HomeMy WebLinkAboutOCSD 01-08I
RESOLUTION NO. OCSD 01-08
RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE
COUNTY SANITATION DISTRICT AUTHORIZING THE EXECUTION
AND DELIVERY BY THE DISTRICT OF AN ALTERNATE STANDBY
CERTIFICATE PURCHASE AGREEMENT RELATING TO ORANGE
COUNTY SANITATION DISTRICT REFUNDING CERTIFICATES OF
PARTICIPATION, 1992 SERIES, AND AUTHORIZING THE EXECUTION
OF NECESSARY DOCUMENTS AND CERTIFICATES AND RELATED
ACTIONS
WHEREAS, County Sanitation District No. 1 of Orange County, California,
County Sanitation District No. 2 of Orange County, California, County Sanitation District
No. 3 of Orange County, California, County Sanitation District No. 5 of Orange County,
California, County Sanitation District No. 6 of Orange County, California, County
Sanitation District No. 7 of Orange County, California, and County Sanitation District No.
11 of Orange County, California (collectively, the "Predecessor Districts") have
previously caused to be executed and delivered $160,600,000 aggregate principal
amount of County Sanitation District Nos. 1, 2, 3, 5, 6, 7 and 11 of Orange County,
California, Refunding Certificates of Participation, 1992 Series, of which $124, 170,000
aggregate principal amount is currently outstanding (the "Certificates"), pursuant to the
Trust Agreement, dated as of October 1, 1992 (the "Original Trust Agreement"), among
the Predecessor Districts and State Street Bank and Trust Company of California, N.A.
(the "Trustee");
WHEREAS, the Original Trust Agreement was modified and amended pursuant
to a First Supplemental Trust Agreement, dated as of August 8, 2000, by and between
the Trustee and the Orange County Sanitation District (the "District"), as successor by
consolidation to the Predecessor Districts (as so modified and amended, the "First
Supplemented Trust Agreement"), and the District, as successor by consolidation to the
Predecessor Districts, further modified, amended, reformed and restated the First
Supplemented Trust Agreement by entering into the Reformed Trust Agreement, dated
as of August 1, 2000 (such Reformed Trust Agreement being herein referred to as the
"Trust Agreement"), by and among the Trustee, the Orange County Sanitation District
Financing Corporation (the "Corporation") and the District, as successor by
consolidation to the Predecessor Districts;
WHEREAS, pursuant to the Trust Agreement, the Certificates were re-
designated the "Orange County Sanitation District Refunding Certificates of
Participation, 1992 Series";
DOClLA1:377324.3
'·
I
WHEREAS, in order to secure the timely payment of the principal and interest
evidenced by the Certificates and to provide a source of payment for the purchase of
Certificates tendered by the owners thereof, the District entered into the Reformed
Standby Certificate Purchase Agreement, dated as of August 1, 2000, with Barclays
Bank PLC, New York Branch (the "Prior Provider") and the Trustee, pursuant to which
the Prior Provider provides liquidity for the Certificates;
WHEREAS, the Trust Agreement allows the District to provide an Alternate
Standby Agreement (as defined in the Trust Agreement) prior to the expiration of the
standby agreement then in effect;
WHEREAS, the District desires to, and Lloyds TSB Bank PLC, acting through its
Miami Agency, is willing to, enter into such a Standby Certificate Purchase Agreement
with the Trustee (the "Standby Agreement");
NOW, THEREFORE, the Board of Directors (the "Board") of Orange County
Sanitation District,
DOES HEREBY RESOLVE, DETERMINE AND ORDER:
Section 1. All of the recitals herein contained are true and correct and the
Board so finds.
Section 2. The Standby Agreement, in substantially the form submitted to this
meeting and made a part hereof as though set forth herein, be and the same is hereby
approved. The Chair of the Board of Directors, and such other member of the Board of
Directors as the Chair may designate, the General Manager of the District and the
Director of Finance of the District, and such other officer of the District as the Director of
Finance may designate (the "Authorized Officers") are, and each of them is, hereby
authorized and directed, for and in the name of the District, to execute and deliver the
Standby Agreement in the form submitted to this meeting, with such changes, insertions
and omissions as the Authorized Officer executing the same may require or approve,
such requirement or approval to be conclusively evidenced by the execution of the
Standby Agreement by such Authorized Officer.
Section 3. The Authorized Officers are, and each of them hereby is,
authorized and directed to execute and deliver any and all documents and instruments
and to do and cause to be done any and all acts and things necessary or proper for
carrying out the execution and delivery of the Standby Agreement and the transaction
contemplated by this Resolution. ·
Section 4. All actions heretofore taken by the officers and employees of the
District with respect to the execution, delivery and sale of the Standby Agreement, or in
connection with or related to the transaction contemplated herein, are hereby approved,
confirmed and ratified.
-2-
DOCSLA1:377324.3
Section 5. This Resolution shall take effect immediately upon its adoption.
PASSED AND ADOPTED at a regular meeting held March 28, 2001.
ATTEST:
oardS~ry
I
-3-
DOGLA1:377324.3
(
I
EXECUTION COPY
STANDBY CERTIFICATE PURCHASE AGREEMENT
dated as ofApril 9, 2001
by and among
ORANGE COUNTY SANITATION DISTRICT,
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, N.A.
and
LLOYDS TSB BANK PLC
Relating to Orange County Sanitation District
Refunding Certificates of Participation, 1992 Series
(
I
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Page
SE CTI o·N 1. 01. Definitions ............................................................................................................. 2
SECTION 1.02. Incorporation of Certain Definitions by Reference ............................................... 6
ARTICLE II
THE COMMITMENT; FEES
SECTION 2.01. Commitment to Purchase Certificates ................................................................... 6
SECTION 2.02. Method of Purchasing ........................................................................................... 6
SECTION 2.03. Reduction of Commitment. ................................................................................... 7
SECTION 2.04. Sale of Certificates ................................................................................................ 1
SECTION 2.05. Commitment Fee ................................................................................................... 8
SECTION 2.06. Upfront Fee ........................................................................................................... 8
SECTION 2.07. Change of Law ...................................................................................................... 8
ARTICLE III
THE BANK RA TE
SECTION 3.01. Purchased Certificates to Evidence Interest at Bank Rate .................................. 10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Purchaser .............................................. .10
SECTION 4.02. Representations and Warranties of the District.. ................................................. 11
ARTICLE V
COVENANTS OF THE DISTRICT
SECTION 5.01. Affirmative Covenants ........................................................................................ 12
SECTION 5.02 .. Negative Covenants ............................................................................................ 14
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. Conditions to Effectiveness of this Agreement. .................................................. 15
I
I
Page
ARTICLE VII
EVENTS OF DEFAULT; REMEDIES
SECTION 7.01. Events of Default. ............................................................................................... 16
SECTION 7.02. Remedies ............................................................................................................. 18
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Waiver; Parties in Interest. .................................................................................. 19
SECTION 8.02. GOVERNING LAW ........................................................................................... 20
SECTION 8.03. Counterparts; Captions ....................................................................................... .20
SECTION 8.04. Fees; Expenses; Documentary Taxes; Indemnification ..................................... .20
SECTION 8.05. Term of the Agreement. ...................................................................................... 21
SECTION 8.06. Extension of Purchase Period ............................................................................. 21
SECTION 8.07. Survival of Representations and Warranties ....................................................... 21
SECTION 8.08. Right of Setoff. .................................................................................................... 21
SECTION 8.09. Severability ......................................................................................................... 22
SECTION 8.10. Notices ................................................................................................................ 22
SECTION 8.11. Place of Payment.. ............................................................................................... 23
SECTION 8.12. Participation ....................................................................................................... .23
SECTION 8.13. Payment Obligations of the District.. .................................................................. 24
11
(
I
STANDBY CERTIFICATE PURCHASE AGREEMENT (this "Agreement"), dated
as of April 9, 2001, by and among ORANGE COUNTY SANITATION DISTRICT, a county
sanitation district organized and existing under the laws of the State of California (the
"District"), STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as
Trustee under the Trust Agreement (referred to herein the "Trustee"), and LLOYDS TSB BANK
PLC, acting through its Miami Agency (the "Purchaser").
WITNESSETH:
WHEREAS, County Sanitation District Nos. 1, 2, 3, 5, 6, 7, and 11 of Orange County,
California (collectively, the "Predecessor Districts") have heretofore authorized $160,600,000
aggregate principal amount of certificates of participation designated County Sanitation District
Nos. 1, 2, 3, 5, 6, 7 and 11 of Orange County, California, Refunding Certificates of Participation,
1992 Series, of which $124,170,000 is currently outstanding (the "Certificates"), delivered
pursuant to the Trust Agreement dated as of October 1, 1992 among the Predecessor Districts
and the Trustee (the "Original Trust Agreement"); and
WHEREAS, pursuant to the terms of the Original Trust Agreement and the Certificates,
the holders of the Certificates have the right to, and under certain circumstances are required to,
tender the Certificates to the Trustee for purchase and to receive as payment the principal amount
of the Certificates plus accrued interest evidenced thereby to the purchase date; and
WHEREAS, the payment of principal and interest evidenced by the Certificates are
insured under a municipal bond insurance policy (the "Policy") issued by the Insurer (as defined
herein); and
WHEREAS, pursuant to the Standby Certificate Purchase Agreement dated as of January
30, 1996 (the "Original Standby Agreement") by and among the Predecessor Districts, the
Trustee and Barclays Bank plc, acting through its New York Branch (the "Original Purchaser"),
the Original Purchaser has agreed, on the terms and conditions specified in the Original Standby
Agreement, to purchase Tendered Certificates (as defined herein); and
WHEREAS, the Certificates evidence direct and proportionate interests in the
installment payments to be paid by the District, as successor by consolidation to the Predecessor
Districts, under the Amendatory Agreement for Acquisition and Construction dated as of
October 1, 1992 (the "Original Agreement for Acquisition and Construction") by and among
the Predecessor Districts; and
WHEREAS, the Original Trust Agreement was modified and amended pursuant to a
First Supplemental Trust Agreement dated as of August 8, 2000 by and between the Trustee and
the District, as successor by consolidation to the Predecessor Districts (as so modified and
amended, the "First Supplemented Trust Agreement"), and the District, as successor by
consolidation to the Predecessor Districts, further amended and modified the First Supplemented
I
2
Trust Agreement by entering into the Reformed Trust Agreement dated as of August 1, 2000 by
and among the Trustee, the Orange County Sanitation District Financing Corporation (the
"Corporation") and the District, as successor by consolidation to the Predecessor Districts (such
Reformed Trust Agreement being herein referred to as the "Trust Agreement"); and
WHEREAS, pursuant to the Trust Agreement, the Certificates were re-designated the
Orange County Sanitation District Refunding Certificates of Participation, 1992 Series; and
WHEREAS, the District amended and modified the Original Agreement for Acquisition
and Construction by entering into the Reformed Agreement for Acquisition and Construction
dated as of August 1, 2000 by and between the District, as successor by consolidation to the
Predecessor Districts, and the Corporation (such Reformed Agreement for Acquisition and
Construction being herein referred to as the "Agreement for Acquisition and Construction");
and
WHEREAS, the District amended and modified the Original Standby Agreement by
entering into the Reformed Standby Certificate Purchase Agreement dated as of August 1, 2000
by and among the District, as successor by consolidation to the Predecessor Districts, the Trustee
and the Original Purchasers; and
WHEREAS, the Trust Agreement allows the District to provide an Alternate Standby
Agreement prior to the expiration of the standby agreement then in effect and the Purchaser is
willing to provide such an Alternate Standby Agreement on the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the respective agreements contained herein,
the parties hereto agree as follows:
SECTION 1.01. Definitions.
ARTICLE I
DEFINITIONS
The following terms, as used herein, have the following meanings:
"Agreement for Acquisition and Construction" has the meaning set forth in the
recitals hereof, as it may be amended or supplemented from time to time.
"Available Commitment" means on any day the sum of the Available Principal
Commitment and the Available Interest Commitment on such day.
"Available Interest Commitment" initially means $9,389,294 (an amount equal to
184 days' interest on the Certificates, computed as though the Certificates bore interest at
the rate of 15% per annum (computed on the basis of a 365-day year or 366-day year, as
applicable, and the actual number of days elapsed)) and thereafter means said amount
adjusted from time to time as follows: (a) downward by an amount that bears the same
proportion to said amount as the amount of any related reduction in the Available
f
I
3
Principal Commitment pursuant to the definition of "Available Principal Commitment"
bears to the Available Principal Commitment prior to such reduction; and (b) upward by
an amount that bears the same proportion to said amount as the amount of any related
increase in the Available Principal Commitment pursuant to clause ( c) of the definition of
"Available Principal Commitment" bears to the Available Principal Commitment prior to
such increase.
"Available Principal Commitment" initially means $124, 170,000, and thereafter
means said amount adjusted from time to time as follows: (a) downward by the amount
of any reduction of the Available Principal Commitment pursuant to Section 2.03 hereof;
(b) downward by the principal amount of any Certificates purchased by the Purchaser
pursuant to Section 2.02(b) hereof; and ( c) upward by the principal amount of any
Certificates theretofore purchased by the Purchaser pursuant to Section 2.02(b) hereof,
which are resold by the Purchaser (or a purchaser from the Purchaser as contemplated by
Section 2.04(a) hereof) pursuant to (or as contemplated by) Section 2.04(b) hereof. Any
adjustments pursuant to clauses (a), (b) and (c) above shall occur simultaneously with the
event requiring such adjustments.
"Bank Rate" means the Prime Rate; provided however that if the Purchaser (or a
purchaser from the Purchaser pursuant to Section 2.04(a) hereof) shall own Purchased
Certificates at the end of the Purchase Period, then, the Bank Rate shall be equal to the
Default Rate for any period thereafter.
"Certificate Documents" means the Trust Agreement, the Agreement for
Acquisition and Construction, the Master Agreement, the Policy, the Swap Agreement,
the Guarantee, this Agreement, the Liquidity Guaranty Agreement, the Confirming
Agreement and the Remarketing Agreement.
"Closing Date" means the date on which this Agreement is delivered by the
Purchaser to the District.
"Confirming Agreement" means the Confirming Agreement dated the date hereof
between the Trustee and the Purchaser, confirming the Purchaser's obligation to purchase
Tendered Certificates hereunder.
"Corporation" means the Orange County Sanitation District Financing
Corporation, a nonprofit public benefit corporation organized and existing under the laws
of the State of California.
"Default" shall mean any event which with notice or lapse of time, or both, would
become an Event of Default.
"Default Rate" means the Prime Rate plus 2%.
"Effective Date" means the date this Agreement, as modified, amended, reformed
and restated as set forth herein, is effective pursuant hereto.
I
4
"Event of Default" shall mean any one of the events described in Article VII
hereof.
"Federal Funds Rate" shall mean the rate for overnight federal funds as
published by the Federal Reserve Bank of New York.
"Guarantee" shall mean that certain Guarantee dated as of December 2, 1992 by
American International Group, Inc. in favor of the District with respect to the Swap
Agreement, as it may be amended or supplemented from time to time.
"Insurer" shall mean Ambac Assurance Corporation, a Wisconsin-domiciled
stock insurance company, or any successor thereto.
"Insurer Event of Insolvency" shall mean the occurrence and continuance of one
or more of the following events: (a) the issuance, under the laws of the state of
incorporation or formation of the Insurer, of an order for relief, rehabilitation,
reorganization, conservation, liquidation or dissolution of the Insurer; (b) the
commencement by the Insurer of a voluntary case or other proceeding seeking an order
for relief, rehabilitation, reorganization, conservation, liquidation or dissolution with
respect to itself or its debts under the laws of the state of incorporation or formation of
the Insurer or any bankruptcy, insolvency or other similar law now or hereafter in effect
including, without limitation, the appointment of a trustee, receiver, liquidator, custodian
or other similar official for itself or any substantial part of its property; ( c) the
commencement against the Insurer of any involuntary case or other proceeding seeking
any relief referred to in the preceding clause (b) which is not contested by the Insurer and
such case or proceeding shall not have been dismissed within sixty (60) days following
the commencement thereof; ( d) the making by the Insurer of an assignment for the
benefit of creditors; ( e) the failure of the Insurer to generally pay its debts or claims under
any of its municipal bond insurance policies as they become due; or (f) the initiation by
the Insurer of any actions to authorize any of the foregoing.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance, deposit
arrangement, lien or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any lease in the nature
thereof and the filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction).
"Liquidity Guaranty Agreement" shall mean that certain Liquidity Guaranty
Agreement dated as of October 1, 1992 by and among the Predecessor Districts and AIG
Financial Products Corp., as amended by Amendment No. I thereto dated as of
August 1, 2000, and as it may be further amended or supplemented from time to time.
"Master Agreement" shall mean that certain Master Agreement for District
Obligations dated as of August 1, 2000, by and between the District and the Orange
County Sanitation District Financing Corporation, as it may be amended from time to
time.
I
I
5
"Maximum Interest Rate" means fifteen percent (15%) per annum; provided that,
for the period during which any Certificate shall constitute a Purchased Certificate, the
Maximum Interest Rate with respect to such Certificate shall be thirty per cent (30%) per
annum.
"Offering Memorandum" shall mean any preliminary or final reoffering
memorandum of the District used with respect to the remarketing of the Certificates.
"Policyholders' Reserve Requirement" means the requirement that the ratio of
the Insurer's Policyholders' Reserves to net insurance in force (i.e., (i) direct insurance
plus (ii) insurance in force assumed less (iii) insurance in force ceded) may not fall below
1/2 of 1 % and remain below 112 of 1 % for a period of ninety (90) days following the
filing of the Insurer with the Wisconsin State Insurance Department of its quarterly
statutory statement reflecting the same.
"Policyholders' Reserves" means the sum of the Insurer's policyholders' surplus
and contingency reserves.
"Prime Rate" means a fluctuating rate of interest equal to the greater of (i) the
rate per annum announced publicly by the Purchaser in New York, New York as the
Purchaser's prime rate, any change in such rate resulting from a change in such prime
rate to be effective on the date of each change in such prime rate announced by the
Purchaser, and (ii) the prevailing Federal Funds rate plus 1 % per annum.
"Purchase Account" means the segregated accounts maintained by the Trustee
for use in connection with the purchase of Certificates pursuant to Section 5.05 of the
Trust Agreement.
"Purchase Date" means a Business Day during the Purchase Period on which the
Purchaser purchases Certificates pursuant to Section 2.02 hereof.
"Purchase Period" means the period on or after 5:00 p.m. April 9, 2001 to and
including the earlier of (i) April 9, 2006, or to an extended date as may become effective
under Section 8.06 hereof or if such day is not a Business Day, the next preceding
Business Day, or (ii) the receipt of a certificate purportedly signed by an officer of the
Trustee stating that this Agreement has been terminated pursuant to the terms of the Trust
Agreement because (x) an Alternate Standby Agreement has been provided under the
Trust Agreement or (y) the Certificates have been defeased in accordance with the
requirements of Article XII of the Trust Agreement, (iii) the receipt of a certificate
purportedly signed by an officer of the Trustee stating that no Certificates remain
Outstanding, (iv) the day after the Purchaser receives notice from the Trustee regarding
the Conversion Date on which the Mode applicable to the Certificates is converted to the
Fixed Rate Mode, or the fifth Business Day following such Conversion Date, whichever
occurs later, (v) the date the Purchaser's obligation to purchase Certificates terminates
and expires pursuant to Section 7.02(a) or 7.02(b) of this Agreement, or (vi) the date
specified in a written notice delivered by the Purchaser to the District, the Remarketing
Agent and the Trustee pursuant to Section 7.02(c) of this Agreement; provided, however,
I
I
6
that the Purchase Period shall not include any period during which the obligation of the
Purchaser to purchase Certificates is suspended pursuant to Section 7.02(a) of this
Agreement.
"Purchase Price" means, with respect to any Certificates purchased by the
Purchaser on any Purchase Date, the aggregate principal amount evidenced thereby plus
accrued and unpaid interests evidenced thereby to such date.
"Purchased Certificate" means Certificates or beneficial interests therein
purchased under the Trust Agreement with amounts obtained hereunder by the Trustee.
"Swap Agreement" shall mean that certain Interest Rate Swap Agreement dated
as of October 1, 1992 between the District and AIG Financial Products Corp., as
amended by Amendment No. 1 thereto dated as of August 1, 2000 and as it may be
further amended or supplemented from time to time.
"Tendered Certificates" means as of any date, the Certificates, or principal
portions thereof, which are subject to purchase pursuant to Sections 5.01, 5.02, 5.03 or
5.04 of the Trust Agreement, other than Certificates which have been remarketed.
"Trust Agreement" has the meaning set forth in the recitals hereof, as the same
may be amended or supplemented from time to time.
SECTION 1.02. Incorporation of Certain Definitions by Reference.
Each capitalized term used herein and not defined herein shall have the meaning provided
therefor in the Trust Agreement or the Agreement for Acquisition and Construction.
ARTICLE II
THE COMMITMENT; FEES
SECTION 2.01. Commitment to Purchase Certificates.
The Purchaser agrees, on the terms and conditions contained in this Agreement, to
purchase Tendered Certificates, for its own account, from time to time during the Purchase
Period at the Purchase Price. The aggregate principal amount of Certificates (or portions thereof
in Authorized Denominations) purchased on any Purchase Date shall not exceed the Available
Principal Commitment of the Purchaser on such date. The interest component of the Purchase
Price shall not exceed the lesser of (1) the Available Interest Commitment of the Purchaser and
(2) the actual amount of accrued interest evidenced by the Certificates so purchased.
SECTION 2.02. Method of Purchasing.
(a) Funding the Purchase Account. No later than 11 :30 a.m. (local time in New York
City) on the Purchase Date, the Trustee shall give the Purchaser notice of the Purchase Price of
the Tendered Certificates required to be purchased by the Purchaser pursuant to Section 2.02(b)
below and the amount of such Purchase Price comprising principal and the amount of such
Purchase Price comprising interest. After receipt of the notice specified in the preceding
I
7
sentence of this paragraph, the Purchaser shall, subject to Section 2.01, and unless the Purchase
Period shall have been terminated or suspended in accordance with Section 7.02 hereof, by
2:00 p.m. (local time in New York City) on the Purchase Date, make available to the Trustee, in
immediately available funds (which funds shall be solely the Purchaser's own funds), to be held
in the Purchase Account as described in Section 5.05 of the Trust Agreement, such Purchase
Price.
(b) Purchase of Certificates. The Trustee shall immediately remit to the Purchaser funds
previously made available to the Trustee pursuant to Section 2.02(a) but which are not used to
purchase Tendered Certificates. The Certificates purchased with moneys made available to the
Trustee as described in Section 2.02(a) above shall constitute Purchased Certificates and
(a) while the system of book-entry described in Section 2.11 of the Trust Agreement is not in
effect, shall be registered in the name of the Purchaser, or any nominee of the Purchaser, and
such Purchased Certificates shall be held by the Trustee, as agent of the Purchaser, and (b) while
such book-entry system is in effect, the ownership of the beneficial interest in such Purchased
Certificates shall be transferred to the Purchaser or its agent. Unless and until revoked by the
Purchaser by written notice to the Trustee, the Purchaser hereby appoints and designates the
Trustee as the agent of the Purchaser for purposes of the foregoing clause (b ); the Trustee hereby
accepts such appointment and designation, agrees that such Purchased Certificates shall be held
for the benefit of the Purchaser, and agrees to make all such notations on its records as may be
appropriate to evidence the foregoing arrangements.
SECTION 2.03. Reduction of Commitment.
Upon any prepayment, payment or provision for payment pursuant to the Trust
Agreement of all or any portion of the principal amount of the Certificates so that such
Certificates shall cease to be Outstanding under the Trust Agreement, the aggregate Available
Principal Commitment of the Purchaser shall automatically be reduced by the principal amount
of such Certificates so prepaid, paid or with respect to which provision for the payment thereof
has been so made. The District agrees to give the Purchaser and the Trustee notice of any
prepayment (other than sinking fund prepayment) or defeasance of the Certificates.
SECTION 2.04. Sale of Certificates.
(a) Right to Sell Certificates. The Purchaser expressly reserves the right to sell, to the
extent permitted by law, at any time, Certificates purchased by it pursuant to this Agreement;
provided that Purchased Certificates may only be sold pursuant to this Section 2.04(a) subject to
the limitation that they may not again be sold, assigned or otherwise disposed of by the purchaser
thereof, beneficially or on the records of the District or the Trustee without obtaining an
authorization from the purchaser that the Remarketing Agent is authorized to sell such Purchased
Certificates on behalf of such purchaser pursuant to Sections 2.06 and 5.06 of the Trust
Agreement. The Purchaser agrees that such sales will be made only to institutional investors or
other entities or individuals which customarily purchase commercial paper or tax exempt
securities in large denominations. After any such sale, the Certificates so sold shall continue to
evidence interest at the Bank Rate until such Certificates are resold by the Remarketing Agent or
until an election not to sell has been made pursuant to Section 2.04(b) hereof.
I
8
(b) Sales by Remarketing Agent. The Purchaser hereby authorizes the Remarketing
Agent to sell Purchased Certificates on behalf of the Purchaser (and any subsequent owner of the
Purchased Certificates, as provided in Section 2.04(a) hereof) pursuant to Section 5.06 of the
Trust Agreement at a price which, together with moneys to be provided by the Trustee under the
Trust Agreement, will equal the Purchase Price. Notwithstanding the foregoing or anything else
contained in this Agreement, the Purchaser or such purchasers shall have the right, by notice to
the Remarketing Agent, to elect not to sell the Purchased Certificates or any portion thereof.
After any such sale by the Remarketing Agent, or any such election not to sell the Purchased
Certificates or any portion thereof, the Purchased Certificates so sold or as to which such election
is made, shall cease to evidence interest at the Bank Rate and shall evidence interest at the rate as
provided for in the Trust Agreement and the Certificates for Certificates which are not Purchased
Certificates.
(c) Notice. The Purchaser hereby agrees to provide notice to the Trustee (which may be
by tested telex or telecopy) when it has received payment of the Purchase Price of Purchased
Certificates that are sold pursuant to this Section 2.04 that states that it has received payment in
full in immediately available funds of such Purchase Price, that the Available Principal
Commitment has been increased by the principal amount of such Purchased Certificates, that the
Available Interest Commitment has been increased as herein provided, and that such Purchased
Certificates may be released.
SECTION 2.05. Commitment Fee.
The District hereby agrees to pay or cause to be paid to the Purchaser a commitment fee
with respect to the commitment of the Purchaser hereunder at the rate of .25 of 1 % per annum
for the duration of this Agreement on the average daily amount of the Available Commitment of
the Purchaser during each portion of such period (after giving effect to any downward
adjustment (x) in the Available Principal Commitment pursuant to clause (b) of the definition
thereof or (y) in the Available Interest Commitment pursuant to clause (a) thereof). Such fee
shall accrue from April 9, 2001 and shall be payable in quarterly installments, each due and
payable in arrears, on the first Business Day of each February, May, August and November
commencing on May 1, 2001 and thereafter occurring during the Purchase Period and on the last
day of the Purchase Period with respect to the quarter (or portion thereof) ending on the last
calendar day of the preceding quarter. Fees payable pursuant to this Section shall be calculated
on the basis of a 365-day year and actual days elapsed. It is understood that such fee shall be
paid by the District on the date due upon submission of an invoice or demand therefor on the part
of the Purchaser.
SECTION 2.06. Upfront Fee.
On the Effective Date the District shall pay to the Bank a nonrefundable upfront fee in
the amount of $5,000 which shall be deemed earned when paid.
SECTION 2.07. Change of Law.
(a) Illegality. If, after the date of this Agreement, the adoption of any governmental rule,
any change in any governmental rule or the applications or requirements thereof (whether such
I
9
change occurs in accordance with the terms of such governmental rule as enacted, as a result of
amendment or otherwise), any change in the interpretation or administration of any
governmental rule by any governmental authority, or compliance by the Purchaser with any
request or directive (whether or not having the force of law) of any governmental authority (a
"Change of Law") shall make it unlawful for the Purchaser to make or maintain its commitment
hereunder, the Purchaser shall immediately notify the Trustee, the District, the Insurer, the
Remarketing Agent and AIG Financial Products Corp. ("AIG-FP") of such Change in Law.
Such notice shall be by telecopy in accordance with Section 8.10 hereof with a copy of such
notice to be sent promptly thereafter by certified mail. Upon giving such notice, the Purchaser
shall not be obligated to purchase Certificates hereunder.
(b) Increased Costs. If, after the date of this Agreement, any Change in Law:
(i) Shall subject the Purchaser to any tax, duty or other charge with respect to
its commitment hereunder, or shall change the basis of taxation of the Purchaser on
Purchased Certificates (except for changes in the rate of taxation on the overall net
income of the Purchaser); or
(ii) Shall impose, modify or hold applicable any reserve, special deposit or
similar requirement against assets held 'by, deposits or other liabilities in or for the
account of, advances or loans by, or any other acquisition of funds by the Purchaser for
the Purchaser's commitment hereunder; or
(iii) Shall impose on the Purchaser any other condition related to its
commitment hereunder;
and the effect of any of the foregoing is to increase the cost to the Purchaser of making, renewing
or maintaining its commitment or to reduce any amount receivable by the Purchaser hereunder;
then the District shall from time to time, upon demand by the Purchaser, pay to the Purchaser
additional amounts sufficient to reimburse the Purchaser for such increased costs or to
compensate the Purchaser for such reduced amounts relating to its commitment hereunder. A
certificate (containing reasonable detail) as to the amount of such increased costs or reduced
amounts, submitted by the Purchaser to the District and to AIG-FP shall, in the absence of
manifest error, be conclusive and binding on the District for all purposes.
(c) Capital Requirements. If, after the date of this Agreement, the Purchaser determines
that (i) any Change of Law affects the amount of capital required or expected to be maintained
by the Purchaser or any person controlling the Purchaser (a "Capital Adequacy Requirement")
and (ii) the amount of capital maintained by the Purchaser which is attributable to or based upon
the commitment or this Agreement must be increased as a result of such Capital Adequacy
Requirement (taking into account the Purchaser's policies with respect to capital adequacy), the
District shall pay to the Purchaser, upon demand of the Purchaser, such amounts as the Purchaser
shall determine are necessary to compensate the Purchaser for the increased costs to the
Purchaser of such increased capital. A certificate of the Purchaser setting forth in reasonable
detail the computation of any such increased costs, delivered by the Purchaser to the District and
to AIG-FP shall, in the absence of manifest error, be conclusive and binding on the District for
all purposes.
I
ARTICLE III
THE BANK RATE
SECTION 3.01. Purchased Certificates to Evidence Interest at Bank Rate.
10
(a) Any Certificate purchased by the Purchaser (whether or not such Purchased
Certificate is subsequently transferred or sold by the Purchaser to another person) pursuant to
this Agreement shall evidence interest at the Bank Rate for the period commencing from the date
that the Purchaser shall have purchased such Certificate and, subject to Section 2.04(a) and the
last sentence of this Section 3.0l(a), continuing until the Purchaser (or a purchaser from the
Purchaser pursuant to Section 2.04(a) hereof) shall no longer be the owner of such Certificate;
provided, however that if an Event of Default shall have occurred and be continuing, the interest
rate evidenced by the Purchased Certificates shall be the Default Rate; provided, further that the
interest rate evidenced by Purchased Certificates for any interest period shall not exceed the
Maximum Interest Rate. With respect to any Certificates which the Purchaser (or any
subsequent purchaser pursuant to Section 2.04(a)) so elects not to sell pursuant to
Section 2.04(b), the interest rate evidenced by such Certificates for the period commencing on
the day the Purchaser or any subsequent purchaser pursuant to Section 2.04(a) so elects not to
sell such Certificates until such time as the Purchaser or such purchaser shall cease to be the
holder of such Certificates shall be equal at any time during such period to the interest rate
applicable to Certificates other than Purchased Certificates and during such period such
Certificates will not constitute Purchased Certificates.
(b) Other than in accordance with the Trust Agreement applicable to all of the
Certificates, the parties hereto acknowledge and agree that there shall be no accelerated payment
of principal evidenced by Purchased Certificates.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Purchaser.
The Purchaser represents and warrants to the District as of the Closing Date that:
(a) Organization; Power. The Purchaser (i) has all the requisite power and authority
(A) to enter into this Agreement and (B) to carry out and consummate all transactions
contemplated by this Agreement, and (ii) has by proper action duly authorized the execution and
delivery of this Agreement.
(b) Conflicts. The execution and delivery of this Agreement and the consummation of
the transactions herein contemplated will not conflict with or constitute on the part of the
Purchaser a breach of or default under its certificate of incorporation or bylaws, or any statute,
indenture, mortgage, deed of trust, lease, note, agreement or instrument to which the Purchaser is
a party or by which it or its properties are bound, or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Purchaser or any of its activities or
properties.
I
11
(c) Regulatory Approvals. No authorization, approval or other action or notice to or
filing with any governmental authority or regulatory body is necessary for the due execution,
delivery and performance by the Purchaser of this Agreement.
(d) Valid and Binding Obligation. This Agreement is the legal, valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws or equitable principles relating to or limiting creditors' rights generally,
or equitable principles when equitable remedies are sought.
SECTION 4.02. Representations and Warranties of the District.
The District represents and warrants to the Purchaser with respect to itself as of the
Closing Date that:
(a) Organization; Power. The District is a county sanitation district duly organized and
existing under the laws of the State of California and has all requisite power and authority,
corporate or otherwise, (i) to conduct its business, to own its properties and to carry on its
activities, (ii) to execute, deliver and perform its obligations under the Certificate Documents to
which the Distiid is a party, and (iii) to execute, deliver or adopt, as the case may be, and
perform its obligations under all other agreements and instruments executed and delivered by the
District pursuant to or in connection with this Agreement.
(b) Conflicts. The execution and delivery of this Agreement and the Certificate
Documents to which the District is a party, and the consummation of the transactions
contemplated herein and therein will not conflict with or constitute, on the part of the District, a
material breach of or default under any statute, indenture, mortgage, deed of trust, lease, note
agreement or other agreement or instrument to which the District is a party or by which it or its
properties are bound, or any order, rule or regulation of any court or governmental agency or
body having jurisdiction of the District or any of its activities or properties which conflict, breach
or default could have a material adverse effect on the validity of this Agreement or the ability of
the District to perform its obligations hereunder.
(c) Valid and Binding Obligations. This Agreement is the legal, valid and binding
obligation of the District, enforceable against the District in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or
other laws or equitable principles relating to or limiting creditors' rights generally, or equitable
principles when equitable remedies are sought.
(d) Financial Condition. The District's most recent Financial Statements and its Annual
Report, copies of which have been furnished to the Purchaser, have been prepared in conformity
with generally accepted accounting principles (except as noted therein) and fairly present the
financial condition of the District as at the date. thereof and the results of its operations for the
period covered thereby. There has been no material adverse change in the financial condition of
the District since the date of the District's most recent Financial Statements.
(e) Regulatory Approvals. On the Closing Date, each authorization, consent, approval,
license or formal exemption from, or filing, declaration or registration with, any court,
I
12
governmental agency or regulatory authority (federal, state or local), required by the District in
connection with the execution and delivery of this Agreement, and the performance by the
District of its obligations under the Certificate Documents to which it is a party which could have
a material adverse effect on the validity of this Agreement \)r the ability of the District to perform
its obligations under the Certificate Documents, has been obtained or made and is in full force
and effect.
(f) Compliance with Laws and Contracts. The execution and delivery of this
Agreement, and the performance by the District of its obligations under any Certificate
Document to which the District is a party, have been duly authorized by the District and will not
(i) violate any law, rule, regulation, order, writ, judgment, injunction, decree, determination or
award presently in effect having applicability to the District which violation could have a
material adverse effect on the validity of this Agreement or the ability of the District to perform
its obligations hereunder, (ii) result in a breach of or constitute a default under any indenture,
ordinance or loan or credit agreement or any other agreement, lease or instrument to which the
District is a party or by which it or its properties may be bound or affected which breach or
default could have a material adverse effect on the validity of this Agreement or the ability of the
District to perform its obligations hereunder, or (iii) result in, or require, the creation or
imposition of any Lien upon or with respect to any of the properties now owned or hereafter
acquired by the District which Lien could have a material adverse effect on the validity of this
Agreement or the ability of the District to perform its obligations hereunder.
(g) Certificate Documents. All of the representations and warranties of the District
contained in the Certificate Documents to which the District is a party are true and correct in all
material respects.
(h) Defaults. No Event of Default or an event which with the lapse of time, the giving of
notice, or both, would constitute an Event of Default as to the District has occurred and is
continuing.
ARTICLE V
COVENANTS OF THE DISTRICT
SECTION 5.01. Affirmative Covenants.
During the term of this Agreement, and until the obligations of the District to the
Purchaser hereunder are paid in full and the Purchaser has no further commitment hereunder,
unless the Purchaser shall otherwise consent in writing, the District covenants, as to itself, as set
forth below:
(a) Maintain Policy. The District shall maintain the Policy and shall use its best efforts
to obtain substitute or additional insurance for the payment of principal and interest evidenced by
the Certificates if the Policy becomes invalid or uncollectible as to all or any portion of the
principal and interest evidenced by the Certificates throughout the term of this Agreement in the
principal amount of the Outstanding Certificates and accrued interest evidenced thereby.
I
I
13
(b) Notice of Default. As soon as practicable, but in any event not more than three (3)
Business Days after the general manager, general counsel or chief financial officer of the District
shall have obtained knowledge of the occurrence of an Event of Default or Default, provide to
the Purchaser the written statement of an authorized officer of the District setting forth the details
of each such Event of Default or Default and the action which the District proposes to take with
respect thereto.
(c) Financial Statements. Within one hundred eighty (180) days after the end of each
fiscal year of the District, provide to the Purchaser financial statements consisting of a balance
sheet of the District as at the end of such period, a statement of income and retained earnings of
the District for such period and a statement of cash flows of the District for such period, setting
forth in comparative form the corresponding figures (if any) for the preceding fiscal year, all in
reasonable detail and accompanied by an audit report of a nationally recognized independent
certified public accountants stating that they have (except as noted therein) been prepared in
accordance with generally accepted accounting principles consistently applied. Within ninety
(90) days after the end of each quarter of the District's fiscal year, and concurrently with the
deli very of the financial statements required by this Section 5. 01 ( c ), the District shall provide to
the Purchaser a certificate from an authorized financial officer of the District in the form set forth
as Exhibit B attached hereto and made a part hereof stating, as set forth in such certificate, that
none of the Events of Default or Defaults identified in such certificate has come to his attention
which was continuing at the end of such period or on the date of his certificate, or indicating the
nature of such Default or Event of Default and the action which the District proposes to take with
respect thereto.
(d) Preservation of Existence, etc. Preserve and maintain its existence, rights and
privileges in the State of California, and qualify and remained qualified and authorized to do
business in each other jurisdiction in which such qualification is necessary in view of its
activities or operations; provided that nothing herein shall preclude the merger or consolidation
of the District to the extent permitted by the Qualified Swap.
(e) Use of Proceeds of Certificates. Use the proceeds from the sale of Certificates as
provided in the Trust Agreement.
(f) Use of Proceeds of Purchase Hereunder. Use or cause the proceeds from purchase
of Certificates made hereunder to be used solely to pay for the Purchase Price of Tendered
Certificates as more fully described in Section 5.03 of the Trust Agreement.
(g) Certain Obligations. Use its best efforts to cause the Insurer at all times to comply
with the Policy, and each of the Trustee and the Remarketing Agent at all times to comply with
the terms of the Certificate Documents to which it is a party.
(h) Inspection. Upon reasonable notice permit any Person designated by the Purchaser
in writing, at the Purchaser's expense, to visit any of the properties of the District, to examine the
corporate books and financial records of the District pertaining to the Certificates, this
Agreement or the Certificate Documents to which it is a party and make copies thereof or
extracts therefrom, and to discuss the affairs, finances and accounts of the District pertaining to
the Certificates, this Agreement or the Certificate Documents to which it is a party with the
I
14
principal officers of the District and its independent public accountants, all at such reasonable
times and as often as the Purchaser may reasonably request.
(i) Compliance with Agreements. Observe and perform all of its obligations under this
Agreement, the Certificates and the other Certificate Documents to which it is a party (including
the Trust Agreement).
(j) Certain Notices. Furnish to the Purchaser a copy of any notice, certification, demand
or other writing or communication given by the Insurer or the Trustee to the District or by the
District to the Insurer or the Trustee under or in connection with the Certificates or any of the
Certificate Documents, in each case within seven (7) days after the receipt or giving of the same.
(k) Litigation Notice. Give the Purchaser prompt notice of any action, suit or proceeding
known to it at law or in equity or by or before any governmental entity or other agency which, if
adversely determined, would materially impair the ability of the District to carry out its
obligations under the laws, rules and regulations governing the District, this Agreement, the
Certificates, any other Certificate Document or any other document, instrument or agreement
required hereunder or thereunder, or would materially and adversely affect the District's assets or
financial condition.
(I) Other Notices. Promptly give written notice to the Purchaser of (i) any material
dispute which may exist between the District and either the Insurer or the Trustee or any dispute
in connection with any transaction contemplated under this Agreement, or (ii) any matter or
event which may result in a material adverse change in the District's financial condition or
operations.
(m) Replacement of Insurer. Upon receipt of written notice from the Purchaser, take
the necessary action to replace the Insurer or to provide an additional insurance policy insuring
payment of the principal and interest evidenced by the Certificates, if at any time the Certificates
are rated below "AA" by Standard & Poor's Ratings Group or "Aa2" by Moody's Investors
Service.
SECTION 5.02. Negative Covenants.
The District covenants, undertakes and agrees with the Purchaser that, from the date of
execution hereof and so long as any Certificate remains Outstanding or any amounts remain due
and owing to the Purchaser hereunder, it will not:
(a) Compliance with Laws, etc. Violate any laws, rules, regulations, or governmental
orders to which it is subject, which violation involves a reasonable possibility of materially and
adversely affecting the District's financial condition, business or results of operations or would
materially adversely affect the District's ability to perform its obligations under this Agreement
or the Certificate Documents to which it is a party.
(b) Liens. Except as provided in or permitted by the Agreement for Acquisition and
Construction, issue or incur any bonds, notes, debentures, obligations or other evidences of
indebtedness of similar nature, or cause to be executed and delivered any evidences of interests
therein, other than the Certificates, payable out of or secured by a security interest in or a pledge
I
15
or assignment of the District's Net Enterprise Revenues or other moneys, securities or funds held
or set aside by the District under the Trust Agreement; and that it will not create or cause to be
created any lien or charge on Net Revenues, or such moneys, securities or funds other than those
permitted by the Trust Agreement or Agreement for Acquisition and Construction.
(c) Other Indebtedness. Except as provided in Article IV of the Agreement for
Acquisition and Construction, create or incur any indebtedness for borrowed money with respect
to Net Revenues other than bond anticipation notes, bonds and other indebtedness which is on a
parity with or subordinated as to payment to the Installment Payments.
(d) Amendments. Amend or modify any Certificate Document to which it is a party in a
manner relating in any way to this Agreement or having a material adverse effect on the
District's ability to pay when due its Installment Payments, without the prior written consent of
the Purchaser; or amend, modify, terminate or grant, or permit the amendment, modification,
termination or grant of, any waiver under, or consent to, or permit or suffer to occur any action or
omission which results in, or is equivalent to, such an amendment, modification, or grant of a
waiver under, any Certificate Document in any material respect without the prior written consent
of the Purchaser.
(e) Offering Memorandum. Refer to the Purchaser in any Offering Memorandum or
make any changes in reference to the Purchaser in any Offering Memorandum without the
Purchaser's prior written consent thereto. Upon the specific request of the District therefor in
each instance, the Purchaser agrees to provide such information with respect to the Purchaser as
may be reasonably requested by the District and required to enable the District to comply with
applicable disclosure requirements for the Offering Memorandum.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. Conditions to Effectiveness of this Agreement.
It shall be a condition precedent to the effectiveness of this Agreement that all corporate
and other proceedings taken in connection with the transactions contemplated hereby and all
documents incident thereto shall be in form and substance satisfactory to the Purchaser and that
the Purchaser shall have received on or prior to the Closing Date:
(i) a true and complete original of this Agreement;
(ii) a photocopy of any amendment to the Policy certified by the Trustee to be
a true copy thereof;
(iii) resolution of the District authorizing this Agreement or the other related
documents, certified on the Closing Date by the Secretary of the District;
(iv) copies of all Certificate Documents;
I
16
(v) signature and incumbency certificates, dated the Closing Date, of the
signatories of the District executing this Agreement;
(vi) copies of the legal opinions rendered in connection with the execution and
delivery of the Certificates, and the delivery of amendments to the Certificate
Documents; and
(vii) an executed opinion of counsel to the District in the form of Exhibit A
hereto.
ARTICLE VII
EVENTS OF DEFAULT; REMEDIES
SECTION 7.01. Events of Default.
Each of the following shall constitute an "Event of Default" hereunder:
(a) Any principal or interest evidenced by the Certificates is not paid by the District when
due and an insurance payment in respect of such principal or interest is not paid by the Insurer
when, as, and in the amounts required to be paid pursuant to the terms of the Policy; or
(b) Nonpayment of any amounts due and payable under Section 2.05 hereof within five
(5) Business Days after the Insurer and the District have received notice from the Purchaser that
the same were not paid when due; or
(c) Nonpayment of any other fees, or any other amount, when due hereunder, if such
failure to pay when due shall continue for seven (7) Business Days after written notice thereof to
the District and the Insurer by the Purchaser; or
( d) Any representation or warranty made by the District under or in connection with this
Agreement or any of the Certificate Documents shall prove to be untrue in any material respect
on the date as of which it was made; or ·
(e) The breach by the District of any of the terms or provisions of Section 5.0l(a), (b),
(d), (e) or (f) or 5.02 hereof; or
(f) The breach by the District of any of the terms or provisions of Section 5.0l(m) and
such breach remains unremedied for thirty (30) days; or
(g) The breach by the District of any of the terms or provisions of Section 5.0l(c), (g),
(h), (i), (j), (k) or (I) and such breach remains unremedied for ten ( 10) Business Days after
receipt of written notice from the Purchaser; or
(h) A proceeding is instituted in a court having jurisdiction over the District, any of its
activities or any of its properties seeking an order for relief, rehabilitation, reorganization,
conservation, liquidation or dissolution in respect of the District under applicable law and such
proceeding is not terminated for a period of sixty (60) consecutive days or such court enters an
order granting the relief sought in such proceeding or the District shall institute or take any
I
17
action for the purposes of instituting any such proceeding; or the District shall become insolvent
or unable to pay its debts as they mature or shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to
the entry of an order for relief in an involuntary case under any such law or shall consent to the
appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian or
sequestrator (or other similar official) of the District, or for any substantial part of its property, or
shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts
or claims as they become due, or shall take any corporate action in furtherance of any of the
foregoing; or
(i) The District shall default in any payment of principal of, or interest on, any obligation
for borrowed money (or of any obligation under conditional sale or other title retention
agreement or of any obligation secured by purchase money mortgage or of any obligation under
notes payable or drafts accepted representing extensions of credit) payable from Net Revenues in
the aggregate amount of $1,000,000 beyond any period of grace provided with respect thereto, or
the District shall default in the performance or observance of any other agreement, term or
condition contained in any agreement under which any such obligation is created (or if any other
event or default thereunder or under such agreement shall occur and be continuing) and the effect
of such event or default is to cause, or to permit the holder or holders of such obligation (or a
trustee on behalf of such holder or holders) to cause, such obligation to become due prior to its
stated maturity; provided, that for purposes of calculating the an1otmt of such defaulted
obligations, trade payables and operating expenses incurred in the ordinary course of business by
the District, the validity of which is being contested in good faith by the District by appropriate
legal action and as to which no final order or judgment has been entered, will not be included,
subject to the limitation that in no event may defaulted obligations of any kind for the District
exceed $1,000,000; or
(j) The failure on the part of the District to perform or observe any other material term,
covenant or agreement contained in this Agreement or any of the other Certificate Documents
(other than those covenants referenced in the other clauses of this Section 7. 01) on its part to be
performed or observed and (i) with respect to any such material term, covenant or agreement
contained herein, any such failure remains unremedied for thirty (30) days after written notice
thereof has been given to the District; and (ii) with respect to any such material term, covenant or
agreement contained in any of the other Certificate Documents, any such failure remams
unremedied after any applicable grace period specified in such Certificate Document; or
(k) The Trust Agreement shall terminate or cease to be of full force and effect, other than
as a result of any prepayment or defeasance in full of the Certificates; or
(I) The occurrence and continuance of any "Event of Default" as defined m the
Agreement for Acquisition and Construction; or
(m) An Insurer Event oflnsolvency shall have occurred; or
(n) Any officer of the Insurer shall, in writing, claim that the Policy, with respect to the
payment of principal or interest evidenced by the Certificates, is not valid and binding on the
Insurer, and repudiate the obligations of the Insurer under the Policy with respect to payment of
I
18
principal and interest evidenced by the Certificates, or the Insurer shall initiate any legal
proceedings to seek an adjudication that the Policy, with respect to the payment of principal or
interest evidenced by the Certificates, is not valid and binding on the Insurer; or
( o) Any governmental authority or any court with jurisdiction to rule on the validity of
the Policy shall announce, find or rule that the Policy is not valid and binding on the Insurer; or
(p) The occurrence of an "Early Termination Date", as defined in the Swap Agreement;
or
(q) Any reduction or suspension of the rating to below "AA" by Standard & Poor's
Ratings Group or "Aa2" by Moody's Investors Service on the Certificates except as a result of a
reduction in the Purchaser's rating; or
(r) Any default by the Insurer in making payment when, as and in the amounts required
to be made pursuant to the express terms and provisions of any other insurance policy associated
with an issue which is rated by either Standard & Poor's Ratings Services or Moody's Investors
Service or surety bond issued by the Insurer associated with an issue which is rated by either
Standard & Poor's Ratings Services or Moody's Investors Service; or
(s) Any failure of the Insurer to maintain the Policyholders' Reserve Requirement.
SECTION 7.02. Remedies.
(a) Upon the occurrence of an Event of Default as specified in clause (n) or ( o) of
Section 7.01 hereof, the Purchaser's obligations under Section 2.01 hereof shall be immediately
suspended without notice or demand and thereafter the Purchaser shall be under no obligation to
purchase hereunder until such obligation is reinstated as described below. Promptly upon the
Purchaser's obtaining knowledge of any such Event of Default, the Purchaser shall notify the
District, the Trustee and the Remarketing Agent of such suspension in writing; provided, that the
Purchaser shall incur no liability or responsibility whatsoever by reason of its failure to give such
notice and such failure shall in no way affect the suspension of the Purchaser's obligations
hereunder. If a court with jurisdiction to rule on the validity of the Policy shall thereafter enter a
final, nonappealable judgment that the Policy is not valid and binding on the Insurer, then the
Purchaser's obligation to purchase under Section 2.01 hereof shall immediately terminate and
expire without notice or demand. If a court with jurisdiction to rule on the validity of the Policy
shall find or rule that the Policy is valid and binding on the Insurer, then the Purchaser's
obligation to purchase under Section 2.01 hereof shall thereupon be reinstated (unless the
Purchase Period shall otherwise have been terminated as provided in this Agreement).
Notwithstanding the foregoing, if three years after the effective date of suspension of the
Purchaser's obligation to purchase Certificates pursuant to this paragraph (a) litigation is still
pending and a judgment regarding the validity of the Policy has not been obtained, then the
Purchaser's obligation to purchase shall, unless previously terminated pursuant to any other
provision thereof, at such time terminate or expire without notice or demand.
(b) Upon the occurrence of an Event of Default as specified in clause (a), (m) or (r) of
Section 7.01 hereof, the Purchaser's obligations under Section 2.01 hereof shall immediately
terminate and expire without notice or demand. Promptly upon the Purchaser's obtaining
I
19
knowledge of any such Event of Default, the Purchaser shall give written notice of the same to
the District, the Trustee and the Remarketing Agent; provided that the Purchaser shall incur no
liability or responsibility whatsoever by reason of its failure to give such notice and such failure
shall in no way affect the termination of the Purchaser's obligations hereunder.
(c) Upon the occurrence of an Event of Default as specified in clause (b), (c) or (q) of
Section 7.01 hereof, the Purchaser may give written notice of such Event of Default and that the
Purchaser's obligations hereunder shall terminate on the close of business fifteen days from
receipt of such notice, to the District, the Trustee and the Remarketing Agent and directing a
Mandatory Purchase of the Certificates pursuant to clause (ii) of Section 5.04(a) of the Trust
Agreement. The Purchaser's obligations under Section 2.01 hereof shall terminate on the close
of business fifteenth (15th) day after receipt by the Trustee of such written notice.
( d) Except as otherwise provided in paragraph ( e) below, upon the occurrence of any
Event of Default, the Purchaser may, in its sole discretion, exercise any other remedies available
to the Purchaser at law or in equity; provided, however, that the Purchaser's obligation to
purchase Certificates shall not be suspended or terminated except as-provided in paragraph (a),
(b) or (c) of this Section 7.02.
(e) The remedies provided in paragraph (a) or (b) of this Section 7.02 shall only be
exclusive with respect to any Events of Default to the extent such remedies are obtained by the
Purchaser. If, for any reason whatsoever the Purchaser is not able to obtain all such remedies,
then the Purchaser hereby reserves the right to pursue any other available remedies, other than
acceleration of any amounts due under this Agreement, whether provided by law, equity or this
Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Waiver; Parties in Interest.
No failure or delay on the part of the Purchaser, any purchaser of Purchased Certificates
or the District in exercising any right, power or privilege hereunder and no course of dealing
shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein expressly provided are cumulative and
not exclusive of any rights or remedies which the Purchaser, any purchaser of Purchased
Certificates or the District would otherwise have. No notice to or demand on the District or any
other party hereto in any case shall entitle the District or such other party to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the rights of the
Purchaser or any purchaser of Purchased Certificates to any other or further action in any
circumstances without notice or demand. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing signed by the
parties hereto and, in the case of any change, waiver, discharge or termination which would
adversely impact the rights of the Insurer hereunder, the Insurer. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective successors and
I
20
assigns of the parties hereto; provided, however, that the District may not assign or transfer any
of their interest hereunder without the prior written consent of the Purchaser.
SECTION 8.02. GOVERNING LAW.
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT
REFERENCE TO CHOICE OF LAW DOCTRINE.
SECTION 8.03. Counterparts; Captions.
(a) This Agreement may be simultaneously executed in several counterparts, each of
which shall be deemed an original, and it shall not be necessary in making proof of this
Agreement to produce or account for more than one such counterpart.
(b) The captions in this Agreement are for convenience of reference only and shall not
affect the meaning or construction of or define or limit any of the provisions hereof.
SECTION 8.04. Fees; Expenses; Documentary Taxes; Indemnification.
(a) The District agrees, whether or not the transactions hereby contemplated shall be
consummated, to pay, and save the Purchaser harmless against liability for the payment of, all
costs of the enforcement of, or the preservation of~ any rights under this Agreement, the other
Certificate Documents, the Certificates, and related documents, and all stamp and documentary
taxes (including interest and penalties, if any) which may be payable in respect of such
documents.
(b) To the maximum extent permitted by law, the District hereby agrees to indemnify,
defend and hold the Purchaser harmless from and against all liability (including, without
limitation, interest, penalties and all reasonable attorneys' fees) to which the Purchaser may
become subject insofar as such liability arises out of or is based upon a suit, proceeding,
investigation or governmental action brought or taken in connection with this Agreement, the
other Certificate Documents or related documents or the use (or the proposed or potential use) of
the proceeds of any purchase under this Agreement, except to the extent such liability is a result
of the Purchaser's gross negligence or willful misconduct.
( c) Any action taken or omitted by the Purchaser, under or in connection with this
Agreement or drafts or documents relating thereto, if taken or omitted without gross negligence
or willful misconduct, shall be binding upon the District and shall not put the Purchaser under
any resulting liability to the District.
( d) To the maximum extent permitted by law, the District hereby agrees at all times to
protect, indemnify and save harmless the Purchaser from and against any and all claims, actions,
investigations, suits and other legal proceedings, and from and against any and all losses, claims,
demands, liabilities, damages, costs, charges, counsel fees and other expenses which the
Purchaser may, at any time, sustain or incur by reason of or in consequence of or arising out of
the execution and delivery of this Agreement, other than as a result of its gross negligence or
willful misconduct, or information furnished by the Purchaser in writing to the District for use in
I
21
the Offering Memorandum and so used which information is held by a court of competent
jurisdiction to contain an untrue statement of a material fact or to omit to state a material fact
required to be stated therein to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. The Purchaser shall not, in any
way, be liable for any failure by the Purchaser to purchase Tendered Certificates under this
Agreement as a result of any act of a governmental authority or any other cause beyond the
control of the Purchaser. The obligations of the District under this Section shall survive the
payment of the Certificates and the termination of this Agreement.
SECTION 8.05. Term of the Agreement.
The term of this Agreement shall be until the first to occur (x) the last day of the Purchase
Period, (y) the payment or provision for payment of the principal and interest evidenced by the
Certificates or (z) written notification from the Trustee (delivered in compliance with Section 2.3
of the Liquidity Guaranty) that it has elected to terminate this Agreement; provided, however,
that the District shall remain obligated for any amounts due hereunder or under Purchased
Certificates.
SECTION 8.06. Extension of Purchase Period.
The District, or if the Liquidity Guaranty Agreement is in effect and AIG-FP is not in
default thereunder, AIG-FP, may from time to time request an extension of the Purchase Period
by delivering to the Purchaser a written request on or prior to the sixtieth (60th) day preceding
the expiration of the Purchase Period (as extended pursuant to this Section), but no earlier than
the ninetieth (90th) day prior to the expiration of the Purchase Period. Within thirty (30) days
following its receipt of a request for an extension, the Purchaser shall give written notification to
the District, the Insurer, AIG-FP and the Trustee, as to whether it elects to extend the Purchase
Period; provided, that if the Purchaser fails to give any such notice, such request shall be deemed
to have been denied and this Agreement shall expire at the end of the Purchase Period then in
effect. If the Purchaser consents to any extension request, the Purchase Period shall be extended
to such date occurring 364 days after the currently scheduled expiration date of the Purchase
Period.
SECTION 8.07. Survival of Representations and Warranties.
All representations and warranties of the District and the Purchaser contained in this
Agreement shall survive delivery of this Agreement and the transactions contemplated hereby.
The obligation of the District to pay the Purchaser its fees pursuant to Section 2.05 hereof shall
survive the payment of the Certificates, the Purchased Certificates and terminatioh of this
Agreement.
SECTION 8.08. Right of Seto.ff.
In addition to any rights now or hereafter granted under applicable law and not by way of
limitation of any such rights, during the continuance of any Event of Default, the Purchaser is
hereby authorized at any time and from time to time so long as no Certificates are then
Outstanding, without notice to the District or to any other person or entity, any such notice being
hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or
I
22
special) and any other indebtedness at any time held or owing by the Purchaser to or for the
credit or the account of the District against and on account of the obligations and liabilities of the
District to the Purchaser under this Agreement, including (without limitation) all claims of any
nature or description arising out of or connected with this Agreement irrespective of whether or
not the Purchaser shall have made any demand hereunder.
SECTION 8.09. Severability.
If any provision of this Agreement shall be held or deemed to be or shall in fact be
illegal, inoperative or unenforceable, the same shall not affect any other provision or provisions
herein contained or render the same invalid, inoperative or unenforceable to any extent
whatsoever.
SECTION 8.10. Notices.
All notices and other communications to or upon the respective parties hereto shall be
sent to such party by mail, facsimile, telex or hand delivery at the address for such party set forth
below, or such other address as such party shall notify the other parties hereto in writing:
If to the Purchaser:
Lloyds TSB Bank plc
575 Fifth Avenue
17 111 Floor
New York, NY 10017
Telephone: (212) 930-8914
Telecopy: (212) 930-5098
Attention: Vice President
To the District:
Orange County Sanitation District
10844 Ellis Avenue
Fountain Valley, California 92708-8127
Telephone: (714) 593-7100
Telecopy: (714) 962-0356
Attention: General Manager
To the Insurer:
Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Telephone: (212) 668-0340
Telecopy: (212) 785-1178
Attention: General Counsel
I
To the Trustee:
State Street Bank and Trust Company of California, N.A.
633 West Fifth Street, li11 Floor
Los Angeles, California 90071
Telephone: (213) 362-7345
Telecopy: (213) 362-7357
Attention: Corporate Trust Department
To AIG-FP:
AIG Financial Products Corp.
100 Nyala Farm
Westport, Connecticut 06880
Telephone: (203) 222-4700
Telecopy: (203) 222-4780
Attention: Structured Finance Group
Fully Supported Group
SECTION 8.11. Place of Payment.
23
All payments are due to the Trustee hereunder shall be made by transfer to the Trustee at
the following account:
State Street Boston
ABA # 011000028
CF: Corporate Trust
AIC # 9000-298-2
Attention: LA Group
All payments due to the Purchaser hereunder shall be made by transfer to the Purchaser at
the following account:
Bank of America, New York
ABA # 026009593
Account Name: Lloyds TSB Bank plc, Miami
Account# 6550101938
SECTION 8.12. Participation.
The Purchaser shall have the right at any time to sell, assign, grant or transfer
participations in all or part of its obligations hereunder and the obligations of the District
hereunder to any bank or financial institution without the consent of or notice to the District;
provided, that any participation shall not relieve the Purchaser from any of its obligations under
this Agreement, and the District, the Trustee and the Remarketing Agent may deal exclusively
I
24
with the Purchaser for all purposes of this Agreement. The Purchaser may disclose to any
participants or prospective participants any information or other data or material in the
Purchaser's possession relating to this Agreement, any Certificate Document, the Insurer and the
District, without the consent of or notice to the District or the Insurer.
SECTION 8.13. Payment Obligations oftlte District.
Notwithstanding anything contained herein, the District shall not be required to advance
any moneys derived from any source of income other than Net Revenues to pay any payments
required to be made by it under this Agreement, or for the performance of any agreements or
covenants required to be performed by it contained herein.
The obligation of the District to pay any payments required to be made by it hereunder is
a special obligation of the District payable, in the manner provided herein, solely from Net
Revenues, and does not constitute a debt of the District or of the State of California, or of any
political subdivision thereof, in contravention of any constitutional or statutory debt limitation or
restriction. Neither the faith and credit nor the taxing power of the District or the State of
California, or any political subdivision thereof, is pledged to the payment of the payments
required to be made by the District under this Agreement.
This Agreement constitutes a Reimbursement Obligation entered into with respect to a
Senior Obligation (the 1992 Agreement for Acquisition and Construction); this Agreement
therefore constitutes a Senior Contract and, consequently, a Senior Obligation and, as such, shall
be subject to the provisions of the Master Agreement and shall be afforded all of the advantages,
benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement.
Capitalized undefined terms used in this Section 8.13 shall have the meanings ascribed
thereto in the Master Agreement.
I
S-1
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed by their duly authorized officers, all as of the date first above written.
[SEAL]
Attest
By: ____________ _
Secretary to the Board of Directors
ORANGE COUNTY SANITATION DISTRICT
By:
---------------~ Name:
Title:
I
LLOYDS TSB BANK PLC,
acting through its Miami Agency
Name:
Title:
By: _______________ _
Name:
Title:
S-2
I
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A.,
as Trustee
By:
~~~~~~~~~~~~~~
Name:
Title:
S-3