HomeMy WebLinkAbout2011-04-26; City Council; 20515 EXHIBIT 2b; SUBSTITUTE CREDIT FACILITY SANTA FE RANCH APTSEXHIBIT A
FORM OF BOND
NO. R- $[AMOUNT]
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
COUNTY OF SAN DIEGO
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)
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 OWNER HEREOF, CEDE
& CO., HAS AN INTEREST HEREIN.
INTEREST RATE MATURITY DATE DATED DATE CUSIP NO.
Junel,20_ May _, 2011
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT:
AND NO/100 DOLLARS
The City of Carlsbad, California (the "Issuer"), a municipal corporation of the State of
California (the "State"), for value received, hereby promises (but 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 from the date of
authentication of this 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
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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 1, 2011 for the period from and including May 2, 2011 to and including May 31, 2011, (b)
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 (as defined
below). 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 of the
month 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 National Association, 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 Second Amended and Restated Indenture of
Trust dated as of May 1, 2011 by and between the Issuer and the Trustee (the "Indenture").
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 f/k/a 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, May 14, 2002 and April 26, 2011 (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 one (1) year or more or such
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 the Bond Mortgage, and, to secure the
payment of the principal of and interest on and purchase price of the Bonds, the Borrower has caused
the Credit Facility to be delivered to the Trustee.
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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 terms 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) thirty (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
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
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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%) 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 (even if such Reset Adjustment
Date, Variable Rate Adjustment Date, the Conversion Date or any Substitution Date fails to occur).
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 optional 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.
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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 full 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.
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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 Assistant City Clerk.
[SEAL] CITY OF CARLSBAD, CALIFORNIA
By:
Mayor
ATTEST:
By:
City Clerk
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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: May , 2011
U.S. BANK NATIONAL ASSOCIATION
By:
Authorized Officer
DOCSOC/1480309v4/022062-0029
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
(Please insert Social Security Number or other identifying 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.
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EXHIBIT B
FORM OF TENDER NOTICE
City of Carlsbad, California
Variable Rate Demand Multifamily Housing Revenue Refunding Bonds
Series A of 1993
(Santa Fe Ranch Apartments f/k/a
La Costa Apartments Project)
TO: U.S. Bank National Association, as Tender Agent
Notice is hereby given pursuant to Section 10.01 of the Second Amended and Restated
Indenture of Trust dated as of May 1, 2011 (the "Indenture") pursuant to which the above-captioned
bonds (the "Bonds") are issued and outstanding, that the undersigned Bondholder demands the
purchase of $ in aggregate principal amount of Bonds, on , which
date is a 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:
Authorized Signature
Copies to: Stern Brothers & Co., Remarketing Agent
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Table of Contents
ARTICLE I
DEFINITIONS
Section 1.01. Definitions 5
Section 1.02. Interpretation 17
ARTICLE II
THE BONDS
Section 2.01. Basic Terms 18
Section 2.02. Determination of Interest Rate and Establishment of Principal Payment Dates 19
Section 2.03. Limited Obligations 24
Section 2.04. Indenture Constitutes Contract 25
Section 2.05. Execution 25
Section 2.06. Authentication 25
Section 2.07. Mutilated, Lost, Stolen or Destroyed 25
Section 2.08. Transfer and Exchange; Persons Treated as Owners 25
Section 2.09. Temporary Bonds 26
Section 2.10. Remarketing of Bonds 26
Section 2.11. Deposit to Cost of Issuance Fund 27
Section 2.12. Book-Entry Only System of Registration 27
Section 2.13. Mandatory Tender of Bonds on Substitution Date 29
ARTICLE III
REDEMPTION OF BONDS PRIOR TO MATURITY
Section 3.01. Redemption of Bonds Prior to Maturity 30
Section 3.02. Selection of Bonds for Redemption 32
Section 3.03. Notice of Redemption 32
Section 3.04. Cancellation 33
Section 3.05. Effect of Notice of Redemption 33
Section 3.06. Purchase of Bonds in Whole in Lieu of Redemption 34
Section 3.07. Cancellation of Purchased Bonds 34
ARTICLE IV
REVENUES AND FUNDS
Section 4.01. Pledge of Revenues and Assets 35
Section 4.02. Establishment of Funds 35
Section 4.03. Application of Revenues 35
Section 4.04. Application of Bond Fund 37
DOCSOC/1480309v4/022062-0029
Table of Contents
(continued)
Page
Section 4.05. Application of Redemption Fund 37
Section 4.06. Application of Administration Fund 37
Section 4.07. Investment of Funds 38
Section 4.08. Moneys Held for Particular Bonds; Funds Held in Trust 39
Section 4.09. Accounting Records 39
Section 4.10. Amounts Remaining in Funds 39
Section 4.11. Rebate Fund 40
Section 4.12. Cost of Issuance Fund 41
Section 4.13. Reports From the Trustee 41
Section 4.14. Drawings Under Credit Facility 41
Section 4.15. Notices Under Credit Enhancement Agreement 42
ARTICLE V
GENERAL COVENANTS AND REPRESENTATIONS
Section 5.01. Payment of Principal and Interest 43
Section 5.02. Performance of Covenants 43
Section 5.03. Instruments of Further Assurance 43
Section 5.04. Inspection of Project Books 43
Section 5.05. No Modification of Security; Additional Indebtedness 43
Section 5.06. Damage, Destruction or Condemnation 43
Section 5.07. Tax Covenants 44
Section 5.08. Representations and Warranties of the Issuer 44
ARTICLE VI
DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND BONDHOLDERS
Section 6.01. Events of Default 46
Section 6.02. Acceleration; Other Remedies Upon Event of Default 46
Section 6.03. Rights of Bondholders 48
Section 6.04. Waiver by the Issuer 48
Section 6.05. Application of Moneys After Default 48
Section 6.06. Rights of the Credit Facility Provider 50
Section 6.07. Remedies Vested in Trustee 50
Section 6.08. Remedies of Bondholders 50
Section 6.09. Termination of Proceedings 51
Section 6.10. Waivers of Events of Default 51
Section 6.11. Notice to Bondholders if Default Occurs 51
ARTICLE VII
CONCERNING THE TRUSTEE
Section 7.01. Standard of Care 53
ii
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Table of Contents
(continued)
Section 7.02. Reliance Upon Documents 54
Section 7.03. Use of Proceeds 56
Section 7.04. Trustee May Hold Bonds 56
Section 7.05. Trust Imposed 56
Section 7.06. Compensation of Trustee 56
Section 7.07. Maintenance of Office 56
Section 7.08. Successor Trustee 57
Section 7.09. Resignation by the Trustee 57
Section 7.10. Removal of the Trustee 57
Section 7.11. Appointment of Successor Trustee 57
Section 7.12. Concerning Any Successor Trustee 58
Section 7.13. Successor Trustee as Trustee, Paying Agent and Bond Registrar 58
Section 7.14. Co-Trustee or Separate Trustee 58
Section 7.15. Compliance of Borrower Under Tax Regulatory Agreement 60
Section 7.16. Limitation on Action by Trustee 60
ARTICLE VIII
SUPPLEMENTAL INDENTURES AND AMENDMENTS OF CERTAIN DOCUMENTS
Section 8.01. Supplemental Indentures Not Requiring Consent of Bondholders 61
Section 8.02. Supplemental Indentures Requiring Consent of Bondholders 61
Section 8.03. Amendments to Financing Agreement Not Requiring Consent of Bondholders 63
Section 8.04. Amendments to Financing Agreement Requiring Consent of Bondholders 63
Section 8.05. Amendments to the Credit Facility 64
ARTICLE IX
SATISFACTION AND DISCHARGE OF INDENTURE
Section 9.01. Discharge of Lien 65
Section 9.02. Discharge of Liability 66
Section 9.03. Payment after Discharge of Indenture 66
Section 9.04. Deposit of Money or Securities with Trustee 66
ARTICLE X
REMARKETING AND PURCHASE OF BONDS
Section \Q.Q\. Demand for and Mandatory Purchase of Bonds 68
Section 10.02. Mandatory Tender of Bonds 69
Section 10.03. Remarketing ofBonds 69
Section 10.04. Purchase of Bonds not Remarketed 70
Section 10.05. Remarketing Agent 71
Section 10.06. Qualifications and Resignation or Removal of Remarketing Agent 72
Section 10.07. Tender Agent 72
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Table of Contents
(continued)
Section 10.08. Qualifications of Tender Agent 74
Sectionl0.09.Dealing in Bonds 74
Section 10.10. Purchased Bonds 75
ARTICLE XI
MISCELLANEOUS
Section \\.Ol.Consents and Other Instruments of Bondholders 76
Section \\.Q2.Limitation of Rights 76
Section \\.Q3.Construction of Conflicts; Severability 76
Section \\.M.Notices 77
Section \\.Q5.Trustee as Paying Agent and Bond Registrar 79
Section \\.Q6.PaymentsDue on Non-Business Days 79
Section \\.Ql.Counterparts 79
Section 11.08. Laws Governing Indenture and Administration of Trust 79
Section \\.09.NoRecourse 79
Section 11.10. Successors and Assigns 80
EXHIBIT A - FORM OF BOND
EXHIBIT B - FORM OF TENDER NOTICE
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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
FIRST AMENDMENT
TO
SECOND AMENDED AND RESTATED
REGULATORY AGREEMENT
AND DECLARATION OF RESTRICTIVE COVENANTS
By and Among
CITY OF CARLSBAD
and
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
and
SANTA FE RANCH, LLC
DATED AS OF MAY 1, 2011
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 f/k/a LA COSTA APARTMENTS PROJECT)
DOCSOC/1480076v3/022062-0029
FIRST AMENDMENT
TO
SECOND AMENDED AND RESTATED
REGULATORY AGREEMENT AND
DECLARATION OF RESTRICTIVE COVENANTS
THIS FIRST AMENDMENT TO SECOND AMENDED AND RESTATED
REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS (the
"First Amendment") is made and entered into as of May 1, 2011, 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"), U.S.
BANK NATIONAL ASSOCIATION, 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 a corporate trust office in San Francisco, California, as
Trustee, also known as "U.S. Bank, N.A." (the "Trustee"), and SANTA FE RANCH, LLC, a
Delaware limited liability company (the "Owner"), and amends, in part, that certain Second
Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants dated as of
May 1, 2002 recorded on May 23, 2002 as Document No. 2002-0437976 in the Official Records of
the County of San Diego, California, as amended (the "Regulatory Agreement").
WITNESSETH:
WHEREAS, the City has adopted a program to finance the construction of multifamily rental
housing pursuant to Chapter 7 of Part 5 of Division 31 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 a multifamily rental
housing project of La Costa Partners, a California general partnership (the "Original 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 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
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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 the
Regulatory Agreement, sold the Project to the Owner; and
WHEREAS, on May 23, 2002, the Federal Home Loan Mortgage Corporation ("Freddie
Mac") delivered its Credit Enhancement Agreement for the Bonds pursuant to the Indenture; and
WHEREAS, the Freddie Mac Credit Enhancement Agreement is expiring on June 6, 2011
and is being replaced by a letter of credit from Wells Fargo Bank, National Association (the "Credit
Facility"), which replacement requires that certain amendments be made to the Regulatory
Agreement;
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. The definition of "Freddie Mac" in Section 1 of the Regulatory
Agreement is deleted. The following terms in Section 1 of the Regulatory Agreement are amended
to read as follows, unless the context in which they are used clearly requires otherwise:
"Credit Facility Provider" - The Credit Facility Provider then obligated under the
Credit Facility in effect under the Indenture.
"Intercreditor Agreement" - The Intercreditor Agreement dated as of May 1, 2011
among the City, the Trustee and the Credit Facility Provider, as the same may be amended or
supplemented, and any future agreement with a Credit Facility Provider that replaces the
Intercreditor Agreement in effect with the previous Credit Facility Provider.
"Note" - The Second Amended and Restated Promissory Note from the Owner to the
City evidencing the Loan, dated as of May 1, 2011, as amended from time to time.
2. NOTICE ADDRESS FOR CREDIT FACILITY PROVIDER. A copy of any
notice delivered to the Owner under the Regulatory Agreement shall also be sent to the Credit
Facility Provider. Any notice required to be given under the Regulatory Agreement shall be
delivered to the Credit Facility Provider at the following address:
Credit Facility Provider: Wells Fargo Bank, National Association
123 N. Wacker Drive, Suite 1900
Chicago, Illinois 60606
Attention: Brett Hill
Facsimile: (312)269-4812
Telephone: (312) 782-0969
with a copy to: Wells Fargo Bank, N.A.
Minneapolis Loan Center
608 2nd Avenue South, 11th Floor
Minneapolis, Minnesota 55402
Attention: Manager
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3. ELIMINATION OF EXHIBIT D. Exhibit D to the Regulatory Agreement, and all
references in the Regulatory Agreement to Exhibit D, are deleted in their entirety.
4. REGULATORY AGREEMENT REMAINS IN EFFECT. Except as expressly
amended by this First Amendment, the Regulatory Agreement remains in full force and effect and
has not otherwise been amended.
5. EFFECTIVE DATE. This First Amendment shall take effect on the date of delivery
of the Credit Facility.
6. MULTIPLE COUNTERPARTS. This First Amendment 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.
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IN WITNESS WHEREOF, the City, the Trustee and the Owner have executed this
Amendment by duly authorized representatives.
CITY OF CARLSBAD
By:
City Manager
ATTEST:
City Clerk
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U.S. BANK NATIONAL ASSOCIATION, as Trustee
By:
Authorized Officer
S-2
DOCSOC/1480076v3/022062-0029
SANTA FE RANCH, LLC, a Delaware limited
liability company
By: CAS A 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:
Brian Eby
Vice President
S-3
DOCSOC/1480076v3/022062-0029
CONSENTED TO BY:
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:
Authorized Officer
S-4
DOCSOC/1480076v3/022062-0029
STATE OF CALIFORNIA )
) ss.
COUNTY OF )
On before me, , Notary Public,
personally appeared , who proved
to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
DOCSOC/1480076v3/022062-0029
STATE OF CALIFORNIA )
) ss.
COUNTY OF )
On before me, , Notary Public,
personally appeared , who proved
to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
DOCSOC/l 480076v3/022062-0029
STATE OF ILLINOIS )
) ss.
COUNTY OF COOK )
On before me, , Notary Public,
personally appeared , who proved
to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal
SIGNATURE OF NOTARY PUBLIC
DOCSOC/1480076v3/022062-0029
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 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, File/Page No. 84-407544.
A-l
DOCSOC/l 480076v3/022062-0029
Table of Contents
1. DEFINITIONS 2
2. NOTICE ADDRESS FOR CREDIT FACILITY PROVIDER 2
3. DELETION OF EXHIBIT D 3
4. REGULATORY AGREEMENT REMAINS IN EFFECT 3
5. EFFECTIVE DATE 3
6. MULTIPLE COUNTERPARTS 3
Exhibit A LEGAL DESCRIPTION
DOCSOC/1480076v3/022062-0029
$15,920,000
CITY OF CARLSBAD, CALIFORNIA
VARIABLE RATE DEMAND MULTIFAMILY
HOUSING REVENUE REFUNDING BONDS
SERIES A OF 1993
(SANTA FE RANCH APARTMENTS
F/K/A LA COSTA APARTMENTS PROJECT)
SECOND AMENDED AND RESTATED PROMISSORY NOTE
As of May 1, 2011 $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'), and its assignee, 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 Second Amended
and Restated Loan Agreement dated as of May 1, 2011, by and among the Issuer, U.S. BANK
NATIONAL ASSOCIATION (the "Trustee") and the Borrower (the "Financing Agreement"), 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 Second
Amended and Restated Indenture of Trust, dated as of May 1, 2011, by and between the Issuer and
the Trustee (the "Indenture"), relating to the Issuer's Variable Rate Demand Multifamily Housing
Revenue Refunding Bonds Series A of 1993 (Santa Fe Ranch Apartments f/k/a La Costa Apartments
Project) (the "Bonds"). All capitalized terms used in this Note and not otherwise defined herein shall
have the meanings as set forth in the Indenture.
THIS NOTE AMENDS AND RESTATES IN FULL THAT AMENDED AND RESTATED
PROMISSORY NOTE DATED AS OF MAY 1, 2002 IN THE AMOUNT OF $15,920,000
EXECUTED BY THE BORROWER IN FAVOR OF THE TRUSTEE.
Interest ("Note Interest") shall accrue on the unpaid principal of this Note from, and
including, the date hereof 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; 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 a Fixed Rate, the Fixed Rate.
On the business day prior to each Interest Payment Date, the Borrower shall pay to the
Trustee Note Interest equal to the interest due on the Bonds on the immediately succeeding Interest
Payment Date.
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
DOCSOC/1480099v3/022062-0029
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 and this Note 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 Amended and Restated First Deed of
Trust and Assignment of Rents and Fixture Filing, dated as of May 1, 2002, as amended by that First
Amendment to Amended and Restated First Deed of Trust and Assignment of Rents and Fixture
Filing, dated as of May 1, 2011, from the Borrower to the Trustee, as it may be from time to time
assigned, supplemented and amended.
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 sufficient 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 and only upon satisfaction of the conditions to redemption of Bonds
stated in the Indenture.
DOCSOC/1480099v3/022062-0029
Notwithstanding anything to the contrary in this Note or the Financing Agreement, the
obligation of the Borrower and its partners evidenced by this Note shall be subject, in all cases, to the
provisions of Section 8.14 of the 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.
DOCSOC/1480099v3/022062-0029
[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:
Brian Eby
Vice President
DOCSOC/1480099v3/022062-0029
ENDORSEMENT
ENDORSEMENT TO SECOND AMENDED AND RESTATED PROMISSORY NOTE,
dated as of May 1, 2011, in the principal amount of $15,920,000, made by SANTA FE RANCH,
LLC, a Delaware limited liability company, payable to the order of the CITY OF CARLSBAD,
CALIFORNIA.
PAY TO THE ORDER OF U.S. BANK NATIONAL ASSOCIATION, as Trustee.
CITY OF CARLSBAD, CALIFORNIA
By:
City Manager
U.S. BANK NATIONAL ASSOCIATION, as Trustee
By:
Its: Authorized Officer
[SIGNATURE PAGE TO ENDORSEMENT OF PROMISSORY NOTE]
DOCSOC/1480099v3/022062-0029
REMARKETING MEMORANDUM DATED MAY ,2011
REMARKETING - NOT A NEW ISSUE
BOOK-ENTRY ONLY
RATINGS: S&P: ["AA/A-1+"]
(See "RATINGS")
On May 27, 1993, In connection with the issuance of the Bonds, Stradling Yocca Carlson & Kaulh, a Professional Corporation, Newport Beach, California, Bond Counsel,
delivered its opinion that, based upon an analysis of existing laws, regulations, rulings and court decisions and assuming, among other matters, continuing compliance subsequent to
the issuance of the Bonds with applicable provisions of the Internal Revenue Code of 1954, as amended (the "1954 Code "), and the Internal Revenue Code of 1986, as amended (the
"1986 Code "), interest on the Bonds is excluded from gross income for federal income tax purposes, except during any period that such Bond is held by a "substantial user " of the
facilities refinanced by the Bonds or by a "related person " within the meaning of Section 103(b)(13) of the 1954 Code. Bond Counsel's opinion also stated that interest on the Bonds
is exempt from personal income taxation by the State of California. See "TAX EXEMPTION" and Appendix B. In the opinion of Bond Counsel, subject to the receipt of the consents
required under the Amended Indenture, the replacement of the Credit Enhancement Agreement securing the Bonds with the Credit Facility and the execution and delivery of the
Indenture, the Financing Agreement and the Bond Mortgage Note and amendments to the Tax Regulatory Agreement (i) are authorized and permitted by the Amended Indenture as
heretofore in effect, and (ii) will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds. See "TAX EXEMPTION" and
Appendix C.
$15,920,000
City of Carlsbad, California
Variable Rate Demand Multifamily Housing Revenue Refunding Bonds
Series A of 1993
(Santa Fe Ranch Apartments f/k/a/ LaCosta Apartments Project)
Credit Facility Substitution Date: May 2, 2011 Maturity Date: June 1, 2016
The City of Carlsbad, California (the "Issuer") has issued its Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, Series A of 1993
(La Costa Apartments Project) in the principal amount of $15,920,000 (the "Bonds") pursuant to an Indenture of Trust, dated as of May 1, 1993 (the
"Original Indenture"), between the City of Carlsbad, California and U.S. Bank National Association, as Trustee (formerly known as U.S. Bank,
N.A., 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 Owner"), upon the terms and conditions of a Loan Agreement,
dated as of May 1, 1993 (the "Original Loan Agreement"), for the purpose of refinancing a multifamily rental apartment development located in
the City of Carlsbad, California (the "Project"). Santa Fe Ranch, LLC, a Delaware limited liability company (the "Borrower"), acquired the Project on
May 23, 2002. In connection with the delivery of a direct pay Credit Enhancement Agreement (the "Credit Enhancement Agreement") of Federal
Home Loan Mortgage Corporation ("Freddie Mac") on May 23, 2002 to secure the Bonds, the Original Indenture and the Original Loan
Agreement were amended and restated by an Amended and Restated Indenture of Trust dated as of May 1, 2002 (the "Amended Indenture"),
between the Issuer and the Trustee, and an Amended and Restated Loan Agreement dated as of May 1, 2002 (the "Amended Loan Agreement"),
between the Issuer, the Trustee and the Borrower. In connection with the delivery of the below defined Credit Facility, the Amended Indenture
and the Amended Loan Agreement will be amended and restated by a Second Amended and Restated Indenture of Trust dated as of May 1, 2011
(the "Indenture"), between the Issuer and the Trustee, and a Second Amended and Restated Loan Agreement dated as of May 1, 2011 (the
"Financing Agreement"), among the Issuer, the Trustee and the Borrower.
The Credit Enhancement Agreement is to be replaced by an irrevocable direct pay letter of credit (the "Credit Facility") to be issued by Wells
Fargo Bank, National Association (the "Credit Facility Provider").
Wells Fargo Bank, National Association
The Trustee shall be authorized to draw amounts required to pay the principal of the Bonds when due at maturity or upon redemption or acceleration and
to pay up to 34 days' interest on the Bonds when due, and to pay the purchase price of Bonds tendered for purchase pursuant to the Indenture to the extent
remarketing proceeds are not available for such purpose. The Credit Facility is initially scheduled to expire on May , [2015][2016], unless terminated earlier
pursuant to its terms. The Bonds are subject to mandatory redemption on the last Business Day which is at least 5 days immediately preceding the
termination of the Credit Facility (such Business Day being initially May , (2015][2016))[ unless the Credit Facility is extended or an Alternate
Credit Facility is delivered pursuant to the Indenture). See "THE BONDS-Mandatory Redemption of the Bonds" and "SECURITY AND SOURCES OF
PAYMENT FOR THE BONDS-Alternate Credit Facility."
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 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 GOVERNING BODY OF THE ISSUER NOR ANY PERSONS EXECUTING THE BONDS SHALL BE LIABLE PERSONALLY ON THE
BONDS BY REASON OF THEIR ISSUANCE.
The Bonds are to be remarketed as fully registered bonds in denominations of $100,000 or any integral multiple of $5,000 in excess thereof
registered in the name of Cede & Co., as nominee of the Depository Trust Company, New York, New York. Individual purchasers will not
receive physical delivery of the Bonds. The Bonds will bear interest at a Variable Rate until the earlier of their final maturity or redemption prior
to maturity or the occurrence of a Reset Adjustment Date or a 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.
This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors should read this Remarketing
Memorandum in its entirety to make an informed investment decision. THIS REMARKETING MEMORANDUM CONTAINS INFORMATION ON
THE BONDS ONLY WHILE THE BONDS ARE IN A VARIABLE PERIOD
The Bonds are re-offered, when as and if received by the Remarketing Agent.
Legal matters incident to the substitution of the Credit Facility for the Credit Enhancement Agreement are subject to the approving opinion
of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Bond Counsel. Certain legal matters will be passed on for
the Borrower by its counsel, Locke Lord Bissell & Liddell LLP, Dallas, Texas and Los Angeles, California, for the Credit Facility Provider by Sheppard Mullin
Richter & Hampton LLP, Los Angeles, California, and for the Remarketing Agent by Gilmore & Bell, PC., Kansas City, Missouri.
SternBrothers&Co.
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.
The Credit Facility Provider has not provided or approved any information in this Remarketing
Memorandum except with respect to the descriptions under the caption "THE CREDIT FACILITY
PROVIDER" and takes no responsibility for any other information contained in this Remarketing
Memorandum. The Credit Facility Provider 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. The Credit Facility
Provider's role is limited to issuing the Credit Facility 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
forth herein, since the date of this Remarketing Memorandum. This Remarketing Memorandum has been
prepared only in connection with the remarketing of the Bonds on the Credit Facility Substitution Date set
forth on the cover of this Remarketing Memorandum and may not be 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.
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.
THIS REMARKETING MEMORANDUM CONTAINS INFORMATION ON THE
BONDS ONLY WHILE THE BONDS ARE IN A VARIABLE PERIOD.
TABLE OF CONTENTS
Page
INTRODUCTION 1 Bond Mortgage Loan Payments; Independent
THE ISSUER 3 Obligation of Borrower 38
THE BONDS 3 Payment of Certain Fees and Expenses 39
General 3 Prepayment of the Bond Mortgage Loan 39
Variable Rate for the Bonds 4 Borrower's Obligations Upon Redemption or Tender 39
Book-Entry-Only System 4 Alternate Credit Facility 40
Demand for and Mandatory Purchase of the Bonds 7 Tax Compliance 40
Purchase of Bonds Not Remarketed 8 Events of Default and Remedies 40
Mandatory Tender of the Bonds on Substitution Remedies on Default 41
Date 9 Obligations of Borrower Are Non-Recourse 42
Optional Redemption of the Bonds 9 THE TAX REGULATORY AGREEMENT 42
Mandatory Redemption of the Bonds 9 Residential Rental Property 42
Selection of Bonds for Redemption 10 Lower-Income Tenants and Eligible Persons 43
Notice of Redemption 10 Sale, Lease or Transfer of the Project 45
Purchase of Bonds in Whole in Lieu of Redemption.. 11 Enforcement 46
SECURITY AND SOURCES OF PAYMENT FOR SUMMARY OF CERTAIN PROVISIONS OF THE
THE BONDS 12 INTERCREDITOR AGREEMENT 46
Limited Obligations 12 TAX EXEMPTION 47
The Credit Facility 13 REMARKETING 48
Alternate Credit Facility 13 RATING 48
THE CREDIT FACILITY PROVIDER 15 APPROVAL OF LEGAL PROCEEDINGS 49
THE CREDIT FACILITY 15 NO CONTINUING DISCLOSURE
SUMMARY OF CERTAIN PROVISIONS OF THE UNDERTAKING 49
REIMBURSEMENT AGREEMENT 15 LITIGATION 49
THE BORROWER AND THE PROJECT 21 The Issuer 49
The Borrower 21 The Borrower 49
The Project 21 APPENDIX A- CERTAIN DEFINITIONS
Subordinate Financing 22 APPENDIX B-ORIGINAL OPINION OF BOND
CERTAIN BONDHOLDERS' RISKS 22 COUNSEL
SUMMARY OF THE INDENTURE 24 APPENDIX C-FORM OF OPINION OF BOND
Establishment of Funds 24 COUNSEL TO BE DELIVERED
Revenue Fund 24 UPON REMARKETING
Bond Fund 25 APPENDIX D- FORM OF CREDIT FACILITY
Redemption Fund 26
Administration Fund 26
Drawings and Notices Under Credit Facility 27
Investment of Funds 27
Rebate Fund 28
Cost of Issuance Fund 28
Moneys Held in Trust 29
Amounts Remaining in Funds 29
Events of Default; Acceleration; Remedies 29
Rights of Bondholders 31
Application of Moneys After Default 32
Rights of the Credit Facility Provider 33
Waivers of Events of Default 33
Supplemental Indentures 34
The Trustee 35
Satisfaction and Discharge of Indenture 37
SUMMARY OF THE FINANCING AGREEMENT .38
Terms of the Bond Mortgage Loan; Assignment 38
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/k/a/ LaCosta Apartments Project)
INTRODUCTION
This Remarketing Memorandum has been prepared in conjunction with the replacement of the
direct pay Credit Enhancement Agreement of Freddie Mac with the Credit Facility of the Credit Facility
Provider and the execution and delivery of the Indenture, the Financing Agreement, the Bond Mortgage
Note and the Intercreditor Agreement (each as defined and described below).
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 f/k/a 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 National Association, as trustee (formerly known as U.S. Bank,
N.A., 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 Owner") upon the terms and conditions of a Loan Agreement, dated as
of May 1, 1993 (the "Original Loan Agreement"), 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."
The Original Owner, the Issuer, the Trustee and The Northwestern Mutual Life Insurance
Company (the "Prior Owner") entered into an Assignment and Assumption Agreement dated as of
June 23, 1998, transferring all of the Original Owner's right, title and interest in the Project to the Prior
Owner. The Prior Owner transferred all of its right, title and interest in the Project and the Bonds to the
Borrower on May 23, 2002 pursuant to an Assignment and Assumption Agreement dated as of May 1,
2002 (the "Assumption Agreement"), among the Prior Owner, the Borrower, the Issuer and the Trustee.
In connection with the acquisition of the Project, the Borrower caused the delivery of a
direct pay Credit Enhancement Agreement (the "Credit Enhancement Agreement") of the Federal
Home Loan Mortgage Corporation ("Freddie Mac") to secure the Bonds and the Original Indenture
and the Original Loan Agreement were amended and restated by an Amended and Restated
Indenture of Trust dated as of May 1, 2002 (the "Amended Indenture"), between the Issuer and the
Trustee, and an Amended and Restated Loan Agreement dated as of May 1, 2002 (the "Amended
Loan Agreement"), among the Issuer, the Trustee and the Borrower. In connection with the
delivery of the below defined Credit Facility, the Amended Indenture and the Amended Loan
Agreement will be amended and restated by a Second Amended and Restated Indenture of Trust
dated as of May 1, 2011 (the "Indenture"), between the Issuer and the Trustee, and a Second
Amended and Restated Loan Agreement dated as of May 1, 2011 (the "Financing Agreement"),
among the Issuer, the Trustee and the Borrower.
The Borrower's repayment obligations under the Financing Agreement will be evidenced by a
Second Amended and Restated Promissory Note dated as of May 1, 2011 from the Borrower to the Issuer,
and subsequently assigned to the Trustee, in the principal amount of $15,920,000 (the "Bond Mortgage
Note"), secured by the Amended and Restated First Deed of Trust and Assignment of Rents and Fixture
Filing dated as of May 1, 2002 (the "Bond Mortgage"), executed by the Borrower.
In connection with the issuance of the Bonds, the Original Owner, the Issuer and the Trustee
entered into an Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants
dated as of May 1, 1993, which contained covenants of the Original Owner 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 was 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 (the "Amended Tax Regulatory Agreement"). The
Amended Tax Regulatory Agreement is being amended by the First Amendment to Second Amended and
Restated Regulatory Agreement and Declaration of Restrictive Covenants dated as of May 1, 2011,
among the Issuer, the Trustee and the Borrower (the Amended Tax Regulatory Agreement as amended,
the "Tax 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 TAX REGULATORY
AGREEMENT."
Freddie Mac is currently providing credit enhancement on the Bonds pursuant to the Credit
Enhancement Agreement. On the Credit Facility Substitution Date set forth on the cover page of this
Remarketing Memorandum, the Borrower is causing the delivery of a direct pay Irrevocable Letter of
Credit (an "Alternate Credit Facility" within the meaning of the Amended Indenture, the "Credit
Facility") by Wells Fargo Bank, National Association (the "Credit Facility Provider"), pursuant to the
Reimbursement Agreement dated as of May 1, 2011 (the "Reimbursement Agreement"), between the
Borrower and the Credit Facility Provider. See "SUMMARY OF CERTAIN PROVISIONS OF THE
REIMBURSEMENT AGREEMENT." The Credit Facility will be in an amount equal to
$ , consisting of (i) the aggregate principal amount of the Bonds being remarketed
($15,920,000), plus not less than 34 days' interest thereon, calculated initially at % per annum, based
on a year of 365 days ($ ). The Credit Facility will have a stated expiration date of
. The form of the Credit Facility is attached as Appendix D.
The Credit Facility Provider, upon the execution and delivery of the Credit Facility, will replace
Freddie Mac as the provider of the Credit Facility under the Amended Indenture. Freddie Mac will
release its security interest in the Project and in all funds held by the Trustee under the Amended
Indenture and the Prior Reimbursement Agreement and will assign its interest under the Multifamily
Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of May 1, 2002 (the
"Reimbursement Mortgage") to the Credit Facility Provider to secure the obligations of the Borrower to
the Credit Facility Provider under the Reimbursement Agreement. The Issuer, the Trustee and the Credit
Facility Provider are entering into an Intercreditor and Subordination Agreement dated as of May 1, 2011
(the "Intercreditor Agreement"), to set forth the rights and obligations of the Issuer, the Trustee and the
Credit Facility Provider with respect to the Financing Agreement, the Bond Mortgage Note, the Bond
Mortgage, the Reimbursement Mortgage and certain other related documents. See "BRIEF SUMMARY
OF CERTAIN TERMS OF THE INTERCREDITOR AGREEMENT."
Brief descriptions of the Reimbursement Agreement and the Intercreditor Agreement are included
herein. The descriptions and summaries of the Credit Facility, the Reimbursement Agreement, the
Intercreditor Agreement and other documents contained 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.
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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 within the
Issuer's boundaries, 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 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
The Bonds are in fully registered form and are registered in the name of Cede & Co., as registered
owner and nominee of The Depository Trust Company, New York, New York ("DTC"). DTC acts as
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 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 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 (see "Demand for and Mandatory Purchase of the Bonds" and "Mandatory Tender of Bonds on
Substitution Date" below).
Interest on the Bonds will be payable on the first Business Day of each month, commencing
June 1, 2011 (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.
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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 be 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 Reset Rate or 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 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 SIFMA 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.
Book-Entry-Only System
The Bonds will be 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 information in this section concerning The Depository Trust Company ("DTC") and DTC's
Book-Entry System has been obtained from DTC. None of the Issuer, the Trustee, the Borrower or the
Remarketing Agent makes any representation or warranty or takes any responsibility for the accuracy or
completeness of such information.
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The Depository Trust Company ("DTC"), New York, New York, will act as securities depository
for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede &
Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative
of DTC. One fully-registered Bond will be issued for each maturity of the Bonds, each in the aggregate
principal amount of such maturity, and will be deposited with DTC. If, however, the aggregate principal
amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million
of principal amount, and an additional certificate will be issued with respect to any remaining principal
amount of such issue.
DTC, the world's largest depository, is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A
of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million
issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments
from over 100 countries that DTC 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 Direct
Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct
Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The
Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National
Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered
clearing agencies. DTCC is owned by the users of its regulated subsidiaries. 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 ("Indirect Participants"). DTC has Standard & Poor's highest
rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange
Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.
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 (a "Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation from DTC of their
purchase. Beneficial Owners are, however, expected to receive written confirmation providing details of
the 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 Bonds representing their ownership
interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. or such other name as may be
requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration
in the name of Cede & Co. or such other 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.
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Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants and by Direct Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain
steps to augment transmission to them of notices of significant events with respect to the Bonds, such as
redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example,
Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit
has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may
wish to provide their names and addresses to the registrar and request that copies of notices be provided
directly to them.
Redemption notices shall be sent to Cede & Co. If less than all of the Bonds within an issue are
being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to
the Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its
usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date.
The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts the Bonds are credited on the record date (identified by a listing attached to the Omnibus
Proxy).
Redemption proceeds and distributions on the Bonds will be made to Cede & Co., or such other
nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct
Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Issuer
to the Trustee on the payable date in accordance with their respective holdings shown on DTC's 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 customers in bearer form or registered in
"street name," and will be the responsibility of such Participant and not of DTC, the Trustee, or the Issuer,
subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of
redemption proceeds, distributions, and dividend payments 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 will be the responsibility of DTC, and disbursement
of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
A Beneficial Owner shall give notice to elect to have its Bonds purchased or tendered, through its
Participant, to the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to
transfer the Participant's interest in the Bonds, on DTC's records, to the Trustee. The requirement for
physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed
satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC's
records and followed by a book-entry credit of tendered Bonds to the Trustee's DTC account.
DTC may discontinue providing its services as securities depository with respect to the Bonds at
any time by giving reasonable notice to the Issuer or the Trustee. Under such circumstances, in the event
that a successor securities depository is not obtained, certificates are required to be printed and delivered.
The Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC
(or a successor securities depository). In that event, Bond certificates will be printed and delivered.
THE ABOVE INFORMATION CONCERNING DTC AND DTC'S BOOK-ENTRY SYSTEM
HAS BEEN OBTAINED FROM SOURCES THAT THE ISSUER AND THE REMARKETING
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AGENT BELIEVE TO BE RELIABLE, BUT THE ISSUER AND THE REMARKETING AGENT
TAKE NO RESPONSIBILITY FOR THE ACCURACY THEREOF. NEITHER THE ISSUER, THE
TRUSTEE, NOR THE REMARKETING AGENT WILL HAVE ANY RESPONSIBILITY OR
OBLIGATION TO DTC PARTICIPANTS, BENEFICIAL OWNERS OR OTHER NOMINEES OF
SUCH BENEFICIAL OWNERS FOR (i) THE ACCURACY OF ANY RECORDS MAINTAINED BY
DTC OR ANY PARTICIPANT; (ii) THE PAYMENT BY DTC OR BY ANY PARTICIPANT OF ANY
AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL AMOUNT OR
REDEMPTION OR PURCHASE PRICE OF, AND INTEREST ON, ANY BONDS; (iii) THE
DELIVERY OF ANY NOTICE BY DTC OR ANY PARTICIPANT; (iv) THE SELECTION OF THE
PARTICIPANTS OR THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF
ANY PARTIAL REDEMPTION OF THE BONDS; OR (v) ANY CONSENT GIVEN OR ANY OTHER
ACTION TAKEN BY DTC OR ANY PARTICIPANT.
So long as Cede & Co. is the registered owner of the Bonds, as nominee for DTC, reference
herein to the registered owners of the Bonds shall mean Cede & Co., as aforesaid, and shall not mean the
Beneficial Owners of the Bonds.
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
(even if such Reset Adjustment Date, Variable Rate Adjustment Date, the Conversion Date or any
Substitution Date for which notice has been given by the Trustee to the Bondholders fails to
occur).
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 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
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(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 a.m., New York, New York 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.
Any Bonds not delivered to the Tender Agent on or prior to 9:30 a.m., New York, New York
time, on the Settlement Date shall be deemed tendered and purchased for all purposes of the Indenture
and 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 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 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 manager, sole member or guarantor of the Borrower or any nominee of the Issuer, the
Borrower, the Credit Facility Provider, or any such manager, sole member 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 10:00 a.m.,
New York, New York 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 sufficient to enable the Tender Agent to
pay the Purchase Price of each such Bond. On each Settlement Date, the Trustee will 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 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
3:00 p.m., New York, New York time, on the Settlement Date; and (b) Eligible Funds from the Borrower
to the extent that moneys obtained pursuant to (a) 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 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 proposed Substitution Date
from the sources available under the Indenture at a Purchase Price equal to the principal amount thereof
plus accrued interest to the proposed Substitution Date even if such Substitution Dated fails to occur.
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 be 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; and (b) that all
Bonds must be surrendered to the Tender Agent for purchase not later than 9:30 a.m., New York, New
York time, on the Substitution Date.
Any Bond not tendered to the Tender Agent for purchase in accordance with the provisions of the
Indenture on the Substitution Date (including any Substitution Date that fails to occur) 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, during the Variable Period the
Bonds are subject to optional redemption, in whole or in part from payments made under the Credit
Facility following an optional prepayment on the Bond Mortgage Loan in accordance with the
prepayment restrictions set forth in the Bond Mortgage Note or from Eligible Funds deposited with the
Trustee, on any Interest Payment Date, at a redemption price of 100% of the principal amount thereof,
plus accrued interest thereon to the redemption date.
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.
Mandatory Redemption of the Bonds
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:
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(a) in whole or in part (and if in part, in Authorized Denominations), following
receipt by the Trustee of a written direction by the Credit Facility Provider to redeem such Bonds
as a result of the payment to the Trustee of Net Proceeds representing casualty insurance proceeds
or condemnation awards applied to the prepayment of the Bond Mortgage Loan; or
(b) in whole, 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; or
(c) 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 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 30 days before the expiration of the then-
existing Credit Facility; or
(d) while the Bonds are registered in the name of the Borrower pursuant to the
Pledge Agreement (or in such other name as the Credit Facility Provider shall have directed) as a
result of a mandatory tender for purchase of the Bonds pursuant to the Indenture, in whole or in
part (and if in part, in Authorized Denominations), at a redemption price equal to the principal
amount of the Bonds specified by the Credit Facility Provider for redemption, plus accrued
interest to the redemption date, without premium; or
(e) 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 Tax Regulatory Agreement.
Selection of Bonds for Redemption
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, 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 10 days (not less than 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
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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; (b) the CUSIP 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; (f) the maturity
date of each Bond being redeemed; (g) 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, including, in the case of an optional redemption, the receipt of Eligible
Funds on the redemption date to pay any redemption premium; and (i) any other descriptive information
needed to identify accurately the Bonds being redeemed.
Each notice of redemption shall state that further 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
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 mail notice pursuant to this
paragraph 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.
Neither the failure of the registered owner of a Bond to receive a notice of redemption mailed by
the Trustee nor any defect in any notice so mailed shall affect the sufficiency of the proceedings for the
redemption of such Bonds. 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 Lieu 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 be 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 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 Bondholders
of the Bonds to be so purchased (other than the notice of redemption otherwise required under the
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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 Trustee
pursuant to the Pledge Agreement and may be 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 automatically cancelled and deemed extinguished 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 Trustee to the effect that not 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.
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:
(a) all right, title and interest of the Issuer in and to all Revenues except for amounts
in the Rebate Fund, the Specified Fees Account and the Cost of Issuance Fund;
(b) 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 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; and
(c) excluding moneys or securities in the Cost of Issuance 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 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 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 liability of the Issuer. THE
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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.
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 Credit Facility
To provide security for the Bonds, the Credit Facility Provider will deliver the Credit Facility to the
Trustee. The Credit Facility will be in an amount equal to $ , consisting of (i) the
aggregate principal amount of the Bonds being remarketed ($15,920,000), plus not less than 34 days'
interest thereon, calculated initially at % per annum, based on a year of 365 days ($ ). The
Credit Facility will have a stated expiration date of . The form of the Credit Facility is
attached as Appendix D. See "THE CREDIT FACILITY PROVIDER." The Trustee will make drawings
under the Credit Facility in accordance with the Indenture. See "SUMMARY OF THE INDIiNTURE-
Drawings Under Credit Facility."
Alternate Credit Facility
Without the consent of Bondholders, the Borrower may, on any 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 10 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 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 "credit support") and, if applicable, for payment
of the Purchase 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 be 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 Facility if (A) the conditions
of the Indenture are satisfied or (B)(i) the Rating Agency confirms 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 the Financing Agreement and (iii) such substitute "credit support" or "liquidity support"(or
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combination thereof) does not increase the amounts required to be paid by, or other obligations of, the
Borrower. 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.
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 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 (l)the day following the Reset Adjustment Date immediately succeeding the Reset
Period; (2) 10 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; (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 two 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
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 permitted under paragraph (b) above.
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The Trustee shall give notice to the owners of the Bonds, by first-class mail not less than nine (9)
days before each proposed Substitution Date specifying: (i) the proposed Substitution Date and (ii) that all
Bonds must be surrendered to the Tender Agent for purchase not later than 9:30 a.m., Washington, DC
time, on the proposed Substitution Date.
THE CREDIT FACILITY PROVIDER
The information presented under this caption "has been supplied by Wells Fargo Bank, National
Association. None of the Issuer, the Trustee, the Borrower or the Remarketing Agent has independently
verified such information, and none assumes responsibility for the accuracy of such information.
[to be provided]
THE CREDIT FACILITY
The following is a brief summary of certain provisions of the Credit Facility. The summary does
not purport to be complete and is qualified in its entirety by reference to the full text of the Credit Facility
which is on file with the Trustee.
The Credit Facility, the form of which is attached as Appendix D, is an irrevocable, direct pay
letter of credit issued by the Credit Facility Provider to pay, in immediately available funds, within a
specified period of time after timely presentation by the Trustee of specified certificates, an amount equal
to $ , consisting of (i) the aggregate principal amount of the Bonds being remarketed
($15,920,000), plus not less than 34 days' interest thereon, calculated initially at 12% per annum, based
on a 365-day year ($ ). The Trustee will draw moneys under the Alternate Credit Facility to
the extent necessary to make payments of such amounts on the Bonds, including the purchase price of
Bonds tendered for purchase. Drawings by the Trustee under the Alternate Credit Facility will reduce the
amounts available for subsequent drawings, subject to reinstatement as provided in the Alternate Credit
Facility.
The Credit Facility is initially scheduled to expire on , unless terminated earlier
pursuant to its terms. Prior to its expiration, the Credit Facility may be replaced with an Alternate Credit
Facility within the meaning of, and in accordance with the provisions of, the Indenture. See "SECURITY
AND SOURCES OF PAYMENT FOR THE BONDS-Alternate Credit Facility."
SUMMARY OF CERTAIN PROVISIONS OF THE REIMBURSEMENT AGREEMENT
The following is a brief summary of certain provisions of the Reimbursement Agreement dated as
of May 1, 2011 (the "Reimbursement Agreement"), between the Borrower and the Credit Facility
Provider. The summary does not purport to be complete and is qualified in its entirety by reference to the
full text of the Reimbursement Agreement, which is on file with the Trustee.
General
Reference is made to the Reimbursement Agreement for the detailed provisions thereof. The
Credit Facility is being issued pursuant to the Reimbursement Agreement, under which the Borrower will
be obligated, among other things, to reimburse the Credit Facility Provider for the full amount of any
drawing to be made under the Credit Facility. To the extent that any reimbursement obligation is not
paid, the reimbursement obligation shall bear interest at the rate set forth in the Reimbursement
Agreement. The Borrower is also obligated to pay periodically certain amounts to the Credit Facility
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Provider as fees for the issuance and maintenance of the Credit Facility.
The Borrower has made certain affirmative representations, warranties and covenants and certain
negative covenants to the Credit Facility Provider to induce the Credit Facility Provider to issue the
Credit Facility to the Trustee. These covenants are exclusively for the benefit of the Credit Facility
Provider and may be waived, modified or enforced as the Credit Facility Provider may determine.
The Credit Facility Provider is not required to enter into any extension or to otherwise amend,
modify or supplement the Credit Facility. Without limitation of the absolute discretion of the Credit
Facility Provider whether to extend the expiration date, any such extension may be subject to such
amendments or modifications to the Reimbursement Agreement and/or any of the Loan Documents as
may be required by the Credit Facility Provider.
The Reimbursement Agreement, and the terms, conditions and agreements contained
therein, are solely for the benefit of the Credit Facility Provider and are not to be relied upon, nor
are they enforceable by, the Bondowners or the Trustee. The terms, conditions and agreements in
the Reimbursement Agreement (other than the form of the Credit Facility) are subject to change by
agreement between the Borrower and the Credit Facility Provider at any time or otherwise as
provided in the Reimbursement Agreement without the consent of or notice to the Issuer, the
Trustee or the Bondowners.
Certain Definitions
Terms not otherwise defined under this heading have the respective meanings set forth in
Appendix A. In addition, for purposes of the Reimbursement Agreement the following terms have the
stated meanings (terms not otherwise defined in Appendix A or below have the respective meanings set
forth in the Reimbursement Agreement):
"Bank Taxable Loan Documents" means the Promissory Note Secured by Deed of Trust dated as
of May 1, 2011, by the Borrower to the order of the Credit Facility Provider, in the original principal
amount of $13,300,000, (2) the deed of trust from the Borrower to the Credit Facility Provider (the "Bank
Taxable Loan Mortgage"), and (3) related UCC financing statements.
"Bond Documents" means (1) the Indenture, (2) the Financing Agreement, (3) the Tax
Regulatory Agreement, (4) the Bond Mortgage, (5) the Mortgage Note, (6) the Credit Facility, (7) the
Remarketing Agreement, and (8) the Intercreditor Agreement.
"Loan Documents" means (1) the Reimbursement Agreement, (2) the Reimbursement Mortgage,
(3) UCC financing statements with respect to the Reimbursement Mortgage, (4) the Assignment of
Property Management Agreement by the Borrower and certain other parties, for the benefit of the Credit
Facility Provider, and (5) certificates of the Borrower's sole member and other parties.
Default
The occurrence of any of the following constitutes an event of default ("Default") under the
Reimbursement Agreement, the other Loan Documents and the Bank Taxable Loan Documents:
(1) Monetary, (a) Borrower's failure to pay when due any sum payable under the
Reimbursement Agreement, or (b) Borrower's failure to pay when due any other sum under any
of the Bond Documents, the Loan Documents, or the Bank Taxable Loan Documents or
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Borrower's failure to deposit any Borrower's Funds, if such failure under this subclause (b) is not
cured within three days after such sum first becomes due and payable; or
(2) Performance of Obligations Under Loan Documents or Bank Taxable Loan
Documents. Borrower's failure to perform any obligation other than those described in clause (1)
above, under any of the Loan Documents, or the Bank Taxable Loan Documents; provided,
however, that if a cure period is provided for the remedy of such failure, Borrower's failure to
perform will not constitute a Default until such date as the specified cure period expires without
such failure having been appropriately remedied; and provided, further, that if no cure period is
provided for such failure, then Borrower's failure to perform will not constitute a Default until 30
days after receipt of notice from Credit Facility Provider of such failure; or
(3) Performance of Obligations Under Bond Documents. Borrower's failure to
perform any obligation other than those described in clause (1) above, under any of the Bond
Documents; provided, however, that if a cure period is provided for the remedy of such failure,
Borrower's failure to perform will not constitute a Default until such date as the specified cure
period expires without such failure having been appropriately remedied; or
(4) Use, (i) the leasing or operation of any of the Improvements in accordance with
the Bond Documents or Loan Documents is prohibited, enjoined or delayed for a continuous
period of more than thirty (30) days; or (ii) utilities or other public services necessary for the full
occupancy and utilization of the Property and Improvements are curtailed for a continuous period
of more than thirty (30) days; or
(5) Liens, Attachment; Condemnation, (i) The recording of any claim of lien against
the Property or Improvements or the service on Bank or Bond Trustee of any bonded stop notice
relating to the loan of proceeds of the Bonds and the continuance of such claim of lien or bonded
stop notice for twenty (20) days without discharge, satisfaction or provision for payment being
made by Borrower in a manner satisfactory to Bank; or (ii) the condemnation, seizure or
appropriation of, or occurrence of an uninsured casualty with respect to any material portion of
the Property or Improvements; or (iii) the sequestration or attachment of, or any levy or execution
upon any of, the Property or Improvements, any other collateral provided by Borrower under any
of the Bond Documents, the Loan Documents, or the Bank Taxable Loan Documents, any monies
in the Account, or any substantial portion of the other assets of Borrower, which sequestration,
attachment, levy or execution is not released, expunged or dismissed prior to the earlier of sixty
(60) days or the sale of the assets affected thereby; or
(6) Representations and Warranties, (i) The failure of any representation or warranty
of Borrower in any of the Bond Documents, the Loan Documents, or the Bank Taxable Loan
Documents and the continuation of such failure for more than fifteen (15) days after written
notice to Borrower from Bank requesting that Borrower cure such failure; or (ii) any material
adverse change in the financial condition of Borrower or any other person or entity in any manner
obligated to Bank under the Bond Documents, the Loan Documents or the Bank Taxable Loan
Documents from the financial condition represented to Bank as of the Effective Date; or
(7) Voluntary Bankruptcy; Insolvency; Dissolution, (i) The filing of a petition by
Borrower for relief under the Bankruptcy Code, or under any other present or future state or
federal law regarding bankruptcy, reorganization or other debtor relief law; (ii) the filing of any
pleading or an answer by Borrower in any involuntary proceeding under the Bankruptcy Code or
other debtor relief law which admits the jurisdiction of the court or the petition's material
allegations regarding Borrower's insolvency; (iii) a general assignment by Borrower for the
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benefit of creditors; or (iv) Borrower applying for, or the appointment of, a receiver, trustee,
custodian or liquidator of Borrower or any of its property; or
(8) Involuntary Bankruptcy. The failure of Borrower to effect a full dismissal of any
involuntary petition under the Bankruptcy Code or under any other debtor relief law that is filed
against Borrower or in any way restrains or limits Borrower or Bank regarding this Agreement or
any of the other Loan Documents or the Bank Taxable Loan Documents, the Property or the
Improvements, prior to the earlier of the entry of any court order granting relief sought in such
involuntary petition, or sixty (60) days after the date of filing of such involuntary petition; or
(9) Bankruptcy of Sole Member. General Partner of Sole Member or Guarantor. The
occurrence of any of the events specified in (7) and (8) above as to any Sole Member, any
General Partner of Sole Member, or any Guarantor; or
(10) Dissolution of Guarantor. The dissolution, unwind or termination of the
Guarantor; or
(11) Change In Management or Control. The occurrence of any material management
or organizational change in Borrower or in the members of Borrower (other than as permitted in
the Reimbursement Mortgage or the Bank Taxable Loan Mortgage), including, without
limitation, any partnership, joint venture or member dispute which Bank determines, in its sole
and absolute discretion, is likely to have a material adverse effect on the rights of Bank under this
Agreement or any of the other Loan Documents or the Bank Taxable Loan Documents, on the
Property and Improvements, or on the ability of Borrower or its partners, venturers or members to
perform their obligations under the Bond and Loan Documents and the Bank Taxable Loan
Documents; or
(12) Loss of Priority. The failure at any time of the Credit Bank Mortgage or the
Bank Taxable Loan Mortgage to be a valid lien upon the Property and Improvements or any
portion thereof, subject only to the Permitted Exceptions (other than any such failure caused by
Bank's execution and delivery of a subordination agreement subordinating the lien of the Credit
Bank Mortgage or the Bank Taxable Loan Mortgage to another lien upon the Property); or
(13) Hazardous Materials. The discovery of any significant Hazardous Materials
(except for those Hazardous Materials permitted under Section 9.2(a)) in, on or about the
Property or Improvements subsequent to the Effective Date, unless such Hazardous Materials are
removed from the Property and properly transported, treated and disposed of, all in accordance
with all applicable Hazardous Materials Laws, within thirty (30) days after written notice from
Bank to Borrower of such discovery. Any such Hazardous Materials shall be "significant" for this
purpose if said Hazardous Materials, in Bank's sole discretion, have a material adverse impact on
the value of the Property and Improvements; or
(14) Transfer of Assets. The sale, assignment, pledge, hypothecation, mortgage or
transfer of the assets of Borrower or Borrower's members (other than as permitted in Section 5.12
of the Credit Bank Mortgage or Section 5.12 of the Bank Taxable Loan Mortgage) other than in
the ordinary course of business of said entity and other than those permitted under the terms of
this Agreement; or
(15) Bond Document Default. Issuer or Bond Trustee declares any default, which
default remains uncured after the expiration of all applicable cure periods, or mandatory
redemption in connection with the Bonds or the Bond Documents, which mandatory redemption
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is not terminated prior to its occurrence, or the obligation to make payment on the debt evidenced
by the Mortgage Note or Bonds is accelerated for any reason, which acceleration is not
terminated prior to its occurrence; or
(16) Failure of Covenants. Subject to any applicable grace period, Borrower fails to
perform or observe any term, covenant or agreement contained in any Bond Document or the
Regulatory Agreement; or
(17) Dissolution. Borrower or any member of Borrower is dissolved, liquidated or
terminated, or all or substantially all of the assets of Borrower or any member of Borrower are
sold or otherwise transferred without Bank's prior written consent; or
(18) Amendments. Any Bond Document is amended, or deemed to have been
amended, without Bank's prior written consent; or
(19) Guaranty Revocation. Guarantor purports to revoke or terminate, or fails to
perform its obligations under, the Repayment Guaranty; or
(20) Other Loan Documents. Any "Default" or "Event of Default" (as defined in any
other Loan Document) occurs under any other Loan Document or Bank Taxable Loan Document;
or
(21) Default Under Swap. The occurrence of a default by Borrower or a termination
event with respect to Borrower under any swap, derivative, foreign exchange or hedge transaction
or arrangement (or similar transaction or arrangement howsoever described or defined) at any
time entered into between Borrower and Lender in connection with the Bank Taxable Loan; or
(22) Default Under Guaranty or Indemnity. The occurrence of a default under any
guaranty or hazardous materials indemnity now or hereafter executed in connection with the
Mortgage Loan or the Bank Taxable Loan, including without limitation any guarantor or
indemnitor's failure to perform any covenant, condition or obligation thereunder.
Remedies
Acceleration Upon Default; Remedies. Upon the occurrence of any Default specified above,
Bank may, at its sole option, do any or all of the following:
(1) Declare the principal of all amounts owing under the Loan Documents or Bank
Taxable Loan Documents, and all other indebtedness of Borrower to Bank, together with all
accrued interest thereon and all other amounts owing in connection therewith, to be immediately
due and payable, regardless of any other specified maturity or due date, without notice of default,
presentment or demand for payment, protest or notice of nonpayment or dishonor, or other notice
or demand of any kind, and without the necessity of prior recourse to any security; provided that
any Default described in paragraphs (7) and (8) under "Defaults" above shall automatically,
without declaration or other action on Bank's part, cause all such amounts to be immediately due
and payable without notice or demand;
(2) Give a written direction to the Trustee to redeem the Bonds pursuant to the
Indenture by reason of such Default, whereupon Bond Trustee shall draw upon the Letter of
Credit in full and cause either a redemption of the Bonds pursuant to the Indenture or, if Bank
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shall so elect pursuant to the Indenture, a special purchase of the Bonds by Bank in lieu of such
redemption.
(3) If the Default may be cured by Bank by taking actions or making payments of
money, Bank shall have the right (but not the obligation), without waiving any right of
foreclosure under the Credit Bank Mortgage, the Bank Taxable Loan Mortgage or other Security
Documents which Bank may have by reason of such Default, to take such actions (including the
retention of attorneys and the commencement or prosecution of actions on its own behalf or on
behalf of Borrower), make such payments and pay for the costs of such actions (including
attorneys' fees and court costs) from its own funds; provided that the taking of such actions at
Bank's expense or the making of such payments by Bank shall not be deemed to cure such
Default, and the same shall not be cured unless and until Borrower shall have reimbursed Bank
for such payment, together with interest at the Standard Rate.
(4) Without limitation upon any of Bank's other rights or remedies under this
Agreement, the other Loan Documents or the Bank Taxable Loan Documents, upon the
occurrence of a Default, Borrower shall immediately deposit an amount equal to any amounts
then available to be drawn under the Credit Facility in a special non-interest bearing account with
Bank from which withdrawals may be made only with the written consent of Bank. To the extent
that Borrower fails to deliver such amount, Borrower agrees that such amount shall be includable
for all purposes in the amounts owing under this Agreement. Without limitation upon the
generality of the foregoing, Borrower agrees that such amounts may be included in credit bids
upon foreclosure of the liens of any or all of the Security Documents. Borrower shall grant a
security interest to Bank in and to such account and all funds therein, pursuant to a pledge and
security agreement in form and content satisfactory to Bank, to secure the Secured Obligations, as
long as the Credit Facility remains in effect. Borrower hereby agrees to execute all documents
required by Bank in connection with any such deposit in order to create, confirm, perfect, or
permit Bank to realize upon, its security interests therein, and hereby irrevocably grants to Bank a
power of attorney, coupled with an interest, to execute all such documents.
(5) Exercise any and all of its rights under the Loan Documents, the Bank Taxable
Loan Documents or the Bond Documents, including foreclosure on any security, and exercise any
other rights with respect to any security whether under the Security Documents or any other
agreement or as provided by law, all in such order and in such manner as Bank in its sole
discretion may determine.
See "THE BONDS-Mandatory Redemption of the Bonds"
The remedies under the Reimbursement Agreement are to be cumulative and in addition to any
other remedy available to the Credit Facility Provider and the exercise of any one or more such remedies
shall not preclude the simultaneous or later exercise of any or all such other remedies. The Borrower has
agreed to pay all costs, expenses and fees of the Credit Facility Provider, including reasonable attorneys'
fees, incurred in enforcing or attempting to enforce or collect any monies owing by the Borrower pursuant
to any of the Bond Documents, whether or not litigation be commenced.
Security for the Credit Facility Provider
The obligations of the Borrower to the Credit Facility Provider are secured by the Loan
Documents . Pursuant to the Bond Pledge Agreement, the Borrower pledges to the Credit Facility
Provider, as additional collateral, any Bonds purchased with the proceeds of a draw upon the Credit
Facility. See "THE BONDS-Purchase of Bonds Not Remarketed."
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The provisions of the Loan Documents and the Bank Taxable Loan Documents are exclusively
for the benefit of the Credit Facility Provider and may be applied, waived, modified or enforced as the
Credit Facility Provider may determine.
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 confirmed or verified by any other person.
Although the information shown below has been obtained from sources believed to be reliable, no
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 hereof.
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 II, 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
General. The Project, known as Santa Fe Ranch Apartments, 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, painting/stucco, boiler
system, tub/showers, kitchen lighting fixtures, ceiling fans, carpet, flooring, and paint/drywall.
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 units per acre.
The Project offers a clubhouse, fitness center, business center, three racquetball/handball 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, washers/dryers, walk-in closets, linen closets, kitchen appliance package, and
outdoor storage areas.
Santa Fe Ranch Apartments is situated at the southeast corner 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
extending north to Orange County and Los Angeles County. Santa Fe Ranch is located approximately 25
miles north of downtown San Diego and just minutes from both 1-5 and 1-15. The Project fronts along La
Costa Avenue, which is where the ingress/egress to the Project is also located. San Diego County is
home to a diverse employment base including San Diego Naval Station, University of California- San
Diego, Sharp Healthcare, Pacific Bell, Qualcomm, Kaiser Permanente, and Scientific Applications
International Corp. Residents commute to both the San Diego Central Business District and the North
County area at major business hubs, including the Palomar Airport Business Center, Sorrento Mesa,
Torrey Pines, and Del Mar Heights.
Unit Breakdown. The average unit size is 858 square feet and breaks down according to the
following chart:
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Unit Type No. of Units Unit Size (SF)
Ibr/lba 64 679
2br/lba 64 841
2br/2ba 192 924
Total 320 858
Occupancy Rates. The following table shows the average occupancy rate of the Project for each
calendar year indicated.
Calendar Year Occupancy Rate
2008 94.3%
2009 93.9%
2010 95.4%
For the first quarter of 2011, the Project had an average occupancy rate of 95.0%.
Subordinate Financing
At the date of delivery of the Credit Enhancement Agreement, the Borrower obtained a
subordinate loan from Freddie Mac in the amount of $13,330,000, of which approximately $8,695,377
remains outstanding as of March 31, 2011. On the Substitution Date the Borrower is prepaying this loan
with the proceeds of a subordinate loan from the Credit Facility Provider in the principal amount of
$13,300,000 (the "Bank Taxable Loan"). The Bank Taxable Loan will bear interest at a monthly floating
rate of the one-month London Interbank Offered Rate plus 2.15% or as otherwise provided in the
Borrower's note evidencing the Bank Taxable Loan. The Bank Taxable Loan matures on the same date
as the expiration of the Credit Facility.
CERTAIN BONDHOLDERS' RISKS
Purchase of the Bonds involves certain investment risks. In order to identify risk factors and
make an informed investment decision, potential investors should be thoroughly familiar with this entire
Official Statement (including the Appendices to this Official Statement) in order to make a judgment as to
whether the Bonds are an appropriate investment. Certain of the risks associated with the purchase of the
Bonds are described below. Such risks should not affect the payment of principal of and interest on the
Bonds if the Credit Facility Provider fulfills the obligations under the Credit Facility. However, upon any
inability or refusal of the Credit Facility Provider to fulfill its obligations under the Credit Facility,
payment of the principal of and interest on the Bonds would be subject to the various risks described
below. The following list of possible factors, while not setting forth all the factors that must be
considered, contains some of the factors that should be considered prior to purchasing the Bonds. This
discussion of risk factors is not, and is not intended to be, comprehensive or exhaustive.
1. Security for the Bonds. The Bonds are limited obligations of the Issuer payable
exclusively out of the loan payments payable under the Financing Agreement and draws on the Credit
Facility (and, in certain circumstances, Bond proceeds and income from the temporary investment
thereof). The Bonds are secured by a pledge by the Issuer of the Trust Estate to the Trustee in favor of
the owners of the Bonds in accordance with the Indenture. A brief description of the Trust Estate is
contained under the heading ""SECURITY AND SOURCES OF PAYMENT FOR THE BONDS."
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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 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
GOVERNING BODY OF THE ISSUER NOR ANY PERSONS EXECUTING THE BONDS
SHALL BE LIABLE PERSONALLY ON THE BONDS BY REASON OF THEIR ISSUANCE.
2. The Credit Facility. Payment of the Bonds will be made from payments under the Credit
Facility or any Alternate Credit Facility. Consequently, the payment of the Bonds while the initial Credit
Facility is in force is ultimately dependent on the credit of the Credit Facility Provider. There can be no
assurance that the credit of the Credit Facility Provider will continue at its current level. A decline in the
credit rating of the Credit Facility Provider could result in a decline in the ratings assigned to the Bonds at
the time of their issuance as well as in the market price of the Bonds. See "THE CREDIT FACILITY
PROVIDER."
3. Default by the Borrower under the Reimbursement Agreement. No representation or
assurance can be made that the Borrower will be able to make the payments required under the
Reimbursement Agreement. If the Borrower is unable to make these payments or a Default otherwise
occurs under the Reimbursement Agreement, the Credit Facility Provider will have the right to cause the
mandatory redemption of the Bonds pursuant to the Indenture. See "THE BONDS-Mandatory
Redemption of the Bonds" and "THE REIMBURSEMENT AGREEMENT."
4. Risk of Taxability - Bonds. Failure of the Borrower to have complied with and to continue
to comply with certain covenants contained in the Financing Agreement and the Tax Regulatory Agreement
and certain other events could result in a Determination of Taxability and in interest on the Bonds being
retroactively taxable. Although the Bonds are subject to mandatory tender upon a Determination of
Taxability at the principal amount thereof, without premium, plus accrued interest to the Tender Date,
Bondowners would not be entitled to receive any amount denoted as "supplemental interest," "additional
interest," "penalty interest," "liquidated damages" or otherwise, in addition to the amounts payable to the
owners of the Bonds prior to the redemption date.
5. Limitation on Enforcement of Remedies. Enforcement of the remedies under the
Indenture, the Financing Agreement, the Bond Mortgage Note, the Tax Regulatory Agreement and the
Credit Facility may be limited or restricted by laws relating to bankruptcy and insolvency, and rights of
creditors under application of general principles of equity, and may be substantially delayed in the event
of litigation or statutory remedy procedures. The various legal opinions to be delivered concurrently with
the remarketing of the Bonds will be qualified as to the enforceability of the various legal instruments by
limitations imposed by principles of equity and by bankruptcy, reorganization, insolvency, moratorium
and similar laws affecting the rights of creditors generally.
6. Early Redemption or Mandatory Tender. Pursuant to the terms of the Indenture, the
Bonds are subject to redemption or mandatory tender for purchase prior to maturity (see "THE
BONDS-Optional Redemption of the Bonds," "-Mandatory Redemption of the Bonds" and "-Demand
for and Mandatory Purchase of the Bonds"). Under those circumstances, a Bondowner whose Bonds are
called for early redemption may not have the opportunity to hold those Bonds for a time period consistent
with such Bondowner's original investment intentions.
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7. Secondary Markets and Prices. Except with respect to the optional or mandatory tender
of the Bonds (see "THE BONDS-Demand for and Mandatory Purchase of the Bonds"), neither the
Borrower nor the Credit Facility Provider will be obligated to repurchase any of the Bonds, and no
representation is made concerning the existence of any secondary market for the Bonds. No assurance
can be given that any secondary market will develop following the completion of the reoffering of the
Bonds on the Credit Facility Substitution Date.
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; and
(f) 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. All Revenues (other than amounts paid under the Credit
Facility) will be deposited by the Trustee, promptly upon receipt thereof, to the General Account of the
Revenue Fund, except (a) as otherwise specifically described below with respect to certain deposits into
the Redemption Fund, (b) the Bond Fee Component will be deposited in 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 attributable, and (e) with respect to amounts required to be transferred
between Funds and Accounts pursuant to applicable provisions of the Indenture.
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
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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 of the Bonds" (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 will deposit directly to the Specified Fees Account of the
Administration Fund the Bond Fee Component received from the Borrower and to the Administration
Expense Account, any additional amounts paid by the Borrower for deposit therein.
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 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; and (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.
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
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Fund on the Business Day immediately succeeding an Interest Payment Date will be transferred 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
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 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, 2011, to, or at the direction of, the Issuer, the
Issuer Fee, (ii) on each June 1, commencing June 1, 2011, to the Trustee amounts due pursuant to
subpart (a) 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), (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), and (v) to the Rebate Analyst, the Rebate Analyst Fee.
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 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 the Credit Facility Provider; THIRD, subject to the limitations in the Indenture, to pay to the
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 the Credit Facility Provider;
FOURTH, 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; FIFTH, to pay to the Rating Agency the annual rating maintenance
fee, if any, of the Rating Agency upon presentment of an invoice from the Rating Agency to the Trustee;
SFXTH, to pay to the Remarketing Agent and the Rebate Analyst fees and expense due from time to time;
and SEVENTH, 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 described in the preceding paragraph on any date on which such
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
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deficiency was requested will be paid. On or before each Interest Payment Date, the income realized
from the investment of moneys in the Administration Fund will be credited by the Trustee to the General
Account of the Revenue Fund.
Drawings and Notices Under Credit Facility
The Credit Facility shall be held by the Trustee and drawn upon in accordance with its terms and
the provisions of the 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 the 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 the Maximum Rate from such
Variable Interest Computation Date to the next Interest Payment Date and shall draw on the Credit
Facility accordingly, hi the event that the Maximum Rate 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 the Indenture and the Financing
Agreement. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS-Alternate Credit
Facility."
The Trustee has agreed to provide to the Credit Facility Provider all notices, including any notice
of failure to receive a payment, as are required under the Credit Facility, in the manner and within the
periods of time provided in the Credit Facility. Certain notices constitute a condition precedent to
payment by the Credit Facility Provider under the Credit Facility.
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; and, provided, further, that amounts in
the Credit Facility Account of the Revenue Fund shall be held uninvested or shall be invested only in
Government Obligations or in Qualified Investments of the type described in subparagraph (g) thereof.
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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 reasonably 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
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, the Borrower or the Rebate
Analyst, with respect to the Rebate Fund, and shall not be required to take any actions under the Indenture
or the Tax Certificate in the absence of written instructions from the Borrower, the Issuer, Bond Counsel,
the Borrower or the Rebate Analyst.
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 Credit Facility
Substitution Date, or as soon as practicable thereafter, the costs related to effecting the delivery of the
Credit Facility in accordance with written instructions to be given to the Trustee by the Borrower, upon
delivery to the Trustee of appropriate invoices for such expenses. Amounts remaining on deposit in the
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Cost of Issuance Fund six months after the Credit Facility Substitution Date will be transferred to the
Borrower. Upon such final disbursement, the Trustee will close the Cost of Issuance Fund.
Moneys Held in Trust
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, then any such amounts 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:
(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
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.
The Trustee and the Issuer agree that, notwithstanding the provisions in the Indenture, no default
under the terms of the Indenture will be construed as resulting in a default under the Bond Mortgage
Note, the Bond Mortgage or any other Bond Mortgage Loan Documents, unless such event also
constitutes a default thereunder.
Upon the occurrence of an Event of Default as provided in (a) above, the Trustee shall, but so
long as no Event of Default has occurred and is then continuing under (b) above, 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,
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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
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 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 Tax 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;
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(b) by pursuing any available remedies under the Financing Agreement, the Tax
Regulatory Agreement or the Credit Facility;
(c) by realizing or causing to be realized through sale or otherwise upon the security
pledged under the Indenture; and
(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 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 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 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, subject to the terms of the Intercreditor Agreement, 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
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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.
Application of Moneys After 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.
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
the Indenture) 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 the
Indenture.
(b) So long as no Event of Default has occurred and is then continuing under
paragraph (b) under "Events of Default; Acceleration; Remedies" above, for the payment to the
Credit Facility Provider of all amounts then due and unpaid under the Reimbursement
Agreement.
(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 premium, 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
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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 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 paragraph (b)
under "Events of Default; Acceleration; Remedies" above, 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.
Rights of the Credit Facility Provider
So long as no Event of Default has occurred and is then continuing as described under paragraph
(b) under "Events of Default; Acceleration; Remedies" above, if an Event of Default as described under
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
Provider; provided, however, that, in any event, so long as no Event of Default has occurred and is then
continuing under paragraph (b) under "Events of Default; Acceleration; Remedies" above, except as
provided in the Intercreditor Agreement, 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 paragraph (b) above, in
the case of an Event of Default under paragraphs (a) or (c) under "Events of Default; Acceleration;
Remedies" above, 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.
Waivers of Events of Default
So long as no Event of Default has occurred and is then continuing under paragraph (b) under
"Events of Default; Acceleration; Remedies" above, the Trustee shall waive any Event of Default
hereunder and its consequences and rescind any declaration of maturity of principal of, premium, if any,
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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 paragraph (b) under "Events of Default;
Acceleration; Remedies" above, 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.
Supplemental Indentures
Without the consent of, or notice to, the Bondholders, but 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;
(f) 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;
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(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
(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 modifying, 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 Mortgage 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 parity 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 (f) any action that results in the interest on the Bonds becoming
included in gross income for federal income tax purposes.
The 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 Tnistee 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.
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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
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 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 funds 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 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
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 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 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
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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.
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 Trustee
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 Reimbursement
Agreement, and shall have paid all fees and expenses of the Issuer, the Trustee, the Tender Agent, the
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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 instruments 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
Bonds, the payment of any amounts owed to the United States 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 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
bankruptcy 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 Mortgage Note payable to the Trustee as
assignee of the Issuer; (b) is in the principal amount of $15,920,000; (c) bears interest as provided in the
Bond Mortgage Note; and (d) 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 Mortgage Note.
The exercise of rights by the Issuer and the Trustee as its assignee with respect to the Bond Mortgage
Loan shall be subject to the terms of the Intercreditor Agreement.
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
will 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 will be credited against the Borrower's obligations under the
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Financing Agreement. If for any reasons the Bond Mortgage Note or any provision thereof is held invalid
or unenforceable against the Borrower by any court of competent jurisdiction, the Bond Mortgage Note or
such provision thereof will be deemed to be the 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-off, recoupment, counterclaim, abatement
or otherwise.
Payment of Certain Fees and Expenses
In addition to payments of principal, premium, if any, and interest on the Bond Mortgage Note,
the Borrower shall pay or cause to be paid the Issuer Fee and the fees and expenses of the Trustee, the
fees and expenses of the Remarketing Agent pursuant to the Remarketing Agreement, and the annual
rating maintenance fees of the Rating Agency, any Extraordinary Trustee's Fees and Expenses, the
Rebate Analyst Fee and any extraordinary expenses of the Issuer not covered by the Issuer's Fee. 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 the
Financing Agreement, the Indenture, the Tax Regulatory Agreement or other Bond Financing Documents
to the extent that it acts without previously obtaining indemnity.
All amounts due above shall be payable from moneys on deposit in the Administration Expense
Account of the Administration Fund available for such purpose 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 available for such purpose are insufficient for such purposes.
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 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 will pay, or cause to be paid
to the Trustee, 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, to the Trustee an amount equal to the principal amount of such Bonds or portions thereof
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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 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.
Alternate Credit Facility
The Borrower, without the consent of Bondholders, may, on any 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 10 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 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 and, if applicable, for payment of the Purchase Price of Bonds delivered or deemed
delivered in accordance with the Indenture. See "SECURITY AND SOURCES OF PAYMENT FOR
THE BONDS-Alternate Credit Facility."
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 Mortgage Note or the Bond Mortgage at the times and in the amounts required by the
Financing Agreement, the Tax Regulatory Agreement, the Bond Mortgage Note or the Bond
Mortgage;
(b) 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
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(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 the Reimbursement Agreement or to bind the
Credit Facility Provider to any notice and cure periods other than as expressly set forth in the
Reimbursement Agreement.
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
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 be 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
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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 and the Trustee,
including reasonable attorneys' fees paid or incurred in connection with such default, and shall have paid
the Issuer Fee, 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-
recourse obligations, as provided therein. Accordingly, except as described in the Financing Agreement,
the obligations of the Borrower under the Financing Agreement (other than the Borrower's
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 TAX REGULATORY AGREEMENT
Residential Rental Property
The Original Owner 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 dated as of May 1, 2002,
among the Borrower, the Issuer and the Trustee (as so amended and restated and as further amended by
the First Amendment to Second Amended and Restated Regulatory Agreement and Declaration of
Restrictive Covenants dated as of May 1, 2011, the "Tax 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 for federal income tax purposes of interest on the
Bonds and maintain compliance with certain policies of the Issuer as follows:
(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.
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(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
connection with a conversion to such ownership or uses except with the prior written approving
opinion of Bond Counsel acceptable to the Issuer 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 transferring individual condominium ownership interests in the
Project during the term of the Tax 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
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 Tax Regulatory
Agreement.
(f) 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 "Qualified Project Period" in the Tax Regulatory Agreement is 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), (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).
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
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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 which 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 the Tax 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.
(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
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 Borrower 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 Borrower will: (i) maintain a list of persons who have notified the Borrower
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 Borrower shall place on its
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
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 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 Tax 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.
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(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.
(i) 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
Choice Voucher tenant-based rental assistance program under Section 8 of the United States
Housing Act of 1937, or its successor. The Borrower 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 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 Carlsbad Housing
Agency.
Sale, Lease or Transfer of the Project
The Borrower 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 under the Tax Regulatory
Agreement), 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 Tax Regulatory Agreement; (ii) an opinion of counsel of the transferee that the
transferee has duly assumed the obligations of the Owner under the Tax Regulatory Agreement and that
such obligations and the Tax 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 Tax 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 Tax Regulatory Agreement. Nothing
contained in the Tax Regulatory 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.
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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 Tax
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 Tax 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 Tax 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 Tax Regulatory Agreement;
(ii) have access to and inspect, examine and make copies of all of the books and
records of the Borrower pertaining to the Project;
(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 Tax Regulatory
Agreement; or
(iv) require the Issuer to declare a default under the Loan and accelerate the
indebtedness evidenced by the Bond Mortgage 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 the Credit Facility Provider 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 and Subordination Agreement dated as of May 1,
2011 (the "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 the Credit Facility
Provider have agreed, among other things, that, until either (a) the Credit Facility Provider fails to honor a
draw properly presented in accordance with the terms of the Credit Facility or (b) the Credit Facility
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 the Credit Facility Provider, 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.
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Notwithstanding anything to the contrary contained in the Financing Agreement and pursuant to
the Intercreditor Agreement, as long as the Credit Facility Provider is not in default of its obligations
under the Credit Facility, 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 otherwise enforce payment or seek other
remedies with respect to the Bond Mortgage Loan, except at the 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, 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 Mortgage Note or cause the mandatory redemption or tender of the Bonds or to
foreclose under the Bond Mortgage, taking into account, however, the cure periods contained in the Tax
Regulatory Agreement and the Intercreditor Agreement; and provided further that this prohibition shall
not be construed to limit the indemnification rights of the Issuer, the Trustee, the Credit Facility Provider
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.
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.
The 1954 Code, the 1986 Code and Section 1.103-8(b) of the Income Tax Regulations (the
"Regulations") require, in part, that at least 20% (15% for projects located in targeted areas) of the
completed rental units in the Project must be occupied by lower-income tenants continuously during the
Qualified Project Period. In addition, the Regulations require that, once available for occupancy, each
rental unit in the Project must be rented or available for rental on a continuous basis during the longer of
(i) the remainder of the term 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 within a reasonable period of not less than 60 days after such noncompliance is first discovered
or would have been discovered by the exercise of reasonable diligence, will cause the loss of the
exclusion from gross income for federal income tax 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 that the Borrower enter into
the Tax Regulatory Agreement, providing, among other things, that the Project be maintained and
available for rental for the periods and in the manner described in the foregoing paragraph. The Tax
Regulatory Agreement has been filed in the real property records of San Diego County, California, and
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.
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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 analysis of existing statutes, regulations, rulings and judicial decisions and assuming,
among other matters, continuing compliance subsequent to the issuance of the Bonds with applicable
provisions of the 1954 Code and the 1986 Code, interest on the Bonds is excluded from gross income tax
purposes, except during any period that such Bond is held by a "substantial user" of the facilities financed
or refinanced by the Bonds or by a "related person" within the meaning of Section 103(b)(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 B. 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, a
Professional Corporation, Newport Beach, California, Bond Counsel, will render its opinion to the effect
that the delivery of the Credit Facility and the execution of the Indenture, the Financing Agreement, the
Bond Mortgage Note and the amendment of the Tax Regulatory Agreement 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.
NO DETERMINATION HAS BEEN MADE SINCE THE DATE OF ISSUANCE OF THE
BONDS AS TO WHETHER THE ORIGINAL OWNER, THE PRIOR OWNER, THE BORROWER
AND THE PROJECT HAVE COMPLIED WITH THE REQUIREMENTS OF THE 1954 CODE AND
THE 1986 CODE FOR THE PURPOSE OF DETERMINING WHETHER THE INTEREST ON THE
BONDS REMAINS EXCLUDABLE FROM GROSS INCOME FOR FEDERAL INCOME TAX
PURPOSES. NO 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
Stern Brothers & Co. (the "Remarketing Agent") has agreed to use its best efforts to remarket the
Bonds from time to time pursuant to the Amended and Restated Remarketing Agreement dated as of May 1,
2011 (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 an initial fee of $ plus out of pocket expenses, and an ongoing fee as provided in the
Remarketing Agreement.
RATING
The Bonds are expected to be assigned, as of the Credit Facility Substitution Date, the ratings set
forth on the cover page by Standard & Poor's Ratings Services, a Standard & Poor's Financial Services
LLC business ("S&P"). Such ratings reflect only the views of S&P at the time the ratings are given, and
the Issuer makes no representation as to the appropriateness of the ratings. An explanation of the
significance of such ratings may be obtained only from S&P. There is no assurance that such ratings will
continue for any given period of time or that they will not be revised downward, suspended or withdrawn
entirely by S&P, if, in its judgment, circumstances so warrant. Any such downward revision, suspension
or withdrawal of such ratings may have an adverse effect on the market price or value of the Bonds.
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APPROVAL OF LEGAL PROCEEDINGS
Legal matters incident to the substitution of the Credit Facility for the Credit Enhancement
Agreement and the execution and delivery of the Indenture, the Financing Agreement, the Bond Mortgage
Note and the amendment of the Tax Regulatory Agreement 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 Facility, will be delivered to the Remarketing Agent on the
effective date of the Credit Facility. A form of the opinion is set forth in Appendix C.
Certain legal matters will be passed on for the Borrower by its counsel, Locke Lord Bissell &
Liddell LLP, Dallas, Texas and Los Angeles, California, for the Credit Facility Provider by Sheppard
Mullin Richter & Hampton LLP, Los Angeles, California, and for the Remarketing Agent by Gilmore &
Bell, P.C., Kansas City, Missouri.
NO CONTINUING DISCLOSURE UNDERTAKING
In connection with the remarketing of the Bonds, the Borrower is not making any undertaking to
the Bondholders to provide annual financial information or other continuing disclosure notices or reports
in reliance upon an exemption from the SEC Rule 15c2-12 continuing disclosure requirements under Rule
LITIGATION
The Issuer
On the Credit Facility Substitution Date, the Issuer will deliver certificates to the effect that, to
the knowledge 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, the Financing Agreement, the Tax Regulatory Agreement
or the 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 or the Bond Mortgage Note, 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.
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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.
"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 Fund" means the Administration Fund established by the Trustee pursuant to the
Indenture.
"Administrative Expense Account" means the Administrative Expense Account within the
Administration Fund established by the Trustee pursuant to the Indenture.
"Affordable Rent" means 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 Number of Persons in Family
One Bedroom 2
Two Bedroom 4
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
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" means a Credit Facility, 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
delivered to replace the Credit Facility which provides security for payment of the principal of and
interest on the Bonds and the purchase price of the Bonds, provided in accordance with the Financing
Agreement.
"Alternate Credit Facility Provider" means the provider of an Alternate Credit Facility,
"Amended Indenture " means the Amended and Restated Indenture of Trust dated as of May 1,
2002, between the Issuer and U.S. Bank, N.A., now known as "U.S. Bank National Association."
'''Amended Loan Agreement" means the Amended and Restated Loan Agreement dated as of
May 1, 2002, among the Issuer, the Trustee and the Borrower.
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"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 Officer" 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 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, (E) 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 (F) 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.
"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 Issuer, the
Trustee, the Remarketing Agent, Tender Agent, the Custodian, and the Rebate Analyst 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 Amended and Restated First Deed of Trust and Assignment of
Rents and Fixture Filing dated as of May 1, 2002, 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, the Reimbursement Agreement, 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 Note " means the Second Amended and Restated Promissory Note dated as of
May 1, 2011, from the Borrower to the Issuer, and subsequently assigned to the Trustee in the principal
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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 Fund" means the Bond Purchase Fund established by the Trustee pursuant to
the Indenture.
"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 the Indenture.
"Bond Year" 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 f/k/a La Costa
Apartments Project) issued pursuant to the provisions of the Original Indenture, as amended and restated
by the Indenture.
"Borrower" means Santa Fe Ranch, LLC, a Delaware limited liability company, or any of its
successors as owner of the Project.
"Business Day " 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 office of the Credit Facility Provider at which draws on the Credit Facility are presented 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 or the Remarketing Agent is located are closed or
(b) the New York Stock Exchange is closed.
"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,
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 the Indenture takes effect as an amendment to and
restatement of the Amended 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.
"Cost of Issuance Fund" means the Cost of Issuance Fund established by the Trustee pursuant to
the Indenture.
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"Credit Facility " means the letter of credit from Wells Fargo Bank, National Association, or any
Alternate Credit Facility at the time in effect.
"Credit Facility Provider" means, so long as the letter of credit provided on the effective date of
the Indenture is in effect, Wells Fargo Bank, National Association, or so long as any Alternate Credit
Facility is in effect, the Credit Facility Provider then obligated under the Alternate Credit Facility.
"Credit Facility Substitution Date " means the date on which the Credit Facility is delivered by
Wells Fargo Bank, National Association to the Trustee.
"Determination of Taxability" means (l)the failure of the Credit Facility Provider or the
Borrower to consent in writing within forty-five (45) days from receipt of the opinion of Bond Counsel
described below 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 "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 minimum 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 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 manager, sole member 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 (f) 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 manager, sole member 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 Indenture 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 the
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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 Trustee's Fees and Expenses " means all those fees, expenses and disbursements
earned or incurred by the Trustee as described in the Indenture during any Bond Year for Extraordinary
Services.
"Financing Agreement" means the Second Amended and Restated Loan Agreement dated as of
May 1, 2011, 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.
"FixedRate Period" means the period during which the Bonds bear interest at the Fixed Rate.
"Government Obligations " means Qualified Investments described in (a) and (b) of the definition
of "Qualified Investments."
"Indenture " means the Second Amended and Restated Indenture of Trust dated as of May 1,
2011, between the Issuer and the Trustee, together with any other indentures supplemental to the
Indenture.
"Information Services " means any of the following services: Financial Information, Inc. "Daily
Called Bond Service," 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302 Attention:
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, 8* 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, Attention: Reporting-Disclosure
Documents, 100 Business Park Drive, Skillrnan, 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, so long as the letter of credit provided on the effective date of
the Indenture is in effect, the Intercreditor and Subordination Agreement dated as of May 1, 2011, among
the Issuer, the Trustee and the Credit Facility Provider, as the same may be amended or supplemented, or,
so long as any Alternate Credit Facility is in effect, an Intercreditor Agreement among the Issuer, the
Trustee and the Credit Facility Provider then obligated under such Alternate Credit Facility.
"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.
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"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.
"Issuer" 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.
''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 advance on each June 1 commencing June 1, 2003; 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.
"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 III 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 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.
"Maturity 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
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 (b) 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
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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 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.
"7954 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.
"Original Owner" means La Costa Partners, a California general partnership, and its successors
and assigns.
"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 the 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 the Indenture; 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 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,
approval, order, waiver, acceptance, appointment or other instrument or communication under or
pursuant to the 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.
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"Paying Agent" means the Trustee acting as such, and any other paying agent appointed pursuant
to the 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, so long as the letter of credit provided on the effective date of the
Indenture is in effect, that certain Pledge, Security and Custody Agreement dated as of May 1, 2011, by
and among the Credit Facility Provider, the Borrower and the Trustee, as further modified or amended
from time to time, or, so long as any Alternate Credit Facility is in effect, a Pledge Agreement among the
Issuer, the Trustee and the Credit Facility Provider then obligated under such Alternate Credit Facility.
"Principal Office of the Remarketing Agent" means the office of the Remarketing Agent located
at 8000 Maryland, Suite 800, 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 Office of the Tender Agent" means the office of the Tender Agent located at 633 West
Fifth Street, 24th Floor, Los Angeles, 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 Office of the Trustee " means the office of the Trustee located at 633 West Fifth Street,
24th Floor, Los Angeles, 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.
"Prior Owner " 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 (f/k/a La Costa
Apartments), located at 3402 Calle Odessa, 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 manager, sole member 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.
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"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 the Federal Home Loan Mortgage Corporation; (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-l by Moody's, which deposits or certificates are
fully insured by the Federal Deposit Insurance Corporation; (f) investment agreements with the Federal
Home Loan Mortgage Corporation 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; (g) 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-l for obligations with less than one year maturity; at least
Aa2/P-l 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 to comply with Section 148 of the 1986 Code. The Borrower shall inform the Issuer
and 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.
"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 be amended
or supplemented.
"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 of the month
preceding any Interest Payment Date.
"Redemption Fund" means the Redemption Fund established by the Trustee pursuant to the
Indenture.
A-9
"Reimbursement Agreement" means the Reimbursement Agreement dated as of May 1, 2011,
between the Borrower and the Credit Facility Provider, 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.
"Remarketing Agent" means the remarketing agent appointed pursuant to the Indenture, initially
Stern Brothers & Co.
"Remarketing Agreement" means the Amended and Restated Remarketing Agreement dated as
of May 1, 2011, between 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.
"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, under
the Indenture 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 occur
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.
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"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, 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 Specified Fees Account, and the Bond Purchase Fund), together with all investment earnings thereon.
"S&P" means Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC
business, 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, 711 Stewart Avenue,
Garden City, New York 11530, Fax: (516) 227-4039 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 the Indenture.
"SIFMA Index Rate" means, as of any date, (i) the per annum rate published or reported by
Municipal Market Data on its SIFMA Municipal Swap Index most recently available, (ii) if the SIFMA
Municipal Swap Index is no longer published or reported, the rate per annum published or reported on the
S&P Weekly High Grade Index (formerly the JJ. Kenny Index), or (iii), if neither the SIFMA Municipal
Swap Index nor the S&P Weekly High Grade Index is published, such alternate interest rate index as the
Remarketing Agent shall select as most comparable to the SIFMA Municipal Swap Index.
"Specified 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 amended by the First Amendment to Second Amended and Restated Regulatory Agreement
and Declaration of Restrictive Covenants dated as of May 1, 2011, as the same may be further amended,
supplemented or restated from time to time.
"Tender Agent" means the Tender Agent appointed in accordance with the Indenture.
"Tender Notice" means a notice of demand for purchase of Bonds given by any Bondholder
pursuant to the Indenture.
"Trustee " means U.S. Bank National Association and its successors in trust under the Indenture.
A-ll
"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 $5,310 per annum, payable in advance on each June 1, commencing
June 1,2003;
(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; and
(c) for purposes of the Financing Agreement, indemnification of the Trustee by the
Borrower.
"Trust Estate " means the following property set forth in the granting clauses of the Indenture:
(i) 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;
(ii) 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 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; and
(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 by the Indenture, 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 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.
"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; provided, however, that for the Variable Interest Accrual Period beginning on
the Closing Date, the Variable Interest Computation Date shall be the Closing Date.
A-12
"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.
A-13
APPENDIX B
ORIGINAL OPINION OF BOND COUNSEL
The following is a copy of the opinion of Bond Counsel that was executed
and delivered on May 27, 1993 in connection with the issuance of the Bonds.
May 27, 1993
Honorable City Council
City of Carlsbad
1200 Carlsbad Village Drive
Carlsbad, California 92008
Re: $15,920,000 City of Carlsbad, California, Variable Rate Demand Multifamily Housing
Revenue Refunding Bonds, Series A of 1993 (La Costa Apartments Project)
Dear Councilmembers:
We have examined certified copies of the proceedings of the City of Carlsbad, California (the
"Issuer"), and other information and documents submitted to us relative to the issuance and sale by the
Issuer of its Variable Rate Demand Multifamily Housing Revenue Refunding Bonds, Series A of 1993
(La Costa Apartments Project), in the aggregate principal amount of $ 15,920,000 (the "Bonds").
The Bonds have been issued pursuant to a resolution of the City Council of the Issuer adopted on
May 11, 1993 (the "Resolution"), Article 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the
Government Code of the State of California (the "Refunding Law") and an indenture of trust dated as of
May 1, 1993 (the "Indenture") by and between the Issuer and First Trust of California, National
Association, as trustee (the "Trustee"). The repayment of the Bonds is secured by a letter of credit (the
"Letter of Credit") issued by Bank of America National Trust and Savings Association (the "Bank"). We
express no opinion as to the validity or enforceability of the Letter of Credit.
The Bonds are dated the date, mature on the date and bear interest payable on the dates and at the
rates per annum to be established from time to time in the manner set forth in the Indenture. The Bonds
are issuable only as fully registered Bonds in the form set forth in the Indenture, redeemable in the
amounts, at the times and in the manner provided for in the Indenture.
In rendering our opinion, we have examined the Refunding Law and originals or certified copies
of the Resolution, the Indenture, the Loan Agreement dated as of May 1, 1993 (the "Loan Agreement")
by and among the Issuer, the Trustee and La Costa Partners, a California general partnership (the
"Owner"), the Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants
dated as of May 1, 1993 (the "Regulatory Agreement") by and among the Issuer, the Trustee and the
Owner, and such other information and documents as we have deemed necessary to render the opinions
set forth herein. As to questions of fact material to the opinions stated herein, we have relied upon
representations made by the Issuer and the Owner contained in the Indenture, the Loan Agreement and
the Regulatory Agreement and the certified proceedings and certifications of public officials, the Bank
and others furnished to us without undertaking to verify through independent investigation the accuracy
of the representations and certifications relied upon us.
B-l
Based upon our examination of all of the foregoing, and in reliance thereon, and on all matters of
fact as we deem relevant under the circumstances, and upon consideration of applicable laws, we are of
the opinion that:
(1) The Issuer is a municipal corporation, duly organized and validly existing under the
Constitution and the laws of the State of California, with full power and authority to adopt the Resolution,
to execute, deliver and perform the Bond Purchase Agreement (the "Purchase Agreement") by and among
the Issuer, Dean Witter Reynolds Inc. and the Owner, the Indenture, the Loan Agreement and the
Regulatory Agreement (collectively, the "Bond Documents"), to loan the proceeds from the sale of the
Bonds to the Owner, and to issue, sell and deliver the Bonds.
(2) The execution and delivery of the Bond Documents have been duly authorized by the
Issuer and, assuming proper authorization, execution and delivery by the respective other parties thereto,
are valid and binding obligations of the Issuer enforceable in accordance with their terms, except to the
extent that enforceability may be limited by moratorium, bankruptcy, reorganization, insolvency or other
laws affecting creditors' rights generally or by the exercise of judicial discretion in accordance with
general principles of equity.
(3) The Bonds have been duly and validly authorized and executed by the Issuer and are
valid and binding special and limited obligations of the Issuer, payable solely out of the revenues and
receipts provided therefor in the Indenture, and all conditions precedent to the delivery of the Bonds have
been fulfilled. The Bonds are enforceable in accordance with their terms and the terms of the Indenture,
except to the extent that enforceability may be limited by moratorium, bankruptcy, reorganization,
insolvency or other laws affecting creditors' rights generally or by the exercise of judicial discretion in
accordance with general principles of equity.
(4) The Indenture creates a valid, express and irrevocable trust under the laws of the State of
California of the Trust Estate (as such term is defined in the Indenture) held or set aside under the
Indenture, subject to the application thereof to the purposes and on the conditions permitted by the
Indenture.
(5) Assuming continuing compliance subsequent to the issuance of the Bonds with
applicable provisions of the Internal Revenue Code of 1954, as amended (the "1954 Code") and the
Internal Revenue Code of 1986, as amended (the "1986 Code"), with respect to the Bonds, under existing
statutes, regulations, rulings and judicial decisions, interest on the Bonds is excluded from gross income
for federal income tax purposes (except during any period while a Bond is held by a "substantial user," or
a "related person," within the meaning of Section 103(b)(13) of the 1954 Code, of the property financed
by proceeds of the Bonds) and is not an item of tax preference for purposes of calculating the federal
alternative minimum tax imposed on individuals and corporations; however, we note that with respect to
corporations, interest on the Bonds may be included as an adjustment in the calculation of alternative
minimum taxable income which may affect such corporation's alternative minimum tax liability. We
express no opinion regarding other federal tax consequences with respect to the Bonds.
(6) In our further opinion, interest on the Bonds is exempt from California personal income
tax.
The opinions expressed herein are based on an analysis of existing statutes, regulations, rulings
and judicial decisions and cover certain matters not directly addressed by such authorities. Such opinions
may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date
hereof. We have not undertaken to determine, or to inform any person, whether any such actions or
events are taken or do occur.
B-2
Additionally, our opinion set forth in paragraph (5) above is subject to the condition that the
Issuer and the Owner comply with certain covenants and the applicable requirements of the 1954 Code
and the 1986 Code that must be satisfied subsequent to the issuance of the Bonds to assure that interest on
the Bonds will remain excludable from gross income for federal income tax purposes. Failure to comply
with such requirements may cause interest on the Bonds to be included in gross income for federal
income tax purposes retroactive to the date of issuance of the Bonds.
Respectively submitted,
B-3
APPENDIX C
PROPOSED FORM OF BOND COUNSEL OPINION
TO BE DELIVERED UPON REMARKETING
C-l
APPENDIX D
FORM OF CREDIT FACILITY
(attached)
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
Wells Fargo Bank, N.A.
123 N. Wacker Drive, Suite 1900
Chicago, EL 60606
Attention: Gail L. Duran
Loan Number: 1003991
INTERCREDITOR AND SUBORDINATION AGREEMENT
among
CITY OF CARLSBAD, CALIFORNIA
as Issuer
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Credit Facility Provider
$15,920,000
City of Carlsbad, California
Variable Rate Demand Multifamily Housing Revenue Refunding Bonds
Series A of 1993
(Santa Fe Ranch Apartments f/k/a
La Costa Apartments Project)
Dated as of May 1,2011
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INTERCREDITOR AND SUBORDINATION AGREEMENT
THIS INTERCREDITOR AND SUBORDINATION AGREEMENT (this
"Agreement") is dated as of May 1, 2011, and is made among CITY OF CARLSBAD,
CALIFORNIA (the "Issuer"), U.S. BANK NATIONAL ASSOCIATION, as Trustee under the
Indenture described below (the "Trustee") and WELLS FARGO BANK, NATIONAL
ASSOCIATION, in its capacity as Credit Facility Provider ("Credit Facility Provider").
WITNESSETH:
WHEREAS, the Issuer has previously issued its Variable Rate Demand Multifamily
Housing Revenue Refunding Bonds Series A of 1993 (Santa Fe Ranch Apartments f/k/a 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") (the obligations under which were secured by that Deed of Trust
recorded on May 26, 1993 as file no. 1993-0332835 of Official Records of San Diego County,
California (the "Official Records"), the "Original Mortgage") between the Issuer and La Costa
Partners, a California general partnership (the "Prior Owner") (succeeded in interest by Santa Fe
Ranch, LLC, the "Owner") which Prior Financing Agreement was restated by that certain
Amended and Restated Loan Agreement dated as of May 1, 2002 (the "Prior Amended
Financing Agreement") among the Issuer, the Owner and the Trustee, the obligations of which
are secured by that Amended and Restated First Deed of Trust and Assignment of Rents and
Fixture Filing dated as of May 1, 2002 and recorded on May 23, 2002 as Instrument No. 2002-
0437977 (the "Bond Mortgage") in the Official Records. The Prior Amended Financing
Agreement has been amended and restated by that certain Second Amended and Restated Loan
Agreement dated as of May 1, 2011 (the "Financing Agreement") among the Issuer, the Owner
and the Trustee, the obligations of which are secured by the Bond Mortgage. Owner's
obligations under the Bond Mortgage are evidenced by that certain Second Amended and
Restated Promissory Note dated as of May 1, 2011 made by Owner to the order of Issuer in the
original principal amount of $15,920,000 (the "Bond Mortgage Note"); 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 was amended
and restated by that Amended and Restated Indenture of Trust dated as of May 1, 2002 between
the Issuer and the Trustee (the "First Amended Indenture"). The First Amended Indenture has
been amended and restated by that certain Second Amended and Restated Indenture of Trust
dated as of May 1, 2011 between the Issuer and Trustee; 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. The Prior Letter of Credit was replaced by a Credit Enhancement Agreement dated as
of May 1, 2002 (the "Credit Enhancement Agreement") between Federal Home Loan Mortgage
W02-WEST:LKY\403414098.3 -1-
Corporation ("Freddie Mac") and the Trustee, which Credit Enhancement Agreement was
delivered to the Trusteee on May 23, 2002; and
WHEREAS, the Owner has decided to replace the Credit Enhancement Agreement and
has caused the Credit Facility Provider to issue to the Trustee for the benefit of Bond owners an
Irrevocable Letter of Credit dated as of May , 2011 (the "Letter of Credit") pursuant to the
terms of a Reimbursement Agreement dated as of May 1, 2011 between Owner and the Credit
Facility Provider, which evidences the Owner's reimbursement obligations to the Credit Facility
Provider (the "Reimbursement Agreement"); 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 caused to be
delivered to the Issuer and assigned to the Trustee the Original Mortgage that was subsequently
amended and restated by the Bond Mortgage and an Amended and Restated Regulatory
Agreement and Declaration of Restrictive Covenants dated as of May 1, 1993 (as amended by (i)
that certain Second Amended and Restated Regulatory Agreement and Declaration of Restrictive
Covenants dated as of May 1, 2002 and recorded on May 23, 2002 as Document No.
2002-0437976 in the Official Records and by (ii) that certain First Amendment to Second
Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants dated as
of May 1, 2011 and to be recorded substantially concurrently herewith, as amended, the
"Regulatory Agreement"); and
WHEREAS, to secure the Owner's reimbursement obligations to the Credit Facility
Provider under the Reimbursement Agreement, the Owner will execute and deliver to the Credit
Facility Provider a Deed of Trust With Absolute Assignment of Leases and Rents, Security
Agreement and Fixture Filing (Credit Bank) dated as of even date herewith (the "Reimbursement
Mortgage") with respect to the Project including the real property described on Exhibit A hereto
which will be recorded concurrently herewith; 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 the Credit Facility Provider, in
consideration of the mutual promises contained herein and in connection with the Credit Facility
Provider's issuance of the Letter of Credit to the Trustee 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, the Bond
Mortgage, the Bond Mortgage Note, the Regulatory Agreement (and any other agreement
W02-WEST:LKY\403414098.3 -2-
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 from time to time.
"Credit Facility Documents" means, collectively, the Letter of Credit, the
Reimbursement Agreement, the Reimbursement Mortgage 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.
"Wrongful Dishonor" means the failure of the Credit Facility Provider to honor a
draw made in accordance with the terms of the Letter of Credit (which draw strictly
complies with, and conforms to, the terms and conditions of the Letter of Credit).
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.
W02-WEST:LKY\403414098.3 -3-
SECTION 3. Exercise of Rights and Remedies by the Credit Facility Provider.
(A) Until either (a) a Wrongful Dishonor has occurred and is continuing, or (b) the
Letter of Credit expires in accordance with its terms:
(i) Except as provided in Sections 3(C) and 3(D), without the prior written
consent of the Credit Facility Provider, 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 the Credit
Facility Provider, 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 the Credit
Facility Provider 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 the Credit Facility Provider for the
repair, restoration, rebuilding or alteration of the Project shall be used by the Trustee (if
directed by the Credit Facility Provider) for 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 the Credit Facility Provider, in its sole
discretion (the Mortgagee may request, however, that the Credit Facility Provider, in its
discretion, provide such direction).
(v) Except as provided in Sections 3(C) and 3(D), the Credit Facility Provider,
in its sole discretion, shall have the sole right to direct the Trustee to waive or forbear 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), the Credit Facility Provider
shall control all of the Mortgage Rights (as such term is defined below) and the Credit
Facility Provider 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 the Credit Facility Provider 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
W02-WEST:LKY\403414098.3 -4-
Owner has agreed to make monthly Bond Mortgage Loan payments under the
Reimbursement Agreement 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, 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 herein as the "Mortgagee Retained Rights").
(vii) Trustee and the 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 the Credit Facility Provider.
(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 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 the Credit Facility Provider for application as
provided in the Reimbursement Agreement until all amounts due to the Credit Facility
Provider under the Reimbursement Agreement have been paid in full.
(x) Trustee and the Issuer irrevocably authorize the Credit Facility Provider to
take any action (but the Credit Facility Provider 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
W02-WEST:LKY\403414098.3 -5-
cash or securities, as described in Section (ix) above (in the name of the Credit Facility
Provider or in the name of the Trustee or Issuer, or otherwise, as the Credit Facility
Provider 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 non-statutory
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 the Credit Facility
Provider may 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 the Credit Facility Provider,
promptly
(1) to take such action as may be requested at any time by the Credit
Facility Provider 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 the Credit Facility Provider in order to
enable the Credit Facility Provider 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 the
Credit Facility Provider or otherwise) after all amounts due to the Credit Facility Provider
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.
W02-WEST:LKY\403414098.3 -6-
For purposes of this Agreement, the Credit Facility Provider'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, as applicable.
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 the Credit Facility Provider, which may be granted or
withheld by the Credit Facility Provider in its sole discretion. Further, at the sole expense
of the Owner or if the Owner fails to pay, at the expense of the Credit Facility Provider,
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 the Credit Facility
Provider in any bankruptcy proceeding of Owner, in order to enable the Credit Facility
Provider 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, 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 the
Credit Facility Provider 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 the Credit Facility Provider.
(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 the Credit Facility Provider, 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 the Credit Facility Provider 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 the Credit Facility Provider to exercise its remedies under
the Reimbursement Agreement or the Reimbursement Mortgage so long as the Credit
Facility Provider is in compliance with its agreements hereunder.
W02-WEST:LKY\403414098.3 -7-
(B) Neither the Credit Facility Provider 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 the Credit Facility Provider in connection with the Bond Mortgage Loan by reason
of the Credit Facility Provider's control of the Bond Mortgage Rights.
(C) If the Owner defaults in the performance or observance of any covenant,
agreement or obligation of the Owner set forth in the Regulatory Agreement, and if such default
remains uncured for a period of 60 days after Owner and the Credit Facility Provider 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 Issuer agree to refrain from the exercise of any such remedies in all events if the
Credit Facility Provider cures any such default by the Owner within 60 days after receipt by the
Credit Facility Provider 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, the Credit Facility Provider
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 Letter of Credit is in
effect and no Wrongful 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 Letter of Credit 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 the Credit Facility
Provider cures any such default by the Owner within 60 days after receipt by the Credit Facility
Provider of written notice of such default, if such default is capable of being cured by the
payment of money or, in the event of any other default, the Credit Facility Provider commences
to cure such default and thereafter diligently proceeds with such cure.
(E) Trustee acknowledges that the Credit Facility Provider 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 Credit Facility Provider that is
primarily held as security for the payment of principal and interest on the Bonds or to reimburse
the Credit Facility Provider for payments made under the Letter of Credit shall be invested in
obligations the interest on which is excludable from gross income for federal income tax
W02-WEST:LKY\403414098.3
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 the Credit Facility Provider 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 the
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.
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
(b) upon the termination or replacement of the Letter of Credit in accordance with its terms, and
no further obligations of Owner remaining outstanding under the Reimbursement Agreement, the
Credit Facility Provider 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 the Credit Facility Provider,
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 the Credit Facility
Provider in payment of the Bond Mortgage Loan as a result of the exercise of set-off rights, the
liquidation of any security interest created by the Bond 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 against the Owner or the Project (including rents
received from the appointment of a receiver) shall be held by the Trustee or the Credit Facility
Provider, as the case may be, for the benefit of the Trustee and the Credit Facility Provider and
will be applied as follows:
(A) Until either (i) a Wrongful Dishonor has occurred and is continuing, or (ii) the
Letter of Credit expires, terminates or is replaced, and the Owner has no further obligations
under the Reimbursement Agreement, such moneys held by the Trustee and the Credit Facility
Provider shall be applied in such manner and in such order as the Credit Facility Provider, in its
sole discretion, determines, subject, however, to the terms of the Reimbursement Mortgage and
Reimbursement Agreement;
W02-WEST:LKYU03414098.3 -9-
(B) Upon and following the occurrence and continuance of an 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 the Credit Facility Provider shall be applied in such manner and in such order
(to the extent permitted by the Bond Documents, the Reimbursement Agreement, the
Reimbursement Mortgage 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 Letter of Credit, under the Indenture or in accordance with written instructions
provided by the Credit Facility Provider (whether as a result of a payment by the Credit Facility
Provider under the Letter of Credit 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 the Credit Facility Provider under the Letter of Credit 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 Letter of Credit 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 Letter of Credit, return said excess funds to the Credit Facility
Provider promptly;
(ii) At the option of the Credit Facility Provider, either reconvey, release and
cancel, or assign to the Credit Facility Provider, 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 the Credit Facility
Provider such instruments and documents as may be reasonably necessary in connection
with such reconveyance, release, cancellation or assignment;
(iii) Deliver to the Credit Facility Provider, in such form and to such place, as
the Credit Facility Provider shall designate, all property due the Credit Facility Provider
pursuant to the provisions of the Indenture; and
(iv) Surrender and return the Letter of Credit to the Credit Facility Provider.
SECTION 7. Substitution of Obligor.
7.1 Issuer and Trustee agree that, should the Credit Facility Provider 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 the Credit Facility Provider shall be the
successor to Owner for all purposes of the Bond Documents and the Credit Facility Provider
W02-WEST:LKY\403414098.3 -10-
acknowledges and agrees to be so treated as successor to the Owner; provided, however, that any
and all liability of the Credit Facility Provider 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 the Credit Facility Provider to the right, title and
interest of the Owner in the Project pursuant to Section 7.1 above, the Credit Facility Provider
shall have the right to sell, transfer and/or assign its interest in the Project to any person or entity,
provided that the Credit Facility Provider or such transferee delivers or causes to be delivered to
Issuer and Trustee concurrently with such transfer:
(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 the
Owner under the Bond Documents to which the Owner is a party accruing from and after
the date of such transfer;
(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; and
(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 the Credit Facility Provider shall be limited to the period it owned the Project and the
Credit Facility Provider 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 the Credit Facility Provider may incur as a result of its
ownership of the Project following a foreclosure or a 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(iii).
SECTION 8. Representations, Warranties and Covenants.
(A) The Issuer represents, warrants and covenants to the other parties hereto that:
(i) 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.
W02-WEST:LKY\403414098.3 -11-
(ii) 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 (a) 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, (b) the exercise of judicial
discretion and (c) the legal remedies against public entities in the State.
(iii) The Issuer will not 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:
(i) 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 interest on the
Bonds from gross income for federal income tax purposes or of any event of default
under any Bond Document.
(ii) 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 binding obligation
of the Trustee enforceable in accordance with its terms.
(iii) 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.
(iv) 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) The Credit Facility Provider represents, warrants and covenants to the other
parties hereto that:
(i) The Credit Facility Provider 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 Credit Facility Provider enforceable in accordance with its
terms.
(ii) The Credit Facility Provider 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.
W02-WEST:LKY\403414098.3 -12-
SECTION 9. Subrogation. Issuer and Trustee agree that the Credit Facility Provider
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 the Credit Facility Provider's
payment (whether pursuant to the Letter of Credit or otherwise) of the principal of or interest on
the Bonds or the payment (whether pursuant to the Letter of Credit or otherwise) or performance
of any obligation under the Bond Documents. Issuer and Trustee agree to cooperate with the
Credit Facility Provider at the Credit Facility Provider's sole expense and liability in connection
with the Credit Facility Provider'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 the Credit Facility Provider such action is necessary to preserve the exclusion
from gross income for federal income tax purposes of interest on the Bonds.
SECTION 10. 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 11. 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 12. 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 13. 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, or any other Bond Document shall also be sent
to the Credit Facility Provider. All communications required to be sent to the Credit Facility
Provider pursuant to the terms of any Bond Document and any other Borrower Document shall
be sent to the following addresses:
To the Credit Facility Provider: Wells Fargo Bank, National Association
123 N. Wacker Drive, Suite 1900
Chicago, Illinois 60606
Attention: Brett A. Hill
Telephone: (312) 269-4812
Facsimile: (312)782-0969
with a copy to: Wells Fargo Bank, N.A.
Minneapolis Loan Center
608 2nd Avenue South, 11th Floor
W02-WEST: LKYVW3414098.3 -13-
Minneapolis, Minnesota 55402
Attention: Manager
The Trustee: U.S. Bank National Association
One California Street, Suite 2550
San Francisco, California 94111
Attention: Multifamily Housing
Telephone: (415)273-4576
Telecopy: (415) 273-4590
The Issuer: City of Carlsbad, California
2965 Roosevelt Street, Suite B
Carlsbad, California 92008-2389
Attn: Housing and Redevelopment Director
Telephone: (760)434-2810
Telecopy: (760) 720-2037
SECTION 14. Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of the Issuer, the Trustee and the Credit Facility Provider 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 Letter of Credit unless the Alternate
Credit Facility Provider replaces the Credit Facility Provider hereunder, (ii) the date the Letter of
Credit expires in accordance with its own terms and all of the Owner's obligations to the Credit
Facility Provider 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 the Credit
Facility Provider under the Reimbursement Agreement have been paid in full.
SECTION 15. Acknowledgment and Consent. The Issuer and Trustee
acknowledge and consent to the granting by the Owner to the Credit Facility Provider of the
Reimbursement Mortgage, which shall be a second priority deed of trust. The Issuer and Trustee
acknowledge and agree that the Credit Facility Provider 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, 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 16. 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:
W02-WEST:LKY\403414098.3 -14-
(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 the Credit Facility Provider 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
(F) 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 17. 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 18. Effectiveness. This Agreement shall be effective as of the Closing
Date.
[Remainder of Page Left Intentionally Blank]
W02-WEST:LKY\403414098.3 -15-
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: "
STATE OF CALIFORNIA )
)
COUNTY OF )
On , before me, , a Notary Public, personally
appeared who proved to me on the basis of satisfactory evidence to be
the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature
[ISSUER'S SIGNATURE PAGE TO SANTA FE RANCH INTERCREDITOR AGREEMENT]
W02-WEST:LKY\403414098.3 -1-
U.S. BANK NATIONAL ASSOCIATION, as
Trustee
By: _
Name:
Title:
STATE OF CALIFORNIA )
)
COUNTY OF )
On , before me, , a Notary Public, personally
appeared who proved to me on the basis of satisfactory evidence to be
the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature.
[TRUSTEE'S SIGNATURE PAGE TO SANTA FE RANCH INTERCREDITOR AGREEMENT]
W02-WEST:LKY\403414098.3 -1-
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Credit Facility Provider
By:_
Name:_
Title: "
[INSERT ILLINOIS NOTARY OR CALIFORNIA NOTARY]
[CREDIT FACILITY PROVIDER'S SIGNATURE PAGE TO SANTA FE RANCH INTERCREDITOR
AGREEMENT]
W02-WEST:LKY\403414098.3 -1-
EXHIBIT A
LEGAL DESCRIPTION
All that certain real property located in the City of Carlsbad, County of San Diego, State of
California, described as follows:
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 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,
File/Page No. 84-407544.
APN: 223-360-01-00; 223-360-02-00; 223-360-03-00; 223-360-04-00.
W02-WEST:LKY\403414098.3 -1-