Okaloosa County BOCC — April 1, 2014 — Loan Agreement.2BL — reading text

of the Maximum Annual Debt Service of the Outstanding Bonds, any outstanding Indebtedness and the Additional Indebtedness then proposed to be issued. 12  (c) For the purpose of determining Debt Service under this Section 5.12, the interest rate on Additional Indebtedness that is proposed to be issued as variable rate shall be deemed to be the Bond Buyer Revenue Bond Index most recently published prior to the sale of such Additional Indebtedness. (d) For the purpose of determining Debt Service under this Section 5.12, the interest rate on outstanding variable rate Bonds or Indebtedness shall be deemed to be (1) if such variable rate Bonds or Indebtedness have been outstanding for at least 12 months prior to the date of sale of such Additional Indebtedness, the highest of (a) the actual rate of interest borne by such variable rate Bonds or Indebtedness on the date of sale, and (b) the average interest rate borne by such variable rate Bonds or Indebtedness during the 12-month period preceding the date of sale, or (2) if such variable rate Bonds or Indebtedness have not been Outstanding for at least 12 months prior to the date of sale of such Additional Indebtedness, the higher of (a) the actual rate of interest borne by the variable rate Bonds or Indebtedness on the date of sale, and (b) the Bond Buyer Revenue Bond Index most recently published prior to the sale of such Additional Indebtedness. (e) For the purpose of this Section 5.12, the phrase "immediately preceding Fiscal Year or any 12 consecutive months selected by the Borrower of the 24 months immediately preceding the issuance of said Additional Indebtedness" shall be sometimes referred to as "12 consecutive months" or the "12-month period." (f) The Net Revenues calculated pursuant to the foregoing Section 5.12(b) may be adjusted upon the written advice of the Consulting Engineers, at the option of the Borrower, as follows: (1) If the Borrower, prior to the issuance of the proposed Additional Indebtedness, shall have increased the rates, fees or other charges for the product, services or facilities of the System, the Net Revenues for the 12 consecutive months shall be adjusted to show the Net Revenues which would have been derived from the System in such 12 consecutive months as if such increased rates, fees or other charges for the product, services or facilities of the System had been in effect during all of such 12 consecutive months. (2) If the Borrower shall have acquired or has contracted to acquire any privately or publicly owned existing utility system that will become part of the System, the cost of which shall be paid from all or part of the proceeds of the issuance of the proposed Additional Indebtedness, then the Net Revenues derived from the System during the 12 consecutive months shall be increased by adding to the Net Revenues for said 12 consecutive months the Net Revenues which would have been derived from said existing utility system as if such existing utility system had been a part of the System during such 12 consecutive months. For the purposes of this paragraph, the Net Revenues derived from said existing utility system during such 12 consecutive months shall be adjusted to determine such Net Revenues by deducting the cost of operation and maintenance of said existing utility system from the gross revenues of said system. Such Net Revenues shall take into account any increase in rates imposed on customers of such utility system on or prior to the acquisition thereof by the Borrower. (3) If the Borrower, in connection with the issuance of Additional Indebtedness, shall enter into a contract (with a duration not less than the final maturity of such Additional 13 Indebtedness) with any public or private entity whereby the Borrower agrees to furnish services in connection with any utility system, then the Net Revenues of the System during the 12 consecutive months shall be increased by the least amount which said public or private entity shall guarantee to pay in any one year for the furnishing of said services by the Borrower, after deducting therefrom the proportion of operating expenses and repair, renewal and replacement cost attributable in such year to such services. (4) In the event the Borrower shall be constructing or acquiring additions, extensions or improvements to the System from the proceeds of such Additional Indebtedness and shall have established fees, rates or charges to be charged and collected from users of such facilities when service is rendered, such Net Revenues for the 12 consecutive months may be adjusted by adding thereto 100% of the Net Revenues estimated by the Consulting Engineers to be derived during the first 12 months of operation after completion of the construction or acquisition of said additions, extensions and improvements from the customers of the facilities to be financed by Additional Indebtedness, together with other funds on hand or lawfully obtained for such purpose; provided such customers must represent existing occupied structures that will be added to the System upon completion of the proposed additions, extensions or improvements. (5) If the Borrower shall add new customers subsequent to the commencement of the 12 consecutive months, the Consulting Engineers may adjust the Net Revenues to reflect the Net Revenues that would have been received by the Borrower if such customers had been in place for the entire 12 consecutive months. (g) In the event any Additional Indebtedness is issued for the purpose of refunding any Bonds then Outstanding or outstanding Indebtedness, the conditions of Section 5.12(b) shall not apply, provided that the issuance of such Additional Indebtedness shall result in a reduction of the aggregate debt service. The conditions of Section 5.12(b) shall apply to Additional Indebtedness issued to refund Subordinated Indebtedness and to Additional Indebtedness issued for refunding purposes which cannot meet the conditions of this paragraph. SECTION 5.13. SUBORDINATED INDEBTEDNESS. The Borrower may at any time or from time to time issue evidences of indebtedness which is not Additional Indebtedness payable in whole or in part out of Net Revenues and which may be secured by a pledge of Net Revenues; provided, however, that such pledge shall be, and shall be expressed to be, subordinated in all respects to the pledge of the Net Revenues created by this Loan Agreement and provided further that the issuance of such Subordinated Indebtedness shall be subject to any provisions contained in financing documents securing outstanding Subordinated Indebtedness to the extent such provisions impact on the ability of the Borrower to issue other Subordinated Indebtedness. The Borrower shall have the right to covenant with the holders from time to time of any Subordinated Indebtedness to add to the conditions, limitations and restrictions under which any Additional Indebtedness may be issued under the provisions of Section 5.12 hereof. The Borrower agrees to pay promptly any Subordinated Indebtedness as the same shall become due. SECTION 5.14. OPERATION AND MAINTENANCE. The Borrower will maintain or cause the System and all portions thereof to be maintained in good condition and will operate or cause to be operated the same in an efficient and economical manner, making or causing to be made such expenditures for equipment and for renewals, repairs and replacements 14 as may be proper for the economical operation and maintenance thereof. The Borrower may contract with a responsible Person which has experience in the operation of utility systems similar to the System for the operation and maintenance of the System. SECTION 5.15. ANNUAL BUDGET. The Borrower shall annually prepare and adopt, prior to the beginning of each Fiscal Year, an Annual Budget. No expenditure for Operating Expenses shall be made in any Fiscal Year in excess of the aggregate amount provided for Operating Expenses in the Annual Budget until the Governing Body shall have approved the increased expenditures. SECTION 5.16. RATES. The Borrower shall fix, establish, maintain and collect such rates, fees and charges for the product, services and facilities of the System, and revise the same from time to time, whenever necessary, so as always to provide in each Fiscal Year Net Revenues equal to at least 125% of the Debt Service Requirement becoming due in such Fiscal Year. Such rates, fees or other charges shall not be so reduced so as to be insufficient to provide adequate Net Revenues for the purposes provided therefor by this Loan Agreement. If, in any Fiscal Year, the Borrower shall fail to comply with the requirements contained in this Section 5.16, it shall promptly cause the Consulting Engineers to review its rates, fees, charges, income, Gross Revenues, Operating Expenses and methods of operation and to make written recommendations as to the methods by which the Borrower may seek to comply with the requirements set forth in this Section 5.16. The Borrower shall forthwith commence to implement such recommendations to the extent required so as to cause it to thereafter comply with said requirements. So long as the Borrower implements such recommendations within 120 days of the receipt thereof, the Borrower's failure to comply with this Section 5.16 shall not be considered an Event of Default under Section 6.1 hereof. SECTION 5.17. BOOKS AND RECORDS. The Borrower shall keep books, records and accounts of the revenues and operations of the System, which shall be kept separate and apart from all other books, records and accounts of the Borrower, and the Holders of any Bonds Outstanding or the duly authorized representatives thereof shall have the right at all reasonable times to inspect all books, records and accounts of the Borrower relating thereto. SECTION 5.18. ANNUAL AUDIT. The Borrower shall, immediately after the close of each Fiscal Year, cause the books, records and accounts relating to the System to be properly audited by a recognized independent firm of certified public accountants, and shall require such accountants to complete their report of such Annual Audit in accordance with applicable law. Each Annual Audit shall be in conformity with generally accepted accounting principles. SECTION 5.19. NO MORTGAGE OR SALE OF THE SYSTEM. Other than with respect to the Outstanding Parity Indebtedness, the Borrower irrevocably covenants, binds and obligates itself not to sell, lease, encumber or in any manner dispose of the System as a whole or any substantial part thereof (except as provided below) until all of the Bonds and all interest thereon shall have been paid in full or provision for payment has been made in accordance with the Bond Indenture. 15  The foregoing provision notwithstanding, the Borrower shall have and hereby reserves the right to sell, lease or otherwise dispose of any of the property comprising a part of the System in the following manner, if any one of the following conditions exist: (A) such property is not necessary for the operation of the System, (B) such property is not useful in the operation of the System, (C) such property is not profitable in the operation of the System, or (D) in the case of a lease of such property, such lease will be advantageous to the System and will not materially adversely affect the security for the Bondholders. Prior to any such sale, lease or other disposition of said property: (1) if the amount to be received therefor is not in excess of five percent (5%) of