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HomeMy Public PortalAbout19941214 - Resolution - Board of Directors (BOD) (3) Cover Sheet for Scanning by ECS Originating Department General Manager Laserfiche Template Board of Directors Template Fields —71 Document Date: l 9-1 q- RH Document Type: Resolution Preserve Name: ,( �- I ,I I_ _(� Keywords (no more than 4): Q l5 Thom Sstct4 S �IP,+�1fvre o�T►-vs�- Project Name: Project Number: Vendor or Other Party: Name (First): Name (Last): Address: APN Number: Document No. 94-44 Additional Field: Additional Field: Additional Field: Additional Field: RESOLUTION NO. 94-44 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE MIDPENINSULA REGIONAL OPEN SPACE DISTRICT "PROVING THE FORMS OF AND AUTHORIZING THE EXECUTION OF AN INDENTURE OF TRUST FOR THE MIDPENINSULA REGIONAL OPEN SPACE DISTRICT 1995 PROMISSORY NOTES AND A CONTRACT OF PURCHASE FOR SAID NOTES, APPROVING A PRELIMINARY OFFICIAL STATEMENT AND PROVIDING FOR THE APPROVAL OF A FINAL OFFICIAL STATEMENT FOR SAID NOTES AND AUTHORIZING THE EXECUTION AND DELIVERY OF ESCROW AGREEMENT AND OTHER DOCUMENTS RELATED THERETO WHEREAS, the Midpeninsula. Regional Open Space District (the "District") is empowered under applicable laws to borrow money for the purpose of acquiring necessary and proper lands and facilities for open space purposes of the District and for the purpose of refinancing any outstanding promissory notes of the District issued for such purposes; and WHEREAS, the Board of Directors of the District (the "Board of Directors") has determined to issue its 1995 Promissory Notes (the "Notes") for such purposes; and WHEREAS, the issuance and sale of the Notes for such purposes is desirable and necessary and conforms with the purposes and requirements of the District and the laws of the State of California; and WHEREAS, in order to implement the foregoing, there has been submitted to the Secretary of the Board of Directors (the "Secretary") a form of Indenture of Trust with respect to the Notes, a Contract of Purchase relating to the Notes and a Preliminary Official Statement relating to the Notes; and WHEREAS, the Board of Directors has carefully considered the terms and conditions of said Indenture of Trust, said Contract of Purchase and said Preliminary Official Statement and is fully advised in the premises; NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Midpeninsula Regional Open Space District, as follows: Section 1. The foregoing recitals are true and correct, and the Board of Directors so finds and determines. Section 2. The Indenture of Trust (the "Indenture") with respect to the Notes, in the form submitted to and on file with the Secretary, is hereby approved for execution by the District, and the President of the Board of Directors (the "President") is hereby authorized to complete and execute the Indenture on behalf of the District in substantially the form submitted, with such modifications as he may approve, and the Secretary is hereby authorized to attest such execution and affix the seal of the District thereto and deliver the Indenture on behalf of the District. Section 3. The Contract of Purchase (the "Contract of Purchase") relating to the Notes, in substantially the form submitted by Stone & Youngberg (the "Underwriter") to and on file with the Secretary, is hereby approved for execution by the District, and the General Manager of the District is hereby authorized to complete, execute and deliver the Contract of Purchase on behalf of the District, with such modifications as he may approve; provid , that the principal amount of the Notes shall not exceed fifteen million dollars ($15,000,000), the net interest cost of the Notes shall not exceed seven and one-half per cent (7-1/2%) per annum and the Underwriter's discount for the purchase of the Notes shall not exceed one per cent (1%) of the principal amount thereof, which discount the Board of Directors hereby determines to equal the Underwriter's spread, which such discount reflects an Underwriter's spread which is both reasonable and customary under the prevailing market conditions. Section 4. The Preliminary Official Statement (the "Preliminary Official Statement") relating to the Notes, in substantially the form submitted by the Underwriter to and on file with the Secretary, is hereby approved by the District, and the General Manager of the District is hereby authorized to approve the distribution of the Preliminary Official Statement in substantially said form and to certify to the Underwriter on behalf of the District that the Preliminary Official Statement is, as of its date, "deemed final" by the District within the meaning of Rule 15c2-12 promulgated under the Securities and Exchange Act of 1934 (except for the omission of certain final pricing, rating and related information as permitted by such rule), and the underwriter is hereby authorized to distribute copies of the Preliminary Official Statement to persons who may be interested in the purchase of the Notes, and after the sale of the Notes, the President and the General Manager of the District are hereby authorized and directed, for and on behalf of the District, to complete, execute and deliver an Official Statement in final form relating to the Notes (the "Official Statement") in substantially the form of the Preliminary Official Statement, and the Underwriter is hereby authorized to delivery copies of the Official Statement to all actual purchasers of the Notes. Sections. The Escrow Agreement (the "Escrow Agreement") relating to the Notes, in the form submitted to and on file with the Secretary, are hereby approved for execution by the District, and the President of the Board of Directors (the "President") is hereby authorized to complete and execute the Escrow Agreement on behalf of the District in substantially the form submitted, with such modifications as he may approve, and the Secretary is hereby authorized to attest such execution and affix the seal of the District thereto and deliver the Escrow Agreement on behalf of the District. Sectionn6. The President, the Secretary, the General Manager and the Treasurer of the District are hereby each authorized and directed, in the name and on behalf of the District, 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 sale, execution and delivery of the Notes and 2 otherwise to carry out, give effect to and comply with the terms and intent of this resolution, the Notes, the Indenture, the Contract of Purchase and the Official Statement; and any such actions heretofore taken by such officers in connection therewith are hereby ratified, confirmed and approved. Section 7. This resolution shall take effect from and after its passage and approval. RESOLUTION NO. 94-44 PASSED AND ADOPTED by the Board of Directors of the Midpeninsula Regional Open Space District on December 14 , 19 94 at a regular meeting thereof, by the following vote: AYES: Peter Siemens, Robert McKibbin, Virginia Babbitt, Nonette Hanko, Elizabeth Crowder, and Wim de Wit NOES: None ABSTAIN: None ABSENT: Ernestine Henshaw ATTEST: APPROVED: Secretarf Pro-tem, Presidlbt, Board of Directors Board of Directors 1, the District Clerk of the Midpeninsula Regional Open Space District, hereby certify that the above is a true and correct copy of a resolution duly adopted by the Board of Directors of the Midpeninsula Regional Open Space District by the above vote at a meeting thereof duly held and called on the above day. Acting District Clerk a MIDPENINSULA REGIONAL OPEN SPACE DISTRICT and FIRST INTERSTATE BANK OF CALIFORNIA, I as Trustee I i i i INDENTURE Dated as of January 1, 1995 Relating to the Midpeninsula Regional Open Space District 1995 Promissory Notes SF2-37183.2 i TABLE OF CONTENTS i Page i SECTION 1. Definitions . . . . . . . . . . . . . . . . . . . 1 i SECTION 2. Equal Security . . . . . . . . . . . . . . . . . 6 SECTION 3 . Authority for the Issuance of the Notes . . . . . 7 SECTION 4. Terms of the Notes . . . . . . . . . . . . . . . 7 SECTION 5. Form of the Notes . . . . . . . . . . . . . . . . it SECTION 6. Execution of the Notes . . . . . . . . . . . . . 18 SECTION 7. Appointment of Trustee; Registration and Transfer of the Notes . . . . . . . . . . . . . . 18 SECTION 8. Delivery of the Notes and Use of Depository . . . . . . . . . . . . . . . . . . . 21 SECTION 9. Payment of the Notes . . . . . . . . . . . . . . 24 SECTION 10. Reserve Fund . . . . . . . . . . . . . . . . . . 26 SECTION 11. Tax Covenants . . . . . . . . . . . . . . . . . 27 SECTION 12. General Covenants . . . . . . . . . . . . . . . 28 SECTION 13. Discharge of Notes . . . . . . . . . . . . . . . 29 SECTION 14. Events of Default and Remedies of Registered Owners of the Notes . . . . . . . . . 30 SECTION 15. Amendment or Supplement of the Indenture . . . . . . . . . . . . . . . . . . . 32 SECTION 16. Benefits of the Indenture Limited to I Certain Parties Successor is Deemed i Included in All References to Predecessor . . . . . . . . . . . . . . . . . . 34 i SECTION 17. Partial Invalidity . . . . . . . . . . . . . . . 34 SECTION 18. Effective Date of the Indenture . . . . . . . . 35 Execution . . . . . . . . . . . . . . . . . . . . . . . . . . 36 EXHIBITA . . . . . . . . . . . . . . . . . . . . . . . . . . A-1 3F2-37183.2 A-1 INDENTURE This Indenture (the "Indenture") is made and entered into as of January 1, 1995, by and between the Midpeninsula Regional Open Space District, a regional open space district duly organized and existing under and by virtue of the laws of the State of California (the "District") , and First Interstate Bank of California, a state banking corporation duly organized and existing under and by virtue of the laws of the State of California and authorized to accept and execute trusts of the character herein set forth, as trustee (the "Trustee") ; WITNESSETH: WHEREAS, the Board of Directors of the District has determined to issue its 1995 Promissory Notes (the "Notes") to finance the costs of the acquisition of necessary and proper lands and facilities for open space purposes of the District and to refund certain of its outstanding promissory notes issued for such purposes pursuant hereto and to secure the Notes in the manner provided herein; and WHEREAS, the District has determined that all things necessary to cause the Notes, when executed by the District and authenticated by the Trustee and delivered as provided herein, to be legal obligations of the District enforceable in accordance with their terms, and to constitute the Indenture a valid agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery hereof and the execution and delivery of the Notes, subject to the terms hereof, have in all respects been duly authorized; NOW, THEREFORE, THE INDENTURE WITNESSETH, that in order to secure the payment of the interest on and principal of and redemption premiums, if any, on all Notes at any time issued and outstanding hereunder according to their tenor, and to secure the observance and performance of all the agreements, conditions, covenants and terms therein and herein set forth, and to declare the conditions and terms upon and subject to which the Notes are to be issued and authenticated and delivered, and in consideration of the premises and of the mutual agreements and covenants herein contained and of the purchase and acceptance of the Notes by the respective owners thereof, and for other valuable considerations, the receipt whereof is hereby acknowledged, the District does hereby agree and covenant with the Trustee, for the benefit of the respective owners of the Notes, as follows: SECTION 1. Definitions. Unless the context otherwise requires, the terms defined in this section shall for all SF2-37183.2 I purposes hereof and of the Notes and of any document mentioned herein have the meanings defined herein, the following definitions to be equally applicable to both the singular and plural forms of any of the terms defined herein: Acquisition Fund "Acquisition Fund" means the Midpeninsula Regional Open Space District 1995 Promissory Note Acquisition Fund established in Section 8. Board "Board" means the Board of Directors of the District. Business Day "Business Day" means a day of the year that is not a Saturday or Sunday or a day on which banking institutions located in San Francisco, California, are required or authorized to remain closed. Code "Code" means the Internal Revenue Code of 1986 and the regulations of the United States Department of the Treasury issued thereunder, and in this regard reference to an art' g Y particular section of the Code shall include reference to all successor sections of the Code. Controller "Controller" means the Controller of the District. District "District" means the P Open Mid peninsula Regional O Space P g P District, a regional open space district duly organized and existing under and pursuant to the Law and having the office of its Board of Directors in Santa Clara County, California. Federal Securities "Federal Securities" means (a) any securities now or hereafter authorized both the interest on and principal of which are guaranteed by the full faith and credit of the United States of America, or any units of a money-market portfolio composed of or collateralized by obligations guaranteed by the full faith and credit of the United States of America; (b) any of the following obligations of federal agencies not guaranteed by the United States of America. (1) participation certificates or senior debt obligations of the Federal Home Loan Mortgage Corporation, (2) bonds or debentures of the Federal Home Loan Bank Board SF2-37183.2 2 i established under the Federal Home Loan Bank Act and bonds of any federal home loan bank established under said act, and (3) stocks, bonds, debentures, participations and other obligations of or issued by the Federal National Mortgage Association, the Student Loan Marketing Association, the Government National Mortgage Association and the Federal Home Loan Mortgage Corporation, as and to the extent that such securities or obligations are eligible for the legal investment of District funds; (c) any repurchase agreements which are secured by any of such securities or obligations that (1) have a fair market value (determined at least monthly) at least equal to one hundred two per cent (102%) of the amount invested in such repurchase agreement, (2) are in the possession of the Trustee or a third party acting solely as agent for the Trustee who holds a perfected first lien therein, and (3) are free from all third ! party claims; and (d) any investment contracts with a financial institution that are fully collateralized by obligations guaranteed by the full faith and credit of the United States of America. General Fund "General Fund" means the General Fund of the District now existing in the treasury of the District under the Law. Indenture "Indenture" means this Indenture. Interest and Principal Fund I "Interest and Principal Fund" means the Midpeninsula Regional Open Space District 1995 Promissory Note Interest and Principal Fund established in Section 8. Law "Law" means Article 3 of Chapter 3 of Division 5 of the Public Resources Code of the State of California, as amended to date, and all laws amendatory thereof and supplemental thereto. Limited Taxes "Limited Taxes" means the limited ad valorem property taxes levied upon all taxable property in the District b the P P P Y Y Board of Supervisors of Santa Clara County and by the Board of Supervisors of San Mateo County and allocated to the District under applicable law that are legally available to a the PP 9 Y pay interest on and principal of and redemption premiums, if any, on the Notes together with the payment on a parity of the interest on and principal of and redemption premiums, if any, on the District's outstanding 1988 Promissory Notes, 1990 Promissory SF2-37183.2 3 Notes and 1992 Promissory Notes and certain land acquisition contracts, but excluding the proceeds of any Tax overrides. Manager "Manager" means the General Manager of the District. Notes "Notes" means the I'Midpeninsula Regional Open Space District 1995 Promissory Notes" designated as such in Section 4 and authorized to be issued by the District under and by the authority of the Law and under and pursuant hereto. Outstanding "Outstanding" means, with respect to the Notes and as of any date of calculation, all Notes authorized, issued, authenticated and delivered hereunder, except: (a) Notes cancelled or surrendered to the Trustee for cancellation pursuant to Section 7; (b) Notes deemed to have been paid as provided in Section 13; and (c) Notes in lieu of or in substitution for which other Notes shall have been authenticated and delivered pursuant to Section 7. President "President" means the President of the Board. Prior Notes "Prior Notes" means $ principal amount of the District's outstanding 1987—fri-o-m-17"s—sory Notes, constituting those notes maturing as specified in Exhibit A attached hereto and incorporated herein, and $ principal amount of the District's outstanding 1990 Promissory Notes, constituting those notes maturing as specified in Exhibit A attached hereto and incorporated herein. 1995 Project 111995 Project" means those necessary and proper lands and facilities for open space purposes of the District which have been authorized by the Board to be acquired by the District and which have been determined by the Board to constitute the 1995 Project. SF2-37183.2 4 Rebate Fund "Rebate Fund" means the Midpeninsula Regional Open Space District 1995 Promissory Note Rebate Fund established in Section 11. Rebate Instructions "Rebate Instructions" means those calculations and directions required to be performed and delivered by the District under and pursuant to the Tax Certificate. Rebate Requirement "Rebate Requirement" has the meaning assigned to it in the Tax Certificate. Refunding Fund "Refunding Fund" means the Midpeninsula Regional Open Space District 1995 Promissory Note Refunding Fund established in Section 8. Reserve Fund "Reserve Fund" means the Midpeninsula Regional Open Space District 1995 Promissory Note Reserve Fund established in Section S. Reserve Fund Requirement "Reserve Fund Requirement" means, as of any date of determination, the least of (a) $ or (b) maximum annual payments of interest on and principal of the Notes due in the current or any future year ending on September 1, or (c) one hundred twenty-five per cent (125%) of the average annual payments of interest on and principal of the Notes due in the current or each future year ending on September 1, as computed by the District and specified to the Trustee; Provided, that such requirement (or any portion thereof) may be provided by one or more policies of municipal bond insurance or surety bonds issued by a municipal bond insurer or by a letter of credit issued by a bank if the obligations insured by such insurer or issued by such bank, as the case may be, have ratings at the time of issuance of such policy or surety bond or letter of credit equal to "Aaall or higher assigned by Moody's Investors Service and "AAA" or higher assigned by Standard & Poor's Corporation. Secretary "Secretary" means the Secretary of the Board. SP2-37193.2 5 i Supplemental Indenture i "Supplemental Indenture" means any indenture then in full force and effect that has been made and entered into by and between the District and the Trustee, amendatory of or supplemental hereto; but only to the extent that such Supplemental Indenture is specifically authorized hereunder. Tax Certificate "Tax Certificate" means that certificate executed by the District at the time of the original issuance, authentication and delivery of the Notes relating to the requirements of Section 148 of the Code, as originally executed and as it may from time to time be amended or supplemented. Tax Overrides "Tax Overrides" means any tax levied for the purpose of the payment of general obligation bonded indebtedness authorized by voters of the District. Treasurer I "Treasurer" means the Treasurer of the District. Trustee "Trustee" means First Interstate Bank of California a state banking corporation duly organized and existing under and by virtue of the laws of the State of California and authorized to accept and execute trusts of the character herein set forth, having a principal corporate trust office in Los Angeles or San Francisco, California, and its successors or assigns, or any other bank or trust company having a principal corporate trust office in San Francisco, California, which may at any time be substituted in its place as provided in Section 7. Written Order "Written Order" means a written order of the District, signed by the President or Vice-President of the Board or the Manager, or by any other person authorized by resolution of the Board to perform an act or to sign a document on behalf of the District for purposes hereof. SECTION 2 . Equal Security. In consideration of the acceptance of the Notes by the registered owners thereof, the Indenture shall be deemed to be and shall constitute a contract between the District and such registered owners to secure the full and final payment of the interest on and principal of and redemption premiums, if any, on all Notes which may from time to time be authorized, sold, executed, authenticated and delivered SF2-37183.2 6 hereunder, subject to the agreements, conditions, covenants and terms contained herein; and all agreements, conditions, covenants and terms contained herein required to be observed or performed by or on behalf of the District shall be for the equal and proportionate benefit, protection and security of all registered owners of the Notes without distinction, preference or priority as to security or otherwise of any Notes over any other Notes by reason of the number thereof or the time of execution, authentication or delivery thereof or otherwise for any cause whatsoever, except as expressly provided herein or therein; provided, that the registered owners of the Notes shall have no benefits or rights in or to any money in the Refunding Fund. SECTION 3 . Authority for the Issuance of the Notes. The Board has reviewed all proceedings heretofore taken relative to the authorization of the Notes and has found, as a result of such review, and hereby finds and determines that all acts, conditions and things required by law to exist, to happen and to be performed precedent to the issuance of the Notes do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the District is now duly authorized to issue the Notes and incur an indebtedness under and pursuant to the conditions and terms provided herein. SECTION 4. Terms of the Notes. Promissory notes of the District in the aggregate principal amount of $ are hereby authorized to be issued by the District under and pursuant to the Law for the purpose of financing the costs of the acquisition of the 1995 Project and the refunding of the Prior Notes, together with the payment of the related incidental expenses, which authorized issue of promissory notes is hereby designated the "Midpeninsula Regional Open Space District 1995 Promissory Notes. " The Notes shall be issued in fully registered form in the denomination of five thousand dollars ($5,000) or any integral multiple thereof (but not to exceed the principal amount of Notes maturing on any one date) , shall be dated January 1, 1995, shall mature (subject to any right of prior redemption reserved herein) on the dates and in the principal amounts and shall bear interest (payable on September 1, 1995, and semiannually thereafter on March 1 and September 1 of each year until the Notes shall have been fully paid) at the rates per annum as set forth in the following schedule: SF2-37183.2 7 Maturity Date Principal Interest (September 1) Amount Rate 1997 $ $ 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 The Notes shall bear interest from the interest payment date next preceding the date of authentication and registration thereof, unless the Notes are authenticated and registered on a day during the period from the sixteenth (16th) day of the month next preceding an interest payment date to such interest payment date, both days inclusive, in which event they shall bear interest from such interest payment date, or unless the Notes are authenticated and registered on a day on or before the fifteenth (15th) day of the month next preceding the first interest payment date, in which event they shall bear interest from January 1, 1995. The interest due on and before the maturity or the prior redemption of the Notes shall be payable until the principal of the Notes shall have been fully paid by check mailed on each such interest payment date to the persons whose names appear as the registered owners thereof at the close of business as of the fifteenth (15th) day of the month next preceding each such interest payment date on the registration books required to be kept by the Trustee pursuant to Section 7 (except that in the case of a registered owner of one million dollars ($1, 000, 000) or more in aggregate principal amount of Notes Outstanding, payment shall be made at such registered owner's option by wire transfer of immediately available funds according to written instructions provided by such registered owner to the Trustee at least fifteen 15 days g ( ) Y before such interest payment date) , and the principal of and the redemption premiums, if any, on the Notes shall be payable at the maturity of the Notes or upon the redemption prior to maturity only on surrender of the Notes by such registered owners to the Trustee at the principal corporate trust office of the Trustee in San Francisco, California, or any other location so designated by the Trustee. Both the interest on and principal of and i 3F2-37183.2 8 redemption premiums, if any, on the Notes shall be payable in lawful money of the United States of America. The Depository Trust Company, New York, New York is hereby appointed depository for the Notes; and the Notes shall be initially registered in the name of "Cede & Co. , " as nominee of The Depository Trust Company, and shall be evidenced by one Note maturing on each maturity date set forth herein in the total principal amount of the Notes to become due and payable on such maturity date and shall be numbered in consecutive order from R-1 upwards. Registered ownership of the Notes, or any portion thereof, may not thereafter be transferred except as provided in Section 7 or Section 8. The Notes maturing by their terms on or after September 1, 2005, shall be subject to optional redemption by the District on any interest payment date on or after September 1, 2004 , prior to their respective maturity dates, as a whole, or in part in integral multiples of five thousand dollars ($5, 000) from such maturities selected by the District (and by lot within any one maturity if less than all the Notes of any one maturity are to be redeemed) , from any legally available funds of the District, upon mailed notice as hereinafter provided, at a redemption price equal to the following amount (expressed as a percentage of the principal amount of the Notes or the portions thereof called for redemption) , together with accrued interest thereon to the date of redemption, namely: Redemption Date Redemption Price September 1, 2004 102% March 1, 2005 101 On or after September 1, 2005, and prior to maturity 100 If less than all the Outstanding Notes of any one maturity date are to be redeemed at any one time, the Trustee shall select the Outstanding Notes or the portions thereof to be redeemed at such time from the Outstanding Notes maturing on such date by lot in any manner that it deems fair. Notice of redemption of any Note or any portion thereof shall be given by the Trustee by mailing a copy of such notice by first class mail to the registered owner thereof and to all securities depositories and securities information services selected by the District and set forth in a Written Order filed with the Trustee to comply with custom or the rules of any securities exchange or commission or brokerage board or otherwise as may be determined by the District in its sole discretion not less than thirty (30) days nor more than sixty (60) days before the redemption date; Provided, that receipt of any such notice shall not be a condition precedent to the effect of such notice and neither failure to receive any such notice nor any immaterial SF2-37193.2 9 defect contained therein shall affect the validity of the proceedings for the redemption of such Note or such portion thereof. Such notice shall state the redemption date, the redemption price, the place of redemption, and shall designate the principal amount, the numbers and CUSIP numbers of the Notes to be redeemed in whole or in part, and shall require that such Notes be then surrendered at the office of the Trustee for redemption in whole or in part at such redemption price, giving notice also that further interest on the Notes or the portions thereof called for redemption will not accrue from and after such redemption date. If any Note so chosen for redemption is to be redeemed in part only, such notice shall also state that such Note is to be redeemed in part only and that upon the presentation of such Note for redemption there will be issued in lieu of the unredeemed portion of the principal amount thereof a new Note or Notes of the same interest rate and maturity date of an aggregate principal amount equal to the unredeemed portion thereof. If notice of redemption has been duly given as aforesaid and money for the payment of the redemption price of the Notes or the portions thereof so called for redemption is held by the Trustee, then on the redemption date designated in such notice such Notes or such portions thereof shall become due and payable, and from and after the date so designated interest on such Notes or the portions thereof so called for redemption shall cease to accrue and the registered owners of such Notes or such portions thereof shall have no rights in respect thereof except to receive payment of the redemption price thereof. From and after the original issuance, authentication and delivery of the Notes the findings and determinations of the Board respecting the Notes shall be conclusive evidence of the existence of the facts so found and determined in any action or proceeding in any court in which the validity of such Notes is at issue, and no bona fide purchaser of any of the Notes shall be required to see to the existence of any fact or to the performance of any condition or to the taking of any proceeding required prior to such issuance or to the application of the purchase price paid for the Notes. The validity of the issuance of the Notes shall not be dependent on or affected in any way by any proceedings taken by the District for acquiring the 1995 Project or refunding the Prior Notes or any contracts made by the District in connection therewith. The recital contained in the Notes that the Notes are issued under and pursuant to the Law and under and pursuant hereto shall be conclusive evidence of their validity and of the regularity of their issuance and all Notes shall be incontestable from and after their original issuance, authentication and delivery. The Notes shall be deemed to be issued, within the meaning hereof, whenever the definitive Notes (or any temporary Notes exchangeable therefor) have been delivered to the purchaser thereof and the purchase price thereof received. SF2-37183.2 10 SECTION 5. Form of the Notes. The Notes, including the Certificate of Authentication and Registration and the Assignment to appear thereon, shall be in substantially the following forms, the blanks being suitably filled in to comply with the provisions hereof, namely: SF2-37183.2 I (Form of Note] UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTIES OF SANTA CLARA AND SAN MATEO MIDPENINSULA REGIONAL OPEN SPACE DISTRICT 1995 PROMISSORY NOTE No. $ i Interest Maturity Date Rate Date of Note CUSIP September 1, January 1, 1995 REGISTERED OWNER: i PRINCIPAL AMOUNT: DOLLARS Midpeninsula Regional Open Space District, a regional open space district duly organized and existing under and pursuant to the laws of the State of California, and having the office of its Board of Directors in Santa Clara County, California (the "District") , hereby acknowledges itself indebted to and, for value received, promises to pay (but only out of the funds hereinafter referred to, and subject to any right of prior redemption reserved herein) to the registered owner set forth above on the maturity date set forth above or upon the prior redemption hereof the principal sum set forth above, together with interest thereon at the interest rate per annum set forth above from the interest payment date next preceding the date of registration of this Note (unless this Note is registered on a day during the period from the sixteenth (16th) day of the month next preceding an interest payment date to such interest payment date, both days inclusive, in which event it shall bear interest from such interest payment date, or unless this Note is registered on a day on or before the fifteenth (15th) day of the preceding the first interest payment date in which month next prec g p ym , event it shall bear interest from January 1, 1995) , payable on September 1, 1995, and semiannually thereafter on March 1 and September 1 of each year. Interest due on and before the maturity or the prior redemption of this Note shall be payable until the principal hereof shall have been fully paid by check mailed on each such interest payment date to the registered owner hereof at the close of business as of the fifteenth (15th) day of the month next preceding each such interest payment date SF2-37183.2 12 I (except that in the case of a registered owner of one million dollars ($1, 000, 000) or more in aggregate principal amount of Notes outstanding, payment shall be made at such registered owner's option by wire transfer of immediately available funds according to written instructions provided by such registered owner to the Trustee at least fifteen (15) days before such interest payment date) , and the principal hereof and the redemption premium, if any, hereon shall be payable at the maturity or upon the prior redemption of this Note only upon surrender hereof by the registered owner hereof at the principal corporate trust office of the Trustee, initially First Interstate Bank of California, in San Francisco, California, or any other location so designated by the Trustee (together with any successor trustee, the "Trustee") . Both the interest on and principal of and redemption premium, if any, on this Note are payable in lawful money of the United States of America. This Note is one of a duly authorized issue of promissory notes of the District designated as its 1995 Promissory Notes (the "Notes") aggregating Dollars $ in principal amount, all of like date and tenor (except for such variations as may be required to designate varying numbers, interest rates, denominations, maturities or redemption provisions) , and is issued under and by authority of Article 3 of Chapter 3 of Division 5 of the Public Resources Code of the State of California, as amended to date, and all laws amendatory thereof and supplemental thereto (the "Law") , and under and pursuant to the provisions of an Indenture dated as of January 1, 1995, by and between the District and the Trustee (the "Indenture") , to provide funds for the purpose of acquiring necessary and proper lands and facilities for open space purposes of the District and for refunding certain of the District's outstanding promissory notes issued for such purposes (all as more particularly provided in the Indenture) , and reference is hereby made to the Indenture for a description of the terms on which the Notes are issued, for the provisions with regard to the security for the repayment of the Notes and for the rights of the registered owners of the Notes, and all the terms of the Indenture are hereby incorporated herein and constituted a contract between the District and the registered owner of this Note, to all the provisions of which the registered owner of this Note, by his acceptance hereof, consents and agrees, and the registered owner of this Note shall have recourse to all the provisions of the Indenture and shall be bound by all the terms and conditions thereof. The Notes maturing by their terms on or after September 1, 2005, are subject to optional redemption by the District on any interest payment date on or after September 1, 2004, prior to their respective maturity dates, as a whole, or in part in integral multiples of five thousand dollars ($5, 000) from such maturities selected by the District (and by lot within any one maturity if less than all the Notes of any one maturity are SF2-37183.2 13 to be redeemed) , from any legally available funds of the District, upon mailed notice as hereinafter described, at a redemption price equal to the following amount (expressed as a percentage of the principal amount of the Notes or the portions thereof called for redemption) , together with accrued interest thereon to the date of redemption, namely: Redemption Date Redemption Price September 1, 2004 102% March 1, 2005 101 On or after September 1, 2005, and prior to maturity 100 If less than all the outstanding Notes of any one maturity date are to be redeemed at any one time, the Trustee shall select the outstanding Notes or the portions thereof to be redeemed at such time from the outstanding Notes maturing on such date by lot in any manner that it deems fair. As provided in the Indenture, notice of redemption of this Note or any portion hereof shall be given by the Trustee by mailing a copy of such notice by first class mail to the registered owner hereof and to all securities depositories and securities information services selected by the District to comply with custom or the rules of any securities exchange or commission or brokerage board or otherwise as may be determined by the District in its sole discretion not less than thirty (30) days nor more than sixty (60) days before the redemption date; provided, that receipt of such notice shall not be a condition precedent to the effect of such notice and neither failure to receive any such notice nor any immaterial defect contained therein shall affect the validity of the proceedings for the redemption of this Note or such portion hereof. If notice of redemption has been duly given as aforesaid, then on the redemption date designated in such notice this Note or such portion hereof shall become due and payable at the above-described redemption price, and if money for the payment of the above-described redemption price of this Note or such portion hereof is held by the Trustee, then from and after the date so designated interest on this Note or such portion hereof shall cease to accrue and the registered owner of this Note shall, as to this Note or such portion hereof, have no rights in respect hereof except to receive payment of the redemption price hereof on the redemption date hereof; provided, that if this Note is to be redeemed in part only, upon presentation of this Note for redemption there will be issued in lieu of the unredeemed portion of the principal amount hereof a new Note or Notes of the same interest rate and maturity date of an aggregate principal amount equal to the unredeemed portion hereof. SF2-37183.2 14 It is hereby recited, certified and declared that this Note is issued in strict conformity with the Constitution and laws of the State of California and with proceedings of the District authorizing the same, and that all acts, conditions and things required by law to exist, to happen and to be performed precedent to the issuance of this Note do exist, have happened and have been performed in the time, form and manner as required by law, and that this Note, together with all other indebtedness and obligations of the District, does not exceed any limit prescribed by the Constitution or laws of the State of California. It is hereby further recited, certified and declared that the Notes are limited obligations of the District and that the interest on and principal of and redemption premiums, if any, on the Notes are, as authorized by and subject to the Law, payable only from limited ad valorem property taxes levied upon all taxable property within the District by the Board of Supervisors of Santa Clara County and by the Board of Supervisors of San Mateo County, and allocated to the District under applicable law, that are legally available to pay the Notes together with the payment on a parity of the interest on and principal of the District's outstanding 1987 Promissory Notes, 1988 Promissory Notes, 1990 Promissory Notes and 1992 Promissory Notes and certain land acquisition contracts, or from other funds legally available therefor. The full faith and credit or taxing power of the District is not pledged for the payment of the interest on or principal of or redemption premiums, if any, on the Notes, and the Notes are not secured by a legal or equitable pledge of, or charge, lien or encumbrance upon, any property of the District or any of its income or revenue. This Note is transferable by the registered owner hereof, in person or by his duly authorized attorney, at the above-mentioned office of the Trustee, upon surrender of this Note for cancellation accompanied by delivery of a duly executed written instrument of transfer in a form approved by the Trustee, and thereupon a new Note or Notes of authorized denominations for a like aggregate principal amount and of the same maturity date will be issued to the transferee in exchange therefor, in the manner, subject to the conditions and upon payment of the charges provided in the Indenture. The District and the Trustee may deem and treat the registered owner of this Note as the absolute owner hereof for all purposes, and neither the District nor the Trustee shall be affected by any notice or knowledge to the contrary; and payment of the interest on and principal of and redemption premium, if any, on this Note shall be made only to such registered owner as above provided, which payment shall be valid and effectual to satisfy and discharge the liability on this Note to the extent of the sum or sums so paid. The Notes are authorized to be issued in the form of fully registered notes in the denomination of five thousand M-371812 15 dollars ($5,000) or any integral multiple thereof (not exceeding the principal amount of Notes maturing in any one year) , and, subject to the conditions and upon payment of the charges provided in the Indenture, the Notes may be exchanged at the above-mentioned office of the Trustee for the same aggregate principal amount of Notes of the same maturity date of other authorized denominations. This Note shall not be entitled to any benefits under the Resolution or become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been signed by the Trustee. IN WITNESS WHEREOF, the District has caused this Note on its behalf to be signed by the manual or facsimile signature of the President of its Board of Directors and attested by the manual or facsimile signature of the Secretary of its Board of Directors and has caused the seal of the District to be impressed or printed hereon, all as of January 1, 1995. MIDPENINSULA REGIONAL OPEN SPACE DISTRICT B President of the Board of Directors [SEAL] Attest: Secretary of the Board of Directors [Form of Trustee's Certificate of Authentication and Registration] This is one of the Notes described in the within-mentioned Indenture which has been authenticated and registered as of FIRST INTERSTATE BANK OF CALIFORNIA, as Trustee B Authorized Signatory SM-37183.2 16 (Form of Assignment) For value received the undersigned do(es) hereby sell, assign and transfer unto the within Note and do(es) hereby irrevocably constitute and appoint attorney to transfer the same on the register of the Trustee, with full power of substitution in the premises. Dated• SIGNATURE GUARANTEED BY: NOTE: The signature(s) to this Assignment must correspond with the name(s) as written on the face of the within Note in every particular, without alteration or enlargement or any change whatsoever, and the signature(s) must be guaranteed by an eligible guarantor institution (being banks, stock brokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program) pursuant to Securities and Exchange Commission Rule 17A(d) 15. Social Security Number, Taxpayer Identification Number or other identifying number of Assignee: Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC") , to Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC) , ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof Cede & Co. , has an interest herein. SF2-37183.2 17 I SECTION 6. Execution of the Notes. The President and the Secretary who may be in office at the date of the Notes, or at any time thereafter prior to the delivery of the Notes, and each of such officers, are hereby authorized and directed, respectively, as such officers to sign and attest each of the Notes on behalf of the District by use of their manual or facsimile signatures, and the Secretary is hereby additionally authorized and directed to impress or print the seal of the District thereon, which such signing and sealing shall be a sufficient and binding execution of the Notes by the District. In case any officer whose signature appears on the Notes shall cease to be such officer before the delivery of the Notes to the purchaser, such signature shall nevertheless be valid and sufficient for all purposes the same as though such officer had remained in office until the delivery of the Notes. Only such of the Notes as shall bear thereon a certificate of authentication and registration in the form hereinabove set forth, executed and dated by an authorized signatory of the Trustee, shall be entitled to any benefits hereunder or be valid or obligatory for any purpose, and the execution of such certificate shall be conclusive evidence that the Notes so authenticated and registered have been duly authorized, executed, issued and delivered hereunder and are entitled to the benefits hereof. SECTION 7. Appointment of Trustee; Registration and Transfer of the Notes. First Interstate Bank of California at its principal corporate trust office in San Francisco, California, is hereby appointed Trustee of the District for the purpose of performing all duties and obligations imposed upon it herein. The District may at any time in its sole discretion remove the Trustee initially appointed and any successor thereto and may appoint a successor or successors thereto by an instrument in writing; provided, the District agrees that it will at all times maintain a Trustee for the Notes having a principal corporate trust office in San Francisco, California. The Trustee may at any time resign and be discharged from its duties and obligations hereunder by giving forty-five (45) days' written notice of such resignation to the District; provided, that if no successor Trustee shall have been appointed and shall have accepted such appointment within ninety (90) days following the giving of notice of removal or notice of resignation as aforesaid, the resigning Trustee or any registered owner of the Notes (on behalf of himself and all other owners) may petition any court of competent jurisdiction to appoint a successor Trustee, which court may, upon such notice, if any, as such court may deem proper and prescribe, appoint a successor Trustee or grant such other legal or equitable release as such court may deem appropriate. The Trustee is hereby authorized and directed to pay interest on the Notes due on and before the maturity or the prior redemption thereof to the registered owners thereof as their names appear at the close of business as of the fifteenth (15th) day of the month preceding each such interest payment date on the registration books required to be kept by it pursuant to sr2-37183.2 1 8 this section as the registered owners thereof, such interest to be paid by check mailed on each such interest payment date to such registered owners at their addresses appearing on such books or at such other addresses as they may have filed with the Trustee for that purpose (except that in the case of a registered owner of one million dollars ($1, 000,000) or more in aggregate principal amount of Notes outstanding, payment shall be made at such registered owner's option by wire transfer of immediately available funds according to written instructions provided by such registered owner to the Trustee at least fifteen (15) days before such interest payment date) , and to pay to such registered owners the principal of the Notes and any redemption premium thereon upon presentation and surrender of the Notes to the Trustee at maturity or upon the prior redemption thereof. The Trustee shall cancel and destroy all Notes paid by it at maturity or upon the prior redemption thereof and all Notes surrendered to it by the District, and shall deliver to the District a certificate of such destruction, and the Trustee shall keep accurate records of all Notes cancelled and destroyed by it hereunder. The District shall from time to time, subject to any agreement between the District and the Trustee then in force, pay the Trustee compensation for its services, reimburse the Trustee for all its advances and expenditures, including but not limited to advances to and fees and expenses of independent accountants, counsel and consultants or other experts employed by it in the exercise and performance of its duties and obligations hereunder, and indemnify and save the Trustee harmless against liabilities not arising from its own negligence or willful misconduct which it may incur in the exercise and performance of its duties and obligations hereunder. The recitals of facts, agreements and covenants contained herein and in the Notes shall be taken as statements, agreements and covenants of the District, and the Trustee does not assume any responsibility for the correctness of the same and does not make any representation as to the sufficiency or validity hereof or of the Notes, and shall not incur any responsibility in respect thereof other than in connection with the duties and obligations expressly assigned to or imposed upon it herein or in the Notes, and shall not be liable in connection with the performance of its duties and obligations hereunder except for its own negligence or willful misconduct. The Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties and obligations hereunder, and the Trustee's rights to immunities and protection from liability hereunder and its payment of its fees and expenses shall survive its resignation or removal and the final payment or the defeasance of the Notes. The cost of printing of any Notes and any services rendered or any expenses incurred by the Trustee in connection with any exchange or transfer shall be paid by the District. SF2-37183.2 19 The Trustee will keep at its principal corporate trust office in Los Angeles or San Francisco, California, sufficient books for the registration, transfer and exchange of the Notes, which books shall at all times be open to inspection by the District during normal business hours, and upon presentation for such purpose the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or exchange the Notes on such books as hereinafter provided. Any Note may be transferred on such books by the registered owner thereof, in person or by his duly authorized attorney, upon payment by the person requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer and upon surrender of such Note for cancellation accompanied by delivery of a duly executed written instrument of transfer in a form approved by the Trustee. Whenever any Note or Notes shall be surrendered for transfer, the District shall execute and the Trustee shall authenticate and deliver a new Note or Notes of authorized denominations for a like aggregate principal amount and of the same maturity date. The District and the Trustee may deem and treat the registered owner of any Note as the absolute owner of such Note for the purpose of receiving payment thereof and for all other purposes, whether such Note shall be overdue or not, and neither the District nor the Trustee shall be affected by any notice or knowledge to the contrary received by the District or the Trustee; and payment of the interest on and principal of and redemption premium, if any, on such Note shall be made only to such registered owner as above provided, which payment shall be valid and effectual to satisfy and discharge liability on such Note to the extent of the sum or sums so paid. Any Note may be exchanged on such books by the registered owner thereof, in person or by his duly authorized attorney, upon payment by the person requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange and upon surrender of such Note for cancellation, for a like aggregate principal amount of Notes of the same maturity date of other authorized denominations. The cost of printing any new Notes shall be paid by the District. If any Note is mutilated, lost, stolen or destroyed, the District shall execute and the Trustee shall authenticate and register a new Note of the same date, maturity and denomination as that mutilated, lost, stolen or destroyed; provided, that in the case of any mutilated Note, such mutilated Note shall first be surrendered to the Trustee, and in the case of any lost, stolen or destroyed Note, there shall be first furnished to the Trustee evidence of such loss, theft or destruction which shall be satisfactory to the Trustee, together with an indemnity satisfactory to it. In the event any such Note shall have matured or been called for redemption, instead of issuing a duplicate Note, the Trustee may pay the same. The District and SF2-37183.2 20 the Trustee may charge the owner of such Note with their reasonable fees and expenses in connection with replacing any Note mutilated, lost, stolen or destroyed. The Trustee may consult with counsel (who may be counsel to the District) with regard to legal questions arising hereunder, and the opinion of such counsel shall be full and complete authorization and protection to the Trustee in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. The Trustee shall have no responsibility or liability with respect to any information, statement or recital in any official statement or other disclosure material prepared or distributed with respect to the issuance of the Notes. SECTION 8. Delivery of the Notes and Use of Depository. (a) The Secretary is directed to cause to be prepared a sufficient number of blank Notes of suitable quality and to cause the blank spaces thereof to be filled in to comply with the provisions hereof, and to procure their execution by the proper officers of the District, and to deliver them to the Treasurer, who shall safely keep the same and deliver them to the Trustee for authentication and registration after the sale thereof, and the Trustee shall deliver them to such purchaser upon receiving therefor the purchase price thereof and accrued interest thereon to the date of delivery. The President and the Secretary are further authorized and directed to make, execute and deliver to the purchaser of the Notes a signature certificate in the form customarily required by purchasers of notes of public districts certifying to the genuineness and due execution of the Notes, and the Trustee is hereby authorized and directed to make, execute and deliver to the purchaser of the Notes a receipt in the form customarily required by purchasers of notes of public districts evidencing the payment of the purchase price and the delivery of the Notes, which receipt shall be conclusive evidence that the Notes have been duly paid for and delivered. The purchaser of the Notes and any subsequent registered owner of the Notes are hereby authorized to rely upon and shall be justified in relying upon any such signature certificate and any such receipt with respect to the Notes issued and delivered pursuant to the authority hereof. (b) Notwithstanding any provision hereof to the contrary, the Notes shall be initially registered as provided in Section 3 , and registered ownership of the Notes, or any portion thereof, may not thereafter be transferred except: (i) To any successor of The Depository Trust Company or its nominee, or to any substitute depository designated pursuant to clause (ii) of this subsection (a "substitute depository") ; provided, that any successor of The Depository Trust Company or any substitute depository SF2-37183.2 21 shall be qualified under any applicable laws to provide the service proposed to be provided by it; (ii) To any substitute depository designated by the District, upon (1) the resignation of The Depository Trust Company or its successor (or any substitute depository or its successor) from its functions as depository, or (2) a determination by the District that The Depository Trust Company or its successor (or any substitute depository or its successor) is no longer able to carry out its functions as depository; provided, that any such substitute depository shall be qualified under any applicable laws to provide the services proposed to be provided by it; or To any person as provided below upon (1) the resignation of The Depository Trust Company or its successor (or any substitute depository or its successor) from its functions as depository; provided, that no substitute depository can be obtained, or (2) a determination by the District that it is in the best interests of the District to remove The Depository Trust Company or its successor (or any substitute depository or its successor) from its functions as depository. In the case of any transfer pursuant to clause (i) or clause (ii) of this subsection, upon receipt of all Outstanding Notes by the Trustee, together with a Written Order to the Trustee, a new Note shall be executed, authenticated and delivered for each maturity of the Notes then Outstanding, registered in the name of such successor or such substitute depository, or their nominees, as the case may be, all as specified in such Written Order. In the case of any transfer pursuant to clause (iii) of this subsection, upon receipt of all Outstanding Notes by the Trustee, together with a Written Order to the Trustee, new Notes shall be executed and delivered in such denominations and registered in the names of the registered owners thereof, subject to the limitations of Section 4; Provided, that the Trustee shall not be required to deliver such new Notes within a period less than sixty (60) days from the date of receipt of such Written Order, and subsequent to any transfer pursuant to clause (iii) of this subsection the Notes shall be transferred as provided in Section 7. In the case of partial redemption or an advance refunding of the Notes, The Depository Trust Company shall make an appropriate notation on the Notes indicating the date and amounts of such reduction in principal, in form acceptable to the District. The District and the Trustee shall have no responsibility for transmitting payments to, communication with, notifying, or otherwise dealing with any beneficial owners of the Notes, and neither the District nor the Trustee will have any Sn-37183.2 22 responsibility or obligations, legal or otherwise, to the beneficial owners or to any other party, including The Depository Trust Company or its successor (or any substitute depository or its successor) , except as the registered owner of a Note. So long as the Outstanding Notes are registered in the name of Cede & Co. or its registered assigns, the District and the Trustee shall cooperate with Cede & Co. , as sole registered Owner, and its registered assigns in effecting payment of the principal and redemption premiums, if any, and interest evidenced and represented by the Notes by arranging for payment in such manner that funds for such payments are properly identified and are made immediately available on the date they are due. (c) Upon the receipt of payment for the Notes when the same shall have been duly sold and delivered, the Trustee shall set aside and deposit the proceeds received from such sale in the following respective funds and in the following order of priority: (i) The Trustee shall deposit in the "Midpeninsula Regional Open Space District 1995 Promissory Note Interest and Principal Fund, " which fund the District hereby agrees and covenants to establish and maintain with the Trustee until payment in full (or provision therefor made) of all interest on and principal of and redemption premiums, if any, on the Notes, a sum of money equal to the accrued interest from the date of the Notes to the date of the payment of the purchase price thereof. (ii) The Trustee shall deposit in the "Midpeninsula Regional Open Space District 1995 Promissory Note Reserve Fund, " which fund the District hereby agrees and covenants to establish and maintain with the Trustee until payment in full (or provision therefor made) of all interest on and principal of and redemption premiums, if any, on the Notes, a sum of money equal to the Reserve Fund Requirement. (iii) The Trustee shall deposit in the "Midpeninsula Regional Open Space District 1995 Promissory Note Refunding Fund, " which fund the District hereby agrees and covenants to establish and maintain with the Trustee until 1, 1995, an amount of such proceeds which, together IW her available money transferred at the same time by the District to the Trustee in the amount of $ , will be sufficient (as determined by the District) to provide for the refunding of all outstanding Prior Notes in accordance with a Written Order delivered to the Trustee. All money in the Refunding Fund shall be transferred by the Trustee to the respective paying agents for the Prior Notes and used by such paying agents to refund the Prior Notes, in accordance with such Written order; provided, that after such transfer by the Trustee any remaining balance in the Refunding Fund SF2-37183.2 23 shall be transferred by the Trustee to the Treasurer for deposit in the Acquisition Fund. (iv) The Trustee shall transfer the remainder of the proceeds received from the sale of the Notes to the Treasurer for deposit in the "Midpeninsula Regional Open Space District 1995 Promissory Note Acquisition Fund, " which fund the District hereby covenants and agrees to establish and maintain with the Treasurer until payment of all costs of the issuance of the Notes and the payment of the costs of acquisition of the Project. All money in the Acquisition Fund shall be withdrawn therefrom solely for paying costs of the issuance of the Notes (including, but not limited to, all printing and document preparation expenses in connection with the Notes and the preliminary official statement and official statement pertaining to the Notes, rating agency fees, CUSIP Service Bureau charges, the initial fees and expenses of the Trustee, and other fees and expenses III incurred in connection with the issuance of the Notes and the acquisition of the 1995 Project) , including reimbursing the District for any such costs theretofore paid by it, except that any balance of money in the Acquisition Fund not needed or used for such purposes, after the closure of such fund, shall be transferred to the Trustee for deposit in the Interest and Principal Fund. All money in the Acquisition Fund shall, pending expenditure, be deposited or invested as determined by the Controller as permitted by law in any lawful investments of the District so as to obtain the highest yield that the Controller deems practicable, having due regard for the safety of such deposits and investments; rovided, that all such deposits and investments shall be withdrawable or shall mature, as the case may be, to coincide as nearly as practicable with the time when such money is expected to be withdrawn for use hereunder. All proceeds of such deposits or investments shall (except as otherwise provided by Section 11) be deposited as and when received in the Acquisition Fund. SECTION 9. Payment of the Notes. The Notes are limited obligations of the District, and the interest on and principal of and redemption premiums, if any, on the Notes shall, as authorized by and subject to the Law, be paid only from the Limited Taxes, or from other funds legally available therefor. The full faith and credit or taxing power of the District is not pledged for the payment of the interest on or principal of or redemption premiums, if any, on the Notes, and the Notes are not and shall not be secured by a legal or equitable pledge of, or charge, lien or encumbrance upon, any property of the District or any of its income or revenue. In order to provide for the timely payment of the interest on and principal of and redemption premiums, if any, on the Notes as the same becomes due, the District agrees and SM-37183.2 24 covenants, consistent with the foregoing and as authorized by and subject to the Law, that until the interest on and the principal of and redemption premiums, if any, on the Notes are paid in full or until there is a sum held by the Trustee set apart for that purpose sufficient to meet all payments of the interest on and principal of and redemption premiums, if any, on the Notes as they become due, it will annually set aside a portion of the Limited Taxes (or other legally available funds of the District) sufficient to pay such interest and principal and redemption premiums, if any, that will become due before the proceeds of the Limited Taxes levied at the next general tax levy will be available for such purpose. In order to implement this provision, the District further agrees and covenants that it will set aside, as soon as possible after the receipt of the Limited Taxes that become delinquent after April 10 of each year (commencing with such Limited Taxes that become delinquent after April 10, 1995) , an amount of such Limited Taxes (or other legally available funds of the District) equal to the interest that becomes due and payable on the Notes on the next succeeding September 1 plus the redemption premiums, if any, on the Notes that become due on the Notes on or prior to such date plus the principal of the Notes that becomes due and payable on the next succeeding September 1, and that it will set aside, as soon as possible after the receipt of such Limited Taxes that become delinquent after December 10 of each year (commencing with such Limited Taxes that become delinquent after December 10, 1995) , an amount of such Limited Taxes (or other legally available funds of the District) equal to the interest that becomes due and payable on the Notes on the next succeeding March 1 plus the redemption premiums, if any, on the Notes that become due on or prior to such date. All such amounts of Limited Taxes (or other legally available funds of the District) shall be transferred as soon as received by the District by the Controller to the Trustee for deposit in the Interest and Principal Fund. All money in the Interest and Principal Fund shall be used solely for the payment of the interest on and principal of and redemption premiums, if any, on the Notes; provided, that when all the interest on and principal of and redemption premiums, if any, on the Notes have been paid, any balance of money then remaining in the Interest and Principal Fund shall be transferred by the Trustee to the Controller for deposit in the General Fund. All money in the Interest and Principal Fund shall, pending its disbursement as above provided, be deposited or invested by the Trustee as directed in writing by the Controller in Federal Securities so as to obtain the highest yield that the Controller deems practicable, having due regard for the safety of such deposits and investments and subject to the provisions of Section 11; provided, that all such deposits and investments shall be withdrawable or shall mature, as the case may be, to coincide as nearly as practicable with the time when such money SF2-37183.2 25 is required to be withdrawn for use hereunder. All proceeds of such deposits or investments shall (except as otherwise provided by Section 11) be deposited as and when received in the Interest and Principal Fund. The Trustee shall not be liable or responsible for any loss suffered in connection with any such deposit or investment made by it under the terms of and in accordance with this section. The covenants and agreements set forth herein are for the equal and proportionate benefit, security and protection of all owners of the Notes and the District's outstanding 1987 Promissory Notes, 1988 Promissory Notes, 1990 Promissory Notes and 1992 Promissory Notes and certain land acquisition contracts and any additional notes which may hereafter be issued on a parity with the Notes, without preference or distinction as to security or otherwise of any such obligations over any of the other by reason of the number or date thereof or the time of sale, execution or delivery hereof. SECTION 10. Reserve Fund. The money in the Reserve Fund shall be used solely for the payment of the interest on and principal of and redemption premiums, if any, on the Notes in the event and to the extent that the District has provided to the Trustee no other money available therefor, except that (1) any money in the Reserve Fund in excess of the Reserve Fund Requirement may be withdrawn from the Reserve Fund and transferred by the Trustee to the Controller for deposit in the General Fund upon receipt by the Trustee of a Written Order, and (2) the money in the Reserve Fund may be used (together with any other money available for that purpose) for the retirement or refunding of all the Outstanding Notes. Whenever any withdrawals from the Reserve Fund reduce the balance therein below the Reserve Fund Requirementl the Reserve Fund shall be replenished to the Reserve Fund Requirement from the first available Limited Taxes (or other legally available funds of the District) , except that the District shall not be obligated to make any payments into the Reserve Fund at any time when the money contained therein and in the Interest and Principal Fund is at least equal to the principal amount of the Outstanding Notes plus the interest then due and thereafter to become due thereon. All money in the Reserve Fund shall, pending its use, be deposited or invested by the Trustee as directed in writing by the Controller in Federal Securities so as to obtain the highest yield that the Controller deems practicable, having due regard for the safety of such deposits and investments and subject to the provisions of Section 11; provided, that all such deposits and investments shall be withdrawable or shall mature, as the case may be, to coincide as nearly as practicable with the time when such money is expected to be withdrawn for use hereunder, and in any event not later than September 1, 2014. All proceeds of such deposits or investments shall (except as otherwise provided by Section 11) be deposited as and when received in the SF2-37183.2 26 Interest and Principal Fund. The Trustee shall not be liable or responsible for any loss suffered in connection with any such deposit or investment made by it under the terms of and in accordance with this section. When all the interest on and the principal of the Notes has been paid, any balance of money then remaining in the Reserve Fund shall be transferred by the Trustee to the Controller for deposit in the General Fund. SECTION 11. Tax Covenants. (a) The District will not take any action, or fail to take any action, if such action or failure to take such action would adversely affect the exclusion from gross income of the interest on the Notes pursuant to Section 103 of the Code. The District will not directly or indirectly use or make any use of the proceeds of the Notes or any other funds of the District or take or omit to take any action that would cause the Notes to be "arbitrage bonds" subject to federal income taxation by reason of Section 148 of the Code or "private activity bonds" subject to federal income taxation by reason of Section 141(a) of the Code or obligations subject to federal income taxation because they are "federally guaranteed" as provided in Section 149 (b) of the Code. The District, with respect to the proceeds of the Notes and such other funds, will comply with all requirements of such sections of the Code, and all regulations of the United States Department of the Treasury issued thereunder to the extent that such regulations are, at the time, applicable and in effect; provided, that if the District shall obtain an opinion of nationally recognized bond counsel to the effect that any action required under this section is no longer required to maintain the exclusion from gross income of the interest on the Notes pursuant to Section 103 of the Code, the District may rely conclusively on such opinion in complying with the provisions hereof; and provided further, that in the event that at any time the Board is of the opinion that for purposes of this section it is necessary to restrict or limit the yield on the investment of any moneys held by the District hereunder or otherwise, the Board shall so instruct the Controller in writing, and the Controller shall take such action as may be necessary in accordance with such instructions. (b) Without limiting the generality of the foregoing, the District will, consistent with the Tax Certificate, pay from time to time all amounts required to be rebated to the United States of America pursuant to Section 148 (f) of the Code and all regulations of the United States Department of -Treasury issued thereunder to the extent that such regulations are, at the time, applicable and in effect, which obligation shall survive payment in full or defeasance of the Notes. To that end, there is hereby established in the treasury of the District a fund to be known as the "Midpeninsula Regional Open Space District 1995 Promissory Notes Rebate Fund" to be held and administered by the Controller. The District will comply with the provisions of the Tax SF2-37193.2 27 Certificate with respect to making deposits in the Rebate Fund, and moneys held in the Rebate Fund are pledged to provide payments to the United States of America as provided herein and in the Tax Certificate and no other person shall have claim to such moneys except as provided in the Tax Certificate. SECTION 12 . General Covenants. The District agrees and covenants that, until payment in full of all the interest on and principal of and redemption premiums, if any, on the Notes (or provision satisfactory for such payment shall have been made) , it will: A. Duly and punctually pay or cause to be paid the interest on and principal of and redemption premiums, if any, on the Notes in accordance with the conditions and terms thereof and with the conditions and terms hereof. B. Incur no additional indebtedness or capital lease obligations payable from the Limited Taxes received by the District having any priority in payment to the payment of the interest on or principal of or redemption premiums, if any, on the Notes. C. Incur no additional indebtedness or capital lease obligations payable from the Limited Taxes received by the District on a parity in payment of the interest on or principal of or redemption premiums, if any, on the Notes unless it shall have first filed with the Trustee a certificate (which the Trustee shall maintain in its files, but shall have no responsibility for the review or verification thereof) executed by the Controller showing: 1. The total Limited Taxes received by the District in its most recent audited fiscal year, as shown by the most recent audited financial statement of the District, plus the total subventions in lieu of taxes received by the District from the State of California in such fiscal year; 2 . The debt service payable by the District during its next succeeding fiscal year on all indebtedness or capital lease obligations of the District that would be payable from the Limited Taxes on a parity with the Notes and the debt service that is payable on the outstanding Notes in the next succeeding fiscal year; 3 . That the total defined in subparagraph 1 above is at least one hundred twenty-five per cent (125%) of the total defined in subparagraph 2 above. D. Prepare and adopt a budget for each fiscal year, which budget shall provide for the payment of the interest and redemption premiums, if any, on and the principal of the Notes becoming due and payable in such fiscal year and for SF2-37183.2 28 appropriations of the Limited Taxes fully sufficient to make such payments. A Written Order shall be filed by the District with the Trustee within twenty (20) days of the adoption of each such budget, which order shall state that adequate provision has been made in such budget for the purposes hereof. The budgets of the District on file with the Trustee shall be open to inspection during regular business hours by any registered owner of the Notes. SECTION 13 . Discharge of Notes. (a) If the District shall pay or cause to be paid or there shall otherwise be paid to the registered owners of all outstanding Notes the interest thereon and the principal thereof and the redemption premiums, if any, thereon at the times and in the manner stipulated therein and herein, then all agreements, covenants and other obligations of the District to the registered owners of such Notes hereunder shall thereupon cease, terminate and become void and be discharged and satisfied. In such event, the Trustee shall execute and deliver to the District all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee shall pay over or deliver to the District all money or securities held by it pursuant hereto which are not required for the payment of the interest on or principal of and redemption premiums, if any, on such Notes or any outstanding fees or expenses of the Trustee. (b) Any Outstanding Notes shall on the maturity date or redemption date thereof be deemed to have been paid within the meaning of and with the effect expressed in subsection (a) of this section if there shall be on deposit with the Trustee money which is sufficient to pay the interest due on such Notes on such date and the principal and redemption premiums, if any, due on such Notes on such date. (c) Any Outstanding Notes shall prior to the maturity date or redemption date thereof be deemed to have been paid within the meaning and with the effect expressed in subsection (a) of this section if (1) in case any such Notes are to be redeemed on any date prior to their maturity date, the District shall have agreed to mail a notice of redemption to the respective registered owners of all Outstanding Notes and to those securities depositories or securities information services selected by it pursuant to Section 4, (2) there shall have been deposited with an escrow agent or the Trustee either money in an amount which shall be sufficient or Federal Securities which are not subject to redemption except by the holder thereof prior to maturity (including any Federal Securities issued or held in book-entry form on the books of the Department of the Treasury of the United States of America) or municipal obligations which have been defeased with Federal Securities and which are rated in the highest rating category either by Moody's Investors Service or Standard & Poor's Corporation the interest on and principal of SF2-37193.2 29 I which when paid will provide money which, together with the money, if any, deposited with such escrow agent or the Trustee at the same time, shall be sufficient to pay when due the interest to become due on such Notes on and prior to the maturity dates or redemption dates thereof, as the case may be, and the principal of and redemption premiums, if any, on such Notes on and prior to the maturity dates or the redemption dates thereof, as the case may be, as evidenced by a report of an independent certified public accountant or other competent verification agent appointed by the District on file with the District and the Trustee, and (3) in the event such Notes are not by their terms subject to j redemption within the next succeeding sixty (60) days, the District shall have agreed to mail a notice to the registered owners of such Notes and to those securities depositories or securities information services selected by it pursuant to I Section 4 that the deposit required by clause (2) above has been made with such escrow agent or the Trustee and that such Notes are deemed to have been paid in accordance with this section and stating the maturity dates or redemption dates, as the case may be, upon which money is to be available for the payment of the principal of and redemption premiums, if any, on such Notes. (d) Anything contained herein to the contrary notwithstanding, any money held by the Trustee in trust for the payment and discharge of any of the Notes or any interest thereon which remains unclaimed for two (2) years after the date when such Notes or interest thereon have become due and payable, either at their stated maturity dates or by call for redemption prior to maturity, if such money was held by the Trustee on such date, or for two (2) years after the date of deposit of such money if deposited with the Trustee after the date when such Notes or interest thereon became due and payable, shall be repaid by the Trustee to the District as its absolute property free from trust and for use in accordance with the Law, and the Trustee ! shall thereupon be released and discharged with respect thereto and the registered owners of such Notes shall look only to the District for the payment of such Notes and interest thereon; Provided, that before the Trustee shall be required to make any such repayment the District shall mail pursuant to Section 4 a notice to the registered owners of all Outstanding Notes that such money remains unclaimed and that after a date named in such notice, which date shall not be less than thirty (30) days after the date of the mailing of such notice, the balance of such money then unclaimed will be returned to the District. SECTION 14. Events of Default and Remedies of Registered Owners of the Notes. If any one or more of the following events (herein an "Event of Default") shall happen, i that is to say: (a) If default shall be made in the due and punctual payment of the interest on any Note when and as the same shall become due and payable; i SM37183.2 30 (b) If default shall be made in the due and punctual payment of the principal of or redemption premium, if any, on any Note when and as the same shall become due and payable; (c) If default shall be made by the District in the observance or performance of any of the other agreements, conditions, covenants or terms on its part contained herein or in the Notes, and such default shall have continued for a period of sixty (60) days after the District shall have been given notice in writing of such default by the Trustee; provided, that such default shall not constitute an Event of Default hereunder if the District shall commence to cure such default within such sixty (60) -day period and thereafter diligently and in good faith shall proceed to cure such default within a reasonable period of time; or (d) If the District shall file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law of the United States of America, or if a court of competent jurisdiction shall approve a petition, filed with or without the consent of the District, seeking reorganization under the federal bankruptcy laws or any other applicable law of the United States of America, 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 District or of the whole or any substantial part of its property; then, and in each and every such case during the continuance of such Event of Default, the Trustee may, and upon the written consent of the registered owners of not less than twenty-five per cent (25%) in aggregate principal amount of the Notes at the time outstanding, shall have the right and be entitled (for the benefit of all registered owners of the Notes similarly situated) (a) by mandamus or other suit or proceeding at law or in equity to enforce his rights against the District or any member of the Board or officer or employee of the District, and to compel the District or any such member of the Board or officer or employee to perform and carry out their duties under the Law and the agreements and covenants with the registered owners of the Notes contained herein; (b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the registered owners of the Notes; or (c) by suit in equity upon the nonpayment of the Notes to require the District or any member of the Board or officer or employee of the District to account as the trustee of an express trust. SF2-37183.2 31 Nothing in this section or in any other provision herein or in the Notes shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the interest on and principal of and redemption premiums, if any, on the Notes to the respective registered owners of the Notes at the respective dates of maturity or upon prior redemption as provided herein from the funds provided herein, or shall affect or impair the right of such registered owners, which is also absolute and unconditional, to institute suit to enforce such payment by virtue of the contract embodied herein and in the Notes. A waiver of any default or breach of duty or contract by any registered owner of any Note shall not affect any subsequent default or breach of duty or contract and shall not impair any rights or remedies on any such subsequent default or breach of duty or contract, delay or omission by any registered owner of any Note 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 and remedy conferred upon such registered owners by the Law or hereby may be enforced and exercised from time to time and as often as shall be deemed expedient by such registered owners. If any action, proceeding or suit to enforce any right or exercise any remedy is abandoned or determined adversely to any registered owner of a Note, the District and such registered owner shall be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken. No remedy herein conferred upon or reserved to the registered owners of the Notes is intended to be exclusive of any other remedy, and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at 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. SECTION 15. Amendment or Supplement of the Indenture. The Indenture and the rights and obligations of the District and of the registered owners of the Notes may be amended or supplemented at any time by the execution and delivery of a Supplemental Indenture by the District and the Trustee, which Supplemental Indenture shall become binding when the written consents of the registered owners of sixty per cent (60%) or more in aggregate principal amount of the Notes then Outstanding (exclusive of Notes disqualified as provided herein) are filed with the Trustee. No such amendment or supplement shall (1) extend the maturity of or reduce the interest rate on or otherwise alter or impair the obligation of the District to pay SM-37183.2 32 the interest on or principal of or redemption premium, if any, on any Note at the time and place and at the rate and in the currency and from the funds provided herein without the express written consent of the registered owner of such Note, or (2) permit the issuance by the District of any obligations payable from the proceeds of the Limited Taxes other than as provided herein, or jeopardize the ability of the District to levy and collect the Limited Taxes, or (3) reduce the percentage of Notes required for the written consent to any such amendment or supplement, or (4) modify any rights or obligations of the Trustee without its prior written assent thereto. The Indenture and the rights and obligations of the District and of the registered owners of the Notes may also be amended or supplemented at any time by the execution and delivery of a Supplemental Indenture by the District and the Trustee, which Supplemental Indenture shall become binding upon execution without the prior written consent of any registered owners of the Notes, but only to the extent permitted by law and after receiving an approving opinion of Counsel and only for any one or more of the following purposes (a) To add to the agreements and covenants required herein to be performed by the District other agreements and covenants thereafter to be performed by the District which shall not (in the opinion of the District) adversely affect the interests of the registered owners of the Notes, or to surrender any right or power reserved herein to or conferred herein upon the District which shall not (in the opinion of the District) adversely affect the interests of the registered owners of the Notes; (b) To make such provisions for the purpose of curing any ambiguity or of curing, correcting or supplementing any defective provision contained herein or in regard to questions arising hereunder which the District may deem desirable or necessary and not inconsistent herewith and which shall not (in the opinion of the District) adversely affect the interests of the registered owners of the Notes; (c) To make such additions, deletions or modifications as may be necessary or appropriate to insure compliance with Section 148 (f) of the Code relating to the required rebate of excess investment earnings to the United States of America, or otherwise as may be necessary to insure exclusion from gross income for purposes of federal income taxation of the interest on the Notes; or (d) To make such additions, deletions or modifications as may be necessary or appropriate to maintain any then current rating by either Moody's Investors Service or Standard & Poor's Corporation on the Notes. SF2-37183.2 33 Notes owned or held for the account of the District shall not be deemed Outstanding for the purpose of any consent or other action or any calculation of Outstanding Notes provided for in this section and shall not be entitled to consent to or take any other action provided for in this section. After the effective date of any action taken as hereinabove provided, the District may determine that the Notes may bear a notation by endorsement in form approved by it as to such action, and in that case upon demand of the registered owner of any Note Outstanding on such effective date and presentation of his Note for such purpose at the principal corporate trust office of the Trustee in San Francisco, California, a suitable notation as to such action shall be made on such Note. If the District shall so determine, new Notes so modified as, in the opinion of the District, shall be necessary to conform to such action shall be prepared and executed, and in that case upon demand of the registered owner of any Note Outstanding on such effective date such new Notes shall, upon surrender of such Outstanding Notes, be exchanged at the principal corporate trust office of the Trustee in San Francisco, California, without cost to each registered owner for Notes then outstanding. The provisions of this section shall not prevent any registered owner of the Notes from accepting any amendment or supplement as to any particular Notes held by such registered owner; provided, that due notation thereof is made on such Notes. SECTION 16. Benefits of the Indenture Limited to Certain Parties, Successor is Deemed Included in All References to Predecessor. Nothing contained herein, express or implied, is intended to give to any person other than the District, the Board, the Trustee and the registered owners of the Notes any right, remedy or claim under or by reason hereof, and any agreement or covenant required herein to be performed by or on behalf of the District or the Board or any officer or employee thereof shall be for the sole and exclusive benefit of the Trustee and the registered owners of the Notes. Whenever either the District or the Board or any officer or employee thereof is named or referred to herein, such reference shall be deemed to include the successor to the powers, duties and functions with respect to the administration, control and management of the affairs of the District that are presently vested in the District or the Board or such officer or employee, and all agreements and covenants required herein to be performed by or on behalf of the District or the Board or any officer or employee thereof shall bind and inure to the benefit of the respective successors thereof whether so expressed or not. SECTION 17. Partial Invalidity. If any one or more of the agreements, conditions, covenants or terms or portions thereof required hereby to be observed or performed by the District or the Board or any officer or employee thereof or the SF2-37183.2 34 i Trustee should be contrary to law, then such agreement or agreements, such condition or conditions, such covenant or covenants or such term or terms or such portions thereof shall be null and void and shall be deemed separable from the remaining agreements, conditions, covenants or terms or portions thereof and shall in no way affect the validity hereof or of the Notes; and the registered owners of the Notes shall retain all the rights and benefits accorded to them under the Law or any other applicable provisions of law. The District hereby declares that it would have executed the Indenture and each and every other article, section, paragraph, subdivision, sentence, clause and phrase hereof and would have authorized the issuance of the Notes pursuant hereto irrespective of the fact that any one or more of the articles, sections, paragraphs, subdivisions, sentences, clauses or phrases hereof or the application thereof to any person or circumstance may be held to be unconstitutional, unenforceable or invalid. SECTION 18. Effective Date of the Indenture. The Indenture shall take effect from and after its execution and delivery. SF2-37183.2 35 IN WITNESS WHEREOF the P Mid peninsula Regional Open P g Space District has caused the Indenture to be signed in its name by its President and its seal to be hereunto affixed and to be attested by its Secretary, and First Interstate Bank of California, as Trustee, in token of its acceptance of the trusts created hereunder, has caused the Indenture to be signed in its corporate name by its officer thereunto duly authorized, all as of the date and year first above written. MIDPENINSULA REGIONAL OPEN SPACE DISTRICT By President of the Board of Directors [SEAL] ATTEST: i Secretary of the Board of Directors FIRST INTERSTATE BANK OF CALIFORNIA, as Trustee By Authorized Officer I SF2-37183.2 36 F-I __ EXHIBIT A I [TO COME] I 11 i i SF2-37193.2 A-1 $15,000,000* PURCHASE CONTRACT Midpeninsula Regional Open Space District 1995 Promissory Notes THIS AGREEMENT, is made and entered into as of this th day of December 1994, by and between the MIDPENINSULA REGIONAL OPEN SPACE DISTRICT, duly organized and existing under the laws of the State of California(the "District") and Stone & Youngberg, (the "Underwriter"); WIINESSEIR : WHEREAS,the District wishes to undertake the financing of land and the refinancing of prior debt. The District is authorized pursuant to the laws of the State of California to cause the sale of notes for such purposes; and WHEREAS,the District desires to cause the sale and the Underwriter desires to buy and offer to the public such notes; NOW,THEREFORE, in consideration of the promises and the mutual covenants contained herein, the parties hereto hereby agree as follows: Section 1. Obligation to Purchase. The Underwriter agrees to purchase and the District agrees to deliver$15,000,000* aggregate principal amount of 1995 Promissory Notes, dated January 1, 1995 (the "Notes") in the annual principal amounts, at the annual interest rates, and at the prices set forth in Exhibit A, incorporated herein by reference, and as described in the Indenture of Trust relating to the Notes between the District and the Trustee executed and entered into as of January 1, 1995 (the "Indenture") and the Preliminary Official Statement dated December_, 1994, as amended and supplemented by the Final Official Statement, relating to the Notes, including the Appendices thereto (the "Official Statement") subject to the conditions set forth in this Purchase Contract. The Underwriter will not be under any obligation under this Purchase Contract to purchase less than all of the Notes. Section 2 Purchase Price. The purchase price of the Notes will be $ plus accrued interest on the Notes from January 1, 1995, to the date of delivery thereof. Such purchase price is based on the par amount of Notes less an Underwriter's discount of $ and less an original issue discount to investors of$ The good faith check in the amount of$50,000, which has been tendered herewith to the District, wil'I be returned to the Underwriter at the Closing. In the event that the Underwriter terminates this Purchase Contract pursuant to Section 7 hereof, the District will return such good faith check to the Underwriter. In the event the Underwriter fails(other than for a reason permitted hereunder)to accept delivery and pay for the Notes as herein provided, such check will be Preliminary, subject to change. retained by the District as and for full liquidated damages for such failure and for any default hereunder on the part of the Underwriter and neither party hereto will have any further rights against the other hereunder. Section 3. Delivery of and Payment for the Notes. The Closing will take place on January 19, 1995 in San Francisco, California, or at such other time and place as may be mutually agreeable to the District and the Underwriter. At the Closing, the Trustee will deliver or cause to be delivered to the Underwriter the Notes in book-entry only form together with the other documents hereinafter mentioned,against delivery of federal funds to the order of the District in the amount of the purchase price, plus accrued interest with respect to the Notes from January 1, 1995 to the date of delivery. Section 4. The Notes. The Notes will be delivered under the provisions of the Indenture. The Notes will be in book-entry only form, in denominations of five thousand dollars ($5,000) or in integral multiples thereof Section 5. Representations and Warranties of the District. The District represents and warrants to the Underwriter that: (1) The District is duly organized and existing under and by virtue of the laws of the State of California and has all necessary power and authority to enter into this Purchase Contract. (2) To the best knowledge of the District, the execution and delivery of this Purchase Contract, the Indenture and compliance with the provisions thereof, will not conflict with, or constitute a breach of or default under, the District's duties under said documents or any law, administrative regulation, court decree, resolution, charter, bylaws or other agreement to which the District is subject to or by which it is bound. (3) To the best knowledge of the District, there is no action, suit, proceeding or investigation at law or in equity before or by any court or governmental agency or body pending or threatened against the District to restrain or enjoin the delivery of the Notes, or in any way contesting or affecting the validity of this Purchase Contract, the Indenture, the Notes or contesting the powers of the District to enter into or perform its obligations under any of the foregoing to which it is a party. (4) The information contained in the Preliminary Official Statement dated December—, 1994 is true and correct in all material respects and such information does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Section 6. Conditions Precedent to Closing. Conditions precedent to the Closing (to be satisfied in form and substance satisfactory to the Underwriters) are as follows: (1) Delivery of the Notes, the Indenture, and this Purchase Contract in form and substance acceptable to Orrick, Herrington& Sutcliffe ("Bond Counsel"). -2- (2) Opinion, dated the date of Closing, of Bond Counsel, that interest with respect to the Notes will be excluded from gross income for the purposes of income taxation by the United States of America and will be exempt from personal income taxation imposed by the State of California. (3) Opinion of the District's Counsel dated the date of Closing as to the due authorization, execution and delivery by the District of the Indenture, and this Purchase Contract and as to the legal, valid and binding nature thereof. (4) Such other Notes, instruments or opinions as the Underwriter may deem necessary or desirable to evidence the due authorization, authentication and delivery of documents pertaining to this transaction and the legal, valid and binding nature thereof, as well as compliance with all parties with the terms and conditions hereof. Section 7. Events Permitting the Underwriters to Terminate. The Underwriter may terminate its obligation to purchase the Notes at any time before Closing if any of the following occurs: (1) Any legislative, executive or regulatory action or any court decision, which, in the judgment of the Underwriter, casts sufficient doubt on the legality of or the tax-exempt status of interest on obligations such as the Notes so as materially to impair the marketability or to reduce the market price of such obligations; (2) Any action by the Securities and Exchange Commission or a court which would require registration of the Notes under the Securities Act of 1933, as amended, in connection with the public offering thereof, (3) Any restriction or trading in securities, or any banking moratorium, or the inception or escalation of any war or major military hostilities which, in the judgment of the Underwriter, substantially impairs the ability of the Underwriter to market the Notes; or (4) Any event or condition which, in the judgment of the Underwriter, renders untrue or incorrect, in any material respect as of the time to which the same purports to relate, the information, including the financial statements, contained in the Official Statement, or which requires that information not reflected in such Official Statement should be reflected therein in order to make the statements and information contained therein not misleading in any material respect as of such time. -3- (5) Any threatened or pending litigation that, in the opinion of the Underwriter affects the marketability of the Notes or their validity. (6) Any conditions as set forth in Section 6 (Conditions Precedent to Closing) are not met to the satisfaction of the Underwriter. Section 8. Fees and Expenses. The Underwriter will pay the costs and expenses incurred in connection with this financing including advertising and selling expenses. The District will pay all other costs in connection with the sale and delivery of the Notes, including the cost of printing or reproducing the Preliminary Official Statement, the Final Official Statement and the Notes, the fees of the Trustee, the fees and disbursements of Bond Counsel, the rating agency fees, insurance premiums, and the fees and disbursements of any other experts or consultants retained by the District. Section 9. Notices. Any notices to be given to the Underwriter will be given in writing to Stone & Youngberg, 50 California Street, 35th Floor, San Francisco, California 94111. Any notices to be given to the District will be given in writing to the Midpeninsula Regional Open Space District, 330 Distel Circle, Los Altos, CA 94022, Attn: L. Craig Britton, General Manager. Section 10. No Assignment. This Purchase Contract has been entered into by the District, and the Underwriter, and their successors or assigns and no person other than the foregoing will acquire or have any right under or by virtue of this Purchase Contract. All of the representations, warranties and agreements contained in this Purchase Contract will survive the delivery of and payment of the Notes and any termination thereof. Section 11. Applicable Law. This Purchase Contract will be interpreted, governed and enforced in accordance with the laws of the State of California. Section 12. Severability. In the event any provision of this Purchase Contract will be held invalid or unenforceable by any court of competent jurisdiction, such holding will not invalidate or render unenforceable any other provision hereof. MIDPENINSULA REGIONAL STONE& YOUNGBERG OPEN SPACE DISTRICT By: By: Partner Title: [SF943010.010] -4- i a I EXHIBIT A MIDPENINSULA REGIONAL OPEN SPACE DISTRICT 1995 Promissory Notes Maturity Date Principal Amount Interest Rate Price 9/1/97 9/1/98 9/1/99 9/1/00 9/1/01 9/1/02 9/1/03 9/1/04 9/1/OS 9/1/06 9/1/07 9/1/08 9/1/09 9/1/10 9/1/11 9/1/12 9/1/13 9/1/14 [To be completed at pricing] I A-1 Q PRET (ARY OFFICIAL STATEMENT DATED 1994 NEW ISSUE—FULL BOOK-EN-_.i RATING: Standard & Poor's: ►- X (See "RATING" herein.) In the opinion of Orrick, Herrington&Sutchfje, Bond Counsel, based on existing laws, regulations, rulings and court decisions and ei it assuming, among other matters, compliance with certain covenants, interest on the 1995 Notes is excluded from gross income for federal Hincome tax purposes and is exempt from State of California personal income taxes. In the opinion of Bond Counsel, interest on the 1995 oNotes is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes,although Bond Counsel $, 3 observes that is included in adjusted current earnings in calculating federal corporate alternative minimum taxable income. Bond Counsel _lw= expresses no opinion regarding other federal or state income tax consequences relating to the ownership or disposition of, or the accrual or a receipt of interest on, the 1995 Notes. See "TAX MATTERS"herein. $1590009000* MIDPENINSULA REGIONAL OPEN SPACE DISTRICT 1995 PROMISSORY NOTES o (Santa Clara and San Mateo Counties, California) V �i o` Dated:January 1, 1"5 Due: September 1, as shown below This cover page contains certain information for general reference only.It is not a summary of this issue.Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision. w The District's 1995 Promissory Notes(the"1995 Notes")are being issued for the purposes of acquiring land and facilities within y r 50 the District to preserve and use as open space,to refund Notes issued in 1987,to advance refund a portion of Notes issued in 1990,to fund a reserve fund and to pay costs of issuance of the 1995 Notes. o `o The 1995 Notes will bear interest payable semiannually on March 1 and September 1 of each year commencing September 1, 1995. 99 to will be initially delivered only in book-entry form registered to Cede&Co.as nominee of The Depository Trust _C The 1 5 Notes vs Y Y rY � 8 Po rY a Company("DTC").Principal of the 1995 Notes will be payable at the principal corporate trust office of the Trustee,First Interstate g .71 g I Bank of California,in California,to DTC,which will in turn remit such principal or redemption price and interest to the Ca DTC participants,which will in turn remit such principal or redemption price and interest to the Beneficial Owners of the 1995 Notes, 0 as described herein. DTC will act as securities depository for the 1995 Notes. Individual purchases will be made in book-entry only form in the principal amount of $5,000 or integral multiples thereof. Purchasers of the 1995 Notes will not receive instruments 15 representing their interests in the 1995 Notes purchased.See"THE 1995 NOTES—Description of the 1995 Notes"and"—Book- °" ° Entry Only System." The 1995 Notes maturing on or after September 1,2005,are subject to optional redemption prior to maturity on any interest y H payment date on or after September 1,2004,in whole or in part in any manner determined by the District and by lot within any one `o maturity, at the prices described herein. See"THE 1995 NOTES—Optional Redemption" herein. The 1995 Notes are limited obligations of the District payable from limited ad valorem property taxes levied upon all taxable V eg property within the District by the Board of Supervisors of Santa Clara County and by the Board of Supervisors of San Mateo County �+ = and allocated to the District under applicable law,and from any other funds legally available therefor.The 1995 Notes are payable on a o parity with the District's outstanding 1988 Notes,1990 Notes and 1992 Notes left outstanding after this partial advance refunding,and 8 certain land purchase contracts,as more fully described herein.The full faith and credit or taxing power of the District is not pledged for the payment of the 1995 Notes, and the 1995 Notes are not secured by a legal or equitable pledge of, or charge, lien or encumbrance on,any property of the District or any of its income or revenue.The 1995 Notes are not a debt of the State of California e u or any of its political subdivisions,other than the District,and neither the State nor any of its political subdivisions,other than the oo District,is liable therefor,nor in any event will the 1995 Notes be payable out of any funds or properties other than those of the District •v v as set forth in the Indenture for the 1995 Notes. MATURITY SCHEDULE* `pp9 pp e Interest Yield or Interest Yield or Q ` c Due Sept. 1 Principal Rate Price Due Sept. 1 Principal Rate Price R 1997 $ % % 2006 $ % % a 0 1998 2007 1999 2008 •_' 2000 2009 2001 2010 e° 2002 2011 •o H 2O03 2012 �= a 2004 2013 r' w 'r 2005 2014 (Plus Accrued Interest,If Any) O 3 v The 1995 Notes are offered when,as,and if issued,subject to the approval of legality by Orrick,Herrington&Sutcliffe,San Francisco, ' California. Certain legal matters will be passed upon for the District by its General Counsel. It is expected that the 1995 Notes will be a c available for delivery to DTC in New York, New York on or about January 19. 1995. y ° Stone & Youngberg L � y a � o r :. A • Preliminary, subject to change. [S&Y DOC SF942770.011 DATED 12/06/94] MIDPENINSULA REGIONAL OPEN SPACE DISTRICT Santa Clara and San Mateo Counties, California Board of Directors Virginia Babbitt, Mountain View- President Peter W. Siemens, Los Gatos - Vice President Robert J. McKibbin, Cupertino - Treasurer Ernestine U. Henshaw, Sunnyvale - Secretary Elizabeth S. Crowder, Portola Valley - Director Wim de Wit, San Carlos - Director Nonette G. Hanko, Palo Alto - Director District Staff L. Craig Britton, General Manager Michael L. Foster, Controller Susan Schectman, General Counsel SPECIAL SERVICES Bond Counsel Orrick, Herrington& Sutcliffe San Francisco, California Trustee First Interstate Bank of California San Francisco, California [S&Y DOC SF942770.011 DATED 12/06/94] No dealer, broker, salesperson or other person has been authorized by the District or the Underwriter to give or to make any representations other than those contained herein and, if given or made, such other information or representation must not be relied upon as having been authorized by the District or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor will there be any sale of the 1995 Notes by any person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers of the 1995 Notes. Statements contained in this Official Statement which involve estimates, forecasts, projections 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. The information set forth herein has been obtained from the District and from other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Underwriter. The information and expressions of opinion herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder will, under any circumstances, create any implication that there has been no change in the affairs of the District or the Counties since the date hereof. All of the summaries contained herein of the authorizing indenture and other documents referred to herein are made subject to the provisions of such documents respectively, and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the District for further information in connection therewith. All capitalized terms used herein and not normally capitalized have the meanings assigned to them in the Indenture (as defined herein), unless otherwise stated in this Official Statement. IN CONNECTION WITH THIS OFFICIAL STATEMENT, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE AND MAINTAIN THE MARKET PRICE OF THE 1995 NOTES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. [S&Y DOC SF942770.011 DATED 12/06/941 TABLE OF CONTENTS INTRODUCTION.................................................................................................... I THE1995 NOTES ................................................................................................... 3 THEREFUNDING PLAN ......................................................................................... 8 SECURITY AND SOURCE OF PAYMENTS.................................................................. 9 THEINDENTURE .................................................................................................. I I THEPROJECT....................................................................................................... 15 THEDISTRICT...................................................................................................... 15 ESTIMATED TAX REVENUES AND NOTE RETIREMENT.............................................. 18 DISTRICT FINANCIAL INFORMATION...................................................................... 27 CONSTITUTIONAL AND STATUTORY TAX LIMITATIONS ........................................... 32 LEGAL................................................................................................................. 33 TAXMATTERS ..................................................................................................... 33 LEGALITY FOR INVESTMENT................................................................................. 34 RATING............................................................................................................... 34 LITIGATION ................................... ..................................................................... 35 UNDERWRITING ................................................................................................... 35 AVAILABILITY OF DOCUMENTS............................................................................. 35 MISCELLANEOUS ................................................................................................1 36 APPENDIX A - DISTRICT'S AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 1994 ....... ...................................................................... A-1 APPENDIX B - GENERAL AND ECONOMIC INFORMATION SANTA CLARA COUNTY AND SAN MATEO COUNTY...................................................................... B-1 APPENDIX C - FORM OF BOND COUNSEL'S OPINION................................................. C-1 [S&Y DOC SF942770.011 DATED 12/06/94] $15,000,000- MIDPENINSULA REGIONAL OPEN SPACE DISTRICT 1995 PROMISSORY NOTES (Santa Clara and San Mateo Counties, California) INTRODUCTION This Official Statement, including the cover page and the appendices hereto (the "Official Statement") is provided to furnish information in connection with sale of the $15,000,000* aggregate principal amount of Midpeninsula Regional Open Space District 1995 Promissory Notes (the "1995 Notes") being issued pursuant to an Indenture of Trust dated as of January 1, 1995 (the "Indenture"). The 1995 Notes are being issued in book-entry only form in accordance with the provisions of Article 3 of Chapter 3 of Division 5 of the Public Resources Code of the State of California, as amended and supplemented (the "Law"), for the purposes of acquiring land and facilities to preserve and use as open space, refunding Notes issued in 1987, advance refunding in part Notes issued in 1990, funding a reserve fund and paying costs of issuance of the 1995 Notes. The Midpeninsula Regional Open Space District (the "District"), which was established by the voters in 1972, includes approximately 330 square miles of land within Santa Clara County and San Mateo County (collectively, the "Counties") on the peninsula south of San Francisco, California, plus approximately 1.2 square miles of land in Santa Cruz County. The 1994 population of the District is approximately 621,600. District policies are the responsibility of a seven member Board of Directors elected from seven wards within the District. The 1995 Notes are limited obligations of the District payable from limited ad valorem property taxes levied upon all taxable property within the District by the Board of Supervisors of Santa Clara County and by the Board of Supervisors of San Mateo County and allocated to the District under applicable law (sometimes herein referred to as "Limited Taxes"), and from any other funds legally available therefor. Although a portion of the District lies in Santa Cruz County, no property taxes are levied and collected for the District by the Board of Supervisors of Santa Cruz County. The full faith and credit or taxing power of the District is not pledged for the payment of the 1995 Notes, and the 1995 Notes are not secured by a legal or equitable pledge of, or charge, lien or encumbrance on, any property of the District or any of its income or revenue. The 1995 Notes will be secured on a parity with the District's $11,800,000 outstanding principal amount of 1988 Promissory Notes (the "1988 Notes"), $11,500,000 outstanding principal amount of 1990 Promissory Notes (the 1990 Notes"), and the $8,000,000 outstanding principal amount of 1992 Promissory Notes (the 1992 Notes") (such 1988 Notes, 1990 Notes, 1992 Notes and the 1995 Notes being herein referred to as the "Notes"). The 1995 Notes will also be secured on a parity with certain land purchase contracts of the District in the outstanding principal amount of $57,700 as of December 31, 1994 (the "Parity Land Contracts" and together with the Notes, the *Preliminary, subject to change. -I- [S&Y DOC SF942770.011 DATED 12106/94] "Parity Debt"). In addition, the District has outstanding other obligations payable from its legally available funds and the District intends to issue additional obligations on a parity with the Notes upon the satisfaction of certain conditions precedent set forth in the Indenture. See "SECURITY AND SOURCE OF PAYMENT," "THE INDENTURE" and "DISTRICT FINANCIAL INFORMATION" herein. The District has projected that, during the fiscal year 1995-96, total revenues available to pay debt service on the Notes and other obligations is estimated by the District to be approximately 3.13 times 1995-96 debt service on the District's outstanding Notes, Parity Land Contracts and other obligations following the issuance of the 1995 Notes. See "ESTIMATED TAX REVENUES AND NOTE RETIREMENT" herein for further information regarding the District's outstanding indebtedness and the assumptions underlying the District's revenue projections. See also "DISTRICT FINANCIAL INFORMATION -- Other Outstanding Debt." The amount of property tax revenues allocated to the District is primarily a function of the assessed value of properties in the tax code areas comprising the District, the rates at which such properties are taxed by the Counties and the allocation formula applied to property tax revenues. The reduction of assessed values of taxable property in the District caused by economic factors beyond the District's control, or the complete or partial destruction of such property, or a change in the property tax rates or in the property tax allocation formula established by California law could cause a reduction in the tax revenues of the District. Such reduction of tax revenues could have an adverse effect on the District's ability to make timely payments of principal of, redemption premium, if any, and interest on the Notes. Likewise, delinquencies in the payment of property taxes could have an adverse effect on the District's ability to make timely debt service payments. With the exception of the audited financial statements of the District for the year ended March 31, 1994 contained in Appendix A, the financial and statistical information contained herein has been obtained from the records of the District and from certain other sources and such financial information has not been audited or reviewed by the independent auditors for the District. There is no assurance that the numbers contained in the financial projections contained herein will be met, or that the assumptions on which such projections were made will conform to actual experience. If actual experience should deviate significantly from the assumptions upon which such projections were made, the moneys available to the District for the payment of the principal of, redemption premium, if any, and interest on the 1995 Notes may be insufficient to make such payments. -2- [S&Y DOC SF942770.011 DATED 12/06/94] THE 1995 NOTES Authority for Issuance The issuance of the 1995 Notes by the District is authorized pursuant to the Law and the Indenture. Section 5544.2 of the Law provides, in part, that the District may incur indebtedness, whether by borrowing money or by purchasing on contract, to acquire necessary and proper land and facilities. The amount of such indebtedness incurred may not exceed an amount equal to the anticipated tax income of the District over the next five-year period. Following the issuance of the 1995 Notes, the outstanding indebtedness of the District under Section 5544.2 of the Law will represent approximately 83% of the Limited Taxes anticipated to be received by the District from April 1, 1995 through March 31, 2000. Description of the 1995 Notes The 1995 Notes will bear interest payable semiannually on March I and September I of each year commencing September 1, 1995 at the rates per annum and will mature on the dates and in the principal amounts shown on the cover page of this Official Statement. The 1995 Notes will be issued in book-entry only form, in the denomination of$5,000 or any integral multiple thereof. The 1995 Notes will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, and will be evidenced by one 1995 Note maturing on each maturity date set forth on the cover of this Official Statement. Principal of the 1995 Notes and interest due at maturity or upon prior redemption will be payable upon surrender of the 1995 Notes only at the principal corporate trust office of First Interstate Bank of California (the "Trustee") in San Francisco, California. Payment of interest on the 1995 Notes, except at maturity or upon prior redemption, will be made by check mailed on each interest payment date to the registered owner as its name and address appear at the close of business on the fifteenth day of the month next preceding each interest payment date in the register kept by the Trustee as registrar for the District except that in the case of a registered owner of$1,000,000 or more in principal amount of Notes outstanding, payment will be made at such owner's option by wire transfer of immediately available funds according to written instructions provided by such owner to the Trustee at least 15 days before such interest payment date). See "Book-Entry Only System" below. Optional Redemption The 1995 Notes maturing by their terms on or after September 1, 2005, are subject to optional redemption by the District on any interest payment date on or after September 1, 2004, and prior to their respective maturity dates, as a whole, or in part in integral multiples of five, thousand dollars ($5,000) in any manner determined by the District (and by lot within any one maturity if less than all the 1995 Notes of any one maturity are redeemed), from any legally -3- [S&Y DOC SF942770.011 DATED 12/06/94] available funds of the District, upon mailed notice as hereinafter provided, at a redemption price equal to the following amount expressed as a percentage of the principal amount of the 1995 Notes or the portions thereof called for redemption, together with accrued interest thereon to the date of redemption, namely: Dates Price September 1,2004 102.0% March 1,2005 101.0 September 1,2005 and thereafter 100.0 Notice of Redemption The Indenture requires the Trustee to give mailed notice of redemption of any 1995 Notes to the registered owners of the Notes called in whole or in part and to various securities depositories and securities information services at least thirty, but not more than sixty, days prior to the redemption date; provided, that neither failure to receive any such notice nor any material defect contained therein will affect the redemption of such 1995 Notes. So long as the Book-Entry system is used for the 1995 Notes, the Trustee will give any notice of redemption or any other notices required to be given to Owners only to DTC. Any failure of DTC to advise any DTC Participant (as defined herein), or of any DTC Participant to notify the Beneficial Owner (as defined herein), of any such notice and its content or effect will not affect the validity of the redemption of the 1995 Notes called for redemption or any other action premised on such notice. Beneficial Owners may desire to make arrangements with a DTC Participant so that all notices of redemption or other communications to DTC which affect such Beneficial Owners, including notification of all interest payments, will be forwarded in writing by such DTC Participant. See "THE 1995 NOTES -- Book-Entry Only System" herein. Note Transfer and Exchange The 1995 Notes are transferable by the registered owner thereof, in person or by duly authorized attorney, at the principal corporate trust office of the Trustee in San Francisco, California, upon surrender thereof for cancellation accompanied by a duly executed written instrument of transfer on a form approved by the Trustee, and thereupon a new 1995 Note or 1995 Notes will be issued to the transferee in exchange therefor, in the manner, subject to the conditions and upon payment of any tax or governmental charge required to be paid with respect to such transfer as set forth in the Indenture. -4- [S&Y DOC SF942770.01 1 DATED 12/06/94] Book-Entry Only System DTC will act as securities depository for the 1995 Notes. The 1995 Notes will be executed and delivered as fully-registered notes registered in the name of Cede & Co. (DTC's partnership nominee). One fully-registered note will be executed and delivered for each maturity of the 1995 Notes, each in the aggregate principal amount due on such maturity date, and will be deposited with DTC. The following information has been provided by DTC and the District makes no representation as to its accuracy or completeness. For further information, DTC may be contacted in New York,New York. DTC is a limited purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants ("DTC Participants") deposit with DTC. DTC also facilitates the settlement among DTC Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in DTC Participants' accounts, thereby eliminating the need for physical movement of securities certificates. "Direct Participants" include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The Rules applicable to DTC and its participants are on file with the Securities and Exchange Commission. Purchases of 1995 Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the 1995 Notes on DTC's records. The ownership interest of each actual purchaser of each 1995 Note ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the 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 1995 Notes are to be accomplished by entries made on the books of DTC Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive 1995 Notes representing their ownership interests, except in the event that use of the book-entry system for the 1995 Notes is discontinued. To facilitate subsequent transfers, all 1995 Notes deposited by DTC Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of 1995 Notes with DTC and their registration in the name of Cede & Co. effect no change in beneficial -5- I [S&Y DOC SF942770.411 DATED 12/06/94] ownership. DTC has no knowledge of the actual Beneficial Owners of the 1995 Notes; DTC's records reflect only the identity of the Direct Participants to whose accounts such 1995 Notes are credited, which may or may not be the Beneficial Owners. The DTC Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Neither DTC nor Cede & Co. will consent or vote with respect to the 1995 Notes. Under its usual procedures, DTC mails an Omnibus Proxy to the issuer of the securities 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 1995 Notes are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments and premium, if any, with respect to the 1995 Notes will be made to DTC. DTC's practice is to credit Direct Participants' accounts on the payable date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on the payable date. Payments by DTC 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 registered in "street name," and will be the responsibility of such DTC Participant and not of DTC, the Trustee or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the 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. DTC may discontinue providing its services as securities depository with respect to the 1995 Notes at any time by giving reasonable notice to the Trustee and the District. Under such circumstances, in the event that a successor securities depository is not obtained, physical notes are required to be printed and delivered as described in the Indenture. In the event the District and the Trustee determine not to continue the DTC book-entry only system or DTC determines to discontinue its services with respect to the 1995 Notes and the District does not select another qualified securities depository, the District will deliver one or more 1995 Notes in such principal amount or amounts, in authorized denominations, and registered in whatever name or names, as DTC will designate. In such event, transfers and exchanges of 1995 Notes will be governed by the provisions of the Indenture. AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE 1995 NOTES, THE TRUSTEE WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO HOLDERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL -6- [S&Y DOC SF942770,01 1 DATED 12/06/94] OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OR SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE 1995 NOTES CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. THE DISTRICT, THE TRUSTEE AND THE UNDERWRITER HAVE NO RESPONSIBILITY OR LIABILITY FOR ANY ASPECTS OF THE RECORDS RELATING TO OR PAYMENTS MADE ON ACCOUNT OF BENEFICIAL OWNERSHIP, OR FOR MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS RELATING TO BENEFICIAL OWNERSHIP OF INTERESTS IN THE 1995 NOTES. THE DISTRICT, THE TRUSTEE AND THE UNDERWRITER CANNOT AND DO NOT GIVE ANY ASSURANCES THAT DTC WILL DISTRIBUTE PAYMENTS TO DTC PARTICIPANTS OR THAT DTC PARTICIPANTS OR OTHERS WILL DISTRIBUTE PAYMENTS WITH RESPECT TO THE 1995 NOTES RECEIVED BY DTC OR ITS NOMINEES AS THE HOLDER OR ANY REDEMPTION NOTICES OR OTHER NOTICES TO THE BENEFICIAL HOLDERS, 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. The foregoing description of the procedures and record keeping with respect to beneficial ownership interests in the 1995 Notes, payment of principal, redemption premium, if any, and interest with respect to the 1995 Notes to DTC, DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the 1995 Notes and other related transactions by and between DTC, DTC Participants and the Beneficial Owners is based solely on the District's and the Trustee's understanding of such procedures and record keeping from information provided by DTC. Accordingly, no representations can be made concerning these matters and neither DTC, DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or DTC Participants, as the case may be. The District and the Trustee understand that the current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and that the current "Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC. -7- I [S&Y DOC SF942770.011 DATED 12/06/94] THE REFUNDING PLAN The District plans to apply proceeds of the 1995 Notes made available to it for the purposes of (i) acquiring land and facilities to preserve and use as open space, (ii) refunding Notes issued in 1987, (iii) advance refunding a portion of Notes issued in 1990, (iv) funding a reserve fund and(v) paying the costs of issuance of the 1995 Notes. The 1987 Notes were issued in March 1987 in the aggregate principal amount of $21,200,000 to legally defease certain outstanding promissory notes of the District, prepay land contract debt, and to finance the acquisition of land and facilities to preserve and use as open space. A portion of the 1987 Notes were economically defeased as part of the 1990 Note issue. The principal amount of the 1987 Notes remaining as of December 31, 1994 is $5,901,194, all of which will be defeased by the 1995 Notes. The 1990 Notes were issued in September 1990 in the aggregate principal amount of $15,000,000 to refund a portion of the 1987 Notes and to finance the acquisition of open space lands. The principal of the 1990 Notes which is legally defeasable is $3,500,000* . The 1987 Notes and 1990 Notes are together referred to herein as the "Refunded Securities". Proceeds from the sale of the 1995 Notes, together with certain funds made available through the defeasance of the Refunded Securities, will be deposited in trust with First Interstate Bank of California (the "Escrow Agent") pursuant to two escrow agreements each dated as of January 1, 1995 (the "Escrow Agreements"). One such Escrow Agreement will relate to the 1987 Notes and the other will relate to the 1990 Notes. The funds deposited pursuant to the Escrow Agreements will be applied to the purchase of direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury of the United States) the timely payment of principal of and interest on which are fully guaranteed by the United States of America (the "Escrow Securities"). The Escrow Securities, including interest thereon, together with other moneys held pursuant to the Escrow Agreements, will be sufficient to pay (i) the principal of and interest on the 1987 Notes to and including March 1, 1995 when all of the 1987 Notes then remaining outstanding will be prepaid at a prepayment price equal to 101% of the principal amount to be prepaid and (ii) the principal of and interest on a portion of the 1990 Notes to and including September 1, 1999 when a portion of the 1990 Notes maturing in the years 2008 through and including 2010 will be redeemed at a redemption price equal to 102.0% of the principal amount to be prepaid. The foregoing deposits pursuant to the Escrow Agreements will result in the defeasance of the Refunded Securities pursuant to the provisions of the respective instruments pursuant to which they were delivered as of the date of execution and delivery of the 1995 Notes. The Escrow Securities and other moneys held under the Escrow Agreements are pledged to the payment of the Refunded Securities. Neither the principal of the Escrow Securities deposited with the Escrow Agent nor the interest thereon will be available for the payment of the 1995 Notes. *Preliminary, subject to change. -8- [S&Y DOC SF942770.011 DATED 121/06/941 SECURITY AND SOURCE OF PAYMENT Property Taxes The 1995 Notes are payable from limited ad valorem property taxes levied upon all taxable property within the District by the Board of Supervisors of Santa Clara County and by the Board of Supervisors of San Mateo County, and allocated to the District under applicable law, and from any other legally available funds of the District including, but not limited to, subventions received from the State in lieu of property taxes, if any, certain federal and State grants, if any, and interest earned on invested funds. The full faith and credit or taxing power of the District is not pledged for the payment of the 1995 Notes, and the 1995 Notes are not secured by a legal or equitable pledge of, or charge, lien or encumbrance on, any property of the District or any of its income or revenue. The Indenture constitutes a contract between the District and the registered owners of the 1995 Notes. The covenants and agreements set forth in the Indenture will be for the equal and proportionate benefit, security and protection of all registered owners of the 1995 Notes and any additional parity notes which may hereafter be issued without preference, priority or distinction as to security or otherwise of any of such obligations over any of the other by reason of the number or date thereof or the time of sale, execution and delivery thereof. For the purpose of paying the principal of and interest on the 1995 Notes, until the principal of and interest on the 1995 Notes are paid or until there is a sum in the treasury of the District set apart for that purpose sufficient to meet all payments of principal of and interest on the 1995 Notes as they become due, the District agrees pursuant to the Indenture annually to set aside a portion of the limited ad valorem taxes levied upon all taxable property within the District by the Boards of Supervisors of the Counties, and allocated to the District under applicable law, or other legally available funds of the District, sufficient to pay such principal of and interest on the 1995 Notes that will become due before the proceeds of a tax levied at the next general tax levy will be available for such purpose. See "THE INDENTURE - Note Fund" herein. Reserve Fund (may be substituted with a surety*) A Reserve Fund will be established for the security of the noteholders in the amount of which is the Reserve Fund Requirement, as defined in the Indenture. An amount equal to the Reserve Fund Requirement will be retained in the Reserve Fund and used only for the payment of principal of, redemption premium, if any, and interest on the 1995 Notes to the extent amounts in the Note Fund (as defined below) are insufficient therefor or for the retirement of all outstanding 1995 Notes. Whenever any withdrawals from the Reserve Fund reduces the balance therein below the Reserve Fund Requirement, the Reserve Fund will be replenished to the Reserve Fund Requirement from the first available Limited Taxes, as provided in the Indenture. *Preliminary,subject to change. -9- [S&Y DOC SF942770.011 DATED 12/06/94] Parity Obligations The 1995 Notes are co-equal to and are on a parity with the outstanding 1988 Notes, 1990 Notes and 1992 Notes as well as the Parity Land Contracts described below. In February 1988, pursuant to Resolution 88-03 adopted by the Board of Directors of the District on January 27, 1988, and an Indenture of Trust on February 1, 1988 (the "1988 Indenture") the District said the 1988 Notes in the aggregate principal amount of$12,500,000 to finance acquisition of open space lands. The outstanding 1988 Notes mature annually from March 1, 1994 through February 1, 2008 and bear interest at a floating rate which is based upon prevailing market conditions and is predetermined every seven days. For the 52 weeks ending November 9, 1994, the average interest rate for the 1988 Notes was 2.82%. As of January 1, 1995, the outstanding principal of the 1988 Notes is $11,800,000. In September 1990, pursuant to Resolution 90-38 adopted by the Board of Directors of the District on August 22, 1990 (the "1990 Resolution") the District sold the 1990 Notes in the aggregate principal amount of$15,000,000 to refund a portion of the 1987 Notes, prepay certain land contract debt and finance acquisition of open space lands. The outstanding 1990 Notes mature annually from September 1, 1995 through September 1, 2010 and bear interest at rates ranging from 6.5% to 7.5%. After the partial refunding of the 1990 Notes by the 1995 Notes as described under "Refunding Plan", $11,500,000 of the original principal amount of the 1990 Notes will remain outstanding. In December 1992, pursuant to Resolution No. 92-56 adopted by the Board of Directors of the District on November 18, 1992 (the "1992 Resolution"), the District sold the 1992 Notes in the aggregate principal amount of$8,000,000 to finance acquisition of open space lands. The 1992 Notes mature annually from July 1,1997 through July 1, 2012 and bear interest at rates ranging from 5.00% to 6.35%. As of January 1, 1994 all of the $8,000,000 original principal amount of the 1992 Notes will remain outstanding. As of January 1, 1995, the District will have $1,947,000 aggregate principal amount of notes representing obligations of the District under contracts for the purchase of land by the District for open space (the "Land Contract Notes"). As of March 31, 1994, land with a cost of approximately $3,515,050 was pledged as collateral for the Land Contract Notes. The 1995 Notes being offered herein are payable from property taxes allocated to the District and legally available to pay the Notes and obligations of the District on a parity with the Notes (the "Limited Tax Revenues") and other revenues as herein described, and are not secured by a pledge of any land or other property of the District. Of the $1,947,000 total amount of Land Contract Notes outstanding, $57,700 is payable from Limited Tax Revenues on a parity with the Notes. The District intends to issue additional notes on a parity with the Notes in the future. -10- [S&Y DOC SF942770.011 DATED 12/06/94] THE INDENTURE The following is a brief outline of certain provisions of the Indenture and is not to be considered a full statement pertaining thereto. Reference is made to the Indenture for the complete text thereof. Copies of the Indenture are available from the District. Flow of Funds Upon the sale and delivery of the 1995 Notes, the Treasurer of the District (the "Treasurer") will set aside and deposit the proceeds received from such sale in the following respective funds and in the following order of priority: first, in the 1995 Promissory Note Interest and Principal Fund (the "Note Fund"), an amount equal to $ ; second, in the 1995 Promissory Note Reserve Fund (the "Reserve Fund"), an amount equal to $_; third, in the 1995 Promissory Note Refunding Fund (the "Refunding Fund"), an amount equal to $ ; and fourth, in the 1995 Promissory Note Acquisition Fund (the "Acquisition Fund"), the balance of such proceeds. Note Fund Under the Indenture, the District agrees and covenants that, as authorized by and subject to the Law, until the principal of, redemption premiums, if any, and interest on the 1995 Notes are paid in full or until there is a sum in the treasury of the District set apart for that purpose sufficient to meet all payments of principal of, redemption premiums, if any, and interest on the 1995 Notes as they become due, it will annually set aside a portion of the limited ad valorem taxes levied upon all taxable property in the District by the Boards of Supervisors of the Counties and allocated to the District under applicable law, or other legally available funds of the District, sufficient to pay such principal of, redemption premiums, if any, and interest on the 1995 Notes that will become due before the proceeds of such tax levied at the next general tax levy will be available for such purpose. In order to implement this covenant, the District further agrees to set aside as soon as possible after the receipt of such taxes that become delinquent after April 10 of each year, commencing April, 1995, an amount of such taxes or other available funds of the District equal to the interest that becomes due and payable on the 1995 Notes on the next succeeding September 1, plus the principal and redemption premiums, if any, on the 1995 Notes that become due on the 1995 Notes on or prior to such date, and that it will set aside, as soon as possible after the receipt of such taxes that become delinquent after December 10 each year, commencing December 1995, an amount of such taxes or other legally available funds of the District equal to the interest that becomes due and payable on the 1995 Notes on the next succeeding March 1. Notwithstanding this covenant, the Counties have adopted the Teeter Plan, which as long as it remains in effect, will provide the District with its apportionment of secured taxes, including the delinquent portion. Under the Indenture, all such taxes or other legally available funds of the District will be deposited by the District Controller in the Note Fund. -11- [S&Y DOC SF942770.01 i DATED 12/06/94] Moneys in the Note Fund are required to be used solely for the payment of the principal, redemption premium, if any, and interest on the 1995 Notes. Pending disbursement, moneys in the Note Fund will be deposited or invested as permitted by law and the Indenture. All proceeds of such deposits or investments will be deposited as and when received in the Note Fund. The covenants and agreements set forth in the Indenture are for the equal and proportionate benefit, security and protection of all owners of the 1995 Notes, 1992 Notes, 1990 Notes and 1988 Notes and any additional notes which may be issued on a parity with the Notes, without preference or distinction as to security or otherwise of any such obligations over any of the other by reason of the number or date thereof or the time of sale, execution and delivery of the 1995 Notes. Reserve Fund The Indenture requires that the Reserve Fund, initially funded with proceeds of the sale of the 1995 Notes in the amount of$ (the "Reserve Fund Requirement"), be maintained at the Reserve Fund Requirement so long as the 1995 Notes are outstanding. In the event withdrawals from the Reserve Fund decrease the balance in the Reserve Fund to an amount less than the Reserve Fund Requirement, the District is required to replenish the Reserve Fund from the first available taxes and revenues of the District, proves, fever, that the District is not obligated to replenish the Reserve Fund at any time when the sum of the amounts in the Reserve Fund and the Note Fund is at least equal to the aggregate principal amount of the 1995 Notes then outstanding and interest then due and thereafter to become due on such 1995 Notes. The Indenture permits the District to withdraw any amounts in the Reserve Fund in excess of the Reserve Fund Requirement. Furtherance, the Indenture permits the District to substitute the Reserve Fund with a qualifying surety bond or letter of credit. Except as previously described, all moneys in the Reserve Fund are required to be used solely for the payment of the principal of, redemption premium, if any, and interest on, the 1995 Notes in the event and to the extent that the District has no other moneys available therefor. Acquisition Fund Moneys in the Acquisition Fund shall be used and withdrawn solely for paying costs of issuance of the 1995 Notes and the financing of the Project. After the closure of the Acquisition Fund, any moneys remaining therein will be transferred to the Note Fund. Investment of Moneys in the Funds and Accounts Subject to the provisions of the Internal Revenue Code of 1986, as amended, and State law, including the Law, all moneys in the funds and accounts established under the Indenture are to be deposited or invested as determined by the Controller so as to obtain the highest yield that the Controller deems practicable, having due regard for the safety of such deposits and investments; provided, that all such deposits and investments must be withdrawable or must -12- [S&Y DOC SF942770.011 DATED 12/06/941 mature at such times so as to coincide as nearly as practicable with the time when such moneys are expected to be withdrawn for use under the Indenture. Proceeds of the investment of amounts in the funds and accounts established by the Indenture are deposited as and when received in the fund or account in which such investments are held, except that proceeds of the investment of amounts in the Reserve Fund are to be deposited in the Interest and Principal Fund in accordance with the Indenture. Covenants and Additional Debt The District agrees and covenants that until payment in full of all the principal of, redemption premium, if any, and interest on the 1995 Notes (or provision satisfactory for such payment) will have been made, it will: 1. Duly and punctually pay or cause to be paid the principal of, redemption premium, if any, and interest on the 1995 Notes in accordance with the conditions and terms thereof and of the Indenture; 2. Incur no additional indebtedness or capital lease obligations payable from Limited Taxes received by the District having any priority in payment to payment of the principal of, redemption premium, if any, and interest on the 1995 Notes; 3. Incur no additional indebtedness or capital lease obligations payable from Limited Taxes received by the District on a parity in payment with the principal of, interest on, or redemptions premiums, if any, on the 1995 Notes unless it will have first filed with the Trustee a certificate executed by the District Controller showing: (i) the total Limited Taxes plus the total subventions received by the District from the State of California in its most recent audited fiscal year, as shown by the most recent audited financial statement of the District; (ii) the debt service payable by the District during its next succeeding fiscal year on all indebtedness or capital lease obligations of the District that would be payable from the Limited Taxes on a parity with the 1995 Notes and the debt service that is payable on the outstanding 1995 Notes in the next succeeding fiscal year; and (iii) that the total defined in subparagraph (i) above is at least 125% of the total defined in subparagraph (ii) above. "Limited Taxes" means the limited ad valorem property taxes levied on all taxable property in the District by the Boards of Supervisors of the Counties and allocated to the District under applicable law that are legally available to pay the 1995 Notes and any other notes and parity debt. -13- [S&Y DOC SF942770.011 DATED 12/06/94] Prepare and adopt a budget for each fiscal year, which budget will provide for the payment of the principal of, redemption premium, if any, and interest on the 1995 Notes becoming due and payable in such fiscal year and for appropriations of the Limited Taxes fully sufficient to make such payments. The budgets of the District on file with the Trustee will be open to inspection during regular business hours by any registered owner of the 1995 Notes. Insufficiency of Net Revenues to Pay Debt Service The following events would result in default by the District under the Indenture, including, (i) failure to provide due and punctual payment of the interest and principal or redemption premium, if any, on any Note when it becomes due and payable, (ii) failure to observe or perform in concert with any of the other agreements, conditions, covenants or terms of the Indenture, and such default continues for 60 days after notice of default is given by the Trustee, and (iii) filing of a petition seeking reorganization under the federal bankruptcy laws or any other applicable law of the United States of America. In each case during the continuance of such events of default, the Trustee may, upon the written consent of at least 25% in aggregate principal amount of the 1995 Notes at the time outstanding of the registered owners, (i) by suit enforce his rights against the District or any member of the Board or officer or employee of the District and compel the District to carry out their duties under the law and the agreements and covenants with the registered owners of the 1995 Notes, (ii) by suit enjoin any acts or things which are unlawful or violate the rights of the registered owners of the 1995 Notes, or (iii) by suit upon the nonpayment of the 1995 Notes, require the District to account as the trustee of an express trust. Nothing in the Indenture, including the covenants described herein, will affect or impair the obligation of the District, which is absolute and unconditional, to pay the interest on and principal of and redemption premiums, if any, on the 1995 Notes to the respective registered owners of the 1995 Notes at the respective dates of maturity or redemption. -14- [S&Y DOC .3r942770.01 1 DATED 12/06/941 THE PROJECT In addition to funding the Reserve Fund and paying costs of issuance of the 1995 Notes, proceeds of the 1995 Notes will be used by the District to acquire necessary and proper lands and facilities for preservation and use as open space (the "Project") in accordance with the Law. See "THE DISTRICT - Objectives and Operations" below. THE DISTRICT Location and Size On November 7, 1972, the citizens of northwestern Santa Clara County voted to establish the Midpeninsula Regional Park District under provisions of the Law. On July 7, 1976, after another public vote the District expanded its boundaries by annexing the southeastern portion of San Mateo County. The District was subsequently renamed the "Midpeninsula Regional Open Space District." The approximately 331 square miles of the District include about 200 square miles within Santa Clara County and 130 square miles within San Mateo County, constituting approximately 61% and 39% respectively of the total District area. In 1992, approximately 1.2 square miles of land in Santa Cruz County was also annexed to the District, although the District receives no portion of the property taxes attributable to this land. The southwestern border of the District falls approximately along the ridgeline of the coast range which bisects the San Francisco Peninsula into the coastside and bayside regions. The coastside is predominately rural in character, with limited areas of flat land on the ocean terraces and vast areas of steep, forested ridges and canyons located inland. The District is located on the bayside which has more gentle topography characterized by substantially level areas and rolling plains which have been more favorable for development. The District's northeast border is the San Francisco Bay. The District is composed of the incorporated communities of Palo Alto, Mountain View, Los Altos, Los Altos Hills, Sunnyvale, Cupertino, Saratoga, Monte Sereno, and Los Gatos and adjacent unincorporated areas located in Santa Clara County, the incorporated communities of Woodside, San Carlos, Menlo Park, East Palo Alto, Atherton, Portola Valley and Redwood City and adjacent unincorporated areas located in San Mateo County. The small portion of the District in Santa Cruz County is in an unincorporated area. The District encompasses a population of approximately 621,600 persons. Management The seven-member elected District Board of Directors originates, guides, and enforces District policies. Members of the Board of Directors are elected for staggered four-year terms from seven wards within the District. -15- [S&Y DOC SF942770.011 DATED 12/06/94] The following are the current Board members: Virginia Babbitt, President Elizabeth S. Crowder, Director Peter W. Siemens, Vice President Wim de Wit, Director Robert J. McKibbin, Treasurer Nonette G. Hanko, Director Ernestine U. Henshaw, Secretary L. Craig Britton is the District's General Manager and is responsible for the administration of the District's affairs. Mr. Britton joined the District in 1977 as Land Acquisition Manager and in 1979 also assumed the duties of Assistant General Manager. Prior to his involvement with the District, Mr. Britton worked for the Counties of Marin and Santa Cruz and the State of California with duties including acquisition and property management. Mr. Britton attended Claremont Men's College and San Francisco State College where he received a B.A. in Business. Michael L. Foster has been Controller of the District since 1978. In addition to his responsibility with the District, Mr. Foster is also the Vice President - Financial Planning and Treasurer of California Microwave, Inc., a communications equipment manufacturer. Mr. Foster received both an undergraduate degree in economics and a Master of Business Administration from Stanford University. The District currently has 47 full-time employees, 3 part-time employees, and 3 seasonal employees. Objectives and Operations Preservation of open space is the principal objective of the District. "Open space" is generally defined by the District as any land or water area which remains in a natural state, is used for agriculture, or is otherwise essentially undeveloped. The Master Plan of the District (the "Master Plan"), which was adopted initially by the District Board of Directors on December 14, 1977 and January 11, 1978, defines acquisition policies and the role the District will play in the preservation of open space. According to the Master Plan, the District seeks to preserve open space for the following purposes: for the protection of natural vegetation, for the protection of wildlife, for outdoor recreation, for guiding urban form, for scenic preservation, for the preservation of unique sites, for the protection of agriculture, for the production of minerals and for the protection of public health and safety. Under certain circumstances the District may acquire undeveloped land within an urbanized area. The Master Plan of the District defines acquisition policies and the role the District will play in the preservation of open space and reflects the roles the District believes other public agencies and private organizations should play in the preservation of open space. The Master Plan map was based on an open space lands evaluation. -16- [S&Y DOC SF942770.011 DATED 12/06/941 The District's most effective method for the preservation of open space is the purchase of land with District revenues and from the proceeds of its debt obligations. Other sources of revenues for acquiring land for open space purposes include obtaining State and federal grants for the land purchases. From time to time the District also receives gifts of open space land and participates in joint projects with other governmental agencies and private non-profit organizations to acquire and maintain open space lands. The District has the power of eminent domain. However, the District does not have regulatory power over lands other than those it owns. Consequently, it cannot adopt zoning ordinances or regulations affecting lands not owned by the District. The power to protect open space by regulating land use is held primarily by the cities located within the District and by the Counties. It is the policy of the current Board of Directors that during the next several years as much as possible of the District's financial resources will be devoted to acquiring open space lands before the land is developed and land costs become prohibitive. In keeping with this land acquisition policy, administrative costs are projected to be kept to a minimum, but land management expenditures are anticipated to be an increasing percentage of annual tax revenue. Approximately 37,200 acres of open space land had been preserved by the District as of January 1, 1994. The use of proceeds of the 1995 Notes will add additional land to the District's current open space holdings. -17- [S&Y DOC SF942770.01 1 DATED 12/06/941 ESTIMATED TAX REVENUES AND NOTE RETIREMENT General The 1995 Notes are limited obligations of the District payable from limited ad valorem property taxes levied upon all taxable property within the District by the Boards of Supervisors of the Counties, and allocated to the District under applicable law, and from any other funds legally available therefor. The full faith and credit or taxing power of the District is not pledged for the payment of the 1995 Notes, and the 1995 Notes are not secured by a legal or equitable pledge of, or charge, lien or encumbrance on, any property of the District or any of its income or revenue. See "DISTRICT FINANCIAL INFORMATION" for a description of certain other moneys which may be available to pay debt service on the 1995 Notes. The District's revenues are derived from two basic sources: (1) the District's allocation of the 1% tax rate levied in the Counties; and (2) subventions received from the State in lieu of certain property taxes. Property Tax Limitation and Allocation Article XIIIA of the California Constitution provides for a maximum ad valorem property tax equal to one percent of the full cash value of property. Article XIIIA defines full cash value to mean "the county assessor's valuation of real property as shown on the 1975-76 tax bill under 'full cash value', or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment." At other times, this full cash value may be increased at a rate not to exceed two percent per year to account for inflation. Future assessed valuation growth allowed under Article XIIIA (new construction, certain changes of ownership, two percent inflation) will be allocated on the basis of"situs" among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies and schools will share the growth of "base" revenues from the tax rate area. Each year's growth allocation becomes part of each agency's allocation in the following year. The availability of revenues from growth in tax bases to such entities may be affected by the establishment of redevelopment agencies which, under certain circumstances, may be entitled to revenues resulting from the increase in certain property values. See "CONSTITUTIONAL AND STATUTORY TAX LIMITATIONS." Although Proposition 46, approved by the voters of the State in June 1986, permits local governments, including the District, to issue bonded indebtedness payable from ad valorem taxing in excess of one percent of full cash value with the approval of two-thirds of the votes cast by voters voting on the proposition, the voters of the District have not been presented with a tax override proposal with respect to the 1995 Notes. Owners of the 1995 Notes have no right to compel the District to levy or cause to be levied any tax for the payment of the principal of, redemption premium, if any, or interest on the 1995 Notes and must look solely to the -18- (S&Y DOC SF942770.011 DATED 12/06/941 allocation described above and to certain other legally available revenues of the District for such payment. Property Tax Collection Procedures In California, property which is subject to ad valorem taxes is classified as "secured" or "unsecured." The secured classification includes property on which any property tax levied by the county becomes a lien on that property. A tax levied on unsecured property does not become a lien against the taxed, unsecured property, but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens on the secured property, regardless of the time of the creation of other liens. A 10% penalty is added to delinquent taxes which have been levied with respect to property on the secured roll. In addition, property on the secured roll on which taxes are delinquent becomes tax defaulted property by the last business day of the fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes and delinquency penalties, plus a redemption penalty of 1.5% per month. The valuation of property is determined as of either (1) the 1975-76 tax year, (2) the later date of a change of ownership or new construction, or(3) March I of the tax year if the value has declined below the previous year's value. For property on the secured roll, taxes become delinquent on December 10 and April 10. Taxes on unsecured property are due March I and become delinquent August 31. When a change of ownership or completion of new construction occurs a supplemental assessment is made. Depending upon when the change of ownership occurred or when the construction was completed there can be one or two supplemental assessments. -19- [S&Y DOC SF942770.011 DATED 12/06/941 Assessed Valuation Table I shows a detailed summary of the District's assessed valuation since 1985-86. Property in the District is assessed by the Santa Clara and San Mateo County Assessors in their respective counties except for public utility property which is assessed by the State Board of Equalization. TABLE I District Assessed Valuation ($000,000's) Santa Clara San Mateo Total District Less: Total Net County County Gross Redevelopment District Fiscal Year Portion Portion Valuation Increment Valuation 1985-86 23,264.7 8,900.1 32,164.8 516.4 31,648.4 1986-87 25,560.3 9,832.2 35,392.4 748.4 34,644.1 1987-88 27,708.4 10,844.5 38,552.9 966.0 37,586.9 1988-89 29,285.4 11,583.5 40,869.0 1,047.1 39,821.9 1989-90 32,999.0 13,040.2 46,039.2 1,358.7 44,680.5 1990-91 36,598.5 14,849.0 51,447.5 1,586.8 49,860.7 1991-92 38,191.6 15,866.6 54,058.2 1,783.7 52,274.5 1992-93 40,129.0 16,809.8 56,938.8 1,936.5 55,002.3 1993-94 41,537.4 17,592.6 59,130.0 2,075.5 57,054.5 1994-95 41,918.1 18,203.5 60,121.6 2,146.9 57,974.7 Source: California Municipal Statistics. Secured and Unsecured Tax Levies Table 2 shows the total combined secured and unsecured tax receipts allocated by the Counties to the District and received by the District during the last nine fiscal years. The Pre- Article XIIIA tax override for the District, as well as certain late payments of taxes with respect to fiscal years prior to the fiscal years during which such payments are made are not reflected in Table 2. See "CONSTITUTIONAL AND STATUTORY TAX LIMITATIONS - Constitutional Limitations - Article XIIIA" below. -20- [S&Y DOC SF942770.01 1 DATED 12/06/94] TABLE 2 District Current Secured and Unsecured Tax Receipts (Excludes Pre-Article XIIIA Tax Override Levy)(1) Current Secured Tax Receipts(1) State Fiscal Santa Clara San Mateo District Total Year County County Secured 1985-86 $3,139,700 $1,334,200 $4,473,900 1986-87 3,445,208 1,463,045 4,908,253 1987-88 3,712,180 1,674,445 5,386,625 1988-89(2) 4,007,120 1,792,226 5,799,346 1989-90 4,476,832 2,031,886 6,508,718 1990-91 4,580,579 2,342,564 6,923,143 1991-92 5,311,839 2,426,882 7,73 8,72 l 1992-93 5,448,227 2,449,937 7,898,164 1993-94 5,431,540 2,633,077 8,064,617 Current Unsecured Tax Receipts State Fiscal Santa Clara San Mateo District Total Total Secured Year County County Unsecured and Unsecured 1985-86 $451,500 $196,800 $648,300 $5,122,200 1986-87 512,189 209,185 721,374 5,629,627 1987-88 507,689 221,739 729,428 6,116,053 1988-89(2) 574,021 236,983 811,004 6,610,350 1989-90 625,167 242,246 867,413 7,376,131 1990-91 739,049 280,485 1,019,534 7,942,677 1991-92 742,900 312,098 1,054,998 8,793,719 1992-93 762,242 331,431 1,093,673 8,991,837 1993-94 754,355 363,596 1,117,951 9,182,568 (1) The District also receives a share of delinquent taxes, redemption fees, supplemental taxes and State subvention payments received b each County. This revenue totaled$1 110 317 in 1993-94 and the District paY Y tY expects to receive$504,000 in 1994-95. (?) Nine-month fiscal year(District changed fiscal year end from June 30 to March 31). Source: District Controller. The Board of Supervisors of the Counties have approved the implementation of the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the "Teeter Plan"), as provided for in Section 4701 et seq. of the California Revenue and Taxation Code. Under the Teeter Plan, the Counties apportion secured property taxes on an accrual basis when due (irrespective of actual collections)to local political subdivisions, including the District, for which the Counties act as the tax-levying or tax-collecting agency. The Teeter Plan is to remain in effect unless the Board of Supervisors of the Counties orders its discontinuance or unless, prior to the commencement of any Fiscal Year of the Counties (which commences on July 1), the Board of Supervisors receives a petition for its -21- [S&Y DOC SF942770.011 DATED 12/06/94] discontinuance joined in by resolutions adopted by at least two-thirds of the participating revenue districts in the Counties, in which event the Board of Supervisors is to order discontinuance of the Teeter Plan effective at the commencement of the subsequent fiscal year. If the Teeter Plan is discontinued subsequent to its implementation, secured property taxes would be allocated to political subdivisions (including the District) for which the Counties act as the tax-levying or tax- collecting agency as collected (see "Ad Valorem Property Taxation" above). According to California Municipal Statistics, Inc., the secured tax delinquency rate has been at or below 3.9% in both Counties during each of the last seven fiscal years, as shown below in Table 3: TABLE Secured Tax Delinquency Rates (at June 30) Fiscal Year Santa Clara County(1) San Mateo County(1) 1987-88 2.88% 2.22% 1988-89 2.63 2.03 1989-90 2.57 182 1990-91 3.37 3.66 1991-92 3.44 3.83 1992-93 3.15 3.40 1993-94 2.70 3.61 (1) Counties operate on Teeter Plan. Source: California Municipal Statistics, Inc. The District's allocation of tax revenues is the aggregate of the District's apportionment of the taxes produced by the one percent tax rate in nearly one thousand tax code areas in Santa Clara and San Mateo Counties. In accordance with Chapter 6 of the State Revenue and Taxation Code, the tax increment derived by the increase in assessed valuation in each tax code area is apportioned to the taxing entities within the code area in the same proportion as in the prior year, subject to certain modifications for change in jurisdiction or new incorporations and for certain incremental tax revenues allocated directly to redevelopment agencies within the District. Thus, the increase in the District's allocation of taxes varies directly with the increase in the assessed valuation within the District. Unlike special districts in California that are wholly within one county, as a multi-county special district, the District receives 100% of its allocation of collected taxes pursuant to Section 98.6 of the California Revenue and Taxation Code, and is not subject to a discretionary reduction in such allocation by action of either County's Board of Supervisors. -22- [S&Y DOC SF942770.011 DATED 12/061941 Projected Revenues The District has projected revenues and expenditures for the first ten years in which the 1995 Notes will be outstanding and these projections are set forth in Table 4. The District's projection of revenues is based on the following parameters: (1) Annual increases of three percent (excluding subventions) in 1995-96 and five percent per year thereafter in the Districts' allocation of funds derived from the basic 1% tax rate. The assessed valuation of taxable property within the District has increased at an average rate of 4.1% annually over the last five years. (2) District cash balances will be invested to earn five percent per annum. (3) Revenue from State and federal grants is included based on approved project grants. Although the District believes such assumptions to be reasonable, there is no assurance that such assumptions and the projections based thereon will in fact be realized. A State budget for State fiscal year 1994-95 was adopted July 8, 1994. The State proposed a two-year solution to eliminate the $2.0 billion accumulated budget deficit as of June 30, 1994. The budget calls for no tax increases, a freeze in the spending for K-12 education at the current funding levels, increased spending for prisons, and decreased spending for health and welfare programs. The budget relied on the State borrowing $7 billion through a combination of revenue anticipation warrants and revenue anticipation notes. To ensure the repayment of these borrowings, the budget contains provisions for automatic spending cuts in 1994-95 and 1995-96 if revenue fails to meet expectations. The District cannot predict what actions will be taken in the future by the State Legislature and the Governor to deal with budget shortfalls. The State budget will be affected by the course of the national economy and other factors. The District's share of local property taxes is currently unaffected for State fiscal year 1994-95. No assurance can be given that such an exemption will be available in future years. -23- [S&Y DOC SF942770.011 DATED 12/06/941 Table 4 below shows the estimated projected revenues for the District for fiscal years 1994-95 through 2003-04. TABLE 4 Estimated Revenues, 1994-95-2003-04 ($000's) Fiscal Year Tax Revenues(1) Interest Earnings(2) Other Revenue(3) Total Revenues 1994-95 $10,140 $390 $1,721 $12,251 1995-96 10,444 375 2,000 12,819 1996-97 10,966 400 2,170 13,536 1997-98 11,515 425 700 12,640 1998-99 12,090 425 725 13,240 1999-00 12,695 450 755 13,900 2000-01 13,330 450 785 14,565 2001-02 13,996 475 815 15,286 2002-03 14,696 475 850 16,021 2003-04 15,431 500 885 16,816 (1) Estimated tax revenues include the District's share of funds derived from the I% tax rate and subventions received from the State of California in lieu of property taxes. The projection assumes a 3% increase in 1995- 96 and 5%per year increases thereafter. (2) Interest earnings on the reserve fund and other funds of the District estimated at 5%. Such assumption is based on historical increases; there is no assurance that such increases will occur. (3) "Other Revenue"is primarily grant receipts, rental income, and, in 1995-96 through 1996-97, proceeds from the sale ofsurplus property. Source: District Controller. -24- [S&Y DOC SF942770.011 DATED 12/06/94] Note Retirement Table 5 estimates debt service coverage on the 1995 Notes and other debt of the District on a parity with the 1995 Notes. The minimum debt service coverage ratio is estimated to be approximately 2.86 in 1997-98. The District intends to issue additional notes on a parity with the 1995 Notes in the future. Although the Indenture requires the District to meet certain financial tests before it may issue any such additional notes, the issuance of additional parity notes by the District would decrease the debt service coverage ratios reflected on Table 5. See "THE INDENTURE Covenants and Additional Debt." See "DISTRICT FINANCIAL INFORMATION - Other Outstanding Debt" for a description of the District's other outstanding obligations payable from Limited Tax Revenues and other legally available funds of the District. TABLE Estimated Debt Service Schedule Parity Debt ($000's) Fiscal Estimated 1995 Notes(2) Other Parity Total Paritv Coverage W/O Year Revcnues(l) -Principal Interest Total Debt Service Debt Service Coverage Other Revenues 1994-95 12,251 239 239 2,749 2,988 4,10 3.52 1995-96 12,819 958 958 3,134 4,092 3.13 164 1996-97 13,536 958 958 3,171 4,129 3.28 2.75 1997-98 12,640 958 958 3,456 4,414 2.86 2.71 1998-99 13,240 100 955 1,055 3,422 4,477 2.96 180 1999-00 13,900 100 950 1,050 3,392 4,442 3,13 2.96 2000-01 14,565 100 944 1,044 3,356 4,400 3.31 113 2001-02 15,286 100 939 1,039 3,417 4,456 3.43 3.25 2002-03 16,021 100 933 1,033 3,378 4,411 3.63 3.44 2003-04 16,816 too 927 1,027 3,344 4,371 3.85 3.64 (1) Estimated Revenues from Table 4. (2) Assumes an average interest of665%. (3) Other Revenues from Table 4. -25- [S&Y DOC SF942770.011 DATED 12/06/94] Direct and Overlapping Bonded Indebtedness The following sets forth the overlapping and direct bonded indebtedness of the District as of December 1, 1994. 1994-95 Assessed Valuation: $57,974,647,879 (after deducting $2,146,898,062 redevelopment incremental valuation) DIRECT AND OVERLAPPING BONDED DEBT: %Applicable(1) Debt 12-1-94 Santa Clara County Authorities 39.966% $116,430,550 San Mateo County Authorities 32.693 71,031,301 Santa Clara County Flood Control and Water Conservation District,Zones W-I &NC-1 34.572& 58.859 7,920,089 Foothill Community College District Certificates of Participation 92.162 28,408,937 Mountain View-Los Altos Union High School District Certificates of Participation 100. 5,914,000 Sunnyvale School District Certificates of Participation 100. 8,970,000 Cupertino Union School District Certificates of Participation 72.574 13,727,372 Campbell Union School District 16.841 4,574,841 Other School Districts and Authorities Various 16,652,314 City of Mountain View and Lease Obligations 100. 26,984,197 City of Sunnyvale Lease Obligations 99.994 26,818,391 City of Palo Alto Lease Obligations 100. 11,102,800 City of Cupertino Lease Obligations 89.888 52,602,458 City of Redwood City Lease Obligations 100. 24,415,000 Other Cities Various 4,795,000 Other City Lease Obligations Various 12,222,457 Redwood City General Improvement Districts 100. 17,575,000 El Camino Hospital District Facilities Authority 96.982 3,573,787 Santa Clara Valley Water District Certificates of Participation 39.966 57,798,829 Parking Districts 100. 9,590,000 1915 Act Bonds(Estimate) Various 33,481,450 Other Special Districts Various 5,298,728 Midpeninsula Regional Open Space District 100. 45,800,000(2) Midpeninsula Regional Open Space District 100. 9,875,000 TOTAL GROSS DIRECT AND OVERLAPPING BONDED DEBT $615,562,501 (3) Less: Santa Clara County FC&WCD,Zone NC-1 (100%self-supporting) 1,050,000 Cities of Mountain View and San Jose self-supporting bonds 416,577 El Camino Hospital Facilities Authority(100%self-supporting) 3,573,787 TOTAL NET DIRECT AND OVERLAPPING BONDED DEBT $610,522,137 (1) Based on 1993-94 ratios. (2) Includes$15,000,000 Refunding Notes to be sold. Excludes amounts to be refunded. (3) Excludes tax and revenue anticipation notes, revenue, mortgage revenue and tax allocation bonds and non- bonded capital lease obligations. Ratios to 1994-95 Assessed Valuation: Direct Debt($55,675,000). . . . . . . 0.10% Total Gross Debt. . . . . . . . . . . . . . . 1.06% Total Net Debt . . . . . . . . . . . . . . . . 1.05% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6-30-94: $2,756,629 -26- [S&Y DOC SF942770.011 DATED 12/06/941 DISTRICT FINANCIAL INFORMATION Method of Accounting The official books of record kept by the District utilize the principles of fund accounting as prescribed for special districts by the State Controller. All District funds reflect the modified accrual basis of accounting under which revenues are generally recognized in the period they become available and measurable and expenditures are recognized generally when the obligation is incurred, except for interest on long term debt which is recognized as an expenditure when due. The District's fiscal year is April I through March 31. Prior to fiscal year 1988-89, the District's fiscal year was July I to June 30. The District's certified public accountants are currently Deloitte & Touche, San Jose, California. District Financial Statements The District's audited statement of General Fund Revenues, Expenditures and Changes in Fund Balance for the four years ended March 31, 1994 is shown in Table 6. General property taxes are the District's largest source of revenues. Over the last four fiscal years, property taxes have generated between 70% and 89% of the District's total revenues. See "ESTIMATED TAX REVENUES AND NOTE RETIREMENT" and "CONSTITUTIONAL AND STATUTORY TAX LIMITATIONS" for a description of the tax assessment process in California. Land acquisition, including debt service on notes issued to buy land in prior years, is the major component of the District's expenditures, representing between 68% and 78% of total expenditures in each year since fiscal year 1989-90. Table 7 shows the combined Balance Sheet for the District's General Fund, General Fixed Assets Fund, and General Long-Term Debt Fund for the years ended March 31, 1993 and March 31, 1994. The General Fixed Assets Fund includes all land, equipment, structures and improvements. The General Long-Term Debt Fund accounts for the annual payment of long- term debt. See APPENDIX A, "DISTRICT'S AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 1994 - Notes to Financial Statements" for the breakdown of changes in the General Long-Term Debt Account and the amount of future debt service payments. -27- [S&Y DOC SF942770.011 DATED 12/06/94] TABLE 6 Midpeninsula Regional Open Space District General Fund Revenues,Expenditures And Changes In Fund Balance(1) ($000's) Projected 1990-91 1991-92 1992-93 1993-94 1994-95 REVENUES: General Property Tax $ 8,645 $ 9,434 $ 9,628 $10,116 $9,960 State Grants 1,343 713 25 224 1,146 Other Taxes 171 111 171 177 180 Interest 961 840 474 472 390 Other 1,155 1,042 561 479 575 TOTAL REVENUES $12,275 $12,140 $10,857 $11,468 $12,251 EXPENDITURES: Salaries and Benefits $ 2,141 $ 2,270 $ 2,635 $ 2,699 $ 2,953 Services and Other 3,630 1,979 2,091 1,947 1,892 SUBTOTAL $ 5,771 $ 4,249 $ 4,726 $ 4,646 $ 4,845 DEBT SERVICE: Principal Repayment $ 5,446 $ 1,666 $ 2,205 $ 2,346 $ 873 Interest 2,797 3,070 3,666 2,959 3,385 SUBTOTAL DEBT SERVICE $ 8,243 $ 4,736 $ 5,871 $ 5,305 $ 4,258 SUBTOTAL EXPENDITURES 14,014 8,985 10,597 9,951 9,103 OPERATING CASH FLOW ($1,739) $ 3,155 $ 260 $ 1,517 $ 3,148 PROPERTY ACQUISITION 9,924 4,467 11,253 5,297 6,258 EXCESS OF REVENUES OVER EXPENDITURES (11,663) (1,312) (10,993) (3,780) (3,110) PROCEEDS FROM NOTES PAYABLE 17,622 135 7,817 5,508 5,500 NET EXCESS 5,959 (1,177) (3,176) 1,728 2,390 STARTING FUND BALANCE 9,806 15,765 14,588 11,412 13,140 ENDING FUND BALANCE $15,765 $14,588 $11,412 $13,140 $15,530 (1) Fiscal Years ending March 31. -28- [S&Y DOC SF942770.011 DATED 12/06/94] TABLE Midpeninsula Regional Open Space District Balance Sheet ($000's) March 31,1994 March 31,1993 General General General General General Fixed Long-Term General Fixed Long-Term Fund Assets Debt Fund Assets Debt ASSETS AND OTHER DEBT BALANCES: Cash and Cash Investments $5,271 $3,245 Restricted Cash 5,685 5,285 Taxes Receivable 2,627 3,259 Other Receivables 1,085 1,005 Prepaid Expenses/Other Assets 18 18 Land(At Cost) 136,897 131,599 Equipment 1,200 1,111 Structures and Improvements 5,929 5,212 Amount to be Provided for Retirement of General Long-Term Debt 60,087 54,788 TOTAL ASSETS $14,686 $144,026 $60,087 $12,811 $137,923 $54,788 LIABILITIES AND FUND EQUITY LIABILITIES: Accounts Payable $ 144 $ 123 Accrued Liabilities/Deposits 274 375 Deferred Revenue 1,128 901 Notes Payable 60,087 54,788 --- - _ - - - TOTAL LIABILITIES $1,546 $O T6 0,087 $1,399 -$O $54,788 FUND EQUITY: Investment in General Fixed Assets $144,026 $137,923 Fund Balance 13,140 11 Al2 TOTAL FUND EQUITY $13,140 $144,026 $o $II,412 $137,923 $o TOTAL LIABILITIES AND EQUITY $14,686 $144,026 $60,087 $12,811 $137,923 $54,788 Source: District Controller. Debt Capacity Pursuant to the Law, the District may acquire lands or facilities by means of a plan to borrow money or by purchase on contract. The amount of such indebtedness to be incurred may not exceed an amount equal to the District's anticipated tax income for the next five-year period. All such indebtedness must be repaid during a period not to exceed 20 years from the date on which it is incurred and may bear interest at rates not exceeding 12% per annum. Each such indebtedness will be authorized by a Indenture adopted by the affirmative votes of at least two- thirds of the members of the Board of Directors of the District. In addition, the Indenture imposes additional limitations upon the issuance of debt payable on a parity with the Notes. See "THE INDENTURE - Covenants and Additional Debt." -29- [S&Y DOC SF942770.01 1 DATED 12/06/94] Sources of Funds Tax Revenues. The general ad valorem property tax is the District's major source of revenue, as well as the primary source of funds for the payment of debt service on the Notes. The general ad valorem property tax consists of secured and unsecured property taxes. See "ESTIMATED TAX REVENUES AND NOTE RETIREMENT" above for a more complete description of the District's tax revenues. State Grants, In 1994-95, the District projects revenues from grants of $1,146,000, which amount represents grants for which the District has received approval, pending the completion of land acquisitions or site development for certain projects. In general, the District only budgets grant revenues when the source and amount of the grant have been reasonably assured. Major Uses of Funds. Most of the District's funds are used for the acquisition of open space lands and to service the debt issued for those purposes. In keeping with the policy of the District's Board of Directors, administrative costs are projected to be kept to a minimum, but land management expenditures are anticipated to be an increasing percentage of annual tax revenue. In 1993-94, land acquisition, including debt service on notes issued to buy land in prior years, 10. million accounting for 70%of total District expenditures. totaled 6 $ g P Other Outstanding Debt Following the issuance of the 1995 Notes the District will have outstanding $11,800,000 of 1988 Notes, $11,500,000 of 1990 Notes and $8,000,000 of 1992 Notes. In addition, the District will have outstanding $17.3 million aggregate principal amount of lease obligations represented by certificates of participation executed and delivered in 1993, and approximately $1,947,000 principal amount of Land Contract Notes as described below. The District has never j defaulted on any of its debt. Table 8 below lists the District's total indebtedness outstanding as of December 31, 1994, after giving effect to the issuance of the 1995 Notes. The outstanding balance of the Land Contract Notes as shown below is, in some cases, an aggregate of the outstanding balances on more than one Land Contract Note. In some cases, several parcels constituting one open space area have been purchased at different times through contracts secured by Land Contract Notes with differing maturities and interest rates. In each case, the land has been purchased pursuant to the California Public Resources Code which currently requires payment of debt over not more than 20 years. Approximately 29% ($19.2 million) of the debt outstanding, including the $17.3 million certificates of participation issued in 1993, and approximately $1.9 million of the Land Contract Notes will be subordinate to the obligation of the District to make payments on the 1995 Notes from Limited Tax Revenues. The Indenture requires that any future debt issued by the District and payable from Limited Taxes be on a parity with or subordinate to the 1995 Notes. -30- [S&Y DOC SF942770,01 1 DATED 12/06/94] TABLE 8 Midpeninsula Regional Open Space District Debt Outstanding(1) ($000's) Obligation Original Amount Outstanding 1995-96 of Notes 12-31-94(1) Debt Service Final Payment El Corte de Madera $500 $500 $ 40 March 1998 Fremont Older 89 62 66 June 1995 Foothills 192 165 18 December 1998 La Honda Creek 2 941 574 84 October 1996 Sierra Azul(2 470 256 35 August 2008 Skyline 600 90 65 May 1996 Russian Ridge 300 300 15 December 1996 1988 Notes(3) 12,500 11,800 1,140 February 2008 1990 Notes 15,000 11,500 1,360 September 2010 1992 Notes 8,000 8,000 480 December 2012 1993 Certificates of Participation 17,315 17,275 1,000 September 2020 1995 Notes 15,000* 15,000* 1,035 December 2014 TOTAL $70,907 $65,522 $5,338 (1) Including the 1995 Notes expected to be issued in January 1995; excluding the 1987 and 1990 Notes to be refunded by the 1995 Notes. (2) Aggregation of Notes payable for parcels within one open space preserve. (3) Projected 4%average interest rate. Salaries and Benefits Salaries and benefits for the District's 47 full-time, 3 part-time, and 3 seasonal employees represent the third major component of total District expenditures. In 1993-94, $2,699,000 was expended for salaries and benefits. District employees are covered under the Public Employees Retirement System administered by the State of California. Other uses of funds include patrol and site development, site maintenance, professional services, utilities and communications. -31- JI [S&Y DOC SF942770.011 DATED 12/06/941 CONSTITUTIONAL AND STATUTORY TAX LIMITATIONS Constitutional Limitations - Article XIIIA Article XIIIA of the California Constitution limits the maximum ad valorem tax on real property to one percent of "full cash value," to be collected by counties and apportioned according to law, but provides that the one percent limitation does not apply to ad valorem taxes to pay interest or redemption charges on (1) indebtedness approved by the voters prior to July 1, 1978, or (2) any bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast by the voters voting on the proposition. "Full cash value" is defined to mean "the county assessor's valuation of real property as shown on the 1975-76 tax bill under full cash value or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment." The full cash value may be adjusted annually to reflect inflation at a rate not to exceed two percent per year, or reduction in the consumer price index or comparable data for the area under taxing jurisdiction or reduced in the event of declining property value caused by substantial damage, destruction or other factors. Legislation enacted by the California Legislature provides that each county will levy the maximum tax permitted by Article XIIIA of $1.00 per$100 of assessed valuation(based on full cash value). Article XIIIA has subsequently been amended to permit reduction of the "full cash value" base in the event of declining property values caused by damage, destruction or other factors and to provide that there would be no increase in the "full cash value" base in the event of reconstruction of property damaged or destroyed in a disaster and in various other minor or technical ways. Gann Initiative At the Statewide special election on November 6, 1979, the voters approved an initiative entitled "Limitation on Government Appropriations" (the "Gann Initiative") which added Article XIIIB to the California Constitution. Under Article XIIIB, as amended in 1990, State and local government entities have an annual "appropriations limit" which limits the ability to spend certain moneys which are called "appropriations subject to limitation" in an amount higher than the "appropriations limits." Article XIIIB does not affect the appropriation of moneys which are excluded from the definition of "appropriations limit" including appropriations of any special district which existed on January 1, 1978, and which did not as of the 1977-78 fiscal year levy an ad valorem tax on property in excess of 12.5 cents per $100 of assessed value. Since the District did not levy a tax in excess of 12.5 cents, in the opinion of the District's General Counsel the District's appropriations are not subject to the limitations of Article XIIIB. -32- [S&Y DOC �&942770.011 DATED 12/06/941 Statutory Limitations On November 4, 1986, California voters approved Proposition 62, an initiative statute limiting the imposition of new or higher taxes by local agencies. The statute (a) requires new or higher general taxes to be approved by two-thirds of the local agency's governing body and a majority of its voters, (b) requires the inclusion of specific information in all local ordinances or Indentures proposing new or higher general or special taxes, (c) penalizes local agencies that fail to comply with the foregoing, and (d) requires local agencies to stop collecting any new or higher general tax adopted after July 31, 1985, unless a majority of the voters approved the tax by November 3, 1988. Two State Court of Appeals decisions, both of which are final decisions, have declared the majority voter provisions referred to in (a) above in one case and in (a) and (d) above in the second case to be unconstitutional. The District has not collected new or higher taxes to date, and it has no plans to collect new or higher taxes. Future Initiatives Article XIIIA, the Gann Initiative and Proposition 62 were each adopted as measures that qualified for the ballot pursuant to California's initiative process. From time to time other initiative measures could be adopted, further affecting District revenues or the District's ability to expend revenues. LEGAL All legal proceedings in connection with the issuance of the 1995 Notes are subject to the approval of Orrick, Herrington & Sutcliffe, San Francisco, California, Bond Counsel. The form of the opinion of Bond Counsel is set forth in Appendix C to this Official Statement. TAX MATTERS In the opinion of Orrick, Herrington & Sutcliffe, Bond Counsel, based on existing laws, regulations, rulings and court decisions, interest on the 1995 Notes is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes. Bond Counsel is also of the opinion that interest on the 1995 Notes is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes although Bond Counsel observes that such interest is included in adjusted current earnings in calculating federal corporate alternative minimum taxable income. The form of the opinion of Bond Counsel is set forth in Appendix C to this Official Statement. -33- [S&Y DOC SF942770.011 DATED 12/06/94] The Internal Revenue Code of 1986 (the "Code") imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the 1995 Notes. The District has covenanted to comply with certain restrictions designed to assure that interest on the 1995 Notes will not be included in federal gross income. Failure to comply with these covenants may result in interest on the 1995 Notes being included in federal gross income, possibly from the date of issuance of the 1995 Notes. The opinion of Bond Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the 1995 Notes may affect the tax status of interest on the 1995 Notes. Certain requirements and procedures contained or referred to in the Indenture and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the 1995 Notes) may be taken, under the circumstances and subject to the terms and conditions set forth in such documents, upon the advice or with the approving opinion of nationally recognized bond counsel. Bond Counsel expresses no opinion as to any 1995 Notes or the interest thereon if any such change occurs or action is taken upon the advice or approval of bond counsel other than itself. Although Bond Counsel has rendered an opinion that interest on the 1995 Notes is excluded from gross income for federal income tax purposes and is exempt from California personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, . The nature and holder's federal or state tax liability.the 1995 Notes may otherwise affect a o y consequences will depend u extent of these other tax Pe on the tax status of the holder particular and the holder's other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. LEGALITY FOR INVESTMENT The 1995 Notes are legal investments in California for commercial and savings banks and as such are legal investments for all trust funds, and for funds of insurance companies and trust companies. The 1995 Notes are eligible as security for deposits of public moneys in California. RATING As noted on the cover page of this Official Statement, Standard & Poor's Corporation has given the 1995 Notes the rating of "_" (the "Rating Agency"). Any explanation of the significance of such ratings may be obtained only from the Rating Agency. The District has furnished to the Rating Agency certain information and materials. Generally, rating agencies base their ratings on such information and materials and, in addition, on investigations, studies and assumptions made by the rating agencies themselves. There is no assurance that the rating mentioned above will remain for any given period of time or that the rating may not be lowered -34- [S&Y DOC SF942770.011 DATED 12/06/941 or withdrawn entirely by the Rating Agency if in their judgment circumstances so warrant. Any such downward change or withdrawal of a rating may have an adverse effect on the market price of the 1995 Notes. LITIGATION There is no litigation pending concerning the validity of the 1995 Notes and the application of the proceeds thereof, the corporate existence of the District, or the title of the officers thereof to their respective offices or contesting or affecting the Districts ability to P g g receive the Limited Taxes or other moneys that could be used for payment of the 1995 Notes. There are a number of lawsuits and claims pending against the District. The aggregate amount of P g g the uninsured liabilities of the District and the timing of any anticipated payments of judgments which may result from suits and claims will not, in the opinion of the General Counsel of the District, materially affect the District's finances or impair its ability to repay the 1995 Notes. UNDERWRITING The 1995 Notes will be purchased from the District by Stone & Youngberg as underwriter (the "Underwriter") under a Purchase Contract pursuant to which the Underwriter agrees to purchase all of the 1995 Notes for an aggregate purchase price of $ plus accrued interest, if any, from January 1, 1995 to the delivery date thereof. 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 1995 Notes to certain dealers (including dealers depositing 1995 Notes into investment trusts), dealer banks, banks acting as agents and others at prices lower than said public offering prices. AVAILABILITY OF DOCUMENTS During the initial offering period for the 1995 Notes, copies of the forms of the Indenture and other documents referred to herein may be obtained, upon written request, from Midpeninsula Regional Open Space District, 330 Distel Circle, Los Altos, California 94022, Attention: General Manager. After delivery of the 1995 Notes, copies of such agreements may be obtained from the Trustee, First Interstate Bank of California, 345 California Street, 8th Floor, San Francisco, California 94104, Attention: Corporate Trust Department. -35- [S&Y DOC SF942770.011 DATED 12/06/941 MISCELLANEOUS Insofar as any statements made in this Official Statement 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 registered owners of the 1995 Notes. Neither the members of the Board of Directors nor the officers or employees of the District are liable personally on the 1995 Notes by reason of their issuance. The execution and delivery of this Official Statement have been duly authorized by the District. MIDPENINSULA REGIONAL OPEN SPACE DISTRICT By: /s/ L. Craig Britton General Manager -36- [S&Y DOC SF942770.011 DATED 1.2/06/94] APPENDIX A DISTRICT'S AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 1994 A-1 [S&Y DOC SF942770.011 DATED 12/06/94] APPENDIX B GENERAL AND ECONOMIC INFORMATION SANTA CLARA COUNTY AND SAN MATEO COUNTY Introduction Santa Clara County is located below the southern point of San Francisco Bay and covers a total land area of over 1,300 square miles or about 847,000 acres. Two distinct valleys are created by the hill formation of the Santa Cruz Mountains and the Diablo Range. These two areas are known locally as "North County" and "South County." South County has retained the agricultural base which once characterized the entire area. North County is densely populated, extensively urbanized and heavily industrialized. Most of North County is now referred to as "Silicon Valley" because of the concentration of electronics companies throughout the area. San Mateo County is located on the San Francisco Peninsula. The coastal mountains run north and south through the County dividing the lightly populated coastal area from the more heavily developed eastern corridor between San Francisco and San Jose. San Mateo County attracted businesses at a fast pace during the 1960s with its suburban atmosphere and convenient access to nearby population centers. The County is characterized by manufacturing, engineering and technical-product firms located along the Bay, with commercial and residential areas stretching westward into the foothills. Transportation facilities in the Counties include San Francisco International Airport, a small deepwater port in Redwood City and freeway and bridge connections to nearby ports and airports in San Francisco, San Jose and Oakland. In addition to their own extensive range of manufacturing, professional, service, and academic employers, the Counties provide an important residential base for the financial, trade, commercial, and industrial companies located in San Francisco. The District extends from 20 to 40 miles south of San Francisco. Population According to the California State Department of Finance, as of January 1, 1993, Santa Clara County is ranked the fourth most populous County in the State and is the most populous of the nine San Francisco Bay Area counties. The County's population has been growing at a fast pace since 1960, and between 1960 and 1984, Santa Clara County's population more than doubled. B-I [S&Y DOC SF942770.011 DATED 12/06/941 San Mateo County has experienced moderate but consistent population growth since 1970. The U.S. Census reports that between 1970 and 1980 the County grew by approximately 30 ,000 residents, or 5.4%. The 1990 Census reported that the County population was 649,623, which represents a 10.6 increase over 1980. The table below shows population estimates for the last five years for both Santa Clara and San Mateo Counties. The population within the Midpeninsula Regional Open Space District was estimated by the District in 1994 to be approximately 621,600. POPULATION STATISTICS SAN MATEO AND SANTA CLARA COUNTIES For Years 1989 through 1993 1989 1990 1991 1992 1993 Midpeninsula Regional Open Space District(1) 593,269 598,916 600,900 610,500 621,600 San Mateo County(2) 633,000 649,623 657,000 670,100 680,900 Santa Clara County(2) 1,443,800 1,497,577 1,513,100 1,531,800 1,563,800 Source: (1) Midpeninsula Regional Open Space District. (2) California State Department of Finance, Population Research. The 1990 figures come from the United States Census Bureau. Economic Characteristics Santa Clara County, with approximately 782,100 wage and salary jobs in 1993, has the largest employment base of any county in Northern California. Three major industry sectors comprise 72% of the County's employment: manufacturing (30%), services (28%) and retail trade (14%). Their percentage share of County payrolls has remained virtually constant over the past five years. Various types of manufacturing firms are located in Santa Clara County, with durable goods manufacturing accounting for almost 90% of manufacturing employment. Within this sector, the electrical equipment and supplies industry accounts for approximately 36% of all County manufacturing jobs. Other major components of durable goods manufacturing are electronic components and accessories; office computing and accounting machinery; instruments, guided missiles and space vehicles and communications equipment. In the nondurable goods manufacturing sector, the printing, publishing, software, and goods processing industries are the leading employers. The services sector has been the fastest growing industry, particularly in the areas of business and medical services which support electronics manufacturing and health care. B-2 [S&Y DOC SF942770.011 DATED 12/06/941 San Mateo County's diversified economy includes construction, manufacturing, transportation, communications, retail and wholesale trade, financial services and government employment. Forty-eight of the nation's top 100 industrial firms are either headquartered or have branch offices in San Mateo County, The two major growth industries affecting San Mateo County over the past decade have been the high technology and office sectors. The San Francisco Bay Area's principal airport, San Francisco International Airport, is located within San Mateo County. Major commercial centers located in the Counties include the Stanford Shopping Center in Palo Alto, Eastridge Mall and Valley Fair in San Jose, Vallco Fashion Park in Cupertino, San Antonio Shopping Center in Mountain View, Great Mall in Milpitas and Hillsdale Mall in San Mateo. Taxable sales and the number of sales permits issued in each County since 1989 are shown below. TAXABLE SALES AND NUMBER OF SALES PERMITS SAN MATEO AND SANTA CLARA COUNTIES For Years 1989 through 1993 ($000's) Santa Clara County San Mateo County Year No.of Taxable Percent No.of Taxable Percent (As of July 1) Permits Sales Increase Permits Sales Increase 1989 48,206 17,343,878 8.3% 22,008 7,541,003 4.8% 1990 47,832 17,914,405 3.9 22,764 7,843,359 4.0 1991 48,559 17,425,346 -2.7 22,258 7,863,738 0.3 1992 50,789 17,661,362 1.4 22,835 8,093,618 2.9 1993 50,755 18,516,103 4.8 23,213 8,143,240 0.6 Source: California State Board of Equalization Major employers in each County, ranked by employment size, are shown in the following table. Santa Clara County's major employers, led by Lockheed Missiles & Space Company, Hewlett-Packard and IBM, are active in the high technology, aerospace and electronic industries. Many of these companies are the resident hardware and software producers of"Silicon Valley." San Mateo County's employment base includes United Airlines, which employs over 18,000 persons at the San Francisco International Airport, and several electronics manufacturers, medical facilities and research organizations. B-3 [S&Y DOC SF942770.011 DATED 12/06/941 MAJOR EMPLOYERS SANTA CLARA AND SAN MATEO COUNTIES (Firms Ranked by Employment Size) Employers Location Employees SANTA CLARA COUNTY: Hewlett-Packard Company Palo Alto 16,000 County of Santa Clara San Jose 13,801 Lockheed Missiles& Space Co. Sunnyvale 1 1,61 1 IBM Corporation San Jose 8,500 Stanford University Palo Alto 7,900 Stanford Hospital Palo Alto 5,323 Santa Clara Valley Health& Hosp. San Jose 5,165 City of San Jose San Jose 5,084 Apple Computers Cupertino 4,930 Sun Microsystems Mountain View 4,830 National Semiconductor Santa Clara 4,736 Intel Corporation Santa Clara 4,000 Pacific Bell San Jose 3,216 Tandem Computers Cupertino 3,100 Silicon Graphics Mountain View 2,929 Solectron Corporation Milpitas 2,900 Advanced Micro-Devices, Inc. Sunnyvale 2,866 Applied Materials Santa Clara 2,865 San Jose State University San Jose 2,800 Syntex Corporation Palo Alto 2,800 Good Samaritan Health Systems San Jose 2,653 Varian Associates Palo Alto 2,642 SAN MATEO COUNTY: United Airlines San Francisco Int'I Airport 18,430 County of San Mateo Redwood City 4,500 Raychem Corporation Menlo Park 4,000 American Airlines,Inc. San Francisco Intl Airport 2,500 SRI International Menlo Park 2,300 Seton Medical Center Daly City 2,200 Oracle Corporation Foster City 2,150 Franklin Resources San Mateo 2,077 Kaiser Foundation Hospital Redwood City 1,982 Mills Peninsula Hospital Burlingame 1,900 Genentech,Inc. South San Francisco 1,867 U.S. Postal Service San Mateo 1,538 Sequoia Hospital Redwood City 1,300 Stanford Linear Accelerator Menlo Park 1,272 Informix Software, Inc. Menlo Park 1,200 Macy's San Mateo 1,090 Source: San Jose Chamber of Commerce, November 1994;San Mateo County Economic Development Association, Inc., 1993. B-4 [S&Y DOC SF942770.011 DATED 12/06/941 i The unemployment rates for both Counties for 1989 through 1993 are shown below. CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT SAN MATEO AND SANTA CLARA COUNTIES Annual Averages(1990-1993) Santa Clara County 1990 1991 1992 1993 Civilian Labor Force(1) 846,700 833,700 837,500 838,800 Employment 812,800 787,200 781,200 782,100 Unemployment 33,900 46,500 56,300 56,700 Unemployment Rate(2) 4.0% 5.6% 6.7% 6.8% San Mateo County 1990 1991 1992 1993 Civilian Labor Force(1) 368,400 364,100 365,000 366,000 Employment 357,900 349,300 346,100 347,100 Unemployment 10,500 14,800 18,900 18,900 Unemployment Rate(2) 2.8% 4.1% 5.2% 5.2% (1) Labor force by place of residence. Employment includes persons involved in labor-management trade disputes. (2) The unemployment rate is computed from non-rounded data; therefore it may differ from rates calculated by using rounded figures in this tahle. Source: State of California, Employment Development Department The following table shows the ten largest taxpayers of secured taxes for the Counties. TEN LARGEST TAXPAYERS AS OF 1993 SANTA CLARA AND SAN MATEO COUNTIES Santa Clara County San Mateo County Hewlett-Packard United Airlines Lockheed Missiles& Space Co. Pacific Gas&Electric IBM Corporation Pacific Bell Pacific Bell American Airlines Pacific Gas&Electric Genentech Sobrato Development Corp. Raychem Corporation Richard T. Perry,et.al Delta Airlines Tandem Computers United Telecom/U.S. Sprint Syntex Redwood Shores Properties Metropolitan Life Insurance Co. USAir,Inc. Source: Offices of the Santa Clara County Treasurer-Tax Collector and the San Mateo County Treasurer-Tax Collector. B-5 [S&Y DOC SF942770.011 DATED 12/06i941 Construction The following table shows building permit activity in Santa Clara County for 1989-1993 and in San Mateo County for 1989-1993. BUILDING PERMIT ACTIVITY SANTA CLARA AND SAN MATEO COUNTIES For Years 1989 through 1"3 SANTA CLARA COUNTY: Type 1989 1990 1991 1992 1993(1) Residential: New Single dwellings $ 402,555 $ 288,014 $ 268,931 $ 280,131 $ 89,738 New Multi-dwellings 125,184 216,002 148,266 80,671 19,605 Additions/Alterations 161,812 182,501 175,512 182,049 49,153 Total Residential $ 689,551 $ 686,517 $ 592,709 $ 542,851 $158,496 Non-Residential: New Commercial $ 160,567 $ 207,147 $ 154,964 $ 151,682 $29,331 New Indust rial 127,235 182,585 65,962 63,073 15,471 Other 49,513 39,271 35,466 45,896 17,968 Additions/Alterations 419,432 331,978 374,962 381,649 113,189 Total Non-Residential $ 756,747 $ 760,981 $ 631,354 $ 642,300 $175,959 TOTAL VALUATION $1,446,298 $1,447,498 $1,224,063 $1,185,151 S334,445 No.of New Dwelling Units Single dwellings 2,548 1,675 1,663 1,693 525 Multi-dwellings 2,311 3,646 2,102 1,143 252 Total Units 4,859 5,321 3,765 2,836 777 SAN MATEO COUNTY: Type 1989 1990 1991 1992 1993(1) Residential: New Single dwellings $216,674 $139,797 $122,888 $83,835 $ 17,084 New Multi-dwellings 109,034 20,219 38,163 38,808 3,029 Additions/Alterations 155,624 149,160 128,515 128,826 35,352 Total Residential $481,332 $309,176 $289,566 $251,469 $55,465 Non-Residential: New Commercial $ 91,510 $ 77,279 $ 35,363 $ 30,265 $ 8,360 New Industrial 12,256 3,408 34,707 3,689 0 Other 19,593 10,479 10,012 10,455 3,473 Additions/Alterations 114,616 124,447 102,771 112,354 43,372 Total Non-Residential $ 237,975 $ 215,613 $ 182,853 $ 156,763 $ 57,205 TOTAL VALUATION $719,307 $524,789 $472,419 $408,232 $112,670 B-6 [S&Y DOC S17942770.011 DATED 12/06/94] No. of New Dwelling Units Single dwellings 1,085 636 503 342 79 Multi-dwellings 1,335 191 331 596 49 Total Units 2,420 827 834 938 128 (1) 1993 data as ofApril, 1993. Source: Construction Industry Research Board. Agriculture Santa Clara County was once a leading producer of apricot, cherry and prune crops. However, recent industrial development and urbanization have displaced most of the agricultural land. Most of the remaining agricultural acreage is found around the communities of Gilroy and Morgan Hill. Major crops include cut flowers, wine grapes, mushrooms and nursery stock. Dairy products and seasonal crops including tomatoes, bell peppers, strawberries, prunes, walnuts and garlic provide the balance of agricultural production in Santa Clara County. San Mateo County is a national leader in the production of ornamental flowers and nursery products. This industry, which accounts for about 80% of total County revenue from agriculture, developed in the County due to the favorable climate and proximity to the San Francisco International Airport. The industry is located in the western part of the County, particularly around the communities of Half Moon Bay and Pescadero. Transportation Transportation has played a vital role in the Bay Area's growth as an economic center. Seven general purpose ports located in the area and numerous special purpose facilities serve manufacturing industries and facilitate distribution to world markets. The San Francisco Bay Area is the western terminus for three transcontinental railroads. An extensive network of freeways serves the area. The Bay Area's network of freeways and expressways provides the peninsula industries access to regional, national and international markets. U.S. 101, a parallel route along the Bay, and a major north-south highway between San Francisco and Los Angeles, provides access to the deep sea ports at San Francisco and Redwood City, and to air passenger and cargo facilities of San Francisco International and San Jose International Airports. Interstate Highway 280 traverses the ridge of the peninsula and joins U.S. 101 in San Francisco. Additional north-south transportation is provided by Interstate 5, the major national highway reaching north to Canada and south through San Diego, and State Highway 82. Principal routes connecting the peninsula with the East Bay's air and sea ports are State Highway 17, Interstate Highway 680 and the San Mateo, Dumbarton, and San Francisco-Oakland Bay Bridges. B-7 [S&Y DOC SF942770.011 DATED 12/06/94] The main coast line of the Southern Pacific Railroad traverses Santa Clara County, providing connections to San Francisco, Oakland, and Los Angeles, commuter passenger service is operated on the Southern Pacific between San lose and San Francisco In addition to local bus service, cities in the District are served by Santa Clara County Transit System, San Mateo County Transit District and Greyhound Bus Lines. The Bay Area Rapid Transit System ("BART") provides passenger rail service within Contra Costa, Alameda, San Francisco and northern San Mateo Counties. San Francisco International Airport, located in San Mateo County, is served by all major scheduled air carriers. Metropolitan Oakland International Airport is served by eight scheduled airlines and two large supplemental carriers. The San Jose International Airport is served by twelve airlines. General aviation airports include Reid-Hillview in San Jose, South County Airport, Palo Alto Airport, San Carlos Airport, and Half Moon Bay Airport. Water transportation is provided by the international water transportation complex of the San Francisco Bay; major ports include the Port of Oakland, Port of San Francisco, and Port of Redwood City. Education In 1994, approximately 235,442 students were enrolled in in Santa Clara County's 314 public elementary and high schools. In San Mateo County about 85,090 students attended approximately 96 elementary, 36 middle and 24 public high schools. Institutions of higher education include Stanford University, the University of Santa Clara, San Jose State University, and nine public community colleges. B-8 [S&Y DOC SF942770.011 DATED 12/06/94] APPENDIX C FORM OF BOND COUNSEL'S OPINION C-1 f �� ESCROW AGREEMENT by and between the MIDPENINSULA REGIONAL OPEN SPACE DISTRICT and SEATTLE-FIRST NATIONAL BANK Dated as of January 1, 1995 I RELATING TO THE MIDPENINSULA REGIONAL OPEN SPACE DISTRICT 1987 PROMISSORY NOTES SF2-37187.1 I ESCROW AGREEMENT This Escrow Agreement (the "Agreement") , dated as of January 1, 1995, by and between the Midpeninsula Regional open Space District, an open space district duly organized and existing under the laws of the State of California (the "District") , and Seattle-First National Bank, a national banking association duly organized and existing under the laws of the United States of America and having a principal corporate trust office in Seattle, Washington, and being qualified to accept and administer the trust hereby created (the "Escrow Agent") ; WITNESSETH: WHEREAS, the Board of Directors of the District on March 11, 1987, duly adopted Resolution No. 87-09 (the 111987 Resolution") providing for the issuance and sale of $21,200,000 principal amount of its 1987 Promissory Notes (the 111987 Notes") ; and WHEREAS, the Board of Directors of the District on August 22, 1990, duly adopted Resolution No. 90-38 (the 111990 Resolution") providing for the issuance of $15,000,000 principal amount of its 1990 Promissory Notes (the 111990 Notes") for the purpose, among others, of retiring those certain 1987 Notes more particularly described in Exhibit A attached hereto and incorporated herein (the "Paid 1987 Notes") ; and WHEREAS, the District has determined that it would be in the best interests of the District and the residents of the District to provide for the retirement of the remaining portion SF2-37187.1 of the 1987 Notes, as more particularly described in Exhibit B attached hereto and incorporated herein (the "Refunded 1987 Notes") ; and WHEREAS, the Board of Directors of the District on December 14, 1994, duly authorized the execution and delivery of an Indenture (the "Indenture") by and between itself and First Interstate Bank of California, as trustee, providing for the issuance of $ principal amount of its 1995 Promissory Notes (the 111995 Notes") for the purpose, among others, of retiring the Refunded 1987 Notes; and WHEREAS, the District has taken action to cause to be delivered to the Escrow Agent for deposit in the Escrow Fund hereinafter referred to certain United States Treasury obligations (the "Escrow Securities") listed on Schedule I attached hereto and made a part hereof in an aggregate principal amount which, together with the money listed on Schedule I attached hereto and made a part hereof deposited in the Escrow Fund hereinafter referred to at the same time as such deposit and the income to accrue on such securities, will be sufficient to make the payments of the interest on and principal of the Refunded 1987 Notes maturing by their terms on March 1, 1995, as they respectively become due on such date and to redeem the Refunded 1987 Notes maturing on and after March 1, 1996, on March 1, 1995; and WHEREAS, the provisions of the 1987 Resolution and the Indenture are incorporated herein by reference as if set forth herein in full; SF2-37197.1 2 i NOW, THEREFORE, the District and the Escrow Agent hereby agree as follows: Section 1. Establishment and Maintenance of Escrow Fund. The Escrow Agent agrees to establish and maintain the Escrow Fund (the "Escrow Fund") until the Refunded 1987 Notes have been retired as provided in Section 2 hereof and to hold the Escrow Securities initially deposited in the Escrow Fund and the money (whether constituting the initial deposit in the Escrow Fund or constituting receipts on the Escrow Securities) in the Escrow Fund at all times as a separate trust account wholly segregated from all other securities, investments or money held by it, and all securities and money in the Escrow Fund are hereby irrevocably pledged to secure the retirement of the Refunded 1987 Notes as provided in Section 2 hereof; provided, that any money held in the Escrow Fund that is not used for the retirement of the Refunded 1987 Notes in accordance with the 1987 Resolution and Section 2 hereof shall, on March 1, 1995, be repaid to the District free from the trust created by the Agreement. Section 2. Payment from the Escrow Fund. The Escrow Agent is hereby irrevocably instructed to, and the Escrow Agent hereby agrees to, collect and deposit in the Escrow Fund the interest on and principal of the Escrow Securities held in the Escrow Fund promptly as such interest and principal become due, and to use such interest and principal, together with any other money deposited in the Escrow Fund, for the payment of the interest on and principal of the Refunded 1987 Notes maturing by their terms on March 1, 1995, as they respectively become due on I� SF2-37187.1 3 such date and to redeem the Refunded 1987 Notes maturing on and after March 1, 1996, on March 1, 1995, at the places and in the manner stipulated in the 1987 Resolution. Section 3. Deficiencies in the Escrow Fund. If at any time it shall appear to the Escrow Agent that the money in the Escrow Fund, including the anticipated proceeds of the Escrow Securities, will not be sufficient to make all payments required by Section 2 hereof, the Escrow Agent shall notify the District in writing as soon as reasonably practicable of such fact, stating the amount of such deficiency and the reason therefor, and the District shall use its best efforts to obtain and deposit with the Escrow Agent for deposit in the Escrow Fund, from any legally available moneys, the additional money necessary to make such payments; provided, that the Escrow Agent shall in no event or manner be responsible for the failure of the District to make any such deposit. Section 4. Compensation and Indemnification of the i Escrow Agent. a e one-time District shall a the Escrow Agent a o e ( ) pay g n time fee of $ for its services hereunder and shall reimburse the Escrow Agent for its out-of-pocket expenses (including but not limited to the fees and expenses, if any, of its counsel or accountants) incurred by the Escrow Agent in connection with its services hereunder; provided, that these fees and expenses shall in no event be deducted from the Escrow Fund, and provided further, that such fees and expenses shall not include the fees sF2-37187.1 4 of the Escrow Agent acting in the capacity of the Paying Agent under the 1987 Resolution. (b) The District agrees to indemnify the Escrow Agent, its agents and its officers or employees for, and hold the Escrow Agent, its agents and its officers or employees harmless from, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind (including, without limitation, reasonable fees and disbursements of counsel or accountants for the Escrow Agent) which may be imposed on, incurred by, or asserted against the Escrow Agent or such other party at any time by reason of its performance of Escrow Agent's services, in any transaction arising out of the Agreement or any of the transactions contemplated herein, unless due to the negligence or willful misconduct of the particular indemnified party. Section 5. Functions of the Escrow Agent. (a) The Escrow Agent undertakes to perform only such duties as are expressly and specifically set forth in the Agreement and no implied duties or obligations shall be read into the Agreement against the Escrow Agent. (b) The Escrow Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, and shall be protected and indemnified as stated in the Agreement, in acting, or refraining from acting, upon any written notice, instruction, request, certificate, document, report or opinion furnished to the Escrow Agent and reasonably believed by the Escrow Agent to have been signed or SF2-37187.1 5 presented by the proper party, and it need not investigate any fact or matter stated in such notice, instruction, request, certificate, document, report or opinion. (c) The Escrow Agent shall not have any liability hereunder except to the extent of its own negligence or willful misconduct, and in no event shall the Escrow Agent be liable for any special, indirect or consequential damages, even if parties I know of the possibility of such damages. The Escrow Agent shall have no duty or responsibility under the Agreement in the case of any default in the performance of covenants or agreements 1 contained in the 987 Resolution or in the case of the receipt of any written demand with respect to such default. The Escrow I Agent is not required to resolve conflicting demands to money or property in its possession under the Agreement. (d) The Escrow Agent may consult with counsel of its own choice (which may be counsel to the District) and the opinion of such counsel shall be full and complete authorization to take or suffer in good faith any action in accordance with such opinion of counsel. (e) The Escrow Agent shall not be responsible for any of the recitals or representations contained herein or in the 1987 Resolution. (f) The Escrow Agent may become the owner of, or acquire any interest in, any of the 1987 Notes with the same rights that it would have if it were not the Escrow Agent, and may engage or be interested in any financial or other transaction with the District. sF2-37187.1 6 (g) The Escrow Agent shall not be liable for the accuracy of the calculations as to the sufficiency of the Escrow Securities and the other money deposited in the Escrow Fund to pay the interest on or principal of the Refunded 1987 Notes as provided in Section 2 hereof. (h) The Escrow Agent shall not be liable for any action or omission of the District under the Agreement, the 1987 Resolution or otherwise. (i) Whenever in the administration of the trust of the Agreement the Escrow Agent shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or willful misconduct on the part of the Escrow Agent, be deemed to be conclusively proved and established by a certificate of an authorized representative of the District, and such certificate shall, in the absence of negligence or willful misconduct on the part of the Escrow Agent, be full warrant to the Escrow Agent for any action taken or suffered by it under the provisions of the Agreement upon the faith thereof. (J) The Escrow Agent may at any time resign by giving written notice to the District of such resignation. The District shall promptly appoint a successor Escrow Agent by the resignation date. Resignation of the Escrow Agent will be effective sixty (60) days after notice of the resignation is given as stated above or upon appointment of a successor Escrow SP2-37187.1 7 Agent, whichever first occurs. If the District does not appoint a successor Escrow Agent by the resignation effective date, the resigning Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor Escrow Agent (or may deposit with the court the Escrow Securities and money held by it in trust under the Agreement) , which court may thereupon, after such notice, if any, as it may deem proper and prescribe and as may be required by law, appoint a successor Escrow Agent. After receiving a notice of resignation of an Escrow Agent, the District may appoint a temporary Escrow Agent to replace the resigning Escrow Agent until the District appoints a successor Escrow Agent. Any such temporary Escrow Agent so appointed by the District shall immediately and without further act be superseded by the successor Escrow Agent so appointed. (k) The Escrow Agent will provide the District with annual statements of the account maintained hereunder. Section 6. Notices. All notices and communications hereunder shall be in writing and shall be deemed to be duly given if received or sent b first class mail as follows: g Y If to the District: Midpeninsula Regional Open Space District 330 Distel Circle Los Altos, California 94022 Attention: General Manager If to the Escrow Agent: Seattle-First National Bank Bond Trustee Services 1001 Fourth Avenue, filth Floor Seattle, Washington 98154 I� I SF2-37197.1 8 Section 7. Severability. If any section, paragraph, sentence, clause or provision of the Agreement shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such section, paragraph, sentence, clause or provision shall not affect any of the remaining provisions of the Agreement. Section 8. Execution. The Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all together shall constitute but one and the same agreement. SF2-37187.1 9 IN WITNESS WHEREOF, the District and the Escrow Agent have caused the Agreement to be executed each on its behalf as of the day and year first above written. MIDPENINSULA REGIONAL OPEN SPACE DISTRICT By President of the Board of Directors [SEAL] I Attest: S e Directors Secretary of the Board of Direct r SEATTLE-FIRST NATIONAL BANK By Assistant Vice President I SF2-37197.1 10 i i SCHEDULE I Cash Deposit [TO COME] Escrow Sgcurities United States Treasury Certificates of Indebtedness - State and Local Government Series Principal Amount Interest Rate Maturity Date [TO COME] I i SF2-37187.1 I-1 EXHIBIT A [TO COME] i I sF2-37187.1 A-1 �s EXHIBIT B [TO COME] I i I I SF2-37187.1 B—1