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Legal Resources | Education Code |  EC  81908  

Indentures   

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(a) An indenture pursuant to which bonds are issued may include any and all covenants and agreements on the part of the board as the board deems necessary or advisable for the better security of the bonds issued thereunder. An indenture may include a clause, relating to the bonds issued thereunder, requiring the board to do any or all of the following:

(1) To pay or cause to be paid punctually the principal of all the bonds and the interest thereon on the date or dates, or at the place or places, and in the manner mentioned in the bonds and in the coupons appertaining thereto in accordance with the indenture.

(2) To operate the project continuously, to the extent practicable under conditions as they may from time to time exist, in an efficient and economical manner.

(3) To make all necessary repairs, renewals, and replacements to any project, and to keep the project at all times in good repair, working order, and condition.

(4) To preserve and protect the security of the bonds and the rights of the holders thereof and to warrant and defend these rights.

(5) To pay and discharge or cause to be paid and discharged all lawful claims for labor, materials, and supplies or other charges which, if unpaid, might become a lien or charge upon the revenues, or any part thereof, of any project acquired, constructed, or completed from the proceeds of the sale of the bonds, or upon any physical properties, or which might impair the security of the bonds.

(6) To fix, prescribe, and collect rates, rentals, or other charges in connection with the services and facilities furnished from the project acquired, constructed, or purchased from part or all of the proceeds of the bonds, sufficient to pay the principal of and interest on the bonds as they become due and payable, together with additional sums as may be required for any fund created by this chapter, for the further security of these bonds, or as a depreciation charge or other charge in connection with the project.

(7) To hold or cause to be held in trust the revenues or any part of the revenues pledged to the payment of the bonds and the interest thereon, or to any reserve or other fund created by this chapter for the further protection of the bonds, and to apply the revenues or any part of revenues or cause them to be applied only as provided in the indenture.

(b) An indenture may also include clauses which do any or all of the following:

(1) Limit, restrict, or prohibit any right, power, or privilege of the board to mortgage or otherwise encumber, sell, lease, or dispose of any improvements constructed from the proceeds of the bonds, or to enter into any lease or agreement which impairs or impedes the operation of a project, or any part thereof, necessary to secure adequate revenues or which otherwise impairs or impedes the rights of the holders of the bonds with respect to these revenues.

(2) Define the power of the board in applying the proceedings of the sale of any issue of bonds for the purpose of acquiring, constructing, or completing any project or any part thereof.

(3) Limit the power of the board to issue additional bonds for the purpose of acquiring, constructing, or completing any project or any part thereof.

(4) Require, specify, or limit the kind, amount, and character of insurance to be maintained by the board on any project, or any part thereof, and the use and disposition of the proceeds of any insurance thereafter collected.

(5) Provide the events of default and the terms and conditions upon which any or all of the bonds of the board then or thereafter issued may become or be declared due and payable prior to maturity, and the terms and conditions upon which this declaration and its consequences may be waived.

(6) Designate the rights, limitations, powers, and duties arising upon breach by the board of any of the covenants, conditions, or obligations contained in any indenture.

(7) Prescribe a procedure by which the terms and conditions of the indenture may be subsequently amended or modified with the consent of the board and the vote or written assent of the holders of a specified principal amount or specified proportion of the bonds issued and outstanding. The clause may provide for meetings of bondholders and for the manner in which the consent of the bondholders may be given. The clause shall specifically state the effect of an amendment or modification upon the rights of the holders of all of the bonds and interest coupons appertaining thereto, whether attached thereto or detached therefrom.

With respect to any clause providing for the modification or amendment of an indenture, the board may agree that bonds held by the county treasurer, the United States or any instrumentality thereof, or the State of California or any political subdivision thereof (including every municipal corporation, district, public corporation, board, or agency of any kind or class) shall not be counted as outstanding bonds, or be entitled to vote or assent, but shall nevertheless, be subject to modification or amendment.

(8) Provide for other acts and matters as may be necessary convenient, or desirable in order to better secure the bonds or to make the bonds more marketable.

(c) The board may provide in an indenture for the carrying of liability or property or any other insurance in any amount or character it shall determine, and for the payment of the premiums thereon.

(d) The board may include in an indenture the limitations as to competitive projects, both as to location and comparative rentals, as may be deemed necessary or desirable for the security of revenue bonds issued pursuant to this chapter.

(e) The board may include in an indenture a covenant that no project acquired, constructed, or completed from the proceeds of revenue bonds issued under the provisions of this chapter shall be used without charge therefor or any facilities thereof be furnished free of charge to any person.

(Amended by Stats. 1990, Ch. 1372, Sec. 585.)