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Home My WebLink AboutReso-107-2005 RESOLUTION NO. 107-2005 CITY COUNCIL, CITY OF SOUTH SAN FRANCISCO, STATE OF CALIFORNIA RESOLUTION OF THE CITY OF SOUTH SAN FRANCISCO AUTHORIZING THE EXECUTION AND DELIVERY OF AN INSTALLMENT PURCHASE AGREEMENT, A BOND PURCHASE AGREEMENT, AN OFFICIAL STATEMENT AND A CONTINUING DISCLOSURE CERTIFICATE AND AUTHORIZING CERTAIN RELATED MATTERS WHEREAS, the City of South San Francisco (the "City") is duly organized and existing under the laws of the State of California (the "Law") and is authorized pursuant to the Law to enter into an installment purchase agreement for the purpose of financing and/or refinancing the acquisition and construction of public capital improvements; and WHEREAS, the City desires to enter into one or more Installment Purchase Agreements (the "Installment Purchase Agreement"), by and between the City and the California Statewide Communities Development Authority, a joint exercise of powers agency (the "Authority") in order to provide for the financing of certain public capital improvements related to the City's wastewater system (the "Project"); and WHEREAS, this City Council finds that the financing of the Project results in significant public health benefits, including but not limited to more efficient delivery of service, and that the Project constitutes facilities for the production, storage, transmission, or treatment of wastewater or recycled water; and WHEREAS, the City desires to participate in the Authority's Water and Wastewater Pooled Financing Program, a part of the Authority's economic development financing programs (the "Program") and that the Authority assign the right to receive the Installment Payments under the Installment Purchase Agreement to a trustee (the "Trustee") to be named in a Master Indenture (the "Indenture"), by and between the Authority and the Trustee and that the Authority issue its Revenue Bonds (the "Bonds") to finance and/or refinance the Project pursuant to the Indenture; and WHEREAS, the City desires to participate in conjunction with the parties to that certain Amended and Restated Joint Exercise of Powers Agreement Relating to the California Statewide Communities Development Authority, dated as of June 1, 1998 (the "Agreement"); and WHEREAS, the City proposes to participate in the Program and desires that certain projects to be located within the City be financed pursuant to the Program and it is in the public interest and for the public benefit that the City do so; and WHEREAS, in order to authorize the execution of the Installment Purchase Agreement and the preparation of an Official Statement relating to the Bonds (the "Official Statement") and to provide for certain related matters, the City Council of the City of South San Francisco deems it in the best interests of the City to adopt this Resolution (the "Resolution"). NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SOUTH SAN FRANCISCO, as follows: Section 1. Execution of the Installment Purchase Agreement and the Bond Purchase Agreement. The City Manager, Assistant City Manager, Finance Director, or City Attorney (the "Authorized Officers") are hereby authorized and directed to execute for and on behalf of the City the Installment Purchase Agreement, in the form filed with the minutes of this meeting, with such changes therein as the Authorized Officers shall approve, such approval to be conclusively evidenced by the execution and delivery thereof. The Authorized Officers are hereby authorized and directed to negotiate and accept on behalf of the City the payment terms of the Installment Purchase Agreement and the Bond Purchase Agreement which will reflect the terms of the sale of the Bonds by the Underwriter (as defined below), such approval to be conclusively evidenced by the execution and delivery thereof; provided, however, that the aggregate principal components of the payments under Installment Purchase Agreement may not exceed $6,000,000, the Underwriter's discount (without giving effect to any original issue discount) may not exceed 0.80% of the aggregate principal components of the payments under the Installment Purchase Agreement and the average interest rate evidenced thereunder shall not exceed 5.0%. The Authorized Officers are hereby authorized and directed to execute for and on behalf of the City a Bond Purchase Agreement containing the final payment terms of the Installment Purchase Agreement and the Bonds in the form filed with the minutes of this meeting, with such changes therein as the Authorized Officers shall approve, such approval to be conclusively evidenced by the execution and delivery thereof. The obligation of the City to make the Installment Payments under the Installment Purchase Agreement is a special obligation of the City payable solely from the System Net Revenues (as defined under the Installment Purchase Agreement), and does not constitute a debt of the City or of the State of California or of any political subdivision thereof in contravention of any constitutional or statutory debt limitation or restriction. The City shall not be obligated to make payments to cover the shortfall in payments of any other City in the Program. Section 2. Authorization of Preliminary Official Statement. Execution of Final Official Statement. Execution of Continuing Disclosure Certificate. The City hereby approves the form of the preliminary Official Statement (the "Preliminary Official Statement") relating to the Bonds. The Authorized Officers are hereby authorized to certify that said Preliminary Official Statement, is as of its date "deemed final" for purposes of Rule 15c2-12 of the Securities and Exchange Commission. The Authorized Officers are hereby authorized and directed to execute for and on behalf of the City a final Official Statement, in substantially the form of the Preliminary Official Statement, with such changes therein (and additions thereto to reflect the terms of the sale of the Bonds) as the Authorized Officers shall approve, such approval to be conclusively evidenced by the execution and delivery thereof. The Authorized Officers are hereby authorized and directed to execute for and on behalf of the City a Continuing Disclosure Certificate, in the form filed with the minutes of this meeting, with such changes therein as the Authorized Officers shall approve, such approval to be conclusively evidenced by the execution and delivery thereof. Section 3. JP A Matters. The City hereby approves the Project and the Authority as issuer of the Bonds to finance the Project pursuant to Section 9 of the Agreement. Section 4. Appointment of Professionals. Henderson Capital Partners, LLC (the "Underwriter") is hereby confirmed and appointed as the City's underwriter in connection with the financing authorized by this Resolution. Hawkins Delafield & Wood LLP is hereby confirmed as the bond counsel in connection with the Bonds. Section 5. Other Actions Authorized. The Authorized Officers and such other proper officers of the City are hereby authorized to take all actions and execute any and all documents described in this Resolution and otherwise necessary or desirable to effect the execution and delivery of the Installment Purchase Agreement and to make any changes to the forms of the legal documents approved in this Resolution as necessary or desirable to comply with the terms of municipal bond insurance; to change the dates and the percentages in the rate covenant and additional debt test contained in any documents approved at this meeting from the dates and percentages on the forms submitted to this meeting; and to do any and all things and to execute and deliver any and all documents which they may deem necessary or advisable in order to consummate the execution and delivery of the Installment Purchase Agreement and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution, the Installment Purchase Agreement, the Bond Purchase Agreement, the Preliminary Official Statement, the Official Statement and the Continuing Disclosure Certificate. Such actions heretofore taken by such officers are hereby ratified, confirmed and approved. The Authorized Officers are authorized to substitute a non-profit corporation or joint powers authority for the Authority in connection with the transaction authorized in this Resolution on the advice of bond counsel. * * * * * * I hereby certify that the foregoing Resolution was regularly introduced and adopted by the City Council of the City of South San Francisco at a regular meeting held on the 28th day of September 2005 by the following vote: AYES: Councilmembers Richard A. Garbarino and Karvl Matsumoto. Mayor Pro Tem Joseph A. Femekes and Mayor Ravmond L. Green NOES: None ABSTAIN: None ABSENT: Councilmember Pedro Gonzalez ATTEST: Attachments: Installment Purchase Agreement (P. 8) Bond Purchase Agreement (P. 44) Preliminary Official Statement (P. 60) Continuing Disclosure Certificate - (P. 126) Attachments to Resolution No. 107-2005 Hawkins De1afield & Wood LLP Draft INSTALLMENT PURCHASE AGREEMENT by and between [P ARTICIP ANT] and CALIFORNIA STATEWIDE COMMUNITIES DEVELOP1v.IENT AUTHORITY T!!'!tpr'l !'!c r.f 1 'JOO" ~_....__ _u _.... _...., _____ relating to CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY WATER AND W ASTEW A TER REVENUE BONDS (pOOLED FINANCING PROGRAM) SERIES 2005_ F.8 16396.1001098 AGMT Section 1.1. Section 2.1. Section 2.2. Section 3.1. Section 3.2. Section 3.3. Section 4.1. Section 4.2. Section 4.3. Section 5.1. Section 5.2. Section 5.3. Section 5.4. Section 6.1. Section 6.2. Section 6.3. Section 6.4. Section 6.5. Section 6.6. Section 6.7. Table of Contents Page ARTICLE I DEFINITIONS Definitions......................................................................... .................................... 2 ARTICLE II REPRESENTATIONS AND WARRANTIES Representations by the Participant ....... ................ ..... .~.. ........... ......... ............. ....... 9 Representations and Warranties by the Authority............................................... 10 ARTICLE III ACQUISITION OF THE PROJECT Sale and Purchase of Project. ............. ................ ............... ....... .................. ......... 10 Title..................... ..... ....... ............. ................. ........... .................. ................ ......... 10 Changes to the Project......... ........................ ..... ......... ................. ......... ........... ..... 10 ARTICLE IV INST ALL1v.IENT PAYMENTS Purchase Price. ......... ............... ......... ......... ....... ....; ..................... ................. ........ 10 Installment Payments and Additional Payments ................................................. 11 Appointment of Dissemination Agent and Arbitrage Calculation Service ......... 11 ARTICLE V SECURITY Pledge of System Net Revenues........... ...;... ............................ ............ ................ 12 Allocation of System Revenues. ........... ................ .... ........... .............. ...... ........... 12 Additional Parity Debt ..... ...... ....... ..... ..................... ........... ............. ....... ............. 14 Rate Stabilization Fund................................................................................ ....... 15 ARTICLE VI COVENANTS OF THE PARTICIPANT Punctual Payment ..... ....... ................. .............. ........... ....... ........... ....... ..... ........ .... 15 Legal Existence................................................................................................... 16 Against Encumbrances..... ...... ............... .................. ........... ...... .......... ................. 16 Against Sale or Other Disposition of the System................................................ 16 Maintenance and Operation of System ............................................................... 16 msurance. ......... .......... ........... ....... .... ....... ........................... ............. ............ ........ 16 Eminent Domain Proceeds.... .....:..... ....... .............. ............. ......... ............. ........... 17 P.9 16396.1001098 AGMT 16396.1 001098 AGMT P.lO Liability of Participant Limited to System Revenues ......................................... 26 Successor Is Deemed Included in all References to Predecessor........................ 26 Waiver of Personal Liability.. ........................................ ........ .............. ..... .......... 26 Article and Section Headings, Gender and References....................................... 26 Partial fuvalidity ............ ........... ....... ............. ......... ........... ..... .............................. 26 MISCELLANEOUS Discharge of Obligations. ................ ..... ............... ..... .... ............... ..... ............. ...... 25 ARTICLE X DISCHARGE OF OBLIGATIONS ARTICLE IX Events of Default and Acceleration of Maturities............................................... 23 Application of Funds Upon Acceleration............................................................ 24 Other Remedies of the Authority........................................................................ 24 Non-Waiver.......... .................................... ........................................................... 25 Remedies Not Exclusive ... .............. ............. .................. .................. ............. ...... 25 Notices........................................ ......................:.................................................. 25 EVENTS OF DEFAULT AND REMEDIES OF THE AUTHORITY PREP A Y1v.lENT OF INSTALLMENT P A Y1v.lENTS Prepayment....................................................................... ................. ................... 22 ARTICLE vm ARTICLE VII Amounts of Rates, Fees and Charges. .................................. ........... .................... 18 Enforcement of and Performance Under Contracts. ........................................... 18 Collection of Charges, Fees and Rates................................................................ 19 No Free Service.. ........ .......... .... ....... ............... ....... ..... ................ ..... .................... 19 Prompt Acquisition and Construction of the Projects ......................................... 19 Payment of Claims ..... ..... ........... ....... ...... ....... .............. .................... ................... 19 Books of Record and Accounts; Financial Statements ....................................... 19 Payment of Taxes and Other Charges and Compliance with Governmental Regulations ......... ........... .... ....... ...... ..................................... ..... ....... ....... ............. 20 Tax Covenants and Matters. .............. ...... ................ ............ ............. ......... .......... 20 Rebate Fund. ....... ...... ............. ..... ..... ........;.. ........ ................ ........ ....... ..... ............. 21 Continuing Disclosure....... ....... ....... ................ ................................. ................... 22 Further Assurances................ ............................................................ .............. .~.. 22 Reimbursement of Bond Insurer and Other Provisions Relating to the Bond fusurer....................... ............ ........... ............. ............. ......... ..... ...... ...................... 22 Page Table of Contents (continued) Section 10.1. Section 10.2. Section 10.3. Section 10.4. Section 10.5. Section 9.1. Section 8.1. Section 8.2. Section 8.3. Section 8.4. Section 8.5. Section 8.6. Section 7.1. Section 6.16. Section 6.17. Section 6.18. Section 6.19. Section 6.20. Section 6.8. Section 6.9. Section 6.10. Section 6.11. Section 6.12. Section 6.13. Section 6.14. Section 6.15. Section 10.6. Section 10.7. Section 10.8. Section 10.9. Section 10.10. Section 10.11. Section 10.12. Table of Contents (continued) Page Assignment.......................................................................................................... 27 Net Contract ................................................... ..................................................... 27 California Law................................................................................. ,... ................ 27 Effective Date............................................... ~...................................................... 27 Execution in Counterparts....... ........................................... .................. ~............... 27 Indemnification of Authority.. ..... .................. ...... ..... ........ ....... ....... ...... ........ ...... 27 Amendments........................................ .:.............................................................. 29 P.ll 16396.1001098 AGMT 16396.1001098 AGMT P.12 NO"', THEREFORE, IN CONSIDERATION OF THESE PREMISES AND OF THE MUTUAL AGREEMENTS AND COVENANTS CONTAINED HEREIN AND FOR OTHER VALUABLE CONSIDERATION, THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS: WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in 'connection with the execution and delivery of this Installment Purchase Agreement do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Installment Purchase Agreement; WHEREAS, the Authority will assign its right to receive Installment Payments under this Agreement to Union Bank of California, N.A., as Trustee under that certain Indenture, dated as of _ 1, 2005, and will issue its California Statewide Communities Development Authority Water and Wastewater Revenue Bonds (Pooled Financing Program), Series 2005_ to be secured in part by the Installment Payments; WHEREAS, the Participant and the Authority have duly authorized the execution of this Agreement; WHEREAS, the Participant is authorized by the laws of the State of California (the "Law") to enter into this Agreement; WHEREAS, the Authority has agreed to assist the Participant in financing and/or refinancing the Project; WHEREAS, the Project is a public capital improvement that results in significant public health benefits, including but not limited to more efficient delivery of service and constitutes facilities for the production, storage, transmission, or treatment of water, recycled water, or wastewater; WHEREAS, the Participant proposes to finance and/or refinance certain facilities (the "Project") within its enterprise system described in Exhibit A hereto (the "System"); WITNESSETH: This INSTALLMENT PURCHASE AGREEMENT, made and entered into as of _ 1,2005, by and between the [PARTICIPANT], public agency duly organized and existing under and by virtue of the laws of the State of California (the "Participant"), and CALIFORNIA STATEWIDE COMMUNITIES DEVELOPNIENT AUTHORITY, a joint exercise of powers agency duly organized and existing under and by virtue of the laws of the State of California (the " Authority"). INSTALLl\1ENT PURCHASE AGREEMENT ARTICLE I DEFINITIONS Section 1.1. Definitions. Unless the context otherwise requires, the terms defined in this Section shall for all purposes hereof and of any amendment hereof or supplement hereto and of any report or other document mentioned herein or therein have the meanings defined herein, the following definitions to be equally applicable to both the singular and plural forms of any of the terms defmed herein. Unless the context otherwise requires, all capitalized terms used herein and not defmed herein shall have the meanings ascribed thereto in the Indenture. Agreement The term "Agreement" means this Agreement, by and between the Participant and the Authority, dated as of the date hereof, as originally executed and as it may from time to time be amended or supplemented in accordance herewith. Annual Debt Service The term "Annual Debt Service" means, for any Fiscal Year, the sum of (1) the interest accruing on all Parity Debt during such Fiscal Year, assuming that all Parity Debt is retired as scheduled, plus (2) the principal amount (including principal due as sinking fund installment payments) allocable to all Parity Debt in such Fiscal Year, calculated as if such principal amounts were deemed to accrue daily during such Fiscal Year in equal amounts from, in each case, each payment date for principal or the date of delivery of such Parity Debt (provided that nrlnrln~l ~h~lr not hp nppmpn to ~('r.nlP. for OTp.Mp.r th:m ~ ~f\~-n::!v np'r1nn nr1nr to 9.nv n::lvmp.nt r~-u--r- ~~._~ u__ -- ----~--- -- ------ --- 0------ __._u - --- --.I r----- r---- -- --.I r-,1-~--U- date), as the case may be, to the next succeeding payment date for principal, provided, that the following adjustments shall be made to the foregoing amounts in the calculation of Annual Debt Service: (A) with respect to any such Parity Debt bearing or comprising interest at other than a fixed interest rate, the rate of interest used to calculate Annual Debt Service shall be (i) with respect to such Parity Debt then outstanding, one hundred ten per cent (110%) of the greater of (1) the daily average interest rate on such Parity Debt during the twelve (12) calendar months next preceding the date of such calculation (or the portion of the then current Fiscal Year that such Parity Debt has borne interest) or (2) the most recent effective interest rate on such Parity Debt prior to the date of such calculation or (ii) with respect to such Parity Debt then proposed to be issued, the then current 20- Bond GO Index rate as published in The Bond Buyer (or if The Bond Buyer or such index is no longer published, such other published similar index); (B) with respect to any such Parity Debt having twenty-five per cent (25%) or more of the aggregate principal amount thereof due in anyone Fiscal Year, Annual Debt Service shall be calculated for the Fiscal Year of determination as if the interest on and principal of such Parity Debt were being paid from the date of incurrence thereof in substantially equal annual amounts over a period of twenty (20) years from the date of such Parity Debt provided, however that the full amount of such Parity Debt shall be included in Annual Debt Service if the date of calculation is within 24 months of the actual maturity of the payment; F.13 16396.1001098 AGMT 16396.1001098 AGMT P.14 The term "Business Day" means any day other than a Saturday, a Sunday or a day on which banks located in the city where the Corporate Trust Office is located, are required or authorized to remain closed. Business Day The term "Bond Insurer" means Financial Security Assurance, Inc. and its successors and asSIgnS. The term "Authority Bonds" means the California Statewide Communities Development Authority Water and Wastewater Revenue Bonds (Pooled Financing Program), Series 2005_ issued by the Authority, and at any time Outstanding pursuant to the Indenture. Bond Insurer Authori!y Bonds The term "Authority" means C::!lifornia Statewide COIP..lTIunities Development Authority, a joint exercise of powers agency dilly organized and existing under and by virtue of the laws of the State of California. Authority (F) Repayment Obligations proposed to be entered into as Parity Debt shall be deemed to be payable at the scheduled amount due under such Repayment Obligation as calculated under this definition. (E) if an interest rate swap agreement is in effect with respect to, and is payable on a parity with, any Parity Debt to which it relates, no amounts payable under such interest rate swap in excess of debt service payable under such Parity Debt agreement shall be included in the calculation of Annual Debt Service unless the sum of (i) the interest payable on such Parity Debt, plus (ii) the amounts payable by the Participant under such interest rate swap agreement, less (iii) the amounts receivable by the Participant under such interest rate swap agreement, are greater than the interest payable ori such Parity Debt, in which case the amount of such payments to be made that exceed the interest to be paid on such Parity Debt shall be included in such calculation, and for this purpose, the variable amount under any such interest rate swap agreement shall be determined in accordance with the procedure set forth in subparagraph (A) of this definition; and (D) Annual Debt Service shall not include interest on Parity Debt which is to be paid from amounts constituting capitalized interest; (C) with respect to any such Parity Debt or portions thereof bearing no interest but which are sold at a discount and which discount accretes with respect to such Parity Debt or portions thereof, such accreted discount shall be treated as due when scheduled to be paid; Certificate of the Participant The term "Certificate of the Participant" means an instrument in writing signed by the chief executive officer or chief financial officer of the Participant, or by any other officer of the Participant duly authorized by the Participant for that purpose, such authorization to be evidenced by a certificate verifying the specimen signatures of such officers at the request of the Trustee. Code The term "Code" means the Internal Revenue Code of 1986, as amended, and the regulations of the United States Department of the Treasury issued thereunder, and in this regard reference to any particular section of the Code shall include reference to all successors to such section of the Code. Continuing Disclosure Certificate The term "Continuing Disclosure Certificate" means, collectively, any Continuing Disclosure Certificate executed by the Participant with respect to the Authority Bonds. Event of Default The term "Event of Default" means an event described in Section 8.1 hereof. Fiscal Year The term BFiscal YearB means the period beginning on July 1 of each year and ending on the last day of June of the next succeeding year, or any other twelve-month period selected and designated as the official Fiscal Year of the Participant. Generallv Accepted Accounting Principles The term "Generally Accepted Accounting Principles" means the uniform accounting and reporting procedures set forth in publications of the American Institute of Certified Public Accountants or its successor, or by any other generally accepted authority on such procedures, and includes, as applicable, the standards set forth by the Governmental Accounting Standards Board or its successor. Indenture The term "Indenture" means the Indenture, dated as of _ 1, 2005, by and between the Authority and the Trustee, as it may from time to time be amended or supplemented in accordance with its terms. P.15 16396.1 001098 AGMT 16396.1 001098 AGMT P.16 The term "Moody's" means Moody's Investors Service, a corporation duly organized and existing under and by virtue of the laws of the State of Delaware, and its successors and assigns, except that if such corporation shall be dissolved or liquidated or shall no longer perform the services of a municipal securities rating agency, then the term "Moody's" shall be deemed to refer to any other nationally recognized municipal securities rating agency selected by the Participant. Moody's The term "Maximum Annual Debt Service" means, as of any date of calculation, the largest Annual Debt Service during the period from the date of such calculation through the final maturity date of all Parity Debt. Maximum Annual Debt Service The term "Law" means the laws of the State of California pursuant to which the Participant was formed and operates and Section 5451 of the Government Code of the State of California and in each case all laws amendatory thereof or supplemental thereto. Law The term "Interest Payment Date" means the payment dates of the Authority Bonds identified in the Indenture. Interest Payment Date The term "Installment Payments" means the Installment Payments of interest and principal scheduled to be paid by the Participant under and pursuant hereto as provided in Exhibit B hereto. Installment Payments The term "Installment Payment Date" means the fifteenth day of the month prior to each related Interest Payment Date, or if said date is not a Business Day, then the preceding Business Day. Installment Payment Date The term "Independent Certified Public Accountant" means any firm of certified public accountants appointed by the Participant, which is independent of the Participant and the Authority pursuant to the Statement on Auditing Standards No. 1 of the American Institute of Certified Public Accountants. IndeQendent Certified Public Accountant Municipal Bond Insurance Policy The term "Municipal Bond Insurance Policy" means the policy or policies of municipal bond insurance issued by the Bond Insurer. Net Proceeds The term "Net Proceeds" means, when used with respect to any casualty insurance or condemnation award, the proceeds from such insurance or condemnation award remaining after payment of all expenses (including attorneys' fees) incurred in the collection of such proceeds. Operation and Maintenance Costs The term "Operation and Maintenance Costs" means the reasonable and necessary costs paid or incurred by the Participant for maintaining and operating the System, determined in accordance with Generally Accepted Accounting Principles, including all reasonable expenses of management and repair and all other expenses necessary to maintain and preserve the System in good repair and working order, and including all administrative costs of the Participant that are charged directly or apportioned to the operation of the System, such as salaries and wages of employees, overhead, taxes (if any) and insurance premiums (including payments required to be paid into any self-insurance funds), and including all other reasonable and necessary costs of the Participant or charges required to be paid by it to comply with the terms hereof or of any Supplemental Agreement or of any resolution authorizing the execution of any Parity Debt, such as . compensation, reimbursement and indemnification of the Trustee and the Authority and fees and expenses of Independent Certified Public Accountants; but excluding in all cases (i) payment of Pa...'i.ty Debt and Subordinate Obligations, (ii) costs of capital additions, replacements, betterments, extensions or improvements which under Generally Accepted Accounting Principles are chargeable to a capital account, and (iii) depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles. Parity Debt The term "Parity Debt" means the Installment Payments and any Parity Obligations. Parity Obligation Payments The term "Parity Obligation Payments" means the payments scheduled to be paid by the Participant under and pursuant to the Parity Obligations, which payments are secured by a pledge of System Net Revenues on a parity with the Installment Payments as provided herein. Parity Obligations The term "Parity Obligations" means all obligations of the Participant authorized and executed by the Participant other than the Installment Payments, the Parity Obligation Payments under which are secured by a pledge of the System Net Revenues on a parity with the Installment Payments as provided herein, including but not limited to any Repayment Obligations secured by System Net Revenues on a parity with the Installment Payments. F.17 16396.1001098 AGMT 16396.1 001098 AGMT P.18 The term "Reserve Account" means that Account within the Reserve Fund held under the Indenture relating to this Agreement. Reserve Account . The term "Rebate Fund" means the fund by that name established pursuant to Section 4.5 of the Indenture and provided for in Section 6.17 hereof. Rebate Fund "Repayment Obligation" means the reimbursement obligation or any other payment obligation of the Participant under a written agreement between the Participant and a credit provider to reimburse the credit provider for amounts paid pursuant to a credit facility for the payment of the principal amount or purchase price of and/or interest on any Parity Debt. Repayment Obligation The term "Rate Stabilization Fund" means the fund by that name established pursuant to Section 5.4 hereof. Rate Stabilization Fund The term "Purchase Price" means the principal amount plus interest thereon owed by the Participant to the Authority under the terms hereof as provided in Section 4.1. Purchase Price The term "Project" means any additions, betterments, extensions and improvements to the System financed or refinanced described in Exhibit A hereto. Project The term "Prior Liens" means those liens, if any, on the System Revenues which are senior to the pledge under this Agreement as identified in Exhibit A hereto. Prior Liens The term "Participating Underwriter" shall have the meaning ascribed thereto in the Continuing Disclosure Certificate. Participating Underwriter The term "Participant" means the [Participant], a public agency dilly organized and existing under and by virtue of the laws of the State ofCalifomia. ParticiQant Reserve Account Requirement The term "Reserve Account Requirement" has the meaning assigned in the Indenture. Reserve Policy The term "Reserve Policy" has the meaning assigned in the Indenture. Subordinate Obligations The term "Subordinate Obligations" means the. obligations of the Participant that are subordinate in payment to the Installment Payments. Supplemental Agreement The term "Supplemental Agreement" means any agreement then in full force ,md effect which has been entered into by the Participant and the Trustee, amendatory of or supplemental hereto; but only if and to the extent that such Supplemental Agreement is specifically authorized hereunder. System The term "System" means the whole and each and every part of the system identified in Exhibit A hereto of the Participant, including the portion thereof existing on the date hereof, and including all additions, betterments, extensions and improvements to such system or any part thereof hereafter acquired or constructed. System Net Revenues The term "System Net Revenues" means for any period System Revenues less Operation and Maintenance Costs for such period; provided that certain adjustments in the amount of System Net Revenue deemed collected during a Fiscal Year may be made in connection with amounts deposited in the Rate Stabilization Fund as provided in Section 5.4 herein. System Revenue Fund The term "System Revenue Fund" means the fund by that name created pursuant to Section 5.2 hereof. System Revenues The term "System Revenues" means all gross income and revenue received or receivable by the Participant from the ownership or operation of the System, determined in accordance with Generally Accepted Accounting Principles, including all fees (including connection fees), rates, charges and all amounts paid under any contracts received by or owed to the Participant in connection with the operation of the System and all proceeds of insurance relating to the System and investment income allocable to the System and all other income and revenue howsoever F.19 16396.1 001098 AGMT 16396.1 001098 AGMT P.20 (d) The Participant has reviewed the Indenture and accepts its terms. (c) The Participant has determined that it is necessary and proper for Participant uses and purposes within the terms of the Law that the Participant finance and/or refinance the acquisition. of the Project in the manner provided for in this Agreement. (b) The Participant will not take or permit any action to be taken which results in the interest paid for the installment purchase of the Project under the terms of this Agreement being included in the gross income of the Authority or its assigns for purposes of federal or State of California income taxation. (a) The Participant is a'public agency dilly organized and existing under and pursuant to the laws of the State of California. The Participant has full legal right, power and authority to enter into this Agreement and carry out its obligations hereunder, to carry out and consummate all transactions contemplated by this Agreement, and the Participant has complied with the provisions of the Law in all matters relating to such transactions. By proper action, the Participant has duly authorized the execution, delivery and due performance of this Agreement. Section 2.1. Representations by the Participant. The Participant makes the following representations: REPRESENTATIONS AND WARRANTIES ARTICLE II "Written Request of the Participant" means an instrument in writing signed by the chief executive or chief financial officer of the Participant or their designee, or by any other officer of the duly authorized by the Participant for that purpose, such authorization to be evidenced at the request of the Trustee by a certificate verifying the specimen signatures of such officers. Written Request of the Participant The term "Trustee" means Union Bank of California, N.A. acting in its capacity as Trustee under and pursuant to the Indenture, and its successors and assigns. Trustee "Tax Certificate" means collectively all the certificates, each dated the date of the original issuance and delivery of the Authority Bonds, with respect to the requirements of certain provisions of the Code, as each such certificate may from time to time be modified or supplemented in accordance with the terms thereof. Tax Certificate derived by the Participant from the ownership or operation of the System or arising from the System, subject to and after satisfaction of any Prior Liens. . Section 2.2. Representations and Warranties by the Authority. The Authority represents and warrants that the Authority is a joint exercise of powers agency duly organized and in good standing under the laws of the State of California, has full legal right, power and authority to enter into this Agreement and to carry out and consummate all transactions contemplated by this Agreement and by proper action has duly authorized the execution, delivery and due performance of this Agreement. ARTICLE III ACQUISITION OF THE PROJECT Section 3.1. Sale and Purchase of Proiect. [In consideration for the Authority's assistance in financing the Project, the Participant agrees to act as the Authority's agent for purposes of construction and acquisition of the Project. The Authority will make the net proceeds of the Authority Bonds allocable to the Participant available to the Participant for this purpose, as provided in the Indenture.! In consideration for the Authority's assistance in refinancing those components of the Project constituting refinancing of existing public capital improvements, the Participant agrees to sell, and hereby sells, to the Authority, and the Authority agrees to purchase and hereby purchases, from the Participant, said portion of Project at the purchase price equal to the net proceeds of the Authority Bonds allocable to the refinancing.] In consideration for the Installment Payments as set forth in Section 4.2, the Authority agrees to sell, and hereby sells, to the Participant, and the Participant agrees to purchase, and hereby purchases, from the Authority, the Project at the purchase price specified in Section 4.1 hereof and otherwise in the manner and in accordance with the provisions of this Agreement. Section 3.2. Title. All right, title and interest in the Project shall vest in the Participant immediately upon execution and delivery of this Agreement. Section 3.3. Changes to the Proiect. The Participant may at any time substitute other public capital improvements for the then existing components of the Project by submitting a Written Request of the Participant to the Authority and the Trustee specifying the components of the Project to be substituted and the new components. ARTICLE IV INSTALLMENT PAYMENTS Section 4.1. Purchase Price. (a) The Purchase Price to be paid by the Participant hereunder to the Authority is the sum of the principal amount of the Participant's obligations hereunder plus the interest to accrue on the unpaid balance of such principal amount from the effectiye date hereof oyer the term hereof; subject to prepayment as provided in Article VII. (b) The principal amount of the payments to be made by the Participant hereunder is set forth in Exhibit B hereto. P.21 16396.1001098 AGMT 16396.1001098 AGMT P.22 Section 4.3. Appointment of Dissemination Agent and Arbitrage Calculation Service. The Participant hereby appoints the firm designated pursuant to Section 4.6 of the Indenture as its dissemination agent to assist in compliance with Section 6.18 hereof. The Participant hereby appoints the firm designated pursuant to Section 4.5 of the Indenture as its arbitrage calculation In addition to the Installment Payments, the Participant shall also pay such amounts ("Additional Payments") as shall be required for the payment of all fees and administrative costs of the Authority and the Trustee relating to the Authority Bonds and allocable to the Participant, including without limitation all expenses, compensation and indemnification of the Authority and the Trustee payable by the Participant hereunder and under the Indenture, fees of auditors, accountants, attorneys or engineers, and all other necessary administrative 'costs of the Authority or charges required to be paid by it to comply with the terms hereof (including the fees of the disclosure consultant and arbitrage calculations service provided in Section 4.3), of the Authority Bonds or of the Indenture or to indemnify the Authority and its employees, officers and directors and the Trustee; provided that the foregoing obligation shall be limited to those amounts reasonably allocable to the Participant. The Participant shall not be obligated to make payments hereunder or incur any liability as a result of the default of any other public agency under an Installment Purchase Agreement, the obligations under which have been assigned to the Trustee under the Indenture in connection with the Authority Bonds. . The obligation of the Participant to make the Installment Payments is absolute and unconditional, and until such time as the Purchase Price shall have been paid in full (or provision for the payment thereof shall have been made pursuant to Article IX), the Participant will not discontinue or suspend any Installment Payments required to be made by it under this Section when due, whether or not the System or any part thereof is operating or operable or has been completed, or its use is suspended, interfered with, reduced or curtailed or terminated in whole or in part, and such payments shall not be subject to reduction whether by offset or otherwise and shall not be conditional upon the performance or nonperformance by any party of any agreement for any cause whatsoever. Each Installment Payment shall be paid to the Authority in lawful money of the United States of America. In the event the Participant fails to make any of the payments required to be made by it under this Section, such payment shall continue as an obligation of the Participant until such amount shall have been fully paid; and the Participant agrees to pay the same with interest accnling thereon at the rate or rates of interest then applicable to the remaining unpaid principal balance of the Installment Payments if paid in accordance with their terms. Section 4.2. Installment Payments and Additional Payments. The Participant shall, subject to any rights of prepayment provided ,in Article VII, pay the Authority the Purchase Price in installment payments of interest and principal in the amounts and on the Installment Payment Dates as set forth in Exhibit B hereto. (c) The interest to accrue on the unpaid balance of such principal amount is as specified in Section 4.2 and Exhibit B hereto, and shall be paid by the Participant as and constitutes interest paid on the principal amount of the Participant's obligations hereunder. service to comply with Sections 6.16 and 6.17 hereof (provided that if the Participant is a "small governmental issuer" as set forth in Section 148(f)(4)(D) of the Code no such firm need be appointed on the Participant's behalf or such services paid for by the Participant). ARTICLE V SECURITY Section 5.1. Pledge of System Net Revenues. All System Net Revenues and all amounts on deposit in the System Revenue Fund are hereby irrevocably pledged to the payment of the Installment Payments as provided herein and the System Net Revenues shall not be used for any other purpose while any of the Installment Payments remain unpaid; provided that out of. the System Revenues there may be apportioned such sums for such purposes as are expressly permitted herein. This pledge, together with the pledge created by all other Parity Debt, shall constitute a first lien on System Net Revenues and, subject to application of amounts on deposit therein as permitted herein, the System Revenue Fund and other funds and accounts created hereunder for the payment of the Installment Payments and all other Parity Debt in accordance with the terms hereof and of the Indenture. Section 5.2. Allocation of System Revenues. In order to carry out and effectuate the pledge and lien contained herein, the Participant agrees and covenants that all System Revenues shall be received by the Participant in trust hereunder and shall be deposited when and as received in a special fund designated as the "System Revenue Fund", which fund is hereby established and which fund the Participant agrees and covenants to maintain and to hold separate and apart from other funds so long as any Installment Payments remain unpaid. To the extent the Participant has an existing fund which satisfies the foregoing requirements, then such shall be deemed to be the "System Revenue Fund" and the Participant shall not be required to create a new fund. The Participant may maintain separate accounts within the System Revenue Fund. The amounts in the System Revenue Fund shall be invested in Authorized Investments. Moneys in the System Revenue Fund shall be used and applied by the Participant as provided in this Agreement. The Participant shall, from the moneys in the System Revenue Fund, pay all Operation and Maintenance Costs (including amounts reasonably required to be set aside in contingency reserves for Operation and Maintenance Costs, the payment of which is not then immediately required) as such Operation and Maintenance Costs become due and payable. Thereafter, all remaining moneys in. the System Revenue Fund shall be set aside by the Participant at the following times for the transfer to the following respective special funds in the following order of priority; and all moneys in each of such funds shall be held in trust and shall be applied, used and withdrawn only for the purposes set forth in this Section. F.23 16396.1001098 AGMT 16396.1001098 AGMT P.24 (b) Reserve Account. On or before the first Business Day of each month, the Participant shall, from the remaining moneys in the System Revenue Fund, thereafter, without preference or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, transfer to the Trustee as provided in Section 3.2 of the Indenture for deposit in the Revenue Fund for application to the Reserve Account in accordance with the Indenture and to the applicable trustee for such other reserve accounts, if any, as may have been established in connection with Parity Obligations that sum, if any, necessary to restore the Reserve Account to an amount equal to the Reserve Account Requirement and otherwise replenish the: Reserve Account for any withdrawals (including draws upon the Reserve Policy or any credit facility) to pay the Installment Payments due hereunder and necessary to restore such other reserv(~ accounts to an amount equal to the amount required to be maintained therein; provided that payments to restore the Reserve Account after a withdrawal may be mac:ie in monthly installments equal to 1/12 of the aggregate amount needed to restore the Reserve Account to the Reserve Account Requirement as of the date of the withdrawal. The Participant's obligation to replenish the Reserve Account shall be limited to draws on the Reserve Account relating to the Participant. To the extent that draws on the Reserve Account are from a credit facility as permitted under the definition of Reserve Account Requirement in the Indenture, transfers hereunder to restore the' Reserve Account shall be made to reimburse the provider of such credit facility. The Participant shall be obligated to make payments to the msurer for draws on the Reserve Policy only to the extent of draws on the Reserve Account relating to this Agreement. Interest shall accrue and be payable on draws under the Reserve Policy and all related reasonable expenses incurred by the Insurer from the date of payment by the Insurer at the Late Payment Rate. "Late Payment Rate" means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from time to time by IP Morgan Chase Bank (N.A.) at its principal office in the City of New York, as its prime or base lending rate ("Prime Rate") (any change in such Prime Rate to be effective on the date such change is announced by JP Morgan Chase Bank (N.A.)) plus 3%, and (ii) the then applicable highest rate of interest on the Series 2005_ Bonds and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over a year of 360 days. In the event JP Morgan Chase Bank (N.A.) ceases to announce its Prime Rate publicly, Prime Rate shall be the publicly announced prime or base lending rate of such national bank as the Insurer shall specify. R,epayment of draws and payment of expenses and accrued interest thereon at the Late Payment Rate (collectively, "Policy Costs") shall commence in the first month following each draw, and each such monthly payment shall be in an amount at least equal to 1/12 of the aggregate of Policy Costs related to such draw (provided that the Participant may repay the Policy Costs in full at any time during this period). (a) Installment Payments. Not later than each Installment Payment Date, the Participant shall, from the moneys in the System Revenue Fund, transfer to the Trustee the Installment Payment due and payable on that Installment Payment Date. The Participant shall also, from the moneys in the System Revenue Fund, transfer to the applicable trustee for deposit in the respective payment fund, without preference or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, any other Parity Obligation Payments in accordance with the provisions of any Parity Obligation. If the Participant shall fail to pay any Policy Costs in accordance with the requirements set forth above, the Insurer shall be entitled to exercise any and all legal and equitable: remedies available to it, including those provided hereunder and under the Indenture other than (i) acceleration of the maturity of the Bonds or (ii) remedies which would adversely affect owners of the Bonds. For purposes of the additional parity debt test in Section 5.3(c) and the rate covenant in Section 6.8(b), Net Revenues shall provide at least one times coverage of the Policy Costs then due and owing in addition to the other coverage requirements therein. (c) Surplus. Moneys on deposit in the System Revenue Fund not necessary to make any of the payments required above, may be expended by the Participant at any time for any purpose permitted by law, including but not limited to payments with respect to Subordinate Obligations and deposits to the Rate Stabilization Fund. Section 5.3. Additional Parity Debt. The Participant may at any time enter into any Parity Debt; provided: (a) The Participant shall be in compliance with all agreements, conditions, covenants and terms contained herein and in all Supplemental Agreements required to be observed or performed by it, and a Certificate of the Participant to that effect shall have been filed with the Trustee (with the consent of the Bond Insurer this condition shall not apply where the purpose of the proposed Parity Debt is to cure such non-compliance). (b) The Parity Debt shall have been duly authorized pursuant to the Law and all applicable la,\Tf's, and the amount on deposit in the Reser"e Account relating to the Parity Debt shall be increased to an amount at least equal to the Reserve Account Requirement as calculated with respect to such Parity Debt; provided that if such Parity Debt shall not be Installment Payments, then a reserve account held by an independent trustee (who may be other than the Trustee) shall be established in an amount equal to the lesser of the maxii.num an.nual debt service of such Parity Debt (calculated on the basis of a year ending on the principal payment date of such Parity Debt) or the maximum amount permitted under the Code; provided further that, if such Parity Debt is a loan from a governmental agency, then a reserve account shall be established in the amount required or permitted by such governmental agency. (c) The System Net Revenues for the last completed Fiscal Year or any 12 consecutive months within the last 18 months preceding the date of execution of such Parity Debt, as shown by a Certificate of the Participant on file with the Trustee, plus an allowance for increased System Net Revenues arising from any increase in the rates, fees and charges of the System which was duly adopted by the governing board of the Participant prior to the date of the execution of such Parity Debt but which, during all or any part of such 12 month period, was not in effect, in an amount equal to the amount by which the System Net Revenues would have been increased if such increase in rates, fees and charges had been in effect during the whole of such 12 month period, as shown by a Certificate of the Participant on file with the Trustee, shall have produced a sum equal to at least 120 percent of the Maximum Annual Debt Service as calculated after the execution of such Parity Debt; provided, that in the event that all or a portion of such Parity Debt is to be issued for the purpose of refunding and retiring any Parity Debt then F.25 16396.1001098 AGMT 16396.1 001098 AGMT P.26 Section 6.1. Punctual Payment. The Participant will punctually pay the Installment Payments in strict conformity with the terms hereof and will faithfully satisfy, observe and perform all agreements, conditions, covenants and terms hereof and of any Supplemental Agreements. COVENANTS OF THE PARTICIPANT ARTICLE VI Section 5.4. Rate Stabilization Fund. There is hereby established a special fund to be known as the "Rate Stabilization Fund" which shall be held by the Participant. The Participant may, during or within 210 days after a Fiscal Year, deposit surplus System Net Revenues transferred from the System Revenue Fund attributable to such Fiscal Year (on the basis of Generally Accepted Accounting Principles) into the Rate Stabilization Fund. The Participant may at any time withdraw moneys from the Rate Stabilization Fund and deposit such amounts into the System Revenue Fund. Notwithstanding anything to the contrary provided herein, System Net Revenues deposited into the Rate Stabilization Fund shall not be taken into account as System Net Revenues for purposes of the calculations in Sections 5.3 and 6.8(b) in the Fiscal Year to which such deposit is attributable, and amounts withdrawn from the Rate Stabilization Fund and deposited into the System Revenue Fund, during or within 210 days after a Fiscal Year, may be taken into account as System Revenues for purposes of the calculations required under Sections 5.3 and 6.8(b) in such Fiscal Year; provided that, for purposes of the calculation required under Section 6.8(b), the amount of System Net Revenues before any credits for withdrawals from the Rate Stabilization Fund may not be less than 100% of Maximum Annual Debt Service: for outstanding Parity Debt; provided further that the foregoing provisions shall be subject to the rate stabilization fund provisions of any Parity Debt outstanding as of the date hereof. The amounts in the Rate Stabilization Fund shall be invested in the Authorized Investments. Nothing contained in this Section shall limit the issuance of any revenue bonds of the Participant payable from the System Net Revenues and secured by a lien and charge on the System Net Revenues if, after the issuance and delivery of such revenue bonds, none of the Installment Payments shall be unpaid. Furthermore, nothing contained in this Section shall limit the issuance of any Subordinate Obligations. . outstanding, interest and principal payments on the Parity Debt to be so refunded and retired from the proceeds of such Parity Debt being issued shall be excluded from the foregoing computation of Maximum Annual Debt Service; provided further, that the Participant may at any time issue a Parity Debt without compliance with the foregoing conditions if the Annual Debt Service for each Fiscal Year during which such Parity Debt is outstanding will not be increased by reason of the issuance of such Parity Debt; provided further, the Bond Insurer may waive the requirements in paragraph (b) above relating to funding the Reserve Account or other reserve account if the Parity Debt proposed to be issued is irrevocably guaranteed by a credit provider in at least the second highest rating category of Moody's or S&P; and provided further, an adjustment shall be made in the amount of System Net Revenues as provided in Section 5.4 hereof. Section 6.2. Legal Existence. The Participant will use all means legally available to maintain its existence. Section 6.3. Against Encumbrances. The Participant will not mortgage or otherwise encumber, pledge or place any charge upon any of the System Net Revenues except as provided herein, and will not issue any obligations secured by System Net Revenues senior to the Parity Debt; provided, that the Participant may at any time issue any Subordinate Obligations. Section 6.4. Against Sale or Other Disposition of the System. The Participant will not sell or otherwise dispose of the System or any part thereof essential to the proper operation of the System or to the maintenance of the System Net Revenues, unless the Installment PaYIIlents have been fully paid or provision has been made therefor in accordance with Article 9.1 hereof. The Participant will not enter into any lease or agreement which impairs the operation of the System or any part thereof necessary to secure adequate System Net Revenues for the payment of-the Installment Payments, or which would otherwise impair the rights of the Owners with respect to the System Net Revenues or the operation of the System. Section 6.5. Maintenance and Operation of System. The Participant will maintain and preserve the System in good repair and working order at all times and will operate the System in an efficient and economical manner. Section 6.6. Insurance. (a) The Participant will procure and maintain at all times insurance on the System against such risks (including accident to or destruction of the System) as are usually insured in connection \'!'!it.~ operations similar to the System and, to the extent such insurance is a\'ailable for reasonable premiums from a reputable insurance company, such insurance shall be adequate in. amount and, as to the risks insured against, shall be maintained with responsible: insurers; provided, that such insurance coverage may be satisfied under a self-insurance progranl which is actuarially sound. . (b) The Participant shall procure and maintain or cause to be procured and nlaintained public liability insurance covering claims against the Participant (including its directors, officers and employees) for bodily injury or death, or damage to property occasioned by reason of the Participant's operations, including any use of the System, and such insurance shall afford protection in such amounts as are usually covered in connection with operations similar to the System; provided, that such insurance coverage may be satisfied under a self-insurance program . which is actuarially sound. (c) If all or any part of the System shall be damaged or destroyed the Net Proceeds. realized by the Participant therefrom shall be deposited by the Participant with the Trustee in a special fund which the Trustee shall establish as needed in trust and applied by the Participant to the cost of acquiring and constructing additions, betterments, extensions or improvements to the System if (A) the Participant first secures and files with the Trustee a Certificate of the Participant showing (i) the loss in annual System Revenues, if any, suffered, or to be suffered, by the Participant by reason of such damage or destruction, (ii) a general description of the additions, betterments, extensions or improvements to the System then proposed to be acquired P.27 16396.1001098 AGMT 16396.1001098 AGMT P.28 If such eminent domain proceedings have had no effect~ or at most an immaterial effect, upon the System Revenues and the security of the Installment Payments, and a Certificate of the Participant to such effect has been filed with the Trustee, then the Participant shall forthwith Section 6.7. Eminent Domain Proceeds. If all or any part of the System shall be taken by eminent domain proceedings, the Net Proceeds realized by the Participant therefrom shall be deposited by the Participant with the Trustee in a special fund which the Trustee shall establish as needed in trust and applied by the Participant to the cost of acquiring and constructing additions, betterments, extensions or improvements to the System if (A) the Participant first secures and files with the Trustee a Certificate of the Participant showing (i) the loss in annual System Revenues, if any, suffered, or to be suffered, by the Participant by reason of such eminent domain proceedings, (ii) a general description of the additions, betterments, extensions or improvements to the System then proposed to be acquired and constructed by the Participant from such proceeds, and (iii) an estimate of the additional System Revenues to be derived from such additions, betterments, extensions or improvements; and (B) the Trustee has been furnished a Certificate of the Participant, certifying that such additional System Revenues will sufficiently offset on a timely basis the loss of System Revenues resulting from such eminent domain proceedings so that the ability of the Participant to pay Installment Payments when due will not be substantially impaired, and such Certificate of the Participant shall be final and conclusive, and any balance of such proceeds not required by the Participant for such purpose shall be deposited in the System Revenue Fund and applied as provided in Section 5.2 hereof, provided, that if the foregoing conditions are not met, then such proceeds shall be deposited with the Trustee and applied to make Installment Payments as they come due and Parity Obligation Payments as they shall become due; provided further that the foregoing procedures for the application of Net Proceeds shall be subject to any similar provisions for Parity Debt on a pro rata basis. . If such damage or destruction has had no effect, or at most an immaterial effect, upon the System Revenues and the security of the Installment Payments, and a Certificate of the Participant to such effect has been filed with the Trustee, then the Participant shall forthwith deposit such proceeds in the System Revenue Fund, to be applied as provided in Section 5.2 hereof. and constructed by the Participant from such proceeds, and (iii) an estimate of the additional System Revenues to be derived from such additions, betterments, extensions or improvements; and (B) the Trustee has been furnished a Certificate of the Participant, certifying that such additional System Revenues will sufficiently offset on a timely basis the loss of System Revenues resulting from such damage or destruction so that the ability of the Participant to pay Installment Payments when due will not be substantially impaired, and such Certificate of the Participant shall be final and conclusive, and any balance of such proceeds riot required by the Participant for such purpose shall be deposited in the System Revenue Fund and applied as provided in Section 5.2 hereof, provided, that if the foregoing conditions are not met, then such proceeds shall be deposited with the Trustee and applied to make Installment Payments as they come due and Parity Obligation Payments as they shall become due; provided further that the foregoing procedures for the application of Net Proceeds shall be subject to any similar provisions for Parity Debt on a pro rata basis. deposit such proceeds in the System Revenue Fund, to be applied as provided in S~~ction 5.2 hereof. Section 6.8. Amounts of Rates. Fees and Charges. (a) The Participant will, at all times while any of the Installment Payments remain. unpaid, fix, prescribe and collect rates, fees and charges and manage the operation of the System for each Fiscal Year so as to yield System Revenues at least sufficient, after making reasonable allowances for contingencies and errors in the estimates, to pay the following amounts during such Fiscal Year: (i) All current Operation and Maintenance Costs. (ii) . The Installment Payments and the payments for the other Parity Debt. and the Repayment Obligations and the payment of the Subordinate Obligations as they become due and payable. (iii) All payments required for compliance with the terms hereof, including restoration of the Reserve Account to an amount equal to the Reserve Account Requirement, and the termS of any Supplemental Indenture; (iv) All payments to meet any other obligations of the Participant which are charges, liens or encumbrances upon, or payable from, the System Net Revenues. (b) In addition to the requirements of the foregoing subsection (a) of this Section, the Participant will, at all times while any Installment Payments remain unpaid, to the Inaximum extent permitted by law, fix, prescribe and collect rates, fees and charges and m,mage the operation of the System for each Fiscal Year so as to yield System Net Revenues during such Fiscal Year equal to at least 120% per cent of the Annual Debt Service in such Fiscal Year; provided, an adjustment shall be made to the amount of System Net Revenues as provided in Section 5.4 hereof. The Participant may make or permit to be made adjustments from time to time in such rates, fees and charges and may make or permit to be made such classification thereof as it deems necessary, but shall not reduce or permit to be reduced such rates, fees and charges below those then in effect unless the System Revenues from such reduced rates, fees and charges will at all times be sufficient to meet the requirements of this Section. Section 6.9. Enforcement of and Performance Under Contracts. The Participant shall enforce all material provisions of any contracts to which it is a party, an assignee, successor in interest to a party or third-party beneficiary, in any case where such contracts provide for . material payments or services to be rendered to the System. Further, the Participant will comply with, keep, observe and perform all material agreements, conditions, covenants and terms, express or implied, required to be performed by it, contained in all contracts affecting or involving the System, to the extent that the Participant is a party thereto. P.29 16396.1 001098 AGMT 16396.1001098 AGMT P.30 The Participant will prepare annually, not later than one hundred eighty (180) days after the close of each Fiscal Year, so long as any Installment Payments remain unpaid, an audited financial statement of the Participant relating to the System Revenue Fund and all other accounts or funds established pursuant hereto for the preceding Fiscal Year prepared by an Independent Certified Public Accountant, showing the balances in each such account or fund as of the beginning of such Fiscal Year and all deposits in and withdrawals from each such account or fund during such Fiscal Year and the balances in each such account or fund as of the end of such Fiscal Year, which audited financial statement shall include a statement as to the manner and extent to which the Participant has complied with the provisions hereof and of any Supplemental Agreement as it relates to such accounts and funds. The Participant will furnish a copy of such audited financial statement to the Trustee, the Bond Insurer and to the Information Services upon request, and will furnish such reasonable number of copies thereof to investment bankers, security dealers and others interested in the Authority Bonds. Section 6.14. Books of Record and Accounts: Financial Statements. The Participant will keep proper books of record and accounts in which complete and correct entries shall be made of all transactions relating to the System and the System Revenue Fund, and upon request will provide information concerning such books of record and accounts to the Trustee. Section 6.13. Payment of Claims. The Participant will pay and discharge any and all lawful claim.s for labor, materials or supplies which, if unpaid, might become a lien or charge upon the System or upon the System Net Revenues or any part thereof, or upon any funds held by the Trustee, or which might impair the security of the Installment Payments; provided, that nothing herein contained shall require the Participant to make any such payments so long as the Participant in good faith shall contest the validity of any such claims and such nonpayment will not materially adversely affect the Participant's ability to perform its obligations hereunder. Section 6.12. Prompt Acquisition and Construction of the Proiects. Prior to completion of any part of the Project, the Participant will acquire and. construct the Projects with all practicable dispatch, and such acquisition and construction will be made in an expeditious manner and in conformity with the law so as to complete the same as soon as possible. Section 6.11. No Free Service. The Participant will not permit any part of the System or any facility thereof to be used or taken advantage of free of charge by any corporation, firm or person, or by any public agency (including the State of California and any city, county, public agency, political subdivision, public corporation or agency or any thereof), unless otherwise required by law or existing written agreements. Section 6.10. Collection of Charges. Fees and Rates. The Participant will have in effect at all times rules and regulations requiring each user of the System to pay the .applicable charges, fees and rates and providing for the billing thereof and for a due date and a delinquency date for each bill. In each case where such bill remains unpaid in whole or in part after it becomes delinquent, the Participant will enforce the collection procedures contained in such rules and regulations. Section 6.15. Payment of Taxes and Other Charges and Compliance with Governmental Regulations. The Participant will pay and discharge all. taxes, service charges, assessments and other governmental charges which may hereafter be lawfully imposed upon the System or any properties owned by the Participant, or upon the System Revenues, when the same shall become due; provided, that nothing herein contained shall require the Participant to make any such payments so long as the Participant in good faith shall contest the validity of any such taxes, service charges, assessments or other goyernmental charges and such nonpayment will not materially adversely affect the Participant's ability to perform its obligations hereunder" The Participant will duly comply with all applicable state, federal and local statutes and all valid regulations and requirements of any governmental authority relative to the operation of the System or any part thereof, but the Participant shall not be required to comply with any regulations or requirements so long as the validity or application thereof shall be contested in good faith and such noncompliance will not materially adversely affect the Participant's ability to perform its obligations hereunder. Section 6.16. Tax Covenants and Matters. (a) General. The Participant hereby covenants with the holders of the Authority Bonds that, notwithstanding any other provisions of this Agreement, they shall not take any action, or fail to take any action, if any such action or failure to take action would adversely affect the exclusion from gross income of interest on the Authority Bonds under Section 103 of the Code. The Participant shall not, directly or indirectly, use or permit the use of proceeds of the Authority Bonds or any of the property financed or refinanced with proceeds of the Authority Bonds, or any portion thereof, by any person other than a governmental unit (as such term is used in Section 141 of the Code) in such manner or to such extent as would result in the loss or exclusion from gross income for federal income tax purposes of interest on the Authority Bonds. (b) Arbitrage. The Participant shall not, directly or indirectly, use or pemdt the use of any proceeds of any Authority Bonds, or of any property financed or refinanced thereby, or other funds of the Participant, or take or omit to take any action, that would cause the Authority Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code. To that end, the Participant shall comply with all requirements of Section 148 of the Code and all regulations of the United States Department of the Treasury issued thereunder to the extent such requirements are, at the time, in effect and applicable to the Authority Bonds. (c) Federal Guarantee. The Participant shall not make any use of the proceeds of the Authority Bonds or any other funds of the Participant, or take or omit to take any other action, that would cause the Authority Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Code. (d) Compliance with Tax Certificate. In furtherance of the foregoing tax covenants of this Section, the Participant covenants that they will comply with the provisions of the Tax Certificate, which is incorporated herein as if fully set forth herein. These covenants shall survive payment in full or defeasance of the Authority Bonds. P.31 16396.1001098 AGMT 16396.1 001098 AGMT P.32 (d) Survival of Defeasance. Notwithstanding anything in this Agreement to the . contrary, the obligation to comply with the requirements of this Section shall survive the payment in full or defeasance of the Installment Payments. (c) Record Keeping. The Participant shall retain records of all determinations made hereunder until six years after payment in full of the Installment Payments. (b) Deficiencies in the Rebate Fund. In the event that, prior to the time of any payment required to be made from the Rebate Fund, the amount in the Rebate Fund is not sufficient to make such payment when such payment is due, the Participant shall calculate or cause to be calculated the amount of such deficiency and deposit an amount received from any legally available source equal to such deficiency prior to the time such payment is due. (ii) Transfer of Moneys. Within 55 days of the end 'Of each such fifth Bond Year, the Participant shall deposit to the Rebate Fund from any legally available moneys for such purpose, if and to the extent required so that the balance in the Rebate Fund shall equal the "rebate amount" so calculated in accordance with this Section. (i) Computation of Rebate Amount. Within 55 days of the end of each fifth Bond Year (as such term is defined in the Tax Certificate), and each Bond Year in which funds remain on deposit in the Project Account relating to the Participant, the Participant shall calculate or cause to be calculated the amount of "rebate amount," in accordance with Section 148(f)(2) of the Code and Section 1.148-3 of the Treasury Regulations (taking into account any applicable exceptions with respect to the computation of the "rebate amount," described, if applicable, in the Tax Certificate (e.g., the temporary investments exceptions of Section 148(f)(4)(A)(ii) or Section 148(f)(4)(B) of the Code, the expenditure requirements of Section 148(f)(4)(B) or Section 148(f)(4)(C) of the Code or Section 1.148-7(d) of the Treasury Regulations, the exception for certain "small governmental issuers" as set forth in Section 148(f)(4)(D) of the Code, and taking into account whether the election pursuant to Section 148(f)(4)(C)(vii) of the Code (the;; 1 Y2% Penalty") has been made)), for this purpose treating the last day of the applicable Bond Year as a computation date, within the meaning of Section 1.148-1 (b) of the Treasury Regulations. (a) Establishment. Pursuant to the Indenture, the Trustee will hold a special fund (the "Rebate FundI!) for any amounts required to satisfy the requirement to make rebate payments to the United States pursuant to Section 148 of the Code and the Treasury Regulations promulgated thereunder. Such amounts shall be free and clear of any lien under this Agreement and shall be governed by this Section, Section 6.16 of this Agreement, Section 4.5 of the Indenture and by the Tax Certificate executed by the Participant. All money at 'any time deposited in the Rebate Fund shall be held by the Trustee in trust for payment to the United States Treasury. All amounts on deposit in the Rebate Fund shall be governed by this Section and the Tax Certificate, unless and to the extent: that the Participant delivers to the Trustee an opinion of nationally recognized bond counsel that the exclusion from gross income for federal income tax purposes of interest on the Authority Bonds will not be adversely affected if such requirements are not satisfied. Section 6.17. Rebate Fund. Section 6.18. Continuing Disclosure. The Participant hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate. Notwithstanding any other provision of this Agreement, failure of the Participant to comply with the Continuing Disclosure Certificate shall not be considered an Event of Default; however, any Participating Underwriter or any holder or beneficial owner of the Authority Bonds may take such actions as described under the Continuing Disclosure Certificate to cause the Participant to comply with its obligations under this Section. Section 6.19. Further Assurances. The Participant will adopt, make, execute and deliver any and all such further indentures, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance hereof. Section 6.20. Reimbursement of Bond Insurer and Other Provisions Relating to the Bond Insurer. (a) The Participant agrees to payor reimburse the Bond Insurer any and all charges, fees, costs and expenses which the Insurer may reasonably payor incur in connection with (i) the administration, enforcement, defense or preservation of any rights or security in respect of this Installment Purchase Agreement or the Indenture, (ii) the pursuit of any remedies under the Indenture or this Installment Purchase Agreement or otherwise afforded by law or equity, (iii) the violation by the Participant of any law, rule or regulation, or any judgment, order or decree applicable to it or (iv) any litigation or other dispute in connection with the Indenture or the Installment Agreement or the transactions contemplated thereby, other than amounts resulting from the failure of the Bond Insurer to honor its obligations under Municipal Bond Insurance Policy; provided that the foregoing obligation shall be strictly limited to defaults with respect to the Participant. The Bond Insurer shall have the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent. proposed in respect of the Indenture or the Installment Purchase Agreement. (b) The Participant will provide the Bond Insurer with its annual budget within 30 days of its adoption and its annual audited financial statements within 210 days after the end of the Participant's Fiscal Year. ARTICLE VII PREPAYMENT OF INSTALLMENT PAYMENTS Section 7.1. .Prepavment. The Participant may prepay the Installment Payments in accordance with the provisions of the Indenture applicable to the redemption prior to maturity of the Authority Bonds. Before making any prepayment pursuant to this Section, the Participant shall give the Authority and the Trustee not less than sixty (60) days prior notice of such prepayment. P.33 16396.1001098 AGMT 16396.1001098 AGMT P.34 then, and in each and every such case during the continuance of such Event of Default specified in clauses (3) and (4) above, the Authority shall, and for any other such Event of Default the Authority may (and at the direction of the Bond Insurer, shall), by notice in writing to the Participant, declare the entire principal amount of the unpaid Installment Payments and the accrued interest thereon to be due and payable immediately, and upon any such declaration the same shall become immediately. due and payable; provided that any such declaration of acceleration shall be subject to the prior written consent of the Bond Insurer. This subsection however, is subject to the condition that if at any time after the entire principal amount of the unpaid Installment Payments and the accrued interest thereon shall have been so declared due and payable and before any judgment or decree for the payment of the moneys due shall have been obtained or entered the Participant shall deposit with the Authority a sum sufficient to pay the unpaid plincipal amount of the Installment Payments or the unpaid payment of any other (4) if payment of the principal of any Parity Debt is accelerated in accordance with its terms; (3) if the Participant shall file a petition or answer seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if a court of competent jurisdiction shall approve a petition filed with or without the consent of the Participant seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if under the provisions of any other law for the relief or aid of debtors any court of competent jurisdiction shall assume custody or control of the Participant or of the whole or any substantial part of its property; or (2) if default shall be made by the Participant in the performance of any of the other agreements or covenants required herein to be performed by it, and such default shall have continued for a period of thirty (30) days after the Participant shall have been given notice in writing of such default by the Authority, the Trustee or the Bond Insurer; provided that such default shall not constitute an Event of Default hereunder, if the Participant shall commence to cure such default within such thirty (30) day period and thereafter diligently and in good faith shall proceed to cure such default within a reasonable period of time; provided, such period shall not extend beyond a total of 90 days except with the prior consent of the Bond Insurer; (1) if default shall be made by the Participant in the due and punctual payment of any Installment Payment or any Parity Debt when and as the same shall become due and payable; Section 8.1. Events of Default and Acceleration of Maturities. If one Of more of the following Events of Default shall happen, that is to say -- EVENTS OF DEFAULT AND REMEDIES OF THE AUTHORITY ARTICLE VIII Parity Debt referred to in clause (1) above due prior to such declaration and the accrued interest thereon, with interest on such overdue installments, at the rate or rates applicable to the remaining unpaid principal balance of the Installment Payments or such other Parity Debt if paid in accordance with their terms, and the reasonable expenses of the Authority and the Bond Insurer, and any and all other defaults known to the Authority. (other than in the payment of the entire principal amount of the unpaid Installment Payments and the accrued interest thereon due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Authority and the Bond Insurer or provision deemed by the Authority and the Bond Insurer to be adequate shall have been made therefor, then and in every such case the Authority and the Bond Insurer, by written notice to the Participant, may rescind and annul such declaration and its consequences; but no such rescission and annulment shall extend to or shall affect any subsequent default or shall impair or exhaust any right or power consequent thereon. Section 8.2. Application of Funds Upon Acceleration. Upon the date of the declaration of acceleration as provided in Section 8.1, all System Revenues thereafter received shall be applied in the following order (subject on a pro rata basis to the acceleration provisions of Parity Debt) - First, to the payment, without preference or priority, and in the event of any insufficiency of such System Revenues ratably without any discrimination or preference, of the fees, costs and expenses of the Authority and Trustee, if any, in carrying out the provisions of this article, including reasonable compensation to its accountants and counsel and similar costs with respect to Parity Debt; Second, to the payment of Operation and Maintenance Costs; Third, to the payment of the entire principal amount of the unpaid Installment Payments and the unpaid principal amount of all other Parity Debt and the accrued interest thereon, with interest on the overdue installments at the rate or rates of interest applicable to the Installment Payments and such other Parity Debt if paid in accordance with their respective terms; and Fourth, to the Bond Insurer, any amounts owed pursuant to Sections 5.2(b), 6.20 and 8.1 hereof. Section 8.3. Other Remedies of the Authority. The Authority shall have the right with the written consent of the Bond Insurer and shall at the direction of the Bond Insurer: (a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the Participant or any director, officer or employee thereof, and to compel the Participant or any such director, officer or employee to perform and carry out its or his duties under the Law and the agreements and covenants required to be performed by it or him contained herein; (b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Authority; or (c) by suit in equity upon the happening of an Event of Default to require the Participant and its directors, officers and employees to account as the trustee of an express trust. P.35 16396.1001098 AGMT 16396.1 001098 AGMT P.36 Section 9.1. Discharge of Obligations. The obligations hereunder may be discharged as provided in Article VIII of the Indenture. DISCHARGE OF OBLIGATIONS ARTICLE IX Section 8.6. Notices. Notwithstanding any other provision hereof, the Trustee shall immediately notify the Bond Insurer if at any time there are insufficient moneys to make any Installment Payments as required and immediately upon the occurrence of any event of default hereunder. Section 8.5. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Authority is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by the Law or any other law. If any action, proceeding or suit to enforce any right or exercise any remedy is abandoned or determined adversely to the Authority, the Participant and the Authority shall be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken. A waiver of any default or breach of duty or contract by the Authority shall not affect any subsequent default or,breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Authority to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or shall be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Authority by the Law or by this article may be enforced and exercised from time to time and as often as shall be deemed expedient by-the Authority. Notwithstanding anything contained herein, the Authority shall have no security interest in or mortgage on the Project, the System or other facilities of the Participant or any other real property of the Participant and no default hereunder shall result in the loss of the Project, the System or other facilities of the Participant or any other real property of the Participant. Section 8.4. Non-Waiver. Nothing in this article or in any other provision hereof shall affect or impair the obligation of the Participant, which is absolute and unconditional, to pay the Installment Payments to the Authority at the respective due dates or upon prepayment from the System Net Revenues, the System Revenue Fund and the other funds herein pledged for such payment, or shall affect or impair the right of the Authority, which is also absolute and unconditional, to institute suit to enforce such payment by virtue of the contract embodied herein. ARTICLE X MISCELLANEOUS Section 10.1. Liability of Participant Limited to System Revenues. Notwithstanding anything contained herein, the Participant shall not be required to advance any moneys derived from any source of income other than the System Revenues, the System Revenue Fund and the other funds provided herein for the payment of the Installment Payments or for the performance of any agreements or covenants required to be performed by it contained herein. The Participant may, however, advance moneys for any such purpose so long as such moneys are derived from a source legally available for such purpose and may be legally used by the Participant: for such purpose. The obligation of the Participant to make the Installment Payments is a special obligation of the Participant payable solely from the System Net Revenues, and does not constitute a debt of the Participant or of the State of California or of any political subdivision thereof in contravention of any constitutional or statutory debt limitation or restriction. Section 10.2. Successor Is Deemed Included in all References to Predecessor. Whenever. either the Participant or the Authority is named. or referred to herein, such reference shall be deemed to include the successor to the powers, duties and functions that are presently vested in the Participant or the Authority, and all agreements and covenants required hereby to be performed by or on behalf of the Participant or the Authority shall bind and inure to the benefit of the respective successors thereof whether so expressed or not. .Section 10.3. vVaiver of Persollal Liabilitv. l~o director, officer or employee or the Participant shall be individually or personally liable for the payment of the Installment Payments or be subject to any personal liability by reason of the execution of this Agreement or the issuance of the Bonds. . Section lOA. Article and Section Headings. Gender and References. The headings or titles of the several articles and sections hereof and the table of contents appended heret:o shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof, and words of any gender shall be deemed and construed to include all genders. All references herein to "Articles," "Sections" and other subdivisions or clauses are to the corresponding articles, sections, subdivisions or clauses hereof; and the words "hereby", "herein," "hereof," "hereto," "herewith" and other words of similar import refer to this Agreement as a whole and not to any particular article, section, subdivision or clause hereof. Section 10.5. Partial Invaliditv. If anyone or more of the agreements or covenants or portions thereof required hereby t9 be performed by or on the part of the Participant or the Authority shall be contrary to law, then such agreement or agreements, such covenant or covenants or such portions thereof shall be null and void and shall be deemed separable from the remaining agreements and covenants or portions thereof and shall in no way affect the validity hereof. The Participant and the Authority hereby declare that they would have executed this Agreement, and each and every other article, section, paragraph, subdivision, sentence, clause and phrase hereof irrespective of the fact that anyone or more articles, sections, paragraphs, F.37 16396.1 001098 AGMT 16396.1 001098 AGMT . P.38 (ii) any act or omission of the Participant or any of its agents, contractors, servants, employees or licensees in connection with this Agreement or the Project, the operation of the Project, or the condition, environmental or otherwise, occupancy, use, possession, conduct or management of work done in or about, or from the planning, design, acquisition, construction or development of, the Project or any part thereof; (i) the Indenture, this Agreement or the execution or amendment thereof or in connection with transactions contemplated thereby, 'including the sale, resale or remarketing of the Authority Bonds; Participant agrees to indemnify, hold harmless and defend the Authority and the Trustee, and each of their respective officers, governing board members, directors, officials, employees, attorneys and agents (collectively, the "Indemnified Parties"), against any and all losses, damages, claims, actions, liabilities, costs and expenses of any conceivable nature, kind or character (including, without limitation, reasonable attorneys' fees, litigation and court costs, amounts paid in settlement and amounts paid to discharge judgments) to which the Indemnified Parties, or any of them, may become subject under federal or state securities laws or any other statutory law or at common law or otherwise arising out of or based upon or in any way relating to: To the fu.llest. extent perrnitted by 1m.v, the Co._+':,..,."""" 1 () 1 1 T.....AO;"9""\""'l.....~+::,...n+;"..... n.+ ^ ,,+'h,......,..~f-~, lJ~\.-l.lVU ol V. 1 ol. lllU\,-Ulllloll'-'UI.1Vll Vol rl..UI.UVlll. '1'. Section 10.10. Execution in Counterparts. This Agreement may be executed in several counterparts" each of which shall be deemed an, original, and all of which shall constitute but one and the same instrument. Section 10.9. Effective Date. This Agreement shall become effective upon its execution and delivery, and shall terminate when the Purchase Price shall have been fully paid (or provision for the payment thereof shall have been made to the satisfaction of the Authority). Section 10.8. California Law. THE INSTALLMENT PURCHASE AGREEMENT SHALL BE CONSTRUED AND GOVERNED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. Section 10.7. Net Contract. This Agreement shall be deemed and construed to be a net contract, and the Participant shall pay absolutely net during the term hereof. the Installment Payments and all other payments required hereunder, free of any deductions and without abatement, d.iminution or set-off whatsoever. Section 10.6. Assignment. This Agreement and any rights hereunder may be assigned by the Authority, as a whole or in part, without the necessity of obtaining the prior consent of the Participant. The Participant acknowledges and agrees that the Installment Payments will be assigned to the Trustee and pledged under the Indenture to the payment of the Authority Bonds. subdivisions, sentences, clauses or phrases hereof or the application thereof to any person or circumstance may be held to be unconstitutional, unenforceable or invalid. (iii) any lien or charge upon payments by the Participant to the Authority and the Trustee hereunder, or any taxes (including, without limitation, all ad valorem taxes and sales taxes), assessments', impositions and other charges imposed on the Authority or the Trustee in respect of any portion of the Project; (iv) any violation of any environmental law, rule or regulation with respect to, or the release of any toxic substance from, the Project or any part thereof; (v) Bonds; the defeasance and/or redemption, in whole or in part, of the Authority (vi) any untrue statement or misleading statement or alleged untrue statement or alleged misleading statement of a material fact furnished in writing by the Participant contained in any offering statement or document for the Authority Bonds ,or ~my of the documents relating to the Authority Bonds to which the Participant is a party, or any omission or alleged omission from any offering statement or document for the Authority Bonds of any material fact necessary to be stated therein in order to make the statements made therein by the Participant, in the light of the circumstances under which they were made, not misleading; (vii) the Trustee's acceptance or administration of the trust of the Indenture, or the exercise or performance of any of its powers or duties thereunder or under any of the documents relating to the Authority Bonds to whichit is a party; except (a) in the case of the foregoing indemnification of the Trustee or any of their respective officers, members, directors, officials, employees, attorneys and agents, to the extent such daJnages are "'a"""",.:i 1--....., +"hc ....I"').,...l~.-.en,...o. ,........ 'T7~11.t:...l .........~,.,""~.rl,..,.,.+ ",j: n....,..'h r'r'\rio'rt"\T'~+~O,...t 0""......'(1'. "'.... {"h,,\ ~'r'\ +"he v U"I;.-U U J LH' Hv.5~~.5 Ivv V~ ,vv ~ ~l.i..u I~.u"vVHU.UvL V~ "UvH .LHU.vI.U~ll.LI.vU .L aJ. LJ, VI. "U J ~u LU case of the foregoing indemnification of the Authority or any of its officers, members, directors, officials, employees, attorneys and agents, to the extent such daJnages are caused by the willful misconduct of such Indemnified Party; provided that the foregoing indemnification shall be strictly limited to defaults or other actions by the Participant and shall not encompass matters relating only to other Participants (as defined in the Indenture). In the event that any action or proceeding is brought against any Indemnified Party with respect to which indemnity may be sought hereunder, the Participant, upon written notice from the Indemnified Party, shall assume the investigation and defense thereof, including the employment of counsel selected by the Indemnified Party, and shall assume the payment of all expenses related thereto, with full power to litigate, compromise or settle the same in its sole discretion; provided that the Indemnified Party shall have the right to review and approve or disapprove any such compromise or settlement. Each Indemnified Party shall have the right to employ separate counsel in any such action or proceeding and participate in the investigation and defense thereof, and the Participant shall pay the reasonable fees and expenses of such separate counsel; provided, however, that such Indemnified Party may only employ separate counsel at the expense of the Participant if in its judgment a conflict of interest exists by reason of common representation or if all parties commonly represented do not agree as to the action (or inaction) of counsel. P.39 16396.10101098 AGMT 16396.1001098 AGMT P.40 Section 10.12. Amendments. This Agreement may only be amended in accordance with the terms of Indenture. Any Ratings Agency rating the Authority Bonds shall receive notice of each amendment to this Agreement and a copy thereof at least 15 days in advance of its execution. The Bond Insurer shall be provided with a full transcript of all proceedings.relating.to any amendment or supplement hereto. The rights of any persons to indemnify hereunder and rights to payment of fees and reimbursement of expenses pursuant to Section 4.2, hereof shall survive the final payment or defeasance of the Authority Bonds and in the case of the Trustee any resignation or removal. The provisions of this Section shall survive the termination of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed and attested this Agreement by their officers thereunto duly authorized as of the day and year fIrst written above. [P ARTICIP ANT] By: Authorized Representative CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY By: Member of the Commission F.41 16396.1001098 AGMT 16396.1001098 AGMT P.42 Type of System: Description of the Project: Prior Liens: EXHIBIT A INFORMATION CONCERNING PARTICIPANT EXHIBIT B SCHEDULE OF INSTALLMENT PAYMENTS 1. The principal amount of payments to be made by the Participant hereunder is $. . 2. The installment payments of principal and interest are payable in the amounts and on the Installment Payment Dates (dates shown are the first day of the month after the Installment Payment Dates which are due on the 15th day of the prior month) as shown in Attachment A. P.43 16396.1001098 AGMT 16398.1001098 AGMT P.44 The Bonds are being issued for the purposes described in the Official Statement, including the financing and refinancing of public capital improvements. 2. Terms of the Bonds. The Preliminary Official Statement with respect to the Bonds, dated __, 2005 (the "Preliminary Official Statement"), as amended to conform to the terms of this Bond Purchase Agreement, and with such changes and amendments as are mutually agreed to by the Authori~y and the Underwriter, including the cover page, the appendices and all information incorporated therein by reference, is herein collectively referred to as the "Official Statement." The terms of the Bonds and the Installment Purchase Agreements (defined below) shall be as set forth in Exhibit A hereto and as further described in the Official Statement and shall be issued under and pursuant to the Indenture, dated as of 1, 2005 (the "Indenture"), by and between the Authority and Union Bank of California, N.A., as trustee (the "Trustee"). Capitalized terms used herein unless. otherwise defined herein shall have the meanings given to such terms in the Indenture. 1. Sale of the Bonds. Upon the terms and conditions and upon the basis of the representations and warranties hereinafter set forth, the Underwriter hereby agrees to purchase from the Authority for reoffering to the public, and the Authority hereby agrees to sell to the Underwriter . for such purpose, all (but not less than all) of the $ aggregate principal amount of the Authority's Water and Wastewater Revenue Bonds (Pooled Financing Program), Series 2005_ (the "Bonds"). The purchase price of the Bonds shall be $ (representing the par amount of the Bonds, less a net original issue discount of and less an Underwriter's discount of $~. The undersigned (the "Underwriter") offers to enter into this Bond Purchase Agreement with the California Statewide Communities Development Authority (the "Authority"), which, upon the acceptance hereof by the Authority and the public agencies listed on the signature page hereto (the "Participants"), will be binding upon the Authority, the Participants and the Underwriter. This offer is made subject to the written acceptance of this Bond Purchase Agreement by the Authority and the Participants and the delivery of such acceptance to the Underwriter at or prior to 11 :59 p.m., Pacific time, on the date hereof. Ladies and Gentlemen: California Statewide Communities Development Authority 1100 K Stree:t, Suite 101 Sacramento, California 95814 BOND PURCHASE AGREEMENT ,2005 $ California Statewide Communities Development Authority Water and Wastewater Revenue Bonds (pooled Financing Program) Series 2005_ Hawkins Delafield & Wood LLP Draft 3. Public Offerinl! of the Bonds. The Underwriter agrees to make a bona fide public offering of all the Bonds at not in excess of the respective initial public offering prices to be set forth on the cover page of the Official Statement, plus interest accrued on the Bonds from their date. The Underwriter reserves the right to change such initial offering prices as the Underwriter shall deem necessary in connection with the marketing of the Bonds and to offer and sell the Bonds to certain dealers and others at prices lower than the initial offering prices set forth on the cover page of the Official Statement. The Underwriter also reserves the right to (i)'overallot or effect transactions which stabilize or maintain the market prices of the Bonds at levels above those which 'might otherwise prevail in the open market and (ii) discontinue such stabilizing, if commenced, at any time. . 4. Legal Documents. The Authority hereby authorizes the use by the Underwriter of the Indenture, the Disclosure Certificates (as defined below) and the Official Statement" and any supplements or amendments thereto, and the information contained in each of such documents, in connection with the public offering and sale of the Bonds. The Authority consents to the use by the Underwriter prior to the date hereof of the Preliminary Official Statement in connection with the public offering of the Bonds. Various cities, counties and special districts in California (collectively, the "Members") entered into a Joint Exercise of Powers Agreement, effective June 1, 1988, as amended (the "JPA Agreement"). The Authority and each Participant will enter into an Installment PUrchase Agreement, each dated as of 1, 2005 (the "Installment Purchase Agreements"), which provide for the payment of Installment Payments by the Participants. The Authority authorized the issuance of the Bonds and execution of related documents pursuant to a Resolution adopted __, 2005 (u.1.e "Authority Resolution"). The Authority and the Participants will enter into Continuing Disclosure Certifilcates (the "Disclosure Certificates") in substantially the forms attached to the Preliminary Official Statement and the Official Statement. The Authority will deliver to the Underwriter, within seven business days after the date of this Bond Purchase Agreement or four (4) days before settlement date, whichever is sooner and in sufficient time to accompany any confirmation requesting payment from any customers of the Underwriter, copies of the Official Statement in final form (including all documents incorporated by reference therein) and any amendment or supplement thereto in such quantities as the Underwriter may reasonably request in order to comply with the obligations of the Underwriter pursuant to the rules of the Municipal Securities Rulemaking Board and Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (the "Rule"). As soon as practicable following receipt thereof from the Authority, the Underwriter shall deliver the Official Statement to a nationally recognized municipal securities information repository (as such term is defined by the Rule). The Underwriter hereby agrees to deliver a copy of the Official Statement to a national repository on or before the Closing Date and to each investor that purchases any of the Bonds during the Underwriting Period (as such term is defined under the Rule), and to otherwise comply with all applicable statutes and regulations in connection with the offering and sale of the Bonds, including without limitation, MSRB Rule G-32 and the Rule. F.45 16398.1001098 AGMT 16398.1 001098 AGMT P.46 (d) To the best knowledge of the Authority, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body pending other than as described in the Official Statement, (i) in any way questioning the existence of the Authority or the titles of the officers of the Authority to their respective offices; (ii) affecting, contesting or seeking to prohibit, restrain or enjoin the issuance or delivery of. any of the Bonds, or the payment or collection of any amounts pledged or to be pledged to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity of the Bonds or the Authority Documents or the consummation of the transactions contemplated thereby, or contesting the exclusion of the interest on the Bonds from taxation or contesting the powers of the Authority to assign and pledge the Installment Payments; or (iii) contesting the completeness or accuracy of the (c) The Bonds are special limited obligations of the Authority and are payable, as to principal, premium (if any), and interest thereon, from a pledge of and lien on the Revenues and certain other funds held under the Indenture. (b) The Authority has the legal rIght and power to issue and deliver the Bonds and to execute and deliver, and to perform its obligations under, the Indenture, the Installment Purchase Agreements and this' Bond Purchase Agreement (collectively, the "Authority Documents"). The Authority has duly authorized the issuance and delivery of the B.onds and the execution and delivery of, and perfomlance of its obligations under, the Authority Documents and as of the date hereof such authorizations are in full force and effect and have not been amended, modified or rescinded. When executed and delivered by the respective parties thereto, the Authority Documents will constitute legal, valid and binding obligations of the Authority in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws and the application of equitable principles relating to or affecting creditors' rights generally. The Authority has complied, and will at the Closing be in compliance in all respects, with its obligations under the Authority Documents. (a) . The Authority is a joint powers authority under Chapter 5 of Division 7 of Title 1 of the California Government Code, duly organized and validly existing under and by virtue of the Constitution and the laws of the State of California 6. Representations. Warranties and Covenants of the Authority. The Authority represents, warrants and covenants to the Underwriter that: 5. Deliverv of Bonds and Closing. At 8:00 a.m., California time, on , 2005 or at such other time or on such other business day as shall have been mutually agreed upon by the Authority and the Underwriter (the "Closing Date"), the Authority will deliver to the Underwriter at the office of The Depository Trust Company ("DTC") in New York, New York, or at such other place as the Authority and the Underwriter may mutually agree upon, the Bonds in fully registered book-entry form, duly executed and registered in the name of Cede & Co., as nominee of DTC, and subject to the terms and conditions hereof, the Underwriter will accept such delivery and pay the purchase price of the Bonds by wire transfer payable in Federal funds at the office of Hawkins Delafield & 'Wood LLP, San Francisco, California, or such other place as shall have been mutually agreed upon by the Authority and the Underwriter. Such delivery of and payment for the Bonds is referred to herein as the "Closing." The Bonds shall be made available for inspection by DTC at least one business day before the Closing. Preliminary Official Statement (excluding all appendices) or the Official Statement (excluding all appendices) or any supplement or amendment thereto or asserting that the Preliminary Official Statement (excluding all appendices) or the Official Statement (excluding all appendices) contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or riecessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 7. Representations. Warranties and Covenants of the Participants. Each Participant individually represents, warrants and covenants to the Underwriter that: (a) The Participant is a public agency, duly organized and validly existing under and by virtue of the Constitution and the laws of the State of California. (b) The Participant has the legal right and power to execute and deliver, and to perform its obligations under, the related Installment Purchase Agreement and this Bond Purchase Agreement (collectively, the "Participant Documents"). The Participant has duly authorized the execution and delivery of, and performance of its obligations under, the Participant Documents and as of the date hereof such authorizations are in full force. and effect and have not been amended, modified or rescinded. When executed and delivered by the respective parties thereto, the Participant Documents will constitute legal, valid and binding obligations of the Participant in accordanc.e with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws and the application of equitable principles relating to or affecting creditors' rights generally. The Participant has complied, and will at the Closing be in compliance in all respects, with its obligations under the Participant Documents. \. C j The information in h'1e Official Statement concerning the Participant is true and correct in all material respects, and the information in the Official Statement c:oncerning the Participant does not contain any misstatement of any material fact and does not omit any statement necessary to make the statements, in the light of the circumstances in which such statements were made, not misleading. (d) The Participant covenants with the Underwriter that so long as the Underwriter is required under the Rule to send any potential customer, on request, a copy of the Official Statement (the "Delivery Period"), if any event occurs which might or would cause the information in the Official Statement concerning the Participant, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Participant shall notify the Underwriter thereof, and if in the opinion of the Underwriter such event requires the preparation and publication of a supplement or amendment to the Official Statement, the Participant will cooperate with the Underwriter in the preparation of an amendment or supplement to the Official Statement, in a form and in a manner approved by the Underwriter. (e) The Participant will advise the Underwriter promptly of any proposal to amend or supplement the Official Statement and will not effect or consent to any such amendment or supplement without consultation with the Underwriter. The Participant will advise the Underwriter promptly of the institution of any proceedings known to it by any P.47 16398.1001098 AGMT 16398.1 001098 AGMT P.48 (k) Any certificate signed by any official or other representative of the Participant and delivered to the Underwriter pursuant to this Bond Purchase Agreement shall be deemed G) There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body pending or, to the best knowledge of the Participant, threatened (i) in any way questioning the existence of the Participant or the titles of the officers of the Participant to their respective offices; (ii) in any way contesting or affecting the validity of the Participant Documents or the consummation of the transactions contemplated thereby, (iii) which may result in any material adverse change relating to the finances or operations of the Participant; or (iv) contesting the completeness or. accuracy of the Preliminary Official Statement or the Official Statement or any supplement or aInendment thereto or asserting that the Preliminary Official Statement or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (i) All authorizations, consents or approvals of, or filings or registrations with any Governmental Entity or court necessary for the valid issuance of, and performance by the Partic:ipant of its obligations under, the Participant Documents will have been duly obtained nr m<ulp nn'nr to thp .j~~n!'ln('p of thp "Knna'S {!'Inri r1;~('jnc";'ri 1"n 1"hp TTnrlprnmt""r\ ~Tn +nrlh"".. -... .L.&..&....._..... ~ ................ -...&.:.a_ "'''-'l,,7__'&'.II.__ ,L ,,".L~__ "-'-'.1.. \................. ""-&.u_.&."""~"'"''""'' "'~ ....a...."'" "-"....a........""".&.. ""'.1...1. ""'.LJ- ...""""' .....................\..1.1. authorization, consent or approval of, or filing or registration with, any Governmental Entity or court is, or under existing requirements of law will be, necessary for the valid execution and delivery of, or performance by the Participant of its obligations under, the Participant Documents, other than any authorization, consent, approval, filing or registration as may be required under the Blue Sky or securities laws of any state in connection with the offering, sale or issuance of the Bonds. (h) The authorization, execution and deliyery by the Participant of the Participant Documents, and compliance by the Participant with the provisions thereof, do not and will not conflict with or constitute a breach of or default by the Participant under any applicable constitutional provision, law or administrative rule or regulation of the State or the United States, or any applicable judgment, decree, consent or other agreement to which it is bound or by which its properties may be affected. (g) The Participant is not in breach of or in default under any applicable constitutional provision, law or administrative rule or regulation of the State of California or the United States, or any applicable judgment, decree, consent or other agreement to which the Participant is a party, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute such a default or event of default under any of the foregoing. (f) If the Official Statement is supplemented or amended, the information in the Official Statement concerning the Participant as so supplemented or amended, as of the date of such supplement or amendment, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of th~ circumstances under which they were made, not misleading. Governmental Entity prohibiting or otherwise affecting the use of the Official Statement in connection with the offering, sale or distribution of the Bonds. a representation and warranty by the Participant to the Underwriter as to the truth of the statements therein made. (1) The Participant has not been notified of any listing or proposed lis1ing by the Internal Revenue Service to the effect that the Participant is an issuer whose: arbitrage certificates may not be relied upon. (m) Other than as contemplated by the Official Statement, between the date of this Bond Purchase Agreement and the Closing Date the Participant will not, without the prior written consent of the Underwriter, offer or issue any certificates, bonds, notes or other obligations for borrowed money or incur any material liabilities, direct or contingent, payable from or secured by a pledge of the System Net Revenues (as such term is defined in the related Installment Purchase Agreement). (n) The financial statements of, and other financial information regarding, the Participant contained in the Official Statement fairly present the financial position and results of the operations of the Participant as of the dates and for the periods therein set forth, and (i) the audited financial statements of the Participant attached to the Official Statement have been prepared in accordance with generally accepted accounting principles consistently applied and (ii) the other financial information contained in the Official Statement concerning the Participant has been compiled and presented on a basis substantially consistent with that of the Participant's audited financial statements included in the Official Statement. (0) The Participant agrees to the terms of the sale of the Bonds as provided herein and agrees to such terms of sale as they shall be reflected in the principal and interest components of the Installment Payments under the related Installment Purchase Agreements, as pro'videa in Ext'.J.bit B hereto,. The PCL.......icipant agrees to execute the Participant I)ocwilents subject to the conditions herein contained. The Participant agrees to indemnify the: Authority and the Trustee and to pay the fees and expenses of the Authority and the Trustee relating to the Bonds (as provided in Sections 4.2 and 10.11 of the Installment Purchase Agreement) and all other costs and expenses relating to the Bonds, including but not limited to annual fees of the Authority, arbitrage rebate calculation fees and disclosure service fees which are allocable to the Participant; provided that the foregoing indemnification and paym.ents shall be limited as to each Participant to such Participant's reasonable pro rata share. (p) The Participant has never failed to comply with its continuing disclosure obligations undertaken in connection with the Rule in any material respect. 8. ,Closing Conditions. The Underwriter has entered into this Bond Purchase Agreement in reliance upon the representations, warranties and covenants of the Authority and the Participants contained herein, and the performance by the Authority and the Participants of their obligations hereunder, both as of the date hereof and as of the Closing Date. The Underwriter's obligations under this Bond Purchase Agreement are and shall also be subject to the following conditions: (a) The representations and warranties of the Authority and the Participants contained herein shall be true, complete and correct in all material respects on the date hereof and at and as of the Closing Date, as if made at and as of the Closing Date, and the statements made in all certificates and other documents delivered to the Underwriter at tbe Closing F.49 16398.1001098 AGMT 16398.1001098 AGMT P.50 (i) legislation shall have been enacted by the United States or the State of California or shall have been reported out of committee or be pending in committee, or a decision shall have been rendered by a court of the United States or the Tax Court of the United States, or a ruling shall have been made or a regulation, proposed regulation or a temporary regulation shall have been published in the Federal Register or any other release or announcement shall have been made by the Treasury Department of the United States or the Internal Revenue Service, with respect to Federal or California taxation upon revenues or other income or payments of the general character to be derived by the Authority or upon interest received on (f) The Underwriter may terminate this Bond Purchase Agreement by notification to the Authority if at any time after the date hereof and prior to the Closing: ( (e) (i) No default by the Authority or any Participant shall have occurred and be continuing in the payment of the principal of or premium, if any, or interest on any bond, note or other evidence of indebtedness issued by the Authority or any Participant, respectively, and (ii) no bankruptcy, insolvency or other similar proceeding in respect of the Authority or any Participant shall be pending nor to the knowledge of the Authority or any Participant, contemplated. (d) Except as disclosed in the Official Statement, no decision, ruling or finding shall have been entered by any court or Governmental Entity since the date of this Bond Purchase Agreement (and not reversed on appeal or otherwise set aside) which in the reasonable opinion of the Underwriter materially adversely affects the market for the Bonds. (c) At the time of the Closing, the Official Statement (as amended and supplemented) shall be true and correct in all material respects, and shall not omit any statement or information necessary to make the statements therein, in the light of circumstances under which they were made, not misleading. (b) At the time of the Closing, the Indenture, the Disclosure Certificates, the Installment Purchase Agreements and this Bond Purchase Agreement shall be in full force and effect, and shall not have been amended, modified or supplemented in any material. respect from the forms of such documents which have been provided to the Underwriter as of the date hereof (except as may be agreed to by the Underwriter); all actions which, in the opinion of Hawkins Delafield & Wood LLP, San Francisco, California ("Bond Counsel") shall be necessary in connection with the transactions contemplated hereby shall have been duly taken and shall be in full force and effect; and the Authority and the Participants shall -perform or shall have performed their obligations required under or specified in this Bond Purchase Agreement to be performed at or prior to the Closing pursuant hereto shall be true, complete and correct in all material respects at the Closing Date; the Authority and the Participants shall be in compliance with each of the agreements made by it in this Bond Purchase Agreement (unless such agreements are waived by the Underwriter); there shall not have occurred an adverse change in the financial position, results of operations or financial condition of any of the Participants which materially . adversely affects the ability of a Participant to pay Installment Payments when due or otherwise perform any of its obligations under the related Installment Purchase Agreement. obligations of the general character of the Bonds, which in the reasonable opinion of the Underwriter materially adversely affects the market for the Bonds; or (ii) the United States shall have. become engaged in hostilities or an escalation of hostilities which have .resu1ted in a declaration of war, or a national emergency or the President of the United States of America shall have committed the armed forces of the United States of America to combat so as to adversely affect the financial markets in the United States of America and in the reasonable opinion of the Underwriter materially adversely affects the market for the Bonds; or (iii) there shall have occurred and be continuing a general suspension of trading on the New York Stock Exchange, or a general banking moratorium shall have been declared by Federal, California or New York authorities having jurisdiction and being in force; or (iv) there shall have occurred an adverse change in the financial position, results of operations or financial condition of the Authority or any Participant which in the reasonable opinion of the Underwriter materially adversely affects the market for the Bonds; or (v) any legislation, ordinance, rule or regulation shall be introduced in, or be enacted by, any governmental body, department or agency of the State, or a decision by any court of competent jurisdiction within the State or any court of the United States shall be rendered which, in the reasonable opinion of the Underwriter, materially adversely affects the market price of the Bonds; or (vi) legislation shall be enacted by the Congress of the Upjted States, or decision by a court of the United States shall be rendered, or a stop order, ruling, regulation or official. statement by, or on behalf of, the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall be issued or made to the effect that the issuance, offering or sale of obligations of the general character of the Bonds, or the issuance, offering or sale of the Bonds, including all underlying obligations, as contemplated hereby or by the Official Statement, is in violation or would be in violation of, or that obligations of the general character of the Bonds, or the Bonds, are not exempt from n~gistration under, any provision of the federal securities laws, including the Securities Act of 1933, as amended and as then in effect, or that the Indenture needs to be qualified under the Trust Indenture Act of 1939, as amended and as then in effect; or (vii) additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental agency or by any national securities exchange, which restrictions materially adversely affect the ability of underwriters to trade obligations of the general character of the Bonds; or (viii) any rating of the Bonds shall have been downgraded, suspended or withdrawn by a national rating service, which, in the Underwriter's reasonable opinion, materially adversely affects the marketability or market price of the Bonds; or F.51 16398.1001098 AGMT 16398.1 001098 AGMT P.52 (C) the Indenture, the Installment Purchase Agreements and this Bond Purchase Agreement have been duly authorized, executed and delivered (B) the statements and infomlation in the Official Statement on the cover page relating to tax exemption, description of the Bonds and security for the Bonds and statements under the captions "INTRODUCTION," "THE BONDS," "SECURITY FOR THE BONDS," "TAX MATTERS," "Appendix C - Definitions and Summary of Legal Documents" and "Appendix D-Form of Bond Counsel's Opinion," to the extent they purport to summarize certain provisions of the Indenture, the Installment Purchase Agreements and the Bonds and the final approving opinion of such counsel dated the date of the closing, present a fair and accurate summary of such provisions and such opinion in all material respects; (A) the Bonds are exempt from registration pursuant to the Securities Act of 1933, as amended, and the Indenture is exempt from qualification as an indenture pursuant to the Trust Indenture Act of 1939, as amended; Insurer as to paragraph (C) below and a reliance letter or separate opinion addressed to the Authority as to paragraph (D) below), to the: effect that: to the Undervvriter (toget.i.er \\lith a reliance letter or separate opinion addressed to the (ii) Supplemental Opinion. A supplemental opinion of Bond Counsel, in form and substance satisfactory to the Underwriter, dated the Closing Date, addressed (i) Bond Counsel Opinion. The opinion of Bond Counsel, dated the Closing Date, in substantially the form included in the Official Statement as Appendix D, addressed to the Authority (together with a reliance letter addressed to the Underwriter). At or prior to the Closing, the Underwriter shall receive the following Cg) documents: (x) any event occurring, or information becoming known which, in the reasonable judgment of the Underwriter, makes any statement or information contained in the Official Statement, as of its date, untrue in any material adverse respect, or has the effect that the Official Statement, as of its date, contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (for the purposes of this paragraph, prior to the printing of the . final Official Statement, the Preliminary Official Statement, together with any additional information for inclusion therein or changes thereto delivered on or prior to the date hereof in writing to the Underwriter shall be ' deemed to be the Official Statement); (ix) the commencement of any action, suit or proceeding described in Section 6(m) or 7(j); which, in the judgment of the Underwriter, materially adversely affects the market price of the Bonds; or by the Authority and, assuming due authorization, execution and delivery by the other parties thereto, such documents constitute the legal, valid and binding agreements of the Authority enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws. affecting creditors' rights, to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State of California; and (D) although we have not undertaken to check the accuracy, completeness or fairness of, or verified the information contained in, the Official Statement, and are therefore unable to make any representation to you in that regard, we have participated in conferences prior to the date of the Official Statement with your representatives and representatives of the Authority, the Participants, counsel to the Authority and Participants and others, during which conferences the contents of the Official Statement and related matters were discussed. Based upon the information made~ available to us in the course of our participation in such conferences, our review of the documents referred to above, our reliance on the certificates and the opinions of counsel described above and our understanding of applicable law, we do not believe that the Official Statement (other than financial statements and projections and statistical data therein, information concerning the Policy, the Reserve Policy" the Bond Insurer, The Depository Trust Company and the book-entry system and Appendices A, E and F thereto, as to which no view is expressed) as of its date contained, or as of the date hereof, contains, any untrue statement or a material fact, or as of its date omitted, or as of the date hereof omits, to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Finally, we advise you that, other than reviewing the various ce~rtificates and opinions required by this Bond Purchase Agreement regarding the Official Statement, we have not taken any steps since the date of the Official Statement to verify the accuracy of the statements contained in the Official Statement as of the closing date; (ill) Ooinion of Authority Counsel. An opinion of counsel to the Authority in form and substance satisfactory to the Underwriter dated the Closing Date, addressed to the Underwriter and the Bond Insurer, to the effect that: (A) The Authority is a joint powers agency organized under and by virtue of the laws of the State of California. (B) the resolution of the Authority approving and authorizing the execution and delivery of the Indenture, the Installment Sale Agreements, the Bond Purchase Contract and the Bonds was duly adopted at a meeting of the governing body of the Authority which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout. P.53 16398.1001098 AGMT 16398.1 001 098 AGMT P.54 (G) to the best knowledge of such counsel after reasonable investigation, there is no action, suit, proceeding or investigation of a material nature at law or in equity before or by any court, public board or body, pending or threatened against or affecting the Participant, affecting the (F) to the best knowledge of such counsel, the information in the Official Statement concerning the Participant (excluding therefrom financial statements and other statistical data included in the Official Statement, as to which no view need be expressed) does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (E) the execution and delivery by the Participant of the Participant Documents, and compliance by the Participant with the provisions of the foregoing, under the circumstances contemplated thereby, do not and will not in any material respect conflict with or constitute a breach of or default under any law, administrative regulation, court decree, resolution or agreement to which the Participant is subject to or by which it is bound; . (D) the Official Statement has been duly approved and the Participant Documents have been duly authorized, executed and delivered by the Participant and, assuming due authOIization, execution and delivery by the other parties thereto, such documents constitute the legal, valid and . binding agreements of the Participant enforceable in accordance with their terms, subject to laws relating to bankruptcy, insolvency or other laws affecting the enforcement of creditors i rights generally and the application of equitable principles if equitable remedies are sought; (C) the resolution of the Participant approving and authorizing the execution and delivery of the Participant Documents and approving the Official Statement (the "Participant Resolution") was duly adopted at a meeting of the governing board of the Participant which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and the Participant Resolution is in full force and effect and has not been modified, amended or rescinded as of the date of such certificate; (B) the Participant has full legal power and lawful authority to enter into the Participant Documents; (A) the Participant is a public agency duly organized and validly existing under and by virtue of the laws of the State of California; (iv) Opinion of Participant Counsels.. Opinions from counsel to each Participant in form and substance satisfactory to the Underwriter dated the Closing Date, addressed to the Participant, the Underwriter and the Bond Insurer, to the effect that: validity of the Participant Documents or the adequacy of the Official Statement; and (H) no authorization, approval, consent or other order of the State or any governmental agency within the State of California having jurisdiction over the Participant is required for the valid authorization, execution and delivery by the~ Participant of the Participant Documents, which has not already been obtained as of the Closing Date. (v) Closing Certificate of Authoritv. A certificate from the Authority in form and substance satisfactory to the Underwriter, dated the Closing Date, to the effect that the representations and warranties of the Authority contained in this Bond Purchase Agreement are true and correct on and as of the Closing Date with the same effect as if made on the Closing. (vi) Closing Certificates of Participants. Certificates from each Participant in form and substance satisfactory to the Underwriter, dated the Closing Date, to the effect that: (A) 1he representations and warranties of the Participant contained in this Bond Purchase Agreement are true and correct on and as of the Closing Date with the same effect as if made on the Closing; and (B) 1here has been no material adverse change in the financial condition or results of operations of the Participant from the date of the Official Statement to the date of such certificate. (vii) 15c2-12 Certificates. Certificates, dated the date of the Preliminary Official Statement, from the Authority and each Participant, deeming the Preliminary Official Statement final for purposes of the Rule. (viii) Certificate of Trustee. A certificate, dated the Closing Date, signed by a duly authorized officer of the Trustee, to the effect that (i) the Trustee is a national banking association, duly organized and validly existing and in good standing under the laws of the United States, having full power and being qualified to enter, accept and administer the trust created under the Indenture, (ii) all approvals, consents and orders of any governmental authority or agency having jurisdiction in the matter that would constitute a condition precedent to the performance by the Trustee of its duties and obligations under the Indenture have been obtained and are in full force and effect" and (iii) the acceptance of the duties and obligations of the Trustee under the Indenture, and the consummation of the transactions on 1he part of the Trustee contemplat(~d therein, and the compliance by the Trustee with the terms, conditions and provisions of such document do not contravene any provisions of applicable law of regulation or any order or decree, writ or injunction of the Articles of Incorporation or Bylaws of the Trustee, and, to the best of such officer's knowledge, will not require the consent under, or result in a beach of or default under, any resolution, agreement or other instrument to which the Trustee is a party or by which it may be bound. F.SS 16398.1 001098 AGMT 16398.1 001098 AGMT P.56 If the: Authority and each Participant shall be unable . to satisfy the conditions to the Underwriter's obligations contained in this Bond Purchase Agreement, and such condition is not waived by th'e Underwriter, or if the Underwriter's obligations shall be terminated for any reason permitted by this Bond Purchase Agreement, this Bond Purchase Agreement shall terminate and (xvi) Other Items Requested by Counsel. Such additional legal opinions, certificates, proceedings, instruments and other documents as the Underwriter or Bond Counsel may reasonably request to evidence compliance by the Authority and each Participant with legal requirements, the accuracy, as of the time of Closing, of the representations of the Authority and each Participant herein contained and the due performance or satisfaction by the Authority and each Participant at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by the Authority and each Participant. (xv) Bond Insurance. The policy of municipal bond insurance and the reserve account surety bond issued by Financial Security Assurance, Inc. (the "Bond Insurer"), together with such legal\ opinions and certificates as may be reasonably requested by Bond Counsel. (xiv) Rating. Evidence that the ratings on the Bonds described in the Official Statement are in full force and effect on the Closing Date. (xiii) Tax Certificate. Tax Certificates of the Authority and each Participant, in form satisfactory to Bond Counsel. (xii) JP A Agreement and Filing. A certified copy of the JP A Agreement, duly executed and delivered by the parties thereto, and evidence of the filing of a notice pursuant to Section 6503.5 of the California Government Code. (xi) Legal Documents. Two copies each of the Indenture, the Installment Purchase Agreements, the Disclosure Certificates and the Official Statement, duly executed and delivered by the respective parties thereto. (x) Resolutions. A certified copy of the Authority Resolution, each Participant Resolution and a Resolution of the Trustee authorizing the execution and delivery of the Indenture (ix) Opinion of Counsel to Trustee. An opinion of counsel to the Trustee, dated the Closing Date, addressed to the Underwriter and the Authority, to the effect that (i) the Trustee is duly organized and validly existing under the laws of the United States of America, having full power and being qualified to enter into, accept and agree to the provisions of the Indenture and (ii) the Indenture has been duly authorized, executed and delivered by the Trustee and, assuming due authorization, execution and delivery by the. other respective parties thereto, constitutes the valid and binding obligations of the Trustee enforceable in accordance with its terms, subject to laws relating to bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditors' rights generally, to the application of equitable principles and to the exercise of judicial discretion in appropriate cases. none of the Authority, the Participants or the Underwriter shall have any further obligation hereunder. 9. Expenses. The Underwriter shall be under no obligation to pay, and the Authority shall pay, but only out of the proceeds of the Bonds, any expenses incident to the performance of the obligations of the Authority hereunde:r including, but not limited to: (a) the cost of preparation, printing and distribution of the Indenture and word processing, reproduction, printing and distribution costs relating to the Preliminary Official Statement, the Official Statement and any supplements or amendments thereto (whether incurred by counselor an independent printer); (b) the cost of preparation of the Bonds; (c) the fees and disbursements of Bond Counsel, Disclosure. Counsel and Counsel to the Authority; (d) the fees and disbursements of the Financial Advisor to the Participants; (e) the fees and disbursements of the Trustee; (f) the fees of the rating agencies; and (g) the premium for the policy of municipal bond insurance and reserve account surety bond. The Underwriter shall pay fees, if any, payable to the California Debt and Investment Advisory Commission in connection with the issuance of the Bonds and all other expenses incurred by the Underwriter in connection with lthe public offering of the Bonds. 10. Notices. Any notice or other communication to be given to the Authority under this Bond Purchase Agreement may be given by delivering the same in writing to the Statewide Communities Development Authority, 1100 K Street, Suite 101, Sacramento, California 95814, Attn: Secretary and any notice or other communication to be given to the Underwriter under this Bond Purchase Agreement may be given by delivering the same in writing. to Henderson Capital Partners, LLC, One Kaiser Plaza, Suite 650, O~land, California 94612. 11. California Law to Govern. This Bond Purchase Agreement shall be governled by and construe.d in accordance. v!ith t:.~e laws of the State of CaliforrJa applicable to contracts made and- performed within such state. 12. Facsimile and Counterpart Signatures. This Bond Purchase Agreement may be executed by the parties hereto by facsimile transmission and in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. P.57 16398.1001098 AGMT 16398.1001098 AGMT P.58 Authorized Officer By: [P ARTICIP ANT] Authorized Officer By: [PAR TICIP ANT] Member of the Commission By: CALIFORNIA STATEWIDE COMMUNITlES DEVELOPMENT AUTHORITY ACCEPTED:: President By: HENDERSON CAPITAL PARTNERS, LLC Very truly yours, 13. Entire Agreement and Beneficiaries. This Bond Purchase Agreement when accepted by the Authority and each Participant in writing as heretofore agreed shall constitute the entire agreement among the Authority, the Participants and the Underwriter and is made solely for the benefit of the Authority, the Participants and the Underwriter (including 'the successors or assigns of the Underwriter). No other person shall acquire or have any right hereunder or by virtue hereof. Maturity Date (October 1) EXHIBIT A Principal ,Amount Interest Rate $ $ % Term Bonds due October 1, 20_ Yield _ % % Term Bonds due October 1, 20_ Yield _ % n....:__~__1 It. _____.._ It. 11___1-.1_ .._ n_-4-~_~.___.._. .c l.Hl~l.pal .M..J.llUUUL.i:l .M..J.IU,-,aUll;; L.U r a.I U'-'Ij!i111I.;:). F.59 Yield; 16398.1 001098 AGMT 16397.1001098 OS HENDERSON CAPITAL PARTNI~RS, LLC P.60 '0 :!.l -a '" ?::o (;3 ~ $ % Term Bonds due October I, 20__ Yield _%* .s $ % Term Bonds due October I, 20__ Yield _%* ::::: $ % Term Bonds due October I, 20__ Yield _%* ~ The Bonds are offered when, as and if delivered and received by the Underwriter, subject to the approval as to their legality by Hawkins Delafield & ~ Wood ILP, San Francisco, California, Bond Counsel, and certain other conditions. Hawkins Delafield & Wood ILP has also served as Disclosure Counsel. ;. Certain legal matters will be passed upon for each of the Program Participants by its respective counsel. Certain matters will be passed on for the Authority by E Orrick, Herrington & Sutcliffe LLP. It is anticipated that the Bonds will be available for delivery to The Depository Trust Company in New York, New York on or about _ -J 2005. . ~ This cover page contains certain information for reference only. It is not a summary of this issue. Investors must read the entire official statement to obtain '8 information essential to the making of an informed investment decision. See "Risk Factors" herein for a discussion of certain of the risks to timely payme11t of the ~ Bonds. .~ ;>, 3 .S '" :s S g '" Q a'3 -6 PriceJ ~ Interest Rate Principal Amount Maturity (October..!l PriceJ Yield Interest Rate Principal Amount Maturity (October 1) MATURITY SCHEDULE* $_ Serial Bonds 5 'J::: g '" '5h S .9 ~ '[ '3 ~ ~ ;::l 'l) ,r;;, '0 '3 ~ n.l -a '" 5 d" o '.0 .~ r~either the faitb and l:redit flu. tbt= taxiug power of mt: State uf Caiii'ornia UI" auj' public agency thereof or the Authority or any Program Participant or :s any member of the Authority is pledged to the payment of the Bonds. The Bonds do not constitutl~ a debt, liability or obligation of the State of California or any :. public agency thereof (other than the Authority payable solely from the Revenues) or any Program Participant or any member of the Authority, and neither the ~ directors of the Authority nor any persons executing the Bonds are liable personally on the Bonds by reason of their issuance. The Authority has no taxing o -5 power. fll The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery ~ of the Bonds by FINANCIAL SECURITY ASSURANCE INC. ~ , 'P CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY WATER AND W ASTEW A TER REVENUE BONDS (pOOLED FINANCING PROGRAM) SERIES 2005_ Participant ( Coun~) Participant ( Coun~) NEW ISSUE - BOC PRELIMINARY OFFICIAL STATEMENT DATED _, 2005 Hawkins Delafield & Wood LLP Draft Dated: _,2005 * Prelimin8!Y, subject to change F.61 16397.1001098 OS 16397.1001098 OS P.62 Other than with respect to information concemingFinaneial Security Assurance mc. (the "Bond Insurer") contained under the caption "Bond msurance" and Appendix E, none of the information in this Official Statement has been supplied or verified by the Bond Insurer and the Bond msurer makes no representation or warranty, express or implied, as to (i) the accuracy or completeness of such information; (ii) the validity of the Bonds; or (iii) the tax exempt status of the interest on the Bonds. The information set forth herein has been obtained from official sources other than the Authority (except for the section "THE AUTHORITY" and the fIrst paragraph of the section "LITIGATION") which are believed to be reliable. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the infiormation in this Official Statement in accordance with, and as part of, their responsibility to investors under the federal securities law as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The information and expression of opinions herein are subject to change without notice and neither 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 information provided herein since the date hereof. This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of facts. No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement in connection with the offering made hereby and, if given or made, such other information or representations must not be relied upon as having been authorized by the Authority or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMJ\,ffiNCED, MAY BE DISCONTINUED AT ANY TIME. CALWORNlASTATE~ECO~TIESDEVELOPMENTAUTHORTrf WATER AND WASTEWATER REVENUE BONDS (pOOL/ED FINANCING PROGRAM) SERIES 2005_ CALIFORNIA STATE~E COMMUNITIES DEVELOPMENT AUTHORITY Steve Szalay, Chairman ChIis McKenzie, Vice Chairman Daniel Harrison, Secretary Norma Lammers, Member Steve Keil, Member Ken Nishimoto, Member Paul Hahn, Member PROGRAM PARTICIPANTS Participant C- County) Participant C- County) BOND COUNSEL Hawkins Delafield & Wood LLP San Francisco, California DISCLOSURE COUNSEL Hawkins Delafield &W ood LLP San Francisco, California TRUSTEE Union Bank of California, N.A. San Francisco, California AUTHORITY COUNSEL Orrick Herrington & Sutcliffe LLP POOL VERIFICATION AGENT Grant Thornton LLP Minneapolis, Minnesota P.63 16397.1 001098 OS 16397.1001098 OS P.64 OPINION OF BOND COUNSEL .... ...... ... ........ ................ ......-.... .., ............. .... ..........:.......... ...... ....... ........ ... .......... ....... ........ ....... .......... 21 CERTAIN ONOOIt'-lG FEDERAL TAX REQUIREMENTS AND COVENANTS ......................................................................................... 22 CERTAIN COllATERAL FEDERAL TAX CONSEQUENCES .............................................................. ......... ............................ ............. 22 ORIGINAL ISSUE DISCOUNT........................................................................................................................................ .................... 22 BOND PREMIuM ................................................................................................................ .............................................................. 23 LEGISLATION.................................................................................................................................. ....................:............................ 23 CONTIN"UIN"G DISCLOSURE ......... ................................................................................................................................................. 24 RA 'fIN" GS ................................................................. ........................................................................................................................... 24 TIffi A UTHORITI'..................................................................................................."...................................... ............ .,.:.................. 20 LEGAL MA TIERS.................................................... ........................................................................................................................ 20 LmGA TION ............................................................................................................"................................ ........................................ 20 TAX MA T1ERS ....................................................................................................... ..............................................................;........... 21 INTRODUCTION ............................................................................................................................................... ................................ 1 PROGRAM PARTICIPANTS AND FIN"ANCIN"G PLAN ............................................................................................................... 3 ESTIMA'TED SOURCES AND USES OF FUNDS ...... ....................... ..................... ........;. ....... ..... .... ............... ................ .... ........ :.. 5 TIffi BONDS........................................................................... ........................................................................ ..................................... 5 BOOK-ENTRY ONLY SySTEM..........................................................................;............................................................. .................. 6 TRANSFERS AND EXCHANGES UPON TERMINATION OF BOOK-ENTRY ONLY SYSTEM ................................................................:. 6 S INKING FuND REDEMPTION.................................................................................................................................. ......................... 7 OPTIONAL REDEMPTION ..... .... ...... ................ .......... ... ..... .......... .... ... ... ............ ....... ......... ...... ...... .... .... ......... .......... ........ ........... .... ... 7 REDEMPTION PROCEDURES .................. ....................... ..... ........ ........ ....... .............. ........ ....... ....................... ............. ....................... 8 DEBT SERVICE SCHEDULE .. ............................... ........... ...................... ...... ................... ..... ............ ................... ....... ....... .......... ........ 9 SECURITY FOR l1IE BONDS ...................... ....................... ...... .......... .................. .... ........ ............. ..... ....... ........ ...... ........ ......... ...... 9 SECURITY UNDER TI:IE INDENTURE.... .......... ........... ........... ..... ......... ......... ....... ...... .................... ................. ......... ........ ..... ......... ...... 9 RESERVE FuND ................... ....................... ................ ..... ............................ ...;................ ...... ....... ....... ............ .......... ........... .......... 11 PLEDGE OF SYSTEM NET REVENUES UNDER TI:IE INSTALLMENT PURCHASE AGREEMENTS ..................................................-...... 11 ADDITIONAL DEBT TESTS UNDER INSTALLMENT PURCHASE AGREEMENTS ................................................................................ 13 RATE COVENANT UNDER TIffi INSTALLMENT PURCHASE AGREEMENTS .......................... ......................... ................................... j 4 RATE STABILIZATION FuND UNDER mE INSTALLMENT PuRCHASE AGREEMENTS ..................................................................... 14 BOND IN"SURAN(~E ..... ....................... ..... ................ ..... ........ ..... ................... ......................... ..... ...... ..... .... .............. .................... .... 14 THE MUNICIPAL BOND INSURANCE POLICy............... .............. .:...............;................. ... ............ ................................ ................... 15 THE BOND INSURER............ .................................................................. .'......... ................................................................................ 15 CONSTITUTIONP.L LIMITATIONS ON APPROPRIATIONS AND CHARGES ..................................................................... 16 ARTICLE XIllB....................................................................................................................................... ......................................... 16 PRoposmoN 218 ...... ......... ......... .... ... ..... ....... ............ ... .......... ............................ .."............. ...... ...... ... .... ... ....... ........ ..... ... ....... ....... 16 FuTuRE INrrIA TIVES ............................................................................................."..................................... ................................... 18 RISK FACTORS ....................... ...... ............ ... .... ...... .............. ............... .................... ........ ...... .... ....... .............. ..... ......... ....... .............. 18 GENERAL..............................................................................................................."...................... ..............:................................... 18 No CROSS-COllA TERALIZA TION ................................ ................................................................................................................... 19 EARlHQUAKES, FLOODS, FIREs, DROUGHT OR OTIffiR NATURAL CONDITIONS........................................................................... 19 INVESTMENT OF FUNDS .... .... ...... .... .......... ....... ............ ........ .., ......... ....................." ....;... ............... ........... .......................... ........ .... 19 LIMITATIONS ON REMEDIES AND BANKRUPTCY ......... ...... ..... .......... ... ......................... ...... ................... ...... .................... ............... 19 Page TABLE OF CONTENTS TABLE OF CONTENTS Page UNDERWRITING.......................................................................................................................................... ................................... 24 POOL VER.IFI CATION ...............................................................................................................................................;..... ............... 25 MISCELLANEOUS .................................................................... ....:.................. .......................................................... ..................... 25 EXCERPTS FROM PARTICIPANTS' FINANCIAL STATEMENTS ...................................................................... APPENDIX A INFORMATION REGARDING PROGRAM P ARTICIP ANTS .................................................................................APPENDIX B DEFINITIONS AND SUMMARY OF LEGAL DOCUMENTS.............................................................................. ,..APPEND IX C FORM OF BOND COUNSEL'S OPINION ...........'...................................................................................................... APPENDIX D FORM OF MUNICIPAL BOND INSURANCE POLICY .................................................~......................................... APPENDIX E INFORMATION CONCERNrnG DTC...................;.................................................................................................... APPENDIX F FORMS OF CONTINUING DISCLOSURE CERTIFICATES .................................................................................. APPENDIX G P.65 16397.1001098 OS 16397.1 001098 OS P.66 * Preliminary, subject to change. Purpose. The Bonds are being sold to finance and refinance certain publiC capital improvements of the Program Participants (defmed below) and to pay the costs incurred in issuing the Bonds. In connection with the financing of new capital. improvements by certain of the Program Participants, a portion of the proceeds of the Bonds will be deposited into the Project Fund arid used to acquire and construct new public capital improvements of certain of the Program Participants. For more information regarding the financing plan, see "PROGRAM PARTICIPANTS AND FINANCING PLAN" herein. The Authority. The Authority is a joint exercise of powers agency created pursuant to the California Government Code on June 1, 1988. For more information regarding the Authority, see "THE AUTHORITY" herein. The Program. The Authority's Water and Wastewater PooJled Financing Program (the "Program") is available to California water and wastewater agencies to facilitate the financing or refinancing of capital improvements. The Program is available to California cities and special districts that operate water or wastewater enterprises. The Program team has assisted 35 loeal agencies borrow an aggregate of approximately $305 million (these borrowings are all independently secured). The Authority is authorized pursuant to Chapter 5 of Division 7 of Title 1 of the California Government Code to issue Bonds to finance and refinance water and wastewater public capital improvements of local agencies located throughout California. The Bonds are being issued pursuant to an Indenture, dated as of _ 1,2005 (the "Indenture"), by and between the California Statewide Communities Development Authority (the "Authority") and Union Bank of California, N.A., as trustee (the "Trustee"). The Bonds are authorized pursuant to the terms of Chapter 5 of Division 7 of Title 1 of the California Government Code (the "Law"). General. This Official Statement, including the cover page and all appendices hereto, provides certain information concerning the sale and delivery of the California Statewide Communities Development Authority Water and Wastewater Revenue Bonds (Pooled Financing Program), Series 2005_ (the "Bonds"). Descriptions and summaries of various documents hereinafter set forth do not pUl-port to be comprehensive or definitive, and reference is made to each document for complete details of all terms and conditions. All statements herein are qualified in their entirety by reference to each document. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in Appendix C hereto entitled "DEFINITIONS AND SUMMARY OF LEGAL DOCUMENTS." This Introduction is subject in all respects to the more complete information contained in this Official Statement, and the offering of the Bonds to potential investors is made only by means of the entire OffiCial Statement. .$ * CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY WATER AND WASTEWATER REVENUE BONDS (pOOLED FINANCING PROGRAM) SERIES 2005_ INTRODUCTION Security for the Bonds. The Bonds will be issued and secured pursuant to the terms of the Indenture. The Bonds are special obliga.tions of the Authority payable solely from Revenues consisting generally of the Installment Payments to be made by certain local public agencies (the "Program Participants ") and from amounts on deposit in certain funds and accounts held under the Indenture~ Financial and other information concerning the Program Participants is in Appendix B attached hereto. No funds of the Authority other than the Revenues are pledged to or available for payment of the principal of or interest on the Bonds. The Installment Payments securing the Bonds are special obligations of the Program Participants under the respective Installment Purchase Agreements entered into by each of the Progrmn Participants with the Authority and dated as of __ 1, 2005 (the "Installment Purchase Agreements"). The Installment Payments under each Installrnent Purchase Agreement are separately secured by a pledge of the System Net Revenues of the Enterprise System of the respective Program Participant under such Installment Purchase Agreement. The pledge of System Net Revenues (as defined herein) under each Installment Purchase Agreement secures only the obligation to pay Installment Payments and other obligations under that particular Installment Purchase Agreement. Individual Program Participants are not obligated to make up for any deficiency in the Installment Payments of other Program Participants under their Installment Purchase Agreement. Neither the faith and credit nor the taxing power of the State of California or any public agency thereof or the Authority or any Progranl Participant or any member of the Authority is pledged to the payment of the Bonds. The Bonds do not constitute a debt, liability or obligation of the State of California or any public agency thereof (other than the Authority payable solely- from the Revenues) or any Program PartiCipant or any member of the Authority, and neither the directors of the Authority nor any persons executing the Bonds are liable personally on the Bonds by reason of their issuance. The Au~thority has no taxing power. . For more information regarding the security for the Bonds, see "SECURITY FOR THE BONDS" herein. . Additional Debt Test under Installment Purchase Agreements. Each Installnlent Purchase Agreement permits the Program Participant to enter into additional obligations secured by System Net Revenues on a parity with the related Installment Payments provided that certain conditions are satisfied as described herein. For more information concerning the additional debt tests under the Installment Purchase Agreements, see "SECURITY FOR THE BONDS-Additional Debt Tests under the Installment Purchase Agreements" herein. Rate Covenant under Installment Purchase Agreements. Each Installment Purcha.se Agreement will require the Program Participant, to the fullest extent permitted by law, to fix, prescribe and collect rates and charges and maintain its operations such that System Net Revenues will be equal to 120% of the Installment Payments and other Parity Debt of such Program Participant during each Fiscal Year, all as more particularly described herein. For nlore information concerning the rate covenants see "SECURITY FOR THE BONDS-Rate Covenant under the Installment Purchase Agreements" herein. P.67 16397.1 001098 OS 16397.1001098 OS P.68 Program Participants. The Program Participants are described in the chart below. See Appendices A alld B for information concerning the operations and fmances of the Program Participants. See "THE BONDS - Debt Service Schedule" for a schedule of the Installment Payments due from each Program Participant under the Installment Purchase Agreements. PROGRAM PARTICIPANTS AND FINANCING PLAN Each Program Participant regularly prepares a variety of reports, including audits, budgets and related documents. Any interested person may obtain a copy of certain reports, as available, from such Program Participant. Additional information 'regarding the Official Statement may be obtained by contacting the Trustee or the Program Participants. Continuing Disclosure and Additional Information. Each Program Participant, subject to certain exceptions, will covenant in a Continuing Disclosure Certificate to provide certain financial information and operating data relating to such Program Participant and notices of certain events, if material. The Anthor1tv will eoven:mt in i:l rontinninp" ni~c1mmre rertifie::lte to nrovicle notlee~ of eert::lln event~_ if - --~--- - ---J .. --- ~- - . - ------ --- -v - - -----------0 - -- -- - - --- - - -- ----- --- -- r- - . --- --- --- -- - - - -- ----- -. -----, -- material. Such information and notices will be filed by the Trustee as Dissemination Agent with certain Nationally Recognized Municipal Securities Repositories. For more information concerning continuing disclosure, see "CONTINUING DISCLOSURE" and Appendix G attached hereto. Redemption. The Bonds are subject to optional and mandatory sinking fund redemption as described herein. See "THE BONDS" herein. Bond Insurance. Concurrently with the issuance of the Bonds, Financial Security Assurance Inc. will issue a municipal bond insurance policy (the "Municipal Bond Insurance Policy") with respect to the Bonds. The Municipal Bond Insurance Policy will unconditionally guarantee the payment of the principal of and interest on the Bonds which has become due for payment, but is unpaid by reason of nonpayment by the Authority. See "BOND INSURANCE" herein. The, Reserve Fund. Concurrently with the issuance of the Bonds, the Trustee is ,to establish, maintain and hold in trust a separate fund designated as the Reserve Fund. Separate Reserve Accounts for each Participant are created within the Reserve Fund. The Reserve Account Requirements (defined herein) will be satisfied with. Bond proceeds or an insurance policy (the "Reserve Policy") to be issued by Financial Security Assurance Inc. Moneys available to the Reserve Fund will be used and withdrawn solely for the purpose of paying principal of and interest on the BOllds in the event Installment Payments deposited with the Trustee are insufficient therefor. Within the Reserve Fund there will be established separate Reserve Accounts relating to each Program Participant. ..Amounts in each Reserve Account will only be available for delinquencies in Installment Payments by the related Program Participant for which , such Account is established. For more information concerning the Reserve Fund and the Reserve Accounts, see "SECURITY FOR THE BONDS-Reserve Fund" herein. Schedule of Program Participants* Final Installment :Payment Date (October 1) Participant Type of System TVDe of Proiect Principal Amount * Preliminary, subject to change. Financing of New Improvements. A portion of the proceeds of the Bonds will be deposited into the Project Fund established under the Indenture .and used to acquire and construct certain public capital improvements of certain of the Program Participants. Within the Project Fund there shall be established separate, segregated Project Accounts with re$pect to such Program Participants. The: chart below summarizes the financing of new improvements by such Program Participants. Schedule of New Improvements* Participant Proiect Project Account Amount * Preliminary, subject to change. Refunding Plan. A portion of the proceeds from the sale of the Bonds will be used to defease and redeem . the (the "Refunded Obligations"). The Refunded Obligations were issued to provide funds for . The chart below summarizes the terms of the refunding and payment of the Refunded Obligations. Under the financing plan, there shall be deposited in an escrow fund (the"Escrow Fund") to be held by a trustee bapk acting as escrow agent (the "Escrow Agent") under an escrow agreement (the "Escrow Agreement"), by and between and the Escrow Agent, funds from a portion of the net proceeds of the sale of the Bonds. The Escrow Agent will hold moneys which will be sufficient to pay the regularly scheduled payments with respect to the Refunded Obligations until the redemption date and to pay the redemption price with respect to 1he Refunded Obligations on such date. Upon the d.eposit of such proceeds and said moneys into the Escrow Fund, the Refunded Obligations will no longer be deemed outstanding. P.69 16397.1001098 OS 16397.1001098 OS P.70 In the event the book-entry only system described below is. discontinued, each Bond will bear interest from the Interest Payment Date next preceding the date of registration thereof, unless such date of registration is during the period from and including the Record Date next . preceding an Interest Payment Date to and including such Interest Payment Date, in which event it will bear interest from such Interest Payment Date, or unless such date of registration is on or before the Record Date next preceding the fIrst Interest Payment Date, in which event it shall bear interest from the delivery date of the Bonds; provided, that if at the time of registration of any Bond interest is then in default on the Outstanding Bonds, such Bond will bear interest from the Interest Payment Date to which interest previously has been paid or made The Bonds will be dated their date of delivery and will be payable in the years and amounts and bear interest at the respective rates set forth on the cover page hereof, which interest shall be payable on April! and October 1 of each year, commencing _ 1,200_ (each, an "Interest Payment Date"). The Bonds will be delivered only in fully registered form and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). DTC will act as securities depository for the Bonds. Ownership interests in the Bonds may be purchased in boqk-entry form only in denominations of $5,000 or any integral m.ultiple thereof. See "Book-Entry Only System" below and Appendix F attached hereto. THE BONDS (1) See "PROGRAM P ARTICIP A_NTS A_ND FINANCING PLA~N"" for a breakdo\vn of the allocation of these al'nounts among the Program Participants. (2) Includes the prl~m1iumfor the Municipal Bond Insurance Policy and Reserve Policy and underwriter's discount, as well as certain legal, financing and printing costs. Uses: Project Fund(l) Escrow Fund(1) Costs.oflssuance(2) Total Uses Sources: Principal Amount of Bonds Original Issue PremiumlDiscount Amounts Related to Refunded Obligations Total Sources The following table sets forth the estimated sources and uses of funds relating to the Bonds. ESTIMATED SOURCES AND USES OF FUNDS * Preliminary, subject to change. Pre.l!!!I!!!ent Price l)repayIiIent Date Obligation ParticiJ!ant Amount Schedule of Refunding* available for payment on the Outstanding: Bonds. Payment of interest on the Bonds due on or before the maturity or prior redemption of the Bonds will be made to the person whose name appears in the registration books maintained under the Indenture as the Owner thereof as of the close of business on the Record Date next preceding each Interest Payment Date, such interest to be paid by check mailed by frrst class mail, postage prepaid, on each Interest Payment Date to such Owner at his address as it appears in the registration books maintained under the Indenture, or, upon written request received prior to the Record Date next preceding an Interest Payment Date of an Owner of at least one million dollars ($1,000,000) in aggregate principal amount of Bonds, by wire transfer in immediately available funds to an account within the continental United States of America designated by such Owner. Book-Entry Only System One fully-registered Bond will be issued for each maturity of the Bonds in the principal amount of the Bonds of such maturity. It will be registered in the name of Cede & Co. and will be deposited with DTC. The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered and wiJlI be governed by the provisions of the Indenture with respect to payment of principal and interest and rights of exchange and transfer. There can be no assurance that DTC participants or others will distribute payments with respect to the Bonds received by DTC or its nominee as the registered Owner, or any prepayment or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or that DTC will service and act in the manner described in this Official Statement. See Appendix F hereto for additional information concerning DTC. Transfers and Exchanges Upon Termination of Book-Entry Only System In the event the book-entry system described above is abandoned, Bonds will be printed and delivered. Thereafter, any Bond may, in accordance with its terms, be transferred upon the books required to be kept pursuant to the Indenture by the person in whose name it is registered, in person or by his dilly authorized attorney, upon surrender of such Bond for cancellation at the Corporate Trust Office of the Trustee accompanied by d~livery of a duly executed written instrument of transfer. Whenever any Bond or Bonds will be surrendered for transfer, the Authority will execute and the Trustee will authenticate and deliver a new Bond or Bonds for a like aggregate principal amount and maturity date. The Trustee will require the payment by the Owner requesting such transfer of any tax or other govemmental charge. required to be paid with respect to such transfer. The Trustee will not be required to register the transfer of (i) any Bond during the fifteen (15) day period preceding any date established by the Trustee for selection of Bonds for redemption., (ii) any Bonds which have been selected for redemption (except for any unredeemed portion of any of such Bonds) or . (iii) any Bonds during the period from any Record Date to.any Interest Payment Date. The Bonds may be exchanged at the Corporate Trust Office of the Trustee for a like aggregate principal amount of Bonds of the same maturity of other authorized denominations. The Trustee will require the payment by the Owner. requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. No such exchange will be made (i) during the fifteen (15) days preceding any date established by the Trustee for selection of Bonds for redemption, (ii) of any P.71 Jl6397.1 001098 OS 16397.1 001098 OS P.72 RedemQtion Price Redem:gtion Period The Bonds maturing by their terms on or after October 1, 20_ are subject to optional redemption by the Authority on any date on or after October 1, 20_, pIlor to their respective stated lllaturity dates, as a whole or in part in such principal amounts and from such maturity dates as selected by the Authority at the direction of the applicable Program Participant, from funds derived.by the Authority from any lawful source and deposited with the Trustee not less than five (5) days prior to the date of redemption, upon mailed notice as provided in the Indenture, at a redemption price equal to the following percentages of the principal amount of the Bonds or the portions thereof redeemed on the following dates, together with interest accrued thereon to the date fixed for redemption: Optional Rederoption *Maturity. * Date (October 1) Sinking Fund Installment Term Bonds Due October 1.1 20 Sinking Fund Installments are established under the Indenture for the mandatory redemption and payment of the Term Bonds maturing on October 1,20_ which payments will become due during the years ending on the dates and in the amounts set forth in the following schedule (except that if any Term Bonds have been optionally redeemed as described below the amounts of such Sinking Fund Installments will be reduced by the principal amount of all such Term Bonds so optionally redeemed). Sinking Fund Redemption Bonds which have been selected for redemption (except for any unredeemed portion of any of such Bonds) or (ill) of any Bonds during the period from any Record Date to any Interest Payment Date. Redemption Procedures __ Whenever less than all the Outstanding Bonds maturing on anyone date are called for redemption at anyone time, the Trustee will select the Bonds to be redeemed (from the Outstanding Bonds maturing on such date not previously selected for redemption) by lot in any manner which the Trustee deems fair; provided, that if less than all the Outstanding Term Bonds maturing on anyone date are called for redemption from proceeds other than Sinking Fund Installment payments at anyone time, the Trustee will calculate a reduction in the Sinking Fund Installment payments required to be made with respect to such Term Bonds (in an amount equal to the amount of Outstanding Term Bonds to be redeemed). Except for Sinking Fund ,Installment redemptions,. the Authority will deposit with the Trustee money sufficient to redeem any Outstanding Bonds not later than five (5) days prior to the redemption date of the Bonds to be redeemed. In lieu of redemption of any Tenm Bonds, amounts on deposit in the Sinking Fund allocable to such Term Bonds may be used and withdrawn by the Trustee at any time upon the request of the Authority at the direction of the applicable Prograrn Participant for the purchase of such Term Bonds at public or private sale as and when and at such prices as the Authority at the direction of the applicable Program Participant may determine. The principal amount of any Term Bonds so purchased by the Trustee will be credited toward and will reduce the principal amount of the Term Bonds required to be redeemed on such Sinking Fund Payment Date. Notice of redemption of any Bonds or any portions thereof will be mailed by fIrst class mail, postage prepaid, by the Trustee not less than 30 nor more than 60 days prior to the redemption date of such Bonds (i) to the respective Owners of the Bonds designated for redemption at their addresses appearing on the bond registration bookS kept by the Trustee, (ii) to the Infonnation Services and (iii) to the Securities Depositories. Each notice of redemption will state the date of such notice, the Bonds to be redeemed, the date of issue of such Bonds, the redemption date, the redemption price, whether funds are then on deposit sufficient to pay the redemption price, the place of redemption (including the name and appropriate address), the CUSIP number (if any) of the maturity or maturities, and, if less than all Bonds of any such maturity are to be redeemed, the distinctive numbers of the Bonds of such maturity to be redeemed and, in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice will also state that on such redemption date there will become due and payable on each of such Bonds the redelnption price thereof or of the specified portion of the principal amount thereof in the case of a Bond to be redeemed in part only, together with interest accnled thereon to the redemption date, and that from and after such redemption date interest thereon will cease to accrue, and will require that such Bonds be then surrendered at the Corporate Trust Office of the Trustee specified in the redemption notice as the place of redeJmption; provided, that failure by the Trustee to give notice to any one or more of the Information Services or Securities- Depositories, or the insufficiency of any such notice or the failure of any Owner to receive any redemption notice mailed to such Owner or any immaterial defect in the notice so mailed shall not affect the sufficiency of the proceedings for the rede:mption of any Bonds. From and after the date fixed for redemption of any Bonds or any portions thereof, if notice of such redemption will have been duly given and funds available for the payment of such redemption price of the Bonds or such portions thereof so called for redemption will have been duly provided, no additional interest will accrue on such Bonds or such portions thereof from and after the redemption date specified in such notice. P.73 16397.1 001098 OS 16397.1 001098 OS P.74 Under the Indenture, the Authority irrevocably transfers and assigns over to the Trustee all of the Installment Payrnents received by the Authority under the Installment Purchase Agreements and any and all rights it has to enforce the obligations of the Progra.m, Participants under the Installment Purchase Agreements. The Installment Payments received by the Trustee (the "Revenues") and in the other funds or accounts (except the Rebate Fund) are irrevocably pledged by the Authority to the punctual payment of the Security under the Indenture SECURITY FOR THE BONDS Total Aggregate Interest Agl~regate Priinci.I!al [Participant] Installment Palments [Participant] Installment Palments Annual Period Ending October 1 Schedule of Annual Installment Pa:yments and Debt Service on the Bonds The following table shows the annual Installment Payments due from each Program Participant and the debt service requirements for the Bonds. Debt Service S(:hedule Bonds. The Revenues and such other funds and accounts are not permitted to be used for any other purpose while any of the Bonds remain Outstanding; subject to the provisions permitting the application thereof for the purposes and on the conditions and terms set forth therein. The Indenture provides that this pledge constitutes a fIrst lien on the Revenues and such other money for the payment of the Bonds in accordance with the terms thereof. The Indenture establishes a special fund known as the "Revenue Fund" held by the Trustee into which all Installment Payments are deposited. The money in the Revenue Fund is required to be transferred by the Trustee for deposit in the following respective funds (each of which is maintained with the Trustee) at the following times and in the following order of priority: (1) Interest Fund; (2) Principal Fund; (3) Sinking Fund; and (4) Reserve Fund. Interest Fund. The Trustee will transfer for deposit in the Interest Fund before each Interest Payment Date, an amount of money from the Revenue Fund which is equal to the aggregate amount of the interest becoming due and payable on all Outstanding Bonds. on such Interest Payment Date. Principal Fund. The Trustee wilJl transfer for deposit in the Principal Fund before October 1 of each year, an amount of money from the Revenue Fund which, together with any money contained in the ........ . 1 "W""'I 1. .,..1 . ~ t-.1 ..., ., . 1 ., ., '1 ,.,' .t'nnClpal .t'uno, IS eqUal 10 me aggregate 3.,.TfiOum or me pnnClpal Decommg Que 3.,.'10. payame on all Outstanding Serial Bonds on such Principal Payment Date. Sinking Fund. The Trustee will transfer for deposit in the Sinking Fund before October 1 of each year as required, an amount of money from the Revenue Fund equal to the Sinking Fund Installments payable on such Sinking Fund Payment Date. Reserve Fund. Concurrently with the issuance of the Bonds, the Trustee is to establish, maintain and hold in trust a separate fund designated as the Reserve Fund. Separate Reserve Accounts for each Participant are created within the Reserve Fund. In the event of a withdrawal of amounts from 'any Reserve Account within the Reserve Fund to make payments to the Interest Fund, Principal Fund or Sinking Fund, the Trustee will deposit in such Reserve Account moneys from the Revenue Fund necessary to restore the amount in such Reserve Account to the Reserve Account Requirement but only from the Installment Payments made for such purpose by the Program Participants who are obligated under the Installment Purchase Agreements to restore said amounts; provided, that if there has been a draw upon any policy of insurance, surety bond, letter of credit or other comparable credit facility used to provide all or a portion of the Reserve Account Requirement, said Installment Payments will be applied to reimburse the provider of such instrument for payments made under such draw plus its expenses in connection therewith. Under each Installment Purchase Agreement, each Program Participant is obligated only to replenish the Reserve Fund for withdrawals therefrom caused by defIciencies in such Program Participant's payment of Installment Payments. F.75 16397.1001098 OS 16397.1 001098 OS P.76 "System Net Revenues" is defined under the Installment Purchase Agreements as, for any period System Revenues less Operation and Maintenance Costs for such period; provided that certain adjustments in the amount of System Net Revenue deemed collected during a Fiscal Year may be made in connection with amounts. deposited in the Rate Stabilization Fund. "System Revenues" is defined under the Installment Purchase Agreements as all gross income and revenue received or receivable by the Participant from the ownership or operation of the System, determined in accordance with Generally Accepted Accounting Principles, including all fees (including connection fees), rates, charges and all amounts paid Each Installment Purchase Agreement provides that all System Net Revenues and all amounts on deposit in the System Revenue Fund are irrevocably pledged to the payment of the Installment Payments and that the System Net Revenues will not be used for any other purpose while any of the Installment Payments remain unpaid. The Installment Purchase Agreement provide that this pledge, together with the pledge created by any other Parity Debt (i.e., the Installment Payments and any other parity obligations of the Program Participant), and subject to any permitted prior liens on Revenues, constitutes a lien on System Net Revenues for the payment of the Installment Payments and all other Parity Debt. Pledge of System Net Revenues under the Installment Purchase Agreements *Preliminary, subject to change. Bond Proceeds and/or Reserve Policy Reserve Account Reguirement Participant Reserve Accounts-Information* The table below describes the Reserve Account Requirement for each Reserve Account and whether-such Reserve Account has been satisfied with Bond proceeds or the Reserve Policy. . The Reserve Account Requirements will be satisfied with Bond proceeds or a debt service reserve fund insurance policy (the "Reserve Policy") to be _issued by Financial Security Assurance Inc. See "BOND INSURANCE - The Bond Insurer" for information on Financial Security Assurance Inc. The total stated amount of the Reserve Policy is $919,398.75 (only a portion of such amount is available to each Reserve Account as shown in the table below). Under the Indenture, the Trustee holds in trust a separate fund designated as the Reserve Fund. The Reserve Fund consists of separate, segregated Reserve Aecounts established for each Program Participant. The amount on deposit in each Reserve Account is required to be maintained in an amount at least equal to the Reserve Account Requirement for such Reserve Account. The Reserve Account Requirements for each Installment Purchase Agreement are set fOlth below and generally are equal to the maximum annual Installment Payments payable by each Program Participant. Each Reserve Account will be available only to cover a deficiency in the Installment Payments under the related Installment Purchase Agreement. Under the Installment Agreements, Program Participants will only be obligated to replenish draws on the Reserve Account relating to such Program Participant. Reserve Fund under any contracts received by or owed to the Participant ill connection with the operation of the System and all proceeds of insurance relating to the System and investment income allocable to the System and all other income and revenue howsoever derived by the Participant from the ownership or operation of the System or arising from the System, subjeet to and after satisfaction of any Prior Liens. "Operation and Maintenance Costs" is defined under the Installment Purchase Agreement as the reasonable and necessary costs paid or incurred by the Participant for maintainiJ?g and operating the System, determined in accordance with Generally Accepted Accounting Principles, including all reasonable expenses of management and repair and all other expenses necessary to maintain and preserve. the System in good repair and working order, and including all administrative costs of the Participant that are charged directly or apportioned. to the operation of the System, such as salaries and wages of employees, overhead, taxes (if any) and insurance premiums (including payments required to be paid into any self-insurance funds), and including all other reasonable and necessary costs of the Participant or charges required to be paid by it to cornply with the terms of the Agreement or of ai:1y Supplemental Agreement or of. any resolution authorizing the execution of any Parity Debt, such as Gompensation, reimbursement and indemnification of the Trustee and the Authority and fees and expenses of Independent Certified Public Accountants; but excluding in all cases (i) payment of Parity Debt and Subordinate Obligations, (ii) costs of capital additions, replacements, betterments, extensions or improvements which under Generally Accepted Accounting Principles are chargeable to a capital account, and (iii) depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles. In order to carry out and effectuate such pledge each Program Participant agrees and covenants that all System Revenues will be deposited when and as received in a special fund designated as the "System Revenue Fund", which fund the Program Participant agrees and covenants to maintain and to hold separate 3..nd apfu-t from other funds so long as any Installment Payments remain unpaid. The Pro~l::Ull Participllilt is required to, from the moneys in the System Revenue Fund, to pay all Operation and Maintenance Costs (including amounts reasonably required to be set aside in contingency reserves for Operation and Maintenance Costs, the payment of which is not then immediately required) as such Operation and Maintenance Costs become due and payable. Thereafter, all remaining moneys in the System Revenue Fund are required to be set aside by the Program Participant at the following times for the transfer to the following respective special funds in the following order of priority. Installment Payments. Not later than each Installment Payment Date (i.e., J\.1arch 15 and September 15 of each year), the Program Participant is required to, from the moneys in the System Revenue Fund, to transfer to the Trustee the Installment Payment due and payable on that Installment Payment Date. The Program Participant will also, from the moneys in the System Revenue Fund, transfer to the applicable trustee for deposit in the respective payment fund, without preference or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, any other Parity Obligation Payments in accordance with the provisions of any Parity Obligation. Reserve Account. On or before the first Business Day of each month, the ProgrmIl Participant is required to, from the remaining moneys in the System Revenue Fund, thereafter, without preference or priority, and in the event of any insufficiency of such moneys ratably without any disGrimination or preference, to transfer to the Trustee for deposit in the Revenue Fund for application to the Participant Reserve Account within the Reserve Fund in accordance with the Indenture and to the applicable trustee for such other reserve accounts, if any, as may have been established in connection with Parity Obligations that sum, if any, necessary to restore the Reserve Account to an amount equal to the Reserve Account P.77 ll6397.1 001098 OS 16397.1 001098 OS P.78 Each Installment Purchase Agreement provides that the. Program Participant which is a party to such Agreement may at any time enter into obligations secured by a lien and charge upon the System Net Revenues of SUGh PrograIil Participant equal to and on a parity with the lien and charge securing the Installment Pa)'Inents, but only if the System Net Revenues for the last completed Fiscal Year or any 12 consecutive months within the last 18 months. preceding the date of execution of such Parity Debt, as shown by a Certificate of the Program Participant on file with the Trustee, plus an allowance for increased System Net Revenues arising from any increase in the rates, fees and charges of the System which became effective prior to the date of the execution of such Parity Debt but which, during all or any part of such 12 month period, was not in effect, in an amount equal to the amount by which the System Net Revenues would have been increased if such increase in rates, fees and charges had been in effect during the whole of such 12 month period, as shown by a Certificate of the Program Participant on file with the Trustee, produce a sum equal to at least 120% of the Maximum Annual Debt Service as calculated after the execution of such Parity Debt; provided, that in the event that all or a portion of such Parity Debt is to be issued for the purpose of refunding and retiring any Parity Debt then Outstanding, interest and principal payments on the Parity Debt to be so refunded and retired from the proceeds of such Parity Debt being issued shall be excluded from the foregoing computation of MaJdmum Annual Debt Service; provided further, that the Program Participant may at any time issue Parity Debt without compliance with the foregoing conditions if the Annual Debt Service for each Fiscal Year during which such Parity Debt is Outstanding win not be increased by reason of the issuance of such Parity Debt; and provided further, an adjustment willlbe made in the amount of System Net Revenues for amounts deposited into or withdrawn from the Rate Stabilization Fund of the Program Participant. Additional Debt Tests under Installment Purchase Agreements No Cross-Collateralization Among Participants. No ProgrmTI Participant has covenanted to pay the Installment PaYlnents of any other Program Participant or to malce up any deficit in the Reserve Fund which occurs by reason. of another Program Participant's nonpayrnent. For this reason, a default in the payment of Installment Payments by any single Program Participant could cause a default in the payments of principal and interest on the Bonds if moneys in such Program Participant's Reserve Account are. insufficient to make up the deficit caused by such nonpayment. .. Surplus. Moneys on deposit in the System Revenue Fund not necessary to make any of the payments required above, may be expended by the Program Participant at any time for any purpose permitted by law, including but not limited to payments with respect to Subordinate Obligations and deposits to the Rate Stabilization Fund. Requirement and otherwise replenish the Reserve Fund for any withdrawals to pay the Installment Payments due lmder the related Installment Purchase Agreement and necessary to restore such other reserve accounts to an amount equal to the amount required to be maintained therein; provided that payments to restore the Reserve Account after a withdrawal will be in an amount equal to 1/12 of the aggregate amount needed to restore the Reserve Account to the Reserve Account Requirement as of the date of the withdrawal. Rate Covenant under the Installment l!>urchase Agreements Each Installment Purchase Agreement provides that the related Program Participant will flX, prescribe and collect rates, fees and charges and manage the operation of the System for each Fiscal Year so as to yield System Revenues at least sufficient, after making reasonable allowances for contingencies and errors in the estimates, to pay the following amounts during such Fiscal Year: (i) All current Operation and .Maintenance Costs. (ii) The Installment Payments and payments for other Parity Debt and the payment of the Subordinate Obligations as they become due and payable. (iii) All payments required for compliance with the terms of the Installment Purchase Agreement, including restoration of the Participant Reserve Account to an amount equal to the Reserve Account Requirement, and of any SuppleJnental Agreement. , (iv) All payments to meet any other obligations of the Program Participant which are charges, liens or encumbrances upon, or payablefrom, the System Net Revenues. - - In addition to the foregoing requirements, the Program Participant will, to the maximum extent permitted by law, fix, prescribe and colleet rates, fees and charges and manage the operation of the System for each Fiscal Year so as to yield SysterIl Net Revenues during such Fiscal Year equal to at least 120% of the Annual Debt Service in such Fiscal Year; provided, an adjustment will be made to the amount of System Net Revenues for amounts deposited into or withdrawn from the Rate Stabilization Fund of the Program Participant. Rate Stabilization Fund under the Installment Purchase Agreements Each Installment Purchase Agreernent creates a Rate Stabilization Fund. Each Program Participant may; during or within 210 days after a Fiscal Year, deposit System Net Revenues attributable to such Fiscal Year (on the basis of Generally Accepted Accounting Principles) into the Rate Stabilization Fund. The Program Participant may at any time withdraw moneys from the Rate Stabilization Fund. System Net Revenues deposited into the R~te Stabilization Fund will not be taken into account as System Net Revenues for purposes of the calculations required by the covenants in the Installment Purchase Agreement relating to System Net Revenue coverage and additional parity debt in the Fiscal Year to which such deposit is attributable, and amounts withdrawn from the Rate Stabilization Fund, during or within 210 days after a Fiscal Year, may be taken into account as Revenues for purposes of the calculations required by such covenants in such Fiscal Year. BOND INSURANCE The following information has been furnished by Financial Security Assurance Inc. (the "Bond Insurer") for use in this Official Statement. No representation is made by the Program Participants, the Authority or the Underwriter as to the accuracy, completeness or adequacy of such infoTIllation, or as to the absence of material adverse changes in the condition of the Bond Insurer subsequent to the date hereof, including but not limited to a downgrade in the credit ratings of the Bond Insurer. Reference is made to Appendix E for a specimen of the Bond hlsurer's municipal bond insurance policy. P.79 16397.1001098 OS 16397.1 001098 OS P.80 The Municipal Bond InsUrance Policy does not protect investors against changes in market value of the Bonds, which market value may be impaired as a result of changes in prevailing interest rates, changes in applicable ratings or other causes. The Bond msurer makes no representation regarding the Bonds or the advisability of investing in the Bonds. The Bond Insurer makes no representation regarding the Official Statement, nor has it participated in the preparation thereof, except that the Bond Insurer has provided to the Authority the information presented under this caption for inclusion in the Official Statement. The financiai statements included as exhibits to the annual and quarterly reports filed by Holdings with the Securities and Exchange Commission are hereby incorporated herein by reference. Also incorporated herein by reference are any such financial statements so filed from the date of this Official Statement until the termination of the offering of the Bonds. Copies of materials incorporated by reference will be provided upon request to Financial Security Assurance me.: 350 Park Avenue, New York, New York 10022, Attention: Communications Department (telephone (212) 826-0100). At June 30, 2004, the Bond Insurer's total policyholders' surplus and contingency reserves were approximately $2,212,545,000 and its total unearned premium reserve was approximately $1,501,280,000 in accordance with statutory accounting practices. At June 30,2004, the Bond Insurer's total shareholders' equity was approximately $2,438,206,000 and its total net unearne:d premium reserve was. approximately $1,255,708,000 in accordance with generally accepted accounting principles. The Bond Insurer is a New York domiciled fmancial guaranty insurance company and a wholly owned subsidiary of Financial Security Assurance Holdings Ltd. ("Holdings"). Holdings is an indirect subsidiary of Dexia, S.A., a publicly held Belgian corporation, and of Dexia Credit Local, a direct wholly- owned subsidiary of Dexia, S.A. Dexia, S.A., through its bank subsidiaries, is primarily engaged in the business of public finance, banking and asset management in France, Belgium and other European countries. No shareholder of Holdings or the Bond msurer is liable for the obligations of the Bond msurer. The Bond Insurer The Municipal Bond msurance Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. Concurrently with the issuance of the Bonds, the Bond Insurer will issue its Municipal Bond msurance Policy for the Bonds. The Municipal Bond Insurance Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Municipal Bond msurance Policy included as Appendix E to this Official Statement. The Municipal Bond Insurance Policy CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES Article xnm Article XllIB of the California State Constitution limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as.adjusted for changes in the cost of living and population. The "base year" for establishing such appropriation limit is the 1978/79 fiscal year and the limit is to be adjusted annually to reflect changes in population and consumer prices. Adjustments in the appropriations limit of an entity may also be made if (i) the financial responsibility for a service is transferred to another public entity or to a private entity, (ii) the financial source for the provision of services is transferred from taxes to other revenues, or (iii) the voters of the entity approve a change in the limit for a period of time not to exceed four years. Appropriations subject to Article XIIIB generally include the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions and refunds of taxes. "Proceeds of taxes" include, but are not limited to, all tax revenues and the proceeds to an entity of government from (i) regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost of providing the service or regulation), and (ii) the investment of tax revenues. Article XllJB includes a requirement that if an entity's revenues in any year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years. Certain expenditures are excluded from the appropriations limit including payments of indebtedness existing or legally authorized as of January 1, 1979, or of bonded indebtedness thereafter. approved by the voters and payments required to comply with court or federal mandates which without discretion require an expenditure for additional services or which unavoidably make the providing of existing services more costly. The Program Participants are of the opinion that their service charges do not exceed the costs they reasonably bear in providing such services and therefore are not subject to the limits of Article XllIB. Proposition 218 An initiative measure entitled the "Right to Vote on Taxes Act" ("Proposition 218") was approved by the voters of the State of California at the November 5, 1996 general election. Proposition 218 added Articles xmc and Article XIIID to the California Constitution. Proposition 218 requires that any agency imposing or increasing any property-related fee or charge must provide written notice to the record owner of each identified parcel upon which such fee or charge is to be imposed and must conduct a public hearing with respect thereto. The proposed fee or charge may not be imposed or increased if a majority of owners of the identified parcels file written protests against it. As a result, if and to the extent that a fee or charge imposed by a Program Participant is ultimately determined to be a "fee" or "charge" as defined in Proposition 218, a Program Participant's ability to increase such fee or charge may be limited by a majority protest. In addition, Proposition 218 includes a number of limitations applicable to existing fees and charges including provisions to the effect that (i) revenues derived from the fee or charge shall not exceed the funds required to provide the property-related service, (ii) such revenues shall not be used for any F.81 16397.1001098 OS 16397.1001098 OS P.82 In February 2004, the California Supreme Court in Richmond et al. v. Shasta Community Services District upheld a Court of Appeal decision that water connection fc~es were not property related fees and charges subject to Article XillD. The California Supreme Court's opinion in Richmond contained dicta In July 1997, the Authority General of the State of Califomia issued an opinion to the effect that Article XIIID does not apply to water fees or charges which are based on the volume of consumption. In November 2000, the Second District Court of Appeal held in Howard Jarvis Taxpayers Association v. City of Los Angeles that water service fees and charges, where based primarily on consumption, were not "fees" or "charges" within the meaning of Article XIllD. The California State Supreme Court denied review of the Howard Jarvis Taxpayers Association case. Proposition 218 defines the terms "fee" and "charge" to mean "any levy other than an ad valorem tax, a special tax or an assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership, including user fees or charges for a property.-related service." A "property-related service" is defined as "a public service having a direct relationship to property ownership." Article xmc provides that the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge and that the power of initiative to affect local taxes, assessments, fees and charges shall be applicable to all local governments. Article XIIICdoes not define the terms "local tax," "assessment," "fee" or "charge," so it is unclear that the definitions set forth in Article XIlID referred to above will be applicable to Article xmC. Moreover, the provisions of Article xmc are not expressly limited to local taxes, assessments, fees and charges imposed after November 6, 1996. Therefore, in the absence of other limitations, it is unclear whether the provisions of Article xmc could be applicable to the fees and charges charged by the Progra...-rn Participants. The Program Participants do not believe that Article XIIIC grants to the voters the power to repeal or reduce rates and charges in a manner which would be inconsistent with the Program Participant's contractual obligations, including but not limited to, the obligation to pay Installment Payments. There can be no assurance of the availability of particular remedies adequate to protect the interests of Bond Owners. Remedies available to Bond Owners in the event of a default are dependent upon judicial actions which are often subject to discretion and delay and could prove both expensive and time-consuming to obtain. Under the Installment Purchase Agreements, the Progrmll Participants have covenanted, to the maximum extent permitted by law, to establish and collect sufficient rates and charges to comply with the rate covenants thereunder. See "SECURITY FOR THE BONDS .. Rate Covenant under the Installment Purchase Agreements" herein. For information concerning the Program Participants, including projections of future rate increases, see Appendix B attached hereto. Proposition 218 provides that stand-by charges, whether characterized as charges or assessments, are classified as assessments and. cannot be imposed without compliance with the provisions of Proposition 218 pertaining assessments. purpose other than that for which the fee or charge was imposed, (iii) the amount of a fee or charge imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel and (iv) no such fee or charge may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question. Property-related fees or charges based on potential or future use of a service are not permitted. The Program Participants believe that their current fees and charges comply with these limitations. that charges for ongoing water service were property related and, thus, subject to Article XllID. However, subsequent to the California Supreme Court's decision in Richmond, the Fourth District Court of Appeal held in Bighorn-Desert View Water Agency v. Beringson that usage-based water rates are not subject to Proposition 218. The appellate court reasoned that such fees were not property related as provided in Proposition 218 or, if property related, were exempt from Proposition 218 as a fee or charge for water services. On October 27, 2004, the California Supreme Court granted a petition for review of the Bighorn decision. Certain aspects of the impact of Proposition 218 in these and other areas remain unclear as court decisions interpreting the application of Proposition 218 to various circumstances continue to be published on a frequent basis. The fees and charges collected by the Participants are based on various criteria. See Appendix B attached hereto. Future Initiatives Articles XllIB, XIIIC and XIIID were adopted as measures that qualified for the ballot pursuant to California's initiative process. From time to time othe~ initiatives could be proposed and adopted affecting the Program Participants' revenues or ability to increase revenues. RISK FACTORS The following section describes certain risk factors affecting the payment of and security for the Bonds. The following discussion of risks is not meant to be an exhaustive list of the risks. associated with the purchase of the Bonds and does not necessarily reflect the relative importance of the various issues. Potential investors are advised to consider the following factors, along with all other infOImation in this Official Statement, in evaluating the Bonds. There can be no assurance that other risk factors will not become material in the future. General The. payment of principal of and interest on the Bonds is secured solely by a pledge of the Revenues and certain funds under the Indenture. Revenues consist of Installment Payments to be made by Program Participants. The obligation of each Program Participant to make Installment Payments is secured by the System Net Revenues of such Program Participant. No assurance can be made that System Net Revenues, estimated or otherwise, wi.ll be realized by any Program Participant in an amount sufficient to pay the Installment Payments of such Program Participant. The realization of future System. Net Revenues is subject to, among other things, the capabilities of management of the Pro graIn Participants, the ability of the Program Participants to provide services to its users, and the ability of the Program Participants to establish and maintain charges sufficient to provide the required debt service coverage as well as pay for Operation and Maintenance Costs. Among other matters, inadequate sources of water, general and local economic conditions and changes in law and government regulations (including initiatives and moratoriums on growth) could adversely affect the amount of System Revenues realized by the Program Participants and ultimately the ability of the Program Participants to pay the Installment Payments. P.83 16397.1001098 OS 16397.1 001098 OS P.84 The enforcement of the remedies provided in the Installment Purchase Agreements and the Indenture could prove both expensive and time consuming. In the event of a default, the Trustee is not empowered to sell the' Projects' in order to pay debt service on the Bonds. In addition, the rights and remedies provided in'the Installment Purchase Agreements and Indenture may' be limited by and are subject to provisions of the federal bankruptcy laws, as now or hereafter enacted, and to other laws or equitable principles that lfiay affect creditors I rights. If a Program Participant were to file a petition under The rights and remedies provided in the Indenture and the Installment Purchase Agreements may be limited by and are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors' rights, to the application of equitable principles if equitable remedies are sought, and to the exercise of judicial discretion. in appropriate cases and to limitations on legal remedies against public agencies in the State of California. The various opinions of counsel to be delivered with respect to such documents, including the opinion of Bond CoUnsel (the form of which is attached as Appendix D), will be similarly qualified. Limitations on Remedies and Bankruptcy All funds and accounts held under the Indenture are required to be invested in Authorized Investments as provided under the Indenture. See Appendix C attached hereto for a summary of the definition of Authorized Investments. See the Program Participants' financial statements attached as Appendix A for a summary or the Program Participants' investments as of the date of such financial statements. All investments, including the Authorized Investments and those authorized by law from time to time for investments by public agencies contain a certain degree of risk. Such risks include, but are not limited to, a lower rate of return than expected, loss of market value and loss or delayed receipt of principal. The occurrence of these events with respect to amounts held under the Indenture or by the Program Participants could have a material adverse effect on the security of the Bonds. Investment of J~unds Earthquakes, floods', fITes or other natural disasters could interrupt operation of the Systems of the Program Participants and cause increased costs and thereby interrupt the ability of the Program Participants to realize System Net Revenues sufficient to pay the Installment Payments. Many of the Program Participants are located in active seismic areas and, in certain cases, flood zones. The Program . Participants are not obligated under the Installment Purchase Agreements to have earthquake or flood insurance. Fmther, Southern California and certain southwestern states are currently experiencing drought. Such drought may negatively impact the cost and availability of water for the Program Participants. Earthquakes, :Hoods, Fires, Drought or Other Natural ConditJions No Program Participant has covenanted to pay the Installment Payments of any other Program . Participant or to make up any deficit in the Reserve Fund which occurs by reason of another Program Participant's nonpayment. For this reason, a default in the payment: of Installment Payments by any single Program Participant could cause a default in the payments of principal and interest on the Bonds if moneys in such Program Participant's Reserve Account are insufficient to make up the deficit caused by such nonpayment. No Cross-Collateralization Chapter 9 of the Bankruptcy Code (Title 11, United States Code), the Bondholders and the Trustee could be prohibited or severely restricted frOln taking any steps to enforce their rights under the Installment Purchase Agreements and from taking any steps to collect amounts due from the Program Participant under the Installment Purchase Agreements. THE AUTHORITY The California Statewide Communities Development Authority (the "Authority") is ajoint exercise of powers authority duly organized and operating pursuant to Article 1 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of the California Government Code, and pursuant to an agreement which became dated as of June 1, 1988; by and among various cities, counties, and special districts, and is qualified to issue the Bonds under the Law. Neither the faith and credit nor the taxing power of the State of California or any public agency thereof or the Authority or any Program Participant or any member of the. Authority is pledged to the payment of the Bonds. The Bonds do not constitute a debt, liability or obligation of the State of California or any public agency thereof (other than the Authority payable solely from the Revenues) or any Program Participant or any member of the Authority, and neither the directors of the Authority nor any persons executing the Bonds are liable personally on the Bonds by reason of their issuance. The Authority has no taxing power. LEGAL MATTERS The legality and enforceability of the Bonds are subject to the approval of Hawkins Delafield & Wood LLP, San Francisco, California, acting as Bond Counsel. The form of such legal opinion is attached hereto as Appendix D. Hawkins Delafield & Wood LLP, San Francisco, California, has also served as Disclosure Counsel. Certain legal matters will be passed upon by the counsel to the Authority and the counsels to the Program Participants. LITIGATION The Authority will certify to the effect that, to the best knowledge of the Authority, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body pending other than as described in the Official Statement (i) in any way questioning the existence of the Authority or the titles of the officers of the Authority to their respective offices; (ii) affecting, contesting or seeking to prohibit, restrain or enjoin the issuance or delivery of any of the Bonds, or the payment or collection of any amounts pledged or to be pledged to pay the principal of and interest on the Bonds., or in any way contesting qr affecting the validity of the Bonds or the related legal documents or the consummation of the transactions contemplated thereby, or contesting the exclusion of the interest on the Bonds from taxation or contesting the powers of the Authority to assign and pledge the Installment Payments; or (iii) contesting the completeness or accuracy of the Preliminary Official Statement (excluding all appendilces) or the Official Statement (excluding all appendices) or any supplement or amendment thereto or asserting that the Preliminary Official Statement (excluding all appendices) or the Official Statement {excluding all appendices) contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. P.85 16397.1 001098 OS 16397.1 001098 OS P.86 Bond Counsel expresses no opinion regarding any other Federal or state tax consequences with respect to the Bonds. Bond Counsel renders its opinion under existing statutes and court decisions as of the issue date, and assumes no obligation to update its opinion after the issue date to reflect any future action, fact or circumstance, or change in law or interpretation, or otherwise. Bond Counsel expresses no opinion on the effect of any action hereafter taken or not taken in reliance upon an opinion of other counsel on the exclusion from gross income for Federal income tax purposes of interest on the Bonds, or under state and local tax law. In addition, in the opinion of Bond Counsel to the Authority, under existing statutes, interest on the Bonds is exempt from personal income taxes imposed by the State of California. In the opinion of Hawkins Delafield & Wood LLP, Bond Counsel to the Authority, under existing statutes and court decisions and assuming continuing compliance with certain tax covenants described herein, (i) interest on the Bonds is excluded from gross income for Federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"), and (ii) interest on the Bonds is not treated as a preference item in calculating the alternative minimum tax imposed on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. In rendering its opinion, Bond Counsel has relied on certain representations, certifications of fact, and statements of reasonable expectations made by the Authority in connection with the Bonds, and Bond Counsel has assumed compliance by the Authority with certain ongoing covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the Bonds from gross income under Section 103 of the Code. Opinion of Bond Counsel TAX MATTERS Each Program Participant will certify to the effect that, other than as described in the Official Statement, including all appendices hereto, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body pending or, to the best knowledge of the Program Participant, threatened (i) in any way questioning the existence of the Program Participant or the titles of the officers of the Program Participant to their respective offices; (ii) in any way contesting or affecting the validity of the legal documents relating to the Bonds entered into by the Program Participant or the consummation of the transactions contemplated thereby, (iii) which may result in any material adverse change relating to the finances or operations of the Program Participant; or (iv) contesting the completeness or accuracy of the Preliminary Official Statement or the Official Statement or any supplement or amendment thereto or asserting that the Prelimjnary Official Statement or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessaty to make the statements therein, in the light of the circumstances under which they were made, not misleading. See Appendix B for certain infonnation related to any litigation affecting the Participants. Certain Ongo~g Federal Tax RequireJlnents and Covenants The Code establishes certain ongoing requirements that must be met subsequent to the issuance and delivery of the Bonds in order that interest on the Bonds be and remain excluded from gross income under Section 103 of the Code. These requirements include, but are not limited to, requireJments relating to use and expenditure of gross proceeds of the Bonds, yield and other restrictions on investInents of gross proceeds, and the arbitrage rebate requirement that certain excess earnings on gross proceeds be rebated to the Federal government. Noncompliance with such requirements may cause interest on the Bonds to become included in gross income for Federal income tax purposes retroactive to their issue date, irrespective of the date on which such noncompliance occurs or is discovered. The Authority has covenanted to comply with certain applicable requirements of the Code to assure the exclusion of interest on the Bonds from gross income under Section 103 of the Code. Certain Collateral Federal Tax Consequences The following is a brief discussion of certain collateral Federal income tax matters with respect to the Bonds. It does not purport to address all aspects of Federal taxation that may be relevant to a particular owner of a Bond. Prospective investors, particularly those who may be subject to speeial rules, are advised to consult their own tax advisors regarding the Federal tax consequences of owning and. disposing of the Bonds. Prospective owners of the Bonds should be aware that the ownership of such. obligations may result in collateral Federal income tax consequences to various categories of persons, such as corporations (including S corporations and foreign corporations), fmancial institutions, property and casualty and life insurance comnanies. individual recinients of Social Securitv and niilroad retirement benefits. individuals ---.1: - - -- n_ ~ ,- -- -. - - - - - .L ." . otherwise eligible for the earned income tax credit, and taxpayers deemed to have incurred or continued indebtedness to purchase or carry obligations the interest on which is excluded from gross income for Federal income tax purposes. Interest on the Bonds may be taken into account in determining the tax liability of foreign corporations subject to the branch profits tax imposed by Section 884 of the Code. Original Issue Discount "Original issue discount" ("OID") is the excess of the sum of all amounts payable at the stated maturity of a Bond (excluding certain "qualified stated interest" that is unconditionally payable at least annually at prescribed rates) over the issue price of that maturity. In general, the "issue price" of a maturity means the first price at which a substantial amount of the Bonds of that maturity was sold (excluding sales to bond houses, brokers, or similar persons acting in the capacity as underwriters, placement agents, or wholesalers). In general, theissue price for each maturity of Bonds is expected.to be the initial public offering price set forth on the cover page of the Official Statement. Bond Counsel further is of the opinion that, for any Bonds having OID (a "Discount Bond"), OID that has accrued and is properly allocable to the owners of the Discount Bonds under Section 1288 of the Code is excludable from gross income for Federal income tax pUlposes to the same extent as other interest on the Bonds. In general, under Section 1288 of the Code, OID on a Discount Bond accrues under a constant yield method, based on periodic compounding of interest over prescribed accrual periods using a compounding rate determined by referenee to the yield on that Discount Bond. An owner's adjusted basis in a Discount Bond is increased by accrued OID for purposes of determining gain or loss on sale, F.87 16397.1 001098 OS 16397.1001098 OS P.88 Legislation affecting municipal bonds is regularly under consideration by the United States . Congress. There can be no assurance that legislation enacted or proposed after the date of issuance of the Bonds will not have an adverse effect on the tax exempt status or market price of the Bonds. A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix D. Legislation In general, if an owner acquires a Bond for a purchase price (excluding accrued interest) or otherwise at a t2X basis that reflects a premium over the sum of all amounts payable on the Bond after the acquisition date (excluding certain "qualified stated interest" that is unconditionally payable at least annually at prescribed rates), that premium constitutes "bond premium" on that Bond (a "Premium Bond"). In general, under Section 171 of the Code, an owner of a Premium Bond must amortize the bond premium over the remaining term of the Premium Bond, based on the owner's yield over the remaining term of the Premium Bond determined based on constant yield principles (in certain cases involving a Premium Bond callable prior to its stated maturity date, the amortization period and yield may be required to be determined on the basis of an earlier call date that results in the lowest yield on such bond). An owner of a Premium Bond must amortize the bond premium by offsetting the qualified stated interest aIlocable to each interest accrual period under the owner's regular method of accounting against the bond premium allocable to that period. In the case of a tax-exempt Premium Bond, if the bond premium allocable to an accrual period exceeds the qualified stated interest allocable to that accrual period, the excess is a nondeductible loss. Under certain circumstances, the owner of a Premium Bond may realize a taxable gain upon disposition of the Premium Bond even though it is .sold or redeemed for an amount less than or equal to the owner's original acquisition cost. Owners of any Premium Bonds should consult their own tax advisors regarding the treatment of bond premium for Federal income tax purpos~s, including various special rules relating thereto, and state and local tax consequences, in connection with the acquisition, ownership, amOltization of bond premium on, sale, exchange, or other disposition of Premium Bonds. Bond Premiuml . exchange, or other disposition of such Bond. Accrued OID may be: taken into account as an increase in the amount of tax-exempt income received or deemed to have been received for purposes of determining various other tax consequences of owning a Discount Bond even though there will not be a corresponding cash payment. Owners of .Discount Bonds should consult their own tax advisors with respect to the treatment of original issue discount for Federal income tax purposes, including various special rules relating thereto, and the state and local tax consequences of acquiring, holding, and disposing of Discount Bonds. CONTINUING DISCLOSURE The Program Participants have covenanted in Continuing Disclosure Certificates for the benefit of the holders and beneficial owners of the Bonds to provide certain financial information and operating data relating to Participants by not later than the 210 days following'the end of the fiscal year (currently their fiscal years end on June 30) (the "Participant Annual Reports"), commencing with the fiscal year ending June 30, 200_, and to provide notices of the occurrence of certain enumerated events, if material. The Authority has covenanted. in a Continuing Disclosure Certificate for the benefit of the holders and beneficial owners of the Bonds to provide notices of the occurrence of certain enumerated events, if material. The Program Participant Annual Reports and the notices of material events will be filed by the Trustee as Dissemination Agent with each Nationally Recognized Municipal Securities Information Repository. The specific nature of the information to be contained in the Anmial Reports and the notice of material events is set forth in Appendix G-"FORMS OF CONTINUING DISCLOSURE CERTIFICATES" hereto. These covenants have been made in order to assist the U;nderwriter in complying with Rule 15c2-12(b)(5) promulgated under the Securities Exchange Act of 1934" RATINGS Upon the issuance by Financial Security Assurance Inc. of its municipal bond insurance policy (the "Municipal Bond Insurance Policy"), Standard & Poor's and Fitch Ratings will assign the Bonds the rating of "AAA". These ratings are based upon the Municipal Bond Insurance Policy. See "BOND INSURANCE" herein. Generally, rating agencies base their ratings on information and material furnished directly to them and on investigations, studies and assumptions made by them. The ratings reflect only the views of such organization and an explanation of the significance of the ratings may be obtained from Standard & Poor's, 25 Broadway, New York, New York 10004 and from Fitch Ratings, 33 Whitehall Street, 27th Floor, New York, New York 10004, respectively. There is no assurance that the ratings will continue for any given period of time or that they will ~ot be revised downward or withdrawn entirely by the rating agencies, if, in the judgment of such rating agencies, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds. UNDERWRITING The Bonds will be purchased by Henderson Capital Partners, LLC (the "Underwriter") pursuant to a Bond Purchase Contract, under which the Underwriter agrees to purchase all of the Bonds for an aggregate purchase price of $ (which represents the principal amount o,f the Bonds pluslless net original issue premium/discount of $__ and less an Underwriter's discount of $ ). The initial public offering prices stated on the cover of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts), dealer banks, banks acting as agents and others at prices lower than said public offering prices. P.89 16397.1 001098 OS 16397.1 001098 OS P.90 Insofar as any statements made in this Official Statem.ent involve matters of opinion or of estimates, whether or not expressly stated, they are set forth as such and not as representations of fact. No representation is made that any of such statements made will be.realized. Neither this Official Statement nor any statement which may have been made verbally or in writing is to be construed as a contract with the Owners of the Bonds. . MISCELLANEOUS Upon delivery of the Bonds, Grant Thornton LLP, a fIrm of independent certified public accountants, will have. verified the mathematical accuracy of certain computations based upon certain information and assertions provided to them by the Underwriter relating to (a) the adequacy of the Program Participants' scheduled Installment Payments to pay when due all of the scheduled principal of and interest on the Bonds, (b) the adequacy of the amounts in the Escrow Fund to pay all of the principal and payment pr(~mium represented by and the interest on the Refunded Obligations (see "P ARTICIP ANTS AND FINANCING PLAN" herein) and (c) the computations of yield of the Bonds and the Escrow Fund which support Bond Counsel's opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes. POOL VERIFICATION The execution and delivery of this Official Statement have been duly authorized by the Authority and the Program Participants. CALIFORN[ASTATE~E COMMUNITIES DEVELOPMENT AUTHORITY By: Member of the Commission [P ARTICIP ANT] By: Authorized Representative [PARTICIPANT] By: Authorized Representative F.91 16397.1001098 OS 16397.1 001098 OS P.92 APPENDIX A . EXCERPTS FROM PROGRAM PARTICIPANTS' FINANCIAL STATEMENTS APPENDIX B INFORMATION REGARDING PROGRAM PARTICIPANTS F.93 16397.1001098 OS 16397.1001098 OS P.94 03) with respect to any such Parity Debt having twenty-five per cent (25%) or more of the aggregate principal amount thereof due in anyone Fiscal Year, Annual Debt Service shall be calculated for tht~ Fiscal Year of determination as if the interest on and principal of such Parity Debt were (A) with respect to any such Parity Debt bearing or comprising interest at other than a fIXed interest rate, the rate of interest used to calculate Annual Debt Service shall be (i) with respect to such Parity Debt then outstanding, one hundred ten per cent (110%) of the greater of (1) the daily average interest rate on such Parity Debt during the twelve (12) calendar lnonths next preceding the date of such calculation (or the portion of the then current Fiscal Year that such Parity Debt has borne interest) or . (2) the most recent effective interest rate on such Parity Debt prior to the date of such calculation or (ii) with respect to such Parity Debt then proposed to be issued, the then current 20-Bond GO Index rate as published in The Bond Buyer (or if The Bond Buyer or such index is no longer published, such other published similar index); The teml "Annual Debt Service" means, for any Fiscal Year, the sum of (1) the interest accruing on all Parity Debt during such Fiscal Year, assuming that all Parity Debt is retired as scheduled, plus (2) the principal amount (including principal due as sinking fund installment payments) allocable to all Parity Debt in such Fiscal Year, calculated as if such principal amounts were deemed to accrue daily during such Fiscal Year in equal amounts from, in each case, each payment date for principal or the date of delivery of such Parity Debt (provided that principal shall not be deemed to accrue for greater than a 365- day period prior to any payment date), as the case may be, to the next succeeding payment date for principal, provided, that the following adjustments shall be made to the foregoing amounts in the calculation of Annual Debt Service: Annual Debt Service The tenn "Agreement" means the Installment Purchase Agreements, by and between the Participants and the Authority, as originally executed and as such may from time to time be amended or supplemented. Agreement The following are summaries of certain of the definitions in the Indenture and the Installment Purchase AgreeInents. This summary is not intended to be comprehensive or definitiye, and reference is made to the actual documents for the complete terms thereof. DEFINITIONS' The following is a brief summary of certain of the defInitions and provisions of the Indenture and the Installment Purchase Agreements. Except where indicated, Installment Purchase Agreements are substantially similar and their terms are collectively summarized in this Appendix. This summary is not intended to be comprehensive or definitive, and reference isnlade to the actual documents for the complete terms thereof. DEFINITIONS AND SUMMARY OF LEGAL DOCUMENTS APPENDIX C being paid from the date of incurrence thereof in substantially equal annual amounts over a period of twenty (20) years from the date of such Parity Debt provided, however that the full amount of such Parity Debt shall be included in Annual Debt Service if the date of calculation is within 24 months. of the actual maturity of the payment; (C) with respect to any such Parity Debt or portions thereof bearing no interest but which are sold at a discount and which discount accretes with respect to such Parity Debtor portions thereof, such accreted discount shall be treated as due when scheduled to be paid; (D) Annual Debt Service shall not include interest on Parity Debt which is to be paid . from amounts constituting capitalized interest; (E) if an interest rate swap agreement is in effect with respect to, and is payable on a parity with, any Parity Debt to which it relates, no amounts payable under such interest rate swap in excess of debt service payable under such Parity Debt agreement shall be included in the calculation of Annual Debt Service unless the sum of (i) the interest payable on such Parity Debt, plus (ii) the amounts payable by the Participant under such interest rate swap agreement, less (iii) the amounts receivable by the Participant under such interest rate swap agreement, are greater thah the interest payable on such Parity Debt , in which case the amount of such payments to be made that exceed the interest to be: paid on such Parity Debt shall be included in such calculation, and for this purpose, the variable amount under any such interest rate swap agreement shall be determined in accordance with the procedure set forth in subparagraph (A) of this det;inition; and (F) Repayment Obligations proposed to be entered into as Parity Debt shall be deemed to be payable at the scheduled amount due under such Repayment Obligation as calculated under this definition. Authorized Investments IIAuthorized Investmentsll means :any of the following obligations which at the time of investment are legal investments of funds of the Participants under the laws of the State of California for the money proposed to be invested under the Indenture: (1) (a) Direct obligations (other than an obligation subject to variation in principal repayment) of the United States of America ("United States Treasury Obligations") (b) obligations fully and unconditionally guaranteed as to tiInely payment of principal and interest by the United States of America, (c) obligations fully and unconditionally guaranteed as to timely payment of principal 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 (d) 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 available to any person claiming through the custodian or to whom the custodian may be obligated. These include, but are not necessarily limited to: P.95 16397.1 001098 OS 16397.1 001098 OS P.96 -Federal National Mortgage Association (FNMA) Senior debt obligations Mortgage-backed securities (excluding stripped mortgages securities which are purchased at prices exceeding their principal amounts) -Federal Home Loan Banks (FHL Banks) Consolidated debt obligations -Farm Credit Banks (formerly: Federal Land Banks, Federal Intermediate Credit Banks and Banks for Cooperatives) Consolidated system wide bonds and notes Senior debt obligations -Federal Home Loan Mortgage Corporation (FHL1\:1:C) Participation certificates (excluding stripped mortgage securities which are purchased at prices exceeding their principal. ainounts) (3) The listed obligations of gove111ment-sponsored agencies wI-rich are not backed by the full faith and credit of the United States of America: (2) Federal Housing Administration debentures. Washington Metropolitan Area Transit Authority Guaranteed transit bonds U.S. Department of Housing & Urban Development Local authority bonds Government National Mortgage Association (GNMA) GNMA -guaranteed mortgage-backed securities GNMA-guaranteed participation certificates U.S. Maritime Administration Guaranteed participation certificates Guaranteed pool certificates General Services Administration Participation certificates Farmers Home Administration Certificates of beneficial ownership U.S. Treasury obligations All direct or fully guaranteed obligations -Student Loan Marketing Association (SLMA) Senior debt obligations (excluding securities that do not have a fixed par value and/or the terms of which do not promise a fIXed dollar amount at maturity or call date) -Financing Corporation (FrCO) Debt obligations -Resolution Funding Corporation (REFCORP) Debt obligations (4) Unsecured certificates of deposit, deposit accounts, time deposits, and bankers' acceptances (having maturities of not more than 30 days) of any bank the short-term obligations of which are rated "A- 1" or better by Standard & Poor'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 $5 million. (6) Commercial paper (having original maturities of not more than 270 days) rated "A-1+" by Standard & Poor's and "Prime-I" by Moody's. (7) Money market funds rated "AAm" or "AAm-G" by Standard & Poor's, or better, including funds which the Trustee or an affiliate manages, sponsors and advises. (8) Repurchase agreements with (1) any domestic bank, or domestic branch of a foreign bank, the long term debt or which is rated at least !!/~...!! by S&P and Nroody'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 Moody's, which broker-dealer falls under the jurisdiction of the Securities Investors Protection Corporation; or (3) any other entity rated "A" or better by S&P and Moody's and acceptable to the Bond Insurer, provided that: A. The market value of the collateral is maintained at levels and upon such conditions as would be acceptable to S&P to maintain an "A" rating in an "A" rated structured financing (with a market value approach); B. The Trustee or a third party acting solely as agent therefor or for the Authority (the "Holder of the Collateral ") has possession of the collateral or the collateral has been transferred to the Holder of the Collateral in accordance with applicable state and federal laws (other than by means of entries on the transferor's books); C. The repurchase agreement shall state and an opinion of counsel shall be rendered at the time such collateral is delivered that the Holder of the Collateral has a perfected frrst priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the Holder of the Collateral is in possession); D. All other requirements of S&P in respect of repurchase agreements shall be met; P.97 16397.1001098 OS 16397.1001098 OS P.98 C. the investment agreement shall state that is the unconditional and general obligation of, 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; B. the invested funds are available for withdrawal without penalty or premium, at any time upon not more than seven days' prior notice; the Authority and the Trustee agree to giye or cause to be given notice in accordance with the temlS of the investment agreement so as to receive funds thereunder with no penalty or premiUTIl paid; (10) Investment agreements with a domestic or foreign bank or corporation (other than a life or property casualty insurance company) 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 [mandal guaranty insurance company, claims paying ability, of the guarantor is rated at least "AA"(without regard to subcategories) by S&P and "Aa" (without regard to subcategories) by Moody's; provided that, by the terms of the investment agreement: 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 Project Fund, construction draws) on the Bonds; (jlii) 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" (without regard to subcategories) or better by Standard & Poor's and "Aa" (without regard to subcategories) or better L_.... Jr__.JI_.'_ uy lV..l.UUULY :So (ii) Direct, general short-term obligations of any state agency or subdivision described in (a) above and rated "A-l +" by Standard & Poor's and "Prime-I" by Moody's. (i) Direct general obligations of any state of the United States 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 rated "A3" by Moody's and "A" by Standard & Poor's, or better, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured general obligation debt is so rated. (9) State Obligations, which means: Notwithstanding the above, if a repurchase agreement has a term of 270 days or less (with no evergreen provision), collateral levels need not be as specified in (A) above, so long as such collateral levels are 103% or better and the provider is rated at least "A" by S&P and Moody's, respectively. E. The repurchase agreement shall provide that if during its term the provider's rating by either ~vioody's or S&P is withdrawn or suspended or falls below "A-" by S&P or "A3" by ~vioody's, as appropriate, the provider must, at the direction of the Authority or the Trustee (who shall give such direction if so desired by the Bond Insurer), within 10 days of receipt of such direction, repurchase all collateral and terminate the agreement, with no penalty or premium to the Authority or Trustee. D. the Authority or the Trustee receives the opinion of domestic counsel (which opinion shall be addressed to the Authority and the Bond fusurer) that such investment agreement is legal, valid, binding and enforceable upon the provider in accordance with its terms and an opinion of foreign counsel (if applicable, which opinion shall be addressed to the Authority and the Bond Insurer) in form and substance acceptable to the Bond fusurer and.addressed to the Authority and the Bond Insurer; E. the investment agreement shall provide that if during its term i) the provider's rating by either S&Por Moody's falls below "AA-" or "Aa3", respectively, the provider shall, at its option, within 10 days of receipt of publication of such downgrade, either (i) collateralize the investment agreement by delivering or transferring in accordance with applicable state and federal laws (other than by means of entries on the provider's books) to the Authority, the Trustee or a third party acting solely as agent therefor (the "Holder of the Collateral") collateral free and clear of any third-party liens or claims the market value of which collateral is maintained at levels and upon such conditions as would be acceptable to S&P to maintain an "A" rating in an "A" rated structured financing (with a market value approach); or (ii) repay the principal of and accnlle but unpaid interest on the investment, and ii) the provider's rating by either S&P or Moody's is withdrawn or suspended or falls below "A-" or "A3", respectively, the provider must, at the direction of the Authority or the Tlustee (who shall give such direction if so directed by the Bond fusurer), within 101 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; F. 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 .Holder of the Collateral has a perfected frrst priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the Holder of the Collateral is in possession); G. 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 (who shall give such direction if so directed by the Bond Insurer), be accelerated and arrlOunts invested and accrued but unpaid interest thereon shall be repaid to the Authority or Trustee, as appropriate, and P.99 16397.1 001098 OS ii) the provider shall become insolvent, not pay its debts as they become due, be . declared or petition to be bankrupt, etc. ("event of insolvency"), the provider's obligations shall a.utomatically be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the Authority or Trustee, as appropriate. (11) Pre-funded municipal obligations rated "AAA" by Standard & Poor's ~md "Aaa" by Moody's meeting the following requirements: (i) the municipal obligations are (i) not subject to redemption prior to rnaturity or (ii) . 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; (ii) the municipal obligations are secured by cash or United States Treasury obligations which may be. applied only to payment of the principal.of, interest and premium on such municipal obligations; (iii) the principal of and interest on the United States 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 principaJl of, interest, and premium, if any, due and to become due on the municipal obligations ("V erification "); (iv) the cash or United States 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; (v) no substitution of a United States Treasury Obligation shall be permitted except with another United States Treasury obligation and upon delivery of a new Verification; and (vi) the cash or the United States Treasury Obligations are not available to satisfy any other claims, including those by or against the trustee or escrow agent. (12) Subject to the prior written consent of the Bond Insurer, local California agency investment pools, so long as such pool is rated in one of the two highest rating categories by S&P and Moody's. (13) The Local Agency Investment Fund administered by the State of California. (14) Other forms of investments approved in writing by the Bond Insurer. Installment Payments "Installment Payments" means the installment payments due under the Installrrlent Purchase Agreements. P.l00 16397.1 001098 OS 16397.1 001098 OS P.10l The teml "Parity Obligation Payments" means the payments scheduled to be paid by the Participant under and pursuant to the Parity Obligations, which payments are secured by a pledge of System Net Revenues on a parity with the Installment Payments. Parity Obligation Payments The term "Parity Debt" means the Installment Payments and any Parity Obligations. Parity Debt The ternl "Operation and Maintenance Costs II means the reasonable and necessary costs paid or incurred by the Participant for maintaining and operating the System, determined in accordance with Generally Accepted Accounting Principles, including all reasonable expenses of maQagement and repair and all other expenses necessary to maintain and preserve the System in good repair and working order, and including all administrative costs of the Participant that are charged directly or apportioned to the operation of the System, such as salaries and wages of employees, overhead, taxes (if any) and insurance premiums (including payments required to be paid into any self-insurance funds), and including all other reasonable and necessary costs of the Participant or charges required to be paid by it to comply with the terms of the Agreement or of any Supplemental Agreement or of any resolution authorizing the execution of any ,Parity Debt, such as compensation, reimbursement and indemnification' of the Trustee and the Authority and fees and expenses of Independent Certified Public Accountants; but excluding in all cases (i) payment of Parity Debt and Subordinate Obligations, (ii) costs of capital additions, replacements, betterments, extensions or improvements which under Generally Accepted Accounting Principles are chargeable to a capital account, and (iii) depreciation, replacemenlt and obsolescence charges or reserves therefor and amortization of intangibles. Operation and 1\.1aintenance Costs The term "Net Proceeds" means, when used with respect to any casualty insurance or condemnation award, the proceeds from such insurance or condemnation award remaining after payment of all expenses (including attorneys' fees) incurred in the collection of such proceeds. Net Proceeds The tenn "Maximum Annual Debt Service" means, as of any date of calculation, the largest Annual Debt Service during the period from the date of such calculation through the [mal maturity date of all Parity Debt. Maximum Annual Debt Service Parity Obligations The term "P~ty Obligations" means all obligations of the Participant authorized and executed by the Participant other than the Installment Payments, the Parity Obligation Payments under which are secured by a pledge of the System Net Revenues on a parity with the Installment Payments:, including but not limited to any Repayment Obligations secured by System Net Revenues on a parity with the Installment Payments. Prior Liens The term "Prior Liens" means those liens, if any, on the System Revenues which are senior to the pledge under the Agreement. Proiect "Project" means the public capital improyements of the Participants financed under the Installment Purchase Agreements. Purchase Price The term "Purchase Price" means the principal amount plus interest thereon owed by the Participant to the Authority under the temas of the Agreement. Record Date "Record Date" means . the close of business on the 15th day of the month preceding any Interest Payment Date, whether or not such day is a Business Day. Repavment Obligation . "Repayment Obligation" means the reimbursement obligation or any other paYlnent obligation under a written agreement between the Participant and a credit provider to reimburse the credit provider for amounts paid pursuant to a credit facility for the payment of the principal amount or purchase price of and/or interest on any Parity Debt. Reserve Account "Reserve Account" means the accounts established within the Reserve Fund relating to the obligations under each separate Installment Purchase Agreements. Reserve Account Requirement The term "Reserve Account Requirement" means the amount required to be on deposit in each Reserve Account as provided in the Indenture; provided, that notwithstanding any provision hereof to the contrary, all or any portion of the Reserve Account Requirement for any Reserve Account nlaY (following written notification to the rating agencies then rating the Bonds) be satisfied by the provision of a policy of insurance, a surety bond, a letter of credit or other comparable credit facility, or a combination thereof, which, together with money on deposit in such Reserve Account, provide an aggregate amount equal to F.I02 16397.1 001098 OS 16397.1 001098 OS P.I03 The term "System Net Revenues" means for any period System Revenues less Operation and Maintenance Costs for such period; provided that certain adjustlnents in the amount of System Net System Net Revenues The term "System" or "Systems" means the whole andeaeh and every part of the water and/or wastewater system of the Participant, including the portion thereof existing on the date of the Agreement, and including all additions, betterments, extensions and improvements to such system or any part thereof and hereafter acquired or constructed. System or System.s The term "Supplemental Agreement" means any agreement then in full force and effect which has been entered into by the Participant and the Trustee, amendatory of or supplemental to the Agreement; but only if and to the extent that such Supplemental Agreement is specifically authorized under the Agreement. Supplemental Agreement The term "Subordinate Obligations" means the obligations' of the. Participant that are subordinate in payment to the Installment Payments. .~llh()rnln~tp ()hliO'~t;r\nc - --- -- ------- ~ ~A..'::O'-U~uv '''Revenues'' means all Installment Payments re~eived or receivable by the Authority. Revenues '''Reserve: Fund" means the fund by that name that is held by the Trustee. Reserve Fund the Reserve Account Requirement, so long as (i) the provider of any such policy of insurance, surety bond, letter of credit or other comparable credit facility is rated in one of the two highest rating categories (at all times) by Moody's and by S&P, (ii) in the case of a substitution of cash for a credit facility, the Trustee has received an opinion of counsel of recognized standing in the field of law relating to municipal bonds substantially to the effect that such substitution is authorized or permitted under the Indenture and will not adversely affect the exclusion from gross income of interest on the Bonds for federal income tax purposes, (iii) if such cred~t facility is not an irrevocable surety bond in the highest rating category of both Moody's and S&P, the Trustee has received written confirmation from Moody's and S&P that such substitution will not cause a lowering or withdrawal of any ratings on the Bonds, and (iv) the Trustee has received an opinion of counsel to the effect that the credit facility to be substituted is a valid, binding and legally enforceable obligation; and provided further, that in the event that any previously funded cash portion of the R~serve Account Requirement is satisfied by the provision of such a policy of insurance, surety bond, letter of credit or other comparable credit facility, or a combination thereof, the amount of money then in . such Reserve Account equal to the portion of the Reserve Account Requirement then being satisfied by such credit facil:lty shall (upon receipt of a Written Request of the related Participant) be withdrawn by the Trustee from such Reserve Account and transferred to the related Participant. Revenue deemed collected during a Fiscal Year may be made in connection with amounts deposited in the Rate Stabilization Fund. System Revenues The term "System Revenues" means all gross income and revenue received or receivable by the Participant from the ownership or operation of the System, determined in accordance with Generally Accepted Accounting Principles, including all fees (including connection fees), rates, charges and all amounts paid under any contracts received by or owed to the Participant in connection with the operation of the System and all proceeds of insurance relating to the System and investment income allocable to the Systerri and all other income and revenue howsoever derived by the Participant from the ownership or operation of the System or arising from the System, subject to and after satisfaction of any Prior Liens. SUlVlMARY OF INDENTURE The following is a summary of certain of the provisions of the Indenture. . This summary is not intended to be comprehensive or definitive, and reference is made to the actual document for the complete terms thereof. Procedure for Amendment of tbe Indenture. The Indenture and the rights and obligations of the Authority and of the Owners under the hldenture and any fustallment Purchase Agreement and the rights and obligations of the Participant and Authority under the Indenture may be amended at :C\l1y time by a Supplemental Indenture or Supplemental Agreement which shall become binding when the written consents of the Owners of at least sixty per cent (60%) in aggregate principal amount of the Bonds then Outstanding (exclusive of Bonds disqualified as provided in the Indenture) and the written consent of the Bond Insurer are filed with the Trustee; provided that so long as the Municipal Bond Insurance Policy is in effect, the Bond fusurer may give consent to amendments in place of the Owners of the Bonds. No such amendment shall (1) extend the maturity of or reduce the interest rate on, or otherwise alter or impair the obligation of the Authority to pay the interest or principal or redemption premium, if any, of any Bond or reduce the scheduled fustallment Payments to come due, without the express written consent of the Owner of the affected Bond, or (2) permit the creation by the Authority of any mortgage, pledge or lien upon the Revenues superior to or on a parity with the pledge and lien created for the benefit of the Bonds or (3) permit the creation by any Participant of any mortgage, pledge or lien upon the System Revenues (as defined in the Installment Purchase Agreements) superior to or on a parity with the pledge and lien created by an Installment Purchase Agreement, (4) reduce the percentage of Bonds required for the written consent to any such amendment, or (5) modify the rights or obligations orthe Trustee without its prior written assent thereto. The Indenture and the rights and obligations of the Authority and of the Owners and any Installment Purchase Agreement and the rights and obligations of the Participant and the Authority thereunder may also be amended at any time by a Supplemental Indenture or Supplemental Agreement which shall become binding upon execution, without the consent of any Owners but only to the extent permitted by law and only for anyone or rnore of the following purposes: (a) To add to the agreements and covenants of the Authority or a Participant other agreements and covenants thereafter to be .observed, or to surrender any right or power reserved to or conferred upon the Authority or the Participant; P.l04 16397.1 001098 OS 16397.1 001098 OS P.lDS then, and in each and every such case during the continuance of such Event of Default, the Trustee may, and upon the written request of the Owners of not less than twenty-five per cent (25%) in aggregate principal amount of the Bonds at the time Outstanding, shall, by notice in writing to the Authority,. declare the principal of all of the Bonds then Outstanding, and the interest accrued thereon, to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything contained in the Indenture or in the Bonds to the contrary notwithstanding; provided, any such declaration shall be limited to those Bonds corresponding in principal amount and maturity date to the principal components of delinquent Installment Payments related to such default (Bonds to be selected by lot within a maturity if necessary); provided further, that any such declaration shall be subject to the prior written consent of the Bond Insurer; and provided further that if, at any time after the principal. of the Bonds shall have been so declared due and payable and before any judgment or decree for the payment of the money due shall have been obtained or entered, there shall be deposited with the Trustee a sum sufficient to pay all principal on the Bonds matured prior to such declaration and all matured (c:) If an Event of Default shall occur under one of the Installment Purchase Agreements; (b) If. default shall be made in the due and punctual payment of the principal of or redemption premium, if any, on or of any Sinking Fund Installment for any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise; or (a) If default shall be made in the due and punctual payment of the interest on any Bond or 'when and as the sa..~e shall become due and payable; ur Events of Default and Acceleration of Maturities. If one or more of the following events (an "Event of Default") shall happen, that is to say: (f) For any other purpose that does not materially adversely affect the interests of the Owners of the Outstanding Bonds. (e) To the extent necessary to maintain any then existing rating by Moody's (if Moody's is then rating the Bonds) or S&P (if S&P is then rating the Bonds) or in connection with placing a credit facility in the Reserve Fund or; (d) To maintain the exclusion under the Code of interest on the Bonds from gross income for federal income tax purposes; (c) To modify, amend or supplement the Indenture in such manner as to permit the qualification under the Trust Indenture Act of 1939, as ~unended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds; (b) To make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision, or in regard to questions arising thereunder, as may deem necessary or desirable and not inconsistent therewith, and which shall not materially adversely affect the interests of the Owners of the Outstanding Bonds; installments of interest (if any) upon all the Bonds, and the expenses of the Trustee, including attorneys' fees, together with interest on any such amounts advanced as provided in the Indenture, and any and all other defaults known to the Trustee (other than in the payment of interest and principal on the Bonds due and payable solely by reason of such dee1aration) shall have been made good or cured or provision shall have been made therefor, then, and in every such case, the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding, by written notice to the Agency and to the Trustee, may, on behalf of the Owners of all the Bonds~, rescind and annul such declaration and its consequences; except that no such rescission or annulment shall occur without the prior written consent of the Bond Insurer, and no such rescission or annulment shall extend to or shall affect any subsequent default or shall impair or exhaust any right or power consequent thereon. Discharge of Bonds. If there shall be paid, to the Owners of all or a portion of the Outstanding Bonds the interest thereon and principal thereof and redemption premiums, if any, thereon at the times and in the manner stipulated therein' and in the Indenture, then the owners of such Bonds shall cease to be entitled to the pledge of Revenues as provided in the Indenture, and all agreements, covenants and other obligations of the Authority to the Owners of such Bonds shall thereupon cease, terminate and become void and be discharged and satisfied. Any Outstanding Bonds for the payment of which money shall have been set aside to be held in trust by the Trustee for such payment at the maturity or redemption date thereof shall be deemed, as of the date of such setting aside, to have been paid. SUlVIMARY OF THE INSTALLMENT PURCHASE AGREEMENTS The following is a collective summary of certain of the terms of the Installnlent Purchase Agreements. This summary is not intended to be comprehensive or definite, and reference is made to the actual documents for the complete terms thereof. Changes to the Project. The Participant may at any time substitute other public capital improvements for the System the then existing components of the Project by submitting a Written Request of the Participant to the Authority and the Trustee specifying the components of the Project to be substituted and the new components. Covenant Against Encumbrances. The Participant will not mortgage or otherwise encumber, pledge or place any charge upon any of the System Net Revenues except as provided in the Agreement, and will not issue any obligations secured by System Net Revenues senior to the Parity Debt; provided, that the Participant may at any time issue :any Subordinate Obligations. Covenant Against Sale or Other Disposition of the System. Except as provided in the fudenture, the Participant will not sell or otherwise dispose of the System or any part thereof essential to the proper operation of the System or to the maintenance of the System Net Revenues, unless the Installment Payments have been fully paid or provision has been made therefor. The Participant will not enter into any lease or agreement which iJmpairs the operation of the System or any part thereof necessary to secure adequate System Net Revenues for the payment of the Installment Payments, or which would otherwise impair the rights of the Owners with respect to the System Net Revenues or the operation of the System. P.l06 16397.1 001098 OS 16397.1 001098 OS P.lD7 Eminent Domain Proceeds., If all or any part of the System shall be taken by eminent domain proceedings, the Net Proceeds realized by the Participant therefrom shall be deposited by the Participant with the Trustee in a special fund which the Trustee shall establish as needed in trust and applied by the Participant to the cost of acquiring and constructing additions, bettelments, extensions or improvements to the System if (A) t.he Participant fIrst secures and files with the Trustee a Certificate of the Participant If such damage or destruction has. had no effect, or at most an immaterial effect, upon the System Revenues and the security of the mstallrrient Payments, and a Certificate of the Participant to such effect has been fIled with the Trustee, then the Participant shall. forthwith deposit such proceeds in the System Revenue Fund. If all or any part of the System shall be damaged or destroyed the Net Proceeds realized by the Participant therefrom shall be deposited by the Participant with the Trustee ,in a special fund which the Trustee shall establish as needed in trust .and applied by the Participant to the cost of acquiring and constructing additions, betterments, extensions or improvements to the System if (A) the Participant first secures and files with the Trustee a Certificate of the Participant showing (i) the loss in annual System Revenues, if any, suffered, or to be suffered, by the Participant by reason of such damage or destruction, (ii) a general description of the additions, betterments, extensions or improvements to the System then proposed tu be acquired and constructed by the Participant from such proceeds, and (iii) an estimate of the additional System Revenues to be derived from such additions, betterments, extensions or improvements; and (B) the Trustee has been furnished a Certificate of the Participant, certifying that such additional System Revenues will sufficiently. offset on a timely basis the loss of System Revenues resulting from such damage or destruction so that the ability of the Participant to pay Installment Payments when due will not be substantially impaired, and such Certificate of the Participant shall be final and conclusive, and any balance of such proceeds not required by the Participant for such purpose shall be deposited in the System Revenue Fund; provided, that if the foregoing conditions are not. met, then such proceeds shall be deposited with lthe Trustee and applied to make Installment Payments as they come due and Parity Obligation Paynlents as they shall become due; provided further that the foregoing procedures for the application of Net Proceeds shall be subject to any similar provisions for Parity Debt on a pro rata basis. The Participant shall procure and maintain or cause to be procured and maintained.public liability insurance covering claims against the Participant (including its directors, officers and employees) for bodily injury or death, or damage to property occasioned by reason of the Participant's operations, including any use of the System, and such insurance shall afford protection in such amounts as are usually covered in connection with operations similar to the System; provided, that such insurance coverage may be satisfied under a self-insurance program which is actuarially sound. Insurance. The Participant will procure and maintain at all times insurance on the System against such risks (including accident to or destruction of the System) as are usually insured in connection with operations similar to the System and, to the extent such insurance is available for reasonable premiums from a reputable insurance company, such insurance shall be adequate in amount and, as to the risks insured against, shall be maintained with responsible insurers; provided, that such insurance coverage may be satisfied under a self-insurance program which is actuarially sound. Covenant Regarding Maintenance and Operation of System. The Participant will maintain and preserve the System in good repair and working order at all times and will operate the System in an efficient and economical manner. showing (i) the loss in annual System Revenues, if any, suffered, or to be suffered, by the Participant by reason of such eminent domain proceedings, (ii) a general description of the additions, betterments, extensions or improvements to the System then proposed to be acquired and constructed by the Participant from such proceeds, and (iii).an estimate of the additional System Revenues to be derived from such additions, betterments, extensions or improvements; and (B) the Trustee has been furnished a Certificate of the Participant, certifying that such additional System Revenues will sufficiently offset on a timely basis the loss of System Revenues resulting from such eminent domain proceedings so that. the ability of the Participant to pay fustallment Payments when due will not be substantially impaired, and such Certificate of the Participant shall be final and conclusive, and any balance of such proceeds not required by the Participant for such purpose shall be deposited in the System Revenue Fund, provided, that if the foregoing conditions are not met, then such proceeds shall be deposited with the Trustee and applied to make Installment Payments as they come due and. Parity Obligation Payments as they shall become due provided further that the foregoing procedures for the application of Net Proceeds shall be subject to. any similar provisions for Parity Debt on a pro rata basis. If such eminent domain proceediIlgs have had no effect, or at most an immaterial effect, upon the System Revenues and the security of the Installment Payments, and a Certificate of the Participant to such effect has been filed with the Trustee, then the Participant shall forthwith deposit such proceeds in the System Revenue Fund. Events of Default and Acceleration of Maturities. If one or more of the following Events of Default shall happen, that is to say -- (1) if default shall be made by the Participant in the due and punctual payment of any Installment Payment or any Parity Debt when and as the same shall become due and payable; (2) if default shall be made by the Participant in the performance of any of the other agreements or covenants required in the Agreement to be performed by it, and such default shall have continued for a period of thirty (30) days after the Participant shall have been given notice in writing of such default by the Authority, the Bond Insurer or the Trustee; provided that such default shall not constitute an Event of Default, If the Participant shall commence to cure such default within such thirty (30) day period and thereafter diligently and in good faith shall proceed to cure such default within a reasonable period of time, provided, such period shall not extend beyond a total of 90 days except with the prior consent of the Bond Insurer; (3) if the Participant shall file a petition or answer seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if a court of competent jurisdiction shall approve a petition filed with or without the consent of the Participant seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if under the provisions of any other law for the relief or aid of debtors any court of competent jurisdiction shall assume custody or control of the Participant or of the whole or any substantial part of its property; or (4) if payment of the principal of any Parity Debt is accelerated in accordance with its terms; P.108 16397.1001098 OS 16397.1 001098 OS P.I09 Amendments. The Agreement may only be amended in accordance with the terms of the Indenture. then and in each and every such case during the continuance of such Event of Default specified in clauses (3) and (4) above, the Authority shall, and for any other such Event of Default the Authority may, by notice in writing to the Participant, declare the entire principal amount of the unpaid Installment Payments and the accrued interest thereon to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable; provided that any such declaration of acceleration shall be subject to the prior written consent of the Bond fusurer. This paragraph however, is subject to the condition that if at any time after the entire principal amount of the unpaid Installment Payments and the accrued interest thereon shall have been so declared due and payable and before any judgment or decree for the payment of the moneys due shall have been optained or entered the Participant shall deposit with the Authority a sum sufficient to pay the unpaid principal amount of the mstallment Payments or the unpaid payment of any other Parity Debt referred to in clause (1) above due prior to such declaration and the accrued interest thereon, with interest on such overdue installments, at the rate or rates applicable to the remaining unpaid principal balance of the Installment Payments or such other Parity Debt if paid in accordance with their terms, and the reasonable expenses of the Authority and the Bond Insurer, and any and all other defaults known to the Authority (other than in the payment of the entire principal ~ount of the unpaid Installment Payments and the accrued interest thereon due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Authority and the Bond Insurer or provision deemed by the Authority and the Bond Insurer to be adequate shall have been made therefor, then and in every such case the Authority and the Bond fusurer,by written notice to the Participant, may rescind and annul such declaration and its consequences; but no such rescission and annulment shall extend to or shaU affect any subsequent default or shall impair or exhaust any right or power consequent thereon. APPENDIX D . FORM 0]8' BOND COUNSEL'S OPINION Upon the delivery of the Bonds, Hawkins Delafield & Wood LLP, San Francisco, California, Bond Counsel, proposes to render a final approving opinion in substantially the following form: _,2005 California Statewide Communities Development Authority Sacramento, California 95814 $ California Statewide Communities Development Authority Water and Wastewater Revenue Bonds (pooled Financing Program) Series 2005_ Members of the Governing Board: We have acted as Bond Counsel in connection with the issuance by the California Statewide Communities Development Authority (the "Authority") of $ aggregate principal amount of California Statewide Communities Development Authority Water and Wastewater Revenue Bonds (Pooled Financing Program) Series 2005_ (the "Bonds ") under and pursuant to the provisions relating to the joint exercise of powers found in Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the "Law"), and under and pursua..l1t to the Indentu.re, dated as of __ 1, 2005 (the "Indenture"), by and between the Authority and.Union Bank of California; as trustee (the "Trustee"). We have reviewed originals or copies identified to our satisfaction as being true copies of the Indenture and certain other records of the Authority. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of Authority officers furnished to us without undertaking to verify the same by independent investigations. Based upon the foregoing and after the examination described above and after examination of such questions of law as we have deemed relevant in the circumstances, but subject to the limitations set forth above, we are of the opinion that: 1. The Authority has lawful authority under the Law to enter into the Indenture, and the Authority has duly authorized, executed and delivered the Indenture and, assuming due authorization, execution and delivery .by the respective other parties thereto, the Indenture is a legal, valid and binding obligation of the Authority enforceable in accordance with its terms. The Indenture creates a valid pledge of the Revenues (as defmed in the Indenture), subject to the provisions thereof permitting the application thereof for the purposes and on the terms and conditions set forth therein. 2. The Authority has lawful authority to issue the Bonds and the Bonds have been duly and validly authorized and issued by the Authority in accordance with the Constitution and statutes of the State of California, including the Law and the Indenture. The Bonds constitute legal, valid and binding special obligations of the Authority payable solely from Revenues and amounts on deposit in certain funds and P.ll0 16397.1 001098 OS 16397.1 001098 OS P.lll Respectfully submitted, The opinions expressed herein are based upon our analysis imd interpretation of laws, regulations, rulings and judicial decisions as they exist on the date hereof and cover certain matters not directly addressed by such authorities. We call attention to the fact that the rights and obligations under the Indenture and the Bonds are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors' rights, to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State of California. This opill~on is issued as of the date hereof, and we assUlme no obligation to update, revise or supplement this opinion to reflect any action hereafter taken or not taken, or any facts or circumstances, or any changes in law or in interpretations thereof, that may hereafter arise or occur, or for any other reason. Except as stated in paragraphs 3 and 4 above, we express no opinion as to any Federal, state or local tax consequences arising with respect to the Bonds or the ownership or disposition thereof. Furthermore, we express no opinion as to the effect of any action hereafter taken or not taken in reliance upon an opinion of counsel other than ourselves on the exclusion from gross income for Federal income tax purposes of iIlterest on the Bonds, or under State and local tax law. 4. In addition, we are further of the opinion that~ under existing statutes, interest on the Bonds is exempt from State of California personal income taxes. 3. Under existing statutes and court decisions, interest on the Bonds is not included in gross income for Federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"). Under the Code, interest on the Bonds is not treated as a preference item in calculating alternative minimum taxable income for purposes of the alternative minimum tax applicable to individuals aIld corporations; such interest, however, is includable in the adjusted current earnings of certain corporations for purposes of computing the alternative minimum tax imposed on such corporations by the Code. In rendering the opinions in this paragraph 3, we have relied upon and assumed (i) the material accuracy of the representations, statements of intention and reasonable expectations, and certifications of fact, contained in the Tax Certificate delivered on the date hereof by the Authority and the Participants with respect to the use of proceeds of the Bonds and the investment of certain funds, and other matters affecting the non-inclusion of interest on the Bonds in gross income for Federal income tax purposes under Section 103 of the Code, and (ii) compliance by the Authority and the Participants with procedures and covenants set forth in the Tax Certificate and with the tax covenants set forth in the Indenture as to such matters. Under the Code, failure to comply with such procedures and covenants may cause the interest on the Bonds to be included in gross income for Federal;income tax purposes, retroactive to the date of issuance of the Bonds, irrespective of the date on which such noncompliance occurs or is ascertained. accounts held IDlder the Indenture. The Bonds are not an obligation of the State of California, any public agency thereof (other than the Authority payable solely from the Revenues), the Participants (as defmed under the Indenture) or any member of the Authority; and neither the faith and credit nor the taxing powers of the State of California or any public agency thereof or any menlber of the Authority is pledged for the payment of the Bonds. The Authority has no taxing power. APPENDIX E FORM OF MUNICIPAL BOND INSURANCE POLICY P.112 16397.1 001098 OS 16397.1 001098 OS P.ll3 Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants "). DTC has Standard & Poor's highest rating: AAl\.. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. DTC, the world's largest depository, is a limited-purpose nust 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 Uniforrn Commercial Code, and a "clearing agency;; registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instrument from over 85 countries tha.t DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC isa wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, GSCC, MBSCC, and EM:CC, also subsidiaries of DTCC), as well as by the New York Stock DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered security certificate will be issued for each issue of the Bonds, each in the aggregate principal amount of such issue, and will be deposited with DTC. The information in this Appendix F concerning The Depository Trust Company ("DTC"), New York, New York, and DTC's book entry system has been obtained from DTC and the Authority takes no responsibility for the completeness or accuracy thereof The Authority cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current "Rules'-' applicable to DTC are onfile with the Securities and l.~change Commission and the current "Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC. INFORMATION CONCERNING DTC APPENDIX F Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("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. Beneficial Owners are, however, expected to receive written confIrmations providing details of the transaction, 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 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in ~onds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC' s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership.. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which mayor may not be the Beneficial Owners. The Direct aIld Indirect 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 fudirect 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. Beneficial Owners of the Bonds may wish to take certain steps to augment the transmission to them of notices of significant events \vith respect to the Bonds, . such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names: and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within an 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. (nor such other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails all Omnibus Proxy to the issuer 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 accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts, upon DTC's receipt of funds and corresponding detail information from the Authority or the Trustee on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or P.114 16397.1 001098 OS 16397.1 001098 OS P.IIS The information in this appendix 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. The Authority may decide to discontinue use of the systerIl of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bondeertificates will be printed and delivered to DTC. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, bond certificates are required to be printed and delivered. registered in "street name," and will be the responsibility of such Participant and not of DTC nor its nominee, the Trustee, or the Authority, subject to any statutory or regulatory requirements as may be in effect from 'time: to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. . . APPENDIX G FORMS OF CONTINUING DISCLOSURE CERTIFICATES FORM OF PARTICIPANT CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certi:ficate (the "Disclosure Certificate") is executed and delivered by the (the "Participant"), dated. , 2005 in connection with the issuance of $ California Statewide Communities Development Authority. Water and Wastewater Revenue Bonds (pooled Financing Program), Series 2005_(the "Bonds"). The Bonds are being issued pursuant to the Indenture, dated as of _ 1, 2005 (the "Indenture"), by and between the California Statewide Communities Development Authority and Union Bank of California, N.A., as trustee (the "Trustee"). The Participant has entered into an Installment Purchase Agreement, dated as of _ 1, 2005 (the "Installment Purchase Agreement") with the Authority. Under the Installment Purchase Agreement the Participant will pay Installment Payments (the "Installment Payment") which will secure in part the Bonds. The Participant covenants and agrees as follows: SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Participant for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Aw.lual Report provided by the Pmticipant pursuant to, and as described in, Sections 3 and 4 of this DisClosure Certificate. "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 ~my Bonds for federal income tax purposes. "Dissemination Agent" shall mlean Union Bank of California, N. A., or any successor Dissemination Agent designated in writing by the Participant and which has filed with the Participant a written acceptance of such designation. "Listed Events" shall mean any of the events listed in Section 5( a) of this Disclosure Certificate. "National Repository" shall mean any Nationally Recogrllzed Municipal Securities Information Repository for purposes of the Rule. The National Repositories currently approved by the Securities and Exchange Commission (the "SEC") are listed in the SEC web site at http://www.sec.gov/info/municipaVnrmsir.htm. "Official Statement" shall mean the Official Statement relating to the Bonds, dated __, 2005. "Participating Underwriter" shall mean the original purchaser of the Bonds required to comply with the Rule in connection with offering of the Bonds. . P.116 16397.1 001098 OS 16397.1 001098 OS P.117 1. The audited financial statements of the Partidpant for the prior fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to goverrimental entities from time to time by the Governmental Accounting Standards Board. If the Participant's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial SECTION 4. Content of Annual Reports. The Participant's Annual Report shall contain the CUSIP numbers of the Bonds and contain or include by reference the: (ii) (if the Dissemination Agent is other than the Participant), file a report with the Participant certifying that the Annual Report: has been provided pursuant to this Disclosure Certificate, stating the date it was provided and listing all the. Repositories to which it was provided. (i) determine each year prior to the date for providing the Annual Report the Name and address of each National Repository and the State Repository, if any; and (c) The Dissemination Agent shall: (b) Not later than fifteen (15) Business Days prior to said date, the Pa,:1:icipant shall provide the Annual Report to the Dissemination Agent (if other than the Participant). If the Participant is unable to provide to the Repositories an Annual Report by the date required in subsection (a), the Participant shall send a notice to each Repository in substantially the form attached as Exhibit A. (a) The Participant shall, or shall cause the Dissemination Agent to, not later than 210 days after the end of the Participant's fiscal year (presently such fiscal year ends June 30), commencing with the report for the fiscal year ending June 30, 200_, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate (the first report for fiscal year ending June 30" 200_ shall not be required to include the items described in Section 4(2) herein). The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the Participant may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. . If the Participant's fiscal year changes, it shall give notice of such change in the s~e manner as for a Listed Event under Section 5(c). SECTION 3. Provision of Annual Reports. "State Repository" shall mean any public or p~vate repository or entity designated by the State as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Certificate, there is no. State Repository. "State" shall mean the State of California. "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "Repository" shall mean each National Repository and each State Repository. statements in a format similar to the financial statements contained in .the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. 2. Updates for the last fiscal year of the information in the following tables from the Section relating to the Participant in Appendix B to the Official Statement presented in substantially the same format as such tables (to the extent the Official Statement cOIltains accurate information regarding the fiscal year covered by an Annual Report, no update shall be necessary): (a) Number of Connections as shown on page _ of the Official Statement; (b) Revenues by Class of User as shown on page _ of the Official Statement; (~) Largest Users as shown on page _ of the Official Statement (this information is only required to the extent the revenues generated by one or more users constitutes _ % or more of the Participant's annual System revenue); and (d) Results for the most recent fiscal year presented in the same format as the Projected Operating Results as shown on page _ of the Official Statement (no updates of projections are required). Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Participant or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a fmal official statement, it must be available from the Municipal Securities RulemaIrJng Beard. The Participant shall clearly identify each such other document so included by reference. SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the Participant shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the fustallment Purchase Agreement or its obligations in relation to the Bonds, if material: 1. principal and interest payment delinquencies; . 2. non-payment related defaults; and 3. adverse tax opinions or events affecting the tax-exempt status of the Bonds. (b) Whenever the Participant obtains knowledge of the occurrence of a Listed Event, the Participant shall as .soon as possible determine if such event would be material under applicable federal securities laws. (c) If the Participant determines that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the Participant shall promptly file a notice of such occurrence with the Repositories. P.118 16397.1 001098 OS 16397.1001098 OS P.l19 No Bondholder or Beneficial Owner may institute such action, suit or proceeding to compel performance unless they shall have first delivered to the Participant satisfactory written evidence of their status as such, ,md a written notice of and request to cure such failure, and the Participant shall have refused to comply therewith within a reasonable time. SECTION 10. Default. In the event of a failure of the Participant to comply with any provision of this Disclosure Certificate, the sole legal remedy of any Holder or Beneficial Owner of the Bonds or the Participating Underwriter shall be an action to compel perform~mce. A default under this Disclosure Certificate shall ][lot be deemed an Event of Default under the Indenture. The Part[cipant 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 Participant, and that under some circumstances compliance with this Disclosure Certificate, without additional disclosures or other action, may not fully discharge all duties and obligations of the Participant under such laws. SECTION 9. Additional fuformation. Nothing in this Disclosure Certificate shall be deemed to preventthe Participant from disseminating any other information~, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Participant chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclos~e CertJlficate, the Participant shall have no obligation under this Certificate to update such information or include it in any future Annual Report or notice of oecurrence of a Listed Event. SECTION 8. Dissemination Agent. The Participant hereby appoints Union Bank: of California, N.A. to serve as the Dissemination Agent herelinder. The Participant may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Participant pursuant to this Disclosure Certificate. SECTION 7. Temrination of Reporting Obligation. The Participant's obligations under this Disclosure Certificate shall temrinate upon the legal defeasance, prior redemption or payment in full of all of the Installment Payments. If such termination occurs prior to the final maturity of the Bonds, the Participant shall give notice of such temrination in the same manner as for a Listed Event under _ Section 5(c). SECTION 6. Use of Central Post Office. The Participant may satisfy its obligations hereunder to file any notice, document or information with a National Repository or State Repository by filing the same with any agent which is -responsible for accepting notices, documents or information for transmission to such National Repository or State Repository, to the extent pemritted by the SEC or SEC staff (a "Central Post Office"). For this purpose, permission shall be deemed to have been granted by the SEC staff if and to tbe extent the Central Post Office has received an interpretive letter, which has not been revoked, from the SEC staff to the effect that using the Central Post Office to transmit information to the National Repositories and the State Repositories will be treated for purposes of the . Rule as if such information were transmitted directly to the National Repositories and the State Repositories. . SECTION 11. Duties. Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Participant agrees, to the extent permitted by law, to indemnify and save the Dissemination Agent, its officers, directors, employees and agentsl. 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 Dissemination Agent's negligence or willful misconduct. The obligations of the Participant under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. SECTION 12. Amendment Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Participant may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived with the consent of the Authority, provided that, in the opiniolllof nationally recognized bond counsel, such amendment or waiver is permitted by the Rule. In the event of any amendment or waiver of a provision of this Disclosure Certificate, the Participant shall. describe such amendment in the same manner as for a Listed Event under Section 5( c). SECTION 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Participant, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. [P ARTICIP ANT] By Authorized Officer Acknowledged as to Duties as Dissemination Agent: UNION B~ OF CALIFORNIA, N.A. By Authorized Officer P.120 16397.1 001098 OS 16397.1 001098 OS P.121 By [form only: no signature requiredl [Participant] Dated: NOTICE IS HEREBY GIVEN that an Annual Report with respect to the above-named Bonds was not released by the Participant by the date required in the Continuing Disclosure Certificate. [The Participant anticipates that the Annual Report will be filed by .] ,2005 Date of Issuance: California Statewide Communities Development Authority Water and Wastewater Revenue Bonds (Pooled Financing Program), Series 2005_ Name of Bond Issue: [participant] Name of Obligated Party: NOTICE TO REPOSITORIES OF FAILURE TO lHLE ANNUAL REPORT EXHIBIT A FORM OF AUTHORITY CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by the California Statewide Communities Development Authority (the "Authority"), dated __, 2005, in connection with the issuance of $__ California Statewide Communities Development Authority Water and Wastewater Revenue Bonds (Pooled Financing Program), Series 2005_ (the "Bonds"). The Bonds are being issued pursuant to the Indenture, dated as of _ 1, 2005 (the "Indenture")~ by and between the California Statewide ComrrlUnities Development Authority and Union Bank of California, N.A., as trustee (the "Trustee"). The Participants (as defined under the Indenture) have entered into Installment Purchase Agreements, dated as of _ 1, 2005 (the "Installment Purchase Agreements ") with the Authority. Under the fustallment Purchase Agreements the Participants will pay Installment Payments (the "Installment Payments") which will secure in part the Bonds. The Authority covenants and agrees as follows: SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Authority for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). SECTION 2. Definitions. In addition to the definitions set forth in the fudenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defmed in this Section, the following capitalized terms shall have the following meanings: "Beneficial Owner" shall mean arlY person which (a) has the power, directly or inclirectly, 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 ,my Bonds for federal income tax purposes. "Dissemination Agent" shall lnean Union Bank of California, N.A., or a,ny succ.essor Dissemination Agent designated in writing by the Authority and which has filed with the Authority a written acceptance of such designation. "Listed Events" shall mean any of the events listed in Section 3(a) of this Disclosure Certificate. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The National Repositories currently approved by the Securities and Exchange Commission (the "SEe") are listed in the SEC web site at http://www.sec.gov/info/municipal/nrm~ir.htm. "Official Statement" shall mean the Official Statement relating to the Bonds, dated ,2005. "Participating Underwriter" shall mean the original purchaser of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Repository" shall mean each N atilonal Repository and each State Repository. "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. P.122 16397.1001098 OS 16397.1 001098 OS P.123 SECTION 4. Use of Central Post Office. The Authority may satisfy its obligations hereunder to fIle any notice, document or information with a National Repository or State Repository by filing the same with any agent which is responsible for accepting notices, documents or information for transmission to such National Repository or State Repository, to the extent permitted by the SEC or SEC staff (a "Central Post Office"). For this purpose, permission shall be deemed to have been granted by the SEC staff if and (c) If the Authority determines that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the Authority shall promptly file a notice of such occurrence with the Repositories. Notwithstanding the foregoing, notice of Listed Events described in subsectipns (a)(4).and (5) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Bonds pursuant to the Indenture. . (b) Whenever the Authority obtains knowledge of the occurrence of a Listed Event, the Authority shall as soon as possible determine if such event would be material under applicable federal securities laws. release, substitution or sale of property securing repayment of the Bonds. 11. substitution of the credit or liquidity providers or their failure to perform; and. 10. unscheduled draws on the credit enhancements reflecting financial difficulties; 9. unscheduled draws on the debt service reserves reflecting fmancial difficulties; 8. adverse tax opinions or events affecting the tax -exempt status of the Bonds; 7. rating changes; 6. defeasances; 5. optional, contingent or unscheduled bond calls; 4. modifications to rights of Bondholders; 3. non-payment related defaults; ....1 .J!.,. principal and interest payment delinquencies; 1. (a) Pursuant to the provisions of this Section 3, the Authority shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: SECTION 3. Reporting of Significant Events. "State Repository" shall mean any public or private repository or entity designated by the State as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Certificate, there is no State Repository. "State" shall mean the State of California. to the extent the Central Post Office has received an interpretive letter, which has not been revoked, from the SEC staff to the effect that using the Central Post Office to transmit information. to the National Repositories and the State Repositories will be treated for purposes of the Rule as if such information were transmitted directly to. the National Repositories and the State Repositories. SECTION 5. Termination of Reporting Obligation. The Authority's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Installment Payments. If such termination occurs prior to the final maturity of the Bonds, the Authority shall give notice of such termination in the same manner as for a Listed Event under Section 3(c). SECTION 6. Dissemination Agent. The Authority hereby appoints Union Bank of California, N.A. to serve as the Dissemination Agent hereunder. The Authority may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Authority pursuant to this Disclosure Certificate. SECTION 7. Default. In the event of a failure of the Authority to comply with any provision of this Disclosure Certificate, the sole legal remedy of any Holder or Beneficial Owner of the Bonds or the _ Participating Underwriter shall be an action to compel performance. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture. No Bondholder or Beneficial Owner may institute such action, suit or proceeding to compel performance unless they shall have first delivered to the Authority satisfactory written evidence of their status as such, and a written notice of and request to cure such failure, and the Authority shall have refused to comply therewith within a reasonable time. SECTION 8. Duties. Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certitilcate, and the Authority agrees, to the extent permitted by law, to indemnify and save the Dissemination Agent, 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 Dissemination Agent's negligence or willful misconduct. The obligations of the Authority under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. SECTION 9. Amendment~ Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Authority may amend this Disclosure. Certificate, and any provision of tlus Disclosure Certificate may be waived with the consent of the Authority, provided that, in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the Rule. In the event of any amendment or waiver of a. provision of this Disclosure Certificate, the Authority shall describe such amendment in the same manner as for a Listed Event under Section 3(c). P.124 16397.1001098 OS 16397.1001098 OS P.12S Authorized Officer By UNION BANK OF CALIFORNIA, N.A. Acknowledged as to Duties as Dissemination Agent: Member of the Commission By CALIFORNIA STATEWIDE COl\1IVIUNITIES DEVELOPMENT AUTHORITY SECTION 10. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Authority, the Dissemination Agent, the Participating Underwritl~r and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Hawkins Delafield & Wood LLP Draft CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by the (the "Participant"), dated , 2005 in connection with the issuance of $ California Statewide Comrrmnities Development Authority Water and Wastewater Revenue Bonds (pooled Financing Program), Series 2005_ (the "Bonds"). The Bo~ds are being issued pursuant to the Indenture, dated as of _ 1, 2005 (the "Indenture"), by and between the California Statewide Communities Development Authority and Union Bank of California, N.A., as trustee (the "Trustee"). The Participant has entered into an Installment Purchase Agreement, dated as of __ 1, 2005 (the "Installment Purchase Agreement") with the Authority. Under the Installment Purchase Agreement the Participant will pay Installment Payments (the "Installment Payment") which will secure in part the Bonds. The Participant covenants and agrees as follows: SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Participant for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply. to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized ternlS shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the Participant pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. ;,;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. "Dissemination Agent" shall mean Union Bank of California, N. A., or ~my successor Dissemination Agent designated in writing by the Participant and which has filed with the Participant a written acceptance of such designation. "Listed Events" shall mean any of the events listed III Section 5(a) of this Disclosure Certificate. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The National Repositories currently approved by the Securities and Exchange Commission (the "SEC"). are listed in the SEC web site at http://www.sec.gov/info/municipal/nnnsir.htm. "Official Statement" shall mean the Official Statement relating to the Bonds, dated 2005. "Participating Underwriter" shall mean the original purchaser of the Bonds required to comply with the Rule in connection with offering of the Bonds. P.126 14420.1026999 AGMT 14420.1 026999 AGMT P.127 1. The audited financial statements of the Participant for the prior fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Gove:mmental Accounting Standards Board. If the Participant's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the j\nnual Report shall contain unaudited SECTION 4. Content of Annual Reports. The Participant's Annual Report shall contain the CUSIP numbers of the Bonds and contain or include by reference the: (ii) (if the Dissemination Agent is other than the Participant), file a report with the Participant certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided and listing all the Repositories to which it was provided. (i) determine each year prior to the date for providing the Annual Report the Name and address of each National Repository and the State Repository, if any; and (c) The Dissemination Agent shall: (b) Not later than fifteen (15) Business Days prior to said date, the Pa..rticipant shall provide the Annual Report to the Dissemination Agent (if other than the Participant). If the Participant is unable to provide to the Repositories an Annual Report by the date required in subsection (a), the Participant shall send a notice to each Repository in substantially the form attached as Exhibit A. (a) The Participant shall, or shall cause the Dissemination Agent to, not later than 210 days after the end of the Participant's fiscal year (presently such fiscal year ends June 30), commencing with the report for the fiscal year ending June 30, 200_, provide to each Repository an Annual Report which is consistent withthe requirements of Section 4 of this Disclosure Certificate (the first report for fiscal year ending June 30, 200_ shall not be required to include the items described in Section 4(2) herein). The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the Participant may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the Participant's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). SECTION 3. Provision of Annual ReQorts. "State Repository" shall mean any public or private repository or entity designated by the State as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Certificate, there is no State Repository. "State" shall mean the State of California. "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "Repository" shall mean each National Repository and each State Repository. fmancial statements in a format similar to the financial statements contained in the final Official Statement, and the audited fmancial statements shall be filed in the same manner as the Annual Report when'they become available. 2. Updates for the last fiscal year of the information in the following tables from the Section relating to the Participant in Appendix B to the Official Statement presented in substantially the same format as such tables (to the extent the Official Statement contains accurate information regarding the fiscal year covered by an Annual Report, no update shall be necessary): (a) (b) Statement; Number of Connections as shown on page _ of the Official Statement; Revenues by Class of User as shown on page _ of the Official (c) Largest Users as shown on page _ of the Official Statement (this information is only required to the extent the revenues generated by one or more users constitutes _ % or more of the Participant's annual System revenue); and (d) Results for the most recent fiscal year presented in the same format as the Projected Operating Results as shown on page _ of the Official Statement (no updates of projections are required). Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Participant or related public entities, which have been suhmitted to each of h~e . Repositories or the Securities and Exchange COll'.u'TIission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The Participant shall clearly identify each such other document so included by reference. SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the Participant shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Installment Purchase Agreement or its obligations in relation to the Bonds, if material: 1. principal and interest payment delinquencies; 2. non-payment related defaults; and 3. adverse tax opinions or events affecting the tax-exempt status of the Bonds. (b) Whenever the Participant obtains knowledge of the occurrence of a Listed Event, the Participant shall as soon as possible determine if such event would be Inaterial under applicable federal securities laws. P. 128 14420.1 026999 AGMT 14420.1 026999 AGMT P.129 SECTION 10. Default. In the event of a failure of the Participant to comply with any provision of this Disclosure Certificate, the sole legal remedy of any Holder or Beneficial Owner of the The Participant 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 Participant, and that under sonle circumstances compliance with this Disclosure Certificate, without additional disclosures or other action, may not fully discharge all duties and obligations of the Participant under such laws. SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Participant from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Participant chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Participant shall have no obligation under this Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 8. Dissemination Agent. The Participant hereby appoints Union Bank of California, N.A. to serve as the Dissemination Agent hereunder. The Participant may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report pr~pared by the Participant pursuant to this Disclosure Certificate. SECTION 7. Termination of Reporting Obligation. The Participant's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Installment Payments. If such termination occurs prior to the final maturity of the Bonds, the Participant shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). SECTION 6. Use of Central Post Office. The Participant may satisfy its obligations hereunder to file any notice, document or information with a National Repository or State Repository by filing the same with any agent which is responsible for accepting notices, documents or information for transmission to such National Repository or State Repository, to the extent permitted by the SEC or SEC staff (a "Central Post Office"). For this purpose, pemussion shall be deemed to have been granted by the SEC staff if and to the extent the Central Post Office has received an interpretive letter, which has not been revoked, from the SEC staff to the effect that using the Central Post Office to transmit information to the National Repositories and the State Repositories will be treated for purposes of the Rule as if such information were transmitted directly to the National Repositories and the State Repositories. (c) If the Participant determines that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the Participant shall promptly file a notice of such occurrence with the Repositories. Bonds or the Participating Underwriter shall be an action to compel performance. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture. No Bondholder or BeneficiaJl Owner may institute such action, suit or proceeding to compel performance unless they shall. have first delivered to the Participant satisfactory written evidence of their status as such, and a written notice of and request to cure such failure, and the Participant shall have refused to comply therewith within a reasonable time. SECTION 11. Duties. ImmuIlities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Participant agrees, to the extent pennitted by law, to indemnify and save the Dissemination Agent, 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 Dissemination Agent's negligence or willful misconduct. The obligations of the Participant under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. SECTION 12. Amendment: '~aiver. Notwithstanding any other provision of this Disclosure Certificate, the Participant may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived with the consent of the Authority, provided that, in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the Rule. In the event of any amendment or waiver of a proyision of this Disclosure Certificate, the Participant shall describe such amendment in the same manner as for a Listed Event under Section 5(c). SECTION 13. Beneficiaries. This Disclosure Certificate shall inure solely to the. benefit of the Participant, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. [P ARTIClP ANT] By Authorized Officer Acknowledged as to Duties as Dissemination Agent: UNION BANK OF CALIFORNIA, N.A. By Authorized Officer P.130 14420.1026999 AGMT 14420.1026999 AGMT P.131 By rform only: no signature requiredl [Participant] Dated: { NOTICE IS HEREBY GWEN that an Annual Report with respect to the above-named Bonds was not released by the Participant by the date required in the Continuing Disclosure Certificate. [The Participant anticipates that the Annual Report will be filed by .] , 2005 California Statewide Communities Development Authority Water and Wastewater Revenue Bonds (Pooled Financing Program), Series 2005_ [participant] Date of Issuance: Name of Bond Issue: Name of Obligated Party: EXIllBIT A NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY City of South San Francisco, California Sewer Revenue Bonds Series 2005D Cash Flow ])rojections as of September 19, 2005 Table of Contents 2005 Bonds Sources and Uses of Funds Bond Production Report Debt Service Requirements Henderson Capital Partners, LLC, Oakland, California P.132 Table 1 2 3 P.133 (11) Equals 2.50% of maximum annual debt service (see Table 3). :Key: SOUTH SAN FRANC I Fi~ename: CSCDA05D ])ate: 09-19-2005 @ 11 :57 :43 Henderson Capital Partners, LLC, Oakland, California $6,165,000.00 (1 ) 6,000,000.00 60,000.00 40,231.35 52,402.50 10,148.44 2,217.71 proj ect Fund............................................ Cost of Issuance........................................ Bond Insurance.......................... ( 0.400000%)... Underwriters Discount................... ( o. 850000lf) . . . Surety Bond................... . . . . . . . . . . . . . . . . . . . . . . . . . . Contingency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . Uses of Funds $6,165,000.00 6,165,000.00 Par Amount of Bonds................... $6,165,000.00 +premium / -Dis.count . . . . . . . . . . . . . . . . . . . $0.00 Bond Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ================ Sources of Funds Delivery Date: 11/ 8/ 5 ====_=======_=m========== Sources and Uses of FUnds Table 1 CALIFORNIA STATEWXDE COMMUNITIES DEVELOPMENT AUTHORXTY City of South San Francisco, California Series 2005D CALIFORNIA STATEWIDE COMMtlNrrIES DEVELOPMENT AOTHORrTY City of South San Francisco, CaJ.ifornia. Jable 2 Series 2005D ======_2=_====_=_._=== Bond Production Report =__====E=======_=====_ Dated 11/ 8/2005 Delivery 11/ 8/2005 Gross Date Principal Bond Type B/Y Coupon Yield $price Priced to Call Px'oduction -.."------ -------------- --------- ..-..----- -------- ------------------- -------------- 10/ 1/ 6 160,000.00 Standard 144 2.6500 2.6500 100.000 160,000.00 10/ 1/ 7 160,000.00 Standard 447 2.8000 2.8000 100.000 160,000.00 10/ 1/ 8 165,000.00 Standard 925 2.8500 2.8500 100.000 165,000.00 10/ 1/ 9 .170,000.00 Standard 1588 2.9000 2.9000 100.000 170,000.00 10/ 1/10 175,000.00 Standard 2445 3.1000 3.1000 100.000 175,000.00 10/ 1/11 180,000.00 Standard 3506 3.2000 3.2000 100.000 18'0,000.00 10/ 1/12 190,000.00 Standard 4817 3.3000 3.3000 100.000 190,000.00 10/ 1/13 195,000.00 Standard 6357 3.4500 3.4500 100.000 195,000.00 10/ 1/14 200,000.00 Standard 8136 3.5500 3.5500 100.000 200,000.00 10/ 1/15 210,000.00 Standard 10214 3.7000 3.7000 100.000 210,000.00 10/ 1/16 215,000.00 Standard 12557 3.8000 3.8000 100.000 215,000.00 10/1/17 225,000.00 Standard 15234 3.9000 3.9000 100.000 22:5,000.00 10/ 1/18 230,000.00 Standard 18201 4.0000 4.0000 100.000 230,000.00 10/ 1/19 240,000.00 Standard 21536 4.1000 4.1000 100.000 240,000.00 10/ 1/20 250,000.00 Standard 25260 4.2000 4.2000 100.000 25,0,000.00 10/ 1/21 260,000.00 Standard 29394 4.2500 4.2500 100.000 2E;0,000.00 10/ 1/22 275,000.00 Standard 34040 4.3000 4.3000 100.000 275,000.00 10/ 1/23 285,000.00 Term Bond 39141 4.4000 4.4000 100.000 285,000.00 10/ 1/24 295,000.00 Term Bond 44716 4.4000 4.4000 100.000 2515,000.00 10/.1/25 310,000.00 Term Bond 50884 4.4000 4.4000 100.000 310,000.00 101 1/26 325,000.00 Term Bond 57675 4.4000 4.4000 100.000 3:;:5,000.00 101 1/27 340,000.00 Term Bond 65120 4.5000 4.5000 100.000 340,000.00 10/ 1/28 355,000.00 Term Bond 73249 4.5000 4.5000 100.000 3S5,000.00 101 1/29 370,000.00 Term Bond 82091 4.5000 4.5000 100.000 370,000.00 101 1/30 385,000.00 Term Bond 91676 4.5000 4.5000 100.000 385,000.00 -------------- -----.....------- 6,165,000.00 6,165,000.00 Par Amount production Gross Production Bond Insurance Underwriters Discount Bid 6,165,000.00 0.00 6,165,000.00 40,231.35 52,402.50 6,072,366.15 100.0000000 0.6525766 0.8500000 98.4974234 Accrued Net to Issuer 0.00 6,072,366.15 Gross Interest Cost +Net Discount Net Interest Cost 3,892,838.13 92,633.85 3,985,471.98 N I C % '1' I C % 4.3473272 4.3689108 Using 98.4974234 From Delivery Date Bond Years Average Coupon Average Life 91,676.375 4.246283 14.870458 TERM BOND(S) : PRINCIPAL COUPON YIELD $price GROSS PRODUCTION BOND YEARS AVG. LIFE ------------ ---------------- -------- ----------------. ------------------ --..-------- 10/ 1/26 1,215,000.00 4.4000 4.4000 100.000 1,215,000.00 23,635.125 19.452778 101 1/30 1,450,000.00 4.5000 4.5000 100.000 1,450,000.00 34,000.972 23.448946 SERIAL BONDS: 3,500,000.00 3,500,000.00 Henderson Capital Pa.rtners, LLC, Oakland, California Date: 09-19-2005 @ 11:58:15 Filename: CSCDA05D Key: SOOTH SAN FRANCI P.134 CALIFORNIA STATI!:WIDE COMMCNITIES DEVELOPMENT AUTHORITY City of South San Francisco, Califo:tnia Series 2005D Date Principal 4/ 1/ 6 10/ 11 6 160,000.00 4/ 11 7 10/ 11 7 160,000.00 4/ 11 8 101 11 B 165,000.00 4/ 1/ 9 10/ 11 9 170,000.00 4/ 1/10 10/ 1110 175,000.00 4/ 1/11 10/ 1/11 180,000.00 4/ 1/12 10/ 1/12 190,000.00 4/ 1/13 10/ 1/13 195,000.00 4/ 1/14 10/ 1/14 200,000.00 4/ 1/15 10/ 1/15 210,000.00 4/ 1/16 10/ 1/16 215,000.00 4/ 1/17 10/ 1/17 225,000.00 4/ 1/18 10/ 1/18 230,000.00 4/ 1/19 10/ 1/19 240,000.00 4/ 1/20 10/ 1/20 250,000.00 4/ 1/21 10/ 1/21 260,000.00 4/ 1/22 10/ 1/22 275,000.00 4/ 1/23 10/ 1/23 285,000.00 4/ 1/24 10/ 1/24 295,000.00 4/ 1/25 10/ 1/25 310,000.00 41 1/26 10/ 1/26 325,000.00 41 1/27 10/ 1/27 340,000.00 4/ 1/28 10/ 1/28 355,000.00 4/ 1/29 10/ 1/29 370,000.00 4/ 1/30 10/ 1/30 385,000.00 6,165,000.00 ACCRUED 6,165,000.00 ============== Debt Service Schedule Coupon Interest 97,508.13 2.650000 122,737.50 120,617.50 2.800000 120,617.50 118,377.50 2.850000 118,377.50 116,026.25 2.900000 116,026.25 113,561.25 3.100000 i13,561.25 110,848.75 3.200000 110,848.75 107,968.75 3.300000 107,968.75 104,833.75 3.450000 104,833.75 101,470.00 3.550000 101,470.00 97,920.00 3.700000 97,920.00 94,035.00 3.800000 94,035.00 89,950.00 3.900000 89,950.00 85,562.50 4.000000 85,562.50 80,962.50 4.100000 80,962.50 76,042.50 4.200000 76,042.50 70,792.50 4.250000 70,792.50 65,267.50 4.300000 65,267.50 59,355.00 4.400000 59,355.00 53,085.00 4.400000 53,085.00 46,595.00 4.400000 46,595.00 39,775.00 4.400000 39,775.00 32,625.00 4.500000 32,625.00 24,975.00 4.500000 24,975.00 16,987.50 4.500000 16,987.50 8,662.50 4.500000 8,662.50 Period Total 97,508.13 282,737.50 120,617.50 280,617.50 118,377 .50 283,377.50 116,026.25 286,026.25 113,561.25 288,561.25 110,848.75 290,848.75 107,968.75 297,968.75 104,833.75 299,833.75 101,470.00 301,470.00 97,920.00 307,920.00 94,035.00 309,035.00 89,950.00 314,950.00 85,562.50 315,562.50 80,962.50 320,962.50 76,042.50 326,042.50 70,792.50 330,792.50 65,267.50 340,267.50 59,355.00 344,355.00 53,085.00 348,085.00 46,595.00 356,595.00 39,775.00 364,775.00 32,625.00 372,625.00 2~,975.00 379,975.00 16,987.50 386,987.50 8,662.50 393,662.50 3,892,838.13 10,057,838.13 3,892,838.13 10,057,838.13 =========-==== ============== Henderson Capital Partners, LLC, Oakland, california Key: SOOTH SAN FRANCI Date: 09-19-2005 @ 11:58:19 Filename: CSCDA05D P.135 Total 380,245.63 401,235.00 401,755.00 402,052.50 402,122.50 401,697.50 405,937.50 404,667.50 402,940.00 405,840.00 403,070.00 404,900.00 401,125.00 401,925.00 402,085.00 401,585.00 405,535.00 403,710.00 401,170.00 403,190.00 404,550.00 405,250.00 404,950.00 403,975.00 402,325.00 Table 3