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Home My WebLink AboutMINUTES - 10111994 - 1.51 a ` fContra ' Costa TO: BOARD OF SUPERVISORS County- TA c.�h�cT FROM: Harvey E. Bragdon Director of Community Development r DATE: October 11, 1994 SUBJECT: 1985 Contra Costa County Home Mortgage Revenue Bonds Resolution 94/481- SPECIFIC REQUEST(S) OR RECOMMENDATIONS(S) & BACKGROUND AND JUSTIFICATION RECOMMENDATIONS ADOPT resolution authorizing the redemption and/or defeasance of the County's outstanding 1985 Home Mortgage Revenue Bonds and approving a First Supplemental Trust Indenture, and a Residual Asset Purchase Contract and matters related thereto, and AUTHORIZE the Deputy Director - Redevelopment to execute necessary documents. FISCAL IMPACT No General Fund monies are involved. The completion of the Residual Asset sale will generate.one time revenue for the County's Affordable Housing Trust Funds. BACKGROUND/REASONS FOR RECOMMENDATIONS In 1985 the County issued $59,000,000 in Home Mortgage Revenue Bonds. These funds were used to purchase mortgages made to eligible first-time homebuyers. Due to payoffs and refinancings, relatively few home mortgages remain in the program portfolio. These mortgages may be sold pursuant to a Residual Asset Purchase Contract, and the remaining bonds defeased in order that the County may receive surplus funds held under the Indenture. Net revenues to the County's Affordable Housing Trust Funds could be in excess of$400,000. CONTINUED ON ATTACHMENT: YES SIGNATURE: �J RECOMMENDATION OF COUNTY ADMINISTRATOR R OMMEN r TION OF BO D COMMITTEE APPROVE OTHER SIGNATURE(S): ACTION OF BOARD ON orj APPROVED AS RECOMMENDED OTHER VOTE OF SUPERVISORS 1 HEREBY CERTIFY THAT THIS IS A UNANIMOUS (ABSENT ) TRUE AND CORRECT COPY OF AN AYES: NOES: ACTION TAKEN AND ENTERED ON THE ABSENT: ABSTAIN: MINUTES OF THE BOARD OF SUPERVISORS ON THE DATE SHOWN. Source: Jim Kennedy 646-4076 cc: County Administrator ATTESTED OCT 1119% County Counsel PHIL BATCHELOR, CLERK OF Auditor Controller THE BOARD OF SUPERVISORS via Community Development AND COUNTY ADMINISTRATOR Magnus Capital Lofton, De Lancie & Nelson �1 Kutak Rock & Campbell BY , l ` va�,. , DEPUTY JK:Ih sra16/revbonds.bos rev. RESOLUTION NO. 94/481 RESOLUTION OF THE BOARD OF SUPERVISORS OF CONTRA COSTA COUNTY AUTHORIZING THE REDEMPTION AND/OR DEFEASANCE OF THE COUNTY' S OUTSTANDING 1985 HOME MORTGAGE REVENUE BONDS, THE SALE OF HOME MORTGAGES AND RELATED INVESTMENT SECURITIES TO EFFECT SUCH REDEMPTION AND/OR DEFEASANCE, APPROVING THE FIRST SUPPLEMENTAL TRUST INDENTURE, THE RESIDUAL ASSET PURCHASE CONTRACT AND THE ESCROW DEPOSIT AGREEMENT AND PROVIDING FOR OTHER MATTERS RELATED THERETO. WHEREAS, the County of Contra Costa, California (the "County") has heretofore issued $58, 999, 782 .20 aggregate original amount of its 1985 Home Mortgage Revenue Bonds (the "Bonds") , pursuant to a Trust Indenture dated as of April 1, 1985 (the "Indenture") between the County and First Interstate Bank of California, as trustee (the "Trustee") , in order to implement a home mortgage financing program (the "Home Mortgage Financing Program") , by financing the purchase of certain home mortgages on single-family dwellings made to low and moderate income persons living in the County (the "Home Mortgages") ; WHEREAS, the Bonds are capital appreciation bonds with a maturity value of $4, 180, 000 and have a first lien on the Home Mortgages; WHEREAS, the County deems it desirable to sell all of the Home Mortgages and all other assets held under and pursuant to the Indenture and to defease the lien of the Indenture with respect to the Bonds by providing an escrow of appropriate investments sufficient to pay all interest on and principal of the Bonds as the same shall become due until the respective redemption date or maturity dates, as applicable; WHEREAS, to accomplish the defeasance of lien of the Indenture, the County deems it desirable to expand the definition of "Investment Securities" described in clause (1) of the Indenture as set forth in the First Supplemental Trust Indenture (the "First Amendment") , and then sell the Home Mortgages and other assets held under the Indenture pursuant to a Residual Asset Purchase Contract (the "Residual Asset Purchase Contract") between the County and Magnus Capital, Inc. (together with other purchasers named therein) ; WHEREAS, the Bonds may be defeased without the necessity of any appropriation of funds by the County; WHEREAS, upon the deposit in trust of cash and/or certain noncallable Investment Securities (the "Escrowed Securities") , the principal of and interest on which when due will provide money sufficient to provide for the full payment of the Bonds to their redemption date or maturity dates, as applicable, then the lien of the Bonds with respect to the Home Mortgages and other assets held under the Indenture shall cease, terminate and be completely discharged and defeased, and the owners of the Bonds shall thereafter be entitled only to payment from such cash and/or Escrowed Securities; WHEREAS, to accomplish such defeasance of the lien of the Indenture with respect to the Bonds, the County must sell the Home Mortgages and other assets held under the Indenture to provide the Escrowed Securities; WHEREAS, to accomplish the sale of the Home Mortgages and other assets held under the Indenture, the County intends to sell all of the Home Mortgages and other assets held under the Indenture pursuant to a Residual Asset Purchase Contract by and between the County and the Purchaser named therein; WHEREAS, the proceeds derived from the sale of the Home Mortgages and other assets held under the Indenture, will consist of cash and the Escrowed Securities . The Escrowed Securities (and cash as necessary) will be held pursuant to an Escrow Deposit Agreement (the "Escrow Deposit Agreement") by and between the County and First Interstate Bank of California, as escrow holder (the "Escrow Holder") for the purpose of providing timely payment of all interest and principal due on the Bonds on their redemption date or maturity, dates, as applicable; WHEREAS, copies of the First Amendment, the Residual Asset Purchase Contract and the Escrow Deposit Agreement have been presented to the County for approval at this time, and it is desirable that such documents now be approved by the County and the transaction contemplated thereby be consummated as soon as practicable. NOW THEREFORE, BE IT RESOLVED BY THE BOARD OF SUPERVISORS OF THE COUNTY OF CONTRA COSTA AS FOLLOWS : SECTION 1 . The County hereby authorizes the Director of Community Development of the County, the Deputy Director - Redevelopment, or either of them, or their designee in writing, to direct the Trustee to sell the Home Mortgages and other Residual Assets (as defined in the Residual Asset Purchase Contract) pursuant to the Residual Asset Purchase Contract on file with the Clerk of the Board of Supervisors (the "Clerk of the Board") . SECTION 2 . The County hereby authorizes the Director of Community Development of the County, the Deputy Director - Redevelopment, or either of them, or their designee in writing, to direct the Trustee to transfer appropriate amounts from the proceeds of the sale of 2 the Home Mortgages and other Residual Assets together with any other assets legally available therefor, to deposit all or a portion of such moneys with the Escrow Holder, pursuant to the Escrow Deposit Agreement for the purpose of discharging the lien of the Indenture with respect to the Bonds . SECTION 3 . The First Amendment, the Residual Asset Purchase Contract and the Escrow Deposit Agreement in the forms on file with the Clerk of the Board are hereby approved, and the Director of Community Development of the County, the Deputy Director - Redevelopment, or either of them, or their designee in writing, is hereby authorized and directed to execute and deliver the First Amendment, the Residual Asset Purchase Contract and the Escrow Deposit Agreement on behalf of the County, and the Clerk of the Board is hereby authorized and directed to attest to the execution of the First Amendment, the Residual Asset Purchase Contract and the Escrow Deposit Agreement, in substantially said forms, with such additions thereto and changes therein as shall be approved by the County Attorney and Special Counsel (as defined below) , the execution thereof to establish conclusive evidence of such approval . SECTION 4 . The Director of Community Development of the County, the Deputy Director - Redevelopment, or either of them, or their designee in writing, is hereby authorized and directed to execute any and all documents and papers and to perform and do any and all acts and things deemed necessary or convenient in order to effect the execution and delivery of the First Amendment, the Residual Asset Purchase Contract and the Escrow Deposit Agreement and the performance of any other action which may be necessary or desirable in connection therewith, or to carry out the intent and purposes of this Resolution. SECTION 5. The County hereby approves the retention of the law firms of Lofton, De Lancie & Nelson, as Special Counsel and Kutak Rock, as Special Tax Counsel to assist the County in connection with the transactions contemplated by this Resolution. SECTION 6. All actions heretofore taken by the officers and agents of the County with respect to the defeasance of the Bonds and the sale of the Home Mortgages and the other Residual Assets are hereby approved, confirmed and ratified. 3 SECTION 7 . This Resolution shall take effect from and after its adoption. ADOPTED this 11th day of October , 1994, by the following vote: AYES : Supervisors Smith, Bishop, DeSaulnier, Torlakson and Powers NOES: None ABSENT: None Tom 2owers Chair of the Board ATTEST: Phil Batchelor, County Administrator and Clerk of the Board of Supervisors B y: Deputy JK:1h resolution/bonds.res 4 ~r s' DRAFT KUTAK ROCK 10/06/94 RESIDUAL ASSETS PURCHASE CONTRACT With Respect to the County of Contra Costa 1985 Home Mortgage Revenue Bonds t By and Between COUNTY OF CONTRA COSTA AND MAGNUS CAPITAL, INC. 01/115048.3 RESIDUAL ASSETS PURCHASE CONTRACT Honorable Chair Board of Supervisors County of Contra Costa Martinez, California Ladies and Gentlemen: Magnus Capital, Inc. (the "Purchaser"), acting not as a fiduciary or an agent for you, but on its own behalf, offers to enter into this Residual Assets Purchase Contract (the "Purchase Contract") with the County of Contra Costa, California (the "County"), subject to your acceptance at or prior to 5:00 p.m., Pacific Standard Time, on October 17, 1994. INTRODUCTORY Pursuant to an Indenture, dated as of April 1, 1985 (the "Indenture"), by and between the County and First Interstate Bank of California, as trustee (the "Trustee"), the County issued $58,999,782.20 original aggregate principal amount of its 1985 Home Mortgage Revenue Bonds (the "Bonds"). Pursuant to the Indenture, the Bonds are secured by an irrevocable pledge of the Home Mortgages (and related agreements) and (i) all proceeds of the sale of the Bonds, (ii) all Revenues, and (iii) any other amounts held in any fund or account established pursuant to the Indenture (except the Nonmortgage Investment Income Fund to the extent of the Nonmortgage Investment Excess), and such Bonds are payable as to principal, redemption price, if any, and interest from such pledged sources. Furthermore, pursuant to Article X of the Indenture, upon provision for payment in full of the Bonds, the County is entitled to receive all money or securities or other property held by the Trustee under the Indenture which are not required for the payment or redemption of Bonds not theretofore surrendered for such payment or redemption, and the pledge of Revenues and other assets made under the Indenture shall cease, terminate, become void and be completely discharged and satisfied. Pursuant to the Resolution (as hereinafter defined) the County has authorized the negotiation of the price to be paid by the Purchaser for the Home Mortgages and the completion of this Purchase Contract. The County agrees to sell the County's Interest in the Residual Assets (as defined below) to the Purchaser, and the Purchaser has agreed to purchase the County's Interest in the Residual Assets from the County upon the terms and conditions set forth herein. 01/115048.3 V l ARTICLE I DEFINITIONS As used in this Purchase Contract, capitalized terms shall have the meanings set forth in this Section 1, unless the context clearly otherwise requires. Any terms used herein which are not defined in this Purchase Contract shall have the meanings given to such terms in the Indenture and the Resolution or other applicable documents from the Transcript of Proceedings for the Bonds, if defined therein. "Bond Documents" shall mean and include all documents and agreements executed in connection with the issuance and sale of the Bonds, including all documents contained in the Transcript of Proceedings for the Bonds, the Notes, the Mortgages, the related PMI Agreements, the related Standard Hazard Insurance policies, the Pool Insurance policies, the Special Hazard Insurance policies, the Policies of Title Insurance and.the Bond Insurance Policy, together with all other related and incidental documents and instruments. "Bonds" shall mean the County's 1985 Home Mortgage Revenue Bonds as heretofore described, issued pursuant to the Indenture, which Bonds are currently outstanding in the amounts, and with the maturities and interest rates set forth in the Certificate and Agreement of the Trustee, executed and delivered in connection with the execution of this Purchase Contract, in substantially the form attached hereto as Schedule II of Exhibit A-1. "Closing Documents" shall mean and include this Purchase Contract, the Escrow Deposit Agreement (defined below), the Officers Certificate and all documents, agreements, instruments, certificates and opinions to be executed and delivered in connection with the purchase by the Purchaser of the County's Interest in the Residual Assets pursuant to the provisions of this Purchase Contract, including, without limitation, the Closing Documents identified in Section 3 hereof. "County" means the County of Contra Costa, California and its successors and assigns. "County's Interest in the Residual Assets" shall mean and include the County's right, title and interest in the Residual Assets. "Date of Release" shall mean the date on which, in accordance with the provisions of Article X of the Indenture, all outstanding Bonds shall have been deemed to have been paid or such payment irrevocably provided for and the lien of the Indenture shall have been irrevocably defeased due to the establishment of the Defeasance Escrow and which shall be selected by the Purchaser to be not more than thirty business days following the date of execution of this Purchase Contract. The Date of Release shall be October 18, 1994 or such other date approved in writing by both the County and the Purchaser. 01/1 15M.3 2 i! f "Defeasance Escrow" shall mean those Investment Securities,purchased at the fair market value thereof, (and cash if and to the extent required) which are described in Schedule II hereto and in the Escrow Deposit Agreement, which cash and securities shall be calculated and shall have been verified to be sufficient to (a) defease the lien of the Indenture with respect to the Bonds and (b) pay the Escrow Trustee's fees and expenses in accordance with the Escrow Deposit Agreement. "Directions from the County" shall mean the directions from the County to the Trustee regarding the transfer of the Residual Assets to the Purchaser, substantially in the form attached hereto as Exhibit D. "Escrow Deposit Agreement" shall mean the Escrow Deposit Agreement relating to the Bonds between the County and the Escrow Trustee. "Escrow Trustee" shall mean the Trustee, and its successors and assigns as provided in the Escrow Deposit Agreement. "Home Mortgage Assignee" shall mean [Pacific Central Mortgage, Inc.] (or other person, if any, designated by the Purchaser), to whom the Home Mortgages are to be assigned. "Home Mortgage Assignee's Counsel" shall mean Sonnenschein Nath & Rosenthal. "Home Mortgages" shall mean and include all rights and interests in the Home Mortgages and the documents and instruments constituting the Home Mortgages, which constitute a portion of the Residual Assets heretofore acquired for the County under and pursuant to the provisions of the Bond Documents, such Home Mortgages to be in the amounts and have the terms and provisions set forth in Schedule III to the Certificate and Agreement of the Trustee attached hereto as Exhibit A-1. "Purchase Contract" shall mean this Residual Assets Purchase Contract, as supplemented and amended according to the terms hereof. "Purchase Price" shall have the meaning as set forth in Section 2 hereof. "Purchaser's Counsel" shall mean Kutak Rock. "Residual Assets" shall mean any and all property (including all existing Home Mortgages and all funds held under the Indenture) which the County is to receive pursuant to the provisions of the Indenture upon the defeasance of the Bonds assigned or otherwise conveyed pursuant to the provisions of this Purchase Contract and the Directions from the County, including the interest earnings to be derived from the reinvestment of the maturing amount of principal and interest of Investment Securities, as defined in the Escrow Deposit Agreement, deposited in the Defeasance Escrow. Residual Assets do not include the Nonmortgage Investment Income Fund to the extent of the Nonmortgage Investment Excess. 01/115048.3 3 "Resolution" shall mean the resolution adopted by the Board of Supervisors of the County on October , 1994, authorizing the execution of this Purchase Contract, the Escrow Deposit Agreement and the sale to the Purchaser of the County's Interest in the Residual Assets. "Special Counsel" shall mean Lofton, De Lancie & Nelson. "Special Tax Counsel" shall mean Kutak Rock. "Trust Estate" shall mean and include the trusts created by the County for the benefit of the Trustee and the owners of the Bonds pursuant to the provisions of the Indenture. "Trust Securities" shall mean and include all securities and other investments now or hereafter held in any of the funds and accounts held by the Trustee under the Indenture. ARTICLE II PURCHASE OF COUNTY'S INTEREST IN THE RESIDUAL ASSETS; TIME TO PERFORM; CONSENT TO AMENDMENT OF INDENTURE On the basis of the representations, warranties and agreements contained herein and for good and valuable consideration, but subject to the terms and conditions herein set forth, the County hereby agrees to sell to the Purchaser, and to assign, transfer and convey over to the Purchaser or such persons as it may designate on the Date of Release, and the Purchaser agrees to buy the County's Interest in the Residual Assets, on the Date of Release, for a purchase price (the "Purchase Price") of (i) $ which shall be payable directly to the County in same day funds, plus (ii) delivery to the Escrow Trustee of the Defeasance Escrow, which shall be purchased at fair market value by the Purchaser on behalf of the County. The Purchaser shall also pay all reasonable costs of issuance, except those fees for which the County is specifically responsible as set forth in Exhibit K hereto, including, but not limited to those costs for which the Purchaser is specifically responsible as set forth in Exhibit K. The Purchaser understands and acknowledges that, although this Purchase Contract conveys title in the County's Interest in the Residual Assets, the Purchaser has no right, except as set forth in the Closing Documents, to possess any cash or Home Mortgages which comprise part of the Trust Estate until the Date of Release occurs. Unless said amendment has previously been made, the Purchaser covenants and agrees that as the holder of more than 60% of the Bonds on the Date of Release, it will consent to an amendment of the Indenture, pursuant to Section 9.01A of the Indenture, to change the definition of "Investment Obligations" in Section 1.01 of the Indenture to include federally guaranteed obligations of the Resolution Funding Corporation. 011115048.3 4 V The Purchaser further covenants and agrees to take all steps necessary to assure compliance by the County with Section 6.10(H) of the Indenture. The Purchaser will forgive the principal on each Home Mortgage it purchases pursuant to the terms of the Indenture. In addition, the Purchaser will deliver correspondence to the obligor on each Home Mortgage that the principal amount forgiven represents full and final compliance by the County with said Section 6.10(H) and that said obligor is not entitled to any further forgiveness. ARTICLE III CONDITIONS TO OBLIGATION OF PURCHASER The Purchaser's obligation to purchase and pay for the County's Interest in the Residual Assets will be subject: (a) to the conditions set forth in this Section 3; (b) to the accuracy of the representations and warranties of the County herein; (c) to the performance by the County of its obligations hereunder; (d) to no material nor adverse change to the information set forth in Schedule I of Exhibit A-1 hereto having occurred between the date hereof and the Date of Release; (e) to the delivery of the following documents on the date hereof: (i) A Certificate and Agreement of the Trustee dated the date hereof in substantially the form attached hereto as Exhibit A-1; (ii) A letter from the County to [First Interstate Bank of California (the "Bailee"), Real Estate Financial Institutions, 1055 Wilshire Boulevard, 8th Floor, Los Angeles, California 90017, Attention: Eugenia Mouissat], in the form attached hereto as Exhibit A-2; (iii) A bailment letter (the "Bailment Letter") to the Bailee in the form attached hereto as Exhibit A-3; and (iv) Delivery of the Home Mortgages to the Bailee together with all documentation described in the Bailment Letter; (f) to the delivery of the following documents on the Date of Release (unless otherwise indicated below): 01/115048.3 5 (i) A Notice to Custodian executed by the County and the Trustee in the form attached hereto as Exhibit A-4 and the Certificate of the Custodian acknowledging receipt of such Notice in the form attached hereto as Exhibit A-5. (ii) A Certificate of the County in substantially the form attached hereto as Exhibit B, which shall have attached thereto a copy of the Resolution. (iii) An opinion of the Special Counsel to the County in substantially the form attached hereto as Exhibit C-1 and an opinion of the Special Tax Counsel to the County in substantially the form attached hereto as Exhibit C-2. (iv) An Authorized Officer's Certificate of the County giving instructions to the Trustee in substantially the form attached hereto as Exhibit D. (v) The executed Escrow Deposit Agreement. (vi) A Closing Statement and Receipt of Purchaser, together with verification of the sufficiency of the Defeasance Escrow in a form acceptable to the Purchaser, County and Trustee. (vii) A Certificate of the Purchaser to the County in substantially the form attached hereto as Exhibit E. (viii) A letter from the Purchaser to the County in substantially the form attached hereto as Exhibit F. (ix) Notification to the servicers that their rights to service the Home Mortgages have been terminated substantially in the form attached hereto as Exhibit G and a Certificate and Agreement of each servicer substantially in the form attached hereto as Exhibit H. (x) An Escrow Trustee's Receipt of the Defeasance Escrow substantially in the form attached hereto as Exhibit I. (xi) A Receipt of the County substantially in the form attached hereto as Exhibit J. (xii) Such other documents, certificates, evidence and opinions as Special Counsel, Special Tax Counsel or Purchaser's Counsel may reasonably request to (1) effectuate the sale, conveyance and/or assignment of the County's Interest in the Residual Assets, (2) signify the delivery of the County's Interest in the Residual Assets to the Purchaser or its assignee, and (3) provide evidence that the County has approved of the transactions contemplated by this Purchase Contract. 01/115048.3 6 r (xiii) Supplemental Indenture amending the Indenture to change the definition of "Investment Securities" in Section 1.01 of the Indenture as set forth in Sections 2 and 5 hereof. Upon execution and delivery of the foregoing documents and instruments, or the written waiver of the Purchaser, as the case may be, the sale and assignment of the County's Interest in the Residual Assets to the Purchaser, together with appropriate documentation required as set forth in paragraph (xii) above, shall be complete and no other action of or future filing of the County shall be required to fully and legally vest title in the Purchaser of all the County's Interest in the Residual Assets. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COUNTY As of the date hereof and as of the Date of Release, the County represents and warrants to the Purchaser of the Home Mortgages that: (a) The County is duly organized and existing under and by virtue of the laws of the State of California and has full legal right, power and authority to: (i) adopt the Resolution, (ii) execute and deliver this Purchase Contract and the other Closing Documents and to perform its obligations under this Purchase Contract and the other Closing Documents, (iii) sell the County's Interest in the Residual Assets, and (iv) carry out _the transactions contemplated by this Purchase Contract and the other Closing Documents. (b) The County has not encumbered the County's Interest in the Residual Assets and the Residual Assets are free and clear of any interest, lien or charge against the County, or encumbrance created by the County, except the lien created in favor of the Trustee and the owners of the Bonds under the Indenture. (c) Prior to the acceptance hereof, the County has duly adopted the Resolution and has duly authorized and approved the execution and delivery of, and the performance by the County of, the obligations on its part contained in this Purchase Contract and the Closing Documents. (d) The County is not in material breach of or default under any applicable law or administrative regulation of the State of California or the United States or any applicable judgment or decree or any loan agreement, note, resolution, agreement, indenture (including the Indenture) or other instrument to which the County is a party or is otherwise subject, which material breach or default would have a material adverse effect on the transactions contemplated by this Purchase Contract and the other Closing Documents. 011115048.3 7 (e) The execution and delivery of this Purchase Contract will not conflict with or constitute a material breach of or default under any law, administrative regulation, judgment, decree, loan agreement, indenture (including the Indenture), note, resolution, agreement or other instrument to which the County is a parry or is otherwise subject. (f) By execution of this Purchase Contract and the Closing Documents, the County will have duly sold, assigned and transferred to the Purchaser the County's Interest in the Residual Assets and all approvals, consents and orders of any governmental authority, board, agency or commission having jurisdiction, including the County, which would constitute a condition precedent to the execution of this Purchase Contract and the other Closing Documents and the performance by the County of its obligations hereunder and thereunder have been obtained. (g) To the best knowledge of the County, there is no action, suit, proceeding, controversy, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending or threatened against the County contesting or affecting (i) the corporate existence or powers of the County, (ii) the titles of its officials to thew respective offices, (iii) the validity of the Bonds, the Bond Documents or the prior use of the Bond proceeds to make the Home Mortgages, (iv) the validity of any action taken by the County in connection with the defeasance of the lien of the Bonds with respect to the Residual Assets, and in connection with the Home Mortgages or the sale and assignment of the County's Interest in the Residual Assets, (v) the validity or enforceability of this Purchase Contract or any other of the Closing Documents, (vi) the powers of the County to adopt the Resolution or to execute and deliver this Purchase Contract or any other of the Closing Documents, or (vii) seeking to restrain or enjoin the execution or delivery of this Purchase Contract or any other of the Closing Documents, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of this Purchase Contract or any other Closing Document (including the sale by the County of the County's Interest in the Residual Assets). (h) Except with respect to the Bonds, the County's Interest in the Residual Assets has not been pledged by the County in any manner to the payment of any other debt or obligation of the County nor is the County's Interest in the Residual Assets payable to or encumbered by any other entity by contract or otherwise. (i). When executed and delivered, all Closing Documents executed by the County shall have been duly authorized, each shall have been validly executed and delivered, and each shall constitute the valid, binding and enforceable obligation of the County according to the terms.thereof. (j) The consummation of the transactions contemplated by this Purchase Contract constitutes a present sale and assignment of the County's Interest in the Residual Assets and is not, nor is it intended to be, a loan by the County coupled with a security interest. 01/115048.3 8 (k) Should the Purchaser or any Home Mortgage Assignee so request, the County will execute, or, if appropriate, direct the Trustee to execute any documents regarding the Uniform Commercial Code in order to evidence the present sale and assignment of the County's Interest in the Residual Assets being made pursuant hereto. (1) As of the date hereof, the County has notified the Trustee of its intention to sell to the Purchaser the County's Interest in the Residual Assets and of its intent to deliver to the Purchaser the Residual Assets on the Release Date. (m) At the time the Residual Assets are conveyed pursuant to the terms hereof, the County will have complied with all applicable laws required to be complied with to consummate the transactions contemplated by this Purchase Contract and the other Closing Documents. Subject to the endorsement of the Home Mortgages by the Trustee to the Home Mortgage Assignees and the execution of any related documents, no further action by the County needs to be taken to effect transfer of title in the County's Interest .in the Residual Assets to the Purchaser on the Date of Release. (n) The County is not transferring the Residual Assets with actual intent to hinder, delay or defraud any creditor of the County. ARTICLE V COVENANTS The County covenants and agrees as follows: (a) By its execution of an Authorized Officer's Certificate, substantially in the form attached hereto as Exhibit D, the County will notify the Trustee of the sale of the County's Interest in the Residual Assets to the Purchaser and direct the Trustee to convey the Residual Assets to the Purchaser or such person as it may designate on the Date of Release, all in accordance with and subject to the provisions of this Purchase Contract. (b) The County covenants and agrees, within its lawful powers and authority, to fully cooperate with the Purchaser, at the Purchaser's expense and as directed by Purchaser, to give all additional instructions reasonably required by the Purchaser and to enforce the duties and obligations of the Trustee under the Indenture, including, without limitation, the obligation to convey and deliver the Residual Assets to the Purchaser. (c) Except as created under the Indenture, the County will not cause any liens or encumbrances to be placed on any of the Residual Assets or on the County's Interest in the Residual Assets and will not otherwise sell or create any lien or encumbrance whatsoever with respect to any of the assets in the Residual Assets or the County's Interest in the Residual Assets. 01/115048.3 9 (d) The County will promptly advise the Purchaser of any litigation or claims which could give rise to a claim under the provision the Bond Documents or the Closing Documents. (e) The County will do any and all reasonable things, within its powers, at the expense of the Purchaser, to effect the delivery of the Residual Assets to the Purchaser on the Date of Release. (f) The County will not direct the Trustee to do anything which would cause it to breach any of the covenants contained in the Bond Documents or the Closing Documents or which would impair the value of the Residual Assets to the Purchaser. (g) The County covenants to execute and deliver or cause to be executed and delivered any and all reasonable supplemental documents, agreements, instruments and certificates as the Purchaser may reasonably require, now or in the future, to evidence Purchaser's ownership (or the ownership of such persons as the Purchaser may designate) of the Residual Assets. (h) The County covenants to take all reasonable steps necessary to amend the definition of"Investment Securities" in Section 1.01 of the Indenture to include federally guaranteed obligations of the Resolution Funding Corporation, and to execute a supplemental indenture evidencing that amendment, subject to Sections 2 and 3 hereof. (i) The County waives its optional call rights with regard to the Bonds. (j) The County will discharge or cause to be discharged the Home Mortgages in accordance with Section 6.10(H) of the Indenture and applicable laws and regulations of the Internal Revenue Service. ARTICLE VI FEES AND EXPENSES Upon the delivery of the County's Interest in the Residual Assets, the County shall pay the fees and expenses, if any, of the Special Counsel, the Special Tax Counsel, the Escrow Trustee's fees and expenses and the fees and expenses of Trustee's counsel each as set forth in Exhibit K attached hereto. ARTICLE VII NOTICES Any notice or other communication to be given to the County under this Purchase Contract may be given by delivering the same in writing to the County at [ ], 01/115048.3 10 Attention: , and any notice or other communication to be given to the Purchaser under this Purchase Contract may be given by delivering the same in writing to: Magnus Capital, Inc., Suite 180, 4165 East Thousand Oaks Boulevard, Westlake Village, California 91362, Attention: Mr. Bruce Coleman. ARTICLE VIII GOVERNING LAW This Purchase Contract shall be governed by the laws of the State of California. ARTICLE IX EFFECTIVE DATE; TERMINATION This Purchase Contract shall become effective upon the execution of the acceptance hereof by the County and the Purchaser and the execution and delivery in form and substance acceptable to the Purchaser and the Home Mortgage Assignee of the Exhibits attached to this Purchase Contract, with respect to which the County shall have no liability for failure of such execution and delivery. This Purchase Contract shall terminate thirty days from its date of execution, and may be extended only in writing executed by both parties hereto. ARTICLE X SURVIVAL The County agrees that all representations, warranties and agreements made by it herein and in any certificate or other instrument delivered pursuant hereto shall be deemed to be relied upon by the Purchaser and any Home Mortgages, and that all representations, warranties and agreements made-by the County herein or in any such certificate or other instrument shall survive the delivery and payment for the County's Interest in the Residual Assets. 01/115048.3 1 1 ARTICLE XI EXECUTION IN COUNTERPARTS This Purchase Contract 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. Dated: October 17, 1994 Very truly yours, COUNTY OF CONTRA COSTA By Name Title MAGNUS CAPITAL, INC. By 01/115048.3 12 EXHIBIT A-1 CERTIFICATE AND AGREEMENT OF THE TRUSTEE Magnus Capital, Inc. Suite 180 4165 East Thousand Oaks Boulevard Westlake Village, CA 91362 Attention: Mr. Bruce Coleman First Interstate Bank of California is acting as trustee (the "Trustee") under and pursuant to the Indenture dated as of April 1, 1985 (the "Indenture") by and between the Trustee and the County of Contra Costa, California (the "County"). Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Purchase Contract described below. In connection with the execution of a Residual Assets Purchase Contract dated October 17, 1994 (the "Purchase Contract"), between the County and Magnus Capital, Inc. (the "Purchaser") pursuant to which and pursuant to the Authorized Officer's Certificate of the County dated the date hereof, the Trustee has been advised that the County has agreed to sell the County's Interest in the Residual Assets to the Purchaser, the Trustee hereby certifies and agrees with the County and the Purchaser as follows: 1. The Trustee is duly organized and validly existing under the laws of the State of California, with full corporate power and authority to serve as Trustee under the provisions of the Indenture. 2. The Trustee acknowledges receipt from the County of written notice to the effect that the County has sold the County's Interest in the Residual Assets to the Purchaser. The Trustee has, pursuant to the Authorized Officer's Certificate, on this date, received written notice from the County that the Trustee shall deliver to the Purchaser the Residual Assets held by the Trustee under the provisions of the Indenture as soon as practicable after the Date of Release, all in accordance with and subject to the provisions of Article X of the Indenture. By execution of this Certificate and Agreement, the Trustee hereby agrees to effect delivery of Residual Assets to the Purchaser on such Date of Release, all in accordance with and subject to the provisions of the Indenture and provided that the requirements of Article X of the Indenture have been met as specified therein. The Trustee acknowledges that the County has advised the Trustee that the directions of the County to deliver such Residual Assets to the Purchaser are irrevocable and further advised the Trustee that no further consents or approvals of governmental entities or resolutions of the County are required in connection with the delivery of such Residual Assets to the Purchaser. Upon delivery of the opinion of Special Counsel as set forth in Exhibit C to the Purchase Contract, the County will 01/115048.3 r certify to the Trustee that the obligation of the Trustee to deliver such Residual Assets to the Purchaser, upon compliance with the terms and conditions of the Indenture, is irrevocable and binding on the County. The Trustee understands and acknowledges that, until it delivers the Residual Assets to the Purchaser, it will hold, maintain and invest the assets in the Trust Estate pursuant to the Indenture. 3. The Trustee makes no representation or warranty as to legal title to or encumbrances upon the Residual Assets, including but not limited to, the Home Mortgages, other than that it has not, in its individual capacity, taken any action which would create a lien senior or equal in right to the Home Mortgages. 4. Attached hereto in Schedules I, II and III are true and correct descriptions (with annotations reflecting any changes from such date to Date of Release) of (a) the amounts held in the funds and accounts established under the Indenture, including a description of the interest and redemption provisions, maturity of any securities or investment of amounts held in such funds and accounts all as of the date hereof, (b) the principal amounts, maturities and interest rates of the Bonds, outstanding as of the date hereof under the provisions of the Indenture and any accrued but unpaid liabilities or any liabilities expected to arise on or before the Date of Release, and (c) the principal balances of the Home Mortgages as of October 17, 1994; provided, however, the information provided with respect to the Home Mortgages is provided in reliance upon information provided by the Servicers to the Trustee and the Trustee makes no representations or warranties with respect to such information. 5. As of the date hereof, the Trustee has not received any notice of any litigation pending or threatened against the Trustee contesting the validity of the Bonds or the Home Mortgages acquired with the proceeds of the Bonds or which attacks the validity of any action taken by the County or the Trustee in connection with such Home Mortgages and the sale of the County's Interest in the Residual Assets or which otherwise affects the validity of the Bonds or the ability of the County to perform its obligations to the holders of the Bonds or otherwise impairs or affects the value of the Residual Assets. 6. To the best knowledge of the Trustee, there are no current "Events of Default" under and pursuant to the provisions of Section 7.01 of the Indenture and the Trustee knows of no circumstances which, with the passage of time or the giving of notice or both, would constitute such an event of default under the provisions of the Indenture. 7. The Trustee, as trustee for the Bondholders, to its best knowledge, holds title to all of the Residual Assets free and clear of any and all liens, claims, liabilities or obligations of any kind or nature to any other party, except; (i) the obligations of the County to the holders of the Bonds; (ii) the claims of the Trustee for payment of any 01/115048.3 Al-2 expenses in accordance with the provisions of the Indenture; and (iii) the obligation to transfer the Residual Assets under the Indenture pursuant to the terms thereof. IN WITNESS WHEREOF, the Trustee, by its duly authorized officer, has hereunto set its hand as of this day of , 1994. FIRST INTERSTATE BANK OF CALIFORNIA, as Trustee t By Name Title 01/115048.3 Al-3 0 SCHEDULEI to Certificate and Agreement of the Trustee Funds and Accounts Held under the Indenture (As of October 17, 1994) 1985 Home Mortgage Revenue Bonds Fund or Account Name Amount Cost of Issuance Account $ Targeted Area Program Account Program Fund Developer Fee Refund Fund Revenue Fund Interest Fund Principal Fund Redemption Fund Program Expense Fund Capital Reserve Fund Nonmortgage Investment Income Fund (less Nonmortgage Investment Excess of $ ) 01/115048.3 Al-4 SCHEDULE III to Certificate and Agreement of the Trustee Home Mortgages Principal Balances as of October 17, 1994 Borrower Principal Balance 01/115048.3 Al-6 SCHEDULE II to Certificate and Agreement of the Trustee Debt Service Payment Schedule for the County of Contra Costa 1985 Home Mortgage Revenue Bonds Principal Date Amount Interest Total Accured Liabilities and Unpaid Liabilities to the Date of Release Date Owed Amount Owed 01/115048.3 Al-5 EXBEIBIT A-2 [County of Contra Costa Letterhead] 1994 First Interstate Bank of California Real Estate Financial Institutions 1055 Wilshire Boulevard 8th Floor Los Angeles, CA 90017 Attention: Eugenia Mouissat Re: County of Contra Costa, 1985 Home Mortgage Revenue Bonds Dear Ms. Mouissat: A bailee letter has been sent to you by First Interstate Bank of California, as trustee (the "Trustee") for the above-referenced bond issue. This letter is in furtherance of said bailee letter and the Custodial Agreement which you have entered into with Pacific Central Mortgage, Inc. ("Pacific")-with respect to the delivery of mortgage loan packages pending purchase of such mortgage loans by Pacific as Home Mortgage Assignee of Magnus Capital, Inc.: 1. You are hereby authorized to accept instructions from [Officer] of the County of Contra Costa (the "County") or his designee in writing, with respect to the mortgage loan packages that are being forwarded to you in your custodial capacity. The above person(s) for the County, or any one of them, are authorized persons to give you instructions on any of the matters relating to the above-referenced sale of mortgages. The Trustee is authorized to give instructions with respect to its respective submissions to you. 2. The County has not yet authorized the sale, transfer, assignment or disposition of the promissory notes and related documents and until(a) such authorization is given, (b) you have received written notice from the County that some or all of the promissory notes have been purchased by Pacific, and (c) the Trustee and the County have released all right title and interest in said promissory notes, the promissory notes and the related documents shall not be transferred to Pacific. 01/115048.3 3. If, by [DATE], 1994, you have not received the written notice described above covering said promissory notes, then those promissory notes and assumption documentation not purchased and released to Pacific shall be returned by you to the Trustee or to such other person or entity as the Trustee may instruct in writing. 4. You may, if requested by Pacific, review such loan documents for compliance with the Federal National Mortgage Association ("Fannie Mae") Custodial Agreement as instructed by Pacific and, for each loan package that complies, execute and deliver the Fannie Mae Custodial Agreement as instructed by Pacific. It is understood and agreed that you shall not complete the review and certification for any loan package that does not comply with the appropriate custodial agreement. You shall incur no liability in connection with any aspect of your review of any of the loan packages and your execution and delivery of either the Fannie Mae Custodial Agreement or the Freddie Mac Custodial Agreement, except in the case of gross negligence or willful misconduct on your part. If you have any questions regarding this, please contact , [Officer], at Very truly yours, cc: First Interstate Bank of California 01/115049.3 A2-2 EXHIBIT A-3 [First Interstate Bank of California Letterhead] October , 1994 First Interstate Bank of California Real Estate Financial Institutions 1055 Wilshire Boulevard 8th Floor Los Angeles, CA 90017 Attention: Eugenia Mouissat Re: Bailment for Home Mortgages Originated in Connection with County of Contra Costa, 1985 Home Mortgage Revenue Bonds Dear Ms. Mouissat: First Interstate Bank of California, as trustee (the "Trustee") for the County of Contra Costa's 1985 Home Mortgage Revenue Bonds, in accordance with an agreement between the County of Contra Costa (the "County") and the Purchaser (as defined below) under which Pacific Central Mortgage, Inc. ("Pacific") is the Home Mortgage Assignee, is sending to you the promissory notes and related assumption documentation, described in Attachment A attached hereto pending purchase of such loans by Magnus Capital, Inc. (the "Purchaser") pursuant to the Residual Assets Purchase Contract dated October 17, 1994 by and between the County and the Purchaser. Notes that are not included are listed on Attachment B. These documents are delivered to you in bailment for the Trustee on a conditional basis, subject to payment to the County by Pacific. Delivery is made to you upon the following conditions: 1. The Trustee is the owner of the promissory notes described above and assumption documentation and delivery to you shall in no way constitute a sale, transfer, assignment or disposition of any kind of said promissory notes by the Trustee or the County. 2. You are accepting said promissory notes and assumption documents as is and will perform no review, make no verification, warranty or representation of any kind with respect to any of the promissory notes or related documents delivered to you except as set forth herein. 01/115048.3 3. Until you receive written notice from the County and the Trustee that some or all of said promissory notes have been purchased by Pacific and that the Trustee and the County have released all right, title and interest in said promissory notes, you agree to return said promissory notes and all assumption documentation to the Trustee on demand. 4. You may, prior to receipt by you of written notice described in "3" above, if requested by Pacific, review such loan documents for compliance with the Federal National Mortgage Association ("Fannie Mae") Custodial Agreement as instructed by Pacific and for each loan package which complies, execute and deliver the Fannie Mae Custodial Agreement as instructed by Pacific. It is understood and agreed that you shall not complete the review and certification for any loan package which does not comply with the appropriate custodial agreement. As provided in the County's letters to you of even date herewith, you shall incur no liability in connection with any aspect of your review of any of the loan packages and your execution and delivery of either the Fannie Mae Custodial Agreement or the Freddie Mac Custodial Agreement, except in the case of gross negligence or willful misconduct on your part. 5. If, by [DATE], 1994, you have not received a written notice as described in "3" above covering all of said promissory notes, then those promissory notes and assumption documentation not purchased and released shall be returned by you to the Trustee or to such other person or entity as the Trustee may instruct you in writing. 6. You agree to hold said promissory notes and assumption documents separate and capable of identification. 7. You are authorized to act upon notice and instruction which you believe in good faith to have been given by a person duly authorized by the Trustee. Very truly yours, . FIRST INTERSTATE BANK OF CALIFORNIA By Name Title 01/115048.3 A3-2 EXHIBIT A-4 NOTICE TO CUSTODIAN Eugenia Mouissat, as Custodian This notice is given by the County of Contra Costa (the "County") to you as custodian pursuant to Section 3 of that certain letter agreement dated , 1994 (the "Bailee Agreement") between First Interstate Bank of California, as trustee (the "Trustee") for the County's 1985 Home Mortgage Revenue Bonds and you. You are hereby notified that all of the promissory notes.delivered to you pursuant to the Bailee Agreement have been purchased by Pacific Central Mortgage, Inc. and the County and the Trustee have released all right, title and interest in said promissory notes. Dated: 1994. COUNTY OF CONTRA COSTA By Name Title FIRST INTERSTATE BANK OF CALIFORNIA By Name Title 01/115048.3 EXHIBIT A-5 $58,999,782.20 (Original Aggregate Principal Amount) COUNTY OF CONTRA COSTA 1985 HOME MORTGAGE REVENUE BONDS CERTIFICATE OF CUSTODIAN We have received on the date set forth below the Notice to Custodian signed by an authorized officer of the County of Contra Costa and the Trustee with respect to the above referenced Bonds notifying us that all the Home Mortgages (promissory notes) delivered pursuant to the Bailee Agreement referred to in such Notice of Custodian have been purchased by Pacific Central Mortgage, Inc., and the Trustee has released all rights and interests thereto. We are prepared to release and transfer such promissory notes pursuant to the instructions of Pacific Central Mortgage, Inc., the purchaser thereof. Dated: 1994. FIRST INTERSTATE BANK OF CALIFORNIA, as Custodian By Name Title 01/115048.3 EXHIBIT B CERTIFICATE OF THE COUNTY RE: INCUMBENCY the duly appointed [Officer] of the County of Contra Costa, California (the "County"), do hereby certify and declare that: 1. The County is a legal subdivision and body corporate and politic of the State of California, duly created and existing under and by virtue of the laws of the State of California. 2. The County previously issued$58,999,782.20 original aggregate principal amount of its 1985 Home Mortgage Revenue Bonds (the "Bonds"), pursuant an Indenture dated as of April 1, 1985 (the "Indenture"), by and between the County and First Interstate Bank of California, as trustee (the "Trustee"). Such Indenture has not been rescinded, superseded or amended further and remains in full force and effect. 3. At its meeting on October , 1994, the Board of Supervisors of the County approved Resolution No. which, among other things, approved the execution by the County of the Residual Assets Purchase Contract, dated October 17, 1994 (the "Purchase Contract") providing for the sale of the County's Interest in the Residual Assets (as defined in the Purchase Contract). Resolution No. has not been rescinded, superseded or amended and remains in full force and effect. Dated: October 18, 1994. COUNTY OF CONTRA COSTA By Its 01/115048.3 EXHIBIT C-1 OPINION OF SPECIAL COUNSEL [Letterhead of Lofton, DeLancie & Nelson] October 18, 1994 County of Contra Costa Magnus Capital, Inc. Martinez, CA 4165 East Thousand Oaks Boulevard, Suite 180 Westlake Village, California 91362 First Interstate Bank Attention: Mr. Bruce Coleman of California San Francisco, CA Re: Sale of County's Interest in the Residual Assets of the County of Contra Costa 1985 Home Mortgage Revenue Bonds Ladies and Gentlemen: We have acted as Special Counsel to the County of Contra Costa (the "County") and are familiar with the sale by the County of certain rights to residual assets pursuant to a Residual Assets Purchase Contract dated October 17, 1994 (the "Purchase Contract"), with Magnus Capital, Inc. (the "Purchaser") and pursuant to which the County has sold the County's Interest in the Residual Assets identified in the Purchase Contract. Pursuant to the Purchase Contract, the County has sold the County's Interest in the Residual Assets to the Purchaser for a purchase price which includes Investment Securities (as defined in the Escrow Deposit Agreement below) and a cash payment to the Escrow Trustee (as defined below) and has executed an Escrow Deposit Agreement dated as of October 18, 1994 (the "Escrow Agreement") by and between the County and First Interstate Bank of California, as Escrow Trustee. Any capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Purchase Contract, and if not- defined in the Purchase Contract, the terms shall have the meanings set forth in the Indenture, defined below. The County issued $58,999,782.20 principal amount of its 1985 Home Mortgage Revenue Bonds (the "Bonds") pursuant to an Indenture dated as of April 1, 1985 (the "Indenture"), by and between the County and First Interstate Bank of California, as trustee (the "Trustee"). Pursuant to the authorization set forth in Resolution No. adopted by the members of the County on October , 1994 (the "Resolution"), the County has entered into the Purchase Contract, the Escrow Deposit Agreement and a Supplemental Indenture dated as of October 1, 1994 (the "Supplemental Indenture"). 01/115048.3 In connection with the delivery of this opinion, we have examined the Purchase Contract, the Escrow Deposit Agreement, the Supplemental Indenture, an Authorized Officer's Certificate dated of even date herewith, a Certificate of County dated of even date herewith (collectively, the "Closing Documents"), the Transcript of Proceedings for the Bonds, the verification report of , dated , 1994 and such other documents and information as we have considered necessary or appropriate. As to questions of fact which are material to this opinion, we have relied upon representations of the County and the certified proceedings and other certification of officers of the County without undertaking to verify through independent investigation the accuracy of the representations made or of the foregoing assumption. Based upon examination of the foregoing, and in reliance thereon, and on all matters of fact as we deem relevant under the circumstances, in our opinion: 1. The County is a legal subdivision and body corporate and politic of the State of California created and existing under and by virtue of the laws of the State of California.. 2. The Resolution has been duly adopted in accordance with the laws of the State of California and all rules applicable to the County, including, without limitation, all public meeting laws. The Resolution is in full force and effect on the date hereof. 3. The County has full legal right, power and authority; (i) to adopt the Resolution; (ii) to execute and deliver the Closing Documents; (iii) to sell, convey and deliver the County's Interest in the Residual Assets to the Purchaser; and (iv) to carry out the transactions contemplated by the Closing documents. 4. To the best of our knowledge, the County is not in breach of, or default under, any applicable law or administrative regulation of the State of California or the United States or any applicable judgment or decree under any loan agreement, indenture, note, resolution, agreement or other instrument to which the County is a party or is otherwise subject which breach or default would have a material adverse effect on the transactions contemplated by the Closing Document; and the adoption of the Resolution and the execution and delivery of the Closing Documents and compliance with the provisions thereof will not conflict with or constitute a breach of or default under any law, administrative regulations, judgment, decree, loan agreement, indenture, note, resolution, agreement or other instrument to which the County is a party of is otherwise subject. 5. To the best of our knowledge, there is no litigation pending or threatened against the County contesting the validity of the Bonds or the residential mortgage program established with the proceeds of the Bonds or which attacks the validity of any action taken by the County or the Trustee in connection with the residential mortgage program, or with the authorization, execution and delivery of the Closing Documents and the sale of the County's Interest in the Residual Assets or which otherwise effects the 01/115048.3 C 1-2 validity of the Bonds or the ability of the County to perform its obligations to the holders of the Bonds or otherwise affects the Residual Assets. 6. To,the best of our knowledge, there is no current "event of default" by the County under the Indenture and the undersigned knows of no circumstances which, with the passage of time or the giving of notice or both, would constitute such an event of default under the provisions of the Indenture. 7. The County has duly authorized and approved the execution and delivery of, and the performance of the County's obligations under, the Closing Documents. Such Closing Documents to which the County is a party have been validly executed by the County, and are the valid and binding obligations of the County, enforceable against the County in accordance with their terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditor's rights generally and to the exercise of judicial discretion in accordance with general principles of equity. 8. The County has complied with all applicable laws required to be complied with to consummate the transaction contemplated by the Closing Documents. Upon execution of the Escrow Deposit Agreement and the delivery of the Defeasance Escrow (as to the sufficiency of which we express no opinion), initially to the Trustee and immediately thereafter to the Escrow Trustee in an amount sufficient to provide (i) the full payment of scheduled principal of and interest on the Bonds as they fall due to their respective maturities in a timely fashion as established in the Escrow Deposit Agreement, and (ii) defease the lien of the Indenture and the Bonds upon the Residual Assets will be discharged and satisfied in accordance with Article X of the Indenture; the County is entitled to receive all money, property and securities held by the Trustee constituting the Residual Assets as defined in the Purchase Contract (including all right, title and interest in the Home Mortgages) free and clear of any trust, lien or pledge of the Indenture, and all obligations of the County under the Indenture with respect to payment of the Bonds from the Revenues described therein shall cease, terminate and be discharged and satisfied, and the owners thereof shall thereafter be entitled only to payment out of any Investment Securities and funds deposited with the Escrow Trustee in the Escrow Account and the investment earnings thereon as provided in the Escrow Agreement. All conditions required for the defeasance of the aforementioned lien on the Residual Assets have been satisfied in accordance with Article X of the Indenture. No further action on the part of the County needs to be taken under state or local law or under the Indenture and no further consents or approvals are necessary on the part of the County to transfer title to and to make delivery of such Residual Assets to the Purchaser or its designee on the Date of Release. 9. The County has legally and validly sold the County's Interest in the Residual Assets to the Purchaser and all actions of the County necessary to effectuate such sale thereof with the Purchaser has been taken in accordance with the laws of the State of California, the Indenture and all other laws and rules and regulations applicable 01/115049.3 C1-3 to the transaction. The transfer of the County's Interest in the Residual Assets to the Purchaser is irrevocable and binding on the County. 10. Pursuant to the Purchase Contract, the County has undertaken and completed all steps necessary to comply with the loan forgiveness provisions of Section 6.10(H) of the Indenture thereby terminating any additional or subsequent rights the Mortgagors may have had to enforce the provisions of Section 6.10(H) of the Indenture. 11. The defeasance of the Bonds in the manner contemplated by the Escrow Agreement is permitted under the terms of the Indenture and the Bonds have been defeased pursuant thereto. 12. The transactions contemplated by the Defeasance Documents do not, in and of themselves, affect the exemption from State of California personal income taxes of interest on the Bonds. This opinion may be relied upon only by you as to matters contained herein and may not be circulated, quoted from or relied upon by any party or for any other purpose without prior written consent. Very truly yours, 01/115048.3 C1-4 EXHIIBIT C-2 OPINION OF SPECIAL TAX COUNSEL [Letterhead of Kutak Rock] October 18, 1994 County of Contra Costa Magnus Capital, Inc. Martinez, CA 4165 East Thousand Oaks Boulevard, Suite 180 Westlake Village, California 91362 First Interstate Bank Attention: Mr. Bruce Coleman of California San Francisco, CA Re: Sale of County's Interest in the Residual Assets of the County of Contra Costa 1985 Home Mortgage Revenue Bonds Ladies and Gentlemen: We have acted as Special Tax Counsel to the County of Contra Costa (the "County") and are familiar with the sale by the County of certain rights to residual assets pursuant to a Residual Assets Purchase Contract dated October 17, 1994 (the "Purchase Contract"), with Magnus Capital, Inc. (the "Purchaser") and pursuant to which the County has sold the County's Interest in the Residual Assets identified in the Purchase Contract. Pursuant to the Purchase Contract, the County has sold the County's Interest in the Residual Assets to the Purchaser for a purchase price which includes Investment Securities (as defined in the Escrow Deposit Agreement below) and a cash payment to the Escrow Trustee (as defined below) and has executed an Escrow Deposit Agreement dated as of October 18, 1994 (the "Escrow Agreement") by and between the County and First Interstate Bank of California, as Escrow Trustee. Any capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Purchase Contract, and if not defined in the Purchase Contract, the terms shall have the meanings set forth in the Indenture, defined below. The County issued $58,999,782.20 principal amount of its 1985 Home Mortgage Revenue Bonds (the "Bonds"), pursuant to an Indenture dated as of April 1, 1985 (the "Indenture"), by and between the County and First Interstate Bank of California, as trustee (the "Trustee"). Pursuant to the authorization set forth in Resolution No. adopted by the members of the County on October , 1994 (the "Resolution"), the County has entered into the Purchase Contract, the Escrow Deposit Agreement and a Supplemental Indenture dated as of October 1, 1994 (the "Supplemental Indenture"). 01/115048.3 In connection with the delivery of this opinion, we have examined the Purchase Contract, the Escrow Deposit Agreement, the Supplemental Indenture, an Authorized Officer's Certificate dated of even date herewith, a Certificate of County dated of even date herewith, a letter from the Purchaser of even date herewith (collectively, the "Closing Documents"), the Transcript of Proceedings for the Bonds, the verification report of , dated , 1994 the opinion of Lofton, DeLancie & Nelson, Special Counsel to the County, of even date herewith and such other documents and information as we have considered necessary or appropriate. As to questions of fact which are material to this opinion, we have relied upon representations of the County and the certified proceedings and other certification of officers of the County without undertaking to verify through independent investigation the accuracy of the representations made or of the foregoing assumption. Based upon examination of the foregoing, and in reliance thereon, and on all matters of fact as we deem relevant under the circumstances, in our opinion the transactions contemplated by the Closing Documents do not, in and of themselves, adversely affect the excludability of interest on the Bonds from gross income for federal income tax purposes under the Internal Revenue Code of 1954, as amended. We express no opinion as to whether interest on the Bonds is now, or will be in the future, excluded from gross income for federal income tax purposes. This opinion may be relied upon only by you as to matters contained herein and may not be circulated, quoted from or relied upon by any party or for any other purpose without prior written consent. Very truly yours, 011115048.3 C2-2 EXHIBIT D AUTHORIZED OFFICER'S CERTIFICATE (DIRECTIONS FROM COUNTY TO TRUSTEE) To First Interstate Bank of California, acting as trustee (the "Trustee") under and pursuant to the provisions of an Indenture, dated as of April 1, 1985, by and between the County of Contra Costa (the "County") and the Trustee, authorizing the issuance of $58,999,782.20 aggregate original principal amount of its 1985 Home Mortgage Revenue Bonds (the "Bonds"). Any terms used herein and not otherwise defined shall have the meanings set forth in the Purchase Contract described below): In connection with the execution of a Residual Assets Purchase Contract dated October 17, 1994 (the "Purchase Contract"), by and between the County and Magnus Capital, Inc. (the "Purchaser") pursuant to which the County has agreed to sell the County's Interest in the Residual Assets, the County is delivering this Officer's Certificate to the Trustee. In accordance with the provisions of the Indenture, the County, by its duly authorized officers, hereby directs you, as Trustee, as follows: 1. (a) You shall execute the Certificate and Agreement of the Trustee and the Escrow Deposit Agreement as Escrow Trustee and (b) you shall deliver the Residual Assets to the Purchaser upon the receipt by you of (i) the Defeasance Escrow described in the Escrow Deposit Agreement (and related fees of the Escrow Trustee), (ii) the opinions of Lofton, DeLancie & Nelson and Kutak Rock, in the forms of Exhibit C-1 and C-2 to the Purchase Contract, (iii) the Escrow Deposit Agreement executed by the County and (iv) payment of the Trustee's fees and costs. You are also instructed to pay the debt service on the Bonds as it is set forth in the Escrow Deposit Agreement. 2. The direction of the County set forth in paragraph 1 above is irrevocable and binding on the County. No further consents or approvals are required in connection with the delivery of such Residual Assets to the Purchaser. The Bond Insurer has been paid all fees and expenses to which it is entitled. 3. You shall be entitled to rely upon additional directions or certificates received from the Purchaser (provided such directions relate to the transfer of the Residual Assets) with the full force and effect as if such directions or certificate were included within this Authorized Officer's Certificate. 011115048.3 4. You shall not rely upon any additional Authorized Officer's Certificate delivered to you under the provisions of the Purchase Contract unless such certificate shall have been approved, in writing, by the Purchaser. Dated: October 1994. COUNTY OF CONTRA COSTA By Its 01/115048.3 D-2 EXHIBIT E CERTIFICATE OF PURCHASER In connection with the sale by the County of Contra Costa (the "County") of all the County's Interest in the Residual Assets (as the term is defined in the Purchase Contract) (hereinafter referred to as the "Residual Assets") to Magnus Capital, Inc. (the "Purchaser") the undersigned hereby confirms that it is this day purchasing the County's Interest in the Residual Assets pursuant to the provisions of a Residual Assets Purchase Contract dated October 17, 1994 (the "Purchase Contract"), by and between the County and the Purchaser. (Any term used herein and not defined shall have the meaning given to it under the Purchase Contract.) In consideration of the authorization and sale of the County's Interest in the Residual Assets by the County to the Purchaser, the undersigned on behalf of the Purchaser hereby represents and warrants that: 1. The undersigned is an authorized representative of the Purchaser with the power and authority to execute and deliver this certificate. 2. The undersigned has such knowledge and experience in financial matters that it is capable of evaluating the merits and risks of purchasing the County's Interest in the Residual Assets. The undersigned is able to bear the economic risk of purchase of the County's Interest in the Residual Assets and the undersigned is an accredited investor as defined in Regulation D under the Securities Act of 1933. 3. During the course of the transaction prior to the sale of the County's Interest in the Residual Assets, the undersigned has received and reviewed copies of (a) the Indenture, (b) the Resolution, (c) the Purchase Contract, (d) the Certificate and Agreement of the Trustee as required by Exhibit A-1 of the Purchase Contract, (e) the Certificate of the County as required by-Exhibit B of the Purchase Contract, (f) the opinions of Special Counsel and Special Tax Counsel to the County as required by Exhibit C-1 and Exhibit C-2 of the Purchase Contract and (g) such other documents, certificates and opinions as we have considered necessary or appropriate. 4. During the course of the transaction prior to the sale of the County's Interest in the Residual Assets, the undersigned has been afforded the opportunity to ask questions of Lofton, DeLancie & Nelson, as special counsel to the County ("Special Counsel"), and Kutak Rock, as special tax counsel to the County ("Special Tax Counsel"), concerning the terms and conditions of the Closing Documents identified in paragraph 3 above (the "Closing Documents") and has been afforded the opportunity to examine information and documents relating to, and to ask questions concerning the County's 1985 Home Mortgage Revenue Bonds (the "Bonds") and the program financed thereby (the "Program") and the existing Residual Assets, as defined in the Purchase Contract. The undersigned understands that Special Counsel and Special Tax Counsel 01/115048.3 have not been requested to undertake, and has not undertaken, to ascertain the accuracy or completeness of any statements made in, or concerning, any of the information or documents relating to the operations, financial conditions or future prospects of the Program and the Residual Assets, including that provided to the undersigned, and the undersigned has not relied upon Special Counsel or Special Tax Counsel for such purposes. 5. To the best of its knowledge, the undersigned has received all necessary information with respect to the Program and the Residual Assets in order to purchase the County's Interest in the Residual Assets. The undersigned has made its investigation of the Program and the Residual Assets, and it has had access during the course of the transaction and prior to the sale of the County's Interest in the Residual Assets to such information as it deemed necessary relative to the Program and the Residual Assets to permit it to make a fully informed decision to purchase the County's Interest in the Residual Assets and although the undersigned has relied upon the representations, warranties, covenants, reports, certificates, agreements and opinions contained in the Closing Documents, it has not relied upon the County or Special Counsel to make any investigation of the Program or the Residual Assets in connection with its decision to purchase the County's Interest in the Residual Assets. 6. The Closing Documents have been approved by the undersigned and contain term s,agreed to by the undersigned. 7. The undersigned is an institutional investor. We have purchased the County's Interest in the Residual Assets based upon the representations and information in the Closing Documents. 8. The undersigned acknowledges that it has read the opinion of the Special Counsel regarding the sale of the County's Interest in the Residual Assets. 9. The undersigned represents that it has examined the Home Mortgages and that none of the Home Mortgages or the deeds of trust related thereto contain any provision, whether in the bodies thereof or in riders thereto, relating to the "forgiveness" of such Home Mortgages upon the payment in full of the Bonds except as set forth in the Purchase Contract and the Indenture and that due provision has been made to satisfy those provisions of the Purchase Contract. Dated: October 18, 1994. MAGNUS CAPITAL, INC. By 01/115048.3 E-2 i EXIHBIT F [Letterhead of Purchaser] 1994 County of Contra Costa Martinez, CA Kutak Rock Washington, D.C. Re: Purchase of Residual Assets Under the Indenture Securing the County of Contra Costa, 1985 Home Mortgage Revenue Bonds Ladies and Gentlemen: You have asked us to provide information and representations concerning the market prices of certain securities that we have provided and certain securities that we have purchased in connection with the sale by the County of certain rights to residual assets pursuant to a Residual Assets Purchase Contract dated October 17, 1994 (the "Purchase Contract") with Magnus Capital, Inc. regarding the County of Contra Costa 1985 Home Mortgage Revenue Bonds (the "Bonds"). The securities that we sold the County consist of certain U.S. Government obligations and Resolution Funding Corporation - interest only strips (the "Escrow Securities") that will be deposited by the County in an escrow fund '(the "Escrow Account"), the principal and interest on which will be used to pay the remaining principal and interest on the Bonds. The securities that we purchased from the County consist of certain Home Mortgages and certain short term investments (the "Liquidated Securities") that were acquired by the County with the proceeds of the Bonds. The amounts derived by the County from the sale of the Liquidated Securities will be used to purchase the Escrow Securities. We understand that you are relying in part on the information and representations contained herein in ascertaining on behalf of the bondholders that the restructuring and defeasance of the Bonds will not adversely affect the exclusion of the interest thereon from gross income for federal income tax purposes under Section 103(a) of the Internal Revenue Code of 1954, as amended. In connection with our purchase of the Liquidated Securities, we represent that: 1. The prices of the securities that we purchased from the County were determined in an arms' length transaction. 2. The prices of the securities were determined without regard to any intent to reduce the yield that our firm realized on such securities. 011115048.3 1 3. The prices of the securities purchased from the County are no higher or lower than the prices we would have paid to our good institutional customers selling a similar quantity of such securities at the time of the execution of the trade. In connection with the purchase of the Escrow Securities on behalf of the County and the deposit thereof by the County into the Escrow Account, we represent that: 1. The prices of the securities that purchased on behalf of the County were determined in an arms' length transaction. 2. The prices of the Escrow Securities were determined without regard to any intent to increase the yield on such securities to the County. 3. The prices of the Escrow Securities are no higher or lower than the prices we would have charged to our good institutional customers purchasing a similar quantity of such securities at the time of the execution of the trade. MAGNUS CAPITAL, INC. By 01/115048.3 F-2 L E7HMIT G NOTIFICATION TO SERVICERS, COMPLIANCE AGENT AND ADMINISTRATOR [First Interstate Bank of California Letterhead] 1994 [Name of Servicers, Compliance Agent and Administrator] [Address] Re: Termination of Origination, Service and Administration Agreement for County of Contra Costa 1985 Home Mortgage Revenue Bonds Dear The County of Contra Costa (the "County") is restructuring the above-referenced bond issue (the "Bonds"). In connection with this restructuring, the County will sell the mortgage loans securing the Bonds (the "Home Mortgages") to Magnus Capital, Inc. (the "Purchaser") on or about October 18, 1994. The Origination, Service and Administration Agreement dated as of May 15, 1985 (the "Servicing Agreement") will not be assigned to the Purchaser and such Servicing Agreement shall terminate effective on October 18, 1994. Accordingly, pursuant to Section 16(1) of the Servicing Agreement, this letter serves as (i) notice to you of the sale of the Home Mortgages and the defeasance in whole of the Bonds; (ii) youracknowledgement of the termination of the Servicing Agreement; (iii) your acknowledgement that upon the sale of the Home Mortgages and the defeasance of the Bonds all of:your rights and obligations under the Servicing Agreement with respect to the Home Mortgages shall terminate; (iv) your acknowledgement to cooperate with the Purchaser in the transfer of Home Mortgages; and (v) your agreement to forward all necessary documents and files with regard to the Home Mortgages to the Purchaser and [in the case of each Servicer] to complete the attached Certificate and Agreement of Servicers as soon as practicable following the sale of the Home Mortgages. 01/115048.3 In addition, in connection with this termination, please advise all borrowers at least fifteen (15) days prior to , 1994, pursuant to RESPA, that their , 1994 payment should be made to the new servicer, Pacific Central Mortgage, Inc.. Very truly yours, COUNTY OF CONTRA COSTA By Name Title AGREED AND ACKNOWLEDGED this day of , 1994 [Name of Servicers] [Name of Compliance Agent] [Name of Administrator] By Name Title cc: 01/115048.3 G-2 Y EXHIBIT H CERTIFICATE AND AGREEMENT OF SERVICERS TRANSFEROR: TRANSFEREE: Pacific Central Mortgage, Inc. TRUSTEE: First Interstate Bank of California DATED: October 18, 1994 EFFECTIVE DATE: Close of business on October 18, 1994 By execution of this Certificate and Agreement of Servicers, the Transferor named above agrees to comply with and perform the transfer and procedures as described below for the loans identified on Exhibit A. Portfolio Accounting The Transferor shall prepare and distribute the following accounting reports and records regarding the servicing portfolio to be transferred on the Effective Date. A. A final trial balance which will be sent to the Transferee. The trial balance must provide loan-level detail, which includes the assigned loan number (monthly) payment for impounds, fixed installment of principal and interest, unpaid principal balance, pass-through interest rate, mortgage interest rate, due date of last paid installment, deposit balance for taxes and insurance, and, if applicable, an unapplied funds. B. The final monthly accounting reports which may apply other loans included in the Servicing Portfolio shall be sent to the Transferee. Accounting Report for the final month will include: — Loan Activity Report — Remittance Reports — Loan Address and Name Changes — Monthly Payment/Rate Changes — Detail Schedule of Special Remittances — Listing of Delinquent Loans — Loan Removal of Status Report 01/115048.3 Final Disposition and Reconciliation of Funds The Transferor shall remit the funds due to the Trustee for the final accounting period (in accordance with established remittance schedule) for all loans included in the Servicing Portfolio transfer. After the Transferor makes the final monthly remittances, the Transferor shall draw a check for the total of the tax, insurance and unapplied impound funds payable to the Transferee and forward it with the Transferee's copy of the accounting reports to the Transferee. The Transferor shall reconcile the custodial accounts and make any necessary adjustments, sending documentation to the Transferee and the transferee as part of the account reports to the Transferee. The Transferor shall instruct the borrowers, beginning with the November 1, 1994 payment, by letter in the form attached, to direct questions and payments to the Transferee, sending the Transferee a copy of each letter. The Transferor shall promptly forward to the Transferee all payments received after the Effective Date, and include a list itemizing payments by loan number. The Transferor shall endorse the check payments to the Transferee and issue a check for payments received in cash. The Transferor shall not authorize any expenditures or disburse any funds for loans involved in this transfer after the Effective Date without the Transferee's approval. The Transferor will transmit the following to the Transferee within two working days after the transfer date: The mortgagors' hazard insurance policies together with a certification that all related premiums have been paid. Individual mortgagor ledgers or histories, showing all entries since the inception of the loan as well as any and all related documents recording delinquent account collection activity. All credit, processing, closing and funding documents and notes in the Transferor's possession related to each loan in the servicing portfolio; the loan file, including tax contract, etc. A list showing any investor and servicing loan number and the attorney's name and address of those loans in process of assignment, foreclosure, bankruptcy or deed in lieu of foreclosure. If the custody and all other documents are not attached, the list must indicate who is in possession of the original Note and insurance/guaranty certificate. The files for these should be transmitted as required above. A list of loans, in loan number order, including all Real Estate Tax Parcel Identification numbers loan by loan. 01/115048.3 H-2 T 1 A list of all FHA mortgages, showing the FHA case number, and name of mortgagor. In addition, provide a separate list of any of those mortgages in process of foreclosure, deed in lieu of foreclosure, or property disposition. The Mortgage Record Change'(Form HUD 92080) with the appropriate blocks completed for each FHA-insured Mortgage in the Servicing Portfolio. Release of Servicing Transferor acknowledges that as of the date above that the Transferee has acquired the mortgage loans, and as of such date the Transferor shall have no further right or interest in servicing the mortgage loans, nor is it due any further compensation therefor. TRANSFEREE: TRANSFEROR: Pacific Central Mortgage, Inc. Dated: Dated: CERTIFICATION BY THE TRANSFEROR The requirements set forth in these instructions have been accomplished and all appropriate items have been forwarded to the Transferee as of TRANSFEROR: By Dated 01/115048.3 H-3 EXHIBIT I $58,999,782.20 (Original Aggregate Principal Amount) COUNTY OF CONTRA COSTA 1985 HOME MORTGAGE REVENUE BONDS ESCROW TRUSTEE'S RECEIPT OF FUNDS The undersigned hereby certifies and declares that: 1. I am an authorized officer of First Interstate Bank of California, as escrow trustee (the "Escrow Trustee") under that certain Escrow Deposit Agreement dated as of October 18, 1994 (the "Escrow Deposit Agreement") by and between the County of Contra Costa (the "County") and the Escrow Trustee. 2. On the date hereof, the Escrow Trustee received the Defeasance Escrow (which is described in Schedule B of the Escrow Deposit Agreement) from the Purchaser representing a portion of the Purchase Price for the purchase of the County's Interest in the Residual Assets. 3. The Defeasance Escrow received by the Escrow Trustee will be held under the.Escrow Deposit Agreement and applied in accordance therewith for the payment of the principal of and interest on the Bonds as set forth therein. 4. All terms used herein and not defined shall have the meaning set forth therefore in the Residual Assets Purchase Contract dated October 17., 1994 between Magnus Capital, Inc. and the County. Dated: October 18, 1994. FIRST INTERSTATE BANK OF CALIFORNIA, as Escrow Trustee By Name Authorized Officer 011115048.3 40 EXHIBIT J $58,999,782.20 (Original Aggregate Principal Amount) COUNTY OF CONTRA COSTA 1985 HOME MORTGAGE REVENUE BONDS RECEIPT OF THE COUNTY FOR PURCHASE PRICE I, [Officer] of the Board of Supervisors of the County of Contra Costa (the "County"), hereby certify and declare that: 1. I am the duly qualified and acting [Officer] of the County and as such, I am familiar with the facts certified herein and authorized to certify the same. 2. I hereby acknowledge receipt on the date hereof of $ from the Purchaser as a portion of the purchase price (the "Purchase Price") for the County's Interest in the Residual Assets. 3. Upon receipt by the Escrow Trustee of the Defeasance Escrow described in Section 1 of the Purchase Contract, the Purchase Price has been paid in full. 4. All terms used herein and not otherwise defined shall have the meaning set forth in the Residual Assets Purchase Contract dated October 17, 1994 between Magnus Capital, Inc. and the County. Dated: 1994. COUNTY OF CONTRA COSTA By Its "S 01/115048.3 e EXHIBIT K ESTIMATED FEES AND EXPENSES County Fees and Expenses Trustee's Counsel $ Trustee/Escrow Trustee Fee Special Counsel Special Tax Counsel Total $ Purchaser Fees and Expenses Servicers' Termination Fee/Transfer Costs $ Accountant's Verification Rating County Purchaser's Counsel Home Mortgage Assignee's Counsel Total $ 01/115048.3. DRAFT KUTAK ROCK 10/06/94 ESCROW DEPOSIT AGREEMENT County of Contra Costa 1985 Home Mortgage Revenue Bonds This ESCROW DEPOSIT AGREEMENT, dated as of October 18, 1994, is by and between the County of Contra Costa (the "County"), and First Interstate Bank of California, as Escrow Holder (the "Escrow Holder"). WITNESSETH: WHEREAS, the County has previously authorized and issued obligations of the County, as hereinafter defined as the "Defeased Bonds," as to which the current Debt Service (as hereinafter defined) is set forth on Schedule A-2 hereto; and WHEREAS, the County has determined to provide for payment of the Escrow Requirement (as hereinafter described) by causing to be deposited with the Escrow Holder, pursuant to the provisions hereof, cash and certain federal securities (hereinafter referred to as the "Escrow Obligation" or "Investment Securities") the principal of and interest on which will be sufficient to pay such Escrow Requirement as it shall become due; and WHEREAS, the County will receive the Escrow Obligation, together with an additional cash payment, from the Purchasers (as hereinafter defined) in exchange for the transfer by the County, on the date hereof, of the Residual Assets (as defined herein); and WHEREAS, in reliance upon the verification of Causey, Demgen & Moore (the form of which is attached hereto as Exhibit 1), the County has determined that the amount on deposit from time to time in,the Escrow Account (as hereinafter defined), together with the earnings to accrue thereon, will be sufficient to pay the Escrow Requirement. NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS AND AGREEMENTS HEREIN CONTAINED, THE COUNTY AND THE ESCROW HOLDER AGREE, as follows: Section 1. Definitions. As used herein, the following terms mean: "Agreement" means this Escrow Deposit Agreement, as supplemented and amended according to the terms hereof. "Cost of Issuance" means the fund established and held by the Escrow Holder pursuant to this Agreement, in which cash will be held for payment of the costs relating 01/115524.2 to this transaction and the transaction contemplated by the Purchase Contract as set forth in Exhibit 2 attached hereto. "Debt Service" means, on any date, the principal of and interest on the Defeased Bonds coming due as shown in Schedule A-2 attached hereto. "Defeased Bonds" means the County's Outstanding 1985 Home Mortgage Revenue Bonds, identified in Schedule A-1 hereto. "Escrow Account" means the account established and held by the Escrow Holder pursuant to this Agreement, in which cash and Investment Securities will be held for payment of the Defeased Bonds. "Escrow Obligations" shall mean the Investment Securities. "Escrow Requirement" means, as of any date of calculation, because Expenses have been otherwise provided for, an amount which will be sufficient to pay, as the installments become due, the Debt Service as set forth in Schedule A-2 attached hereto. "Expenses" means the expenses set forth in a letter agreement of the Escrow Holder and the County. "Indenture" means the Indenture dated as of April 1, 1985, pursuant to which the Defeased Bonds were issued. "Investment Securities" means any of the following but in each case direct, non- callable and not subject to prepayment direct obligations of, or obligations unconditionally guaranteed as to full and timely payment of principal and interest by, the United States of America, including the interest component of Resolution Funding Corporation ("REFCORP") bonds for which the underlying bond is non-callable before the due date of such interest component. Investment Securities shall not include money market mutual funds or unit investment trusts. "Paying Agent" shall mean the paying agent, registrar and transfer agent under the Indenture. "Purchase Contract" means the "Residual Asset Purchase Contract" dated as of October 17, 1994 by and between the County and the Purchasers relating to the sale of the Residual Assets as defined therein. "Purchasers" shall mean Magnus Capital, Inc., as representative of the purchasers, or their successors. 01/115524.2 2 "Resolution" means Resolution No of the County of Contra Costa duly adopted by the County on October , 1994, as amended and supplemented from time to time, authorizing the purchase Contract and this Agreement. "Residual Assets" shall mean any and all property (including all existing Home Mortgages, as defined in the Indenture, and all funds held under the Indenture) that the County is to receive pursuant to the provisions of the Indenture upon the defeasance of the Bonds assigned or otherwise conveyed pursuant to the provisions of the Purchase Contract and the directions from the County to the Trustee regarding the transfer of Residual Assets of even date herewith, including the interest earnings to be derived from the reinvestment of the maturing amount of principal and interest of Investment Securities deposited in the Escrow Account. Residual Assets do not include the Nonmortgage Investment Income Fund to the extent of the Nonmortgage Investment Excess (as such terms are defined in the Indenture). Section 2. Deposit of Funds. Pursuant to the Purchase Contract, the County hereby acknowledges receipt of and agrees to irrevocably deposit into the Escrow Account the Investment Securities (set forth in Schedule B-1 attached hereto) together with such funds, which when applied pursuant to Section 3 below, will at least provide for the Escrow Requirement as of the date of such delivery. The funds held in this Escrow shall be held in escrow, separate from any other funds of the Escrow Holder and held exclusively for the benefit of the holders of the Defeased Bonds. The County hereby designates this Agreement the Certificate of the County required by Section 10.01(1) of the Indenture signifying the intention of the County to discharge the Indenture and the indebtedness secured thereby. Section 3. Use and Investment of Funds. The Escrow Holder agrees: (a) To deposit and hold the Investment Securities and funds in irrevocable escrow during the term of this Agreement and not to permit any substitution of any such Investment Securities without receiving, prior to such substitution, (i) written confirmation from Moody's Investors Service and Standard and Poor's Corporation of the rating on the Defeased Bonds, (ii) a verification report of a certified public accountant in substantially the form attached hereto as Exhibit 1 verifying that the cash flow from such substitute Investment Securities (together with the cash flow from all other Investment Securities and cash held in the Escrow Account) is sufficient to pay all amounts payable hereunder when due and (iii) an opinion of counsel acceptable to the Trustee to the effect that such substitution will not adversely affect the exclusion from gross income for purposes of federal income taxation of interest on the Bonds; (b) To deposit in the Escrow Account, as received, the receipts of maturing principal of and interest on the Investment Securities in the Escrow Account; (c) To reinvest but not at a yield in excess of %, to the extent practicable, upon receipt, any maturing principal and interest of Investment Securities 011115524.2 3 until needed for the next Escrow Requirement, in Investment Securities as directed in writing by the Purchasers. In the absence of such direction, the Escrow Holder shall hold such funds uninvested; (d) To remit upon receipt any earnings derived pursuant to (c) above to the Purchasers; and (e) To establish and deposit in the Cost of Issuance Fund $[AMOUNT] received from the Purchasers to pay a portion of the Cost of Issuance relating to this transaction. Upon receipt of such funds, the Escrow Holder shall pay to the parties specified in Exhibit 2 the amounts specified therein (and shall pay to such other parties, or such other amounts, as are specified in a separate direction to the Escrow Holder signed by or on behalf of the County). Section 4. Payment of Defeased Bonds. (a) Defeased Bonds. Not later than 12:00 noon (Pacific Standard Time) on the business day of the Escrow Holder prior to each Interest Payment Date for the Defeased Bonds, the Escrow Holder shall pay, in immediately available funds, to the Paying Agent for the Defeased Bonds, from the cash on hand in the Escrow Account, a sum sufficient to pay the Debt Service for the Defeased Bonds coming due on such date, as shown on Schedule B-2 hereto. - (b) Priority of Payments. The Investment Securities are irrevocably pledged to the payment of principal and interest on the Defeased Bonds and are not subject to any lien for Expenses. The holders of the Defeased Bonds shall have an express first lien on the cash and the Investment Securities in the Escrow Account until such funds and Investment Securities are used and applied as provided in this Agreement. Section 5. No Redemption or Acceleration of Maturity. The County will not accelerate the maturity or due date of the Defeased Bonds, except to make Mandatory Sinking Account Payments required by the Indenture. The County hereby waives any right it has to redeem the Defeased Bonds pursuant to Section 4.02(C) of the Indenture. Cash held by the Trustee on the date of this Agreement shall not be used to redeem Bonds but shall instead be treated as an element of the Residual Assets. Section 6. Responsibilities of Escrow Holder. (a) The Escrow Holder undertakes to perform only such duties as are expressly and specifically set forth in this Agreement and no implied duties or obligations shall be read into this Agreement relative to the Escrow Holder. (b) The Escrow Holder shall not have any liability hereunder except to the extent of its own negligence or willful misconduct. In no event shall the Escrow Holder be liable for any special, indirect or consequential damages, even if the Escrow Holder or the County know(s) of the possibility of such damages. The Escrow Holder shall have no duty or responsibility 01/115524.2 4 under this Agreement in the case of any default in the performance of the covenants or agreements contained in the Indenture. The Escrow Holder is not required to resolve conflicting demands to money. or property in its possession under this Agreement. (c) The Escrow Holder may consult with counsel of its own choice (which may be counsel to the County or special counsel) and the opinion of such counsel shall be full and complete authorization to take or suffer in good faith any action hereunder in accordance with such opinion of counsel. (d) The Escrow Holder shall not be responsible for any of the recitals or representations contained herein or in the Indenture. (e) The Escrow Holder may become the owner of, or acquire an interest in, any of the Defeased Bonds with the same rights that it would have if it were not the Escrow Holder, and may engage or be interested in any financial or other transaction with the County. (f) The Escrow Holder shall not be liable for the accuracy of any calculations provided as to the sufficiency of the moneys or Investment Securities deposited with it to pay the principal, interest, or premiums, if any,.on the Defeased Bonds. (g) The Escrow Holder shall not be liable for any action or omission of the County under this Agreement or the Indenture. (h) _ Whenever in the administration of this Agreement the Escrow Holder shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or willful misconduct on the part of the Escrow Holder be deemed to be conclusively proved and established by a certificate of an authorized representative of this County and such certificate shall, in the absence of negligence or willful misconduct on the part of the Escrow Holder be full warrant to the Escrow Holder for any action taken or suffered by it under the provisions of this Agreement upon the faith thereof. (i) The Escrow Holder may conclusively rely, as to the truth and accuracy of the statements and correctness of the opinions and the calculations provided to it in connection with this Agreement, and shall be protected in acting, or refraining from acting, upon any written notice, instruction, request, certificate, document or opinion furnished to the Escrow Holder in connection with this Agreement and reasonable believed by the Escrow Holder to have been signed or presented by the proper party, and it need not investigate any fact or matter stated in such notice, instruction, request, certificate, document or opinion. (j) The County agrees to indemnify the Escrow Holder, its agents and its officers or employees, and hold the Escrow Holder, its agents, officers or employees, harmless, from and against any and all liabilities, obligations, losses, damages, penalties, actions,judgments, duties, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without 01/115524.2 5 limitation, reasonable fees and disbursements of counsel for the Escrow Holder) which may be imposed on, incurred by, or asserted against the Escrow Holder at any time by reason of the performance of its duties as Escrow Holder in any transaction arising out of this Agreement or the Indenture, or any of the transactions contemplated herein or in the Indenture, unless due to the Escrow Holder's or its officers' or employees' or agents' negligence or willful misconduct. Such indemnity shall survive the discharge of the Escrow Holder. (k) All notices, certificates or other communications hereunder with the Escrow Holder shall be addressed to the Escrow Holder at: First Interstate Bank of California Attention: Corporate Trust Department 345 California Street, 8th Floor_ San Francisco, CA 94104 Section 7. Resignation of Escrow Holder and Merger of the Escrow Holder. (a) The Escrow Holder may resign and be discharged of its duties hereunder in accordance with the procedures in Section 8.01 of the Indenture, if and at such time as the Escrow Holder shall resign or be discharged as the Trustee under Section 8.01 of the Indenture. Any successor Trustee under the Indenture shall succeed as the Escrow Holder under this Escrow Agreement. (b) Any company into which the Escrow Holder may be merged or converted or with which it may be consolidated or any company resulting form any merger, conversion or consolidation to which it shall be a party or any company to which the Escrow Holder may sell or transfer all or substantially all of its corporate trust business, provided such company shall be eligible under this Agreement, shall be the successor to such Escrow Holder without the execution or filing of any paper or any further act, notwithstanding anything to the contrary herein. Section 8. Successor Escrow Holder. (a) If at any time hereafter the Escrow Holder shall resign, be removed, be dissolved or otherwise become incapable of acting, or shall be taken over by any governmental official, agency, department or board, the position of Escrow Holder shall thereupon become vacant, and the County shall appoint a successor thereto in accordance with the provisions of Section 8.01 of the Indenture. The County shall mail notice of any such appointment to the registered owners of the Defeased Bonds and shall mail a copy thereof to the original purchaser or purchasers of the Defeased Bonds. (b) If no appointment of a successor Escrow Holder shall be made pursuant to the foregoing provisions of this section, the holder of any Defeased Bonds then outstanding,or any retiring Escrow Holder, may apply to any court of competent jurisdiction to appoint a successor Escrow Holder. Such court may thereupon, after such notice, if any, as such court may deem proper and prescribe, appoint a successor Escrow Holder. 01/115524.2 6 Section 9. Compensation and Expenses. The County shall pay the Escrow Holder for its fees and Expenses incurred under the Indenture and for all ordinary expenses incurred or to be incurred by the Escrow Holder in the execution of its duties hereunder (including, without limitation, any publication costs). Such fees and Expenses payable from the Escrow Account shall not exceed ($[AMOUNT])annually. Under no circumstances shall the Escrow Holder ever assert a lien on any cash or Investment Securities in the Escrow Account for any of its fees and expenses above and beyond the amount of$[AMOUNT] annually. In the event that the Escrow Holder gives notice of intent to resign, then arrangement for payment of the successor Escrow Holder, consistent with the preceding sentence of this Section 9, must be completed before such resignation and substitution may be effective. [The County agrees to pay any extraordinary fees and expenses of the Escrow Holder, as well as any extraordinary fees and expenses or indemnification of the Trustee under the Indenture.] Section 10. Term. This Agreement shall commence upon its execution and delivery and shall terminate when the Defeased Bonds have been paid and discharged in accordance with the Indenture and the proceedings authorizing the Defeased Bonds, and all amounts held by the Escrow Holder hereunder have been applied in accordance herewith. Upon termination of this Agreement the balance of any funds held by the Escrow Holder after payment of any outstanding fees and expenses of the Escrow Holder shall be paid to the County. Section 11. Severability. If any one or more of the covenants or agreements provided in this Agreement on the part of the County or the Escrow Holder to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenants or agreements herein contained shall be null and void and shall be severed from the remaining covenants and agreements and shall in no way affect the validity of the remaining provisions of this Agreement. Upon any severance, the Escrow Holder shall promptly notify Moody's Investors Service. Section 12. Counterparts. This Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as duplicate originals and shall constitute and be but one and the same instrument. Section 13. Governing Law. This Agreement shall be governed by the laws of the State of California. Section 14. No Amendment. Notwithstanding any of the provisions contained in this Escrow Deposit Agreement there shall be no amendment of this Escrow Deposit Agreement without the prior written consent of 100% of the holders of the Defeased Bonds except to (a) insert unintentionally omitted material, correct mistakes or clarify ambiguities, (b) pledge additional security, (c) provide for the deposit of additional cash and securities in the Escrow Account or (d) to make any amendment necessary for Moody's Investors Service and Standard and Poor's Rating Group to maintain the highest rating on the Bonds. 01/1 15524.2 7 Prior to the adoption of any amendment, a copy of the proposed language shall be provided to Moody's Investors Service, 99 Church Street, New York, New York 10007, Attention: Public Finance Rating Desk—Refunded Bonds and to Standard and Poor's Corporation, 25 Broadway, New York, New York 10004 Attention: Public Finance Rating Group—Refunded Bonds. In addition, prior to any substantial change to the structure of the transaction contemplated by this Agreement, including among other things, entering into a forward purchase agreement, or changes to the definition of Investment Securities, the Escrow Holder shall first receive written confirmation from Moody's Investors Service and Standard and Poor's Corporation of the rating on the Defeased Bonds. 011115524.2 8 IN WITNESS WHEREOF, the parties hereto have caused this Escrow Deposit Agreement to be executed by their duly authorized officers and their official seals to be hereunto affixed and attested as of the date first above written. COUNTY OF CONTRA COSTA By Title FIRST INTERSTATE BANK OF CALIFORNIA as Escrow Holder By Title 01/115524.2 9 SCHEDULE A-1 DEFEASED BONDS Registered Owner Bond Amount CUSIP Number Maturity Date 01/115524.2 1 SCHEDULE B-1 SUMMARY OF INVESTMENT SECURITIES PLEASE SEE ATTACHED LIST PAGES THROUGH 01/1 15524.2 t 1 SCHEDULE B-2 ESCROW ACCOUNT CASH FLOW PLEASE SEE EXHIBIT A VERIFICATION REPORT DATED OCTOBER 1994 PREPARED BY CAUSEY DEMGEN & MOORE INC., CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS 01/115524.2 EXHIBIT 1 TO ESCROW DEPOSIT AGREEMENT [Letterhead of Causey, Demgen & Moore] [Date of Release] First Interstate Bank of California Escrow Holder San Francisco, CA County of Contra Costa Martinez, CA Re: County of Contra Costa Mortgage Revenue Bonds Ladies and Gentlemen: In connection with the execution of the Escrow Deposit Agreement dated as of the date hereof (the "Agreement") between the County of Contra Costa and First Interstate Bank of California, as Escrow Holder, we have been asked to verify the sufficiency of the cash and Investment Securities to pay, when due, the Escrow Requirement. We have reviewed the Defeasance Requirement described in Schedule B-1 thereto and the calculation of sufficiency shown on Schedule B-2 thereto. Based upon such review, we have verified that accuracy of the arithmetical computation of the adequacy of the maturing principal amounts of the Investment Securities plus the interest thereon, together with such other funds deposited under the Agreement: (i) to pay, when due, the principal of and interest in the Defeased Bonds, (ii) to redeem the Defeased Bonds at the redemption date shown and (iii) to pay the Expenses (as defined in the Agreement). We have also been asked to compute the yield of the Investment Securities, assuming semi-annual compounding and a purchase price of$ Based on the purchase price,.the yield of the Investment Securities does not exceed %. 01/115524.2 SCHEDULE A-2 DEFEASED BONDS DEBT SERVICE PLEASE SEE EXHIBIT B VERIFICATION REPORT DATED OCTOBER 1994 PREPARED BY CAUSEY DEMGEN & MOORE INC., CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS 01/115524.2 a Capitalized terms not otherwise defined herein shall have the meanings set forth in the Agreement. Very truly yours, CAUSEY, DEMGEN & MOORE 01/115524.2 1-2 �i EXHIBIT 2 TO THE ESCROW DEPOSIT AGREEMENT FEES AND EXPENSES* October , 1994 COUNTY EXPENSES: Lofton, De Lancie & Nelson Kutak Rock Libben Financial Consulting First Interstate Bank of California Escrow Agent Fee Causey Demgen and Moore Moody's Investor's Service Standard & Poor's Corporation Miscellaneous Total *Preliminary, subject to change. 01/115524.2