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Home My Public Portal About19981214 - Agendas Packet - Board of Directors (BOD) - 98-30 Regional Open ice MIDPENINSULA REGIONAL OPEN SPACE DISTRICT Meeting 98-30 NOTICE OF SPECIAL MEETING MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY AND SPECIAL.MEETING BOARD OF DIRECTORS OF THE MIDPENINSULA REGIONAL OPEN SPACE DISTRICT AGENDA* 6:30 P.M. 330 Distel Circle Monday Los Altos, California December 14, 1998 *** PLEASE NOTE*** 6:30 P.M. Closed Session Start Time 7:30 P.M. Public Meeting Start Time (6:30) ROLL CALL SPECIAL MEETING OF THE BOARD OF DIRECTORS OF THE MIDPENINSULA REGIONAL OPEN SPACE DISTRICT CLOSED SESSION The Closed Session will begin at 6:30 P.M. At 7:30 P.M., the Board will adjourn the Special Meeting Closed Session to the Special Meeting, and at the conclusion of the Special Meeting, the Board may reconvene the Special Meeting Closed Session. 1. Conference with Legal Counsel - Existing Litigation - Government Code Section 549569(a) A. Richard v. Midpeninsula Regional Open Space District San Mateo County Case No. 402294 B. Obermeyer et al. v. Midpeninsula Regional Open Space District San Mateo County Case No. 405231 2. Conference With Real Pronea Negotiator- Government Code Section 54956.8 Santa Clara County Assessor's Parcel Numbers: 544-28-004. 544-29-Real Property ty , 006; 544-30-002 &-003; 544-31-002, -003, &-004; 544-33-001, -002, & -003; 544-33-014; 544-50-001; 544-50-004; 544-56-004; 558-41-007; 558- 41-011; 558-41-017 & -018; and 558-42-001. Negotiating Parties: Arlie Land&Cattle Company. Nego,iato: John Musumeci Under Negotiations: Instructions to negotiator will concern price and terms of payment. (7:30) SPECIAL MEETING OF THE BOARD OF DIRECTORS I 330 Distel Circle . Los Altos, CA 94022-1404 . Phone: 650-691 -1 200 , � FAX:650-691 0485 . E-mail: mrosrl�sope�r�spat e.org . Web site: ut�ww.openspace.org f3<arcl nt f)net tot,:Pete Siemens,Mary C.Davey, led Cyr, Deane little,Nonette Nanko, Betsy Croy der,Kenneth C. Nit/ I Craig Britton i Meeting 98-30 Page 2 ** ORAL COMMUNICATIONS -- Public ADOPTION OF AGENDA *** ADOPTION OF CONSENT CALENDAR-- M. Davey BOARD BUSINESS (7:45) 1. Review of 1997-1998 Actual Budget Expenditures, Mid-Year Review of 1998-1999 Budget, and Review of Proposed 1999 Financing -- Budget Committee 2. Authorization to Execute and Deliver a Site Lease, Project Lease, Purchase Contract, and Other Items Required to Allow for the Issuance and Sale of$31,000,000 of Midpeninsula Regional Open Space District Financing Authority 1999 Revenue Bonds; Approval of Agreement for Bond Counsel Services with Orrick, Herrington& Sutcliffe; and Setting of Public Hearings on January 12 and 13, 1999 for Approval of Financing and Findings Pursuant to Government Code Section 6586.5 -- M. Foster Resolution of the Board of Directors of the Midpeninsula Regional Open Space District Authorizing the Execution and Delivery of a Site Lease, a Project Lease, and a Continuing Disclosure Agreement, and Approving a Preliminary Official Statement and Approving Certain Other Matters in Connection Therewith (7:55) THE SPECIAL MEETING OF THE BOARD OF DIRECTORS OF THE MIDPENINSULA REGIONAL OPEN SPACE DISTRICT WILL ADJOURN AT THIS TIME IN ORDER TO CONVENE A SPECIAL MEETING OF THE MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY. THE SPECIAL MEETING OF THE BOARD OF DIRECTORS OF THE MIDPENINSULA REGIONAL OPEN SPACE DISTRICT WILL RECONVENE AFTER THE ADJOURNMENT OF THE FINANCING AUTHORITY MEETING (8:30) 3. Annual Dedication Report --C. Britton (8:40) INFORMATIONAL REPORTS -- Directors and Staff ADJOURNMENT *NOTE: 77mes are estimated and items may appear earlier or later than listed. Agenda is subject to change of order. ** TO ADDRESS THE BOARD: The Chair will invite public comment on agenda items at the time each item is considered by the Board of Directors. You may address the Board concerning other matters during oral communications. Each speaker will ordinarily be limited to 3 minutes. Alternately, you may comment to the Board by a written communication, which the Board appreciates. *** All items on the consent calendar shall be roved without discussion one motion. Board members, approved by the General Manager, and members of the public may request that an item be removed from the Consent Calendar during consideration of the Consent Calendar. Regional ace Open , . R-98-148 MIDPENINSULA REGIONAL OPEN SPACE DISTRICT Meeting 98-30 December 14, 1998 AGENDA ITEM _1_ A 'ENt A ITEM Review of 1997-1998 Actual Budget Expenditures, Mid-Year Review of 1998-1999 Budget, and Review of Proposed 1998 Note Issue 1998 ADMINISTRATION AND BUDGET COMMITTEE'S RECOMMENDAT10N Accept this report of the Administration and Budget Committee and the attached Controller's Mid-Year Financial Review. DISCUSSION At your March 25, 1998 meeting, the Administration and Budget Committee recommended that the Committee review the 1997-1998 actual versus budgeted expenditures; review the 1998-1999 budget and expenditure status; review the capital improvement budget; reassess the validity of the target average six percent growth guideline in the operating budget, and establish the methodology by which the guideline will be applied in future years; and meet with the Controller for a review of the District's financial status (see report R-98-41). The Administration and Budget Committee met on November 19 with the General Manager and Program Managers to review 1997-1998 actual versus projected budget expenditures, the status of the current budget through September 30, 1998, and the six percent average growth guideline definition. The Committee is satisfied that the budget is within established guidelines, and has concluded that there is currently no need for any budget adjustments. The current six percent average growth guideline definition, which was presented by staff, should be considered to be in draft form only. Review of the guideline should continue into next fiscal year for further refinement of the definition prior to submittal for final Board approval. The new Board President should consider reappointing a current committee member to next year's Administration and Budget Committee to insure continuity. The Committee met with District Controller M. Foster to review his mid-year financial report. The Controller indicated that financial conditions for the first six months are in excellent order and consistent with the District's long-term financial program. A copy of the Controller's report is attached for your review. At the same time, the Committee also met with underwriters Stone and Youngberg to review the potential for an additional note issue this fiscal year. They indicated that financial conditions and terms for a note issue are very favorable at this time, and the Budget Committee concurs. Prepared by: Administration and Budget Committee Directors Cyr (chair), Nitz, and Davey Deirdre Dolan, Administrative Services Manager Contact person: Director Cyr 330 Distel Cirde o Los Altos, CA 94022-1404 & Phone: 050-691-1200 FAX: 050-091 0485 E-rrmail: mrosdo'openspace.org Web site: www.open pace.org t3oard of t ire(tors.Pete Siemens,Nil iry C. Davev, led C vr, Deane tittle, ,Nonette f-lanko,Betwy Crowder, Kenneth C_ Nit/ I Grail;Britton M-98-01 MEMORANDUM November 9, 1998 TO: Board of Directors FROM: M. Foster, Controller SUBJECT: Mid-Year Financial Review CONTROLLER'S REPORT Attached are unaudited financial statements for the six months ended September 30, 1998. Exhibit A contains the District's September 30 balance sheet compared to our audited position on March 31. Our cash balance is down$2.8 million due to debt service payments, normal cash expenses and $1.0 million of land purchases. It should be noted that $5.4 million of the $16.2 million cash balance are reserve funds to secure outstanding public notes and, therefore, not available to fund Districts expenditures. The District purchased 1 022 500 ased $ of new land in this six- month period. These p � , P e od. additions are detailed in Exhibit F. The District bonded indebtedness is now approximately 70°l0 of our statutory debt ceiling. Exhibit B shows our six-month revenues compared to the same period a year ago and to the twelve-month budget. Tax receipts in this period are up 39%form the prior year period because the District returned a$1.13 million overpayment to Santa Clara County in n 1997 Excluding °Ju ethe return of the 1996 overpayment,ment tax receipts are u 11 to m • � Y P P line with the reported increase in assessed valuation in both Santa Clara and San Mateo Counties. Information from the counties indicates that overall tax revenue will exceed our 1998-1999 budget by approximately $245,000 (2%). Exhibits C, D, and E review six month operational an development spending against the twelve month budget®, versus the time-phased six-month budget(D), and compared to the same period last year(E). The District spent 45%of its total twelve-month administrative, operations, and development budget during the first six months. This is comparable to the levels at mid-year in the prior six years(46%, 45%, 42%, 446%, 41%, 45%). By program, six-month(non-land purchase) spending versus twelve month budget was Administration 44%, Public Communication 44%, Operations 49%, Planning 40%, and Acquisition/Enterprise 34%. The Planning Team estimates that approximately 80% of the structures and improvements budget will be spent by fiscal year-end. I M-98-01 Page 2 Six-month spending was $844,800 (23%)below the time-phased program budgets, similar to the 22%mid-year underrun of last year. The time-phased budgets are usually front-loaded. It is reasonably safe to assume that overall(non-land purchase) spending will be about$400,000(6%)under budget. As shown in Exhibit E, administration, operational, and development spending is up 5% from last year's spending rate. Benefits are up for two reasons. First,the required PERS contribution is up significantly due to the Two Percent at 55-contract amendment. Second, there was a$70,000 refund in social security Medicare payments in the prior year period. Over the last five years, total salary and benefit expense has increased at a 5% annual compound rate while total expenses(excluding land purchases and debt service) have increased at a 4%annual compound rate. Overall, the financial results of the first six months indicate revenues and expenditures are consistent with the District's long-term financial plans. Prepared by: Bunny Congdon, Accounting Specialist Michael Foster, Controller Contact person: Michael Foster EXHIBIT A MIDPENINSULA REGIONAL OPEN SPACE DISTRICT March 31 and September 30, 1998 (Thousands) September 30, 1998 March 31, 1998 (Unaudited) (Audited) Cash and Equivalents $16,187.7 $18,940.2 Receivables 1,173.4 3,404.6 Prepaid Expenses 23.4 23.3 Land, at cost 163,489.4 162,417.0 Equipment 1,771.2 1,682.5 Structures and Improvements 8,446.6 8,104.2 TOTAL ASSETS $191,091.7 $194,571.8 Accounts Payable $243.2 $171.1 Accrued Liabilities 114.9 183.3 Trust Fund--City of Menlo Park 327.1 289.2 Land Contract Debt 711.3 717.8 Public Notes Payable 77,055.2 79,040.2 TOTAL LIABILITIES $78,451.7 $80,401.6 TOTAL EQUITY $112,640.0 $114,170.2 EXHIBIT B MIDPENINSULA REGIONAL OPEN SPACE DISTRICT Six Month Revenue Versus Prior Year (Unaudited) (Thousands) Months Ended September 30 1,998.0 1,997.0 Property Taxes $4,911.1 $3,443.9 Tax Subventions 430.7 198.4 Interest Income 412.8 359.1 Grant Income 175.4 164.9 Rental Income 275.5 275.9 Fines 5.3 5.0 Other 15.6 25.3 TOTAL RECEIPTS $6,226.4 $4,472.5 Six Month Revenue Versus Twelve Month Budget Twelve Month Six Month $ Budget Receipts Received Property Taxes $11,712.0 4,911.1 42 Tax Subventions 430.0 430.7 100 Interest Income 900.0 412.8 46 Grant Income 465.0 175.4 38 Enterprise 600.0 275.5 46 Fines 0.0 5.3 0 Other 397.0 15.6 4 TOTALS $14,504.0 $6,226.4 43 I� EXHIBIT C MIDPENINSULA REGIONAL OPEN SPACE DISTRICT Six Month Operating v. Twelve Month Budget April - September, 1998 (Thousands) Twelve Month Six Mont. Budget Spending Spent ------------------ - -- Salaries $2,853.5 $1,309.4 46 Benefits 783.9 346.4 44 ------------------ ----------------- ------------ Subtotal $3,637.4 $1,655.8 46 Election Expense 75.3 0.0 0 Other Contract Services 349.7 170.1 49 Vehicle Expense 157.5 83.8 53 Contract Site Maintenance Exp. 220.1 100.9 46 Acquisition Expense (Inc.Legal) 277.0 34.6 12 Structures & Improvements 870.8 342.3 39 Printing & Duplicating 30.5 16.6 54 Rents & Leases 17.9 13.1 73 Training & Conferences 61.8 15.2 25 Equipment & Vehicles 161.0 88.7 55 Insurance 152.3 153.4 101 Utilities 93.2 50.4 54 Postage 84.5 17.1 20 Site Preparation 10.0 8.2 82 Communications(Publications&Projects) 135.5 67.4 50 Other Non-Land 125.8 60.4 48 --------------- ----------------- ------------ TOTAL (NON-LAND) $6,460.3 $2,878.0 45 Debt Service 6,467.5 4,225.9 65 Land Option Fees 20.0 20.0 100 Land Acquired 11,303.0 1,022.5 9 Building Improvements 0.5 0.0 0 ------- ----------------- TOTAL $24,251.3 $8,146.4 - 34 EXHIBIT o Six Month Operating axeeooeo V. Time-Phased Budget April - September, zxvo (zuouoaoua) Budget Actual Variance '--------- --'--- --- -----------' ------------ Salaries $1'415.3 $1'309.4 $105.9 acuezito 392.2 346.4 «s.n � Election Expense 0.0 0.0 »'« � Other contract Services 234.3 170.1 s«.z � Vehicle Expense yo.s 83.8 6.7 � Contract site maintenance Exp. 115.9 100 y zs o � . . � Acquisition sopcooc (zoc.Leeaz} 262.0 o*.s 227.4 Structures u Improvements 549.9 342.3 207.e Printing & Duplicating 17.8 16.6 1.2 Rents & Leases 9.1 13.1 (4.0) Training & Conferences a«.s 15.2 19.1 Equipment & v=uiczeo 155.2 88.7 ao.s Insurance 152.3 153.4 (1.1) Utilities 46.7 sn.« (a.,) Postage 42.3 17.1 25.2 Site Preparation 10.0 8.2 1.8 Commuoioatiooa(Pubzicati000&nrujects) 135.5 67.4 68.1 Other Non-Land 59.5 60.4 (o.y) � ---'- ------------ ----------------- ------------ TOTAL <mom-zAmD> $3,722.8 $2'878.0 $844.8 � � ooBr SERVICE � ------------------------------------- Principal Repayment $z'eyz.s $z.yxz.s 0.0 Interest 2'232.9 2,234.4 (z.$) - - -'-'---------- ------'-----'---- ------------ Total Principal a Interest $4,e24.4 $*.zos.y ($1.5} � � � � � � EXHIBIT E (Thousands) atn Months Ended September so zseo 19e7 Increase _________ _________ ------------ Salaries $1,309.4 $1,260.7 u Benefits »*s.« 176.2 y/ � Election Expense 0.0 0.0 o Other Contract Services 170.1 108.2 sr vehicle Expense 83.8 80.2 « Contract Site Maintenance Exp. 100.9 100.0 z Acquisition Expense (zoc.Legal) s«.s 35.9 -« Structures a Improvements 342.3 422.4 -19 � Printing & Duplicating 16.6 ze's zs � Rents a Leases 13.1 s's 147 � � Training a Conferences 152 aou 'ss � � Equipment & vehicles on 7 z�z �' ' -37 � � Insurance zss.« 148.7 a Utilities 50.4 «e.z zu postage 17.1 24.7 -az ' � Site Preparation 8.2 o'n n � � coomouizatiooa(eubIiratinos&ernjento) 674 nuo -17 | Other Non-Land 60.4 so.s » ------------------ ----------------- ------------ � rorAL <Nom-zAmo> $z'ovn.o $z,rss.s s � � Debt Service 4'225.9 3,564.7 ze Land Option Fees 15.0 15.0 o � Land Acquired 1,022.5 616.0 ao Building Improvements 0.0 10.0 -zoo i ------------------ ----------------- ------------ | TOTAL � $8'141.4 $6'941.2 17 ' � � �. � � � � � � � � EXHIBIT F Land Acquired April 1 to September 30, 1998 SELLER DATE PRESERVE CASH PRICE AITKEN 09/08/98 Russian Ridge 775,000 FAUCHER 08/13/98 Sierra Azul 100,000 NEAR-Deposit C5/05/98 Long Ridge 1,000 KELSEY-Deposit 05/11/98 Sierra Azul 1,000 WEAVER 05/28/98 La Honda Creek 50,000 00 LINDNER-Deposit 06/17/98 Mt. Umunhum 1,000 RUSSIAN CONVENT-Deposit 06/24 98 Mills Creek P / 1,000 LANPHEAR-Deposit 07/15/98 Mt. Umunhum 1,000 MARDEN-Deposit 08/20/98 Sierra Azul 1,000 GRAINGER-Deposit 08/20/98 Monte Bello 10,000 GIRDNER-Deposit 08/27/98 Saratoga Gap 1,000 CALVILLO-Deposit 09/25/98 Sierra Azul 1,000 CORTE MADERA ASSOC. 09/28/98 Windy Hill 79,500 GRAND TOTAL 1,022,500 I I I Regionai Open e.r MIDPENINSULA REGIONAL OPEN SPACE DISTRICT R-98-151 Meeting 98-30 December 14, 1998 AGENDA ITEM 2 AGENDA ITEM Issuance of 1999 Revenue Bonds CONTROLLER'S RECOMMENDATIONS 1. Approve the following attached resolution required for the District to complete a lease financing, which will allow the Midpeninsula Regional Open Space District Financing Authority to complete the issuance and sale of$31.0 million of Midpeninsula Regional Open Space District Financing Authority 1999 Revenue Bonds. Resolution of the Board of Directors of the Midpeninsula Regional Open Space District authorizing the execution and delivery of a site lease, a project lease, and a continuing disclosure agreement, and approving a preliminary official statement and approving certain other matters in connection therewith. 2. Set Public Hearings for Board of Directors of the Midpeninsula Regional Open Space District to be held Tuesday, January 12, 1999 at the Town of Portola Valley's Town Hall, 765 Portola Road, Room 8 and Wednesday, January 13, 1999 at the District's Administrative Office at 330 Distel Circle, Los Altos for approval of financing and findings pursuant to Government Code Section 6586.5. 3. Approve the Agreement for Bond Counsel Services with Orrick, Herrington & Sutcliffe of San Francisco. (Completed copies of the resolution and all of the documentation are available for public review at the District office.) DISCUSSION The healthy increase in property tax revenue and favorable bond and bond insurance market conditions make it advantageous to propose the issuance of approximately $29.6 million of lease debt. Of this principal amount, $12.0 million would be used to refinance the outstanding 1992 Notes and a portion of the 1990 Notes. The Lease issued by the District will be sold to, and the District will enter into the lease with, the Midpeninsula Regional Open Space District Financing Authority (the "Authority"), which you approved the creation of at your April 24, 1996 meeting. The District will pay rent under the Lease to the Authority, which will, in turn, issue its 1999 Revenue Bonds (using the District's payments as security for payment of the Bonds). District lands are not put at risk. By utilizing this joint powers financing authority, 330 Distel Circle - Fos Altos, CA 94022-1404 - Phone: 650-691-1200 FAX: 050-691-0485 - F-mail: mrosd(�?«penspace.org # Web site:www,op(,nsl)a((.org Homd of Oiw,tors Pete siemens,Mory C. [Xivey, led Cyr, Deaner I ittle, Nonetie Hanker,Retry Crovvde r, Kennelh(. Nit/ . Ge=not,d Almmr,er:L t raw Britton R-98-151 Page 2 this issue has been structured to minimize the District's near-term debt service while yielding $17.5 million of immediate new land acquisition funds. Despite receiving $17.5 million additional cash, the District's debt service payments would actually decline by $1.3 million in the first five years and decrease by $1.0 million in the first ten years. The change in debt service for each five-year period is as follows: (Willions) Beib After Chang 1998/99 - 2002/03 33.3 32.0 < 1.3> 2003/04 - 2007/08 33.8 34.1 0.3 2008/09 - 2012/13 35.0 38.1 3.1 2013/14 - 2017/18 31.2 42.0 10.8 2018/19 - 2022/23 9.3 23.1 13.8 2023/24 - 2027/28 5.4 23.0 17.6 2028/29 12.8 12.8 148.0 205.1 57.1 The issue has been structured as a lease financing in order to spread the principal repayments over a thirty two-year period. The maximum repayment period under a note structure is twenty years. Another favorable element is that the bond insurer has agreed to accept a surety bond as complete satisfaction of reserve fund requirements. On most prior District financing, an 8% reserve fund ($2.4 million in this case) would have been required. This financing will be insured by AMBAC. Based on current bond market conditions, the expected total cost of funds would be in the range of 5.3%. Estimated Sources and Uses (millions) Sources: 1999 Lease $29.56 1990 & 1992 Note Reserve Funds 1.01 $30.57 Uses: Refund 1990 & 1992 Notes $12.03 Surety Bond .06 Bond Insurance .48 Underwriter Discount .30 Other Cost of Issuance .20 Land Acquisition Funds Jim $30.57 R-98-151 Page 3 The proposed issue is consistent with long-term cash projections and is accommodated within our statutory debt limit. Attached is a ten-year cash flow projection assuming no additional debt issues in the future. After the proposed debt issue and refinancing, the District's bonded indebtedness would be about 54% of the District's statutory debt limit, as a lease financing does not count against the limit. The proposed bond counsel is Orrick, Herrington & Sutcliffe. This firm has served in this role for virtually all of the District's debt issues and staff desires to maintain this successful relationship. Orrick has proposed a$75,000 fee, which is consistent with the last issue of comparable size. The proposed underwriter is Stone & Youngberg LLC. Stone & Youngberg have successfully managed several District financings and have done an outstanding job in optimizing the structure of this issue. The proposed underwriting fee of 1.0% is reasonable. The Midpeninsula,Regional Open Space District Financing Authority is responsible for executing a Bond Purchase Contract with Stone & Youngberg LLC, since the Authority will be issuing the actual revenue bonds. Summary of Proposed Transaction: 1. Amount: Not-to-exceed $31 million 2. Term: Thirty two years 3. Average Life: 17 years 4. Purpose: (1) Refinance 1990 & 1992 Notes ($12.0 million) in order to achieve significant near-term cash flow savings; and (2) provide $17.5 minion of new land acquisition funds 5. Interest Rates: To be priced in early January 1999. Estimated net cost of funds is 5.3% 6. Reserve Fund: None; will provide surety bond 7. Underwriting Fee: 1.0% of issue, or about $296,000 8. Closing Schedule: Mid January 1999 Preparation for this issue is now substantially complete and ready for your review and approval. Representatives from the underwriter and bond counsel will be at the meeting to answer any questions you may have. Parties to the Transaction: 1. Issuing Authority: Nfidpeninsula Regional Open Space District Financing Authority 2. Issuer: Midpeninsula Regional Open Space District 3. Trustee: BNY Western Trust Company 4. Underwriter: Stone and Youngberg 5. Bond Counsel: Orrick, Herrington and Sutcliffe R-98-151 Page 4 Duties of the Parties: 1. Issuing Authority: Act as the issuing authority for the District 2. Issuer: Issues lease debt, receives net proceeds, makes principal and interest payments, as required 3. Trustee: Administers lease for the benefit of the holders, collects principal and interest from District and makes payments to holders, and holds reserve fund 4. Underwriter: Purchases debt from District and Authority and sells to buyer 5. Bond Counsel: Prepares and certifies lease documents The Agreements: Note: These documents are substantially complete and correct but not meant to be in final form at this time. 1. Official Statement: Describes issue to potential buyers 2. Site Lem (between District and Authority): Authority agrees to assist in the financing of specified properties. District leases these properties to the Authority for $1 3. Project Lease (between District and Authority): District leases back the specified properties from the Authority and agrees to make principal and interest payments to the Authority necessary to service the debt 4. Continuing Disclosure Agreement: Appoints the Trustee as the Dissemination Agent with regard to new SEC disclosure rules The Authority will execute the following documents: 1. Bond Purchase Con (between Authority and Underwriter): Defines terms under which the underwriter will buy the issue from the District and Authority 2. Trust Agreement (between Authority and Trustee): Lays out all the details of how the issue will be administered Prepared by: Michael L. Foster, Controller Contact person: Same as above MROSD 10 YEAR CASH FLOW PROJECTION 12/12/98 6% TAX GROWTH AND 10%EXPENSE GROWTH IN 99-00 AFTER 99-00: 4%/YR TAX GROWTH, 6%/YR EXPENSE GROWTH ($Thousands) 10 YEAR FISCAL YEAR: 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 TOTAL BEGINNING CASH 18,940 18,814 7,230 6,963 7,000 7,093 7,008 6,962 6,945 6,950 18,940 TAX REVENUE 12,350 13,091 13,615 14,159 14,726 15,315 15,927 16,564 17,227 17,916 150,889 GRANT RECEIPTS 235 200 206 212 219 225 232 2391 246 253 2,267 JOINT PROJECTS/SALES 565 565 INTEREST INCOME 900 650 350 350 350 350 350 350 350 350 4,350 OTHER INCOME 682 682 734 734 734 734 734 734 734 734 7,236 TOTAL REVENUES 14,732 14,623 14,905 15,455 16,028 16,624 17,243 17,887 18,557 19,253 165,307 OPERATING EXPENSES 5,340 5,874 6,226 6,600 6,996 7,416 7,861 8,332 8,832 9,362 72,840 MAJOR IMPROVEMENTS 720 850 876 902 929 957 985 1,015 1,045 1,077 9,355 CURRENT DEBT SERVICE 6,442 6,529 6,563 6,610 7,150 6,665 6,714 6,762 6,809 6,862 67,106 NEW DEBT SERVICE -144 -546 -243 -194 -139 -79 -21 45 115 194 -1,012 TOTAL EXPENSES 12,358 12,707 13,422 13,918 14,936 14,958 15,539 16,154 16,802 17,495 148,289 OPERATING CASH FLOW 2,374 1,916 1,483 1,538 1,092 1,665 1,704 1,733 1,755 1,758 17,018 LAND CONTRACTS NOTE PROCEEDS (NET) 17,500 17,500 LAND PURCHASES 20,000 13,500 1,750 1,500 1,000 1,750 1,750 1,750 1,750 1,750 46,500 ENDING CASH 18,814 7,230 6,963 7,000 7,093 7,008 6,962 6,945 6,950 6,958 6,958 REQUIRED RESERVES 4,362 4,362 4,362 4,362 4,362 4,362 4,362 4,362 4,362 4,362 AVAILABLE CASH 14,452 2,868 2,601 2,638 2,731 2,646 2,600 2,583 2,588 2,596 CUMM NEW LAND 20,000 1 33,500 35,250 36,750 37,750 39,500 41,250 1 43,000 1 44,750 46,500 Regionai Open ace R-98-158 MIDPENINSULA REGIONAL OPEN SPACE DISTRICT Meeting 98-30 December 14, 1998 AGENDA ITEM 3 AGENDA ITEM Dedication Status of District Lands GENERAL MANAGER'S RECOMMENDATION Adopt the attached Resolution Dedicating Interests in Certain District Lands for Public Open Space Purposes. Introduction: In accordance with the Board's Dedicated Lands Policy as last amended January 221 1986 (see report R-86-03), an annual report indicating the status of District lands as dedicated or undedicated is to be presented to you in December of each year. According to this policy: "Normally, undedicated lands within the District's boundaries will be held for future dedication to park or open space, or both, purposes, but only after the necessary planning, boundary adjustments, provision for permanent access and other changes in configuration, which may involve the disposal or exchange of interests in all or portions of such lands, have been completed." Dedications are usually made in December on the basis of the annual report. During the year, part of the use and management planning decisions the Board makes for specific parcels and preserves is whether to indicate by motion an intention to dedicate certain interests in land, such as fee title or open space or trail easements. Note that although a motion of intent to dedicate might be adopted when the Preliminary Use and Management Plan for a new acquisition is approved, this does not mean that the parcel would necessarily be dedicated the following December. That is because it is usually prudent to wait until the Comprehensive, or at least Interim, Use and Management Plan for the entire preserve is adopted or reviewed. Since it might benefit the program of the District at some future time to apply development density credits from dedicated District land to other lands, dedication of these credits is not now normally included at the time of the annual dedications. The idea behind withholding potential density credits from dedication, while dedicating the land itself for public open space purposes, is that these credits may represent an asset of the District which may be of substantial value in the future. The credits might be used for transfer to private property, potentially increasing the allowed development density on that property. This might be done in connection with a joint development application with the private party. In exchange, some of that property might be permanently preserved or the District might receive a cash payment which could be used for purchase of open space land in another location. Joint development 330 Distel Cirde * Los Altos, CA 94022-1404 e Phone: 050 091-"1 200 FAX:050-091 0485 * F-mail rnrosdt«?openspace.orl; * Web site:www.opensl>ace.org �.�. 13oarrf<�(Dir'(��tors:Pete stetnenc Mary ( . viirgel:I_ ( tali;Button I R- -158 Page 2 98 g plans and transfer of development rights are, of course, subject to approval of the city or county in which the land lies. A further rationale is that the District, in asserting its potential right to use these credits, may be able to counter proposals to increase allowed development densities that are based on the argument that the potential development which the District is precluding by buying open space can be put somewhere else in the hillsides. Since the District has, in effect, paid for this density, we can argue that the District, if anyone, should benefit. Status Summary: Table 1 gives a summary of the dedication status of District preserves and preserve subareas. Only those parcels for which transactions have closed and title has passed to the District on or before December 14, 1998, are included. The interest in land that the District holds, i.e., fee title, an easement, or other (lease, management agreement, etc.) is listed for each area. Rights of first refusal and/or reversions to the District are not included. The District holds an interest in 43,001 acres of land, 38,625 acres in fee, and 4,376 acres in lesser interests. The District added 963 acres of protected lands since December 10, 1997. Recommended Dedications: Long Ride n Snare Preserve. The former Lee property (2.10 acres) includes a critically important segment of trail that leads down to Devils Canyon. The property was gifted to the District to ensure that the trail would be incorporated into the preserve and managed for pubic recreation. Monte Bello Oven Snare Preserve. The former Grainger property (24 acres) is essentially an inholding surrounded by Monte Bello and Skyline Ridge Open Space Preserves. Since the property is extremely visible from a number of public trails, and is within the Skyline Scenic Corridor, the District should retain maximum control over use of the buildings and adjacent land. Dedication precludes transfer of long-term interest in the property but will allow leases and other compatible land uses that can be closely monitored. Russian Ridge Open Snare Preserve. The former Aitken property (43 acres) protects a highly scenic hilltop as viewed from the adjacent Bay Area Ridge Trail. The property was acquired as a result of a lot line adjustment, along with covenants and restrictions over the adjacent 6-acre parcel to minimize potential visual impacts development could have on the surrounding area. No further lot line adjustments will be necessary. Kennedy Limekiln Area of Sierra Azu! QMn Spm Preserve, Dedication of the former Vanderpan property (123.23 acres) should occur because the adjacent properties are dedicated and, together, they permanently protect the upper Soda Springs Canyon watershed. Only properties closer to Soda Springs Road remain undedicated to allow for possible lot line adjustments or density transfers. Skyline Ridge Open Space Preserve. When a portion of the former Bach property was transferred to Guenther for a life-estate, two acres were retained by the District because they R-98-158 Page 3 were close to the main trail and patrol road. The new configuration of the life-estate is satisfactory to both the owner and the District and the remaining 2-acre parcel should now be permanently dedicated to protect the trail corridor. Windy Hill Open Space Preserve. The former POST property (173.50 acres), the most recent addition to the preserve, resulted from lot line adjustments and various agreements that were based on careful consideration of future needs of the District and neighbors. The property was also a bargain sale to the District with the intention to dedicate it as soon as possible. Summaa: Of the 43,001 acres preserved by the District, 1,598 acres are rights that cannot be dedicated such as leases, management agreements, etc., leaving 41,403 acres of marketable interests in land. Of this amount, 27,826 acres (67.21%) are dedicated and 13,578 acres (32.79%) are undedicated. Upon adoption of the attached resolution dedicating 368 additional acres, 28,194 acres (68.10%) would be dedicated and 13,210 acres (31.90%) would be undedicated. Of the 13,210 acres of undedicated lands, 80.18% will be in the Sierra Azul Open Space Preserve. Prepared by: Del Woods, Senior Management Specialist Lisa Zadek, Real Property Assistant Contact person: Del Woods, Senior Management Specialist Table 1.DEDICATION STATUS SUMMARY" File: Run Date: LANDS98.XLS 09-Dec-98 Briggs Creek 0 1 0 1 0 0 0 0 0 1 0 1 Coal Creek 493 0 0 493 0 0 0 0 493 0 0 493 Edgewood County Park 0 0 0 0 468 0 0 468 468 0 0 468 El Corte de Madera Creek 2788 4 0 2792 0 0 0 0 2788 4 0 2792 ElSereno 1080 72 0 1152 0 1 0 1 1080 72 0 1152 Foothills 211 0 0 211 0 0 0 0 211 0 0 211 Fremont Older 735 0 0 735 0 4 0 4 735 4 0 739 G.G.N.R.A. 0 0 0 0 0 1227 0 1227 0 1227 0 1227 La Honda Creek 1839 217 150 2056 0 0 0 0 1839 217 150 2056 Long Ridge 1722 90 34 1813 0 13 0 13 1722 104 34 1826 Los Trancos 274 0 0 274 0 0 0 0 274 0 0 274 Monte Bello "Monte B91W 2631 125 85 2757 0 25 86 25 2631 150 172 2782 Monte Bello Picchetti Ranch 308 0 0 308 0 0 0 0 308 0 0 308 Monte Bello Palo Alto 0 0 0 0 0 85 0 85 0 85 0 85 Monte Bello (All) (2939.270) (125.467) (85.467) (3,W5) (0.000) (110.270) (86.367) (110) (2939) (236) (172) (3,175) Moody Gulch 0 0 0 0 0 171 0 0 0 171 0 171 Pulgas Ridge 293 0 0 293 0 0 0 0 293 0 0 293 Purisima Creek Redwoods 2543 563 560 3106 0 10 0 10 2543 572 560 3116 Rancho San Antonio 2058 81 0 2139 1495 1 0 1496 3553 82 0 3635 Ravenswood 274 0 0 274 98 1 0 99 372 1 0 373 Russian Ridge 1531 92 43 1623 0 6 0 6 1531 98 43 1629 Saratoga Gap 492 394 0 886 2 0 0 2 494 394 0 889 Sierra Azul Cathedral Oaks 225 1877 33 2102 0 9 0 9 225 1886 33 2111 Sierra Azul Kennedy Limekiln 2403 402 123 2805 68 7 5 76 2471 410 128 2881 Sierra Azul Mt.Umunhum 677 8276 379 8953 372 119 0 491 1049 8395 379 9445 Sierra Azul "Summit Road" 0 0 0 0 0 0 0 0 0 0 0 0 Siena Azul (AID (3305.485) (10555.277) (534.570) (13,861) (440.420) (135.856) (5.000) (576) (3746) (10691) (540) (14,437) Skyline Ridge 1120 460 2 1580 81 0 0 81 1201 460 2 1661 Stevens Creek- Shoreline 54 0 0 54 1 0 0 1 55 0 0 55 St.Joseph's Hill 174 0 0 174 94 0 0 94 268 0 0 268 Teague Hill 0 624 0 624 0 0 0 0 0 624 0 624 Thomewood 87 30 0 117 5 10 0 15 92 40 0 131 Windy Hill 1129 176 174 1304 0 1 0 1 1129 177 174 1305 All 25,142 13,484 1,583 38,625 2,686 1,691 (91) 4,376 27,826 16,175 1,674 43,001 "Includes only those interests acquired(title or lease recorded or unrecorded lease fully executed)on or before: 16-Dec-98 Note:All entries rounded to nearest acre after summations. Page 1 DSS(rounded) RESOLUTION NO. RESOLUTION OF THE BOARD OF DIRECTORS OF THE MIDPENINSULA REGIONAL OPEN SPACE DISTRICT DEDICATING INTERESTS IN CERTAIN DISTRICT LANDS FOR PUBLIC OPEN SPACE PURPOSES The Board of Directors of the Midpeninsula. Regional Open Space District does hereby resolve as follows: Section 1. Pursuant to Resolution No. 86-6, the Board of Directors does hereby dedicate for public open space purposes (pursuant to Public Resources Code Section 5540) the interests in land held by the District shown herein, except for possible development rights which might be transferred to or for the benefit of other lands. INTERESTS IN LAND TO BE DEDICATED (EXCEPT FOR POTENTIAL DENSITY CREDITS) Board Approval Closing Property Preserve/Area Gr nor Date Date Aca= IrnAerest Long Ridge Lee 08/27/97 11/20/97 2.10 Fee Monte Bello Grainger 09/23/98 10/09/98 24.00 Fee Russian Ridge Aitken 04/22/98 09/09/98 43.00 Fee Sierra Azul/ Vanderpan 01/28/98 02/20/98 123.23 Fee Kennedy Limekiln Skyline Ridge Guenther (Bach) 06/27/97 12/17/97 2.00 Fee Windy Hill POST (Corte Madera) 02/18/98 09/29/98 173.50 Fee TOTAL: 367.83 MIDPENINSULA REGIONAL OPEN SPACE DISTRICT RESOLUTION NO. 98- A RESOLUTION OF THE BOARD OF DIRECTORS OF THE MIDPENINSULA REGIONAL OPEN SPACE DISTRICT AUTHORIZING THE EXECUTION AND DELIVERY OF A SITE LEASE, A PROJECT LEASE AND A CONTINUING DISCLOSURE AGREEMENT, AND APPROVING A PRELIMINARY OFFICIAL STATEMENT AND APPROVING CERTAIN OTHER MATTERS IN CONNECTION THEREWITH WHEREAS, the Board of Directors (the "Board") of the Midpeninsula Regional Open Space District (the "District") is authorized by law to lease real property for open space purposes of the District; WHEREAS, the District has determined that it is in the best interests of the District and its citizens and is necessary and proper for District purposes that certain real property described in that certain Site Lease (the "Site Lease") proposed to be dated as of January 1, 1999, be leased by the District to the Midpeninsula Regional Open Space District Financing Authority(the"Authority"), and that the Authority lease such real property back to the District pursuant to the Project Lease (the "Project Lease") proposed to be dated as of January 1, 1999, by and between the Authority and the District, in substantially the forms presented to this meeting; WHEREAS, the District proposes to use the proceeds of the Project Lease to finance or refinance the acquisition of land for open space purposes of the District (including the refunding of all or portions of the District's outstanding 1990 Promissory Notes and 1992 Promissory Notes issued for the purpose of financing or refinancing the acquisition of land for open space purposes of the District); WHEREAS, under the Project Lease, the District will be obligated to make rental payments to the Authority to pay for such real property leased to it; WHEREAS, the Authority will assign, without recourse, all its rights to receive such rental payments to BNY Western Trust Company, as trustee (the "Trustee"), for the benefit of the registered owners of the Authority's 1999 Revenue Bonds (the "Bonds") proposed to be issued under a Trust Agreement (the "Trust Agreement") proposed to be dated as of January 1, 1999,by and between the Authority and the Trustee; WHEREAS, in connection with the issuance of the Bonds, the Authority will distribute a Preliminary Official Statement for the Bonds (the "Preliminary Official Statement") in substantially the form presented to this meeting, and the Authority and the District will enter into a Continuing Disclosure Agreement (the "Continuing Disclosure Agreement") with the Trustee in compliance with Securities and Exchange Commission Rule 15c2-12(b)(5); and DOCssF1:314756.1 WHEREAS, all acts, conditions and things (subject to the approval of the financing as described in Section 2 hereof) required by law to exist, to have happened and to have been performed precedent to and in connection with the authorization of the execution and delivery of the Site Lease, the Project Lease and the Continuing Disclosure Agreement 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 execute and deliver the Site Lease, the Project Lease and the Continuing Disclosure Agreement and to approve the Preliminary Official Statement and the distribution thereof; NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Midpeninsula Regional Open Space District, as follows: Section 1. All of the foregoing recitals are true and correct, and the Board so finds and determines. Section 2. A public hearing is hereby called and will be held by the Board in Santa Clara County on Wednesday, January 13, 1999, at 7:30 P.M., at the regular meeting place of the Board, 330 Distel Circle, Los Altos, California 94022, and a public hearing is hereby called and will be held by the Board in San Mateo County on Tuesday, January 12, 1999, at 7:30 P.M., at the Town Hall, Town of Portola Valley, 765 Portola Road, Room 8, Portola Valley, California 94028, which public hearings will consider the proposed financing of the acquisition of land located within the District for open space purposes of the District in the respective two counties by the issuance and sale of the Bonds, and whether there are any significant public benefits to the District from the proposed financing, including demonstrable savings to the District from the issuance and sale of the Bonds, such as savings in effective interest rate, bond preparation, bond underwriting or bond issuance costs (in accordance with Section 6586 of the California Government Code), and at said hearings any interested person may appear to address the Board on the foregoing matters; and the Secretary of the Board is authorized and directed to give notice of the hearing in Santa Clara County by publishing a notice once at least five (5) days prior to such hearing in the San Jose Mercury News, a newspaper of general circulation in Santa Clara County, and to give notice of the hearing in San Mateo County by publishing a notice once at least five (5) days prior to such hearing in the San Mateo County Times, a newspaper of general circulation in San Mateo County. Section 3. The District (subject to the approval of the financing as described in Section 2 hereof) is authorized to execute and deliver the Site Lease, and the President of the Board is hereby authorized and directed to execute the Site Lease for and on behalf of the District and the Secretary of the Board is hereby authorized and directed to attest such execution and to affix the seal of the District thereto and to deliver the Site Lease; and as executed and delivered, the Site Lease shall be in substantially the form presented to this meeting, with such additions thereto or changes therein as the officer executing the Site Lease shall require or approve. Section 4. The District (subject to the approval of the financing as described in Section 2 hereof) is authorized to execute and deliver the Project Lease, and the President of the Board is hereby authorized and directed to execute the Project Lease for and on behalf of the District and the Secretary of the Board is hereby authorized and directed to attest such execution 2 DOCSSFI:3I4756.1 and to affix the seal of the District thereto and to deliver the Project Lease; and as executed and delivered, the Project Lease shall be in substantially the form presented to this meeting, with such additions thereto or changes therein as the officer executing the Project Lease shall require or approve, including those relating to the total rental payments due under the Project Lease and the amount and schedule of the payments thereunder, such approval to be conclusively evidenced by the execution and delivery thereof. Section 5. The District (subject to the approval of the financing as described in Section 2 hereof) is authorized to execute and deliver the Continuing Disclosure Agreement, and the President of the Board is hereby authorized and directed to execute and deliver the Continuing Disclosure Agreement for and on behalf of the District; and as executed and delivered, the Continuing Disclosure Agreement shall be in substantially the form presented to this meeting, with such additions thereto or changes therein as the officer executing the Continuing Disclosure Agreement shall require or approve. Section 6. The sections of the Preliminary Official Statement relating to the District and the transactions contemplated herein, in the form now on file with the Secretary of the Board, are hereby approved, and (subject to the approval of the financing as described in Section 2 hereof) the Controller of the District is hereby authorized to approve the distribution of the Preliminary Official Statement in substantially said form and to certify to the Authority on behalf of the District that said sections of the Preliminary Official Statement are accurate in all material respects, and the Authority is hereby authorized to distribute copies of the Official Statement to persons who may be interested in the purchase of the Bonds. Section 7. The President of the Board, the Secretary of the Board, the General Manager of the District and the Controller of the District (subject to the approval of the financing as described in Section 2 hereof) are hereby each authorized and directed, in the name and on behalf of the District, to take any and all steps and to execute and deliver any and all certificates (including a tax certificate), contracts and other documents (including an escrow agreement relative to the refunding of all or portions of the District's outstanding 1990 Promissory Notes and 1992 Promissory Notes) which they might deem necessary or appropriate in order to consummate the delivery of the documents approved herein and to otherwise effectuate the purposes of this resolution; and such actions previously taken by the officers of the District are hereby ratified and confirmed. Section 8. This resolution shall take effect from and after its passage, approval and adoption. 3 DOCSSF1:314756.1 PASSED AND ADOPTED by the Board of Directors of the Midpeninsula Regional Open Space District on December 14, 1998, by the following vote: AYES: Directors NOES: ABSENT: President of the Board of Directors of the Midpeninsula Regional Open Space District (SEAL) Attest: Secretary of the Board of Directors of the Midpeninsula Regional Open Space District 4 DOCSSF i:314756.1 R-98-01 Page 2 Board President, currently Director Crowder. At the District Board's June 28, 1998 meeting, Directors Nitz, Smernoff, and Davey were appointed to join Director Crowder on the governing Board of the Midpeninsula Regional Open Space District Financing Authority. At the District's Board meeting of October 14, 1998, Director Cyr was appointed to the governing Board replacing Director Smernoff who resigned from the District Board. The fifth member of the Authority's Board is Santa Clara County Supervisor Joseph Simitian. Supervisor Simitian's district encompasses the greatest territory of the District in Santa Clara County. The attached resolution authorizes the actual issuance of the 1999 Revenue Bonds. The critical financial points in the financing structure are set forth in a not-to-exceed format. Permission for binding the Authority to the financing is transferred to the Executive Director so long as the bond issue delivered to the Authority is within the parameters set out in the resolution. Controller Michael Foster's report(R-98-151) relating to the issuance of the 1999 Revenue Bonds is attached. It should be noted that the financial parameters for the issuance of the revenue bonds have been increased about 5% over the amounts set forth in Mr. Foster's report. The Authority is being asked to authorize a bond issue up to the amount of$31 million. The financing team currently expects an issue in the amount of approximately$29.4 million as noted in the Controller's report. The not-to-exceed parameter of$31 million is recommended to take advantage of potential market changes. The underlying Lease would fit within the not-to-exceed $31 million authorization. As noted in the attached Controller's report, the proposed underwriter for the issuance of the Midpeninsula Regional Open Space District Financing Authority bonds is Stone& Youngberg LLC ("S&Y") of San Francisco. S&Y underwrites more California local government financing than any other firm and successfully underwrote the Financing Authority's 1996 Revenue Bond, the District's 1995 Notes; and several District issues in the 1980's. S&Y have done an outstanding job in structuringthis issue and have proposed an underwriting fee not to exceed 1%. This is P p 8 the same fee charged on the Financing Authority's 1996 Revenue Bond and the District 1995 Notes and compares to the 1.2%fee paid to Kidder-Peabody and Prudential-Bache on the District 1993 Certificates of Participation. Attached is the proposed Bond Purchase Contract from S&Y. In summary, S&Y proposes to perform the following: A. Work with Authority staff to structure the offering in order to obtain the most advantageous terms and conditions. B. Lead development of the Official Statement for the Authority. C. Obtain bond insurance. D. At the earliest date practical, submit an offer to the Authority to purchase the notes. E. Sell the Bonds directly or through a syndicate formed by S&Y. MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY R-98-02 Meeting 98-02 December 14, 1998 AGENDA ITEM Issuance of up to $31 million of Midpeninsula Regional Open Space District Financing Authority 1999 Revenue Bonds; Authorization for Executive Director to Execute the Bond Purchase Contract with Stone&Youngberg LLC, and the Agreement for Bond Counsel Services with Orrick, Herrington& Sutcliffe. RECOMMENDED ACTIONS 1. attached Adopt the p c ed Resolution of the Midpeninsula Regional Open Space District Financing Authority Authorizing the Issuance, Sale and Delivery of Not to Exceed $31,000,000 Midpeninsula Regional Open Space District Financing Authority 1999 Revenue Bonds, and Authorizing the Execution and Delivery of a Site Lease and a Project Lease and a Trust Agreement in Connection Therewith and � Authorizing the Execution and Delivery of an Official Statement and a Bond Purchase Contract and a Continuing Disclosure Agreement Relating to Such Bonds and Taking Certain Other Actions in Connection Therewith. 2. Authorize the Authority's Executive Director to execute the attached Bond Purchase Contract with Stone& Youngberg LLC of San Francisco. 3. Authorize the Authority's Executive Director to execute the Agreement for Bond Counsel Services with Orrick, Herrington& Sutcliffe of San Francisco. (Completed copies of the resolution and all of the documentation are available for public review at the District office. BACKGROUND At their April 24, 1996 meeting, the Board of Directors of the Midpeninsula Regional Open Space District approved the Joint Exercise of Powers Agreement by and between the District and the County of Santa Clara creating the Midpeninsula Regional Open Space District Financing Authority. The Santa Clara County Board of Supervisors approved the agreement at their May 7, 1996 meeting. The Midpeninsula Regional Open Space District Financing Authority was created to assist the District in the financing and refinancing of underlying Notes and Leases. By utilizing the joint powers financing authority, the 1996 revenue bonds were issued. It is now proposed that the $31 million of 1999 revenue bonds be issued, which have been structured to significantly reduce the District's near-term debt service. The joint exercise of powers agreement calls for the Authority to be governed by a Board consisting of five members, one member of which shall be, at all times, the District's R-98-01 Page 3 The Bond Purchase Contract with Stone& Youngberg is to be executed by the Financing Authority. The proposed bond counsel is Orrick, Herrington& Sutcliffe. This firm has served in this role for virtually all of the District's debt issues and it is desirable to maintain this successfid relationship. The fee for Orrick, Herrington& Sutcliffe's services relative to this bond issuance is$75,000, payable at the closing of the financing. The agreement for bond counsel services is to be executed by both the District and the Financing Authority. Prepared by: L. Craig Britton, Executive Director Michael L. Foster, Controller Contact Person: Same as above MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY RESOLUTION NO. 98- A RESOLUTION OF THE MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF NOT TO EXCEED $31,000,000 MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY 1999 REVENUE BONDS, AND AUTHORIZING THE EXECUTION AND DELIVERY OF A SITE LEASE AND A PROJECT LEASE AND A TRUST AGREEMENT IN CONNECTION THEREWITH AND AUTHORIZING THE EXECUTION AND DELIVERY OF AN OFFICIAL STATEMENT AND A BOND PURCHASE CONTRACT AND A CONTINUING DISCLOSURE AGREEMENT RELATING TO SUCH BONDS AND TAKING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH WHEREAS, the Midpeninsula Regional Open Space District Financing Authority is a joint exercise of powers entity duly organized and existing under and by virtue of the laws of the State of California(the "Authority"); and WHEREAS, the Midpeninsula Regional Open Space District (the "District") intends to enter into a Project Lease (the "Project Lease") and a related Site Lease (the "Site Lease") with the Authority to lease certain property in the District for open space purposes of the District from the Authority; and WHEREAS, the Authority has determined to issue its 1999 Revenue Bonds in an aggregate principal amount of not to exceed $31,000,000 (the `Bonds") pursuant to a Trust Agreement (the "Trust Agreement") between the Authority and BNY Western Trust Company, as the trustee named therein (the "Trustee"), to provide funds to finance the acquisition of the Project Lease (being the Program Obligation as defined in the Trust Agreement), and the Authority has determined that the property to be leased to the District for open space purposes under the Project Lease is located within the geographic boundaries of the District; and WHEREAS (subject to the approval of the financing as described in Section 2 of Resolution No. 98- adopted by the Board of Directors of the District on December 14, 1998), all acts, conditions and things required by the laws of the State of California to exist, to have happened and to have p been performed precedent to and in connection with the cons ummation of the financing authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the Authority is now duly authorized and empowered, pursuant to each and every requirement of law, to authorize the execution and delivery of certain documents hereinafter mentioned. NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Midpeninsula Regional Open Space District Financing Authority as follows: DOC'SSF1:314738.1 Section 1. All of the above recitals are true and correct, and this Board so finds and determines. Section 2. The forms of the Site Lease and the Project Lease proposed to be executed and entered into by and between the District and the Authority, presented to this meeting and on file with the Secretary of the Authority, are hereby approved, and the Chairperson of the Board, or her designee, is hereby authorized, for and in the name and on behalf of the Authority, to execute and deliver the Site Lease and the Project Lease in substantially said forms, with such changes as such officer may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Section 3. The form of the Trust Agreement proposed to be executed and entered into by and between the Authority and the Trustee, presented to this meeting and on file with the Secretary of the Authority, is hereby approved, and the Chairperson of the Board, or her designee, is hereby authorized, for and in the name and on behalf of the Authority, to execute and deliver the Trust Agreement in substantially said form, with such changes as such officer may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof, and the Bonds authorized to be issued under the Trust Agreement, when executed, shall be delivered to the Trustee for authentication by the Trustee, and the Trustee is hereby requested and directed to authenticate the Bonds by executing the Certificate of Authentication appearing thereon, and to deliver the Bonds, when duly executed and authenticated, to the Underwriter hereinafter defined in accordance with written instructions executed on behalf of the Authority by the Chairperson of the Board, or her designee, which instruc tions said officer is herebyauthorized and directed for an in , d the name and on behalf of the Authority, to execute and deliver to the Trustee and which instructions shall provide for the delivery of the Bonds to such Underwriter upon payment of the purchase price thereof, net of the premium costs of the Bond Insurance Policy and the Reserve Facility (as those terms are defined I in the Trust Agreement), which shall be paid by the Underwriter directly to the issuer thereof. Section 4. The form of Bond Purchase Contract (the "Bond Purchase Contract") proposed to be executed and entered into by and between the Authority and Stone & Youngberg LLC (the "Underwriter"), presented to this meeting and on file with the Secretary of the Authority, providing for the sale of the Bonds to the Underwriter, is hereby approved, and the Chairperson of the Board, or her designee, is hereby authorized, for and in the name and on behalf of the Authority, to execute and deliver to the Underwriter the Bond Purchase Contract in substantially said form providing for the sale of the Bonds, which Bonds shall bear interest at a true interest cost not to exceed five and three-quarters per cent (5-3/4%) per annurn and with an underwriter's discount of not more than one per cent (1%) of the principal amount thereof, plus accrued interest, with such changes as such officer may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Section 5. The form of the Official Statement in preliminary form relating to the Bonds (the "Official Statement"), presented to this meeting and on file with the Secretary of the Authority, is hereby approved, and the Controller of the Authority is hereby authorized, for and in the name and on behalf of the Authority, to approve the distribution of the Official Statement in preliminary form and to certify on behalf of the Authority that the Official Statement in preliminary form has been "deemed final"by the Authority, except for certain final 2 DOCSSFI:314738.1 pricing and related information pursuant to Rule 15c2-12 of the Securities and Exchange Commission, and the Chairperson of the Board, or her designee, is hereby authorized, for and in the name and on behalf of the Authority, to execute and deliver to the Underwriter the Official Statement in final form, with such changes as such officer may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof, and the Underwriter is hereby authorized to distribute copies of the Official Statement to persons who may be interested in the purchase of the Bonds and is directed to deliver such copies to all actual purchasers of the Bonds. Section 6. The form of the Continuing Disclosure Agreement proposed to be executed and entered into by and between the Authority, the District and the Trustee (the "Continuing Disclosure Agreement'), presented to this meeting and on file with the Secretary of the Authority, is hereby approved, and the Controller of the Authority is hereby authorized, for and in the name and on behalf of the Authority, to execute and deliver to the Underwriter the Continuing Disclosure Agreement in substantially said form, with such changes as such officer may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Section 7. The officers of the Authority are hereby authorized and directed, jointly and severally, 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 carry out, give effect to and comply with the terms and intent of this resolution, the Site Lease, the Project Lease, the Trust Agreement, the Bond Purchase Contract, the Continuing Disclosure Agreement and the Bonds, including if appropriate (as determined by such officers) purchasing the Bond Insurance Policy and the Reserve Facility (as those terms are defined in the Trust Agreement) and including the execution of an Agreement for Bond Counsel Services with Orrick, Herrington & Sutcliffe LLP j in substantially the form on file with the Secretary of the Authority, and any such actions heretofore taken by such officers are hereby ratified, confirmed and approved. Section 8. This resolution shall take effect immediately upon its passage. 3 DOCSSF1:314738.1 PASSED AND ADOPTED by the Midpeninsula Regional Open Space District Financing Authority this 14'h day of December, 1998. Chairperson Attest: Secretary II DOCSSF1314738.1 Regional Opei pace A_ 1 MFDPENINSULA REGIONAL OPEN SPACE DISTRICT j MEMORANDUM December 11, 1998 TO: Board of Directors FROM: C. Britton, General Manager In reference to the materials attached for the proposed financing, two minor modifications are necessary. Due to time limitations, the following supplemental information will be delivered to you and explained at your meeting December 14, 1998. They are as follows: 1. The Controller's report was based upon a slightly different repayment schedule than contained in the financial documents. The repayment schedule changes are more favorable to the District, but occurred at the last minute leaving insufficient time to incorporate them into the Controller's analysis. 2. The graph and supporting materials from Stone& Youngberg over-calculated the first year cash flow savings. These materials were delivered by courier from San Francisco and could not be revised in time for the packet mailing. i 330 Distel Circle . Los Altos, CA 94022-1404 . Phone:650-691-1200 FAX: 650-691-0485 . E-mail: mrosd@openspace.org openspace.org Web site:www.openspace.org Board of Directors:Pete Siemens,Mary C.Davey,led Cyr,Deane Little,Nonette Hanko,Betsv Crowder,Kenneth C.Nitz . General Mon,iger:L.Crait;Britton RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: Orrick, Herrington & Sutcliffe LLP 400 Sansome Street San Francisco, California 94111 Attention: Carlo S. Fowler, Esq. I TRUST AGREEMENT by and between the MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY and BNY WESTERN TRUST COMPANY, as Trustee S I� MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY 1999 REVENUE BONDS Dated as of January 1, 1999 DOCSSF1_.31 a304.1 III TABLE OF CONTENTS Page J PARTIES ....................................................................................................................................... I RECITALS I ARTICLE I DEFINITIONS; EQUAL SECURITY.............................................................. 3 SECTION 1.01. Definitions............................................................................................ 3 SECTION 1.02. Equal Security.................................................................................... 12 ARTICLE 11 ISSUANCE OF BONDS ................................................................................ 12 SECTION 2.01. Authorization and Purpose of Bonds................................................. 12 SECTION 2.02. Terms of Bonds.................................................................................. 12 SECTION 2.03. Redemption of Bonds ........................................................................ 15 SECTION 2.04. Forms of Bonds.................................................................................. 17 SECTION 2.05. Execution of Bonds............................................................................ 17 SECTION 2.06. Transfer and Payment of Bonds......................................................... 18 SECTION 2.07. Exchange of Bonds............................................................................ IS SECTION 2.08. Bond Registration Books................................................................... 18 SECTION 2.09. Mutilated, Destroyed, Stolen or Lost Bonds...................................... 19 SECTION 2.10. Temporary Bonds............................................................................... 19 SECTION 2.11. Bonds as Special Obligations............................................................. 19 SECTION 2.12. Use of Book-Entry System for Bonds ...............................................20 SECTION 2.13. Procedure for the Issuance of Bonds ................................................. 21 SECTION 2.14. Validity of Bonds...............................................................................22 ARTICLE III REVENUES AND FUNDS............................................................................ 22 SECTION 3.01. Pledge of Revenues............................................................................ 22 SECTION 3.02. Receipt and Deposit of Revenues in the Revenue Fund.................... 23 SECTION 3.03. Establishment and Maintenance of Accounts for Use of Money inthe Revenue Fund .......................................................................... 23 SECTION 3.04. Rebate Fund....................................................................................... 25 ARTICLE IV COVENANTS OF THE AUTHORITY .........................................................25 SECTION 4.01. Punctual Payment and Perfonnance .................................................. 25 SECTION 4.02. Against Encumbrances....................................................................... 26 SECTION 4.03. Tax Covenants ...................................................................................26 SECTION 4.04. Accounting Records and Reports....................................................... 26 SECTION 4.05. Prosecution and Defense of Suits ...................................................... 26 SECTION 4.06. Enforcement and Amendment of Program Obligation...................... 27 SECTION 4.07. Continuing Disclosure Agreement.....................................................27 SECTION 4.08. Maintenance of Existence.................................................................. 28 SECTION 4.09. Further Assurances............................................................................. 28 ARTICLEV THE TRUSTEE .............................................................................................. 28 SECTION 5.01. The Trustee ........................................................................................ 28 SECTION 5.02. Liability of Trustee ............................................................................ 29 SECTION 5.03. Compensation and Indemnification of Trustee.................................. 31 DOCYS"F1:314304.1 TABLE OF CONTENTS (continued) Page II ARTICLE VI AMENDMENT OF THE TRUST AGREEMENT......................................... 32 SECTION6.01. Amendment of the Trust Agreement ................................................. 32 SECTION 6.02. Disqualified Bonds............................................................................. 33 SECTION 6.03. Endorsement or Replacement of Bonds After Amendment .............. 33 SECTION 6.04. Amendment by Mutual Consent........................................................ 34 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES OF HOLDERS........................ 34 SECTION 7.01. Events of Default and Acceleration of Maturities ............................. 34 SECTION 7.02. Application of Funds Upon Acceleration.......................................... 35 SECTION 7.03. Institution of Legal Proceedings by Trustee...................................... 36 SECTION 7.04. Actions by Trustee as Attorney-in-Fact............................................. 36 SECTION 7.05. Remedies Not Exclusive.................................................................... 37 SECTION 7.06. Limitation on Bondholders' Right to Sue.......................................... 37 SECTION 7.07. Bond Insurer Deemed a Beneficiary and a Party in Interest.............. 37 ARTICLE VIII DEFEASANCE............................................................................................... 37 SECTION 8.01. Discharge of Bonds............................................................................ 37 SECTION 8.02. Unclaimed Money.............................................................................. 39 ARTICLE IX BOND INSURANCE POLICY PROVISIONS; RESERVE FACILITY PROVISIONS................................................................................................. 39 SECTION 9.01. Consents and Rights of Bond Insurer................................................ 39 SECTION 9.02. Certain Provisions Concerning the Bond Insurer..............................40 SECTION 9.03. Payment Procedure Pursuant to Bond Insurance Policy.................... 41 SECTION 9.04. Payment Procedure Pursuant to Reserve Facility..............................43 ARTICLE X MISCELLANEOUS .......................................................................................43 SECTION 10.01. Liability of Authority Limited to Revenues.......................................43 SECTION 10.02. Benefits of the Trust Agreement Limited to Parties..........................43 SECTION 10.03. Successor Is Deemed Included In All References To Predecessor........................................................................................ 44 SECTION 10.04. Execution of Documents by Holders.................................................44 SECTION 10.05. Waiver of Personal Liability..............................................................44 SECTION 10.06. Deposit and Investment of Money in Accounts and Funds...............44 SECTION 10.07. Acquisition of Bonds by Authority....................................................45 SECTION 10.08. Destruction of Cancelled Bonds ........................................................45 SECTION 10.09. Content of Certificates.......................................................................45 SECTION 10.10. Accounts and Funds; Business Days ................................................. 45 SECTION10.11. Notices ............................................................................................... 46 SECTION 10.12. CUSIP Numbers.................................................................................46 SECTION 10.13. Article and Section Headings and References...................................47 SECTION 10.14. Partial Invalidity.................................................................................47 1)0('SSFI:3 14304,1 -ii- TABLE OF CONTENTS (continued) Page SECTION 10.15. California Law...................................................................................47 SECTION 10.16. Execution in Several Counterparts.....................................................47 SECTION 10.17. Effective Date ....................................................................................47 EXECUTION...............................................................................................................................48 EXHIBITA Fonns of Bonds....................................................................................................A-1 DOCSSF-1:3143041 TRUST AGREEMENT This Trust Agreement(the "Trust Agreement"), dated as of January 1, 1999, by and between the Midpeninsula Regional Open Space District Financing Authority, a joint exercise of powers authority duly organized and existing under and by virtue of the laws of the State of California (the "Authority"), and BNY Western Trust Company, a banking corporation duly organized and existing under and by virtue of the laws of the State of California, as Trustee (the "Trustee"); WITNESSETH: WHEREAS, the Authority is authorized pursuant to the Marks-Roos Local Bond Pooling Act of 1985, being Article 4, Chapter 5, Division 7, Title I of the Government Code of the State of California, and all laws amendatory thereof or supplemental thereto (the "Act"), to issue revenue bonds to provide funds to assist local entities to finance or refinance public capital improvements in order that such local entities may achieve their public purposes; and WHEREAS, the Authority has detennined to implement a program (the "Program") under the Act to provide assistance to the Midpeninsula Regional Open Space District (the "District") so that the District can finance or refinance public capital improvements in order that the District may achieve its public purposes, which Program constitutes the funding of the acquisition of a lease (the "Project Lease") between the Authority and the District, which Project Lease is referred to herein as the "Program Obligation"; and WHEREAS, the Authority desires to issue its 1999 Revenue Bonds (the "Bonds") in the aggregate principal amount of dollars (S ) to a obtain money to carry out the Program by funding the acquisition of the a Program Obligation g g under and in accordance with the Act and herewith; and WHEREAS, the Program Obligation provides for the payment by the District of amounts sufficient to enable the Authority to pay the interest on and the principal of and the redemption premiums, if any, on the Bonds and the other costs incurred in connection with the Program; and WHEREAS, as security for the payment of the interest on and the principal of and the redemption premiums, if any, on the Bonds, the Authority desires to assign and pledge to the Trustee all its rights under the Program Obligation; and WHEREAS, the Authority has determined that all things necessary to make the Bonds, when executed by the Authority as provided herein and authenticated and delivered by the Trustee as provided herein, be legal, valid and binding obligations of the Authority according to the import thereof, and to constitute the Trust Agreement a valid assignment and pledge of the amounts assigned and pledged to the payment of the interest on and the principal of and the redemption premiums, if any, on the Bonds and a valid assignment of the rights of the Authority to receive the payments due under the Program Obligation, have been done and performed, and all things precedent to the execution and delivery of the Trust Agreement by the parties hereto UOCSSIT1:314304.1 and the execution, authentication and delivery of the Bonds hereunder, subject to the conditions and teens hereof, have been done and performed; NOW, THEREFORE, THIS TRUST AGREEMENT WITNESSETH, That the Authority, in consideration of the premises, the acceptance by the Trustee of the trusts hereby created, the purchase and acceptance of the Bonds by the Holders thereof and other good and valuable consideration, the receipt of which is hereby acknowledged, and in order to secure the payment of the interest on and the principal of and the redemption premiums, if any, on all Bonds Outstanding hereunder from time to time according to their tenor and effect, and all other payments required to be made hereunder, and to secure the observance and performance by the Authority of all the agreements, conditions, covenants and terms contained herein and in the Bonds required to be observed or performed by the Authority, does hereby assign, bargain, convey, grant, mortgage and pledge a security interest unto the Trustee, and unto its successors or assigns, in the trusts hereunder, and to them and their successors and assigns forever, in all right, title and interest of the Authority in, to and under, subject to the conditions and teens hereof permitting the application thereof for the purposes and on the conditions and terms set forth therein, each and all of the following (collectively, the "Trust Estate"): (a) the proceeds of sale of the Bonds; (b) the Revenues (as defined herein); (c) the money in all the accounts and finds established herein, except the money in the Rebate Fund; and (d) the Program Obligation; TO HAVE AND TO HOLD IN TRUST all of the same hereby assigned, conveyed, mortgaged, pledged and transferred or agreed or intended so to be to the Trustee and its successors or assigns forever for the equal and ratable benefit of the Holders from time to time of all Bonds executed by the Authority and authenticated and delivered by the Trustee hereunder and Outstanding hereunder, and without any priority as to the Trust Estate of any one Bond over an other Bond (except a s expressly provided in or permi tted hereby), u �Y ( p p Y p p y), upon the trusts and subject to the agreements, conditions, covenants and terms hereinafter set forth; i PROVIDED, that if the Authority and its successors or assigns shall well and truly pay, or cause to be paid, the interest on and the principal of and the redemption premiums, if any, on all Bonds issued and secured hereunder at the times and in the manner mentioned herein and in the Bonds according to the true intent and meaning thereof, and shall well and truly keep, perform and observe all the agreements, conditions, covenants and terms contained herein required to be kept,performed and observed by it, and shall pay or cause to be paid to the Trustee all sums of money due or to become due to it in accordance with the agreements, conditions, covenants and terms hereof, then upon such final payment the Trust Agreement and the unvested rights hereby granted shall cease and terminate, otherwise the Trust Agreement shall be and remain in full force and effect; I DOCSSF1:314304.1 2 AND THE TRUST AGREEMENT FURTHER WITNESSETH, and it is expressly declared, that all Bonds issued and secured hereunder shall be executed, authenticated and delivered and that all of the rights and property hereby assigned, conveyed, mortgaged, pledged and transferred shall be dealt with and disposed of under, upon and subject to the agreements, conditions, covenants and terms hereof, and the Authority has agreed and covenanted, and does hereby agree and covenant, with the Trustee and with the Holders from time to time of the Bonds, as follows: ARTICLE I DEFINITIONS; EQUAL SECURITY SECTION 1.01. Definitions. Unless the context otherwise requires, the terms defined in this section shall for all purposes hereof and of any Supplemental Trust Agreement and of any certificate, opinion, request or other document herein or therein mentioned have the meanings herein specified: Accreted Value "Accreted Value" means, with respect to any Capital Appreciation Bond, an amount equal to the principal amount of such Bond plus interest accrued thereon from its date compounded on each January I and July I to and including the redemption date or maturity date of such Bond at the"original issue yield" for such Bond, which "original issue yield"means, with respect to any particular Capital Appreciation Bond, the yield to maturity of such Bond from the date thereof calculated on the basis of semiannual compounding of interest on each January I and July 1; provided, that the Accreted Value on any date other than a January I and a July I shall be calculated by straight line interpolation of the Accreted Values as of the immediately preceding and Succeeding January I and July 1,respectively, as the case may be. Act "Act" means the Marks-Roos Local Bond Pooling Act of 1985, being Article 4, Chapter 5, Division 7, Title I of the Government Code of the State, and all laws amendatory thereof or supplemental thereto. Authority "Authority"means the Midpeninsula Regional Open Space District Financing Authority, a joint exercise of powers authority duly organized and existing under and by virtue of the laws of the State. Board "Board" means the governing board of the Authority. DOCSSFI:314304.1 3 i i Bond Insurance Policy "Bond Insurance Policy"means the municipal bond insurance policy issued by the Bond Insurer and delivered by the Authority to the Trustee on the date of the original execution, authentication and delivery of the Bonds that insures the payment when due of the interest on and the principal of the Bonds as provided therein. Bond Insurer "Bond Insurer" means Anibac Assurance Corporation, a Wisconsin-domiciled stock insurance company. Bonds. Capital Appreciation Bonds Current Interest Bonds Serial Bonds Tenn Bonds "Bonds"means all revenue bonds of the Authority executed, authenticated and delivered hereunder in accordance with Article II. "Capital Appreciation Bonds" means the Bonds maturing on July I in each of the years 2019 through 2028, both dates inclusive, the interest on which is payable at maturity or upon prior redemption and is compounded semiannually on each January 1 and July 1 to and including the maturity dates or redemption dates thereof. "Current Interest Bonds"means the Bonds the interest on which is payable on July 1, 1999, and semiannually thereafter on January 1 and July 1 of each year through and including the maturity dates or redemption dates thereof, consisting of the Current Interest Serial Bonds maturing on July 1 in each of the years 2000 through 2013, both dates inclusive, and the Current Interest Tenn Bonds maturing on July 1, 2018. "Serial Bonds" means Bonds for which no sinking fund payments are provided. "Tenn Bonds"means Bonds which are payable on or before their specified maturity date from sinking fund payments established for that purpose and calculated to retire such Bonds on or before their specified maturity date. Business Day Business Day means any day (other than a Saturday, a Sunday or a legal holiday) on which banks in New York, New York, are open for business and on which the Trustee is open for business at its Principal Corporate Trust Office. Certificate of the Authority "Certificate of the Authority"means an instrument in writing signed by the Chairperson of the Authority, or by any other officer of the Authority duly authorized by the Board for that purpose. »ocssF I!314304.1 4 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 any particular section of the Code shall include reference to all successor sections of the Code. Costs of Issuance "Costs of Issuance" means all costs directly or indirectly payable by or reimbursable to the Authority or the District related to the execution and delivery of the Program Obligation and the Trust Agreement and the sale of the Bonds, including, but not limited to, costs of preparation and reproduction of documents, costs of rating agencies and costs to provide information required by rating agencies, filing and recording fees, initial charges and fees of the Trustee, legal fees and expenses, fees and expenses of consultants and professionals, fees and expenses of the underwriter of the Bonds, premiums for the Bond Insurance Policy and the Reserve Facility and charges and fees incidental to the acquisition of the Program Obligation and the execution, authentication and delivery of the Bonds, and any other charge, cost, expense or fee in connection with the original execution, authentication and delivery of the Bonds. Costs of Issuance Fund "Costs of Issuance Fund"means the Midpeninsula Regional Open Space District Financing Authority 1999 Revenue Bonds Costs of Issuance Fund established pursuant to Section 2.13(d). District "District"means 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. Event of Default "Event of Default" means an event defined as such in Section 7.01. Fiscal Year "Fiscal Year" means the twelve-month period terminating on March 31 of each year, or any other annual accounting period hereafter selected and designated by the Authority as its Fiscal Year in accordance with applicable law. Holder "Holder"means any person who shall be the registered owner of any Outstanding Bond, as shown in the registration books required to be kept by the Trustee pursuant to Section 2.08. Ix0C'SSF1:314304.1 5 i I Independent Certified Public Accountant "Independent Certified Public Accountant"means any firm of certified public accountants duly licensed and entitled to practice and practicing as such under the laws of the State, appointed and paid by the Authority, and each of the members of which firm -- (1) is in fact independent and not under the domination of the Authority; (2) does not have a substantial financial interest, direct or indirect, in the operations of the Authority; and (3) is not connected with the Authority as a member of the Board or officer or employee of the Authority, although such firm may be regularly retained to audit the accounting records of and make reports thereon to the Authority. Information Services "Information Services" means Financial Information, Inc.'s "Daily Called Bond Service," 30 Montgomery Street, 1 Oth Floor, Jersey City, New Jersey 17302, Attention: Editor; Kenny Information Services' "Called Bond Service," 55 Broad Street, 28th Floor,New York, New York 10004; Moody's Investors Service's "Municipal and Government," 99 Church Street, 8th Floor, New York, New York 10007, Attention: Municipal News Reports; and Standard & Poor's "Called Bond Service," 25 Broadway, 3rd Floor, New York, New York 10004; and, in accordance with the then current guidelines of the Securities and Exchange Commission, such other services providing information with respect to called bonds as the Authority may designate in a Certificate of the Authority delivered to the Trustee. Interest Account "Interest Account" means the account by that name within the Revenue Fund established pursuant to Section 3.03. Interest Payment Date i "Interest Payment Date" means a date on which interest is due on the Current Interest Bonds, being January 1 and July 1 of each year to which reference is made, commencing I Oil July 1, 1999. Member "Member"means either the Midpeninsula Regional Open Space District or the County of Santa Clara. Mood "Moody's"means Moody's Investors Service, a corporation duly organized and existing under and by virtue of the laws of the State of Delaware, and its successors or assigns, except that if such corporation shall be dissolved or liquidated or shall no longer perform the I norssr-1:3 1 a3G4A 6 services of a municipal securities rating agency, then"Moody's"shall be deemed to refer to any other nationally recognized municipal securities rating agency selected by the Authority. Opinion of Counsel "Opinion of Counsel"means a written opinion of a law firm of recognized national standing relating to municipal bonds, retained by the Authority. Outstanding "Outstanding,"when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 6.02) all Bonds except -- (1) Bonds theretofore cancelled by the Trustee or surrendered to the Trustee for cancellation; (2) Bonds paid or deemed to have been paid pursuant to Section 8.01; and (3) Bonds in lieu of or in substitution for which replacement Bonds shall have been executed, authenticated and delivered pursuant to Section 2.09. Principal Corporate Trust Office "Principal Corporate Trust Office"means the principal corporate trust office of the Trustee in Los Angeles, California, or such other office of the Trustee designated by the Trus tee for the registration, transfer, exchange or payment of the Bo nds. Principal Subaccount "Principal Subaccount" means the subaccount by that name within the Redemption Account established pursuant to Section 3.03. Proizram Fund i "Program Fund"means the Midpeninsula Regional Open Space District Financing Authority 1999 Revenue Bonds Program Fund established pursuant to Section 2.13(c). i Program Obh.ation "Program Obligation"means the Project Lease. Project Lease Payments "Project Lease Payments"means the payments by the District of the base rental I payments due under the Project Lease as provided therein. i DJCSSF1:314304.1 Project Lease "Project Lease" means that certain Project Lease dated as of January 1, 1999, by and between the Authority and the District entered into by the District for the purpose of financing or refinancing the acquisition of open space for the District. Qualified Investments Qualified Investments" means any of the following as approved by the Bond Insurer: (a) United States Government Obligations (including obligations issued or held in book-entry form on the books of the Department of Treasury of the United States of America) or obligations the timely payment of the interest on and the principal of which are frilly guaranteed by the United States of America; (b) Obligations, debentures, notes or other evidences of indebtedness issued or guaranteed by any one of the following: the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association and the Student Loan Marketing Association; (c) Interest-bearing demand or time deposits (including certificates of deposit) of any bank (including the Trustee), savings and loan association or bank holding company the long-teen debt obligations of which, in the case of each Rating Agency then rating the Bonds, are rated at least equal to the then current rating on the Bonds assigned by such Rating Agency; provided, that the maturity of any such deposit shall not exceed five (5) years; (d) Bankers' acceptances or interest-bearing demand or time deposits (including certificates of deposit) of any bank (including the Trustee) or savings and loan association the long-term debt obligations of which, in the case of each Rating Agency then rating the Bonds, are rated in a rating category at least equal to the then current rating on the Bonds assigned by such Rating Agency; (e) Obligations the interest on which is excludable from the gross income of the registered owners thereof for federal income tax purposes u pursuant to Section 103 of p � the Code and that, in the case of each Rating Agency then rating the Bonds, are rated in a rating category at least equal to the then current rating on the Bonds assigned by such Rating Agency; (f) Commercial paper rated in the highest rating category by each Rating Agency then rating the Bonds; (g) Money market funds rated in the highest rating category by each Rating Agency then rating the Bonds, which may include funds for which the Trustee, its parent, affiliates or subsidiaries provide investment advisory or other management services; I DO( SSE=1:314304.1 8 l (h) Obligations issued by any corporation organized and operating within the United States of America having assets in excess of five hundred million dollars ($500,000,000) which obligations, in the case of each Rating Agency then rating the Bonds, are rated in a rating category at least equal to the then current rating on the Bonds assigned by such Rating Agency; and (i) Investment contracts with entities the debt securities of which are at all times during the tern-1 of the contract rated the same as or higher than the rating on the Bonds by each of the Rating Agencies then rating the Bonds (which contracts will be terminated if such rating is not maintained), which entities have been approved by the Bond Insurer, and notice of such contracts have been provided to the Rating Agencies. Rating Agencies "Rating Agencies" means Moody's and S&P, and their respective successors or assigns, but to the extent that and only so long as either of them is then rating the Bonds, or any other nationally recognized securities rating agency or agencies then rating the Bonds at the request of the Authority. j Rebate Fund "Rebate Fund"means the Midpeninsula Regional Open Space District Financing Authority 1999 Revenue Bonds Rebate Fund established pursuant to Section 3.04. Record Date "Record Date"means, with respect to an Interest Payment Date, the day that is the fifteenth (15th) day of the month prior to such Interest Payment Date. Redemption Account "Redemption Account"means the account by that name within the Revenue Fund established pursuant to Section 3.03. Representation Letter "Representation Letter"means the Letter of Representations dated the date of issuance of the Bonds to The Depository Trust Company, New York, New York, from the Authority g and the Trustee relating to the Bonds. Reserve Account "Reserve Account"means the account by that name within the Revenue Fund established pursuant to Section 3.03. DOCSSF1:314304.1 9 I Reserve Facility "Reserve Facility" means the surety bond issued by the Bond Insurer and deposited in the Reserve Account at the time of the original execution, authentication and delivery of the Bonds to satisfy the requirements of the Reserve Requirement, or any replacement surety bond or insurance policy issued by a company rated Aaa by Moody's and AAA by S&P licensed to issue a surety bond or an insurance policy guaranteeing the timely payment when due of the interest on and principal of the Bonds; provided, that if the ratings of such insurance company fall below Aaa by Moody's or AAA by S&P, the Authority will use its best efforts to pro-cure a replacement surety bond or insurance policy within thirty(30) days from the date of such downgrading meeting the requirements set forth above to the extent that, in the judgment of the Authority, such a replacement surety bond or insurance policy is available upon reasonable terms and at a reasonable cost, or will use its best efforts to deposit into the Reserve Account an amount of money equal to the Reserve Requirement. Reserve Requirement "Reserve Requirement" means per cent (_%) of the principal amount of the Outstanding Bonds, as computed by the Authority from time to time and specified in writing to the Trustee; provided, that such requirement (or any portion thereof) may be provided by a Reserve Facility. Revenue Fund "Revenue Fund"means the Midpeninsula Regional Open Space District Financing Authority 1999 Revenue Bonds Revenue Fund established pursuant to Section 3.02. Revenues "Revenues" means: (a) all amounts payable by the District pursuant to the Program Obligation, including all extensions and renewals of the terms of either of them, and including all amounts realized upon the enforcement of the Program Obligation; (b) all money j deposited and held from time to time by the Trustee in the accounts and funds established hereunder(except the Rebate Fund); (c) all investment income with respect to any money held by the Trustee in the accounts and funds established hereunder(except the Rebate Fund); and (d) all insurance proceeds or condemnation awards received by or payable to the District with respect to the property leased by the District under the Project Lease together with any rental interruption insurance thereon. Securities Depositories "Securities Depositories"means The Depository Trust Company, 711 Stewart Avenue, Garden City, New York 11530, Fax (516) 227-4039 or 4190; Midwest Securities Trust Company, Capital Structures-Call Notification, 440 South LaSalle Street, Chicago, Illinois 60605, Fax (312) 663-2343; Philadelphia Depository Trust Company, Reorganization Division, 1900 Market Street, Philadelphia, Pennsylvania 19103, Attention: Bond Department, Fax (215) 496-5058; and, in accordance with the then current guidelines of the Securities and Exchange DOCSSr l:3143049 1 10 Commission, such other securities depositories as the Authority may designate in a Certificate of the Authority delivered to the Trustee. Sinking Fund Payments "Sinking Fund Payments" means the payments required by Section 2.02 to be deposited in the Sinking Fund Subaccount. Sinking Fund Subaccount "Sinking Fund Subaccount" means the subaccount by that name within the Redemption Account established pursuant to Section 2.02. S&P "S&P"means Standard & Poor's, a division of The McGraw-Hill Companies, Inc., and its successors or assigns, except that if such entity shall be dissolved or liquidated or shall no longer perform the services of a municipal securities rating agency, then "S&P" shall be deemed to refer to any other nationally recognized municipal securities rating agency selected by the Authority. State "State" means the State of California. Supplemental Trust Agreement "Supplemental Trust Agreement" means any trust agreement then in full force and effect which has been duly executed and delivered by the Authority and the Trustee amendatory hereof or supplemental hereto; but only if and to the extent that such Supplemental Trust Agreement is specifically authorized hereunder. Tax Certificate "Tax Certificate" means the Tax Certificate delivered by the Authority at the time of the original execution, authentication and delivery of the Bonds, as the same may be amended or supplemented from time to time in accordance with its terms. Trust Agreement "Trust Agreement" means this Trust Agreement dated as of January 1, 1999, by and between the Authority and the Trustee, as originally executed and as it may from time to time be amended or supplemented by all Supplemental Trust Agreements executed pursuant to the provisions hereof. Trustee j "Trustee" means BNY Western Trust Company, a banking corporation duly organized and existing under and by virtue of the laws of the State of California, as original DOCSSP 1:?14304.1 11 Trustee hereunder, or any other bank or trust company or national banking association which may at any time be substituted in its place as a successor Trustee hereunder as provided in Section 5.01. Trust Estate "Trust Estate"has the meaning ascribed to such term in the Granting Clause hereof. Written Request of the Authority "Written Request of the Authority"means an instrument in writing signed by the Chairperson of the Authority, or by any other officer of the Authority duly authorized by the Board for that purpose. SECTION 1.02. Equal Security. In consideration of the acceptance of the Bonds by the Holders thereof, the Trust Agreement shall be deemed to be and shall constitute a contract by and among the Authority, the Trustee and the Holders from time to time of all Bonds executed, authenticated and delivered hereunder to secure the full and final payment of the interest on and the principal of and the redemption premiums, if any, on all Bonds which may from time to time be executed, authenticated and delivered hereunder, subject to the agreements, conditions, covenants and terms contained herein; and all agreements and covenants contained herein required to be performed by or on behalf of the Authority shall be for the equal and proportionate benefit, protection and security of all Holders of the Bonds without distinction, preference or priority as to security or otherwise of any Bonds over any other Bonds by reason of the number or date thereof or the time of execution, authentication or delivery thereof or for any cause whatsoever, except as expressly provided herein or therein. ARTICLE II ISSUANCE OF BONDS SECTION 2.01. Authorization and Purpose of Bonds. The Authority has reviewed all proceedings heretofore taken relative to the authorization of the Bonds and has found, as a result of such review, and hereby finds and detennines that all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in the issuance of the Bonds do exist, have happened and have been performed in due time, form and manner as required by law, and that the Authority is now duly authorized, pursuant to each and every requirement of the Act, to issue the Bonds in the form and manner provided herein for the purpose of providing funds to pay the costs of funding the acquisition of the Program Obligation and the payment of all Costs of Issuance, and that the Bonds shall be entitled to the benefit, protection and security of the provisions hereof. i SECTION 2.02. Terms of Bonds. The Bonds shall be designated the "Midpeninsula Regional Open Space District Financing Authority 1999 Revenue Bonds" and shall be in the aggregate principal amount of dollars ($ ) I Dorssr-1:314304A 12 and shall be numbered as determined by the Trustee at the time of the delivery thereof, and shall be issued as Current Interest Bonds and as Capital Appreciation Bonds as provided herein. The Current Interest Bonds shall be dated January 1, 1999, shall be issued in fully registered form in denominations of five thousand dollars ($5,000) or any integral multiple of five thousand dollars (55,000) (not exceeding the principal amount of Current Interest Bonds maturing on any one date), and shall mature on the dates and in the principal amounts and shall bear interest at the annual interest rates as set forth in the following schedule: Maturity Date Principal Interest July 1 Amount Rate 2000 S % 2001 2002 2003 2004 2005 2006 2007 2008 2009 20 10 2011 2012 2013 2018 The Current Interest Bonds shall bear interest payable in lawful money of the United States of America at the annual interest rates (based on a 360-day year of twelve 30-day calendar months) set forth above, payable on July 1, 1999, and semiannually thereafter on January 1 and July 1 in each year. Each Current Interest Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof, unless such date of authentication is an Interest Payment Date or is during the period from the day after the Record Date preceding an Interest Payment Date to such Interest Payment Date, both dates inclusive, in which event it shall bear interest from such Interest Payment Date, or unless such date of authentication is prior to the first Record Date, in which event it shall bear interest from its date; provided, that if at the time of authentication of any Current Interest Bond interest is then in default on the Outstanding Bonds, such Current Interest Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment in full of all interest due on the Outstanding Current Interest Bonds. Payment of the interest on the Current Interest Bonds due on any Interest Payment Date on or before the maturity or prior redemption thereof shall be made only to the Holder whose name appears in the registration books required to be kept by the Trustee pursuant to Section 2.08 as the registered owner thereof as of the close of business on the Record Date for such Interest Payment Date, whether or not such Record Date is a Business Day, and shall be paid by check mailed on such Interest Payment Date by first-class mail to such registered owner at the address as it appears in such registration DOCSSFI::14304.1 13 books; provided, that upon the written request of any Holder of one million dollars ($1,000,000) or more in aggregate principal amount of Current Interest Bonds received by the Trustee prior to the applicable Record Date (which such request shall remain in effect until rescinded in writing by such Holder), interest shall be paid on each Interest Payment Date by wire transfer of immediately available funds to an account maintained in any bank or trust company in the United States of America that is a member of the Federal Reserve System designated in such request by such Holder. The principal of and redemption premiums, if any, on the Current Interest Bonds shall be payable in lawful money of the United States of America upon the surrender thereof at maturity or on redemption prior to maturity at the Principal Corporate Trust Office of the Trustee. Sinking Fund Payments are hereby established for the mandatory redemption and payment of the Current Interest Term Bonds, which payments shall become due during the years ending on the dates and in the amounts set forth in the following schedule (except that if any Current Interest Term Bonds have been optionally redeemed pursuant to Section 2.03(b), the amounts of such Sinking Fund Payments shall be reduced proportionately by the principal amount of all such Current Interest Term Bonds so optionally redeemed), namely: Year Ending Sinking Fund July Payment 2014 S 2015 2016 2017 2018 (Maturity Date) All such Sinking Fund Payments shall be deposited in a separate subaccount in the Redemption Account, which subaccount is hereby established and shall be known as the Sinking Fund Subaccount and which subaccount the Authority hereby agrees and covenants to cause to be maintained by the Trustee so long as any Current Interest Term Bonds are Outstanding. All money in the Sinking Fund Subaccount shall be used and withdrawn by the Authority at any time for the purchase of the Current Interest Tenn Bonds, at public or private sale, as and when and at such prices (including brokerage and other charges) as it may in its discretion determine, but not to exceed the principal amount of such Current Interest Tenn Bonds; provided, that all money in the Sinking Fund Subaccount on July 1 of any year on or after July 1, 2014, shall be used and withdrawn by the Authority on such July 1 for the mandatory redemption or payment of the Current Interest Tenn Bonds, and the Authority hereby agrees and covenants with the Holders of the Current Interest Tenn Bonds to call and redeem in accordance with Section 2.03 or pay the Current Interest Tenn Bonds from the Sinking Fund Payments deposited in the Sinking Fund Subaccount pursuant to this paragraph whenever on July 1 of any such year there is money in the Sinking Fund Subaccount available for this purpose. nacssr I:3 14304.1 14 The Capital Appreciation Bonds shall be dated the date of their original execution, authentication and delivery and shall be issued in fully registered form in denominations which will produce five thousand dollars ($5,000) of Accreted Value at maturity or any integral multiple thereof and shall bear interest from such date compounded semiannually on each January 1 and July 1 (commencing on July 1, 1999). The Capital Appreciation Bonds shall mature on the following dates in the following amounts and shall bear interest compounded semiannually at the interest rates and shall have an Accreted Value at maturity as set forth below: Principal Amount Per Maturity Date Principal Interest $5,000 Accreted July 1 Amount Rate Value at Maturity 2019 $ % $ 2020 2021 2022 2023 2024 2025 2026 2027 2028 The Accreted Value of the Capital Appreciation Bonds shall be payable in lawful money of the United States of America upon the surrender thereof at maturity or upon prior redemption at the Principal Corporate Trust Office of the Trustee. SECTION 2.03. Redemption of Bonds. (a) The Current Interest Bonds and the Capital Appreciation Bonds are subject to extraordinary redemption b the Authority prior o to their respective J stated maturity rY p Y YpY dates, upon notice as hereinafter provided, as a whole or in part on any date from prepaid Project Lease Payments made b the District from the netproceeds of condemnation awards Y Y received under the Project Lease under the circumstances and upon the conditions and terns prescribed in the Project Lease, at a redemption price equal to the sum of the principal amount thereof(for the Current Interest Bonds) and the Accreted Value thereof(for the Capital Appreciation Bonds), plus (in the case of the Current Interest Bonds) accrued interest thereon to the redemption date, without a redemption premium. (b) The Current Interest Tenn Bonds are subject to mandatory redemption by the Authority prior to their maturity date in part by lot on July 1 of each year on or after July 1, 2014, to and including July 1, 2017, upon notice as hereinafter provided, from and in the amount of the Sinking Fund Payment due and payable on such date, at a redemption price equal to the i DOC'SSF I:31 d304_1 15 sum of the principal amount thereof plus accrued interest thereon to the redemption date, without a redemption premium. (c) The Current Interest Bonds maturing on or after July 1,2009, are subject to optional redemption by the Authority prior to their respective stated maturity dates, upon notice as hereinafter provided, from any source of funds other than the Sinking Fund Payments, as a whole on any Interest Payment Date on or after July 1, 2008, or in part from such maturities as are designated by the Authority to the Trustee on any Interest Payment Date on or after July 1, 2008, in either case at a redemption price equal to the sum of the principal amount thereof plus accrued interest thereon to the redemption date, together with a redemption premium equal to the following percentage of such principal amount: Redemption Dates Redemption Premium July 1, 2008 2% January 1, 2009, and thereafter 0 (d) If less than all Outstanding Current Interest Bonds maturing by their terns on any one maturity date are to be redeemed at any one time, the Trustee shall select the Current Interest Bonds to be redeemed in any manner deemed fair by it, and the Trustee shall promptly notify the Authority in writing of the numbers of the Current Interest Bonds so selected by it for redemption, and for purposes of such selection Current Interest Bonds shall be deemed to be composed of five thousand dollars ($5,000) multiples and any such multiple may be separately redeemed. (e) Notice of redemption of any Bonds shall be mailed by first-class mail by the Trustee, not less than thirty(30) nor more than sixty (60) days prior to the redemption date, to (i) the respective Holders of the Bonds designated for redemption at their addresses appearing on the registration books required to be kept by the Trustee pursuant to Section 2.08, ii the Information Services and iii the Securities Depositories. Each notice of redemption ( ) p p shall state the date of such notice, the name of the Bonds to be redeemed, the date of the Bonds to be redeemed, the redemption date, the redemption price, the place of redemption (including the name and address of the Principal Corporate Trust Office of the Trustee) and the CUSIP number or numbers of the maturity or maturities, and if less than all of the Current Interest Bonds of any one maturity date are to be redeemed, the distinctive numbers of the Current Interest Bonds of such maturity date to be redeemed, and in the case of Current Interest Bonds to be redeemed in part only, the respective portions of the principal amount of the Current Interest Bonds to be redeemed. Each such notice shall also state that on such redemption date there will become due and payable on each of the Bonds to be redeemed the redemption price thereof and, in the case of a Current Interest Bond to be redeemed in part only, the specified portion of the principal amount thereof to be redeemed, and that from and after such redemption date interest on such Bonds or such portion of a Current Interest Bond shall cease to accrue, and each such notice shall require that all such Bonds to be redeemed be then surrendered at the Principal Corporate Trust Office of the Trustee specified in the redemption notice for payment of the redemption price thereof; provided, that neither failure to receive any such notice nor any immaterial defect contained t>oessr-1:?lasoa.t 16 therein shall invalidate any of the proceedings taken in connection with any such redemption of the Bonds. (f) In the event of redemption of Bonds or portions of the Current Interest Bonds (other than pursuant to paragraph (b) of this section), the Trustee shall mail a notice of redemption upon receipt of a Written Request of the Authority, but only after the Authority shall have deposited with or otherwise made available to the Trustee for deposit in the Redemption Account the money required for payment of the redemption price of all Bonds or such portions of the Current Interest Bonds then to be called for redemption (or the Trustee determines that money will be deposited with or otherwise made available to it in sufficient time for such purpose, in which event the notice of redemption shall state that the proposed redemption is conditioned on there being on deposit in the Redemption Account on the redemption date sufficient money to pay the full redemption price of the Bonds or such portions of the Current Interest Bonds to be redeemed), together with the estimated expense of giving such notice. (g) If a notice of redemption of any Bonds or portions of the Current Interest Bonds to be redeemed has been duly given as aforesaid and money for the payment of the redemption price of the Bonds or such portions of the Current Interest Bonds called for redemption is held by the Trustee, then on the redemption date designated in such notice such Bonds or such portions of the Current Interest Bonds so called for redemption shall become due and payable, and from and after the date so designated interest on such Bonds or such portions of the Current Interest Bonds shall cease to accrue, and the Holders of such Bonds or such portions of the Current Interest Bonds shall have no rights in respect thereof except to receive payment of P p PY the redemption price thereof. SECTION 2.04. Forms of Bonds. The Bonds (and the certificate of authentication and the form of assignment to appear thereon) shall be substantially in the forms set forth in Exhibit A hereto attached and by this reference incorporated herein. SECTION 2.05. Execution of Bonds. The Chairperson of the Authority is hereby authorized and directed to execute each of the Bonds on behalf of the Authority and the Secretary of the Authority is hereby authorized and directed to countersign each of the Bonds on behalf of the Authority, which signatures may be manually subscribed or may be by printed, lithographed or engraved by facsimile reproduction; provided, that in case any officer whose signature appears on the Bonds shall cease to be such officer before the delivery of the Bonds to the purchaser thereof, such signature shall nevertheless be valid and sufficient for all purposes as if such officer had remained in office until such delivery of the Bonds. Only those Bonds bearing thereon a certificate of authentication in the form hereinabove referred to, executed manually and dated by the Trustee, shall be entitled to any benefit, protection or security hereunder or be valid or obligatory for any purpose, and such certificate of authentication of the Trustee shall be conclusive evidence that the Bonds so authenticated have been duly executed and delivered hereunder and are entitled to the benefits, protection and security hereof. i DOCSSFI:314304,1 17 SECTION 2.06. Transfer and Payment of Bonds. Any Bond may, in accordance with its terms, be transferred in the registration books required to be kept by the Trustee pursuant to the provisions of Section 2.08 by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation accompanied by delivery of a duly executed written instrument of transfer in a form acceptable to the Trustee. Whenever any Bond shall be surrendered for transfer, the Authority shall execute and the Trustee shall authenticate and deliver to the transferee a new Bond or Bonds of the same aggregate principal amount and of the same maturity date and of the same or other authorized denominations. All costs of printing the Bonds and any services rendered or expenses incurred by the Trustee in connection with any such exchange shall be paid by the Authority; provided, that the Trustee shall require the payment by the Holder requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer as a condition precedent to the exercise of such privilege. The Authority and the Trustee may deem and treat the registered owner of any Bond as the absolute owner of such Bond for the purpose of receiving payment thereof and for all other purposes, whether such Bonds shall be overdue or not, and neither the Authority nor the Trustee shall be affected by any notice or knowledge to the contrary; and payment of the interest on and the principal of and the redemption premium, if any, on such Bond shall be made only to such registered owner thereof, which payments shall be valid and effectual to satisfy and discharge liability on such Bond to the extent of the sum or sums so paid. The Trustee shall not be required to register the transfer of any Bond during the period established by the Trustee for the selection of any p g Bonds for redemption or to re gister rster the transfer of any Bond which has been selected for redemption in whole or in part from and after the day of mailing a notice of redemption of such Bond selected for redemption in whole or in part as provided in Section 2.03. SECTION 2.07. Exchan-,7e oi'Bonds. Any Bond may be exchanged at the Principal Corporate Trust Office of the Trustee for a new Bond or Bonds of the same aggregate amount of the same mat urity date principal and of the same or other authorized denominations ; s provided, that the Trustee shall not be required to exchange any Bond during the period established by the Trustee for the selection of any Bonds for redemption or to exchange any Bond which has been selected for redemption in whole or in part from and after the day of mailing a notice of redemption of such Bond selected for redemption in whole or in part as provided in Section 2.03. All costs of printing Bonds and any services rendered or expenses incurred by the Trustee in connection with any such exchange shall be paid by the Authority; provided, that the Trustee shall require the payment by the Holder requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange as a condition precedent to the exercise of such privilege. SECTION 2.08. Bond Rei,,istration Books. The Trustee will keep at its Principal Corporate Trust Office sufficient books for the registration and transfer of the Bonds, which books shall during normal business hours be open to inspection by the Authority, and upon presentation for such purpose the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer the Bonds in such books as hereinabove provided. nocssr-I:31a3oa.1 18 i SECTION 2.09. Mutilated, Destroyed, Stolen or Lost Bonds. If any Bond shall become mutilated, the Trustee (at the expense of the Holder) shall thereupon authenticate and deliver a replacement Bond of like tenor and principal amount of authorized denominations in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee at its Principal Corporate Trust Office of the Bond so mutilated, and every mutilated Bond so surTcndered to the Trustee shall be cancelled by the Trustee. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee at its Principal Corporate Trust Office and, if such evidence is satisfactory to the Trustee and indemnity satisfactory to the Trustee shall be given, the Trustee (at the expense of the Holder) shall thereupon authenticate and deliver a replacement Bond of like tenor and principal amount of authorized denominations in lieu of and in substitution for the Bond so lost, destroyed or stolen. Any replacement Bond issued under the provisions of this section shall be equally and proportionately entitled to the benefits and protection hereof with all other Bonds secured hereby, and neither the Authority nor the Trustee shall be required to treat both the original Bond and any replacement Bond as being Outstanding for the purpose of determining the principal amount of Bonds which may be issued hereunder or for the purpose of determining any percentage of Bonds Outstanding hereunder, but both the original and replacement Bond shall be treated as one and the same. SECTION 2.10. Temporary Bonds. The Bonds issued hereunder may be initially issued in temporary forni exchangeable for definitive Bonds when ready for delivery, which temporary Bonds may be printed, lithographed or typewritten, shall be of such denominations as may be determined by the Authority, shall be in fully registered form and may contain such reference to any of the provisions hereof as may be appropriate, and every temporary Bond shall be executed and authenticated as authorized by the Authority in accordance with the terms hereof. If the Authority issues temporary Bonds it will execute and furnish definitive Bonds without delay, and thereupon the temporary Bonds may be surrendered, for cancellation, in exchange therefor at the Principal Corporate Trust Office of the Trustee, and the Trustee shall deliver in exchange for such temporary Bonds at its Principal Corporate Trust Office an equal aggregate principal amount of definitive Bonds of authorized denominations, and until so exchanged, the temporary Bonds shall be entitled to the same benefits hereunder as definitive Bonds delivered hereunder. SECTION 2.11. Bonds as Special ObI44ations. The Bonds are special, limited obligations of the Authority, payable from, and secured as to the payment of the interest thereon and the principal thereof and the redemption premiums, if any, thereon, in accordance with their terms and the terms hereof, solely from the Trust Estate. The Bonds shall not constitute a charge against the general credit of the Authority or the Members, and under no circumstances shall the Authority be obligated to pay the interest on or the principal of or the redemption premiums, if any, on the Bonds except from the Trust Estate. Neither the District, the State nor any public agency (other than the Authority) nor any Member shall be obligated to pay the interest on or the principal of or the redemption premiums, if any, on the Bonds, and neither the faith and credit nor the taxing power of the District, the State or any public agency DOCSSFA:314304.1 19 thereof(other than the Authority) is pledged to the payment of the interest on or the principal of or the redemption premiums, if any, on the Bonds, and neither the payment of the interest on or the principal of or the redemption premiums, if any, on the Bonds constitutes a debt, liability or obligation of the District, the State or any public agency (other than the Authority). SECTION 2.12. Use of Book-Entiy System for Bonds. The Bonds shall be initially issued in non-certificated form and shall be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"), or such other nominee as DC shall request pursuant to the Representation Letter, and the ownership of such Bonds shall be registered in the registration books required to be kept by the Trustee pursuant to Section 2.08 in the name of Cede & Co., as nominee of DTC, or such other nominee as DTC shall request pursuant to the Representation Letter, and payment of the interest on the Current Interest Bonds registered in the name of Cede & Co. shall be made on each Interest Payment Date to the account, in the manner and at the address indicated in or pursuant to the Representation Letter, and the Bonds shall be issued in the form of a single bond for each stated maturity of the Bonds, representing the aggregate principal amount of the Bonds of such maturity. The Authority and the Trustee may treat DTC (or its nominee) as the sole and ) exclusive owner of the Bonds registered in its name for the purposes of payment of the interest on and the principal of and the redemption premiums, if any, on the Bonds, for selecting the Bonds or portions thereof to be redeemed, for giving any notice permitted or required to be given to Holders hereunder, for registering the transfer of the Bonds, for obtaining any consent or other action to be taken by Holders of the Bonds and for all other purposes whatsoever; and neither the Authority nor the Trustee shall be affected by any notice to the contrary, and neither the Authority nor the Trustee shall have any responsibility or obligation to any Participant (which shall mean, for purposes of this section, securities brokers and dealers, banks, trust companies, clearing corporations and other entities, some of whom directly or indirectly own DTC), any person claiming a beneficial ownership interest in the Bonds under or through DTC or any Participant, or any other person whom is not shown in the registration books required to be kept by the Trustee pursuant to Section 2.08 as being a Holder of Bonds, with respect to (1) the accuracy of any records maintained by DTC or any Participant, (ii) the payment by DTC or any Participant of any amount in respect of the interest on or the principal of or the redemption premium, if any, on the Bonds, (iii) any notice which is permitted or required to be given to Holders of Bonds hereunder, (iv) the selection by DTC or any Participant of any person to receive payment in the event of a partial redemption of the Bonds, or(v) any consent given or other action taken by DTC as a Holder of Bonds. The Trustee shall pay the interest on and the principal of and the redemption premiums, if any, on the Bonds at the times, to the accounts, at the addresses and otherwise in accordance with the Representation Letter, and all such payments shall be valid and effective to satisfy fully and discharge the Authority's obligations with respect to the interest on and the principal of and the redemption premiums, if any, on the Bonds to the extent of the sum or sums so paid. Upon delivery by DTC to the Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place of its then existing nominee, the Bonds will be transferable to such new nominee in accordance with the last paragraph of this section. In the event that the Authority determines that it is in the best interests of the beneficial owners of the Bonds that they be able to obtain definitive Bonds in certificated fonn, IxOcssr1:3 1asoa.1 20 the Trustee shall, upon receipt of a Written Request of the Authority, so notify DTC, whereupon DTC shall notify the Participants of the availability through DTC of definitive Bonds, and in such event the Bonds will be transferable in accordance with the last paragraph of this section. DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving written notice of such discontinuance to the Authority or the Trustee and discharging its responsibilities with respect thereto under applicable law, and in such event the Bonds will be transferable in accordance with the last paragraph of this section. Whenever DTC requests the Authority and the Trustee to do so, the Authority and the Trustee will cooperate with DTC in taking appropriate action after reasonable notice to arrange for another securities depository to maintain custody of all Bonds then Outstanding, and in such event the Bonds will be transferable to such securities depository in accordance with the last paragraph of this section, and thereafter all references herein to DTC or its nominee shall be deemed to refer to such successor securities depository and its nominee, as appropriate. So long as all Bonds Outstanding are registered in the name of any nominee of DTC, all payments with respect to the interest on and the principal of and the redemption premiums, if any, on the Bonds and all notices with respect to the Bonds shall be made and given to DTC as provided in the Representation Letter. The Trustee is hereby authorized and requested to execute and deliver the Representation Letter and, in connection with any successor nominee of DTC or any successor depository, enter into comparable arrangements, and the Trustee shall have the same rights with respect to its actions thereunder as it has with respect to its actions hereunder. In the event that any transfer or exchange of Bonds is authorized under the first or second paragraphs of this section, such transfer or exchange shall be accomplished upon receipt by the Trustee from the registered owner thereof of the Bonds to be transferred or exchanged and appropriate instruments of transfer to the permitted transferee, all in accordance with the applicable provisions of Sections 2.06 and 2.07. In the event that definitive Bonds in certificated form are issued to Holders other than Cede & Co., its successor as nominee of DTC as Holder of all the Bonds, another securities depository as Holder of all the Bonds, or the nominee of such successor securities depository, the provisions of Sections 2.06 and 2.07 shall also apply to, among other things, the registration, exchange and transfer of the Bonds and the method of of the interest on and the principal of and th payment e redem redemption premiums, if an on the P P P p � Y, Bo nds. SECTION 2.13. Procedure for the Issuance of Bonds. At any time after the sale of the Bonds, the Authority shall prepare the Bonds and shall execute the Bonds for issuance hereunder and shall deliver them to the Trustee, and thereupon the Bonds shall be authenticated and delivered by the Trustee to the underwriter thereof upon receipt of a Written Request of the Authority and upon receipt of payment of the purchase price thereof from the underwriter, net of the premium costs of the Bond Insurance Policy and the Reserve Facility, which premium costs shall be paid by the underwriter directly to the Bond Insurer. Upon receipt of payment of the net purchase price of the Bonds from the underwriter, the Trustee shall set aside and deposit in or transfer such net purchase price of the Bonds to the following respective accounts or funds, in the following order of priority: uOUssr I:31 a304_1 21 i (a) The Trustee shall deposit in the Interest Account a sum equal to the amount of the accrued interest received by the Trustee upon the delivery of the Bonds. (b) The Trustee shall deposit in the Reserve Account the portion of the requirements of the Reserve Requirement that will not be satisfied by the Reserve Facility, as determined by the Authority. (c) The Trustee shall deposit in the "Midpeninsula Regional Open Space District Financing Authority 1999 Revenue Bonds Program Fund" (which fund is hereby created and which fund the Authority hereby agrees to maintain with the Trustee until the completion of the funding of the acquisition of the Program Obligation), the sum of S , and all money in the Program Fund shall be transferred by the Trustee to the District upon receipt of a Written Request of the Authority to fund the acquisition of the Program Obligation by the Authority. (d) The Trustee shall deposit in the "Midpeninsula Regional Open Space District Financing Authority 1999 Revenue Bonds Costs of Issuance Fund" (which fund is hereby created and which fund the Authority hereby agrees to maintain with the Trustee until July 1, 1999) the remainder of the net purchase price of the Bonds. All money in the Costs of Issuance Fund shall be used and withdrawn by the Trustee to pay the Costs of Issuance of the Bonds upon receipt of a Written Request of the Authority filed with the Trustee, each of which shall be sequentially numbered and shall state the person to whom payment is to be made, the amount to be paid, the purpose for which the obligation was incurred and that such payment is a proper charge against said fund. On July 1, 1999, any remaining balance in the Costs of Issuance Fund shall be transferred by the Trustee to the Revenue Fund. SECTION 2.14. Validity of Bonds. The validity of the issuance of the Bonds shall not be dependent on or affected in any way by the proceedings taken by the Authority for the funding of the acquisition by the Authority of the Program Obligation or by any contracts made by the Authority or its agents in connection therewith, and shall not be dependent upon the perfonnance by any person, fine or corporation of his or its obligation with respect thereto. The recital contained in the Bonds that the same are issued pursuant to the Act and pursuant hereto o shall be conclusive evidence of their validity and of the regularity of their g Y issuance, and all Bonds shall be incontestable from and after their issuance. The Bonds shall be deemed to be issued, within the meaning or an hereof, whenever the definitive Bonds ( Y temporary a p ry Bonds exchangeable therefor) shall have been delivered to the purchaser thereof and the proceeds of sale thereof received. ARTICLE III REVENUES AND FUNDS SECTION 3.01. Pledu~e of Revenues. All Revenues received by the Authority are hereby assigned by the Authority to the Trustee for the benefit of the Holders of the Bonds, and are hereby irrevocably pledged to the payment of the interest on and the principal DOUSSr-1:314304.1 22 of and the redemption premiums, if any, on the Bonds as provided herein, and the Revenues shall not be used for any other purpose while any of the Bonds remain Outstanding. This pledge shall constitute a first pledge of and charge and lien upon the Revenues and all money on deposit in the accounts and funds established hereunder for the payment of the interest on and principal of and redemption premiums, if any, on the Bonds in accordance with the terms hereof and thereof. Further, the Authority hereby assigns to the Trustee all of the Authority's right, title and interest in the Program Obligation as security for payment of the Bonds. The assignment of the Program Obligation to the Trustee is solely in its capacity as Trustee under the Trust Agreement and the duties, powers and liabilities of the Trustee in acting hereunder shall be subject to the provisions of the Trust Agreement. The Trustee shall have no responsibility for the representation, covenants or warranties of the Authority under the Program Obligation. SECTION 3.02. Receipt and Deposit of Revenues in the Revenue Fund. In order to carry out and effectuate the pledge, charge and lien contained herein, the Authority agrees and covenants that all Revenues when and as received by the Authority will be forthwith transferred by the Authority to the Trustee for deposit in the "Midpeninsula Regional Open Space District Financing Authority 1999 Revenue Bonds Revenue Fund,"which fund is hereby created and which fund the Authority hereby agrees and covenants to maintain with the Trustee so long as any Bonds are Outstanding hereunder. All money in the Revenue Fund shall be accounted for through and held in trust in the Revenue Fund by the Trustee, and the Authority shall have no beneficial right or interest in any money in the Revenue Fund except only as herein provided. All Revenues shall be allocated, applied and disbursed solely to the purposes and uses hereinafter in this article set forth, and shall be accounted for separately and apart from all other accounts, funds, money or other resources of the Authority. i SECTION 3.03. Establishment and Maintenance of Accounts for Use of Money in the Revenue Fund. All money in the Revenue Fund shall be set aside by the Trustee in !, the following respective special accounts within the Revenue Fund (each of which is hereby created and each of which the Trustee hereby covenants and agrees to cause to be maintained) in the following order of priority: (a) Interest Account, (b) Redemption Account, and c Reserve Accoun t. nt. All money in each of such accounts shall be held in trust by the Trustee and shall be applied, used and withdrawn only for the purposes hereinafter authorized in this section. (a) Interest Account. On or before January 1 and July 1 of each year, beginning on July 1, 1999, the Trustee shall set aside from the Revenue Fund and deposit in the Interest Account that amount of money which is equal to the amount of interest becoming due and payable on all Outstanding Bonds on such January 1 or July 1,as the case may be; provided, that no such deposit need be made in the Interest Account if the amount contained therein is at DOC:SSF1;314304.1 23 least equal to the aggregate amount of interest becoming due and payable on all Outstanding Bonds on such Interest Payment Date. All money in the Interest Account shall be used and withdrawn by the Trustee solely for the purpose of paying the interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity). (b) Redemption Account. On or before July I of each year, beginning on July 1, 1999, the Trustee shall set aside from the Revenue Fund and deposit in the Principal Subaccount in the Redemption Account an amount of money equal to the principal amount of all Outstanding Current Interest Serial Bonds and Capital Appreciation Bonds maturing on such date and shall set aside from the Revenue Fund and deposit in the Sinking Fund Subaccount in the Redemption Account an amount of money equal to the Sinking Fund Payment required to be made on such date; provided, that no such deposit need be made in the Redemption Account if the amount contained in the Principal Subaccount therein is at least equal to the aggregate amount of the principal of all Outstanding Current Interest Serial Bonds and Capital Appreciation Bonds maturing by their terms on such date and the amount contained in the Sinking Fund Subaccount therein is at least equal to the amount of the Sinking Fund Payment required to be made on such date for all Outstanding Current Interest Term Bonds. All money in the Principal Subaccount in the Redemption Account shall be used and withdrawn by the Trustee solely for the purpose of paying the principal or Accreted Value of the Current Interest Serial Bonds and the Capital Appreciation Bonds as they shall become due and payable, whether at maturity or on prior redemption, and all money in the Sinking Fund Subaccount in the Redemption Account shall be used and withdrawn by the Trustee solely for the purpose of purchasing or redeeming or paying the Current Interest Term Bonds, and with respect to the Sinking Fund Subaccount, on each Sinking Fund Payment date the Trustee shall apply the Sinking Fund Payment required to be made on that date to the redemption (or payment at maturity, as the case may be) of the Current Interest Tenn Bonds upon the notice and in the manner provided in Article II; provided, that at any time prior to selection of Bonds for such redemption the Trustee shall, upon receipt of a Written Request of the Authority, apply any money in the Sinking Fund Subaccount to the purchase for cancellation of Current Interest Term Bonds at public or private sale as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as directed in such Written Request of the Authority, except that the purchase price (excluding accrued interest) shall not exceed the redemption price that would be payable for such Current Interest Term Bonds upon redemption by application of such Sinking Fund Payment, and if during the twelve-month period immediately preceding any Sinking Fund Payment date the Trustee has purchased Current Interest Tenn Bonds with money in the Sinking Fund Subaccount, such Current Interest Term Bonds so purchased shall be applied to the extent of the full principal amount thereof to reduce the Sinkin g Fund Payment ent due on such Sinking Fund Payment date. (c) Reserve Account. (1) On July 1 of each year, beginning on July 1, 1999, the Trustee shall set aside from the Revenue Fund and deposit in the Reserve Account all money remaining in the DOC'SIF 1:114104,1 24 i Revenue Fund. All money in the Reserve Account shall be used and withdrawn by the Trustee solely for the purpose of paying the interest on or the principal of the Bonds(in such order) in the event that no other money is available for this purpose in the Interest Account or in the Redemption Account; provided, that all money on deposit in the Reserve Account in excess of the Reserve Requirement shall, on July 1 of each year(beginning in July, 1999), be withdrawn by the Trustee from the Reserve Account and deposited in the Revenue Fund; and for this purpose all investments in the Reserve Account shall be valued on July 1 of each year(beginning in July, 1999) at the face value thereof if such investments mature within twelve (12) months from the date of valuation, or if such investments mature more than twelve (12) months after the date of valuation, at the price at which such investments are redeemable by the holder, at his option, if so redeemable, or if not so redeemable, at the market value of such investments. (2) Notwithstanding anything contained herein, the Authority may satisfy all or any portion of the requirements of the Reserve Requirement by the deposit with the Trustee of a Reserve Facility that the Trustee may draw upon to the extent necessary to fund any deficiency in the Interest Account or the Redemption Account or the Reserve Account. SECTION 3.04. Rebate Fund. The Authority hereby agrees to establish and maintain with the Trustee so long as any Bonds are Outstanding a fund separate from any other fund established and maintained hereunder designated the "Midpeninsula Regional Open Space District Financing Authority 1999 Revenue Bonds Rebate Fund." The Trustee shall deposit in the Rebate Fund from funds provided by the Authority the Rebate Requirement in accordance with the Tax Certificate, but only as directed by the Authority in an appropriate Written Request of the Authority filed with the Trustee. The Trustee will apply all money held in the Rebate Fund as provided in Section 4.03 and the Tax Certificate, but only as directed by the Authority in an appropriate Written Request of the Authority filed with the Trustee, and subject to the provisions of Section 4.03, all money held in the Rebate Fund is hereby pledged to secure payments to the United States of America, and the Authority and the Holders shall have no rights in or claims to such money. In accordance with the Tax Certificate, the Trustee will remit part or all of the balance held in the Rebate Fund to the United States of America, but only as directed by the Authority in an appropriate Written Request of the Authority filed with the Trustee, and in addition, if the Tax Certificate so requires, the Trustee will deposit money into or transfer money out of the Rebate Fund from or into such accounts or funds as therein provided, but only as directed by the Authority in an appropriate Written Request of the Authority filed with the Trustee. ARTICLE IV COVENANTS OF THE AUTHORITY SECTION 4.01. Punctual Payment and Performance. The Authority will punctually pay the interest on and the principal of and the redemption premium, if any, to become due on every Bond issued hereunder from the Revenues in strict conformity with the DOGSSFl:31d3f4.1 25 i terms hereof and of the Bonds, and will faithfully observe and perform all the agreements, conditions, covenants and terms to be observed or performed by it contained herein and in the Bonds. SECTION 4.02. At, ainst Encumbrances. The Authority will not make any pledge of or place any charge or lien upon the Revenues except as provided herein, and will not issue any bonds, notes or obligations payable from the Revenues or secured by a pledge of or charge or lien upon the Revenues except the Bonds. SECTION 4.03. Tax Covenants. The Authority 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 Bonds pursuant to Section 103 of the Code, and specifically the Authority will not directly or indirectly use or make any use of the proceeds of the Bonds or any other funds of the Authority or take or omit to take any action that would cause the Bonds 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; and to that end the Authority, with respect to the proceeds of the Bonds 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 Authority shall obtain an Opinion of Counsel to the effect that any action required under this section is no longer required, or to the effect that some further action is required, to maintain the exclusion from gross income of the interest on the Bonds pursuant to Section 103 of the Code, the Authority may rely conclusively on such opinion in complying with the provisions hereof; and provided further, that in the event that at any time the Authority is of the opinion that for purposes of this section it is necessary to restrict or limit the yield on the investment of any money held by the Trustee hereunder, the Authority shall so instruct the Trustee in writing, and the Trustee shall take such action as may be necessary in accordance with such instructions. SECTION 4.04. Accountini4 Records and Reports. The Authority will keep or cause to be kept proper books of record and accounts in which complete and correct entries shall be made of all transactions relating to the receipts, disbursements, allocation and application of the Revenues, and such books shall be available for inspection by the Trustee at reasonable hours and under reasonable conditions. Not more than one hundred eighty (180) days after the close of each Fiscal Year, the Authority will furnish or cause to be furnished to the Trustee audited financial statements for such Fiscal Year prepared by an Independent Certified Public Accountant. The Authority will also keep or cause to be kept such other information as required under the Tax Certificate, and the Trustee shall have no duty to review or examine such statements. SECTION 4.05. Prosecution and Defense of Suits. The Authority will defend against every suit, action or proceeding at any time brought against the Trustee upon any claim to the extent arising out of the receipt, application or disbursement of any of the Revenues DOCSSH:3143b4.1 26 or to the extent involving the failure of the Authority to fulfill its obligations hereunder; provided, that the Trustee or any affected Holder at its election may appear in and defend any such suit, action or proceeding. The Authority will indemnify and hold harmless the Trustee against any and all liability claimed or asserted by any person to the extent arising out of any such failure by the Authority, and will indemnify and hold harmless the Trustee against any attorney's fees or other expenses which it may incur in connection with any litigation to which it may become a party by reason of its actions hereunder, except for any loss, cost, damage or expense resulting from the active or passive negligence or willful misconduct of the Trustee. SECTION 4.06. Enforcement and Amendment of Program Obligation. The Authority shall enforce all of its rights with respect to the Program Obligation to the fullest extent necessary to preserve the rights and protect the security of the Holders hereunder. The Authority and the Trustee may, without the consent of or notice to the Holders, consent to any amendment, change or modification of the Program Obligation that may be required (a) to conform to the provisions hereof(including any modifications or changes contained in any Supplemental Trust Agreement), (b) for the purpose of curing any ambiguity or inconsistency or formal defect or omission, (c) to add additional rights acquired in accordance with the provisions of the Program Obligation, (d) in connection with any other change therein which is not to the material prejudice of the Trustee or the Holders pursuant to an Opinion of Bond Counsel, or(e) in an Opinion of Counsel, to preserve or assure the exemption of interest on the Program Obligation or the Bonds from federal income taxes under the Code or the exemption from State of California personal income tax. Except for amendments, changes or modifications provided for in the preceding paragraph, neither the Authority nor the Trustee shall consent to any amendment, change or modification of the Program Obligation without the mailing of notice and the written approval or consent of the Holders of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding given and procured as in this section provided. If at any time the Authority shall request the consent of the Trustee to any such proposed amendment, change or modification of either Program Obligation, the Trustee shall, upon being satisfactorily ro indemnified with respectexpenses, to cause notice of such proposed osed amendme nt, change e or modification to be mailed in the same manner as provided by Section 10.11. Such notice shall briefly set forth the nature of such proposed amendment, change or modification and shall state that copies of the instrument embodying the same are on file at the Principal Corporate Trust { Office of the Trustee for inspection by all Holders. Nothing contained in this section shall be construed to prevent the Trustee, with the prior consent of the Authority and the Bond Insurer, from settling a default under either Program Obligation on such terms as the Trustee may determine to be in the best interests of the Holders. SECTION 4.07. Continuinw Disclosure Agreement. The Authority will comply with and carry out all of the provisions of that certain Continuing Disclosure Agreement executed by the Authority, the District and the Trustee, dated January 1, 1999, as originally executed and as it may be amended from time to time in accordance with the terms thereof, and notwithstanding any other provision hereof, failure of the Authority to comply with such Continuing Disclosure Agreement shall not be considered an Event of Default hereunder; DOCSSr l:314304.1 27 provided, that any Holder may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Authority to comply with its obligations under this section. SECTION 4.08. Maintenance of Existence. The Authority will maintain its existence, powers and authority as a joint exercise of powers entity under the laws of the State of California. SECTION 4.09. Further Assurances. Whenever and so often as reasonably requested to do so by the Trustee or any Holder, the Authority will promptly execute and deliver or cause to be executed and delivered all such other and further assurances, documents or instruments, and promptly do or cause to be done all such other and further things as may be necessary or reasonably required in order to further and more fully vest in the Holders all rights, interests, powers, benefits, privileges and advantages conferred or intended to be conferred upon them hereby. ARTICLE V THE TRUSTEE SECTION 5.01. The Trustee. BNY Western Trust Company at its Principal Corporate Trust Office shall serve as the Trustee for the Bonds for the purpose of receiving all Revenues which the Authority is required to deposit with the Trustee hereunder and for the purpose of allocating, applying and using the Revenues as provided herein and for the purpose of paying the interest on and the principal of and the redemption premiums, if any, on the Bonds presented for payment at its Principal Corporate Trust Office, and for the purpose of cancelling all paid or redeemed Bonds and returning such cancelled Bonds to the Authority, with the rights and obligations provided herein; and the Authority agrees that it will at all times maintain a Trustee havin g a corporate trust office in Los Angeles or San Francisco California. The Authority may at any time, and upon the written direction of the Bond Insurer shall, unless there exists any Event of Default, remove the original Trustee appointed hereunder and any successor Trustee thereto and may appoint a successor Trustee thereto by an instrument in writing; provided, that any such successor Trustee shall be a bank or trust company or national banking association approved by the Bond Insurer and doing business and having a corporate trust office in Los Angeles or San Francisco, California, and having a combined capital (exclusive of borrowed capital) and surplus of at least one hundred million dollars M00,000,000) and being subject to supervision or examination by federal or state authority. If such bank or trust company or national banking association publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purpose of this section the combined capital and surplus of such bank or trust company or national banking association shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Trustee may at any time resign by giving written notice of such resignation to the Authority and by mailing to the Holders and the Bond Insurer notice of such resignation, and upon receiving such notice of I)OCSSF 1:314304.1 28 I _ resignation, anon> the Aut hority shall promptly appoint a successor Trustee acceptable to the Bond Insurer b an instrument in writing; provided, that an removal or resignation Y anon of a g P , Trus tee and Y g appointment of a successor Trustee shall become effective only upon the approval of such successor Trustee by the Bond Insurer and the acceptance of appointment by the successor Trustee. If, within thirty(30) days after notice of the removal or resignation of the Trustee no successor Trustee shall have been appointed and shall have accepted such appointment, the removed or resigning Trustee may petition an court of competent jurisdiction for the Y p J appointment of a successor Trustee, 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 Trustee having the qualifications required hereby. The Authority shall furnish the Bond Insurer with written notice of the resignation or removal of the Trustee and the appointment of any successor Trustee. The Trustee is hereby authorized to pay or redeem the Bonds when duly presented for payment at maturity or on redemption prior to maturity. The Trustee shall cancel all Bonds upon payment thereof or upon the surrender thereof by the Authority and shall destroy such Bonds and a certificate of destruction shall be delivered to the Authority upon its request. The Trustee shall keep accurate records of all Bonds paid and discharged and cancelled by it. The Trustee shall, prior to an Event of Default, and after the curing of all Events of Default that may have occurred, perform such duties and only such duties as are specifically set forth herein and no implied duties or obligations of the Trustee shall be read herein. The Trustee shall, during the existence of any Event of Default (that has not been cured), exercise such of the rights and powers vested in it hereby, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. SECTION 5.02. Liabilitv of Trustee. The recitals of facts, agreements and covenants herein and in the Bonds shall be taken as recitals of facts, agreements and covenants of the Authority, 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 Bonds, and shall not incur any responsibility in respect thereof other than in connection with the duties and obligations assigned to or imposed upon it herein, in the Bonds or in law or equity. The Trustee shall not be liable in connection with the perfonnance of its duties and obligations hereunder except for its own negligence or willful misconduct and shall not be liable for any error of judgment made in good faith by a responsible officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. The Trustee shall not be bound to recognize any person as the Holder of a Bond unless and until such Bond is submitted for inspection, if required, and such Holder's title thereto satisfactorily established, if disputed. The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee hereunder. DOCSSF1:314304.1 29 I The Trustee shall be under no obligation to exercise any of the rights or powers vested in it hereby at the request, order or direction of any of the Holders pursuant to the provisions hereof unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred therein or thereby. The Trustee has no obligation or liability to the Holders for the payment of the interest on or the principal of or the redemption premiums, if any, with respect to the Bonds from its own funds; but rather the Trustee's obligations shall be limited to the performance of its duties and obligations hereunder. The Trustee shall not be responsible for the validity or effectiveness or value of any collateral or security securing the Program Obligation. The Trustee shall not be responsible for the recording or filing of any document relating hereto or to the Program Obligation or of financing statements (or continuation statements in connection therewith) or mortgage or of any supplemental instruments or documents of further assurance as may be required by law in order to perfect the security interests or lien on or in any collateral or security securing the Program Obligation. The Trustee shall not be deemed to have made representations as to the security afforded thereby or as to the validity or sufficiency of any such document, collateral or security. The Trustee shall not be deemed to have knowledge of any Event of Default hereunder unless and until an officer at the Trustee's Principal Corporate Trust Office responsible for the administration of the Trustee's duties and obligations hereunder shall have actual knowledge thereof or the Trustee shall have received written notice thereof(from the Bond Insurer or otherwise) at its Principal Corporate Trust Office. The Trustee shall not be bound to ascertain or inquire as to the performance or observance of any of the agreements, conditions, covenants or terms contained herein or as to the existence of an Event of Default hereunder. The Trustee shall be entitled to advice of counsel and other professionals concerning all matters of trust and its duty hereunder, but the Trustee shall not be answerable for the professional malpractice of any attorney-at-law or ce rtified public accountant in connection with the rendering of his professional advice in accordance w'� p ce with the terms hereof, if such attorney-at-law or certified public accountant was selected by the Trustee with due care. The Trustee shall not be concerned with or accountable to anyone for the subsequent use or application of any money which shall be withdrawn and transferred to the Authority in accordance with the provisions hereof. Whether or not therein expressly so provided, every provision hereof or any related documents relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this article. The Trustee shall be protected in acting upon any bond, certificate (including any Certificate of the Authority), consent, notice, opinion, order, report, request (including any Written Request of the Authority), requisition, resolution or other document or paper believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who may be counsel of or to the Authority, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and DOC:SSF1:',14304.1 30 protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. Whenever in the administration of its rights and obligations hereunder the Trustee shall deem it necessary or desirable that a matter be established or proved 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 bad faith on the part of the Trustee, be deemed to be conclusively proved and established by a Certificate of the Authority, which certificate shall be full warrant to the Trustee for any action taken or suffered under the provisions hereof upon the faith thereof, but in its discretion the Trustee may in lieu thereof accept other evidence of such matter or may require such additional evidence as it may deem reasonable. No provision hereof shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance or exercise of any of its duties hereunder, or in the exercise of its rights or powers. The Trustee shall be entitled to interest on all amounts advanced by it hereunder at its prime rate plus two per cent (2%). The Trustee shall have no responsibility, opinion or liability with respect to any information, statement or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of the Bonds. All immunities, indemnifications and releases from liability granted herein to the Trustee shall extend to the directors, employees, officers and agents thereof. Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, so long as such company shall meet the requirements set forth in Section 5.01, shall be the successor to the Trustee and shall be vested with all of the title to the trust estate and all of the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. SECTION 5.03. Compensation and hulemnification of Trustee. The Authority covenants to pay to the Trustee from time to time, and the Trustee shall be entitled to, reasonable comp ensation for all services rendered by it in the exercise and performance of any of the duties and obligations of the Trustee hereunder, and the Authority will pay or reimburse the Trustee upon its request for all expenses, disbursements and advances incurred or made by the Trustee and its affiliates, directors, employees and agents in accordance with any of the provisions hereof(including the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence, willful default or willful misconduct. The Authority, to the extent permitted by law, shall indemnify, defend and hold harmless the Trustee against any loss, damages, liability or expense incurred without negligence or bad faith on the part of the Trustee arising out of or in connection with (i) the acceptance or administration of the trusts created hereby, or the exercise or performance of any of its duties or obligations hereunder or(ii) any untrue statement or alleged untrue statement of any material fact or omission or I noCssr-I:314304.1 31 I alleged omission to state a material fact necessary to make the statements made, in the light of the circumstances under which they were made, not misleading in any official statement or other offering circular utilized in connection with the sale of any of the Bonds, including costs and expenses (including attorneys' fees) of defending itself against any claim or liability in connection with the exercise or performance of any of its duties and obligations hereunder. The rights of the Trustee and the obligations of the Authority under this section shall survive the discharge of the Bonds and hereof and the resignation or removal of the Trustee. ARTICLE VI AMENDMENT OF THE TRUST AGREEMENT SECTION 6.01. Amendment of the Trust Agreement. The Trust Agreement and the rights and obligations of the Authority and of the Holders may be amended at any time by a Supplemental Trust Agreement which shall become binding when the written consents of the Holders of a majority in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in Section 6.02, are filed with the Trustee; provided, that the prior written consent of the Bond Insurer shall be required prior to submitting any such Supplemental Trust Agreement to the Holders for their consent; and provided further, that before executing any such Supplemental Trust Agreement the Trustee shall first be provided at the Authority's expense with an Opinion of Counsel that such Supplemental Trust Agreement complies with the provisions of the Trust Agreement, on which opinion the Trustee may conclusively rely. No such amendment shall (1) extend the maturity of or reduce the interest rate on or the amount of interest on or principal of or redemption premium, if any, on or Sinking Fund Payment for any Bond without the express written consent of the Holder of such Bond, or (2) permit the creation by the Authority of any pledge of or charge or lien upon the Revenues as provided herein superior to or on a parity with the pledge, charge and lien created hereby for the benefit of the Bonds, or(3) reduce the percentage of Bonds required for the written consent to any such amendment, or(4) modify any duties or obligations of the Authority or the Bond Insurer or the Trustee without their prior written assent thereto, respectively. The Trust Agreement and the rights and obligations of the Authority and of the I Holders may also be amended at any time by a Supplemental Trust Agreement which shall become binding upon adoption without the consent of any Holders, but only to the extent permitted by law(and subject to obtaining the prior written consent of the Bond Insurer), for any purpose that will not materially adversely affect the interests of the Holders including (without limitation) for any one or more of the following purposes -- (a) to add to the agreements and covenants required herein to be performed by the Autho rity other agreements and covenants thereafter to be performed by the Authority, or to surrender any right or power reserved herein to or conferred herein on the Authority; (b) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained herein or in regard DOCSsr-t_3 t a3oa.1 32 i to questions arising hereunder which the Authority may deem desirable or necessary and not inconsistent herewith; (c) to add to the agreements and covenants required herein, such agreements and covenants as may be necessary to qualify the Trust Agreement under the Trust Indenture Act of 1939; (d) to make any amendments or supplements necessary or appropriate to preserve or protect the exclusion of interest on the Bonds from gross income for federal income tax purposes under the Code or the exemption of such interest from State personal income taxes; (e) to make such amendments or supplements as may be necessary or appropriate to maintain any then current rating by any of the Rating Agencies on the Bonds; or (f) to add to the rights of the Trustee; provided, that before executing any such Supplemental Trust Agreement the Trustee shall first be provided at the Authority's expense with an Opinion of Counsel that such Supplemental Trust Agreement complies with the provisions hereof, on which opinion the Trustee may conclusively rely. In connection with the proceedings for the execution of any Supplemental Trust Agreement, the Authority shall (i) provide each Rating Agency notice of such amendment together with a copy of the proposed Supplemental Trust Agreement at least fifteen (15) days in advance of the execution and delivery thereof and (ii) provide the Bond Insurer with a full transcript of all proceedings relating to the execution and delivery of such Supplemental Trust Agreement. SECTION O 6.02. Dis dualified Bonds. Bonds owned or held by or for the � account of the Authority shall not be deemed Outstanding for the purpose an ose of consent or other Y action or any calculation of Outstanding Bonds provided in this article, and shall not be entitled to consent to or take any other action provided in this article. SECTION 6.03. Endorsement or Replacement of Bonds After Amendment. After the effective date of any action taken as hereinabove provided, the Authority may detennine that the Bonds may bear a notation by endorsement in form approved by the Authority as to such action, and in that case upon demand of the Holder of any Outstanding Bonds and presentation of his Bond for such purpose at the Principal Corporate Trust Office of the Trustee, a suitable notation as to such action shall be made on such Bond. If the Authority shall so determine, new Bonds so modified as, in the opinion of the Authority, shall be necessary to conform to such action shall be prepared and executed, and in that case upon demand of the Holder of any Outstanding Bond a new Bond or Bonds shall be exchanged at the Principal Corporate Trust Office of the Trustee without cost to each Holder for its Bond or Bonds then Outstanding upon surrender of such Outstanding Bonds. DOUssrI:314304.1 33 SECTION 6.04. Amendment by Mutual Consent. The provisions of this article shall not prevent any Holder from accepting any amendment as to the particular Bonds held by him, provided that prior written approval is obtained from the Bond Insurer and due notation thereof is made on such Bonds. ARTICLE VII EVENTS OF DEFAULT AND REMEDIES OF HOLDERS SECTION 7.01. Events of Default and Acceleration of Maturities. If one or more of the following events (herein defined to constitute "Events of Default") shall happen, that is to say: (a) if default shall be made by the Authority in the due and punctual payment of the interest on any Bond when and as the same shall become due and payable; (b) if default shall be made by the Authority in the due and punctual payment of the principal of or the redemption premium, if any, on any Bonds as the same shall become due and payable, whether at maturity or by proceedings for redemption, or the making of any Sinking Fund Payment when and as the same shall become due and payable; (c) if default shall be made by the Authority in the performance of any of the other agreements or covenants contained herein required to be perfonned by the Authority, and such default shall have continued for a period of thirty (30) days after the Authority shall have been given notice in writing of such default by the Trustee; or (d) if the Authority shall file a petition or answer seeking arrangement or reorganization under the federal bankruptcy laws or.any other applicable law of the United States of America or any state therein, or if a court of competent jurisdiction shall approve a petition filed with or without the consent of the Authority seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if under the provisions of any other law for the relief or aid of debtors any court of competent jurisdiction shall assume custody or control of the Authority 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 (with the prior written consent of the Bond Insurer) may, and upon the written request of the Holders of not less than a majority in aggregate principal amount of the Bonds then Outstanding (with the prior written consent of the Bond Insurer or at the direction of the Bond Insurer) shall, and in each case so long as the Trustee is indemnified to its satisfaction therefor, by notice in writing to the Authority, declare the principal of all Bonds then Outstanding and the interest accrued thereon to be due and payable immediately, and upon any such declaration the same shall become due and payable, anything contained herein or in the Bonds to the contrary notwithstanding; provided, that this provision is subject to the condition that if at any time after the principal of the Bonds then Outstanding shall have been so declared due and payable and before any judgment or decree for the payment of the money due shall have been obtained or nocssr1:3 1d3a4.1 34 entered the Authority shall deposit with the Trustee a sum sufficient to pay all matured interest on all the Bonds and all principal of the Bonds matured prior to such declaration, with interest at the rate borne b such Bonds on such overdue intere st est and principal, and the reasonable fees and expenses of the Trustee, and any and all other defaults known to the Trustee (other than in the payment of interest on and principal of the Bonds due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall have been made therefor, then and in every such case the Holders of not less than a majority in aggregate principal amount of Bonds then Outstanding, by written notice to the Authority and to the Trustee, may on behalf of the Holders of all the Bonds then Outstanding (with the prior written consent of the Bond Insurer), rescind and annul such declaration and its consequences; and provided further, that no such rescission and annulment shall extend to or shall affect any subsequent default or shall impair or exhaust any right or power consequent thereon. In determining whether an Event of Default has occurred pursuant to subsections (a) or (b) of this section or whether a payment on the Bonds has been made hereunder, no effect shall be given to payments made under the Bond Insurance Policy. The Trustee shall give the Bond Insurer immediate notice of the occurrence of any Event of Default described in subsections (a) or (b) of this section and notice of any other Event of Default known to the Trustee within thirty (30) days of the Trustee's knowledge thereof. For all purposes of the provisions hereof governing Events of Default and remedies, except the giving of notice of an Event of Default to Holders, the Bond Insurer shall be deemed to be the sole Holder of the Bonds for so long as it has not failed to comply with its payment obligations under the Bond Insurance Policy. SECTION 7.02. Application of Funds Upon Acceleration. All money in the accounts and funds provided in Sections 2.13, 3.02 and 3.03 upon the date of the declaration of acceleration by the Trustee as provided in Section 7.01 and all Revenues thereafter received by the Authority hereunder shall be transmitted to the Trustee and shall be applied by the Trustee in the following order-- First, to the payment of the fees, costs and expenses of the Trustee, if any, in carrying out the provisions of this article, including any outstanding fees and expenses of the Trustee and including reasonable compensation to its accountants and counsel, and thereafter to the payment of the costs and expenses of the Holders in providing for the declaration of such Event of Default, including reasonable compensation to their accountants and counsel; and Second, upon presentation of the several Bonds, and the stamping thereon of the amount of the payment if only partially paid or upon the surrender thereof if fully paid, to the payment of the whole amount then owing and unpaid upon the Bonds for interest and principal, with (to the extent permitted by law) interest on the overdue interest and principal at the rate borne by such Bonds, and in case such money shall be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, then to the payment of such interest, principal and (to the extent pennitted by law) interest on overdue interest and principal without preference or nOcssr-i:31 a3o4.1 35 priority among such interest, principal and interest on overdue interest and principal ratably to the aggregate of such interest, principal and interest on overdue interest and principal. SECTION 7.03. Institution of Legal Proceedings by Trustee. If one or more of the Events of Default shall happen and be continuing, the Trustee, with the prior written consent of the Bond Insurer, may, and upon the written request of the Holders of a majority in principal amount of the Bonds then Outstanding and with the prior written consent of the Bond Insurer or at the direction of the Bond Insurer, and in each case so long as the Trustee is indemnified to its satisfaction therefor, shall proceed to protect or enforce its rights or the rights of the Holders of Bonds hereunder by a suit in equity or action at law, either for the specific performance of any agreement or covenant contained herein or in aid of the execution of any power herein granted, or by mandamus or other appropriate proceeding for the enforcement of any other legal or equitable remedy as the Trustee shall deem most effectual in support of any of its rights and duties hereunder; provided, that nothing contained herein or in the Bonds shall affect or impair the obligation of the Authority, which is absolute and unconditional, to pay the interest on and principal of and redemption premiums, if any, on the Bonds to the respective Holders of the Bonds at the respective dates of maturity or upon prior redemption as provided herein from the Revenues as provided herein pledged for such payment, or shall affect or impair the right of such Holders, which is also absolute and unconditional, to institute suit to enforce such payment by virtue of the contract embodied herein and in the Bonds. A waiver of any default or breach of duty or contract by the Trustee or any Holder shall not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Trustee or any Holder to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or shall be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Holders by the Act or by this article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee or the Holders. If any action, proceeding or suit to enforce any right or exercise any remedy is abandoned, the Authority, the Trustee and any Holder shall be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken. SECTION 7.04. Actions by Trustee as Attorney-in-Fact. Any action, proceeding or suit which any Holder shall have the right to bring to enforce any right or remedy hereunder may be brought by the Trustee for the equal benefit and protection of all Holders, whether or not the Trustee is a Holder, and the Trustee is hereby appointed (and the successive Holders, by taking and holding the Bonds issued hereunder, shall be conclusively deemed to have so appointed it) the true and lawful attorney-in-fact of the Holders for the purpose of bringing any such action, proceeding or suit and for the purpose of doing and performing any and all acts and things for and on behalf of the Holders as a class or classes as may be advisable or necessary in the opinion of the Trustee as such attorney-in-fact; provided, that the Trustee shall not take the Bond Insurance Policy into account in determining whether the rights of the Holders of the Bonds are adversely affected by any actions taken or not taken pursuant to the tenns hereof. DOCSSr-I:3l d3o4.1 36 SECTION 7.05. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Holders is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing 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 Act or any other law. SECTION 7.06. Limitation on Bondholders' Right to Sue. No Holder of any Bond issued hereunder shall have the right to institute any suit, action or proceeding, at law or equity, for any remedy hereunder against the Trustee unless (a) such Holder shall have previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Holders of at least a majority in aggregate principal amount of all the Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its own name and the Bond Insurer shall have consented in writing to such request; (c) such Holders shall have tendered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of sixty (60) days after such request shall have been received by, and such tender of indemnity shall have been made to, the Trustee. Each such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Holder of Bonds of any remedy hereunder; it being understood and intended that no one or more Holders shall have any right in any manner whatever by his or their action to enforce any right hereunder except in the manner herein provided, and that all proceedings at law or in equity to enforce any provision hereof shall be instituted and maintained in the manner herein provided and for the equal benefit of all Holders of Outstanding Bonds. SECTION 7.07. Bond Insurer Deemed a Beneficiary and a Party in Interest. The Bond Insurer is hereby deemed a beneficiary hereof and a party in interest hereto, and as a party in interest hereto is entitled to (i) notify the Authority, the Trustee or any applicable receiver of the occurrence of an Event of Default and (ii) request the Trustee or receiver to intervene in judicial proceedings that affect the Bonds or the security therefor; and the Trustee or receiver shall be required to accept notice of an Event of Default from the Bond Insurer. ARTICLE VIII DEFEASANCE SECTION 8.01. Discharge of Bonds. (a) If the Authority shall pay or cause to be paid or there shall otherwise be paid to the Holders of all Outstanding Bonds the interest thereon and the principal thereof and the redemption premiums, if any, thereon at the times and in the manner stipulated herein and therein, then the Holders of such Bonds shall cease to be entitled to the pledge of and charge and DOCSSF 1:3 14304.1 37 lien upon the Revenues as provided herein, and all agreements, covenants and other obligations of the Authority to the Holders of such Bonds hereunder shall thereupon cease, terminate and become void and be discharged and satisfied. In such event, the Trustee shall execute and deliver to the Authority 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 Authority all money or securities held by it pursuant hereto which are not required for the payment of the interest on and principal of and redemption premiums, if any, on such Bonds and for the payment of any fees and expenses of the Trustee. (b) Any Outstanding Bonds shall prior to 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 on and the principal of and the redemption premiums, if any, on such Bonds on and prior to the maturity date or redemption date thereof. (c) Any Outstanding Bonds shall prior to 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 (except that the Authority shall remain liable for the payment of such Bonds, but only out of the money or securities deposited with the Trustee or an escrow agent as hereinafter described) if(1) in case any of such Bonds are to be redeemed on any date prior to their maturity date, the Authority shall have given to the Trustee in form satisfactory to it j irrevocable instructions to provide notice of such redemption in accordance with Section 2.03, (2) there shall have been deposited with the Trustee or an appropriate escrow agent either(A) money in an amount which shall be sufficient or(B) Qualified Investments of the type described in subdivision (1) of the definition thereof which are not subject to redemption prior to maturity (including any such Qualified Investments issued or held in book-entry form on the books of the Treasury of the United States of America) or tax exempt obligations of a state or political subdivision thereof which have been defeased under irrevocable escrow instructions by the deposit of such money or Qualified Investments and which are then rated in the highest t rating category by each of the Rating Agencies, the interest on and principal of which when paid will provide money whic h, together per with the mone y, if any , deposited with the Trustee or such escrow agent at the same time, will be sufficient, in the opinion of an Independent Certified Public Accountant, to pay when due the interest to become due on such Bonds on and prior to the maturity date or redemption date thereof, as the case may be, and the principal of and the redemption premiums, if any, on such Bonds, and (3) in the event such Bonds are not by their terms subject to redemption within the next succeeding sixty (60) days, the Authority shall have given the Trustee in form satisfactory to it irrevocable instructions to mail as soon as practicable a notice to the Holders of such Bonds that the deposit required by clause (2) above has been made with the Trustee or such escrow agent and that such Bonds are deemed to have been paid in accordance with this section and stating the maturity date or redemption date upon which money is to be available for the payment of the principal of and the redemption premiums, if any, on such Bonds. (d) Notwithstanding anything contained herein to the contrary, in the event that the interest on and/or the principal of the Bonds shall be paid by the Bond Insurer pursuant to the Bond Insurance Policy, the Bonds shall remain Outstanding for all purposes, shall not be DOC;SSF 1:314304.1 38 defeased or otherwise satisfied and shall not be considered paid by the Authority and the assignment and pledge of the Revenues and the other funds as provided herein and all agreements, covenants and other obligations of the Authority to the Holders contained herein shall continue to exist and shall run to the benefit of the Bond Insurer, and the Bond Insurer shall be subrogated to the rights of such Holders. SECTION 8.02. Unclaimed Money. Anything contained herein to the contrary notwithstanding, any money held by the Trustee in trust for the payment and discharge of the interest on or the principal of or the redemption premiums, if any, on any of the Bonds which remains unclaimed for two (2) years after the date when the interest on or the principal of or the redemption premiums, if any, on such Bonds has 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 at such date, or for two (2) years after the date of deposit of such money if deposited with the Trustee after the date when the interest on or the principal of or the redemption premiums, if any, on such Bonds has become due and payable, shall be repaid by the Trustee to the Authority as its absolute property free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Holders shall not look to the Trustee for the payment of the interest on or the principal of or the redemption premiums, if any, on such Bonds; provided, that before being required to make any such payment to the Authority, the Trustee shall, at the expense of the Authority, cause to be mailed to all Holders and to the Information Services and the Securities Depositories a notice 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 each such notice, the balance of such money then unclaimed will be returned to the Authority. ARTICLE IX BOND INSURANCE POLICY PROVISIONS; RESERVE FACILITY PROVISIONS SECTION 9.01. Consents and R40hts of Bond Insurer. (a) Any provision hereof expressly recognizing or granting rights in or to the Bond Insurer may not be amended in any manner which affects the rights of the Bond Insurer hereunder without the prior written consent of the Bond Insurer. (b) Unless otherwise provided in this section, the Bond Insurer's consent shall be required in addition to the consent of Holders of the Outstanding Bonds, when required, for the following purposes: (i) execution and delivery of a Supplemental Trust Agreement; (ii) removal of the original Trustee or selection and appointment of any successor Trustee; and (iii) initiation or approval of any action not described in (i) or(ii) above that requires the consent of Holders of the Outstanding Bonds. (c) Any reorganization or liquidation plan with respect to the Authority or the District must be acceptable to the Bond Insurer, and in the event of any reorganization or nor_•ssr-I:3 ia3o-4.1 39 liquidation, the Bond Insurer shall have the right to vote on behalf of all Holders of the Bonds absent a default by the Bond Insurer under the Bond Insurance Policy. d Anything contained herein to the contra notwithstanding,O yt g contrary upon the occurrence and continuance of an Event of Default hereunder, the Bond Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the Holders of the Bonds or the Trustee for the benefit of the Holders of the Bonds hereunder, including, without limitation: (i) the right to accelerate the principal of the Bonds as described herein, and (ii) the right to annul any declaration of acceleration, and the Bond Insurer shall also be entitled to approve all waivers of Events of Default. (e) To the extent that the Trust Agreement confers upon or gives or grants to the Bond Insurer any right, remedy or claim under or by reason hereof, the Bond Insurer is hereby explicitly recognized as being a third-party beneficiary hereunder and may enforce any such right, remedy or claim conferred, given or granted hereunder. (f) Anything contained herein to the contrary notwithstanding, the Bond Insurer's consent shall not be required as otherwise provided in this section or elsewhere herein if the Bond Insurer is in default on any of its payment obligations as set forth in the Bond Insurance Policy. SECTION 9.02. Certain Provisions Concerning the Bond Insurer. (a) While the Bond Insurance Policy is in effect, the Trustee (or the Authority with respect to items requested pursuant to (3) below) shall furnish to the Bond Insurer: (1) as soon as practicable after the filing thereof with the Trustee, a copy of any financial statement of the Authority and a copy of any audit and annual report of the Authority and a copy of any report or notice delivered under Section 4.07; (2) a copy of any notice or certificate to be given to the Holders of the Bonds, including, without limitation, notice of any redemption of or defeasance of the Bonds, and any certificate provided to the Trustee by the Authority pursuant hereto, including, without limitation, any notice or certificate pertaining or relating to the security for the Bonds; (3) such additional information it may reasonably request in writing; and (4) notice of any failure of the Authority to provide required notices, certificates and reports. (b) As long as the Bonds are Outstanding, the Authority will permit the Bond Insurer to discuss the affairs, finances and accounts of the Authority or any information the Bond Insurer may reasonably request regarding the security for the Bonds with appropriate officers of the Authority. The Trustee or the Authority, as appropriate, will permit the Bond Insurer to have DOCSSFI:314304.1 40 access to and to make copies of all books and records relating to accounting for and payment of the Bonds at any reasonable time during normal business hours. (c) The Bond Insurer shall have the right to direct an accounting, at the Authority's expense, and the Authority's failure to comply with such direction within sixty (60) days after receipt of written notice of the direction from the Bond Insurer shall be deemed an Event of Default hereunder; provided, that if compliance cannot occur within such period, then such period will be extended so long as compliance is begun within such period and diligently pursued, but only if such extension would not materially adversely affect the interests of any Holder of the Bonds. (d) Notwithstanding any other provision hereof, the Trustee shall immediately notify the Bond Insurer if at any time there are insufficient moneys to make any payments of interest on or principal of the Bonds as required and immediately upon the occurrence of an Event of Default known to the Trustee hereunder. SECTION 9.03. Payment Procedure Pursuant to Bond Insurance Policy. As long as the Bond Insurance Policy shall be in full force and effect, the Authority and the Trustee agree to comply with the following provisions: (a) At least one (1) day prior to all interest payment dates, the Trustee will detennine whether there will be sufficient funds in the Interest Account and in the Redemption Account to pay the interest on or principal of the Bonds on such interest payment date. If the Trustee determines that there will be insufficient funds in the Interest Account and in the Redemption Account for such purpose, the Trustee shall so notify the Bond Insurer. Such notice shall specify the amount of the anticipated deficiency, the Bonds to which such deficiency is applicable and whether such Bonds will be deficient as to interest or principal, or both. If the Trustee has not so notified the Bond hlsurer at least one 1 day prior to an interest payment dat e, the Bond Insure w' O YP p y r ill make payments of interest or principal due on the Bonds on or before the first (1st) day next foll w'o m the d g ate on which the Bond Insurer shall have received notice of nonpayment from the Trustee. (b) The Trustee shall, after giving notice to the Bond Insurer as provided in subsection (a) above, make available to the Bond Insurer, and at the Bond Insurer's direction, to the United States Trust Company of New York, as insurance trustee for the Bond Insurer or any successor insurance trustee (the `°Insurance Trustee"), the registration books of the Authority maintained by the Trustee and all records relating to the accounts and funds maintained by it hereunder. (c) The Trustee shall provide the Bond Insurer and the Insurance Trustee with a list of Holders of Bonds entitled to receive interest or principal payments from the Bond Insurer under the terms of the Bond Insurance Policy, and shall make arrangements with the Insurance Trustee(i) to mail checks or drafts to the Holders of Bonds entitled to receive full or partial interest payments from the Bond Insurer and (ii) to pay principal n(K:SSF I:3143o4_I 41 i upon Bonds surrendered to the Insurance Trustee by the Holders of Bonds entitled to receive full or partial principal payments from the Bond Insurer. (d) The Trustee shall, at the time it provides notice to the Bond Insurer pursuant to subsection(a) above, notify the Holders of Bonds entitled to receive the payment of interest or principal thereon from the Bond Insurer(i) as to the fact of such entitlement, (ii) that the Bond Insurer will remit to them all or a part of the interest payments next coming due upon proof of the Holder's entitlement to interest payments and delivery to the Insurance Trustee, in form satisfactory to the Insurance Trustee, of an appropriate assignment of the Holder's right to payment, (in) that should they be entitled to receive full payment of principal from the Bond Insurer, they must surrender their Bonds (along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee to permit ownership of such Bonds to be registered in the name of the Bond Insurer) for payment to the Insurance Trustee, and not the Trustee and (iv) that should they be entitled to receive partial payment of principal from the Bond Insurer, they must surrender their Bonds for payment thereon first to the Trustee who shall note on such Bonds the portion of the principal paid by the Trustee and then, along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee, to the Insurance Trustee, which will then pay the unpaid portion of principal. (e) In the event that the Trustee has notice that any payment of interest on or principal of any Bonds which has become due for payment and which is made to a Holder by or on behalf of the Authority has been deemed a preferential transfer and theretofore recovered from such Holder pursuant to the United States Bankruptcy Code b a trustee in bank ruptcy tc in acc ordance with nth the final nona p Y ppealable order of a court having competent jurisdiction, the Trustee shall, at the time the Bond Insurer is notified pursuant to subsection (a) above, notify all Holders of Bonds that in the event that any Holder's payment is so recovered, such Holder will be entitled to payment from the Bond Insurer to the extent of such re covery if sufficient funds are not h ry otherwise available, and the Trustee shall furnish to the Bond Insurer its records evidencing the payments of interest on and principal of the Bonds which have been made b the Trustee and Y subsequently recovered from Holders and the dates on which such payments were made. (f) In addition to those rights granted the Bond Insurer hereunder, the Bond Insurer shall, to the extent it makes payment of interest on or principal of Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Bond Insurance Policy, and to evidence such subrogation (i) in the case of subrogation as to claims for past due interest, the Trustee shall note the Bond Insurer's rights as subrogee on the registration books of the Authority maintained by the Trustee upon receipt from the Bond hlsurer of proof of the payment of interest thereon to the Holders of the Bonds, and (ii) in the case of subrogation as to claims for past due principal, the Trustee shall note the Bond Insurer's rights as subrogee on the registration books of the Authority maintained by the Trustee upon surrender of the Bonds by the Holders thereof together with proof of the payment of principal thereof. I nOcssr1:?14304.1 42 l SECTION 9.04. Payment Procedure Pursuant to Reserve Facilit . As long v X g as the Reserve Facilityshall be in full force and effect the Authority and the y Trustee agree to comply with the following provisions: (a) In the event and to the extent that money on deposit in the Interest Account and in the Redemption Account, plus money on deposit and credited to the Reserve Account in excess of the amount of the Reserve Facility, if any, is insufficient to pay the amount of interest and principal coming due on any Bonds, then upon the later of (1) one (1) day after receipt by the General Counsel of the Bond Insurer of a demand for payment in the form attached to the Reserve Facility (the"Demand for Payment"), duly executed by the Trustee certifying that payment due hereunder has not been made to the Trustee; or(ii) the payment date of the Bonds as specified in the Demand for Payment presented by the Trustee to the General Counsel of the Bond Insurer, the Bond Insurer will make a deposit of funds in an account with the Trustee sufficient for the payment to the Trustee of the amount that is then due to the Trustee (as specified in the Demand for Payment) up to but not in excess of the Surety Bond Coverage (as that term is defined in the Reserve Facility). (b) The Trustee shall, after submitting to the Bond Insurer the Demand for Payment as provided in subsection (a) above, make available to the Bond Insurer all records relating to the accounts and funds maintained by it hereunder. (c) The Trustee shall, upon receipt of any money received from a draw on the Reserve Facility, as specified in the Demand for Payment, credit the Reserve Account to the extent of such money received pursuant to such Demand for Payment. (d) The Reserve Account shall be replenished in the following priority: (i) interest and principal on the Reserve Facility shall be paid from first available Revenues; and (ii) after all such amounts are paid in full, amounts necessary to fund the Reserve Account to the required level, after taking into account the amount available under the Reserve Facility, shall be deposited from the next available Revenues. ARTICLE X MISCELLANEOUS SECTION 10.01. Liability of Authority Limited to Revenues. Notwithstanding anything contained herein, the Authority shall not be required to advance any money derived from any source other than the Revenues and the other funds as provided herein for the payment of the interest on or the principal of or the redemption premiums, if any, on the Bonds or for the performance of any agreements or covenants herein contained; provided, that the Authority may, however, advance funds for any such purpose so long as such funds are derived from a source legally available for such purpose without incurring an indebtedness. SECTION 10.02. Benefits of the Trust Agreement Limited to Parties. Nothing contained herein, expressed or implied, is intended to give to any person other than the ruOUssr1:3 ta3oa.t 43 Authority, the Trustee, the Bond Insurer and the Holders any right, remedy or claim under or by reason hereof. Any agreement or covenant required herein to be performed by or on behalf of the Authority or any member, officer or employee thereof shall be for the sole and exclusive benefit of the Trustee and the Bond Insurer and the Holders. SECTION 10.03. Successor Is Deemed Included In All References To Predecessor. Whenever herein either the Authority or any officer thereof is named or referred to, such reference shall be deemed to include the successor to the powers, duties and functions that are presently vested in the Authority or such officer, and all agreements and covenants required hereby to be performed by or on behalf of the Authority or any officer thereof shall bind and inure to the benefit of the respective successors thereof whether so expressed or not. SECTION 10.04. Execution of Documents by Holders. Any declaration, request or other instrument which is pennitted or required herein to be executed by Holders may be in one or more instruments of similar tenor and may be executed by Holders in person or by their attorneys appointed in writing. The fact and date of the execution by any Holder or his attorney of any declaration, request or other instrument or of any writing appointing such attorney may be proved by the certificate of any notary public or other officer authorized to make acknowledgments of deeds to be recorded in the state or territory in which he purports to act that the person signing such declaration, request or other instrument or writing acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer. The ownership of any Bonds and the amount, maturity, number and date of holding the same may be proved by the registration books required to be kept by the Trustee pursuant to Section 2.08. Any declaration, request, consent or other instrument or writing of the Holder of any Bond shall bind all future Holders of such Bond with respect to anything done or suffered to be done by the Trustee or the Authority M good faith and in accordance therewith. SECTION 10.05. Waiver of Personal Liability. No member, officer or employee of the Authority shall be individually or personally liable for the payment of the interest on or the principal of or the redemption premiums, if any, on the Bonds by reason of their issuance, but nothing herein contained shall relieve any such member, officer or employee from the performance of any official duty provided by the Act or any other applicable provisions of law or hereby. SECTION 10.06. Deposit and Investment of Money in Accounts and Funds. Subject to Section 4.03, all money held by the Trustee in any of the accounts or funds established pursuant hereto shall be invested in Qualified Investments at the Written Request of the Authority filed with the Trustee at least two (2) Business Days prior to the making of any such investment, which such Qualified Investments shall, as nearly as practicable, mature on or before the dates on which such money is anticipated to be needed for disbursement hereunder, and the Trustee shall have no liability or responsibility for any loss resulting from any investment made in accordance herewith; provided, that if no such Written Request is received by the Trustee, the Trustee shall invest such money in those Qualified Investments described in subdivision (g) of DOCSSF1:314304.1 44 the definition thereof, and the Trustee or any of its affiliates may act as agent, sponsor or advisor in connection with any investment made by the Trustee hereunder, and will furnish the Authority periodic cash transaction statements which include detail for all investment transactions made by the Trustee hereunder. The Authority acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Authority the right to receive brokerage confirmations of security transactions as they occur, the Authority specifically waives receipt of such confirmations to the extent permitted by law. SECTION 10.07. Acquisition of Bonds by Authority. All Bonds acquired by the Authority, whether by purchase or gift or otherwise, shall be surrendered to the Trustee for cancellation. SECTION 10.08. Destruction of Cancelled Bonds. Whenever provision is made for the return to the Authority of any Bonds which have been cancelled pursuant to the provisions hereof, the Trustee shall destroy such Bonds and furnish to the Authority a certificate of such destruction upon its request, and the Authority agrees to reimburse the Trustee for costs incurred in connection with the microfilming or the making of other pennanent records of any such destroyed Bonds. SECTION 10.09. Content of Certificates. Every Certificate of the Authority with respect to compliance with any agreement, condition, covenant or provision provided herein shall include (a) a statement that the person or persons making or giving such certificate have read such agreement, condition, covenant or provision and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements contained in such certificate are based; (c) a statement that, in the opinion of the sig ners, they v g ey have made or caused to be made such examination or investigation a 's is necessar y ry to enable them to express an informed opinion as to whether or not such agreement, condition, covenant or provision has been complied with; and (d) a statement as to whether, in the opinion of the signers, such agreement, condition, covenant or provision has been complied with. Any Certificate of the Authority may be based, insofar as it relates to legal matters, upon an Opinion of Counsel unless the person making or giving such certificate knows that the Opinion of Counsel with respect to the matters upon which his certificate may be based, as aforesaid, is erroneous, or in the exercise of reasonable care should have known that the same was erroneous. Any Opinion of Counsel may be based, insofar as it relates to factual matters information with respect to which is in the possession of the Authority, upon a representation by an officer or officers of the Authority unless the counsel executing such Opinion of Counsel knows that the representation with respect to the matters upon which his opinion may be based, as aforesaid, is erroneous, or in the exercise of reasonable care should have known that the same was erroneous. SECTION 10.10. Accounts and Funds: Business Days. Any account or fund required herein to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee either as an account or a fund, and may, for DOCSSPI:314304.1 45 the purposes of such accounting records, any audits thereof and any reports or statements with respect thereto, be treated either as an account or a fund; but all such records with respect to all such accounts and funds shall at all times be maintained in accordance with sound corporate trust industry practice and with due regard for the protection of the security of the Bonds and the rights of the Holders. Any action required to occur hereunder on a day which is not a Business Day shall be required to occur on the next succeeding Business Day. SECTION 10.11. Notices. All written notices to be given hereunder shall be given by mail to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other party in writing from time to time, namely: If to the Authority: Midpeninsula Regional Open Space District Financing Authority Attention: Chairperson 330 Distel Circle Los Altos, California 94022 If to the Trustee: BNY Western Trust Company Attention: Corporate Trust Administration 700 South Flower Street, Suite 500 Los Angeles, California 90017 If to the Bond Insurer: Ambac Assurace Corporation One State Street Plaza New York, New York 10004 In each case in which notice or other communication refers to an Event of Default or with respect to which failure on the part of the Bond Insurer to respond shall be deemed to constitute consent or acceptance, then a copy of such notice or other communication shall also be sent to the attention of the General Counsel and shall be marked to indicate "URGENT MATERIAL ENCLOSED." SECTION 10.12. CUSIP Numbers. Neither the Authority nor the Trustee shall be liable for any defect or inaccuracy in the CUSIP number that appears on any Bond or in any redemption notice relating thereto, and the Trustee may, in its discretion, include in any redemption notice relating to any of the Bonds a statement to the effect that the CUSIP numbers on the Bonds have been assigned by an independent service and are included in such notice solely for the convenience of the Holders and that neither the Authority nor the Trustee shall be liable for any defects or inaccuracies in such numbers. DOCSsr-1:3 14304.1 46 i 1 SECTION 10.1 3. Article cle_ and Section Headings and References. The headings or titles of the several articles and sections hereof and the table of contents appended hereto shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof. All references herein to "Articles,""Sections" and other subdivisions or clauses are to the corresponding articles, sections, subdivisions or clauses hereof; and the words "hereby," "herein,""hereof,""hereto," "herewith," "hereunder"and other words of similar import refer to the Trust Agreement as a whole and not to any particular article, section, subdivision or clause hereof. SECTION 10.14. Partial Invalidity. If any one or more of the agreements or covenants or portions thereof required hereby to be performed by or on the part of the Authority or the Trustee shall be contrary to law, then such agreement or agreements, such covenant or covenants or such portions thereof shall be null and void and shall be deemed separable from the remaining agreements and covenants or portions thereof and shall in no way affect the validity hereof or of the Bonds, and the Holders shall retain all the benefit, protection and security afforded to them under the Act or any other applicable provisions of law. The Authority and the Trustee hereby declare that they would have executed and delivered the Trust Agreement and each and every other article, section, paragraph, subdivision, sentence, clause and phrase hereof and would have authorized the issuance of the Bonds pursuant hereto irrespective of the fact that any one or more 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 1015. California Law. The Trust Agreement shall be construed and governed in accordance with the laws of the State of California. SECTION 10.16. Execution in Several Counterparts. This Trust Agreement may be executed in any number of counterparts and each of such counterparts shall for all u oses be deemed to be an original; and 1 a 1 such counterparts,p rP r o as man of them as the Y Authority and the Trustee shall reserve undestro ed shall together constitute but one and the e Y g same instrument. SECTION 10.17. Effective Date. The Trust Agreement shall become effective upon its execution and delivery. I DOCSS1=1:314304.1 47 IN WITNESS WHEREOF, the MidP eninsula Reg p p Regional Open Space District Financing Authority has caused the Trust Agreement to be signed in its name by its Chairperson, and BNY Western Trust Company, in token of its acceptance of the trusts created hereunder, has caused the Trust Agreement to be signed by its authorized officer, all as of the day and year first above written. MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY I By Chairperson Attest: Secretary BNY WESTERN TRUST COMPANY, as Trustee By Authorized Officer i I I i 3 norssr-1:314304.1 48 EXHIBIT A Forms of Bonds (Current Interest Bond) UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTIES OF SAN MATEO AND SANTA CLARA MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY 1999 REVENUE BOND No. R- $ Interest Maturity Original Rate Date Issue Date CUSIP % July 1, January 1, 1999 REGISTERED OWNER: CEDE & CO. PRINCIPAL SUM: DOLLARS The Midpeninsula Regional Open Space District Financing Authority, a joint exercise of powers authority duly organized and existing under and pursuant to the laws of the State of California (the "Authority"), for value received, hereby promises to pay (but only out of the Revenues and certain other funds hereinafter referred to) to the registered owner identified above or registered assigns, on the maturity dates specified above subject to an right of ri r . P (subject Yprior redemption hereinafter provided for) the principal sum specified above, together with interest on such principal sum from the intere st paym ent date next preceding the date of authentication of this Bond (unless this Bond is authenticated as of an interest payment date or during the period from the sixteenth (16th) day preceding an interest payment date to such interest payment date, both dates inclusive, in which event it shall bear interest from such interest payment date, or unless this Bond is authenticated prior to June 16, 1999, in which event it shall bear interest from the original issue date specified above) until the principal hereof shall have been paid at the interest rate per annum specified above, payable on July 1, 1999, and semiannually thereafter on January 1 and July 1 in each year in lawful money of the United States of America. Interest due on or before the maturity or prior redemption of this Bond shall be payable only by check mailed on each such payment date by first class mail to the registered owner hereof; provided, that upon the written request of the registered owner of one million dollars ($1,000,000) or more in aggregate principal amount of Bonds received by the Trustee prior to the applicable record date (which such request shall rernain in effect until rescinded in writing by such registered owner), interest shall be paid on each interest payment date by wire transfer of immediately available fiends to an account maintained in any bank or trust company in the United States of America that is a member of the Federal Reserve System designated in such request by such registered DOCssF I:314304.1 A-1 i owner. The principal hereof is payable in lawful money of the United States of America at the principal corporate trust office of BNY Western Trust Company in Los Angeles, California, as Trustee (the "Trustee"). This Bond is one of a duly authorized issue of bonds of the Authority designated as its "1999 Revenue Bonds" (the "Bonds") in the aggregate principal amount of dollars ($ ), which Bonds are issued either as Current Interest Bonds (the"Current Interest Bonds"), being the Bonds maturing, respectively, on July 1 of each year from July 1, 2000, through July 1,2013, both dates inclusive, and on July 1, 2018, or as Capital Appreciation Bonds (the "Capital Appreciation Bonds"), being the Bonds maturing, respectively, on July 1 of each year from July 1,2019, through July 1, 2028, both dates inclusive, all of like tenor and date (except for variations, if any, as may be required to provide for the issuance of the Bonds as Current Interest Bonds or as Capital Appreciation Bonds and to designate varying numbers, denominations, maturities, interest rates or redemption provisions of the respective forms of the Bonds), and which Bonds are issued under and pursuant to the provisions of the Marks-Roos Local Bond Pooling Act of 1985, being Article 4, Chapter 5, Division 7, Title 1 of the California Government Code, and all laws amendatory thereof or supplemental thereto (the "Act") and under and pursuant to the provisions of a Trust Agreement dated as of January 1, 1999, by and between the Authority and the Trustee (the "Trust Agreement") (copies of which are on file at the principal corporate trust office of the Trustee in Los Angeles, California). The Bonds are issued to provide funds to assist the Midpeninsula Regional Open Space District (the "District") to implement a program (the "Program") to finance and refinance public capital improvements for the District in order that the District may achieve its public purposes, constituting the funding of the acquisition of a Project Lease (the "Project Lease") between the Authority and the District. The Bonds are limited obligations of the Authority and are payable, as to interest thereon, principal thereof and any redemption premiums thereon, solely from the Revenues (the "Revenues") constituting certain rental payments to be made by the District to the Authority pursuant to the Project Lease and the funds held in the accounts and funds pursuant to the Trust Agreement as provided therein, and the Authority is not obligated to pay interest on or principal of or redemption premiums, if any, on the Bonds except from the Revenues and such funds. All the Bonds are equally and ratably secured in accordance with the conditions and terms of the Trust Agreement by a pledge of and charge and lien upon the Revenues and such funds, and the Revenues and such funds constitute a trust fund for the security and payment of the interest on and principal of and redemption premiums, if any, on the Bonds as provided in the Trust Agreement. The full faith and credit of the Authority is not pledged for the payment of the interest on or principal of or redemption premiums, if any, on the Bonds, and no tax shall ever be levied or collected to pay the interest on or principal of or redemption premiums, if any, on the Bonds. The Bonds are not secured by a legal or equitable pledge of or charge or lien upon any property of the Authority or any of its income or receipts except the Revenues and such funds, and neither the payment of the interest on or principal of or redemption premiums, if any, on the Bonds is a debt, liability or general obligation of the Authority; and reference is hereby made to the Act and to the Trust Agreement and any and all amendments thereof and supplements thereto for a description of the terms on which the Bonds are issued, the provisions with regard to the nature and extent of the Revenues, the rights of the registered owners of the Bonds, the security for payment of the Bonds, the remedies upon default DOCSS11:314304.1 A-2 and limitations thereon, and the amendment of the Trust Agreement (with or without consent of the registered owners of the Bonds); and all the tenns of the Trust Agreement are hereby incorporated herein and constitute a contract between the Authority g and the registered ed owne r of this Bond to all the provi sions of which the registered owner of this Bon P g Bond, by acceptance hereof, Y p , agrees and consents. The Bonds are issuable in the form of fully registered Current Interest Bonds in the denomination of five thousand dollars ($5,000) or any integral multiple thereof or as fully registered Capital Appreciation Bonds of a compounded value at maturity of five thousand dollars ($5,000) or any integral multiple thereof, except that no Bond shall have principal maturing on more than one principal maturity date. The registered owner of any Bond or Bonds may surrender the same (together with a written instrument of transfer satisfactory to the Trustee duly executed by the registered owner or his duly authorized attorney) in exchange for an equal aggregate principal amount of Bonds of the same form and maturity date of any other authorized denominations in the manner, subject to the conditions and upon tine payment of the charges provided in the Trust Agreement. The Current Interest Bonds are subject to extraordinary redemption by the Authority prior to their respective stated maturity dates, upon notice as hereinafter provided, as a whole or in part on any date from prepaid lease payments made by the District from the net proceeds of condemnation awards received under the Project Lease under the circumstances and upon the conditions and terns prescribed in the Project Lease, at a redemption price equal to the sum of the principal amount thereof plus accrued interest thereon to the redemption date, without a redemption premium. The Current Interest Bonds maturing on July 1, 2018, are subject to mandatory redemption by the Authority prior to their maturity date in part by lot on July 1 of each year on and after July 1, 2014, to and including July 1, 2017, upon notice as hereinafter provided, from and in the amount of the Sinking Fund Payments (as that tern is defined in the Trust Agreement, and herein "Sinking Fund Payments") due and payable on such date, at a redemption price equal to the sum of the principal amount thereof plus accrued interest thereon to the redemption date, without a redemption premium. The Current Interest Bonds maturing on or after July 1,2009, are subject to optional redemption by the Authority prior to their respective stated maturity dates, upon notice as hereinafter provided, from any source of funds other than the Sinking Fund Payments, as a whole on an interest payment date y p y on or after July 1,2008, or in part from such maturities as are designated b g y the Authorityto the Trustee on an interest payment date n r y p y o o after July 1, 200 8, in either e case at a redemp tion rice equal to the sum of the principal amount t thereof p q p p plus accrued interest thereon to the redemption date, together with a redemption premium equal to the following percentage of such principal amount: Redemption Dates Redemption Premium July 1, 2008 2% January 1, 2009, and thereafter 0 DOCSS F 1:314'04.1 A-3 Notice of redemption of any Bond selected for redemption shall be mailed by first-class mail by the Trustee, not less than thirty (30) days nor more than sixty(60) days prior to the redemption date, to the registered owner hereof and to the Information Services and the Securities Depositories (as those terms are defined in the Trust Agreement), subject to and in accordance with provisions of the Trust Agreement with respect thereto; provided, that neither failure to receive any such notice nor any immaterial defect contained therein shall invalidate any of the proceedings taken in connection with any such redemption. If notice of redemption has been duly given as aforesaid and money for the payment of the above-described redemption price is held by the Trustee, then this Bond shall, on the redemption date designated in such notice, become due and payable at the above-described redemption price; and from and after the date so designated interest on this Bond shall cease to accrue and the registered owner of this Bond shall have no rights with respect hereto except to receive payment of the redemption price hereof. If an Event of Default (as that term is defined in the Trust Agreement) shall occur, the principal of all Bonds may be declared due and payable upon the conditions, in the manner and with the effect provided in the Trust Agreement; except that the Trust Agreement provides that in certain events such declaration and its consequences may be rescinded under the circumstances as provided therein. This Bond is transferable only on a register to be kept for that purpose at the above-mentioned office of the Trustee by the registered owner hereof in person or by his duly authorized attorney upon payment of the charges provided in the Trust Agreement and upon surrender of this Bond together with a written instrument of transfer satisfactory to the Trustee duly executed by the registered owner or his duly authorized attorney, and thereupon a new fully registered Bond or Bonds in the same aggregate principal amount of authorized denominations will be issued to the transferee in exchange therefor. The Authority and the Trustee may deem and treat the registered owner hereof as the absolute owner hereof for the purpose of receiving payment of the interest hereon and principal hereof and redemption premium, if any, hereon and for all other purposes, whether or not this Bond shall be overdue, and neither the Authority 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 Bond shall be made only to such registered owner, which payments shall be valid and effectual to satisfy and discharge liability on this Bond to the extent of the sum or sums so paid. This Bond shall not be entitled to any benefit, protection or security under the Trust Agreement ent or become valid or obligatory for any purpose until the certificate of authentication hereon endorsed shall have been executed and dated by the Trustee. It is hereby certified that all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law and that the amount of this Bond, together with all other indebtedness of the Authority, does not exceed any limit prescribed by the Constitution or laws of the State of California and is not in excess of the amount of Bonds permitted to be issued under the Trust Agreement. DOcssrI:314304.1 A-4 IN WITNESS WHEREOF, the Midpeninsula Regional Open Space District Financing Authority has caused this Bond to be executed in its name and on its behalf by the manual signature of its Chairperson and countersigned by the manual signature of its Secretary, and has caused this Bond to be dated as of January 1, 1999. MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY By Chairperson Countersigned: Secretary i [xOcssI:1:3 1a3oa.l A-5 I i • This is one of the Current Interest Bonds described in the within-mentioned Trust Agreement which has been authenticated on , BNY WESTERN TRUST COMPANY, as Trustee By Authorized Signatory For value received the undersigned hereby sells, assigns and transfers unto (Taxpayer Identification Number: ) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer the within Bond on the books kept for registration thereof, with full power of substitution in the premises. Dated: Signature Guaranteed: Note: The signature to this Assignment must correspond with the name as written on the face of the Bond in every particular, without alteration or enlargement or any change whatever, and the signature must be guaranteed by an eligible guarantor institution. Unless this Bond is presented by an authorized representative of The Depository Trust Company, a New York corporation("DTC"), to Issuer or the Trustee 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. I DOCSSF 1:314304.I A-( STATEMENT OF INSURANCE Municipal Bond Insurance Policy No. (the"Policy") with respect to payments due for principal of and interest on this Bond has been issued by Ambac Assurance Corporation ("Ambac Assurance"). The Policy has been delivered to the United States Trust Company of New York, New York, as the Insurance Trustee under said Policy and will be held by such Insurance Trustee or any successor insurance trustee. The Policy is on file and available for inspection at the principal office of the Insurance Trustee and a copy thereof may be secured from Ambac Assurance or the Insurance Trustee. All payments required to be made under the Policy shall be made in accordance with the provisions thereof. The owner of this Bond acknowledges and consents to the subrogation rights of Ambac Assurance as more fully set forth in the Policy. DOCSSP 1:31 d30d.1 A_7 (Capital Appreciation Bond) UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTIES OF SAN MATEO AND SANTA CLARA MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY 1999 REVENUE BOND No. R- $ Principal Amount per$5,000 Principal and Compounded Interest Payable at Maturity) Interest Maturity Original Rate Date Issue Date CUSIP % July 1, , 1999 REGISTERED OWNER: CEDE & CO. PRINCIPAL SUM: DOLLARS The Midpeninsula Regional Open Space District Financing Authority, a joint exercise of powers authority duly organized and existing under and pursuant to the laws of the State of California(the "Authority"), for value received, hereby promises to pay (but only out of the Revenues and certain other funds hereinafter referred to) to the registered owner identified above or registered assigns, on the maturity date specified above (subject to any right of prior redemption hereinafter provided for) the principal amount set forth above per$5,000 Principal and Compounded Interest Payable e at Maturity, together wit h ith interest thereon on from the date Y g hereof until such principal sum shall be discharged as provided in the Trust Agreement hereinafter mentioned at the interest rate per annum set forth above, compounded on July 1, 1999, and semiannually thereafter on January 1 and July 1 in each year. The principal and compounded interest of this Bond is payable in lawful money of the United States of America at the principal corporate trust office of BNY Western Trust Company, in Los Angeles, California, as Trustee (the "Trustee") only to the person whose name appears in the registration books required to be kept by the Trustee as the registered owner hereof, such principal and compounded interest to be paid only on the surrender of this Bond to the Trustee at maturity or on redemption prior to maturity. This Bond is one of a duly authorized issue of bonds of the Authority designated as its "1999 Revenue Bonds" (the "Bonds") in the aggregate principal amount of dollars($ ), which Bonds are issued either as Current Interest Bonds (the"Current Interest Bonds"), being the Bonds maturing, respectively, on July 1 of each year from July 1, 2000, through July 1,2013,both dates inclusive, DOCs511:314304A A-8 III i and on July 1, 2018, or as Capital Appreciation Bonds (the"Capital Appreciation Bonds"), being the Bonds maturing, respectively, on July 1 of each year from July 1,2019, through July 1, 2028, both dates inclusive, all of like tenor and date (except for variations, if any, as may be required to provide for the issuance of the Bonds as Current Interest Bonds or as Capital Appreciation Bonds and to designate varying numbers, denominations, maturities, interest rates or redemption provisions of the respective forms of the Bonds), and which Bonds are issued under and pursuant to the provisions of the Marks-Roos Local Bond Pooling Act of 1985, being Article 4, Chapter 5, Division 7, Title 1 of the California Government Code, and all laws amendatory thereof or supplemental thereto (the "Act") and under and pursuant to the provisions of a Trust Agreement dated as of January 1, 1999, by and between the Authority and the Trustee (the"Trust Agreement") (copies of which are on file at the principal corporate trust office of the Trustee in Los Angeles, California). The Bonds are issued to provide funds to assist the Midpeninsula Regional Open Space District (the "District") to implement a program (the "Program")to finance and refinance public capital improvements for the District in order that the District may achieve its public purposes, constituting the funding of the acquisition of a Project Lease (the "Project Lease") between the Authority and the District. The Bonds are limited obligations of the Authority and are payable, as to interest thereon, principal thereof and any redemption premiums thereon, solely from the Revenues (the "Revenues") constituting certain rental payments to be made by the District to the Authority pursuant to the Project Lease and the funds held in the accounts and funds pursuant to the Trust Agreement as provided therein, and the Authority is not obligated to pay interest on or principal of or redemption premiums, if any, on the Bonds except from the Revenues and such funds. All the Bonds are equally and ratably secured in accordance with the conditions and terms of the Trust Agreement by a pledge of and charge and lien upon the Revenues and such funds, and the Revenues and such funds constitute a trust fund for the security and payment of the interest on and principal of and redemption premiums, if any, on the Bonds as provided in the Trust Agreement. The full faith and credit of the Authority is not pledged for the payment of the interest on or principal of or redemption premiums, if any, on the Bonds, and no tax shall ever be levied or collected to pay the interest on or principal of or redemption premiums, if any, on the Bonds. The Bonds are not secured by a legal or equitable pledge of or charge or lien upon any property of the Authority or any of its income or receipts except the Revenues and such funds, and neither the payment of the interest on or principal of or redemption premiums, if any, on the Bonds is a debt, liability or general obligation of the Authority; and reference is hereby made to the Act and to the Trust Agreement and any and all amendments thereof and supplements thereto for a description of the terms on which the Bonds are issued, the provisions with regard to the nature and extent of the Revenues, the rights of the registered owners of the Bonds, the security for payment of the Bonds, the remedies upon default and limitations thereon, and the amendment of the Trust Agreement(with or without consent of the registered owners of the Bonds); and all the terms of the Trust Agreement are hereby incorporated herein and constitute a contract between the Authority and the registered owner of this Bond, to all the provisions of which the registered owner of this Bond, by acceptance hereof, agrees and consents. The Bonds are issuable in the form of fully registered Current Interest Bonds in the denomination of five thousand dollars ($5,000) or any integral multiple thereof or as fully registered Capital Appreciation Bonds of a compounded value at maturity of five thousand DOCSSF I:314304.1 A-9 dollars ($5,000) or any integral multiple thereof, except that no Bond shall have principal maturing on more than one principal maturity date. The registered owner of any Bond or Bonds may surrender the same (together with a written instrument of transfer satisfactory to the Trustee duly executed by the registered owner or his duly authorized attorney) in exchange for an equal aggregate principal amount of Bonds of the same form and maturity date of any other authorized denominations in the manner, subject to the conditions and upon the payment of the charges provided in the Trust Agreement. The Capital Appreciation Bonds are subject to extraordinary redemption by the Authority prior to their respective stated maturity dates, upon notice as hereinafter provided, as a whole or in part on any date from prepaid lease payments made by the District from the net proceeds of condemnation awards received under the Project Lease under the circumstances and upon the conditions and terms prescribed in the Project Lease, at a redemption price equal to the accreted value thereof, without a redemption premium. Notice of redemption of any Bond selected for redemption shall be mailed by first-class mail by the Trustee, not less than thirty (30) days nor more than sixty (60) days prior to the redemption date, to the registered owner hereof and to the Information Services and the Securities Depositories (as those terms are defined in the Trust Agreement), subject to and in accordance with provisions of the Trust Agreement with respect thereto; provided, that neither failure to receive any such notice nor any immaterial defect contained therein shall invalidate any of the proceedings taken in connection with any such redemption. If notice of redemption has been duly given as aforesaid and money for the payment of the above-described redemption price is held by the Trustee, then this Bond shall, on the redemption date designated in such notice, become due and payable at the above-described redemption price; and from and after the date so designated interest on this Bond shall cease to accrue and the registered owner of this Bond shall have no rights with respect hereto except to receive payment of the redemption price hereof. If an Event of Default(as that term is defined in the Trust Agreement) shall occur, the principal of all Bonds may be declared due and payable upon the conditions, in the manner and with the effect provided in the Trust Agreement Agreement; except that the Trust A provides g p g that in certain events such declaration c aration and it s consequences uences may be rescinded under the circumstances as provided therein. This Bond is transferable only on a register to be kept for that purpose at the above-mentioned office of the Trustee by the registered owner hereof in person or by his duly authorized attorney upon payment of the charges provided in the Trust Agreement and upon surrender of this Bond together with a written instrument of transfer satisfactory to the Trustee duly executed by the registered owner or his duly authorized attorney, and thereupon a new fully registered Bond or Bonds in the same aggregate principal amount of authorized denominations will be issued to the transferee in exchange therefor. The Authority and the Trustee may deem and treat the registered owner hereof as the absolute owner hereof for the purpose of receiving payment of the interest hereon and principal hereof and redemption premium, if any, hereon and for all other purposes, whether or not this Bond shall be overdue, and neither the Authority 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 Bond shall be made only to DOCSS F 1:31430d.1 A-10 ' such registered owner, which payments shall be valid and effectual to satisfy and discharge liability on this Bond to the extent of the sum or sums so paid. This Bond shall not be entitled to any benefit, protection or security under the Trust Agreement or become valid or obligatory for any purpose until the certificate of authentication hereon endorsed shall have been executed and dated by the Trustee. It is hereby certified that all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law and that the amount of this Bond, together with all other indebtedness of the Authority, does not exceed any limit prescribed by the Constitution or laws of the State of California and is not in excess of the amount of Bonds permitted to be issued under the Trust Agreement. IN WITNESS WHEREOF, the Midpeninsula Regional Open Space District Financing Authority has caused this Bond to be executed in its name and on its behalf by the manual signature of its Chairperson and countersigned by the manual signature of its Secretary, and has caused this Bond to be dated as of the original issue date specified above. MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY By Chairperson Countersigned: Secretary l UOCSSF 1:314304.1 A-I I ` This is one of the Capital Appreciation Bonds described in the within-mentioned Trust Agreement which has been authenticated on , BNY WESTERN TRUST COMPANY, as Trustee By Authorized Signatory For value received the undersigned hereby sells, assigns and transfers unto (Taxpayer Identification Number: ) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer the within Bond on the books kept for registration thereof, with full power of substitution in the premises. Dated: Signature Guaranteed: Note: The signature to this Assignment must correspond with the name as written on the face of the Bond in every particular, without alteration or enlargement or any change whatever, and the signature must be guaranteed by an eligible guarantor institution. I Unless this Bond is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to Issuer or the Trustee 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. I «ocssH:3 t 430d.1 A-12 i STATEMENT OF INSURANCE Municipal Bond Insurance Policy No. (the "Policy") with respect to payments due for principal of and interest on this Bond has been issued by Ambac Assurance Corporation ("Ambac Assurance"). The Policy has been delivered to the United States Trust Company of New York, New York, as the Insurance Trustee under said Policy and will be held by such Insurance Trustee or any successor insurance trustee. The Policy is on file and available for inspection at the principal office of the Insurance Trustee and a copy thereof may be secured from Ambac Assurance or the Insurance Trustee. All payments required to be made under the Policy shall be made in accordance with the provisions thereof. The owner of this Bond acknowledges and consents to the subrogation rights of Ambac Assurance as more fully set forth in the Policy. I DOCSS 1.314'04.1 A-13 i RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: Orrick, Herrington & Sutcliffe LLP 400 Sansome Street San Francisco, California 94111 Attention: Carlo S. Fowler, Esq. SITE LEASE by and between the MIDPENINSULA REGIONAL OPEN SPACE DISTRICT and the MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY Dated as of January 1, 1999 DOCSSPI:314301.1 TABLE(}FCONTENTS PagePARTIES ......,..,.,^....__.,..__.._................_......_....�._........._._............,....._......._.. l � RECITALS ----.-----------------.-----_______________... l � SECTION l. Leased Preozimro l SlBC7.TON2. Tern----------.-----------_____________~~___. l SECTION 3. Rcuta] 2 � SECTION 4. Purpose................................................................................................................... 2 SECTION 5. Owner iu Fee 2 SECTION 6. Assignments and Subleases ................................................................................... 2 SECTION7. Right of Entry ........................................................................................................2 � SECTION 8. T000inudiOu2 SECTION 9. I)efaolt2 SECTION 10. Quiet Enjoyment....................................................................................................2 SECTION ll. Waiver 0f Personal Liability..................................................................................2 SECTION 12. Eminent Domain 3 SECTION /3. Amendment ............................................................................................................ SECTION 14. Partial Invalidity ________________________,________.. 3 SECTION 15. NoticeB3 SECTION16. Governing Law ......................................................................................................4 SB(.Tl[>N 17. Section Headings ----_____________________________4 SECTION18. Soverabi6t»............................................................................................................4 � SECTION 19. Exccution4 EXECUTION __,_._______________-----------------------.. 5 | EXHIBIT DESCRIPTION (}FREAL PROPERTY �,l | —^---------^--------- / � oocmyp/ swaV| |� � �� ii SITE LEASE This Site Lease(the"Site Lease"), dated as of January 1, 1999,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 the Midpeninsula Regional Open Space District Financing Authority, a joint exercise of powers authority duly organized and existing under and by virtue of the laws of the State of California(the "Authority"); WITNESSETH: WHEREAS,the Authority and the District have determined that it is in the best interests of the District and the residents of the District to provide for the financing or refinancing of the acquisition of additional open space for the District; WHEREAS, the Authority intends to assist the District in financing or refinancing the acquisition of additional open space for the District by issuing its 1999 Revenue Bonds (the "Bonds"); WHEREAS, in order to implement such financing and refinancing,the Authority and the District have determined to execute and enter into the Site Lease whereby District w ereb the Distri 111 lease certain real property owned by the District to the Authority, and to execute and enter into a Project Lease(the"Project Lease") dated as of the date hereof, whereby the Authority will lease such real property back to the District; and WHEREAS, the District and the Authority hereby certify that all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and entering into of the Site Lease do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into the Site Lease; NOW,THEREFORE,IN CONSIDERATION OF THE PREMISES AND OF THE MUTUAL AGREEMENTS AND COVENANTS CONTAINED HEREIN AND FOR OTHER VALUABLE CONSIDERATION,THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS: SECTION 1. Leased Premises. The District hereby leases to the Authority and the Authority hereby hires from the District, on the terms and conditions hereinafter set forth, those certain parcels of real property situated in the State of California, County of Santa Clara, more particularly described in Exhibit A attached hereto and made a part hereof(the"Site"). SECTION 2. Term. The term hereof shall commence on January 1, 1999, or the date the Site Lease is recorded, whichever is later, and shall end on July 1, 2028, unless such term is sooner terminated as hereinafter provided. If prior to July 1, 2028, all base rental payments required to be made under the Project Lease shall have been paid, or provision therefor DOCSSF1:314301.1 made, the term hereof shall end ten (10) days thereafter or ten (10) days after written notice by the District to the Authority in accordance with Section 15 hereof, whichever is earlier. SECTION 3. Rental. The Authority shall pay to the District as and for the total rental payable hereunder the sum of dollars ($ ) on or before the date of commencement hereof, which sum shall be credited to the purchase price of the Project Lease by the Authority and shall be deposited by the District in the Midpeninsula Regional Open Space District 1999 Acquisition Fund (the"Acquisition Fund") to be maintained by the District, and all money in the Acquisition Fund shall be used by the District to finance or refinance the acquisition of additional open space for the District. SECTION 4. Purpose. The Authority shall use the Site solely for the purpose of leasing the Site to the District pursuant to the Project Lease; provided, that in the event of default by the District under the Project Lease the Authority may exercise the remedies provided in the Project Lease. SECTION 5. Owner in Fee. The District covenants that it is the owner in fee of the Site. SECTION 6. Assignments and Subleases. Unless the District shall be in default under the Project Lease, the Authority may not, without the prior written consent of the District, assign its rights hereunder or sublet the Site. SECTION 7. Right of Entry. The District reserves the right for any of its duly authorized representatives to enter upon the Site at any reasonable time to inspect the same or to make any repairs, improvements or changes necessary for the preservation thereof. SECTION 8. Tennination. The Authority agrees, upon the termination hereof, to quit and surrender the Site in the same good order and condition as the same was in at the time of commencement of the term hereunder, reasonable wear and tear excepted, and agrees that any permanent improvements existing upon the Site at the time of the termination hereof shall remain thereon and title thereto shall vest in the District. SECTION 9. Default. In the event the Authority shall be in default in the performance of any obligation on its part to be performed under the terms hereof, which default continues for thirty(30) days following notice and demand for correction thereof to the Authority, the District may exercise any and all remedies granted by law, except that no merger of the Site Lease and of the Project Lease shall be deemed to occur as a result thereof. SECTION 10. Quiet Enjoyment. The Authority at all times during the term hereof shall peaceably and quietly have, hold and enjoy the Site. SECTION 11. Waiver of Personal Liability. All liabilities hereunder on the part of the Authority shall be solely corporate liabilities of the Authority, and the District hereby releases each and every member of the board of directors of the Authority and officer and employee of the Authority of and from any personal or individual liability hereunder, and no member of the board of directors of the Authority or officer or employee of the Authority shall at DOCSSF1:314301.1 2 any time or under any circumstances be individually or personally liable hereunder for anything done or omitted to be done by the Authority hereunder. SECTION 12. Eminent Domain. In the event the whole or any portion of the Site or the improvements thereon(including the Project, as that term is defined in the Project Lease, and herein the "Project") is taken by eminent domain proceedings, the interest of the Authority shall be recognized and is hereby determined to be the amount of the then unpaid principal components of base rental for the Project due under the Project Lease, including all accrued interest thereon, and the amount of the unpaid additional rental due under the Project Lease, and the balance of the award, if any, shall be paid to the District. SECTION 13. Amendment. The Site Lease may be amended by the parties hereto at any time to substitute another parcel or parcels of real property for any one or more of the parcels of real property constituting the Site, as long as the substituted parcel or parcels of real property are used for open space for the District; provided, that before any such substitution is approved by the District it shall have first prepared and filed with the Authority an M.A.I. appraisal by an independent real estate appraiser that the parcel or parcels of real property that are proposed to be so substituted have a fair market value at least equal to the parcel or parcels of real property that are proposed to be released from the terms of the Site Lease by virtue of such substitution, except that if the parcel or parcels of real property that are proposed to be so substituted have been purchased by the District within twelve (12) months of the amendment of the Site Lease, the District may use the purchase price thereof in determining the fair market value thereof; and provided further, that any parcel or parcels of real property that are proposed to be so substituted shall have no prior liens against them that would impair their use for the purpose intended by the District and shall have a useful life at least as long as the parcel or parcels being substituted out of the Site Lease. Following any such substitution, the Authority shall execute appropriate quitclaim deeds to the District for the parcel or parcels so substituted out of the Site Lease and the Authority shall file notice of any amendment to Moody's Investors Service, Inc., 99 Church Street, New York,New York 10007, Attention: Public Finance Department, and to Standard& Poor's, a division of The McGraw-Hill Companies, Inc., 25 Broadway, New York, New York 10004, Attention: Public Finance Department. SECTION 14. Partial Invalidity. If any one or more of the agreements, conditions, covenants or terms hereof shall to any extent be declared invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, the finding or order or decree of which becomes final, none of the remaining agreements, conditions, covenants or terms hereof shall be affected thereby, and each provision of the Site Lease shall be valid and enforceable to the fullest extent permitted by law. SECTION 15. Notices. All approvals, authorizations, consents, demands, designations, notices, offers, requests, statements or other communications hereunder by either party to the other shall be in writing and shall be sufficiently given and served upon the other party if delivered personally or if mailed by United States registered or certified mail, return receipt requested,postage prepaid, and, if to the District, addressed to the Midpeninsula Regional Open Space District, 330 Distel Circle, Los Altos, California 94022, or, if to the Authority, addressed to the Midpeninsula Regional Open Space District Financing District, 330 Distel DOCSSF1:314301.1 3 Circle, Los Altos, California 94022, or to such other addresses as the respective parties may from time to time designate by notice in writing. SECTION 16. Governing Law. The Site Lease shall be governed by and construed and interpreted in accordance with the laws of the State of California. SECTION 17. Section Headings. All section headings contained herein are for convenience of reference only and are not intended to define or limit the scope of any provision hereof. SECTION 18. Severability. If any agreement, condition, covenant or term hereof or any application hereof should be held by a court of competent jurisdiction to be invalid, void or unenforceable, in whole or in part, all agreements, conditions, covenants or terms hereof and all applications thereof not held invalid, void or unenforceable shall continue in full force and effect and shall in no way be affected, impaired or invalidated thereby. SECTION 19. Execution. The Site Lease may be executed and entered into in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. DOCSSF1:314301.1 IN WITNESS WHEREOF, the parties hereto have executed and entered into the Site Lease by their officers thereunto duly authorized as of the day and year first above written. MIDPENINSULA REGIONAL OPEN SPACE DISTRICT By President of the Board of Directors (SEAL) Attest: Secretary of the Board of Directors MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY By Chairperson Attest: Secretary DOCSS£1:314301.1 5 [ATTACH NOTARY ACKNOWLEDGEMENTS HERE] I' i i I DOCSSF1:314301.1 EXHIBIT A I DESCRIPTION OF REAL PROPERTY All those certain parcels of real property situated in the State of California, County of Santa Clara,more particularly described below: it i DOCSSF1:314301.1 A-1 Foley&Gardner.Board Approval Draft 12/09,/98 $3090009000* MIDPF NINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY 1999 Revenue Bonds BOND PURCHASE CONTRACT January _, 1999 Midpeninsula Regional Open Space District Financing Authority 330 Distel Circle Los Altos, California 94022 Midpeninsula Regional Open Space District 330 Distel Circle Los Altos, California 94022 Stone & Youngberg LLC (the "Purchaser") hereby enters into this Bond Purchase Contract with the Midpeninsula Regional Open Space District Financing Authority, California (the "Issuer") and the Midpeninsula Regional Open Space District, California (the "District"). All defined terms used herein shall have the meaning set forth in the Trust Agreement (hereinafter defined), except as otherwise provided herein. 1. Introductory. The Issuer is authorized to issue $30,000,000' aggregate principal amount of its 1999 Insured Revenue Bonds (the "Bonds") pursuant to a Trust Agreement, dated as of January 1, 1999 (the "Trust Agreement") by and between the issuer and BNY Western Trust Company, as trustee (the "Trustee"), and to an approving resolution of the Issuer (the "Resolution"). The Authority will enter into a Project Lease, dated as of January 1, 1999 (the "Project Lease") with the District, in order to (i) help the District acquire land to preserve and use as open space, (ii) lease District properties used in the District's operations, (iii) refund certain outstanding obligations of the District, (iv) fund a reserve fund, and (v) pay costs of issuance of the Bonds. Payments by the District on the rental payments by the District under the Project Lease will constitute "Revenues" as defined in the Trust Agreement. The Project Lease has been executed and delivered pursuant to a resolution of the District (the "District Resolution"). The District is authorized by California law to lease real property for open space purposes. The Bonds shall mature and shall bear interest at the rates of interest set forth on Schedule I hereto. Interest on the Bonds shall be payable semiannually on March 1 and September 1 of each ear, commencing on September 1 1999 each an "Interest Payment Date"). P Y g P ( Y ) The Bonds will be subject to optional, mandatory and extraordinary redemption by the Issuer . Preliminary, Subject to Change prior to maturity unrPr the circumstances and at the prices and times set forth in the Trust P Y Agreement and as described in the Official Statement (as hereinafter defined). Interest on the Bonds will be computed on the basis of a 360-day year consisting of twelve 30-day months The Bonds will be issued as fully registered bonds in the denominations of $5,000 each or any integral multiple thereof with respect to the Current Interest Bonds (as defined in the 1 rust Agreement) and denominations such that the Accreted Value represented thereby on the stated maturity date will be $3,000 or any integral multiple thereof with respect to the Capital Appreciation Bonds (as defined in the Trust Agreement). Principal of and premium, if any, on the Bonds will be payable at the Corporate Trust Office of the Trustee in Los Angeles, California, to the Depository Truss Company, New York, New York ("DTC"), which will in turn remit such principal and interest to its participants for subsequent disbursement to Owners. 2. Purchase, Sale and Delivery of Bonds. On the basis of the representations, warranties and agreements contained herein, but subject to the terms and conditions herein set forth, the Purchaser hereby agrees to purchase from the Issuer, and the Issuer hereby agrees to sell to the Purchaser, the Bonds at a purchase price of $[AMOUNT], reflecting an original issue discount of $[OID] and an underwriter's discount for the purchaser of$[UNDERWRITER'S DISCOUNT]. The Issuer will cause the Bonds to be delivered to DTC, and the Purchaser will pay the purchase price therefor in immediately available funds by 9:00 a.m., California time, on [CLOSING DATE], or at such other time as the Purchaser and the Issuer may agree (such time being hereinafter referred to as the "Closing" or "Closing Date"). The Bonds to be delivered shall be in book-entry form, shall bear CUSIP numbers, and shall be in fully registered form registered in the name of Cede & Co., as nominee of DTC, with one Bond for each maturity of the Bonds in the aggregate principal amount of such maturity. 3. Delivery of Official Statement. The Issuer by official action of its governing board has approved the Preliminary Official Statement relating to the Bonds dated [POS DATE] (the "Preliminary Official Statement). The Issuer has deemed the Preliminary Official Statement to be final as of its date for purposes of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 ("Rule 15c2-12"). The Issuer hereby ratifies the use of the Preliminary Official Statement by the Purchaser in the marketing of the Bonds. The Issuer shall provide to the Purchaser, at its expense, within seven business days following the date hereof, a quantity of final Official Statements, including final information as to the matters omitted from the Preliminary Official Statement in accordance with Rule 15c2-12 (the "Official Statement") adequate to enable the Purchaser to meet the continuing obligations imposed on it by Rule 15c2-12 under the Securities Exchange Act of 1934; provided that the Purchaser shall have advised the Issuer of such quantity within two business days following the date hereof. 4. Financing Documents. The obligation of the Purchaser to purchase the Bonds is subject to the condition that on or prior to the Closing Date, the Purchaser shall have received the following: 2 a. a copy of the I rust Agreement, duly executed and delivered by the Issuer and the Trustee; .b. certified copies-of the final Resolution of the Issuer approving the issuance and sale of the Bonds (the "Resolution") and of the District Resolution; c. a copy of the F.cject Lease; and d. all other material documeuts, relating to the foregoing. The Issuer agrees to provide the Purchaser, at its expense, with a reasonable number of additional copies of the Official Statement as the Purchaser shall request, and the Issuer authorizes the use thereof in connection with the offer, sale and distribution of the Bonds. S. Representations and Warranties of the Issuer. The Issuer represents and warrants to the Purchaser that: a. The Issuer is a joint exercise of powers agency duly organized and existing under the laws of the State of California (the "State") and has and as of the Closing Date will have full legal right, power and authority (i) to enter into this Bond Purchase Contract, (ii) to issue, sell and deliver the Bonds as provided herein, and (iii) to carry out the transactions contemplated by this Bond Purchase Contract, the Trust Agreement, the Project Lease and the Official Statement, as they may be amended or supplemented from time to time by the Issuer. b. The statements contained in the Preliminary Official Statement and the Official Statement under the captions "THE AUTHORITY", "CERTAIN INVESTMENT CONSIDERATIONS" and "APPENDIX B - GENERAL AND ECONOMIC INFORMATION- SANTA CLARA AND SAN MATEO COUNTY", do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements relating to the Issuer contained therein, in light of the circumstances under which they were made, not misleading. c. By official action of the Issuer prior to or concurrently with the acceptance hereof, the Issuer has duly authorized and approved the Preliminary Official Statement and has authorized the Official Statement, has duly authorized and approved the execution and delivery of, and the performance by the Issuer of the obligations on its part contained in, the Trust Agreement, the Bonds, this Bond Purchase Contract and the Project Lease (collectively, the "Issuer Documents") and has duly authorized and approved the consummation of all other transactions contemplated by this Bond Purchase Contract. d. The Issuer is not in breach of or default under any applicable law or administrative regulation of the State or the United States which would impair the performance of its obligations under the Issuer Documents or any applicable judgment or decree or any loan agreement, note, resolution, agreement or other instrument to which the Issuer is a party or is otherwise subject, and the execution and delivery of the Bonds or the Issuer Documents, and compliance with the provisions of each thereof, will not conflict with or constitute a breach or default under any California or federal law, 3 administrative regulation, iudgment, Decree, loan agreement, note, resolution, agreement or other instrument to which the Issuer is a party or is otherwise subject. e. All approvals, consents arJ orders of any California governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to the performance by the' Issuer of its obligations hereunder and under the Issuer Documents have men obtained and in full force and effect. f. To the best of the Issuer's knowledge, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any California court, public board or body, pending or threatencd against the Issuer affecting the existence of the Issuer or the titles of its officials to their respective offices or seeking to prohibit, restrain Pe g or enjoin the sale, issuance or delivery of the Bonds or the pledge of revenues or assets of the Issuer pledged or to be pledged to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity or enforceability of the Resolution, the Trust Agreement, the Bonds or the Official Statement, or contesting the powers of the Issuer for the issuance of the Bonds, the execution and delivery of this Bond Purchase Contract or the Issuer Documents. g. The Bonds, when issued, authenticated and delivered in accordance with-the Trust Agreement and sold to the Purchaser as provided herein, will be validly issued and become outstanding revenue obligations of the Issuer according to their terms and entitled to the benefits of the Trust Agreement. h. The Issuer has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that the Issuer is a bond issuer whose arbitrage certifications may not be relied upon. Any certificate signed by an authorized officer of the Issuer and delivered to the Purchaser shall be deemed a representation and warranty by the Issuer to the Purchaser as to the statements made therein 6. Representations and Warranties of the District. The District represents and warrants to the Purchaser that: a. The District is a regional park district duly organized and existing under the laws of the State of California (the "State") and has and as of the Closing Date will have full legal right, power and authority (i) to enter into this Bond Purchase Contract and (ii) to carry out the transactions contemplated by this Bond Purchase Contract, the Trust Agreement, the Project Lease and the Official Statement, as they may be amended or supplemented from time to time by the District. b. The statements contained in the Preliminary Official Statement and the Official Statement under the captions "THE DISTRICT", "ESTIMATED REVENUES AND OUTSTANDING OBLIGATIONS", "DISTRICT FINANCIAL INFORMATION", "CERTAIN INVESTMENT CONSIDERATIONS" and "APPENDIX A - DISTRICT'S AUDITED FINANCIAL STATEMENT FOR THE YEAR ENDED MARCH 31, 1998", do not contain any untrue statement of a material fact or omit to state a material fact 4 necessary in order to matte the statements relating co the District contained therein, in light of the circumstances under which they were made, not misleading. c. By official action of the District prior to or concurrently with the acceptance hereof, the District has duly authorized and approved the Preliminary Official Statement and has authorized the Official Statement, has duly authorized and approved the execution and delivery of, and tne performance by the District of the obligations on its part contained in, the Trust Agreement, this Bond Purchase Contract and the Project Lease (collectively, the "District Documents") and has duly authorized and approved the consummation of all other transactions contemplated by this Bond Purchase Contract. d. The District is not in breach of or default under any applicable law or administrative regulation of the State or the United States which would impair the performance of its obligations under the District Documents or any applicable judgment or decree or any loan agreement, note, resolution, agreement or other instrument to which the District is a party or is otherwise subject, and the execution and delivery of the Bonds or the District Documents, and compliance with the provisions of each thereof, will not conflict with or constitute a breach or default under any California or federal law, administrative regulation, judgment, decree, loan agreement, note, resolution, agreement or other instrument to which the District is a party or is otherwise subject. e. All approvals, consents and orders of any California governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to the performance by the District of its obligations hereunder and under the District Documents have been obtained and in full force and effect. f. To the best of the District's knowledge, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any California court, public board or body, pending or threatened against the District affecting the existence of the District or the titles of its officials to their respective offices or seeking to prohibit, restrain or enjoin the execution of the Project Lease or the pledge of revenues or assets of the District pledged or to be pledged to pay the rental payments under the Project Lease, or in any way contesting or affecting the validity or enforceability of the Project Lease, the District Resolution, the Trust Agreement, or the Official Statement, or contesting the powers of the District for the execution and delivery of this Bond Purchase Contract or the District Documents. g. The District has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that the District is a bond District whose arbitrage certifications may not be relied upon. Any certificate signed by an authorized officer of the District and delivered to the Purchaser shall be deemed a representation and warranty by the District to the Purchaser as to the statements made therein 7. Covenants. The Issuer and the District covenant with the Purchaser that if between the date on which the Official Statement is delivered pursuant to Section 3 hereof and 25 days after the End of 5 the Underwriting Period (as hereinafter fiet(ned), or such longer per,od as the issuer, the District and the Purchaser shall agree an event occurs which would cause the information in the Official Statement to contain an untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, they or either of them shall notify the Purchaser, or if the Purchaser notifies the Issuer or the District of such an event, and, if in the opinion of the Issuer, the District and the Purchaser such event requires an amendment or supplement to the Official Statement, the Issuer and the District, at the Issuer's expense, will amend or supplement the Otficial Statement in a form and in a manner approved by the. Issuer, the District and the Purchaser; provided, however, if such event shall occur on or prior to the Closing Date, the Purchaser in its sole discretion shall have the right to terminate its obligations hereunder by written notice to the Issuer and the Purchaser shall be under no obligation to purchase the Bonds. As used herein, the term "End of the Underwriting Period" means the later of such time as (i) the Issuer delivers the Bonds to the Purchaser, or (ii) the Purchaser does not retain, directly or as a member of an underwriting syndicate, an unsold balance of the Bonds for sale to the public. Unless the Purchaser gives notice to the contrary, the End of the Underwriting Period shall be deemed to be the Closing Date. Any notice delivered pursuant to this provision shall be written notice delivered to the Issuer at or prior to the Closing Date, and shall specify a date (other than the Closing Date) to be deemed the "End of the Underwriting Period". The Issuer and the District shall supply such information, execute such instruments and take such other action consistent with the provisions of the Trust Agreement in cooperation with the Purchaser as the Purchaser may reasonably request to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Purchaser may designate; provided, however, that neither the Issuer nor the District shall be required to register as a dealer or broker in any such state or jurisdiction or execute any consent to jurisdiction; and provided further all filing fees and other costs shall be paid by the Purchaser. 8. Conditions to Obligations of Purchaser. The obligation of the Purchaser to purchase and pay for the Bonds will be subject to the accuracy of the representations and warranties of the Issuer and the District herein, to the accuracy of statements to be made on behalf of the Issuer and the District hereunder, to the performance by the Issuer and the District of their respective obligations hereunder and to the following additional conditions precedent: a. At the Closing Date, the Resolution and the Issuer Documents and all official action of the Issuer relating thereto shall be in full force and effect and shall not have been amended, modified or supplemented except as may have been agreed to by the Purchaser. b. At the Closing Date, the District Resolution and the District Documents and all official action of the District relating thereto shall be in full force and effect and shall not have been amended, modified or supplemented except as may have been agreed to by the Purchaser. c. The Issuer shall have received an approving opinion of Orrick, Herrington & Sutcliffe LLP, San Francisco, California, Bond Counsel, substantially in the form attached 6 to the Official Statement as Appendix D and acc-tptable to the Purchaser and counsel to the Purchaser, and the Purchaser, and the Trustee shall have received a letter from said firm, dated the Closing Date and addressed to the Purchaser and the Trustee, to the effect that the Purchaser and the Trustee may rely upon such firm's approving opinion as if they were addressed to the Purchaser and the Trustee. d. The Purchaser shall have received opinions, dated the Closing Date, of: i. Bond Counsel, addressed to the Purchaser and in substantially the form attached hereto as Exhibit A; and ii. Counsel to the Issuer and the District, addressed to the Purchaser and in substantially the form attached hereto as Exhibit B. e. The Purchaser shall have received a certificate, dated the Closing Date and signed by an authorized officer of the Trustee, to the effect that (i) he or she is an authorized officer of the Trustee; (ii) the Trust Agreement have been duly executed and delivered by the Trustee; (iii) the Trustee has all necessary corporate and trust powers required to carry out the trust created by the Trust Agreement; and (iv) to the best of his or her knowledge, the acceptance by the Trustee of the duties and obligations of-the Trustee under the Trust Agreement, and compliance with the provisions thereof will not conflict with or constitute a breach of or default under any law, administrative regulation or consent decree to which the Trustee is subject. f. The Purchaser shall have received a certificate, dated the Closing Date and signed on behalf of the Issuer, to the effect that: i. except as disclosed in the Official Statement, to the knowledge of the person signing the certificate, no litigation or other proceedings are pending or threatened against the Issuer in any court or other tribunal of competent jurisdiction, state or federal, in any way (a) seeking to restrain or enjoin the issuance, sale or delivery of the Bonds, (b) questioning or affecting the validity of this Bond Purchase Contract, the Bonds, the Resolution, the Issuer Documents, the pledge to the Bondholders of any money or other security provided under the Trust Agreement or any other transaction referred to in the Official Statement, (c) questioning or affecting the validity or any of the proceedings for the authorization, sale, execution, issuance or delivery of the Bonds, (d) questioning or affecting the organization or existence of the Issuer or the legal authority of the officers thereof g $ tY or (e) questioning or affecting the power and authority of the Issuer to issue the Bonds or to execute the Issuer Documents or the Official Statement; ii. to the best knowledge and belief of the persons signing the certificate, the Official Statement, solely with respect to the sections entitled "THE AUTHORITY", "CERTAIN INVESTMENT CONSIDERATIONS" and "APPENDIX B - GENERAL AND ECONOMIC INFORMATION- SANTA CLARA AND SAN MATEO COUNTY", does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the 7 statements contained therein, in light of the circvm-tances under which they were made, not misleading; and iii. the Issuer has complied with and satisfied all the conditions un its part to be performed or satisfied hereunder at or prior to the Closing Date and the representations and warranties the Issuer contained herein are true and correct as of the Closing Date. g. The Purchaser shall have received a certificate, dated the Closing Date and signed on behalf of the District, to the effect that: i. except as disclosed in the Official Statement, to the knowledge of the person signing the certificate, no litigation or other proceedings are pending or threatened against the District in any court or other tribunal of competent jurisdiction, state or federal, in any way (a) seeking to restrain or enjoin the execution or delivery of the Project Lease, (b) questioning or affecting the validity of this Bond Purchase Contract, the Project Lease, the District Resolution, the District Documents, the pledge of any money or other security provided under the Trust Agreement or the Project Lease or any other transaction referred to in the Official Statement, (c) questioning or affecting the organization or existence of the District or the legal authority of the officers thereof or (d) questioning or affecting the power and authority of the District to execute the District Documents or the Official Statement; ii. to the best knowledge and belief of the persons signing the certificate, the Official Statement, solely with respect to the sections entitled "THE DISTRICT", "ESTIMATED REVENUES AND OUTSTANDING OBLIGATIONS", "DISTRICT FINANCIAL INFORMATION", "CERTAIN INVESTMENT CONSIDERATIONS" and "APPENDIX A - DISTRICT'S AUDITED FINANCIAL STATEMENT FOR THE YEAR ENDED MARCH 31, 1998", does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading; and iii. the District has complied with and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date and the representations and warranties the District contained herein are true and correct as of the Closing Date. h. The Purchaser shall have received an opinion of Foley & Lardner, dated the Closing Date and addressed to the Purchaser as to such matters as the Purchaser shall reasonably request. i. The Purchaser shall have received written or telephone evidence that Standard & Poor's Ratings Group has issued and has not withdrawn a rating of "AAA" on the Bonds, that Moody's Investors Service has issued and not withdrawn a rating of "Aaa" on the Bonds, and the documents delivered at the Closing Date shall satisfy the conditions to I 8 the continuance of such rating and no action shall have been taken o- threatened with a view to the suspension or withdrawal of such rating as of the Closing Date. j. The Purchaser shall have received duly executed copies of all agreements documents and certificates listed on a Closing Memorandum to be approved by Bond Counsel and counsel to the Purchaser. k. The Purchaser shall have received evidence, acceptable to Bond Counsel, that all public hearings and approvals of appropriate governmental officials required with respect to the issuance of the Bonds have been accomplished. 1. The Purchaser shall have received arbitrage certifications by the Issuer in form and substance satisfactory to Bond Counsel. in. The Purchaser shall have received a Continuing Disclosure Certificate in substantially the form attached as an appendix to the Official Statement. n. The Purchaser shall have received evidence of a municipal bond insurance policy relating to the Bonds issued by Ambac Assurance Corporation. o. The Purchaser shall have received evidence of a surety bond in the amount of the Initial Reserve Requirement (as defined in the Trust Agreement) issued by Ambac Assurance Corporation. All the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Bond Purchase Contract shall be deemed to be in compliance with the provisions hereof if, but only if, they are in form and substance reasonable satisfactory to the Purchaser. 9. Termination of Purchaser's Obligations. The Purchaser may terminate its obligations hereunder by written notice to the Issuer if, at any time subsequent to the date hereof and on or prior to the Closing Date: a. (i) Legislation shall have been enacted by the Congress, or recommended to the Congress for passage by the President of the United States or the United States Department of the Treasury or the Internal Revenue Service or any member of the United States Congress, or favorably reported for passage to either House of the Congress by any Committee of such House to which such legislation has been referred for consideration, or (ii) a decision shall have been rendered by a court established under Article III of the Constitution of the United States, or the United States Tax Court, or (iii) an order, ruling, regulation or communication (including a press release) shall have been issued by the Department of the Treasury of the United States or the Internal Revenue Service, in each case referred to in clauses (i), (ii) and (iii), with the purpose or effect, directly or indirectly, of imposing federal income taxation upon interest to be received by any owners of the Bonds which, in the reasonable judgment of the Purchaser, adversely affects the market price of the Bonds. 9 b. Legislation shall have been enacted or any action taken by the Securit:es and Exchange Commission that, in the opinion of counsel to the Purchaser, has the effect of requiring the offer or sale of the Bonds to be registered under the Securities Act of 1933 or the Trust Agreement to be qualified as an Trust Agreement under the Trust Indenture Act of 1939 or any event shall have occurred which, in the reasonable judgment of the Purchaser or counsel to the Purchaser, makes untrue or incorrect in any material respect any statement or information contained in the Official Statement or that, in their reasonable judgment, should be reflected therein in order to make the statements contained therein not misleading in any material respect. c. (i) In the Purchaser's reasonable judgment, the market price of the Bonds is adversely affected because (a) additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange; (b) the New York Stock Exchange or other national securities exchange, or any governmental authority shall impose, as to the Bonds or similar obligations, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of, the Purchaser; (c) a general banking moratorium shall have been established by federal, New York or California authorities; or (d) a war involving the United States of America shall have been declared, or any other national or international calamity shall have occurred, or any conflict involving the armed forces of the United States of America shall have escalated to such a magnitude as to materially affect the Purchaser's ability to market the Bonds; (ii) any litigation shall be instituted, pending or threatened to restrain or enjoin the issuance or sale of the Bonds or in any way contesting or affecting any authority for or the validity of the Bonds, or the existence or powers of the Issuer; or (iii) legislation shall have been introduced in or enacted by the Assembly or Senate of the State of California with the purpose or effect, directly or indirectly, of imposing California income taxation upon interest to be received by any holders of the Bonds. 10. Expenses. The Purchaser shall pay its own expenses, except is prove .below. The District shall pay, at the closing, the fees and expenses of Bond Couns4l, all Blue Sky es and expenses, rating agency fees, surety bond fees the cost of printing the Bo4ds and the Offic I Statement, the Trustee's authentication fees, the fees and expenses of the Issu&-,-and all co and expenses in connection with the refunding of certain the District's outstanding obliga ions. The Purchaser will have no liability for payment of any of the foregoing items. 11. Notices Any notice or other communication to be given to the Issuer under this Bond Purchase Contract may be given by delivering the same in writing to the Issuer, at the addresses set forth above, and any notice or other communication to be given to the Purchaser under this Bond Purchase Contract may be given by delivering the same in writing to Stone & Youngberg LLC, 50 California Street, 35' Floor, San Francisco, California 94111. 10 12. Successors. This Bond Purchase Contract is made solely for the benefit of the Issuer, the District and the Purchaser (including its successors or assigns) and no other persons shall acquire or have any right hereunder or by the virtue hereof; provided that purchasers of the Bonds from the Purchaser will not be considered successors or assigns of the Purchaser. The representations, warranties, and agreements contained herein shall remain operative and in full force and effect and shall survive delivery of and payment for the Bonds hereunder regardless of any investigation made by or on behalf of the Purchaser. 13. Governing Law. This Bond Purchase Contract shall be governed by the laws of the State of California. 14. Public Offering. The Purchaser agrees to make a public offering of the Bonds at the initial public offering price set forth on the cover page of the Official Statement. 15. Effectiveness. This Bond Purchase Contract shall become effective upon the execution of the acceptance hereof by the Issuer. Very truly yours, STONE & YOUNGBERG LLC By: Principal NMPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY By:------------------------ Authorized Officer NHDPENINSULA REGIONAL OPEN SPACE DISTRICT By-------------------—---- Authorized Officer SCHEDULEI MATURITY SCHEDULE Maturity Date Principal Amount Interest Rate Yield (September 1) { ) N N 12 EXHIBIT A FORM OF SUPPLEMENTAL OPINION OF BOND COUNSEL Ladies and Gentlemen: We have acted as bond counsel in connection with the issuance by the Midpeninsula Regional Open Space District Financing Authority (the "Issuer") of its $30,000,000* aggregate principal amount of its 1999 Insured Revenue Bonds (the "Bonds") pursuant to an Trust Agreement of Trust, dated as of January 1, 1999 (the "Trust Agreement"), by and between the Issuer and BNY Western Trust Company, as trustee (the "Trustee"), approved by the Issuer by a resolution adopted by the Issuer (the "Resolution"). We have examined the Trust Agreement and the Bond Purchase Contract, dated [DATE], by and between the Issuer, the Midpeninsula Regional Open Space Park District (the "District") and Stone & Youngberg LLC, as underwriter (the "Underwriter") (the foregoing documents are collectively referred to herein as the "Agreements"), the Official Statement, dated [POS DATE], relating to the Bonds (the "Official Statement"), the law and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the Issuer contained in the Trust Agreement and in the certified proceedings and other certifications of public officials, furnished to us, without undertaking to verify such facts by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, that: 1) The Issuer has full legal right, power and authority to enter into and carry out and effectuate the transactions contemplated in the Bonds, the Agreements and the Official Statement. 2) The Trust Agreement and the Contract of Purchase have been duly authorized, executed and delivered by the Authority, and assuming due authorization, execution and delivery by all other parties thereto, and subject to the limitations expressed within this opinion, constitute valid and legally binding agreements enforceable against the Authority in accordance with their respective terms. 3) The Bonds are exempt from registration pursuant to the Securities Act of 1933, as amended, and the Trust Agreement is exempt from qualification pursuant to the Trust Indenture Act of 1939, as amended. 4) The statements contained in the Official Statement under the captions -INTRODUCTION-, -THE 1999 BONDS-, -SECURITY AND SOURCE OF PAYMENT-, "TRUST AGREEMENT" "LEGAL MATTERS-, TAX MATTERS" and in APPENDIX C - PROPOSED FORM OF BOND COUNSEL OPINION, insofar as such statements purport to 016,177072.2 summarize certain provisions of the Bonds and the Agreements, and to describe the exclusion of interest on the Bonds from gross income for purposes of federal income taxation and the exemption from State of California personal income taxation of interest on the Bonds, are accurate in all material respects and present a fair and accurate summary of such matters, as of the &te hereof. This opinion lc.*ter is solely for your benefit in connection with the transaction covered by the first paragraph of this letter and may not be relied upon, used, circulated, quoted or referred to, nor may copies hereof be delivered to, any other person without our prior written approval. Respectfully submitted, -A-2- 016177072.2 EXHIBIT B FORM OF OPINION OF ATTORNEY OF THE AUTHORITY AND DISTRICT Stone&Youngberg LLC 50 California Street, 351 Floor San Francisco, California 94111 $[DATE] MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY 1999 Insured Revenue Bonds Ladies and Gentlemen: You have asked us to render this opinion in connection with the Midpeninsula Regional Open Space District Financing Authority's (the "Authority") sale of its $[AMOUNT] 1999 Insured Revenue Bonds (the "Bonds") to the underwriter named in the Contract of Purchase, dated [DATE] (the "Contract of Purchase"), by and among the Authority, the Midpeninsula Regional Open Space District (the "District") and the underwriter. In that connection, we have reviewed a Resolution of the Board of the Authority, adopted [DATE] (the "Resolution"), a Resolution of Board of the District (the "District"), an Trust Agreement of Trust, dated as of January 1, 1999 (the "Trust Agreement"), between the Authority and BNY Western Trust Company (the "Trustee"), and the Contract of Purchase, and have made such other examination of such other documents and certificates relating to the Authority, the District and of applicable California law as we have deemed necessary in giving this opinion. Unless otherwise defined herein, all capitalized terms shall have the meaning ascribed to such terms in the Trust Agreement. Based upon the foregoing, we are of the opinion that: 1) The Authority is a joint exercise of powers authority and the District is a regional park district, both duly organized and validly existing under the laws of the State of California. 2) The Authority has full legal right, power and authority to enter into the Trust Agreement, the Contract of Purchase, the Project Lease, dated as of January 1, 1999 (the "Project Lease" b and between the Authority and the District, and the execution and delivery J Y tY of the Trust Agreement, the Project Lease and the Contract of Purchase have been duly authorized by the Authority. 3) The District has full legal right, power and authority to enter into the Project Lease and the Contract of Purchase and the execution and delivery of the Project Lease and the Contract of Purchase have been duly authorized by the District. 016.177072.2 -B-1- I 4) To the best of our know'.dge, the execution and delivery of, and compliance with, the provisions of the Trust Agreement, the Proiect Lease and the Contract of Purchase by the Authority does not in any material respect conflict with or constitute a material breach or material default under any applicable agreement to which the Authority is a party or any existing California law, regulation or court order to which the Authority is a party. 5) To the best of our know_edge, the execution and delivery of, and compliance with, the provisions of the Project Lease and the Contract of Purchase by the District does not in any material respect conflict with or cmlmystitute a material breach or material default under any applicable agreement to which the District is a party or any existing California law, regulation or court order to which the District is a party. 6) Except as otherwise disclosed in the Official Statement, to the best of our knowledge, no litigation is pending, or threatened in writing, against the Authority or the District in any California court, in any way (a) seeking to restrain or enjoin the issuance, sale or delivery of the Bonds, or (b) questioning or affecting the validity of the Trust Agreement, the Project Lease or the Contract of Purchase, or (c) questioning or affecting the validity of any of the proceedings of the Authority relating to the authorization, sale, execution, issuance or delivery of the Bonds, or (d) questioning or affecting the organization and legal existence of the Authority or the District or the title of any members of the respective boards of the Authority or the District. Notwithstanding anything to the contrary herein: a) We expressly decline to render any opinion regarding the content of the Bonds, Official Statement, Preliminary Official Statement or any other disclosure of any kind made in connection with the Bonds. b) We expressly decline to render any opinion regarding the taxability or tax effect (under both state and federal law) of the transactions which are the subject of this letter. c) We expressly decline to render any opinion with respect to the validity or perfection of any lien or security interest created under the Trust Agreement. d) This opinion is based on the existing laws of the State of California as of this date; and we expressly decline to render any opinion as to any laws or regulations of other states or jurisdictions (including federal law and regulations) as they may pertain to the Trust Agreement, the Project Lease, the Contract of Purchase or any transactions contemplated thereby, or with respect to the effect of noncompliance under any such laws or regulations of any other jurisdictions including federal law and regulations, and blue sky laws. e) This opinion is furnished to you and is solely for your benefit. It may not be relied upon by any other person or entity however organized. i016.177072.2 -B-2 f) This opinion may only be used in connection with the transactions contemplated under the Resolution, the District Resolution, the Trust Agreement, the Project Lease and the Contract of Purchase. g) This opinion is giver as of this dp*e, and we expressly decline any undertaking to advise you of any matters arising subsequent to the date hereof which would cause us to amend any portion of the foregoing :n whole c- ir.part. h) The opinions set forth herein are subject to applicable limitations to bankruptcy or equitable principles affecting the enforcement of creditors' rights. The enforcement of the Trust Agreement, the Project Leas,; and the Contract of Purchase is subject to the effect of the general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith or fair dealing, and the possibility of the unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law, and to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against public entities in the State of California. Please be advised that we are not Bond Counsel for the Bonds and have no expertise in the matters related to or in connection with the issuance of the Bonds. Very truly yours, 016.177072.2 -B-3 I CONTINUING DISCLOSURE AGREEMENT by and among the MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY, the MIDPENINSULA REGIONAL OPEN SPACE DISTRICT and BNY WESTERN TRUST COMPANY, as Trustee and Dissemination Agent Dated as of January 1, 1999 Relating to MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY 1999 REVENUE BONDS DOCSSFI:318272.1 CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement(the"Disclosure Agreement"), dated as of January 1, 1999, is executed and delivered by the Midpeninsula Regional Open Space District Financing Authority(the"Authority"), the Midpeninsula Regional Open Space District(the "District") and BNY Western Trust Company, as Trustee (the "Trustee"), in connection with the issuance of$ Midpeninsula Regional Open Space District Financing Authority 1999 Revenue Bonds (the"Bonds")pursuant to a Trust Agreement, dated as of January 1, 1999, by and between the Authority and the Trustee (the"Trust Agreement"). The Authority, the District and the Trustee covenant and agree as follows: SECTION 1. Purpose of the Disclosure Agreement. The Disclosure Agreement is being executed and delivered by the Authority and the District for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriters in complying with S.E.C. Rule 15c2-12(b)(5). SECTION 2. Definitions. In addition to the definitions set forth in the Trust Agreement, which apply to any capitalized term used in the Disclosure Agreement unless otherwise defined in this section, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the Authority or the District, pursuant to, and as described in, Sections 3 and 4 of the Disclosure Agreement. "Beneficial Owner" shall mean any person who has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries). "Disclosure Representative" shall mean the Controller of the Authority or his or her designee, or such other officer or employee as the Authority shall designate in writing to the Dissemination Agent from time to time. "D issemination Agent„ shall mean the Trustee, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Authority which has filed with the Authority a written acceptance of such designation. "Listed Events"shall mean any of the events listed in Section 5(a) of the Disclosure Agreement. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. (The National Repositories currently approved by the Securities and Exchange Commission are set forth in Exhibit B hereto). "Participating Underwriter" shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. DOCSSF1:318272.1 i "Repository" shall mean each National Repository and the State Repository, if any. "Rule"shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "State Repository" shall mean any public or private repository or entity designated by the State as the state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. (Currently, there is no State Repository). SECTION 3. Provision of Annual Reports. (a) The Authority shall, or shall cause the Dissemination Agent to, not later than 210 days after the end of the Authority's Fiscal Year(presently June 30), commencing with the report for the 1998-1999 Fiscal Year, provide to each Repository an Annual Report which is consistent with the requirements of Section 4(a) of the Disclosure Agreement. (b) The District shall, or shall cause the Dissemination Agent to,not later than 210 days after the end of the District's Fiscal Year(presently March 31), commencing with the report for the 1998-1999 Fiscal Year, provide to each Repository an Annual Report which is consistent with the requirements of Section 4(b) of the Disclosure Agreement. An Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of the Disclosure Agreement; provided, that the audited financial statements may be submitted separately from the balance of any related Annual Report and later than the date required above for the filing of such Annual Report if they are not available by that date. If the Fiscal Year of either the Authority or the District changes, such party shall give notice of such change in the same manner as for a Listed Event under Section 5(f). (c) Not later than fifteen(15) Business Days prior to the date specified in subsections (a) and (b) above for providing their respective Annual Reports to the Repositories, the Authority and the District, respectively, shall provide its Annual Report to the Dissemination Agent and the Trustee(if the Trustee is not the Dissemination Agent). If by such date the Trustee has not received a copy of such Annual Report, the Trustee shall contact the Authority or the District, as the case may be, and the Dissemination Agent(if other than the Trustee) to determine if the Authority or the District, as applicable, has provided its Annual Report. (d) If the Trustee is unable to verify that the applicable Annual Report has been provided to Repositories by the date required in subsections (a) or(b), as the case may be, the Trustee shall send a notice to each Repository in substantially the form attached as Exhibit A hereto (e) The Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of each Repository; and I)ocssF1:31 sz72.1 2 I (ii) to the extent an Annual Report has been provided to the Dissemination Agent, file a report with the Authority and the District certifying that the Annual Reports have been provided pursuant to the Disclosure Agreement, stating the date(s) they were provided and listing all the Repositories to which they were provided. SECTION 4. Content of Annual Reports. (a) The Authority's Annual Report shall contain or include by reference the financial statements of the Authority for the prior Fiscal Year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time; provided, that if the Authority has prepared audited financial statements which are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) The District's Annual Report shall contain or include by reference the following: l. The audited financial statements of the District for the prior Fiscal Year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board; provided, that if District's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(b), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement relating to the Bonds (the "Official Statement"), and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. 2. Numerical and tabular information for the immediately preceding Fiscal Year of the type contained in the Official Statement in Table 2 ("District Current Secured and Unsecured Tax Receipts") and Table 8 ("District Debt Outstanding"). Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Authority or the District or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The Authority and the District shall clearly identify each such other document so included by reference. SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5,the Authority shall give, or cause to be given,notice of the occurrence of any of the following events with respect to the Bonds, if material: 1. principal and interest payment delinquencies; DOC'SSF1:318272.1 3 2. non-payment related defaults; 3. modifications to rights of the Holders of the Bonds; 4. optional, contingent or unscheduled bond calls; 5. defeasances; 6. rating changes; 7. adverse tax opinions or events adversely affecting the tax-exempt status of the Bonds; 8. unscheduled draws on the debt service reserves reflecting financial difficulties; 9. unscheduled draws on credit enhancements reflecting financial difficulties; 10. substitution of credit or liquidity providers, or their failure to perform; 11. release, substitution or sale of property securing repayment of the Bonds. (b) The Trustee shall,within two (2) Business Days of obtaining actual knowledge (at the principal corporate trust office specified in Section 12) of the occurrence of any of the Listed Events, contact the Disclosure Representative, inform such person of the event, and request that the Authority promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection(f). (c) Whenever the Authority obtains knowledge of the occurrence of a Listed Event, whether because of a notice from the Trustee pursuant to subsection(b) or otherwise, the Authority shall as soon as possible determine if such event would be material under applicable federal securities laws. (d) If the Authority has determined that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws,the Authority shall promptly notify the Dissemination Agent in writing and shall instruct the Dissemination Agent to report the occurrence pursuant to subsection(f). (e) If in response to a request under subsection(b), the Authority determines that he Listed Event would not be material under applicable federal securities laws the t s d pp , Authority shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence. (f) If the Dissemination Agent has been instructed by the Authority to report the occurrence of a Listed Event, the Dissemination Agent shall file a written notice of such occurrence with the Repositories;provided, that notwithstanding the foregoing, notice of Listed Events described in subsections (a)(4) and (5) need not be given under this subsection any earlier DOCSSF1:318272.1 4 than the notice (if any) of the underlying event is given to Holders of affected Bonds pursuant to the Trust Agreement. SECTION 6. Termination of Reporting,Obligation. The obligations of the Authority, the District,the Trustee and the Dissemination Agent under the Disclosure Agreement shall terminate upon the legal defeasance,prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Authority shall give notice of such termination in the same manner as for a Listed Event under Section 5(f). SECTION 7. Dissemination Agent. The Authority may, from time to time, with the consent of the District, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under the Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Authority pursuant to the Disclosure Agreement. The Authority hereby appoints the Trustee as the initial Dissemination Agent. SECTION 8. Amendment; Waiver. Notwithstanding any other provision of the Disclosure Agreement,the Authority, the District and the Trustee may amend the Disclosure Agreement(and the Trustee shall agree to any amendment so requested by the Authority, which does not impose any greater duties or risk of liability on the Trustee), and any provision of the Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) If the amendment or waiver relates to the provisions of Sections 3(a), 3(b), 4, or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bonds, or the type of business conducted; (b) The undertaking, as amended or taking into account such waiver,would, in the opinion of nationally recognized bond counsel,have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) The amendment or waiver either(i) is approved by the Holders of the Bonds in the same manner as provided in the Trust Agreement for amendments to the Trust Agreement with the consent of Holders, or(ii) does not, in the opinion of the Trustee or nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the Bonds. In the event of any amendment or waiver of a provision of the Disclosure Agreement, the Authority shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type(or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Authority or the District. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i)notice of such change shall be given in the same manner as for a Listed Event under Section 5(f), and(ii) the Annual Report for the year in which the change is made DOCSSF1:318272.1 5 should present a comparison(in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. SECTION 9. Additional Information. Nothing in the Disclosure Agreement shall be deemed to prevent the Authority or the District from disseminating any other information, using the means of dissemination set forth in the Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by the Disclosure Agreement. If the Authority or the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by the Disclosure Agreement, the Authority or the District shall have no obligation under the Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 10. Default. In the event of a failure of the Authority, the District or the Trustee to comply with any provision of the Disclosure Agreement, the Trustee, pursuant to the Trust Agreement or the Project Lease, may(and, at the request of any Participating Underwriter or the Holders of at least 25% aggregate principal amount of Outstanding Bonds, shall), or any Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Authority, the District or the Trustee, as the case may be, to comply with its obligations under the Disclosure Agreement. A default under the Disclosure Agreement shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under the Disclosure Agreement in the event of any failure of the Authority, the District or the Trustee to comply with the Disclosure Agreement shall be an action to compel performance. SECTION 11. Duties Immunities and Liabilities of Trustee and Dissemination Agent. The Dissemination Agent (if other than the Trustee) shall have only such duties as are specifically set forth in the Disclosure Agreement, and the Authority and the District,jointly and severally, agree to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the Authority and the District under this section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. SECTION 12. Notices. Any notices or communications to or among any of the parties to the Disclosure Agreement may be given as follows: If to the Authority: Midpeninsula Regional Open Space District Financing Authority 330 Distel Circle Los Altos, California 94022 Attention: Chairperson DOCSSM318272.1 6 I If to the District: Midpeninsula Regional Open Space District 330 Distel Circle Los Altos, California 94022 Attention: General Manager If to the Trustee and Dissemination Agent: BNY Western Trust Company 700 South Flower Street, 5th Floor Los Angeles, California 90017 Attention: Corporate Trust Administration Any person may,by written notice to the other persons listed above, designate a different address to which subsequent notices or communications should be sent. SECTION 13. Beneficiaries. The Disclosure Agreement shall inure solely to the benefit of the Authority, the District,the Trustee,the Dissemination Agent, if any, the Participating Underwriters and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. SECTION 14. Governing Law. The Disclosure Agreement is made in the State of California and is to be construed under the Constitution and laws of such State. DOCSSF1:318272.1 7 SECTION 15. Counterparts. The Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY By Controller i MIDPENINSULA REGIONAL OPEN SPACE DISTRICT By President of the Board of Directors BNY WESTERN TRUST COMPANY, as Trustee and Dissemination Agent By Authorized Officer DOCSSF1:318272.1 8 EXHIBIT A NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT Name of Obligated Person: Midpeninsula Regional Open Space District Financing Authority Name of Bond Issue: Midpeninsula Regional Open Space District Financing Authority 1999 Revenue Bonds Date of Issuance: January_, 1999 NOTICE IS HEREBY GIVEN that the [Authority] [District] has not provided an Annual Report with respect to the above-named Bonds as required by Section 4.07 of the Trust Agreement, dated as of January 1, 1999,by and between the Authority and BNY Western Trust Company, as Trustee. [The [Authority/District] anticipates that its Annual Report will be filed by Dated: BNY WESTERN TRUST COMPANY, on behalf of the [Authority] [District] cc: [Authority] [District] DOC'SSFI:318272.1 A-I EXHIBIT B Nationally Recognized Municipal Securities Information Repositories approved by the Securities and Exchange Commission as of January 1999: Bloomberg Municipal Repository P.O. Box 840 Princeton,NJ 08542-0840 (609)279-3200/(609) 279-3204 to order documents (609)279-5962 or(609) 279-5963 [FAX] Internet address: MiJNIS@bloomberg com Contact: Lena Panich JJ Kenny Information Services The Repository 65 Broadway, 16th Floor New York, NY 10006 (212) 770-4568 (212) 797-7994 [FAX] e-mail address:joan_horai@mcgrawhill.com Contact: Ms. Joan Horai,Repository Thomson NRMSIR Secondary Market Disclosure 395 Hudson Street, 3rd Floor New York, NY 10014 (212) 807-5001 (212) 989-2078 [FAX] Contact: Carolyn Chin e-mail address: Disclosure(2muller.com DPC Data, Inc. One Executive Drive Fort Lee,NJ 07024 (201) 346-0701 (201) 947-0107 [FAX] Contact: NRMSIR Internet address: nrmsir@dpcdata.com DOC'SSF1:318272.1 B-1 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: Orrick, Herrington & Sutcliffe LLP 400 Sansome Street San Francisco, California 94111 Attention: Carlo S. Fowler, Esq. PROJECT LEASE by and between the MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY and the MIDPENINSULA REGIONAL OPEN SPACE DISTRICT Dated as of January 1, 1999 I DOCSSF 1:31 4300.t TABLE OF CONTENTS Page PARTIES .......................................................................................................................... I RECITALS .......................................................................................................................... 1 ARTICLEI DEFINITIONS................................................................................................. 1 SECTION1.01. Definitions............................................................................................ 1 ARTICLEII THE PROJECT................................................................................................ 5 SECTION 2.01. Lease of the Project.............................................................................. 5 SECTION 2.02. Quiet Enjoyment.................................................................................. 6 SECTION 2.03. Right of Entry and Inspection.............................................................. 6 SECTION 2.04. Prohibition Against Encumbrance or Sale........................................... 6 SECTION2.05. Liens..................................................................................................... 6 ARTICLE III TERM OF THE PROJECT LEASE................................................................ 6 SECTION 3.01. Term of the Project Lease.................................................................... 6 ARTICLE IV USE OF PROCEEDS ...................................................................................... 7 SECTION 4.01. Use of Proceeds.................................................................................... 7 ARTICLE V RENTAL PAYMENTS................................................................................... 7 SECTION 5.01. Rental Payments................................................................................... 7 (a) Base Rental Payments.......................................................................... 7 (b) Additional Rental Payments ................................................................ 7 SECTION 5.02. Annual Budgets; Reporting Requirements .......................................... 8 SECTION 5.03. Application of Rental Payments SECTION 5.04. Rental Abatement................................................................................. 8 SECTION 5.05. Prepayment of Base Rental Payments ................................................. 9 SECTION 5.06. Obligation to Make Rental Payments.................................................. 9 SECTION 5.07. Tax Covenants ..................................................................................... 9 ARTICLE VI TITLE TO THE PROJECT ........................................................................... 10 SECTION 6.01. Title to the Project.............................................................................. 10 ARTICLE VII MAINTENANCE; TAXES AND OTHER CHARGES; INSURANCE....... 10 SECTION 7.01. Maintenance of the Project by the District ........................................ 10 SECTION 7.02. Taxes, Governmental Charges and Utility Charges........................... 10 SECTION7.03. Insurance............................................................................................ 11 SECTION 7.04. Advances............................................................................................ 12 SECTION 7.05. Continuing Disclosure ....................................................................... 12 ARTICLE VIII CONDEMNATION....................................................................................... 12 SECTION 8.01. Condemnation.................................................................................... 12 DOCSSF 1:314300.1 i TABLE OF CONTENTS (continued) Page ARTICLE IX DISCLAIMER OF WARRANTIES; USE OF THE PROJECT; ENVIRONMENTAL MATTERS................................................................. 13 SECTION9.01. Disclaimer of Warranties................................................................... 13 SECTION 9.02. Use of the Project............................................................................... 13 SECTION 9.03. Environmental Matters....................................................................... 13 ARTICLE X ASSIGNMENT AND INDEMNIFICATION............................................... 14 SECTION 10.01. Assignment by Authority................................................................... 14 SECTION 10.02. Assignment by District ...................................................................... 14 SECTION 10.03. Indemnification.................................................................................. 14 ARTICLEXI DEFAULT..................................................................................................... 15 SECTION 11.01. Default................................................................................................ 15 ARTICLE XII DISCHARGE OF OBLIGATIONS............................................................... 15 SECTION 12.01. Discharge of Obligations ................................................................... 15 ARTICLE XIII MISCELLANEOUS ...................................................................................... 16 SECTION 13.01. Notices............................................................................................... 16 SECTION 13.02. Binding Effect.................................................................................... 17 SECTION 13.03. Third Party Beneficiary...................................................................... 17 SECTION13.04. Net Lease ........................................................................................... 17 SECTION 13.05. Amendments...................................................................................... 17 SECTION 13.06. Partial Invalidity................................................................................. 18 SECTION 13.07. Governing Law.................................................................................. 18 SECTION 13.08. Section Headings ............................................................................... 18 SECTION 13.09. Severability........................................................................................ 18 SECTION 13.10. Execution in Counterparts.................................................................. 18 EXECUTION ........................................................................................................................ 19 EXHIBIT A DESCRIPTION OF REAL PROPERTY....................................................... A-I EXHIBIT B BASE RENTAL PAYMENT SCHEDULE................................................... B-1 DOCSSF1314300J PROJECT LEASE This Project Lease (the"Project Lease"), dated as of January 1, 1999, by and between the Midpeninsula Regional Open Space District Financing Authority, a joint exercise of powers authority duly organized and existing under and by virtue of the laws of the State of California (the "Authority"), and 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"); WITNESSETH: WHEREAS, the Authority intends to assist the District in financing or refinancing the acquisition of additional open space for the District by issuing its 1999 Revenue Bonds (the "Bonds"); WHEREAS, in order to implement such financing and refinancing, the Authority and the District have executed and entered into a Site Lease (the"Site Lease") dated as of January 1, 1999, whereby the District will lease certain real property owned by the District to the Authority, and the Authority and the District have determined to execute and enter into the Project Lease whereby the Authority will lease such real property (the"Project") back to the District; WHEREAS, under the Project Lease, the District will be obligated to make base rental payments to the Authority for the lease to it of the Project, which base rental payments will be used to pay the interest on and principal of the Bonds; and WHEREAS, the Authority and the District hereby certify that all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and entering into of the Project Lease do exist,have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into the Project Lease; NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND OF THE MUTUAL AGREEMENTS AND COVENANTS CONTAINED HEREIN AND FOR OTHER VALUABLE CONSIDERATION, THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. Unless the context otherwise requires, the terms defined in this section shall for all purposes hereof and of any amendment hereof 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: DOC'SSF1:311300.1 Applicable Environmental Laws The term"Applicable Environmental Laws"means and shall include, but shall not be limited to, CERCLA, RCRA, the Federal Water Pollution Control Act, 33 USC Section 1251 et sue., the Clean Air Act, 42 USC Section 7401 et sec., HWCL, HSAA, the Porter- Cologne Act, the Air Resources Act, Cal. Health & Safety Code Section 3900 et sec., the Safe Drinking Water& Toxic Enforcement Act, Cal. Health & Safety Code Section 25249.5, and the regulations thereunder, and any other local, state and/or federal laws or regulations, whether currently in existence or hereafter enacted,that govern (i) the existence, cleanup and/or remedy of contamination on property; (ii) the protection of the environment from spilled, deposited or otherwise emplaced contamination; (iii) the control of hazardous wastes; or (iv) the use, generation, transport, treatment, removal or recovery of Hazardous Substances, including building materials. Authority The term "Authority"means the Midpeninsula Regional Open Space District Financing Authority, a joint exercise of powers authority duly organized and existing under and by virtue of the laws of the State. Base Rental Payments The term "Base Rental Payments"means all amounts payable by the District under Section 5.01(a)hereof. Bond Insurer The term Bond Insurer means Ambac Assurance Corporation, a Wisconsin- domiciled stock insurance company, as the issuer of a municipal bond insurance policy insuring the payment when due of the interest and principal of the Bonds as provided therein. Bonds The term `Bonds"means the Midpeninsula Regional Open Space District Financing Authority 1999 Revenue Bonds issued by the Authority under and pursuant to the Trust Agreement, the proceeds of which are to be used as the source of funds for financing and refinancing the acquisition of open space for the District. 2 i)OC'SSF1:314300.1 Business Day The term "Business Day"means any day(other than a Saturday or Sunday) on which the corporate trust department of the Trustee is open for business at its corporate trust office in Los Angeles, California. Code The term "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 any particular section of the Code shall include reference to all successor sections of the Code. District The term"District"means 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. Event of Default The term "Event of Default"means an event described as such in Section 11.01 hereof. Federal Securities The term"Federal Securities"means United States of America Treasury bills, notes, bonds or certificates of indebtedness, or obligations for which the full faith and credit of the United States of America are pledged for the payment of interest and principal, or securities evidencing direct ownership interests in such obligations or in specified portions of the interest on or principal of such obligations that are held by a custodian in safekeeping on behalf of the owners of such securities. Fiscal Year The term"Fiscal Year"means the twelve-month period termination on March 31 of each year, or any other annual accounting period hereafter selected and designated by the District as its Fiscal Year in accordance with applicable law. Hazardous Substance The term"Hazardous Substance"means any substance which shall, at any time, be listed as "hazardous"or"toxic"or in the regulations implementing the Comprehensive Environmental Response, Compensation and Liability Act("CERCLA"), 42 USC Section 9601 et seg., the Resource Conservation and Recovery Act ("RCRA"), 42 USC Section 6901 et sec., the California Hazardous Waste Control Law ("HWCL"), Cal. Health and Safety Code Section 25100 et sea., the Hazardous Substance Account Act("HSAA"), Cal. Health & Safety Code Section 25300 et seq., or the Porter-Cologne Water Quality Control Act(the"Porter-Cologne Act"), Cal. Water Code Section 1300 et seq., or which has been or shall be determined at any 3 I)OC'SSFI:314300.1 time by any agency or court to be a hazardous or toxic substance regulated under Applicable Environmental Laws, and shall also include, without limitation, raw materials, building components, the products of any manufacturing or other activities on the subject property, wastes,petroleum, and source, special nuclear or by-product material as defined by the Atomic Energy Act of 1954, as amended (42 USC Section 3011, et seq., as amended). Insurance Consultant The term "Insurance Consultant"means an individual or firm employed by the District as an independent insurance consultant, experienced in the field of risk management. Interest Payment Date The term "Interest Payment Date"means January 1 and July I of each year, commencing on July 1, 1999. Opinion of Counsel The term "Opinion of Counsel" means a written opinion of counsel of recognized national standing in the field of law relating to municipal bonds, appointed and paid by the District. Owner The term"Owner"means the registered owner of any Bond. Permitted Encumbrances The term "Permitted Encumbrances"means, as of any particular time: (i) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the District may, pursuant to Section 7.02 hereof,permit to remain unpaid; (ii) the Project Lease; (iii) any right or claim of any mechanic, laborer, materialman, supplier or vendor not filed or perfected in the manner prescribed by law; and (iv) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions established following the date of recordation of the Project Lease and to which the Authority and the District consent in writing. Principal Payment Date The term "Principal Payment Date"means July 1 of each year, commencing on July 1, 2000. Project The term"Project"means the Site that has been leased hereunder by the Authority to the District. 4 DOCSSF 1.314300.I Project Lease The term"Project Lease"means this Project Lease dated as of January 1, 1999, by and between the Authority and the District, as originally executed and entered into and as it may from time to time be amended in accordance herewith. Site The term "Site"means those certain parcels of real property situated in the State of California, County of Santa Clara, more particularly described in Exhibit A attached hereto, that have been leased by the District to the Authority pursuant to the Site Lease. Site Lease The term "Site Lease"means that certain Site Lease dated as of January 1, 1999, by and between the Authority and the District, as originally executed and entered into and as it may from time to time be amended in accordance herewith. State The term State means the State of California. Trust Agreement The term "Trust Agreement"means that certain Trust Agreement dated as of January 1, 1999, by and between the Authority and the Trustee, as originally executed and entered into and as it may from time to time be amended or supplemented in accordance therewith, under and pursuant to which the Authority has issued the Bonds. Trustee The term "Trustee"means BNY Western Trust Company, a banking corporation duly organized and existing under and by virtue of the laws of the State of California and having a corporate trust office in Los Angeles, California, and its successors or assigns, or any other bank or trust company which may at any time be substituted in its place as provided in the Trust Agreement. ARTICLE II THE PROJECT SECTION 2.01. Lease of the Project. The Authority hereby leases the Project to the District, and the District hereby rents and hires the Project from the Authority, on the conditions and terms hereinafter set forth. The District hereby agrees and covenants that during the term hereof, except as hereinafter provided, it will use the Project consistent with all restrictions on the use thereof for public purposes so as to afford the public the benefits contemplated hereby and so as to permit the Authority to carry out its agreements and covenants 5 DOCSSF1:314300.1 contained herein and in the Trust Agreement, and the District hereby further agrees and covenants that during the term hereof it will not abandon or vacate the Project. i SECTION 2.02. Quiet Enjoyment. The parties hereto mutually covenant that the District, so long as it observes and performs the agreements, conditions, covenants and terms contained herein required to be observed or performed by it and is not in default hereunder, shall at all times during the term hereof peaceably and quietly have, hold and enjoy the Project without suit, trouble or hindrance from the Authority. SECTION 2.03. Right of Entry and Inspection. The Authority shall have the right (but not the duty) to enter the Project and inspect the Project during reasonable business hours (and in emergencies at all times) for any purpose connected with the Authority's rights or obligations hereunder and for all other lawful purposes. I SECTION 2.04. Prohibition Against Encumbrance or Sale. The District and the Authority will not create or suffer to be created any mortgage, pledge, lien, charge or encumbrance upon the Project, or upon any real or personal property essential to the operation of the Project, except Permitted Encumbrances. The District and the Authority will not sell or otherwise dispose of the Project or any property essential to the proper operation of the Project. SECTION 2.05. Liens. In the event the District shall at any time during the term hereof cause any improvements to the Project to be constructed or materials to be supplied in or upon or attached to the Project, the District shall pay or cause to be paid when due all sums of money that may become due or purporting to be due for any labor, services, materials, supplies or equipment furnished or alleged to have been furnished to or for the District in, upon, about or relating to the Project and shall keep the Project free of any and all liens against the Project. In the event any such lien attaches to or is filed against the Project, the District shall cause each such lien to be fully discharged and released at the time the performance of any obligation secured by any such lien matures or becomes due, except that if the District desires to contest any such lien it may do so; and if any such lien shall be reduced to final judgment and such judgment or any process as may be issued for the enforcement thereof is not promptly stayed, or if so stayed and such stay thereafter expires, the District shall forthwith pay and discharge or cause to be paid and discharged such judgment. The District shall, to the maximum extent permitted by law, indemnify and hold the Authority and its directors, officers and employees harmless from, and defend each of them against, any claim, demand, loss, damage, liability or expense (including attorneys' fees) as a result of any such lien or claim of lien against the Project. ARTICLE III TERM OF THE PROJECT LEASE SECTION 3.01. Term of the Project Lease. The term hereof shall commence on January 1, 1999, or the date the Project Lease is recorded, whichever is later, and shall end on June 30, 2028, unless such term is sooner terminated as hereinafter provided. 6 DOCSSF 1:314300.1 ARTICLE IV USE OF PROCEEDS SECTION 4.01. Use of Proceeds. The parties hereto agree that the proceeds of the Bonds transferred to the District under the Site Lease as and constituting the purchase price of the Project Lease will be used by the District to refinance or finance the cost of acquisition of open space for the District. ARTICLE V RENTAL PAYMENTS SECTION 5.01. Rental Payments. The District agrees to pay to the Authority, without deduction or offset of an kind as rental for the use and occupancy y c of the p Y Project, the following amounts at the following times: (a) Base Rental Payments. The District shall pay to the Authority rental payments with interest and principal components (the "Base Rental Payments") in accordance with the due dates set forth in the Base Rental Payment Schedule set forth in Exhibit B attached hereto and made a part hereof, each of which such payments shall be payable on the fifteenth (15th) Business Day of the month immediately preceding its due date, and any interest or other income with respect thereto accruing prior to such due date shall belong to the District and shall be returned by the Authority to the District. The interest components of the Base Rental Payments payable by the District hereunder shall be paid by the District as and shall constitute interest paid on the principal components of the Base Rental Payments payable by the District hereunder. The payment of base rental during each rental payment period shall be for the use and/or occupancy of the Project by the District for the period ending on the last day of the month in which the Base Rental Payment for such period is due. The District shall provide written notice to the Trustee at least thirty(30) Business Days prior to any Interest Payment Date upon which the District expects to be unable to appropriate and pay the Base Rental Payment due on such Interest Payment Date, informing the Trustee of such inability to appropriate and pay such rental payment. (b) Additional Rental Payments. The District shall pay to the Authority as additional rental hereunder such amounts in each year as shall be required by the Authority for the payment in full of all costs and expenses incurred by the Authority or the Trustee in connection with the execution, performance or enforcement hereof and the assignment hereof under the Trust Agreement and of the ownership of the Project and the lease of the Project to the District, including but not limited to payment of all fees, costs and expenses and all administrative costs of the Authority in connection with the Project, the Site Lease, the Project Lease and the Trust Agreement and all taxes, assessments and governmental charges of any nature whatsoever hereafter levied or imposed by any governmental authority against the Authority, the Trustee or the rentals and the other payments required to be made by the District hereunder. Such additional rental shall be billed to the District by or on behalf of the Authority from time to time, together with a statement certifying that the amount so billed has been paid by 7 DOCSSF t.31 d300.1 the Authority for one or more of the items above described, or that such amount is then payable by the Authority for one or more of such items, and all amounts so billed shall be due and payable by the District within thirty(30) days after receipt of each bill therefor by the District. Payment of base rental and additional rental payments for each rental payment period during the term hereof shall constitute the total rental for such rental payment period, and shall be paid by the District in each rental payment period for and in consideration of the right to the use and occupancy, and the continued quiet enjoyment, of the Project during the rental payment period for which such rental is paid. The parties hereto have agreed and determined that the fair rental value is at least equal to the Base Rental Payments shown in the Base Rental Payment Schedule set forth in Exhibit B attached hereto and made a part hereof, and in making such determination, consideration has been given to the costs of the acquisition of the Project, the other obligations of the parties hereunder, the uses and purposes which may be served by the Project and the benefits therefrom which will accrue to the District, its residents and the general public. Each installment of base rental and additional rental payable hereunder shall be paid in lawful money of the United States of America to or upon the order of the Authority. Any such installment of base rental or additional rental accruing hereunder which shall not be paid when due shall bear interest at the rate of twelve per cent (12%)per annum, or the maximum interest rate then permitted by law. All such delinquent installments of base rental and interest thereon shall be deposited in the Reserve Account created under the Trust Agreement, and all I such delinquent installments of additional rental and interest thereon shall be paid to or upon the order of the Authority. Notwithstanding any dispute between the Authority and the District, the District shall make all rental payments when due hereunder without deduction or offset of any kind and shall not withhold any rental payments pending the final resolution of such dispute. SECTION 5.02. Annual Bud etg s; Reporting Requirements. The District covenants, subject to Section 5.06, to take action as may be necessary to include all such rental payments due hereunder in its annual budgets and to make the necessary annual appropriations for all such rental payments. The District will furnish to the Authority and the Trustee and the Bond Insurer on April 1 of each year a certification that the annual proposed budget of the District for the Fiscal Year of the District beginning on such date contains such necessary annual appropriations. SECTION 5.03. Application of Rental Payments. All rental payments received shall be applied first to the interest components of the base rental due hereunder, then to the principal components (including any prepayment premium components) of the base rental due hereunder and thereafter to all additional rental due hereunder, but no such application of any payments which are less than the total rental due and owing shall be deemed a waiver of an Event of Default hereunder. SECTION 5.04. Rental Abatement. During any period in which,by reason of eminent domain proceedings (as described in Section 8.01), there is substantial interference with the use and possession by the District of any portion of the Project, the rental payments due hereunder with respect to such portion of the Project shall be abated proportionately by the fractional amount that the cost of the portion of the Project so condemned bears to the entire cost 8 DOC'SSFI:314300.I of the Project, as calculated by the District and set forth in writing to the Authority and the Trustee; and the District waives the benefits of Civil Code Sections 1932(2) and 1933(4) and any and all other rights to terminate the Project Lease by virtue of any such interference and the Project Lease shall continue in full force and effect. Such abatement shall continue for the period commencing with the date of such interference and ending with the termination thereof. SECTION 5.05. Prepayment of Base Rental Payments. (a) The District may prepay, from eminent domain proceeds received by it pursuant to Section 8.01, all or any portion of the principal components of base rental payments then unpaid, on any date, as a whole or in part in integral multiples of five thousand dollars ($5,000)plus any single lesser portion of five thousand dollars ($5,000), at a prepayment price equal to the sum of the principal components prepaid plus accrued or accreted interest thereon, as the case may be, to the date of prepayment. (b) The District may prepay on any Interest Payment Date on or after July 1, 2008 (but not later than July 1, 2018), from any source of available funds, the principal components of the base rental payments payable on and after July 1, 2009, in whole or in part in integral multiples of five thousand dollars ($5,000) principal amount in inverse order of Principal Payment Dates (and by lot within any one Principal Payment Date), at a prepayment price equal to the sum of the principal components prepaid plus accrued interest thereon to the date of prepayment plus a prepayment premium equal to a percentage of the principal amount thereof, in accordance with the following schedule: Prepayment Date Prepayment Premium July 1, 2008 2% January 1, 2009, and thereafter 0 (c) Before making any prepayment pursuant to this section, the District shall, within five (5) Business Days following the event creating such right or obligation to prepay, give written notice to the Authority and the Trustee describing such event and specifying the date on which the prepayment will be made, which date shall be not less than sixty(60) days from the date such notice is given. SECTION 5.06. Obligation to Make Rental Pa Ments. The agreements and covenants on the part of the District contained herein shall be deemed to be and shall be construed to be duties imposed by law and it shall be the duty of each and every public official of the District to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the District to carry out and per form the agreements and covenants contained herein agreed to be carried out and performed by the District. SECTION 5.07. Tax Covenants. The District will not directly or indirectly use or permit the use of the proceeds of the obligation provided herein or any other funds of the District or take or omit to take any action which would cause such obligation to be an"arbitrage bond"within the meaning of Section 148 of the Code, or a"federally guaranteed obligation" under Section 149(b) of the Code, or a"private activity bond" as described in Section 141 of the 9 DQCSSFI.314300.1 Code; and to that end, so long as any rental payments due hereunder are unpaid, the District will comply with all requirements of such sections of the Code to the extent applicable to the obligation provided herein. The District will at all times do and perform all acts and things permitted by law which are necessary or desirable in order to assure that the interest installments of such rental payments will not be included in the gross income of the owners of the Bonds for federal income tax purposes under the Code and will take no action that would result in such interest being so included. ARTICLE VI TITLE TO THE PROTECT SECTION 6.01. Title to the Project. Title to the Project shall remain in the Authority during the term of the Project Lease, and title to all property that is placed in or about the Project by the District during the term of the Project Lease and that can be removed without damage to the Project or which is not integrally related to the Project shall remain in the District during the term of the Project Lease. Upon termination or expiration of the Project Lease, title to the Project shall vest in the District, and upon such termination or expiration or vesting, the Authority shall execute and deliver such conveyances, deeds, bills of sale, registration documents and other instruments as may be necessary to effect such vesting of record. ARTICLE VII MAINTENANCE; TAXES AND OTHER CHARGES; INSURANCE SECTION 7.01. Maintenance of the Project by the District. The District agrees that, at all times during the term hereof, it will, at its own cost and expense, maintain, preserve and keep the Project and every portion thereof in good repair, working order and condition and that it will from time to time make or cause to be made all necessary and proper repairs, replacements and renewals. The Authority shall have no responsibility in any of these matters or for the making of additions or improvements to the Project. SECTION 7.02. Taxes, Governmental Charges and Utility Charges. The parties hereto contemplate that the Project will be used for public purposes by the District and, therefore, that the Project will be exempt from all taxes presently assessed and levied with respect to real and personal property, respectively. In the event that the use, possession or acquisition by the District of any portion of the Project is found to be subject to taxation in any form, the District will pay or cause to be paid during the term hereof, as the same respectively become due, all taxes and governmental charges of any kind whatsoever that may at any time be lawfully assessed or levied against or with respect to any portion of the Project and any other property acquired by the District in substitution for, as a renewal or replacement of, or a modification, improvement or addition to any portion of the Project, as well as all utility charges incurred in the operation, maintenance, use, occupancy and upkeep of any portion of the Project; provided, that with respect to any governmental charges or taxes that may lawfully be paid in 10 DOCSSF 1:3 14300.1 I installments over a period of years, the District shall be obligated to pay only such installments as are accrued during such time as the Project Lease is in effect. SECTION 7.03. Insurance. The District shall procure or cause to be procured and maintain or cause to be maintained throughout the term hereof for the Project policies of insurance against the following risks in the following respective amounts: I (1) workers' compensation insurance covering all employees working in or on the Project, in the same amount and type as other workers' compensation insurance maintained by the District for similar employees doing similar work; and the District shall also require any other person or entity working in or on the Project to carry the foregoing amount of workers' compensation insurance; and (2) a standard comprehensive public entity liability insurance policy or policies in protection of the District, the Authority and the Trustee and its directors, officers and employees, indemnifying and defending such parties against all direct or contingent loss or liability for damages for personal injury, death or property damage occasioned by reason of the possession, operation or use of the Project, with minimum liability limits of one million dollars ($1,000,000) for personal injury or death of each person and three million dollars ($3,000,000) for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of two hundred thousand dollars ($200,000) (subject to a deductible clause of not to exceed one hundred thousand dollars ($100,000)) for damage to property resulting from each accident or event; provided, that such public liability and property damage insurance may be in the form of a single limit policy in the amount of three million dollars ($3,000,000) covering all such risks and may be maintained as part of or in conjunction with any other liability insurance carried by the District. Each insurance policy provided for in this section shall contain a provision to the effect that the insurance company shall not cancel the policy or modify it materially and adversely to the interests of the Authority or the Trustee without first giving written notice thereof to the Authority and the Trustee at least sixty (60) days in advance of such intended cancellation or modification; provided, that the Trustee shall not be responsible for the sufficiency of any insurance herein required and shall be fully protected in accepting payment on account of such insurance or an adjustments compromise r Y J p o settlement of an loss agreed to b Y g Y it. Notwithstanding the above provisions, as an alternative to providing the foregoing policies of insurance, the District may provide a self-insurance method or plan of protection, which such self-insurance maintained by the District shall comply with the following terms: 0) the self-insurance program shall be approved by an Insurance Consultant; (ii) the self-insurance program shall include an actuarially sound claims j reserve fund out of which each self-insured claim shall be paid, the adequacy of each such fund shall be evaluated on an annual basis by the Insurance Consultant, and any deficiencies in any self-insurance claims 11 noc5sF1:3 14300.t i i i fund shall be remedied in accordance with the recommendation of the Insurance Consultant; (iii) the self-insurance claims fund shall be held in a separate fund by the District; (iv) in the event the self-insurance program shall be discontinued, the actuarial soundness of its claim reserve fund, as determined by the Insurance Consultant, shall be maintained. The District shall file a certificate with the Trustee and with the Bond Insurer not later than June 1 of each year certifying that the insurance required by this section is in full force and effect for the ensuing year and that the Trustee is named as a loss payee on each policy of insurance which the Project Lease requires to be so endorsed. SECTION 7.04. Advances. In the event the District shall fail to maintain the full insurance coverage required hereby, the Authority may (but shall be under no obligation to) purchase the required policies of insurance and pay the premiums on the same and provide for payment thereof, and all amounts so advanced therefor by the Authority shall become additional rental, which amounts the District agrees to pay within thirty (30) days of a written request therefor, together with interest thereon at the rate of twelve per cent (12%)per annum. SECTION 7.05. Continuing Disclosure. The District hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Agreement, dated the date hereof,between the District and the Authority and the Trustee (the "Continuing Disclosure Agreement"). Notwithstanding any other provision of the Project Lease, failure of the District to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default hereunder; provided, that the Trustee may and, at the request of the Authority or Owners of at least twenty-five percent(25%) aggregate principal amount of outstanding Bonds, shall, or any Owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this section. ARTICLE VIII CONDEMNATION SECTION 8.01. Condemnation. If prior to the termination of the term hereof title to, or the temporary use of, the Project or any portion thereof or the estate of the District or the Authority in the Project or any portion thereof shall be taken under the exercise of the power of eminent domain by any governmental body or by any person or firm or corporation acting under governmental authority, then the District and the Authority will cause the net proceeds of any condemnation award to be applied to the prompt replacement of the condemned portion of the Project, and any balance of the net proceeds remaining after such work has been completed shall be paid to the District;provided, that the District, at its option and provided the proceeds of such condemnation award together with any other moneys then available for the purpose are at least sufficient to prepay an aggregate principal amount represented by 12 DOCSS F(:314300. i outstanding Bonds equal to the amount of outstanding Bonds attributable to the portion of the q g Project so condemned(determined by reference to the proportion which the cost of the condemned portion of the Project bears to the cost of the entire Project), may elect not to repair, reconstruct or replace the condemned portion of the Project and thereupon shall cause said proceeds to be used for the prepayment of outstanding Bonds pursuant to the provisions of Section 5.05(a) hereof and Section 2.03 of the Trust Agreement. ARTICLE IX DISCLAIMER OF WARRANTIES; USE OF THE PROJECT; ENVIRONMENTAL MATTERS SECTION 9.01. Disclaimer of Warranties. THE AUTHORITY DOES NOT MAKE ANY AGREEMENT, WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR PARTICULAR PURPOSE OR FITNESS FOR USE OF THE PROJECT, OR WARRANTY WITH RESPECT THERETO. THE DISTRICT ACKNOWLEDGES THAT THE AUTHORITY IS NOT A MANUFACTURER OF ANY PORTION OF THE PROJECT OR A DEALER THEREIN AND THAT THE AUTHORITY LEASES THE PROJECT TO THE DISTRICT AS-IS, IT BEING AGREED THAT ALL OF THE AFOREMENTIONED RISKS ARE TO BE BORNE BY THE DISTRICT. IN NO EVENT SHALL THE AUTHORITY BE LIABLE FOR ANY INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGE IN CONNECTION WITH OR ARISING OUT OF THE PROJECT LEASE OR THE EXISTENCE, FURNISHING, FUNCTIONING OR THE DISTRICT'S USE OF THE PROJECT AS PROVIDED HEREBY. SECTION 9.02. Use of the Project. The District will not use, operate or maintain the Project improperly, carelessly, in violation of any applicable law or in a manner contrary to that contemplated hereby. The District will provide all permits and licenses, if any, necessary for the use of the Project. In addition, the District agrees to comply in all respects with all laws of the jurisdictions in which its operations involving any portion of the Project may extend and any legislative, executive, administrative or judicial body exercising any power or jurisdiction over the Project; provided, that the District may contest in good faith the validity or application of any such law or rule in any reasonable manner which does not, in the opinion of the Trustee, adversely affect the estate of the Authority in and to the Project or its interest or rights hereunder. SECTION 9.03. Environmental Matters. � (a) The District and the Authority will comply with all Applicable Environmental Laws and will not use, store, generate,treat, transport or dispose of any Hazardous Substance on, or in a manner that would cause it to later flow, migrate, leak, leach or otherwise come to rest on or in the Project. (b) The District and the Authority will transmit copies of all records concerning the contact with any local, state or federal agency concerning any violation of any Applicable Environmental Laws involving the Project, and all notices, orders or statements 13 DOCSSF i:314300.1 received from any governmental entity concerning violations of Applicable Environmental Laws with respect to the Project and any operations conducted thereon or any conditions existing thereon to the Trustee. The District and the Authority will notify the Trustee in writing immediately of any release, discharge, spill, or deposit of any Hazardous Substance that has occurred or is occurring which in any way affects or threatens to affect the Project or the people, structures, or other property thereon. (c) The District and the Authority will permit the Trustee, its agents or any experts designated by the Trustee to have full access to the Project during reasonable business hours for purposes of such independent investigation of compliance with all Applicable Environmental Laws. ARTICLE X ASSIGNMENT AND INDEMNIFICATION SECTION 10.01. Assignment by Authority. The parties understand that the Site Lease and the Project Lease will be assigned by the Authority to the Trustee under the Trust Agreement, and the District hereby approves the Trust Agreement and the pledge and assignment of all of the Authority's right, title and interest in the Site Lease and the Project Lease to the Trustee under the Trust Agreement for the benefit of the Owners of the Bonds (as provided in the Trust Agreement). Accordingly, the District agrees to make all payments of base rental due hereunder to the Trustee, notwithstanding any claim, defense, set-off or counterclaim whatsoever (whether arising from a breach hereof or otherwise) that the District may from time to time have against the Authority, and the District also agrees to execute all documents, including notices of assignment and chattel mortgages or financing statements, which may be reasonably requested by the Authority or the Trustee to protect their interests in the Project during the term hereof. SECTION 10.02. Assignment by District. The Project Lease and the interest of the District in the Project may not be assigned or encumbered by the District. SECTION 10.03. Indemnification. The District will, to the full extent then permitted by law, indemnify, protect, hold harmless, save and keep harmless the Authority and the Trustee and its directors, officers and employees from and against any and all liability, obligations, losses, claims and damages whatsoever, regardless of the cause thereof, and expenses in connection therewith, including, without limitation, counsel fees and expenses, penalties and interest arising out of or as the result of the entering into of the Project Lease or the Trust Agreement, the use of the Project and each portion thereof or any accident in connection with the operation, use, condition or possession of the Project or any portion thereof resulting in damage to property or injury to or death to any person including,without limitation, any claim alleging latent and other defects, whether or not discoverable by the District or the Authority, and any claim arising out of strict liability in tort. The indemnification arising under this section shall continue in full force and effect notwithstanding the full payment of all obligations hereunder or the termination hereof for any reason or the resignation or removal of the Trustee. The District agrees not to withhold or abate any portion of the payments required pursuant hereto by reason of any defects, malfunctions, breakdowns or infirmities of the Project. The District 14 DOCSSF1:314300.1 and the Authority mutually agree to promptly give notice to each other of any claim or liability hereby indemnified against following either's learning thereof ARTICLE XI DEFAULT SECTION 11.01. Default. (a) If default shall be made by the District in the observance or performance of any agreement, condition, covenant or term contained herein required to be observed or performed by it(including without limitation the payment of any base rental payments or additional rental payments due hereunder), or upon the happening of any of the events specified in subsection (b) of this section(in either case, an"Event of Default" hereunder), then, subject to the provisions of subsection(c), the Authority shall (with or without notice and demand and without limiting any other rights or remedies the Authority may have) maintain the Project Lease in full force and effect and recover rent and other monetary charges as they become due without terminating the District's right to possession of the Project, regardless of whether or not the District has abandoned the Project. (b) In addition to any Event of Default resulting from breach by the District of any agreement, condition, covenant of term hereof, if(1) the District's interest herein or any part thereof be assigned, sublet or transferred without the written consent of the Authority, either voluntarily or by operation of law; or(2) the District shall file any petition or institute any proceedings under any act or acts, state or federal, dealing with or relating to the subject of bankruptcy or insolvency or under any amendment of such act or acts, either as a bankrupt or as an insolvent or as a debtor or in any similar capacity,wherein or whereby the District asks or seeks or prays to be adjudicated a bankrupt, or is to be discharged from n p Y J a or all of its debts or g Y obligations, or offers to its creditors to effect a composition or extension of time to pay its debts, or asks, seeks or prays for a reorganization or to effect a plan of reorganization or for a readjustment of its debts or for any other similar relief, or if the District shall make a general or any assignment for the benefit of its creditors; or(3) the District shall abandon or vacate the Project or any portion thereof; then in each and every such case the District shall be deemed to be in default hereunder. (c) Neither the District nor the Authority shall be in default in the performance of any of its obligations hereunder(except for the obligation to pay base rental pursuant to Section 5.01)unless and until it shall have failed to perform such obligation within thirty (30) days after written notice by the District or the Authority, as the case may be, to the other party properly specifying wherein it has failed to perform such obligation. ARTICLE XII DISCHARGE OF OBLIGATIONS SECTION 12.01. Discharge of Obligations. (a) If the District shall pay or cause to be paid all Base Rental Payments and the interest accrued thereon and all additional rental required to be paid by it hereunder at the 15 DOC'SSF1:314300.1 times and in the manner provided herein, the right, title and interest of the Authority herein and the obligations of the District to the Authority hereunder shall thereupon cease, terminate, become void and be completely discharged and satisfied, except only as provided in subsection (c). (b) Any unpaid principal component of a Base Rental Payment shall on its scheduled payment date or date of prepayment be deemed to have been paid within the meaning of and with the effect expressed in subsection (a) of this section if the District makes payment of such Base Rental Payment in the manner provided herein, and money for the purpose of such payment or prepayment is then held by the Trustee. (c) All or any portion of any unpaid principal component of a Base Rental Payment shall, prior to its scheduled payment date or date of prepayment, be deemed to have been paid within the meaning of and with the effect expressed in subsection (a) of this section (except that the District shall remain liable for such Base Rental Payment, but only out of such money or securities deposited with the Trustee or an appropriate escrow agent as herein described for such payment) if(i) notice is provided to the Trustee as required by the Trust Agreement, (ii) there shall have been deposited with the Trustee or such escrow agent either money in an amount which shall be sufficient, or Federal Securities which are not subject to redemption prior to maturity except by the holder thereof(including any such Federal Securities issued or held in book entry form) the interest on and principal of which when paid will provide money which, together with money, if any, deposited with the Trustee or such escrow agent at the same time, shall be sufficient, as stated in a report of a nationally recognized independent certified public accountant or other verification agent addressed to the District and the Trustee or such escrow agent verifying such sufficiency in full, to pay when due such principal component of such Rental Payment or such portion thereof on and prior to its payment date or its date of prepayment, as the case may be, and the prepayment premium, if any, thereon, and (iii) an Opinion of Counsel addressed to the District and the Trustee or such escrow agent and the Bond Insurer is filed to the effect that the action taken pursuant to this subsection will not cause the interest components of the Rental Payments to be includable in gross income under the Code for federal income tax purposes and that the Bonds are no longer Outstanding(as that term is defined in the Trust Agreement). (d) After the payment of all Base Rental Payments and the interest accrued thereon and all additional rental and all fees and expenses of the Trustee, the Trustee, upon request of the District, shall cause an accounting to be made in accordance with standard trust industry procedures and filed with the Authority and District and shall execute and deliver to the Authority and the District all such instruments as may be necessary or desirable to evidence such total or partial discharge and satisfaction, as the case may be. ARTICLE XIII MISCELLANEOUS SECTION 13.01. Notices. All written notices to be given hereunder shall be given by first class mail to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other parties in writing from time to time, namely: 16 noCssra.314300.1 I If to the Authority: Midpeninsula Regional Open Space District Financing Authority Attention: Chairperson 330 Distel Circle Los Altos, California 94022 If to the District: Midpeninsula Regional Open Space District Attention: General Manager 330 Distel Circle Los Altos, California 94022 If to the Trustee: BNY Western Trust Company Attention: Corporate Trust Administration 700 South Flower Street, Suite 500 Los Angeles, California 90017 SECTION 13.02. Binding Effect. The Project Lease shall inure to the benefit of and shall be binding upon the Authority and the District and their respective successors and assigns. SECTION 13.03. Third Party Beneficiary. The Trustee is hereby designated a third party beneficiary hereunder for the purpose of enforcing any of its rights or any of the rights assigned by the Authority to the Trustee under the Trust Agreement. SECTION 13.04. Net Lease. It is the purpose and intent of the Authority and the District that lease payments hereunder shall be absolutely net to the Authority so that the Project Lease shall yield to the Authority the lease payments, free of any charges, assessments or impositions of any kind charged, assessed or imposed on or against the Project, and without counterclaim, deduction, defense, deferment or set-off by the District except as herein specifically otherwise provided. The Authority shall not be expected or required to pay any such charge, assessment or imposition, or be under any obligation or liability hereunder except as herein expressly set forth, and all costs, expenses and obligations of any kind relating to the maintenance and operation of the Project which may arise or become due during the term of the Project Lease shall be paid by the District. SECTION 13.05. Amendments. The Project Lease may be amended in writing as may be mutually agreed by the Authority and the District, subject to the written approval of the Trustee and the Bond Insurer;provided, that no such amendment which adversely affects the rights of the Owners shall be effective unless it shall have been consented to by the Owners of Bonds representing a majority of the principal amount of all outstanding Bonds; and provided further, that no such amendment shall (a) extend the payment date of any base rental payment, or reduce the interest,principal or prepayment premium component of any 17 DOCSSF1:314300.1 base rental payment, without the prior written consent of the Owner of each Bond so affected, or (b) reduce the percentage of Bonds the consent of the Owners of which is required for the execution of any amendment hereof, and provided further, that no such amendment shall substitute another parcel or parcels of real property for any one or more of the parcels of real property leased hereunder unless the substituted parcel or parcels of real property are used for open space for the District, and before any such substitution is approved by the District it shall have first prepared and filed with the Authority and the Trustee and the Bond Insurer an M.A.I. appraisal by an independent real estate appraiser that the parcel or parcels of real property that are proposed to be so substituted have a fair market value at least equal to the parcel or parcels of real property that are proposed to be released from the terms of the Project Lease by virtue of such substitution, except that if the parcel or parcels of real property that are proposed to be so substituted have been purchased by the District within twelve (12) months of the amendment of the Project Lease, the District may use the purchase price thereof in determining the fair market value thereof; and provided further, that any parcel or parcels of real property that are proposed to be so substituted shall have no prior liens against them that would impair their use for the purpose intended by the District and shall have a useful life at least as long as the parcel or parcels being substituted out of the Project Lease. Following any such substitution, the Authority shall execute appropriate quitclaim deeds to the District for the parcel or parcels so substituted out of the Project Lease. The Authority shall provide notice of any such substitution to Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007, Attention: Public Finance Department, and to Standard &Poor's, a division of The McGraw-Hill Companies, Inc., 25 Broadway, New York, New York 10004, Attention: Public Finance Department. SECTION 13.06. Partial Invalidity. If any one or more of the agreements, conditions, covenants or terms hereof shall to any extent be declared invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, the finding or order or de cree of which becomes final none of the remainingagreements, conditions,g covenants or terms hereof shall be affected thereby, and each provision of the Project Lease shall be valid and enforceable to the fullest extent permitted by law. SECTION 13.07. Governing Law. The Project Lease shall be governed by and construed and interpreted in accordance with the laws of the State. SECTION 13.08. Section Headings. All section headings contained herein are for convenience of reference only and are not intended to define or limit the scope of any provision hereof. SECTION 13.09. Severability. If any agreement, condition, covenant or term hereof or any application hereof should be held by a court of competent jurisdiction to be invalid, void or unenforceable, in whole or in part, all agreements, conditions, covenants or terms hereof and all applications thereof not held invalid, void or unenforceable shall continue in full force and effect and shall in no way be affected, impaired or invalidated thereby. SECTION 13.10. Execution in Counterparts. The Project Lease may be executed and entered into in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. 18 DOCSSF1:314300.1 IN WITNESS WHEREOF, the parties hereto have executed and entered into the Project Lease by their officers thereunto duly authorized as of the day and year first written above. MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY By Chairperson Attest: Secretary MIDPENINSULA REGIONAL OPEN SPACE DISTRICT By President of the Board of Directors (SEAL) Attest: Secretary of the Board of Directors 19 I)OC'SSFI:314300.1 [ATTACH NOTARY ACKNOWLEDGEMENTS HERE] DOC:SSF 1:314300.1 EXHIBIT A DESCRIPTION OF REAL PROPERTY All those certain parcels of real property situated in the State of California, County of Santa Clara, more particularly described below: I A-1 DOC'SSP1:314300.1 EXHIBIT B BASE RENTAL PAYMENT SCHEDULE I Principal Interest Date Component Com on nent Total July 1, 1999 $ $ January 1, 2000 July 1, 2000 $ January 1, 2001 July 1, 2001 January 1, 2002 July 1, 2002 January 1, 2003 July 1, 2003 January 1, 2004 July 1, 2004 January 1, 2005 July 1, 2005 January 1, 2006 July 1, 2006 January 1, 2007 July 1, 2007 January 1, 2008 July 1, 2008 January 1, 2009 July 1, 2009 January 1, 2010 July 1, 2010 January 1, 2011 July 1, 2011 January 1, 2012 July 1, 2012 January 1, 2013 July 1, 2013 January 1, 2014 July 1, 2014 January 1, 2015 July 1, 2015 January 1 2016 July 1, 2016 January 1, 2017 July 1, 2017 January 1, 2018 July 1, 2018 January 1, 2019 B-1 DOt`SSF 1:314300.1 l Principal Interest Date Com onent Component Total July 1, 2019 $ $ $ January 1, 2020 July 1, 2020 January 1, 2021 July 1, 2021 January 1, 2022 July 1, 2022 January 1, 2023 July 1, 2023 January 1, 2024 July 1, 2024 January 1, 2025 July 1, 2025 January 1, 2026 July 1, 2026 January 1, 2027 July 1, 2027 January 1, 2028 July 1, 2028 i B-2 DOCSSF1.314300.1 I I AGREEMENT FOR BOND COUNSEL SERVICES This Agreement for Bond Counsel Services(this "Agreement") is entered into as of December 14, 1998,by and between the Midpeninsula Regional Open Space District Financing Authority (the "Authority") and Orrick, Herrington& Sutcliffe LLP ("Bond Counsel"), as follows: WITNESSETH: WHEREAS, the Authority desires to engage the services of a bond counsel to assist the Midpeninsula Regional Open Space District(the"District") in connection with the refunding of all or portions of the District's outstanding 1990 Promissory Notes and 1992 Promissory Notes (collectively, the"Notes") and the financing of additional open space for the District by the execution of a Project Lease with the District(the "Local Obligation") and by the funding by the Authority of the Project Lease with the proceeds of the Authority's 1999 Revenue Bonds (the "1999 Bonds"), which will be issued by the Authority and secured by payments from the District to the Authority under the Local Obligation; and WHEREAS,Bond Counsel possesses the necessary professional capabilities and resources to provide the legal services required by the Authority as described in this Agreement; NOW, THEREFORE, in consideration of the mutual conditions, covenants and terms herein contained, the parties hereto agree as follows: Section 1. Legal Services. The Authority hereby employs Bond Counsel to furnish the legal services hereinafter set forth, and Bond Counsel agrees to provide such services in its capacity as bond counsel, including the rendering of certain legal services required in the conduct of the proceedings for the execution and delivery of the Local Obligation and the issuance of the 1999 Bonds in an estimated principal amount of not to exceed thirty-one million dollars ($3 1,000,000), all as set forth more particularly below: (a) Consultation with appropriate representatives of the District, including the General Manager of the District, legal counsel to the District and the Authority("Legal Counsel") and other financing participants, with respect to the timing,terms and legal structure of the proposed financing, including analysis of the financing and considerations of state law, federal tax law, federal securities law and general public finance law. (b) Preparation of the legal proceedings for the authorization, execution and delivery of the Local Obligation and related documents and preparation of the legal proceedings for the authorization, issuance, sale and delivery of the 1999 Bonds, including preparation of all necessary authorizing resolutions, a Trust Agreement, a Continuing Disclosure Agreement and other related documents (except the Official Statement,which shall be prepared by Stone&Youngberg LLC, as the underwriter of the 1999 Bonds (the"Underwriter"))required in connection with the financing, and including preparation of the legal proceedings for the refunding of all or portions of the Notes. DOC'SSFI:111141.1 (c) Attendance at document review sessions and meetings of the District Board of Directors and the Authority where the financing and related matters will be discussed and authorizing actions taken, and the rendering of legal advice, as necessary, and attendance at such other meetings as shall be deemed necessary for the proper conduct of the financing. (d) Review of the Official Statement as to those matters that are related to a description of the legal documents, the issuance and sale of the 1999 Bonds and the Local Obligation; provided, that Bond Counsel shall not be responsible for the overall preparation or content of the Official Statement, which shall be the responsibility of the Authority and the Underwriter. (e) Review of any insurance or other credit enhancement arrangements entered into in connection with the financing, if such credit enhancement is desired by the District or the Authority. (f) Preparation of the final closing papers, including a tax certificate, required to effect the delivery of the Local Obligation and the 1999 Bonds, and organization of and attendance at the related closing. (g) The rendering of a customary final approving legal opinion on the validity of the Local Obligation and the rendering of a customary final approving legal opinion on the validity of the 1999 Bonds and the related Trust Agreement and the tax-exempt status of interest on the 1999 Bonds, and the rendering of such other legal opinions as may be appropriate in connection with the issuance, delivery and receipt of payment for the 1999 Bonds; provided, that Bond Counsel shall not be required to issue any opinion with respect to the Official Statement. (h) Such other legal services as may be incidental to the foregoing. Bond Counsel's services are limited to those specifically set forth above, and do not include representation of the District,the Authority or any other party to the transaction in any litigation or other legal or administrative proceeding involving the Local Obligation or the 1999 Bonds. Additionally, unless specifically requested by the Authority, Bond Counsel's services do not include any responsibility for the preparation or content of the Official Statement (other than preparation of a summary of related legal documents and the review of the description of the opinion to be rendered by Bond Counsel concerning certain tax matters), and Bond Counsel's services also do not include any responsibility for state blue sky laws or any financial advice or analysis with respect to the Local Obligation or the 1999 Bonds. Also, Bond Counsel will not be responsible for the services performed or acts or omissions of any other financing participant. Also,Bond Counsel's services will not include services related to rebate compliance or continuing disclosure (although Bond Counsel may be available for separate engagements to provide such services pursuant to separate contracts). Finally,the Authority and Bond Counsel acknowledge that the District and the Authority have engaged Legal Counsel to render day-to-day ongoing legal services, and Bond Counsel shall circulate documents to and coordinate its services with Legal Counsel to the extent requested by the Authority or such Legal Counsel. 2 DOCSSF1:318242.1 Section 2. Compensation and Reimbursements. (a) Compensation. The Authority agrees to pay Bond Counsel for services rendered pursuant to this Agreement a fee of$70,000,payable at the closing of the financing. (b) Reimbursement. In addition to the fee for legal services provided above, the Authority will reimburse Bond Counsel for one-half(1/2) of the costs and expenses (direct and indirect) incurred in connection with its services, including (without limitation)word processing, document reproduction and delivery, travel, long distance telephone(including facsimile transmission), computer research,bound volumes, secretarial overtime and other similar expenses (not to exceed a total reimbursement of$5,000), except that any filing, publication or printing costs required in connection with the Local Obligation and the 1999 Bonds shall be paid directly by the Authority. (c) Payment. Fees and expenses shall be payable upon the date of the issuance of the 1999 Bonds or upon the date of the termination of this Agreement. Section 3. Termination of this Agreement. This Agreement (and all legal services to be rendered under it)may be terminated at any time by written notice from either party, with or without cause, and in that event, all finished and unfinished documents prepared for adoption or execution by the District and the Authority shall, at the option of the District or the Authority,become its respective property and shall be delivered to it or to any party it may designate; provided, that Bond Counsel shall have no liability whatsoever for any subsequent use of such documents. In the event of termination by the Authority, Bond Counsel shall be paid for its services performed hereunder based on the amount of time expended by Bond Counsel's attorneys and legal assistants at their hourly rates from time to time in effect(but not in excess of $25,000), unless the termination is made for cause, in which event compensation, if any, shall be adjusted in the light of the particular facts and circumstances involved in the termination, and upon termination, Bond Counsel shall have no future duty of any kind to or with respect to the Local Obligation or the 1999 Bonds or the District or the Authority. Section 4. Nature of Engagement; Relationships With Other Parties. The role of Bond Counsel, generally, is to prepare or review the procedures for the issuance of bonds and similar obligations and to provide an expert legal opinion with respect to the validity thereof and other subjects addressed by such opinion, and consistent with the historical origin and unique role of bond counsel, and reliance thereon by the public finance market, Bond Counsel's role as band counsel under this Agreement is to provide an opinion and related legal al services that represent an objective judgment on the matters addressed rather than the partisan positron of an advocate. The District and the Authority acknowledge that Bond Counsel regularly performs legal services for many private and public entities in connection with a wide variety of matters. For example, Bond Counsel has represented, is representing or may in the future represent other public entities, underwriters, trustees, rating agencies, insurers, credit enhancement providers, lenders, contractors, suppliers, financial and other consultants/advisors, accountants, investment providers/brokers,providersibrokers of derivative products and others who may have a role or interest in the issuance of the Local Obligation or the 1999 Bonds or that 3 DOC'SSF1:318242.1 may be involved with or adverse to the District or the Authority in this or some other matter, and Bond Counsel agrees not to represent any such entity in connection with the issuance of the Local Obligation and the 1999 Bonds during the term of this Agreement without the prior consent of the District or the Authority, as the case may be, except possibly with respect to investment or derivative products where,because Bond Counsel has assisted a number of the providers/brokers in designing and developing their products and provides general and transactional advice with respect to such products, it is not practical to seek specific consent in each case, and instead Bond Counsel agrees to separate the attorneys working on the issuance of the Local Obligations and the 1996 Bonds pursuant to this Agreement from the attorneys working on the investment or derivative products. Given the special, limited role of Bond Counsel described above,the District and the Authority acknowledge that no conflict of interest exists or would exist, and waives any conflict of interest that might appear actually or potentially to exist, now or in the future,by virtue of this Agreement or any such other attorney-client relationship that Bond Counsel may have had, have or enter into, and the District and the Authority specifically consent to any and all such relationships. Section 5. Limitation of Rights to Parties; Successor and Assigns. Nothing in this Agreement or in any of the documents contemplated hereby, expressed or implied, is intended or shall be construed to give any person other than the District, the Authority and Bond Counsel any legal or equitable right or claim under or in respect of this Agreement, and this Agreement shall inure to the sole and exclusive benefit of the District, the Authority and Bond Counsel. The Authority shall not assign its rights and obligations under this Agreement without the written consent of Bond Counsel, and Bond Counsel shall not assign its obligations under this Agreement without the written consent of the Authority; and all references to the District, the Authority and Bond Counsel in this Agreement shall be deemed to refer to any such assignee or successor of the District, the Authority or Bond Counsel, as the case may be, and shall bind and inure to the benefit of such assignee or successor whether so expressed or not. Section 6. Bond Counsel agrees that Carlo S. Fowler will have primary responsibility for the financing described herein. It is further agreed that Bond Counsel may utilize one or more other partners or associates to assist in the financing as may be necessary or appropriate, including those with particular expertise in the areas of municipal finance law, tax law and securities law; provided,that such other partners or associates will work at all times under the supervision of Mr. Fowler,who will at all times retain direct responsibility for the financing on behalf of Bond Counsel. Section 7. Notices. The addresses of the parties for the giving of notices or for other official business hereunder shall be as follows: District: Midpeninsula Regional Open Space District 330 Distel Circle Los Altos, California 94022 j Attention: General Manager I I 4 DOCSSFI.31&242.1 1 Authority: Midpeninsula Regional Open Space District Financing Authority 330 Distel Circle Los Altos, California 94022 Attention: Chairperson Bond Counsel: Orrick, Herrington& Sutcliffe LLP Old Federal Reserve Bank Building 400 Sansome Street San Francisco, California 94111 Attention: Carlo S. Fowler, Esq. Section 8. Counterparts. This Agreement may be executed in any number of counterparts and each counterpart shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same agreement. 5 DOCSSFI:318242.1 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first written above. MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY By Executive Director ORRICK, HERRINGTON& SUTCLIFFE LLP By A Partner APPROVED: MIDPENINSULA REGIONAL OPEN SPACE DISTRICT B President of the Board of Directors 6 DOCSSFI:318242.1 PRELIMINARY O-TICIAL STt-_TEMENT DATED DECEMBER 14, 1"8 NEW ISSUE—BOOK-ENTRY ONLY RATINGS:Moody's Aaa S&P AAA Ambac insured .2 2 See"Ratings" as In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, based on existing laws, regulations, rulings and court decisions and a 2 assuming, among other matters, compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax 0 purposes under Section 103 of the Internal Revenue Code and is exempt from State of California personal income taxes. In the opinion of Bond 8.2 Counsel, interest on the Bonds is not a specific prej,rence item for purposes of federal individual or corporate alternative minimum taxes,although I "a Bond Counsel observes that such interest is included in adjusted current earnings in calculating federal corporate alternative minimum taxable Z M T income. Bond Counsel expresses no opinion regarding other federal or state income tax consequences relating to the ownership or disposition of, .2—.0 z N or the accrual or receipt of interest on, the Bonds. )ee"TAX MAi TEAS'. 0 0 0 $30,000,000* r- 0 r-,8 0 cc MIDPENINSULA REGIONAa OPEN SPACE DISTRICT FINANCING AUTHORITY >.-6 U) 0 3: 1999 REVENUE BONDS Ea 8 li.0 32 0 75 0 oz Z Dated:Date of Delivery Due:September 1,as shown below dd The Bonds are being issued to enable the Midpeninsula Regional Open Space District Financing Authority(the"Authority")to acquire and E a certain Project Lease(the"1999 Lease")from the Midpeninsula Regional Open Space District(the"District"),to assist the District in acquiring t; a .2 land to preserve and use as open space,refund certain outstanding obligations of the District,purchase a reserve fund surety policy and pay costs 0 ati of issuance of the Bonds. The current interest Bonds will bear interest payable on March I and September I of each year,commencing September 1, 1999. 02 , 0 Cr W= The Bonds will be initially delivered only in book-entry form, registered to Cede & Co. as nominee of the Depository Trust Company r ("DTC").Principal of the Bonds will be payable at the principal corporate trust office of BNY Western Trust Company(the"Trustee'),in San 0 C 3.2 Francisco,California,to DTC,which will act as initial securities depository for the Bonds.Individual purchases will be made in book-entry only 4)C 1i form in the principal amount of$5,000 or integral multiples thereof. Purchasers of the Bonds will not receive instruments representing their E Qa H interests in the Bonds. See"THE BONDS—"Description of the Bonds"and'I—Book-Entry Only System." M E r 2 0 M 2 The Bonds are subject to optional and mandatory redemption prior to maturity. See"THE BONDS—Redemption". E(�2 cc- The payment of principal and interest on the Bonds will be made from"Revenues",consisting principally of payments to be made by the 8 2 8 District under the 1999 Lease from any funds legally available therefor. Payments under the 1999 Lease are subordinate to or on a parity with C, c 2* 0= certain outstanding District obligations and are subject to annual appropriation as described herein.The full faith and credit of the District is not 0 pledged for the payment of the Revenues,and the 1999 Lease is not secured by any pledge of property of the District or any of its revenue. E S2 Payment of the principal of and interest on the Bonds when due will be insured by a municipal bond insurance policy to be issued by Ambac O 5 CE z Assurance Corporation simultaneously with the delivery of the Bonds.See"MUNICIPAL BOND INSURANCE FOR THE BONDS". 2 z 2 tit, Anzbgw E 0 The Bonds are special obligations of the Authority payable solely from the Revenues and specific funds and accounts.The Bonds are not W_ il: 'a d a debt or liability of the District,the counties of Santa Clara and San Mateo,the State of California or any other political subdivision thereof, other than the Authority.None of these entities is obligated to pay the principal of the Bonds,or the interest thereon,except from the funds C 0 described above,and neither the faith and the credit nor the taxing power of any of them is pledged to such payment.The issuance of the Bonds 00 0 shall not directly, indirectly or contingently obligate any entity to levy or pledge any form of taxation or make any appropriations for their payment.Neither the Authority nor the District has taxing power. V cc 0 E= E 5.2 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 B 2-6 Official Statement to obtain information essential to the making of an informed investment decision. C z 0 0 0m MATURITY SCHEDULE* 0 - 0 Current Interest Bonds Maturing September I Maturity Interest price/ Maturity Interest Price/ a 0 z Date Principal Rate Yield Date Principal Rate Yield Z Q $ % % $ % % -0 C .0 $ %Term Bonds due September 1, —Yield % E 4) 0 4; > Capital Appreciation Bonds Maturing September 1 *4 *0 a Maturity Aggregate Accreted Yield to 'a 2 C Date Initial Amount Value Maturity E *4 The Bonds are offered when, as and if issued, subject to the approval of validity of the Bonds by Orrick, Herrington & Sutcliffe LLP San Francisco, California. Certain legal matters will be passed upon for the Authority and the District by their legal counsel,and for the Underwriter by W Foley & Lardner. It is expected that the Bonds will be available for delivery through the facilities of D TC on or about January 20, 1999. 0 00 Stone & Youngberg LLC :E P:5 Preliminary,subject to change MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANZING AUTHORITY Authority Governing Board BETS`.' C^.OWDER JED CYR MARY DAVEY KEN 41TZ JOE S0,11TIAN MIDPENINSUtA REGIONAL OPEN SPACE DISTRICT Board of Directors BETSY CROWDER, President JED CYR, Vice President KEN NITZ, Treasurer PETE SIEMENS, Secretary MARY DAVEY, Member DEANE LITTLE, Member NONETTE HANKO, Member District Staff L. CRAIG BRITTON, General Manager MICHAEL L. FOSTER, Controller SUSAN SCHECHTMAN, Esq., District Legal Counsel SPECIAL SERVICES Bond Counsel Orrick, Herrington & Sutcliffe LLP San Francisco, California Escrow Verification Causey, Demgen & Moore, Inc. Denver, Colorado Trustee BNY Western Trust Company Los Angeles, California Iv No dealer, broker, salesperson or other person has been authorized by the Author- ity, 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 representa- tion must not be relied upon as having been authorized by the Authority, 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 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such an offer, solicita- tion or sale. This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts, 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 no- tice 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 of San Mateo and Santa Clara since the date hereof. All of the summaries contained herein of the authorizing Trust Agreement and other documents referred to herein are made subject to the provisions of such docu- ments respectively, and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on Me with the Authority and 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 Trust Agreement, 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 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. MAP TABLE OF CONTENTS INTRODUCTION 1 THE 1999 BONDS2 Authority for Issuance 2 Description of the Bonds 2 Current Interest Bonds 2 Capital Appreciation Bonds 2 � Optional Redemption 3 � Extraordinary Redemption 3 � Selection uf Bonds for Redemption 3 Notice ufRedemption 3 Effect of Redemption and Notice 4 Transfer and Exchange 4 Book-Entry Only System 4 ESTIMATED SOURCES AND USES OF FUNDS 6 ESTIMATED DEBT SERVICE 6 THE FINANCING PLAN 7 The 19S9 Lease Proceeds 7 MUNICIPAL BOND INSURANCE FOR THE BONDS 7 The Bond Insurer D Available Information 8 Incorporation of Certain Documents by Reference 8 SECURITY AND SOURCE OF PAYMENT 9 The 19H8Lease 8 Remedies 10 Surety Reserve 10 Parity Obligations/Senior Lien Obligations 11 THE TRUST AGREEMENT 11 Interest Account 12 Redemption Account 12 Reserve Account 13 Rebate Fund 13 Investment of Moneys in Funds and Accounts 13 Covenants uf the Authority 19 � District Covenants and Additional Debt 14 THEAUTHORITY is THE DISTRICT 15 � Location and Size 15 Management 15 Objectives and Operations 16 ESTIMATED REVENUES AND OUTSTANDING OBLIGATIONS 17 General 17 Property Tax Limitation and Allocation 17 Property Tax Collection Procedures 17 Assessed Valuation 18 Secured and Unsecured Tax Levies 18 Projected Revenues 20 Estimated Debt Service Coverage 2C Direct and Overlapping Bonded Indebtedness 2 i DISTRICT FINANCIAL INFORMATION 21 Method of Accounting 21 District Financial Statements 2' Debt Capacity/Additional Debt 23 Sources of Funds 23 Other Outstanding Debt 23 Salaries and Benefits 24 CONSTITUTIONAL AND STATUTORY TAX LIMITATIONS 24 Constitutional Limitations-Article XIIIA 24 Gann Initiative 24 Proposition 62 24 Proposition 218 25 Future Initiatives 25 CERTAIN INVESTMENT CONSIDERATIONS 26 Bankruptcy and Limitations on Remedies 26 No Assurance of Secondary Market for the Bonds 26 Year 2000 Concerns 26 LEGAL MATTERS 27 TAX MATTERS 27 LEGALITY FOR INVESTMENT 28 RATINGS 29 LITIGATION 29 UNDERWRITING 29 CONTINUING DISCLOSURE 29 AVAILABILITY OF DOCUMENTS 30 MISCELLANEOUS 30 APPENDIX A: DISTRICT'S AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 1998 31 APPENDIX B: GENERAL AND ECONOMIC INFORMATION SANTA CLARA COUNTY AND SAN MATEO COUNTY 1 APPENDIX C: PROPOSED FORM OF BOND COUNSEL OPINION 1 APPENDIX D: FORM OF CONTINUING DISCLOSURE AGREEMENT 1 APPENDIX E: TABLE OF ACCRETED VALUES i APPENDIX F: SPECIMEN INSURANCE POLICY 2 $30,000,000* MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY 1999 REVENUE BONDS INTRODUCTION This Official Statement, including the cover page and the appendices hereto (the "Official Statement") provides information in connection with the sale of $30,000,000* aggregate principal amount of Mid- peninsula Regional Open Space District Financing Authority 1999 Revenue Bonds (the "Bonds") being is- sued pursuant to a Trust Agreement, dated as of January 1, 1999 (the "Trust Agreement"), between the Midpeninsula._Reg1 nio,_al Open Space District (the"Authority") and BNY Western Trust Company, as trustee (the "Trustee"). The sale of t e onds will enable the Authority to enter into a Project Lease ( the "1999 Lease") with the Midpeninsula Regional Open Space District (the "District") to (i) help the District acquire land to preserve and use as open space, (ii) lease District properties used in the District's operations, (iii) refund certain outstanding obligations of the District, (iv)provide for a reserve fund surety bond, and (v) pay costs of issuance of the Bonds. In 1996, the Authority was established under a Joint Exercise of Powers Agreement between the Dis- trict and the County of Santa Clara, pursuant to Chapter 5, Division 7 of Title 1 of the Government Code of the State of California (the "Act"). The Authority was created in part to help the District finance public capital improvements through the acquisition and/or construction of real and personal property for sale or lease to the District, with the power to issue and deliver bonds as authorized under the Act aiid to purchase bonds or other obligations of the District. The President of the Board of Directors of the Dis- trict serves as the President of the Board of Directors of the Authority. Three members of the Board of Directors of the District, appointed by the President, and the member of the Board of Supervisors of the County whose district encompasses the greatest territory of the District are also members of the Gov- erning Board of the Authority. The District, 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 1998 population of the District is approximately 650,000. District policies are the responsibility of a seven- member Board of Directors elected from seven wards within the District. The payment of principal and interest on the Bonds will be secured under the Trust Agreement by the Revenues. The Revenues consist principally of payments to be made by the District to the Authority pur- suant to a Project Lease, dated as of January 1, 1999, by and between the District and the Authority (the "Project Lease") in the amount of $[AMOUNT] from any other funds legally available therefor. The District has covenanted under the 1999 Lease to take such action as may be necessary to include all rental pay- ments in its annual budget and to make the necessary annual appropriations for the rental payments. The District's primary source of revenue is property tax revenues. The amount of property tax reve- nues allocated to the District is primarily a function of the assessed value of properties in the District, the rates at which such properties are taxed by the Counties and the allocation formula applied to prop- erty tax revenues. The reduction of assessed values of taxable property in the District caused by eco- nomic 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 revenues of the District. Such reduction of revenues could have an adverse effect on the District's ability and, therefore, the Authority's ability, to make timely payments on the 1999 Lease and on the Bonds, respectively. Likewise, delinquencies in the payment of property taxes could have an adverse effect on the District's ability to make timely payments on the 1999 Lease. Furthermore, the obligation of the District to appropriate and pay rental payments under the 1999 Lease will be subordinate to the obligation of the District to apply revenues to make payment on senior lien debt. The District has other indebtedness and lease obligations subordinate to senior debt payable from its general revenues as described under "EsTmATm REvENm AND OUTSTANDING OBLIGATIoxs" and "DISTRICT FINANciAL INFORMATION". 1 With the exception of the audited financial statements of the District for the year ended Ma-ech 31, 1998, contained in APPENDIX A, the financial and statistical information contained herein has been ob- tained 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 de- viate significantly from the assumptions upon which such projections were made, the moneys available to the District may be insufficient to make such payments on the 1999 Lease which could then produce insufficient Revenue for the Authority to make the payment of the principal of, redemption premilzm, if any, and interest on the Bonds. THE 1999 BONDS Authority for Issuance The issuance of the Bonds by the Authority is authorized pursuant to the Act and the Trust Agree- ment. With the proceeds of the Bonds, the Authority will acquire the 1999 Lease. Payments by the Dis- trict under the 1999 Lease will constitute "Revenues" as defined in the Trust Agreement. The 1999 Lease has been executed and delivered pursuant to a resolution of the District. The District is authorized by California law to lease real property for open space purposes. Description of the Bonds The Bonds will bear interest at the rates and mature in the amounts and on the dates set forth on the cover page of this Official Statement. The Bonds in the aggregate principal amount of $30,000,000* will be issued as fully registered bonds in the denominations of $5,000 each or any integral multiple thereof with respect to the Current Interest Bonds and denominations such that the Accreted Value represented thereby on the stated maturity date will be $5,000 or any integral multiple thereof with respect to the Capital Appreciation Bonds. Principal of and premium, if any, on the Bonds will be payable at the Corpo- rate Trust Office of the Trustee in Los Angeles, California, to The Depository Trust Company, New York, New York ("DTC"), which will in turn remit such principal and interest to its participants for subsequent disbursement to Owners. See "Book-Entry Only System". Current Interest Bonds Interest on the Current Interest Bonds is payable on March 1 and September 1 of each year (each an "Interest Payment Date"), commencing September 1, 1999, by check mailed to the Owners whose names appear on the registration books of the Trustee as of the close of business on the fifteenth day of the month immediately preceding each Interest Payment Date (each, a "Record Date"); but interest may be paid by wire transfer to any owner of Bonds in the aggregate principal amount of $1,000,000 or more upon the written request of such owner to the Trustee prior to the Record Date. So long as Cede &Co. is the Owner of all of the Bonds, interest payments will be made by the Trustee by wire transfer to DTC in immediately available funds. Each Current Interest Bond will be dated as of the Delivery Date, and will bear interest (calculated on the basis of a 360-day year comprised of twelve 30-day months) from the Interest Payment Date next pre- ceding the date of authentication thereof, unless (i) it is authenticated after a Record Date and on or be- fore the following Interest Payment Date, in which event it will bear interest from such Interest Payment Date; or (ii) it is authenticated on or before August 15, 1999, in which event it will bear interest from the Delivery Date; but if, as of the date of authentication of any Current Interest Bond, interest thereon is in default, such Current Interest Bond will bear interest from the Interest Payment Date to which interest thereon has previously been aid or made available for payment. be P Y p Capital Appreciation Bonds The Capital Appreciation Bonds will be dated as of the Delivery Date and are payable at maturity in an amount (their "Accreted Value") equal to the initial amount of such Bonds as shown on the cover page hereof, plus accrued interest thereon from the date of such Bonds, compounded on each Compounding Date. The Capital Appreciation Bonds are subject to optional and extraordinary redemption prior to ma- 2 turity. Interest on the Capital Appreciation Bonds will be payable at maturity or prior redemption upon presentation and surrender at the Corporate Trust Office of the Trustee to DTC, which will in turn remit such accreted value to its participants for subsequent disbursement to Owners. The Accreted Value per $5,000 maturity amount of each Capital Appreciation Bond, as of the Delivery Date and as of each Compounding Date thereafter, is shown in the Table of Accreted Values (the "Table of Accreted Values") attached hereto as APPENDIX E. "Accreted Value" means, with respect to any Capital Appreciation Bond, (a) on any Compounding Date, the amount set forth opposite such Compounding D,-te on the Table of Accreted Values which is included in APPENDIX E, (b) on any date between the Delivery Date and the first Compounding Date, the amount determined on the basis of straight-line interpolation between the Delivery Date and such Compounding Date (based on a 360-day year and twelve 30-day months), and (c) on any date which is between two Compounding Dates (based on a 360-day year and twelve 30-day months), the amount determined on the basis of straight-line interpolation between such date and such Compounding Dates. Optional Redemption The Bonds maturing on or after September 1, 2010, are subject to optional redemption by the Aiithority on any Interest Payment Date or Compounding Date (as applicable) on or after September 1, 2009, and prior to their respective maturity 1, PRICE dates, as a whole, or in part in integral multi- OPTIONAL REDEMPTION DATES ples of $5,000, from maturities selected by the (%PRINCIPAL) Authority(and by lot within any one maturity if September 1, 2009, and March 1, 2010 102% less than all the Bonds of any one maturity are September 1, 2010 and March 1, 2011 101% redeemed), from any legally available funds of September 1, 2011 and thereafter 100% the Authority, at a redemption price expressed as a percentage of the principal amount of the Bonds or the portions thereof called for redemption, to- gether with accrued interest thereon to the date of redemption, as shown in the table above. Extraordinary Redemption The Bonds are subject to redemption on or prior to their respective maturities, upon notice, as a whole on any date, or in part by lot on any Interest Payment Date in integral multiples of $5,000 principal amount (or Accreted Value thereof in the case of the Capital Appreciation Bonds) so that the aggregate annual amounts of principal which will be payable after such redemption date will be as nearly propor- tional as practicable to the aggregate annual amounts of principal with respect to the unpaid Project Lease, from prepaid rental payments made by the District from funds received by the District due to a governmental taking of the Project, or portions thereof, by eminent domain proceedings, which is subject to the 1999 Lease, at a redemption price equal to the sum of the principal amount (or Accreted Value) plus accrued interest thereon to the date fixed for redemption, without premium. Selection of Bonds for Redemption When less than all of the Bonds of any one maturity date are to be redeemed, the Trustee will select the outstanding Bonds or the portions thereof for redemption by lot in any manner that it deems fair. Notice of Redemption The Trustee is required to give mailed notice of redemption of any Bonds to the registered owners of the Bonds called in whole or in part and to various securities depositories and securities information services at least 30, but not more than 60, days prior to the redemption date; but neither failure to re- ceive any such notice nor any immaterial defect contained therein will affect the redemption of such Bonds. So long as the Book-Entry Only System is used for the Bonds, the Trustee will give any notice of re- demption or any other notices required to be given to Owners only to DTC. Any failure of DTC to advise any DTC Participant, or of any DTC Participant to notify the Beneficial Owner, of any such notice and its content or effect will not affect the validity of the redemption of the Bonds 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 Benefi- 3 i cia) Owners, including notification of all interest payments, will be forwarded in writing by such DTC Par- ticinant. See "J'HE BoxDS- Book-Entry Only System". Effect of Redemption and Notice If a notice of redemption of any Bonds to be redeemed has been properly given and money to pay the redemption price of such Bonds is held by the Trustee, then on the redemption date designated in such notice such Bonds so called for redemption shall become due and payable, and from and after the date so designated interest on such Bonds shall cease to accrue, and the Holders of such Bonds shall have no rights in respect thereof except to receive payment of the redemption price. Transfer and Exchange The Bo nds are transferable b the registered owner thereof, in person or duly y � p y y attorney, at *he principal corporate trust office of the Trustee in Los Angeles, 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 Bond or Bonds 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. Boek-Entry Only System DTC will act as securities depository for the Bonds. The Bonds 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 Bonds, 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 neither the District nor the Authority makes any 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 or- ganization" 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 secu- rities 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 pp p p and Exchange Commission. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond(`Beneficial Owner")is in turn to be recorded on the Direct and Indirect Participants' records. Bene- ficial 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 state- ments of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner en- tered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by en- tries made on the books of DTC Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Bonds representing their ownership interests, unless use of the book-entry system for the Bonds is discontinued. 4 To facilitate subsequent transfers, all Bonds deposited by DTC Participants with DTC are registered in the name of D',C's partnership nominee, Cede & Co. The deposit of Bonds with DTC and their registra- tion in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's rec- ords reflect only the idefitity of the Direct Partici- LIMITED BOOK-ENTRY RESPONSIBILITIES pants to whose accounts such Bonds are credited, As long as a book-entry only system is used for the which may or may not be the Beneficial Owners. T Bonds, the Trustee will send any notice of redemption or he DTC Participants will remain responsible for tic keeping account of their holdings on behalf of their Fothernotices to holders only to DTC, Any failure of DTC customers. to advise any DTC Participant, or of any DTC Participant to notify any Beneficial Owner, of any notice and its con- Conveyance of notices and other communica- tent or effect will not affect the validity or sufficiency of tions by DTC to Direct Participants, by Direct Par- the proceedings relating to the redemption of the Bonds ticipants to Indirect Participants, and by Direct Par- called for redemption or of any other action premised on ticipants and Indirect Participants to Beneficial such notice. Owners will be governed by arrangements among them, subject to any statutory or regulatory re- The Authority, the District, the Trustee and the Un- quirements as may be in effect from time to time. derwriter have no responsibility or liability for any aspects Q1 of the records relating to or payments made on account Neither DTC nor Cede*&Co. will consent or vote of beneficial ownership, or for maintaining, supervising or with respect to the Bonds. Under its usual proce-dures, DTC mails an Omnibus Proxy to the issuer Of reviewing ewi.ng any records relating to beneficial ownership of the securities as soon arpossible after the record interests in the Bonds. date. The Omnibus Proxy assigns Cede & Co.'s con- The Authority, the District, the Trustee and the Un- to or voting rights to those Direct Participants derwriter cannot and do not give any assurances that to whose accounts the Bonds are, credited on the DTC will distribute payments to DTC Participants or that record date (identified in a listing attached to the DTC Participants or others will distribute payments with Omnibus Proxy). respect to the Bonds received by DTC or its nominees as Principal and interest payments and premium, if the holder or any redemption notices or other notices to any, with respect to the Bonds will be made to DTC. the beneficial holders, or that they will do so on a timely DTC's practice is to credit Direct Participants' ac- basis, or that DTC will serve and act in the manner de- counts on the payable date in accordance with their scribed in this Official Statement respective holdings shown on DTC's records unless I I DTC has reason to believe that it will not receive payment on the payable date. Payments by DTC Partici- pants 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 Bonds at any time by giving reasonable notice to the Trustee and the Authority. 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 Trust Agreement. If the Authority and the Trustee determine not to continue the DTC book-entry only system or DTC determines to discontinue its services with respect to the Bonds and the District does not select another qualified securities depository, the Authority will deliver one or more Bonds 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 Bonds will be governed by the provisions of the Trust Agree- ment. DTC's operations may be affected by "Year 2000" and related computer processing issues. See "CERTAIN INVESTMENT CONSIDERATIONS—Year 2000 Concerns—DTC". The foregoing description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal of, redemption premium, if any, and interest on the Bonds to 5 DTC, DTC Participants or E2neficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, DTC Participants and the Beneficial Owners is based solely on the Authority's and the Trustee's understanding of such procedures and rec- ord 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 hiformation with respect to such matters, but should instead confirm the same with DTC or DTC Partici- pants, as the case may be. The Autho-ity and the Trustee understand that the current "Rules" applicable to DTC are on file with th, Securitie- and Exchange Commission and that the current "Procedures" of DTC to be followed in dealLig with DTC Participants are on file with DTC. ESTIMATED SOURCES AND USES OF FUNDS Principal Amount of Bonds Proceeds of the sale of Funds and Accounts of Prior Bonds the Bonds, together with, TOTAL SOURCES other sources of funds, are Project Fund expected to be applied as Refunding Escrow Deposit indicated by the estimates Surety Bond(Reserve Fund Substitute) Cost of Issuance(including Bond Insurance premium) shown in this table: Underwriter's Discount TOTAL USES ESTIMATED DEBT SERVICE The following table sets forth annual debt service on the Bonds based on the maturity dates and in- terest rates printed on the cover hereof based. (FOR FISCALYEARS ENDING MARCH 31) YEAR YEAR (April 1) PRINCIPAL INTEREST TOTAL (April 1) PRINCIPAL INTEREST TOTAL 1999 $ $ 2016 $903,678 $1,251,322 $2,155,000 2000 746,219 746,219 2017 899,390 1,360,610 2,260,000 2001 375,000 663,641 1,038,641 2018 896,990 1,478,010 2,375,000 2002 440,000 649,770 1,089,770 2019 892,491 1,597,509 2,490,000 2003 510,000 633,000 1,143,000 2020 875,175 1,749,825 2,625,000 2004 590,000 612,905 1,202,905 2021 869,275 1,880,725 2,750,000 2005 670,000 589,260 1,259,260 2022 866,133 2,023,867 2,890,000 2006 760,000 561,710 1,321,710 2023 860,975 2,169,026 3,030,000 2007 860,000 529,905 1,389,905 2024 858,039 2,326,961 3,185,000 2008 970,000 493,278 1,463,278 2025 854,380 2,490,620 3,345,000 2009 1,085,000 451,121 1,536,121 2026 850,017 2,659,983 3,510,000 2010 1,205,000 403,001 1,608,001 2027 846,076 2,838,924 3,685,000 2011 1,340,000 348,250 1,688,250 2028 842,460 3,027,540 3,870,000 2012 1,480,000 286,175 1,766,175 2029 838,975 3,226,025 4,065,000 2013 1,645,000 215,821 1,860,821 2030 834,575 3,430,425 4,265,000 2014 1,815,000 136,199 1,951,199 2031 1 831,1741 3,648,8261 4,480,000 2015 2,000,000 47,000 2,047,0001 6 THE FINANCING PLAN The Bonds are being issued to provide the funds needed to (i) assist the District in acquiring land to preserve and use as open space, (ii) ledse District properties, (iii) refund certain outstanding obligations of the District, (iv)provide for a reserve fund surety bond and(v)pay costs of issuance of the Bonds. The Authority will use a portion of the Bond proceeds to acquire from the District the 1999 Lease. The District will apply the funds received from the Authority to the foregoing purposes. The 1999 Lease Proceeds The District will use a portion cf Cie proceed.; o: the 1999 Lease to refinance or finance the cost of acquisition of open space for the Dis`rict, to refund a portion of the District's outstanding promissory notes issued in 1990 and to refund all of the District's outstanding notes issued in 1992. MUNICIPAL BOND INSURANCE FOR THE BONDS Ambac Assurance Corporation (the `Bond Insurer") has made a commitment to issue a municipal bond insurance policy (the "Municipal Bond Insurance Policy") relating to the Bonds effective as of the date of issuance of the Bonds. Under the terms of the Municipal Bond Insurance Policy, the Bond Insurer will pay to the United States Trust Company of New York, in New York, New York, or any successor thereto (the "Insurance Trustee") that portion of the principal of and interest on the Bonds which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer (as such terms are defined in the Municipal Bond Insurance Policy). The Bond Insurer will make such payments to the Insur- ance Trustee on the later of the date on which such principal and interest becomes Due for Payment or within one business day following the date on which the Bond Insurer shall have received notice of Non- payment from the Trustee. The insurance will extend for the term of the Bonds and, once issued, cannot be cane d Insurer. e Municipal Bond urance Policy will insure payment only on stated maturity dates and on man- dat sinking fund inst ent dates, in the case of principal, and on stated dates for payment, in the Jcase o ' terest. If the nds become subject to mandatory redemption and insufficient funds are avail- able for re!Te fall outstanding Bonds, the Bond Insurer will remain obligated to pay principal of and interest on outstanding Bonds on the originally scheduled interest and principal payment dates in- cluding mandatory sinking account redemption dates. In the event of any acceleration of the principal of the Bonds, the insured payments will be made at such times and in such amounts as would have been made had there not been an acceleration. IF the Trustee has notice that any payment of principal of or interest on a Bond which has become Due for Payment and which is made to a Bondholder by or on behalf of the District has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United State Bankruptcy Code in accordance with a final, nonappealable order of a court of competent jurisdiction, such registered owner will be entitled to payment from the Bond Insurer to the extent of such recovery if sufficient funds are not otherwise available. The Municipal Bond Insurance Policy does not insure any risk other than Nonpayment, as defined in the Policy. Specifically, the Municipal Bond Insurance Policy does not cover: • payment on acceleration, as a result of a call for redemption (other than mandatory sinking fund redemption) or as a result of any other advancement of maturity; • payment of any redemption,prepayment or acceleration premium; • nonpayment of principal or interest caused by the insolvency or negligence of any Trustee or Paying Agent, if any. If it becomes necessary to call upon the Municipal Bond Insurance Policy, payment of principal re- quires surrender of Bonds to the Insurance Trustee together with an appropriate instrument of assign- ment so as to permit ownership of such Bonds to be registered in the name of the Bond Insurer to the extent of the payment under the Municipal Bond Insurance Policy. Payment of interest pursuant to the Municipal Bond Insurance Policy requires proof of Bondholder entitlement to interest payments and an appropriate assignment of the Bondholder's right to payment to the Bond Insurer. Upon payment of the 7 insurance benefits, the Bond Insurer will become the owner of the Bonds, appurtenant coupon, if any, or right to payment of principal or intereE, on such B)nds and -,-ill be fully subrogated to the surrendering Bondholder's rights to payment. If the Bond Insurer were to become insolvent, any claims arising under the Municipal Bond Insurance Policy would be excluded from coverage by the California Insurance Guaranty Association, established pursuant to the laws of the State of California. The Bond Insurer The following information has been provided by the Bond Insurer and has not been verified by the Authority, the District, the Trustee or the Underwriter. The Bond Insurer is a Wisconsin-domiciled stock insurance corporation regulated by the Office of the Commissioner of Insurance of the State of Wisconsin and licensed to do business in 50 states, the Dis- trict of Columbia, the Territory of Guam and the Commonwealth of Puerto Rico, with admitted assets of approximately $3,073,000,000 (unaudited) and statutory capital of approximately $1,769,000,000 (unau- dited) as of March 31, 1998. Statutory capital consists of The Bond Insurer's policyholders' surplus and statutory contingency reserve. Standard &Poor's Ratings Services, a division of The McGraw-Hill Compa- nies, Inc., Moody's Investors Service and Fitch IBCA Inc., have each assigned a triple-A financial strength rating to the Bond Insurer. The Bond Insurer has obtained a ruling from the Internal Revenue Service to the effect that the in- suring of an obligation by the Bond Insurer will not affect the treatment for federal income tax purposes of interest on such obligation and that insurance proceeds representing maturing interest paid by the Bond Insurer under policy provision substantially identical to those contained in its municipal bond in- surance policy shall be treated for federal income tax purposes in the same manner as if such payments were made by the issuer of the Bonds. The Bond Insurer makes no representation regarding the Bonds or the advisability of investing in the Bonds and makes no representation regarding, nor has it participated in the preparation of, the Official Statement other than the information supplied by the Bond Insurer and presented under the heading "MUNICIPAL BOND INSURANCE FOR THE BONDS". Available Information The parent company of the Bond Insurer, Ambac Financial Group, Inc. (the "Company"), is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information may be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices at 7 World Trade Center, New York, New York 10048 and Northwestern Atrium Center, S00 West Madison Street, Suite 1400, Chi- cago, Illinois 60661. Copies of such material can be obtained from the public reference section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. In addition, the aforementioned material may also be inspected at the offices of the New York Stock Exchange, Inc. (the "NYSE") at 20 Broad Street, New York, New York 10005. The Company's Common Stock is listed on the NYSE. Copies of the Bond Insurer's financial statement prepared in accordance with statutory accounting standards are available from the Bond Insurer. The address of the Bond Insurer's administrative offices and its telephone number are One State Street Plaza, 17th Floor, New York, New York, 10004 and (212) 668-0340. Incorporation of Certain Documents by Reference The following documents filed by the Company with the Commission (File No. 1-10777) are incorpo- rated by reference in this Official Statement; • The Company's annual Report on Form 10-K for the fiscal year ended December 31, 1997, and filed on April 1, 1998; 8 * The Company's Current Report on Form 8-K dated January 31, 1998, and filed on February 28, 1998; * The Company's Current Report on Form-8-K dated March 13, 1998, and filed March 14, 1998; * The Company's Current Report on Form 8-K/A, First Amendment to Current Report on Form 8- dated March 13, 1998, and filed on March 15, 1998; and * The Company's Quarterly Report on Form 10-0 for the quarterly,period ended March 31, 1998, and filed on May 15, 1998. All documents subsequently (ilea by the Company pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in the same manner as described above in "Available Information". SECURITY AND SOURCE OF PAYMENT The payment of principal and interest on the Bonds will be secured under the Trust Agreement by the Revenues. The Revenues consist principally of payments to be made by the District to the Authority un- der the 1999 Lease. The obligation to make such payments is subordinate to the District's obligation to make payments on its promissory notes issued in 1990, 1995 and 1996, to the extent such notes will re- main outstanding after issuance of the Bonds, and such obligation is on a parity with the District's other outstanding lease obligations,payable from any source of legally available funds. The 1999 Lease The obligation of the District to make the rental payments pursuant to the 1999 Lease does not con- stitute an obligation of the District for which the District is obligated to levy or pledge any form of taxa- tion or for which the District has levied or pledged any form of taxation, nor does the obligation of the district to make the Rental Payments constitute an indebtedness of the District, the State, or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction. The obligation of the District to appropriate and pay rental payments under the 1999 Lease will be subordinate to the obligations of the District to apply tax revenues to make payments on senior hen obli- gations. Under the 1999 Lease, the District covenants to take action as may be necessary to include all rental payments due under the 1999 Lease in its annual budgets and to make the necessary annual appropria- tions for all such Rental Payments. The 1999 Lease provides that the covenant of the District to budget and appropriate will be deemed to be and will be construed to be duties imposed by law and it will be the duty of each and every public official of the District to take such action and do such things as are re- quired by law in the performance of the official duty of such officials to enable the district to carry out and perform such covenants. During any period in which, by reason of eminent domain proceedings (as described in the 1999 Lease), there is substantial interference with the use and possession by the District of any portion of the Project, rental payments due under the 1999 Lease with respect to such portion of the Project will be abated proportionately by the fractional amount that the cost of the portion of the Project so condemned bears to the entire cost of the Project, as calculated by the District and set forth in writing to the Trustee; and the District waives the benefits of Civil Code Sections 1932(2) and 1933(4) and any and all other rights to terminate the 1999 Lease by virtue of any such interference and the 1999 Lease will continue in full force and effect. Such abatement will continue for the period commencing with the date of such condemnation and ending with the substantial replacement of the portions of the Project so condemned. The District will agree in the 1999 Lease that it will procure and maintain (or cause to be procured and maintained) throughout the term of the 1999 Lease (a) workers' compensation insurance covering all employees working in or on the Project, and (b) public entity liability insurance, with minimum liability limits of $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of $200,000 (subject to a deductible clause of not to exceed $100,000) for damage to property resulting from each accident or event; provided, that such public liability and property damage insurance may be in the form of a single 9 limit policy in the amount of $3,00,000 covering all such risks and may LI- maintained as part of or in conjunction with any other liability insurance carried by the District. As an alternative to providing the insurance described in sentences (a) and (b) above, the District may provide a self-insurance method or plan of protection in compliance with -ertain pre-Asions of the 1999 Lease. The District also will agree in the 1999 Lease to file a certificate with the Trustee each year certifying that the insurance required under the 1999 Leas, is in full force and effect for the ensuing year and that the Trustee is named as a loss payee on each policy of insurance which the 1999 Lease required to be so endorsed. The 1999 Lease may be amended from time to time (with the prior written consent of the Bond In- surer) to permit the substitution of one parcel or parcels of real property for parcels of real property which are the subject of the 1999 Lease, as long as the substituted parcels or parcels are used for open space for the District; provided, that before any such substitution is appro-ied by the District it will have first prepared and filed with the Authority and the Trustee an M.A.I. appraisal by an independent real es- tate appraiser concluding that the parcel or parcels of real property to be so substituted have a fair mar- ket value at least equal to that of the parcel or parcels of rcal property to be released from the terms of the 1999 Lease by virtue of such substitution except that if the parcel or parcels of real property that are proposed to be substituted have been purchased by the District within 12 months of the amendment of the 1999 Lease, the District may use the purchase price thereof in determining the fair market value thereof; and, provided further, that so long as any parcel or parcels of real property that are proposed to be so substituted have no prior liens against them that would impair their use for the purpose intended by the District and have a useful life at least as long as the parcel or parcels being substituted out of the 1999 Lease. Remedies Any remedies available to the Authority under the 1999 Lease and Trust Agreement or by any law now or hereafter enacted are cumulative, and the exercise of one right or remedy will not impair the right of the Authority to any or all remedies allowable under any statute or rule of law. However, the enforce- ment of any remedies provided in the 1999 Lease and Trust Agreement could prove expensive and time consuming. If the District fails to make Rental Payments when due, the Trustee may sue for payment on an an- nual basis; but any suit for money damages would be subject to limitations on legal remedies against public entities in California, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest. In the event of a default, the Trustee will not have the right to re- enter and re-let the Project. In addition to the limitations on remedies contained in the 1999 Lease and the Trust Agreement, the rights and remedies provided in the Trust Agreement and the 1999 Lease may be limited by and are sub- ject to provisions of federal bankruptcy laws, as now or hereafter enacted and to other laws or equitable principles that may affect creditors' rights. Surety Reserve A Surety Reserve will be established for the security of the registered owners of the Bonds in the stated amount of $[AMOUNT], which is the initial Reserve Requirement, as defined in the Trust Agree- ment. The initial Reserve Requirement will be satisfied by a deposit of a Surety Bond to be issued by Ambac in the stated amount of $[AMOUNT]. For information concerning Ambac, see "MUNICIPAL BOND INSURANCE FOR THE BONDS". An amount equal to the Reserve Requirement will be retained in the Reserve Account and used only for the payment of principal of and interest on the Bonds to the extent amounts in the Revenue Account (as defined below) are insufficient therefor or for the retirement of all outstand- ing Bonds. Whenever any withdrawals from the Reserve Account reduce the balance therein below the Reserve Requirement, the Reserve Account will be replenished to the Reserve Requirement on September 1 of each year from moneys remaining in the Revenue Fund, as provided in the Trust Agreement. 10 �I Parity Obligations/Senior Lien Obligations In 1990, the District sold its 1990 Notes in the aggregate principal amount of$15,C 90,000 to:efund a portion of 1987 promissory notes, prepay certain land contract debt and finance acquisition of open space lands. The outstanding 1990 Notes mature annually through September 1, 201u, and bear interest at rates up to 7.5% per annum. As of September 30, 1998, the outstanding principal of the 1990 Notes was $12,615,000. Following the refunding of.a portion of the 1990 Notes through the issuance of the Bonds, the outstanding principal of the 1990 Notes to remain outstanding will be $8,705,000. 2'he Dis- trict's obligation to make payments on the 1990 Notes is senior to its obligations under the 1999 Lease. In 1992, the District sold its 1992 Notes in the aggregate principal amount of $8,000,000 to finance acquisition of open space lands. The 1992 Notes mature annually through July 1, 201:, and bear interest at rates up to 6.35%. As of September 30, 1998, the outstanding principal of the 1992 Notes was $7,345,000. All of the 1992 Notes are to be refunded through the issuance of the Bond.s. In 1993, the District sold its 1995 Notes in the aggregate principal amount of$11,500,000 to refund a portion of the 1987 Notes and finance the acquisition of open space lands. The 1995 Notes mature an- nually through September 1, 2014, and bear interest at rates up to 7.10%. As of September 30, 1998, the outstanding principal of the 1995 Notes was $11,400,000. The District's obligation to make payments on the 1995 Notes is senior to its obligations under the 1999 Lease. In 1996, the District sold its 1996 Notes in the aggregate principal amount of $18,166,481 to refund a portion of the 1987 Notes and finance the acquisition of open space lands. The 1996 Notes mature an- nually through September 1, 2014, and bear interest at rates up to 6.30%. As of September 30, 1998, the outstanding principal of the 1996 Notes was $17,796,481. The District's obligation to make payments on the 1996 Notes is senior to its obligations under the 1999 Lease. As of September 30, 1998, the District had $711,340 aggregate principal amount of notes represent- ing obligations of the District under contracts for the purchase of land by the District for open space (the "Land Contract Notes"). of which $11,286 is payable from Limited Tax Revenues on a parity with the 1996 Notes, the 1995 Notes and the 1990 Notes. The District may in the future issue additional notes on a parity with such Notes subject to covenants described herein for issuing such parity debt. See "DIsTRIcr FINANCIAL INFORMATION". THE TRUST AGREEMENT The Following is a brief outline of certain provisions of the Trust Agreement and is not to be considered a full statement pertaining thereto. Reference is made to the Trust Agreement for the complete text thereof. Copies of the Trust Agreement are available from the Authority. � The Authority will use the proceeds of the Bonds to acquire the 1999 Lease ), pa j costs of issuance and provide for a reserve fund surety bond. All Revenues received by the Authority are hereby assigned by the Authority to the Trustee for the benefit of the Owners of the Bonds, and are hereby irrevocably pledged to the payment of the interest on and the principal of and the redemption premiums, if any, on the Bonds as provided herein, and the Revenues will not be used for any other purpose while any of the Bonds remain Outstanding. This pledge will constitute a first pledge of and charge and lien upon the Revenues and all money on deposit in the accounts and funds established hereunder for the payment of the interest on and principal of and re- demption premiums,if any, on the Bonds in accordance with the terms hereof and thereof. In order to carry out and effectual' the pledge, charge and lien contained in the Trust Agreement, the Authority agrees and covenants that a l revenues when and as received by the Authority will be trans- ferred by the Authority to the Trustee deposit in the "Nhdpeninsula Regional Open Space District Fi- nancing Authority 1999 Revenue Bonds Revenue Fund," which fund the Authority agrees and covenants to maintain with the Trustee so long as any Bonds are Outstanding. All money in the Revenue Fund will be accounted for and held in trust by the Trustee, and the Authority will have no beneficial right or inter- est in any money in the Revenue Fund. All Revenues will be accounted for separately and apart from all other accounts, funds,money or other resources of the Authority. 11 All money in the Revenue Fund will be set aside by the Trustee in the following respective special ac- counts within the Revenue Fund in the following order of priority: • Interest Account, • Redemption Account, and • R Ac count, ccount. All money in each of such accounts will be held in trust by the Trustee and will be applied, used and withdrawn only for the purposes set forth in the Trust Agreement. Interest Account On March 1 and September 1 of each year, beginning on September 1, 1999, the Trustee will set aside from the Revenue Fund and deposit in the Interest Account that amount of money which is equal to the amount of interest becoming due and payable on all Bonds on such March 1 or September 1, as the case may be; but no such deposit need be made in the Interest Account if the amount contained therein is at least equal to the aggregate amount of interest becoming due and payable on all Bonds on such Interest Payment Date. All money in the Interest Account will be used and withdrawn by the Trustee solely for the purpose of paying the interest on the Bonds as it will become due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity). Redemption Account On September 1 of each year, beginning on September 1, 1999, the Trustee will set aside from the Revenue Fund and deposit in the Principal Subaccount in the Redemption Account an amount of money equal to the principal amount of all Outstanding Current Interest Serial Bonds and Capital Appreciation Bonds maturing on such September 1 and will set aside from the Revenue Fund and deposit in the Sink- ing Fund Subaccount in the Redemption Account an amount of money equal to the Sinking Fund Payment required to be made on such September 1;but no such deposit need be made in the Redemption Account if the amount contained in the Principal Subaccount therein is at least equal to the aggregate amount of the principal of all Outstanding Current Interest Serial Bonds and Capital Appreciation Bonds maturing by their terms on such September 1 and the amount contained in the Sinking Fund Subaccount therein is at least equal to the amount of the Sinking Fund Payment required to be made on such September 1 for all Outstanding Current Interest Term Bonds. All money in the Principal Subaccount in the Redemption Account will be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Current Interest Serial Bonds and or Ac- creted Value of the Capital Appreciation Bonds as they become due and payable, whether at maturity or on prior redemption, and all money in the Sinking Fund Subaccount in the Redemption Account will be used and withdrawn by the Trustee solely for the purpose of purchasing or redeeming or paying the Cur- rent Interest Term Bonds and with respect to the Sinking Fund Subaccount, on each Sinking Fund Pay- ment date the Trustee will apply the Sinking Fund Payment date the Trustee will apply the Sinking Fund Payment required to be made on that date to the redemption (or payment at maturity, as the case may be) of the Current Interest Term Bonds upon notice; provided, that at any time prior to giving any such notice of such redemption the Trustee will, upon receipt of a Written Request of the Authority, apply any money in the Sinking Fund Subaccount to the purchase for cancellation of Current Interest Term Bonds at public or private sale as and when and at such prices (including brokerage and other charges, but ex- cluding accrued interest, which is payable from the Interest Account) as directed in such Written Request of the Authority, except that the purchase price (excluding accrued interest) will not exceed the redemp- tion price that would be payable for such Current Interest Term Bonds upon redemption by application of such Sinking Fund Payment, and if during the twelve-month period immediately preceding any Sinking Fund Payment date the Trustee has purchased Current Interest Term Bonds with money in the Sinking Fund Subaccount, such Current Interest Term Bonds so purchased will be applied to the extent of the full principal amount thereof to reduce the Sinking Fund Payment due on such Sinking Fund Payment date. 12 Reserve Account On September 1 of each year, beginning on September 1, 1999, the Trustee will set aside from the Revenue Fund and deposit in the Reserve Account all money remaining in the Revenue Fund. All money in the Reserve Account will be used and withdrawn by the Trustee solely for the purpose of paying the interest on or the principal of the bonds (in such order) in the event that no other money is available for this purpose in the Interest Account or in the Redemption Account or through the Reserve Fund Surety Bond; but all money on deposit in the Reserve Account in excess of the Reserve Requirement will, on September 1 of each year (beginning in September 1999), be withdrawn by the Trustee from the Reserve Account and deposited in the Revenue Fund; and for this purpose all investments in the Reserve Account will be valued on September 1 of each year (beginning in September 1999) at the face value thereof if such investments mature within 12 months from the date of valuation, or if such investments mature more than 12 months after the date of valuation, at the price at which such investments are re- deemable by the holder, at his option, if so redeemable, or if not so redeemable, at the market value of such investments. Rebate Fund The Authority agrees to establish and maintain with the Trustee so long as any Bonds are Outstand- ing a fund separate from any other fund established under the Trust Agreement designated the "Nfid- peninsula Regional Open Space District Financing Authority 1996 Revenue Bonds Rebate Fund." The Trustee will deposit in the Rebate Fund from funds provided by the Authority the Rebate Requirement in accordance with the Tax Certificate, but only as directed by the Authority in an appropriate Written Re- quest of the Authority filed with the Trustee. The Rebate Fund is not security for the Bonds. Investment of Moneys in Funds and Accounts Subject to the provisions of the Internal Revenue Code of 1986 (the "Code") and State law, all moneys in the funds and accounts established under the Trust Agreement are to be deposited or invested as de- termined by the District Controller so as to obtain the highest yield that the District 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 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 Trust Agreement. Proceeds of the investment of amounts in the funds and accounts established by the Trust Agreement are deposited as and when received in the fund or account in which such investments are held. Covenants of the Authority Punctual Payment and Performance. The Authority will punctually pay the interest on and the princi- pal of and the redemption premium, if any, to become due on every Bond from the Revenues in strict conformitywith the terms of the Trust Agreement and of the Bonds and will faithfully observe and per- form 87' Y p form all the 1999 Lease, conditions, covenants and terms to be observed or performed. Against Encumbrances. The Authority will not make any pledge of or place any charge or lien upon the Revenues except as provided in the Trust Agreement, and will not is n p p gr o sue any bonds, notes or obliga- tions payable from the Revenues or secured by a pledge of or charge or lien upon the Revenues except the Bonds. The District may,however,issue additional parity notes and enter into leases. Tax Covenants. The Authority 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 Bonds pursuant to Section 103 of the Code. Accounting Records and Reports. The Authority will keep or cause to be kept proper books of record and accounts in which complete and correct entries will be made of all transactions relating to the re- ceipts, disbursements, allocation and application of the Revenues, and such books will be available for inspection by the Trustee at reasonable hours and under reasonable conditions. Not more than 210 days after the close of each Fiscal Year, the Authority will furnish or cause to be furnished to the Trustee audited financial statements for such Fiscal Year prepared by an Independent Certified Public Account- ant. 13 Prosecution and Defense of Suits. The Authority will defend against every suit, action or proceeding at any time brought against the Trustee upon any claim to the extent arising out of the receipt, ap,)hcation or disbursement of any of the Revenues or to the extent involving the failure of the Authority to fulfill its obligations; provided, that the Trustee or any affected Owner at its election may appear in and defend any suit, action or proceeding. The Authority will indemnify and hold harmless the Trustee against any and all liability claimed or asserted by any person to the extent arising out of any such failure by the Authority, and will indemnify and hold harmless the Trustee against any attorney's fees or other ex- penses which it may incur in connection with any litigation to which it may become a party by reason of its actions under the Trust Agreement, except for any loss, costs, damage or expense resulting from the active or passive negligence, willful misconduct or breach of duty by the Trustee. Enforcement and Amendment of Agreements. The Authority will enforce all of its rights with respect to the 1999 Lease to the fullest extent necessary to preserve the rights and protect the security of the Owners under the Trust Agreement. The Authority and the Trustee may, without the consent of or notice to the Owners, consent to any amendment, change or modification of either Agreement that may be required (a) to conform to the pro- visions of the Trust Agreement (including any modifications or changes contained in any Supplemental Trust Agreement), (b) for the purpose of curing any ambiguity or inconsistency or formal defect or omis- sion, (c) to add additional rights acquired in accordance with the provisions of the Agreement, (d) in con- nection with any other change therein which is not to the material prejudice of the Trustee or the Owners pursuant to an Opinion of Bond Counsel, or (e) in an Opinion of Counsel, to preserve or assure the ex- emption of interest on the Agreement or the Bonds from federal income taxes under the Code or 'the ex- emption from State of California personal income tax. Except for amendments, changes or modifications provided for in the preceding paragraph, neither the Authority nor the Trustee will consent to any amendment, change or modification of either Agree- ment without the mailing of notice and the written approval or consent of the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding given and procured. If at any time the Authority will request the consent of the Trustee to any such proposed amendment, change or modification of either Agreement, the Trustee will, upon being satisfactorily indemnified with respect to expenses, cause notice of such proposed amendment, change or modification to be mailed. Such no- tice will briefly set forth the nature of such proposed amendment, change or modification and will state that copies of the instrument embodying the same are on file at the Principal Corporate Trust Office of the trustee for inspection by all Owners. Maintenance of Existence. The Authority will maintain its existence, powers and authority as a joint exercise of powers entity under the laws of the State of California. Further Assurances. Whenever and so often as reasonably requested to do so by the Trustee or any Owner, the Authority will promptly execute and deliver or cause to be executed and delivered all such other and further assurances, documents or instruments, and promptly do or cause to be done all such other and further things as may be necessary or reasonably required in order to further and more fully vest in the Owners all rights, interest, powers, benefits, privileges and advantages conferred or intended to be conferred upon them. District Covenants and Additional Debt In connection with the issuance of any additional indebtedness or the entering into of any capital lease obligations (the "Additional Obligations"): The District must first file with the Trustee a certificate executed by the District Controller showing: (1) the total "Limited Taxes" (excluding any subventions received by the District from the State of California, excluding any interest earnings and assuming a delinquency rate equal to the average delinquency rate for the last five years, or a zero delinquency rate if the allocable share of the District's taxes are collected on the teeter Plan) in its most recent audited fiscal year, as shown by the most recent audited financial statement of the District; (2) the debt service pay- able by the District during its next succeeding fiscal year on all indebtedness or capital lease obli- gations of the District that would be payable from the Limited Taxes in the next succeeding fiscal 14 year; and (3) that the total described in item (1) above is at least 125% of the total described in subparagraph(2) above, and • The test must be applied with reference to the maximum annual debt service on all the outstand- ing parity obligations and such proposed Additional Obligations, with variable rate obligations as- sumed to bear an interest rate equal to the Bond Buyer 20-year index (or some other index ap- proved by the Bond Insurer or its successor. "Limited Taxes means the limited ad valorem 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 any Additional Obligations. The District agrees and covenants that it will diligently and in good faith contest any attempt to re- duce its limited taxing authority, and that it will promptly notify the Bond Insurer in writing if any meas- ure or petition is introduced to change such taxing authority. THE AUTHORITY The Authority is a joint powers authority, organized pursuant to a Joint Exercise of Powers Agree- ment dated as of "May 1 1996 the "Joint Powers Ag reement")Bement b and betty Y J Ben the District and the County of Santa Clara. The Joint Powers Agreement was entered into pursuant to the provisions of the California Government Code, The Authority is a separate entity constituting a public instrumentality of the State of California and was formed for the public purpose of assisting the District in financing capital projects. Four members of the Board of Directors of the District and one member of the Board of Super- visors of the County of Santa Clara constitute the Directors of the Authority. THE DISTRICT Location and Size On November 7, 1972, the citizens of northwestern Santa Clara County voted to establish the Mid- peninsula Regional Park District under provisions of the Public Resources Code of the State of California. On July 7, 1976, after another public vote, the District expanded its boundaries by annexing the south- eastern portion of San Mateo County. The District was subsequently renamed the "Midpeninsula Re- gional 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%respec- tively 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 attribut- able 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 650,000 persons. Management The seven-member elected District Board of Directors originates, guides, and enforces District poli- cies. Members of the Board of Directors are elected for staggered four-year terms from seven wards within the District. 15 The foll,)wing are the current Board members: PETS SIEMENS (Ward 1, Los Gatos area); MARY DAvEy (.lard' 2, Lus Altos area); JED CYR (Ward 3, Sunnyvale area); DEANE LITTLE (Ward 4, Mountain View area); NONETIT HANKO (Ward 5, Palo Alto area); BETsy CRowDER (Ward 6, Woodside area); and KEN Nrrz (Ward 7, Redwood City area). . L. CRAIG BRMON is the District's General Manager and is responsible for the administration of the Dis- t.,ict's affairs. Mr. Britton joined the District in 1977 as Land Acquisition Manager and in 1979 also as- sumed 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 acqui- sition and p.operty management. Mr. Britton attended Claremont Men's College and San Francisco State College where he received a B.A. in Business. NUCHAEL L. FOSTER has been Controller of the District since 1978. In addition to his responsibility with Vie District, Mr. Foster is also Vice President -Finance and Chief Financial Officer of SDL, Inc., a manufac- turer of optoelectronic products. Mr. Foster received both an undergraduate degree in economics and a Master of Business Administration from Stanford University. The District currently has 55 full-time employees, 2 part-time employees and 5 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 District has adopted the following mission statement: "To ac- quire and preserve a regional greenbelt of open space land in perpetuity; protect and restore the natural environment; and provide opportunities for ecologically sensitive public enjoyment and education." - The Master Plan of the District (the "Master Plan"), which was adopted initially by the District Board of Directors in fiscal year 1977/78, 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. 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 af- fecting 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 possi- ble 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. 1 Approximately [&)&�31E] acres of open space land had been preserved by the District as 0f 1998. The use of proceeds of a portion of the Bonds will add additional land to the District's current open space holdings. 16 I ESTIMATED REVENUES AND OUTSTANDING OBLIGATIONS General The Bonds are limited obligations of the Authority payable from the Revenues. The Revenues consist principally of payments to be made by the District to the Authority with respect to the 1999 Lease. The District's sources of revenues for making payments under the 1999 Lease 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 X 11A 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 thereaf- ter, 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 govern- ments, 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 Bonds. Owners of the Bonds 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 Bonds and must look solely to the 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 a county becomes a lien on that property sufficient, in the opinion of the county assessor, to secure payment of the taxes. Every tax which becomes a lien on secured property has priority over all other liens, arising pursuant to State law, on the secured property, regardless of the time of the creation of such other liens. A tax levied on unsecured property does not become alien against the taxed unsecured property, but may become a lien on certain other property owned by the taxpayer. Secured and unsecured property are entered separately on the assessment roll maintained by the county assessor. The method of collecting delinquent taxes is substantially different for the two classifi- catio ns of The exclusive property. e m cans of enforcing the payment of delinquent taxes with respect to property on the secured roll is the sale of the property securing the taxes to the State for the amount of taxes that is delinquent. The taxing authority has four ways of collecting unsecured personal property taxes in the absence of timely payments by the taxpayer: (i) a civil action against the taxpayer; (ii) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (iii) filing a certificate of delinquency for record in the county recorder's office, in order to obtain alien on certain property of the taxpayer; and (iv) seizure and sale of personal property, improvements or possessory interests belonging or taxable to the assessee. A ten percent 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 is sold to the __ State on o. about June 30 of each fiscal year. Such property may thereafter be redeemed by payment of the delinquenj taxes and,a delinquency penalty, plus a redemption penalty of IY2 percent per month to the time of redemption. J taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the county tax collector. A 10 percent penalty also applies to de- linquent taxes on property on the luisecured roll, and further, an additional penalty of 1Y2 percent per month accrues with resp.-ct to such taxes beginning the first day of the third month following the delin- quency date. Except for property a-sensed by the State, the valuation of property is determined as of March 1 each year and equal installments of taxes levied upon secured property become delinquent on the following December 10 and April 10. Taxes on unsecured property are due March I and become delinquent August 31 and such taxes are levied at the prior year's secured tax rate. The valuation of State-assessed property is determined on January 1 of each year. SB 327 (Chapter 499, Statutes of 1995) changes the property tax lien date fro-n March 1 to January 1 effective January 1, 1997. 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 ex- cept for public utility property which is assessed by the State Board of Equalization. TABLE 1: DISTRICT ASSESSED VALUATION(in millions of dollars) STATE SANTA CLARA SAN MATEO DISTRICTWIDE LESS REDEVELOP- DISTRICTWIDE FISCAL YEAR COUNTY ITORTION COUNTY PORTION GROSS VALUATION MENTINCREMENT NET 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 1995/96 42,872.9 18,8923 61,765.2 2,360.7 59,404.5 Source: California Municipal Statistics. Secured and Unsecured Tax Levies Table 2 on the next page shows the total combined secured and unsecured tax receipts allocated by the Counties to the District and received by the District during the last ten fiscal years. The pre-Article XHIA 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 "CON- STITUTIONAL AND STATUTORY TAx LIMITATIONS-Constitutional Umitations-Article XMA". 18 TABLE 2: DISTRI%,T CURRENT oECURED AND UNSECURED TAX RECEIPTS -A 1 I STATE1 TAX FISCAL40 i i i i •i WUNTY { MATE/ COUNTY DISTRICTWIDE SECURED 1988/89(2) $4,007,12A $ 1,792,226 $ 5,799,346 1989/90 4,476,83^. 2,031,886 6,508,718 1990/91 4,580,579 2,342,564 6,923,143 1991/91 5,311,830 2,426,882 7,738,721 1992/93 5,448,227 2,449,937 7,898,164 1993/94 5,431,540 2,633,077 8,064,617 1994/95 5,947,13E 2,829,980 8,777,115 1995/96 5,906,079 2,909,826 8,815,905 1996/97 6,076,52o 3,049,870 9,126,395 1997/98 6,577,561 3,234,981 9,812,542 STATE 1 TAX RECEIPTS TOTAL1 FISCAL YEAR + + CLARA COUNTY. + { i COUNTY DISTRICTWIDE UNSECURED AND UNSECURED 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 1994/95 704,557 322,486 1,027,043 9,804,158 1995/96 716,892 351,800 1,068,692 9,884,597 1996/97 800,423 356,314 1,156,737 10,283,132 1997/98 896,648 354,600 1,251,248 11,063,790 (1) The District also receives a share of delinquent taxes, redemption fees, supplemental taxes and State subvention payments received by each County. This revenue totaled$445,950 in 1996/97 and$605,219 in 1997/98. (2) Nine-month fiscal year(District changed fiscal year end from June 30 to March 31). Source: District Controller. The Boards of Supervisors of the Counties have respectively approved the implementation of the Al- ternative 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 Boards of Supervisors of the Counties, respectively, order its discontinuance or unless, prior to the commencement of any Fiscal Year of the Counties (which commences on July 1), such Board of Supervisors receive a petition for its discontinuance joined in by resolutions adopted by at least two-thirds of the participating revenue districts in the respective County, in which event the respective 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 Dis- trict) for which such County acts as the tax-levying or tax-collecting agency as collected (see "Ad Valorem Property Taxation"). TABLE 3: SECURED TAX DELINQUENCY RATES(at June 30) [to come in draft#41 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 19 Counties. In accordance with Chapter 6 of the State Revenue and Taxation Code, the tax increment de- rived 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 an(A for certain incremental tax revenues allocated directly to redevelopment agencies within the District. Thus, the increase in the District's allocation of taxes var- ies 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 dis- trict, the District receives 100% of its allocation of collected 'taxes pursuant to Section 98.6 of the Califor- nia Revenue and Taxation Code, and is not subject to a discretionary reduction in such allocation by ac- tion of either County's board of Supervisors. Projected Revenues The District has projected revenues for the first ten years in which the Bonds will be outstanding and these projections are set forth in Table 4 below. The District's projection of revenues is based on the following parameters: * Annual increases of 3 percent per year 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 av- erage rate of approximately 3.5%annually over the last five years. + District cash balances will be invested to earn 5.5 percent per annum. * "Other Revenue" is primarily grants, rental income, and in 1999/2000, proceeds from the sale of surplus property. Although the District believes such assumptions to be reasonable, there is no assurance that such as- sumptions and the projections based thereon will in fact be realized. Table 4 below shows the estimated projected revenues for the District for fiscal years 1998/99.through 2007/08. -TABLE 4: ESTIMATED DISTRICT REVENUES, 1998/99 THROUGH 2008/00(in thousands of dollars) FISCALYEAR ENDING IN 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Tax Revenues(8) 12,350 13,091 13,615 14,519 14,726 15,315 15,927 16,564 17,227 17,916 Interest Earnings(b) 900 650 350 350 350 350 350 350 350 350 Other Revenue 1 A82 882 940 946 953 959 966 973 980 987 TOTAL 14,732 14,623 14,905 15,455 16,029 16,624 17,243 17,887 18,557 19,253 (a) includes District's share of funds from the 1%ad valorem tax rate and subventions received from the State of California in lieu of property taxes; projected to assume a 6%annual increase in 1999/00 and increases of 4%per year thereafter. As- sessed value of taxable property within the District increased at an average rate of approximately 3.6%annually during the past five years and has increased approximately 11%during 1998/99. (b) estimated at 5%, based on historical returns only; no assurance can be made as to future returns. (c) primarily grant receipts and rental income. Source: District Controller. Estimated Debt Service Coverage Table 5 estimates debt service coverage on the District's various debt and lease obligations. See "DISTRICT FINANCIAL INFORMATION - Other Outstanding Debt" for a description of the District's other out- standing obligations payable from Revenues and other legally available funds of the District. TABLE 5: ESTIMATED DEBT SERVICE COVERAGE($000s exceet covera e� FISCAL YEAR ENDING IN 1999 2000 2001 2002 2003 2004 2005 TOTAL REVENUES AVAILABLE FOR DEBT SERVICE 15,484 14,913 15,022 15,574 16,148 16,746 17,367 PRO FORMA DEBT SERVICE 6,112 5,959 7,380 7,864 8,394 8,342 8,387 TOTAL COVERAGE RATIO 2.53 2.50 2.04 1.98 1.92 2.01 2.07 Source: District Controller. 20 Direct and Overlapping Bonded Indbbtudness The following table sets forth the overlapping and direc. bonded indebtedness of the District as of July 1, 1998. [TO APPEAR IN DRAFT#41 Source: California Municipal Statistics. DISTRICT FINANCIAL INFORMATION Method of Accounting The official books of record kept by the District utilize the principles of fund accounting as pre- scribed 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 1 through March 31. Prior to fiscal year 1988/89, the District's fiscal year was July 1 to June 30. The Dis- trict's certified public accountants are currently Grant Thornton, San Jose, California. District Financial Statements The District's audited statement of General Fund Revenues, Expenditures and Changes in Fund Bal- ance for the six years ended March 31, 1998,is shown in Table 6. General property taxes are the District's largest source of revenues. Over the last six fiscal years, property taxes have generated between 70% and 89% of the District's total revenues. See "Es DATED TAx REVENUES AND NOTE RETIREMENT" and "CONsnTu ZONAL 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 com- ponent of the District's expenditures. Table 7 sets forth 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, 1997 and 1998. 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 Finan- cial Statements for the Year Ended March 31, 1998 - Notes to Financial Statements" for the breakdown of changes in the General Long-Term Debt Account and the amount of future debt service payments. 21 TABLE 6: DISTRICT GENERAL FUND REVENUES,WENDITURES AND C'iANGES IN FUC4 BALANCE;'n thousands of dollars) REVENUES General Property Tax 9,626 10,116 10,199 10,173 10,025 11,313 State Grants 25 224 1,352 332 195 585 Other Taxes 171 177 250 119 183 224 Interest Income 474 472 618 694 711 1,353 Other 561 479 651 1,062 1,247 982 TOTAL REVENUES 10,857 11,468 13,070 12,380 12,362 14,459 EXPENDITURES Salaries and Benefits 2,635 2,699 2,868 '),923 3,038 3,133 Services and Other 2,091 1,947 1,436 1,664 2141 2 306 SUBTOTAL 4,726 4,646 4,304 4,586 5,179 5,439 DEBT SERVICE Principal Repayment 2,206 2,346 874 1,483 640 1,446 Interest Paid 3,666 2,959 3,195 3,951 4,721 4,534 TOTAL DEBT SERVICE 5,871 5,305 4,069 5,434 5,361 5,980 EXPENDITURES ANDDEBTSERVICE 10,597 9,951 8,373 10,020 10,540 11,419 NET OPERATING CASH FLOW 260 1,517 4,697 2,359 1,822 3,040 PROPERTY ACQUISITION 11,253 5,297 8,454 14,409 930 1,W8 REVENUES EXPENDITURES (10,993) (3,780) (3,758) (12,049) 892 1,052 PROCEEDS OF NOTES PAYABLE 7,817 5,508 5,226 7,259 9,962 0 NET EXCESS(DEFICIENCY) (3,176) 1,728 1,469 (4,791) 10,854 1,052 STARTING FUND BALANCE 14,589 11,413 13,141 14,609 9,818 20,673 ENDING FUND BALANCE 11,413 13,141 14,609 9,818 20,673 21,725 Source: Audited Financial Statements. TABLE 7:DISTRICT GENERAL BALANCE SHEET(In thousands of dollars) AS 0 F MARAS OF MARCH GENERAL FIXED LONG-TERM GENERAL FIXED LONG-TERM FUND ASSETS DEBTASSETS ASSETS/OTHER DEBT BALANCES Cash and Cash Investments $ 13,586 $ 13,882 Restricted Cash 5,374 5,788 Taxes and Other Receivables 3,405 1,703 Prepaid Expenses and Other Assets 23 21 Land(at cost) $162,417 $160,429 Equipment 1,683 1,543 Structures and Improvements 8,104 7,207 Retirement of Long-Terre Debt $79,758 $81,204 TOTAL ASSETS 2$ 2,368 172,204 $79,758 $21,395 169,179 $81,204 LIABILITIES AND FUND EQUITY: LIABILITIES Accounts Payable $141 $191 Accrued Liabilities/Deposits 272 278 Deferred Revenue 223 254 Notes Payable $797 $81,204 TOTAL LIABILITIES 636 79 758 722 $0 $81,204 FUND EQUITY: Investment in General Fixed Assets $172,204 $169,179 Fund Balance 21IM 20,672 TOTAL FUND EQUITY $21,725 $172,204 $0 $20,672 $169,179 $0 TOTAL LIABILITIES AND EQUITY $22,361 $172,204 $79,758 $21,395 $169,179 81 204 Source: Audited Financial Statements. 22 � Debt Capacity/Additional Debt Pursuant to the California. lic Resources Code, the District may acquire lands o: facilities by means of a plan to borrow money or by purchase on contract. The amount of such indebtet�ness 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 in- curred and may bear interest at rates not exceeding 12% per annum. Each such indebtedness will be authorized by a trust agreement adopted by a resolution adopted by the affirmative votes of at least two- thirds of the members of the Board of Directors of the District. Additional debt may also be subject to pro- visions of parity debt covenants of the District arising from other outstanding obligations. 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 Revenues on the 1999 Lease to pay debt service on the Bonds. The general ad valorem property tax consists of secured and unsecured property taxes. See "ESUMATEDTAX REVENUSAND NOTE RETtME)► Ew" for a description of the District's tax revenues. Grams. In 1998/99, the District projects revenues from grants of $800,000,which amount represents grants for which the District has received approval,pending the completion of land acquisitions or site de- velopment for certain projects. In general, the District budgets grant revenues only 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 antici- pated to be an increasing percentage of annual tax revenue. In 1997/98, land acquisition,including debt service on notes issued to buy land in prior years, totaled$7,967,500,accounting for approximately 59%of total District expenditures. Other Outstanding Debt Following the execution of the 1999 Lease,the District will have outstanding$8,705,000 of 1990 Notes, $0 of 1992 Notes, $11,400,000 of 1995 Notes and $17,796,481 of 1996 Notes. In addition,the District will have outstanding$16,45 5,000 aggregate principal amount of lease obligations represented by certificates of participation executed and delivered in 1993, $11,433,720 aggregate principal amount of lease obligations related to the Authority's 1996 revenue bonds and approximately$711,340 principal amount of Land Con- tract Notes as described below. The District has never defaulted in the payment of any of its debt. Table 8 below lists the District's total indebtedness outstanding as of September 30, 1998, after giving effect to the issuance of the Bonds. The outstanding balance of the Land Contract Notes as shown below is, in the case of the Sierra Azul Contract, an aggregate of the outstanding balances on more than one Land Contract Note. Over time, several parcels constituting orie opt ace area have been purchased at differ- ent times through contracts secured by Land Contract otes with diff aturities and interest rates. In each case, the land has been purchased pursuant t 13eCali€ornia Public Re urces Code which currently requires payment of debt over not more than 20 ye s. r,� TABLE 8:DISTRICT DEBT OUTSTANDING A SEPTEMBER 30,1998(in thousan of dollars) ORIGINALAMOUNT OUTSTANDING AMOUNT 1 1 DEBT SERVICE FINAL PAYMENT Foothills 192 136 18 December 2008 Skyline 500 500 33 March 2003 Sierra Azul 150 75 13 August 2008 1990 Notes 15,000 8,705 1,108 September 2010 1993 Certificates 17,315 16,455 1,267 September 2020 1995 Notes 11,500 11,400 890 March 2015 1996 Revenue Bonds 29,910 29,230 1,911 September 2026 1999 Revenue Bonds 29,427 29.427(') 722 September 2031 TOTAL 103,994 95,929 5,962 (a) as of the date of issuance of the Bonds. Source: District Controller. 23 Salaries and Benefits Salaries and benefits for the District's 55 full-time, 2 part-time, and 5 seasonal employees represent the third major component of total District expenditures. In 1997/98, $3,133,448 was expe;_ded for salaries and benefits. District employees are covered under the Public Employees Retirement System ad- ministered by the State of California. Other uses of funds include patrol and site development, site maintenance, professional Services, utilities and communications. CONSTITUTIONAL AND STATUTORY TAX LIMITATIONS Constitutional Limitations-Article XIIIA Article XIIIA of the California Constitution limits the maximum ad valorem tax on real prcperty to one percent of "full cash value," to be collected by counties and apportioned according to law, but pro- vides 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 sub- stantial 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 dam- aged 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 Cali- fornia 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 that are called "appropria- tions 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", in- cluding 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. Proposition 62 A statutory initiative("Proposition 62")was adopted by the voters at the November 4, 1986, general election, which(i)requires that any new or higher taxes for general governmental purposes imposed by local governmental entities such as the District be approved by a two-thirds vote of the governmental entity's legislative body and by a majority vote of the voters of the governmental entity voting in an election on the tax, (u) requires that any special tax (defined as taxes levied for other than general governmental purposes) imposed by a local governmental entity be approved by a two-thirds vote of the voters of the governmental entity voting in an election on the tax,(iii)restricts the use of revenues from a special tax to the purposes or for the service for which the special tax was imposed, (iv) prohibits the imposition of ad valorem taxes on real property by local governmental entities except as permitted by Article XIIIA, (v) prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local governmental entities, and(vi)requires that any tax imposed by a 24 local governmental entity on or after August 1, 1985, be ratified by a majority vote of the voters voting in an election on the tax within two years of the adoption of the initiative or be terminated b,November 18, 1938. On September 28, 1995, the California Supreme Court, in the case of Santa Clara County Local Transportation Corporation v. Guardino, upheld the constitutionality of Proposition 62. In that case, the court held that a county-wide sales tax of one-half of one percent was a special tax that, under section 53722 of the Government Code,required a two-thirds voter approval. Because the tax received an affirmative vote of only 54.1 percent, this special tax was found to be invalid. On December 16, 1997, the California Court of Appeal, in the case of McBrearty v.District of Brawley,ruled that a local utility tax adopted in 1991 could be challenged in 1996 for lack of voter approval under Proposition 62, despite the passage of five years, due to th fa ct that Guardino was not decided until 1995. The court again found Proposition 62 to be constitutional and to apply to local taxes adopted even before Guardino was decided, concluding that the District of Brawley woWe.be left with the choice of holding an election on its utility tax or ceasing to collect the tax The District does not anticipate any material adverse effect in its financial condition as the result of the Guardino and Brawley cases. Proposition 218 On November 5, 1996, California voters approved Proposition 218, which added Articles XIIIC and XIOD to the California Constitution,imposing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments and property-related fees and charges. Proposition 218 states that all taxes imposed by local governments shall be deemed to be either general taxes or special taxes. Special purpose districts,including school districts,have no power to levy general taxes. No local government may impose,extend or increase any general tax unless and until such tax is submitted to the electorate and approved by a majority vote. No local government may impose, extend or increase any special tax unless and until such tax is submitted to the electorate and approved by a two-thirds vote. Proposition 218 also provides that no tax, assessment, fee or charge shall be assessed by any agency upon any parcel of property or upon any person as an incident of property ownership except: (i) the ad valorem property tax unposed pursuant to Article XIII and Article XIIIA of the California Constitution, (ii) any special tax receiving a two-thirds vote pursuant to the California Constitution, and (iii) assessments, fees and charges for property related services as provided in Proposition 218. Proposition 218 then goes on to add voter requirements for assessments and fees and charges imposed as an incident of property ownership, other than fees and charges for sewer,water, and refuse collection services. In addition, all assessments and fees and charges imposed as an incident of property ownership, including sewer, water and refuse collection services, are subjected to various additional procedures, such as hearings and stricter and more individualized benefit requirements and findings. The effect of such new provisions will presumably be to increase the difficulty a local agency will have in imposing,increasing or extending such assessments,fees and charges. Proposition 218 also extended the initiative power to reducing or repealing any local taxes,assessments,fees and charges. This extension of the initiative power is not limited to taxes imposed on or after November 6, 1996, the effective date of Proposition 218, and could result in retroactive repeal or reduction in any existing taxes, assessments, fees and charges, subject to overriding federal and State constitutional principles relating to the impairments of contracts. Proposition 218 is likely to undergo both judicial and legislative scrutiny before its full impact on the District and its obligations can be determined. Certain provisions of Proposition 218 may be examined by the courts for their constitutionality under both State and federal constitutional law. The District is not able to predict the outcome of any such examination. The foregoing discussion of Proposition 218 should not be considered an exhaustive or authoritative treatment of the issues. The District does not expect to be in a position to control the consideration or disposition of these issues and cannot predict the timing or outcome of any judicial or legislative activity in this regard. Interim rulings, final decisions,legislative proposals and legislative enactments may all affect the impact of Proposition 218 on the Bonds as well as the market for the Bonds. 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. 25 CERTAIN INVESTMENT CONSIDERATIONS THE BONDS ARE SUBJECT TO CERTAIN RISKS. The following information should be considered by prospective investors in evaluating the Bonds. However, the following does not purport to be an exhaus- tive listing of risks and other considerations which may be relevant to investing in the Bonds, and the or- der in which the following information is presented is not intended to reflect the relative importance of any such risks. Each investor and his or her advisors must consider these and other relevant risks in evaluating the suitability of the Bonds for investment. The Authority makes no representation as to such suitability. Bankruptcy and Limitations on Remedies In addition to the limitations on remedies contained in the Trust Agreement and the 1999 Lease, the rights and remedies provided in the Trust Agreement and the 1999 Lease may be limited by and are sub- ject to the provisions of federal bankruptcy laws and to other laws or equitable principles that may affect the enforcement of creditors' rights generally. Under Chapter 9 of the Bankruptcy Code (Title 11, United States Code), which governs the bankruptcy proceedings for public agencies such as the Authority and the District, there are no involuntary petitions in bankruptcy. If the Authority or the District were to file a petition under Chapter 9 of the Bankruptcy Code, the Owners and the Trustee could be prohibited from taking any steps to enforce their rights under the Trust Agreement or the 1999 Lease, and from taking any steps to collect amounts due from the Authority or the District thereunder. No Assurance of Secondary Market for the Bonds The Underwriter is under no obligation to make a secondary market for the Bonds, and no assurance can be given as to whether such a market will develop. If a secondary market exists, there can be no guarantee that the Bonds can be sold for any particular price. Prices upon resale of the Bonds could be substantially lower than the original purchase price. In addition, due to the small size of the issue, any market for the Bonds will necessarily be limited in size, with only intermittent trading activity expected. Accordingly, a purchaser of the Bonds should be prepared to have his or her funds committed for an in- definite period of time,perhaps until the Bonds mature or are redeemed. Year 2000 Concerns Overview. Many existing computer programs and chips use only two digits to identify a year in the date field, resulting in the inability of software applications and hardware components to properly proc- ess calendar dates during the year 2000 and beyond, as well as some dates in 1999. In addition, certain applications and components may not reflect the fact that the year 2000, unlike other "century years" such as the year 1900, is a leap year. Many believe that the consequences of equipment and systems failures may be more extensive and complex than anticipated, and the efficacy of remedial or preventa- tive measures may not meet expectations in some cases. Likewise, the implementation and performance of year 2000 compliance plans may be impaired by a shortage of qualified personnel. The District. The District is working to resolve the potential impact of the year 2000 on the ability of its computerized information systems to accurately process information that may be date-sensitive. The District uses financial systems incorporating computer hardware and software programs as well as equipment containing embedded technology, such as microprocessors, which could inaccurately recog- nize a date using "00" as the year 1900 rather than the year 2000, possibly resulting in the failure of such systems and/or equipment to perform their intended functions or to support other operations involving such dates. Similar problems may affect a wide range of public utilities and other entities which provide services or payments necessary for the normal operation of the District, and any interruption of such services or payments could disrupt such operations, possibly for a substantial period of time, resulting in a material and adverse effect on the District. Although the District is planning solutions to be implemented and tested prior to the year 2000, there can be no assurance that internal or external factors will not cause significant disruptions in the operations of the District. If the District or any third parties upon it relies are unable to address the year 2000 issues in a timely manner, such failure could result in significant disruptions and a material finan- 26 cial risk to the District. Should such disruptions occur, the District may be subject to claims in substan- tial amounts, significant portions of which may be uninsured. Such claims could have a material adverse effect on the financial condition of the District. The Counties. The Counties' receipt of tax revenues is subject in part to the performance of computer systems and software which may be subject to year 2000 problems. The County of Santa Clara con- ducted an assessment of this issue in 1997 and determined that much of its information technology in- frastructure required modification or replacement. The County then established a central Year 2000 program office which uses both in-house staff and qualified consultants, with the goal of making possible continuous operation of vital County services and accountability of public resources throughout the year 2000 transition. The County has placed its revenue and payment capabilities at the highest level of pri- ority in its year 2000 efforts, along with public health and safety. While the County cannot guarantee success in this program, it believes that it can be year 2000-ready and that no delays will occur in any payments to the District. The Trustee. The Trustee has stated that, in its general capacity as a paying agent, registrar, escrow agent, trustee and depository, and in its specific capacities as Trustee, it intends to meet the federal regulation that all securities processing institutions be year 2000 compliant by December 31, 1998. With respect to debt service payments on the Bonds, if the Trustee is provided with funds therefor on a timely basis, the Trustee is prepared to provide manual payment checks to any paying agents and to DTC in the event computer payment systems fail. In no capacity is the Trustee prepared to anticipate the perform- ance of the Federal Reserve wire transfer payments system or the effects thereof. Debt service payments due on the Bonds for the first six months of calendar year 2000 will be due only on March 1, 2000. DTC. DTC management is aware that some computer applications, systems and the like for process- ing data("Systems") that are dependent upon calendar dates,including dates before, on and after January 1, 2000, may encounter "Year 2000 problems". DTC has informed its Participants and other members of the financial community (the "Industry") that it has developed and is implementing a program so that its Systems, as the same relate to the timely payment of distributions (including principal and income pay- ments) to securityholders, book-entry deliveries and settlement of trades within DTC ("DTC Services"), continue to function appropriately. This program includes a technical assessment and a remediation plan, each of which is complete. Additionally, DTC's plan includes a testing phase, which is expected to be completed within appropriate time frames. However, DTC's ability to perform properly its services is also dependent upon other parties, includ- ing but not limited to issuers and their agents, as well as third-party vendors from whom DTC licenses software and hardware, and third-party vendors on whom DTC relies for information or the provision of services, including telecommunication and electrical utility service providers, among others. DTC has informed the Industry that it is contacting (and will continue to contact) third-party vendors from whom DTC acquires services to: (i) impress upon them the importance of such services being Year 2000 com- pliant and (ii) determine the extent of their efforts for Year 2000 remediation (and, as appropriate, test- ing) of their services. In addition,DTC is in the process of developing such contingency plans as it deems appropriate. According to DTC, the foregoing information with respect to DTC has been provided to the Industry for informational purposes only and is not intended to serve as a representation, warranty, or contract modification of any kind. LEGAL MATTERS All legal proceedings in connection with the issuance of the Bonds are subject to the approval of Or- rick, Herrington & Sutcliffe uP, San Francisco, California, Bond Counsel. Bond Counsel assumes no re- sponsibility for the accuracy, completeness or fairness of this Official Statement. The proposed form of the opinion of Bond Counsel is set forth in APPravntx C to this Official Statement. TAX MATTERS In the opinion of Orrick, Herrington&Sutcliffe up, Bond Counsel, based on existing laws, regulations, rulings and court decisions, interest on the Bonds is excluded from gross income for federal income tax 27 -)urposes under Section 103 of the Internal Revenue Code of 1986 (the "Code") and is exempt from State )f Califor:Ya personal income taxes. Bond Counsel is also of the opinion that interest on the Bonds 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 proposed form of the opinion of Bond Coun- sel is set forth in APPMLx C to this Official Statement. The difference, if any, between the issue price of any maturity of the Current Interest Bonds or the Capital Appreciation Bonds, and the amount to be paid at maturity of such Bonds (excluding amounts stated to by interest and payable at least annually over the term of such Bonds) constitutes `original is- aue discou--it," the accrual of which, to the extent properly allocable to each owner thereof, is treated as interest on such Bonds, which is excluded from gross income for federal income tax purposes and is ex- empt from State of California personal income taxes. For these purposes; the issue price of a particular maturity of such Bonds is the first price at which a substantial amount of such maturity of such Bonds is sold to the public (excluding bond houses, brokers, or similar persons, or organizations acting in the ca- pacity of underwriters, placement agents, or wholesalers). The original issue discount with respect to any maturity of such Bonds accrues daily over the term of maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Bond to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Bonds. Own- ers of the Bonds should consult their own tax advisors with respect to the tax consequences of owner- ship of Bonds with original issue discount, including the treatment of purchasers who do not purchase such Bonds in the original offering to the public at the first price at which a substantial amount of such Bonds is sold to the public. 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 Bonds. The Author- ity has covenanted to comply with certain restrictions designed to assure that interest on the Bonds will not be included in federal gross income. Failure to comply with these covenants may result in interest on the Bonds being included in federal gross income, possibly from the date of issuance of the Bonds. 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 Bonds may affect the value of, or tax status of interest on, the Bonds. Further, no assurance can be given that pending or future legislation or amendments to the Code, if enacted into law, or any proposed legislation or amendments to the Code, will not adversely affect the value of, or the tax status of interest on, the Bonds. Prospective holders are urged to consult their own tax advisors with respect to proposals to restructure the federal income tax. Certain requirements and procedures contained or referred to in the Trust Agreement and other rele- vant documents may be changed and certain actions (including, without limitation, defeasance of the Bonds) 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. Although Bond Counsel has rendered an opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from California personal income taxes, the owner- ship or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect a holder's federal or state tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the holder 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 Bonds 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 Bonds are eligible as security for deposits of public moneys in California. 28 RATINGS Moody's Investors Service and Standard & Poor's Ratings Group have assigned their ratings of "Aaa" and "AAA", respectively, to the Bonds with the understanding that upon delivery of the Bonds, a policy insuring th- payment when due of the principal of and interest on the Bonds will be issued by Ambac. Such ratings reflect only the views of such organizations and an explanation of the significance of such ratings may be obtained from them as follows: Moody's Investors Service, 99 Church Street, New York, New York 10007, (212) 5 53-0300; and Standard &Poor's Corporation, 25 Broadway, New York, New York 10004, (212) 208-8000. There is no assurance that such ratings will continue for any given period of time or that they will not b._ revised downward or withdrawn entirely by the rating agency if, in the judgment of such rating agency, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Bonds. LITIGATION There is no litigation pending concerning the validity of the Bonds and the application of the proceeds thereof, the corporate existence of the Authority, the District, or the title of the officers thereof to their respective offices or contesting or affecting the District's ability to receive the Limited Taxes or other moneys that could be used for payment of the Bonds. There are a number of lawsuits and claims pend- ing against the District. The aggregate amount of 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 make Revenue payments under the 1999 Lease, or the Authority's repayment of the Bonds. UNDERWRITING The Bonds will be purchased from the Authority by Stone & Youngberg LLC as underwriter (the "Un- derwriter") under a Purchase Contract pursuant to which the Underwriter has agreed to purchase all of the Bonds for an aggregate purchase price of $[AMOUNT]. Such purchase price is based on an initial par amount of $[AMOUNT] less an original issue discount to investors of $[AMOUNT] and less an under- writer's discount of $[AMOUNT]. The initial public offering prices stated on the cover of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Bonds to certain dealers (in- cluding dealers depositing Bonds into investment trusts), dealer banks, banks acting as agents and others at prices lower than said public offering prices. CONTINUING DISCLOSURE The Authority and the District have covenanted for the benefit of the owners and the beneficial own- ers of the Bonds to provide certain financial information and operating data relating to the District by no later than 210 days following the end of the District's fiscal year (presently March 31) (the "Annual Re- port"), commencing with the report for the 1998/99 Fiscal Year, and to provide notices of the occurrence of certain enumerated events, if deemed by the Authority or the District to be material under federal se- curities laws. The Annual Report will be filed by the Trustee on behalf of the District with each Nationally Recognized Municipal Securities Information Repository and State Repository, if any. The notices of ma- terial events will be filed by the Trustee on behalf of the District with the Municipal Securities Rulemaking Board. The specific nature of the information to be contained in the annual Report or the notices of ma- terial events is set forth below in "APPENDLx D: Form of Continuing Disclosure Agreement". These cove- nants have been made in order to assist the Underwriter in complying with SEC Rule 15c12(b)(5) (the "Rule"). Neither the Authority nor the District has ever failed to comply with such covenants. A failure by the District or the Authority to comply with the provisions of the Continuing Disclosure Agreement will not constitute a default under the Trust Agreement (although Bondholders will have any available remedy at law or in equity). Nevertheless, such a failure to comply must be reported in accor- dance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds. 29 AVAILABILITY OF DOCUMENTS During the initial offering period for the Bonds, copies of the forms of the Trust Agreement and other documents referred to :.erein maybe obtained, upon written request, from Midpeninsula Regional Open Space District Financing Authority, 330 Distel Circle, Los Altos, California 94022, Attention: Chairperson. After delivery of the Bonds, copies of such agreements may be obtained from the Trustee, BNY Western Trust Co^ipany, 700 Swith Flower Street, Suite 300, Los Angeles, California 90017-4104, Attention: Cor- porate Trust Department. 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 repre- sentation is made that <ny 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 Bonds. The execution cut on and deliveryof this Official vial Statement have e been duly authorized by the Authority. MIDPENINSULA REGIONAL OPEN SPACE DISTRICT FINANCING AUTHORITY 30 APPENDIX A: DISTRICT'S AUDITD FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 1998 31 APPENDIX B: GENERAL AND ECONOMIC INFOrMATION SANTA CLARA COUNTY AND SAN MATEO COUNTY Introduction Santa Clara County is located below the so».thern point of San Francisco Bay and covers a total land area of over 1,300 sWiare miles nr about 847,000 acres. Two distinct valleys are created by the hill for- mation 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 agriculture.'. 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 deepwa- ter port in Redwood City and freeway and bridge connections to nearby ports and airports in San.Fran- cisco, San Jose and Oakland. In addition to their own extensive range of manufacturing, professional, service, and academic em- ployers, the Counties provide an important residential base for the financial, trade, commercial, and in- dustrial companies located in San Francisco. The District extends from 20 to 40 miles south of San Fran- cisco. Population According to the California State Department of Finance, as of January 1, 1996, 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. 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 six years for both Santa Clara and San Mateo Counties. The population within the Midpeninsula Regional Open Space District was estimated by the District in 1996 to be approximately 601,000. POPULATION: DISTRICT,SAN MATEO AND SANTA CLARA COUNTIES(1993 THROUGH 1998) Midpeninsula Regional Open Space District M 601,000 601,000(3 601,000(3 San Mateo County(2) 680,900 679,100 685,000 Santa Clara County(2) 1,563,800 1,581,700 1,594,800 Sources: (1) Midpeninsula Regional Open Space District. (2) California State Department of Finance, Population Research. (3) Number used based upon 1990 census. Economic Characteristics Santa Clara County, with approximately 818,100 wage and salary jobs in 1995, has the largest em- ployment 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. B-1 Various types of manufactn6tg firms are located in Santa Clara County, with durable goods manufac- turing 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 com- munications equipment. In the nondurable goods manufacturing sector, the pr4nting, publisbing, software, and goods proc- essing 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. San Mateo County's diversified economy includes const:uction, manufacturing, transportation, com- munications, 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 Interna- tional Airport, is located within San Mateo County. Major commercial centers located in the Co-,mties 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 1992 are shown below. -TAXABLE SALES AND NUMBER OF SALES PERMITS: SAN MATEO AND SANTA CLARA COUNTIES(sales In thousands of dollars) SAN MATEO COUNTY SANTA CLARA COUNTY AT JULY 1: PERMITS TAXABLE SALES %CHANGE PERMITS TAXABLE SALES %CHANGE 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 1994 50,966 19,633,186 6.0 23,348 8,172,772 0.4 1995 51,576 23,449 1996 1997 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 Hewlett-Packard,the County,Lockheed Missiles&Space Co. and 1BM, are active in the high technology, government, aerospace and electronic sectors. Many of these companies are the resident hardware and software producers of"Silicon Valley." San Mateo County's employment base includes United Air- lines, which employs over 17,000 persons at the San Francisco International Airport, and several electronics manufacturers,medical facilities and research organizations. [Continued Next Page] B-2 MAJOR EMPLOYERS: SANTA CLARA AND SAN MAT.'.'0 COUNTIES WORKFORCESANTA CLARA COUNTY S A N MATEO C 0 U N TY EMPLOYERS —WORKFORCE Hewlett-Packard Company United Airlines County of Santa Clara Oracle Corp. Lockheed/Martin County of San Mateo IBM Corporation Raychem Corp. Stanford University Genentech Inc. UCSF/Stanford Hospital Franklin Resources Inc. Santa Clara Valley Health&Hospital American Airlines City of San lose SRI international Apple Computers Intuit Inc. Sun Microsystems U.S.Postal Service National Semiconductor Kaiser Permanente Medical Center Intel Corporation Seton Medical Center Pacific Bell Sequoia Hospital Tandem Computers Sar.Francisco Internat'.onal Airport Silicon Graphics San Mateo Community College Distrlut Solectron Corporation Advanced Micro Devices.Inc, Sources: San Jose Metropolitan Chamber of Commerce; San Mateo County Economic Development Association, Inc. The unemployment rates for both Counties for 1992 through 1997 are shown below. ANNUAL AVERAGE CIVILIAN LABOR FORCE,EMPLOYMENT AND UNEMPLOYMENT: SAN MATEO AND SANTA CLARA COUNTIES SANTA CLARA COUNTY 1990 1991 1992 1993 1994 1995 Civilian Labor Force M 837,500 838,800 857,200 860,700 Employment 781,200 782,100 803,400 818,100 Unemployment 56,300 56,700 53,800 42,600 Unemployment Rate(2) 6.7% 6.8% 6.3% 5.0°h SAN MATEO COUNTY Civilian Labor ForceM 365,000 366,000 371,100 371,100 Employment 346,100 347,100 352,800 352,800 Unemployment 18,900 18,900 18,300 18,300 —Unemployment Rate(2) 5.2% 5.2% 4.9 4.9°f° 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 table. 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 1997: SANTA CLARA AND SAN MATEO COUNTIES COUNTYSANTA CLARA a / 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. Sources:Offices of the Santa Clara County Treasurer-Tax Collector and the San Mateo County Treasurer-Tax Collector. B-3 Construction The following table shows building permit activity in Santa Clara County for 1992-1997 and in San Mateo County for 1992-1997. BUILDING PERMIT ACTIVITY: SANTA CLARA AND SAN MATEO COUNTIES Type 1989 90 Residential: New Single dwellings $ 402,555 $ 288,014 $ 268,931 $ 280,131 $ 300,307 $ 336,452 $ 401,553 New Multi-dwellings 125,184 216,002 14b,266 80,671 103,592 132,420 92,002 Additions/Alterations 161,812 182,501 175,512 182,049 165,154 168,586 163,557 Total Residential $ 689,551 $ 686,517 $ 592,709 $ 542,851 $ 569,051 $ 637,458 $657,111 Non-Residential: New Commercial $ 160,567 $ 207,147 $ 154,964 $ 151,682 $ 123,271 $117,928 $244,798 New industrial 127,235 182,585 65,962 63,073 48,917 88,319 138,731 Other 49,513 39,271 35,466 45,896 28,931 24,681 41,364 Additions/Alterations 419,432 331,978 374,962 381,649 421,978 . 365,156 434,516 Total Non-Residential $ 756,747 $ 760,981 $ 631,354 $ 642,300 $ 623,095 $596,083 $859,410 TOTAL VALUATION $1,446,298 $1,447,498 $1,224,063 $1,185,151 $1,192,146 $1,233,542 $1,516,520 No.of New Dwelling Units Single dwellings 2,548 1,675 1,663 1,693 1,825 2,128 2,213 Multi-dwellings 2,311 3,646 2,102 1,143 1,628 1,817 1,232 Total Units 4,859 5,321 3,765 2,836 3,453 3,945 3,445 SAN MATEO COUNTY: Residential: New Single dwellings $216,674 $139,797 $122,888 $83,835 $101,862 $136,623 $151,230 New Multi-dwellings 109,034 20,21 38,163 38,808 10,61 34,67 59,26 Additions/Alterations 155,624 149,160 128,515 128,826 113,210 108,967 113,151 Total Residential $481,332 $309,176 $289,566 $251,469 $225,689 $280,269 $323,646 Non-Residential: New Commercial $ 91,510 $ 77,279 $ 35,363 $ 30,265 $ 31,160 $112,874 $ 64,311 New Industrial 12,256 3,40 34,707 3,68 9 9 6,08 Other 19,593 10,47 10,012 10,455 11,11 14,25 10,88 Additions/Alterations 114,616 124,447 102,771 112,354 127,457 167,339 132,966 Total Non-Residential $ 237,975 $ 215,613 $ 182,853 $ 156,763 $ 170,658 $ 295,454 $ 214,248 TOTAL VALUATION $719,307 $524,789 $472,419 $408,232 $396,347 $575,721 $537,895 No.of New Dwelling Units Single dwellings 1,08 6 5 34 4 5 7 Multi-dwellings 1,33 1 3 59 3 6 Total Units 2,42 8 8 93 5 8 1,34 Source: Economic Sciences Corp. 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 re- maining 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 in- cluding tomatoes, bell peppers, strawberries, prunes, walnuts and garlic provide the balance of agricul- tural production in Santa Clara County. B-4 I f San Mateo County is a national leader in the production of ornamental flowers and nursery oroducts. 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. :he indus- try 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 econonac center. Severn 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 :er..ainus for three transcontinental railroads. An extensive network of freeways servesY a s sees the area The Bayw Area's s network of freeways and expressways provides the peninsula industries access to re- gional, 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 po.is 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. Princi- pal 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. The main coast line of the Union Pacific Railroad traverses Santa Clara County, providing connections to San Francisco, Oakland, and Los Angeles, commuter passenger service is operated on the Southern Pa- cific between San Jose 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('KART") 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 Fran- cisco 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 Santa Clara County's 314 public elemen- tary and high schools. In San Mateo County about 85,090 students attended approximately 96 elemen- tary, 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-5 APPENDIX C: PROPOSED FORM OF BOND COUNSEL OPINION C-l APPENDIX D: FORM OF CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement (the "Disclosure Agreement") is executed and delivered by the Midpeninsula Regional Open Space District (the "District") in connection with the issuance, sale and de- livery of $[AMOUNT] Midpeninsula Regional Open Space District Financing Authority 1999 Insured Reve- nue Bonds (the "Bonds"). The Bonds are being executed and delivered pursuant to a Trust Agreement, dated as of January 1, 1999 (the "Trust Agreement"),between the Midpeninsula Regional Open Space Dis- trict Financing Authority (the "Authority") and BNY Western Trust Company, as trustee (the "Trustee"). The District covenants and agrees as follows: Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the District for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). Section 2. Definitions. In addition to the definitions set forth in the Trust Agreement, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the fol- lowing capitalized terms shall have the following meanings: "Annual Report"shall mean any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Dissemination Agent" shall mean the District, or any successor Dissemination Agent designated in writing by the District and which has filed with the District a written acceptance of such designation. "Listed Events"shall mean any of the events listed in Section 5(a) of this Disclosure Agreement. "National Repository"shall mean any Nationally Recognized Municipal Securities Information Reposi- tory for purposes of the Rule. "Participating Underwriter"shall mean the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Repository"shall mean each National Repository and each State Repository. "Rule"shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "State Repository" shall mean any public or private repository or entity designated by the State of California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Disclosure Agreement, there is no State Repository. Section 3. Provision of Annual Reports. (a) The District shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the District's fiscal year (which currently ends on March 31), commencing with the report for the 1998/1999 Fiscal Year, provide to each Repository an Annual Report which is consistent with the re- quirements of Section 4 of this Disclosure Agreement. Not later than 15 Business Days prior to said date, the District shall provide the Annual Report to the Dissemination Agent (if other than the District). The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the District may be submitted separately from the bal- ance of the Annual Report, and later than the date required above for the filing of the Annual Report if not available by that date. If the District's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). (b) If the District is unable to provide to the Repositories an Annual Report by the date required in subsection(a), the District shall send a notice to the Municipal Securities Rulemaking Board and the ap- propriate State Repository, if any, in substantially the form attached as Exhibit A. (c) The Dissemination Agent shall: (1) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and each State Repository, if any; and D-1 (2) if the Dissemination Agent is other than the District, file a report with the District certifying tl.at the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was pro- vided and listing all the Repositories to which it was provided. Section 4. Content of Annual Reports. The District's Annual Report shall contain or incorporate by reference the following: (a) Audited Financial Statements prepared in accordance with generally accepted accounting princi- ples as promulgated to apply to governmental entities from time to time by the Governmental Account- ing Standards Board. If the District's audited financial statements are not available by the time the An- nual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official State- ment, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Updates, if any, of information contained in Tables 2, 3, 4, 5, 6, 7 and 8 the Sections titled "THE DISTRICT", "ESTIMATED REVENUES AND OUTSTANDING OBLIGATIONS" and "DISTRICT FINANCIAL IN- FORMATION" to the extent that such information has materially changed and are not included in the Audited Financial Statements provided pursuant to 4(a). (c) Addition to any of the information expressly required to be provided under paragraph (a) of this Section, the District shall provide such further information, if any, as may be necessary to make the spe- cifically required statements, in the light of the circumstances under which they are made, not mislead- ing. Any or all of the items listed above may be included by specific reference to other documents, in- cluding official statements of debt issues of the District or related public entities, which have been sub- mitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The District shall clearly identify each such other document so included by reference. Section 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: (1) Principal and interest payment delinquencies. (2) Non-payment related defaults. (3)Unscheduled draws on debt service reserves reflecting financial difficulties. (4)Unscheduled draws on credit enhancements reflecting financial difficulties. (5) Substitution of credit or liquidity providers, or their failure to perform. (6) Adverse tax opinions or events affecting the tax-exempt status of the security. (7) Modifications to rights of security holders. (8) Contingent or unscheduled bond calls. (9) Defeasances. (10) Release, substitution, or sale of property securing repayment of the securities. (11) Rating changes. (b) Whenever the District obtains knowledge of the occurrence of a Listed Event, the District shall as soon as possible determine if such event would be material under applicable Federal securities law. (c) If the District determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the District shall promptly file a notice of such occurrence with the Municipal Securities Rulemaking Board and each State Repository. Notwithstanding the foregoing, notice of Listed Events described in subsections(a)(8) and(9)need not be given under this subsection any D-2 earlier than the notice (if any) of the underlying event is given to holders of affected Bonds pursuant to the Trust Agreement. Section 6. Termination of Reporting Obligation. The District's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the t Bonds. 1;such termination occurs prior to the final maturity of the Bonds, the District shall give notice of _ such termination in the same manner as for a Listed Event under Section 5(c). Section 7. Dissemination Agent The District may, from time to time, appoint or engage a Dissemina- tion Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Agent, with or without appointing a successor Dissemination Agent Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the District may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bonds, or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nation- ally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Trust Agreement for amendments to the Trust Agreement with the consent of holders, or (ii) does not, in the opinion of the Trustee or nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds. If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in or- der to provide information to investors to enable them to evaluate the ability of the District to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repositories in the same manner as for a Listed Event under Section 5(c). Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Dis- closure Agreement. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agree- ment, the District shall have no obligation under this Disclosure Agreement to update such information or include it in an future Annual Report or notice of occurrence of a Listed Event. YP Section 10. Default. In the event of a failure of the District to comply with any provision of this Dis- closure Agreement any holder or beneficial owner of the Bonds may take such actions as may be neces- sary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Agreement. A default under this Disclosure D-3 Agreeme , shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy un- der this Disclosure Agreement in the event of any failure of the District to comply with this Disclosure Agreement shall be an action to compel performance. Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only ;uch duties as are specifically set forth in this Disclosure Agreement, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or perform- ance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negli- gence or willful misconduct. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 12. Benefrciaries. This Disclosure Agreement shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. Dated- [DATE] [SIGNATURE] EXHIBIT A— NOTICE OF FAILURE TO FILE ANNUAL REPORT] Name of Issuer: Midpeninsula Regional Open Space District Financing Authority Name of Issue: S[AMOUNT] Midpeninsula Regional Open Space District Financing Authority 1999 Insured Revenue Bonds Date of Issuance: January_-, 1999 NOTICE IS HEREBY GIVEN that the District has not provided an Annual Report with respect to the above-named issue as required. The District anticipates that the Annual Report will be filed by ------------- D-4 APPENDIX E: TABLE OFACCRETED VALUES E-1 I APPENDIX F: SPECIMEN INSURANCE POLICY 016.1 763M3 F-1