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CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION
From: Barbara Pachon, Director of Finance
Subject:
Resolution approving the form of and
authorizing the execution and delivery of a
purchase and sale agreement and related
documents with respect to the sale ofthe City
of San Bernardino's Proposition lA
Receivable from the State; and directing and
authorizing certain other actions m
connection therewith.
Department: Finance
Council Meeting Date: Oct. 19, 2009
Synopsis of Previous Council Action:
August 17,2009: Resolution 2009-305 adopted approving the City of San Bernardino's FY
2009-2010 Budget.
Recommended motion:
Adopt Resolution
/).za.., CC')'tu:zd-/
.
Signature
Contact person: Barbara Pachon, Director of Finance
Phone: x 5242
Supporting data attached: staff report, Prop lA agreement
Ward:
all
$2,938,300 funds to City
Funding Requirements:
Amounts:
Source:
Proceeds from sale of Prop lA Receivable to State
Finance:
Council Notes:
Agenda Item No. --12
to,/q-oe;
CITY OF SAN BERNARDINO REQUEST FOR COUNCIL ACTION
STAFF REPORT
SUBJECT:
A resolution approving the form of and authorizing the execution and delivery of a purchase and
sale agreement and related documents with respect to the sale of the City of San Bernardino's
Proposition lA receivable from the State; and directing and authorizing certain other actions in
connection therewith.
BACKGROUND
Factored into the FY 2009-2010 Adopted Budget are the estimated proceeds that the City will
receive through participation in the State's "Proposition JA Securitization Program." At the
time the budget was adopted, the City learned that the State would be withholding (or
"borrowing") 8% the City's estimated local property tax for FY 2009-2010, which equates in
dollars to approximately $2,938,300. The State's authority to borrow this money from cities
comes from the State Legislature's recent budget action to suspend Proposition lA. Proposition
lA was passed by California voters in 2004 to ensure local property tax and sales tax revenues
remain with local government thereby safeguarding funding for public safety, health, libraries,
parks, and other local services. Provisions can only be suspended if the Governor declares a
fiscal necessity and two-thirds of the Legislature concur. The emergency suspension of
Proposition lA was passed by the Legislature and signed by the Governor as ABX4 14 and
ABX4 15 as part of the 2009-10 budget package on July 28, 2009. The legislation requires the
state to repay cities the borrowed funds plus interest (at a rate of2%) by June 30, 2013.
To mitigate this loss of revenue and the resulting impact to cities' cash flow, the State, in
conjunction with the suspension of Proposition lA, also created the "Proposition 1A
Securitization Program" which allows cities to essentially sell their Proposition lA receivables
to the "California Statewide Communities Development Authority" (known as "Califomia
Communities"). California Communities is a joint powers authority sponsored by the California
State Association of Counties and the League of California Cities. The sale of our Proposition
IA receivable will provide the City with 100% of its Proposition lA receivable ($2,938,300) in
two equal installments, on January 15, 2010 and May 3, 2010. All costs related to this financing
will be borne by the State of California. The City of San Bernardino will not have to pay any
interest cost or costs of issuance in connection with its participation.
In order to participate in the program the City's resolution of the Mayor and Common Council
authorizing participation in the program must be adopted by November 6th. Additionally, all
executed documents must be received by California Communities no later than November 6th,
2009.
It is important to note that the State legislature is currently reviewing a clean-up bill, SB67 which
would provide for a few critical changes to the enacted legislation, including but not limited to
providing for: financing to occur in November; county auditor certification of amount of Prop
lA receivable; tax-exempt structure; California Communities as the only issuer; more flexibility
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on bond structure (interest payments, state payment date and redemption features); and sales
among local agencies. As of the time of this writing, the bill had not yet been passed and signed
into law, but California Communities expects that to occur prior to funding the program. If for
any reason SB 67 is not enacted and the bonds cannot be sold by December 31, 2009, all
approved documents placed in escrow with Transaction counsel will be of no force and effect
and will be destroyed.
Attachment "A" to this staff report also provides more detailed information from California
Communities regarding the "Proposition 1A Securitization Program."
FINANCIAL IMPACT
As previously mentioned, included in the City's Adopted FY 2009-2010 Budget is the loss of
property tax from the suspension of Proposition lA in the amount of $2,938,300. Also included
are the corresponding estimated proceeds of $2,938,300 that the City will receive through
participation in the Proposition fA Securitization Program. Not participating in the program
would result in a FY 2009-2010 budget shortfall of $2,938,300. Additionally, the City's flow
capacity would be severely impacted.
RECOMMENDATION
Adopt Resolution.
'-",
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Auachment "A" to staff report
Proposition lA Securitization Program
[Fact Sheet]
ProDosition lA SusDension: Proposition lA was passed by California voters in 2004 to ensure
local property tax and sales tax revenues remain with local govemment thereby safeguarding
funding for public safety, health, libraries, parks, and other local services. Provisions can only be
suspended if the Governor declares a fiscal necessity and two-thirds of the Legislature concur.
The emergency suspension of Proposition lA was passed by the Legislature and signed by the
Governor as ABX4 14 and ABX4 15 as part of the 2009-10 budget package on July 28, 2009.
Under the provision, the State will borrow 8% of the amount of property tax revenue apportioned to
cities, counties and special districts. The state will be required to repay those obligations plus
interest by June 30, 2013.
The legislature is currently reviewing a clean-up bill, SB67 which would provide for a few critical
changes to the enacted legislation, including but not limited to providing for: financing to occur in
November; county auditor certification of amount of Prop lA receivable; tax-exempt structure;
California Communities as the only issuer; more flexibility on bond structure (interest payments,
state payment date and redemption features); sales among local agencies; and revision to the
hardship mechanism. While SB 67 has not yet been passed and signed into law, California
Communities expects that to occur prior to funding the Program. If for any reason SB 67 is not
enacted and the bonds cannot be sold by December 31, 2009, all approved documents placed in
escrow with Transaction counsel will be of no force and effect and will be destroyed.
ProDosition lA Securitization Prol!:ram: Authorized under ABX4 14 and ABX4 15, the
Proposition lA Securitization Program was instituted by California Communities to enable Local
Agencies to sell their respective Proposition lA Receivables to California Communities. Currently,
SB67 is being considered to clarify specific aspects of ABX4 14 and ABX4 15. Under the
Securitization Program, California Communities will simultaneously purchase the Proposition lA
Receivables, issue bonds ("Prop lA Bonds") and provide each local agency with the cash proceeds
in two equal installments, on January 15,2010 and May 3, 2010 (to coincide with the dates that the
State will be shifting property tax from local agencies). The purchase price paid to the local
agencies will equal 100% of the amount of the property tax reduction. All transaction costs of
issuance and interest will be paid by the State of California. Participating local agencies will have
no obligation on the bonds and no credit exposure to the State.
If the City of San Bernardino sells its Proposition lA Receivable under the Proposition lA
Securitization Program, California Communities will pledge the City of San Bernardino's
Proposition lA Receivable to secure the repayment of a corresponding amount of the Prop lA
Bonds. The City of San Bernardino's sale of its Proposition lA Receivable will be irrevocable.
Bondholders will have no recourse to the City of San Bemardino if the State does not make the
Proposition lA Repayment.
ProDosition lA Prol!:ram SDonsor: California Statewide Communities Development Authority
("California Communities") is a joint powers authority sponsored by the California State
Association of Counties and the League of California Cities. The member agencies of California
Communities include approximately 230 cities and 54 counties throughout California. [Note - a
city does not need to be a member of California Communities to participate].
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Attachment 'fA" to staff report
Benefits of Participation in the Proposition lA Securitization Proeram:
The benefits to the City of San Bernardino for participation in the Proposition 1 A Securitization
Program include:
. Immediate cash relief - the sale of the City's Proposition lA Receivable will provide the
City with 100% of its Proposition lA Receivable in two equal installments, on January 15,
2010 and May 3, 2010.
. Mitigates impact of 8% prooertv tax withholding in January and Mav - Per ABX4 14 and
ABX4 15 and the proposed clean-up legislation SB 67, the State will withhold 8% of
property tax receivables due to Cities, Counties, and Special Districts under Proposition lA.
The financing outlines bond proceeds to be distributed to coincide with the dates that the
State will be shifting property tax from local agencies.
. All costs of financing borne bv the State of California. The City will not have to pay any
interest cost or costs of issuance in connection with it participation.
. No obligation on Bonds. The City has no obligation with respect to the payment of the
bonds, nor any reporting, disclosure or other compliance obligations associated with the
bonds.
Proceeds of the Sale ofthe City's Proposition lA Receivable:
Upon delivery of the Proposition lA Bonds, California Communities will make available to the City
its fixed purchase price, which will equal 100% of the local agency's Proposition 1 A Receivable.
These funds may be used for any lawful purpose of the City and are not restricted by the program.
Proposed Proposition lA Receivables Sale Resolution:
The proposed Proposition lA Receivables Sale Resolution:
(I) Authorizes the sale of the City's Proposition lA Receivable to California Communities for
100% of its receivable;
(2) Approves the form, and directs the execution and delivery, of the Purchase and Sale
Agreement with California Communities and related documents;
(3) Authorizes and directs any Authorized Officer to send, or to cause to be sent, an irrevocable
written instruction required by statute to the State Controller notifying the State of the sale
of the Proposition IA Receivable and instructing the disbursement of the Proposition lA
Receivable to the Proposition lA Bond Trustee;
(4) Appoints certain City officers and officials as Authorized Officers for purposes of signing
documents; and
(5) Authorizes miscellaneous related actions and makes certain ratifications, findings and
determinations required by law.
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Attachment "A" to staff report
Proposed Purchase and Sale Al!:reement
The proposed Purchase and Sale Agreement:
(I) Provides for the sale of the Proposition lA Receivable to California Communities;
(2) Contains representations and warranties of the City to assure California Communities that
the Proposition lA Receivable has not been previously sold, is not encumbered, that no
litigation or other actions is pending or threatened to disrupt the transaction and the this is an
arm's length "true sale" of the Proposition lA Receivable.
(3) Provides mechanics for payment of the Purchase Price
(4) Contains other miscellaneous provisions.
Proposed Purchase and Sale Al!:reement Exhibits:
The proposed Proposition lA Purchase and Sale Agreement Exhibits:
(Bl) Opinion of Counsel: This is an opinion of the counsel to the local agency (which may be an
in-house counselor an outside counsel) covering basic approval of the documents, litigation,
and enforceability of the document against the Seller. It will be dated as of the Pricing date
of the bonds (currently expected to be November 10,2009).
(B2) Bringdown Opinion: This simply "brings down" the opinions to the closing date (currently
expected to be November 19,2009).
(C I) Certificate of the Clerk of the Local Agency: A certificate of the Clerk confirming that the
resolution was duly adopted and is in full force and effect.
(C2) Seller Certificate: A certification of the Seller dated as of the Pricing Date confirming that
the representations and warranties of the Seller are true as of the Pricing Date, confirming
authority to sign, confirming due approval of the resolution and providing payment
instructions.
(C3) Bill of Sale and Bringdown Certificate: Certificate that brings the certifications of C2 down
to the Closing Date and confirms the sale of the Proposition lA Receivable as of the Closing
Date.
(D) Irrevocable Instructions to the Controller: Required in order to let the State Controller know
that the Proposition lA Receivable has been sold and directing the State to make payment of
the receivable to the Trustee on behalf of the Purchaser.
(E) Escrow Instruction Letter: Instructs Transaction Counsel (Orrick) to hold all documents in
escrow until closing, and if closing does not occur by December 31, 2009 for any reason, to
destroy all documents.
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RESOLUTION NO.
MAYOR AND COMMON COUNCIL
OF THE
CITY OF SAN BERNARDINO
A RESOLUTION APPROVING THE FORM OF AND
AUTHORIZING THE EXECUTION AND DELIVERY OF A
PURCHASE AND SALE AGREEMENT AND RELATED
DOCUMENTS WITH RESPECT TO THE SALE OF THE
SELLER'S PROPOSITION IA RECEIVABLE FROM THE
STATE; AND DIRECTING AND AUTHORIZING CERTAIN
OTHER ACTIONS IN CONNECTION THEREWITH
WHEREAS, pursuant to Section 25.5 of Article XIII of the Califomia
Constitution and Chapter l4XXXX of the California Statutes of 2009 (Assembly
Bill No. 15), as amended (the "Act"), certain local agencies within the State of
Califomia (the "State") are entitled to receive certain payments to be made by the
State on or before June 30, 20 I 3, as reimbursement for reductions in the
percentage of the total amount of ad valorem property tax revenues allocated to
such local agencies during the State's 2009-10 fiscal year (the "Reimbursement
Payments"), which reductions have been authorized pursuant to Sections 100.05
and 100.06 of the California Revenue and Taxation Code;
WHEREAS, the City of San Bernardino, a local agency within the
meaning of Section 6585(f) of the Califomia Government Code (the "Seller"), is
entitled to and has determined to sell all right, title and interest of the Seller in and
to its "Proposition IA receivable", as defined in Section 6585(g) of the California
Govemment Code (the "Proposition lA Receivable"), namely, the right to
payment of moneys due or to become due to the Seller pursuant to Section
25.5(a)(I)(B)(iii) of Article XIII of the California Constitution and Section 100.06
of the California Revenue and Taxation Code, in order to obtain money to fund
public capital improvements or working capital;
WHEREAS, the Seller is authorized to sell or otherwise dispose of its
property as the interests of its residents require;
WHEREAS, the California Statewide Communities Development
Authority, a joint exercise of powers authority organized and existing under the
laws of the State (the "Purchaser"), has been authorized pursuant to Section
6588(x) of the California Government Code to purchase the Proposition 1 A
Receivable;
WHEREAS, the Purchaser desires to purchase the Proposition 1 A
Receivable and the Seller desires to sell the Proposition 1 A Receivable pursuant
to a purchase and sale agreement by and between the Seller and the Purchaser in
the form presented to this Mayor and Common Council (the "Sale Agreement")
for the purposes set forth herein;
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WHEREAS, in order to finance the purchase price of the Proposition I A
Receivable from the Seller and the purchase price of other Proposition I A
Receivables from other local agencies, the Purchaser will issue its bonds (the
"Bonds") pursuant to Section 6590 of the California Government Code and an
Indenture (the "Indenture"), by and between the Purchaser and Wells Fargo Bank,
National Association, as trustee (the "Trustee"), which Bonds will be payable
solely from the proceeds of the Seller's Proposition IA Receivable and other
Proposition I A Receivables sold to the Purchaser by local agencies in connection
with the issuance of the Bonds;
WHEREAS, the Seller acknowledges that (i) any transfer of its
Proposition 1 A Receivable to the Purchaser pursuant to the Sale Agreement shall
be treated as an absolute sale and transfer of the property so transferred and not as
a pledge or grant of a security interest by City of San Bemardino to secure a
borrowing, (ii) any such sale of its Proposition I A Receivable to the Purchaser
shall automatically be perfected without the need for physical delivery,
recordation, filing or further act, (iii) the provisions of Division 9 (commencing
with Section 9101) of the California Commercial Code and Sections 954.5 to
955.1 of the Califomia Civil Code, inclusive, shall not apply to the sale of its
Proposition IA Receivable, and (iv) after such transfer, the Seller shall have no
right, title, or interest in or to the Proposition IA Receivable sold to the Purchaser
and the Proposition I A Receivable will thereafter be owned, received, held and
disbursed only by the Purchaser or a trustee or agent appointed by the Purchaser;
WHEREAS, the Seller acknowledges that the Purchaser will grant a
security interest in the Proposition IA Receivable to the Trustee and any credit
enhancer to secure payment of the Bonds;
WHEREAS, a portion of the proceeds of the Bonds will be used by the
Purchaser to, among other things, pay the purchase price of the Proposition I A
Receivable;
WHEREAS, the Seller will use the proceeds received from the sale of the
Proposition IA Receivable for any lawful purpose as permitted under the
applicable laws of the State;
NOW THEREFORE, the Mayor and Common Council of the City of San
Bernardino hereby resolves as follows:
Section I. All of the recitals set forth above are true and correct,
and this Mayor and Common Council hereby so finds and determines.
Section 2. The Seller hereby authorizes the sale of the Proposition
I A ReecivabW-ttF the Purchaser for a price equal to the amount certified as the
Initial Amount (as defined in the Sale Agreement) by the County auditor pursuant
to the Act. The form of Sale Agreement presented to the Mayor and Common
Council is hereby approved. An Authorized Officer (as set forth in Aooendix A
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of this Resolution. attached hereto and by this reference incorporated herein) is
hereby authorized and directed to execute and deliver the Sale Agreement on
behalf of the Seller, which shall be in the fonn presented at this meeting.
Section 3. Any Authorized Officer is hereby authorized and
directed to send, or to cause to be sent, an irrevocable written instruction to the
State Controller (the "Irrevocable Written Instruction") notifying the State of the
sale of the Proposition lA Receivable and instructing the disbursement pursuant
to Section 6588.6(c) of California Government Code of the Proposition lA
Receivable to the Trustee, on behalf of the Purchaser, which Irrevocable Written
Instruction shall be in the fonn presented at this meeting.
Section 4. The Authorized Officers and such other Seller officers,
as appropriate, are hereby authorized and directed, jointly and severally, to do any
and all things and to execute and deliver any and all documents, including but not
limited to, if required, appropriate escrow instructions relating to the delivery into
escrow of executed documents prior to the closing of the Bonds, and such other
documents mentioned in the Sale Agreement or the Indenture, which any of them
may deem necessary or desirable in order to implement the Sale Agreement and
otherwise to carry out, give effect to and comply with the tenns and intent of this
Resolution; and all such actions heretofore taken by such officers are hereby
ratified, confinned and approved.
Section 5. All consents, approvals, notices, orders, requests and
other actions pennitted or required by any of the documents authorized by this
Resolution, whether before or after the sale of the Proposition 1 A Receivable or
the issuance of the Bonds, including without limitation any of the foregoing that
may be necessary or desirable in connection with any default under or amendment
of such documents, may be given or taken by an Authorized Officer without
further authorization by this Mayor and Common Council, and each Authorized
Officer is hereby authorized and directed to give any such consent, approval,
notice, order or request, to execute any necessary or appropriate documents or
amendments, and to take any such action that such Authorized Officer may deem
necessary or desirable to further the purposes of this Resolution.
Section 6. The Mayor and Common Council acknowledges that,
upon execution and delivery of the Sale Agreement, the Seller is contractually
obligated to sell the Proposition lA Receivable to the Purchaser pursuant to the
Sale Agreement and the Seller shall not have any option to revoke its approval of
the Sale Agreement or to detennine not to perform its obligations thereunder.
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Section 7. This Resolution shall take effect from and after its
Adoption and approval.
PASSED AND ADOPTED by the Mayor and Common Council of
the City of San Bernardino, State of Califomia, this _ day of
,2009, by the following vote:
COUNCIL MEMBERS
AYES
ESTRADA
BAXTER
BRINKER
SHORETT
KELLEY
JOHNSON
MCCAMMACK
Attest:
Rachel Clark, City Clerk
Approved as to fonn:
SELLER'S COUNSEL
~
es F. Penman, City Attorney
ated: O~ /3, 2..801
NAYS
4
ABSTAIN ABSENT
Patrick J. Morris, Mayor
City of San Bernardino
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APPENDIX A
3
CITY OF SAN BERNARDINO
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5
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Authorized Officers:
Barbara Pachon, Director of Fioance
8
Rita Conrad, Deputy Director of Finance
9
Katherine Myers, Accounting Manager
Patrick]. Morris, Mayor
Charles E. McNeely, City Manager
any designee of any of them, as appointed in a written certificate of
such Authorized Officer delivered to the Trustee.
CITY OF SAN BERNARDINO, CALIFORNIA,
as Seller
and
CALIFORNIA STATEWIDE COMMUNITlES
DEVELOPMENT AUTHORITY,
as Purchaser
PURCHASE AND SALE AGREEMENT
Dated as of November I, 2009
TABLE OF CONTENTS
Page
I. DEFINITIONS AND INTERPRETATION ...................................................................... 2
2. AGREEMENT TO SELL AND PURCHASE; CONDITIONS PRECEDENT................ 2
3. PURCHASE PRICE, CONVEYANCE OF PROPOSITION IA RECEIVABLE
AND PAYMENT OF PURCHASE PRICE ...................................................................... 3
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER .......................... 4
5. REPRESENTATIONS AND WARRANTIES OF THE SELLER ...................................5
6. COVENANTS OF THE SELLER..................................................................................... 7
7. THE PURCHASER'S ACKNOWLEDGMENT............................................................... 9
8. NOTICES OF BREACH ...................................................................................................9
9. LIABILITY OF SELLER; INDEMNIFICATION ............................................................9
10. LIMITATION ON LIABILITY ......................................................................................10
II. THE SELLER'S ACKNOWLEDGMENT...................................................................... 10
12. NOTl CES ......................................................................................................................... 10
13. AMENDMENTS ............................................................................................................. 10
14. SUCCESSORS AND ASSIGNS ..................................................................................... 10
15. THIRD PARTY RIGHTS................................................................................................ I I
16. PARTIAL INV ALlDITY ................................................................................................ I I
17. COUNTERPARTS .......................................................................................................... II
18. ENTIRE AGREEMENT.................................................................................................. II
19. GOVERNING LAW ........................................................................................................ 12
EXHIBIT A - DEFINITI ONS ................................................................................................... A-I
EXHIBIT B I - OPINION OF SELLER'S COUNSEL........................................................... B I-I
EXHIBIT B2 - BRlNGDOWN OPINION OF SELLER'S COUNSEL................................. B2-1
EXHIBIT C I - CLERK'S CERTlFlCA TE............................................................................. C I-I
EXHIBIT C2 - SELLER CERTlFICA TE............................................................................... C2-1
EXHIBIT C3 - BILL OF SALE AND BRINGDOWN CERTIFICATE................................ C3-1
EXHIBIT D -IRREVOCABLE INSTRUCTIONS TO CONTROLLER................................D- I
EXHIBIT E - ESCROW INSTRUCTION LETTER................................................................ E-I
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT, dated as of November 1,2009
(this "Agreement"), is entered into by and between:
(1) CITY OF SAN BERNARDINO, a local agency of the State of California
within the meaning of Section 6585(f) of the California Government Code (the "Seller"); and
(2) CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT
AUTHORITY, a joint exercise of powers authority organized and existing under the laws of the
State of California (the "Purchaser").
REelT ALS
A. Pursuant to Section 25.5 of Article XIII of the California Constitution and
Section 100.06 ofthe California Revenue and Taxation Code, local agencies within the meaning
of Section 6585(0 of the California Govemment Code are entitled to receive certain payments to
be made by the State of California (the "State") on or before June 30, 2013, as reimbursement for
reductions in the percentage of the total amount of ad valorem property tax revenues allocated to
such local agencies during the State's 2009-10 fiscal year, which reductions have been
authorized pursuant to Sections 100.05 and 100.06 of the Califomia Revenue and Taxation Code.
B. The Seller is the owner of the Proposition 1 A Receivable (as defined
below) and is entitled to and has determined to sell all right, title and interest in and to the
Proposition lA receivable, namely, the right to payment of moneys due or to become due to the
Seller pursuant to Section 25.5(a)(l)(B)(iii) of Article XIII of the California Constitution and
Section 100.06 of the California Revenue and Taxation Code, in order to obtain money to fund
any lawful purpose as permitted under the applicable laws of the State.
C. The Seller is authorized to sell or otherwise dispose of its property as the
interests of its residents require.
D. The Purchaser, a joint exercise of powers authority organized and existing
under the laws of the State, has been authorized pursuant to Section 6588(x) of the Califomia
Government Code to purchase the Proposition I A Receivable.
E. The Seller is willing to sell, and the Purchaser is willing to purchase, the
Proposition 1 A Receivable upon the terms specified in this Agreement.
F. Pursuant to its Proposition lA Receivable Financing Program (the
"Program"), the Purchaser will issue its bonds (the "Bonds") pursuant to an Indenture (the
"Indenture"), between the Purchaser and Wells Fargo Bank, National Association, as trustee (the
"Trustee"), and will use a portion of the proceeds thereof to purchase the Proposition I A
Receivable from the Seller.
G. The Purchaser will grant a security interest in such Proposition 1 A
Receivable to the Trustee and each Credit Enhancer to secure the Bonds.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
I. Definitions and lnteroretation.
(a) For all purposes of this Agreement, except as otherwise expressly provided
herein or unless the context otherwise requires, capitalized terms not otherwise defined herein
shall have the meanings ascribed to such terms in Exhibit A attached hereto and which is
incorporated by reference herein.
(b) The words "hereof," "herein," "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement; section and exhibits references contained in this Agreement are
references to sections and exhibits in or to this Agreement unless otherwise specified; and the
term "including" shall mean "including without limitation."
(c) Any agreement, instrument or statute defined or referred to herein or in any
instrument or certificate delivered in connection herewith means such agreement, instrument or
statute as from time to time may be amended, modified or supplemented and includes (in the
case of agreements or instruments) references to all attachments and exhibits thereto and
instruments incorporated therein; and any references to a Person are also to its permitted
successors and assigns.
2. Agreement to Sell and Purchase; Conditions Precedent.
(a) The Seller agrees to sell, and the Purchaser agrees to purchase, on the Closing
Date, for an amount equal to the Purchase Price, all right, title and interest of the Seller in and to
the "Proposition IA receivable" as defined in Section 6585(g) of the California Government
Code (the "Prooosition I A Receivable"), namely, the right to payment of moneys due or to
become due to the Seller pursuant to Section 25.5(a)(1 )(B)(iii) of Article Xlii of the California
Constitution and Section 100.06 of the California Revenue and Taxation Code. The Purchase
Price shall be paid by the Purchaser to the Seller in two equal cash installment payments, without
interest (each, an "Installment Payment" and, collectively, the "Installment Payments"), on
January 15,2010, and May 3, 2010 (each a "Payment Date" and, collectively, the "Payment
Dates"). The Purchaser shall pay the Purchase Price by wire transfer pursuant to wire
instructions provided by the Seller to the Trustee bye-mail tojohn.deleray@wellsfargo.com or
by facsimile to 213-614-3355, Attention: John Deleray. If wire instructions are not provided to
the Trustee (or if such wire instructions are invalid) payment will be made by check mailed to
the Seller's Principal Place of Business.
(b) The performance by the Purchaser of its obligations hereunder shall be
conditioned upon:
(i) Transaction Counsel receiving on or before the date the Bonds are sold
(the "Pricing Date"), to be held in escrow until the Closing Date and then
delivered to the Purchaser on the Closing Date, the following documents
2
duly executed by the Seller or its counsel, as applicable: (I) an opinion of
counsel to the Seller dated the Pricing Date in substantially the form
attached hereto as Exhibit B I, (2) certificates dated the Pricing Date in
substantially the forms attached hereto as Exhibit C I and Exhibit C2,
(3) irrevocable instructions to the Controller dated as of the Closing Date
in substantially the form attached hereto as Exhibit 0, (4) this Agreement,
(5) a certified copy of the resolution of the Seller's Mayor and Common
Council approving this Agreement, the transactions contemplated hereby
and the documents attached hereto as exhibits, and (6) an escrow
instruction letter in substantially the form attached hereto as Exhibit E;
(ii) Transaction Counsel receiving on or before the Pricing Date, (I) a
bringdown opinion of counsel to the Seller dated as of the Closing Date in
substantially the form attached hereto as Exhibit B2, and (2) a bill of sale
and bringdown certificate of the Seller (the "Bill of Sale") in substantially
the form attached hereto as Exhibit C3: orovided that the Purchaser may
waive. in its sole discretion, the requirements of Section 2(b )(ii)(I);
(iii) the Purchaser issuing Bonds in an amount which will be sufficient to pay
the Purchase Price; and
(iv) the receipt by the Purchaser of a certification of the County Auditor
confirming the Initial Amount of the Proposition IA Receivable pursuant
to the Act.
(c) The performance by the Seller of its obligations hereunder shall be
conditioned solely upon the Purchaser's issuance of the Bonds its execution and delivery of this
Agreement, pursuant to which it is legally obligated to pay the Installment Payments to the Seller
on the Payment Dates as set forth in this Agreement, and no other act or omission on the part of
the Purchaser or any other party shall excuse the Seller from performing its obligations
hereunder. Seller specifically disclaims any right to rescind this Agreement, or to assert that title
to the Proposition IA Receivable has not passed to the Purchaser, should Purchaser fail to make
Installment Payments in the requisite amounts on the Payment Dates.
3. Purchase Price. Convevance of Prooosition IA Receivable and Pavment of
Purchase Price.
(a) Upon pricing of the Bonds by the Purchaser, the Purchaser will inform the
Seller that it will pay the Purchase Price in Installment Payments on the Payment Dates.
(b) In consideration of the Purchaser's agreement to pay and deliver to the Seller
the Installment Payments on the Payment Dates, the Seller agrees to (i) transfer, grant, bargain,
sell, assign, convey, set over and deliver to the Purchaser, absolutely and not as collateral
security, without recourse except as expressly provided herein, and the Purchaser agrees to
purchase, accept and receive, the Proposition I A Receivable, and (ii) assign to the Purchaser, to
the extent permitted by law, all present or future rights, if any, of the Seller to enforce or cause
the enforcement of payment of the Proposition 1 A Receivable pursuant to the Act and other
3
applicable law. Such transfer, grant, bargain, sale, assignment, conveyance, set over and
delivery is hereby expressly stated to be a sale and, pursuant to Section 6588.6(b) of the
California Government Code, shall be treated as an absolute sale and transfer of the Proposition
I A Receivable, and not as a grant of a security interest by the Seller to secure a borrowing. This
is the statement referred to in Sections 6588.6(b) and (c) of the California Government Code.
4. ReDresentations and Warranties of the Purchaser. The Purchaser represents
and warrants to the Seller, as of the date hereof, as follows:
(a) The Purchaser is duly organized, validly existing and in good standing under
the laws of the State of California.
(b) The Purchaser has full power and authority to enter into this Agreement and to
perform its obligations hereunder and has duly authorized such purchase and assignment of the
Proposition 1 A Receivable by the Purchaser by all necessary action.
(c) Neither the execution and delivery by the Purchaser of this Agreement, nor
the performance by the Purchaser of its obligations hereunder, shall conflict with or result in a
breach or default under any of its organizational documents, any law, rule, regulation, judgment,
order or decree to which it is subject or any agreement or instrument to which it is a party.
(d) To the best of the knowledge of the Purchaser, no action, suit, proceeding,
inquiry or investigation, at law or in equity, before or by any court, public board or body, is
pending or threatened in any way against the Purchaser affecting the existence of the Purchaser
or the titles of its commissioners or officers, or seeking to restrain or to enjoin the purchase of
the Proposition 1 A Receivable or to direct the application of the proceeds of the purchase
thereof, or in any way contesting or affecting the validity or enforceability of any of the
Transaction Documents or any other applicable agreements or any action of the Purchaser
contemplated by any of said documents, or in any way contesting the powers of the Purchaser or
its authority with respect to the Transaction Documents to which it is a party or any other
applicable agreement, or any action on the part of the Purchaser contemplated by the Transaction
Documents, or in any way seeking to enjoin or restrain the Purchaser from purchasing the
Proposition lA Receivable or which if determined adversely to the Purchaser would have an
adverse effect upon the Purchaser's ability to purchase the Proposition lA Receivable, nor to the
knowledge of the Purchaser is there any basis therefor.
(e) This Agreement, and its execution, delivery and performance hereof have
been duly authorized by it, and this Agreement has been duly executed and delivered by it and
constitutes its valid and binding obligation enforceable against it in accordance with the terms
hereof, subject to the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws relating to or affecting creditors' rights generally or the
application of equitable principles in any proceeding, whether at law or in equity.
(f) The Purchaser is a separate legal entity, acting solely through its authorized
representatives, from the Seller, maintaining separate records, books of account, assets, bank
accounts and funds, which are not and have not been commingled with those of the Seller.
4
(g) All approvals, consents, authorizations, elections and orders of or fi I ings or
registrations with any governmental authority, board, agency or commission having jurisdiction
which would constitute a condition precedent to, or the absence of which would adversely affect,
the purchase by the Purchaser of the Proposition I A Receivable or the performance by the
Purchaser of its obligations under the Transaction Documents to which it is a party and any other
applicable agreements, have been obtained and are in full force and effect.
(h) Insofar as it would materially adversely affect the Purchaser's ability to enter
into, carry out and perform its obligations under any or all of the Transaction Documents to
which it is a party, or consummate the transactions contemplated by the same, the Purchaser is
not in breach of or default under any applicable constitutional provision, law or administrative
regulation of the State of Califomia or the United States or any applicable judgment or decree or
any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which it
is a party or to which it or any of its property or assets is otherwise subject, and, to the best of the
knowledge of the Purchaser, no event has occurred and is continuing which with the passage of
time or the giving of notice, or both, would constitute a default or an event of default under any
such instrument, and the execution and delivery by the Purchaser of the Transaction Documents
to which it is a party, and compliance by the Purchaser with the provisions thereof, under the
circumstances contemplated thereby, do not and will not conflict with or constitute on the part of
the Purchaser a breach of or default under any agreement or other instrument to which the
Purchaser is a party or by which it is bound or any existing law, regulation, court order or
consent decree to which the Purchaser is subject.
5. Reoresentations and Warranties of the Seller. The Seller hereby represents
and warrants to the Purchaser, as of the date hereof, as follows:
(a) The Seller is a local agency within the meaning of Section 6585(f) of the
California Government Code, with full power and authority to execute and deliver this
Agreement and to carry out its terms.
(b) The Seller has full power, authority and legal right to sell and assign the
Proposition IA Receivable to the Purchaser and has duly authorized such sale and assignment to
the Purchaser by all necessary action; and the execution, delivery and performance by the Seller
of this Agreement has been duly authorized by the Seller by all necessary action.
(c) This Agreement has been, and as of the Closing Date the Bill of Sale will have
been, duly executed and delivered by the Seller and, assuming the due authorization, execution
and delivery of this Agreement by the Purchaser, each of this Agreement and the Bill of Sale
constitutes a legal, valid and binding obligation of the Seller enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws relating to or affecting creditors' rights generally or the
application of equitable principles in any proceeding, whether at law or in equity.
(d) All approvals, consents, authorizations, elections and orders of or filings or
registrations with any govemmental authority, board, agency or commission having jurisdiction
which would constitute a condition precedent to, or the absence of which would adversely affect,
the sale by the Seller of the Proposition I A Receivable or the performance by the Seller of its
5
obligations under the Resolution and the Transaction Documents to which it is a party and any
other applicable agreements, have been obtained and are in full force and effect.
(e) Insofar as it would materially adversely affect the Seller's ability to enter into,
carry out and perform its obligations under any or all of the Transaction Documents to which it is
a party, or consummate the transactions contemplated by the same, the Seller is not in breach of
or default under any applicable constitutional provision, law or administrative regulation of the
State of California or the United States or any applicable judgment or decree or any loan
agreement, indenture, bond, note, resolution, agreement or other instrument to which it is a party
or to which it or any of its property or assets is otherwise subject, and, to the best of the
knowledge of the Seller, no event has occurred and is continuing which with the passage of time
or the giving of notice, or both, would constitute a default or an event of default under any such
instrument, and the adoption of the Resolution and the execution and delivery by the Seller of the
Transaction Documents to which it is a party, and compliance by the Seller with the provisions
thereof, under the circumstances contemplated thereby, do not and will not conflict with or
constitute on the part of the Seller a breach of or default under any agreement or other instrument
to which the Seller is a party or by which it is bound or any existing law, regulation, court order
or consent decree to which the Seller is subject.
(f) To the best of the knowledge ofthe Seller, no action, suit, proceeding, inquiry
or investigation, at law or in equity, before or by any court, public board or body, is pending or
threatened in any way against the Seller affecting the existence of the Seller or the titles of its
Mayor and Common Council members or officers to their respective offices, or seeking to
restrain or to enjoin the sale of the Proposition lA Receivable or to direct the application of the
proceeds of the sale thereof, or in any way contesting or affecting the validity or enforceability of
any of the Transaction Documents or any other applicable agreements or any action of the Seller
contemplated by any of said documents, or in any way contesting the powers of the Seller or its
authority with respect to the Resolution or the Transaction Documents to which it is a party or
any other applicable agreement, or any action on the part of the Seller contemplated by the
Transaction Documents, or in any way seeking to enjoin or restrain the Seller from selling the
Proposition lA Receivable or which if determined adversely to the Seller would have an adverse
effect upon the Seller's ability to sell the Proposition lA Receivable, nor to the knowledge of the
Seller is there any basis therefor.
(g) Prior to the sale of the Proposition 1 A Receivable to the Purchaser, the Seller
was the sole owner of the Proposition lA Receivable, and has such right, title and interest to the
Proposition lA Receivable as provided in the Act. From and after the conveyance of the
Proposition 1 A Receivable by the Seller to Purchaser on the Closing Date, the Seller shall have
no right, title or interest in or to the Proposition 1 A Receivable. Except as provided in this
Agreement, the Seller has not sold, transferred, assigned, set over or otherwise conveyed any
right, title or interest of any kind whatsoever in all or any portion of the Proposition 1 A
Receivable, nor has the Seller created, or to the best knowledge of the Seller permitted the
creation of, any lien, pledge, security interest or any other encumbrance (a "Lien") thereon.
Prior to the sale of the Proposition 1 A Receivable to the Purchaser, the Seller held title to the
Proposition I A Receivable free and clear of any Liens. As of the Closing Date, this Agreement,
together with the Bill of Sale, constitutes a valid and absolute sale to the Buyer of all of the
Seller's right, title and interest in and to the Proposition lA Receivable.
6
(h) The Seller acts solely through its authorized officers or agents.
(i) The Seller maintains records and books of account separate from those of the
Purchaser.
(j) The Seller maintains its respective assets separately from the assets of the
Purchaser (including through the maintenance of separate bank accounts); the Seller's funds and
assets, and records relating thereto, have not been and are not commingled with those of the
Purchaser.
(k) The Seller's principal place of business and chief executive office is located at
300 N. "D" Street, San Bernardino, CA 92418.
(I) The aggregate amount of the Installment Payments is reasonably equivalent
value for the Proposition I A Receivable. The Seller acknowledges that the amount payable to or
on behalf of the Purchaser by the State with respect to the Proposition IA Receivable will be in
excess of the Purchase Price and the Initial Amount of the Proposition IA Receivable and
confinns that it has no claim to any such excess amount whatsoever.
(m) The Seller does not act as an agent of the Purchaser in any capacity, but
instead presents itself to the public as an entity separate from the Purchaser.
(n) The Seller has not guaranteed and shall not guarantee the obligations of the
Purchaser, nor shall it hold itself out or pennit itself to be held out as having agreed to payor as
being liable for the debts of the Purchaser; and the Seller has not received nor shall the Seller
accept any credit or financing from any Person who is relying upon the availability of the assets
of the Purchaser in extending such credit or financing. The Seller has not purchased and shall
not purchase any ofthe Bonds or any interest therein.
(0) All transactions between or among the Seller, on the one hand, and the
Purchaser on the other hand (including, without limitation, transactions govemed by contracts for
services and facilities, such as payroll, purchasing, accounting, legal and personnel services and
office space), whether existing on the date hereof or entered into after the date hereof, shall be on
tenns and conditions (including, without limitation, tenns relating to amounts to be paid
thereunder) which are believed by each such party thereto to be both fair and reasonable and
comparable to those available on an anns-length basis from Persons who are not affiliates.
(p) The Seller has not, under the provisions of Section 100.06(b) of the California
Revenue and Taxation Code, received a reduction for hardship or otherwise, nor has it requested,
made arrangements for, or completed a reallocation or exchange with any other local agency, of
the total amount of the ad valorem property tax revenue reduction allocated to the Seller pursuant
to Section 100.06(a) of the California Revenue and Taxation Code.
6. Covenants of the Seller.
(a) The Seller shall not take any action or omit to take any action which adversely
affects the interests of the Purchaser in the Proposition IA Receivable and in the proceeds
thereof. The Seller shall not take any action or omit to take any action that shall adversely affect
7
the ability of the Purchaser, and any assignee of the Purchaser, to receive payments of the
Proposition I A Receivable.
(b) The Seller shall not take any action or omit to take any action that would
impair the validity or effectiveness of the Act, nor, without the prior written consent of the
Purchaser or its assignees, agree to any amendment, modification, termination, waiver or
surrender of, the terms of the Act, or waive timely performance or observance under the Act.
Nothing in this agreement shall impose a duty on the Seller to seek to enforce the Act or to seek
enforcement thereof by others, or to prevent others from modifying, terminating, discharging or
impairing the validity or effectiveness of the Act.
(c) Upon request of the Purchaser or its assignee, (i) the Seller shall execute and
deliver such further instruments and do such further acts (including being named as a plaintiff in
an appropriate proceeding) as may be reasonably necessary or proper to carry out more
effectively the purposes and intent of this Agreement and the Act, and (ii) the Seller shall take all
actions necessary to preserve, maintain and protect the title of the Purchaser to the Proposition
IA Receivable.
(d) On or before the Closing Date, the Seller shall send (or cause to be sent) an
irrevocable instruction to the Controller pursuant to Section 6588.6(c) of Cali fomi a Govemment
Code to cause the Controller to disburse all payments of the Proposition I A Receivable to the
Trustee, together with notice of the sale of the Proposition I A Receivable to the Purchaser and
the assignment of all or a portion of such assets by the Purchaser to the Trustee. Such notice and
instructions shall be in the form of Exhibit D hereto. The Seller shall not take any action to
revoke or which would have the effect of revoking, in whole or in part, such instructions to the
Controller. Upon sending such irrevocable instruction, the Seller shall have relinquished and
waived any control over the Proposition 1 A Receivable, any authority to collect the Proposition
I A Receivable, and any power to revoke or amend the instructions to the Controller
contemplated by this paragraph. Except as provided in Section 2(c) of this Agreement, the Seller
shall not rescind, amend or modify the instruction described in the first sentence of this
paragraph. The Seller shall cooperate with the Purchaser or its assignee in giving instructions to
the Controller if the Purchaser or its assignee transfers the Proposition I A Receivable. In the
event that the Seller receives any proceeds of the Proposition I A Receivable, the Seller shall
hold the same in trust for the benefit of the Purchaser and the Trustee and each Credit Enhancer,
as assignees of the Purchaser, and shall promptly remit the same to the Trustee.
(e) The Seller hereby covenants and agrees that it will not at any time institute
against the Purchaser, or join in instituting against the Purchaser, any bankruptcy, reorganization,
arrangement, insolvency, liquidation, or similar proceeding under any United States or state
bankruptcy or similar law.
(f) The financial statements and books and records of the Seller prepared after the
Closing Date shall reflect the separate existence of the Purchaser and the sale to the Purchaser of
the Proposition IA Receivable.
(g) The Seller shall treat the sale of the Proposition I A Receivable as a sale for
regulatory and accounting purposes.
8
(h) From and after the date of this Agreement, the Seller shall not sell, transfer,
assign, set over or otherwise convey any right, title or interest of any kind whatsoever in all or
any portion of the Proposition I A Receivable, nor shall the Seller create, or to the knowledge of
the Seller permit the creation of, any Lien thereon.
7. The Purchaser's Acknowledl!:ment. The Purchaser acknowledges that the
Proposition I A Receivable is not a debt or liability of the Seller, and that the Proposition I A
Receivable is payable solely by the State from the funds of the State provided therefor.
Consequently. neither the taxing power of the Seller, nor the full faith and credit thereof is
pledged to the payment of the Proposition IA Receivable. No representation is made by the
Seller conceming the obligation or ability of the State to make any payment of the Proposition
I A Receivable pursuant to Section 100.06 of the Revenue and Taxation Code and Section 25.5
of Article XIll of the Califomia Constitution, nor is any representation made with respect to the
ability of the State to enact any change in the law applicable to the Transaction Documents
(including without limitation Section 100.06 of the Revenue and Taxation Code or Section
6588.6 of the Government Code). The Purchaser acknowledges that the Seller has no obligation
with respect to any offering document or disclosure related to the Bonds.
8. Notices of Breach.
(a) Upon discovery by the Seller or the Purchaser that the Seller or Purchaser has
breached any of its covenants or that any of the representations or warranties of the Seller or the
Purchaser are materially false or misleading, in a manner that materially and adversely affects
the value of the Proposition IA Receivable or the Purchase Price thereof, the discovering party
shall give prompt written notice thereof to the other party and to the Trustee, as assignee of the
Purchaser, who shall, pursuant to the Indenture, promptly thereafter notify each Credit Enhancer
and the Rating Agencies.
(b) The Seller shall not be liable to the Purchaser, the Trustee, the holders of the
Bonds, or any Credit Enhancer for any loss, cost or expense resulting from the failure of the
Trustee, any Credit Enhancer or the Purchaser to promptly notify the Seller upon the discovery
by an authorized officer of the Trustee, any Credit Enhancer or the Purchaser of a breach of any
covenant or any materially false or misleading representation or warranty contained herein.
9. Liabilitv of Seller: Indemnification. The Seller shall be liable in accordance
herewith only to the extent of the obligations specifically undertaken by the Seller under this
Agreement. The Seller shall indemnify, defend and hold harmless the Purchaser, the Trustee and
each Credit Enhancer, as assignees of the Purchaser, and their respective officers, directors,
employees and agents from and against any and all costs, expenses, losses, claims, damages and
liabilities to the extent that such cost, expense, loss, claim, damage or liability arose out of, or
was imposed upon any such Person by the Seller's breach of any of its covenants contained
herein or any materially false or misleading representation or warranty of the Seller contained
herein. Notwithstanding anything to the contrary herein, the Seller shall have no liability for the
payment of the principal of or interest on the Bonds issued by the Purchaser.
9
10. Limitation on Liabilitv.
(a) The Seller and any officer or employee or agent of the Seller may rely in good
faith on the advice of counselor on any document of any kind, prima facie properly executed and
submitted by any Person respecting any matters arising hereunder. The Seller shall not be under
any obligation to appear in, prosecute or defend any legal action regarding the Act that is
unrelated to its specific obligations under this Agreement.
(b) No officer or employee of the Seller shall have any liability for the
representations, warranties, covenants, agreements or other obligations of the Seller hereunder or
in any of the certificates, notices or agreements delivered pursuant hereto, as to all of which
recourse shall be had solely to the assets of the Seller.
11. The Seller's Acknowledl!ment. The Seller hereby agrees and acknowledges
that the Purchaser intends to assign and grant a security interest in all or a portion of (a) its rights
hereunder and (b) the Proposition 1 A Receivable, to the Trustee and each Credit Enhancer
pursuant to the Indenture. The Seller further agrees and acknowledges that the Trustee, the
holders ofthe Bonds, and each Credit Enhancer have relied and shall continue to rely upon each
of the foregoing representations, warranties and covenants, and further agrees that such Persons
are entitled so to rely thereon. Each of the above representations, warranties and covenants shall
survive any assignment and grant of a security interest in all or a portion of this Agreement or the
Proposition IA Receivable to the Trustee and each Credit Enhancer and shall continue in full
force and effect, notwithstanding any subsequent termination of this Agreement and the other
Transaction Documents. The above representations, warranties and covenants shall inure to the
benefit of the Trustee and each Credit Enhancer.
12. Notices. All demands upon or, notices and communications to, the Seller, the
Purchaser, the Trustee or the Rating Agencies under this Agreement shall be in writing,
personally delivered or mailed by certified mail, retum receipt requested, to such party at the
appropriate notice address, and shall be deemed to have been duly given upon receipt.
13. Amendments. This Agreement may be amended by the Seller and the
Purchaser, with (a) the consent of the Trustee, (b) the consent of each Credit Enhancer, and (c) a
Rating Agency Confirmation, but without the consent of any of the holders of the Bonds, for the
purpose of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement.
Promptly after the execution of any such amendment, the Purchaser shall furnish
written notification of the substance of such amendment to the Trustee and to the Rating
Agencies.
14. Successors and Assil!ns. This Agreement shall be binding upon and inure to
the benefit of the Seller, the Purchaser and their respective successors and permitted assigns.
The Seller may not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of the Purchaser. Except as specified herein, the Purchaser may
not assign or transfer any of its rights or obligations under this Agreement without the prior
written consent of the Seller.
10
15. Third Partv Rights. The Trustee and each Credit Enhancer are express and
intended third party beneficiaries under this Agreement. Nothing expressed in or to be implied
from this Agreement is intended to give, or shall be construed to give, any Person, other than the
parties hereto, the Trustee, and each Credit Enhancer, and their permitted successors and assigns
hereunder, any benefit or legal or equitable right, remedy or claim under or by virtue of this
Agreement or under or by virtue of any provision herein.
16. Partial lnvaliditv. If at any time any provIsion of this Agreement is or
becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither
the legality, validity or enforceability of the remaining provisions of this Agreement nor the
legality, validity or enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
17. Counteroarts. This Agreement may be executed in any number of identical
counterparts, any set of which signed by all the parties hereto shall be deemed to constitute a
complete, executed original for all purposes.
18. Entire Agreement. This Agreement sets forth the entire understanding and
agreement of the parties with respect to the subject matter hereof and supersedes any and all oral
or written agreements or understandings between the parties as to the subject matter hereof.
II
19. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be duly executed as of the date first written above.
CITY OF SAN BERNARDINO, as Seller
By:
Authorized Officer
CALIFORNIA STATEWIDE COMMUNITIES
DEVELOPMENT AUTHORITY, as Purchaser
By:
Authorized Signatory
12
EXHIBIT A
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly provided herein
or unless the context otherwise requires, capitalized terms not otherwise defined herein shall
have the meanings set forth below.
"Act" means Chapter 14XXXX of the California Statutes of 2009 (Assembly Bill
No. 15), as amended.
"Bill of Sale" has the meaning given to that term in Section 2(b )(ii) hereof.
"Closing Date" means the date on which the Bonds are issued. The Closing Date
is expected to be November 19, 2009, but the Purchaser may change the Closing Date by
providing e-mail notification to conradJi@sbcity.org not later than one day prior to the Closing
Date.
"Controller" means the Controller of the State.
"County Auditor" means the auditor or auditor-controller of the county within
which the Seller is located.
"Credit Enhancer" means any municipal bond insurance company, bank or other
financial institution or organization which is performing in all material respects its obligations
under any Credit Support Instrument for some or all of the Bonds.
"Credit Support Instrument" means a policy of insurance, a letter of credit, a
stand-by purchase agreement, a revolving credit agreement or other credit arrangement pursuant
to which a Credit Enhancer provides credit or liquidity support with respect to the payment of
interest, principal or purchase price of the Bonds.
"Initial Amount" means, with respect to the Proposition IA Receivable, the
amount of property tax revenue reallocated away from the Seller pursuant to the provisions of
Section 100.06 of the Revenue and Taxation Code, as certified by the County Auditor pursuant
to the Act.
"Installment Payments" have the meaning set forth in Section 2(a).
"Payment Dates" have the meaning set forth in Section 2(a).
"Pricing Date" means the date on which the Bonds are sold. The Pricing Date is
expected to be November 10, 2009, but the Purchaser may change the Pricing Date by providing
e-mail notification to conrad_ri@sbcity.org not later than one day prior to the Pricing Date.
"Principal Place of Business" means, with respect to the Seller, the location of the
Seller's principal place of business and chief executive office located at 300 N. "D" Street, San
Bernardino, CA 92418.
A-I
"Proposition IA Receivable" has the meaning set forth in Section 2(a).
"Purchase Price" means an amount equal to the Initial Amount.
"Rating Agency" means any nationally recognized rating agency then providing
or maintaining a rating on the Bonds at the request of the Purchaser.
"Rating Agency Confirmation" means written confirmation from each Rating
Agency that any proposed action will not, in and of itself, cause the Rating Agency to lower,
suspend or withdraw the rating then assigned by such Rating Agency to any Bonds.
"Resolution" means the resolution adopted by the Mayor and Common Council
approving the sale of the Proposition I A Receivable.
"State" means the State of Califomia.
"Transaction Counsel" means Orrick, Herrington & Sutcliffe LLP.
"Transaction Documents" mean this Agreement, the Bill of Sale, the Indenture,
the Bonds and the Irrevocable Instructions For Disbursement of Proposition I A Receivable of
City of San Bernardino, dated as of the Closing Date.
A-2
EXHIBIT Bl
OPINION OF COUNSEL
to
CITY OF SAN BERNARDINO
Dated: Pricing Date
California Statewide Communities Development Authority
Sacramento, Califomia
Wells Fargo Bank, National Association
Los Angeles, California
Re: Sale of Proposition I A Receivable
Ladies & Gentlemen:
[I have/This Office has] acted as counsel for the City of San Bernardino (the
"Seller") in connection with the adoption of that certain resolution (the "Resolution") of the
Mayor and Common Council of the Seller (the "Governing Body") pursuant to which the Seller
authorized the sale to the Califomia Statewide Communities Development Authority (the
"Purchaser") of the Seller's "Proposition IA Receivable", as defined in and pursuant to the
Purchase and Sale Agreement dated as of November I, 2009 (the "Sale Agreement") between
the Seller and the Purchaser. In connection with these transactions, the Seller has issued certain
Irrevocable Instructions For Disbursement of the Seller's Proposition IA Receivable to the
Controller of the State of California (the "Disbursement Instructions") and a Bill of Sale and
Bringdown Certificate of the Seller (the "Bill of Sale" and, collectively with the Sale Agreement
and the Disbursement Instructions, the "Seller Documents").
Unless the context otherwise requires, capitalized terms used but not otherwise
defined herein shall have the meanings given to such terms in the Sale Agreement. [IIWe] have
examined and are familiar with the Seller Documents and with those documents relating to the
existence, organization, and operation of the Seller, the adoption of the Resolution, and the
execution of the Seller Documents, and have satisfied ourselves as to such other matters as [I/we]
deem necessary in order to render the following opinions. As to paragraphs numbered 3 and 4
below, [lIwe] have relied as to factual matters on the representations and warranties of the Seller
contained in the Sale Agreement.
Based upon the foregoing, and subject to the limitations and qualifications set
forth herein, [l/we] are of the opinion that:
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I. The Seller is a local agency, within the meaning of Section 6585(1) of the
California Government Code. The Governing Body is the governing body of the Seller.
2. The Resolution was duly adopted at a meeting of the Governing Body,
which was called and held pursuant to law and with all public notice required by law, and at
which a quorum was present and acting throughout, and the Resolution is in full force and effect
and has not been modified, amended or rescinded since the date of its adoption.
3. To the best of[my/our] knowledge, no action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public board or body, is pending or
threatened in any way against the Seller (i) affecting the existence of the Seller or the titles of its
Governing Body members or officers to their respective offices; (ii) seeking to restrain or to
enjoin the sale of the Proposition I A Receivable or to direct the application of the proceeds of
the sale thereof, or materially adversely affecting the sale of the Proposition IA Receivable; (iii)
in any way contesting or affecting the validity or enforceability of the Resolution, Seller
Documents or any other applicable agreements or any action of the Seller contemplated by any
of said documents; or (iv) in any way contesting the powers of the Seller or its authority with
respect to the Resolution or the Seller Documents or any other applicable agreement, or any
action on the part of the Seller contemplated by any of said documents.
4. To the best of [my/our] knowledge, prior to the sale of the Proposition IA
Receivable to the Purchaser, the Seller had not sold, transferred, assigned, set over or otherwise
conveyed any right, title or interest of any kind whatsoever in all or any portion of the Seller's
Proposition I A Receivable, nor had the Seller created, or permitted the creation of, any Lien
thereon.
5. The Seller has duly authorized and executed the Seller Documents and,
assuming the due authorization execution and delivery of the Sale Agreement by the Purchaser,
each Seller Document will be legal, valid and binding against the Seller and enforceable against
the Seller in accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or laws relating to or affecting
creditors' rights, and the application of equitable principles and the exercise of judicial discretion
in appropriate areas.
No opinion is expressed concerning the obligation or ability of the State of
California to make any payment of the Proposition IA Receivable pursuant to Section 100.06 of
the Revenue and Taxation Code and Section 25.5 of Article XIII of the California Constitution,
nor is any opinion expressed with respect to the ability of the State to enact any change in the
law applicable to the Seller Documents (including, without limitation, Section 100.06 of the
Revenue and Taxation Code or Section 6588.6 of the Govemment Code). Furthermore, [lIwe]
express no opinion as to the value of the Proposition IA Receivable or as to any legal or
equitable remedies that may be available to any person should the Proposition I A Receivable
have little or no value. No opinion is expressed with respect to the sale of Bonds by the
Purchaser.
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The legal opinion set forth herein is intended for the information solely of the
addressees hereof and for the purposes contemplated by the Sale Agreement. The addressees
may not rely on it in connection with any transactions other than those described herein, and it is
not to be relied upon by any other person or entity, or for any other purpose, or quoted as a whole
or in part, or otherwise referred to, in any document, or to be filed with any governmental or
administrative agency other than the Purchaser or with any other person or entity for any purpose
without [my/our] prior written consent. In addition to the addressees hereof, each Credit
Enhancer and the underwriters of the Bonds may rely upon this legal opinion as if it were
addressed to them. [I/We] do not undertake to advise you of matters that may come to [my/our]
attention subsequent to the date hereof that may affect the opinions expressed herein.
Very truly yours,
By:
Seller's Counsel
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EXHIBIT B2
OPINION OF COUNSEL
to
CITY OF SAN BERNARDINO
Dated: Closing Date
California Statewide Communities Development Authority
Sacramento, California
Wells Fargo Bank, National Association
Los Angeles, California
Re: Sale of Proposition I A Receivable (Bringdown Opinion)
Ladies & Gentlemen:
Pursuant to that certain Purchase and Sale Agreement dated as of November I,
2009 (the "Sale Agreement") between the City of San Bemardino (the "Seller") and the
Califomia Statewide Communities Development Authority (the "Purchaser"), this Office
delivered an opinion (the "Opinion") dated the Pricing Date as counsel for the Seller in
connection with the sale of the Seller's Proposition IA Receivable (as defined in the Sale
Agreement), the execution of documents related thereto and certain other related matters.
Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Sale Agreement.
I confirm that you may continue to rely upon the Opinion as if it were dated as of
the date hereof. Each Credit Enhancer and the underwriters of the Bonds may rely upon this
legal opinion as if it were addressed to them. This letter is delivered to you pursuant to Section
2(b)(ii)(I) of the Sale Agreement.
Very truly yours,
By:
Seller's Counsel
B2-1
EXHIBIT Cl
CLERK'S CERTIFICATE
CERTIFICATE OF THE
CITY CLERK OF
CITY OF SAN BERNARDINO, CALIFORNIA
Dated: Pricing Date
The undersigned City Clerk of the City of San Bernardino (the "Seller"), a local agency
of the State of California within the meaning of Section 6585(f) of the California Government
Code, does hereby certify that the foregoing is a full, true and correct copy of Resolution No.
duly adopted at a regular meeting of the Mayor and Common Council of said
Seller duly and legally held at the regular meeting place thereof on the day of
, 2009, of which meeting all of the members of said Mayor and Common
Council had due notice and at which a quorum was present and acting throughout, and that at
said meeting said resolution was adopted by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
I do hereby further certify that I have carefully compared the same with the original
minutes of said meeting on file and of record in my office and that said resolution is a full, true
and correct copy of the original resolution adopted at said meeting and entered in said minutes
and that said resolution has not been amended, modified or rescinded since the date of its
adoption and the same is now in full force and effect.
I do hereby further certify that an agenda of said meeting was posted at least 72 hours
before said meeting at a location in the City of San Bemardino, California freely accessible to
members of the public, and a brief general description of said resolution appeared on said
agenda.
Capitalized terms used but not defined herein shall have the meanings given to such
terms in the Purchase and Sale Agreement, dated as of November I, 2009, between the Seller
and the California Statewide Communities Development Authority.
WITNESS by my hand as of the Pricing Date.
By:
City Clerk of the City of San Bernardino,
Califomia
CI-I
EXHIBIT C2
SELLER CERTIFICATE
SELLERCERTIFICA TE
Dated: Pricing Date
We, the undersigned officers of the City of San Bernardino (the "Seller"), a local
agency of the State of California within the meaning of Section 6585(f) of the California
Government Code, holding the respective offices herein below set opposite our signatures, do
hereby certifY that on the date hereof the following documents (the "Seller Transaction
Documents") were officially executed and delivered by the Authorized Officer or Officers whose
names appear on the executed copies thereof, to wit:
Document
]. Purchase and Sale Agreement, dated as of November 1,2009 (the
"Sale Agreement"), between the Seller and the California
Statewide Communities Development Authority (the "Purchaser").
2. Irrevocable Instructions For Disbursement of Seller's Proposition
IA Receivable to the Controller of the State of California, dated
the Closing Date.
3. Bill of Sale, dated the Closing Date.
Capitalized terms used herein and not defined herein shall have the meaning given
such terms in the Sale Agreement.
We further certify as follows:
I. At the time of signing the Seller Transaction Documents and the other documents and
opinions related thereto, we held said offices, respectively, and we now hold the same.
2. The representations and warranties of the Seller contained in the Seller Transaction
Documents are true and correct as of the date hereof in all material respects.
3. The Mayor and Common Council duly adopted its resolution (the "Resolution") approving
the sale of the Seller's Proposition IA Receivable at a meeting of the Mayor and Common
Council which was duly called and held pursuant to law with all public notice required by
law and at which a quorum was present and acting when the Resolution was adopted, and
such Resolution is in full force and effect and has not been amended, modified, supplemented
or rescinded.
C2-1
1
2
3
4
5
SilUlllture
13
14 I HEREBY CERTIFY that the signatures of the officers named above are
enuine.
6
7
arbara Pachon, Director ofPinance
8
'ta Conrad, Deputy Director of Finance
9
therine Myers, Accounting Manager
10
11 harles E. McNeely, City Manager
12
15
16 Dated: Pricing Date
17
18
19
20
21
22
23
24
25
26
27
28
By:
City Clerk of the City of San Bernardino,
California
C2-2
EXHIBIT C3
BILL OF SALE AND BRINGDOWN CERTIFICATE
BILL OF SALE AND BRINGDOWN CERTlFlCA TE
Pursuant to terms and conditions of the Purchase and Sale Agreement (the "Sale
Agreement"), dated as of November 1, 2009, between the undersigned (the "Seller") and the
California Statewide Communities Development Authority (the "Purchaser"), and in
consideration of the obligation of the Purchaser to pay and deliver to the Seller the Purchase
Price (as defined in the Sale Agreement), in two equal installment payments to be made on
January 15,2010, and May 3, 2010 (collectively, the "Payment Dates"), the Seller does hereby
(a) transfer, grant, bargain, sell, assign, convey, set over and deliver to the Purchaser, absolutely
and not as collateral security, without recourse except as expressly provided in the Sale
Agreement, the Proposition IA Receivable as defined in the Sale Agreement (the "Proposition
lA Receivable"), and (b) assign to the Purchaser, to the extent permitted by law (as to which no
representation is made), all present or future rights, if any, of the Seller to enforce or cause the
enforcement of payment of the Proposition I A Receivable pursuant to the Act and other
applicable law. Such transfer, grant, bargain, sale, assignment, conveyance, set over and
delivery is hereby expressly stated to be a sale and, pursuant to Section 6588.6(b) of the
California Govemment Code, shall be treated as an absolute sale and transfer of the Proposition
I A Receivable, and not as a grant of a security interest by the Seller to secure a borrowing.
Seller specifically disclaims any right to rescind the Agreement, or to assert that title to the
Proposition IA Receivable has not passed to the Purchaser, should Purchaser fail to make the
installment payments in the requisite amounts on the Payment Dates.
The Seller hereby certifies that the representations and warranties of the Seller set
forth in the Certificate of the City Clerk dated the Pricing Date, the Seller Certificate dated the
Pricing Date and in the Transaction Documents to which the Seller is a party are true and correct
in all material respects as of the date hereof (except for such representations and warranties made
as of a specified date, which are true and correct as of such date). Capitalized terms used but not
defined herein shall have the meanings given to such terms in the Sale Agreement.
Dated: Closing Date
CITY OF SAN BERNARDINO
By:
Authorized Officer
C3-1
EXHIBIT D
IRREVOCABLE INSTRUCTIONS TO CONTROLLER
IRREVOCABLE INSTRUCTIONS FOR DISBURSEMENT
OF PROPOSITION I A RECEIVABLE OF
CITY OF SAN BERNARDINO
Dated: Closing Date
Office of the Controller
State of California
P.O. Box 942850
Sacramento, California 94250-5872
Re: Notice of Sale of Proposition I A Receivable by the City of San
Bernardino and Wiring Instructions Information Form
Dear Sir or Madam:
Pursuant to Section 6588.6(c) of the California Govemment Code, City of San
Bernardino (the "Seller") hereby notifies you of the sale by Seller, effective as of the date of
these instructions written above, of all right, title and interest of the Seller in and to the
"Proposition IA Receivable" as defined in Section 6585(g) of the California Government Code
(the "Proposition IA Receivable"), namely, the right to payment of moneys due or to become
due to the Seller pursuant to Section 25.5(a)(I)(B)(iii) of Article XIII of the Califomia
Constitution and Section 100.06 of the California Revenue and Taxation Code.
By resolution, the Seller's Mayor and Common Council authorized the sale of the
Proposition IA Receivable to the California Statewide Communities Development Authority (the
"Purchaser") pursuant to a Purchase and Sale Agreement, dated as of November I, 2009 (the
"Purchase and Sale Agreement") and a Bill of Sale, dated the Closing Date (as defined in the
Purchase and Sale Agreement). The Proposition IA Receivable has been pledged and assigned
by the Purchaser pursuant to an Indenture, dated as of November I, 2009 (the "Indenture")
between the Purchaser and Wells Fargo Bank, National Association, as Trustee (the "Trustee").
The Seller hereby irrevocably requests and directs that, commencing as of the
date of these instructions written above, all payments of the Proposition I A Receivable (and
documentation related thereto) be made directly to Wells Fargo Bank, National Association, as
Trustee, in accordance with the wire instructions and bank routing information set forth below.
Please note that the sale of the Proposition IA Receivable by the Seller is
irrevocable and that: (i) the Seller has no power to revoke or amend these instructions at any
time; (ii) the Purchaser shall have the power to revoke or amend these instructions only if
there are no notes of the Purchaser outstanding under the Indenture and the Indenture has
been discharged; and (iii) so long as the Indenture has not been discharged, these instructions
D-l
cannot be revoked or amended by the Purchaser without the consent of the Trustee. Should
the Purchaser, however, deliver a written notice to the Office of the Controller stating that:
(a) the Seller failed to meet the requirements set forth in the Purchase and Sale Agreement;
(b) the Purchaser has not waived such requirements; and (c) the Purchaser has not purchased
the Proposition 1A Receivable as a result of the circumstances described in (a) and (b) above,
then these instructions shall be automatically rescinded and the Seller shall again be entitled
to receive all payment of moneys due or to become due to the Seller pursuant to Section
25.5(a)(1)(B)(i;;) of Article XIII of the California Constitution and Section 100.06 of the
California Revenue and Taxation Code.
Bank Name:
Bank ABA Routing #:
Bank Account #:
Bank Account Name:
Further Credit To:
Bank Address:
Bank Telephone #:
Bank Contact Person:
Wells Fargo Bank, N.A.
121000248
0001038377
Corporate Trust Clearing
CSCDA Proposition 1A Bonds
707 Wilshire Blvd., 17th Floor
MAC E2818-176
Los Angeles, CA 90017
(213) 614-3353
Robert Schneider
Please do not hesitate to call the undersigned if you have any questions regarding
this transaction. Thank you for your assistance in this matter.
Very truly yours,
CITY OF SAN BERNARDINO
By:
Authorized Officer
D-2
EXHIBIT E
ESCROW INSTRUCTION LETTER
ESCROW INSTRUCTION LETTER
,2009
California Statewide Communities Development Authority
1100 K Street
Sacramento, CA 95814
Re: Prooosition I A Receivable financing
Dear Sir or Madam:
The City of San Bemardino (the "Seller") hereby notifies you of its agreement to
participate in the California Statewide Communities Development Authority Proposition IA
Receivable financing. By adoption of a resolution (the "Resolution") authorizing the sale of its
Proposition IA Receivable, the Seller's Mayor and Common Council has agreed to sell to the
California Statewide Communities Development Authority (the "Purchaser"), for a purchase
price that meets the conditions set forth in the Resolution, all of its right, title and interest in the
Proposition IA Receivable.
Enclosed herewith are the following documents which have been duly approved
and executed by the Seller and which are to be held in escrow by Orrick, Herrington &
Sutcliffe LLP, as transaction counsel ('Transaction Counsel"), as instructed below:
I. certified copy of the Resolution, together with a certificate of the City Clerk,
dated the Pricing Date;
2. the Seller Certificate, dated the Pricing Date;
3. the Opinion of Seller's Counsel, dated the Pricing Date;
4. the Opinion of Seller's Counsel (bringdown opinion), dated the Closing Date;
5. the Purchase and Sale Agreement, dated as of November 1,2009;
6. the Bill of Sale and Bringdown Certificate, dated the Closing Date; and
7. the Irrevocable Instructions to Controller, dated the Closing Date.
The foregoing documents are to be held in escrow by Transaction Counsel and
shall be delivered on the Closing Date (as defined in the Purchase and Sale Agreement),
provided that such Closing Date occurs on or before December 31, 2009.
E-I
Should (i) the Closing Date not occur on or berfore December 31, 2009, or (ii)
Transaction Counsel receive prior to the Closing Date written notification from Seller or Seller's
Counsel stating, respectively and in good faith, that the representations made in the Seller's
Certificate are not true and accurate, or the opinions set forth in the Opinion of Seller's Counsel
are not valid, in each case as of the Closing Date and provided that the Purchaser may, in its sole
discretion, choose to waive receipt of such representations or opinions, then this agreement shall
terminate and Transaction Counsel shall destroy all of the enclosed documents.
Very truly yours,
CITY OF SAN BERNARDINO
By:
Authorized Officer
Enclosures
cc: Orrick, Herrington & Sutcliffe LLP
E-2