax
purposes; and upon such notice and delivery of the consent and the opinion, such different redemption
schedule shall apply to any redemption described in this paragraph for such Reset Period or Fixed Rate
Period, as applicable, without further action by any party.
While the Bonds are registered in the name of the Borrower pursuant to the Pledge Agreement or
on behalf of Freddie Mac in such other name as Freddie Mac shall have directed, as a result of a
mandatory tender for purchase of the Bonds pursuant to the Indenture, the Bonds are subject to
redemption in whole or in part on any date, at the option of Freddie Mac, at a redemption price equal to
the principal amount thereof plus accrued interest to the redemption date, without premium, from moneys
deposited with the Trustee.
Optional redemption of Bonds at a premium may only be made if the Trustee shall have received
Eligible Funds (not consisting of funds drawn under the Credit Facility) in an amount sufficient to pay the
applicable redemption premium.
The Trustee shall effect a redemption of Bonds pursuant to the Indenture not more than 35 days
following its receipt of moneys representing an optional prepayment of the Bond Mortgage Loan.
-13- 25%
Mandatory Redemption
The Bonds are subject to mandatory redemption on any date, at a redemption price equal to the
principal amount thereof plus accrued interest to the redemption date, without premium, at the earliest
practicable date from payments made under the Credit Facility or receipt by the Trustee of Eligible Funds
upon the occurrence of any of the following:
(a) in whole or in part (and if in part, in Authorized Denominations), upon receipt by
the Trustee of (i) proceeds of a draw under the Credit Facility; (ii) Net Proceeds representing
Mortgage Loan, such amount to be applied to reimburse the Credit Facility Provider for the draw
casualty insurance proceeds or condemnation awards applied to the prepayment of the Bond
under the Credit Facility as a result of casualty or condemnation of the Project; and (iii) a written
direction by the Credit Facility Provider to redeem such Bonds, pursuant to the Credit Facility; or
(b) in whole, upon receipt by the Trustee of amounts from the Credit Facility
Provider pursuant to the Credit Facility as a result of an occurrence of a default under any Bond
Mortgage Loan Document and receipt by the Trustee of a written direction by the Credit Facility
Provider to redeem the Bonds pursuant to the Credit Facility; or
(c) in whole, on the last Business Day which is not less than five (5) days before the
date of expiration of any Credit Facility unless the Trustee receives a renewal or extension of or
replacement for such Credit Facility meeting the applicable requirements of the Financing
Agreement or, in the case of a replacement of the Credit Facility in connection with a Reset
Adjustment Date or the Conversion Date pursuant to the Indenture, an irrevocable commitment of
an entity to issue an Alternate Credit Facility to be in effect upon and after such Reset Adjustment
Date or Conversion Date, in each case not less than thirty (30) days before the expiration of the
then-existing Credit Facility; or
(d) in part in Authorized Denominations, at the direction of the Credit Facility
Provider (i) on a Reset Adjustment Date, Variable Rate Adjustment Date or the Conversion Date
in an amount not greater than the amount in the Principal Reserve Fund on the first day of the
month prior to the Conversion Date, Variable Rate Adjustment Date or Reset Adjustment Date, as
applicable, or (ii) on any Interest Payment Date during a Variable Period, in an amount not
greater than the amount in the Principal Reserve Fund on the first day of the month prior to such
Interest Payment Date; or
(e) in part in Authorized Denominations, on each Interest Payment Date, during any
Reset Period or Fixed Rate Period, with respect to the Bonds that have term maturities occurring
during such Reset Period or Fixed Rate Period commencing on the first sinking fund mandatory
redemption date established for the Bonds for such Reset Period or Fixed Rate Period as provided
in the last paragraph of this caption; provided that if less than all the Bonds shall have been
redeemed pursuant to the terms set forth in “THE BONDS-Optional Redemption of the Bonds”
above or (a) above, the amount of Bonds to be redeemed in each year from sinking fund
nearly as practicable, to the decrease in the payments on the Bond Mortgage Loan in such year; or
installments as provided in this paragraph shall be decreased by an amount, in proportion, as
(Q in whole, on the day following any Reset Period if the Trustee has not received
the items required by the Indenture, as applicable, to effect a new Variable Period, Reset Period
or a Conversion or upon cancellation of a rate adjustment on a Reset Adjustment Date or upon
cancellation of a conversion to a Fixed Rate; or
-14- 257
(g) in whole, upon receipt by the Trustee of notice from the Issuer of a
Determination of Taxability, or subject to the provisions of the Intercreditor Agreement, upon
acceleration of the Bond Mortgage Loan pursuant to the Financing Agreement following a default
by the Borrower under the Financing Agreement or the Regulatory Agreement.
At least fifteen (15) days before a Reset Adjustment Date, a Variable Rate Adjustment Date or
the Conversion Date, the Borrower shall, with the written consent of the Credit Facility Provider,
determine whether the Bonds shall have serial maturities, term maturities with sinking fund redemptions,
terms maturities without sinking fund redemptions or any combination thereof; provided that in all events
the maturity structure shall be based upon the Principal Reserve Schedule Payments made by the
Borrower under the Bond Mortgage Loan for deposit to the Principal Reserve Fund. The Borrower shall
deliver to the Trustee an Opinion of Bond Counsel to the effect that such determination of maturities
andor sinking fund redemption schedule will not adversely affect the exclusion of interest on the Bonds
from gross income for federal income tax purposes.
Selection of Bonds for Redemption
The Trustee shall select Bonds subject to mandatoly sinking fund redemption by lot within the
appropriate maturity. If less than all the Bonds then outstanding shall be called for redemption other than
as a result of mandatory sinking fund redemption, the Trustee shall redeem an amount of Bonds so that
the resulting decrease in debt service on the Bonds in each semiannual period ending on an Interest
Payment Date is proportional, as nearly as practicable, to the decrease in the payments on the Bond Note
in each such semiannual period, and the Bonds shall be selected by lot without each maturity, the cost of
such selection being at the Borrower's expense. Bonds shall be redeemed only in Authorized
Denominations.
Notice of Redemption
Notice of the intended redemption of each Bond shall be given by the Trustee by first-class mail,
postage prepaid, to the registered owner at the address of such owner shown on the Bond Register. All
such redemption notices shall be given not less than ten (10) days (not less than thirty (30) days in the
case of optional or mandatory sinking fund redemptions) nor more than 60 days prior to the date fixed for
redemption. The Trustee may provide a conditional notice of redemption upon the direction of the Credit
Facility Provider or the Borrower (with the prior written consent of the Credit Facility Provider).
Notices of redemption shall state the redemption date and the redemption price, the place or
places where amounts due upon such redemption will be payable, and, if less than all of the Outstanding
Bonds are called for redemption, shall state (a) the numbers of the Bonds to be redeemed by giving the
individual certificate of each Bond to be redeemed or shall state that all Bonds between two stated
certificate numbers, both inclusive, are to be redeemed or that all of the Bonds of one or more maturities
have been called for redemption; @) the CUSP numbers of all Bonds being redeemed if available; (c) the
amount of each Bond being redeemed (in the case of a partial redemption); (d) the date of issue of the
Bond as originally issued; (e) the rate of interest borne by each Bond being redeemed; (0 the maturity
date of each Bond being redeemed; (9) the possibility of a purchase of Bonds in lieu of redemption, if
applicable; (h) the conditions, if any, which must be satisfied in order for the redemption to take place on
the scheduled date of redemption; and (i) any other descriptive information needed to identify accurately
the Bonds being redeemed.
Each notice of redemption shall state that fmther interest on the Bonds will not accrue from and
after the redemption date and that payment of the principal amount and premium, if any, will be made
-15-
upon presentation and surrender of the Bonds endorsed in blank unless the Bonds are then held in a book-
entry only system of registration.
Notice of such redemption shall also be sent by certified mail, overnight delivery service,
facsimile transmission or other secure means, postage prepaid, to the Credit Facility Provider, the Rating
Agency, all municipal Securities Depositories and at least two of the national Information Services that
disseminate securities redemption notices, when possible, at least (5) five days prior to the mailing of
notices required by the paragraph above, and in any event no later than simultaneously with the mailing of
notices required by the paragraph above; provided that neither failure to receive such notice nor any
defect in any notice so mailed shall affect the sufficiency of the proceedings for the redemption of such
Bonds.
In addition to providing notice of redemption as set forth above, the Trustee shall send a second
notice of redemption within 60 days after the redemption date, by certified mail, overnight delivery
service, or other secure means, postage prepaid to the registered owners of any Bonds called for
redemption, at their addresses appearing on the Bond Register, who have not surrendered their Bonds for
redemption within 30 days following the redemption date.
Failure to give notice by mailing to the registered owner of any Bond designated for redemption
or tender or to any depository or information service shall not affect the validity of the proceedings for the
redemption of any other Bond if notice of such redemption shall have been mailed as provided in the
Indenture.
Purchase of Bonds in Whole in Lien of Redemption
Notwithstanding anything in the Indenture to the contrary, at any time the Bonds are subject to
redemption in whole pursuant to the provisions of the Indenture, all (but not less than all) of the Bonds to
be redeemed may be purchased by the Trustee (for the account of the Borrower or the Credit Facility
Provider or their respective designees, as directed by such party) on the date which would he the
redemption date at the written direction of the Credit Facility Provider or the Borrower, with the prior
written consent of the Credit Facility Provider, who shall give the Trustee at least one Business Day’s
notice prior to such redemption date, at a purchase price equal to the redemption price which would have
been applicable to such Bonds on the redemption date. The Bonds shall he purchased in lieu of
redemption only from amounts provided by the Credit Facility Provider or from other Eligible Funds. In
the event the Trustee is so directed to purchase Bonds in lieu of redemption, no notice to the Bondholders
of the Bonds to be so purchased (other than the notice of redemption otherwise required under the
Indenture) shall be required, and the Trustee shall be authorized to apply to such purpose the funds in the
Redemption Account which would have been used to pay the redemption price for such Bonds if such
Bonds had been redeemed rather than purchased Such Bonds so purchased for the account of the
Borrower shall for all purposes under the Indenture constitute Purchased Bonds held by the Custodian
pursuant to the Pledge Agreement and may he remarketed by the Remarketing Agent in accordance with
the provisions of the Indenture. Such Purchased Bonds, if not remarketed or transferred as provided in
the Indenture, shall be redeemed and canceled automatically by the Trustee on the date which is not later
than five (5) years from the date of purchase, unless an opinion of Bond Counsel is delivered to the
Trustee to the effect that not redeeming and canceling such Purchased Bonds will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds. Any purchase
of Bonds as described in this paragraph shall not extinguish the indebtedness represented by such Bonds.
-16- 225-9
SECURITY AND SOURCES OF PAYMENT FOR THE BONDS
Under the Indenture, the Issuer grants to the Trustee a security interest in the following property
described below under “Trust Estate” to secure the Bonds (said property being herein referred to as the
“Trust Estate”). The Trust Estate is granted to the Trustee in order to secure, first, the payment of
principal of, premium, if any, and interest on the Bonds according to their tenor and effect, and, second,
the payment to Freddie Mac of the Freddie Mac Reimbursement Amount and the Freddie Mac Credit
Enhancement Fee (or, if an Alternate Credit Facility has been delivered to the Trustee in accordance with
the provisions thereof, the payments to the Alternate Credit Facility Provider of its fees and other amounts
due it in connection with such Alternate Credit Facility), and the performance and observance by the
Issuer of all the covenants expressed or implied in the Indenture and in the Bonds:
in the Rebate Fund, the Specified Fees Account and the Cost of Issuance Fund;
(a) all right, title and interest of the Issuer in and to all Revenues except for amounts
Bond Note, the Bond Mortgage and the Credit Facility (other than the Reserved Rights), (b) all right, title and interest of the Issuer in and to the Financing Agreement, the
including all extensions and renewals of the terms thereof, if any, including, but without limiting
the generality of the foregoing, the present and continuing right to receive, receipt for, collect or
make claim for any of the moneys, income, revenues, issues, profits and other amounts payable or
bring actions and proceedings thereunder or for the enforcement thereof, and to do any and dl
receivable thereunder, whether payable under the above-referenced documents or otherwise, to
things which the Issuer or any other person is or may become entitled to do under said
documents subject in all events to the Issuer’s Reserved Rights; and
(c) excluding moneys or securities in the Cost of Issuance Fund, the Principal
Reserve Fund, the Specified Fees Account, the Rebate Fund and the Bond Purchase Fund,
all other funds or accounts established under the Indenture, and all money and securities
whether tangible or intangible from time to time hereafter by delivery or by writing of any
held therein or investments thereof, and any and all other rights and interests in property
kind, conveyed, mortgaged, pledged, assigned or transferred as and for additional security
thereunder for the Bonds by the Issuer or by anyone on its behalf or with its written consent
to the Trustee.
Limited Obligations
The Bonds and the interest thereon are limited obligations of the Issuer, payable solely from the
Trust Estate under the Indenture, including, without limitation, its interest in payments received under the
Bond Mortgage Note and the Credit Facility and give rise to no pecuniary of the Issuer. THE BONDS
SHALL NOT BE A DEBT, EITHER GENERAL OR SPECIAL, OF THE STATE OR ANY
POLITICAL SUBDIVISION THEREOF, AND NEITHER THE STATE NOR ANY POLITICAL.
SUBDIVISION THEREOF SHALL BE LIABLE THEREON. NEITHER THE FAITH, REVENUES,
CREDIT NOR TAXING POWER OF THE ISSUER, THE STATE OR ANY POLITICAL
SUBDIVISION THEREOF SHALL BE PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF,
PREMIUM (IF ANY), OR INTEREST ON THE BONDS. THE BONDS ARE PAYABLE, AS TO
PRINCIPAL, PREMIUM (IF ANY), AND INTEREST, SOLELY OUT OF THE TRUST ESTATE
WHICH ARE THE SOLE ASSETS OF THE ISSUER PLEDGED THEREFOR, AND THEN ONLY TO
THE EXTENT PROVIDED IN THE INDENTURE. NEITHER THE MEMBERS OF THE CITY
COUNCIL OF THE ISSUER NOR ANY PERSONS EXECUTING THE BONDS SHALL BE LIABLE
PERSONALLY ON THE BONDS BY REASON OF THEIR ISSUANCE.
-17- 2100
No agreement or obligation contained in the Indenture shall be deemed to be an agreement or
obligation of any councilmember, officer, employee, commissioner, servant or agent of the Issuer in his
or her individual capacity, and neither the councilmembers of the Issuer nor any officer thereof executing
any Bond shall be liable personally on such Bond or be subject to any personal liability or accountability
by reason of the issuance thereof. No councilmember, officer, employee, commissioner, servant or agent
of the Issuer shall incur any personal liability with respect to any other action taken by him or her
pursuant to the Indenture.
THE BONDS ARE NOT A DEBT OF THE UNITED STATES OF AMERICA, OR ANY
AGENCY OF THE UNITED STATES OF AMERICA, OR FREDDIE MAC, AND ARE NOT
GUARANTEED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF
AMERICA OR BY FREDDIE MAC. PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY,
OR INTEREST ON THE BONDS IS NOT GUARANTEED BY FREDDIE MAC. THE
OBLIGATIONS OF FREDDIE MAC UNDER THE CREDIT ENHANCEMENT AGREEMENT ARE
OBLIGATIONS SOLELY OF FREDDIE MAC AND ARE NOT BACKED BY THE FULL FAITH AND
CREDIT OF THE UNlTED STATES OF AMERICA.
The Credit Enhancement Agreement
the Trustee. See “FREDDIE MAC” and “SUMMARY OF THE CREDIT ENHANCEMENT To provide security for the Bonds, Freddie Mac will enter into a Credit Enhancement Agreement with
AGREEMENT” herein. F’ursuant to the Credit Enhancement Agreement, Freddie Mac is required to pay
Guaranteed Payments (See - APPENDIX A DEFINITIONS OF CERTAIN TERMS, “Required Bond
Payment” herein) with respect to the Bond Mortgage Loan when and in the amounts due, and the Purchase
Price of the Bonds in accordance with the terms of the Indenture and Credit Enhancement Agreement. See
“Appendix A--Defmitions of Certain Terms” for a definition of “GuaranteedPayment”.
Alternate Credit Facility
With the prior written consent of the Credit Facility Provider (but without the consent of
Bondholders) the Borrower may, on any Interest Payment Date during a Variable Period, on any Reset
Adjustment Date, or any Variable Rate Adjustment Date and on the Conversion Date (but no later than
seventeen (17) days prior to the expiration date of the Credit Facility unless a commitment to extend the
existing credit Facility has been delivered to the Trustee satisfying the requirements of the Indenture, if
applicable), and, following the beginning of a Reset Period or the Fixed Rate Period, on any Interest
Payment Date occurring after the Bonds may first be optionally redeemed at a price of not greater than
par plus accrued interest to the redemption date and subject to the terms of the existing Credit Facility and
Reimbursement Agreement, arrange for the delivery to the Trustee of an Alternate Credit Facility in
substitution for the Credit Facility then in effect (referred to in the Financing Agreement as ‘%redit
support”) and, if applicable, for payment of the F‘urchase Price of Bonds delivered or deemed delivered in
accordance with the Indenture (referred to in the Financing Agreement as “liquidity support”). The
foregoing notwithstanding, with the prior written consent of the Credit Facility Provider, a Substitution
Date may he selected by the Borrower to occur on a date other than the aforementioned dates, subject to
the notice requirements of the Indenture. In addition, without the consent of the Borrower (and without
the consent of the Bondholders), the Credit Facility Provider may provide any other form of “credit
support” or “liquidity support” (or combination thereof) issued by the Credit Facility Provider in
Substitution for the Credit Enhancement Agreement (or any successor Credit Facility) if (A) the
conditions of the Indenture are satisfied or (B)(i)the Rating Agency confirms in writing that such
Bonds, (ii) the Credit Facility Provider delivers to the Issuer and the Trustee an Opinion of Counsel
substitution will not result in a withdrawal, qualification or reduction of the then current rating of the
-18- 26 I
satisfying the requirements of the Financing Agreement and (iii) such substitute “credit support” or
“liquidity support”(or combination thereof) does not increase the amounts required to be paid by, or other
obligations of, the Borrower. The Borrower acknowledges that it is required to pay Freddie Mac an
amount calculated in accordance with the provisions of the Reimbursement Agreement upon the delivery
of an Alternate Credit Facility during the period therein specified. Any Alternate Credit Facility shall
satisfy the following conditions, as applicable:
(a) An Alternate Credit Facility may be issued to provide only credit support or only
liquidity support so long as a separate Credit Facility provides, at all times while such Alternate
Credit Facility is in effect, complementary credit support or liquidity support, as the case may be,
so that at all times while any of the Bonds bear interest at the Variable Rate or the Reset Rate
such Bonds shall he entitled to credit support and to the liquidity support required by such mode;
provided that in no event shall Freddie Mac be obligated to provide only liquidity or credit
support if any Person other than Freddie Mac provides either liquidity or credit support. During
the Fixed Rate Period, the Bonds shall be entitled to credit support only. Notwithstanding the
foregoing, prior to the commencement of the Fixed Rate Period, the Issuer may, in its sole
Period.
discretion, waive the requirement that a Credit Facility be provided during such Fixed Rate
(b) The Alternate Credit Facility shall (i) be in an amount equal to the aggregate
principal amount of the Bonds Outstanding from time to time plus the Interest Requirement or
otherwise provide coverage satisfactory to the Rating Agency; (ii)provide for payment in
immediately available funds to the Trustee upon receipt of the Trustee’s request for such payment
with respect to any Interest Payment Date, purchase date (if applicable) or extraordinary
mandatory redemption date pursuant to the Indenture; (iii) if the Alternate Credit Facility is
provided to secure Bonds during a Reset Period, provide an expiration date no earlier than the
earliest of (1) the day following the Reset Adjustment Date immediately succeeding the Reset
Period; (2) ten (1 0) days after the Trustee receives notice from the Credit Facility Provider of an
Event of Default under the Indenture or a default under and as defined in the Reimbursement
Agreement and a direction to redeem all Outstanding Bonds; (3) the date on which all Bonds are
paid in full and the Indenture is discharged in accordance with its terms; and (4) the date on
which the Bonds become secured by an Alternate Credit Facility in accordance with the terms of
the Indenture and the Reimbursement Agreement; (iv) unless waived by the Issuer in its sole
discretion, result in the Bonds receiving a long-term rating or short-term rating, or both, as
applicable for the mode then in effect, in one of the three highest rating categories of the Rating
Agency without regard to pluses or minuses and (v) have a stated expiration or termination date
not sooner than one year following its effective date.
(c) In connection with the delivery of an Alternate Credit Facility, the Trustee must
receive (i) an Opinion of Counsel to the Credit Facility Provider issuing the Alternate Credit
Facility, in form and substance satisfactory to the Issuer and the Trustee, relating to the due
authorization and issuance of the Alternate Credit Facility, its enforceability, that the statements
made relating to the Alternate Credit Facility and Reimbursement Agreement contained in any
disclosure document related to the Bonds are true and correct, that the Credit Facility is not
required to be registered under the Securities Act of 1933, as amended (unless waived by the
Issuer with the consent of the Remarketing Agent) and if applicable, that payments made by the
Credit Facility Provider pursuant to the Credit Facility will not be voidable under Section 547 of
the Bankruptcy Code and would not be prevented by the automatic stay provisions of
Section 362(a) of the Bankruptcy Code, in the context of a case or proceeding by or against the
Borrower, a general partner of the Borrower or by the Issuer under the Bankruptcy Code; (ii) an
Opinion of Bond Counsel to the effect that the substitution of such Alternate Credit Facility will
262
-19-
not adversely affect the exclusion from gross income, for federal income tax purposes, of the
interest payable on the Bonds; (iii) the delivery of a continuing disclosure agreement approved by
the Issuer if required by the Financing Agreement; and (iv) a rating letter from the Rating Agency
establishing a rating on the Bonds.
The Trustee shall give notice to the owners of the Bonds, by first-class mail not less than nine (9)
days before each Substitution Date specifying: (i) the Substitution Date and (ii) except as described herein
under the caption “THE BONDS-Mandatory Tender of the Bonds on Substitution Date,” all Bonds must
be surrendered to the Tender Agent for purchase not later than 9:30 a.m., Washington, DC time, on the
Substitution Date.
FREDDIE MAC
The information presented under this caption “FREDDIE MAC” has been supplied by Freddie Mac.
None of the Issuer, the Trustee, the Borrower nor the Remarketing Agent has independently ver8ed such
information, and none assumes respomibility for the accuracy ofsuch information.
Freddie Mac is a shareholder-owned government-sponsored enterprise created on July 24, 1970
pursuant to the Federal Home Loan Mortgage Corporation Act, Title I11 of the Emergency Home Finance
Act of 1970, as amended, 12 U.S.C. $5 1451-1459 (the “Freddie Mac Act”). Freddie Mac’s statutory
mission is (i) to provide stability in the secondary market for residential mortgages; (ii) to respond
appropriately to the private capital market; (iii) to provide ongoing assistance to the secondary market for
residential mortgages (including activities relating to mortgages on housing for low- and moderate-
income families involving a reasonable economic rem that may be less than the return earned on other
activities); and (iv) to promote access to mortgage credit throughout the United States (including central
cities, rural areas and underserved areas) by increasing the liquidity of mortgage financing. Neither the
United States nor any agency or instrumentality of the United States is obligated, either directly or
indirectly, to fund the mortgage purchase or financing activities of Freddie Mac.
Freddie Mac’s principal business consists of the purchase of first-lien, conventional residential
mortgages subject to certain maximum loan limits and other underwriting requirements under the Freddie
Mac Act. Freddie Mac finances its mortgage purchases through the issuance of a variety of securities,
primarily pass-through mortgage participation certificates and unsecured debt, as well as with cash and
equity capital.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”)
established Freddie Mac’s eighteen-member Board of Directors, of which 13 members are elected by the
holders of Freddie Mac’s common stock and the remaining five are appointed by the President of the
United States. Freddie Mac is subject to regulation by three agencies of the federal government. The
Department of Housing and Urban Development (“HUD”) has responsibility for overseeing Freddie
Mac’s fulfillment of its statutory mission, including facilitating the financing of affordable housing in
certain geographic areas and among certain income segments. In addition, the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992 created a separate offke within HUD, known as
the Office of Federal Housing Enterprise Oversight (“OFHEO”), to monitor the adequate capitalization
and safe operation of Freddie Mac. The director of OFHEO is appointed by the President of the United
States and confirmed by the Senate for a five-year term. Finally, the Secretary of the Treasury must
approve the issuance of, including interest mtes of and maturities on, all notes, debentures and substantially
identical types of unsecured debt obligations of Freddie Mac, as well as the issuance of types of mortgage-
related securities not issued prior to FIRREA.
-20- 263
Freddie Mac prepares an annual Information Statement that describes Freddie Mac, its business and
prepared by Freddie Mac is dated March 26, 2001, for the year ended December 31, 2000. On a quarterly
operations and contains Freddie Mac’s audited financial statements. The most recent Information Statement
basis, and from time to time, as necessary, Freddie Mac prepares Information Statement Supplements that
include unaudited financial data and other information concerning its business and operations. The most
recent Information Statement Supplement prepared by Freddie Mac is dated January 31, 2002. Interested
persons can obtain the most recent Information Statement and Information Statement Supplement, and any
Department at Freddie Mac, 8200 Jones Branch Drive, McLean, Virginia 22102 @hone 800EREDDIE [373-
other documents prepared and made available by Freddie Mac, by writing or calling the Investor Inquiry
33431). Selected financial and other information can also be obtained by accessing Freddie Mac’s World
Wide Web site at http://www.freddiem.com,
Freddie Mac makes no representations as to the contents of this Remarketing Memorandum, the
suitability of the Bonds for any investor, the feasibility of performance of any project, or compliance with any
the Credit Enhancement Agreement.
securities, tax or other laws or regulations. Freddie Mac’s role is limited to discharging its obligations under
FREDDIE MAC’S OBLIGATIONS WITH RESPECT TO THE BONDS ARE SOLELY AS
PROVIDED IN THE CREDIT ENHANCEMENT AGREEMENT. THE OBLIGATIONS OF FREDDIE
MAC UNDER THE CREDlT ENHANCEMENT AGREEMENT WILL BE OBLIGATIONS SOLELY OF
FREDDIE MAC, A SHAREHOLDER-OWNED GOVERNMENT-SPONSORED ENTERPRISE
ORGANIZED AND EXISTING UNDER THE LAWS OF THE UNITED STATES OF AMERICA.
FREDDIE MAC HAS NO OBLIGATION TO PURCHASE, DIRECTLY OR INDIRECTLY, ANY OF THE
BONDS EXCEPT AS EXPRESSLY PROVIDED IN THE CREDIT ENHANCEMENT AGREEMENT.
THE BONDS ARE NOT A DEBT OF THE UNITED STATES OF AMERICA, OR ANY OTHER
AGENCY THEREOF, OR OF FREDDIE MAC, AND ARE NOT GUARANTEED BY THE FULL FAITH
AND CREDIT OF THE UNITED STATES OF AMERICA OR BY FREDDIE MAC.
SUMMARY OF THE CREDIT ENHANCEMENT AGREEMENT
The following & a brief summary of certain prov&ions of the Credit Enhancement Agreement. The
summary is qualiJed in its entirety by refrence to the full text of the Credit Enhancement Agreement, a copy
of which & onfile with the Tmtee.
Freddie Mac is delivering to the Trustee its Credit Enhancement Ageement dated as of May 1,2002
pursuant to which, subject to certain requirements set forth therein, Freddie Mac agrees to make certain
Guaranteed Payments related to the Bond Mortgage Loan (but not the obligations of the Borrower to pay
certain fees to the Issuer and the Trustee) and to pay the Purchase Price of the Bonds under certain
circumstances, all as described below. This following brief description of the payment terms of the Credit
Enhancement Agreement does not purport to be complete. Purchasers of the Bonds may obtain a copy of
the executed Credit Enhancement Agreement by contacting the Trustee.
On each Interest Payment Date and on any other date upon which any principal of the Bond Note
is paid, Freddie Mac is required to pay the sum of the Interest and Principal Component of a Guaranteed
Payment. The Guaranteed Payment is comprised of (i) the Interest Component, which is the regularly
scheduled monthly payment of interest on the unpaid principal balance of the Bond Mortgage Loan less
interest accrued on any Purchased Bonds (as defined in the Credit Enhancement Agreement) and (ii) the
Principal Component, which is (x) the regularly scheduled payment of principal on the Bond Note, if any
(y) upon optional or mandatory prepayment of the Bond Mortgage Loan, the principal amount of the
Bond Note being prepaid, and (2) on the maturity date or upon acceleration of the Bond Note, the unpaid
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principal balance of the Bond Note. Freddie Mac has no obligation under any circumstance to provide for
any prepayment premium or other prepayment charge payable on the Bond Mortgage Loan due under the
Financing Agreement.
In addition, on any date to the extent that Bonds are required to be purchased pursuant to the
Indenture and are not remarketed, Freddie Mac will pay the Purchase Price of such Bonds. If any Bonds
are purchased under such scenario, the Bonds will be held in the name of the Custodian subject to Freddie
Mac’s security interest in such Bonds as evidenced by a Pledge, Security and Custody Agreement
between the Borrower and the Trustee acting as custodian thereunder.
In no event is Freddie Mac required to pay such Guaranteed Payment or the Purchase Price of
Bonds with respect to Bonds registered in the name of the Borrower.
The Credit Enhancement Agreement terminates on the first to occur of (a) the date the Bonds are
paid in full, (b) the date the Bonds are purchased in lieu of redemption pursuant to the terms of the Credit
Enhancement Agreement, (c) June 6, 2016, (d) the date on which the Trustee, after having received
sufficient funds to redeem all of the Bonds Outstanding in accordance with the terms of the Indenture,
releases the trust estate encumbered by the Indenture and pays Freddie Mac all amounts required to be
paid under the Indenture, the Financing Agreement, the Reimbursement Agreement or the Credit
Enhancement Agreement and any other Bond Financing Document and shall have released Freddie Mac
from all obligations and liability under the Credit Enhancement Agreement, and (e) the day immediately
following the effective date of any Alternate Credit Facility and the Trustee’s release of Freddie Mac
from all obligations and liability under the Credit Enhancement Agreement.
FREDDIE MAC’S OBLIGATIONS WITH RESPECT TO THE BONDS ARE SOLELY AS
PROVIDED IN THE CREDIT ENHANCEMENT AGREEMENT. THE OBLIGATIONS OF FREDDIE
MAC UNDER THE CREDIT ENHANCEMENT AGREEMENT WILL BE OBLIGATIONS SOLELY
ORGANIZED AND EXISTING UNDER THE LAWS OF THE UNITED STATES, AND WILL NOT BE
BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA. FREDDIE
MAC HAS NO OBLIGATION TO PURCHASE, DIRECTLY OR INDIRECTLY, ANY OF THE BONDS
EXCEPT AS EXPRESSLY PROVIDED IN THE CREDIT ENHANCEMENT AGREEMENT. THE
BONDS ARE NOT A DEBT OF THE UNITED STATES OF AMERICA, OR ANY OTHER AGENCY
THEREOF, OR OF FREDDIE MAC, AND ARE NOT GUARANTEED BY THE FULL FAITH AND
CREDIT OF THE UNITED STATES OF AMERICA OR BY FREDDIE MAC.
OF FREDDIE MAC, A SHAREHOLDER-OWNER GOVERNMENT-SPONSORED ENTERPRISE
SUMMARY OF CERTAIN PROVISIONS OF THE REIMBURSEMENT AGREEMENT
The following is a brief summary of the Reimbursement Agreement. The summary does not purport
to be complete or definitive and is qualified in its entirety by reference to the full text of the Reimbursement
Agreement, a copy of which is onfile with the Trustee.
The obligations of the Borrower to Freddie Mac under the Credit Enhancement Agreement are
evidenced by a Reimbursement and Security Agreement dated as of May 1, 2002 (the “Reimbursement
Agreement”), between the Borrower and Freddie Mac. Under the Reimbursement Agreement, the Borrower
has promised to repay Freddie Mac all sums of money Freddie Mac has advanced to the Trustee for the
Guaranteed Payments made on the Bond Mortgage Loan as well as any payments ma& for Purchased Bonds
upon a failed remarketing. The Reimbursement Agreement also provides that the Borrower will pay the
Freddie Mac Credit Enhancement Fee to Freddie Mac and the Servicing Fee to the Freddie Mac Servicer.
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Under the provisions of the Reimbursement Agreement, Freddie Mac may declare an Event of Default
if (a) the Borrower fails to pay any amounts due under the Reimbursement Agreement, @) the Borrower fails
to observe or perform any of the covenants, conditions or agreements set forth in the Reimbursement
Agreement or other Borrower Document, (c) an Event of Default occurs under the Reimbursement Mortgage
or any of the other Borrower Documents (taking into account any cure periods), (d) any representation or
warranty made under the Reimbursement Agreement or any of the other Borrower Documents or any
certificate delivered by the Borrower pursuant to the Reimbursement Agreement or other Borrower Document
was or becomes inaccurate or incorrect in any material respect when made or deemed made, or (e) Freddie
Mac notified the Borrower that Purchased Bonds have not been remarketed as of the ninetieth (90th) day
following purchase by the Trustee on behalf of the Borrower and the Borrower has not reimbursed Freddie
Mac for the amount advanced to purchase the Purchased Bonds, together with any fees due under the
Reimbursement Agreement. Upon an Event of Default, Freddie Mac may accelerate the Borrower’s
obligations under the Reimbursement Agreement and terminate the Credit Enhancement Agreement in
accordance with its terms and tak any other action at law or equity to protect its rights against the Borrower in
the Project, including foreclosing against the Project subject to the Bond Mortgage. If Freddie Mac elects to
foreclose against the Project, it has the option to keep the Bonds outstanding or cause a redemption of the
Bonds.
The obligations of the Borrower under the Reimbursement Agreement will be secured by the
Reimbursement Mortgage. The Reimbursement Mortgage will be subordinate to the Bond Mortgage.
Bondholders will have no rights under and are not third-party beneficiaries under the Reimbursement
Mortgage.
THE BORROWER AND THE PROJECT
The following information concerning the Borrower and the Project has been provided by
representatives of the Borrower and has not been independently confrmed or verified by any other person.
Although the information shown below has been obtained from sources believed to be reliable, M
representation is made herein by the Issuer as to the accuracy or adequacy of such information or as to the
absence of material adverse changes in such information subsequent to the date hereoj:
The Borrower
Santa Fe Ranch, LLC, a Delaware limited liability company, is acquiring and will operate the
Project. The sole member of the Borrower is CASA Partners 11, L.P., an Illinois limited partnership (the
“member”). The general partner of the Member is Henderson Global Investors GP, L.L.C., a Delaware
limited liability company. The Borrower owns no other properties.
The Project
The Property is a garden-style multifamily development in good condition, completed in 1986. A
rehabilitation program completed in 1998 included items such as asphalt paving, wood siding
replacements, roof system repairs, paintingktucco, boiler system, tub/showers, kitchen lighting fixtures,
ceiling fans, carpet, flooring, and painthywall. Construction is wood frame with a stucco exterior and
red concrete tile roofs. The total apartment community is situated on approximately 20.5 acres, or 15.61
unitdacre
Santa Fe Ranch Apartments is situated at the southeast comer of La Costa Avenue and Rancho
Santa Fe Road, between 1-5 and 1-15. 1-5 is the primary north-south interstate for San Diego County,
which provides transportation throughout Southern California, beginning at the U.S.-Mexico border and
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Amenities
The Propeq offers a clubhouse, fitness center, business center, three racquetbalVhandbal1 courts,
two lighted tennis courts, two swimming pools and spas, picnic areas, electronically controlled entry
gates, and car wash areas. Unit amenities include wood burning fireplaces, built-in bookcases, ceiling
fans, breakfast bars, washeddryers, walk-in closets, linen closets, kitchen appliance package, and outdoor
storage areas.
Subordinate Financing
At the date of delivery of the Credit Enhancement Agreement, the Borrower will obtain a
subordinate loan from Freddie Mac in the approximate amount of $13,330,000. This subordinate loan
will bear interest at a Floating Rate related to the Freddie Mac Reference Bill Rate, will amortize monthly
and will mature on June 1, - . The estimated annual debt service on the subordinate loan will be
approximately $1,000,000.
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Operating History
The following information has been obtained from the Borrower and sets forth the Net Operating
Income (net income before depreciation, taxes or interest expenses and average occupancy for the Project
for 200 1.
Net Operating Income $
occupancy
CERTAIN BONDHOLDERS’ RISKS
The purchase of the Bonds will involve a number of risks. The following is a summary, which does
not purport to be comprehensive or definitive, of some of such risk factors.
No Borrower Personal Liability
The Borrower has not been nor will it be (subject to certain limited exceptions to non-recourse liability
Mortgage Loan, nor under the other Bond Financing Documents. All payments on the Bond Mortgage Loan
set forth in the Financing Agreement and the Bond Mortgage) personally liable for payments on the Bond
are expected to be derived from revenues generated by the Project.
Limited Security
The Bonds are limited obligations of the Issuer payable solely from certain funds pledged to and
held by the Trustee pursuant to the Indenture.
Early Redemption
amount or who hold such a Bond trading at a price in excess of par, should consider the fact that the Bonds are
Purchasers of Bonds, including tho= who purchase Bonds at a price in excess of their principal
subject to redemption at a redemption price equal to their principal amount plus accrued interest in the event
such Bonds are redeemed prior to maturity. This could occur, for example, in the event that the Bond
Mortgage Loan is prepaid as a result of a casualty or condemnation award payments affecting the Project or
there is a default under the Bond Mortgage or the Borrower elects to voluntarily prepay the Bond Mortgage
Loan. See “THE BONDS-Mandatory Redemption.”
Economic Feasibility
The economic feasibility of the Project depends in large part upon it being substantially occupied
at projected rent levels. There can be no assurance that in the future the Borrower will be able to rent the
units at rates which will enable them to make timely payments on the Bond Mortgage Loan.
Enforceability and Bankruptcy
The remedies available to the Trustee and the Bondholders upon an event of default under the
Financing Agreement, the Credit Enhancement Agreement or the Indenture are in many respects
dependent upon regulatory and judicial actions which are often subject to discretion and delay.
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Under existing laws and judicial decisions, the remedies provided under the aforesaid documents
may not readily be available or may be limited. The various legal opinions to be delivered concurrently
with the delivery of the Bonds and the aforesaid documents will he qualified to the extent that the
enforceability of certain legal rights related to the 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.
SUMMARY OF THE INDENTURE
The following is a brief summary of certain provisions of the Indenture. This summary does not
purport to be complete or definitive and is qualified in its entirety by reference to the Indenture, copies of
which are on file with the Trustee.
Establishment of Funds
In addition to the Bond Purchase Fund, the Indenture establishes the following funds:
(a) Revenue Fund, and within the Revenue Fund a General Account and a Credit
Facility Account;
(b) Bond Fund, and within the Bond Fund a Purchased Bonds Account;
(c) Redemption Fund;
(d) Administration Fund and within the Administration Fund a Specified Fees
Account and an Administration Expense Account;
(e) Cost of Issuance Fund;
(0 Principal Reserve Fund; and
(8) Rebate Fund.
Revenue Fund
There will be deposited in the Credit Facility Account of the Revenue Fund all amounts received
pursuant to draws on the Credit Facility. Moneys received from the Freddie Mac Servicer or the
Borrower representing monthly payments by the Borrower in accordance with the Principal Reserve
Schedule shall be deposited directly to the Principal Reserve Fund as provided in the Indenture. All
Revenues (other than amounts paid under the Credit Facility or received as Principal Reserve Schedule
Revenue Fund, except (a) as otherwise specifically described below with respect to certain deposits into
Payments) will be deposited by the Trustee, promptly upon receipt thereof, to the General Account of the
the Redemption Fund, (b) the Bond Fee Component will be deposited in the Administration Expense
Account and the Issuer Fee shall be deposited to the Specified Fees Account, (c) as otherwise specifically
provided in the Indenture with respect to deficiencies in the Administration Fund, (d) with respect to
investment earnings to the extent required to be retained in the Funds and Accounts to which they are
Principal Reserve Fund; and (fj with respect to amounts required to be transferred between Funds and
attributable, (e) as otherwise specifically provided in the Indenture with respect to certain deposits to the
Accounts pursuant to applicable provisions of the Indenture.
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On each Interest Payment Date or any other date on which payment of principal or interest on the
Bonds becomes due and payable, the Trustee, out of moneys in the Credit Facility Account and the
General Account of the Revenue Fund, will credit the following amounts to the following Funds, but in
the order and within the limitations indicated in the Indenture with respect thereto, as follows:
FIRST, to the Bond Fund from moneys in the Credit Facility Account of the Revenue
Fund, an amount equal to the principal of and interest due on the Bonds on such date (excluding
principal or interest on any Purchased Bonds and excluding the principal constituting a
mandatory sinking fund payment on any Bonds on such date); and
SECOND, to the Bond Fund from moneys in the Credit Facility Account of the Revenue
Fund, an amount equal to the principal amount due and payable on the Bonds with respect to
mandatory sinking fund redemption (excluding principal of any Purchased Bonds) on such date;
and
THIRD, to the Redemption Fund from moneys in the Credit Facility Account (i) amounts
paid to the Trustee under the Credit Facility to be applied to the mandatory redemption of all or a
portion of the Bonds as described herein under the caption “THE BONDS - - Mandatory
Redemption” (other than a mandatory sinking fund redemption); and (ii) amounts paid to the
Trustee pursuant to the Credit Facility to be applied to the optional redemption of all or a portion
of the Bonds as described herein under the caption “THE BONDS-Optional Redemption of the
Bonds”; and
FOURTH, to the Purchased Bonds Account in the Bond Fund from moneys in the
General Account, an amount equal to the interest due on the Purchased Bonds on such date.
Immediately upon receipt, the Trustee will deposit directly to the Redemption Fund (a) Net
Proceeds representing casualty insurance proceeds or condemnation awards paid as a prepayment of the
Bond Mortgage Loan, such amount to be applied to reimburse the Credit Facility Provider for a draw
under the Credit Facility in such amount to provide for extraordinary mandatory redemption of all or a
portion of the Bonds pursuant to the Indenture; and (b) Eligible Funds (other than draws under the Credit
Facility) paid to the Trustee to be applied to the optional redemption of all or a portion of the Bonds
pursuant to the Indenture; provided, however, any premium paid in connection with an optional
redemption of the Bonds shall not be paid from amounts drawn on the Credit Facility.
Immediately upon receipt, the Trustee shall deposit directly to the Principal Reserve Fund all
Principal Reserve Schedule Payments received from the Freddie Mac Servicer or the Borrower.
Immediately upon receipt, the Trustee will deposit directly to the Administration Fund the Bond
Fee Component received from the Freddie Mac Servicer or the Borrower and to the Specified Fees
Account, the Issuer Fee.
Should the amount in the Bond Fund or in the Redemption Fund, as applicable, be insufflcient to
pay the amount due on the Bonds on any given Interest Payment Date or other payment date after the
transfers from the Credit Facility Account, the Trustee will credit to the Bond Fund the amount of such
deficiency by charging the following Funds and Accounts in the following order of priority: (a) the
General Account of the Revenue Fund; (b) the Administration Expense Account; (c) the Redemption
Fund, except no such charge to the Redemption Fund will be made from moneys to be used to effect a
redemption for which notice of redemption has been provided for or from moneys which are held for
payment of Bonds which are no longer Outstanding under the Indenture; and (d) the Principal Reserve
Fund.
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Bond Fund
The Trustee will charge the Bond Fund, on each Interest Payment Date, an amount equal to the
unpaid interest and principal due on the Bonds on such Interest Payment Date, and will cause the same to
be applied to the payment of such interest and principal when due (excluding principal on any Purchased
Bond). Any moneys remaining in the Bond Fund on any Interest Payment Date after application as
provided in the preceding sentence may, to the extent there shall exist any deficiency in the Redemption
Fund to redeem Bonds called for mandatory sinking fund redemption on such Interest Payment Date, be
transferred to the Redemption Fund to be applied for such purpose. Any balance remaining in the Bond
Fund on the Business Day immediately succeeding an Interest Payment Date will be transferred to the
Freddie Mac Servicer for payment to the Credit Facility Provider to be applied in accordance with the
Reimbursement Agreement.
Redemption Fund
Any moneys credited to the Redemption Fund and not otherwise restricted will be applied FIRST,
to reimburse the Credit Facility Provider to the extent of any draw made under the Credit Facility for
redemption of the Bonds as a result of a casualty or condemnation with respect to the Project; SECOND,
to pay the redemption price of Bonds called for redemption as a result of an optional or mandatory
redemption of the Bonds; and THIRD, to make up any deficiency in the Bond Fund on any Interest
Payment Date, to the extent moneys then available in the General Account of the Revenue Fund and the
Administration Expense Account are insufficient to make up such deficiency, provided that no moneys to
he used to effect a redemption for which a conditional notice of redemption, the conditions of which have
been satisfied, or an unconditional notice of redemption has been provided or moneys which are held for
payment of Bonds which are no longer Outstanding under the Indenture will be so transferred.to the Bond
Fund.
On or before each Interest Payment Date, the income realized from the investment of moneys in
the Redemption Fund will be credited by the Trustee to the General Account of the Revenue Fund.
Administration Fund
Amounts in the Specified Fees Account shall be withdrawn or maintained, as appropriate, by the
Trustee to pay (i) on each June 1, commencing June 1, 2003, to, or at the direction of, the Issuer, the
Issuer Fee, (ii) on each June 1 and December 1, commencing December 1, 2002, to the Trustee amounts
due pursuant to subparts (a) and (d) of the definition of the Trustee’s Fee, (iii) upon receipt, to the
Trustee, any amounts due to the Trustee which have not been paid, other than amounts paid in accordance
with clause (ii) and (iv) upon receipt, to, or at the direction of, the Issuer, any portion of the Issuer Fee
due and unpaid, other than amounts paid in accordance with clause (i) .
Amounts in the Administration Expense Account will be withdrawn or maintained, as
appropriate, by the Trustee and used FIRST, to make up any deficiency in the Bond Fund on any Interest
Payment Date, to the extent moneys then available in the General Account of the Revenue Fund are
insufficient to make up such deficiency; SECOND, to pay to Freddie Mac any unpaid portion of the
Freddie Mac Credit Enhancement Fee and Liquidity Use Fee, as certified in writing by Freddie Mac to the
Borrower and the Trustee; THIRD, to pay to the Trustee any Extraordinary Trustee’s Fees and Expenses
due and payable from time to time, as set forth in an invoice submitted to the Borrower, the Issuer and
Freddie Mac; FOURTH, to pay to the Freddie Mac Servicer any unpaid portion of the Ordinary Servicing
Fees and Expenses and any Extraordinary Servicing Fees and Expenses due and owing from time to time,
as set forth in an invoice submitted to the Borrower, the Trustee and Freddie Mac; FIFTH, to pay to the
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Issuer any extraordinary expenses it may incur in connection with the Bonds or the Indenture from time to
time, as set forth in an invoice submitted to the Borrower, the Trustee and Freddie Mac; SIXTH, to make
up any deficiency in the Redemption Fund on any redemption date of Bonds, to the extent moneys then
available in the Redemption Fund are insufficient to redeem Bonds called for redemption on such
redemption date; SEVENTH, to pay the Rating Agency the annual rating maintenance fee, if any, of the
Rating Agency; EIGHTH, to pay the Counterparty ongoing fees owed to such Counterparty, if any; and
NINTH, to transfer any remaining balance after application as aforesaid to the General Account of the
Revenue Fund.
payable from the Administration Fund as described in the preceding paragraph on any date on which such
In the event that the amounts on deposit in the Administration Fund are not equal to the amounts
amounts are due and payable, the Trustee will give notice to the Borrower of such deficiency and of the
amount of such deficiency and request payment within two Business Days to the Trustee of the amount of
such deficiency. Upon payment by the Borrower of such deficiency, the amounts for which such
from the investment of moneys in the Administration Fund will be credited by the Trustee to the General
deficiency was requested will be paid. On or before each Interest Payment Date, the income realized
Account of the Revenue Fund.
Principal Reserve Fund
During any Variable Period, there will be deposited into the Principal Reserve Fund that portion
of the monthly payments made by the Borrower in accordance with the Principal Reserve Schedule
attached to the Reimbursement Agreement and designated for deposit to the Principal Reserve Fund as
required by the Financing Agreement and the Reimbursement Agreement. Any interest earned on or
profits realized from amounts on deposit in the Principal Reserve Fund will be deposited into the
Principal Reserve Fund. Provided that there is no deficiency in the Principal Reserve Fund, the
Default exists under any of the Bond Mortgage Loan Documents, interest and profits realized from
Administration Expense Account, the Specified Fees Account or the Rebate Fund and that no Event of
amounts on deposit in the Principal Reserve Fund shall be paid to the Borrower on the Interest Payment
Date next succeeding receipt of such interest or profits by the Trustee. In addition, remarketing proceeds
shall be deposited in the Principal Reserve Fund and used to reimburse Freddie Mac in an amount equal
to the amount of any Liquidity Advance paid to the Trustee to purchase Bonds on any Settlement Date.
At the direction of Freddie Mac, amounts on deposit in the Principal Reserve Fund shall be used by the
Trustee (i) to pay any amounts owed to Freddie Mac in connection with any unreimbursed draw against
the Credit Facility for the Principal Component (as defined in the Credit Facility) (or in the case of a
failed remarketing, any unreimbursed draw for principal andor interest in connection with a failed
remarketing), and (ii) in the event of a default by the Borrower under any of the Bond Mortgage Loan
Documents, to pay any amounts required to be paid to Freddie Mac pursuant to the Reimbursement
Freddie Mac.
Agreement or any other Bond Mortgage Loan Document or to pay any other sum as directed in writing by
On each Reset Adjustment Date, Variable Rate Adjustment Date and on the Conversion Date,
amounts on deposit in the Principal Reserve Fund shall be used to reimburse the Credit Facility Provider
in an amount equal to the Principal Component of any Guaranteed Payment made by the Credit Facility
Provider to the Trustee under the Credit Facility to redeem Bonds pursuant to the Indenture.
On the first day of the month in which an Interest Payment Date falls during a Reset Period or the
Fixed Rate Period, amounts on deposit in the Principal Reserve Fund will be used to reimburse the Credit
Facility Provider in an amount equal to the Principal Component of any Guaranteed Payment made by the
Credit Facility Provider to the Trustee under the Credit Enhancement Agreement to redeem Bonds in
Authorized Denominations pursuant to the Indenture.
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On any Interest Payment Date, to the extent of any deficiency in the Bond Fund, to the extent
moneys then available in accordance with the Indenture in the General Account of the Revenue Fund, the
Administration Expense Account and the Redemption Fund are insufficient to make up such deficiency,
at the direction of Freddie Mac amounts on deposit in the Principal Reserve Fund shall be transferred to
the Bond Fund in the amount of such deficiency.
Any amounts remaining in the Principal Reserve Fund afier payment in full of the principal of
and interest on the Bonds shall be applied as described herein under the caption “SUMMARY OF THE
INDENTURE-Amounts Remaining in Funds.”
Investment of Funds
The moneys held by the Trustee shall constitute trust funds for the purposes of the Indenture.
Any moneys attributable to each of the funds and accounts under the Indenture shall be invested by the
Trustee, at the written direction of the Borrower, with respect to all other Funds and Accounts, in
Qualified Investments which mature on the earlier of (i) six months from the date of investment and
(ii) the date such moneys are needed; provided, that if the Trustee shall have entered into any investment agreement requiring investment of moneys in any fund or account under the Indenture in accordance with
such investment agreement and if such investment agreement constitutes a Qualified Investment, such
moneys shall be invested in accordance with such requirements. Such investments may be made through
the investment or securities department of the Trustee. All such Qualified Investments purchased with
money in any fund or account under the Indenture shall mature, or shall be subject to redemption or
withdrawal without discount or penalty at the option of the Trustee, prior to the next succeeding Interest
Payment Date.
Qualified Investments representing an investment of moneys attributable to any Fund or Account
shall be deemed at all times to be a part of said Fund or Account, and, except as otherwise may be
provided expressly in the Indenture, the interest thereon and any profit arising on the sale thereof shall be
credited to the General Account of the Revenue Fund, and any loss resulting on the sale thereof shall be
charged against the General Account of the Revenue Fund. Such investments shall be sold at the best
price obtainable whenever it shall be necessary so to do in order to provide moneys to make any transfer,
withdrawal, payment or disbursement from such Fund or Account. In the case of any required transfer of
moneys to another such Fund or Account, such investments may be transferred to that Fund or Account in
lieu of the required moneys if permitted by the Indenture as an investment of moneys in that Fund or
Account.
The Trustee will not be liable or responsible for any loss resulting from any investment made in
accordance with the Indenture.
In computing for any purpose under the Indenture the amount in any Fund or Account on any
date, obligations so purchased will be valued at the lower of cost or par exclusive of accrued interest.
Rebate Fund; Rebate of Excess Investment Earnings to United States
The Rebate Fund shall be established by the Trustee and held and applied as provided in the
Indenture. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust, to the
extent required to satisfy the Rebatable Arbitrage (as defined in the Indenture) and as calculated by the
Rebate Analyst, for payment to the United States Government, and neither the Issuer, the Borrower, the
Credit Facility Provider nor the Bondholders shall have any rights in or claim to such moneys. The
Trustee shall follow the written instructions of the Issuer, Bond Counsel or the Rebate Analyst, with
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respect to the Rebate Fund, and shall not be required to take any actions under the Indenture in the
absence of written instructions from the Borrower, the Issuer, Bond Counsel or the Rebate Analyst.
Within 55 days of the end of each fifth Bond Year, the Trustee shall cause the Rebate Analyst to
calculate the amount of rebatable arbitrage, in accordance with the Indenture and Section 148(f)(2) of the
1986 Code and Treasury Regulations Section 1.148-3 (taking into account any exceptions with respect to
the computation of the rebatable arbitrage, if applicable, (e&, the temporary investments exceptions of
Section 148(f)(4)(B) and (C) of the 1986 Code), for this purpose treating the last day of the applicable
Bond Year as a (computation) date, within the meaning of the Regulations (the “Rebate Arbitrage”).
Within 55 days of the end of each fifth Bond Year, upon the written direction of the Issuer, Bond
Counsel or the Rebate Analyst, an amount shall he deposited to the Rebate Fund by the Trustee from
amounts provided by the Borrower, if and to the extent required so that the balance in the Rebate Fund
shall equal the amount of rebatable arbitrage so calculated as described in the preceding paragraph.
Any funds remaining in the Rebate Fund after redemption and payment of all of the Bonds and
payment and satisfaction of any Rebatable Arbitrage, or provision made therefor satisfactory to the
Trustee, will be withdrawn and remitted to the Borrower.
Notwithstanding the foregoing, the computations and payments of rebatable arbitrage need not be
made to the extent that neither the Issuer nor the Borrower will thereby fail to comply with any
requirements of Section 148(f) of the 1986 Code based on an opinion of Bond Counsel that such failure
will not adversely affect the exclusion from gross income for federal income tax purposes of interest on
the Bonds, a copy of which shall be provided to the Trustee, at the expense of the Borrower.
Cost of Issuance Fund
The Trustee will use moneys on deposit in the Cost of Issuance Fund to pay on the Closing Date,
or as soon as practicable thereafter, the costs related to effecting the delivery of the Credit Enhancement
Agreement in accordance with written instructions to be given to the Trustee by the Borrower and
approved by Freddie Mac, upon delivery to the Trustee of appropriate invoices for such expenses.
Amounts remaining on deposit in the Cost of Issuance Fund six (6) months after the Closing Date will be
transferred to the Borrower. Upon such final disbursement, the Trustee will close the Cost of Issuance
Fund.
Moneys Held in Trnst
All moneys held by the Trustee, as such, at any time pursuant to the terms of the Indenture shall
be and thereby are assigned, transferred and set over’ unto the Trustee in trust for the purposes and under
the terms and conditions of the Indenture.
Amounts Remaining in Funds
After full payment of the Bonds (or provision for payment thereof having been made in
accordance with the Indenture) and full payment of the fees, charges and expenses of the Trustee and
other amounts required to be paid under the Indenture or under the any Bond Mortgage Loan Document,
the Credit Facility or the Reimbursement Agreement, including fees payable to the Issuer and the Credit
Facility Provider, any amounts remaining in any Fund or Account under the Indenture other than the
Rebate Fund shall be paid to the Borrower; provided however, that if a default shall have occurred and
remain uncured under any Bond Mortgage Loan Document of which the Trustee shall have received
written notice from the Credit Facility Provider or the Freddie Mac Servicer, then any such amounts
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remaining in any Fund or Account under the Indenture shall be paid to the Credit Facility Provider to be
applied in accordance with the Reimbursement Agreement.
Events of Default; Acceleration: Remedies
Each of the following constitutes an Event of Default under the Indenture:
any Bond (other than Purchased Bonds), when due, whether at the stated maturity thereof, or
(a) failure to pay the principal or Purchase Price of, premium, if any, or interest on
upon proceedings for redemption thereof, or on the maturity thereof by declaration; or
(b) failure by the Credit Facility Provider to make when due a required payment
under the Credit Facility; or
(c) failure to observe or perform any of the covenants, agreements or conditions on
the part of the Issuer in the Indenture or in the Bonds (other than with respect to payment of
principal of and interest on the Bonds) and the continuance thereof for a period of 30 days after
written notice to the Issuer from the Trustee or the Bondholders of more than 51% of the
aggregate principal amount of Bonds then Outstanding at such time specifying such default and
requiring the same to be remedied; provided that the Credit Facility Provider shall have directed in writing that the same shall have constituted an Event of Default.
under the terms of the Indenture will be construed as resulting in a default under the Bond Note, the Bond
The Trustee and the Issuer agree that, notwithstanding the provisions in the Indenture, no default
Mortgage or any other Bond Mortgage Loan Documents, unless such event also constitutes a default
thereunder.
long as no Event of Default has occurred and is then continuing under (b) above, only upon receipt from
Upon the occurrence of an Event of Default as provided in (a) above, the Trustee shall, but so
the Credit Facility Provider of a notice directing such acceleration (which notice may be given in the sole
discretion of the Credit Facility Provider), by notice in writing delivered to the Issuer, declare the
principal of all Bonds then Outstanding and the interest accrued thereon immediately due and payable,
and such principal and interest shall thereupon become and be immediately due and payable and interest
shall cease to accrue. Upon the occurrence of an Event of Default as provided in (c) above, the Trustee
may, but so long as no Event of Default has occurred and is then continuing under (b) above, only upon
receipt of the written consent of the Credit Facility Provider (which consent may be given in the sole
discretion of the Credit Facility Provider), by notice in writing delivered to the Issuer, declare the
principal of all Bonds then Outstanding and the interest accrued thereon immediately due and payable,
and such principal and interest shall thereupon become and be immediately due and payable and interest
shall cease to accrue. Upon the occurrence of an Event of Default under (b) above, the Trustee may, and
upon the written request of the Bondholders of more than 51% of the Bonds then Outstanding and receipt
of indemnity satisfactory to it shall, by notice in writing delivered to the Issuer, declare the principal of all
Bonds then Outstanding and the interest accrued thereon immediately due and payable, and such principal
and interest shall thereupon become and be immediately due and payable and interest shall cease to
accrue. The payment of the Bonds resulting from a declaration of acceleration on the Bonds as the result
of an Event of Default occurring under (a) or (c) above shall be made from the Credit Facility.
If at any time after the Bonds shall have been so declared due and payable, and before any
judgment or decree for the payment of the money due shall have been obtained or entered, the Issuer, the
Borrower or the Credit Facility Provider, as applicable, shall pay to or deposit with the Trustee a sum
sufficient to pay all principal of the Bonds then due (other than solely by reason of such declaration) and
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*
all unpaid installments of interest, if any, upon all the Bonds then due, with interest at the rate borne by
the Bonds on such overdue principal and (to the extent legally enforceable) on such overdue installments
of interest, and the reasonable expenses of the Trustee shall have been paid in full, and all outstanding
amounts then due and unpaid under the Reimbursement Agreement (including with respect to Freddie
Mac all outstanding Freddie Mac Reimbursement Amounts and all Freddie Mac Credit Enhancement
Fees) shall have been paid in full, and all other defaults under the Indenture have been made good or
cured or waived in writing by the Credit Facility Provider (or, if an Event of Default under (b) above has
occurred and is then continuing, by the Bondholders of more than 51% of the aggregate principal amount
of the Bonds then Outstanding), then and in every case, the Trustee on behalf of the Bondholders of all
the Outstanding Bonds shall rescind and annul such declaration and its consequences; but no such
rescission and annulment shall extend to or shall affect any subsequent default, nor shall it impair or
exhaust any right or power consequent thereon.
Upon the happening and continuance of an Event of Default, the Trustee in its own name and as
trustee of an express trust, on behalf and for the benefit and protection of the Bondholders of all Bonds
with respect to which such an Event of Default has occurred and of the Credit Facility Provider (if no
Event of Default has occurred and is continuing under (b) above), may also proceed to protect and enforce
any rights of the Trustee and, to the full extent that the Bondholders of such Bonds themselves might do,
the rights of such Bondholders under the laws of the State or under the Indenture by such of the following
remedies as the Trustee shall deem most effectual to protect and enforce such rights; provided that, so
long as no Event of Default has occurred and is then continuing under (b) above, the Trustee may
undertake any such remedy only upon the receipt of the prior written consent of the Credit Facility
Provider (which consent may be given in the sole discretion of the Credit Facility Provider) or in
accordance with the provisions of the Intercreditor Agreement:
(a) by mandamus or other suit, action or proceeding at law or in equity, to enforce
the payment of the principal of, premium, if any, or interest on the Bonds then Outstanding, or for
the specific performance of any covenant or agreement contained in the Indenture or in the Credit
Facility, the Financing Agreement or the Regulatory Agreement, or to require the Issuer to carry
out any other covenant or agreement with Bondholders and to perform its duties under the Act;
(b) by pursuing any available remedies under the Financing Agreement, the
Regulatory Agreement or the Credit Facility;
pledged under the Indenture; and
(c) by realizing or causing to be realized through sale or otherwise upon the security
(d) by action or suit in equity, to enjoin any acts or things that may be unlawful or in
violation of the rights of the Bondholders and to execute any other papers and documents and do
and perform any and all such acts and things as may be necessary or advisable in the opinion of
the Trustee in order to have the respective claims of the Bondholders against the Issuer allowed in
any bankruptcy or other proceeding.
No remedy by the terms of the Indenture conferred upon or reserved to the Trustee or to the
Bondholders is intended to be exclusive of any other remedy, but each and every such remedy shall be
cumulative and shall be in addition to any other remedy given to the Trustee, the Credit Facility Provider
or the Bondholders under the Indenture, the Financing Agreement, the Regulatory Agreement, the Credit
Facility or the Reimbursement Agreement, as applicable, or now or hereafter existing at law or in equity
or by statute. No delay or omission to exercise any right or power accruing upon any Event of Default
shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or
acquiescence therein, and every such right and power may be exercised from time to time and as often as
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may be deemed expedient. No waiver of any Event of Default under the Indenture, whether by the
Trustee, the Credit Facility Provider or the Bondholders, shall extend to or shall affect any subsequent
default or event of default or shall impair any rights or remedies consequent thereto.
Rights of Bondholders
If an Event of Default under (b) above shall have occurred and is then continuing, and if
requested in writing so to do by the Bondholders of more than 5 1% of the aggregate principal amount of
the Bonds then Outstanding with respect to which there is a default, and if indemnified to its satisfaction,
the Trustee shall exercise one or more of the rights and powers conferred by the Indenture as the Trustee,
being advised by counsel, shall deem most expedient in the interest of the affected Bondholders. If an
Event of Default under (b) above shall have occurred and is then continuing, the Bondholders of more
than 51 % of the aggregate principal amount of the Bonds then Outstanding with respect to which an
Event of Default has occurred shall have the right at any time, subject to the conditions described in the
next succeeding paragraph, by an instrument in writing executed and delivered to the Trustee, to direct the
time, method and place of conducting all proceedings to be taken in connection with the enforcement of
the terms and conditions of the Indenture, or for the appointment of a receiver or any other proceedings
thereunder, in accordance with the provisions of law and of the Indenture.
No Bondholder shall have any right to institute any suit, action or proceeding in equity or at law
for the enforcement of the Indenture or for the execution of any trust thereunder or for the appointment of
a receiver or any other remedy thereunder, unless (a) a default shall have occurred of which the Trustee
shall have been notified as provided therein; (b) such default shall have become an event of default under
(b) above; (c) the Bondholders of more than 51% of the aggregate principal amount of the Bonds then
Outstanding shall have made written request to the Trustee and shall have offered the Trustee reasonable
opportunity either to proceed to exercise the powers granted in the Indenture or to institute such action,
suit or proceeding in its own name; (d) such Bondholders shall have offered to the Trustee indemnity as
provided in the Indenture; and (e) the Trustee shall within 60 days thereafter fail or refuse to exercise such
powers or to institute such action, suit or proceeding, it being understood and intended that no one or
more Bondholders of the Bonds shall have any right in any manner whatsoever to affect, disturb or
prejudice the lien of the Indenture or the rights of any other owners of Bonds or to obtain priority or
preference over any other owners of Bonds or to enforce any right under the Indenture, except in the
manner provided in the Indenture and for the equal and ratable benefit of all owners of Bonds with respect
to which there is a default. Nothing contained in the Indenture shall, however, affect or impair the right
of any Bondholder to enforce the payment of the principal of, the premium, if any, and interest on any
Bond at the maturity thereof or the obligation of the Issuer to cause to be paid the principal of, premium,
if any, and interest on the Bonds to the respective owners thereof at the time, in the place, from the
sources and in the manner expressed in the Bonds.
Rights of the Credit Facility Provider
(b) under “Events of Default; Acceleration; Remedies” above, if an Event of Default as described under
So long as no Event of Default has occurred and is then continuing as described under paragraph
paragraph (a) or (c) under such caption shall have occurred and upon receipt of the written direction of the
Credit Facility Provider (which direction may be given in the sole discretion of the Credit Facility
Provider), the Trustee shall be obligated to exercise any right or power conferred by the remedial
provisions of the Indenture in the manner set forth in such written direction of the Credit Facility
Provider. If such written direction expressly states that the Trustee may exercise one or more of the rights
and powers conferred the provision herein described as the Trustee shall deem to be in the interest of the
Bondholders and the Credit Facility Provider, the Trustee shall exercise one or more of such rights and
powers as the Trustee shall deem to be in the best interests of the Bondholders and the Credit Facility
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Provider; provided, however, that in any event, so long as no Event of Default has occurred and is then
continuing under paragraph (h) above, the Trustee may not undertake any action to realize, through sale
or otherwise, upon the Bond Mortgage Loan without the express written direction of the Credit Facility
Provider.
the case of an Event of Default under paragraphs (a) or (c) above, the Credit Facility Provider shall have
So long as no Event of Default has occurred and is then continuing under paragraph (b) above, in
the right, by an instrument in writing executed and delivered to the Trustee, to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee.
Supplemental Indentures
Without the consent of, or notice to, the Bondholders, hut with the prior written consent of the
Credit Facility Provider, and after written notice to the Rating Agency, the Issuer and the Trustee may
enter into supplemental indentures (not inconsistent with the terms of the Indenture or materially adverse
to the owners of the Bonds) for any one or more of the following purposes:
(a) to cure any ambiguity or formal defect or omission in the Indenture;
(b) to grant to or confer upon the Trustee for the benefit of the Bondholders any
additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon
the Bondholders or the Trustee or either of them;
(c) to subject to the lien and pledge of the Indenture additional revenues, properties
or collateral;
(d) to modify, amend or supplement the Indenture or any indenture supplemental
thereto in such manner as to permit the qualification thereof under the Trust Indenture Act of
1939, as amended, or any similar federal statute hereafter in effect or to permit the qualification
of the Bonds for sale under the securities laws of any of the states of the United States;
(e) in connection with any other change in the Indenture which will not adversely
affect the interest of the Trustee or the Bondholders;
(0 to insert such provisions as are, in the opinion of Bond Counsel, necessary to
maintain the exclusion from gross income for federal income tax purposes of interest on the
Bonds;
(g) to modify or amend the Indenture as necessary to maintain the then current rating
on the Bonds, except no change may be made that will adversely affect the interests of the
Bondholders;
(h) during a Variable Period, to modify, alter, amend or supplement the Indenture in
any other respect, including amendments which would otherwise require Bondholders consent, if
notice of the proposed supplemental indenture is given to Bondholders (in the same manner as
notices of redemption are given) at least thirty (30) days before the effective date thereof and, on
or before such effective date, the Bondholders have the right to demand purchase of their Bonds
pursuant to the Indenture; or
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(i) to modify, alter, amend or supplement the Indenture in connection with the
delivery of any Alternate Credit Facility.
With the prior written consent of the Credit Facility Provider, the Bondholders of more than 51%
of the aggregate principal amount of the Bonds then Outstanding shall have the right, from time to time,
to consent to and approve the execution by the Issuer and the Trustee of supplemental indentures for the
purpose of modifylng, altering, amending, adding to or rescinding any of the terms or provisions
contained in the Indenture or in any supplemental indenture; provided, however, that no such
supplemental indenture may permit or be construed to permit (a) an extension of the time for payment of
or reduction in the Purchase Price, or an extension of the time for payment of, or an extension of the
stated maturity or a reduction in the principal amount, or reduction in the rate of interest on, or an
extension of the time of payment of interest on, or a reduction of any premium payable on the redemption
of, any Bonds, or a reduction in the Borrower’s obligation on the Bond Note, without the consent of all of
the owners of all of the Bonds then Outstanding; (b) the creation of any lien prior to or on a panty with
the lien of the Indenture; (c) a reduction of the aforesaid percentage of the principal amount of Bonds
which is required in connection with the giving of consent to any such supplemental indenture, without
consent of the Bondholders of all the Bonds then outstanding; (d) a modification of the rights, duties or
immunities of the Trustee, without the consent of the Trustee; (e) a privilege or priority of any Bond over
any other Bonds; or (0 any action that results in the interest on the Bonds becoming included in gross
income for federal income tax purposes.
Trustee
The Trustee, prior to an Event of Default under the Indenture and after the curing or waiver of all
such events which may have occurred, is required to perform such duties and only such duties as are
specifically set forth in the Indenture. In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the requirements, if any, of the
Indenture.
In case an Event of Default has occurred and is continuing, the Trustee shall exercise such rights
and powers vested in it by the Indenture, and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of such person’s own
affairs.
No provision of the Indenture shall be construed to relieve the Trustee from liability for its own
negligence or willful misconduct in connection with the Trustee’s duties thereunder, except to the extent
set forth in the Indenture.
The Trustee shall be under no obligation to exercise those rights or powers vested in it by the
Indenture, unless such Bondholders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it in the compliance with such
request or direction.
At all times, regardless of whether or not any such Event of Default shall exist:
(i) the Trustee shall not be liable for any error of judgment made in good faith by an
officer, agent or employee of the Trustee; and
(ii) the Trustee shall not be liable with respect to any action taken or omitted to be
taken by it in good faith in accordance with the direction of the Credit Facility Provider or the
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Bondholders of more than 5 1% of the aggregate principal amount of the Bonds then Outstanding
(or such lesser or greater percentage as is specifically required or permitted by the Indenture)
relating to the time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon the Trustee under the Indenture.
No provision of the Indenture shall require the Trustee to expend or risk its own fimds or
otherwise incur any financial liability in the performance of any of its duties or in the exercise of any of
its rights or powers under the Indenture.
The Trustee shall be entitled to its Ordinary Trustee’s Fees and Expenses in connection with the
services rendered by it in the execution of the trusts created under the Indenture and in the exercise and
performance of any of the powers and duties thereunder of the Trustee to the extent moneys are available
therefor, in accordance with the Indenture, exclusive of Extraordinary Services. The Trustee shall be
entitled to Extraordinary Trustee’s Fees and Expenses in connection with any Extraordinary Services
performed.
Any corporation or association into which the Trustee may be converted or merged, or with
which it may he consolidated, or to which it may sell or transfer its trust business and assets as a whole or
substantially as a whole, or any corporation or association resulting from any such conversion, sale,
merger, consolidation or transfer to which it is a party shall, ipso facto, be and become successor Trustee
under the Indenture and vested with all the title to the whole property or Trust Estate, and all the trusts,
powers, discretions, immunities, privileges and all other matters as was its predecessor, without the
execution or filing of any instruments or any further act, deed or conveyance on the part of any of the
parties to the Indenture, anything therein to the contrary notwithstanding, and shall also be and become
successor Trustee in respect of the beneficial interest of the Trustee in the Bond Mortgage Loan.
The Trustee and any successor Trustee may at any time resign from the trusts created under the
Indenture by giving written notice to the Issuer, the Borrower, the Tender Agent, the Remarketing Agent
and the Credit Facility Provider, and by giving notice by certified mail or overnight delivery service to
each Holder of the Bonds then Outstanding. Such notice to the Issuer, the Borrower, the Tender Agent,
the Remarketing Agent and the Credit Facility Provider may he served personally or sent by certified
mail. The Trustee shall not resign until a successor Trustee has been appointed. If no successor Trustee
shall have been appointed and have accepted appointment within 60 days following delivery of all
required notices of resignation, the resigning Trustee may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
The Trustee may be removed at any time, by an instrument in writing signed by the Issuer with
the consent of the Credit Facility Provider (which consent shall not be unreasonably withheld) and
delivered to the Trustee, the Borrower, the Tender Agent, the Remarketing Agent and the Credit Facility
Provider, and of an Event of Default (other than a failure of the Credit Facility Provider to make a
required payment under the Credit Facility) by a written instrument signed by the Credit Facility
Provider. If an Event of Default caused by a failure of the Credit Facility Provider to make when due a
required payment under the Credit Facility shall have occurred and be continuing, the Trustee may be
removed by an instrument or concurrent instruments in writing signed by the Bondholders of more than
51% of the aggregate principal amount of the Bonds then Outstanding and delivered to the Trustee, the
Issuer, the Borrower, the Tender Agent, the Remarketing Agent and the Credit Facility Provider. The
Trustee may also be removed for cause, at the direction of the Credit Facility Provider, by an instrument
in writing signed by the Issuer consenting to such removal (which consent of the Issuer shall not be
unreasonably withheld) and delivered to the Trustee and the Borrower. The Trustee may not be removed
until a successor has been appointed.
-31.
In case the Trustee shall resign or be removed, or be dissolved, or shall be in course of dissolution
or liquidation, or otherwise become incapable of acting under the Indenture, or in case it shall be taken
under the control of any public officer or officers, or of a receiver appointed by a court, a successor may
be appointed by the Issuer with the approval of the Credit Facility Provider, or if the Issuer is then in
default under the Indenture, by the Bondholders of more than 51% of the aggregate principal amount of
the Bonds then Outstanding, with the approval of the Credit Facility Provider, by an instrument or
concurrent instruments in writing signed by such Bondholders, or by their duly authorized attorneys,
delivered to the Issuer, the Borrower, the Credit Facility Provider and such successor Trustee; provided,
nevertheless, that in case of vacancy the Issuer may appoint a temporary Trustee to fill such vacancy until
a successor Trustee shall be appointed by such Bondholders in the manner above described; and any such
temporary Trustee so appointed by the Issuer shall immediately and without further act be superseded by
the Trustee so appointed by such Bondholders. Every such Trustee reappointed shall be a trust company
or bank organized under the laws of the United States of America or any state thereof and which is in
good standing, within or outside the State, having a reported capital and surplus of not less than
$50,000,000 and at least $50,000,000 in trust assets under management if there be such an institution
willing, qualified and able to accept the trust upon reasonable or customary terms. Such successor
Trustee shall agree to be the successor Bond Mortgagee under the Bond Mortgage.
Satisfaction and Discharge of Indenture
If the Issuer shall pay or cause to be paid to the Bondholders of the Bonds, the principal, interest
and premium, if any, to become due thereon at the times and in the manner stipulated in the Indenture, in
any one or more of the following ways:
(a) by the payment of principal of (including redemption premium, if any) and
interest on all Bonds outstanding; or
(b) by (i) the deposit or credit to the account of the Trustee, in trust, of money or
securities in the necessary amount to pay the principal, redemption price or Purchase Price and
interest to the date established for purchase or redemption (calculated at the Maximum Rate to the
extent the Bonds then bear interest at a Variable Rate) whether by redemption, purchase or
otherwise; and (ii) if the Bonds then bear interest at the Variable Rate, the delivery to the Tmtee
of a written confirmation by the Rating Agency of the rating then existing on the Bonds as of the
date of such deposit or credit will not be withdrawn, qualified or reduced; or
(c) by the delivery to the Trustee, for cancellation by it, of all Bonds outstanding;
and shall have paid all amounts due and owing to the Credit Facility Provider under the Indenture and
under the Credit Enhancement Agreement and the Reimbursement Agreement, including but not limited
to the Freddie Mac Reimbursement Amount and the Freddie Mac Credit Enhancement Fee, and shall have
paid all fees and expenses of the Issuer, the Trustee, the Freddie Mac Servicer, the Tender Agent, the
Remarketing Agent and each Paying Agent, and if the Issuer shall keep, perform and observe all and
singular the covenants and promises in the Bonds and in the Indenture expressed as to be kept, performed
and observed by it or on its part, then these presents and the estates and rights thereby granted shall cease,
determine and be void, and thereupon the Trustee shall cancel and discharge the lien of the Indenture and
execute and deliver to the Issuer such inshuments in writing as shall be requisite to satisfy the lien
thereof, and reconvey to the Issuer the estate thereby conveyed, and assign and deliver to the Issuer any
interest in property at the time subject to the lien of the Indenture which may then be in its possession,
except amounts held by the Trustee for the payment of principal of, interest and premium, if any, on the
the Credit Facility Provider.
Bonds, the payment of any amounts owed to the United States or the payment of any amounts payable to
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Any Outstanding Bond shall prior to the maturity or redemption date thereof be deemed to have
been paid within the meaning and with the effect expressed in the immediately preceding paragraph if,
under circumstances which do not render interest on the Bond includable in the gross income of the
owner thereof for federal income tax purposes, the following conditions shall have been fulfilled (a) in
case such Bond is to be redeemed on any date prior to its maturity, the Trustee shall have given to the
Bondholder irrevocable notice of redemption on said date; (b) there shall be on deposit with the Trustee
either moneys or direct obligations of the United States of America in an amount, together with
anticipated earnings thereon (but not including any reinvestment of such earnings), which will be
sufficient to pay when due the principal or redemption price, if applicable, and interest due and to become
due on such Bond on the redemption date or maturity date thereof, as the case may be; and (c) the Trustee
shall have received an opinion of nationally recognized bankruptcy counsel that payments from such
moneys are not subject to recovery under Section 544, 547 or 550 of the United States Bankruptcy Code
or any other applicable bankruptcy provisions as a preferential or fraudulent transfer in the event of a
baduuptcy by the Borrower.
SUMMARY OF THE FINANCING AGREEMENT
The following is a brief summary of certain provisions of the Financing Agreement. The
summary does not purport to be complete or definitive and is qualified in its entirety by reference to the
Financing Agreement, copies of which are on file with the Trustee.
Terms of the Bond Mortgage Loan; Assignment
The Bond Mortgage Loan (a) is evidenced by the Bond Note payable to the Trustee as assignee of
the Issuer; (b) is initially secured by the Credit Enhancement Agreement; (c) is in the principal amount of
$15,920,000; (d) bears interest as provided in the Bond Note; (e) provides for deposits into the Principal
Reserve Fund as set forth in the schedule attached to the Reimbursement Agreement and (Q is subject to
optional and mandatory prepayment at the times, in the manner and on the terms, and has such other
terms and provisions, as are set forth in the Bond Note. The Freddie Mac Servicer will act as the Servicer
of the Bond Mortgage Loan pursuant to the Guide, subject to the Issuer’s rights as set forth in the
Intercreditor Agreement.
The Issuer will assign to the Trustee pursuant to the Indenture of all of its right, title and interest
in the Bond Note, the Financing Agreement (excluding the Reserved Rights), the Credit Enhancement
Agreement, the Bond Mortgage Loan and the Revenues as security for the payment of the Purchase Price
of, principal of, premium, if any, and interest on the Bonds and the payment of the Freddie Mac Credit
Enhancement Fee and Freddie Mac Reimbursement Amount.
Bond Mortgage Loan Payments; Independent Obligation of Borrower
The Borrower agrees to repay the Bond Mortgage Loan at the times and in the amounts necessary
to enable the Trustee, on behalf of the Issuer, to pay all amounts payable with respect to the Bonds, when
due, whether at maturity or upon redemption (with premium, if applicable), acceleration, tender, purchase
or otherwise. The obligation of the Borrower to make the payments set forth in the Financing Agreement
under the Bond Note, provided that in all events payments made by the Borrower under and pursuant to
will be an independent and separate obligation of the Borrower from its obligation to make payments
the Bond Note will be credited against the Borrower’s obligations under the Financing Agreement. If for
any reasons the Bond Note or any provision thereof is held invalid or unenforceable against the Borrower
by any court of competent jurisdiction, the Bond Note or such provision thereof will be deemed to be the
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obligation of the Borrower pursuant to the Financing Agreement to the full extent permitted by law and
such holding will not invalidate or render unenforceable any of the provisions of the Financing
Agreement and will not serve to discharge any of the Borrower’s payment obligations under the
Financing Agreement.
The obligations of the Borrower to repay the Bond Mortgage Loan, to perform all of its
obligations under the Bond Mortgage Loan Documents, to provide indemnification pursuant to the
Financing Agreement, to pay costs, expenses and charges pursuant to the Financing Agreement and to
make any and all other payments required by the Financing Agreement or any other documents
contemplated by the Financing Agreement or by the Bond Mortgage Loan Documents will be absolute
and unconditional and will not be subject to diminution by set-ofc recoupment, counterclaim, abatement
or otherwise.
Payment of Certain Fees and Expenses Under the Bond Note
The payments to be made by the Borrower (or through the Freddie Mac Servicer) under the Bond
Note include certain moneys to be paid in respect of, among others, the Bond Fee Component, the Issuer
Fee, the Ordinary Servicing Fees and Expenses, the Freddie Mac Credit Enhancement Fee, the fees and
expenses of the Remarketing Agent pursuant to the Remarketing Agreement, the Principal Reserve
Schedule Payments pursuant to the Financing Agreement and amounts required to be deposited in the
Custodial Escrow Account, if any, pursuant to the Bond Mortgage Loan Documents, as provided in the
Financing Agreement. To the extent that any portion of the Ordinary Servicing Fees and Expenses,
Freddie Mae Credit Enhancement Fee, the Remarketing Agent’s Fees or the annual rating maintenance
be payable from moneys on deposit in the Administration Expense Account of the Administration Fund
fees of the Rating Agency remain due and owing at any time, such amounts remaining due and owing will
as provided in the Indenture or from other moneys of the Borrower, to the extent that moneys in the
Administration Expense Account of the Administration Fund are insuffkient for such purposes. All other
fees and expenses will be payable from moneys of the Borrower as provided in the Financing Agreement.
Prepayment of the Bond Mortgage Loan
The Borrower will have the option to prepay the Bond Mortgage Loan in full or in part prior to
the payment and discharge of all the Outstanding Bonds only in accordance with the provisions of the
Bond Note. The Bonds are subject to redemption in accordance with the terms and conditions set forth in
the Indenture. In connection with any prepayment, whether optional or mandatory, in addition to all other
payments required under the Bond Note, the Borrower will pay, or cause to be paid to the Freddie Mac
Servicer or otherwise, an amount sufficient to pay the redemption price of the Bonds to be redeemed,
including principal, interest and premium, if any, and further including any interest to accrue with respect
to the Bond Mortgage Loan and such Bonds between the prepayment date and the redemption date,
together with a sum sufficient to pay all fees, costs and expenses in connection with such redemption and,
in the case of redemption in whole, to pay all other amounts payable under the Financing Agreement, the
Indenture and the Reimbursement Agreement.
Borrower’s Obligations Upon Redemption or Tender
In the event of any redemption in whole or in part of the Bonds, the Borrower will timely pay, or
cause to be paid through the Freddie Mac Servicer, to the Trustee an amount equal to the principal
amount of such Bonds or portions thereof called for redemption, together with interest accrued to the
redemption date and premium, if any. The Borrower will timely pay all fees, costs and expenses
associated with any redemption of Bonds. In the event that on any optional tender date or mandatory
tender date under and as provided in the Indenture, Bonds are tendered and not remarketed by the
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Remarketing Agent, and remarketing proceeds are not available for the purpose of paying the purchase
price of such Bonds, the Borrower will cause to be paid, under and subject to the terms of the
Reimbursement Agreement and the Credit Facility to the Trustee by the applicable times provided in the
Indenture an amount equal to the principal amount of such Bonds tendered and not remarketed, together
with interest accrued to the mandatory tender date or optional tender date, as the case may be. The
Borrower acknowledges that Purchased Bonds will be purchased by the Trustee for and on behalf of, and
registered in the name of, the Borrower and will be pledged to the Credit Facility Provider pursuant to the
Pledge Agreement.
Tax Compliance
In the Financing Agreement, the Borrower has covenanted that is will not knowingly take or
permit, or knowingly omit to take or cause to be taken, any action within its control that would adversely
affect the exclusion of the interest on the Bonds from gross income for federal income tax purposes.
Events of Default and Remedies
The following shall be “Events of Default” under the Financing Agreement and the terms “Event
of Default” or “default” shall mean, whenever they are used in the Financing Agreement, one or all of the
following events:
(a) failure by the Borrower to pay any amounts due under the Financing Agreement,
the Bond Note or the Bond Mortgage at the times and in the amounts required by the Financing
Agreement, the Regulatory Agreement, the Bond Note or the Bond Mortgage;
@) failure by the Borrower to observe and perform any of its other covenants,
conditions or agreements contained in the Financing Agreement, other than as referred to in
clause (a) above, for a period of thirty (30) days after written notice specifying such failure and
requesting that it be remedied is given by the Issuer or the Trustee to the Borrower; provided,
however, that if the failure shall be such that it can be corrected but not within such period, the
Issuer and the Trustee will not unreasonably withhold their consent to an extension of such time if
corrective action is instituted by the Borrower within such period and diligently pursued until the
failure is corrected; or
(c) the occurrence of a default under the Reimbursement Agreement shall at the
discretion of the Credit Facility Provider constitute an Event of Default under the Financing
Agreement. The occurrence of a default under the Financing Agreement shall in the discretion of
the Credit Facility Provider constitute a default under the Bond Mortgage Loan Documents and
the Reimbursement Agreement.
Nothing contained in the Financing Agreement is intended to amend or modify any of the
provisions of the Bond Mortgage Loan Documents or to bind the Issuer, the Trustee, the Freddie Mac
Servicer or Freddie Mac to any notice and cure periods other than as expressly set forth in the Bond
Mortgage Loan Documents.
Remedies on Default
Subject to the rights of the Credit Facility Provider under the Intercreditor Agreement, whenever
any Event of Default under the Financing Agreement shall have happened and be existing, any one or
more of the following remedial steps may be taken; provided that in no event shall the Issuer be obligated
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to take any step which in its opinion will or might cause it to expend time or money or otherwise incur
liability unless and until a satisfactory indemnity bond has been furnished to it:
(a) The Issuer shall cooperate with the Trustee as the Trustee acts pursuant to the
provisions of the Indenture relating to remedies.
(b) In the event any of the Bonds shall at the time he outstanding and not paid and
discharged in accordance with the provisions of the Indenture, the Issuer or the Trustee may have
access to and inspect, examine and make copies of the books and records and any and all
accounts, data and income tax and other tax returns of the Borrower.
(c) The Issuer may, without being required to give any notice (other than to the
Trustee), except as provided in the Financing Agreement, pursue all remedies of a creditor under
the laws of the State, as supplemented and amended, or any other applicable laws.
(d) The Issuer or the Trustee may take whatever action at law or in equity may
appear necessary or desirable to collect the payments then due and thereafter to become due
under the Financing Agreement, or to enforce performance and observance of any obligation,
agreement or covenant of the Borrower under the Financing Agreement.
(e) At the written request of the Issuer, declare all amounts due under the Financing
Agreement and the Bond Mortgage Loan to be immediately due and payable; provided, however,
that, in the case of an Event of Default described in (b) above, the amounts due under the
Financing Agreement and the Bond Mortgage Loan shall not be accelerated where (i) the Trustee
has received an opinion of Bond Counsel that the failure to accelerate the Bond Mortgage Loan
under such circumstances will not adversely affect the exclusion from gross income for federal
income tax purposes of interest on the Bonds, and (ii) the Credit Facility Provider has directed the
Trustee not to so declare such amounts due.
Any amounts collected pursuant to the Financing Agreement and any other amounts which would
be applicable to payment of principal of and interest and any premium on the Bonds collected pursuant to
action taken after default shall be applied in accordance with the provisions of the Indenture.
The provisions of the Financing Agreement are subject to the further limitation that if, after any
Event of Default all amounts which would then be payable thereunder by the Borrower if such Event of
Default had not occurred and was not continuing shall have been paid by or on behalf of the Borrower,
the Borrower shall have also performed all other obligations in respect of which it is then in default
thereunder, and shall have paid the reasonable charges and expenses of the Issuer, the Trustee, the Freddie
Mac Servicer and the Credit Facility Provider, including reasonable attorneys’ fees paid or incurred in
connection with such default, and shall have paid the Issuer Fee, all Freddie Mac Reimbursement
Amounts and Freddie Mac Credit Enhancement Fees, and if there shall then be no Event of Default
existing under any of the Bond Financing Documents, then and in every such case such Event of Default
under the Financing Agreement shall be waived and annulled, but no such waiver or annulment shall
affect any subsequent or other Event of Default or impair any right consequent thereon.
Obligations of Borrower Are Non-Recourse
Generally, the obligations of the Borrower under the Bond Mortgage Loan Documents are non-
the obligations of the Borrower under the Financing Agreement (other than the Borrower’s
recourse obligations, as provided therein. Accordingly, except as described in the Financing Agreement,
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indemnification obligations, obligations to pay fees and expenses under the Financing Agreement and to
pay rebate to the federal government, if any) are non-recourse obligations of the Borrower to the same
extent as provided in the Bond Mortgage Loan Documents.
THE REGULATORY AGREEMENT
Residential Rental Property
The Original Developer acknowledged and agreed in the Amended and Restated Regulatory
Agreement and Declaration of Restrictive Covenants dated as of May 1, 1993 that the Project is to be
owned, managed and operated as a project for “residential rental property’’ as such term is defined in
Section 103(b)(4)(A) of the 1954 Code. The Borrower by its execution of the Second Amended and
Restated Regulatory Agreement and Declaration of Restrictive Covenants (as so amended and restated,
the “Regulatory Agreement”) represents warrants and covenants to ensure compliance during the
Qualified Project Period with certain requirements necessary to maintain the exclusion from gross income
the Issuer as follows:
for federal income tax purposes of interest on the Bonds and maintain compliance with certain policies of
(a) The Project has been constructed for the purpose of providing multifamily
residential rental property, and the Borrower shall own, manage and operate the Project as a
project to provide multifamily residential rental property comprised of a building or structure or
several interrelated buildings or structures, together with any functionally related and subordinate
facilities, and no other facilities.
(b) All of the dwelling units in the Project are and will remain similarly constructed
units, and each dwelling unit in the Project will contain complete separate and distinct facilities
for living, sleeping, eating, cooking and sanitation for a single person or a family, including a
sleeping area, bathing and sanitation facilities and cooking facilities equipped with a cooking
range, refrigerator and sink.
(c) None of the dwelling units in the Project have been or will at any time be utilized
on a transient basis, or will ever be used as a hotel, motel, dormitory, fraternity house, sorority
house, rooming house, nursing home, hospital, sanitarium, rest home or trailer court or park.
(d) No part of the Project has been or will at any time be owned or used as a
cooperative housing corporation or a community apartment project or a stock cooperative. Other
than obtaining and recording a condominium plan and map on the Project, and obtaining a white
report from the California Department of Real Estate, the Borrower shall not take any steps in
opinion of Bond Counsel acceptable to the Issuer and the Trustee, that the interest on the Bonds connection with a conversion to such ownership or uses except with the prior written approving
will not become taxable thereby. The final subdivision map to be recorded for the Project shall
state the restriction against transferring individual condominium ownership interests in the
Project during the term of the Regulatory Agreement.
(e) All of the dwelling units in the Project have been and will be available for rental
on a continuous basis to members of the general public. The Borrower shall not discriminate on
the basis of race, creed, color, sex, age or national origin in the lease, use or occupancy of the
Project or in connection with the employment or the application for employment of persons for
the operation and management of the Project. The Borrower will not give preference to any
particular class or group in renting the dwelling units in the Project, except to the extent that
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dwelling units are required to be leased or rented to Lower-Income Tenants or to be available for
occupancy on a priority basis by Very Low Income Tenants as set forth in the Regulatory
Agreement.
(t) The Lower Income Units will be intermingled with all other dwelling units in the
Project and shall be of comparable quality, shall contain similar amenities and offer a range of
sizes and number of bedrooms comparable to the other units in the Project. Tenants in the Lower
Income Units will continue to have equal access to and enjoyment of all common facilities of the Project.
(g) The Project Site consists of a parcel or parcels that are contiguous except for the
interposition of a road, street or stream, and all of the Project Facilities comprise a single
geographically and functionally integrated project for residential rental property, as evidenced by
the ownership, management, accounting and operation of the Project.
(h) No unit in any building or structure in the Project which contains fewer than 5
units shall be occupied by the Borrower or any person related to or affiliated with the Borrower,
such as a resident manager or maintenance personnel.
Lower-Income Tenants and Eligible Persons
The definition of “Qualijieed Project Period” in the Second Amended and Restated Regulatory
Agreement and Declaration of Restrictive Covenants is amended to read as follows: the period beginning
on January 15, 1987 and ending on the latest of (a) the date which is 10 years after the date on which at
least 50 percent of the dwelling units in the Project were first occupied (June 3, 1997), @)the date which
is a Qualified Number of Days after the date on which any of the dwelling units in the Project was first
occupied, (c) the date on which any assistance provided with respect to the Project under Section 8 of the
United States Housing Act of 1937 terminates, (d) June 1, 2007, or (e) the date on which no Bonds
remain Outstanding. For purposes of clause @), the term “Qualified Number of Days” means, 50 percent
until the final maturity of the Bonds (including any refunding bonds).
of the number of days comprising the term from the date of issuance of the Prior Bonds (April 26, 1985)
During the Qualified Project Period
(a) Not less than twenty percent (20%) of the units in the Project shall be
continuously occupied by or held available for occupancy by Lower Income Tenants at an
Affordable Rent. For this purpose, a unit occupied by a Lower-Income Tenant who at the
commencement of the occupancy is a Lower-Income Tenant shall be treated as occupied by such
individual or family during their tenancy in such unit, even though they subsequently cease to be
then vacated shall be considered occupied by a Lower-Income Tenant until reoccupied, other than
a Lower-Income Tenant. Moreover, a unit previously occupied by a Lower-Income Tenant and
for a temporary period, at which time the character of the unit shall be redetermined. In no event
shall such temporary period exceed thirty-one (3 1) days.
(b) Upon the commencement of the Qualified Project Period, and on the first day of
each month thereafter during the term of the Regulatory Agreement, the Borrower shall advise
the Issuer, the Trustee, the Credit Facility Provider and the Program Administrator of the status of
the occupancy of the Project by delivering to such parties a Certificate of Continuing Program
Compliance.
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(c) The Borrower will obtain and maintain on file an Income Certification from each
Lower-Income Tenant, dated immediately prior to the initial occupancy of such Lower-Income
Tenant in the Project. The Borrower agrees to provide such additional information as may be
required in the future by the State of California, the Issuer, the Program Administrator and by
Section 103(b)(4)(A) of the Prior Code and the Regulations, as the same may be amended from
policies, procedures or other official statements now or hereafter promulgated, proposed or made
time to time, or in such other form and manner as may be required by applicable rules, rulings,
by the Department of the Treasury or the Internal Revenue Service with respect to obligations
transitioned under Section 1313(a) of the Tax Reform Act of 1986. A copy of each such Income
with the Program Administrator pursuant to subsection (b). The Borrower shall make a good
Certification will be attached to the monthly Certificate of Continuing Program Compliance filed
faith effort to verify that the income provided by an applicant in an Income Certification is
accurate by taking one or more of the following steps as a part of the verification process:
(i) obtaining a copy of a Lower-Income Tenant’s federal income tax return for the tax year
immediately prior to the commencement of such Lower-Income Tenant’s occupancy,
(ii) obtaining an employer’s verification of such Lower-Income Tenant’s current income, or,
(iii) if the Lower-Income Tenant is unemployed or if the tax return is unavailable, obtaining other
satisfactory evidence of income for such year.
of their desire to rent a unit in the Project and who have Adjusted Incomes which would qualify
(d) The Borrower will: (i) maintain a list of persons who have notified the Borrower
them as Very Low Income Tenants, and (ii) offer to rent at least half of the Lower-Income Units
(subject to the availability thereof at any time) on a priority basis to the persons on such list prior
to offering to rent such units to any other persons and in choosing such Very Low Income
tenants. To fulfill its obligation under this subparagraph (d), the Borrower shall place on its
Tenants shall use selection criteria no more burdensome than shall be applied to other prospective
waiting list persons referred by the Carlsbad Housing Agency. The Borrower agrees to make the
units coming vacant available on a priority basis, first, to any Very Low Income Tenants who are
Very Low Income Tenants who are on the Section 8 Rental Assistance waiting list of the
Section 8 Housing Choice Voucher holders or the recipients of another rent subsidy, second, to
Carlsbad Housing Agency, and third, to other Very Low Income Tenants. Nothing contained in
this provision shall require the Borrower to offer to rent such units to such persons on terms and
conditions which are more favorable than the terms and conditions on which such units will be
offered to Lower Income Tenants generally. Provided that the Borrower has complied with the
foregoing to attract Very Low Income Tenants to the Project, nothing in the Regulatory
Agreement shall be construed as requiring the Borrower to keep units vacant for occupancy by
Very Low Income Tenants where no Very Low Income Tenants have applied for occupancy.
(e) The Borrower will maintain complete and accurate records pertaining to the
Lower Income Units, and will permit any duly authorized representative of the Issuer, the
Program Administrator, the Trustee, the Credit Facility Provider, the Department of the Treasury
or the Internal Revenue Service to inspect the books and records of the Borrower pertaining to the
Project, including those records pertaining to the occupancy of the Lower Income Units.
(f) The Borrower shall accept as tenants on the same basis as all other prospective
tenants persons who are recipients of federal funds for rent subsidies pursuant to the Housing
Housing Act of 1937, or its successor. The Borrower shall not apply selection criteria to Section
Choice Voucher tenant-based rental assistance program under Section 8 of the United States
8 Housing Choice Voucher holders which are more burdensome than criteria applied to any other
prospective tenants.
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(g) The form of lease to be utilized by the Borrower in renting any units in the
Project to any person other than a Section 8 tenant who is intended to qualify as a Lower-Income
Tenant shall provide for termination of the lease and consent by such person to immediate
eviction for failure to qualify as a Lower-Income Tenant as a result of any material
misrepresentation made by such person with respect to the Income Certification.
(h) The Borrower shall provide a 60-day notice of intent to increase the rent on any
Lower Income Unit and provide a copy of such notice to the Issuer and the Carlsbad Housing
Agency.
(i) The Borrower shall establish a written policy on the tenant-paid utilities for the
Lower Income Units, and provide a copy of said policy to the Issuer and the Carlshad Housing
Agency.
Sale, Lease or Transfer of the Project
portion thereof (other than for individual tenant use as contemplated under the Regulatory Agreement),
The Borrower covenants and agrees not to sell, transfer or otherwise dispose of the Project, or any
without obtaining the prior written consent of the Issuer, the Credit Facility Provider and the Trustee,
which consent shall be deemed given upon receipt by the Issuer, the Credit Facility Provider and the
Trustee of (i) evidence reasonably satisfactory to the Issuer, the Credit Facility Provider and the Trustee
that the Owner’s purchaser or transferee has assumed in writing the Owner’s duties and obligations under
the Regulatory Agreement; (ii) an opinion of counsel of the transferee that the transferee has duly
assumed the obligations of the Owner under the Regulatory Agreement and that such obligations and the
Regulatory Agreement are binding on the transferee; and (iii) an opinion of Bond Counsel that such
transfer will not adversely affect the exclusion from gross income for federal income tax purposes of
interest on the Bonds or the Prior Bonds. It is expressly stipulated and agreed that any voluntary sale,
transfer or other disposition of the Project in violation of the Regulatory Agreement shall be null, void
and without effect, shall cause a reversion of title to the Borrower, and shall be ineffective to relieve the
Borrower of its obligations under the Regulatory Agreement. Nothing contained in the Regulatoty
Agreement shall affect any provision of any other document or instrument between the Owner and the
Credit Facility Provider which requires the Owner to obtain the consent of the Credit Facility Provider as
a precondition to the voluntary sale, transfer or other disposition of the Project.
Enforcement
Subject to the provisions of the Intercreditor Agreement, 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 sixty (60) days after notice
thereof shall have been given by the Issuer or the Trustee to the Owner and the Credit Facility Provider
(provided that said period may be extended if the Borrower has commenced to cure such default and is
diligently pursuing such cure and delivers to the Issuer and the Trustee 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), then the Issuer or the Trustee, acting on its own behalf or on behalf of
the Issuer, shall declare an “Event of Default” to have occurred under the Regulatory Agreement, and, at
its option, 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 Issuer or the Trustee
under the Regulatory Agreement;
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(ii) have access to and inspect, examine and make copies of all of the books and
records of the Borrower pertaining to the Project;
(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; or
(iv) require the Issuer to declare a default under the Loan and accelerate the
indebtedness evidenced by the Bond Note, and thereafter exercise all other rights and remedies
under the Financing Agreement and proceed to redeem Bonds in accordance with the Indenture.
SUMMARY OF CERTAIN PROVISIONS OF THE
INTERCREDITOR AGREEMENT
The Issuer, the Trustee and Freddie Mac have agreed upon their respective rights arising from an
Event of Default under either the Bond Financing Documents or the Bond Mortgage Loan Documents
relating to the Bonds in an Intercreditor Agreement. The following is a brief summary of certain
provisions of the Intercreditor Agreement. The summary does not purport to be complete or definitive
and is qualified in its entirety by reference to the full text of the Intercreditor Agreement, a copy of which
is on file with the Trustee.
Under the terms of the Intercreditor Agreement, the Issuer, the Trustee and Freddie Mac have
agreed, among other things, that, until either (a) Freddie Mac fails to honor a draw properly presented in
accordance with the terms of the Credit Enhancement Agreement or (b) the Credit Enhancement
Agreement terminates in accordance with its terms, certain of the rights and remedies of the Issuer and the
Trustee, under certain of the Bond Financing Documents, including (without limitation) the rights and
remedies of the Mortgagee (as defined in the Bond Mortgage) under the Bond Mortgage may be exercised
solely at the direction of Freddie Mac, in its sole discretion, including (without limitation) the right to
waive certain terms and conditions of certain of the Bond Financing Documents pertaining to the
Borrower.
Notwithstanding anything to the contrary contained in the Financing Agreement and pursuant to
the Intercreditor Agreement, as long as Freddie Mac is not in default of its obligations under the Credit
Enhancement Agreement, neither the Issuer, the Trustee nor any other person shall, upon the occurrence
of an Event of Default under the Financing Agreement or upon the occurrence of any event of default
under the Bond Financing Documents, take any action to accelerate or othenvise enforce payment or seek
other remedies with respect to the Bond Mortgage Loan, except at the direction of Freddie Mac; provided
that this prohibition shall not be construed to limit the rights of the Issuer or the Trustee to specifically
enforce the Regulatory Agreement in order to provide for operation of the Project in accordance with the
1954 Code, the applicable provisions of the 1986 Code and the Act or to exercise their other rights and
remedies thereunder including their right following an event of default thereunder to accelerate the Bond
Note or cause the mandatory redemption or tender of the Bonds or to foreclose under the Bond Mortgage;
and provided further that this prohibition shall not be construed to limit the indemnification rights of the
Issuer, the Trustee, the Freddie Mac Servicer, Freddie Mac or any other indemnified party under the
Financing Agreement to enforce its rights against the Borrower under the Financing Agreement by
mandamus or other suit, action or proceeding at law or in equity where such suit, action or proceeding
does not seek any remedies under or with respect to the Bond Mortgage or cause acceleration of the Bond
Mortgage Loan.
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TAX EXEMPTION
The 1954 Code and the 1986 Code contain certain requirements which must be met subsequent to the
issuance and delivery of the Bonds for the interest on the Bonds to be and remain excluded from gross income
for federal income tax purposes. Failure to comply with such requirements may cause the interest on the
Bonds to be included in gross income for federal income tax purposes retroactive to the date of issue of the
Bonds. The Issuer has covenanted in the Indenture and the Borrower has covenanted in the Financing Agreement-to take, or refrain from taking, such actions as are required under the 1954 Code and the 1986 Code
to maintain the exclusion from gross income for federal income tax purposes of the interest on the Bonds.
“Regulations”) require, in part, that at least 20% (15% for projects located in targeted areas) of the completed
The 1954 Code, the 1986 Code and Section 1.103-8@) of the Income Tax Regulations (the
rental units in the Project must be occupied by lower-income tenants continuously during the Qualified Project
must be rented or available for rental on a continuous basis during the longer of (i) the remainder of the term
Period. In addition, the Regulations require that, once available for occupancy, each rental unit in the Project
during which the Bonds are outstanding, or (ii) the Qualified Project Period. The Regulations provide that
failure to satisfy the foregoing requirements on a continuing basis, unless corrected withii a reasonable period
exercise of reasonable diligence, will cause the loss of the exclusion from gross income for federal income tax of not less than 60 days after such noncompliance is first discovered or would have been discovered by the
purposes of interest on the Bonds as of the date of issuance of the Bonds.
In order to comply with these requirements, the Issuer has required, among other things, that the Borrower enter into the Regulatory Agreement, providing, among other things, that the Project be maintained
Regulatory Agreement has been filed in the real propelty records of San Diego County, California, and the
and available for rental for the periods and in the manner described in the foregoing paragraph. The
requirements thereof are intended as restrictive covenants binding upon and running with title to the Project.
The Trustee, the Borrower and the Issuer have agreed to undertake such amendments to the various documents
and such additional restrictions or actions as may be necessary to maintain the exclusion from gross income for
federal income tax purposes of interest on the Bonds.
In connection with the issuance of the Bonds on May 27, 1993, Stradling Yocca Carlson & Rauth, a
Professional Corporation, Newport Beach, California, Bond Counsel, delivered its opinion that, based upon an
continuing compliance subsequent to the issuance of the Bonds with applicable provisions of the 1954 Code
analysis of existing statutes, regulations, rulings and judicial decisions and assuming, among other matters,
period that such Bond is held by a “substantial user’’ of the facilities financed or refinanced by the Bonds or by and the 1986 Code, interest on the Bonds is excluded from gross income tax purposes, except during any
a “related person” within the meaning of Section 103@)(13) of the 1954 Code. Bond Counsel’s opinion also stated that interest on the Bonds is exempt from personal income taxation imposed by the State of California.
The opinion delivered by Bond Counsel at the time of the issuance of the Bonds is attached hereto as Appendix C. Bond Counsel has not been asked to reconfirm or to update such opinion and expresses no opinion as to whether interest on the Bonds is, as of the date hereof, excludable from gross income for federal
income tax purposes or is exempt from personal income taxes of the State of California.
In connection with the remarketing of the Bonds, Stradling Yocca Carlson & Rauth, Newport Beach,
California (“Bond Counsel”), will render its opinion to the effect that the transfer of the Project to the
Borrower, the delivery of the Credit Enhancement Agreement and the execution of the Amended and Restated
Loan Agreement, the Amended and Restated Indenture of Trust , the Regulatory Agreement and the Bond
Note will not, in and of themselves, adversely affect the exclusion of interest on the Bonds from gross income
for federal income tax purposes. A copy of Bond Counsel’s proposed form of opinion is attached as Appendix
C hereto.
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AS TO WHETHER THE PRIOR DEVELOPER, THE BORROWER AND THE PROJECT HAVE
NO DETERMINATION HAS BEEN MADE SINCE THE DATE OF ISSUANCE OF THE BONDS
COMPLIED WITH THE REQUIREMENTS OF THE 1954 CODE AND THE 1986 CODE FOR THE
EXCLUDABLE FROM GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES NO
PURPOSE OF DETERMINING WHETHER THE INTEREST ON THE BONDS REMAINS
REPRESENTATIONS OR LEGAL OPINIONS ARE BEING MADE OR RENDERED BY ANY PARTY OR LAW FIRM REGARDING WHETHER THE INTEREST ON THE BONDS CONTINUES TO BE
EXCLUDABLE FROM GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES.
REMARKETING
Stem Brothers & Co. (the “Remarketing Agent”) has agreed to use. its best efforts to remarket the
Bonds pursuant to a Remarketing Agreement, dated as of May 1, 2002 (the “Remarketing Agreement”)
between the Remarketing Agent and the Borrower at a price equal to 100% of the principal amount thereof,
plus accrued interest. In consideration for its services, the Remarketing Agent will receive a fee of $
plus out of pocket expenses.
RATING
Standard & Poor’s Ratings Services, a division of the McGraw Hill Companies (“S&F’”) has rated
the Bonds [**“AANA-l+”**] Freddie Mac has hished to S&P certain materials and information with
respect to Freddie Mac and the Credit Enhancement Agreement. Generally, rating agencies base their
ratings on such information and materials and on their own investigations, studies and assumptions. The
rating reflects only the views of the rating agency and any explanation of the significance of such rating
may be obtained only from S&P. There is no assurance that the rating will remain in effect for any given
period of time or that it will not he revised downward or withdrawn entirely by the rating agency if, in its
judgment, circumstances so warrant. Any downward revision or withdrawal of the rating may have an
adverse effect on the market price of the Bonds.
APPROVAL OF LEGAL PROCEEDINGS
Legal matters incident to the sale and transfer of the Project to the Borrower, the assumption of
the Bond Mortgage Loan by the Borrower and the substitution of the Credit Enhancement Agreement for
the Letter of Credit are subject to the approving opinion of Bond Counsel. A signed copy of Bond
Counsel’s opinion, dated and premised on facts existing and law in effect as of the effective date of the
Credit Enhancement Agreement, will be delivered to the Remarketing Agent on the effective date of such
agreement. A form of such opinion is set forth in Exhibit B hereto.
Certain legal matters will be passed upon for Freddie Mac by its counsel, Kutak Rock, LLP.
Certain legal matters will be passed upon for the Borrower by its counsel, Locke Liddell & Sapp, LLP,
Dallas, Texas and for the Issuer by its City Attorney.
49- 242”
LITIGATION
The Issuer
On the Closing Date, the Issuer will deliver certificates to the effect that, to the howledge of the
Issuer, no litigation is pending or threatened against the Issuer (i) to restrain or enjoin the remarketing of
the Bonds, or contesting or questioning the validity of the Bonds or the proceedings and authority under
which the Bonds have been authorized and are to be remarketed, or the pledge or application of any
money or security provided for the payment of the Bonds or (ii) which questions the validity of any of the
Indenture, Financing Agreement, Regulatory Agreement or Bonds.
The Borrower
There is not now pending or, to the knowledge of the Borrower, threatened any proceeding or litigation
against the Borrower affecting the ability of the Borrower to enter into or deliver the Financing
Agreement, the Assumption Agreement or the First Amendment to Amended and Restated Regulatory
Agreement and Declaration of Restrictive Covenants, seeking to restrain or enjoin the Borrower’s
execution and delivery of the agreements described in this Remarketing Memorandum, or contesting the
existence or powers of the Borrower with respect to the transactions described in this Remarketing
Memorandum.
MISCELLANEOUS
This Remarketing Memorandum is hereby duly approved by the Issuer as of the date on the cover
page hereof.
CITY OF CARLSBAD, CALIFORNIA
BY Mayor
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APPENDIX A
DEFINITIONS OF CERTAIN TERMS
In addition to the terms defined elsewhere in this Remarketing Memorandum, the following are
definitions of certain terms used in this Remarketing Memorandum. Terms used but not otherwise
defined herein shall have the meanings assigned to such terms in the Indenture or the Financing
Agreement.
‘Xct” means Chapter 7 of Part 5 of Division 3 1 (commencing with Section 52075) of the Health
and Safety Code of the State of California, as amended.
“Administration Fund” means the Administration Fund established by the Trustee pursuant to the
Indenture.
Administration Fund established by the Trustee pursuant to the Indenture.
“Administrative Expense Account” means the Administrative Expense Account within the
“Alternate Credit Facility” means a Credit Facility (other than the Credit Enhancement
Agreement), including, without limitation, a letter of credit, surety bond, insurance policy, standby
purchase agreement, guaranty, mortgage-backed security or other credit facility, collateral purchase
agreement or similar agreement issued by a financial institution (including without limitation Freddie
Mac) which provides security for payment of (i) the principal of and interest on the Bonds and the
purchase price of the Bonds while the Bonds bear interest at a Variable Rate (but in no case less than all
of the Outstanding Bonds) when due or (ii) the Bond Mortgage Loan in an amount not less than the
Guaranteed Payment, provided in accordance with the Financing Agreement.
“Alternate Credit Facility Provider” means the provider of an Alternate Credit Facility.
“Assignment and Assumption Agreement” means that certain Assignment and Assumption
Agreement dated as of May 1,2002 among the Prior Developer, the Borrower, the Issuer and the Trustee.
“Authorized Denomination” means (A) with respect to Bonds in a Variable Period, $100,000
principal amount or any integral multiple of $5,000 greater than $100,000, and (9) with respect to Bonds
during any Reset Period or the Fixed Rate Period, $5,000 principal amount or any integral multiple
thereof.
“Authorized Ufficer” means (A) when used with respect to the Issuer, the Mayor, the City Clerk
or the City Manager of the Issuer and such additional person or persons, if any, duly designated by the
Issuer in writing to act on its behalf, (9) when used with respect to the Borrower, any president or vice
president of the general partner of the Borrower and such additional person or persons, if any, duly
designated by the Borrower in writing to act on its behalf, (C) when used with respect to the Trustee, any
authorized signatory of the Trustee, or any person who is authorized in writing to take the action in
question on behalf of the Trustee, (D) when used with respect to the Freddie Mac Servicer, any duly
authorized officer of the Freddie Mac Servicer and such additional person or persons, if any, duly
designated by the Freddie Mac Servicer in writing to act on its behalf, (E) when used with respect to the
Remarketing Agent, any Vice President of the Remarketing Agent and such additional person or persons,
if any, duly designated by the Remarketing Agent in writing to act on its behalf, (F) when used with
respect to the Tender Agent, any authorized signatory of the Tender Agent and such additional person or
persons, if any, duly designated by the Tender Agent in writing to act on its behalf, and (G) when used
with respect to the Credit Facility Provider, any Vice President or any person who is authorized in writing
to take the action in question on behalf of the Credit Facility Provider.
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“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy,” as now and
hereafter in effect, or any successor federal statute.
“BMA Index Rate” means a rate equal to the index of the weekly index rate resets of tax-exempt
variable rate issues included in a database maintained by Municipal Market Data, a Thomson Financial
Services Company, or its successors, which meet specific criteria established by the Bond Market
Association, such index currently known as the Bond Market Associationm Municipal Swap Index.
“Bond Counsel” means any firm of attorneys appointed by the Issuer experienced in matters
relating to the issuance of obligations by states and their political subdivisions who are listed as municipal
bond attorneys in The Bond Buyer’s Municipal Marketplace and reasonably acceptable to the Credit
Facility Provider.
“Bund Fee Component” means the regular, ongoing fees from time to time of the Tender Agent,
the Custodian, and the Counterparty (as defined in the Reimbursement Agreement) expressed in terms of
a percentage of the principal amount of Outstanding Bonds (including Purchased Bonds) on an annual
basis.
“Bond Financing Documents” means, collectively, the Indenture, the Bonds, the Financing
Agreement, the Remarketing Agreement and the Bond Mortgage Loan Documents.
“Bond Fund” means the Bond Fund established by the Trustee pursuant to the Indenture.
“Bond Mortgage” means the First Deed of Trust and Assignment of Rents and Fixture Filing
dated as of May 1, 1993, together with all riders and addenda thereto, from the Borrower to the Trustee,
securing payment of the Bond Mortgage Loan, as such Bond Mortgage may from time to time be
amended, modified or supplemented.
“Bond Mortgage Loan” means the mortgage loan in the original amount of $15,920,000 made to
the Borrower pursuant to the Financing Agreement and the Bond Mortgage Loan Documents.
“Bond Mortgage Loan Documents” means the Bond Mortgage, the Bond Mortgage Note, the
Tax Regulatory Agreement, any Custodial Escrow Agreement, the Credit Enhancement Agreement, the
Reimbursement Agreement, the Reimbursement Mortgage, the Intercreditor Agreement, the Pledge
Agreement, and any and all other instruments and other documents evidencing, securing, or otherwise
relating to the Bond Mortgage Loan or any portion thereof.
“Bond Mortgage Loan Purchase Notice” shall have the meaning set forth in the Credit
Enhancement Agreement.
“Bond Mortgage Note” means the Amended and Restated Promissory Note dated as of May -,
2002 from the Borrower to the Issuer, and subsequently assigned to the Trustee in the principal amount of
$15,920,000, together with all riders and addenda thereto, evidencing the Bond Mortgage Loan, as such
Bond Mortgage Note may be amended, supplemented or restated from time to time.
the Indenture.
“Bond Purchase Fund” means the Bond Purchase Fund established by the Trustee pursuant to
“Bond Register” means the books or other records maintained by the Bond Registrar setting forth
the registered Bondholders from time to time of the Bonds.
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“Bond Registrar” means the Trustee acting as such, and any other bond registrar appointed
pursuant to the Indenture.
following year, so long as the Bonds are Outstanding.
“Bond Year” means the period commencing on June 1 of each year and ending on May 3 1 of the
any Outstanding Bond.
“Bondholder, ” “Owner, ” or “Holder” means any person who shall be the registered owner of
Housing Revenue Refunding Bonds Series A of 1993 (Santa Fe Ranch Apartments fMa Gew&y&b La
“Bonds” means the $15,920,000 City of Carlsbad, California Variable Rate Demand Multifamily
Costa Apartments Project) issued pursuant to the provisions of the Original Indenture, as amended and
restated by the Indenture.
“Borrower” means Santa Fe Ranch, L.L.C., a Delaware limited liability company, or any of its
successors as owner of the Project.
Federal Reserve Bank of New York (or other agent acting as the Credit Facility Provider’s fiscal agent
“Business Day” means any day other than (i) a Saturday, (ii) a Sunday, (iii) a day on which the
identified to the Trustee) is authorized or obligated by law or executive order to remain closed, (iv) a day
on which the westem regional office or the permanent home office of the Credit Facility Provider is
closed and (v) a day on which (a) banking institutions in the City of New York or in the city in which the
Principal Office of the Trustee, the Tender Agent, the Remarketing Agent or the western regional office
or the permanent home office of the Credit Facility Provider is located are closed or (b) the New York
Stock Exchange is closed.
Borrower and the counterparty named therein, as such agreement may be amended, modified,
“Cap Agreement” means that certain Rate Cap Agreement dated May - 2002, between the
supplemented or restated from time to time and any successor interest rate cap agreement approved in
writing by the Credit Facility Provider
“Cap Provider” means the “Counterparty” named in the Cap Agreement.
“Commifmenf” means that commitment letter dated 2002 by Freddie Mac to
the Freddie Mac Servicer regarding the Bond Mortgage Loan. -9
“Certificate of the Issuer, ” “Statement of the Issuer, ” “Request of the Issuer” and “Requisition
of the Issuer” mean, respectively, a written certificate, statement, request or requisition signed in the
name of the Issuer by an Authorized Officer of the Issuer or such other person as may be designated and
authorized to sign for the Issuer. Any such instrument and supporting opinions or representations, if any,
representation, and the two or more so combined shall be read and construed as a single instrument.
may, but need not, be combined in a single instrument with any other instrument, opinion or
“Closing Date” means the date on which the Indenture takes effect as an amendment to and
restatement of the Original Indenture.
“Conversion” means the establishment of the interest rate on the Bonds at the Fixed Rate,
pursuant to the Indenture.
“Conversion Date ” means the date on which the Fixed Rate for the Bonds becomes effective.
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“Cost of Issuance Fund” means the Cost of Issuance Fund established by the Trustee pursuant to
the Indenture.
“Counterparty” has the meaning given that term in the Reimbursement Agreement.
“Credit Enhancement Agreement” means the Credit Enhancement Agreement dated as of May 1,
2002 between Freddie Mac and the Trustee, as such Credit Enhancement Agreement may from time to
time he amended or supplemented.
“Credit Facility” means the Credit Enhancement Agreement or any Alternate Credit Facility at
the time in effect.
“Credit Facility Provider” means, so long as the Credit Enhancement Agreement is in effect,
Freddie Mac, or so long as any Alternate Credit Facility is in effect, the Credit Facility Provider then
obligated under the Alternate Credit Facility.
Freddie Mac Servicer, in accordance with the Guide (as amended from time to time) or otherwise, for the
“Custodial Escrow Account” means, collectively, the account or accounts established by the
purpose of funding a debt service reserve for the Bond Mortgage Loan, if required by Freddie Mac.
“Custodial Escrow Agreement” means any agreement (which agreement may be the Guide or
Commitment as applicable) pursuant to which a Custodial Escrow Account is established and maintained
pursuant to the Guide.
collateral agent for the Credit Facility Provider.
“Custodian” means US. Bank, N.A., not in its individual capacity but solely in its capacity as
“Determination of Taxability” means 41) the failure of the Credit Facility Provider or the
Borrower to consent in writing within forty-five (45) days to any amendment to the Indenture, the
Financing Agreement or the Tax Regulatory Agreement which in the written opinion of Bond Counsel
addressed to the Issuer, the Trustee and the Credit Facility Provider is necessary to preserve the exclusion
from gross income of interest on the Bonds for federal income tax purposes, or (2) enactment of
legislation or a final judgment or order of a court of original jurisdiction, a final order of any other court
of competent jurisdiction, or a final ruling or decision of the Internal Revenue Service, in any such case to
the effect that the interest on any of the Bonds (other than interest on any Bond for any period during
which such Bond is held by a “suhstantial user” of any facility financed with the proceeds of the Bonds or
a “related person,” as such terms are used in Section 103(b)(13) of the Internal Revenue Code of 1954
and except for any alternative minimum or preference tax) is not excludahle for federal income tax
purposes from the gross income of the recipients thereof subject to federal income taxes as a result of
action or inaction of the Borrower while the Bonds bear interest at a Variable Rate and as a result of any
action during a Reset Period or after the Conversion Date. With respect to clause (2) above, a judgment
or order of a court or a ruling or decision of the Internal Revenue Service shall be considered final only if
no appeal or action for judicial review has been filed and the time for filing such appeal or action has
expired.
“DTC” means The Depository Trust Company, New York, New York, as securities depository
for the Bonds pursuant to the Indenture.
“Eligible Funds” means (a) remarketing proceeds received from the Remarketing Agent or any
purchaser (other than funds provided by the Borrower, any general partner or guarantor of the Borrower
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or the Issuer), (b) proceeds received pursuant to the Credit Facility, (c) proceeds of the Bonds received
contemporaneously with the issuance and sale of the Bonds, (d) proceeds of an issue of refunding bonds
received contemporaneously with the issuance and sale of such refunding bonds, (e) proceeds from the
investment or reinvestment of moneys described in clauses (a), (b), (c) and (d) above, or (0 moneys
delivered to the Trustee and accompanied by a written opinion of nationally recognized counsel
experienced in bankruptcy matters acceptable to the Rating Agency to the effect that if the Borrower, any
general partner or guarantor of the Borrower, or the Issuer were to become a debtor in a proceeding under
the Bankruptcy Code: (i) payment of such moneys to Bondholders would not constitute a voidable
preference under Section 547 of the Bankruptcy Code and (ii) the automatic stay provisions of
Section 362(a) of the Bankruptcy Code would not prevent application of such moneys to the payment of
the Bonds.
“Event of Default” or ‘‘event of default” means any of those events specified in and defined by
the applicable provisions of the Indentureto constitute an event of default.
“Extraordinary Services’’ means and includes, but not by way of limitation, services, actions and
things carried out and all expenses incurred by the Trustee in respect of or to prevent default under the
Indenture, the Financing Agreement and the Bond Mortgage Loan Documents, including any attorneys’
fees and other litigation costs that are entitled to reimbursement under the terms of the Financing
Agreement, and other actions taken and carried out which are not expressly set forth in the Indenture.
“Extraordinary Servicing Fees and Expenses’’ means all fees and expenses of the Freddie Mac
Servicer under the Guide during any Bond Year in excess of Ordinaty Servicing Fees and Expenses.
earned or incurred by the Trustee as described in the Indenture during any Bond Year for Extraordinary
“Extraordinary Trustee b Fees and Expenses’’ means all those fees, expenses and disbursements
Services.
“Financing Agreement” means the Amended and Restated Loan Agrement dated as of May 1,
2002, among the Borrower, the Issuer and the Trustee, as such Financing Agreement may from time to
time be amended or supplemented.
“Fixed Rate” means the interest rate borne by the Bonds from and after Conversion and until the
maturity date of the Bonds, determined in accordance with the Indenture.
“Fixed Rate Period” means the period during which the Bonds bear interest at the Fixed Rate.
“Freddie Mac” means the Federal Home Loan Mortgage Corporation, a shareholder owned
government-sponsored enterprise organized and existing under the laws of the United States of America,
and its successors and assigns.
“Freddie Mac Credit Enhancement Fee” shall have the meaning set forth in the Reimbursement
Agreement.
“Freddie Mac Credit Enhancement Payment” shall have the meaning set forth in the Credit
Enhancement Agreement.
“Freddie Mac Reimbursement Amount” shall have the meaning set forth in the Reimbursement
Agreement.
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time to time (which may be Freddie Mac if Freddie Mac elects to service the Bond Mortgage Loan), or its
“Freddie Mac Servicer” means the eligible servicing institution designated by Freddie Mac from
successor, as Freddie Mac Servicer of the Bond Mortgage Loan (with respect to payments made by the
Borrower thereunder) and the Reimbursement Agreement and the Reimbursement Mortgage. Initially,
the Freddie Mac Servicer shall be Reilly Mortgage Group, Inc.
“Government Obligations” means Qualified Investments described in (a) and (b) of the definition
of “Qualified Investments.”
“Guaranteed Payment” shall have the meaning set forth in the Credit Enhancement Agreement.
“Guide” means the Freddie Mac Multifamily SelledServicer Guide, as amended and
supplemented from time to time.
“Indenture” means the Amended and Restated Indenture of Trust, dated as of May 1, 2002
between the Issuer and the Trustee, together with any other indentures supplemental to the Indenture.
Called Bond Service,” 30 Montgomery Street, lo* Floor, Jersey City, New Jerse 07302 Attention:
“Information Services” means any of the following services: Financial Information, Inc. “Daily
Editor; Kenny Information Services, “Called Bond Service,” 55 Water Street, 45 Floor, New York,
New York 10041; Moody’s Investors Service “Municipal and Government,” 99 Church Street, Stb Floor,
New York, New York 10007, Attention: Municipal News Reports; and EXCITE, INC. Called Bonds
Dept., 5 Hanover Square, New York, New York 10004; The Bond Buyer, Muni-Facts Secondary Market,
New York, New York 10004-1549; Bloomberg Financial Markets, Attention: Reporting-Disclosure
Disclosure Services, Attention: Municipal Redemption Notices, One State Street Plaza, 31” Floor,
Documents, 100 Business Park Drive, Skillman, New Jersey 08558; or such other services providing
information with respect to called bonds as the Issuer may designate in a certificate of the Issuer delivered
to the Trustee.
1;
Agent which is in effect as of the Closing Date.
“Initial Rate” means, with respect to the Bonds, the interest rate determined by the Remarketing
the Issuer, the Trustee and Freddie Mac, as the same may be amended or supplemented.
“Intercreditor Agreement” means the Intercreditor Agreement dated as of May 1, 2002 among
“Interest Payment Date” means (i) for interest accrued during any Variable Period, the first
Business Day of each month thereafter for the preceding calendar month, (ii) for interest accrued during
any Reset Period, June 1 and December 1 of each year, commencing on the June 1 or December 1 next
Date, June 1 and December 1 of each year, commencing on the June 1 or December 1 next following the
following the applicable Reset Adjustment Date and (iii) for interest accrued on and after the Conversion
Conversion Date and the Maturity Date.
Maximum Rate and (b) during a Reset Period or the Fixed Rate Period, 189 days’ interest computed at the
“Interest Requirement” means (a) during the Variable Period, 34 days interest computed at the
Reset Rate or the Fixed Rate, as applicable or in the case of either (a) or (b), such lesser number of days
as is acceptable to the Rating Agency.
“Zssuer” means the City of Carlsbad, California, a municipal corporation of the State of
California, and any successor to its rights, duties and obligations under the indenture.
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“Zssuer Fee” means the fee owed to the Issuer from the Borrower, accruing from the date of
issuance of the Bonds, equal to 23 basis points (.23%) per annum of the aggregate principal amount
of Bonds Outstanding as of the date of issue and each June 1 thereafter (prior to any principal
reduction on that date), payable annually in arrears on each June 1 commencing June 1, 2002; and
provided, however, that such fee does not include amounts due, if any, for extraordinary services and
expenses of the Issuer, the Trustee, Bond Counsel or the Trustee’s counsel to be paid by the
Borrower pursuant to the Financing Agreement.
“Liquid@ Advance” shall have the meaning provided in the Reimbursement Agreement.
“Liquidity Commitment” shall have the meaning provided in the Credit Enhancement Agreement.
“Market Risk Event” means (a)(i) legislation enacted by the Congress or (ii) a final non-
appealable decision rendered by a court established under Article I11 of the Constitution of the
United States, or the United States Tax Court, or (iii) an order, ruling or regulation issued by the
United States Department of the Treasury or the Internal Revenue Service, with the purpose or effect,
directly or indirectly, of causing interest received by any Bondholder to be included in the gross income
of such Bondholder for purposes of federal income taxation; or @) legislation enacted or any action taken
by the Securities and Exchange Commission which, in the opinion of counsel to the Remarketing Agent,
has the effect of requiring the remarketing of the Bonds to be registered under the Securities Act of 1933,
as amended (the “Securities Act”), or any other “security,” as defined in the Securities Act, issued in
connection with or as part of the remarketing of the Bonds to be so registered or the Indenture to be
qualified as an indenture under the Trust Indenture Act of 1939, as amended; or (c) any event shall have
occurred or shall exist which, in the reasonable judgment of the Remarketing Agent, makes or has made
untrue or incorrect in any material respect any statement or information contained in a reoffering circular
or other disclosure document distributed in connection with the Conversion or Reset Adjustment Date or
is not or was not reflected in such reoffering circular or other disclosure document but should be or should
have been reflected therein in order to make the statements or information contained therein not
misleading in any material respect; or (d) in the reasonable judgment of the Remarketing Agent, any
event which makes it impractical or inadvisable for the Remarketing Agent to remarket or enforce
agreements to remarket Bonds because trading in securities generally shall have been suspended on the
New York Stock Exchange, Inc., or a general banking moratorium shall have been established by federal,
New York or State authorities.
“Muhrri!y Date” means the maturity date of the Bonds set forth in the Indenture and set forth on
the cover page of this Remarketing Memorandum.
“Maximum Rate” means twelve percent (12%) per annum; provided that the Maximum Rate may
be increased to a specified higher Maximum Rate if there shall have been delivered to the Trustee (a) an
Opinion of Bond Counsel to the effect that such higher Maximum Rate is permitted under applicable law
Bondholders for federal tax purposes and @) either (1) the written consent of the Credit Facility Provider
and will not, in itself, cause the interest on the Bonds to be included in the gross income of the
to the specified higher Maximum Rate and evidence that the Credit Facility will cover the Interest
Requirement at such Maximum Rate, or (2) a new or amended Credit Facility in an amount equal to the
sum of (i) the then outstanding principal amount of the Bonds and (ii) the new Interest Requirement
calculated using the new Maximum Rate; provided that the Maximum Rate shall never exceed the
maximum rate permitted by law to be paid on the Bonds or to be charged on the Bond Mortgage Loan.
“Moody’s” means Moody’s Investors Service, Inc., its successors and assigns, if such successors
and assigns shall continue to perform the functions of a securities rating agency.
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“Net Proceeds” when used with respect to any insurance or condemnation award, means the
gross proceeds from the insurance or condemnation award with respect to which that term is used
remaining after payment of all reasonable expenses incurred in the collection of such gross proceeds,
including reasonable attorney fees.
“1954 Code” means the Internal Revenue Code of 1954, as amended, and the regulations
promulgated thereunder, as such 1954 Code shall have been in effect immediately preceding the
enactment of the 1986 Code.
“1986 Code” means the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder.
“Ordinary Servicing Fees and Expenses” means the ordinary fees payable to the Freddie Mac
Servicer in connection with the servicing of the Bond Mortgage Loan under the Guide, payable monthly
in arrears on the first day of each month in an amount equal to one-twelfth (1/12) of 0.- % of the
principal balance of the Bond Mortgage Loan outstanding on the day before such payment is due.
“Original Developer” means La Costa Partners, a California general partnership, and its
successors and assigns.
been duly authenticated and delivered by the Trustee under the Indenture, except:
“Outstanding” when used with respect to the Bonds, means, as of any date, all Bonds that have
(a) Bonds surrendered and replaced upon exchange or transfer, or cancelled because
of payment or redemption, at or prior to such date;
(b) Bonds for the payment, redemption or purchase for cancellation of which
sufficient money has been deposited prior to such date with the Trustee (whether upon or prior to
paid and discharged pursuant to the provisions of the Indenture; provided that if such Bonds are
the maturity, amortization or redemption date of the same), or which are deemed to have been
to be redeemed prior to the maturity thereof, other than by scheduled amortization, notice of such
redemption shall have been given or arrangements satisfactory to the Trustee shall have been
made therefor, or waiver of such notice satisfactory in form to the Trustee shall have been filed
with the Trustee;
(c) Bonds in lieu of which others have been authenticated (or payment, when due, of
which is made without replacement) under the Indenture; and also except that; and
(d) For the purpose of determining whether the Bondholders of the requisite amount
of Bonds Outstanding have made or concurred in any notice, request, demand, direction, consent,
pursuant to the Indenture, Purchased Bonds and Bonds owned by or for the account of the
approval, order, waiver, acceptance, appointment or other instrument or communication under or
Borrower or any Person owned, controlled by, under common control with or controlling the
Borrower shall be disregarded and deemed to be not Outstanding unless all Bonds shall be so
owned; the term ‘%ontrol” (including the terms “controlling”, “controlled by” and “under
common control with”) means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through the ownership of
voting securities, by contract, or otherwise. Beneficial ownership of 5% or more of a class of
securities having general voting power to elect a majority of the board of directors of a
corporation shall be conclusive evidence of control of such corporation.
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to the Indenture.
“Paying Agent” means the Trustee acting as such, and any other paying agent appointed pursuant
any other organization or entity (whether governmental or private).
“Person ” means an individual, estate, trust, corporation, partnership, limited liability company or
May 1,2002, by and between the Custodian and the Borrower, as further modified or amended from time
“Pledge Agreement” means that certain Pledge, Security and Custody Agreement dated as of
to time.
“Principal Component” shall have the meaning set forth in the Credit Enhancement Agreement.
“Principal Office of the Credit Facility Provider ” means the office of the Credit Facility Provider
located at 8100 Jones Branch Drive, McLean, Virginia 22102 or such other office or offices as the Credit
Facility Provider may designate from time to time, or the office of any successor Credit Facility Provider
where it principally conducts its business of serving as credit facility provider under indentures pursuant
to which municipal or governmental obligations are issued.
“Principal Office of the Remarketing Agent” means the office of the Remarketing Agent located
at 8000 Maryland, Suite 1020, St. Louis, Missouri 63105, or such other office or offices as the
Remarketing Agent may designate from time to time, or the office of any successor Remarketing Agent
where it principally conducts its business of serving as remarketing agent under indentures pursuant to
which municipal or governmental obligations are issued.
California Street, Suite 2550, San Francisco, California 941 11 or such other office or offices as the “Principal Ofice of the Tender Agent” means the office of the Tender Agent located at One
Tender Agent may designate from time to time, or the office of any successor Tender Agent where it
principally conducts its business of serving as tender agent under indentures pursuant to which municipal
or governmental obligations are issued.
“Principal Ofice ofthe Tmtee” means the office of the Trustee located at One California Street,
Suite 2550, San Francisco, California 941 11 or such other office or offices as the Trustee may designate
from time to time, or the office of any successor Trustee where it principally conducts its business of
serving as trustee under indentures pursuant to which municipal or governmental obligations are issued.
“Principal Reserve Fund” means the Principal Reserve Fund established by the Trustee pursuant
to the Indenture.
“Principal Reserve Schedule Payments” means the payments to be made by the Borrower in
accordance with the Principal Reserve Schedule attached to the Reimbursement Agreement.
“Prior Credit Facility” means the Letter of Credit from Bank of America National Trust and
Savings Association originally issued on - 1993, in the amount of $- and
expiring on -9 200,
“Prior Developer” means Northwestern Mutual Life Insurance Company and its successors and
assigns.
“Project” means the land and 320 residential rental apartment units, and related fixtures,
equipment, furnishings and site improvements known as Santa Fe Ranch Apartments (ma La Costa
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Apartments), located at , Carlsbad, California, in San Diego County, California,
including the real estate described in the Bond Mortgage.
“Purchased Bond” means any Bond during the period from and including the date of its purchase
by the Trustee on behalf of and as agent for the Borrower with amounts provided by the Credit Facility
Provider under the Credit Facility, to, but excluding, the date on which such Bond is remarketed to any
Person other than the Credit Facility Provider, the Borrower, any general partner or guarantor of the
Borrower or the Issuer.
“Purchase Price, ” with respect to any Bond required to be purchased pursuant to the Indenture,
means the principal amount of such Bond plus interest accrued thereon to the Settlement Date and with
respect to any Bond to be purchased in lieu of redemption pursuant to the Indenture means the principal
amount of such Bond plus any redemption premium due thereon plus interest accrued thereon to the
Settlement Date.
“Qualified Investments” means any of the following if and to the extent permitted by law:
(a) direct and general obligations of the United States of America; (b) obligations of any agency or
instrumentality of the United States the payment of the principal of and interest on which are
unconditionally guaranteed by the full faith and credit of the United States of America; (c) senior debt
obligations of Freddie Mac; (d) senior debt obligations of Fannie Mae; ( (e) demand deposits or time
deposits with, or certificates of deposit issued by, the Trustee or its affiliates or any bank organized under
the laws of the United States or any state or the District of Columbia which has combined capital, surplus
and undivided profits of not less than $50,000,000; provided that the Trustee or such other institution has
been rated at least P-1 by Moody’s, which deposits or certificates are fully insured by the Federal Deposit
Insurance Corporation; (f) investment agreements with Freddie Mac or a bank or any insurance company
or other financial institution which has a rating assigned by Moody’s to its outstanding long-term
unsecured debt which is the highest rating (as defined below) for long-term unsecured debt obligations
assigned by Moody’s, and which are approved by the Credit Facility Provider; (9) shares or units in any
money market mutual fund (including mutual funds of the Trustee or its affiliates) registered under the
Investment Company Act of 1940, as amended, whose investment portfolio consists solely of direct
obligations of the United States government, and which fund has been rated Aaa by Moody’s; or (h) any
other investments that have been previously approved in writing by the Credit Facility Provider. For
purposes of this definition, the “highest rating” shall mean a rating of at least P-1 for obligations with less
than one year maturity; at least Aa2P-1 for obligations with a maturity of one year or greater but less than
three years; and at least Aaa for obligations with a maturity of three years or greater. Qualified
Investments must be limited to instruments that have a predetermined fixed-dollar amount of principal
due at maturity that cannot vary or change and interest, if tied to an index, shall be tied to a single interest
rate index plus a single fixed spread, if any, and move proportionately with such index.
‘Zating Agency” means each national rating agency then maintaining a rating on the Bonds, or
any successor or assign thereof.
“Rebate Analyst” means a certified public accountant, financial analyst or bond counsel, or any
firm of the foregoing or financial institution experienced in making the arbitrage and rebate calculations
required pursuant to Section 148 of the 1986 Code and retained to make the computations and give
directions required under the Arbitrage Rebate Agreement among the Issuer, the Trustee and the
Borrower with respect to the Bonds. The Issuer shall inform the Trustee in writing of the name of the
Rebate Analyst.
“Rebate Analyst Fee” means the annual fee of the Rebate Analyst, to be paid to or at the
direction of the Issuer from the Issuer’s Fee.
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“Rebate Fund” means the Rebate Fund established by the Trustee pursuant to the Indenture.
“Record Date” means during any Variable Period, the Business Day immediately preceding an
Interest Payment Date and during any Reset Period or the Fixed Rate Period, the 15th day preceding any
Interest Payment Date.
“Redemption Fund” means the Redemption Fund established by the Trustee pursuant to the
Indenture.
“Reimbursement Agreement” means the Reimbursement and Security Agreement dated as of
May I, 2002, between the Borrower and Freddie Mac, as such Reimbursement Agreement may be
amended or supplemented from time to time, and upon the effectiveness of any Alternate Credit Facility,
any similar agreement between the Borrower and the Alternate Credit Facility Provider pursuant to which
the Borrower agrees to reimburse the Alternate Credit Facility Provider for payments made under the
Alternate Credit Facility, as such agreement may be amended or supplemented.
“Reimbursement Mortgage” means the Multifamily Deed of Trust, Assignment of Rents,
Security Agreement and Fixture Filing dated as of May 1, 2002, from the Borrower to Freddie Mac, as
the same may be amended or supplemented from time to time.
“Remarketing Agent” means the remarketing agent appointed pursuant to the Indenture, initially
Stem Brothers & Co.
“Remarketing Agreement” means the Remarketing Agreement dated as of May 1, 2002, among
the Issuer, the Remarketing Agent and the Borrower, or any similar agreement between the Remarketing
Agent and the Borrower, in each case as originally executed or as it may be amended or supplemented
from time to time in accordance with its terms.
“Remarketing Date” means each date on which the Remarketing Agent is required to notify the
Trustee, the Tender Agent, the Borrower and the Credit Facility Provider of the Bonds for which it has
found purchasers, as set forth in the Indenture.
“Remarketing Memorandum” means this Remarketing Memorandum dated May -, 2002,
relating to the remarketing of the Bonds, as the same may be supplemented or amended.
‘‘Reserved Rights” means those certain rights of the Issuer under the Bond Financing Documents
to indemnification and to payment or reimbursement of fees and expenses of the Issuer, including the
Issuer Fee as well as the fees and expenses of counsel, assumption fees and indemnity payments, its right
ownership of the Project, its right to inspect and audit the books, records and premises of the Borrower to give and receive notices and to enforce notice and reporting requirements and restrictions on transfer of
and of the Project, its right to collect legal fees and related expenses, its right to specifically enforce the
terms of the Tax Regulatory Agreement, including the Borrower’s covenant to comply with applicable
federal tax law and State law (including the Act and the rules and regulations of the Issuer), its right to
receive notices under the Bond Financing Documents and its right to receive notices and reports under the
Bond Financing Documents and its rights to give or withhold consent to amendments, changes,
modifications and alterations to the Bond Financing Documents and to such other matters where, under
the Indenture or under the Bond Financing Documents, the Issuer’s consent or approval is required.
Reset Rate or to a different Reset Rate. During a Variable Period, a Reset Adjustment Date may occur
“Reset Adjustment Date ” means any date on which the interest rate on the Bonds is adjusted to a
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only on any Interest Payment Date, or if such Interest Payment Date is not a Business Day, the next
succeeding Business Day.
“Reset Period” means each period during which the Bonds bear interest at a Reset Rate.
“Reset Rate” means the rate of interest borne by the Bonds as determined in accordance with the
Indenture..
“Responsible Officer” means any officer of the Trustee employed within or otherwise having
regular responsibility in connection with the corporate trust department of the Trustee and who is located
at the Principal Office of the Trustee.
“Revenue Fund” means the Revenue Fund established by the Trustee pursuant to the Indenture.
the Financing Agreement, the Bond Mortgage Note or the Bond Mortgage (except Principal Reserve
“Revenues” means (i) all payments made with respect to the Bond Mortgage Loan pursuant to
Schedule Payments), including all casualty or other insurance benefits and condemnation awards paid in
connection therewith (subject in all events to the interests of the Credit Facility Provider therein under the
terms of the Credit Facility and the Reimbursement Agreement), (ii) payments made by the Credit
Facility Provider pursuant to the Credit Facility and (iii) all moneys and securities held by the Trustee in
the funds and accounts established pursuant to the Indenture (excluding moneys or securities in the Cost
of Issuance Fund, the Rebate Fund, the Principal Reserve Fund, the Specified Fees Account, and the
Bond Purchase Fund), together with all investment earnings thereon.
“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies,
Inc., and its successors and assigns if such successors and assigns shall continue to perform the functions
of a securities rating agency.
Garden City, New York 11530, Fax: (516) 2274039 or 4190, or such other securities depositories as the
“Securities Depositories” means The Depository Trust Company, 711 Stewart Avenue,
Issuer may designate in a certificate of the Issuer delivered to the Trustee and the Credit Facility Provider.
“Settlement Date” means any date on which any Bond is purchased pursuant to the Indenture.
“Spec@ed Fees Account” means the Specified Fees Account within the Administration Fund
created under the Indenture.
“State ” means the State of California.
“Substitution Date” means the date established for the mandatory tender and purchase of the
Bonds in connection with the delivery to the Trustee of an Alternate Credit Facility pursuant to the
Indenture.
“Tax Certificate ” means that Tax Certificate executed by the Issuer and dated the Closing Date.
“Tax Regulatory Agreement” means the Second Amended and Restated Regulatory Agreement
and Declaration of Restrictive Covenants dated as of May 1, 2002 among the Issuer, the Trustee and the
Borrower, as the same may be amended, supplemented or restated from time to time.
“Tender Agent” means the Tender Agent appointed in accordance with the Indenture.
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“Tender Notice” means a notice of demand for purchase of Bonds given by any Bondholder
pursuant to the Indenture.
“Trustee” means U.S. Bank, N.A. and its successors in trust under the Indenture.
“Trustee’s Fees” means the ongoing compensation and expenses payable to the Trustee as
follows:
(a) the annual administration fees of the Trustee, as Trustee, Registrar and Paying
Agent, for the ordinary services of the Trustee rendered under the Indenture during each twelve
month period which shall be ( ) basis points per annum of the
principal amount of Bonds Outstanding payable semiannually on each 1 and
1, commencing 1, 2002, subject to an annual minimum fee of
m
(b) the reasonable fees and charges of the Trustee for necessary extraordinary
services rendered by it and reasonable extraordinary expenses incurred by it under the Indenture
as and when the same become due, including reasonable counsel fees (including fees prior to
litigation, at trial or for appellate proceedings); provided, however, that the Trustee shall not be
required to undertake any such extraordinary services unless provision for payment of
extraordinary expenses satisfactory to the Trustee shall have been made;
(c) for purposes of the Financing Agreement, indemnification of the Trustee by the
Borrower; and
(d) the annual fee of the Trustee, as Dissemination Agent, which is included as part
of the Issuer’s Fee and shall be $250 per year.
“Trust Estate” shall have the meaning set forth under “GRANTING CLAUSES - TRUST
ESTATE.
“Variable Interest Accrual Period” means, during any Variable Period, a period beginning on the
Interest Computation Date, except that the first Variable Interest Accrual Period for any Variable Period
date following any Variable Interest Computation Date and ending on the next succeeding Variable
shall begin on the first day of such Variable Period and end on the next succeeding Variable Interest
Computation Date.
“Variable Interest Computation Date” means, with respect to any Variable Interest Accrual
Period, each Wednesday during such period, or if any such Wednesday is not a Business Day, the next
succeeding Business Day.
“Variable Period” means each period during which the Bonds bear interest at a Variable Rate.
“Variable Rate” means the variable rate of interest borne by the Bonds as determined in
accordance with the Indenture
“Variable Rate Adjustment Date” means any date upon which the Bonds begin to bear interest at
a Variable Rate for the succeeding Variable Period.
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APPENDIX B
FORM OF OPINION OF BOND COUNSEL
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