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TRANSCRIPT
SUPPLEMENT TO
PRELIMINARY OFFICIAL STATEMENT
DATED MARCH 20, 2020
Relating to
CLEVELAND COUNTY PUBLIC FACILITIES AUTHORITY
$2,500,000 LEASE REVENUE REFUNDING BONDS, SERIES 2020
PLEASE BE ADVISED that the above-referenced Preliminary Official Statement has been revised to insert a subsection entitled "Infectious Disease Outlook (COVID-19)'' under the caption “RISK FACTORS.”
Infectious Disease Outlook (COVID-19)
The World Health Organization has declared a pandemic following the outbreak of COVID-19, a respiratory disease caused by a new strain of coronavirus (the “Pandemic”), which is currently affecting many parts of the world, including the United States and Oklahoma. On January 31, 2020, the Secretary of the United States Health and Human Services Department declared a public health emergency for the United States in connection with COVID-19. On March 13, 2020, the President of the United States declared the Pandemic a national emergency and the Oklahoma Governor (the “Governor”) subsequently declared COVID-19 an imminent threat of disaster for all counties in Oklahoma (collectively, the “disaster declarations”). On April 5, 2020, in response to a request from the Governor, the President issued a Major Disaster Declaration for the State of Oklahoma.
Pursuant to Oklahoma’s Catastrophic Health Emergency Act, the Governor has broad authority to respond to disasters. including suspending any regulatory statute prescribing the procedures for conducting state business or any order or rule of a state agency that would in any way prevent, hinder, or delay necessary action in coping with this disaster and issuing executive orders that have the force and effect of law. The Governor has issued a number of executive orders relating to COVID-19 preparedness and mitigation. Many of the federal, state and local actions and policies under the aforementioned disaster declarations are focused on limiting instances where the public can congregate or interact with each other, which affects economic growth within Oklahoma.
Since the disaster declarations were made, the Pandemic has negatively affected travel, commerce, and financial markets globally, and is widely expected to continue negatively affecting economic growth and financial markets worldwide and within Oklahoma. Stock values and crude oil prices in the U.S. and globally, have seen significant declines attributed to COVID-19 concerns. Oklahoma may be particularly at risk from any global slowdown, given the risk of contraction in the oil and gas industry and spillover effects into other industries, including manufacturing.
These negative impacts may reduce or negatively affect property values, as well as the ability of property owners to pay ad valorem taxes as the same becomes due and payable. See “PROJECTED REVENUE & DEBT SERVICE REQUIREMENT.” The Bonds are secured by an appropriation of ad valorem taxes, and a reduction in property values may result in lower tax collections.
The County continues to monitor the spread of COVID-19 and is working with local, state, and national agencies to address the potential impact of COVID-19 upon the County. While the potential impact of COVID-19 on the County cannot be quantified at this time, the continued outbreak of COVID-19 could have an adverse effect on the County’s financial condition.
The date of this Supplement is April 15, 2020.
PRELIMINARY OFFICIAL STATEMENT DATED MARCH 20, 2020
NEW ISSUE NON RATED
In the opinion of Bond Counsel, interest on the Bonds is excluded from gross income of the owners thereof for Federal income tax purposes, and is not an item of tax preference for purposes of the federal alternative minimum tax. Interest on the Bonds is also exempt from State of Oklahoma income tax under present law. See “Tax Matters” herein.
$2,500,000∗ CLEVELAND COUNTY PUBLIC FACILITIES AUTHORITY
Lease Revenue Refunding Bonds (Cleveland County Health Department Moore Facility Project)
Series 2020
Dated: March 1, 2020 Due: September 1, as shown on inside cover
The $2,500,000* Lease Revenue Refunding Bonds, Series 2020 (the “Bonds”) are dated March 1, 2020. Interest on the bonds is payable semi-annually on March 1 and September 1 of each year commencing on September 1, 2020. The Bonds will be issued and registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), to which all payments of principal and interest will be made from Bancfirst, Oklahoma City, Oklahoma (the “Trustee”). The Bonds mature on September 1 of the years, and in the amounts, and bear interest at the rates set forth on the inside cover.
The Bonds are being issued pursuant to a Bond Indenture dated March 1, 2020 (the “Bond Indenture”), between the Cleveland County Public Facilities Authority (the “Authority”), a public trust and an agency of the State of Oklahoma, the beneficiary of which is Cleveland County, Oklahoma (the “County”) and the Trustee, in order to provide funds which will be used to (i) provide a current refunding of the outstanding principal amount of the $3,145,000 Cleveland County Public Facilities Authority Lease Revenue Bonds (Cleveland County Health Department – Moore Facility Project) Series 2009 (the “Series 2009 Bonds”), the proceeds of which were used to demolish an existing building and construct, furnish and equip a new 27,000 square foot Cleveland County Health Department facility located in Moore, Oklahoma (the “Facility”); and, (ii) pay all the costs of issuance of the Bonds (the “Project”).
The Bonds are subject to mandatory, optional, and special redemption as outlined herein in the section entitled “The Bonds”.
NEITHER THE BONDS NOR THE HEREINAFTER DESCRIBED LEASE AGREEMENT SHALL GIVE RISE TO A GENERAL OBLIGATION OR OTHER INDEBTEDNESS OF THE STATE OF OKLAHOMA OR OF THE AUTHORITY OR CLEVELAND COUNTY NOR A MANDATORY PAYMENT OBLIGATION IN ANY YEAR WHICH CLEVELAND COUNTY DOES NOT HAVE REVENUE AVAILABLE TO PAY LEASE PAYMENTS UNDER THE LEASE AGREEMENT. THE LEASE AGREEMENT IS SUBJECT TO RECEIPT OF ANNUAL PAYMENTS FROM CLEVELAND COUNTY PAYABLE SOLELY OUT OF REVENUE FOR THE THEN CURRENT FISCAL YEAR OF CLEVELEAND COUNTY, AND UPON FAILURE TO MAKE LEASE PAYMENTS OR ANY OTHER TERMINATION OF THE LEASE AGREEMENT, THE BONDS WILL BE PAYABLE FROM MONIES, IF ANY, HELD BY THE TRUSTEE UNDER THE BOND INDENTURE AND ANY AMOUNTS RESULTING FROM SUBLETTING OR SUBLEASING OF THE FACILITY. THE AUTHORITY HAS NO TAXING POWER.
The Bonds are offered when, as and if issued and received by the original purchaser thereof, subject to prior sale, to withdrawal or modifications of the offer without any notice, and to the approval of legality of the Bonds by the Floyd Law Firm, P.C., Norman, Oklahoma, Bond Counsel. Certain legal matters will be passed upon for the Underwriter by its Counsel, Johanning & Byrom, PLLC, Oklahoma City, Oklahoma, and, for the Authority by its Counsel, Bailey & Poarch, Norman, Oklahoma. It is expected that the Bonds in definitive form will be available for delivery on or about April 29, 2020.
∗ Preliminary, subject to change
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SUPPLEMENT PAGE DEEMED FINAL POS DATED MARCH 20, 2020
$2,500,000∗
CLEVELAND COUNTY PUBLIC FACILITIES AUTHORITY Lease Revenue Refunding Bonds, Series 2020
(Cleveland County Health Department - Moore Facility Project) Series 2020
Dated Date: March 1, 2020 Due: September 1, as described below
MATURITY SCHEDULE
Maturity Principal Interest Date Amount Rate Yield CUSIP(1)
9-01-2020 $ 100,000
9-01-2021 $ 185,000
9-01-2022 $ 190,000
9-01-2023 $ 195,000
9-01-2024 $ 200,000
9-01-2025 $ 205,000
9-01-2026 $ 215,000
9-01-2027 $ 215,000
9-01-2028 $ 220,000
9-01-2029 $ 230,000
[Plus Accrued Interest]
(1)CUSIP numbers have been assigned to this issue by CUSIP Global Services, which is managed on behalf of the American Bankers Association by S&P Global Market Intelligence, a part of S&P Global Inc., and are included solely for the convenience of the purchasers of the Bonds. None of the Authority, the Trustee, the County or the Underwriter shall be responsible for the selection or correctness of the CUSIP numbers shown herein.
Optional Redemption: The Authority reserves the right to redeem the Bonds prior to maturity. See “THE BONDS – Redemption Prior to Maturity”.
∗ Preliminary, subject to change
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REGARDING USE OF THIS OFFICIAL STATEMENT
For purposes of compliance with Rule 15c2-12 of the United States Securities and Exchange Commission, as amended (“Rule 15c2-12”), this document constitutes an “official statement” of the Authority with respect to the Bonds that has been “deemed final” by the Authority as of its date except for the omission of no more than the information permitted by Rule 15c2-12.
This Official Statement does not constitute an offer to sell or solicitation of an offer to buy within any jurisdiction to any person to whom it is unlawful to make such offer or solicitation within such jurisdiction. In connection with the offering of the Bonds, no dealer, salesman, or any other person has been authorized to give any information or to make any representation other than contained herein. If given or made, such information or representation must not be relied upon.
Certain information set forth herein has been obtained from the Authority and other sources which are believed to be reliable but such information is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Underwriter. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority or the County or other matters described herein since the date hereof. See “CONTINUING DISCLOSURE” for a description of the County’s undertaking to provide certain information on a continuing basis.
NEITHER THE BONDS NOR THE LEASE AGREEMENT SHALL GIVE RISE TO A GENERAL OBLIGATION OR OTHER INDEBTEDNESS OF THE STATE OF OKLAHOMA OR OF THE AUTHORITY OR CLEVELAND COUNTY NOR A MANDATORY PAYMENT OBLIGATION IN ANY YEAR WHICH CLEVELAND COUNTY DOES NOT HAVE REVENUE AVAILABLE TO PAY LEASE PAYMENTS UNDER THE LEASE AGREEMENT. THE LEASE AGREEMENT IS SUBJECT TO RECEIPT OF ANNUAL PAYMENTS FROM CLEVELAND COUNTY PAYABLE SOLELY OUT OF REVENUE FOR THE THEN CURRENT FISCAL YEAR OF CLEVELEAND COUNTY, AND UPON FAILURE TO MAKE LEASE PAYMENTS OR ANY OTHER TERMINATION OF THE LEASE AGREEMENT, THE BONDS WILL BE PAYABLE FROM MONIES, IF ANY, HELD BY THE TRUSTEE UNDER THE BOND INDENTURE AND ANY AMOUNTS RESULTING FROM SUBLETTING OR SUBLEASING OF THE FACILITY. THE AUTHORITY HAS NO TAXING POWER.
Any statements in this Official Statement involving matters of opinion, estimations, or projections, whether or not expressly so stated, are intended as such and not as ‘representations of facts’. This Official Statement shall not be construed as a contract or agreement between the Authority and the purchasers or holders of any of the Bonds.
THIS OFFICIAL STATEMENT CONTAINS “FORWARD-LOOKING” STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS MAY INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE AND ACHIEVEMENTS TO BE DIFFERENT FROM THE FUTURE RESULTS, PERFORMANCE AND ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED THAT THE ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS.
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The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
All references made herein to the Bond Indenture are qualified in their entirety by reference to such complete document, original counterparts of which are on file in the offices of the Authority, 201 S. Jones, Suite 200, Norman, Oklahoma and the corporate trust offices of BancFirst, 101 N. Broadway, Suite 800, Oklahoma City, Oklahoma, 73102, as Trustee.
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TABLE OF CONTENTS
INTRODUCTORY STATEMENT ...................................................................................................... 1 THE BONDS ........................................................................................................................................ 2 Description of the Bonds ......................................................................................................... 2 Redemption .............................................................................................................................. 2 BOOK-ENTRY-ONLY SYSTEM ....................................................................................................... 3 SECURITY ........................................................................................................................................... 5 PLAN OF FINANCE ............................................................................................................................ 6 PROJECTED REVENUE & DEBT SERVICE REQUIREMENT ...................................................... 6 SOURCES AND USES OF FUNDS .................................................................................................... 7 RISK FACTORS .......... ....................................................................................................................... 7 CLEVELAND COUNTY, OKLAHOMA ............................................................................................ 8 CLEVELAND COUNTY PUBLIC FACILITIES AUTHORITY ....................................................... 10 THE FACILITY (CLEVELAND COUNTY HEALTH DEPARTMENT – MOORE FACILITY) .... 10 TAX MATTERS ................................................................................................................................... 11 FORWARD-LOOKING STATEMENTS ......................................................................................... 14 LEGAL MATTERS ........................................................................................................................... 14 NO LITIGATION .............................................................................................................................. 15 TRUSTEE .......................................................................................................................................... 15UNDERWRITER .............................................................................................................................. 15 CONTINUING DISCLOSURE ......................................................................................................... 15 DEEMED FINAL .............................................................................................................................. 18 MISCELLANEOUS .......................................................................................................................... 19 APPROVAL OF OFFICIAL STATEMENT ..................................................................................... 19
EXHIBITS
A FORM OF BOND INDENTURE B AMENDED AND RESTATED LEASE AGREEMENT C LEGAL OPINION D AUDITED FINANCIAL STATEMENTS OF CLEVELAND COUNTY, JUNE 30, 2016 E DEBT SERVICE SCHEDULE F CONTINUING DISCLOSURE AGREEMENT
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THE CLEVELAND COUNTY PUBLIC FACILITIES AUTHORITY
201 S. Jones Norman, Oklahoma 73069
(405) 366-0200
TRUSTEES OF THE AUTHORITY
Darry Stacy Chairman
Rod Cleveland Trustee
Harold Haralson Trustee
AUTHORITY COUNSEL
Bailey & Poarch Norman, Oklahoma
BOND COUNSEL
Floyd Law Firm, P.C. Norman, Oklahoma
FINANCIAL ADVISOR
The Baker Group LP Oklahoma City, Oklahoma
TRUSTEE BANK
BancFirst Oklahoma City, Oklahoma
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INTRODUCTORY STATEMENT
This Official Statement, including the cover page and Appendices, is furnished to provide information with respect to the offering by the Cleveland County Public Facilities Authority (the “Authority”) of its $2,500,000* Lease Revenue Refunding Bonds (Cleveland County Health Department – Moore Facility Project) Series 2020 (the "Bonds"). The Bonds are being executed and delivered pursuant to a Bond Indenture dated as of March 1, 2020 (the “Bond Indenture”) between the Authority and Bancfirst, Oklahoma City, Oklahoma, as trustee (the “Trustee”).
The Bonds as initially issued are dated March 1, 2020. Interest on the Bonds is payable semi-annually on March 1 and September 1 of each year, commencing September 1, 2020. The Bonds will be issued and registered in the name of Cede & Co., as nominee of the Depository Trust Company, New York, New York (“DTC”), to which all payments of principal and interest will be made from the Trustee. The Bonds mature on September 1 of the years, and in the amounts, and bear interest at the rates set forth on the inside cover page of this Official Statement.
The Authority is issuing the Bonds in order to provide funds which will be used to (i) provide a current refunding of the outstanding principal amount of the $3,145,000 Cleveland County Public Facilities Authority Lease Revenue Bonds (Cleveland County Health Department – Moore Facility Project) Series 2009 (the “Series 2009 Bonds”), the proceeds of which were used to demolish an existing building and construct, furnish and equip a new 27,000 square foot Cleveland County Health Department facility located in Moore, Oklahoma (the “Facility”); and, (ii) pay all the costs of issuance of the Bonds (the “Project”).
The Bonds and interest thereon are payable by the Authority solely from (i) lease payments (the “Lease Payments”) paid annually by Cleveland County (the “County”) under an Amended and Restated Lease Agreement dated as of March 1, 2020 (the “Lease Agreement”); (ii) amounts on deposit in the Revenue Fund, and the investment earnings on such fund; and, (iii) net revenues received by the Trustee from any insurance coverage, condemnation award with respect to, or sale of the Facility.
NEITHER THE BONDS NOR THE LEASE AGREEMENT SHALL GIVE RISE TO A GENERAL OBLIGATION OR OTHER INDETEDNESS OF THE STATE OF OKLAHOMA OR OF THE AUTHORITY OR CLEVELAND COUNTY NOR A MANDATORY PAYMENT OBLIGATION IN ANY YEAR WHICH CLEVELAND COUNTY DOES NOT HAVE REVENUE AVAILABLE TO PAY LEASE PAYMENTS UNDER THE LEASE AGREEMENT. THE LEASE AGREEMENT IS SUBJECT TO RECEIPT OF MONTHLY PAYMENTS FROM CLEVELAND COUNTY PAYABLE SOLELY OUT OF REVENUE FOR THE THEN CURRENT FISCAL YEAR OF CLEVELAND COUNTY, AND UPON FAILURE TO MAKE LEASE PAYMENTS OR ANT OTHER TERMINATION OF THE LEASE AGREEMENT, THE BONDS WILL BE PAYABLE FROM MONIES, IF ANY, HELD BY THE TRUSTEE UNDER THE BOND INDENTURE AND ANY AMOUNTS RESULTING FROM SUBLETTING OR SUBLEASING OF THE FACILITY. THE AUTHORITY HAS NO TAXING POWER.
Brief descriptions of the Authority, the County, the Trustee, the Bonds, the Lease Agreement and the Bond Indenture are contained in this Official Statement and the Appendices hereto. Such descriptions do not purport to be complete or definitive. All references made herein to the Bonds are qualified in their entirety by reference to the Bond Indenture. All references made herein to the Bond Indenture and the Lease Agreement are qualified in their entirety by reference to such complete documents which are available in the offices of the Authority and the Trustee. All information contained herein in reference to or about the Authority or the Facility was provided by the Authority which is solely responsible for the accuracy and completeness thereof.
Neither the Bonds, the Lease Agreement, nor any payments required by the County shall constitute a mandatory payment obligation in any ensuing year beyond the then current fiscal year or constitute or give rise to a general obligation or other indebtedness of the County. The term “Lease Payments” means the amount payable by Cleveland County under the Lease Agreement which will be used for payment of the Bonds.
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THE BONDS
DESCRIPTION OF THE BONDS
The Bonds are dated March 1, 2020. The Bonds will mature on September 1 of the years indicated on the inside cover page hereof. The Bonds will be issued in the principal amounts and bear interest at the rates set forth on the inside cover page of this Official Statement. Interest on the Bonds is payable semi-annually on March 1 and September 1 of each year commencing September 1, 2020.
The Bonds will be issued and registered in the name of Cede & Co., as nominee of the Depository Trust Company, New York, New York (“DTC”), to which all payments of principal and interest will be made from the Trustee.
Purchasers will acquire beneficial interests in the Bonds in principal amounts of $5,000 and integral multiples thereof by book entry only. Purchasers of the Bonds will not receive physical delivery of bond certificates. The Bonds will not be transferable or exchangeable, except for transfers to another nominee of DTC or otherwise as described herein.
REDEMPTION PROVISIONS
The Bonds are subject to redemption prior to maturity as described in this section of the Official Statement.
MANDATORY REDEMPTION
The Bonds maturing on September 1, 20__, are subject to mandatory sinking fund redemption and payment prior to maturity on September 1, 20__, and on each September 1, thereafter through September 1, 20__, at a redemption price equal to the principal amount thereof plus accrued interest thereon to the redemption date, as follows:
Mandatory Redemption Dates Principal
OPTIONAL REDEMPTION.
The Bonds maturing September 1, 20__ and thereafter, shall be subject to redemption at the option of the Authority, on at least thirty (30) days’ notice, in whole or in part in inverse order of maturity and by lot within a maturity, on any date, on or after September 1, 20__, of the principal amount to be redeemed, plus accrued interest to the date fixed for redemption, at the redemption price of par.
SPECIAL REDEMPTION.
The Bonds are subject to redemption at the option of the Authority, in whole or in part, at any time, if such redemption is made from (a) insurance proceeds; (b) expropriation awards; (c) the proceeds of the sale of all or part of the Facility; or (d) payments received from the Authority pursuant to an Event of Default as defined in the Bond Indenture. In the event that such redemption is made, such redemption shall be made at the principal amount redeemed and the interest accrued thereon to the redemption date.
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The Bonds are subject to redemption, at the option of the Authority, in whole at any time, at the principal amounts thereof and accrued interest to the date fixed for redemption, if, as a result of any change in the Constitution of the United States of America or of the State of Oklahoma or legislative or administrative action whether State or Federal, or by final judgment in a court of competent jurisdiction after the contest thereof by the County or the Authority in good faith, wherein (i) the Bond Indenture or the Lease Agreement becomes void, unenforceable, or impossible to perform in accordance with the intent and purpose of the parties as expressed therein or (ii) the interest on the Bonds shall become includable in the gross income of the holders thereof for federal income tax purposes.
NOTICE OF REDEMPTION.
In the event any of the Bonds or portions thereof (which shall be $5,000 or an integral multiple thereof) are called for redemption as aforesaid, notice thereof identifying the Bonds or portions thereof to be redeemed will be given by the Trustee by mailing a copy of the redemption notice by first class mail (postage prepaid) not less than 30 days prior to the date fixed for redemption to the registered owner of each Bond to be redeemed in whole or in part at the address shown on the registration books. All Bonds so called for redemption will cease to bear interest after the specified redemption date provided funds for their redemption are on deposit at the place of payment at that time.
BOOK-ENTRY-ONLY SYSTEM
The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds (also referred herein as the “Securities”). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee). One fully-registered Security certificate will be issued for the Securities in the aggregate principal amount of such issue and will be deposited with DTC at the office of the Trustee on behalf of DTC utilizing the DTC FAST System of registration.
DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants (“Participants”) deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants’ accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). The Rules applicable to DTC and its Participants are on file with the United States Securities and Exchange Commission.
Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transactions,
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as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities are discontinued.
To facilitate subsequent transfers, all Securities deposited by Participants with DTC (or the Trustee on behalf of DTC utilizing the DTC FAST System of registration) are registered in the name of DTC’s partnership nominee, Cede & Co. The deposit of Securities with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose account such Securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the Securities within the issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to Securities. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose account the Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Securities will be made by the Bank to DTC. DTC’s practice is to credit Direct Participants’ accounts on payable date in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not receive payment on payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as in the case with securities held for the accounts of customers in bearer form or registered in “street name”, and will be the responsibility of such Participants and not of DTC, Agent, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the Authority or Agent, disbursement of such payments to Direct Participant shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.
A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant’s interest in the Securities, on DTC’s records, to Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Securities to Agent’s DTC account.
DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to the Authority or Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Security certificates are required to be printed and delivered.
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The Authority may decide to discontinue use of the system of book-entry transfer through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered. In reading this Preliminary Official Statement is should be understood that while the Securities are in the Book-Entry-Only System, references in other sections of this Preliminary Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Securities, but (i) all rights of ownership must be exercised through DTC and the Book-Entry-Only System, and (ii) except as described above, notices that are to be given to registered owners under the Indenture will be given only to DTC. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the Authority believes to be reliable, but the Authority takes no responsibility for the accuracy thereof.
SECURITY
The Authority has secured repayment of the Bonds with a first mortgage on the land and improvements thereon which comprise the Facility, a pledge of Lease Payments, and an assignment of the Lease Agreement between Cleveland County (the “County”), on behalf of the Cleveland County Health Department (the “Department”), and the Authority for the Facility.
The payment of the principal of and interest on the Bonds do not constitute an indebtedness or liability of the State of Oklahoma or any political subdivision thereof, Cleveland County, Oklahoma, or the individual trustees of the Authority. The issuance of the Bonds do not directly or indirectly obligate the State of Oklahoma, any political subdivision thereof or Cleveland County, Oklahoma, to provide any funds for the payment of the Bonds. The Bonds do not currently and shall never be considered a debt of the State of Oklahoma, any political subdivision thereof or Cleveland County, Oklahoma, within the meaning of the Constitution or the statutes of the State of Oklahoma, and do not currently and shall never constitute a charge against the credit or taxing power of the State of Oklahoma, any political subdivision thereof or Cleveland County, Oklahoma. Neither the State of Oklahoma, any political subdivision thereof nor Cleveland County, Oklahoma, shall be liable for the payment of the principal of and interest on the Bonds or for the performance of any agreement or covenant of any kind which may be undertaken by the Authority. No breach by the Authority of any covenant or agreement shall create any obligation upon the State of Oklahoma or any political subdivision thereof or Cleveland County, Oklahoma, including any charge against their credit or taxing power. THE AUTHORITY HAS NO TAXING POWER.
THE BONDS ARE LIMITED AND SPECIAL REVENUE OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM A PLEDGE OF ANNUAL CLEVELAND COUNTY LEASE PAYMENTS. THE BONDS AND THE INTEREST THEREON DO NOT CONSTITUTE AN INDEBTEDNESS OF THE STATE OF OKLAHOMA OR OF CLEVELAND COUNTY NOR ARE THEY PERSONAL OBLIGATIONS OF THE TRUSTEES OF THE AUTHORITY. THE AUTHORITY HAS NO TAXING POWER.
NEITHER THE BONDS NOR THE LEASE AGREEMENT SHALL GIVE RISE TO A GENERAL OBLIGATION OR OTHER INDEBTEDNESS OF THE STATE OF OKLAHOMA OR OF THE AUTHORITY OR CLEVELAND COUNTY NOR A MANDATORY PAYMENT OBLIGATION IN ANY YEAR WHICH CLEVELAND COUNTY DOES NOT HAVE REVENUE AVAILABLE TO PAY LEASE PAYMENTS UNDER THE LEASE AGREEMENT. THE LEASE AGREEMENT IS SUBJECT TO RECEIPT OF MONTHLY LEASE PAYMENTS FROM CLEVELAND COUNTY, AND UPON FAILURE TO MAKE LEASE AGREEMENT, THE BONDS WILL BE PAYABLE FROM MONIES, IF ANY, HELD BY THE TRUSTEE UNDER THE BOND INDENTURE AND ANY AMOUNTS RESULTING FROM SUBLETTING OR SUBLEASING OF THE FACILITY.
NO ADDITIONAL INDEBTEDNESS SECURED ON A PARITY OR EQUAL BASIS WITH THE AFOREMENTIONED SECURITY SHALL BE ISSUED BY THE AUTHORITY.
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PLAN OF FINANCE
A portion of Department general revenues consist of a not to exceed two and one half mill ad valorem tax levy which is authorized by Article 10, Section 9A of the Oklahoma Constitution and Title 63, Oklahoma Statutes 2011, Section 1-223 et seq. Although these taxes are not directly pledged for the payment of the Bonds, property taxes collected for the benefit of the Department ultimately are deposited in the general revenue account of the Department along with other revenues derived from the dedicated State appropriations, Federal sources and from service charges collected in the ordinary course of operations.
The Department occupies the Facility. Lease Payments in the amount required to fully amortize the debt will be made by the County to the Authority for use of the Facility by the Department. The Lease Payment is to be deposited in the Revenue Fund for the payment of the Bonds no later than August 15 of each year until August 15, 2029.
PROJECTED REVENUE & DEBT SERVICE REQUIREMENT
ESTIMATEDREVENUE SERIES 2020
FYE NET ASSESSED MILL LEVY APPROPRIATED TO NET DEBT30-Jun VALUATION 2.57 MILLS HEALTH DEPARTMENT SERVICE
2015 1,939,232,899$ 0.00257 4,983,829$ 234,000$ 2016 2,089,113,046$ 0.00257 5,369,021$ 234,000$ 2017 2,140,481,156$ 0.00257 5,501,037$ 234,000$ 2018 2,219,115,954$ 0.00257 5,703,128$ 234,000$ 2019 2,298,137,489$ 0.00257 5,906,213$ 234,000$
2020(1) 2,344,100,239$ 0.00257 6,024,338$ 234,000$ 2021(1) 2,390,982,244$ 0.00257 6,144,824$ 234,000$ 2022(1) 2,438,801,888$ 0.00257 6,267,721$ 234,000$ 2023(1) 2,487,577,926$ 0.00257 6,393,075$ 234,000$ 2024(1) 2,537,329,485$ 0.00257 6,520,937$ 234,000$ 2025(1) 2,588,076,074$ 0.00257 6,651,356$ 234,000$ 2026(1) 2,639,837,596$ 0.00257 6,784,383$ 234,000$ 2027(1) 2,692,634,348$ 0.00257 6,920,070$ 234,000$ 2028(1) 2,746,487,035$ 0.00257 7,058,472$ 234,000$ 2029(1) 2,801,416,775$ 0.00257 7,199,641$ 234,000$ 2030(1) 2,857,445,111$ 0.00257 7,343,634$ 234,000$
(1) represents 2% growth factor
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SOURCES AND USES OF FUNDS
The estimated sources and uses of funds are shown below:
SOURCES
Proceeds $ Accrued Interest Prior Series 2009 Bond Fund Transfer TOTAL SOURCES $ USES
Deposit to Current Refunding Fund $ Deposit to Bond Fund Underwriter Discount Cost of Issuance* TOTAL USES $
*Costs of issuance includes fees for Bond Counsel, Underwriter Counsel, Authority Counsel, printing expense, Trustee Bank, Financial Advisor, and other approved miscellaneous expenses.
RISK FACTORS
BEFORE PURCHASING THE BONDS, PROSPECTIVE INVESTORS AND THEIR PROFESSIONAL ADVISORS SHOULD CAREFULLY CONSIDER ALL POSSIBLE FACTORS WHICH MAY AFFECT BOTH THE OPERATIONS AND REVENUES OF THE FACILITY AND, CONSEQUENTLY, CREATE THE POSSIBILITY THAT THE INTEREST ON THE BONDS MAY NOT BE PAID WHEN DUE OR THAT THE BONDS MAY NOT BE PAID AT MATURITY. THE FOLLOWING RISK FACTORS--WHICH ARE NOT INTENDED TO BE AN EXHAUSTIVE LISTING OF ALL POSSIBLE RISKS ASSOCIATED WITH AN INVESTMENT IN THE BONDS--MUST BE CONSIDERED PRIOR TO PURCHASING THE BONDS, MOREOVER, THE ORDER OF PRESENTATION OF THE RISKS SUMMARIZED BELOW DOES NOT NECESSARILY REFLECT THE SIGNIFICANCE OF THE RISKS.
General. The Bonds are ultimately payable solely from Lease Payments by the County, on behalf of the Department, from funds established in the Bond Indenture and interest earnings thereon, and from the proceeds of the sale of all or part of the Facility.
The purchase of the Bonds offered hereby is without recourse to the Authority or the Trustee, and the holders of the Bonds must assume the entire risk that the county will meet its obligations under the Lease Agreement. In this connection, the holders of the Bonds should understand that the County has the obligation to make the Lease Payments specified therein only from the annually budgeted general revenues of the Department; to insure that the Facility is not misused, abused, wasted or allowed to deteriorate; and to perform certain other actions.
Non-appropriation Risk. Among other things, the Lease Agreement provides that it will terminate at the end of any Fiscal Year of the County ending June 30, if the County has insufficient funds to pay the Lease Payments for the ensuing fiscal year. The amounts received thereafter by the Authority upon any subsequent sale or lease of the Facility may or may not be sufficient to pay the Bonds.
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Enforceability of Remedies The remedies available to the Municipal Bond Insurer, Trustee and the
Owners of the Bonds upon an event of default under the Bond Indenture are, in many respects, dependent upon regulatory, and judicial actions which are often subject to discretion and delay. Under existing laws and judicial decisions, the remedies provided under these documents may not be readily available or may be limited by judicial or regulatory action. The various legal opinions to be delivered upon delivery of the Bonds will be qualified to the extent that the enforceability of certain rights related to the Bonds is subject to limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and proceedings.
No Alternative Use Risk. Because of its contemplated use, the Facility may not be easily converted
to an alternative use or sold to alternate users. Conversion of the Facility to an alternate use would require substantial expenditures and there is no assurance that a lessee or new tenant could be obtained within any particular time. Accordingly, potential purchasers of the Bonds should not assume that it will be possible to foreclose on and sell or relet the Facility for an amount sufficient to provide for payment of the Bonds.
CLEVELAND COUNTY, OKLAHOMA Cleveland County, Oklahoma is located in the central part of the State of Oklahoma. Cleveland County has a total land and water area of 558.34 square miles, and is drained by the Little River, and the Canadian River, which forms the southern boundary.
The City of Norman is the county seat of the County and is approximately 17 miles south of Oklahoma City and 180 miles north of Dallas, Texas on Interstate Highway 35. The County is traversed by IH 35, U.S. Highway 77, and State Highway 9. The major cities and towns in Cleveland County include Norman, Moore, Noble and Lexington. A portion of Oklahoma City is also located in the northern region of the County.
The economy of the County is largely driven by its proximity to the Oklahoma City MSA and is well diversified with business, industry, agriculture and governmental service. The University of Oklahoma, the USAF Logistics Center on Tinker Air Force Base, the National Postal Training Center, and the National Weather Center all work to provide employment opportunities for residents of Cleveland County.
The governing body of the County is the Board of County Commissioners, which is comprised of three members elected for staggered four-year terms. The current members of the Board and their positions are as follows:
NAME POSITION Darry Stacy Chairman Rod Cleveland Trustee Harold Haralson Trustee
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MAJOR TAXPAYERS 2019 TOP ASSESSED TAXPAYERS VALUE Oklahoma Gas & Electric $ 31,396,887 Walmart/Sam’s 21,559,037 Links/Greens 10,562,648 York/Johnson Controls 9,662,032 Oklahoma Natural Gas 8,788,459 Avara/Astellas 8,700,372 ACC OP (Brooks Street), LLC 7,200,000 Brookwood Village 7,188,409 Rainier UTC Acquisitions, LLC 6,059,619 Mission Point 5,966,169 Source: Cleveland County Assessor’s Office
POPULATION TRENDS
YEAR POPULATION
2018 (Estimated) 281,669 2010 255,755 2000 208,016 1990 174,253 Source: U.S. Census Bureau
LARGEST EMPLOYERS
EMPLOYER # OF EMPLOYEES
The University of Oklahoma 12,941 Norman Regional Hospital 3,040 Norman Public Schools 1,806 Johnson Controls 1,030 Walmart Supercenter 950 City of Norman 859 Riverwind Casinos 838 Hitachi 400 National Oceanic & Atmospheric Admin 400 Cleveland County 396 Super Target 380 Oklahoma Veterans Center 350 US Postal Service 350 SYSCO Foods 337
Source: Norman Chamber of Commerce
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EXISTING INDEBTEDNESS
Cleveland County: Cleveland County, Oklahoma has no long term debt outstanding. Cleveland County Public Facilities Authority: The Public Facilities Authority currently has no other debt outstanding other than the Series 2009 Bonds (Health Department) which will be currently refunded by the Bonds.
Cleveland County Justice Authority: The Justice Authority, with its recent and final payment on March 1, 2020, on its Series 2015 Bonds, no longer has any long term debt outstanding.
CLEVELAND COUNTY PUBLIC FACILITIES AUTHORITY
The Authority was created by a Trust Indenture dated September 29, 1980 (the “Trust Indenture”), for the furtherance of public purposes and the benefit of Cleveland County, Oklahoma pursuant to the provisions of Title 60 Oklahoma Statutes 2011, Sections 176 et seq., as amended (the “Public Trust Act”), Title 60 Oklahoma Statutes 2011, Sections 175.1 et seq., as amended (the “Oklahoma Trust Act”), and other applicable statutes and laws of the State of Oklahoma.
The Trust Indenture empowers the Authority among other things to acquire, construct, maintain and operate the Facilities for Cleveland County, Oklahoma and to borrow money by mortgage, pledge or other encumbrance of its trust estate or its revenues. All properties held by the Authority for Cleveland County, Oklahoma will become the property of Cleveland County, Oklahoma when the Authority’s debts are extinguished and the Authority terminated. The Authority will have the same duration as the beneficiary and continue until its purpose shall have been fulfilled or until it shall have been terminated by agreement of all its lenders and the governing body of the beneficiary with approval of the Governor of the State of Oklahoma, provided that all indebtedness of the Authority shall have been paid.
The Authority is governed by Board of Trustees comprised of the elected County Commissioners of the County. The Current trustees are:
NAME POSITION Darry Stacy Chairman Rod Cleveland Trustee Harold Haralson Trustee
THE FACILITY (CLEVELAND COUNTY HEALTH DEPARTMENT)
The Cleveland County Health Department-Moore Facility is approximately 27,000 square feet and was originally built in 1968 and replaced in 2009 with the new Facility constructed, furnished and equipped with the proceeds from the Series 2009 Bonds.
The Department is organized and staffed to provide the following public health services to the resident of Cleveland County:
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Public Health Education
Environmental Health Program
Women Infants and Children Program
Immunizations Program
Communicable Disease Program
Child Guidance Program
Children First Program
SoonerStart Early Intervention
Family Planning
Dental Program
Jackie Kanak is the current Regional Director for the Cleveland County Health Department, taking
office April 15, 2019. Her predecessor is Keith Reed, whom is now the Deputy Commissioner of Health for the State of Oklahoma Department of Health.
Outlined below is the record of County Net Assessed Valuations, Mill Levy and the total amount appropriated from all sources from the County to the Department. Table 1 APPROPRIATED FY NAV LEVY TO HEALTH DEPT 2019 $2,298,137,489 2.57 $5,906,213 2018 $2,219,115,954 2.57 $5,703,128 2017 $2,140,481,156 2.57 $5,501,037 2016 $2,089,113,046 2.57 $5,369,021 2015 $1,939,232,899 2.57 $4,983,829 Source: County Assessor’s Office
TAX MATTERS
Federal Tax Considerations
In the opinion of Bond Counsel, under existing statutes, regulations, rulings, and court decisions, interest on the Bonds is excludable from the gross income of the owners of the Bonds for federal income tax purposes. Bond Counsel is further of the opinion that interest on the Bonds is not an item of tax preference for purposes of the federal alternative minimum tax. In expressing such opinions, Bond Counsel will rely on and assume compliance by the Authority and the Department with the terms of the Federal Tax and Arbitrage and Use of Proceeds Certificate and the Lease Agreement, and continuing requirements with certain provisions of the Internal Revenue Code of 1986 (the “Code”) after the issuance of the Bonds. The Federal Tax and Arbitrage and Use of Proceeds Certificate and the Lease Agreement contain certain covenants with respect to the use and investment of the proceeds of the Bonds and the use of the Trust Estate. Failure by the Authority or Department to comply with these covenants and all requirements of the Code may cause the interest on the Bonds to become includable in federal gross income retroactively to the date of issuance of the Bonds.
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The laws and regulations upon which Bond Counsel has based its opinion are subject to change by the Congress and the Department of the Treasury and to subsequent judicial and administrative interpretation. There can be no assurance that such laws or regulations or the interpretation thereof will not be changed in a manner which would adversely affect the tax treatment of ownership of the Bonds.
Certain foreign corporations doing business in the United States may be subject to a “branch profits tax” on their effectively-connected earnings and profits including tax-exempt interest such as interest on the Bonds. Furthermore, in the case of a subchapter S corporation, interest on the Bonds is treated as passive investment income which is subject to the tax imposed by Section 1375 of the Code.
Prospective purchasers of the Bonds should be aware that the ownership of tax-exempt obligations may result in collateral federal income tax consequences to financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations. Prospective purchasers falling within any of these categories should consult their own tax advisers as to the applicability of these consequences. Bank-Qualified Obligations
The Bonds are not “qualified tax-exempt” obligations for purposes of Section 265(b)(3) of the Code, and, in the case of certain financial institutions (within the meaning of Section 265(b)(3) of the Code), no deduction will be allowed for any portion of such financial institution’s interest expense allocable to interest on the Bonds. Backup Withholding
As a result of the enactment of the Tax Increase Prevention and Reconciliation Act of 2005, interest on tax-exempt obligations such as the Bonds is subject to information reporting in a manner similar to interest paid on taxable obligations. Backup withholding may be imposed on payments made after March 31, 2007 to any bondholder who fails to provide certain required information including an accurate taxpayer identification number to any person required to collect such information pursuant to Section 6049 of the Code. The reporting requirement does not in and of itself affect or alter the excludability of interest on the Bonds from gross income for federal income tax purposes or any other federal tax consequence of purchasing, holding or selling tax-exempt obligations. State Tax Considerations
Interest on the Bonds is exempt from State of Oklahoma income taxation under present law. Depending upon the state of residence of the registered owners of the Bonds, interest income on the Bonds may be subject to state income tax liability in their respective state of residence. Each registered owner of the Bonds is encouraged to consult with a tax advisor in order to determine the applicability of state income taxation to this investment. Original Issue Discount
The resulting discount on those Bonds which are sold at an initial offering price to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers) which is less than the principal amount of those particular Bonds constitute Original Issue Discount, which is excludable from the gross income for federal income tax purposes. Generally, such Original Issue Discount accretes actuarially on a constant interest rate basis over the term of the respective
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Bonds and the basis of such Bonds acquired at such initial offering price by an initial purchaser of the particular Bonds will be increased by the amount of such accreted interest. Original Issue Premium
Certain maturities of the Bonds may be initially offered to the public at prices greater than the amounts payable thereon at maturity. As a result of the tax cost reduction requirements of the Code relating to amortization of bond premium, under certain circumstances an initial owner of Premium Bonds may realize a taxable gain upon disposition of such Premium Bonds even though they are sold or redeemed for an amount equal to such owner’s original cost of acquiring such Premium Bonds. Owners of Premium Bonds are advised that they should consult with their own tax advisors with respect to the tax consequences of owning such Premium Bonds. Compliance with Tax Law Requirements
In order to maintain the exclusion from federal gross income of interest on the Bonds and for no other purpose, the Authority and the Department covenant in the Indenture and in the Federal Tax and Arbitrage and Use of Proceeds Certificate and the Lease Agreement to comply with the provisions of the Code. Until and unless, and except to the extent in the opinion of Bond Counsel, the following are not necessary to maintain the exclusion from federal gross income of interest on the Bonds, the Authority and the Department make certain covenants, representations and warranties with respect to the Bonds. The Authority and the Department covenant to submit in a timely manner all reports, accountings and information to the Internal Revenue Service, take whatever action is necessary within its power to assure the continued tax exemption on the Bonds, and take whatever action is necessary within its power to comply with the applicable laws and regulations in order to maintain the exclusion from federal gross income of interest on the Bonds.
Tax legislation, administrative actions taken by tax authorities, and court decisions, whether at the federal or state level, may adversely affect the tax-exempt status of interest on the Bonds under federal or state law and could affect the market price or marketability of the Bonds.
Prospective purchasers of the Bonds should consult their own tax advisors regarding the foregoing matters. Required Rebate to the United States
The Authority in the Indenture has covenanted to comply and the Trustee is empowered to take any and all actions necessary to comply with all of the provisions of the Code relating to the exemption from federal income taxes of the interest paid upon the bonds authorized by the Indenture, including the Bonds, to the end that interest thereon shall remain exempt from federal income taxation.
The Code provides that bonds which are part of an issue, including the Bonds, will be treated as arbitrage bonds if certain hereinafter described requirements are not met with respect to such issue.
Under the Code, an issuer, including the Authority, is required to make certain payments or rebates to the United States, absent any exceptions thereto, in an amount equal to the sum of the excess of the amount of money earned on all non-purpose investments, over the amount of money which would have been earned if such non-purpose investments were invested at a rate of interest equal to the yield on the issue, including the Bonds, plus any income derived from the aforesaid excess itself, unless an exception to rebate applies. The aforesaid payments or rebates are to be paid in installments which are required to be made at least once every five years and each such installment is required to be in an amount which ensures that 90 percent of the excess amount (referred to above) with respect to the issue, at the time payment of such installment is required, will have been paid to the United States. The final installment is required to
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be paid no later than 60 days after the final maturity of the Bonds on September 1, 2024, and shall be in an amount sufficient to pay the remaining balance of the excess amount (referred to above) with respect to such issue. Changes in Federal and State Tax Law
From time to time, there are legislative proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters referred to above or adversely affect the market value of the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted it would apply to bonds issued prior to enactment. In addition, regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value of the Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Bonds or the market value thereof would be impacted thereby. Purchasers of the Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory initiatives or litigation. The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and delivery of the Bonds, and Bond Counsel has expressed no opinion as of any date subsequent thereto or with respect to any pending legislation, regulatory initiatives or litigation.
FORWARD LOOKING STATEMENTS
The statements contained in this Official Statement, and in any other information provided by the
Authority, that are not purely historical, are forward-looking statements, including statements regarding the Authority’s expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward looking statements included in this Official Statement are based on information available to the Authority on the date hereof, and the Authority assumes no obligation to update any such forward-looking statements. It is important to note that the Authority’s actual results could differ materially from those in such forward-looking statements. The forward-looking statements herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including legislative, judicial and other governmental authorities and officials. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Authority. Any of such assumptions could be inaccurate and, therefore, there can be no assurances that the forward-looking statements included in this Official Statement would prove to be accurate.
LEGAL MATTERS
Legal matters incident to the issuance of the Bonds are subject to the unqualified approving opinion of the Floyd Law Firm, P.C, Norman, Oklahoma, as Bond Counsel. Certain legal matters will be addressed by Johanning & Byrom, PLLC, Oklahoma City, Oklahoma, as Counsel to the Underwriter. Certain other legal matters will be addressed by Bailey & Poarch, Norman, Oklahoma, as Counsel to the Authority.
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NO LITIGATION
There is not now pending or threatened any litigation restraining or enjoining the execution or delivery of the Lease Agreement, the Assignment or the Bond Indenture or the issuance or delivery of the Bonds or in any manner questioning the proceedings and authority under which the Lease Agreement, the Assignment or the Bond Indenture are to be executed or delivered or the Bonds are to be issued or affecting the validity thereof.
TRUSTEE
BancFirst, Oklahoma City, Oklahoma, is the Trustee for this issue.
The Trustee has agreed to accept the trust created by the Bond Indenture, and to perform the obligations imposed upon it by the Bond Indenture on behalf of the Registered Owners of the Bonds. In accepting an appointment as Trustee and such obligations, the Trustee has made no judgment and makes no representations or warranties as to the investment character or quality of the Bonds. The Trustee has not participated in the preparation of this Official statement and is not responsible for its accuracy or completeness.
UNDERWRITER
The Bonds are to be purchased by D.A. Davidson & Company (the “Underwriter”) pursuant to a Bond Purchase Agreement with the Authority (the “Bond Purchase Agreement”). The Underwriter has agreed to purchase the Bonds at a price of $________________ (representing the par amount of the Bonds less the underwriter discount of $__________ and net original issue discount/premium of $_______ plus $__________ accrued interest). The Bond Purchase Agreement provides that the Underwriter will not be obligated to purchase any Bonds if all Bonds are not available for purchase and requires the Authority to indemnify the underwriters against losses, claims, damages and liabilities rising out of any incorrect or incomplete statements or information contained in this Official Statement pertaining to the Authority and certain other matters. The initial public offering price set forth on the cover page hereof may be changed under certain conditions. The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts) and others at prices lower than the public offering prices stated on the Cover page hereof. The initial public offering prices may be changed from time to time by the Underwriter.
CONTINUING DISCLOSURE
The County and the Department have made the following agreement for the benefit of the holders and beneficial owners of the Bonds and are required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds. Under the agreement, the County represents that it will be the only “obligated person” (as defined in the Rule) with respect to the Bonds at the time Bonds are delivered to the Underwriter and that no other person presently is expected to become an obligated person with respect to the Bonds at any time after the issuance of the Bonds. Further, pursuant to the agreement, the County is obligated to provide certain updated financial information, operating data, and timely notice of certain specified events to the Municipal Securities Rule Making Board (the “MSRB”). Information will be available free of charge via the Electronic Municipal Market Access (“EMMA”) system at www.emma.msrb.org. See “Continuing Disclosure Agreement – Exhibit F”.
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Annual Reports
The County will provide certain updated financial information annually. The information to be updated includes all quantitative financial information of the general type included in this Official Statement as Exhibit D (Audited Financial Statements of the County) and operating data contained in the Official Statement, for each fiscal year to include the information set forth under the “CLEVELAND COUNTY, OKLAHOMA – MAJOR TAXPAYERS” and “THE FACILITY (CLEVELAND COUNTY HEALTH DEPARTMENT – TABLE 1”) (to the extent such information does not appear within the County’s Audited Financial Statements (the “Annual Report”). The County will update and provide this information within six months after the end of each fiscal year commencing with the fiscal year report ending June 30, 2020. The County will provide updated information to the Trustee who will provide it to the MSRB.
The County may provide updated information in full text or may incorporate by reference other
publicly available documents, as permitted by United States Securities and Exchange Commission Rule 15c2-12 (the “Rule”). The updated information will include audited financial statements if the County commissions an audit and the audit is completed by the required time. If audited financial statements are not available by the required time, the County will provide such financial statements on an unaudited basis within the required time and audited financial statements when they become available. Any such financial statements will be prepared in accordance with generally accepted (“GAAP”) accounting principles or such other accounting principles as the County may be required to employ from time to time pursuant to State law or regulation.
The County’s current fiscal year-end is the last day of June. Accordingly, the County must provide
updated information by the last day of December in each year, unless the County changes its fiscal year. If the County changes its fiscal year, it will notify the MSRB.
Material Event Notices
The County shall notify the MSRB, in a timely manner not in excess of ten (10) business days after the occurrence of the event, of any of the following events with respect to the Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701- TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (7) modifications to rights of holders of the Bonds, if material; (8) obligation calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the County; (13) the consummation of a merger, consolidation, or acquisition involving the County or the sale of all or substantially all of the assets of the County, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; (14) appointment of a successor or additional Paying Agent/Registrar or change in the name of the Paying Agent/Registrar, if material; (15) incurrence of a Financial Obligation of the County, if material, or agreement to covenants, events of default, remedies,
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priority rights, or other similar terms of a Financial Obligation of the County, any of which affect security holders, if material; and (16) default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the County, any of which reflect financial difficulties. Neither the Bonds nor the Indenture make any provision for debt service reserves, credit enhancement, or liquidity enhancement. In addition, the County will provide timely notice of any failure by the County to provide annual financial information in accordance with their agreement described above under “Annual Reports.”
For the purposes of (a) the event identified in (12), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the County in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the County, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the County. “Financial Obligation” means a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term Financial Obligation shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule.
The County shall also provide to the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner, notice of a failure by the County to provide required annual financial information and notices of material events. All documents provided to the MSRB pursuant to this section shall be accompanied by identifying information as prescribed by the MSRB.
Compliance with Prior Undertakings
The Authority’s currently outstanding Public Facilities Authority Lease Revenue Bonds (Health Department-Moore Facility), Series 2009, and the no longer outstanding Public Facilities Authority Lease Revenue Refunding Bonds (Cleveland County Health Department), Series 2011, provided the County enter into continuing disclosure undertakings.
The County failed to file or timely file its audited financial statements or annual operating data for fiscal years required for the five year look-back period (June 30, 2015 through June 30, 2019). County audits for June 30, 2019, June 30, 2018, and June 30, 2017 have not been filed and a notice of failure was filed on January 8, 2020, for both the fiscal years ending in 2019 and 2018, and a notice of failure was filed on January 5, 2018, for fiscal year ending 2017. The June 30, 2016, and the June 30, 2015 County audits were both filed late on January 31, 2020, with notice of failures filed on January 10, 2017 and January 14, 2016, respectively. Annual operating data was not filed timely for June 30, 2015 through June 30, 2019, and on March 12, 2020, operating data was filed for all five years with a catch up filing. Further the County did not file or timely file the failure notices of its failure to provide the information on or before the date per prior continuing disclosure undertakings.
Additionally, the County or Authority did not have any annual filing requirements with the exception of material event notices. The County nor the Authority filed material event notices involving the rating presenting on Standard & Poor’s Negative-Credit Watch on December 15, 2015, with the eventual rating withdrawal due to the failure of providing timely financial reporting on March 31, 2016. The material event notice was filed on March 4, 2020.
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Limitations and Amendments
The Obligated Party has agreed to update information and to provide notices of material events only as described above. The Obligated Party has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that has been provided except as described above. The Obligated Party makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Bonds at any future date. The Obligated Party disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders of Bonds may seek a writ of mandamus to compel the Obligated Party to comply with its agreement. Nothing in this paragraph is intended or shall act to disclaim, waive, or limit the Obligated Party’s duties under federal or state securities laws.
The Continuing Disclosure Agreement may be amended by the Obligated Party from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the Obligated Party, but only if (1) the agreement, as so amended, would have permitted an underwriter to purchase or sell Bonds in the primary offering of the Bonds in compliance with the Rule, taking into account any amendments or interpretations of the Rule since such offering as well as such changed circumstances and (2) either (a) the registered owners of a majority in aggregate principal amount (or any greater amount required by any other provision of the Indenture) of the outstanding Bonds consent to such amendment or (b) a person that is unaffiliated with the Obligated Party (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interests of the registered owners and beneficial owners of the Bonds. The Obligated Party may also amend or repeal the provisions of the continuing disclosure agreement if the SEC amends or repeals the applicable provisions of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Bonds in the primary offering of the Bonds. If the Obligated Party amends its agreements, it has agreed to include with the next financial information and operating data provided in accordance with its agreement described above under “Annual Reports” an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of information and data provided.
DEEMED FINAL
THE AUTHORITY HAS CERTIFIED THAT THIS OFFICIAL STATEMENT WAS DEEMED FINAL AS OF ITS DATE FOR PURPOSES OF RULE 15c2-12(b), EXCEPT FOR THE INFORMATION NOT REQUIRED TO BE INCLUDED THEREIN UNDER RULE 15c2-12(b).
Concurrently with the delivery of the Bonds, the Authority will furnish a certificate executed on behalf of the Authority to the effect that the final Official Statement, as of the date of the final Official Statement and as of the date of delivery of the Bonds, does not contain any untrue statement of a material fact or omit to state any material fact necessary to make to the statements herein, in light of the circumstances under which they were made, not misleading.
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MISCELLANEOUS
The references to and excerpts from the Lease Agreement, the Bond Indenture and other agreements described herein are merely summaries of certain provisions thereof and do not purport to be the complete provisions of those documents. A copy of such documents is available from the Authority. Any statements contained in this Official Statement, including the Exhibits, hereto, involving matters of opinion, estimates or projections, whether or not expressly so stated, are intended as such and not as representations that such estimates or assumptions are correct or will be realized. So far as any statements are made in this Official Statement and Exhibits attached hereto involving matters of opinion, whether or not expressly so stated, they are intended as such and not as representations of fact. Neither this Official Statement nor any statement that may have been made orally, or in writing, is to be construed as a contract with the purchasers or holders of any of the Bonds.
All information contained in this Official Statement and Exhibits is subject to change and/or correction without notice, and neither the delivery of the Official Statement nor any sale made hereunder shall create any implication that the information contained herein is complete or accurate in its entirety as of any date after the date hereof.
Reference is made to the Exhibits hereto which are an integral part of this Official Statement and must be read together with the rest of this Official Statement.
APPROVAL OF OFFICIAL STATEMENT
This Official Statement has been approved by the Authority.
CLEVELAND COUNTY PUBLIC FACILITIES AUTHORITY
By: /s/ Darry Stacy
Chairman of Trustees
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.
EXHIBIT A
FORM OF BOND INDENTURE
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.
FORM OF
BOND INDENTURE between CLEVELAND COUNTY PUBLIC FACILITIES AUTHORITY and BancFirst OKLAHOMA CITY, OKLAHOMA as Trustee Dated as of March 1, 2020 This Bond Indenture dated as of March 1, 2020, by and between the parties hereto, together with any bond indenture supplemental hereto authorizing the issuance of bonds constitutes a security agreement authorizing the issuance and securing the payment of bonds of the Cleveland County Public Facilities Authority entitled "Cleveland County Public Facilities Authority Lease Revenue Refunding Bonds, (Cleveland County Health Department – Moore Facility Project), Series 2020" in the principal amount of $__________.
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Table of Contents
ARTICLE I: DEFINITIONS AND INTERPRETATIONS .............................................................3 Section 1.01: Definitions. ....................................................................................................3 Section 1.02: Rules of Interpretation. ................................................................................12
ARTICLE II: THE BONDS ...........................................................................................................13 Section 2.01: Bonds Authorized. .......................................................................................13 Section 2.02: Bonds and Amount Authorized. ..................................................................13 Section 2.03: Execution; Limited Obligation. ...................................................................13 Section 2.04: Form of Bonds. ............................................................................................14 Section 2.05: Maturity Schedule. .......................................................................................14 Section 2.06: Conditions on Issuance. ...............................................................................14 Section 2.07: Terms of Bonds. ...........................................................................................16 Section 2.08: Execution of Bonds. .....................................................................................16 Section 2.09: Transfer of Bonds. .......................................................................................17 Section 2.10: Exchange of Bonds. .....................................................................................17 Section 2.11: Bond Registration Books, Regulations with Respect to Exchanges
and Transfers. .........................................................................................................18 Section 2.12: Temporary Bonds. ........................................................................................18 Section 2.13: Bonds Mutilated, Lost, Destroyed or Stolen. ...............................................19
ARTICLE III: REDEMPTION OF BONDS ..................................................................................19 Section 3.01: Redemption of the Bonds. ...........................................................................19 Section 3.02: Optional Redemption. ..................................................................................19 Section 3.03: Mandatory Redemption. ..............................................................................19 Section 3.04: Special Redemption. ....................................................................................20 Section 3.05: Notice of Redemption. .................................................................................20
ARTICLE IV: ESTABLISHMENT OF FUNDS AND APPLICATION THEREOF ...................20 Section 4.01: Establishment of Funds. ...............................................................................20 Section 4.02: Revenue Fund. ............................................................................................21 Section 4.03: Bond Fund. ...................................................................................................21 Section 4.04: Payments from the Principal and Interest Accounts of the Bond
Fund. ......................................................................................................................21 Section 4.05: Purchase of Bonds on Open Market. ...........................................................22 Section 4.06: Unclaimed Monies. ......................................................................................22 Section 4.08: Additional Funds and Accounts. ..................................................................23 Section 4.09: Investment of Funds. ....................................................................................23
ARTICLE V: PROCEEDS OF SALE OF BONDS .......................................................................23 Section 5.01: Proceeds of Sale of Bonds. ..........................................................................24
ARTICLE VI: PARTICULAR COVENANTS OF AUTHORITY ...............................................24 Section 6.01: General. ........................................................................................................24 Section 6.02: Payment of Bonds. .......................................................................................24 Section 6.03: Payment of Lawful Charges. ........................................................................24 Section 6.04: Accounts and Audit. ....................................................................................25
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Section 6.05: Further Assurances.......................................................................................25 Section 6.06: Insurance. .....................................................................................................25 Section 6.07: Tax Covenants. ............................................................................................25 Section 6.08: Continuing Disclosure. ................................................................................26
ARTICLE VII: CONCERNING THE TRUSTEE AND PAYING AGENTS ..............................27 Section 7.01: Appointment of Trustee. ..............................................................................27 Section 7.02: Paying Agents; Appointment and Acceptance of Duties. ............................27 Section 7.03: Concerning the Trustee. ...............................................................................27 Section 7.04: Compensation. .............................................................................................28 Section 7.05: Certain Permitted Acts. ................................................................................29 Section 7.06: Resignation of Trustee. ................................................................................29 Section 7.07: Removal of Trustee. .....................................................................................29 Section 7.08: Appointment of Successor Trustee; Temporary Trustee. ............................29 Section 7.09: Transfer of Rights and Property to Successor Trustee. ................................30
ARTICLE VIII: INDENTURES ....................................................................................................31 Section 8.01: Supplement or Amendment Without Bondholder Consent. ........................31 Section 8.02: Supplement or Amendment upon Approval of 51% of Bondholders. .........31 Section 8.03: Filing and Recording....................................................................................32 Section 8.04: Reliance on Counsel. ...................................................................................32 Section 8.05: Amendment or Supplement Binding. ..........................................................32
ARTICLE IX: EVENTS OF DEFAULT AND REMEDIES OF BONDHOLDERS ....................32 Section 9.01: Events of Default; Acceleration of Maturities; Remedies. ..........................32 Section 9.02: Appointment of Temporary Trustee; Receivers. ..........................................33 Section 9.03: Waiver of Appraisement, Etc. ......................................................................34 Section 9.04: Insufficiency in Revenue Fund and other Funds of the Authority;
Application of Monies. ..........................................................................................35 Section 9.05: Discontinuance of Proceedings. ...................................................................36 Section 9.06: Remedies not Exclusive. ..............................................................................36 Section 9.07: Remedies Vested in Trustee. .......................................................................36 Section 9.08: Individual Bondholder Action Restricted ....................................................37 Section 9.09: Waiver and Non-Waiver of Event of Default. .............................................37
ARTICLE X: DEFEASANCE .......................................................................................................37 Section 10.01: Payment and Termination ..........................................................................38 Section 10.02: Provision for Payment................................................................................38
ARTICLE XI: ADDITIONAL BONDS ........................................................................................39 Section 11.01: General Provisions for the Issuance of Additional Bonds. ........................39
ARTICLE XII: MISCELLANEOUS .............................................................................................39 Section 12.02: Preservation and Inspection of Documents. ...............................................39 Section 12.03: Parties Interested Herein. ...........................................................................39 Section 12.04: Severability of Invalid Provisions. .............................................................40 Section 12.05: Successors. .................................................................................................40 Section 12.06: Notices. ......................................................................................................40
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Section 12.07: Counterparts. ..............................................................................................41 Section 12.08: Consents of Owners of Bonds. ..................................................................41 Section 12.09: Limitation of Rights. ..................................................................................41 Section 12.10: Rules of Interpretation. ..............................................................................41 Section 12.11: Payments due on Saturdays, Sundays and Holidays. .................................41 Section 12.12: Applicable Provisions of Law. ...................................................................42 Section 12.13: No Personal Liability. ................................................................................42 Section 12.14: Table of Contents and Section Headings Not Controlling.........................42 Section 12.15: Indenture to Constitute a Contract. ............................................................42
SIGNATURE PAGE......................................................................................................................43
ACKNOWLEDGEMENTS ...........................................................................................................44
EXHIBIT A: FORM OF BOND ....................................................................................................45
EXHIBIT B: LEGAL DESCRIPTION ..........................................................................................53
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$__________ CLEVELAND COUNTY PUBLIC FACILITIES AUTHORITY
LEASE REVENUE REFUNDING BONDS (CLEVELAND COUNTY HEALTH DEPARTMENT -MOORE FACILITY PROJECT) SERIES 2020 This Bond Indenture, (herein together with any amendments hereto called "Indenture") dated as of the 1st day of March, 2020, by and between Cleveland County Public Facilities Authority (hereinafter called the "Authority") and BancFirst, Oklahoma City, Oklahoma, as Trustee, a state banking corporation duly organized and existing under the laws of the State of Oklahoma, possessing corporate trust powers and having offices located in Oklahoma City, Oklahoma (hereinafter, together with any bank or trust company appointed as successor trustee under this Indenture, called "Trustee"). WITNESSETH: WHEREAS, Cleveland County Public Facilities Authority was created by a Trust Indenture dated September 29. 1980, (the "Trust Indenture") for the furtherance of public purposes and the benefit of Cleveland County, Oklahoma, pursuant to the provisions of Title 60, Oklahoma Statutes 2011, Section 176 et seq., as amended (the "Public Trust Act"), Title 60, Oklahoma Statutes 2011, Section 175.1 et seq., as amended (the "Oklahoma Trust Act") and other applicable statutes and laws of the State of Oklahoma; and WHEREAS, the Authority desires to provide funds, together with other available funds, to current refund the outstanding portion of the $3,145,000 Cleveland County Public Facilities Authority Lease Revenue Bonds (Cleveland County Health Department – Moore Facility Project) Series 2009 (the “Series 2009 Bonds” or “Refunded Bonds”), to establish a reserve fund, if any; and to pay costs of issuance related thereto (the “Project”). The Refunded Bonds provided supplemental funds to finance the demolition of an existing building and construction, furnishing, and equipping of an expanded new 27,000 square foot Cleveland County Health Department Facility in Moore, Oklahoma (the "Facility") which Facility was leased to the Board of County Commissioners of Cleveland County on behalf of the Cleveland County Health Department. The Authority has resolved to issue its Lease Revenue Refunding Bonds (Cleveland County Health Department – Moore Facility Project) Series 2020 (the "Bonds") in the aggregate principal amount of $_________ which are authorized by the terms of this instrument; and WHEREAS, the Authority has leased the Facility unto the Board of County Commissioners of Cleveland County on behalf of the Cleveland County Health Department (herein the "Lessee") under the terms of a related Amended and Restated Lease Agreement (the "Lease") and wherein Lessee has agreed to make rental payments sufficient to pay the principal of and interest on the Bonds; and WHEREAS, all things necessary to make this Indenture a valid Bond Indenture to secure the payment of said Bonds, have been performed, and the execution of this Indenture has in all respects been authorized.
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NOW, THEREFORE, THIS INDENTURE WITNESSETH: The Authority, in consideration of the premises and the acceptance by the Trustee of the trusts hereby created and of the purchase and acceptance of the Bonds by the owners thereof, and for other good and valuable consideration, receipt of which is hereby acknowledged, in order to secure the payment of the principal of and interest on the Bonds according to their tenor and effect and to secure the performance and observance by the Authority of all the covenants expressed or implied herein and in the Bonds, does hereby irrevocably pledge and assign unto the Trustee, and its successors in trust and assigns forever, all and singular the property hereinafter described (the "Trust Estate"): GRANTING CLAUSE FIRST All right, title and interest of the Authority in and to: A. The Facility. B. The Gross Revenues derived and to be derived from the Facility. C. The Amended and Restated Lease Agreement and all rentals derived therefrom. D. The Assignment of Rents and Leases. E. All renewals, improvements and replacements thereof or substitutions therefor. F. All proceeds and products thereof. G. All funds and accounts established hereunder (except for the Rebate Fund). GRANTING CLAUSE SECOND All other property of the Authority of every kind and nature from time to time hereafter by delivery or by writing of any kind conveyed, mortgaged, pledged, assigned or transferred, as and for additional security hereunder, by the Authority or by anyone on its behalf or with its written consent, to the Trustee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof; TO HAVE AND TO HOLD all and singular the Trust Estate, including all additional property which by the terms hereof has or may become subject to the lien of this Bond Indenture, unto the Trustee, its successors in trust and assigns, forever. IN TRUST, NEVERTHELESS, upon the terms and trusts herein set forth for the equal and proportionate benefit and security of all present and future owners of the Bonds without preference of any Bond over any other, and for enforcement of the payment of the Bonds in accordance with their terms, and all other sums payable hereunder or on the Bonds and for the performance of and compliance with the obligations, covenants and conditions of this Indenture, as if all the Bonds at any time Outstanding had been authenticated, executed and delivered simultaneously with the execution and delivery of this Indenture, all as herein set forth;
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PROVIDED, HOWEVER, that if the Authority, its successors or assigns shall well and truly pay, or cause to be paid, the principal of and interest on the Bonds due or to become due thereon, at the times, and in the manner mentioned in such Bonds according to the true intent and meaning thereof, and shall cause the payments to be made under the provisions of this Indenture, or shall provide, as permitted hereby, for the payment thereof by depositing with the Trustee the entire amount due or to become due thereon, and shall well and truly keep, perform and observe all the covenants and conditions pursuant to the terms of this Indenture to be kept, performed and observed by it, and shall pay or cause to be paid to the Trustee and any paying agent all sums of money due or to become due in accordance with the terms and provisions hereof, then upon such final payments this Indenture and the rights hereby granted shall cease, determine and be void, otherwise this Indenture to be and remain in full force and effect. THIS INDENTURE FURTHER WITNESSETH, and it is expressly declared, that all the Bonds issued and secured hereunder are to be issued, authenticated and delivered, and all said property, rights and interest hereby given, granted, bargained, alienated, remised, released, conveyed, transferred, assigned, confirmed, set over and pledged are to be dealt with and disposed of under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes as hereinafter express, and the Authority has agreed and covenanted, and does hereby agree and covenant, with the Trustee and with the respective registered owners, from time to time, of the Bonds as follows:
ARTICLE I: DEFINITIONS AND INTERPRETATIONS Section 1.01: Definitions.
The following shall have the meanings set forth hereinbelow, unless the context shall clearly require another or different meaning or intent: "Additional Bonds" means all bonds or series of bonds, authenticated, issued and delivered in the future under this Indenture pursuant to Section 11 secured on a parity with the Bonds other than the Bonds. "Assignment of Rents and Leases" shall mean the Assignment of Rents and Leases dated as of March 1, 2020 by and between the Authority and the Trustee. "Authority" or “Issuer” shall mean the Cleveland County Public Facilities Authority, a public trust created and existing under the provisions of Title 60, Oklahoma Statutes, Section 176 et. seq. acting by and through its Trustees. "Authority Counsel" shall mean counsel to the Authority. "Bonds" shall mean the $________ Cleveland County Public Facilities Authority Lease Revenue Refunding Bonds (Cleveland County Health Department – Moore Facility Project), Series 2020, executed, authenticated and issued under this Indenture and any Additional Bonds issued pursuant to any indenture(s) supplemental hereto.
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"Bond Counsel" shall mean an attorney or firm of attorneys nationally recognized in municipal bond and public finance law. "Bond Fund" shall mean the Bond Fund created in Section 4.03 of this Indenture. "Bond Payment Date" shall mean March 1 and September 1 of each year, commencing September 1, 2020. "Bondholders", "Holder of Bonds", "Holder" or "Owner" (when used with reference to Bonds) or any similar term, shall mean any person or party who shall at any time be the registered owner of any Outstanding Bond or Bonds. "Business Day" shall mean any day other than (i) a Saturday or Sunday or (ii) a day on which banking institutions in the State are authorized or obligated by law or executive order to be closed for business. "Code" or "Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as amended and supplemented, and the regulations promulgated thereunder. "Costs of Issuance" shall mean the costs incurred with respect to the issuance of the Bonds, Authority's and Trustee's initial fees and expenses, costs and expenses of independent consultants, financial consultants, attorneys, printing expenses, or reimbursement to the Authority for any statement of cost, expense or advances rendered by or on behalf of the Authority. "Counsel's Opinion" shall mean an opinion signed by an attorney or firm of attorneys selected by or satisfactory to the Authority, which attorney or attorneys may be counsel to the Authority, but may not be a full-time employee of the Authority, the Borrower or the Trustee. "County" shall mean Cleveland County, Oklahoma. "Department" shall mean the Cleveland County Health Department.
"Eligible Investments" means investments in one or more of the following types of obligations selected by the Trustee:
1. Direct obligations (other than an obligation subject to variation in principal repayment) of the United States of America (“United States Treasury Obligations”); obligations fully and unconditionally guaranteed as to timely payment of principal and interest by the United States of America; obligations fully and unconditionally guaranteed as to timely payment of and interest by any agency or instrumentality of the United States of America when such obligations are backed by the full faith and credit of the United States of America; or
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evidences of ownership of proportionate interests in future interest and principal payments on obligations described above held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying government obligations are not applicable to any person claiming through the custodian or to whom the custodian may be obligated (collectively “Governmental Obligations”).
2. Federal Housing Administration debentures.
3. The following listed obligations of government sponsored agencies which are not backed by the full faith and credit of the United States of America:
· Federal Home Loan Mortgage Corporation (FHLMC) Participation Certificates Senior Debt Obligations
· Farm Credit System (formerly: Federal Land Banks, Federal Intermediate Credit Banks and Banks for Cooperatives) consolidated system-wide bonds and notes
· Federal Home Loan Banks (FHL Banks) Consolidated Debt Obligations
· Federal National Mortgage Association (FNMA) Senior debt obligations and mortgage-backed securities (excluding stripped mortgage securities which are purchased at prices exceeding their principal amounts)
4. Unsecured certificates of deposit, time deposits, and bankers’ acceptances
(having maturities of not more than 365 days) of any bank the short-term obligations of which are rated “A-1+” or better by S&P and “Prime-1” by Moody’s.
5. Deposits the aggregate amount of which are fully insured by the Federal Deposit Insurance Corporation (FDIC), in banks which have capital and surplus of at least $15 million.
6. Commercial paper (having original maturities of not more than 270 days) rated “A-1+” by S&P and “Prime-1” by Moody’s.
7. Money market funds rated “Aam” or “Aam-G” by S&P, or better, and if rated by Moody’s rated “Aa2” or better.
8. “State Obligations,” which means:
A. Direct general obligations of any state of the United States of America or any subdivision or agency thereof to which is pledged the full faith and credit of a state the unsecured general obligation debt of which is
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rated “A-3” by Moody’s and “A-” by S&P, or better, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured general obligation debt is so rated.
B. Direct general short-term obligations of any state agency or subdivision or agency thereof described in (A) above and rated “A-1+” by S&P and “MIG-1” by Moody’s.
C. Special Revenue Bonds (as defined in the United States Bankruptcy Code) of any state, state agency or subdivision described in (A) above and rated “AA-” or better by S&P and “Aa3” or better by Moody’s.
9. Pre-refunded municipal obligations rated ‘AAA’ by Standard & Poor’s Corporation and ‘Aaa’ by Moody’s meeting the following requirements:
A. the municipal obligations are (1) not subject to redemption prior to maturity or (2) the trustee for the municipal obligations has been given irrevocable instructions concerning their call and redemption and the issuer of the municipal obligations has covenanted not to redeem such municipal obligations other than as set forth in such instructions; B. the municipal obligations are secured by cash or U.S. Treasury Obligations which may be applied only to payment of the principal of, interest and premium on such municipal obligations; C. the principal of and interest on the U.S. Treasury Obligations (plus any cash in the escrow) has been verified by the report of independent certified public accountants to be sufficient to pay in full all principal of, interest, and premium, if any, due and to become due on the municipal obligations (“Verification Report”); D. the cash or U.S. Treasury Obligations serving as security for the municipal obligations are held by an escrow agent or trustee in trust for owners of the municipal obligations; E. no substitution of a U.S. Treasury Obligation shall be permitted except with another U.S. Treasury Obligations and upon delivery of a new Verification Report; and F. the cash or U.S. Treasury Obligations are not available to satisfy any other claims, including those by or against the trustee or escrow agent.
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10. Repurchase agreements: with (1) any domestic bank, or domestic branch of a foreign bank, the long term debt of which is rated at least “A-” by S&P and “A3” by Moody’s; or (2) any broker-dealer with “retail customers” or a related affiliate thereof which broker-dealer has, or the parent company (which guarantees the provider) of which has, long-term debt rated at least “A-” by S&P and “A3” by Moody’s, which broker-dealer falls under the jurisdiction of the Securities Investors Protection Corporation; or (3) any other entity rated at least “A-” by S&P and “A3” by Moody’s (each an “Eligible Provider”), provided that:
A. (i) permitted collateral shall include U.S. Treasury Obligations, or senior debt obligations of GNMA, FNMA or FHLMC (no collateralized mortgage obligations shall be permitted for these providers), and (ii) collateral levels must be at least 102% of the total principal when the collateral type is U.S. Treasury Obligations, 103% of the total principal when the collateral type is GNMA’s and 104% of the total principal when the collateral type is FNMA and FHLMC (“Eligible Collateral”); B. the Trustee or a third party acting solely as agent therefore or for the Issuer (the “Custodian”) has possession of the collateral or the collateral has been transferred to the Custodian in accordance with applicable state and federal laws (other than by means of entries on the transferor’s books) and such collateral shall be marked to market; C. the collateral shall be marked to market on a daily basis and the provider or Custodian shall send monthly reports to the Trustee and the Issuer setting forth the type of collateral, the collateral percentage required for that collateral type, the market value of the collateral on the valuation date and the name of the Custodian holding the collateral; D. the repurchase agreement shall state, and an opinion of counsel shall be rendered at the time such collateral is delivered that the Custodian has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof; E. the repurchase agreement shall provide that if during its term the provider’s rating by either Moody’s or S&P is withdrawn or suspended or falls below “A-” by S&P or “A3” by Moody’s, as appropriate, the provider must, notify the Issuer and the Trustee within five (5) days of receipt of such notice. Within ten (10) days of receipt of such notice, the provider shall either: (i) provide a written guarantee acceptable to the Issuer and the Trustee, (ii) post Eligible Collateral, or (iii) assign the agreement to an Eligible Provider. If the provider does not perform a remedy within ten (10) business days, the provider shall, at the direction of the Trustee, repurchase all collateral and terminate the repurchase agreement, with no penalty or premium to the Issuer or the Trustee.
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11. Investment agreements: with a domestic or foreign bank or corporation the long-term debt of which, or, in the case of a guaranteed corporation the long-term debt, or, in the case of a monoline financial guaranty insurance company, claims paying ability, of the guarantor is rated at least “AA-” by S&P and “Aa3” by Moody’s (each an “Eligible Provider”); provided that:
A. interest payments are to be made to the Trustee at times and in amounts as necessary to pay debt service (or, if the investment agreement is for the construction fund, construction draws) on the Bonds; B. the invested funds are available for withdrawal without penalty or premium, at any time upon not more than seven (7) days’ prior notice; the Issuer and the Trustee hereby agree to give or cause to be given notice in accordance with the terms of the investment agreement so as to receive funds thereunder with no penalty or premium paid; C. the provider shall send monthly reports to the Trustee and the Issuer setting forth the balance the Issuer or Trustee has invested with the provider and the amounts and dates of interest accrued and paid by the provider; D. the investment agreement shall state that it is an unconditional and general obligation of the provider, and is not subordinated to any other obligation of, the provider thereof, or if the provider is a bank, the agreement or the opinion of counsel shall state that the obligation of the provider to make payments thereunder ranks pari passu with the obligations of the provider to its other depositors and its other unsecured and unsubordinated creditors; E. the Authority and the Trustee shall receive an opinion of domestic counsel to the provider that such investment agreement is legal, valid, binding and enforceable against the provider in accordance with its terms; F. the Authority and the Trustee shall receive an opinion of foreign counsel to the provider (if applicable) that (a) the investment agreement has been duly authorized, executed and delivered by the provider and constitutes the legal, valid and binding obligation of the provider, enforceable against the provider in accordance with its terms, (b) the choice of law of the state set forth in the investment agreement is valid under that country’s laws and a court in such country would uphold such choice of law, and (c) any judgment rendered by a court in the United States would be recognized and enforceable in such country;
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G. the investment agreement shall provide that if during its term: i. in the event the provider’s rating by either S&P or Moody’s falls below “AA-” or “Aa3”, the provider shall, at its option, within ten (10) days of receipt of publication of such downgrade, either (i) provide a written guarantee acceptable to the Issuer and the Trustee, (ii) post Eligible Collateral with the Issuer, the Trustee or a third party acting solely as agent therefore (the “Custodian”) free and clear of any third party liens or claims, (iii) assign the agreement to an Eligible Provider, or (iv) repay the principal of and accrued but unpaid interest on the investment; ii. the provider’s rating by either S&P or Moody’s is withdrawn or suspended of falls below “A-” or “A3”, the provider must, at the direction of the Authority or the Trustee within then(10) days of receipt of such direction, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium to the Authority or Trustee. H. in the event the provider is required to collateralize, permitted collateral shall include U.S. Treasury Obligations, or senior debt obligations of GNMA, FNMA or FHLMC (no collateralized mortgage obligations shall be permitted for these providers) and collateral levels must be 102% of the total principal when the collateral type is U.S. Treasury Obligations, 103% of the total principal when the collateral type is GNMA’s and 104% of the total principal when the collateral type is FNMA and FHLMC (“Eligible Collateral”). In addition, the collateral shall be marked to market on a daily basis and the provider or Custodian shall send monthly reports to the Trustee and the Authority setting forth the type of collateral, the collateral percentage required for that collateral type, the market value of the collateral on the valuation date and the name of the Custodian holding the collateral; I. the investment agreement shall state and an opinion of counsel shall be rendered, in the event collateral is required to be pledged by the provider under the terms of the investment agreement, at the time such collateral is delivered, that the Custodian has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof; J. the investment agreement must provide that if during its term: (i) the provider shall default in its payment obligations, the provider’s obligations under the investment agreement shall, at the direction of the Authority or the Trustee, be accelerated and amounts invested and accrued
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but unpaid interest thereon shall be repaid to the Authority or Trustee, as appropriate, and (ii) the provider shall become insolvent, not pay its debts as they become due, be declared or petition to be declared bankrupt, etc. (“event of insolvency”), the provider’s obligations shall automatically be accelerated and amounts invested and accrued but unpaid and interest thereon shall be repaid to the Authority or Trustee, as appropriate.
12. Subject to the prior written approval of the County, such other obligations, as shall permitted to be legal investments of the Authority by the laws of the State of Oklahoma.
13. Pre-refunded municipal obligations rate ‘AAA’ by Standard & Poor’s
Corporation and ‘Aaa’ by Moody’s.
14. Investment agreements with financial institutions, which agreements have been approved by the Authority in writing.
15. Subject to the prior written approval of the Authority, such other
obligations as shall be permitted to be legal investments of the Authority by the laws of the State of Oklahoma. "Facility" or "Moore Facility" shall include the Authority's interest in the land and buildings, fixtures, property and improvements presently or hereafter located thereon which are under the ownership, management or control of the Authority, including the building constructed for use by the Department, Moore, Oklahoma. "Fiscal Year" means the year July 1 to June 30. "Event of Default" shall have the meaning specified in Article IX hereof. "Gross Revenues" or "Revenues" shall mean and include: (i) all rentals, fees, charges, income, receipts and other monies derived from its operation of the properties, real, personal or both, included in the Facility or from the furnishing and supplying of the services, facilities and commodities thereof, and without limiting the generality of the foregoing, shall include all rentals, fees, charges, income, receipts and other monies (a) derived by the Authority from the leasing of all or a part of the Facility, including but not limited to the payments by the Department under the Lease as hereinafter defined or (b) otherwise derived from or arising through the operation by the Authority of the Facility; and (ii) earnings on and the income from the investment of monies held under this Indenture to the extent such earnings or income are deposited in the fund created hereby; provided that (a) the term "Gross Revenues" or "Revenues" shall not include monies received as proceeds from the sale of bonds or as grants or gifts, the use of which is limited by the grantor or donor to the construction of capital improvements, except to the extent that any such monies shall be received as payments for the use and service of or commodities and facilities furnished by the Facility; and (b) in no event shall the term "Gross Revenues" or "Revenues" include any income, receipts or other monies of the Authority which
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are derived from their operation of properties not included in the Facility or from the furnishing and supplying of the services, facilities and commodities of such owner properties. “Immediate Notice” means notice transmitted by electronic means, in writing, by telecopier or other electronic means or by telephone (promptly confirmed in writing) and received by the party addressed. "Indenture" shall mean this Indenture, as supplemented or amended by an Indenture supplemental hereto or amendatory hereof. “Interest Payment Date” means the first day of March and September of each year, beginning September 1, 2020, (b) for Bonds subject to redemption in whole or in part on any date, the date of such redemption, and (c) for all Bonds any date determined pursuant to Section 9.04. "Lease Agreement" shall mean the Amended and Restated Lease Agreement between the Authority as Lessor and the County (on behalf of the Department) as Lessee, whereby the Authority leases the Facility to the County on behalf of the Department. "Leased Properties" shall mean the "Facility" as defined herein. "Operation and Maintenance Expenses" shall include, together with any other proper cost items not specifically mentioned herein, all costs and expenses incurred after the Facility are complete, not part of the Facility, costs, and excluding the principal and interest requirements on the Bonds and other revenues, funds and accounts required to be maintained by the Trustee under the Indenture. Said operation and maintenance costs shall include, but are not limited to the following: Trustee Fees and expenses; annual audit costs of the Authority; legal and administrative expenses incurred in connection with the Facility; insurance costs required under the Lease and under the Indenture; taxes, if any; repair, replacement, alteration and improvement expenses necessary to insure that the overall operating efficiency of the Facility will not be materially impaired; costs of heat, light, power elevator services, janitorial services, painting, decorating, and maintenance repairs. "Outstanding" or "Bonds Outstanding", when used with reference to the Bonds shall mean the aggregate of all Bonds authorized and issued by the Authority and authenticated and delivered by the Trustee under the provisions of this Indenture, except: (a) Bonds which have been cancelled or surrendered to the Trustee for cancellation; (b) Bonds deemed to have been paid pursuant to Article X hereof; and (c) any Bonds in lieu of or in substitution for another Bond or Bonds that have been
issued by the Authority and authenticated and delivered by the Trustee pursuant to this Indenture.
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"Record Date" shall mean the fifteenth day of the month next preceding an interest or principal payment date. "Rentals" or "Rental Payments" shall mean all the rentals or charges received by the Authority or the Trustee on behalf of the Authority, pursuant to the Lease pertaining to the Facility and any other rentals or charges the Authority may receive from the use of the Facility. "State" shall mean the State of Oklahoma. "Trustee" shall mean the bank serving as Trustee under this Indenture, whether original or as successor. "Trust Estate" shall mean: (a) all the right, title and interest of the Authority in and to the Facility; (b) the Gross Revenues derived and to be derived therefrom; (c) the Funds and accounts established hereunder (except for the Rebate Fund); (d) and all other monies and assets which are or may be in the future granted, bargained, sold, alienated, demised, released, conveyed, transferred, assigned, confirmed, pledged with and set over unto the Trustee in trust by the Authority in the preambles and recitals to this Indenture and any additions thereto pursuant to any supplemental Indenture, (e) the Lease Agreement, and (f) the Assignment of Rents and Leases. Section 1.02: Rules of Interpretation. For purposes of this Indenture, except as otherwise expressly provided or the context otherwise requires:
(a) The words “herein,” “hereof” and “hereunder” and other similar words refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.
(b) The definitions in this Article are applicable whether the terms defined are used in the singular or the plural.
(c) All accounting terms which are not defined in this Indenture have the meanings assigned to them in accordance with then applicable generally accepted accounting principles.
(d) Any pronouns used in this Indenture include both the singular and the plural and cover both genders.
(e) Any terms not defined in this Indenture, but which are defined in the Lease Agreement have the same meaning in this Indenture as are given to them in the Lease Agreement.
(f) Any terms defined elsewhere in this Indenture have the meanings attributed to them where defined.
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(g) Words referring to the redemption or calling for redemption of Bonds shall not be deemed to refer to the payment of Bonds at their stated maturity.
(h) The captions or headings herein are for convenience only and in no way define, limit or describe the scope or intent, or control or affect the meaning or construction, of any provisions or sections hereof.
(i) Any references to Section numbers are to Sections of this Indenture unless stated otherwise.
ARTICLE II: THE BONDS Section 2.01: Bonds Authorized. The Bonds authorized by this Indenture are issued to provide funds to fund the Facility and to pay the costs and expenses of, and incidental to, the issuance and sale of such Bonds. Section 2.02: Bonds and Amount Authorized. There is hereby authorized the issuance, registration, authentication and delivery of "Cleveland County Public Facilities Authority Lease Revenue Refunding Bonds (Cleveland County Health Department - Moore Facility Project), Series 2020" in the aggregate principal amount of _________________ and 00/100 Dollars ($___________). The Bonds shall be dated the date of delivery, and shall be in the form, bear interest at the rates and shall mature as hereinafter in this Indenture provided. Section 2.03: Execution; Limited Obligation. The Bonds shall be executed on behalf of the Authority with the manual or facsimile signature of the Chairman of the Authority, attested by the manual or facsimile signature of the Secretary of the Authority and shall have affixed or facsimile thereon the official seal of the Authority. The Trustee shall register the Bonds in its office and shall execute the Certificate of the Trustee on the Bonds to that effect by manual signature. In case any officer of the Authority whose manual or facsimile signature shall appear on the Bonds shall cease to be such officer before the delivery of such Bonds, such signature or the facsimile signature thereof shall nevertheless be valid and sufficient for all purposes, as if such officer had remained in office until delivery. The Authority may adopt and use for that purpose the manual or facsimile signature of any person or persons who shall have been the Chairman or Secretary at any time on or after the date borne by the Bonds, notwithstanding that such person may not have been such Chairman or Secretary at the date of any such Bond or may have ceased to be such Chairman or Secretary at the time when any such Bond shall be authenticated and delivered. The Bonds shall be limited and special obligations of the Authority, payable solely from the Trust Estate. The Bonds shall constitute a valid claim of the respective owners thereof against the Trust Estate, which is pledged to secure the payment of the principal of, redemption premium, if any, and interest on the Bonds, and which shall be utilized for no other purpose, except as expressly authorized in this Indenture.
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NEITHER THE BONDS NOR THE LEASE AGREEMENT SHALL GIVE RISE TO A GENERAL OBLIGATION OR OTHER INDEBTEDNESS OF THE STATE OF OKLAHOMA OR OF THE AUTHORITY OR THE COUNTY, NOR A MANDATORY PAYMENT OBLIGATION IN ANY YEAR WHICH THE DEPARTMENT DOES NOT HAVE REVENUE AVAILABLE TO PAY LEASE PAYMENTS UNDER THE LEASE AGREEMENT. THE LEASE AGREEMENT IS SUBJECT TO RECEIPT OF MONTHLY LEASE PAYMENTS FROM THE DEPARTMENT PAYABLE SOLELY OUT OF REVENUE FOR THE THEN CURRENT FISCAL YEAR OF THE DEPARTMENT, AND UPON FAILURE TO MAKE LEASE PAYMENTS OR ANY OTHER TERMINATION OF THE LEASE AGREEMENT, THE BONDS WILL BE PAYABLE FROM MONIES, IF ANY, HELD BY THE TRUSTEE UNDER THIS BOND INDENTURE AND ANY AMOUNTS RESULTING FROM THE SUBLETTING OR SUBLEASING OF THE FACILITY. THE BONDS AND THE INTEREST THEREON DO NOT CONSTITUTE AN INDEBTEDNESS OF THE STATE OF OKLAHOMA OR CLEVELAND COUNTY, OKLAHOMA, NOR ARE THEY PERSONAL OBLIGATIONS OF THE TRUSTEES OF THE AUTHORITY. THE AUTHORITY HAS NO TAXING POWER. Section 2.04: Form of Bonds. The Bonds issued under this Indenture shall be substantially in the applicable form set forth in Exhibit “A” attached hereto with such variations, omissions and insertions as are permitted or required by this Indenture. Section 2.05: Maturity Schedule. The Interest on the Bonds shall be payable annually on ________ 1 and _____ 1 of each year, commencing on ______ 1, 202_ until the principal amount of the Bonds is paid. Interest on such Bonds shall be computed on the basis of a 360-day year of twelve 30-day months. The Bonds shall bear interest and shall mature in the following amounts on the following dates: Maturity Principal Interest DATE AMOUNT RATE (plus accrued interest) Section 2.06: Conditions on Issuance. Notwithstanding any other provision of this Indenture appearing to be to the contrary, the Bonds authorized by this Article shall not be authenticated or registered by the Trustee, or be delivered to any person, until the following conditions have been received by or met to the satisfaction of the Trustee: (1) Indenture. An original or certified copy of this Indenture authorizing the issuance
of the Bonds;
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(2) Bond Documents. Original executed counterparts of the Bond Purchase
Agreement, the Lease Agreement, the Continuing Disclosure Agreement, the Assignment of Rents and Leases, the Arbitrage Rebate Agreement, and the Federal Tax and Arbitrage and Use of Proceeds Certificate;
(3) Counsel's Opinion. A Counsel's Opinion to the Authority to the effect the
Authority has the right and power under the Act as amended to the date of such Opinion to refund the Series 2009 Bonds, to adopt such Indenture, that such Indenture has been duly and lawfully adopted by the Authority, is in full force and effect and is valid and binding upon the Authority and enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to the enforcement of creditors rights generally and except to the extent that the enforceability thereof may be limited by the application of general principles of equity and the terms of this Indenture, as supplemented, and the Act as amended to the date of such Opinion, and the Bonds have been duly and validly authorized, issued and authenticated in accordance with applicable law and this Indenture;
(4) Assurances. Assurances shall have been delivered to the Trustee certifying to the
following: (a) The principal amount of the Bonds authorized to be issued and delivered,
to whom delivery is to be made, and the amount of money to be paid to the Trustee as the purchase price of the Bonds;
(b) The authenticity and fact of proper execution by the Authority of the
Bonds as provided in this Indenture; (c) The Authority is in full possession of the Trust Estate described in this
Indenture; (d) The non-existence of litigation or controversy, pending or threatened,
affecting the existence of the Authority or the powers of its board of directors, or affecting the validity or enforceability of the Bonds authorized by this Indenture or any proceedings whatsoever related to the issuance of the Bonds authorized by this Indenture or affecting the title to the Trust Estate described in this Indenture, or the funds provided for the payment of the principal of and interest on indebtedness authorized by this Indenture to be incurred;
(e) Payments of costs of issuance due and payable from the proceeds of the
Bonds, to whom each payment is to be made by the Trustee, the amount of each such payment and the purpose thereof;
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(f) The authorization of the Chairman or Vice Chairman of the Authority to execute such Certificate;
(5) Market Legal Opinion. There shall have been delivered to the Trustee the
legal opinion of the Floyd Law Firm, P.C., Norman, Oklahoma, in customary form;
(6) Receipt of Purchase Price. The Trustee shall have received the entire amount of
the purchase price of the Bonds as specified in the Certificate prescribed by Section 2.06(4) above;
(7) Additional Documents. Such additional documents, certificates and
Counsel's Opinion as may be required by the Authority to effect the issuance and sale of the Bonds.
Section 2.07: Terms of Bonds. The Bonds shall be issued in the denomination of $5,000 or any multiple of $5,000. Bonds issued upon exchanges and transfers of other Bonds shall be dated so that no gain or loss of interest shall result from such exchange or transfer. Each Bond shall bear interest from the date thereof. The Bonds shall be numbered from R-1 or T-1 upwards in chronological order as issued. Interest on Bonds shall be paid by the Trustee by check or draft mailed to the registered owner at his address as it appears on the books of registry kept pursuant to the provisions of Section 2.11 hereof, and Bonds shall be paid as to principal by the Trustee by presentation and surrender thereof to the Trustee at its principal corporate trust office by the registered owner. The principal of, premium, if any, and interest on the Bonds shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for public and private debts. Section 2.08: Execution of Bonds. (a) The Bonds shall be signed on behalf of the Authority by the manual or facsimile signature of its Chairman or Vice Chairman and attested by the manual or facsimile signature of its Secretary or an Assistant Secretary, and its seal shall be thereunto affixed by its Secretary or an Assistant Secretary, which may be by a facsimile of the Authority's seal which is imprinted upon the Bonds. The Bonds shall then be delivered to the Trustee for authentication by it. In case any officer who shall have signed or attested any of the Bonds shall cease to be such officer before the Bonds so signed or attested shall have been authenticated or delivered by the Trustee or issued by the Authority, such Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issuance, shall be binding upon the Authority as though such person who signed or attested the same had continued to be such officer of the Authority. Also, any Bond may be signed or attested on behalf of the Authority by any person who on the actual date of the execution of such Bond shall be the proper officer of the Authority, although on the nominal date of such Bond any such person shall not have been such officer of the Authority.
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(b) Only such of the Bonds as shall bear thereon a certificate of authentication, executed by the Trustee shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate shall be conclusive evidence that the Bonds so authenticated have been duly authenticated and delivered under, and are entitled to the benefits of, this Indenture and the Holder thereof is entitled to the benefits of the Indenture. Section 2.09: Transfer of Bonds. (a) Any Bond may, in accordance with its terms, be transferred, upon the books required to be kept pursuant to the provisions hereof, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a written instrument of transfer in a form approved by the Trustee, duly executed. (b) Whenever any Bond or Bonds shall be surrendered for transfer, the Authority shall execute and the Trustee authenticate and deliver a new Bond or Bonds, for like aggregate principal amount, interest rate and maturity date. The Trustee shall require the payment by the Bondholder requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer. (c) The Authority shall not be required: (i) to transfer any Bond after the fifteenth (15th) day of the month next preceding an Interest Payment Date on the Bonds or during the fifteen (15) days next preceding the date of giving notice of such redemption, or (ii) to register the transfer of any Bond so selected for redemption in whole or in part, except the unredeemed portion of the Bonds being redeemed in part. (d) The Authority and the Trustee may deem and treat the person in whose name any Outstanding Bond shall be registered upon the registration books of the Authority as the absolute owner of such Bond, whether such Bond shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal and redemption premium, if any, of and interest on such Bond and for all other purposes, and all such payments so made to any such registered owner or upon his order shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid, and neither the Authority nor the Trustee shall be affected by any notice to the contrary. The Authority agrees to the extent of the Trust Estate to indemnify and save the Trustee harmless from and against any and all loss, cost, charge, expense, judgment or liability incurred by it, acting in good faith and without negligence under this Indenture, in so treating any such registered owner. Section 2.10: Exchange of Bonds. Bonds may be exchanged at the principal office of the Trustee for a like aggregate principal amount of Bonds of the same series and maturity of other authorized denominations. The Trustee shall require the payment by the Bondholder requesting such exchange of any tax, fee or other governmental charge required to be paid with respect to such exchange. The
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Authority shall not be obligated to make any such exchange of Bonds after the fifteenth (15th) day of the month next preceding an Interest Payment Date on the Bonds or, in the case of any proposed redemption of Bonds, during the fifteen (15) days next preceding the date of giving notice of such redemption. Section 2.11: Bond Registration Books, Regulations with Respect to Exchanges and Transfers. The Trustee will keep or cause to be kept, at its principal office, sufficient books for the registration and transfer of the Bonds, which shall at all times be open to inspection by the Authority; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as they may prescribe, register or transfer or cause to be registered or transferred, on said books, Bonds as hereinbefore provided. In all cases in which the privilege of exchanging Bonds or transferring Bonds is exercised, the Authority shall execute, and the Trustee shall authenticate, register and deliver Bonds in accordance with the provisions of this Indenture. All Bonds surrendered in any such exchanges or transfers shall forthwith be shown cancelled on the books of the Trustee. Section 2.12: Temporary Bonds. The definitive Bonds shall be fully engraved (as that term is customarily used) or lithographed or printed in the form prescribed by Section 2.04 of this Indenture. (a) Until the definitive Bonds are prepared, the Authority may execute, in the same manner as is provided in Section 2.03 hereof, and, upon the written request of the Authority, the Trustee shall authenticate and deliver, in lieu of definitive Bonds, to the extent authorized by law, one or more temporary Bonds subject to the same provisions, limitations and conditions as, and substantially of the tenor of, such definitive Bonds; provided, however, that such temporary Bonds may be in denominations of $5,000 or any multiples of $5,000, may provide for such rights of exchange or registration as may be stated therein, and may have such omissions, insertions and variations as may be appropriate for temporary Bonds. The Authority at its own expense shall prepare and execute and, upon the surrender at the principal office of the Trustee of such temporary Bonds for exchange and the cancellation of such temporary Bonds, the Trustee shall authenticate and, without charge to the Holder thereof, deliver in exchange therefor, definitive Bonds, of the same aggregate principal amount and series and maturity as the temporary Bonds surrendered. Until so exchanged, the temporary Bonds shall in all respects be entitled to the same benefits and security as definitive Bonds authenticated and issued pursuant to this Indenture. (b) If the Authority shall authorize the issuance of temporary Bonds in more than one denomination, the Holder of any temporary Bond or Bonds may, at his option, surrender the same to the Trustee in exchange for another temporary Bond or Bonds of like aggregate principal amount and maturity of any other authorized denomination or denominations, and thereupon the Authority shall execute and the Trustee shall authenticate and, in exchange for the temporary Bond or Bonds so surrendered and upon payment of the taxes, fees and charges provided for in Section 2.10, shall deliver a temporary Bond or Bonds of like aggregate principal amount and
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maturity in such other authorized denomination or denominations as shall be requested by such Holder. (c) All temporary Bonds surrendered in exchange either for another temporary Bond or Bonds or for a definitive Bond or Bonds shall be forthwith cancelled by the Trustee. Section 2.13: Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Authority at the expense of the Holder of such Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor and number in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be cancelled by it and delivered to, or upon the order of, the Authority. If any Bond issued hereunder shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Authority and the Trustee and, if such evidence be satisfactory to the Trustee and indemnity of the Authority and the Trustee in form satisfactory to the Trustee shall be given, the Authority at the expense of the Holder, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor and number in lieu of and in substitution for the Bond so lost, destroyed or stolen (or if any such Bond shall have matured or shall be about to mature, instead of issuing a substitute Bond the Trustee may pay the same without surrender thereof). Any Bond issued under the provisions of this Section in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an additional contractual obligation of the Authority, and shall be equally and proportionately entitled to the benefits of the Indenture with all other Bonds secured by this Indenture. Neither the Authority nor the Trustee shall be required to treat both the original Bond and any substitute Bond as being "Outstanding" for the purpose of determining the principal amount of Bonds which may be issued hereunder or for the purpose of determining any percentage of Bonds Outstanding hereunder, but both the original and substitute Bond shall be treated as one and the same.
ARTICLE III: REDEMPTION OF BONDS Section 3.01: Redemption of the Bonds. The Bonds are subject to redemption prior to the stated maturities thereof, and shall be redeemable, upon notice as provided in this Article, at such times, and upon such terms as may be specified in such Bonds and in this Indenture. Section 3.02: Optional Redemption. The Bonds maturing on September 1, 202_, shall be subject to redemption at the option of the Authority, on at least thirty (30) days’ notice, in whole or in part in inverse order of maturity and by lot within a maturity on any date, on or after September 1, 202_, at par plus, in each case, accrued interest to the date fixed for redemption. Section 3.03: Mandatory Redemption. The Bonds maturing on _________ 1, 202_, are subject to mandatory redemption, in part,
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principal amount as follows: Mandatory
Redemption Dates Principal Section 3.04: Special Redemption. The Bonds are subject to redemption at the option of the Authority, in whole or in part, at any time, if such redemption is made from (a) insurance proceeds; (b) expropriation awards; (c) the proceeds of the sale of all or part of the Facility; or (d) payments received from the Authority pursuant to an Event of Default as defined in this Indenture. If such redemption is made, such redemption shall be made at the principal amount redeemed and the interest accrued thereon to the redemption date. The Bonds are subject to redemption, at the option of the Authority, in whole at any time, at the principal amounts thereof and accrued interest to the date fixed for redemption, if, as a result of any change in the Constitution of the United States of America or of the State of Oklahoma or legislative or administrative action whether State or Federal, or by final judgment in a court of competent jurisdiction after the contest thereof by the County or the Authority in good faith, wherein (i) the Indenture or the Lease Agreement becomes void, unenforceable, or impossible to perform in accordance with the intent and purpose of the parties as expressed therein or (ii) the interest on the Bonds shall become includable in the gross revenue income of the holders thereof for federal income tax purposes. Section 3.05: Notice of Redemption. In the event any of the Bonds or portions thereof (which shall be $5,000 or an integral multiple thereof) are called for redemption as aforesaid, notice thereof identifying the Bonds or portions thereof to be redeemed will be given by the Trustee Bank by mailing a copy of the redemption notice by first class mail (postage prepaid) not less than 30 days prior to the date fixed for redemption to the registered owner of each Bond to be redeemed in whole or in part at the address shown on the registration books of the Trustee. All Bonds so called for redemption will cease to bear interest after the specified redemption date provided funds for their redemption are on deposit at the place of payment at that time.
ARTICLE IV: ESTABLISHMENT OF FUNDS AND APPLICATION THEREOF Section 4.01: Establishment of Funds. The Authority hereby establishes and creates the following funds and accounts, which funds and accounts shall be special trust funds held by the Trustee: (1) Revenue Fund. (2) Bond Fund which shall consist of a Principal Account and an Interest Account.
at the principal amount thereof, on September 1 in each of the years below described in the
(3) Bond Proceeds Fund.
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Section 4.02: Revenue Fund. There is hereby established and created a Revenue Fund. All Rental payments received by the Authority from the Lessee derived from the Facility leased pursuant to the Lease shall be collected by the Authority and deposited in the Trustee Bank under the terms of this Indenture. These deposits shall be made into a Revenue Fund created pursuant to the terms of this Indenture. Under the terms of this Indenture, the Trustee is directed to annually transfer to the Bond Fund on or before the 20th day of each month commencing _____ __, 202_, from funds on deposit in such Revenue Fund, sums that will be equal to the interest payable on ________1, 202_, and thereafter, a sum equal to one-sixth of the interest payable on the next ensuing Interest Payment Dates and sums that will be equal to the principal payable on __________ 1, 202_, and thereafter, a sum equal to one-twelfth of the principal payable on the next ensuing principal payment date. The Trustee shall pay from funds on deposit in the Revenue Fund when due and payable the sums due under the terms of Section 4.2 of the Lease. Section 4.03: Bond Fund. There is hereby established and created a Bond Fund, and within such Fund two subaccounts shall be established: (1) A Principal Account. (2) An Interest Account. The Trustee shall, out of any monies transferred from the Revenue Fund make payments into the following funds, as received, in the following order of priority: (i) into the Interest Account, sums that will be equal to the interest payable on ________ 1, 20__, and thereafter, an amount equal to one-sixth of the interest due on such ___ 1 and ______ 1 next succeeding, less the credit balance, if any, of the Interest Account on such date of payment, and (ii) into the Principal Account, sums that will be equal to the principal payable on _______ 1, 202_, and thereafter, an amount equal to one-twelfth of the principal maturing or subject to Mandatory Redemption on such ________ 1 next succeeding, less the credit balance, if any, of the Bonds so maturing or being redeemed on such date. Section 4.04: Payments from the Principal and Interest Accounts of the Bond Fund. (1) Prior to each Interest Payment Date, the Trustee shall withdraw from the Interest Account of the Bond Fund an amount equal to the interest due on the Bonds on such Interest Payment Date and apply the same to the payment of said interest due. (2) Prior to each date on which any principal amount of the Bonds is to mature or, alternatively, are to be redeemed, the Trustee shall withdraw from the Principal Account of the Bond Fund an amount equal to the amount of Bonds so maturing or being redeemed, as applicable, and apply the same to the payment of such maturing principal or redemption price of Bonds being redeemed, as applicable.
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Section 4.05: Purchase of Bonds on Open Market. At any time, either before or after any Bonds may be called for prior redemption, the Authority may direct the Trustee to purchase one or more Bonds on the open market, out of any money in the Principal Account in excess of the aggregate amount then required to be on deposit in the Principal Account under the provisions of this Article IV, and, in that event, if the Trustee can so purchase any such Bond or Bonds at a price not to exceed a price approved by the Authority, it shall so purchase the same. In the event that any Bond shall be redeemed prior to maturity, or purchased by the Authority prior to maturity thereof, upon cancellation thereof, the amount of interest expressed in such Bond which would have been payable on each Interest Payment Date following cancellation to the date of maturity expressed in such Bond shall be deemed to have been deposited in the Interest Account on the fifteenth (15th) day of the month prior to such Bond Payment Date and the amount of principal of such Bond shall be deemed to have been so deposited in the Principal Account and transferred on the fifteenth (15th) day of the month prior to the expressed maturity date thereof. Section 4.06: Unclaimed Monies. Any amounts remaining in any fund or account after full payment of the Bonds, all Trustee's fees and all other amounts required to be paid under the Indenture, shall be paid to the Authority. In the event any Bonds shall not be presented for payment when the principal thereof becomes due, either at maturity, the date fixed for redemption thereof, or otherwise, if funds sufficient for the payment thereof shall have been deposited in the Bond Fund or otherwise made available to the Trustee for deposit therein, all liability of the Authority to the Owner or Owners thereof for the payment of such Bonds shall forthwith cease, terminate and be completely discharged, and thereupon it shall be the duty of the Trustee to hold such funds in a separate trust account for the benefit of the Owner or Owners of such Bonds, who shall thereafter be restricted exclusively to such funds for any claim of whatever nature on his, her or their part under this Indenture or on, or with respect to said Bond, except that the Trustee shall keep the funds invested and said investment earnings shall be available. If any Bond shall not be presented for payment within the period of five years following the date when such Bond becomes due, whether by maturity or otherwise, the Trustee shall return to the Authority the funds theretofore held by it for payment of such Bond and such Bond shall, subject to the defense of any applicable statute of limitation, thereafter be an unsecured obligation of the Authority. Section 4.07: Establishment of Bond Proceeds Fund. There is hereby established and created a Bond Proceeds Fund, which shall receive the proceeds of the Bonds. The costs and expenses of and incidental to the issuance and sale of the Bonds shall be paid to the persons entitled thereto, in the respective amounts as certified to the Trustee by the Authority in accordance with the provisions of Section 5.01 of this Indenture.
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Section 4.08: Additional Funds and Accounts. In addition to the funds and accounts specifically authorized under this Article, the Trustee shall have the authority to create and maintain such other funds and accounts as it may deem necessary for proper administration hereunder. Section 4.09: Investment of Funds. (a) Monies held in the Interest Account and the Principal Account of the Bond Fund and the Bond Proceeds Fund shall be invested and reinvested by the Trustee to the fullest extent practicable only in Authorized Investments which mature not later than such times as shall be necessary to provide monies when needed for payments to be made from the Interest Account and Principal Account of the Bond Fund. Provided, however, that the Trustee shall make such investments only in accordance with written instructions received from the Authority; and in the event timely instructions as to investment are not received, then the Trustee shall proceed with investment of such Interest Account or Principal Account of the Bond Fund and the Bond Proceeds Fund. Interest earned on investments in the Interest Account and the Principal Account shall be credited to the account wherein earned and utilized to reduce the next payment due. (b) Monies in the Revenue Fund may be invested and reinvested in Authorized Investments at the written direction of the Authority which mature not later than such times as shall be necessary to provide sufficient monies when needed for payments to be made from such fund, and in any case, monies in the Revenue Fund sufficient to meet the periodic transfers to the Bond Fund shall be available for timely transfer, and, in the event that timely instructions are not received, then the Trustee shall proceed with investment of such Revenue Fund. Interest earned on investments in the Revenue Fund shall be transferred to the Interest Account of the Bond Fund as received. (c) Monies held in the Bond Proceeds Fund shall be invested and reinvested in Authorized Investments at the direction of the Authority. Interest earned on investments in the Bond Proceeds Fund shall be transferred to the Interest Account of the Bond Fund as received. (d) Reserved. (e) Any monies held as part of any fund established hereunder shall be invested or reinvested by the Trustee in accordance with the terms hereunder. All earnings on such investments will be applied in such a manner as to meet the terms hereunder and to meet the applicable arbitrage requirements of Section 148 of the Internal Revenue Code of 1986, as amended, and the applicable regulations and rulings thereunder.
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Section 5.01: Proceeds of Sale of Bonds. All proceeds of the sale of the Bonds issued under this Indenture shall be paid to the Trustee and shall be deposited and/or disbursed as follows: FIRST: The sum of $__________ (representing the par amount of the Bonds of
$__________, less an underwriter’s discount of $______ plus accrued interest of $______) shall be deposited at closing to the Bond Proceeds Fund created by this Indenture. Accrued interest in the amount of $_____ shall be deposited to the Interest Account of the Bond Fund. Such costs and expenses of and incidental to the issuance and sale of the Bonds shall be paid to the persons entitled thereto, (i) to pay the fees and expenses incidental and necessary to the issuance of the Bonds, including legal fees, financial consultant fees, costs of issuance expenses and Trustee Bank fees and expenses, upon order of the Chairman or the Vice Chairman of the Authority in the respective amounts as certified to the Trustee by the Authority in accordance with the provisions of this Indenture; and
SECOND: The sum of $__________, which includes amounts transferred from
the funds and accounts related to the Refunded Bonds and other amounts provided by the Authority, if any, shall be deposited to the Series 2009 Bond Fund for the payment of the outstanding Series 2009 Bonds on the redemption date; and
THIRD: To transfer to the Bond Fund hereinafter created, any and all sums
remaining in the Bond Proceeds Fund after the transfers described in FIRST and SECOND hereinabove have been made.
ARTICLE VI: PARTICULAR COVENANTS OF AUTHORITY
Section 6.01: General. The Authority hereby covenants and agrees with the Trustee and with the holders of the Bonds and makes provisions which shall be a part of its contract with such holders, to the effect and with the purpose set forth in the following provisions and Sections of this Article. Section 6.02: Payment of Bonds. The Authority shall duly and punctually pay or cause to be paid the principal of every Bond and the interest thereon at the dates and places and in the manner mentioned in such Bonds according to the true intent and meaning thereof. The Trust Estate is hereby pledged to the payment of the Bonds in the manner and to the extent herein specified. Section 6.03: Payment of Lawful Charges. The Authority shall not create or suffer to be created a lien or charge on a parity with the Bonds on the Trust Estate or any part thereof or upon the revenues therefrom, except the pledge and lien created by this Indenture for the payment of the principal of and interest on the Bonds. The Authority shall not make any payments in lieu of any tax or assessment unless required by law, and shall make no payment to any person, by way of compensation or otherwise, in respect
ARTICLE V: PROCEEDS OF SALE OF BONDS
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of any tax, assessment or other charge levied on or on account of real property or other assets which are part of the Trust Estate and are owned or leased by the Authority if, by virtue of such ownership or leasehold interest, such real property or other assets shall be exempt from such tax, assessment or other charge. Section 6.04: Accounts and Audit. The Authority shall keep or cause to be kept, proper books of record and account (separate from all other records and accounts) in which complete and correct entries shall be made of its transactions relating to the Trust Estate of any part thereof, and which, together with all other books and papers of the Authority, shall at all reasonable times be subject to the inspection of the Trustee, or the Holder or Holders of any of the Bonds then Outstanding or their representatives duly authorized in writing. The Authority shall cause its books and accounts to be audited each Fiscal Year by a Certified Public Accountant, and within six months after the end of each Fiscal Year copies of the reports of such audits so made shall be furnished to the Trustee, and shall send copies hereof to the Auditor and Inspector of the State of Oklahoma and to its Beneficiary, Cleveland County. Section 6.05: Further Assurances. At any and all times the Authority shall, so far as it may be authorized by law, pass, make, do, execute, acknowledge and deliver all and every such further indentures, acts, deeds, conveyances, assignments, transfers and assurances as may be necessary or desirable for the better assuring, conveying, granting, assigning and confirming all and singular the rights, revenues and other funds hereby pledged or assigned, or intended so to be, or which the Authority may hereafter become bound to pledge or assign, or as may be reasonable and required to carry out the purposes of this Indenture. The Authority shall at all times, solely from the Trust Estate, to the extent permitted by law, defend, preserve and protect the Trust Estate and the pledge of the revenues and other funds pledged hereunder and all the rights of the Bondholders hereunder against all claims and demands of all persons whomsoever. Section 6.06: Insurance. The Authority covenants that it will carry, or cause to be carried at the Authority's expense, as long as any bonds are outstanding and to the extent available, insurance against loss covering the property included in the Trust Estate and as may be ordinarily maintained on similar property by prudent operators of property of the size and character of said Trust Estate, with responsible insurers, for the use and benefit of the Trust Estate, as certified to the Trustee, and will repair or replace any such destroyed or damaged property included in the said Trust Estate and apply the available proceeds of any such insurance for such purpose. Said insurance policy or policies shall contain a loss payable clause providing that proceeds of payment under said policy shall be payable to the Authority and to the Trustee, as their respective interests may appear. Section 6.07: Tax Covenants.
(a) The Authority covenants that it will neither make nor direct the Trustee to make any investment or other use of the proceeds of any Series of Bonds issued hereunder that would
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cause such Series of Bonds to be “arbitrage bonds” as that term is defined in Section 148(a) of the Code, that it will comply with the requirements of the Code and any regulations promulgated thereunder and the Federal Tax Certificate and Arbitrage and Use of Proceeds Certificate and Arbitrage Rebate Agreement incorporated herein throughout the term of such Series of Bonds to maintain for federal income tax purposes the tax-exempt status of all interest paid on the Bonds. The Trustee covenants that in those instances where it exercises discretion over the investment of funds, it shall not knowingly make any investment inconsistent with the foregoing covenants.
(b) Reserved.
(c) The Authority covenants that it (1) will take, or use its best efforts to require to be taken, all actions that may be required of the Authority for the interest on the Bonds to be and remain not included in gross income for federal income tax purposes, (2) will not take or authorize to be taken any actions within its control that would adversely affect that status under the provisions of the Code, and (3) will timely meet the rebate requirements of the Code, including, but not limited to, payment of any required rebates to the United States of America. Section 6.08: Continuing Disclosure. The Authority hereby covenants and agrees that it will, not later than 180 days following the end of the fiscal year (as of the date of this Indenture, June 30 is the end of the fiscal year), submit or cause the Trustee to submit to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access (EMMA), accompanied by identifying information as prescribed by the Municipal Security’s Rulemaking Board, the Authority’s audited financial information, system financial and operating information for the Authority and the Cleveland County Health Department (the “Department”) which shall include that financial and operating information customarily prepared by the Authority and the Department and which is publicly available, and to provide, in a timely manner, notice of the events, specified below, in Rule 15c2-12 promulgated by the Securities and Exchange Commission:
(1) Principal and interest payment delinquencies; (2) Non-payment related defaults, if material; (3) Unscheduled draws on debt service reserves reflecting financial difficulties; (4) Unscheduled draws on credit enhancements reflecting financial difficulties; (5) Substitution of credit or liquidity providers, or their failure to perform; (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security; (7) Modifications to rights of security holders, if material; (8) Bond calls, if material, and tender offers; (9) Defeasances; (10) Release, substitution, or sale of property securing repayment of the securities, if material; (11) Rating changes;
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(12) Bankruptcy, insolvency, receivership or similar event of the obligated person; (13) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; (14) Appointment of a successor or additional trustee or the change of name of a trustee, if material; (15) Incurrence of a financial obligation of the Authority, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the Authority, any of which affect Bondholders, if material; and (16) default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the Authority, any of which reflect financial difficulties.
The Trustee shall provide notice in writing to the Authority and the Department that such financial and operating information described above is required to be provided by such date at least 30 business days in advance of such date.
ARTICLE VII: CONCERNING THE TRUSTEE AND PAYING AGENTS
Section 7.01: Appointment of Trustee. BancFirst, Oklahoma City, Oklahoma, is hereby appointed Trustee for the Holders of the Bonds. The Trustee shall also act as registrar, transfer agent and authenticating agent in accordance with this Indenture. The Trustee shall signify its acceptance of the duties and obligations imposed upon it by this Indenture, by executing this Indenture. Section 7.02: Paying Agents; Appointment and Acceptance of Duties. The Paying Agent with respect to the Bonds shall be the Trustee. The Paying Agent shall signify acceptance of the duties and obligations imposed upon it by executing this Indenture. Section 7.03: Concerning the Trustee. The Trustee shall in no event, capacity or manner be or become liable or responsible to anyone for any loss or damage which may result from its or their failure or neglect to act, excepting only such loss or damage as may result from its negligence or willful misconduct and: (A) The Trustee shall be entitled to rely upon the advice of attorneys, professional engineers, and accountants, and any act or omission to act done or omitted by the Trustee in reliance in good faith upon such advice and counsel shall not constitute negligence; (B) The Trustee shall not be required to take notice or be deemed to have notice of any Event of Default hereunder other than as provided in Section 10.01 hereof unless such notice be given in writing by a Bondholder.
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(C) The Trustee may execute any trust or powers hereunder and perform any duties hereunder through employees, attorneys, agents or servants, and it shall be entitled to advice of counsel in regard thereto, and may receive or recover any reasonable costs or expenses in connection therewith; (D) The Trustee shall not be responsible for doing or performing any thing or act which the Authority shall have covenanted to do or perform, or for any compliance with any covenant by the Authority, or for the sufficiency of the security for the Bonds, or otherwise as to the maintenance of such security; nor shall the Trustee be bound to ascertain or inquire as to the performance of any covenant, condition, or agreement by the Authority, but it may require full information and advice in regard to any of the foregoing; (E) The Trustee shall not be accountable for the use of any Bonds authenticated or delivered, or for any of the proceeds of such Bonds after the same shall have been paid out by it; and the holders of the Bonds shall not be entitled to any interest from the Trustee on funds in its hands for payment of the same; (F) The Trustee shall not be accountable for any acts done by it upon any notice, requisition, request, consent, certificate, order, affidavit or other information believed by it to be genuine and correct and to have been signed or sent by the person proper to have done so; (G) The Trustee shall not be bound to recognize any person or persons as a Bondholder or Bondholders or to take action at his or their request, unless such Bond or Bonds shall be deposited with the Trustee or submitted to it for inspection; and any action taken by the Trustee pursuant to this Indenture upon request or authority of the Bondholders shall be conclusive and binding upon all future owners of the same Bond or any Bonds issued in exchange therefor or in place thereof; and (H) The Trustee shall, prior to an Event of Default, and after the curing of all Events of Default which may have occurred, perform such duties and only such duties as are specifically set forth in this Indenture. The Trustee shall, during the existence of any Event of Default (which has not been cured), exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under similar circumstances. Section 7.04: Compensation. The Trustee shall be entitled to receive reasonable compensation for all services rendered under this Indenture, and also to receive reimbursement for all reasonable expenses, charges, counsel fees and other disbursements, including those of its attorneys, agents, and employees, incurred in and about the performance of its powers and duties under this Indenture. The Authority further agrees, solely from the Trust Estate, to indemnify and save the Trustee harmless against any liabilities which it may incur in the exercise and performance of its powers and duties hereunder and which are not due to its negligence, misconduct or default.
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Section 7.05: Certain Permitted Acts. The Trustee may become the owner of any Bonds with the same rights it would have if it were not the Trustee. To the extent permitted by law, the Trustee may act as a depository for, and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Bondholders or to effect or aid in any reorganization resulting from or pertaining to the enforcement of the Bonds or this Indenture, whether or not such committee shall represent the holders of a majority in principal amount of the Bonds then Outstanding. Section 7.06: Resignation of Trustee. The Trustee may at any time resign and be discharged of the duties and obligations created by this Indenture by giving not less than thirty (30) days written notice to the Authority, and giving written notice thereof to each Bondholder in the manner required to redeem Bonds, specifying the date when such resignation shall take effect, and such resignation shall take effect upon the day specified in such notice unless previously a successor shall have been appointed by the Authority or the Bondholders as provided in Section 7.08 hereof, in which event such resignation shall take effect immediately on the appointment of such successor. In no event, however, shall such a resignation take effect until a successor Trustee (or temporary Trustee) has been appointed pursuant to Section 7.08 hereof. Section 7.07: Removal of Trustee. The Trustee may be removed by an instrument in writing signed by the Authority, as long as the Authority is not in default under this Indenture, and filed with the Trustee or by an instrument or concurrent instruments in writing, filed with the Trustee and the Authority, and signed by the Bondholders representing a majority in principal amount of the Bonds then Outstanding or their attorneys-in-fact duly authorized, excluding any Bonds held by or for the account of the Trustee or the Authority; provided however, that such removal shall not become effective until such time as a successor Trustee has been appointed pursuant to Section 7.08 hereof and has duly accepted its appointment. Section 7.08: Appointment of Successor Trustee; Temporary Trustee. (A) In case at any time the Trustee shall resign or shall be removed or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or if a receiver, liquidator or conservator of the Trustee, or of its property, shall be appointed, or if any public officer shall take charge or control of the Trustee, or of its property or affairs, a successor Trustee may be appointed at any time by the Bondholders representing a majority in principal amount of the Bonds then Outstanding, excluding any Bonds held by or for the account of the Trustee or the Authority, by an instrument or concurrent instruments in writing signed by such Bondholders, as applicable, or by their attorneys-in-fact duly authorized and delivered to such successor Trustee, notification thereof being given to the Authority and its predecessor; provided, nevertheless, that if a successor Trustee shall have not been appointed by the Bondholders as aforesaid, the Authority, by duly written instrument signed by its Chairman and Secretary shall forthwith
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appoint a temporary Trustee to fill such vacancy until a successor Trustee shall be appointed by the Bondholders as authorized in this Section 7.08. The Authority shall give written notice of any such appointment made by it in the manner required to redeem Bonds. Any temporary Trustee appointed by the Authority shall, immediately and without further act, be superseded by a Trustee appointed by the Bondholders. (B) If in a proper case no appointment of a successor Trustee shall be made by Bondholders pursuant to the foregoing provisions of this Section within 45 days after the Trustee shall have given to the Authority written notice as provided in Section 7.06 hereof or after a vacancy in the office of the Trustee shall have occurred by reason of its inability to act, the Trustee or the Bondholders may apply to any court of competent jurisdiction to appoint a successor Trustee. Said court may thereupon, after such notice, if any, as such court may deem proper, appoint a successor Trustee. (C) Any successor or temporary Trustee appointed under the provisions of this Section shall be a commercial bank with trust powers or trust company organized under the laws of any state of the United States, or a national banking association having capital, surplus and undivided profits aggregating at least $75,000,000, if there be such a Trustee or trust company or national banking association willing and able to accept the office on reasonable and customary terms and authorized by laws to perform all the duties imposed upon it by this Indenture. (D) The original and every successor Trustee/Paying Agent shall: (a) be a trust company or bank in good standing located in or incorporated under the laws of the State, (b) be duly authorized to exercise trust powers, (c) be subject to examination by a federal or state authority and (d) maintain a reported capital and surplus of not less than seventy-five million dollars ($75,000,000). Section 7.09: Transfer of Rights and Property to Successor Trustee. Any successor or temporary Trustee appointed under this Indenture shall execute, acknowledge and deliver to its predecessor, and to the Authority an instrument accepting such appointment, and thereupon such successor or temporary Trustee, without any further act, deed or conveyance, shall become fully vested with all monies, estates, properties, rights, powers, duties and obligations of its predecessor, with like effect as if originally named as Trustee; but the Trustee ceasing to act shall nevertheless, take all steps necessary, execute and deliver all required documents to effectively transfer to the successor Trustee, execute, acknowledge and deliver such instrument of conveyance and further assurance and do such other things as may reasonably be required to more fully and certainly vest and confirm in such successor or temporary Trustee all the right, title and interest of the predecessor Trustee in and to any property held by it under this Indenture, and shall pay over, assign and deliver to the successor or temporary Trustee any money or other property subject to the trusts and conditions herein set forth. Should any deed, conveyance or instrument in writing from the Authority be required by such successor or temporary Trustee for more fully and certainly vesting in and confirming to such successor or temporary Trustee any such estates, rights, powers and duties, all such deeds, conveyances and instruments in writing shall, on request and so far as may be authorized by law, be executed, acknowledged and delivered by the Authority.
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ARTICLE VIII: INDENTURES
Section 8.01: Supplement or Amendment Without Bondholder Consent. The Trustee and the Authority may, from time to time and at any time without the consent of the Holders of any of the Bonds, enter into indentures supplemental or amendatory hereto which, in the opinion of the Trustee (whose opinion shall be conclusive upon the Authority and the Holder of any Bond), shall not be inconsistent with the terms and provisions hereof for any of the purposes heretofore specifically authorized in this Indenture, and in addition thereto for the following purposes: (a) To cure any ambiguity or formal defect, inconsistency, or omission in this Indenture or to clarify matters or questions arising thereunder; (b) To add additional covenants and agreements of the Authority for the purpose of further securing the payment of the Bonds; (c) To confirm as further assurance any pledge of additional revenues, monies, securities or funds; (d) To effect any changes necessary in order that the rating or ratings, if any, assigned to the Bonds by Moody's or S&P shall be the best ratings obtainable with respect to such Bonds from such rating agencies; or (e) To provide for the creation of any additional funds or accounts as the Authority and the Trustee shall deem desirable for the further securing and assurance of Bonds Outstanding, or provide for such additional funds or accounts as the Authority shall deem appropriate to enhance the management and efficiency of the Authority; and (f) To maintain the tax-exempt status of the Bonds. At least thirty (30) days prior to the execution of any supplement or amendment to the Indenture for any of the purposes of this Section 8.01, the Trustee shall cause a notice of the proposed execution of such supplement or amendment to be mailed, postage prepaid, to the Bondholders of record at their addresses as shown on the bond registration books. Such notice shall briefly set forth the nature of the proposed supplement or amendment and shall state that copies thereof are on file at the principal corporate trust office of the Trustee for inspection by the Bondholders. A failure on the part of the Trustee to mail the notice required by this Section 8.01 shall not affect the validity of such supplement or amendment. Section 8.02: Supplement or Amendment upon Approval of 51% of Bondholders. The provisions of this Indenture may be supplemented or amended in any particular by the Authority and the Trustee and the Holders of not less than fifty-one percent (51%) of the
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aggregate principal amount of Bonds then Outstanding which would be adversely affected by the supplement or amendment; provided, however, that no such supplement or amendment may be adopted which decreases the percentage of Bonds required to approve a supplement or amendment, nor which permits a change in the date of payment of the principal of any Bonds or the rate or rates of interest thereon, or the creation of a lien upon the Authority's interest in the Trust Estate or a pledge of revenues superior to the lien or pledge created by this Indenture or a priority of any Bond over any other Bond, without the consent of all the Bondholders. Section 8.03: Filing and Recording. Copies of any amendatory or supplemental indenture shall be filed with the Trustee before such amendment or supplement may become effective. The Trustee shall file all necessary UCC-1 continuation statements to preserve its liens hereunder. Section 8.04: Reliance on Counsel. The Trustee shall be entitled to receive, and shall be fully protected in relying upon an opinion of counsel, who may be counsel for the Authority, as conclusive evidence that any such proposed amendatory or supplemental Indenture complies with the provisions of this Indenture, and that it is proper for the Trustee, under the provisions of this Article, to join in the execution of such amendatory or supplemental Indenture. Section 8.05: Amendment or Supplement Binding. Upon the execution of any amendatory or supplemental Indenture pursuant to the provisions of this Article, this Indenture shall be and be deemed to be supplemented, modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the Trustee, the Authority, and the Holders of the Bonds then Outstanding shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such modification and amendments.
ARTICLE IX: EVENTS OF DEFAULT AND REMEDIES OF BONDHOLDERS Section 9.01: Events of Default; Acceleration of Maturities; Remedies. (a) If one or more of the following events (herein called and defined as "Events of Default") shall happen: (1) Failure to keep the Leased Properties of the Trust Estate free and clear of
all adverse claims and demands and all liens and encumbrances whatsoever on said Trust Estate; or
(2) Failure to keep said Leased Properties in proper repair, or commit or allow
waste thereon or with respect thereto; or (3) Failure to comply with any statutes, rules or regulations with respect to or
affecting the Trust Estate and operation of the Authority; or
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(4) Failure to procure and provide the insurance required by this Indenture; or (5) Failure to make when due the payment of principal or interest and/or
applicable redemption premium on the Bonds; or (b) Should any judicial or other proceedings at any time be instituted against the Authority or the Trustee, or either of them, or the Holder of any Bond, involving any part or portion of the Trust Estate or Gross Revenues and income therefrom, or involving the validity of this Bond Indenture; or (c) Should the Trustee encounter any adverse claims or other difficulties or obstacles in endeavoring to secure for itself or themselves or the beneficiaries hereunder, the benefit of all rights, powers, priorities and privileges vested in and conferred upon the Trustee by this Bond Indenture. In the event of the occurrence of any one or more above described Events of Default, then, in those circumstances, at its sole option and discretion (after first giving the Authority Immediate Notice to comply therewith and failure of the Authority to so comply within a ten-day period), either in its own name or in the name of the Authority, the Trustee may exercise any legal remedy it may have in law or in equity, including, but not limited to any one or more of the following: (a) acceleration of maturities;; compromise or discharge any such liens, adverse claims and demands, claim or liability, and encumbrances; make any such repairs; eliminate any such waste; cause each such statute, rule or regulation to be complied with; procure and provide any such insurance; enter an appearance in and defend against any such judicial or other proceedings and file and prosecute therein such cross-petition or counterclaim as to the Trustee may deem proper; institute and prosecute all such suits and actions as may be deemed necessary, expedient or advisable to allay and remove any such adverse claim or other difficulty or obstacle, and (without limitation by virtue of the express enumeration of powers hereinabove) as it may deem proper for the protection of the Trust Estate and the Bonds, all at the Authority's expense. Upon the occurrence of any Event of Default described in Section 9.01(a) hereof, the Trustee may, and upon the written request of the holders of not less than a majority in aggregate principal amount of the Bonds then outstanding shall, by notice in writing delivered to the Authority, declare the principal of all Bonds then outstanding and the interest accrued thereon including any other indebtedness, obligations and sums secured by this Indenture, including attorney's fees, immediately due and payable, and such principal and interest shall thereupon become and be immediately due and payable. Section 9.02: Appointment of Temporary Trustee; Receivers. On the happening of an Event of Default as defined herein, or upon a default as specified herein, then, and in every such case, the Trustee or the Holders of at least 51% of the Bonds
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Outstanding hereunder may appoint a receiver or temporary trustee or trustees for the Trust Estate. Every appointment shall be in writing and shall specify the default or defaults existing under the terms of this Indenture whereby the power of appointment thereby granted is invoked, shall designate the name and person or persons to be such receiver or temporary trustee or trustees and, upon compliance with the provisions hereof, if such appointment is by the Trustee, and upon compliance with this Indenture, if such appointment is by the holders of at least 51% of the Bonds then Outstanding thereunder, the trustee so supplanted shall ipso facto cease to have any power or authority under this Bond Indenture. Any receiver, temporary trustee or trustees, who shall have been appointed by the Trustee under the terms of this Indenture may be supplanted by a receiver, temporary trustee or trustees appointed by the holders of at least 51% of the Bonds then Outstanding under this Indenture. The receiver, temporary trustee or trustees shall receive a reasonable fee for his or their services in any amount fixed by the Trustee, which may be charged by holders of at least 51% of the Bonds then Outstanding, to be paid from the Gross Revenues of the Trust Estate. In the event of any vacancy in the office or position of any receiver, temporary trustee or trustees, the permanent trustee so supplanted shall not be entitled to act as trustee under this Indenture by reason whereof, but such vacancy shall continue to exist until some person be appointed as temporary trustee under the terms of this Indenture. The written appointment of any receiver, temporary trustee or trustees hereunder shall be sent by registered mail to the County Clerk of the Beneficiary, Cleveland County. In the event of the appointment of a receiver, temporary trustee or trustees hereunder, either to supplant a permanent trustee or to supplant a temporary trustee appointment by the Trustee made by the holders of at least 51% of the Bonds then Outstanding hereunder, a copy of such appointment or appointments shall be sent by registered mail to the Trustee, as well as to the County Clerk. Upon the curing of the default or defaults pursuant to which any receiver, temporary trustee or trustees shall have been appointed under the terms of this Indenture, and if there shall not be then any default under the provisions of this Indenture, the permanent trustees of the Authority or the governing body of the County may give written notice to the Trustee of the curing of said default or defaults and of the non-existence of any other defaults hereunder; and upon the delivery of said notice to the Trustee hereunder, and its acquiescence therein, the receiver, temporary trustee or trustees appointed hereunder shall ipso facto cease to have any power or authority under this Bond Indenture and the permanent trustees of the Authority shall be reinstated as trustees under this Bond Indenture with all rights and powers to the same except as though a receiver or temporary trustee or trustees had not been appointed. Section 9.03: Waiver of Appraisement, Etc. Upon the occurrence of an Event of Default, to the extent that such rights may then lawfully be waived, neither the Authority, nor anyone claiming through or under the Authority,
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shall set up, claim, or seek to take advantage of any appraisement, valuation, stay, extension or redemption laws now or hereafter in force, in order to prevent or hinder the enforcement of this Indenture or the exercise by the Trustee of any of its rights under this Indenture with respect to the Trust Estate. Section 9.04: Insufficiency in Revenue Fund and other Funds of the Authority; Application of Monies. Anything in this Indenture to the contrary notwithstanding, if at any time the monies in the Revenue Fund and all other funds and assets of the Trust Estate received and held in regard to the Bonds (including any unspent monies in the Bond Proceeds Fund) shall not be sufficient to pay the interest on or principal of the Bonds as the same shall become due and payable (either by their terms or by acceleration), such monies, together with any monies when available or thereafter becoming available for such purpose, whether through the exercise of the remedies provided for in this Article or otherwise, shall be applied as follows: A. Unless the principal of all the Bonds shall have become or shall have been declared due and payable, all such monies shall be applied: (1) To the payment to the persons entitled thereto of all installments of interest then
due and payable in the order in which such installments became due and payable; (2) To the payment to the persons entitled thereto of the unpaid principal of any of the
Bonds which shall have become due and payable (other than the Bonds called for redemption for the payment of which monies are held pursuant to the provisions of this Indenture) in the order of their due dates (with interest on the principal amount of such Bonds due and payable);
(3) To the extent of any remaining funds following the payment in full of the amounts
required in 1 and 2 above, to the payments set forth in Section 4.03 in the same order of priority.
B. If the principal of all the Bonds shall have become or shall have been due and payable, all such monies shall be applied, after payment of all reasonable fees and expenses of the Trustee to the payment of the principal and interest then due and unpaid upon the Bonds, without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Bond over any other Bond, ratably, according to the amounts due respectively for principal and interest, to the persons entitled thereto without any discrimination or preference except as to any differences in the respective rates of interest specified in the Bonds; and C. If the principal of all the Bonds shall have been declared due and payable and if such declaration shall thereafter have been rescinded and annulled, then, subject to the provisions of paragraph (B) above, in the event that the principal of all the Bonds shall later become or be declared due and payable, the monies then remaining in and thereafter accruing to the Revenue
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Fund and all other funds held under the Indenture shall be applied in accordance with the provisions of paragraph (A) above. Whenever money is to be applied by the Trustee pursuant to the provisions of this Section, such money shall be applied by the Trustee at such times and from time to time as the Trustee in its sole discretion shall determine, having due regard to the amount of such money available for application and the likelihood of additional money becoming available for application in the future; the deposit of such money or setting aside such money in trust for the proper purpose shall incur no liability whatsoever to the Authority, to any Bondholder or to any other person for any delay in applying any such money, so long as the Trustee acts with reasonable diligence, having due regard to the circumstances, and ultimately applies the same in accordance with such provisions of this Indenture as may be applicable at the time of application by the Trustee. Whenever the Trustee shall apply such funds, it shall fix the date (which shall be an Interest Payment Date unless it shall deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such dates shall cease to accrue. Whenever all principal of, redemption premium (if any) and interest on all Bonds have been paid under the provisions of this Section and all expenses and charges of the Trustee, the Authority, then any balance remaining in such funds after payment in full of such obligations shall be paid to the Authority as provided in Section 4.06 hereof. Section 9.05: Discontinuance of Proceedings. In case any proceeding taken by the Trustee on account of any default shall have been discontinued or abandoned for any reason, then and in every such case the Authority, the Trustee and the Bondholders shall be restored to their former positions and rights hereunder, respectively, and all rights, remedies, powers and duties of the Trustee shall continue as though no proceeding had taken place. Section 9.06: Remedies not Exclusive. Upon the occurrence of an Event of Default, the Trustee may also pursue any other remedy available to it as it shall deem best, including any action or suit at law or equity to enforce the payment of the principal of, redemption premium (if any) and interest on the Bonds then outstanding, or for the specific performance of any covenant or agreement contained herein or for enforcement of the rights of the Authority, the Trustee or the Bondholders with respect to the Trust Estate or any part thereof or for the enforcement of any proper legal or equitable remedy as the Trustee shall deem most effectual to protect the rights aforesaid, insofar as the same may be authorized by law. No remedy by the terms of this Indenture conferred upon or reserved to the Trustee or the Bondholders is intended to be exclusive of any other remedy, but each and every remedy shall be cumulative and shall be in addition to every other remedy given under this Indenture or existing at law or in equity on or after the date of adoption of this Indenture. Section 9.07: Remedies Vested in Trustee. Subject to Section 9.02 and 9.03 hereof, all rights of action (including the right to file
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proof of claims) under this Indenture or under any of the Bonds may be enforced by the Trustee without possession of the Bonds and without their production in any trial or other proceedings relating thereto. Any suit or proceeding instituted by the Trustee may be brought in its name as Trustee without the necessity of joining as plaintiffs or defendants any holders of the Bonds. Section 9.08: Individual Bondholder Action Restricted No holder of any Bond shall have any right to institute any suit, action or proceeding for the enforcement of this Indenture or for the execution of any trust hereunder or for any remedy under this Indenture, unless (i) at least fifty-one percent (51%) of the aggregate principal amount of Bonds Outstanding shall have made written request to the Trustee to proceed to exercise the powers granted in this Indenture or to institute an action, suit or proceeding in its own name; and such Bondholders shall have offered the Trustee such indemnity as may be satisfactory to the Trustee, and the Trustee shall have failed or refused to exercise the powers granted in this Indenture or to institute an action, suit or proceeding in its own name for a period of fifteen (15) days after receipt of the request and offer of indemnity or (ii) no one or more Holders of Bonds shall have any right in any manner whatsoever to disturb or prejudice the security of this Indenture or to enforce any right hereunder except in the manner herein provided and then only for the equal benefit of the Holders of all Outstanding Bonds. Section 9.09: Waiver and Non-Waiver of Event of Default. A. No delay or omission of the Trustee or of any Holder of Bonds to exercise any right or power accruing upon any Event of Default shall impair the right or power or shall be construed to be a waiver of an Event of Default or an acquiescence therein. Every power and remedy given by this Article to the Trustee and to the Holders of the Bonds, respectively, may be exercised from time to time and as often as may be deemed expedient; B. The Trustee may waive any Event of Default which in its opinion shall have been remedied before the entry of final judgment or decree in any suit, action or proceeding instituted by it under the provisions of this Indenture, or before the completion of the enforcement of any other remedy under this Indenture. C. Notwithstanding anything contained in this Indenture to the contrary, the Trustee shall waive any Event of Default and its consequences, subject to Section 9.05. D. In case of a waiver by the Trustee of any Event of Default the Authority, the Trustee, and the Bondholders shall be restored to their former positions and rights under this Indenture but no waiver shall extend to any subsequent or other Event of Default or impair any right consequent thereon. The Trustee shall not be responsible to anyone for waiving or refraining from waiving any Event of Default in accordance with this Section.
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Section 10.01: Payment and Termination When the Bonds secured by this Indenture shall have become due and payable in accordance with their terms, or shall have been duly called for redemption, or irrevocable instructions to call the Bonds for redemption shall have been given by the Authority to the Trustee and the whole amount of the principal, the interest and the premium, if any, so due and payable upon all of the Bonds then Outstanding shall be paid to, or sufficient monies after consideration of investment income to be earned on such monies, shall be held by the Trustee and provisions shall also be made for paying all other sums payable under this Indenture by the Authority, then, and in that case, the right, title and interest of the Trustee shall thereupon cease, determine and become void, and the Trustee shall execute such documents to evidence such release as may be reasonably required by the Authority, and shall turn over to the Authority any surplus monies in any account other than monies needed for redemption or payment of Bonds. The release of the obligations of the Authority under this Section shall be without prejudice to the right of the Trustee to be paid reasonable compensation for all services rendered by it hereunder and all its reasonable expenses, charges and other disbursements incurred on or about the administration of the trust hereby created and the performance of its powers and duties hereunder. Notwithstanding anything to the contrary herein, the following requirements regarding defeasance shall be met as follows: (1) Defeasance shall be accomplished only with an irrevocable deposit in escrow of certain investments referred to in this section. Further substitutions of securities in the escrow are not permitted. The deposit in the escrow must be sufficient, without reinvestment, to pay all principal and interest as scheduled on the Bonds to and including the date of redemption. (2) A copy of the escrow agreement and Certified Public Accountant's certificate stating that the escrow is sufficient to meet standards of this section, together with the final Official Statement for the refunding issue (if applicable), Bond Counsel opinion, Trustee's receipt, and Trustee's certification as to the application of funds shall be furnished to the Trustee and the Authority no later than ten (10) business days subsequent to the defeasance. (3) The investments for a defeasance must consist solely of one or more of the following: (a) cash; (b) State and Local Government Series issued by the United States Treasury ("SLGS"); (c) United State Treasury bills, notes and bonds, as traded on the open market; and (d) Zero Coupon United States Treasury Bonds. Section 10.02: Provision for Payment. Bonds or interest installments for the payment or redemption of which non-callable direct obligations of, or non-prepayable obligations the payment of the principal of and interest on which are unconditionally guaranteed, by the United States of America shall have been set aside and shall be held in trust by the Trustee at maturity or a date set for redemption by the Authority shall be deemed to have been paid within the meaning and with the effect expressed in Section
ARTICLE X: DEFEASANCE
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10.01 hereof. All outstanding Bonds and all interest on such Bonds shall, prior to the maturity or redemption thereof, be deemed to have been paid within the meaning and with the effect expressed in Section 10.01 in case of any of said Bonds which are to be redeemed on any date prior to their maturity, (a) the Authority shall have given to the Trustee in form satisfactory to it irrevocable instructions to give notice of redemption of such bonds on said date; (b) there shall be government obligations the principal of and interest on which when due will provide monies which shall be sufficient to pay when due the principal of and interest due at the maturity or on the redemption date thereof, as the case may be; and (c) in the event such Bonds are not by their terms subject to redemption within the next succeeding sixty (60) days, the Authority shall have given the Trustee in form satisfactory to it irrevocable instructions to give, as soon as practicable, notice of redemption that the deposit required by (b) above has been made with the Trustee and that such Bonds and interest thereon are deemed to have been paid in accordance with this Section and stating such maturity or redemption date upon which monies are to be available for the payment of the principal of and interest on such Bonds.
ARTICLE XI: ADDITIONAL BONDS Section 11.01: General Provisions for the Issuance of Additional Bonds. So long as any of the Bonds herein authorized remain outstanding, the Authority agrees that it shall not issue additional bonds or obligations payable from the Lease Rentals, except for those Bonds required to be issued in accordance with Section 2.10, 2.11, 2.12 and 2.13 herein.
ARTICLE XII: MISCELLANEOUS Section 12.01: Covenants Run with Estate. All terms, provisions, conditions, covenants, warranties and agreements contained herein shall be binding upon the successors and assigns of the Authority and shall be deemed and considered to be covenants running with the interests affected; and all such terms, provisions, conditions, covenants, warranties and agreements shall likewise inure to the benefit of everyone who may at any time be a beneficiary hereunder. Section 12.02: Preservation and Inspection of Documents. All documents received by the Trustee under the provisions of this Indenture shall be retained in its possession and shall be subject at all reasonable times to the inspection of the Authority and any Bondholders and their agents and their representatives, any of whom may make copies thereof. Section 12.03: Parties Interested Herein. Nothing in this Indenture expressed or implied is intended or shall be construed to confer upon, or to give to, any person or corporation, other than the Authority, the Trustee and the Bondholders any right, remedy or claim under or by reason of this Indenture or any covenant, condition or stipulation thereon; and all the covenants, stipulations, promises and agreements in this Indenture contained by and on behalf of the Authority shall be for the sole and exclusive benefit of the Authority, the Trustee, and the Bondholders.
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Section 12.04: Severability of Invalid Provisions. If any one or more of the covenants or agreements provided in this Indenture on the part of the Authority or the Trustee to be performed should be contrary to law, then such covenant or covenants or agreement or agreements shall be deemed severable from the remaining covenants and agreements, and shall in no way affect the validity of the other provisions of this Indenture. Section 12.05: Successors. Whenever in this Indenture the Authority is named or referred to, it shall be deemed to include any public trust or other entity organized and existing for the benefit of and on behalf of the State, which may succeed to the principal functions and powers of the Authority, and all the covenants and agreements contained in the Authority by or in behalf of the Authority shall bind and inure to the benefit of said successor whether so expressed or not. Section 12.06: Notices. Any notice, request, complaint, demand, communication or other paper shall be sufficiently given and shall be deemed given when delivered or mailed by registered or certified mail, postage prepaid or sent by telegram to: Authority: Cleveland County Public Facilities Authority Cleveland County Court House 201 S. Jones, Norman, Oklahoma 73069 Tel: (580) 924-2202 Department: Cleveland County Health Department 424 S. Eastern Ave., Moore, Oklahoma 73160 Tel: (405) 794-1591 Fax: (405) 794-2385 Trustee: BancFirst Attn: Corporate Trust 101 N. Broadway, Oklahoma City, Oklahoma 73102 Tel: (405) 218-4645 Fax: (405) 270-4779
In case by reason of the suspension of regular mail service, it shall be impracticable to give notice by first class mail of any event to any Bondholder or the Authority when such notice is required to be given pursuant to any provisions of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be sufficient giving of such notice. The Authority, the Department, and the Trustee may, by notice pursuant to this Section, designate any different addresses to which subsequent notices, certificates or other communications shall be sent. A duplicate copy of each notice, approval, consent, request, complaint, demand or other communication given hereunder by the Issuer, the Department or the Trustee to any one of the others shall also be given to the others. For purposes of this Section
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and the definition of Immediate Notice, “electronic means” shall mean telecopy or facsimile transmission or other similar electronic means of communication which produces evidence of transmission. Notwithstanding the foregoing, notices to the Trustee shall be effective only upon receipt. Section 12.07: Counterparts. This Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 12.08: Consents of Owners of Bonds. Any consent, request, directions, approval, objection or other instrument required by this Indenture to be signed and executed by the Owners of Bonds may be in any number of concurrent documents and may be executed by such Owners of Bonds in person or by an agent appointed in writing. Proof of the execution of any such consent, request, direction, approval, objection or other instrument or of the written appointment of any such agent or of the ownership of Bonds, if made in the same manner as that of this Indenture, shall be sufficient for any of the purposes of this Indenture, and shall be conclusive in favor of Trustee with regard to any action taken by it under such request or other instrument. The fact of ownership of Bonds and the amount or amounts, numbers and other identification of such Bonds, and the date of owning the same shall be proved by the registration books of the Authority maintained pursuant to Section 2.11 hereof. Section 12.09: Limitation of Rights. With the exception of any rights herein expressly conferred, nothing expressed or mentioned in or to be implied from this Indenture or the Bonds is intended or shall be construed to give to any person or company other than the parties hereto and the Owners of the Bonds, any legal or equitable right, remedy or claim under or with respect to this Indenture and all of the covenants, conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the parties hereto and the Owners of the Bonds as herein provided. Section 12.10: Rules of Interpretation. Unless expressly indicated otherwise, references to Sections or Articles are to be construed as references to Sections or Articles of this instrument as originally executed. Use of the words "herein", "hereby", "hereunder", "hereof", "hereinabove", "hereinafter" and other equivalent words refer to this Indenture and not solely to the particular portion in which such word is used. Section 12.11: Payments due on Saturdays, Sundays and Holidays. In any case where the date of maturity of interest on or principal of the Bonds or the date fixed for purchase or redemption of any Bonds shall not be a Business Day, then payment of principal, purchase price or interest need not be made on such date but may be made on the next succeeding Business Day and with the same force and effect as if made on the date of maturity or the date fixed for purchase or redemption, and no interest shall accrue for the period after such date.
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Section 12.12: Applicable Provisions of Law. This Indenture and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with the laws of the State. Section 12.13: No Personal Liability. Notwithstanding anything to the contrary contained herein or in any of the Bonds, or in any other instrument or document executed by or on behalf of the Authority in connection herewith, no stipulation, covenant, agreement or obligation contained herein or therein shall be deemed or construed to be a stipulation, covenant, agreement or obligation of any present or future director, officer, employee or agent of the Authority, or of any trust or, member, director, trustee, officer, employee or agent or any successor to the Authority, in any such person's individual capacity, and no such person, in his individual capacity, shall be liable personally for any breach of non-observance of or for any failure to perform, fulfill or comply with any such stipulations, covenants, agreements or obligations, nor shall any recourse be had for the payment of the principal or interest on any of the Bonds or for any claim based thereon or on any such stipulation, covenant, agreement or obligation, against any such person, in his individual capacity, either directly or through the Authority or any successor to the Authority, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such person, in his individual capacity, is hereby expressly waived and released. Section 12.14: Table of Contents and Section Headings Not Controlling. The Table of Contents and headings of the several Sections of this Indenture have been prepared for convenience of reference only and shall not control, affect the meaning of, or be taken as an interpretation of any provision of this Indenture. Section 12.15: Indenture to Constitute a Contract. This Indenture, upon execution by the Authority and the Trustee shall constitute a third-party beneficiary contract by and between the Authority, the Trustee and the Holders of all the Bonds.
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SIGNATURE PAGE IN WITNESS WHEREOF, the Authority has caused this Indenture to be executed by its Chairman and attested by its Secretary and has caused the seal of the Authority to be affixed hereto, and the Trustee for itself, its successors or assigns, as Trustee, has caused this Indenture to be executed by its Authorized Officer and Trust Officer and attested by its Secretary and has caused its corporate seal to be affixed hereto all as of the day and year first above written. (SEAL) CLEVELAND COUNTY PUBLIC
FACILITIES AUTHORITY ATTEST: , Secretary Chairman (SEAL) BANCFIRST, Trustee
Authorized Officer
(Signature Page to CCPFA – Health Dept. Refunding Bond Indenture)
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ACKNOWLEDGEMENTS STATE OF OKLAHOMA ) ) COUNTY OF CLEVELAND ) I hereby acknowledge that on this ____ day of _____, 2020 personally appeared Darry Stacy, Chairman of the Cleveland County Public Facilities Authority, a public trust and affixed his signature on the foregoing instrument on behalf of the Trust. Notary Public (SEAL) My Commission Expires: STATE OF OKLAHOMA ) ) ss COUNTY OF CLEVELAND ) The foregoing instrument was acknowledged before me this ____ day of _____, 2020, by __________________________________________, Authorized Officer of BancFirst, a state banking corporation, on behalf of such banking association. Notary Public (SEAL) My Commission Expires:
(Acknowledgement Page to CCPFA – Health Dept. Refunding Bond Indenture)
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EXHIBIT A: FORM OF BOND UNITED STATES OF AMERICA STATE OF OKLAHOMA CLEVELAND COUNTY PUBLIC FACILITIES AUTHORITY LEASE REVENUE REFUNDING BONDS (CLEVELAND COUNTY HEALTH DEPARTMENT – MOORE FACILITY PROJECT) SERIES 2020 No. R-___ CUSIP: Dated Date: _____1, 2020 Maturity Date: ___________
1, _____ Interest Rate: ________% Payment Dates: ___________ 1 and ______
1, Commencing ______ 1, 202_ REGISTERED OWNER: **CEDE & CO.** PRINCIPAL AMOUNT: **______________________________________DOLLARS** The Cleveland County Public Facilities Authority (the "Issuer"), a public trust organized and existing under and pursuant to the Constitution and laws of the State of Oklahoma (the "State"), FOR VALUE RECEIVED, hereby promises (but only from the revenues, income and other monies of the Authority hereinafter specified and not otherwise) to pay to the registered owner identified above, or registered assigns, the Principal Amount specified above on the Maturity Date specified above (subject to any right of prior redemption provided for in the Indenture referred to below), the Principal Amount set forth above and to pay interest thereon from the date set forth above, or from the most recent Payment Date to which interest has been paid or duly provided for, on each Payment Date set forth above, at the applicable Interest Rate per annum set forth above until the principal hereof is duly paid or provided for. The interest so payable on any Payment Date will, subject to certain exceptions provided in the Indenture referred to below, be paid to the person in whose name this Bond is registered at the close of business on the regular record date next preceding such Payment Date (unless this Bond is registered as of an Interest Payment Date, in which event it shall bear interest from that date or unless this Bond is registered prior to the first Interest Payment Date, in which event it shall bear interest from its dated date) semi-annually on _____ 1 and ________ 1 of each year commencing on ______ 1, 2020. Principal of, premium, if any, and interest on this Bond are payable in such coin or currency of the United States of America as at the time of payment is legal tender for
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payment of private and public debts, at the principal corporate trust office of BancFirst, Oklahoma City, Oklahoma, or its successor in trust (the "Trustee"). Payment of interest alone shall be made by check or draft mailed by first class mail to the address of the person entitled thereto. This Bond is one of a duly authorized issue of Bonds of the Issuer designated as its Lease Revenue Refunding Bonds, (Cleveland County Health Department -Moore Facility Project) Series 2020, limited in aggregate principal amount to $_______ (the "Bonds"). The Bonds are issued under and are equally and ratably secured as to principal, premium, if any, and interest by a Bond Indenture dated as of March 1, 2020, (the "Indenture"), between the Issuer and the Trustee, to which Indenture and all indentures supplemental thereto (copies of which are on file at the principal corporate trust office of the Trustee) reference is hereby made for a description of the trust estate under the Indenture, the nature and extent of security, the terms and conditions upon which the Bonds are issued and secured, and the rights of the owners thereof. THE BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM PLEDGED REVENUES AND OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE. THE BONDS AND THE INTEREST THEREON DO NOT CONSTITUTE AN INDEBTEDNESS, LIABILITY, GENERAL OR MORAL OBLIGATION OR A LOAN OF THE FAITH AND CREDIT OR A CHARGE OF ANY TAXING POWER, IF ANY, OF THE AUTHORITY, THE STATE OF OKLAHOMA OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION OF THE STATE OF OKLAHOMA, AND SHALL NOT CONSTITUTE NOR GIVE RISE TO A PECUNIARY LIABILITY OF THE AUTHORITY, THE STATE OF OKLAHOMA OR ANY POLITICAL SUBDIVISION THEREOF, OR A CHARGE AGAINST THEIR GENERAL CREDIT OR TAXING POWERS. THE ISSUER HAS NO TAXING POWER. The Bonds are being issued to provide funds to the Issuer to current refund the outstanding portion of the Issuer’s $3,145,000 Public Facilities Lease Revenue Bonds (Cleveland County Health Department – Moore Facility Project) Series 2009 (the “Series 2009 Bonds” or the “Refunded Bonds”) that were issued to provide supplemental funds to finance the demolition of an existing building and construction, furnishing, and equipping of an expanded new 27,000 square foot Cleveland County Health Department Facility in Moore, Cleveland County, Oklahoma to be leased to the Cleveland County Health Department. The Bonds are being issued in the form of fully registered bonds without coupons. Redemption of the Bonds. The Bonds are subject to redemption prior to the stated maturities thereof, and shall be redeemable, upon notice as provided in the Indenture, at such times, and upon such terms as may be specified in this Bond and in the Indenture.
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Optional Redemption.
The Bonds maturing on ____________ 1, 202_, shall be subject to redemption at the option of the Authority, on at least thirty (30) days’ notice, in whole or in part in inverse order of maturity and by lot within a maturity on any date, on or after ________ 1, 202_, at par plus, in each case, accrued interest to the date fixed for redemption.
Mandatory Redemption.
The Bonds maturing on __________ 1, 202_, are subject to mandatory redemption, in part, at the principal amount thereof, on __________ 1 in each of the years below described in the principal amount as follows: Mandatory Redemption Dates Principal
Special Redemption. The Bonds are subject to redemption at the option of the Authority, in whole or in part, at any time, if such redemption is made of (a) insurance proceeds; (b) expropriation awards; (c) the proceeds of the sale of all or part of the Facility; or (d) payments received from the Authority pursuant to an Event of Default as defined in this Indenture. If such redemption is made, such redemption shall be made at the principal amount redeemed and the interest accrued thereon to the redemption date. The Bonds are subject to redemption, at the option of the Authority, in whole at any time, at the principal amounts thereof and accrued interest to the date fixed for redemption, if, as a result of any change in the Constitution of the United States of America or of the State of Oklahoma or legislative or administrative action whether State or Federal, or by final judgment in a court of competent jurisdiction after the contest thereof by the County or the Authority in good faith, wherein (i) the Indenture or the Lease Agreement becomes void, unenforceable, or impossible to perform in accordance with the intent and purpose of the parties as expressed therein or (ii) the interest on the Bonds shall become includable in the gross revenue income of the holders thereof for federal income tax purposes. Notice of Redemption. In the event any of the Bonds or portions thereof (which shall be $5,000 or an integral multiple thereof) are called for redemption as aforesaid, notice thereof identifying the Bonds or portions thereof to be redeemed will be given by the Trustee Bank by mailing a copy of the redemption notice by first class mail (postage prepaid) not less than 30 days prior to the date fixed for redemption to the registered owner of each Bond to be redeemed in whole or in part at the address shown on the registration books of the Trustee. All Bonds so called for redemption will cease to bear interest after the specified redemption date provided funds for their redemption are on deposit at the place of payment at that time.
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Additional Provisions.
The registered owner of this Bond shall have no right to enforce the provisions of the Indenture or to institute action to enforce the covenants therein, or to take any action with respect to any event of default thereunder, or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the Indenture. Modifications or alterations of the Indenture or of any indenture supplemental thereto may be made only to the extent and in the circumstances permitted by the Indenture. Transfer of Bonds (a) Any Bond may, in accordance with its terms, be transferred, upon the books required to be kept pursuant to the provisions hereof, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a written instrument of transfer in a form approved by the Trustee, duly executed. (b) Whenever any Bond or Bonds shall be surrendered for transfer, the Authority shall execute and the Trustee authenticate and deliver a new Bond or Bonds, for like aggregate principal amount, interest rate and maturity date. The Trustee shall require the payment by the Bondholder requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer. (c) The Authority shall not be required: (i) to transfer any Bond after the fifteenth (15th) day of the month next preceding an Interest Payment Date on the Bonds or during the fifteen (15) days next preceding the date of giving notice of such redemption, or (ii) to register the transfer of any Bond so selected for redemption in whole or in part, except the unredeemed portion of the Bonds being redeemed in part. (d) The Authority and the Trustee may deem and treat the person in whose name any Outstanding Bond shall be registered upon the registration books of the Authority as the absolute owner of such Bond, whether such Bond shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal and redemption premium, if any, of and interest on such Bond and for all other purposes, and all such payments so made to any such registered owner or upon his order shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid, and neither the Authority nor the Trustee shall be affected by any notice to the contrary. The Authority agrees to the extent of the Trust Estate to indemnify and save the Trustee harmless from and against any and all loss, cost, charge, expense, judgment or liability incurred by it, acting in good faith and without negligence under this Indenture, in so treating any such registered owner.
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Exchange of Bonds. Bonds may be exchanged at the principal office of the Trustee for a like aggregate principal amount of Bonds of the same series and maturity of other authorized denominations. The Trustee shall require the payment by the Bondholder requesting such exchange of any tax, fee or other governmental charge required to be paid with respect to such exchange. The Authority shall not be obligated to make any such exchange of Bonds after the fifteenth (15th) day of the month next preceding an Interest Payment Date on the Bonds or, in the case of any proposed redemption of Bonds, during the fifteen (15) days next preceding the date of giving notice of such redemption.
Bond Registration Books, Regulations with Respect to Exchanges and Transfers The Trustee will keep or cause to be kept, at its principal office, sufficient books for the registration and transfer of the Bonds, which shall at all times be open to inspection by the Authority; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as they may prescribe, register or transfer or cause to be registered or transferred, on said books, Bonds as hereinbefore provided. In all cases in which the privilege of exchanging Bonds or transferring Bonds is exercised, the Authority shall execute, and the Trustee shall authenticate, register and deliver Bonds in accordance with the provisions of this Indenture. All Bonds surrendered in any such exchanges or transfers shall forthwith be shown cancelled on the books of the Trustee. Temporary Bonds. The definitive Bonds shall be fully engraved (as that term is customarily used) or lithographed or printed in the form prescribed by Section 2.04 of this Indenture. (a) Until the definitive Bonds are prepared, the Authority may execute, in the same manner as is provided in Section 2.03 hereof, and, upon the written request of the Authority, the Trustee shall authenticate and deliver, in lieu of definitive Bonds, to the extent authorized by law, one or more temporary Bonds subject to the same provisions, limitations and conditions as, and substantially of the tenor of, such definitive Bonds; provided, however, that such temporary Bonds may be in denominations of $5,000 or any multiples of $5,000, may provide for such rights of exchange or registration as may be stated therein, and may have such omissions, insertions and variations as may be appropriate for temporary Bonds. The Authority at its own expense shall prepare and execute and, upon the surrender at the principal office of the Trustee of such temporary Bonds for exchange and the cancellation of such temporary Bonds, the Trustee shall authenticate and, without charge to the Holder thereof, deliver in exchange therefor, definitive Bonds, of the same aggregate principal amount and series and maturity as the temporary Bonds surrendered. Until so exchanged, the temporary Bonds shall in all respects be entitled to the same benefits and security as definitive Bonds authenticated and issued pursuant to this Indenture.
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(b) If the Authority shall authorize the issuance of temporary Bonds in more than one denomination, the Holder of any temporary Bond or Bonds may, at his option, surrender the same to the Trustee in exchange for another temporary Bond or Bonds of like aggregate principal amount and maturity of any other authorized denomination or denominations, and thereupon the Authority shall execute and the Trustee shall authenticate and, in exchange for the temporary Bond or Bonds so surrendered and upon payment of the taxes, fees and charges provided for in Section 2.10, shall deliver a temporary Bond or Bonds of like aggregate principal amount and maturity in such other authorized denomination or denominations as shall be requested by such Holder. (c) All temporary Bonds surrendered in exchange either for another temporary Bond or Bonds or for a definitive Bond or Bonds shall be forthwith cancelled by the Trustee.
Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Authority at the expense of the Holder of such Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor and number in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be cancelled by it and delivered to, or upon the order of, the Authority. If any Bond issued hereunder shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Authority and the Trustee and, if such evidence be satisfactory to the Trustee and indemnity of the Authority and the Trustee in form satisfactory to the Trustee shall be given, the Authority at the expense of the Holder, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor and number in lieu of and in substitution for the Bond so lost, destroyed or stolen (or if any such Bond shall have matured or shall be about to mature, instead of issuing a substitute Bond the Trustee may pay the same without surrender thereof). Any Bond issued under the provisions of this Section in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an additional contractual obligation of the Authority, and shall be equally and proportionately entitled to the benefits of the Indenture with all other Bonds secured by this Indenture. Neither the Authority nor the Trustee shall be required to treat both the original Bond and any substitute Bond as being "Outstanding" for the purpose of determining the principal amount of Bonds which may be issued hereunder or for the purpose of determining any percentage of Bonds Outstanding hereunder, but both the original and substitute Bond shall be treated as one and the same. This Bond may be exchanged, and its transfer may be registered, by the registered owner hereof in person or by his attorney duly authorized in writing at the principal office of the Paying Agent, but only in the manner and subject to the limitations set forth in the Indenture and upon payment of a charge to reimburse the Trustee for any tax, fee or other governmental charge required to be paid with respect to such transfer or exchange, and upon surrender and cancellation of this Bond. Upon exchange or registration of such transfer, a new registered Bond or Bonds of equal aggregate principal amount of the same maturity and interest rate and of any authorized denomination or denominations will be issued in exchange therefor.
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The person in whose name this Bond shall be registered shall be deemed and regarded as the absolute Owner thereof for all purposes, and payment of principal, premium, if any, or interest of this Bond shall be made only to the registered owner thereof, his registered assigns or his legal representative, but such registration may be changed as provided in the Indenture. All such payments shall be valid and effectual to satisfy and discharge the liability upon this Bond to the extent of the sum or sums paid. The Bonds are issuable only as registered without coupons in denominations of $5,000 principal amount and any integral multiple thereof. The principal hereof may be declared or may become due on the conditions, in the manner and at the times set forth in the Indenture upon the occurrence of an Event of Default, as provided in the Indenture. It is hereby certified, recited and declared that all acts, conditions and things required to exist, happen and be performed precedent to and in the execution and delivery of the Indenture and the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law and that the issuance of this Bond, together with all other obligations of the Authority, does not exceed or violate any constitutional or statutory limitation. The Bond shall not be entitled to any benefit under the Indenture or become valid or obligatory for any purpose until such Bond shall have been authenticated by the Certificate of the Trustee endorsed hereon.
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IN WITNESS WHEREOF, the Authority has caused this Bond to be duly executed in its name by the signature of its Chairman, and attested by the signature of its Secretary, all as of ______ 1, 2020. CLEVELAND COUNTY PUBLIC FACILITIES AUTHORITY By:
Chairman Attest: Secretary CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds of the issue described in the within mentioned Indenture. BANCFIRST, OKLAHOMA CITY, OKLAHOMA By:
Authorized Officer Authentication Date:
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EXHIBIT B: LEGAL DESCRIPTION
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.
EXHIBIT B
AMENDED AND RESTATED LEASE AGREEMENT
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.
FORM OF AMENDED AND RESTATED LEASE AGREEMENT Between CLEVELAND COUNTY PUBLIC FACILITIES AUTHORITY As Lessor And THE BOARD OF COUNTY COMMISSIONERS OF CLEVELAND COUNTY ON BEHALF OF THE CLEVELAND COUNTY HEALTH DEPARTMENT as Lessee Dated March 1, 2020 ALL OF THE RIGHT, TITLE AND INTEREST OF CLEVELAND COUNTY PUBLIC FACILITIES AUTHORITY UNDER THIS AMENDED AND RESTATED LEASE AGREEMENT IN AND TO ALL PAYMENTS OF RENTAL AND ADDITIONAL RENT HAVE BEEN ASSIGNED TO BANCFIRST, OKLAHOMA CITY, OKLAHOMA, AS TRUSTEE FOR THE $________ CLEVELAND COUNTY PUBLIC FACILITIES AUTHORITY LEASE REVENUE REFUNDING BONDS (CLEVELAND COUNTY HEALTH DEPARTMENT – MOORE FACILITY PROJECT), SERIES 2020.
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CLEVELAND COUNTY PUBLIC FACILITIES AUTHORITY
AMENDED AND RESTATED LEASE AGREEMENT THIS AMENDED AND RESTATED LEASE AGREEMENT (hereinafter together with any amendments hereto, called "Lease" or "Agreement"), dated as of March 1, 2020, by and between CLEVELAND COUNTY PUBLIC FACILITIES AUTHORITY, a public trust organized and existing under the laws of the State of Oklahoma (together with its successors and assigns, "Lessor") and THE BOARD OF COUNTY COMMISSIONERS OF CLEVELAND COUNTY ON BEHALF OF THE CLEVELAND COUNTY HEALTH DEPARTMENT, a duly organized and existing subdivision of the State of Oklahoma (together with its successors, "Lessee").
Table of Contents ARTICLE I: DEFINITIONS AND RULES OF CONSTRUCTION .................................................. 5
Section 1.1: Definitions of Words and Terms. ......................................................................... 5 Section 1.2: Rules of Construction. .......................................................................................... 5
ARTICLE II: REPRESENTATIONS ................................................................................................... 6 Section 2.1: Representations and Covenants by Lessee. .......................................................... 6 Section 2.2: Representations and Covenants by Lessor. .......................................................... 7
ARTICLE III: GRANTING PROVISIONS; TERM ............................................................................ 8 Section 3.1: Granting of Leasehold. ......................................................................................... 8 Section 3.2: Lease Term. .......................................................................................................... 9 Section 3.3: Nonappropriation. ................................................................................................. 9 Section 3.4: Use of Premises. ................................................................................................. 10
ARTICLE IV: PROVISIONS FOR PAYMENT OF RENTALS ...................................................... 10 Section 4.1: Rentals. ............................................................................................................... 10 Section 4.2: Additional Rents. ................................................................................................ 10 Section 4.3: Rentals and Additional Rent Constitute Current Expense. ............................... 10 Section 4.4: Rentals and Additional Rent Payable Without Abatement or Set-Off;
Lessee's Obligations. .................................................................................................. 11 Section 4.5: Prepayment of Rentals. ....................................................................................... 11 Section 4.6: Transfer of Funds to Paying Agent. ................................................................... 11
ARTICLE V: REFUNDING OF THE SERIES 2009 BONDS ......................................................... 12 ARTICLE VI: IMPOSITIONS ........................................................................................................... 12
Section 6.1: Impositions. ........................................................................................................ 12 Section 6.2: Contest of Impositions. ....................................................................................... 12
ARTICLE VII: INSURANCE; INDEMNITY ................................................................................... 12 Section 7.1: Insurance Required. ............................................................................................ 12
ARTICLE VIII: ASSIGNMENT AND SUBLEASING .................................................................... 14 Section 8.1: Assignment by Lessor. ....................................................................................... 14
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Section 8.2: Assignment and Subleasing by Lessee............................................................... 14 ARTICLE IX: MAINTENANCE, REPAIRS AND MODIFICATIONS; OPERATION ................ 14
Section 9.1: Maintenance, Repairs and Modifications. ......................................................... 14 Section 9.2: Liens. ................................................................................................................... 15
ARTICLE X: LESSEE'S OPTION TO EXTEND LEASE TERM ................................................... 15 Section 10.1: Option to Extend Original Term. ..................................................................... 15
ARTICLE XI: DAMAGE, DESTRUCTION AND CONDEMNATION; USE OF NET PROCEEDS ............................................................................................................................ 16 Section 11.1: Damage, Destruction and Condemnation. ....................................................... 16 Section 11.2: Division of Award: ........................................................................................... 16
11.2.1: Partial Condemnation. .................................................................................... 16 11.2.2: Total Condemnation. ...................................................................................... 16
Section 11.3: Cooperation Between Parties. .......................................................................... 17 Section 11.4: Notice of Condemnation. ................................................................................. 17 Section 11.5: Condemnation Sale........................................................................................... 17
ARTICLE XII: DEFAULT PROVISIONS ........................................................................................ 17 Section 12.1: “Events of Default” Defined. ........................................................................... 17 Section 12.2: Remedies. ......................................................................................................... 18 Section 12.3: Continuing Obligation. ..................................................................................... 18 Section 12.4: Attorney’s Fees. ................................................................................................ 18 Section 12.5: No Remedy Exclusive. ..................................................................................... 19 Section 12.6: No Additional Waiver Implied by One Waiver. .............................................. 19
ARTICLE XIII: NOTICES ................................................................................................................. 19 Section 13.1: Notices. ............................................................................................................. 19
ARTICLE XIV: AMENDMENTS, CHANGES AND MODIFICATIONS ..................................... 20 Section 14.1: Amendments, Changes and Modifications. ..................................................... 20
ARTICLE XV: RETENTION OF TITLE TO FACILITIES; GRANT OF EASEMENTS; QUIET ENJOYMENT COVENANT. ................................................................................... 20 Section 15.1: Retention of Title to Facilities. ......................................................................... 20 Section 15.2: Grant of Easements........................................................................................... 20 Section 15.3: Quiet Enjoyment. .............................................................................................. 20
ARTICLE XVI: MISCELLANEOUS ................................................................................................ 20 Section 16.1: Maintenance of Tax Exemption. ...................................................................... 20 Section 16.2: Access to Premises. .......................................................................................... 21 Section 16.3: Release and Indemnification. ........................................................................... 21 Section 16.4: References to Lessor. ........................................................................................ 21 Section 16.5: Binding Effect. .................................................................................................. 21 Section 16.6: Force Majeure. .................................................................................................. 21 Section 16.7: Indenture. .......................................................................................................... 22 Section 16.8: Laws, Rules, and Regulations. ......................................................................... 22 Section 16.9: Holding Over by Lessee. .................................................................................. 22 Section 16.10: Section and Article Headings. ........................................................................ 22 Section 16.11: Execution of Counterparts. ............................................................................. 22
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Section 16.12: Construction and Enforcement. ...................................................................... 22 Section 16.13: Severability. .................................................................................................... 22 Section 16.14: Complete Agreement. ..................................................................................... 22 Section 16.15: Accounting Terms. ......................................................................................... 23 Section 16.16: Time is of the Essence. ................................................................................... 23 Section 16.17: Invalidity of Provision or Part Thereof. ......................................................... 23 Section 16.18: No Waiver of Rights....................................................................................... 23 Section 16.19: Rights are Cumulative. ................................................................................... 23 Section 16.20: Provisions are Binding Upon Assigns and are Real Covenants. ................... 23
ACKNOWLEDGEMENTS ................................................................................................................ 25 SCHEDULE 1: THE FACILITY SITE .............................................................................................. 26 EXHIBIT A TO LEASE AGREEMENT: RENTAL PAYMENT SCHEDULE .............................. 27
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RECITALS WHEREAS, Lessor and Lessee previously entered into a lease agreement dated September 1, 2009 (the “Original Lease”), covering a 27,000 square foot building and related improvements and support facilities on the real property described in Schedule 1 hereto for the purpose of supplying administrative space and facilities for the Cleveland County Health Department (the "Facility"); and WHEREAS, in order to facilitate the construction of the Facility, the Authority issued its Cleveland County Public Facilities Authority Lease Revenue Bonds (Cleveland County Health Department – Moore Facility Project) Series 2009, in the aggregate principal amount of $3,145,000 (the “Series 2009 Bonds”) and WHEREAS, Lessor desire to issue its Lease Revenue Refunding Bonds (Cleveland County Health Department – Moore Facility Project) Series 2020 in order to currently refund the outstanding portion of the Authority’s Series 2009 Bonds and pay costs of issuance related thereto (the “Bonds”); and WHEREAS, the Lessor will enter into a Bond Indenture dated as of March 1, 2020, with BancFirst, Oklahoma City, Oklahoma, a state banking corporation, regarding the issuance of the Bonds (the “Bond Indenture”) to provide the funds to currently refund the outstanding portion of the Series 2009 Bonds, and pay costs of issuance of the Bonds (the “Project); and WHEREAS, Lessor desires to amend and restate the Original Lease by which the Facility is leased to Lessee for the rentals and upon the terms and conditions hereinafter set forth, and WHEREAS, Lessee, pursuant to the foregoing proposals of Lessor, desires to amend and restate the Original Lease of the Facility from Lessor, for the rentals and upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein set forth, Lessor and Lessee do hereby covenant and agree as follows:
ARTICLE I: DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1: Definitions of Words and Terms. In addition to words and terms defined herein, the words and terms as used in this Lease shall have the same meaning as defined in the Bond Indenture, unless some other meaning is plainly intended:
Section 1.2: Rules of Construction. Words of the masculine gender shall be deemed and construed to include correlative words
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of the feminine and neuter genders. Unless the context shall otherwise indicate, the words importing the singular number shall include the plural and vice versa, and words importing person shall include firms, associations and corporations, including public bodies, as well as natural persons. The words "herein", "hereby", "hereunder", "hereof", "hereto", "hereinbefore", "hereinafter" and other equivalent words refer to this Lease and not solely to the particular article, section, paragraph or subparagraph hereof in which such word is used. Reference herein to a particular article or a particular section shall be construed to be a reference to the specified article or section hereof unless the context or use clearly indicates another or different meaning or intent. Whenever an item or items are listed after the word "including", such listing is not intended to be a listing that excludes items not listed.
ARTICLE II: REPRESENTATIONS
Section 2.1: Representations and Covenants by Lessee. Lessee represents, warrants and covenants as follows: (a) Lessee is a duly organized and existing subdivision of the State of
Oklahoma, with full power and authority to enter into this Agreement and the transactions contemplated hereby and to perform all of its obligations hereunder;
(b) The lease of the Facility by Lessor to Lessee, as provided in this Lease, is
necessary, desirable and in the public interest, and Lessee hereby declares its current need for the Facility;
(c) Lessee has full power and authority to enter into the transactions
contemplated by this Lease and to carry out its obligations hereunder; (d) Lessee has duly authorized the execution and delivery of this Lease by
proper action by its governing body at a meeting duly called, regularly convened and attended throughout by the requisite majority of the members thereof or by other appropriate official approval, and all requirements have been met and procedures have occurred in order to ensure the validity and enforceability of this Lease;
(e) Neither the execution and delivery of this Lease, nor the fulfillment of or
compliance with the terms and conditions hereof, nor the consummation of the transactions contemplated hereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any agreement or instrument to which Lessee is a party or by which Lessee is bound;
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(f) There is no proceeding pending or threatened in any court or before any
governmental authority or arbitration board or tribunal challenging the validity of the authorization or the power or authority of Lessee to enter into this Lease or the validity or enforceability hereof or thereof or which, if adversely determined, would adversely affect the transactions contemplated hereby or the interest of Lessor or its assigns under this Lease;
(g) Lessee has not made, done, executed or suffered, and warrants that it will
not make, do, execute or suffer, any act or thing whereby Lessee's interest in any property now or hereafter included in the Facility shall be or may be impaired, changed or encumbered in any manner whatsoever, except as contemplated by this Lease;
(h) No event or condition that constitutes, or with the giving of notice or the
lapse of time or both would constitute, an Event of Default exists at the date hereof; (i) Lessee will do or cause to be done all things necessary to preserve and keep
in full force and effect its existence as a body corporate and politic; (j) Lessee is not aware of any public bidding requirements applicable to this
Lease and the Facility that have not been met; (k) During the Lease Term, the Facility will be used by Lessee only for the
purpose of performing essential governmental or proprietary functions of Lessee consistent with the permissible scope of Lessee's authority;
(l) Lessee will annually provide Lessor with proofs of appropriation for the
ensuing budget year and such other financial information relating to the ability of Lessee to continue this Lease as may be requested by Lessor;
Section 2.2: Representations and Covenants by Lessor. Lessor represents, warrants and covenants as follows: (a) Lessor has full power and authority to enter into the transaction
contemplated by this Lease and the Bond Indenture, and to carry out its obligations hereunder and thereunder;
(b) Lessor has duly authorized the execution and delivery of this Lease and the
Bond Indenture by proper action by its governing body at a meeting duly called, regularly convened and attended throughout by the requisite majority of the members thereof or by other appropriate official approval, and all requirements have been met and procedures have occurred in order to ensure the validity and enforceability of this Lease and the Bond Indenture;
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(c) Neither the execution and delivery of this Lease and the Bond Indenture, nor
the fulfillment of or compliance with the terms and conditions hereof or thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any agreement or instrument to which Lessor is a party or by which Lessor is bound;
(d) There is no proceeding pending or threatened in any court or before any
governmental authority or arbitration board or tribunal challenging the validity of the authorization or the power or authority of Lessor to enter into this Lease or the Bond Indenture or the validity or enforceability hereof or thereof or which, if adversely determined, would adversely affect the transactions contemplated hereby or thereby or the interest of Lessor or its assigns under this Lease;
(e) Lessor has not made, done, executed or suffered, and warrants that it will not
make, do, execute or suffer, any act or thing whereby Lessor's interests in any property now or hereafter included in the Facility shall be or may be impaired, changed or encumbered in any manner whatsoever, except as contemplated by this Lease;
(f) Lessor will do or cause to be done all things necessary to preserve and keep
in full force and effect its existence as a body corporate and politic; (g) Lessor has complied with such public bidding requirements as may be
applicable to this Lease and the acquisition and construction of the Facility; and (h) Lessor will use or cause to be used the proceeds of this Lease as soon as
practicable and with all reasonable dispatch for the purpose for which this Lease has been executed and delivered. No part of the proceeds of this Lease shall be invested in any securities, obligations or other investments or used, at any time, directly or indirectly, in a manner which, if such use had been reasonably anticipated on the date of issuance of this Lease, would have caused any portion of this Lease to be or become "arbitrage bonds" within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”) and the applicable regulations of the Treasury Department.
(i) Lessor will comply with all applicable provisions of the Code and the
applicable regulations of the Treasury Department to maintain the exclusion of the interest components of Rental Payments from gross income for purposes of federal income taxation; and
ARTICLE III: GRANTING PROVISIONS; TERM
Section 3.1: Granting of Leasehold. Lessor, by these presents, hereby rents, leases and lets the Facility unto the Lessee, and
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Lessee hereby rents, leases and hires the Facility from Lessor for the rentals (herein, collectively, the "Rentals" or the "Rental Payment") and subject to the terms and conditions hereafter set forth.
Section 3.2: Lease Term. The Original Term (the "Original Term") shall commence on March 1, 2020, and shall terminate on June 30, 2020, the last day of Lessee's current Fiscal Year. The Lease Term may be continued, at the option of Lessee, at the end of the Original Term or any renewal term, for an additional one year (the “Renewal Term”) (the “Original Term and the “Renewal Term” together, the “Lease Term”); provided that the final Renewal Term shall not extend beyond June 30, 2030. Lessee shall have the option to extend the Lease Term beyond the final Renewal Term under an option to renew for each Fiscal Year subsequent as provided in Section 10.1. Lessee shall be deemed to have exercised its option to continue this Lease for the next Renewal Term pursuant to Section 10.1 unless Lessee shall have terminated this Lease pursuant to Section 3.3. The terms and conditions during any Renewal Term shall be the same as the terms and conditions during the Original Term as provided on Exhibit "A" hereto. The Lessee hereby agrees to pay as rent from monies legally available to the Authority (or such other person as the Lessor may designate as provided in Section 4.6 hereof), on or before the 15th day of August, 2020, and annually thereafter on each August 15 to and including the 15th of August, 2029, in the annual amounts as set forth in Exhibit A hereto (the “Rental Payment Date”). The Rental Payments will begin August 15, 2020. Lessee intends, subject to the provisions of Section 3.3, to continue this Lease through the Original Term and all Renewal Terms and to pay the Rentals and Additional Rentals hereunder. Lessee shall annually budget and appropriate funds sufficient to pay on an annual basis all rental payments and additional rentals, as required, during the Original Term and each of the Renewal Terms. The responsible financial officer of Lessee shall do all things lawfully within his power to obtain and maintain funds from which the Rentals and Additional Rentals may be made, including making provision for such Rentals and Additional Rentals in each proposed annual budget submitted for approval in accordance with applicable procedures of Lessee and to exhaust all available reviews and appeals in the event such portion of the budget is not approved. Notwithstanding the foregoing, the decision to budget and appropriate funds or to extend this Lease for any Renewal Term is to be made in accordance with Lessee's normal procedures for such decisions, and the then current governing body of Lessee will have the final responsibility for that decision.
Section 3.3: Nonappropriation. Lessee is obligated only to pay such Rental Payments and Additional Rentals under this Lease as may lawfully be made from funds budgeted and appropriated for that purpose during Lessee's then current budget year. Should Lessee fail to budget, appropriate or otherwise make available funds to pay Rental Payments and Additional Rentals following the then current Original Term or Renewal Term, this Lease shall not be renewed and shall terminate at the end of the then current Original Term or Renewal Term. Lessee agrees to deliver notice to Lessor of such failure to
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appropriate at least sixty (60) days prior to the end of the then current Original Term or Renewal Term, but failure to give such notice shall not extend the term beyond such Original Term or Renewal Term.
Section 3.4: Use of Premises. Lessee shall have the right to use the Facilities for any essential governmental or proprietary purpose of Lessee, subject to the limitations contained in this Lease.
ARTICLE IV: PROVISIONS FOR PAYMENT OF RENTALS
Section 4.1: Rentals. Rental Payments shall be due, exclusively from legally available funds, in lawful money of the United States of America to Lessor on each Rental Payment Date, in such amounts as are described on Exhibit "A" hereto. Lessee shall pay Lessor a charge on any Rental Payment not paid on the date such payment is due at the maximum amount permitted by law, whichever is less, from such date. A portion of each Rental Payment is paid as, and represents payment of, interest, as set forth on Exhibit "A".
Section 4.2: Additional Rents. Lessee shall pay, subject to the provisions of Sections 3.2 and 3.3, as Additional Rent all expenses, including attorney fees, incurred in connection with the enforcement of any rights under this Lease by Lessor. Amounts required to be paid under this Section shall be paid directly to the fund, person or entity owed. Additional Rent shall also include:
(i) ad valorem taxes, assessments or payment in lieu of taxes, if any; (ii) Lessor’s Authority Program administrative fee of 1/8 of 1% of the amount of the
outstanding principal on the Bonds as of each annual anniversary date of this Lease and Trustee annual fees and expenses;
(iii) any sums which the Lessor shall be obligated to pay pursuant to the terms of the
Bond Indenture;
(iv) any sums expended by the Lessor or Trustee to insure the Facility on Lessee’s failure to maintain insurance in accordance with this Lease; and
(v) amounts to be rebated to the Federal government, if any and costs of performing
rebate calculations and opinions related thereto; (collectively, the “Additional Rents”)
Section 4.3: Rentals and Additional Rent Constitute Current Expense. The obligation of Lessee to pay the Rentals and the Additional Rent and other amounts
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payable hereunder is subject to the provisions of Section 3.3, constitutes a current expense of Lessee and does not constitute a general obligation or indebtedness of Lessee for which Lessee is obligated to levy or pledge any form of taxation or for which Lessee has levied or pledged any form of taxation; such obligation shall not be construed to be a debt of Lessee in contravention of any applicable constitutional or statutory limitation or requirement, but in each Fiscal Year shall be payable solely from the amounts budgeted or appropriated therefor out of the income and revenue provided for such Fiscal Year, any proceeds of the Facility and the Net Proceeds of any insurance or condemnation awards.
Section 4.4: Rentals and Additional Rent Payable Without Abatement or Set-Off; Lessee's Obligations. Subject to the provisions of Section 3.3, Lessee covenants and agrees that all payments of Rentals and Additional Rent shall be made by Lessee on or before the date the same become due, and Lessee shall perform all of its other obligations, covenants and agreements hereunder (including the obligation to pay Rentals and Additional Rent) without notice or demand and without abatement, deduction, setoff, counterclaim, recoupment or defense or any right of termination or cancellation arising from any circumstance whatsoever, whether now existing or hereafter arising. Nothing in this Lease shall be construed as a waiver by Lessee of any rights or claims Lessee may have against Lessor under this Lease or otherwise, but any recovery upon such rights and claims shall be from Lessor separately, it being the intent of this Lease that Lessee shall be unconditionally and absolutely obligated to perform fully all of its obligations, agreements and covenants under this Lease, including its obligation to pay Rentals and Additional Rent. Lessee may, however, at its own cost and expense and in its own name or in the name of Lessor, prosecute or defend any action or proceeding or take any other action involving third persons which Lessee deems reasonably necessary in order to secure or protect its right of possession, occupancy and use hereunder, and in such event Lessor hereby agrees to cooperate fully with Lessee and to take all action necessary to effect the substitution of Lessee for Lessor in any such action or proceeding if Lessee shall so request.
Section 4.5: Prepayment of Rentals. Lessee may at any time prepay all or any part of the Rentals provided for hereunder.
Section 4.6: Transfer of Funds to Paying Agent. BancFirst, Oklahoma City, Oklahoma, is hereby designated as Paying Agent for Rental Payments under this Lease. The Lessor hereby agrees to direct that all Rental Payments be made by the Lessee direct to the Trustee, and in any case, not less than one business day subsequent to each Rental Payment Date Lessor shall, from moneys transferred by Lessee to Lessor pursuant to Section 4.1. forward to the Paying Agent such Rental Payment for deposit in the Revenue Fund. The Paying Agent will hold all such moneys received by it hereunder in trust and shall make Rental Payments all in accordance with the Bond Indenture.
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ARTICLE V: REFUNDING OF THE SERIES 2009 BONDS
Section 5.1: Refunding of the Series 2009 Bonds The proceeds of the Bonds shall be used to currently refund the outstanding portion of the Series 2009 Bonds and to pay costs of issuance of the Bonds in accordance with the Bond Indenture.
ARTICLE VI: IMPOSITIONS
Section 6.1: Impositions. The Lessee shall pay and discharge, before the delinquency thereof, all taxes and assessments, general and special, if any, which may be lawfully taxed, charged, levied, assessed or imposed upon or against or be payable for or in respect of the Facility, including any taxes and assessments not of the kind enumerated above to the extent that the same are lawfully made, levied or assessed in lieu of or in addition to taxes or assessments now customarily levied against real or personal property, and further including all water and sewer charges, assessments and other general governmental charges and impositions whatsoever, foreseen or unforeseen, which if not paid when due would impair the security of Lessor or encumber the Facility (all of the foregoing being herein referred to as "Impositions"). Upon receiving notice of any Imposition, Lessee shall immediately notify Lessor of the same and shall provide Lessor with relevant invoices, bills or other evidence of such Imposition.
Section 6.2: Contest of Impositions. Lessee and Lessor shall each have the right, in its own name or in the other party's name, to contest the validity or amount of any Imposition which is required to be paid and discharged pursuant to the terms of this Article by appropriate legal proceedings instituted at least ten (10) days before the Imposition complained of becomes delinquent and may permit the Imposition so contested to remain unpaid during the period of such contest and any appeal therefrom unless the noncontesting party shall notify the contesting party that, in the opinion of Counsel, by nonpayment of any such items the interest of the noncontesting party in the Facility will be materially endangered or the Facility or any part thereof will be subject to loss or forfeiture, in which event the contesting party shall promptly pay such taxes, assessments or charges or provide the noncontesting party with full security against any loss which may result from nonpayment, in form satisfactory to the noncontesting party. Lessor and Lessee each agrees to cooperate with the other in connection with any and all administrative or judicial proceedings related to Impositions. The contesting party shall hold the noncontesting party whole and harmless from any costs and expenses the noncontesting party may incur with respect to any Imposition.
ARTICLE VII: INSURANCE; INDEMNITY
Section 7.1: Insurance Required. Lessee shall, during the Lease Term, cause the Facility to be kept continuously insured against such risks customarily insured against for facilities such as the Facility and shall pay (except
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as otherwise provided herein), as the same become due, all premiums in respect thereof, such insurance to include the following policies of insurance: (a) Insurance insuring the Facility against loss or damage by fire, lightning and
all other risks covered by the extended coverage insurance endorsement then in use in the State in an amount not less than an amount equal to the full insurable value thereof (subject to reasonable loss deductible clauses) issued by such insurance company or companies authorized to do business in the State as may be selected by Lessee. The full insurable value of the Facility may be determined from time to time at the request of Lessee or Lessor (but not less frequently than every five years) by an architect, contractor, appraiser, appraisal company or one of the insurers, to be selected and paid by Lessor. The policy or policies of such insurance shall name Lessee, Lessor and Trustee as insureds, as their respective interests may appear. All proceeds from such policies of insurance shall be applied as provided in Article XI;
(b) Comprehensive general accident and public liability insurance (including
coverage for all losses whatsoever arising from the ownership, maintenance, operation or use of any automobile, truck or other motor vehicle), under which Lessee, Lessor and Trustee are named as insureds, in an amount not less than the amount which the Lessor shall reasonably require for a combined single limit for bodily injuries and property damage;
(c) Workers' compensation and unemployment coverages to the extent, if any,
required by the laws of the State; (d) Insurance during the period of acquisition, construction, equipping and furnishing of the Facilities against all risks of the type described in clause 7.1(a) to the extent of the current full insurable value thereof. In lieu of carrying such insurance described in this clause 7.1(d), the Lessor may cause such insurance to be carried by contractors constructing, equipping and furnishing the Facilities; and Not less than thirty (30) days prior to the expiration dates of the expiring policies, originals or copies of the policies required by this Section or certificates evidencing such insurance shall be delivered by Lessee to Lessor and to any assignee of any of Lessor's rights hereunder. All policies of such insurance, and all renewals thereof, shall contain a provision that such insurance may not be cancelled by the issuer thereof without and least thirty (30) days' written notice to Lessee and Lessor. Nothing in this Lease shall be construed as preventing Lessee from satisfying the insurance requirements herein set forth by using blanket policies of insurance, provided each and all of the requirements and specifications of this Lease respecting such insurance are complied with. In the event of failure to provide and maintain said required insurance, the parties hereto agree that the Trustee may obtain said insurance and charge the premium thereto as Additional Rent.
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ARTICLE VIII: ASSIGNMENT AND SUBLEASING
Section 8.1: Assignment by Lessor. Lessor's right, title and interest in, to and under this Lease and the Facility may not be assigned to any party other than the Bond Trustee, as security for and in connection with the Bonds.
Section 8.2: Assignment and Subleasing by Lessee. None of Lessee's right, title and interest in, to and under this Lease and in the Facility may be assigned or encumbered by Lessee for any reason, except that Lessee may sublease all or part of the Facility if Lessee obtains the prior written consent of Lessor and an opinion of nationally recognized Counsel on the subject of tax exempt municipal obligations satisfactory to Lessor that such subleasing will not adversely affect the exclusion of the interest components of the Rental Payments from gross income for federal income tax purposes. Any such sublease of all or part of the Facility shall be subject to this Lease and the rights of Lessor in, to and under this Lease and the Facility, and shall terminate upon termination of Lessee's rights hereunder. No assignment or subleasing shall in any way relieve the Lessee from primary liability for any of its obligations under this Lease including, but not limited to, their obligation to pay rentals, amounts and fees. The foregoing notwithstanding, the following shall not be construed or deemed to be prohibited transfers or assignments by Lessee pursuant to this Article 8 and shall not require the prior consent of Lessor (i) any transfers or assignments to the Trustee pursuant to the Bond Indenture to secure payment of the Bonds and the performance of the obligations under the Bond Indenture, (ii) any reorganization, merger, restructure or renaming of Lessee, or (iii) any change of control of Lessee.
ARTICLE IX: MAINTENANCE, REPAIRS AND MODIFICATIONS; OPERATION
Section 9.1: Maintenance, Repairs and Modifications. It is expressly understood that this Agreement is a financing lease and that all costs of administration, operation, maintenance, repair and replacement is excluded from this Agreement unless otherwise provided herein and that such costs will be borne by the Lessee. The Lessee shall be obligated to maintain, preserve and keep the Facility in good repair, working order and condition, and shall from time to time make all repairs, replacements and improvements necessary to keep the Facility in such condition. In addition, Lessee and Lessor shall, at its own expense and with the prior written consent of the other party, have the right to remodel any portion of the Facility or to make additions, modifications and improvements thereto. All such additions, modifications and improvements shall thereafter comprise part of the Facility and be subject to the provisions of this Lease; provided, however, that Lessee or Lessor may install at its own expense any furniture, furnishings, trade fixtures and business equipment and such furniture, furnishings, trade fixtures and business equipment (specifically excluding lighting fixtures and heating, ventilating and air conditioning equipment and the wiring within conduits) shall remain the property of such party and shall not be subject to the provisions of this Lease. Such additions,
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modifications and improvements shall not in any way damage the Facility nor cause it to be used for purposes other than those permitted by this Lease and authorized under the provisions of municipal, state and federal law. The Facility, upon completion of any additions, modifications and improvements pursuant to this Section, shall be of a value which is not less than the value of the Facility immediately prior to the making of such additions, modifications and improvements. Any property for which a substitution or replacement is made pursuant to this Section may be disposed of by the party that made such substitution or replacement in such manner and on such terms as are determined by such party. Neither the Lessee nor Lessor will permit any mechanic's or other lien to be established or remain against the Facility for labor or materials furnished in connection with any remodeling, additions, modifications, improvements, repairs, renewals or replacements made by it pursuant to this Section; provided that if any such lien is established and the contesting party shall first notify the other party of the contesting party's intention to do so, the contesting party may in good faith contest any lien filed or established against the Facility, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom unless the noncontesting party shall notify Lessee that, in the opinion of Counsel, by nonpayment of any such item the interest of the noncontesting party in the Facility will be endangered or the Facility or any part thereof will be subject to loss or forfeiture, in which event the contesting party shall promptly pay and cause to be satisfied and discharged all such unpaid items or provide the noncontesting party with full security against any such loss or forfeiture, in form satisfactory to the noncontesting party. Lessor and Lessee will cooperate fully with each other in any such contest, upon request and at the expense of the contesting party.
Section 9.2: Liens. Neither Lessor nor Lessee shall, directly or indirectly, create, incur, assume or suffer to exist any mortgage, pledge, lien, charge, encumbrance or claim on or with respect to the Facility, other than the respective rights of Lessor and Lessee as herein provided.. Except as expressly provided in this Article, Lessee shall promptly, at its own expense, take such action as may be necessary to duly discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim if the same shall arise as a result of any action or failure to act of such party at any time.
ARTICLE X: LESSEE'S OPTION TO EXTEND LEASE TERM
Section 10.1: Option to Extend Original Term. Lessee shall have the option to extend the Lease Term beyond June 30, 2020, for an unlimited number of successive one-year terms coextensive with Lessee's Fiscal Year; provided that the first such term would begin on March 1, 2020, and end on the last day of Lessee's then current Fiscal Year (herein the "Original Term"), and at that time this Lease will be affirmatively renewed and mutually ratified by the Lessee and Lessor for another Fiscal Year unless the Lessee takes official action to terminate this Lease and the same procedure will apply at the end of each fiscal year until all of the indebtedness referred to herein is paid. Lessee shall pay Rental Payments during each such additional term the same Rental Payments in the annual amounts as set forth in Exhibit A hereto on the same other terms as the Original Term. Any extensions of the Lease Term
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beyond June 30, 2030, shall be in addition to, and not be considered a part of, the Original Term and all Renewal Terms.
ARTICLE XI: DAMAGE, DESTRUCTION AND CONDEMNATION; USE OF NET PROCEEDS
Section 11.1: Damage, Destruction and Condemnation. If the Facilities shall be damaged or either partially or totally destroyed at any time during the primary term of this Lease Agreement, or if the whole or any part of the Facilities shall be taken or condemned by a competent authority for public use or purpose, there shall be no abatement or reduction in the rentals, amounts and fees payable by the Lessee under this Lease Agreement on account of such damage, destruction, taking or condemnation.
Section 11.2: Division of Award: The total amount collected under any and all policies of insurance covering such damage or destruction, or any award or compensation or damages recovered on account of any such taking or condemnation, less any expenses, including counsel fees incurred in litigating, arbitrating, compromising or settling any claim arising out of such damage, destruction, taking or condemnation, shall promptly, when received or collected, be deposited in a special fund to be used as hereinafter provided.
11.2.1: Partial Condemnation. If the amount collected is sufficient, it shall be used to repair and restore the
damaged, destroyed, taken or condemned Facilities or replace the same by acquiring, constructing, equipping and furnishing new Facilities of equivalent efficiency, utility and value, approved by the Lessor suitable for the needs and uses of the Lessee.
11.2.2: Total Condemnation. In the event that the Lessor determines that the funds received from said
insurance policies, awards, compensation, or damages received or recovered, or otherwise available on account of any loss, are insufficient to meet the costs of repairing and restoring or replacing (as aforesaid) the property included in the Facilities so as to make the Facilities again usable for their intended purpose, the overall operating efficiency of which has not been materially reduced, then Lessee may, at its option, furnish or cause to be furnished funds sufficient, together with insurance proceeds, awards, compensation, or damages received or recovered, to repair and restore or replace the Facilities so as to make them again usable for their intended purpose without materially reducing the overall individual and collective operating efficiency thereof.
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Section 11.3: Cooperation Between Parties. The Lessor and the Lessee shall cooperate and consult with each other in all matters pertaining to the settlement, compromise, arbitration or adjustment of any and all claims and demands for damages on account of damage, destruction, taking or condemnation of the Facilities, and the settlement, compromising, adjustment or arbitration of any such claim shall be subject to the approval of the Lessor.
Section 11.4: Notice of Condemnation. Upon the receipt of notice of taking or condemnation, the receiving party shall give prompt written notice thereof to the other party, and each party, unless in default, shall have the right to file, prosecute and collect their respective claims for an award on account of such taking or condemnation.
Section 11.5: Condemnation Sale. Lessor shall not sell or convey any part of the Facilities under threat of condemnation without the written consent of Lessee to the terms and conditions of such sale, including the consideration to be received and the delivery date.
ARTICLE XII: DEFAULT PROVISIONS
Section 12.1: “Events of Default” Defined. The following shall be "Events of Default" under this Lease and term "Events of Default" shall mean, whenever it is used in this Lease, any one or more of the following events: (a) Failure by Lessee to pay any Rental Payment, Additional Rent or other
payment required to be paid hereunder at the time specified herein; (b) Failure by Lessee to observe and perform any covenant, condition or
agreement on its part to be observed or performed, other than as referred to in clause (a) of this Section, for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied has been given to Lessee by Lessor; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, Lessor may consent to an extension of such time if Lessee certifies that corrective action has been instituted by Lessee within the applicable period and will be diligently pursued until the Default is corrected;
(c) Any statement, representation or warranty made by Lessee in or pursuant to
this Lease or any instrument or certificate related thereto or to the Project shall be incorrect, untrue or misleading in any material respect;
(d) Any provision of this Lease shall at any time for any reason cease to be valid
and binding on Lessee, or shall be declared to be null and void, or the validity or
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enforceability thereof shall be contested by Lessee or any governmental agency or authority if the loss of such provision would materially adversely affect the rights or security of Lessor, or Lessee shall deny that it has any further liability or obligation under this Lease;
Section 12.2: Remedies. Whenever any Event of Default shall have happened and be continuing, Lessor shall have the right, at its option and without any further demand or notice, to take any one or more of the following remedial steps: (a) Terminate the term of this Lease Agreement and recover to the Lessor
possession of the Facility; and (b) By written notice to Lessee, Lessor may declare all Rental Payments
and other amounts payable by Lessee hereunder to the end of the then current Original Term or Renewal Term to be due;
(c) With or without terminating this Lease, sell or lease the Facility and collect
the rentals therefor upon such terms and conditions as it may deem satisfactory in its sole discretion, with Lessee, to the extent permitted by law, remaining liable for the difference between the Rentals, Additional Rentals and other amounts payable by Lessee hereunder during the Original Term or then current Renewal Term, as the case may be, and the net proceeds of any purchase price, rents or other amounts paid by the purchaser, new lessee or sublessee of the Facility, and, provided further, that in such event, if Lessor shall receive a payment for sale of the Facility or total Rentals for lease of the Facility that are, after payment of Lessor's expenses in connection therewith, in excess shall be paid to Lessee either by Lessor, its assigns, or by its sublessee; and
(d) Take whatever action at law or in equity may appear necessary or desirable
to collect the Rentals then due and thereafter to become due during the then current Original Term or Renewal Term, or enforce performance and observance of any obligation, agreement or covenant of Lessee under this Lease.
Section 12.3: Continuing Obligation. In the event that the Lessee fails to pay a rental, amount or fee as set out in Section 3 hereof when the same becomes due and payable, the rental, amount or fee so in default shall continue as an obligation of the Lessee until the amount in default shall have been fully paid and the Lessee shall pay the same with interest thereon at the maximum rate permitted by law.
Section 12.4: Attorney’s Fees. In the event the Lessor files court proceedings to collect the rentals, amounts and fees due hereunder or to enforce any other obligation, covenant, agreement, term or condition of this Lease Agreement, the Lessee will pay to the Lessor's reasonable attorney's fees and other expenses incurred by the Lessor in connection with such court proceedings. Any remedy of the Lessor under
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this Lease Agreement for the collection of rentals, amounts and fees due hereunder shall also be available to the Lessor for collection of all such attorney's fees and other expenses.
Section 12.5: No Remedy Exclusive. No remedy herein conferred upon or reserved to Lessor is intended to be exclusive and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Lease or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle Lessor or Lessee to exercise any remedy reserved to it in this Article it shall not be necessary to give any notice, other than such notice as may be required in the Article or by law.
Section 12.6: No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Lease shall be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waiver any other breach hereunder.
ARTICLE XIII: NOTICES
Section 13.1: Notices. It shall be sufficient service of any notice, request, complaint, demand or other paper required by this Lease to be given or filed with Lessor or Lessee if the same shall be duly mailed by registered or certified mail with postage prepaid addressed as follows: (a) If to Lessor: Cleveland County Public Facilities Authority Attention: Chairman Cleveland County Court House 201 S. Jones Norman, Oklahoma 73069 (b) If to Lessee: Cleveland County Health Department Attention: Jackie Kanak, Regional Director 250 12th Avenue NE Norman, Oklahoma 73071 Lessor and Lessee may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. Notwithstanding anything contained herein to the contrary, any notice required to be given by Lessor or Lessee hereunder shall be deemed to have been given and shall be effective as of the date such notice is received or refused reflected on said notice. All notices, certificates,
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demands, requests, or other communications made by either party to the other which are required or permitted by the provisions of this Agreement shall be in writing.
ARTICLE XIV: AMENDMENTS, CHANGES AND MODIFICATIONS
Section 14.1: Amendments, Changes and Modifications. This Lease may be amended, changed or modified in any manner by written agreement of Lessor and Lessee and approved by the Board of County Commissioners of Cleveland County, Oklahoma. Any waiver of any provision of this Lease or any right or remedy hereunder must be affirmatively and expressly made in writing and shall not be implied from inaction, course of dealing or otherwise.
ARTICLE XV: RETENTION OF TITLE TO FACILITIES; GRANT OF EASEMENTS; QUIET ENJOYMENT COVENANT.
Section 15.1: Retention of Title to Facilities. The Lessor covenants and agrees that, except as provided in the Indenture, if any, and this Lease Agreement, it will not sell, assign, encumber, convey or otherwise dispose of the Facilities or any part thereof during the primary term of this Lease Agreement without prior written consent of the Lessee.
Section 15.2: Grant of Easements. The Lessor will, however, at the request of the Lessee grant such rights-of-way or easements over, across or under, the reality included in the Facilities, or grant such permits or licenses in respect to the use thereof, as shall be necessary or convenient for the operation or use of the Facilities by the Lessee; provided, however, that such leases, rights-of-way, easements, permits or licenses shall not have a materially adverse effect upon the Facilities or the overall operating efficiency thereof.
Section 15.3: Quiet Enjoyment. Lessor warrants and covenants that Lessee, upon paying the rental and performing its other obligations hereunder, shall peaceably hold and enjoy the Facilities during the term of this Lease Agreement and shall have full and unrestricted rights of access, ingress and egress thereto for itself and its employees, guests, patrons and invitees.
ARTICLE XVI: MISCELLANEOUS
Section 16.1: Maintenance of Tax Exemption. Neither Lessor nor Lessee shall not take any action or fail to take any action which action or failure would cause the interest payable on the Bonds to be includable in gross income for federal income tax purposes or would otherwise result in a breach of any representations, conditions, or covenants of Lessee as set forth in the Bond Indenture.
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Lessor nor Lessee will comply with all applicable provisions of the Code and the regulations of the Treasury Department thereunder, from time to time proposed or in effect, in order to maintain the exclusion from gross income for purposes of federal income taxation of the interest components of Rental Payments under this Lease.
Section 16.2: Access to Premises. Lessee agrees that Lessor or any agent or representative of Lessor shall have the right at all reasonable times to enter upon and to examine and inspect the Facility. Lessee further agrees that Lessor and any such agent or representative shall have such rights of access to the Facility as may be reasonably necessary to cause the proper maintenance of the Improvements in the event of failure by Lessee to perform its obligations hereunder.
Section 16.3: Release and Indemnification. To the extent permitted by law, Lessee shall indemnify, protect, hold harmless, save and keep Lessor harmless from and against any and all liability, obligation, loss, claim, tax and damage whatsoever, regardless of cause thereof, and all expenses in connection therewith (including counsel fees and expenses) arising out of or as the result of (a) the entering into of this Lease, (b) the acquisition, equipping and installation of the Facility, (c) injury, actual or claimed, of whatsoever kind or character, to property or persons, occurring or allegedly occurring in, on or about the Facility during the Lease Term, and/or (d) the breach of any covenant by Lessee herein or any material misrepresentation by Lessee contained herein. The indemnification arising under this section shall continue in full force and effect notwithstanding the full payment of all obligations under this Lease or the termination of this Lease for any reason.
Section 16.4: References to Lessor. The right to receive Rental Payments and Additional Rental Payments hereunder together with the right to enforce the same are being assigned to the Trustee concurrently with the execution and delivery of this Lease. References to "Lessor" in connection with such rights shall mean Trustee or its assignees, and references to "Lessor" in connection with rights and obligations not so assigned shall mean Cleveland County Public Facilities Authority.
Section 16.5: Binding Effect. This Lease together with any amendments thereto shall inure to the benefit of and shall be binding upon Lessor and Lessee and their respective successors and assigns.
Section 16.6: Force Majeure. Neither party shall be held responsible for losses resulting from its non-performance under this Agreement, if fulfillment of any terms or provisions of this Agreement are delayed or prevented by any cause not within the control of the party whose performance is interfered with and which said party is unable to prevent by the exercise of reasonable diligence.
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Section 16.7: Indenture. This Agreement shall be subject to all terms and conditions of the Indenture.
Section 16.8: Laws, Rules, and Regulations. Lessor and Lessee and their respective officers, agents, employees, contractors, licensees
and any other person whom they control or have the right to control, shall comply with all present and future laws, ordinances, orders, directive, rules and regulations of the United States of America, the State of Oklahoma, the County of Cleveland, applicable cities or towns and their respective agencies, departments, authorities and commissions which may either directly or indirectly affect Lessor or Lessee or the operations on or in connections with the Premises.
Section 16.9: Holding Over by Lessee. If applicable, Lessee shall not use or remain in possession of the Premises and
Improvements after the termination of this Agreement. Any holding over, or continued use or occupancy by Lessee after the termination of this Lease, without the written consent of Lessor and Trustee, shall not constitute a month-to-month tenancy, and all other expenses, obligations and payments in effect for the immediately preceding month of this Lease shall apply to the month-to-month tenancy. There shall be no renewal whatsoever of this Lease by operation of law.
Section 16.10: Section and Article Headings. The Section and Article headings herein are for convenience only and in no way define, limit or describe the scope or intent of any of the provisions hereof.
Section 16.11: Execution of Counterparts. This Agreement shall become effective upon its delivery. This Lease may be executed simultaneously in two or more counterparts, each of which shall be deemed to be an original, and all of which together shall constitute but one and the same instrument.
Section 16.12: Construction and Enforcement. This Agreement shall be construed and enforced in accordance with the laws of the State of Oklahoma. Wherever in this Agreement it is provided that either party shall or will make any payment or perform or refrain from performing any act or obligation, each such provision shall, even though not so expressed, be construed as an express covenant to make such payment or to perform, or not to perform, as the case may be, such act or obligation.
Section 16.13: Severability. In the event any provision hereof shall be determined to be invalid or unenforceable, the validity and effect of the other provisions hereof shall not be affected thereby.
Section 16.14: Complete Agreement. This written agreement is a final expression of the Agreement between the parties hereto and such Agreement may not be contradicted by evidence of any prior oral agreement or of a
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contemporaneous oral agreement between the parties hereto. No unwritten oral agreement between the parties exists.
Section 16.15: Accounting Terms. Accounting terms used herein and not otherwise specifically defined shall have the meaning ascribed to such terms by generally accepted accounting principles as from time to time in effect.
Section 16.16: Time is of the Essence. All time limits stated in this Lease Agreement are of the essence of this Lease Agreement.
Section 16.17: Invalidity of Provision or Part Thereof. In the event any provision, or any portion of any provision of this Ground Lease is held invalid, the other provisions of this Ground Lease and the remaining portion of said provision, shall not be affected thereby and shall continue in full force and effect.
Section 16.18: No Waiver of Rights. No failure of Lessor or Lessee to exercise any power given to either party hereunder or to insist upon strict compliance by the other party with its undertakings, duties and obligations hereunder, and no custom or practice of the parties hereto at variance with the provisions hereof shall constitute a waiver of either of Lessor's or Lessee’s right to demand exact compliance with the provisions contained in this Lease Agreement.
Section 16.19: Rights are Cumulative. All rights, powers, and privileges conferred herein upon both parties hereto shall be cumulative.
Section 16.20: Provisions are Binding Upon Assigns and are Real Covenants. It is mutually covenanted, understood and agreed by and between the parties hereto, that each of the provisions of this Lease Agreement shall apply to, extend to, be binding upon and inure to the benefit or detriment of not only the parties hereto, but also the legal representatives, successors and assigns of Lessor, Trustee and Lessee hereto, and shall be deemed and treated as real covenants running with the real property during the Lease Term. The parties further acknowledge and agree that the Trustee and its successors and assigns shall be deemed third party beneficiaries hereunder. Whenever a reference to the parties hereto is made, such reference shall be deemed to include the legal representatives, successors and assigns of said party, the same as if in each case expressed.
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IN WITNESS WHEREOF, the parties hereto have executed these presents the day and year first above written. CLEVELAND COUNTY PUBLIC FACILITIES
AUTHORITY (LESSOR) (SEAL) By: Name: Darry Stacy Title: Chairman, ATTEST: Secretary THE BOARD OF COUNTY COMMISSIONERS
OF CLEVELAND COUNTY ON BEHALF OF THE CLEVELAND COUNTY HEALTH DEPARTMENT (LESSEE)
By: Name: Harold Haralson Title: Chairman (SEAL) ATTEST: County Clerk Accepted this ____ day of March, 2020.
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ACKNOWLEDGEMENTS
STATE OF OKLAHOMA ) ) SS COUNTY OF CLEVELAND ) The foregoing instrument was acknowledged before me on this ____ day of March, 2020, by Darry Stacy, as Chairman of the Cleveland County Public Facilities Authority, a public trust organized and existing under the laws of the Oklahoma public trust, on behalf of the trust. Notary Public My Commission Expires: (SEAL) STATE OF OKLAHOMA ) ) SS COUNTY OF CLEVELAND ) The foregoing instrument was acknowledged before me on this ____ day of March, 2020, by Harold Haralson, as Chairman of the Board of County Commissioners of Cleveland County, Oklahoma, on behalf of the Cleveland County Health Department, a duly organized and existing subdivision of the State of Oklahoma.. Notary Public My Commission Expires: (SEAL)
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SCHEDULE 1: THE FACILITY SITE
A part of Block B, of EASTMOOR ADDITION, an Addition to Moore, Cleveland County, Oklahoma, being more particularly described as follows: COMMENCING at the Southeast Corner of said Block B, thence North 00°06’18” West, along the East Line of said Block B, a distance of 135.16 feet; thence South 89°53’42” West, a distance of 78.02 feet to THE POINT OF BEGINNING; thence South 89°52’46” West, a distance of 217.22 feet; thence South 00°00’35” East, a distance of 6.21 feet; thence South 89°43’30” West, a distance of 206.06 feet; thence North 00°02’15” West, a distance of 174.07 feet; thence North 89°52’59” East, a distance of 206.14 feet; thence North 00°00’35” West, a distance of 1.57 feet; thence North 89°50’50” East, a distance of 135.09 feet; thence North 00°09’10” West, a distance of 0.49 feet; thence North 89°50’50” East a distance of 110.07 feet; thence South 00°09’10” East, a distance of 59.90 feet; thence South 89°50’50” West, a distance of 28.35 feet; thence South 00°09’10” East, a distance of 109.57 feet to the Point or Place of Beginning.
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EXHIBIT A TO LEASE AGREEMENT: RENTAL PAYMENT SCHEDULE
August 15, 2020 August 15, 2021 August 15, 2022 August 15, 2023 August 15, 2024 August 15, 2025 August 15, 2026 August 15, 2027 August 15, 2028 August 15, 2029
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EXHIBIT C
LEGAL OPINION
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.
All dates herein subject to change
PROPOSED FORM OF BOND COUNSEL OPINION
An opinion in substantially the following form will be delivered by Floyd Law Firm, P.C., Bond Counsel, upon delivery of the Bonds, assuming no material changes in facts or law.
_______ __, 2020
Cleveland County Public Facilities Authority Norman, Oklahoma Re: $2,500,000* Cleveland County Public
Facilities Authority, Lease Revenue Refunding Bonds (Cleveland County Health Department - Moore Facility Project), Series 2020 (the "Bonds")
Ladies and Gentlemen: We have acted as Bond Counsel in connection with the issuance on this date by the Cleveland County Public Facilities Authority (the “Authority”) of the above-captioned Bonds, and we have examined a copy of the Transcript of Proceedings of the Authority preliminary to, and in the issuance of the above-captioned Bonds, and a specimen Bond of the issue, and based upon such examination, it is our opinion that said issuance by the Authority is lawfully authorized by said proceedings under present law. The Bonds are issuable only in registered form in denominations of $5,000 or any integral multiple of $5,000 thereof, and with respect to principal maturing on the same date, are exchangeable for other bonds of the same maturity, bear interest payable on March 1 and September 1 of each year, commencing September 1, 2020, until the principal is paid, mature on September 1 in the years, in the principal amounts and bear interest at the rates all as set forth on the face thereof and in the Indenture hereinafter mentioned. As Bond Counsel, we have participated in the preparation or review of certain documents, including but not limited to: the Bond Indenture dated as of March 1, 2020, by and between the Authority and BancFirst, Oklahoma City, Oklahoma, as trustee (the "Indenture"); the Amended and Restated Lease Agreement dated March 1, 2020 by and between the Authority and the Board of County Commissioners of Cleveland County on behalf of Cleveland County Health Department (herein referred to as "Department"), by which the Authority leased certain real property to the Department, renewable for consecutive one year terms, (the "Lease Agreement"); the Assignment of Rents and Leases dated as of March 1, 2020 (the “Assignment”); and the proceedings authorizing execution and delivery of all of the foregoing. We have also examined the relevant provisions of the Constitution and statutes of the State of Oklahoma, the Internal Revenue Code of 1986, as amended (the “Code”), and the above-mentioned Indenture and Lease Agreement, which contain, among other things, certain covenants requiring the Authority and the Department to comply with various requirements to maintain the exemption of interest on the Bonds from Federal income taxation.
All dates herein subject to change
As to questions of fact material to our opinion, we have relied upon statements, representations, and reasonable expectations of the Authority and others in connection with the Bonds, and we have relied upon the representations of the Authority and the Department contained in the Indenture and other related documents and in the certified proceedings and other certifications of public officials and documents executed by officers and officials of the Authority furnished to us without undertaking to verify the same by independent investigation. The Code establishes certain requirements that must be met subsequent to the issuance and delivery of the Bonds in order that the interest, as it accrues on the Bonds be and remain treated as interest which is not includable in gross income under Section 103 of the Code. These requirements include provisions which prescribe yield and other limits relative to the investment and expenditure of the proceeds of the Bonds and other amounts and require that certain earnings be rebated to the Federal government. The Authority and the Department agree to comply with certain provisions and procedures, pursuant to which such requirements can be satisfied. Noncompliance with such requirements may cause interest on the Bonds to become includable in gross income for Federal income tax purposes retroactive to the date of issuance thereof, irrespective of the date on which such noncompliance is ascertained. From such examination and in reliance thereon and on all matters of fact as we deemed relevant under the circumstances, it is our opinion, under existing law that the Authority is a validly existing public trust under the laws of the State of Oklahoma of which Cleveland County, Oklahoma (the “County”), is the beneficiary and, as such a regularly constituted authority of the County, which is a political subdivision of the State of Oklahoma, and that the Bonds and the aforesaid Indenture are valid and binding obligations of the Authority enforceable according to their terms. The Indenture creates the valid pledge of the Trust Estate (as defined in the Indenture) that it purports to create. The Indenture and the Bonds have been duly authorized and entered into except as the enforceability thereof may be limited by any applicable bankruptcy, insolvency or other similar laws or enactments now or hereafter enacted by the State of Oklahoma or the Federal government affecting the enforcement of creditors’ rights generally, and the fact that specific performance and other equitable remedies are granted only in the discretion of a court. We are of the opinion that the Authority has the right and power to authorize and execute the Lease Agreement, and such Lease Agreement has been duly authorized and executed by the Authority, is in full force and effect and is valid and binding upon the Authority and enforceable in accordance with its terms, and no other authorization for the Lease Agreement is required. It is our further opinion, based upon existing law, statutes, judicial decisions, regulations, and published rulings of the Internal Revenue Service, and, assuming continuing compliance by the Authority and the Department with their herein described covenants to comply with all of the requirements of the Code contained in the aforesaid Indenture and other related documents, interest on the Bonds is excluded from the gross income of the payees thereof for Federal income tax purposes pursuant to Section 103 of the Code under present law and interpretation thereof and is not a specific preference item for purposes of the Federal alternative minimum tax. The opinions set forth in the preceding sentence are subject to the condition that the Authority and the Department comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be excluded from gross income for Federal income tax
All dates herein subject to change
purposes. The Authority and the Department have covenanted to comply with each such requirement. In our opinion, the covenants contained in the aforesaid Indenture and other related documents by which the Authority and the Department have agreed to comply with the Code to the end that interest on the Bonds shall remain exempt from Federal income taxes are valid and binding obligations of the Authority and the Department and compliance therewith is not prohibited by or violative of any provision of law applicable to the Authority and the Department. The failure of the Authority or the Department to comply with its aforesaid covenants could cause the interest on the Bonds to be so included in gross income retroactive to the date of issuance of the Bonds, irrespective of the date on which such noncompliance is ascertained. Ownership of tax-exempt obligations may result in collateral Federal income tax consequences to certain taxpayers, and therefore prospective purchasers of the Bonds should consult their tax advisors as to applicability of any such collateral consequences. We express no opinion regarding any other Federal tax consequences arising with respect to the Bonds. It is our further opinion, based upon present law, and depending upon the state of residence of the registered owners of the Bonds, that interest on the Bonds is exempt from income taxation by the State of Oklahoma. We express no opinion regarding other state tax consequences arising with respect to the Bonds. Prospective purchasers of the Bonds should consult their tax advisors as to the state income tax treatment of the interest on the Bonds. The foregoing opinions are qualified only to the extent that the rights of the holders of the Bonds and the enforceability of the Bonds may be subject to bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditors' rights generally heretofore or hereafter enacted and that their enforcement may also be subject to the exercise of judicial discretion in appropriate cases. We have not been engaged or undertaken to examine or review the accuracy, completeness or sufficiency of the Official Statement (the “Official Statement”) or other offering material relating to the Bonds and we express no opinion relating thereto (excepting only the matters set forth as our opinion in the Official Statement). We express no opinion herein as to compliance with state or Federal securities laws and regulations applicable to disposition of rights under the Indenture and the payments to any investor. As Bond Counsel, we express no opinion as to other tax consequences regarding the Bonds. The attorneys providing the opinion on behalf of our firm are admitted to practice in the State of Oklahoma, and we express no opinion as to matters under or involving the laws of any jurisdiction other than the laws of the State of Oklahoma and the United States of America. The opinion set forth above is as of the date of this letter, and we undertake no responsibility for updating, revising or supplementing such opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. The opinion set forth above may be relied upon only by the addressee hereof and for the sole purpose of the transaction specifically referred to herein. The opinions contained herein are expressions of professional judgment regarding the legal matters addressed herein and not a guarantee of result. Very truly yours,
All dates herein subject to change
FLOYD LAW FIRM, P.C.
EXHIBIT D
AUDITED FINANCIAL STATEMENTS OF CLEVELAND COUNTY, OKLAHOMA
AS OF FISCAL YEAR ENDING JUNE 30, 2016
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cleveland county
Financial Audit
For the fiscal year ended June 30, 2016
This publication, issued by the Oklahoma State Auditor and Inspector’s Office as authorized by 19 O.S. § 171, has not been printed, but is available on the agency’s website (www.sai.ok.gov) and in the Oklahoma Department of Libraries Publications Clearinghouse Digital Prairie Collection (http://digitalprairie.ok.gov/cdm/search/collection/audits/) pursuant to 65 O.S. § 3-114.
CLEVELAND COUNTY, OKLAHOMA FINANCIAL STATEMENT
AND INDEPENDENT AUDITOR'S REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2016
May 30, 2019 TO THE CITIZENS OF CLEVELAND COUNTY, OKLAHOMA Transmitted herewith is the audit of Cleveland County, Oklahoma for the fiscal year ended June 30, 2016. The audit was conducted in accordance with 19 O.S. § 171. A report of this type can be critical in nature. Failure to report commendable features in the accounting and operating procedures of the entity should not be interpreted to mean that they do not exist. The goal of the State Auditor and Inspector is to promote accountability and fiscal integrity in state and local government. Maintaining our independence as we provide this service to the taxpayers of Oklahoma is of utmost importance. We wish to take this opportunity to express our appreciation for the assistance and cooperation extended to our office during our engagement. Sincerely,
CINDY BYRD, CPA OKLAHOMA STATE AUDITOR & INSPECTOR
CLEVELAND COUNTY OFFICIALS FOR THE FISCAL YEAR ENDED JUNE 30, 2016
Board of County Commissioners District 1 – Rod Cleveland District 2 – Darry Stacy District 3 – Harold Haralson County Assessor David Tinsley County Clerk Tammy Belinson County Sheriff Joe Lester County Treasurer
Jim Reynolds Court Clerk
Rhonda Hall District Attorney
Greg Mashburn
CLEVELAND COUNTY, OKLAHOMA FOR THE FISCAL YEAR ENDED JUNE 30, 2016
i
TABLE OF CONTENTS FINANCIAL SECTION Report of State Auditor and Inspector .......................................................................................................... 1
Financial Statement: Statement of Receipts, Disbursements, and Changes in Cash Balances—Regulatory Basis (with Combining Information) ......................................................................................................................... 4
Notes to the Financial Statement ............................................................................................................ 5
OTHER SUPPLEMENTARY INFORMATION
Comparative Schedule of Receipts, Expenditures, and Changes in Cash Balances—Budget and Actual—Budgetary Basis—General Fund ............................................. 13 Comparative Schedule of Receipts, Expenditures, and Changes in Cash Balances—Budget and Actual—Budgetary Basis—County Health Department Fund .............. 14 Note to Other Supplementary Information ........................................................................................... 15 Schedule of Expenditures of Federal Awards ...................................................................................... 16 Notes to the Schedule of Expenditures of Federal Awards .................................................................. 17
INTERNAL CONTROL AND COMPLIANCE SECTION Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards ................................................................................................................. 18 Independent Auditor's Report on Compliance for Each Major Federal Program and on Internal Control Over Compliance Required by the Uniform Guidance ........................................ 20
CLEVELAND COUNTY, OKLAHOMA FOR THE FISCAL YEAR ENDED JUNE 30, 2016
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INTERNAL CONTROL AND COMPLIANCE SECTION - CONTINUED
Schedule of Findings and Questioned Costs ............................................................................................... 22 Appendix A: Corrective Action Plan (Prepared by County Management) ................................................. 41 Appendix B: Summary Schedule of Prior Audit Findings (Prepared by County Management) ................ 45
FINANCIAL SECTION
Independent Auditor’s Report
TO THE OFFICERS OF CLEVELAND COUNTY, OKLAHOMA Report on the Financial Statement
We have audited the combined total—all county funds on the accompanying regulatory basis Statement of Receipts, Disbursements, and Changes in Cash Balances of Cleveland County, Oklahoma, as of and for the year ended June 30, 2016, and the related notes to the financial statement, which collectively comprise the County’s basic financial statement as listed in the table of contents. Management’s Responsibility for the Financial Statement
Management is responsible for the preparation and fair presentation of this financial statement in accordance with the regulatory basis of accounting described in Note 1, and for determining that the regulatory basis of accounting is an acceptable basis for the preparation of the financial statement in the circumstances. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility
Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
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Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles
As described in Note 1, the financial statement is prepared by Cleveland County using accounting practices prescribed or permitted by Oklahoma state law, which is a basis of accounting other than accounting principles generally accepted in the United States of America. The effects on the financial statement of the variances between the regulatory basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. Adverse Opinion on U.S. Generally Accepted Accounting Principles
In our opinion, because of the significance of the matter discussed in the “Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles” paragraph, the financial statement referred to above does not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of Cleveland County as of June 30, 2016, or changes in financial position for the year then ended. Unmodified Opinion on Regulatory Basis of Accounting
In our opinion, the financial statement referred to above presents fairly, in all material respects, the combined total of receipts, disbursements, and changes in cash balances for all county funds of Cleveland County, for the year ended June 30, 2016, in accordance with the basis of accounting described in Note 1. Other Matters
Supplementary and Other Information
Our audit was conducted for the purpose of forming an opinion on the combined total of all county funds on the financial statement. The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and the remaining supplementary information, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the financial statement. The schedule of expenditures of federal awards and the remaining supplementary information is the responsibility of management and was derived from and related directly to the underlying accounting and other records used to prepare the financial statement. Such information has been subjected to the auditing procedures applied in the audit of the financial statement and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statement or to the financial statement itself, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards and the remaining supplementary information is fairly stated, in all material respects, in relation to the financial statement. Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated May 28, 2019, on our consideration of Cleveland County’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the County’s internal control over financial reporting or on compliance. That report is an integral part
3
of an audit performed in accordance with Government Auditing Standards in considering Cleveland County’s internal control over financial reporting and compliance.
CINDY BYRD, CPA OKLAHOMA STATE AUDITOR & INSPECTOR May 28, 2019
REGULATORY BASIS FINANCIAL STATEMENT
CLEVELAND COUNTY, OKLAHOMA STATEMENT OF RECEIPTS, DISBURSEMENTS, AND
CHANGES IN CASH BALANCES—REGULATORY BASIS (WITH COMBINING INFORMATION)
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
The notes to the financial statement are an integral part of this statement. 4
Beginning EndingCash Balances Receipts Transfers Transfers Cash Balances
July 1, 2015 Apportioned In Out Disbursements June 30, 2016
Combining Information:
County General Fund 16,437,442$ 23,408,245$ -$ -$ 20,729,307$ 19,116,380$ County Highway Fund 8,226,707 6,289,228 - - 6,387,960 8,127,975 County Health 8,794,477 5,119,675 - - 6,905,617 7,008,535 Resale Property 3,513,943 1,126,572 - - 1,687,712 2,952,803 Sheriff Service Fee 1,164,538 831,976 - - 1,567,728 428,786 Sheriff Revolving 311,714 617,706 - - 715,967 213,453 County Treasurer Certification Fee 483,433 54,900 - - 18,737 519,596 County Clerk Lien Fee 280,071 45,866 - - 12,146 313,791 County Clerk Preservation 848,295 301,705 - - 235,099 914,901 Bridge Capital Improvement Fund 209,838 411 - - - 210,249 County Sheriff Courthouse Security Service Fee 3,834 50,277 - - 758 53,353 Sales Tax 703,744 8,885,889 - - 8,907,230 682,403 Cleveland County Justice Center 340,834 1,778,495 - - 2,051,375 67,954 Community Development Block Grant Disaster Recovery - 2,659,532 - - 1,359,606 1,299,926 Highway Community Service 517 - - 517 Sheriff Drug Fund 8,620 - - - - 8,620 Sheriff Environmental Award 7,784 395 - - - 8,179 Sheriff Jail Fund 72,369 90,389 - - 140,036 22,722 Sheriff Commissary 298,159 273,269 - - 378,809 192,619 Sheriff Federal Share Revenue 32,196 71 - - - 32,267 Sheriff Donations 1,603 - - - 104 1,499 Sheriff Justice Assistance Grant 279 3,000 - - 2,697 582 Sheriff Property Forfeiture 79,444 - - - 6,083 73,361 County Commissioner Building Fund 693,026 1,541 - - - 694,567 County Assessor Revolving 3,412 5,670 - - 300 8,782 Child Abuse Prevention 11,147 729 - - - 11,876 Saferoom FEMA Grant 2,789 - - - - 2,789 Sheriff Criminal Alien Assistance Grant 676 7,666 - - 1,687 6,655 Local Emergency Planning Committee 24,142 1,000 - - 15,094 10,048 County Fair Board 426,907 - - 407,108 19,785 14 County Sinking 1,343 4 - - - 1,347 District Attorney Incarceration Costs 14,783 6,828 - - - 21,611 Hazard Mitigation Grant 2,339 - - - - 2,339 Cleveland County Anna McBride Court 33,255 101,500 - - 115,452 19,303 County Bridge and Road Improvement Fund 3,075,242 429,430 - - - 3,504,672 First Choice Recovery 870 2,375 - - 1,100 2,145 S.T.O.P. Violence Against Women 12,785 30,633 - - 38,312 5,106 Cleveland County Access to Recovery 462 - - - - 462 Sheriff Mobile Command Center 56,111 - - - 10,904 45,207 Safe Room Grant 183,616 1,344 - - 184,960 - Early Settlement Fund 4,000 13,764 - - 14,054 3,710 Fairgrounds - 307,423 407,108 - 132,090 582,441 Sheriff Reserve Deputy Donations - 12,709 - - - 12,709
Combined Total - All County Funds 46,366,746$ 52,460,217$ 407,108$ 407,108$ 51,640,709$ 47,186,254$
CLEVELAND COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
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1. Summary of Significant Accounting Policies
A. Reporting Entity
Cleveland County is a subdivision of the State of Oklahoma created by the Oklahoma Constitution and regulated by Oklahoma Statutes. The accompanying financial statement presents the receipts, disbursements, and changes in cash balances of the total of all funds under the control of the primary government. The general fund is the county’s general operating fund, accounting for all financial resources except those required to be accounted for in another fund, where its use is restricted for a specified purpose. Other funds established by statute and under the control of the primary government are also presented. The County Treasurer collects and remits material amounts of intergovernmental revenues and ad valorem tax revenue for other budgetary entities, including emergency medical districts, libraries, school districts, and cities and towns. The cash receipts and disbursements attributable to those other entities do not appear in funds on the County’s financial statement; those funds play no part in the County’s operations. Any trust or agency funds maintained by the County are not included in this presentation. B. Fund Accounting
The County uses funds to report on receipts, disbursements, and changes in cash balances. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. Following are descriptions of the county funds included as combining information within the financial statement:
County General Fund – accounts for the general operations of the government. County Highway Fund – accounts for state, local, and miscellaneous receipts and disbursements are for the purpose of constructing and maintaining county roads and bridges. County Health – accounts for monies collected on behalf of the County Health Department from ad valorem taxes and state and local revenues. Resale Property – accounts for the collection of interest and penalties on delinquent taxes and the disposition of same as restricted by state statute. Sheriff Service Fee – accounts for the collection and disbursement of Sheriff process service fees as restricted by state statute.
CLEVELAND COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
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Sheriff Revolving – accounts for collections received for reimbursement of salaries and housing prisoners.
County Treasurer Certification Fee – accounts for the collection of fees by the County Treasurer for mortgage tax certificates and disbursements as restricted by state statute. County Clerk Lien Fee – accounts for lien collections and disbursements as restricted by state statute. County Clerk Preservation – accounts for fees collected for instruments filed in the County Clerk’s office as restricted by state statute for preservation of records. Bridge Capital Improvement Fund – accounts for state monies received for the construction and/or improvements of bridges within the County. County Sheriff Courthouse Security Service Fee – accounts for fees received from the Court Clerk and disbursed for courthouse security. Sales Tax – accounts for the collections of county sales tax to be disbursed in accordance with sales tax ballot. Cleveland County Justice Center – accounts for monies received and disbursed for the operation of the Justice Center. Community Development Block Grant Disaster Recovery – accounts for federal grant monies received and disbursed as restricted by the grant agreement with the Oklahoma Department of Commerce. Highway Community Service – accounts for the collection of funding through the Oklahoma Department of Corrections and the disbursements are for administrative expenses and supervision of offenders. Sheriff Drug Fund – accounts for the collection of the Sheriff’s percentage of drug forfeitures and disbursements are restricted by state statute. Sheriff Environmental Award – accounts for grant monies received and fines collected. Disbursements are restricted by grant agreement. Sheriff Jail Fund – accounts for the jail bond fees received from the Court Clerk and disbursed for the operation of the jail. Sheriff Commissary – accounts for monies received from inmates for purchases from the County’s commissary and disbursements as restricted by state statute.
CLEVELAND COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
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Sheriff Federal Share Revenue – accounts for the collection of a percentage of seized assets and disbursed for law enforcement purposes. Sheriff Donations – accounts for donations made to the Sheriff’s office and disbursements can be used for the lawful operation of the office.
Sheriff Justice Assistance Grant – accounts for grant monies received and disbursed as restricted by the grant agreement. Sheriff Property Forfeiture – accounts for proceeds from property forfeitures and disbursements as restricted by state statute. County Commissioner Building Fund – accounts for proceeds from the sale of county-owned real estate and disbursed as restricted by state statute. County Assessor Revolving – accounts for the collection of fees for copies restricted by state statute. Child Abuse Prevention – accounts for monies received from jury decisions to aid in the prevention of child abuse. Saferoom FEMA Grant – accounts for grant monies received and disbursed as restricted by the grant agreement. Sheriff Criminal Alien Assistance Grant – accounts for grant monies received and disbursed as restricted by the grant agreement. Local Emergency Planning Committee – accounts for grant monies received and disbursed as restricted by the grant agreement. County Fair Board – accounts for the collection of revenue generated from building rent, booth rental, and other fees. Disbursements are for the operation of the County Fair Board. County Sinking – accounts for the payment of interest and principal on the matured portion of long-term bonded debt and civil judgments. District Attorney Incarceration Costs – accounts for the collection of incarceration fees assessed as court costs and collected by the Court Clerk. Disbursements are for the lawful operation of the office. Hazard Mitigation Grant – accounts for grant monies received and disbursed as restricted by the grant agreement.
CLEVELAND COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
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Cleveland County Anna McBride Court – accounts for grant monies received and disbursed as restricted by the grant agreement. County Bridge and Road Improvement Fund – accounts for monies collected by the state to improve county roads and bridges. First Choice Recovery – accounts for grant monies received and disbursed as restricted by the grant agreement. S.T.O.P. Violence Against Women – accounts for federal grant funds passed through the District Attorney’s Council for the purpose of providing services to victims of domestic violence. Cleveland County Access to Recovery – accounts for grant monies received and disbursed as restricted by the grant agreement. Sheriff Mobile Command Center – accounts for donations received by Cleveland County Sheriff’s office to purchase a mobile command center for disasters. Safe Room Grant – accounts for the receipt of grant monies in the form of reimbursements for safe rooms. Early Settlement Fund – accounts for the receipt of salary reimbursements from the State of Oklahoma Supreme Court. Fairgrounds – accounts for the receipt of revenue generated from building rent, booth rental, and other fees. Disbursements are for the operation of the fairgrounds. Sheriff Reserve Deputy Donations – accounts for the receipt of donations and disbursed for Sheriff Reserve Deputy equipment.
C. Basis of Accounting
The financial statement is prepared on a basis of accounting wherein amounts are recognized when received or disbursed. This basis of accounting differs from accounting principles generally accepted in the United States of America, which require revenues to be recognized when they become available and measurable or when they are earned, and expenditures or expenses to be recognized when the related liabilities are incurred. This regulatory basis financial presentation is not a comprehensive measure of economic condition or changes therein. Title 19 O.S. § 171 specifies the format and presentation for Oklahoma counties to present their financial statement in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) or on a regulatory basis. The County has elected to present their financial statement on a regulatory basis in conformity with Title 19 O.S. § 171. County
CLEVELAND COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
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governments (primary only) are required to present their financial statements on a fund basis format with, at a minimum, the general fund and all other county funds, which represent ten percent or greater of total county revenue with all other funds included in the audit presented in the aggregate in a combining statement. However, the County has elected to present all funds included in the audit in the Statement of Receipts, Disbursements, and Changes in Cash Balances—Regulatory Basis. D. Budget
Under current Oklahoma Statutes, a general fund and a county health department fund are the only funds required to adopt a formal budget. On or before May 31 of each year, each officer or department head submits an estimate of needs (budget) to the governing body. The budget is approved for the respective fund by office, or department and object. Within weeks, the County Budget Board may approve changes of appropriations within the fund by office or department and object. E. Cash and Investments
For the purposes of financial reporting, “Ending Cash Balances, June 30” includes cash and cash equivalents and investments as allowed by statutes. The County pools the cash of its various funds in maintaining its bank accounts. However, cash applicable to a particular fund is readily identifiable on the County’s books. The balance in the pooled cash accounts is available to meet current operating requirements.
State statutes require financial institutions with which the County maintains funds to deposit collateral securities to secure the County’s deposits. The amount of collateral securities to be pledged is established by the County Treasurer; this amount must be at least the amount of the deposit to be secured, less the amount insured (by, for example, the FDIC). The County Treasurer has been authorized by the County’s governing board to make investments. Allowable investments are outlined in statutes 62 O.S. § 348.1 and § 348.3. All investments must be backed by the full faith and credit of the United States Government, the Oklahoma State Government, fully collateralized, or fully insured. All investments as classified by state statute are nonnegotiable certificates of deposit. Nonnegotiable certificates of deposit are not subject to interest rate risk or credit risk.
2. Ad Valorem Tax
The County's property tax is levied each October 1 on the assessed value listed as of January 1 of the same year for all real and personal property located in the County, except certain exempt property. Assessed values are established by the County Assessor within the prescribed guidelines established by the Oklahoma Tax Commission and the State Equalization Board. Title 68 O.S. §
CLEVELAND COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
10
2820.A. states, ". . . Each assessor shall thereafter maintain an active and systematic program of visual inspection on a continuous basis and shall establish an inspection schedule which will result in the individual visual inspection of all taxable property within the county at least once each four (4) years." Taxes are due on November 1 following the levy date, although they may be paid in two equal installments. If the first half is paid prior to January 1, the second half is not delinquent until April 1. The County Treasurer, according to the law, shall give notice of delinquent taxes and special assessments by publication once a week for two consecutive weeks at any time after April 1, but prior to the end of September following the year the taxes were first due and payable. Unpaid real property taxes become a lien upon said property after the treasurer has perfected the lien by public notice. Unpaid delinquent personal property taxes are usually published in May. If the taxes are not paid within 30 days from publication, they shall be placed on the personal tax lien docket.
3. Other Information
A. Pension Plan Plan Description. The County contributes to the Oklahoma Public Employees Retirement Plan (the Plan), a cost-sharing, multiple-employer defined benefit pension plan administered by the Oklahoma Public Employees Retirement System (OPERS). Benefit provisions are established and amended by the Oklahoma Legislature. The Plan provides retirement, disability, and death benefits to Plan members and beneficiaries. Title 74, Sections 901 through 943, as amended, establishes the provisions of the Plan. OPERS issues a publicly available financial report that includes financial statements and supplementary information. That report may be obtained by writing OPERS, P.O. Box 53007, Oklahoma City, Oklahoma 73105 or by calling 1-800-733-9008. Funding Policy. The contribution rates for each member category are established by the Oklahoma Legislature and are based on an actuarial calculation which is performed to determine the adequacy of contribution rates. B. Other Post Employment Benefits (OPEB) In addition to the pension benefits described in the Pension Plan note, OPERS provides post-retirement health care benefits of up to $105 each for retirees who are members of an eligible group plan. These benefits are funded on a pay-as-you-go basis as part of the overall retirement benefit. OPEB expenditure and participant information is available for the state as a whole; however, information specific to the County is not available nor can it be reasonably estimated.
CLEVELAND COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
11
C. Contingent Liabilities Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, primarily the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable fund. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time; although, the County expects such amounts, if any, to be immaterial. As of the end of the fiscal year, there were no claims or judgments that would have a material adverse effect on the financial condition of the County; however, the outcome of any lawsuit would not be determinable. D. Sales Tax On December 9, 2008 the voters of Cleveland County approved a one-fourth of one cent (1/4%) sales tax on gross receipts or proceeds on certain sales, to terminate at twenty (20) years from the effective date of the tax or at the date of retirement of any debt incurred related thereto, whichever occurs earlier. Such tax is to be used for design, construction, financing, furnishings, capital facilities and improvements, equipment, fixtures, site preparation, street improvements, and continuing maintenance and operation expenses for a new Cleveland County Detention Facility to be located in Cleveland County; authorizing the pledging of the sales tax for debt service; determining a effective date; making provisions severable; and declaring an emergency. These funds are accounted for in the Sales Tax fund. E. Tax Abatements
The County is subject to ad valorem tax abatements granted by the State of Oklahoma in accordance with the Oklahoma Constitution, Article 10 Section 6B for qualifying manufacturing concern—ad valorem tax exemption. Under this program, a five-year ad valorem tax exemption exempts all real and personal property that is necessary for the manufacturing of a product and facilities engaged in research and development which meet the requirements set by the Oklahoma Constitution and statutes. Under Title 68 O.S. § 2902, in exchange for the five-year exemption, qualifying manufacturing concerns must meet certain minimum investment requirements for construction, acquisition, or expansion of a manufacturing facility. In addition, there are general minimum payroll requirements that must be met and the qualifying manufacturing concern must offer basic health benefit plans to all full-time employees within 180 days of employment. The County had $71,722 of ad valorem taxes abated under this program for the fiscal year ended June 30, 2016. The State has an Ad Valorem Reimbursement Fund in accordance with Title 62 O.S. § 193 that is used to reimburse the County for the loss of revenue. Monies apportioned to this fund by the State
CLEVELAND COUNTY, OKLAHOMA NOTES TO THE FINANCIAL STATEMENT
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
12
also may be transferred to other state funds or otherwise expended as directed by the Legislature. In the event monies apportioned to the Fund are insufficient to pay all claims for reimbursement, claims for reimbursement for loss of revenue due to manufacturing exemptions of ad valorem taxes shall be paid first, and any remaining funds shall be distributed proportionally among the counties making claims for reimbursement for loss of revenue for school district exemptions. F. Interfund Transfer
During the fiscal year, the County made the following transfer between cash funds:
• $407,108 was transferred from County Fair Board fund to create the Fairgrounds fund. G. Special Items
Operational Audit The State Auditor and Inspector’s Office conducted an Operational Audit concerning the Cleveland County Sheriff’s Office (CCSO) Operations for the period of July 1, 2011 through June 30, 2016. The audit request contained several objectives including determining the total funding available for the operation of CCSO which includes the F. Dewayne Beggs Detention Center (Jail). The report was released on September 11, 2017 and is located at www.sai.ok.gov.
OTHER SUPPLEMENTARY INFORMATION
CLEVELAND COUNTY, OKLAHOMA COMPARATIVE SCHEDULE OF RECEIPTS, EXPENDITURES, AND
CHANGES IN CASH BALANCES—BUDGET AND ACTUAL—BUDGETARY BASIS—GENERAL FUND
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
13
Budget Actual VarianceBeginning Cash Balances 16,437,442$ 16,437,442$ -$ Less: Prior Year Outstanding Warrants (76,296) (76,296) - Less: Prior Year Encumbrances (1,228,098) (1,084,047) 144,051 Beginning Cash Balances, Budgetary Basis 15,133,048 15,277,099 144,051
Total Receipts, Budgetary Basis 23,372,005 23,408,245 36,240
Total Expenditures, Budgetary Basis 38,505,053 21,325,485 17,179,568
Excess of Receipts and Beginning CashBalances Over Expenditures, Budgetary Basis -$ 17,359,859 17,359,859$
Reconciliation to Statement of Receipts,Disbursements, and Changes in Cash Balances Add: Cancelled Warrants 173 Add: Current Year Outstanding Warrants 1,352,407 Add: Current Year Encumbrances 403,941 Ending Cash Balance 19,116,380$
General Fund
CLEVELAND COUNTY, OKLAHOMA COMPARATIVE SCHEDULE OF RECEIPTS, EXPENDITURES, AND
CHANGES IN CASH BALANCES—BUDGET AND ACTUAL—BUDGETARY BASIS—COUNTY HEALTH DEPARTMENT FUND
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
14
Budget Actual VarianceBeginning Cash Balances 8,794,477$ 8,794,477$ -$ Less: Prior Year Outstanding Warrants (22,395) (22,395) - Less: Prior Year Encumbrances (2,365,755) (2,283,887) 81,868 Beginning Cash Balances, Budgetary Basis 6,406,327 6,488,195 81,868
Total Receipts, Budgetary Basis 5,138,561 5,119,675 (18,886)
Total Expenditures, Budgetary Basis 11,544,888 5,460,035 6,084,853
Excess of Receipts and Beginning CashBalances Over Expenditures,Budgetary Basis -$ 6,147,835 6,147,835$
Reconciliation to Statement of Receipts,Disbursements, and Changes in Cash BalancesAdd: Current Year Encumbrances 858,240 Add: Current Year Outstanding Warrants 2,460 Ending Cash Balance 7,008,535$
County Health Department Fund
CLEVELAND COUNTY, OKLAHOMA NOTE TO OTHER SUPPLEMENTARY INFORMATION
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
15
1. Budgetary Schedules
The Comparative Schedules of Receipts, Expenditures, and Changes in Cash Balances—Budget and Actual—Budgetary Basis for the General Fund and the County Health Department Fund present comparisons of the legally adopted budget with actual data. The "actual" data, as presented in the comparison of budget and actual, will differ from the data as presented in the Statement of Receipts, Disbursements, and Changes in Cash Balances (with Combining Information) because of adopting certain aspects of the budgetary basis of accounting and the adjusting of encumbrances and outstanding warrants to their related budget year. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary integration in these funds. At the end of the year unencumbered appropriations lapse.
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
CLEVELAND COUNTY, OKLAHOMA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
16
Federal Grantor/Pass-ThroughGrantor/Program Title
FederalCFDA
Number
Pass-ThroughGrantor'sNumber
Federal Expenditures
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENTPassed Through State Department of Commerce: Huricane Sandy Community Development Block Grant Disaster
Recovery Grants (CDBG-DR) 14.269 16232 CDBG-DR 13 740,590$ Huricane Sandy Community Development Block Grant Disaster
Recovery Grants (CDBG-DR) 14.269 16565 CDBG-DR 13 619,016 Total U.S. Department of Housing and Urban Development 1,359,606
U.S. DEPARTMENT OF THE INTERIORDirect Grant:
Payments in Lieu of Taxes 15.226 N/A 32,724 Total U.S. Department of the Interior 32,724
U.S. DEPARTMENT OF JUSTICEDirect Grant:
Violence Against Women Formula Grants 16.588 N/A 30,653 Passed Through the District Attorney's Council:
State Criminal Alien Assistance Program 16.606 N/A 1,687 Edward Byrne Memorial Justice Assistance Grant Program 16.738 N/A 2,697
Total U.S. Department of Justice 35,037
U.S. DEPARTMENT OF HOMELAND SECURITYPassed Through the Oklahoma Department of Emergency Management:
Disaster Grants - Public Assistance (Presidentially Declared Disasters) 97.036 DR-4222 59,128 Fire Management Assistance Grant 97.046 N/A 37,692
Total U.S. Department of Homeland Security 96,820
Total Expenditures of Federal Awards 1,524,187$
CLEVELAND COUNTY, OKLAHOMA NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
17
Basis of Presentation The schedule of expenditures of federal awards includes the federal grant activity of Cleveland County, and is presented on the cash basis of accounting. The information in this schedule is presented in accordance with the requirements of the Uniform Guidance. Indirect Cost Rate Cleveland County has elected to not use the 10 percent de minimis cost rate allowed for by 2 CFR§ 200.414(f).
INTERNAL CONTROL AND COMPLIANCE SECTION
Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With
Government Auditing Standards TO THE OFFICERS OF CLEVELAND COUNTY, OKLAHOMA We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the combined total—all funds of the accompanying Combined Statement of Receipts, Disbursements, and Changes in Cash Balances (with Combining Information) of Cleveland County, Oklahoma, as of and for the year ended June 30, 2016, and the related notes to the financial statement, which collectively comprises Cleveland County’s basic financial statement, prepared using accounting practices prescribed or permitted by Oklahoma state law, and have issued our report thereon dated May 28, 2019. Our report included an adverse opinion on the financial statement because the statement is prepared using accounting practices prescribed or permitted by Oklahoma state law, which is a basis of accounting other than accounting principles generally accepted in the United States of America. However, our report also included our opinion that the financial statement does present fairly, in all material respects, the receipts, disbursements, and changes in cash balances – regulatory basis of the County for the year ended June 30, 2016, on the basis of accounting prescribed by Oklahoma state law, described in Note 1. Internal Control Over Financial Reporting
In planning and performing our audit of the financial statement, we considered Cleveland County’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statement, but not for the purpose of expressing an opinion on the effectiveness of Cleveland County’s internal control. Accordingly, we do not express an opinion on the effectiveness of Cleveland County’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did identify certain deficiencies in internal control, described in the accompanying schedule of findings and questioned costs that we consider to be material weaknesses: 2016-008 and 2016-012
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Compliance and Other Matters
As part of obtaining reasonable assurance about whether Cleveland County’s financial statement is free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed an instance of noncompliance or other matters that is required to be reported under Government Auditing Standards and which is described in the accompanying schedule of findings and questioned costs as item 2016-012. We noted certain matters regarding statutory compliance that we reported to the management of Cleveland County, which are included in Section 4 of the schedule of findings and questioned costs contained in this report. Cleveland County’s Response to Findings
Cleveland County’s response to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. Cleveland County’s responses were not subjected to the auditing procedures applied in the audit of the financial statement and, accordingly, we express no opinion on the response. Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. This report is also a public document pursuant to the Oklahoma Open Records Act (51 O.S. § 24A.1 et seq.), and shall be open to any person for inspection and copying.
CINDY BYRD, CPA OKLAHOMA STATE AUDITOR & INSPECTOR May 28, 2019
Independent Auditor's Report on Compliance for Each Major Federal Program
and on Internal Control Over Compliance Required by the Uniform Guidance
TO THE OFFICERS OF CLEVELAND COUNTY, OKLAHOMA Report on Compliance for Each Major Federal Program
We have audited the compliance of Cleveland County, Oklahoma, with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on Cleveland County’s major federal program for the year ended June 30, 2016. Cleveland County’s major federal program is identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility
Management is responsible for compliance with the requirements of federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor’s Responsibility
Our responsibility is to express an opinion on compliance for each of the County’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Cleveland County’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Cleveland County’s compliance. Opinion on Each Major Federal Program
In our opinion, Cleveland County, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended June 30, 2016.
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Other Matters
The results of our auditing procedures disclosed other instances of noncompliance, which are required to be reported in accordance with the Uniform Guidance and which are described in the accompanying schedule of findings and questioned costs as items 2016-005, 2016-006, and 2016-007. Our opinion on each major federal program is not modified with respect to these matters. Cleveland County’s response to the noncompliance findings identified in our audit is described in the accompanying schedule of findings and questioned costs. Cleveland County’s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. Report on Internal Control Over Compliance
Management of Cleveland County is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Cleveland County’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Cleveland County’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. We identified certain deficiencies in internal control over compliance, as described in the accompanying schedule of findings and questioned costs as items 2016-001, 2016-002, and 2016-003 that we consider to be material weaknesses. Cleveland County’s Response to Findings
Cleveland County’s response to the internal control over compliance findings identified in our audit are described in the accompanying schedule of findings and questioned costs. Cleveland County’s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.
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The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. This report is also a public document pursuant to the Oklahoma Open Records Act (51 O.S., section 24A.1 et seq.), and shall be open to any person for inspection and copying.
CINDY BYRD, CPA OKLAHOMA STATE AUDITOR & INSPECTOR May 28, 2019
CLEVELAND COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
23
SECTION 1—Summary of Auditor’s Results Financial Statements Type of auditor's report issued: ..................... Adverse as to GAAP; unmodified as to statutory presentation Internal control over financial reporting:
• Material weakness(es) identified? ................................................................................................ Yes
• Significant deficiency(ies) identified? .......................................................................................... No Noncompliance material to financial statements noted? ........................................................................... Yes Federal Awards Internal control over major programs:
• Material weakness(es) identified? ................................................................................................ Yes
• Significant deficiency(ies) identified? ....................................................................... None reported Type of auditor's report issued on
compliance for major programs: ........................................................................................... Unmodified Any audit findings disclosed that are required to be reported
in accordance with 2 CFR § 200.516(a) of the Uniform Guidance? .................................................. Yes Identification of Major Programs CFDA Number(s) Name of Federal Program or Cluster
14.269 Hurricane Sandy Community Development Block Grant Disaster Recovery Grants (CDBG-DR)
Dollar threshold used to distinguish between
Type A and Type B programs: .................................................................................................. $750,000 Auditee qualified as low-risk auditee? ....................................................................................................... No
CLEVELAND COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
24
SECTION 2—Findings related to the Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Finding 2016-008 - Inadequate County-Wide Controls (Repeat Finding 2015-001) Condition: Through the process of gaining an understanding of the County’s internal control structure, it was noted that county-wide controls regarding Control Environment, Risk Assessment, Information and Communication, and Monitoring have not been designed. Cause of Condition: Policies and procedures have not been designed and implemented to ensure that an adequate system of county-wide controls exists. Effect of Condition: Without an adequate system of county-wide controls, there is greater risk of a breakdown in control activities which could result in unrecorded transactions, undetected errors, or misappropriation of funds. Recommendation: The Oklahoma State Auditors & Inspector’s Office (OSAI) recommends the County design and implement a system of county-wide procedures to identify and address risks related to financial reporting and to ensure that information is communicated effectively. OSAI also recommends the County design monitoring procedures to assess the quality of performance over time. These procedures should be written policies and procedures and could be included in the County’s policies and procedures handbook. Management Response: Chairman of the Board of County Commissioners: This finding is overly broad and vague. In response to this finding, Cleveland believes that internal controls are adequate. Furthermore, Cleveland County is in the process of implementing a new accounting system which will provide an additional layer of controls to the already existing internal controls. Criteria: Internal control is an integral component of an organization’s management that provides reasonable assurance that the objectives of effectiveness and efficiency of operations, reliability of financial reporting and compliance with laws and regulations are being met. Internal control comprises the plans, methods, and procedures used to meet missions, goals, and objectives. Internal control also serves as the first line of defense in safeguarding assets and preventing and detecting errors and fraud. County management is responsible for designing a county-wide internal control system comprised of Control Environment, Risk Assessment, Information and Communication, and Monitoring for the achievement of these goals. The Control Environment sets the tone of an entity and influences the control consciousness of its people. The Control Environment is the foundation for all other components of internal control and provides structure and discipline. Among the important elements of the control environment are the attitude, awareness, and actions of management, as well as those charged with governance, concerning internal control.
CLEVELAND COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
25
Risk Assessment is a component of internal control which should provide for an assessment of the risks the county faces from both internal and external sources. Once risks have been identified, they should be analyzed for their possible effect. Management then has to formulate an approach for risk management and decide upon the internal control activities required to mitigate those risks and achieve the internal control objectives. Information and Communication is a component of internal control which should provide for a county to run and control its operations. A county must have relevant, reliable information, both financial and nonfinancial. The information should be recorded and communicated to management and others within the county who need it and in a form and within a time frame that enables them to carry out their internal control and operational responsibilities. In addition, the county needs to make sure that the forms of communication are broad-based and that information technology management assures useful, reliable, and continuous communications. Monitoring is a component of internal control which should assess the quality of performance over time and ensure that the findings of audits and other reviews are promptly resolved. Ongoing monitoring occurs during normal operations and includes regular management and supervisory activities, comparisons, reconciliations, and other actions people take in performing their duties. It includes ensuring that management know their responsibilities for internal control and the need to make control monitoring part of their regular operating processes. Proper monitoring will ensure that controls continue to be adequate and function properly. Finding 2016-012 - Inadequate Internal Controls and Noncompliance Over Disbursements and Payroll (Repeat Finding 2015-003) Condition: During observation and testwork, the following exceptions were noted:
• After the accrual of 480 hours of compensatory time, employees are not being paid a cash payment for overtime.
• Of the forty-one (41) disbursements tested, five (5) disbursements were not timely encumbered.
Cause of Condition: Procedures have not been designed and implemented to strengthen internal controls over the disbursement process, or to ensure that accruals do not exceed the limits designated by County policy. Effect of Condition: These conditions resulted in noncompliance with state statute and county policy. These conditions could also result in unrecorded transactions, undetected errors, misappropriation of funds. Recommendation: OSAI recommends that the County implement internal control procedures to ensure compliance with state statute and County policy. Purchase orders should be encumbered before goods or services are ordered in accordance with 19 O.S. § 1505C and compensatory time limits should be enforced to ensure compliance with County policy.
CLEVELAND COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
26
Management Response: Chairman of the Board of County Commissioners: Monthly reports with compensatory balances are provided to each county officer on a monthly basis. Furthermore, compensation time is frequently addressed at the Cleveland County Budget Board monthly meetings. Each elected officer strives to effectively manage compensatory overtime; however, in certain departments inadequate staffing, emergencies and other unforeseen circumstances require employees to incur compensatory time in order to adequately serve the needs of Cleveland County. County Clerk: The purchase orders not timely encumbered were stamped “exception” during the review process. Also, blanket purchase orders would help with pre-encumbering prior to an order being placed and invoiced. Criteria: An important aspect of internal control is the safeguarding of assets. Internal controls over safeguarding of assets constitute a process, affected by the entity’s governing body, management, and other personnel, designed to provide reasonable assurance regarding prevention or untimely detection of unauthorized acquisition, use, or disposition of the entity’s assets and safeguarding assets from loss, damage, or misappropriation. Effective internal controls require that management properly implement procedures to ensure that purchases comply with 19 O.S. § 1505. County policy states: “In the case of law enforcement personnel who are not exempt. Each employee can accumulate up
to 480 hours of compensatory time off. After the accrual of 480 hours of compensatory time, a law enforcement employee will thereafter be paid cash payment for overtime. In all cases where compensatory time off is authorized, once the employee has utilized compensatory time off to reduce the maximum accrual below the applicable limit, then additional overtime will be paid in the form of additional compensatory time off.”
SECTION 3—Independent Auditor's Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance Finding 2016-001 - Inadequate Internal Controls Over the Schedule of Expenditures of Federal Awards (Repeat Finding 2015-005) PASS-THROUGH GRANTOR: Oklahoma Department of Commerce FEDERAL AGENCY: Department of Housing and Urban Development CFDA NO: 14.269 FEDERAL PROGRAM NAME: Hurricane Sandy Community Development Block Grant Disaster Recovery Grants (CDBG-DR) FEDERAL AWARD NUMBER: B-13-DS-40-0001 FEDERAL AWARD YEAR: 2016
CLEVELAND COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
27
CONTROL CATEGORY: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Cash Management, Period of Performance, Procurement and Suspension and Debarment, Reporting and Special Tests and Provisions QUESTIONED COSTS: $-0- Condition: During our review and reconciliation of the Schedule of Expenditures of Federal Awards (SEFA) as initially prepared by the County, we noted the following:
• CFDA #15.226 Payments in Lieu of Taxes expenditures in the amount of $32,724 were not included on the SEFA.
• CFDA #16.588 Violence Against Women Formula Grants expenditures were overstated by $7,658. • CFDA #16.738 Edward Byrne Memorial Justice Assistance Grant Program expenditures in the
amount of $2,697 were not included on the SEFA. • CFDA #97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters)
expenditures in the amount of $59,128 were not included on the SEFA. • CFDA #97.046 – Fire Management Assistance Grant expenditures in the amount of $37,692 were
not included on the SEFA. These errors resulted in the SEFA being understated by $124,583. Cause of Condition: Policies and procedures have not been designed and implemented to ensure accurate reporting of federal grant expenditures. Effect of Condition: This condition resulted in inaccurate reporting of federal grant expenditures on the SEFA. Recommendation: OSAI recommends each office and/or department within the County establish internal controls to ensure accurate reporting of expenditures on the SEFA and to ensure compliance with federal requirements. Management Response: Chairman of the Board of County Commissioners: Cleveland County has purchased the SEFA Module for the new financial system. This system will build the report as transactions occur during the fiscal year. County Treasurer and County Clerk: We are putting together a common list that every department will utilize. This system will require all departments to use the same transaction codes creating uniformity throughout the County. Criteria: 2 CFR 200, Subpart D, §___.302(b) reads as follows:
(b) The financial management system of each non-Federal entity must provide for the following…: (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the CFDA title and number, Federal award
CLEVELAND COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
28
identification number and year, name of the Federal agency, and name of the pass-through entity, if any. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§200.327 Financial reporting and 200.328 Monitoring and reporting program performance. If a Federal awarding agency requires reporting on an accrual basis from a recipient that maintains its records on other than an accrual basis, the recipient must not be required to establish an accrual accounting system. This recipient may develop accrual data for its reports on the basis of an analysis of the documentation on hand. Similarly, a pass-through entity must not require a subrecipient to establish an accrual accounting system and must allow the subrecipient to develop accrual data for its reports on the basis of an analysis of the documentation on hand. (3) Records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. (4) Effective control over, and accountability for, all funds, property, and other assets. The non-Federal entity must adequately safeguard all assets and assure that they are used solely for authorized purposes. See §200.303 Internal controls.
2 CFR § 200.508(b) Auditee responsibilities reads as follows:
The auditee must: Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with §200.510 Financial statements.
2 CFR § 200.510(b) Financial statements reads as follows:
Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended as determined in accordance with §200.502 Basis for determining Federal awards expended. [….]
Further, accountability and stewardship should be overall goals in management’s accounting of federal funds. Internal controls should be designed to monitor compliance with laws and regulations pertaining to grant contracts.
Finding 2016-002 - Inadequate County-Wide Controls Over Major Federal Programs - Hurricane Sandy Community Development Block Grant Disaster Recovery Grants (CDBG-DR) PASS-THROUGH GRANTOR: Oklahoma Department of Commerce FEDERAL AGENCY: Department of Housing and Urban Development CFDA NO: 14.269 FEDERAL PROGRAM NAME: Hurricane Sandy Community Development Block Grant Disaster Recovery Grants (CDBG-DR)
CLEVELAND COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
29
FEDERAL AWARD NUMBER: B-13-DS-40-0001 FEDERAL AWARD YEAR: 2016 CONTROL CATEGORY: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Cash Management, Period of Performance, Procurement and Suspension and Debarment, Reporting and Special Tests and Provisions QUESTIONED COSTS: $-0- Condition: County-wide controls regarding Control Environment, Risk Assessment, Information and Communication, and Monitoring have not been designed and implemented. Cause of Condition: Policies and procedures have not been designed and implemented to ensure the County is in compliance with grant requirements. Effect of Condition: This condition could result in noncompliance with grant requirements. Recommendation: OSAI recommends that the County design and implement a system of internal controls to ensure compliance with grant requirements. Management Response: Chairman of the Board of County Commissioners: The County has contracted with the engineering services company as sub recipient for the administration of the County’s CDBG-DR program. This company is responsible for program delivery and general administration. As a grant administrator, they will ensure that Local, State, and Federal regulations are met. Their responsibilities will include program oversight for the following: Program Oversight: Includes engineering and construction activities and compliance; contractor change orders; labor standards compliance monitoring; contractor payment application approvals; review of environmental studies; submission of and HUD approvals for identified projects. Program Administration: Responsible for the oversight of compliance in eligibility activities, meeting CDBG-DR program national objectives, identification of how each activity addresses a need from the disaster, and prevention of Duplication Benefits from all sources. Program Monitoring: Monitors all procurement and performance review, technical assistance, internal audit functions, reports to prevent fraud, abuse and mismanagement of funds, and monitoring standards and procedures. Criteria: Internal control is an integral component of an organization’s management that provides reasonable assurance that the objectives of effectiveness and efficiency of operations, reliability of financial reporting and compliance with laws and regulations are being met. Internal control comprises the plans, methods, and procedures used to meet missions, goals, and objectives. Internal control also serves as the first line of defense in safeguarding assets and preventing and detecting errors and fraud. County management is responsible for designing a county-wide internal control system comprised of Control
CLEVELAND COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
30
Environment, Risk Assessment, Information and Communication, and Monitoring for the achievement of these goals. The Control Environment is the foundation for all other components of internal control. When management believes that internal controls are important to meeting its goals and objectives and communicates this belief to its employees at all levels, internal controls are more likely to be functioning well. However, if management views internal controls as unrelated to achieving its goals and objectives, or even as an obstacle, it is almost a certainty that this attitude will be held by all employees, despite official statements or policies to the contrary. This understanding by management of the importance of internal controls and the communication of this importance to its employees are key elements of the control environment. Risk Assessment is a component of internal control which should provide for an assessment of the risks the County faces from both internal and external sources. Once risks have been identified, they should be analyzed for their possible effect. Management then has to formulate an approach for risk management and decide upon the internal control activities required to mitigate those risks and achieve the internal control objectives of efficient and effective operations, reliable financial reporting, and compliance with laws and regulations. For a county to run and control its operations, it must have relevant, reliable information, both financial and nonfinancial. That information should be recorded and communicated to management and others within the County who need it and in a form and within a time frame that enables them to carry out their internal control and operational responsibilities. In addition, the county needs to make sure that the forms of communications are broad-based and that information technology management assures useful, reliable, and continuous communications. Monitoring is a component of internal control which should assess the quality of performance over time and ensure that the findings of audits and other reviews are promptly resolved. Ongoing monitoring occurs during normal operations and includes regular management and supervisory activities, comparisons, reconciliations, and other actions people take in performing their duties. It includes ensuring that management know their responsibilities for internal control and the need to make control monitoring part of their regular operating process. Finding 2016-003 - Inadequate Internal Controls Over Major Federal Programs - Hurricane Sandy Community Development Block Grant Disaster Recovery Grants (CDBG-DR) PASS-THROUGH GRANTOR: Oklahoma Department of Commerce FEDERAL AGENCY: Department of Housing and Urban Development CFDA NO: 14.269 FEDERAL PROGRAM NAME: Hurricane Sandy Community Development Block Grant Disaster Recovery Grants (CDBG-DR) FEDERAL AWARD NUMBER: B-13-DS-40-0001 FEDERAL AWARD YEAR: 2016
CLEVELAND COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
31
CONTROL CATEGORY: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Cash Management, Procurement and Suspension and Debarment, Reporting, Special Tests and Provisions QUESTIONED COSTS: $-0- Condition: During the process of documenting the County’s internal controls regarding federal disbursements, we noted that the County has not established internal controls to ensure compliance with the following compliance requirements: Activities Allowed/Unallowed, Allowable Costs/Cost Principles, Cash Management, Procurement and Suspension and Debarment, Reporting, and Special Tests and Provisions. Cause of Condition: Policies and procedures have not been designed and implemented to ensure the County is in compliance with grant requirements. Effect of Condition: This condition could result in noncompliance with grant requirements and a loss of federal funds to the County. Recommendation: OSAI recommends that the County gain an understanding of the requirements for these programs and implement a system of internal controls to ensure compliance with grant requirements. Management Response: Chairman of the Board of County Commissioners: The County hired a company that instituted the following controls system to guide program administration. Internal Controls: A program has developed policies and procedures that define staff qualifications and duties, lines of authority, separation of functions. These policies and procedures include written accounting procedures for approving and recording transactions, where financial records are periodically compared to actual assets and liabilities to check for completeness and accuracy. Accounting Controls: They maintain an adequate financial accounting tracking system for the County’s CDBG-DR program, the basic elements of which include the following: (a) a chart of accounts, (b) a general ledger, (c) a cash disbursement journal, (d) payable and receivable ledgers, and (e) job cost journals for all construction and non-construction activities. These trackers provide reliable, complete, and up-to-date information about sources and uses of all funds. Cost Controls: They have instituted a clearly defined set of standards and procedures for determining the reasonableness, allow ability and allocable. Documentation Controls: They maintain up-to-date files of original source documentation (receipts, invoices, canceled checks, etc.) for all transactions, including those involving obligations incurred and the use of CDBG-DR program income and interest. Budget Controls: They maintain an up-to-date budget for all funded activities and has performed a comparison of that budget with actual expenditures for each of its own budget categories. These controls regularly compare progress toward the achievement of goals with the rate of expenditure of program funds.
CLEVELAND COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
32
Criteria: Circular A-133 § .300 (b) states that the auditee shall: “Maintain internal controls over Federal programs that provides reasonable assurance that the auditee is managing Federal awards in compliance with laws, regulations, and the provisions of contracts or grant agreements that could have material effect on each of its Federal programs.”
2 CFR § 200.303 Internal Controls states that:
“The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). (b) Comply with Federal statutes, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. (d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. (e) Take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, state, local, and tribal laws regarding privacy and obligations of confidentiality.”
Further, accountability and stewardship should be overall goals in management’s accounting of federal funds. Internal controls should be designed to monitor compliance with laws and regulations pertaining to grant contracts. Finding 2016-005 - Noncompliance with Cash Management - Hurricane Sandy Community Development Block Grant Disaster Recovery Grants (CDBG-DR) PASS-THROUGH GRANTOR: Oklahoma Department of Commerce FEDERAL AGENCY: Department of Housing and Urban Development CFDA NO: 14.269 FEDERAL PROGRAM NAME: Hurricane Sandy Community Development Block Grant Disaster Recovery Grants (CDBG-DR) FEDERAL AWARD NUMBER: B-13-DS-40-0001 FEDERAL AWARD YEAR: 2016 CONTROL CATEGORY: Cash Management QUESTIONED COSTS: $-0-
CLEVELAND COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
33
Condition: During the review of 100% of federal disbursements the following was noted:
• Three (3) disbursements totaling $37,750 were not made within 15 days of availability. • The County did not track interest earned on cash advances. • $1,977.29 in interest was not remitted to the Federal agency.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure the County is in compliance with federal grant requirements. Effect of Condition: These conditions resulted in noncompliance with federal grant requirements. Recommendation: OSAI recommends the County gain an understanding of requirements for federal programs and implement internal controls to ensure compliance with these requirements. Management Response: Chairman of the Board of County Commissioners: Cleveland County is utilizing its accounting and purchasing system as required by Oklahoma Statute to track its CDBG-DR funds. On April 19, 2016, Cleveland County submitted a letter explaining how its accounting and purchasing system is required to flow by law. Due to the nature of the County’s accounting system, Cleveland County requested HUD and Oklahoma Department of Commerce for a Waiver Request of Cash on Hand to waive the 15-day release of funds process. The County currently uses its General Accounts appropriation ledger to track all advances received from the State. A separate tracker has been developed to track interest has earned on County CDBG-DR funds. Any money not expended after the maximum time allowed is considered excess cash on hand and has been returned to ODCO/HUD. Criteria: Circular A-133 § .300 states in part that the auditee shall:
“(b) Maintain internal controls over Federal programs that provides reasonable assurance that the auditee is managing Federal awards in compliance with laws, regulations, and the provisions of contracts or grant agreements that could have material effect on each of its Federal programs. (c) Comply with laws, regulations, and the provisions of contracts or grant agreements related to each of its Federal programs.” The County’s contract with the Oklahoma Department of Commerce states that: “All funds received shall be expended within fifteen (15) days of receipt.” 2 CFR 200 Compliance Supplement Part 3.1 Cash Management states that: “Except for interest earned on advances of funds exempt under the Intergovernmental Cooperation Act (31 USC 6501 et seq.) and the Indian Self-Determination Act (23 USC 450), interest earned by local government and Indian tribal government grantees and subgrantees on advances is required to be submitted promptly, but at least quarterly, to the Federal agency. Up to $100 per year may be kept for administrative expenses.”
CLEVELAND COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
34
Finding 2016-006 - Noncompliance with Procurement and Suspension and Debarment - Hurricane Sandy Community Development Block Grant Disaster Recovery Grants (CDBG-DR) PASS-THROUGH GRANTOR: Oklahoma Department of Commerce FEDERAL AGENCY: Department of Housing and Urban Development CFDA NO: 14.269 FEDERAL PROGRAM NAME: Hurricane Sandy Community Development Block Grant Disaster Recovery Grants (CDBG-DR) FEDERAL AWARD NUMBER: B-13-DS-40-0001 FEDERAL AWARD YEAR: 2016 CONTROL CATEGORY: Procurement and Suspension and Debarment QUESTIONED COSTS: $-0- Condition: The County did not verify that its contractors were not debarred, suspended, or otherwise excluded before entering into covered transactions with them. Cause of Condition: Policies and procedures have not been designed and implemented to ensure the County is in compliance with grant requirements. Effect of Condition: This condition resulted in noncompliance with grant requirements. Recommendation: OSAI recommends the County gain an understanding of requirements for federal programs and implement internal controls to ensure compliance with the requirements. Management Response: Chairman of the Board of County Commissioners: Initially, the County procured an engineering company to administer its CDBG-DR program. The County staff has been actively monitoring their performance and its administration roles for the County CDBG-DR program. Subsequently, the County staff recognized the engineering company’s deficiencies and therefore procured another engineering company for the administration of the County’s CDBG-DR program. The new engineering company is responsible for program delivery and general administration. Their grant administration will ensure the Local, State, and Federal regulations are met. Action to correct this issue took place in January 2017. At that time, the initial engineering company’s debarment status was verified and it was determined the contractor was not debarred and was not delinquent for any federal debt. Criteria: Circular A-133 § .300 states in part that the auditee shall:
“(b) Maintain internal controls over Federal programs that provides reasonable assurance that the auditee is managing Federal awards in compliance with laws, regulations, and the provisions of contracts or grant agreements that could have material effect on each of its Federal programs. (c) Comply with laws, regulations, and the provisions of contracts or grant agreements related to each of its Federal programs.”
CLEVELAND COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
35
Circular A-102 1.d. states that: “Debarment and Suspension. Federal agencies shall not award assistance to applicants that are debarred or suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs under Executive Order 12549. Agencies shall establish procedures for the effective use of the List of Parties Excluded from Federal Procurement or Nonprocurement programs to assure that they do not award assistance to listed parties in violation of the Executive Order. Agencies shall also establish procedures to provide for effective use and/or dissemination of the list to assure that their grantees and subgrantees (including contractors) at any tier do not make awards in violation of the nonprocurement debarment and suspension common rule.”
2 CFR § 200.303 states that: “The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). (b) Comply with Federal statutes, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. (d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. (e) Take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, state, local, and tribal laws regarding privacy and obligations of confidentiality.”
2 CFR § 180.300 states, “When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by:
(a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person.”
Finding 2016-007 - Noncompliance with Reporting - Hurricane Sandy Community Development Block Grant Disaster Recovery Grants (CDBG-DR) PASS-THROUGH GRANTOR: Oklahoma Department of Commerce FEDERAL AGENCY: Department of Housing and Urban Development
CLEVELAND COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
36
CFDA NO: 14.269 FEDERAL PROGRAM NAME: Hurricane Sandy Community Development Block Grant Disaster Recovery Grants (CDBG-DR) FEDERAL AWARD NUMBER: B-13-DS-40-0001 FEDERAL AWARD YEAR: 2016 CONTROL CATEGORY: Reporting QUESTIONED COSTS: $-0- Condition: Of the seven (7) disbursements for this program, five (5) reflected that the County did not submit expenditure reports by the 10th day of the month. Cause of Condition: Policies and procedures have not been designed and implemented to ensure state and federal reporting requirements are made in accordance with federal compliance requirements. Effect of Condition: This condition resulted in noncompliance with state and federal grant requirements. Recommendation: OSAI recommends the County gain an understanding of requirements for these programs and implement internal controls to ensure compliance with these requirements. Management Response: Chairman of the Board of County Commissioners: The County has been working with ODOC staff when additional assistance is needed and especially efforts are made to ensure the County CDBG-DR program expenditures report and other State and HUD requirements are submitted on time and as required. Criteria: Circular A-133 § .300 states in part that the auditee shall:
“(b) Maintain internal controls over Federal programs that provides reasonable assurance that the auditee is managing Federal awards in compliance with laws, regulations, and the provisions of contracts or grant agreements that could have material effect on each of its Federal programs. (c) Comply with laws, regulations, and the provisions of contracts or grant agreements related to each of its Federal programs.”
2 CFR § 200.303 states that: “The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). (b) Comply with Federal statutes, regulations, and the terms and conditions of the Federal awards.
CLEVELAND COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
37
Further, the County’s contracts with the Oklahoma Department of Commerce states that: “The Contractor is required to submit a Monthly Expenditure Report by the tenth (10th) of the month following the receipt and/or expenditure of funds.”
SECTION 4—This section contains certain matters not required to be reported in accordance with Government Auditing Standards. However, we believe these matters are significant enough to bring to management’s attention. We recommend that management consider these matters and take appropriate corrective action. Finding 2016-010 Inadequate Internal Controls and Noncompliance Over Inmate Trust Fund Checking Account and Sheriff Commissary Fund (Repeat Finding 2004-002, 2004-003, 2005-002, 2005-003, 2006-004, 2006-005, 2007-002, 2008-004, 2009-003, 2010-003, 2011-002, 2012-002, 2013-002, 2014-002, 2015-006) Condition: We noted the following weaknesses/ deficiencies regarding the Inmate Trust Fund Checking Account and Sheriff Commissary Fund:
• Jail bookkeeping personnel does not understand all aspects of the Inmate Trust Fund Checking Account reconciliation process; allowing the inmate trust financial system vendor to adjust and make reconciling items to the monthly reconciliation.
• One employee receipts monies, prepares deposits, posts deposits, controls bank statements, prepares disbursements, prints checks, has administrative rights to software program, and performs the reconciliation for the Inmate Trust Fund Checking Account.
• Bank reconciliations are not timely preformed and the inmate trust ledgers have not been reconciled to the bank account. Additionally, as of January 31, 2017 the Trust Fund bank account had an insufficient fund balance of $16,499 and as of March 21, 2017 had an insufficient fund balance of $20,829 after changing bank accounts due to new commissary vendor.
• Upon further review of the Inmate Trust Fund the following was noted: o There is no policy or procedure regarding unclaimed funds. o Inmate trust fund ledger indicated released inmates still had a balance on the ledger even
though a check cleared the bank. o Journal entries are used when bank statements are being reconciled for unknown variances
and without verifying the amount to the Inmate Trust Fund Ledger. • Collections were not deposited into the Inmate Trust Fund Checking Account daily. • Out of 100% of disbursements tested for FY 16:
o Disbursements issued by debit cards are not monitored, they can be authorized by one employee, all employees have authority to issue cards, and debit card transactions are not reviewed or reconciled to the inmate trust ledgers.
• The County Sheriff’s office does not file an annual report for the Sheriff Commissary Fund with the Board of County Commissioners by January 15th of each year.
Cause of Condition: Policies and procedures have not been designed and implemented for proper administration regarding the Inmate Trust Fund Checking Account and Sheriff Commissary Fund.
CLEVELAND COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
38
Effect of Condition: These conditions resulted in noncompliance with state statutes and an insufficient fund balance within the Inmate Trust Fund Checking Account. In addition, without proper accounting and safeguarding of the Inmate Trust Fund Checking Account and Sheriff Commissary Fund, there is an increased risk of misappropriation of funds. Recommendation: OSAI recommends the following:
• Κey duties and responsibilities should be segregated among different individuals to reduce the risk of error or fraud. No one individual should have the ability to authorize transactions, have physical custody of assets, and record transactions.
• Inmate Trust Fund Checking Account monies should be maintained in a manner that reflects each inmate’s trust deposits, disbursements, and account balances. The inmates’ trust fund balances should be reconciled to the bank statements each month. The inmate trust financial system vendor should not have authority to adjust or change the monthly reconciliation.
• Bank reconciliations should be performed on a monthly basis. • Procedures should be developed for unclaimed inmate funds that are outstanding more than six (6)
months in accordance with Title 22 O.S. § 1325 (F&H) • All collections should be deposited daily. • Expenditures are to be made from the Inmate Trust Fund Checking Account in accordance with
Title 19 O.S. § 531 A. • The Sheriff should file a report of the commissary with the County Commissioners by January
15th, of each year in accordance with Title 19 O.S. § 180.43D. Management Response: County Sheriff: The circumstances surrounding this finding were in place under a previous administration and current leadership at the Sheriff’s Office had no involvement or knowledge of improper or inadequate behaviors or procedures. The new administration has hired an accountant to provide better oversight to the fiscal process and financial aspects of the organization. The monthly reports are currently being reviewed and all appropriate accounts and budgetary required information will be reflected on the monthly reports. Inmate Trust Fund issues occurring under the former administrations oversight have been identified. The new leadership worked with the District Attorney’s Office, State Auditor’s Office, and the Board of County Commissioners (BOCC) to correct previous administration deficiencies. Bondsmen and attorneys are no longer issued checks, the insufficient balance has been satisfied and made whole, internal controls have been put in place for continued review of checking accounts. Various oversight procedures and internal controls have been established to maintain integrity as related to the Inmate Trust Fund. Criteria: Effective accounting procedures and internal controls are necessary to ensure stewardship and accountability of public funds. Safeguarding controls are an important aspect of internal controls. Safeguarding controls relate to the prevention or timely detection of unauthorized transaction and unauthorized access to assets. Failure to perform tasks that are part of internal controls, such as reconciliations not performed or not timely prepared, are deficiencies in internal control. Further, reconciliations should be performed on a monthly basis.
CLEVELAND COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
39
Effective internal controls should provide procedures wherein receipts for the monies collected are maintained and available for inspection and deposits are made on a daily basis. Title 19 O.S. § 531 A. states in part, “The county sheriff may establish a checking account, to be
designated the “Inmate Trust Fund Checking Account.” The county sheriff shall deposit all monies collected from inmates incarcerated in the county jail into this checking account and may write checks to the Sheriff’s Commissary Account for purchases made by the inmate during his or her incarceration and to the inmate from unencumbered balances due the inmate upon his or her discharge.”
Title 19 O.S. § 180.43 D. states in part, “Any funds received pursuant to said operations shall be
the funds of the county where the persons are incarcerated and shall be deposited in the Sheriff’s Commissary Account. The sheriff shall be permitted to expend the funds to improve or provide jail services. The sheriff shall be permitted to expend any surplus in the Sheriff’s Commissary Account for administering expenses for training equipment, travel or for capital expenditures. The claims for expenses shall be filed with and allowed by the board of county commissioners in the same manner as other claims. The Sheriff shall receive no compensation for the operation of said commissary. The sheriff shall file an annual report on any said commissary under his or her operation no later than January 15 of each year.”
Title 22 O.S. § 1325(F, H) outlines the procedures for handling unclaimed property. Finding 2016-013 – Inadequate Internal Controls Over Court Clerk Expenditures and Reporting Process (Repeat Finding 2015-007) Condition: Upon inquiry of the Court Clerk employees, observation and test of records, the following was noted: Court Fund:
• One (1) of twenty-five (25) Court Fund claims did not match the invoiced amount.
District Court Receipts: • Six (6) of the twenty-five (25) voided receipts tested, the original copy was not retained.
Quarterly Reports:
• The original signed quarterly reports are not being maintained therefore, we were unable to view all of the signed original reports to determine if they were reviewed by someone other than the preparer.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure that claims are properly approved and/or voided, and that quarterly reports are maintained and reviewed by someone other than the preparer.
CLEVELAND COUNTY, OKLAHOMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
40
Effect of Condition: These conditions resulted in noncompliance with state statute and could result in unrecorded transactions, misstated financial reports, undetected errors, and misappropriation of funds. Recommendation: OSAI recommends payment of expense be made only after the claim is approved by the governing board. OSAI also recommends that, original voided receipts and quarterly reports be retained and the quarterly reports are signed and reviewed by someone other than the preparer. Management Response: Court Clerk: These findings occurred during a prior administration. Corrective action has been taken. The court fund claims are now reviewed by the bookkeeper. To verify that all steps are followed, we will document on our receipts at the time the receipt is written if only one receipt is generated. Criteria: Accountability and stewardship are over all goals of management in the accounting of funds. To help ensure a proper accounting of funds, proper authorizations should be obtained and key duties and responsibilities should be segregated among different individuals to reduce the risk of error or fraud. No one individual should have the ability to authorize transactions and acknowledge receipt of the goods or services. Title 20 O.S. § 1304 states, “Claims against the court fund shall include only expenses lawfully
incurred for the operation of the court in each county. Payment of the expenses may be made after the claim is approved by the district judge who is a member of the governing board of the court fund and either the local court clerk or the local associate district judge who is a member of the governing board.”
Title 19 O.S. § 220A states, “Claims against the fund shall include only expenses incurred for the
operations of the court clerk’s office in each county, and payment may be made after the claim is approved by the court clerk and either the district or associate district judge of that county.”
41
APPENDIX A
CORRECTIVE ACTION PLAN
(Prepared by County Management)
45
APPENDIX B
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
(Prepared by County Management)
EXHIBIT E
DEBT SERVICE SCHEDULE
$2,500,000∗ CLEVELAND COUNTY PUBLIC FACILITIES AUTHORITY
Lease Revenue Refunding Bonds, Series 2020 (Cleveland County Health Department - Moore Facility Project)
Series 2020
Dated Date: March 1, 2020 Due: September 1, as described below
Due Principal Rate Interest Total P+I
9-01-2020
9-01-2021
9-01-2022
9-01-2023
9-01-2024
9-01-2025
9-01-2026
9-01-2027
9-01-2028
9-01-2029
∗ Preliminary, subject to change
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.
EXHIBIT F
CONTINUING DISCLOSURE AGREEMENT
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.
CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement (this “Agreement”) dated as of March 1, 2020, is executed and delivered by Cleveland County Public Facilities Authority (the “Issuer”) the Board of County Commissioners of Cleveland County on behalf of the Cleveland County Health Department (the “County” or the “Department”) and BancFirst, Oklahoma City, Oklahoma, as trustee, and acting hereunder as dissemination agent (the “Trustee”), for the benefit of the holders of the Cleveland County Public Facilities Authority Lease Revenue Refunding Bonds (Cleveland County Health Department – Moore Facility Project) Series 2020 (the “Bonds”), issued pursuant to a Bond Indenture, dated as of March 1, 2020 (the “Bond Indenture”), by and between the Issuer and the Trustee. Capitalized terms used in this Agreement which are not otherwise defined in the Bond Indenture shall have the respective meanings specified above or in Article IV hereof. The County and the Trustee hereby covenant and agree as follows:
ARTICLE I The Undertaking
Section 1.1. Purpose; No Issuer Responsibility or Liability. This Agreement is being executed and delivered in accordance with subsection (d)(2) of the Rule (as defined herein) solely for the benefit of the holders of the Bonds and Beneficial Owners of the Bonds and in order to assist the Underwriter in complying with the Rule. The County represents that it will be the only “obligated person” (as defined in the Rule) with respect to the Bonds at the time the Bonds are delivered to the Underwriter and that no other person presently is expected to become an obligated person with respect to the Bonds at any time after the issuance of the Bonds. The County and the Trustee acknowledge that the Issuer has undertaken no responsibility, and shall not be required to undertake any responsibility, with respect to any reports, notices or disclosures required by or provided pursuant to this Agreement, and shall have no liability to any person, including any holder of the Bonds or Beneficial Owner of the Bonds, with respect to any such reports, notices or disclosures.
Section 1.2. Annual Financial Information. The County shall provide to the Trustee the County’s Annual Financial Information as defined and described in Section 4.1(1) hereof with respect to each fiscal year of the County, within 6 months after the end of each fiscal year or such later time as the Annual Financial Information becomes available, commencing with the fiscal year report ending June 30, 2020. At least 30 Business Days but not more than 45 Business Days in advance of the date specified in the previous sentence, the Trustee shall provide notice in writing to the County and the Financial Advisor, complete with the list of the Annual Financial Information, required under Section 4.1(1) hereof, that such information is required to be provided to the Trustee by such date. The Trustee shall promptly provide such Annual Financial Information to (i) the MSRB in accordance with Section 2.2 hereunder, (ii) the Issuer, and (iii) the Financial Advisor, in each case within 10 Business Days after receipt by the Trustee.
Section 1.3. Audited Financial Statements. If not provided as part of the Annual Financial Information by the date required by Section 1.2 hereof, the County shall promptly provide its Audited Financial Statements, when available, to the Trustee, but no later than 10 Business Days upon being made publicly available. The Trustee shall provide any such Audited
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Financial Statements to (i) the MSRB, (ii) the Issuer, and (iii) the Financial Advisor, in each case within 10 Business Days after receipt by the Trustee.
Section 1.4. Listed Event Notices. (a) If a Listed Event occurs, the County shall provide notice of such Listed Event to (i) the MSRB in accordance with Section 2.3 hereunder, (ii) the Issuer, and (iii) Financial Advisor.
(b) Any notice of a defeasance of Bonds shall state whether the Bonds have been escrowed to maturity or to an earlier redemption date and the timing of such maturity or redemption.
(c) The Trustee shall promptly advise the County and the Issuer whenever, in the course of performing its duties as Trustee under the Indenture, the Trustee has actual notice of an occurrence which would require the County to provide notice of a Listed Event hereunder; provided, however, that the failure of the Trustee to so advise the County or the Issuer shall not constitute a breach by the Trustee of any of its duties and responsibilities under this Agreement or the Indenture.
(d) Nothing in this Agreement shall be deemed to prevent the County from disseminating any other information, using the means of dissemination set forth in this Agreement or any other means of communication, or including any other information in any Annual Financial Information or notice of Listed Event hereunder, in addition to that which is required by this Agreement. If the County chooses to do so, the County shall have no obligation under this Agreement to update such additional information or include it in any future Annual Financial Information or notice of a Listed Event hereunder.
Section 1.5. Additional Disclosure Obligations. The County acknowledges and understands that other state and federal laws, including but not limited to the Securities Act of 1933 and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, may apply to the County and that, under some circumstances, compliance with this Agreement without additional disclosures or other action may not fully discharge all duties and obligations of the County under such laws.
ARTICLE II Operating Rules
Section 2.1. Reference to Other Filed Documents. It shall be sufficient for purposes of Section 1.2 hereof if the County provides Annual Financial Information (but not Listed Event notices) by specific reference to documents either (i) available to the public on the MSRB Internet Web Site or (ii) filed with the SEC.
Section 2.2. Submission of Information. Annual Financial Information may be set forth or provided in one document or a set of documents, and at one time or in part from time to time. Annual Financial Information shall be submitted in Prescribed Form.
Section 2.3. Disclosure of Listed Events. The County hereby covenants that it will disseminate, or cause the Trustee to disseminate, in a timely manner, not in excess of 10 Business Days after the occurrence of any Listed Event, a Listed Event Notice with respect to
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such event to the MSRB in Prescribed Form. Notwithstanding the foregoing, notice of optional or unscheduled redemption of any Bonds need not be given under this Agreement any earlier than the notice (if any) of such redemption is given to the owners of the Bonds pursuant to the Indenture.
Section 2.4. Dissemination Agents. The Trustee, with the prior written consent of the County in each instance, may from time to time further designate an agent to act on its behalf in providing or filing notices, documents and information as required of the Trustee under this Agreement, and revoke or modify any such designation.
Section 2.5. Transmission of Information and Notices. Unless otherwise required by law all notices, documents and information provided to the MSRB shall be provided in an electronic format as prescribed by the MSRB (presently the MSRB Internet Web Site), and shall be accompanied by identifying information as prescribed by the MSRB.
Section 2.6. Fiscal Year. The County’s fiscal year is from July 1 – June 30 and the County shall promptly notify the (i) MSRB, (ii) the Issuer, (iii) the Financial Advisor, and (iv) the Trustee of each change in its fiscal year.
ARTICLE III Effective Date, Termination, Amendment and Enforcement
Section 3.1. Effective Date, Termination. (a) This Agreement shall be effective upon the issuance of the Bonds.
(b) The County’s and the Trustee’s obligations under this Agreement shall terminate upon a legal defeasance, prior redemption or payment in full of all of the Bonds. (c) This Agreement, or any provision hereof, shall be null and void in the event that (1) the County delivers to the Trustee an opinion of Counsel, addressed to the County, the Issuer and the Trustee, to the effect that those portions of the Rule which require this Agreement, or such provision, as the case may be, do not or no longer apply to the Bonds, whether because such portions of the Rule are invalid, have been repealed, or otherwise, as shall be specified in such opinion, and (2) the Trustee delivers copies of such opinion to (i) the MSRB and (ii) the Issuer. The Trustee shall so deliver such opinion within one Business Day after receipt by the Trustee.
Section 3.2. Amendment. (a) This Agreement may be amended, by written agreement of the parties, without the consent of the holders of the Bonds (except to the extent required under clause (4)(ii) below), if all of the following conditions are satisfied: (1) such amendment is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law (including rules or regulations) or in interpretations thereof, or a change in the identity, nature or status of the County or the type of business conducted thereby, (2) this Agreement as so amended would have complied with the requirements of the Rule as of the date of this Agreement, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, (3) the County shall have delivered to the Trustee an opinion of Counsel, addressed to the County, the Issuer and the Trustee, to the same effect as set forth in clause (2) above, (4) either (i) the County
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shall have delivered to the Trustee an opinion of Counsel or a determination by a person, in each case unaffiliated with the Issuer or the County (such as bond counsel or the Trustee) and acceptable to the County, addressed to the County, the Issuer and the Trustee, to the effect that the amendment does not materially impair the interests of the holders of the Bonds or (ii) the holders of the Bonds consent to the amendment to this Agreement, and (5) the County, or the Trustee as directed by the County, shall have filed such opinion(s) and amendment in the same manner as for the occurrence of a Listed Event under Section 2.3 hereof.
(b) In addition to subsection (a) above, this Agreement may be amended by written agreement of the parties, without the consent of the holders of the Bonds, if all of the following conditions are satisfied: (1) an amendment to the Rule is adopted, or a new or modified official interpretation of the Rule is issued, after the effective date of this Agreement which is applicable to this Agreement, (2) the County shall have delivered to the Trustee an opinion of Counsel, addressed to the County, the Issuer and the Trustee, to the effect that performance by the County under this Agreement as so amended will not result in a violation of the Rule and (3) the County, or the Trustee as directed by the County, shall have filed such opinion(s) and amendment in the same manner as for the occurrence of a Listed Event under Section 2.3 hereof.
(c) This Agreement may be amended by written agreement of the parties, without the consent of the holders of the Bonds, if all of the following conditions are satisfied: (1) the County shall have delivered to the Trustee an opinion of Counsel, addressed to the County, the Issuer and the Trustee, to the effect that the amendment is permitted by rule, order or other official pronouncement, or is consistent with any interpretive advice or no-action positions of staff of the SEC, and (2) the County, or the Trustee as directed by the County, shall have filed such opinion(s) and amendment in the same manner as for the occurrence of a Listed Event under Section 2.3 hereof.
(d) To the extent any amendment to this Agreement results in a change in the type of financial information or operating data provided pursuant to this Agreement, the first Annual Financial Information filing provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided and/or no longer provided.
(e) If an amendment is made pursuant to Section 3.2(a) hereof to the accounting principles to be followed by the County in preparing its financial statements, the Annual Financial Information filing for the fiscal year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Such comparison shall include a qualitative and, to the extent reasonably feasible, quantitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information.
Section 3.3. Benefit; Third-Party Beneficiaries; Enforcement. (a) The provisions of this Agreement shall constitute a contract with and inure solely to the benefit of the holders from time to time of the Bonds, except that (i) beneficial owners of Bonds shall be third-party beneficiaries of this Agreement and (ii) the Issuer shall be deemed to be a third-party beneficiary of this Agreement and shall be entitled to enforce the rights of the Trustee under this Agreement
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to the extent the Trustee shall fail or refuse or shall be unable to take any enforcement action hereunder. The provisions of this Agreement shall create no rights in any person or entity except as provided in this subsection (a) and in subsection (b) of this Section.
(b) The obligations of the County to comply with the provisions of this Agreement shall be enforceable (i) in the case of enforcement of obligations to provide Annual Financial Information and Listed Event Notices, by any holder of Outstanding Bonds, or by the Trustee on behalf of the holders of Outstanding Bonds, or (ii), in the case of challenges to the adequacy of the Annual Financial Information and Listed Event Notices so provided, by the Trustee on behalf of the holders of Outstanding Bonds; provided, however, that the Trustee shall not be required to take any enforcement action except at the direction of the Issuer (but the Issuer shall have no obligation to take any such action), or the holders of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding, who shall have provided the Trustee with adequate security and indemnity. The rights of the holders’ and the Trustee to enforce the provisions of this Agreement shall be limited solely to a right, by action in mandamus or for specific performance, to compel performance of the County’s obligations under this Agreement. In consideration of the third-party beneficiary status of beneficial owners of Bonds pursuant to subsection (a) of this Section, beneficial owners shall be deemed to be holders of Bonds for purposes of this subsection (b).
(c) Any failure by the County or the Trustee to perform in accordance with this Agreement shall not constitute a default or an Event of Default under the Indenture, and the rights and remedies provided by the Indenture upon the occurrence of a default or an Event of Default shall not apply to any such failure.
(d) This Agreement shall be construed and interpreted in accordance with the laws of the State, and any suits and actions arising out of this Agreement shall be instituted in a court of competent jurisdiction in the State; provided, however, that to the extent this Agreement addresses matters of federal securities laws, including the Rule, this Agreement shall be construed in accordance with such federal securities laws and official interpretations thereof.
(e) In case any one or more of the provisions of this Agreement shall for any reason be held to be illegal or invalid, such illegality or invalidity shall not affect any other provision of this Agreement, but this Agreement shall be construed and enforced as if such illegal or invalid provision had not been contained herein.
ARTICLE IV Definitions
Section 4.1. Definitions. The following terms used in this Agreement shall have the following respective meanings:
(1) “Annual Financial Information” means, collectively, (i) updated versions or similar information of the following financial information and operating data of the County set forth in the Official Statement, for each fiscal year of the County, as follows:
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Updates of the financial information and operating data of the County set forth under the “CLEVELAND COUNTY, OKLAHOMA – MAJOR TAXPAYERS” and “THE FACILITY (CLEVELAND COUNTY HEALTH DEPARTMENT – TABLE 1 WITHIN”)(to the extent such information does not appear within the County’s Audited Financial Statements);
(ii) the information regarding amendments to this Agreement required pursuant to Sections 3.2(d) and (e) of this Agreement; and (iii) the County’s Audited Financial Statements, when and if available, or its Unaudited Financial Statements, in the event that Audited Financial Statements, when and if available, are unavailable as of the filing deadline.
Notwithstanding the descriptions above, the County need only provide the Annual Financial Information, or portions thereof, if any, which is customarily prepared by the County and is made publicly available.
The descriptions contained in Section 4.1(1)(i) hereof of financial information and operating data constituting Annual Financial Information constitute general categories of financial information and operating data of the County. When such descriptions include information that no longer can be generated because the County’s operations to which it related have been materially changed or discontinued, a statement to that effect shall be provided in the Annual Financial Information filing for the fiscal year in which such information has been materially changed or discontinued. Such statement shall explain, in narrative form, the reasons for the modification and the impact of the modification on the type of financial information or operating data being provided and/or no longer provided.
(2) “Audited Financial Statements” means the annual financial statements, if any, of the County, audited by such auditor as shall then be required or permitted by State law or the Indenture. Audited Financial Statements shall be prepared in accordance with GAAP; provided, however, that pursuant to Sections 3.2(a) and (e) hereof, the County may from time to time, if required by Federal or State legal requirements, modify the accounting principles to be followed in preparing its financial statements. The notice of any such modification required by Section 3.2(a) hereof shall include a reference to the specific Federal or State law or regulation describing such accounting principles, or other description thereof.
(3) “Beneficial Owner” shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories, or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes.
(4) “Business Day” means any day of the year other than (a) a Saturday or Sunday, (b) any day on which banks located in Oklahoma City, Oklahoma, or the city in which the office of the Trustee is located are required or authorized by law to remain closed, or (c) any day on which the New York Stock Exchange is closed.
(5) “Counsel” means Floyd Law Firm, P.C., Norman, Oklahoma or other nationally recognized bond counsel or counsel expert in federal securities laws.
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(6) “Financial Advisor” means The Baker Group, Inc., Oklahoma City, Oklahoma.
(7) “Financial Obligation” means a debt obligation; derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or a guarantee of either a debt obligation or a derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation. The term financial obligation does not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule.
(8) “GAAP” means generally accepted accounting principles as prescribed from time to time for governmental units by the Governmental Accounting Standards Board, or any successor to the duties or responsibilities thereof.
(9) “Internet Web Site” means the MSRB’s Electronic Municipal Market Access (EMMA) system, presently at http://emma.msrb.org, or at such other place as may be designated from time to time by the MSRB.
(10) “Listed Event” means any of the following events with respect to the Bonds:
(i) principal and interest payment delinquencies;
(ii) non-payment related defaults, if material;
(iii) unscheduled draws on debt service reserves reflecting financial difficulties;
(iv) unscheduled draws on credit enhancements reflecting financial difficulties;
(v) substitution of credit or liquidity providers, or their failure to perform;
(vi) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, notices of Proposed Issue (IRS Form 5701-TEB), or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds;
(vii) modifications to rights of Bondholders, if material;
(viii) bond calls, if material; and tender offers;
(ix) defeasances;
(x) release, substitution or sale of property securing repayment of the Bonds, if material;
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(xi) rating changes;
(xii) bankruptcy, insolvency, receivership or similar event of the County;
(xiii) consummation of a merger, consolidation, or acquisition involving the County, or the sale of all or substantially all the assets of the County other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material;
(xiv) appointment of a successor or additional trustee, or the change of name of a trustee, if material;
(xv) incurrence of a Financial Obligation of the County, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the County, any of which affect Bond holders, if material; and
(xvi) default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the County, any of which reflect financial difficulties.
(11) “Listed Event Notice” means notice of a Listed Event in Prescribed Form.
(12) “MSRB” means the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934, or any successor thereto or to the functions of the MSRB contemplated by this Agreement.
(13) “Official Statement” means the Official Statement dated ____________, 2020, of the Issuer relating to the Bonds.
(14) “Prescribed Form” means, with regard to the filing of Annual Financial Information and Listed Event Notices with the MSRB at www.emma.msrb.org (or such other address or addresses as the MSRB may from time to time specify), such electronic format, accompanied by such identifying information, as shall have been prescribed by the MSRB and which shall be in effect on the date of filing of such information.
(15) “Rule” means Rule 15c2-12 promulgated by the SEC under the Securities Exchange Act of 1934 (17 CFR Part 240, §240.15c2-12), as amended, as in effect on the date of this Agreement, including any official interpretations thereof issued either before or after the effective date of this Agreement which are applicable to this Agreement.
(16) “SEC” means the United States Securities and Exchange Commission.
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(17) “Unaudited Financial Statements” means the same as Audited Financial Statements, except that they shall not have been audited, provided that such statements are in a format similar to that of the Audited Financial Statements.
(18) “Underwriter” means D.A. Davidson & Co.
ARTICLE V Miscellaneous
Section 5.1 Duties, Immunities and Liabilities of Trustee. Article VIII of the Indenture is hereby made applicable to this Agreement as if this Agreement were, solely for this purpose, contained in the Indenture. The Trustee shall have only such duties under this Agreement as are specifically set forth in this Agreement, and the County agrees, to the extent permitted by applicable law, to indemnify and save the Trustee, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Trustee’s negligence or willful misconduct in the performance of its duties hereunder. Such indemnity shall be separate from and in addition to that provided to the Trustee under the Indenture. The obligations of the County under this Section shall survive resignation or removal of the Trustee and payment of the Bonds.
Section 5.2 Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties have each caused this Agreement to be executed by their duly authorized representatives, and the County has caused its corporate seal to be hereunto affixed and attested by an authorized representative, all as of the date first above written.
BOARD OF COUNTY COMMISSIONERS OF CLEVELAND COUNTY, OKLAHOMA, ON BEHALF OF CLEVELAND COUNTY HEALTH DEPARTMENT
By: _______________________________ Title: _______________________________
(SEAL) ATTEST: Clerk
BANCFIRST, as Trustee
By: _______________________________ Title: _______________________________
(Signature Page to Continuing Disclosure Agreement)
