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HomeMy WebLinkAboutMINUTES - 02231999 - C194 RESOLUTION NO. 99/6 2 OF THE BOARD OF SUPERVISORS OF THE COUNTY OF CONTRA COSTA, CALIFORNIA RESOLUTION AUTHORIZING AND RATIFYING THE ISSUAN=CE AND SALE OF COUNTY OF CONTRA COSTA. PUBLIC FINANCING AUTHORITY LEASE REVENUE BONDS (REFUNDING AND VARIOUS CAPITAL PROJECTS), 1999 SERIES A; AUTHORIZING AND CONFIRMING THE FORMS AND THE EXECUTION OF A TRUST AGREEMENT, A MASTER SITE LEASE, A FACILITY LEASE (VARIOUS CAPITAL PROJECTS), A LETTER OF INSTRUCTIONS, A CONTINUING DISCLOSURE AGREEMENT AND AN OFFICIAL STATEMENT; RATIFYING ANIS CONFIRMINtG THE BOND PURCHASE CONTRACT; APPROVING THE BASE RENTAL PAYMENTS UNDER SAID FACILITY LEASE, AND APPROVING ALL ACTIONS TAKEN IN CONNECTION THEREWITH. WHEREAS, this Board of Supervisors (this "Board') by Resolution No. 98/ 618 adopted December 8, 1998, has authorized the issuance and sale of the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 1.999 Series A (the "Bonds") in order to refund and defense certain outstanding County of Contra Costa 1988 Certificates of Participation for Consolidated Capital Projects, Equipment Acquisition Program and Countywide Telecommunications Network (herein called the "Prior Certificates"), to finance certain County facilities and to pay the costs of issuing the Bonds; WHEREAS, there has been presented to this meeting a report of the sale of the Bonds; WHEREAS, this Board desires to authorize, ratify and confirm the issuance and sale of the:Bonds and the execution of the following documents: 1. Trust Agreement, dated as of February 1, 1999 (the "Trust Agreement"), by and among U.S. Bank Trust National Association, as trustee (the "Trustee"), the County of Contra Costa Public Financing Authority(the"Authority") and the County; 2. Master Site Lease, dated as of February 1, 1999 (the "Site Lease"), by and between the County and the Authority; 3. Facility Lease (Various Capital Projects), dated as of February 1, 1999 (the"Facility Lease"),by and between the Authority and the County; 4. Letter of Instructions, dated as of February 1, 1999 (the "Letter of Instructions'), from.the Authority and the County to the trustee for the Prior Certificates; oocssr 1 330389.2 If to the Trustee: U.S.Bank Trust National Association One California Street,Suite 400 San Francisco,CA 94111 Attention: Corporate Trust Department Telephone: (415)273-4519 Fax: (415)27.3-4592 Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s)to which subsequent notices or communications should be sent. SECTION 13. Beneficiaries, This Disclosure Agreement shall inure solely to the benefit of the County, the Trustee, the Dissemination Agent, the Participating Underwriters and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. F-6 SECTION 14. CojAatQ2W& This Disclosure Agreement may be executed in several counterparts,each of which shall be an original and all of which shall constitute but one and the same instrument. Date: February 1, 1999. COUNTY OF CONTRA COSTA By Chair of the Beard of Supervisors of the County of Contra Costa,State of California Attest: Philip J.Batchelor,Clerk of the Board of supervisors and County Administrator By Chief Clem Approved as to form: County Counsel U.S.BAND TRUST NATIONAL ASSOCIATION, as Trustee By Authorized Officer F-7 EXHIBIT A NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT Narne of County:County of Contra Costa Nance of Issue: Cour:ty of Contra Costa Public Facilities Financing Authority Lease Revenue Bonds(Refunding and Various Capital Projects), 1999 Series A Date of issuance: NOTICE IS HEREBY GIVEN that the County of Conga Costa(the"County")has not provided an Annual Report with respect to the above-named Bonds as required by Section 8.08 of the Facility Lease (Various Capital Facilities), dated as of a ebruary 1, 1999, by and between the County of Contra Costa Public Financing Authority and the County. The County anticipates that the Annual Report will be fried by Dated: U.S.BAND TRUST NATIONAL.ASSOCIATION,on behalf of COUNTY OF CONTRA COSTA cc: County of Contra Costa F-8 EXHIBIT B The Nationally Recognized Municipal Securities Infonnation Repositories approved by the Securities and.Exchange Commission as of the date of the Disclosure Agreement are as follows: Bloomberg Municipal Repository P.O.Box 840 Princeton,NJ 08542-0840 (609)279-3200/(609)2793204 to order documents (509)279-5962 or(609)2795963(FAX) Internet address: MIJNIS@bloomberg.com Contact: Lena Panich JJ Kenny Information Services The Depository 65 Broadway, 16th Floor New York,NY 10006 (212)770-4568 (212)797-7994(FAX.) e-Tnaii address:Joan—horai@rncgrawhill.corn Contact: Ms.Joan Horai,depository `I°homscar NRMSIR Secondary Market Disclosure 395 Hudson Street,3rd Floor New York,NY 10014 (212)807-50101 (212)989-2078(FAX) Contact: Carolyn Chin e-snail address: Disclosure@ nuller.corn DPC Data,Inca 03ne Executive Dave Fort Lee,N.J. 07024 (201)346-0701 (201)947-0107(FAX) Contact: "-,NRMSIR Internet address: nrinsir@dpcdata.corn F-9 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX G BOOK-ENTRY ONLY SYSTEM DTC will act as securities depository for the 1999 Series A Bonds. The 1999 Series A Bonds will be executed and delivered as fully-registered 1999 Series A Bonds registered in the name of Cede & Co. (DTC's partnership nominee). One fully-registered certificate will be executed and delivered for each Maturity Date of the 1999 Series A Bonds, each in the aggregate principal amount due on such Maturity Date, and will be deposited with DTC. DTC is a limited purpose trust company organized under the New York Banking Law,a"banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing agency" within the meaning of the New York Uniform Commercial Code, and a ""clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates, Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The Rules applicable to DTC and its participants are on file with the Securities and Exchange Commission. Purchases of 1999 Series A Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 1999 Series A Bonds on DTCs records. The ownership interest of each actual purchaser of each 1999 Series A Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 1999 Series A Bonds are to be accomplished by entries made or the books of Participants acting on behalf of Beneficial Owners, Beneficial Owners will not receive certificates representing their ownership interests, -except in the event that use of the book-entry system for the 1999 Series A Bonds is discontinued. To facilitate subsequent transfers, all 1999 Series A Bonds deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of 1999 Series A Bonds with DTC and their registration in the name of Cede & Co, effect no change in beneficial ownership. DTC! has no knowledge of the actual Beneficial Owners of the 1999 Series A Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such 1999 Series A Bonds are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. G-1 Neither DTC nor Cede & Co, will consent or vote with respect to the 1999 Series A Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the issuer of the securities as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the 1999 Series A Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments with respect to the 1999 Series A Bonds will be made to DTC. DTC's practice is to credit Direct Participants' accounts can the payable date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on the payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "streetname," and will be the responsibility of such Participant and not of DTC, the Trustee, the Authority or the County, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the.Authority or the Trustee,fiscal agent or other designated agent,disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the 1999 Series A Bonds at any time by giving reasonable notice to the Trustee and the .Authority. Under such circumstances, in the event that a successor securities depository is not obtained, physical certificates are required to be printed and delivered as described in the Trust Agreement. In the event the Authority and the Trustee determine not to continue the DTC boob-entry only system or DTC determines to discontinue its services with respect to the 1999 Series A Bonds and the Authority does not select another qualified securities depository, the Authority will deliver one or more 1999 Series A Bonds in such principal amount or amounts, in authorized denominations, and registered in whatever name or names,as designated by DTC. In such event,transfers and exchanges of 1999 Series A Bonds will be governed by the provisions of the Trust Agreement. DTC management is aware that some computer applications, systems, and the like for processing date ("System's")that are dependent capon calendar dates, including dates before, on, and after January 1, 2000,may encounter"Fear 2000 problems." DTC has informed its Participants and other members of the financial community (the "Industry") that it has developed and is implementing a program so that its Systems, as the sauce relate to the timely payment of distributions (including principal and income payments) to securityholders, boob;-entry deliveries, and settlement of trades within DTC ("DTC Services"), continue to function appropriately. This program includes a technical assessment and a remediation plan, each of which is complete. Additionally,DTC's plans includes a testing phase,which is expected to be completed within appropriate time frames. However, DTC°s ability to properly perform its services is also dependent upon other parties, including but not limited to issuers and their agents, as well as third party vendors from whom DTC licenses software and hardware, and third party vendors on whom DTC relies for information of the provision of services, including telecommunication and electrical utility service providers, among others. DTC has informed the Industry that it is contacting(and will continue to contact)third party vendors from whom DTC acquires services to: (i)impress upon them the importance of such services being year 2000 compliant; and (ii)determine the extent of their efforts for Year 2000 remediation (and, as appropriate, testing) of their services. In addition, DTC is in the process of developing such contingency plans as it deems appropriate. G-2 AS LONG AS A ROOK-ENTRY ONLY SYSTEM IS USED FOR THE 1999 SERIES A BONDS, THE TRUSTEE WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO HOLDERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY PARTICIPANT, OR OF ANY PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE ANIS ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OR SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE 1999 Series A BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. THE COUNTY, THE TRUSTEE, THE, AUTHORITY ANIS THE UNDERWRITERS TERS HAVE NO RESPONSIBILITY OR LIABILITY FOR ANY ASPECT OF THE RECORDS RELATING TO OR PAYMENTS MADE ON ACCOUNT OF BENEFICIAL OWNERSHIP, OR FOR MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS RELATING TO BENEFICIAL OWNERSHIP OF INTERESTS IN THE 1999 SERIES A BONDS. THE COUNTY, THE TRUSTEE, THE AUTHORITY ANIS THE UNDERWRITERS CANNOT .ANIS DO NOT CINE ANY ASSURANCES THAT DTC WILL DISTRIBUTE PAYMENTS TO DTC PARTICIPANTS OR THAT PARTICIPANTS CMZ OTHERS WILL DISTRIBUTE PAYMENTS WITH RESPECT TO THE :999 SERIES A BONDS RECEIVED BY DTC OR ITS NOMINEES AS THE HOLDER THEREOF OR ANY REDEMPTION NOTICES OR OTHER NOTICES TO THE BENEFICIAL HOLDERS, OR THAT THEY WILL DO SO ON A TIMELY BASIS, OR. THAT DTC WILL SERVICE ANIS ACT IN THE MANNER DESCRIBER IN THIS OFFICIAL STATEMENT. The foregoing description of the procedures and record keeping with respect to beneficial ownership interests in the 1999 Series A Bonds, payment of principal, redemption premium, if any, and interest with respect to the 1999 Series A Bonds to DTC, its Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the 1999 Series A ends and other related transactions by and between DTC, its Participants and the Beneficial Owners is based solely on the County's and the Trustee's understanding of such procedures and record keeping from information provided by ITC. Accordingly, no representations can be made concerning these matters and neither DTC, its Participants nor the Beneficial Owners should rely on the foregoing information with respect to such utters, but should instead confirm the same with DTC or its Participants, as the case may be. The County and the Trustee understand that the current "Rules" applicable to DTC are on file with. the Securities and Exchange Commission and that the current "Procedures"of DTC to be followed in dealing with Participants are on file with DTC. G-3 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX H SPECIMEN MUNICIPAL,BOND INSURANCE POLICY Hd1 (THIS PAGE INTENTIONALLY LEFr BLANK) T K ."x�!'; : lk: .. S.-i - ' -.':i. .:.:. :T:.:. �.� ;::� t,.. .:. :: � (-''T '..:y - t ' K.e:>-x:x�c.F ♦��- V:..K- - Y . �`� ..i"f'K��.�. f:< i::-" �. }. Yk .ii�k :f� ♦ - �%': �u:,�{>. F r:'ti'.:: _ f��t•:►, �IS.;i. i .::. :.rF; !:. ♦ ..:.r .:a� rl' * ,r; ! S .. ♦ `!^�- t;:ax(_.. 'r-... ♦: :. 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Y.s.,.}, :.. .?'!'' 4:.'.t' .. _: }". `.''1':. 1M,.:! -ti, !"" :. f:1�. �k '{:-t..' t:, ;.{ :eA'r ♦� § ...f :.:;k ... \.♦'� Y..: t.�s: '�.w-�� .,.:.-.. ,,,-�. -.. ,_ �� �, ..::i: 'S.'. a iffc}r: '�:�L a .:*'r` Y� Y� � -Y �x', :3. .���� '�� ..' ..�. � ��+..�' .:i' .:^.<�:' at{.:�:::!f tY�.;".':. a..ti:.•,{F. >:{ i K!;t" " f., i;;.:ry ': `.t--. <:* i # ':3� a'fiR- :Y. �r (THIS PAGE INTENTIONALLY LEFT BLANK) (THIS PAGE INTENTIONALLY LEFT BLANK) (THIS PAGE INTENTIONALLY LEFT BLANK) $74,685,000 COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY Lease Revenue Bonds (Refunding and Various Capital Projects) 1999 Series A BOND PURCHASE CONTRACT January 21, 1999 Board of Directors County of Contra Costa Public Financing Authority County Administrator's Office 651 Pine Street, 11th Floor Martinez, California 94553-0063 Board of Supervisors County of Contra Costa, California County Administrator's Office 651 Pine Street, 11th Floor Martinez, California 94553-0063 Ladies and Gentlemen: The undersigned, Bear, Stearns & Co. Inc., as representative (the "Representative") of itself and Merrill Lynch & Co., as underwriters (collectively, the "Underwriter"), hereby offers to enter into this Bond Purchase Contract (the "Purchase Contract") with you, the County of Contra Costa Public Financing Authority (the "Authority") and the County of Contra Costa, California (the "County"), for the purchase by the Underwriter of the Bonds (as hereinafter defined) which will be issued and delivered under the Trust Agreement, dated as of February 1, 1999 (the "Trust Agreement"), by and between the Authority and U.S. Bank Trust National Association, as trustee (the "Trustee"). The Representative has been duly authorized to execute this Purchase Contract and to take any action hereunder on behalf of the Underwriter. This offer is made subject to acceptance by the Authority and the County prior to 11;59 p.m., California time, on the date hereof. If this offer is not so accepted, this offer will be subject to withdrawal by the Underwriter upon notice delivered to you at any time prior to acceptance. Upon acceptance, this Purchase Contract shall be in full force and effect in accordance with its terms and shall be binding upon the Authority, the County and the Underwriter. SFLIB 1/1070496/4/10420/00292/shaf k/3anrary 20,1999-4:30 1. Purchase, Sale and Delivery of the Bonds, (a) Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, the Underwriter hereby agrees to purchase and. the Authority agrees to sell to the Underwriter all (but not less than all) of the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 1999 Series A (the "Bonds") in the aggregate principal amount of $74,585,000. The Bonds are payable from revenues of the Authority which primarily consist of certain base rental payments (the "Base Rental Payments") to be made by the County pursuant to, and as defined in, the Facility Lease, dated as of February 1, 1999, by and between the County and the Authority (the "Facility Lease"), as the rental for certain real property and improvements located thereon (the "Leased Facilities"). The Authority and the County have entered into a Master Site Lease dated as of February 1, 1999 (the "Site Lease"), pursuant to which the County has leased the Leased Facilities to the Authority. Pursuant to the Trust Agreement, the Authority has assigned to the Trustee certain of its interests in the Facility Lease, including the right to receive Base Rental Payments. The Bonds will mature on the dates and in the amounts and be subject to redemption as shown in Exhibit A hereto. The Bonds are being issued to (i) refund and defease of the County's outstanding 1988 Certificates of Participation, dated as of July 1, 1988 (the "1988 Certificates"), which were originally executed and delivered in the aggregate principal amount of$61,690,000 and (ii) to finance various capital projects of the County (the "Project"). Pursuant to a Letter of Instructions (the "Letter of Instructions") relating to the 1988 Certificates, dated as of February 1, 1999, between the County and U.S. Bank Trust National Association, a portion of the proceeds of the Bonds, together with other legally available funds of the County, will be deposited into an escrow fund and applied to pay the principal of and interest on the 1988 Certificates to and including June 1, 1999, and to redeem the outstanding 1988 Certificates on June 1, 1999, at a redemption price of 102% of the principal amount thereof plus accrued interest. The County has covenanted under the Facility Lease that it will take such action as may be necessary to include the Base Rental Payments thereunder in its annual budgets and to make the necessary annual appropriations therefor. Payment of the principal of and interest on the Bonds maturing on and after June 1, 2002 (the "Insured Bonds") when due will be insured by MBIA Insurance Corporation (the "Insurer"), which will issue a municipal bond insurance policy (the "Bond Insurance Policy") simultaneously with the delivery of the Bonds. The Insurer will also provide a Debt Service Reserve Surety Bond(the "Reserve Surety"). The Bonds shall be substantially in the form described in, and shall be executed, delivered and secured under and pursuant to, and shall be payable and subject to redemption as provided in, the Trust Agreement. (b) The Authority has heretofore delivered to the Underwriter copies of the Preliminary Official Statement, dated January 8, 1999 relating to the Bonds (as amended or supplemented, the "Preliminary Official Statement") that the Authority has deemed final as of the date thereof, except for the omission of such information as is permitted to be omitted in SFLiBI/1070496/4/20420/00292/shahk/January 20,1999-4:30 2 accordance with paragraph (1) of Rule 15c2-12 of the Securities and Exchange Commission ("Rule 15c2-12"). The Authority shall prepare and deliver to the Underwriter, as promptly as practicable, but in no event later than seven (7) business days from the date hereof and within sufficient time to accompany any confirmation requesting payment from any customers of any of the Underwriter, a final official statement, with such changes and amendments as may be agreed to by the Underwriter, in such quantities as the Underwriter may request in order to comply with paragraph(4) of Rule 15c2-12 and the rules of the Municipal Securities Rulemaking Board (such official statement, including the cover page and appendices thereto, as the same may be supplemented or amended, is herein referred to as the "Official Statement"). The Authority hereby ratifies, confirms and approves the use and distribution by the Underwriter prior to the date thereof of the Preliminary Official Statement and hereby authorizes the Underwriter to use and distribute a final Official Statement and all other documents, certificates and statements furnished by the Authority to the Underwriter in connection with the transactions contemplated by this Purchase Contract, in connection with the offer and sale of the Bonds. The County will undertake, pursuant to a Continuing Disclosure Agreement, dated as of the Closing Bate (as hereinafter defined) (the "Continuing Disclosure Agreement"), between the County and the Trustee, to provide certain annual financial information and notices of the occurrence of certain events, if material. A form of the Continuing Disclosure Agreement is set forth in the Preliminary Official Statement and will also be set forth in the Official Statement. The Trust Agreement, the Facility Lease, the Site Lease, the Continuing Disclosure Agreement, the Letter of Instructions and the Bonds shall be collectively referred to herein as the "Legal Documents." (c) The purchase price for the Bonds shall be $75,154,573.54 (which reflects an underwriting discount of$435,857.46 plus a net original issue premium of$905,431.00) plus accrued interest from February 1, 1999 to the Closing Date (as hereinafter defined). (d) The Underwriter has delivered to the County a corporate check in the amount of $743,600 payable to the order of the County. In the event that the County or the Authority does not accept this offer, such check shall be immediately returned to the Underwriter. If the offer made hereby is accepted, the County agrees to hold the check uncashed until the Closing as security for the performance by the Underwriter of the obligation to accept and pay for the Bonds at the Closing and, in the event of its compliance with such obligations, such check shall be returned uncashed to the Underwriter at the Closing. In the event that the Authority fails to deliver the Bonds at the Closing, or if the County or the Authority shall be unable to satisfy the conditions of the obligations of the Underwriter contained herein, or if the obligations of the Underwriter shall be terminated for any reason permitted by this Purchase Contract, such check shall be immediately returned to the Underwriter and such return shall constitute a full release and discharge of all claims by the Underwriter arising out of the transactions contemplated hereby. In the event that the Underwriter fails (other than for a reason permitted hereunder) to accept and pay for the Bonds at the Closing, such check shall be retained by the County as and for full liquidated damages for such failure and for any defaults hereunder on the part of the Underwriter and such retention shall constitute a full release and discharge of all claims by the County and the Authority against the Underwriter arising out of the transactions contemplated hereby. S FLI B I/i 070496i4/i 0420/00292/shah',c/3anuary 20,1999-4:30 3 (c) At 10:00 a.m., California time, on March 4, 1999, or at such other time or on such other date as we mutually agree upon (the "Closing Date"), the Trustee will deliver or cause to be delivered to the Underwriter, through the book-entry system of The Depository Trust Company in New York, New York ("DTC"), the Bonds in the form of a separate single fully registered Bond (which may be typewritten) for each maturity date (all of the Bonds to bear CU SIF' numbers, which shall be timely provided by the Underwriter), duly executed, together with the other documents mentioned herein. The Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in subparagraph (c) above in immediately available funds (such delivery and payment being herein referred to as the "Closing") payable to the order of the Trustee in an amount equal to the purchase price net of the premiums for the Bond Insurance Policy and the Reserve Surety which shall be wired on behalf of the County directly to the Insurer. The Bonds will be made available for inspection by DTC in New York, New York, not less than one business day prior to the Closing. (f) The Underwriter agrees to make a bona fide public offering of the Bonds at the initial offering prices set forth in the Official Statement, which prices may be changed from time to time by the Underwriter after such offering. 2. Representations, Warranties and Agreements of the Authority_. The Authority hereby represents, warrants and agrees with the Underwriter as follows: (a) The Authority is and will be on the Closing Date a joint powers authority organized, existing and operating pursuant to the Constitution and laws of the State of California with the full power and authority to execute and deliver the Official Statement, and to enter into this Purchase Contract and the Legal Documents; (b) By official action of the Authority prior to or concurrently with the acceptance hereof, the Authority has duly authorized and approved the execution and delivery of, and the performance by the Authority of the obligations on its part contained in, the Legal Documents and the consummation by it of all other transactions contemplated by the Official Statement and this Purchase Contract; (c) To the best knowledge of the Authority after reasonable investigation, the execution and delivery of the Legal Documents by the Authority, this Purchase Contract and the Official Statement, and compliance with the provisions on the Authority's part contained herein and therein, will not in any material respect conflict with or constitute a breach of or default under any law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Authority is a party or is otherwise subject, nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the properties or assets of the Authority under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided in the Legal Documents; (d) To the best knowledge of the Authority after reasonable investigation, the Authority is not in any material respect in breach of or default under any applicable law or SFLIBI/1070496/4/10420/00292/shahk/danuary 20,1999-4:30 4 administrative regulation of the State of California or the United States of America or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Authority is a party or is otherwise subject, and no event has occurred and is continuing which, with the passage of time or the giving of notice or both, would constitute a default or an event of default under any such instrument; (e) To the best knowledge of the Authority after reasonable investigation, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, pending or threatened against the Authority in any material respect affecting the existence of the Authority or the titles of its officers to their respective offices or seeking to prohibit, restrain or enjoin the issuance, sale, or delivery of the Bonds or the receipt of Base Rental Payments or in any way contesting or affecting the validity or enforceability of the Legal Documents or this Purchase Contract or contesting the powers of the Authority or its authority to enter into, adopt or perform its obligations under any of the foregoing, or contesting in any way the completeness or accuracy of the Official Statement, or any amendment or supplement thereto, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Legal Documents or this Purchase Contract; (f) The Authority will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order (i) to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and (ii) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and will use its best efforts to continue such qualification in effect so long as required for distribution of the Bonds; provided, however, that in no event shall the Authority be required to take any action which would subject it to general or unlimited service of process in any jurisdiction in which it is not now so subject; (g) As of the date hereof, and except for statements regarding DTC, the County and the Insurer, as to which the Authority does not make any representation or warranty, the Preliminary Official Statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading in any material respect; (h) As of the date thereof and at all times subsequent thereto to and including the date which is the End of the Underwriting Period (as such term is hereinafter defined) for the Bonds, and except for statements regarding DTC, the County and the Insurer, as to which the Authority does not make any representation or warranty, the Official Statement did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading in any material respect; (i) If between the date hereof and the date which is the End of the Underwriting Period for the Bonds, an event occurs which would cause the information contained in the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or SFLIBIJ1070496/4/10420/00292/shahk/January 20,1999-4:30 5 necessary to crake such information therein, in the light of the circumstances under which it was presented, not misleading in any material respect, the Authority will notify the Underwriter, and, if in the opinion of the Authority or their counsel or the Underwriter or their counsel, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the Authority will forthwith prepare and furnish to the Underwriter (at the expense of the Authority) a reasonable number of copies of an amendment of or supplement to the Official Statement (in form and substance satisfactory to counsel for the Underwriter) which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to prospective purchasers, not misleading in any material respect. For the purposes of this subsection, between the date hereof and the date which is the End of the Underwriting Period for the Bonds, the Authority will furnish such information with respect to itself as the Underwriter may from time to time reasonably request; 0) If the information contained in the Official Statement is amended or supplemented pursuant to paragraph (i) hereof, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such subparagraph) at all times subsequent thereto up to and including the date which is the End of the Underwriting Period for the Bonds, the portions of the Official Statement so supplemented or amended (including any financial and statistical data contained therein), except for statements regarding DTC, the County and the Insurer, as to which the Authority does not make any representation or warranty, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was presented, not misleading in any material respect; (k) As used herein and for the purposes of the foregoing (and for purposes of Section 3 below), the term "End of the Underwriting Period" for the Bonds shall mean the Closing bate unless the Authority and the County shall have been notified in writing to the contrary by the Underwriter on or prior to the Closing Date; (1) To the extent permitted by law, the Authority agrees to indemnify and hold harmless the Underwriter, both collectively and 'individually, and each person, if any, who controls (within the meaning of Section 15 of the Securities Act of 1933, as amended, or of Section 20 of the Securities Act of 1934, as amended) the Underwriter, either collectively or individually, and the officers, directors, agents and employees of the Authority against any and all losses, claims, damages, liabilities and expenses (i) arising out of any statement or information in the Preliminary Official Statement or in the Official Statement, relating to the Authority, that is or is alleged to be untrue or 'incorrect in any material respect or the omission or alleged omission therefrom of any statement or information that should be stated therein or that is necessary to make the statements therein relating to the Authority not misleading in any material respect and (ii) to the extent of the aggregate amount paid in settlement of any litigation commenced or threatened arising from a claim based upon any such untrue statement or omission if such settlement is effected with the written consent of the Authority; provided, however, that in no event shall this indemnification agreement inure to the benefit of the Underwriter, either collectively or individually (or any person controlling the Underwriter) on account of any losses, claims, damages, liabilities or actions arising from the sale of the Bonds SFLIBI/10704496/4/10420/00292/shahk/January 20,1999-4:30 6 upon the public offering to any person by the Underwriter, either collectively or individually, if such losses, claims, damages, liabilities or actions arise out of, or are based upon, an untrue statement or omission or alleged untrue statement or omission in the Preliminary Official Statement and if the Official Statement shall correct the untrue statement or omission or the alleged untrue statement or omission which is the basis of the loss, claim, damage, liability or action for which indemnification is sought and a copy of the Official Statement had not been sent or given to such person at or prior to confirmation of such sale to him or her. In case any claim shall be made or action brought against the Underwriter, either collectively or individually, or any controlling person based upon the Official Statement for which indemnity may be sought against the Authority, as provided above, the Underwriter shall promptly notify the Authority in writing setting forth the particulars of such claim or action and the Authority shall assume the defense thereof, including at its option the retaining of counsel acceptable to the Underwriter and including the payment of all expenses. The Underwriter or any such controlling person shall have the right to retain separate counsel in any such action but shall bear the fees and expenses of such counsel unless the Authority shall have specifically authorized the retaining of such counsel. If the parties to such suit include both the Underwriter or such controlling person or persons and the Authority, and the Underwriter or controlling person or persons have been advised by such counsel that one or more legal defenses may be available to it or them which may not be available to the Authority, the Authority shall not be entitled to assume the defense of the suit, 3. Representations Warranties and Agreements of the County. The County hereby represents, warrants and agrees with the Underwriter as follows: (a) The County is and will be on the Closing Date a political subdivision of the State of California organized and operating pursuant to the Constitution and laws of the State of California with the full power and authority to execute and deliver the Official Statement, and to enter into this Purchase Contract and the Legal Documents to be executed by it; (b) By official action of the County prior to or concurrently with the acceptance hereof, the County has duly authorized and approved the execution and delivery of, and the performance by the County of the obligations on its part contained in, the Legal Documents to be executed by it and the consummation by it of all other transactions contemplated by the Official Statement and this Purchase Contract; (c) To the best knowledge of the County after reasonable investigation, the execution and delivery of the Legal Documents to be executed by the County, this Purchase Contract and the Official Statement, and compliance with the provisions on the County's part contained herein and therein, will not in any material respect conflict with or constitute a breach of or default under any law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the County is a party or is otherwise subject, nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the properties or assets of the County under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided in the Legal Documents; SFLI131/1070496/4/10424/00292/shahk/January 20,1999-4:30 7 (d) To the best knowledge of the County after reasonable investigation, the County is not in any material respect in breach of or default under any applicable law or administrative regulation of the State of California or the United States of America or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the County is a party or is otherwise subject, and no event has occurred and is continuing which, with the passage of time or the giving of notice or both, would constitute a default or an event of default under any such instrument; (e) To the best knowledge of the County after reasonable investigation, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, pending or threatened against the County in any material respect affecting the existence of the County or the titles of its officers to their respective offices or seeking to prohibit, restrain or enjoin the sale, execution or delivery of the Bonds or the payment of Base Rental Payments or in any way contesting or affecting the validity or enforceability of the Legal Documents to which the County is a party or this Purchase Contract or contesting the powers of the County or its authority to enter into, adopt or perform its obligations under any of the foregoing, or contesting in any way the completeness or accuracy of the Official Statement, or any amendment or supplement thereto, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Legal Documents or this Purchase Contract; (f) The County will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order (i) to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and will use its best efforts to continue such qualification in effect so long as required for distribution of the Bonds (at the sole expense of the Underwriter); provided, however, that in no event shall the County be required to take any action which would subject it to general or unlimited service of process in any jurisdiction in which it is not now so subject; (g) As of the date hereof, and except for statements regarding DTC, the Authority and the Insurer, as to which the County does not make any representation or warranty, the Preliminary Official Statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading in any material respect; (h) As of the date thereof and at all times subsequent thereto to and including the date which is the End of the Underwriting Period for the Bonds, and except for statements regarding DTC, the Authority, and the Insurer, as to which the County does not make any representation or warranty, the Official Statement did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading in any material respect; SFLIBI/1070496/4/10420/00292/shahk/3aruary 20,1999-4:30 8 (i) If between the date hereof and the date which is the End of the Underwriting Period for the Bonds, an event occurs which would cause the information contained in the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or Necessary to make such information therein, in the light of the circumstances under which it was presented, not misleading in any material respect, the County will notify the Authority and the Underwriter, and, if in the opinion of the County, the Authority, the Underwriter or their counsel, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the County will forthwith prepare and furnish to the Underwriter (at the expense of the County) a reasonable number of copies of an amendment of or supplement to the Official Statement (in form and substance satisfactory to counsel for the Underwriter) which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to prospective purchasers, not misleading in any material respect. For the purposes of this subsection, between the date hereof and the date which is the End of the Underwriting Period for the Bonds, the County will furnish such information with respect to itself as the Underwriter may from time to time reasonably request; 0) If the information contained in the Official Statement is amended or supplemented pursuant to paragraph (i) hereof, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such subparagraph) at all times subsequent thereto up to and including the date which is the End of the Underwriting Period for the Bonds, the portions of the Official Statement so supplemented or amended (including any financial and statistical data contained therein), except for statements regarding DTC, the Authority, and the Insurer, as to which the County does not make any representation or warranty, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was presented, not misleading in any material respect; (k) To the extent permitted by law, the County agrees to indemnify and hold harmless the Underwriter, both collectively and individually, and each person, if any, who controls (within the meaning of Section 15 of the Securities Act of 1933, as amended, or of Section 20 of the Securities Act of 1934, as amended) the Underwriter, either collectively or individually, and the officers, directors, agents and employees of the County against any and all losses, claims, damages, liabilities and expenses (i) arising out of any statement or information in the Preliminary Official Statement or in the Official Statement, relating to the County, that is or is alleged to be untrue or incorrect in any material respect or the omission or alleged omission therefrom of any statement or information that should be stated therein or that is necessary to make the statements therein relating to the County not misleading in any material respect and (ii) to the extent of the aggregate amount paid in settlement of any litigation commenced or threatened arising from a claim based upon any such untrue statement or omission if such settlement is effected with the written consent of the County; provided, however, that in no event shall this indemnification agreement inure to the benefit of the Underwriter, either collectively or individually (or any person controlling the Underwriter) on account of any losses, claims, damages, liabilities or actions arising from the sale of the Bonds upon the public offering to any person by the Underwriter, either collectively or individually, if such losses, claims, damages, SFLIBI/:070496/4/10420/00292/shahk/January 20,1999-4:30 9 liabilities or actions arise out of, or are based upon, an untrue statement or omission or alleged untrue statement or omission in the Preliminary Official Statement and if the Official Statement shall correct the untrue statement or omission or the alleged untrue statement or omission which is the basis of the loss, claire, damage, liability or action for which indemnification is sought and a copy of the Official Statement had not been sent or given to such person at or prior to confirmation of such sale to him or her. In case any claim shall be made or action brought against the Underwriter, either collectively or individually, or any controlling person based upon the Official Statement for which indemnity may be sought against the County, as provided above, the Underwriter shall promptly notify the County in writing setting forth the particulars of such claim or action and the County shall assume the defense thereof, including at its option the retaining of counsel acceptable to the Underwriter and including the payment of all expenses. The Underwriter or any such controlling person shall have the right to retain separate counsel in any such action but shall bear the fees and expenses of such counsel unless the County shall have specifically authorized the retaining of such counsel. If the parties to such suit include both the Underwriter or such controlling person or persons and the County, and the Underwriter or controlling person or persons have been advised by such counsel that one or more legal defenses may be available to it or them which may not be available to the County, the County shall not be entitled to assume the defense of the suit. 4. Conditions to the Obligations of the Underwriter. The Underwriter hereby enters into this Purchase Contract in reliance upon the representations and warranties of the County and the Authority contained herein and the representations and warranties to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the Authority and the County of their obligations both on and as of the date hereof and as of the Closing Date. Accordingly, the Underwriter's obligations under this Purchase Contract to purchase, to accept delivery of and to pay for the Bonds shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the representations and warranties of the County contained herein as of the date hereof and as of the Closing Date, to the accuracy in all material respects of the statements of the officers and other officials of the Authority and the County made in any certificate or other document furnished pursuant to the provisions hereof, to the performance by the Authority and the County of their respective obligations to be performed hereunder and under the Legal Documents as herein defined at or prior to the Closing Date, and also shall be subject to the following additional conditions; (a) At the Closing, the Legal Documents shall have been duly authorized, executed and delivered by the respective parties thereto, and the Official Statement shall have been duly authorized, executed and delivered by the County, all in substantially the forms heretofore submitted to the Underwriter, with only such changes as shall have been agreed to by the Underwriter, and shall be in full force and effect; and there shall be in full force and effect such resolutions of the Board of Directors of the Authority and of the Board of Supervisors of the County as, in the opinion of Orrick, Herrington & Sutcliffe LLP ("Bond Counsel"), shall be necessary or appropriate in connection with the transactions contemplated hereby; (b) Between the date hereof and the Closing Date, the market price or marketability, at the initial offering price set forth in the Official Statement, of the Bonds shall SrLIBI/1070496/4/10420/00292/shahk/Jaruary 20,1999-4:30 10 not have been materially adversely affected, in the reasonable judgment of the Underwriter (evidenced by a written notice from the Representative to the Authority and the County terminating the obligation of the Underwriter to accept delivery of and make any payment for the Bonds), by reason of any of the following. (1) legislation enacted (or resolution passed) by or introduced or pending legislation amended in the Congress or recommended for passage by the President of the United States, the Speaker of the House of Representatives, the President Pro Tempore of the Senate, the Chairman or ranking minority member of the Committee of Ways and Means of the House of Representatives or the chairman or ranking minority member of the Committee on Finance of the Senate, or a decision rendered by a court established under Article III of the Constitution of the United States or by the Tax Court of the United States, or an order, ruling, regulation (final, temporary or proposed) or press release issued or made by or on behalf of the Treasury Department of the United States or the Internal Revenue Service, with the purpose or effect, directly or indirectly, of imposing federal income taxation upon moneys that would be received by the County or rental payments that would be received by the Trustee under the Trust Agreement or upon such interest as would be received by the Bondowners; (2) the declaration of war or engagement in major military hostilities by the United States or the occurrences of any other national emergency or calamity relating to the effective operation of the government of or the financial community in the United States; (3) the declaration of a general banking moratorium by federal, New York or California authorities, or the general suspension of trading on any national securities exchange; (4) the imposition by the New York Stock. Exchange or other national securities exchange, or any governmental authority, of any material restrictions not now in force with respect to the Bonds or obligations of the general character of the Bonds or securities generally, or the material increase of any such restrictions now in force, including those relating to the -extension of credit by, or the charge to the net capital requirements of, the Underwriter; (5) legislation enacted (or resolution passed) by or introduced or pending legislation amended in the Congress or recommended for passage by the President of the United States, or an order, decree or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed) or press release issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bands, including any or all underlying arrangements, are not exempt from registration under the Securities Act of 1933, as amended, or that the Trust Agreement is not exempt from qualification under the Trust Indenture Act of 1939, as amended, or that the execution, offering or sale of obligations of the SFLIBI/1070496/4/10420/00292/shahk/January20, 1999-4:30 11 general character of the Bonds, including any or all underlying arrangements, as contemplated hereby or by the Official Statement, otherwise is or would be in violation of the federal securities laws as amended and then in effect; (6) the withdrawal or downgrading of any rating of the Bonds by a national rating agency; or (7) any event occurring, or information becoming known which, in the judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Official Statement, or has the effect that the Official Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading in any material respect; (c) At or prior to the Closing Date, the Underwriter shall have received the following documents, in each case satisfactory in form and substance to the Underwriter: (1) Two copies of the Legal Documents (excluding the Bonds), each duly executed and delivered by the respective parties thereto; (2) The approving opinion, dated the Closing Date and addressed to the Authority, of Bond Counsel in substantially the form attached to the Official Statement as Appendix E, and a letter of such counsel, dated the Closing Date and addressed to the Underwriter to the effect that such opinion may be relied upon by the Underwriter to the same extent as if such opinion were addressed to it; (3) The supplemental opinion, dated the Closing Date and addressed to the Underwriter, of Bond Counsel, substantially to the effect that (i) this Purchase Contract has been duly executed and delivered by the County and the Authority, respectively, and (assuming due authorization, execution and delivery by and validity with respect to the Underwriter) constitutes a valid and binding obligation of the County and the Authority, respectively, subject to laws relating to bankruptcy or other laws affecting creditors' rights generally, to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against public bodies in the State of California and that no opinion is expressed with respect to the indemnification, contribution, choice of law, choice of forum or waiver provisions therein; (ii) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Trust Agreement is exempt from qualification under the Trust Indenture Act of 1939, as amended (except that no opinion is expressed as to the Bond Insurance Policy or the Reserve Surety); and (iii) the statements contained in the Official Statement under the captions "THE 1999 SERIES A BONDS," "SECURITY AND SOURCES OF PAYMENT FOR THE 1999 SERIES A BONDS, "TAX MATTERS," and in Appendix D - "SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL SFLI$I/1070496/4/'0420/00292/shahk/January 20,1999-4:30 12 LEGAL DOCUMENTS" and in APPENDIX E - "PROPOSED FORM OF OPINION OF BOND COUNSEL" (excluding therefrom all information contained in debt service schedules and financial or statistical information as to which no view is expressed) insofar as such statements purport to summarize certain provisions of the Legal Documents and Bond Counsel's opinion concerning certain federal tax matters relating to the Bonds, are accurate in all material respects. (4) The opinion of the County Counsel, as counsel for the Authority, dated the Closing Date and addressed to the Underwriter, to the effect that (i) the Authority is a joint powers authority duly organized and operating pursuant to the laws of the State of California; (ii) the resolution or resolutions of the Authority approving and authorizing the execution and delivery by the Authority of the Legal Documents, the Purchase Contract and the Official Statement (the "Authority Resolution") were duly adopted at meetings of the Board of the Authority which were called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout; (iii) to the best knowledge of such counsel. after reasonable investigation, there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending or threatened against or affecting the Authority, to restrain or enjoin the receipt or assignment of the Base Rental Payments under the Facility Lease, or in any way contesting or affecting the validity of the Bonds, the Legal Documents or the Purchase Contract; (iv) the execution and delivery of the Legal Documents, the Purchase Contract and the Official Statement, the adoption of the Authority Resolution, and compliance by the Authority with the provisions of the foregoing, under the circumstances contemplated thereby, do not and will not in any material respect conflict with or constitute on the part of the Authority a breach or default under any agreement or other instrument to which the Authority is a party (and of which such counsel is aware after reasonable investigation) or by which it is bound (and of which such counsel is aware after reasonable investigation) or any existing law, regulation, court order or consent decree to which the Authority is subject; (v) the Official Statement has been duly authorized, executed and delivered, and the Legal Documents and the Purchase Contract have been duly authorized, executed and delivered by the Authority and, assuming due authorization, execution and delivery by and validity against the other parties thereto, constitute legal, valid and binding agreements of the Authority enforceable in accordance with their respective terms, subject to laws relating to bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally and the application of equitable principles if equitable remedies are sought, the exercise of judicial discretion and the limitation on legal remedies against public entities in California; (vi) except as described in the Official Statement, no authorization, approval, consent, or other order of the State of California or any other governmental authority or agency within the State of California having jurisdiction over the Authority is required for the valid authorization, execution, delivery and performance by the Authority of the Legal Documents, the Official SFL€BI/i070496/4/10420/00292/shahk/January 20,1999-4;30 13 Statement or the Purchase Contract or for the adoption of the Authority Resolution which has not been obtained. (5) The opinion of the County Counsel, dated the Closing Date and addressed to the Underwriter, to the effect that (i) the County is a political subdivision of the State of California; (ii) the resolution or resolutions of the County approving and authorizing the execution and delivery by the County of the Legal Documents to which the County is a party, the Purchase Contract and the Official Statement (the "County Resolution") were duly adopted at meetings of the Board of Supervisors of the County which were called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout; (iii) to the best knowledge of such counsel after reasonable investigation, there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending or threatened against or affecting the County, to restrain or enjoin the payment of the Base Rental Payments under the Facility Lease, or in any way contesting or affecting the validity of the Bonds, the Legal Documents to which the County is a party or the Purchase Contract; (iv) the execution and delivery of the Legal Documents to which the County is a party, the Purchase Contract and the Official Statement, the adoption of the County Resolution, and compliance by the County with the provisions of the foregoing, under the circumstances contemplated thereby, do not and will not in any material respect conflict with or constitute on the part of the County a breach or default under any agreement or other instrument to which the County is a party (and of which such counsel is aware after reasonable investigation) or by which it is bound (and of which such counsel is aware after reasonable investigation) or any existing law, regulation, court order or consent decree to which the County is subject; (v) the Official Statement has been duly authorized, executed and delivered, and the Legal Documents to which the County is a party and the Purchase Contract have been duly authorized, executed and delivered by the County and, assuming due authorization, execution and delivery by and validity against the other parties thereto, constitute legal, valid and binding agreements of the County enforceable in accordance with their respective terms, subject to laws relating to bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally and the application of equitable principles if equitable remedies are sought, the exercise of judicial discretion and the limitation on legal remedies against public entities in California; and (vi) except as described in the Official Statement, no authorization, approval, consent, or other order of the State of California or any other governmental authority or agency within the State of California having jurisdiction over the County is required for the valid authorization, execution, delivery and performance by the County of the Legal Documents to which the County is a party, the Official Statement or the Purchase Contract or for the adoption of the County Resolution which has not been obtained. (6) The opinion, dated the Closing Date and addressed to the Representative, the Authority and the County, of Counsel to the Trustee, to the effect that (i) the Trustee has been duly incorporated as a national banking SFLIBI/1070496/4/10420/00292/shahk/January 20,1999-4:30 14 association under the laws of the United States and is in good standing under the laws of the State of California, duly qualified to do business and to exercise trust powers therein, having full power and authority to enter into and to perforin its duties as Trustee under the Trust Agreement, (ii) the Trustee has duly authorized, executed and delivered the Trust Agreement, (iii) the Trust Agreement constitutes a legally valid and binding agreement of the Trustee, enforceable against the Trustee in accordance with its terms, (iv) the Bonds have been duly authenticated and delivered by the Trustee, (v) no authorization, approval, consent, or other order of the State of California or any other governmental authority or agency within the State of California having jurisdiction over the Trustee is required for the valid authorization, execution, delivery and performance by the Trustee of the Trust Agreement, and (vi) the execution and delivery of the Trust Agreement and compliance by the Trustee with the respective provisions of the foregoing, under the circumstances contemplated thereby, do not and will not in any material respect conflict with or constitute on the part of the Trustee a breach or default under any agreement or other instrument to which the Trustee is a party (and of which such counsel is aware after reasonable investigation) or by which it is bound (and of which such counsel is aware after reasonable investigation) or any existing law, regulation, court order or consent decree to which the Trustee is subject. (7) The opinion, dated the Closing Date and addressed to the Underwriter, of Brown & Wood LLP, San Francisco, California, counsel for the Underwriter ("Underwriter's Counsel") to the effect that (a) the Bonds are exempt from reg=istration under the Securities Act of 1933, as amended, and the Trust Agreement is exempt from qualification under the Trust Indenture Act of 1939, as amended; and (b) without passing upon or assuming any responsibility for the accuracy, completeness or fairness of the statements contained in the Official Statement and making no representation that they have independently verified the accuracy, completeness or fairness of any such statements, based upon the information made available to them in the course of their participation in the preparation of the Official Statement as counsel for the Underwriter, nothing has come to their attention which would lead them to believe that the Official Statement as of its date and as of the Closing Date (excluding therefrom any information in the Official Statement relating to DTC or the operation of the book-entry system, the information contained in the Official Statement under the caption "BOND INSURANCE," as to Appendices C, D, E, F, G and I-I, or any other financial or statistical data included in the Official Statement, as to which no opinion need be expressed) contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading in any material respect; (8) An opinion of Bond Counsel, dated the date of the Closing and addressed to the Authority, the Insurer and the Underwriter, substantially to the effect that (i) upon the issuance of the Bonds and the application of the proceeds thereof in accordance with the Trust Agreement and fetter of SFL',B i/1070496/4/10420100292/shahk/January 20,1999-4:30 15 Instructions, all liability of County in respect of the 1988 Certificates has ceased, terminated and been discharged pursuant to the terms of the trust agreement pursuant to which the 1988 Certificates were executed and delivered, and the holders of such 1988 Certificates are entitled to payment of the principal or redemption price of and interest on such 1988 Certificates only out of the moneys or securities deposited with the Escrow Agent for the payment of such 1988 Certificates and (ii) such payment will not in and of itself, cause interest on the 1988 Certificates to be included in gross income for federal income tax purposes; (9) A certificate or certificates, dated the Closing Date, signed by a duly authorized official of the Authority satisfactory to the Underwriter, in form and substance satisfactory to the Underwriter, to the effect that, to the best of such official's knowledge, (a) the representations and warranties of the Authority contained in the Purchase Contract are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date; (b) no litigation is pending or threatened (i) to restrain or enjoin the execution, sale or delivery of any of the Bonds or the Base Rental Payments under the Facility Lease, (ii) in any way contesting or affecting the validity of the Bonds, the Purchase Contract, or the Legal Documents, or (iii) in any way contesting the existence or powers of the Authority; and (e) no event affecting the Authority has occurred since the date of the Official Statement which either makes untrue or incorrect in any material respect as of the Closing Date any statement or information contained in the Official Statement relating to the Authority or is not reflected in the Official Statement but should be reflected therein in order to make the statements and information therein relating to the Authority not misleading in any material respect; (10) A certificate or certificates, dated the Closing Date, signed by a duly authorized official of the County satisfactory to the Underwriter, in form and substance satisfactory to the Underwriter, to the effect that, to the best of such official's knowledge, (a) the representations and warranties of the County contained in the Purchase Contract are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date; (b) no litigation is pending or threatened (i) to restrain or enjoin the execution, sale or delivery of any of the Bonds or the Base Rental Payments under the Facility Lease, (ii) in any way contesting or affecting the validity of the Bonds, the Purchase Contract, or the Legal Documents to which the County is a party, or (iii) in any way contesting the existence or powers of the County material to the transaction; and (c) no event affecting the County has occurred since the date of the Official Statement which either makes untrue or incorrect in any material respect as of the Closing Date any statement or information contained in the Official Statement relating to the County or the Project or is not reflected in the Official Statement but should be reflected therein in order to make the statements and information therein relating to the County or the Project not misleading in any material respect; SFL1H1/1070496/4/10420/00292/shahk/January 20,1999-4:30 16 (11) A certificate, dated the date of Closing, signed by a duly authorized official of the Trustee, satisfactory in form and substance to the Underwriter, to the effect that. (i) the Trustee is a national banking association organized and existing under and by virtue of the laws of the United States, having the full power and being qualified to enter into and perform its duties under the Trust Agreement and to execute and deliver the Bonds to the Underwriter and the Trust Agreement constitutes the legal, valid and binding obligations of the Trustee, enforceable in accordance with their terms; (ii) the Trustee is duly authorized to enter into the Trust Agreement and to execute and deliver the Bonds to the Underwriter pursuant to the Trust Agreement; (iii) the execution and delivery of the Trust Agreement and compliance with the provisions on the Trustee's part contained therein, will not conflict with or constitute a breach of or default under any law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Trustee is a party or is otherwise subject (except that no representation, warranty or agreement is made with respect to any federal or state securities or blue sky laws or regulations), nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the properties or assets held by the Trustee pursuant to the lien created by the Trust Agreement under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by the Trust Agreement; (iv) to the best of the knowledge of the Trustee, it has not been served with any action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, nor is any such action or other proceeding threatened against the Trustee, affecting the existence of the Trustee, or the titles of its officers to their respective offices or seeking to prohibit, restrain or enjoin the execution and delivery of the Bonds or the collection of revenues to be applied to pay the principal, premium, if any, and interest with respect to the Bonds, or the pledge thereof, or in any way contesting or affecting the validity or enforceability of the Legal Documents, or contesting the powers of the Trustee or its authority to enter into, adopt or perform its obligations under any of the foregoing to which it is a party, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Legal Documents; and sFLiB 1/1070496/4/10420/00292/shahk/January 20,1999-4:30 17 (12) Two copies of the Official Statement, executed on behalf of the Authority by an authorized representative of the Authority; (13) Two certified copies of the general resolution of the Trustee authorizing the execution and delivery of the Legal Documents to which the Trustee is a party; (14) Two certified copies of the Authority Resolution; (15) Two certified copies of the County Resolution; (16) A report addressed to the Authority, dated on or prior to the date of the Closing, from Deloitte & Touche LLP, certified public accountants, verifying the accuracy of (i) the mathematical computations concerning the adequacy of the maturing principal amounts of and interest earned on the government obligations, together with other escrowed moneys, to be deposited into the escrow fund pursuant to the Letter of Instructions to pay when due the principal of and interest on the 1988 Certificates to and including June 1, 1999 and to pay on June 1, 1999 pursuant to a call for redemption the principal of and interest and premium on the 1988 Certificates maturing on and after June 1, 1999, and(ii) the mathematical computations of the yield on the Bonds, and the yield on the government obligations purchased with a portion of the proceeds of the sale of the Bonds, respectively, and used in part by Bond Counsel in concluding that interest on the Bonds is excludable from gross income for federal income tax purposes under presently existing law, regulations, decisions and official interpretations, including the "arbitrage" regulations promulgated and proposed under Section 148(x) of the Internal Revenue Code of 1986, as amended or any successor thereto; (17) Evidence that any ratings described in the Official Statement are in full force and effect as of the Closing Date; (18) A tax certificate by the County and the Authority in form and substance acceptable to Bond Counsel and the Underwriter; (19) Evidence satisfactory to the Underwriter as to the County's legal title to the Leased Facilities; (20) The Bond Insurance Policy for the Insured Bonds, duly executed and issued by the Insurer; (21) An opinion of counsel to the Insurer, dated the Closing Date, addressed to the Authority and the Underwriter in form and substance acceptable to the Representative, to the effect that (i) the Bond Insurance Policy is in effect and is a valid and binding upon the Insurer and (ii) the description of the Bond Insurance Policy and the Insurer contained in the Official Statement fairly and accurately describes the Insurer and the Bond Insurance Policy; SFLIB i/1070495/4/10420/00292/shahk/Ja^.�ary 20,1999-4:30 18 (22) Such additional legal opinions, certificates, proceedings, instruments, insurance policies or evidences thereof and other documents as the Underwriter, Underwriter's Counsel or Bond Counsel may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the Closing Date, of the representations of the County and the Authority herein and of the statements and information contained in the Official Statement, and the due performance or satisfaction by the Trustee, the County and the Authority at or prior to the Closing of all agreements then to be performed and all conditions then to be satisfied by any of them in connection with the transactions contemplated hereby and by the Legal Documents. 5. Expenses, All expenses and costs incident to the authorization, execution, delivery and sale of the Bonds to the Underwriter, including the costs of printing of the Bonds, the Preliminary Official Statement, the Official Statement, the cost of duplicating the Legal Documents, the fees of accountants, consultants and rating agencies, the premiums for the Bond Insurance Policy and the Reserve Surety, the initial fee of the Trustee and its counsel in connection with the execution and delivery of the Bonds and the fees and expenses of Bond Counsel shall be paid from the proceeds of the Bonds. All out-of-pocket expenses of the Underwriter, including traveling and other expenses, including those associated with the California Debt and Investment Advisory Commission fee, the production of the County's presentations to rating agencies and credit enhancement providers, and the preparation of the Blue Sky Memorandum and Legal Investment Survey, and the fees of Underwriter's Counsel, shall be paid by the Underwriter. 6. Notices. Any notice or other communication to be given to the parties to this Purchase Contract may be given by delivering the same in writing to the respective party at the following address: Representative: Bear, Stearns & Co. Inc. 1999 Avenue of the Stars, 32nd Floor Los Angeles, California 90067-6100 Attention: Michelle Issa County: County of Contra Costa County Administrator's Office 651 Pine Street, 6th Floor Martinez, California 94553-0063 Attention: Director, Capital Facilities and Debt Management SFLiFiI/1070496/4/10420/00292/shahk/3anuary 20,1999-4:30 19 Authority: County of Contra Costa Public Financing Authority County Administrator's Office 651 Pine Street, 11th Floor Martinez, California 94553-0063 Attention: Executive Director and Secretary 7. Survival of representations and Warranties. The representations and warranties of the Authority and the County set forth in or made pursuant to this Purchase Contract shall not be deemed to have been discharged, satisfied or otherwise rendered void by reason of the Closing or termination of this Purchase Contract and regardless of any investigations or statements as to the results thereof made by or on behalf of the Underwriter and regardless of delivery of and payment for the Bonds. This Purchase Contract may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original. SFLIB 1/1070496/4/i 0420/00292/shahk/January 20,1999-4:30 20 8. Effectiveness, This Purchase Contract shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by duly authorized officers of the County and the Authority and shall be valid and enforceable as of the time of such acceptance. Very truly yours, BEAR, STEARNS & CO. INC. MERRILL LYNCH & CO. By: BEAR, STEARNS & CO. INC., as Representative By: Michelle Issa Managing Director ACCEPTED: APPROVED AS TO FORM: COUNTY OF CONTRA COSTA PUBLIC COUNTY COUNSEL FINANCING AUTHORITY By: _ By: Philip J. Batchelor Executive Director and Secretary COUNTY OF CONTRA COSTA, CALIFORNIA By; Laura W. Lockwood Director, Capital Facilities and Debt Management SFLIBI/'070495/4/10420/00292/shahk/January 20,1999-4:30 21 EXHIBIT A MATURITY SCHEDULE Maturity Date (June 1) Principal Amount Interest Rate Yield or Price 1999 $1,275,000 4.000% 3.000% 2000 2,210,000 4.000 3.250 2001 2,660,000 4.000 3.500 2002 2,765,000 4.000 3.550 2003 2,885,000 4.000 3.650 2004 3,000,000 4.000 3.750 2005 3,115,000 4.000 3.850 2006 3,235,000 4.000 3.950 2007 3,365,000 4.000 4.050 2008 3,505,000 5.000 4.150 2009 2,605,000 4.200 100.000 2010 2,725,000 4.250 4.300 2011 2,835,000 4.400 100.000 2012 2,965,000 5.250 4.500 2013 3,115,000 5,250 4.600 2014 3,280,000 5.250 4.700 2015 3,455,000 5.250 4.750 2016 3,630,000 5.250 4.800 2017 1,390,000 4.750 4.875 2018 1,455,000 4.750 4.950 2019 1,525,000 5.000 100.000 2028 17,690,000 5.000 5.110 SFLIBI/1070496/4/10420/00292/shahk/January 20,1999-4:30 A-1 (THIS PAGE INTENTIONALLY LEFF BLANK) .......... .. .. ......... APPENDIX B COUNTI TY FINANCIAL I? OILMATI€IN Changes in State Funding and County's Response California counties administer numerous health and social service programs as the administrative agent of the state pursuant to State law. Historically,many of these programs have been either wholly or partially funded with State revenues that have been subject each year to the State budget and appropriation process. Wile the composition of State revenues has shifted over recent years; the overall proportion of the County's General Fund budget financed by state revenues has remained steady at approximately 35%. During the three fiscal years from 1991-92 through 1993-94, the state of California experienced budget deficits largely attributable to the economic recession in California. In dealing with these deficits, the State, among other things, in 1991-92 implemented a "realignment program" removing State funding for certain health and welfare programs from the State budget process and shifting the fiscal responsibility for these programs to the counties. Under this plan, State funding for these programs was replaced with the sales tax increase of 112-cent as well as an increase in vehicle license fees. An additional sales tax increase was subsequently approved by the voters as Proposition 172, permanently extending the tax for public safety purposes. The realignment program shred approximately $2.2 billion out of the state budget process. In response to continued state budget deficits, the 1992-93 state budget reduced $1.3 billion in aid to local governments, and the 1993-94 State budget shifted about $2.1 billion in property taxes from counties to relieve the State of its obligation to find education. The property tax revenue losses for counties were offset in part by additional sales tax revenues and the elimination of state mandates. Over the last several years, State and federally mandated expenditures in justice, health and welfare have grown at a greater rate than the County's discretionary general purpose revenues. At the same time, decreased State revenues have resulted in fewer State funds being available to the County. The result has been that the County has increased its contribution to maintain mandated services while optional local services have been. reduced. The Board has responded to this trend in part by instituting aneasures to improve management, thereby reducing costs and increasing productivity and maintain ing services with diminished funding. 1995-99 State Budget On August 21, 1998, Governor Wilson signed the Budget Act for the 1998-99 Fiscal Year (the 1998-99 Budget Act")but vetoed about$1.5 billion of specific spending items in the areas of water and conservation, low-income, emergency and farmworker housing, as well as about$54 million for Highway Patrol salary increases. Governor Wilson set aside approximately $2501 million of vetoed fiends to fund programs for education. The 1998-99 Midget Act contains $57.€1 billion for General Fund revenues and transfers (a 4.2% increase from: the 1997-98 fiscal year) and expenditures of $57.3 billion (an 7.3% increase from. the 1997-98 fiscal year), leaving a budget reserve of$445 million at June 30, 1998 (this amount does not include the potential restoration of the $250 million of vetoed education fanding) and $1.26 billion in the Special Fund for Economic Uncertainties (a 30% decrease from the 1997-98 fiscal year). 13-1 The 1998-99 Budget Act reflects a $1.4 billion tax reduction, the largest in State history, which will increase by$2.5 billion upon full implementation. Of that amount, more than $500 million is a 25% offset in Vehicle License Fee payments beginning January 1, 1999. If revenues exceed the current forecast in future years, the amount of Vehicle License Fee offset will grow to 67.5%. The 1998-99 Budget Act also contains a substantial increase in the dependent credit exemption, a capped renter's tax credit and a package of targeted tax relief measures for economic growth. K-12 education receives an increase of$2.2 billion in increased and ongoing Proposition 98 support in the 1998-99 Budget Act, with funding included for a r~inimurn K 80 days of instruction,ninth-grade class size reduction, new standards- based textbooks, and library and laboratory materials. In addition,the 199899 Budget Act anticipates the adoption of legislation for a comprehensive remedial instruction program addressing low-performing schools, social promotion and school accountability. With respect to counties, one of the significant aspects of the 1998-99 Budget Act is the inclusion of moneys designated to fund the newly-enacted California Work Opportunity and Responsibility to Fids ("CalWOP ICs") programs, which became operative on January 1, 1998 (see "Federal Funding and Welfare Reform"below). The level of intergovernmental revenues that the County will receive from.tie State in fiscal year 1998-99 and in subsequent fiscal years is likely to be affected by the financial condition of the State. Federal Funding and Welfare Reform The federal government provided approximately 16% of the County's 1997-98 General Fund Budgets. The humsan services departments receive substantial funds for assistance payments and social service programs. On August 22, 1996, President Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act which made substantial modifications to the welfare system and required the State to submit a plan detailing how it world meet the provisions of the Act in order to begin receiving federal funding under the Temporary Assistance to Needy Families ("TAN- 17") Bloch grant. As early as March 1995, in anticipation of the passage of Welfare Reform, the County initiated the development of a local welfare reform proposal with the intent of seeking State and federal waivers and status as a demonstration project. Can July 22, 1997, t`_':e California State Department. of Social Services notified counties that waivers to operate the Shared Understanding to Change the Community to Enable Self-Sufficiency ("SUCCESS") Demonstration Project had been approved and would be effective for three years beginning August 1, 1997. The SUCCESS project, the first welfare reform demonstration project to be approved in the State, is based on a community-designed model for delivering comprehensive, integrated and effective services to public assistance populations. The SUCCESS model emphasizes family self- sufficiency elfsufficiency and responsibility through up-front employment assistance, child care and comprehensive case managed services. Services are delivered in partnership with community-based organizations and through multi-disciplinary teams to ensure the appropriateness of services while eliminating duplication. Integration of the child protective services, child support enforcement and housing assistance staff into the SUCCESS program design as additional components to the demonstation project have enhanced efforts to improve the well-being of children in the County. Among other changes, the Welfare Reform Act has allowed the State to deny access to some federally fznded welfare assistance programs to legal immigrants (beat not to refugees). In the aggregate, the bill's restrictions would reduce federal expenditures in low-income programs by more than $55 billion over the next six years. Dearly all of do $55 billion in savings comae from reductions in the federal food stamp programa, Supplemental Security Income (SSI) program and assistance to legal immigrants. California would potentially lose over $10.0 billion ir. federal funds during the same period of time. The Governor's budget for 1997-98 eliminated State mandates for General Assistance. B-2 Public outcry over the severity of the reductions, particularly to legal aliens, coupled with. a robust economy, has resulted in a restoration of benefits to many legal aliens who were already in the County prior to the reform legislation. For example,the fiscal year 1998-99 Mate budget provides for the Cash Assistance Program for Immigrants (CAFI) which provides for the continuation of SSI type payments for some 3,600 aged, blind and disabled legal aliens statewide. This program w.11 be fully funded by the State with no share of costs to the County. As part of the 1997-98 Budget Acts legislative package, the Legislature and Governor meed on a comprehensive reform of the State's public assistance programs to implement the new federal Law. The neer basic State welfare program is called the California Work Opportunity and Responsibility to Kids Act,which replaces the former Aid to Families with Dependent Children(AFDC) and Greater Avenues to Independence(GAIN)programs effective January 1, 1998. Consistent with the federal Law, CaIWCR.s contains new time limits can receipt of welfare aid, both lifetime as well as for any current time on aid. The centerpiece of CaIWORKs is the linkage of eligibility to work participation requirements. Administration of the new Welfare-to-Work programs will be largely at the county level, and counties are given financial incentives for success in this programa.. Although the longer-term impact of the new federal Law and CaIWORKs cannot be determined until more time has passed, the County does not presently anticipate that these new progranis will have any material adverse financial in-npact on its finances. It is currently u,-iknown what aspects of welfare reform the State will choose to impler bent and whether or not the State will mitigate impacts to the County. If there are additional costs to the County during the 1998-99 fiscal year due to the Welfare Reform .Act or other related legislation., the County anticipates that it may be necessary to reduce ,general government service levels by deleting positions and/or reducing overhead costs. In any event, the County's budget for 1998-99 will be balanced, as required by law, within the available financial resources. The County Board of Supervisors has repeatedly demonstrated its resolve to balance the County's budget despite, difficult program reductions, impacting constituents and employees,Haat have often been necessary to achieve a balanced budget. Trial Court Funding Assembly Bill 233 ("AB 233"), which was adopted by the State Legislature in 1997 and became e5ective January 1, 1998, transferred responsibility from. the counties to the State for local trial court funding commencing in the 1997-98 fiscal year. Under the legislation.,the State assuiried a greater degree of responsibility for trial court operations costs starting in Fiscal Year 1997-98. The County's trial court funding reguirernent will decline frorn $22.8 million in Fiscal Year 1997-98 to $17.9 million in Fiscal Year 1998-99 as a result of AB 233. TI'kae County will continue to be obligated to provide court facilities for all judicial officers and support positions authorized prior to July 1, 1995. This includes those Judicial officers and positions which replace those offices and positions created prior to July 1, 11-996. However, A.B 233 does not require that the County finance new capital facility expenditures related to judicial officers and support staff required for any judgeships authorized during the period from.January 1, 1998 to June 30, 2€101, B-3 County Budget Process The County is required by State law to adopt a balanced budget by August 30 of each year, although the Board -nay, by resolution, extend on a permanent basis or for a limited period, the date to October 2. The County's budget process involves a number of steps. First, upon release of the Governor's Proposed Budget in January, the County Administrator prepares a preliminary forecast of the County's budget based on current year expenditures, the assumptions and projections contained in the Governor's Proposed Budget and other projected revenue trends. Second, the County Administrator presents the County's Proposed Budget to the Board of Supervisors. Absent the adoption of a final County budget by June 30, the current existing budget is continued into the neva fiscal year until a final budget is adapted. Third, between January and the time the State adopts its own budget, legally due no later than June 15,representatives of the County Administrator monitor,review and analyze the State budget and all adjustments made by the State legislature. Upon adoption of the final State budget, the County Administrator recommends revisions to the Proposed Budget to align County expenditures with approved State revenue. After conducting public hearings and deliberating the details of the budget, the Board adopts the County's Final Budget by August 30, or by October 2 if the Board has adopted a resolution to extend the deadline. The County adopted its Final Budget for 1998-99 on September 22, 1995, ahead of the legally extended deadline of October 2, 1998. In carder to ensure that the budget remains in balance throughout the fiscal year, the County Administrator monitors actual expenditures and revenue receipts each month. In the event of a projected year-end deficit, immediate steps are taken, in accordance with the State Constit=ution, to reduce expenditures. On a quarterly basis, the County Administrator's staff prepares a report that details the activity within each budget category and provides summary information on the status of the budget. Actions which are necessary to ensure a healthy budget status at the end of the fiscal year are recommended in the quarterly budget status reports. Other items which have major fiscal impacts are also reviewed quarterly. The County's ability to increase its revenues is limited by State laws which prohibit the imposition of fees to raise general revenue, except to recover the cost of regulation or provisions of services. See "CONSTITL TIONI AL AND STATUTORY LIMITATIONS ON TAXES, REVEN'I.iES AND APPROPRIATIONS" in the forepart of this Official Statement. 1996-97 and 1997-98 County General Fund Budgets Set forth below is a description of the County's comparative budgetary and expenditure experience for fiscal years 1996-97 through 1997-98. For a summary of the actual audited financial results of the County for fiscal year 1997-98, see "FINANCIAL, STATE- MENTS OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30, 19981' in Appendix C to this Official Statement. Fiscal Year 1996-97 of e County's fiscal year 1996-97 Adapted.Budget reflected a 3.9% decline from fiscal year 1995-96. However, the County experienced a decline in general assistance and welfare caseloads compared to the prior fiscal year,thereby resulting in greater discretionary County revenue than in the recent past. The County's 1996-97 Adjusted Budget did not contain any significant budget cuts as a result of improvement in both the State and local economies. B-4 Fiscal .Year 1997-98. The County's Fiscal Year 1997-98 budget was slightly smaller than that of the prior fiscal year. Public assistance assts continued to drop significantly,paced by General Assistance expenditures that fell to $3,5 million compared to over$6.3 million in Fiscal Year 1996-97. Expenditure increases in the public Protection and Health and Welfare categories were primarily due to federal and State grant increases identified in the 1997-98 State Budget Act. The fund balance increased 13% over Fiscal Year 1996-97. As in Fiscal Year 1996-97, the County budget did not contain any significant budget cuts, as the health of both the State and local economies continued to improve. 1998-99 County General Fund Budget The County's Fiscal Year 1998-99 budget is 3.8%percent larger than that of the prior fiscal year due to increases in costs for general government,health and sanitation.,public assistance, and public ways and facilities. Health and sanitation casts are anticipated to increase due to increased grant funding of public health programs, increases in SB 855/1255 Disproportionate Share funding, and expansion of mental health programs. Public assistance is expected to rise by $13 million compared to the prior fiscal year due to increased funds for federally-funded dead Start programs and State-funded CaIWORKs programs for childcare. 13_5 A comparison of the County's General Fund budgets for Fiscal Years 1997 98 and 1998-99 is shown below, COUNTY OF CONTRA COSTA GENERAL FUND BUDGETS FOR FISCAL YEARS 1997-94 AND 1998-99 (LN THOUSANDS OF DOLLARS) Final Final Budget Budget 1997°98 1998-99 General Governnient $ 99,232 $102,616 Public Protection 232,231 227,520 Health and Sanitation 148,041 16€3,054 Public Assistance 243,108 256,154 Education 12,281 13,157 Public Ways and Facilities 51,395 59,191 Recreation and Culture 1 1 Reserves and Debt Service 48,848 48.926 Total Requirements JH&137 JU2,629, AVAILABLE FUNDS F-and Balance available $ 80,247 $ 87,088 Property Faxes 96919 11 99,548 Other faxes 9,265 9,535 Licenses, Permits and Franchises 11,935 12,480 Fines,l~orfekures and Penalties 13,8.62 -16,438 Use of honey and Property 14,280 16,13` Intergovernmental 422,85 A 432,057 Charges for Current Ser-oices 115,'%44 133,652 Other Revenue 80662 73,700 Total Available Funds g .. 137 777 629 Source: Cou;ity A editor-Conto':ler Ata Valorem Property Taxes `axes are levied for each fiscal year on taxable real and personal property that is situated in the County as of the preceding January 1. For assessn-sent and collection purposes, property is classified either as "secured" or"unsecu-ed," and is listed accordingly or, separate parts of the assessment roll. The "secured roll" is that pari of the assessment roll containing Mate assessed property and property secured. taxes, a lien<on real tpropertty asahicy1!? s sufficient,5cinch the C opinion. of the Assessor, to secure payment of the taxes, `.itt er-orove:ty is Caes'JrCJ'✓es.sed on the "S.d.i�.eJSecurbaL.f..ro ' Property taxes on the secured roll are due in two install nests, on November 1 and February 1 of each fiscal year. If unpaid, such taxes become delinquent on December 10 and April 1€3,respectively, and a 1x %penalty attaches to any delinquent payment. In addition, property on the secured roll with respect to which taxes are delinquent is declared to be in default on or about June 30 of the fiscal year Such B-6 property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus a redemption penalty of one and one half percent per month to the time of redemption. If taxes are unpaid for a period of five years or more, the tax-defaulted property is declared to be subject to the Treasuier's power of sale and may be subsequently sold by the Treasurer. Legislation establishied the "supplemental roll" in 1984, which directs the Assessor to reassess real property, at market value, or. the date the property changes ownership or upon completion of construction. Property on the supplemental roll is eligible for billing 30 days after the reassessment and notification to the new assessee. The resultant chane (or refurid) is a orae-tiine levy on the increase (or decrease) ii. value for the period between the date of the change in ownership or completion of construction and the date of the next regular tax roll upon which the assessment is entered. Billings are made on a monthly basis and are due on the date mailed. If mailed between the months of July t=rough October, the first instailsnent becomes delinquent on December 10th and the second on April 10th. If mailed within the months of November through June, the first installment becomes delinquent on the last day of the month following the month of billing. The second installment becomes delinquent on the last day of the fourth month following the date the first installment is delinquent, Property taxes on the unsecured roll are due as of the January 1 lie:^date and become delinquent, if unpaid, on August 31. A 10% penalty attaches to delinquent taxes on property on the unsecured roll, and an additional penalty of one and one-half percent per month begins to accrue beginning November 1. The taxing authority has four ways of collecting unsecured personal property taxesa (1) by filing a civil action against the taxpayer; (2)by filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) by filing a certificate of delinquency for recordation in the County Recorder's office, in order to obtain a lien on certain property of the taxpayer; and(4)by the seizure and sale of personal property, improvements or possessory interest, belonging to the taxpayers The County and its political subdivisions operate under the Teeter Plan pursuant to provisions of Sections 4701-4717 of the California Revenue and Taxation Code. Pursuant to those sections, the accounts of all political subdivisions that levy taxes on the County tax rolls are credited with 100% of their respective tax levies regardless of actual payments and delinquencies. Th,- County Treasury's cash position. (from taxes;) is protected by a special fund (the "Tax bosses Reserve Fund") into which all countywide delinquent penalties are deposited. The County has used this method since fiscal year 19501.51 Historically,the County has borne the full cost of property assessment and revenue collection and distribution.. Senate Bill 2557,passed in 19590, allowed counties to charge cities, schools, special districts and redevelopment agencies for their share of property tax administrative costs. This legislation was subsequently repealed as to charges against school districts. In addition, the legality of the property tax administrative charge has been challenged by the other affected taxing entities. Wile the County is unable to predict the ultimate outcome of such litigation,the County has prevai`_ed at the Court of Appeals level on the issue of the viability of tax administrative charges to redevelopment agencies and at the Superior Court level as to all other challenged fees. The amount in questions, approximately $4 million per year, does not represent a large proportion of the County's arcual Oereral Fund Budgets, which exceed$877 million.. Major property tax assessment appeals by business and the tail industry total $5.6 billion in assessments wits the potential loss of revenue in the millions to various units of'ocaI government. The County has hired Baler and O'Brien, a firma with international experience in the oil refinery sector, to B-7 vigorously fight the appeals. These appeals are currently under study or being deliberated, with decisions expected this fiscal year and in fiscal year 1999-2000. The County has incorporated $3.5 million of property tax revenue adjustments in its Fiscal Year 1998-99 budget as a precaution against potential assessment appeal decisions. A recent history of County tax levies, del:nquencies and the Tax Losses Reserve Fund cash balances as of June 30 is shown below. COUNTY€3F CONTRA COSTA SUMMARY OF ASSESSED VALUATIONS ANIS AD VALOREM PROPERTY TAXATION FOR FISCAL YEARS 1989-90 THROUGH 1998-99 .Percentage Secured Current Levy Current Levy Tax Losses Fiscal Property Tax Delinquent Delinquent Reserve Fund Year Assessed Valuation Levies June 30 June 30 Balance June 30 1989-90 $48,641,369,485 $593,937,412 $14,746,710 148% $21,797,766 1990-91 54,1.14,860,918 669,071,124 19;762,687 2.95 24,093,615 1991-92 58,422,186,087 714,963,082 24,787,991 3.47 26,558,333 1992-93 61,393,320,088 760,559,294 24,239;204 3.19 29,042,152 1993-94 63,427,696,578 794,435,830 20,652,106 2.60 31,225,565 1994-95 65,294,364,749 823,495,651 20,640,379 2.51 24,709,211 1995-96 67,146,461,590 854,519,586 18,296,237 2.14 18,670,811 1996-97 69,242,099,630 869,580,974 18,057,023 2.08 17,!54,539 1997-98 70,314,800,892 892,581,453 15,547,736 1.74 19,508,732 1998-99 71,720,000,000") n/a n/a n/a n/a `1' Figure for 1998-99 is estimated. Source: County Auditor-Controller During each f=iscal year, the Tax Losses Reserve Fund is reviewed and when the amount of the fund exceeds certain levels, the excess is credited to the County General Fund as provided by Section 4703 and 4703.2 of the California Revenue and Taxation Code. Sections 4703 and 4703.2 alloy any county to draw down the Tax Losses Reserve Fund to a balance equal to (i) one percent of the total of all taxes and assessments levied on the secured roll for that year, or (ii) 25% of the current year delinquent secured tax levy. The reductions in the Tax Losses Reserve Fuad balances during the last three years reflect multiple reductions in minimum reserve requirements legislated over that period. The impact of these reductions was to allow increased credits to the County General Fund. No other material drawdowns have occurred. 13-8 Largest Taxpayers The ten largest taxpayers in the County,as shown on the fiscal year 1997-98 secured tax roll, a.d the approximate amounts of their property tax payments are shown below. These ten taxpayers paid a total of$98.5 million in taxes,or about 11.2% of the County's 1997-98 secured tax collection. COUNTY OF CONTRA COSTA TEN LARGEST PROPERTY TAXPAYERS Total Taxes Paid %of Total County Company 1997-98 Tax atoll Chevron USS. $28,212,648.23 3.2.1% Pacific Gas&Electric Company 16,706,093.20 1.90 Shell Oil Company 16,692,809.86 1.90 Pacific Bell 12,453,434.90 1.42 Tosco Corporation 7,353,235.14 0.84 Unocal 6,208,876.84 0.71 USS Posco 4,908,517.38 0.56 Bank of America 2,081,298.56 0.24 GWF Power Systems 1,954,751.34 0.22 Taubman(Sun Valley—Hilltop) 1,891,067.26 0.21 TOTAL $98,4624732.71 11.21-% Source: County Treasurer-Tax Collector B-9 Redevelopment Agencies The California Community Redevelopment Law authorizes city or county redevelopment agencies to issue bonds payable frorn the allocation of tax revenues resulting from increases in full cash values of properties within designated prosect areas. In effect, local taxing authorities other than the redevelopment agency realize tax revenues only on the "frozen" tax base. The following table shows redevelopment agency f,11 cash value increments and tax allocations for agencies within the County. COMMUNITY REDEVELOPMENT AGENCY PROJECTS FULL CASH VALUE INCREMENTS AND TAx ALLOCATIONS") FISCAL FEARS 1988-89 THROUGH 1997-98 Fiscal full Cash Value Total Tax Year Base Year Value Increment(2) Allocations(3) 1988-89 81,342,442,031 $2,845,683,596 833,282,273 6989`90 1,591,934,101 3,275,371,212 35,326,113 1990-91 1,696,768,706 3,966,154,674 42,174,285 :991-92 1,806,223,553 4,573,718,772 48,590,841 1992-93 1,864,029,147 5,009,792,773 53,485,897 1993-94 1,864,029,147 5,236,543,696 55,748,579 1994-95 2,715,784,139 5,320,724,209 56,677,717 1995-96 3,051,303,629 5,337,629,341 57,204,637 1996-97 3,195,085,095 5,493,724,548 58,807,€182 1997--98 2,198,412,524(4) 5,687,404,922 60,454,787 (1) 179all cash values for all redevelopment projects above the"frozen"base year valuations. These data represent growth in full cash values generating tax revenues for use by the community redevelopment agencies. (2) Dm not include unitary and operating non-unitary utility roll values which,starting with Fiscal Year 2988-89,are dere ~lined by the State Board of Equalization on a countywide basis as provided by Assembly Bill 454,Chapter 921,Statutes of 1987. (') Actual tax revenues collected by the County which have been or will be paid to the community redevelopment agencies. �4) 1997-98 Base Year value reduced to exclude project areas with negative increment. Source: County Auditor-Controller County Investment P'ooL None of the proceeds of the 1999 Series A. Bonds will be deposited in the Contra Costa County Investment Pool (the "fool") maintained by the County Treasurer to facilitate the cash flow needs of the members of the Pool. Rather, proceeds of the 1999 Series A Bonds will be deposited with the Trustee in certain fiduciary accounts. While no proceeds of the 1999 Series A Bonds will be deposited in the fool, the following information regarding the Pool is provided for purposes of providing a discussion of the investment practices of the County with respect to its operating funds. State law requires that all moneys of the County, school districts, and certain special districts be held in the County Treasury by the Treasurer. The Treasurer has authority to implement and oversee the investment of such rands in the fool in accordance with California Government Code Section 53600 et seq. (the "California Government Code"). The Treasurer accepts funds only from agencies located within the County. The moneys on deposit are predominantly derived from local government revenues consisting of property taxes, State and federal funding and other fees and charges. There are currently 37 participants in the Pool, the largest being the County. The County, Schools and Corn„munity Colleges, and Sanitation Districts represent an aggregate 95%of the Pool. B-10 As of October 31, 1998, investments in the Fool were held for the following local agencies in the indicated amounts: Par Value Number of Local Agency (in millions) Percent Agencies County of Contra Costa $ 579.5 53.69"/ 1 School Dstricts 323.5 30.09 19 Community College Districts 22.2 2.46 1 Cather Public Agencies* 1501 1 13.96 16 Total 1,075.5 100.00% 37 S s�itation,nre and transportation authorities and two joint power authorities are the only voluntary pa-6cipants in the fool. The Treasurer has historically maintained a:note restrictive investment policy for the fool than that mandated under the California Government Code. For instance, the use of reverse repurchase agreements and purchase of?mutual fund shares are;prohibited. The County has an investment oversight committee that meets quarterly to regularly monitor and report on all investment activities of the County Treasurer's office. The County Treasurer's investment portfolio is in compliance with Government Code Section 53634 et :req, and the Treasurer's current investment policy. The market value of the fool equaled $1,072,580,459.73 on October 31, 1998. As of October 31, 1998, the pool had approximately 60.27% of its assets invested in cash and U.S. Treasury and federal agency securities. Approximately 26,32% of the Fool's assets were invested in highly 'iquid short-term money market -struments '(certificates of deposit, bankers acceptances, and commercial paper). As of October 31, 1998, the detailed composition, cost and market value of the Pool was as follows: Percent of Type of investment Cost Market Value® Total Cast Cash $ 53,547,004.50 $ 53,547,005.50 4.99% U.S. Treasuries 54,220,022.49 56,448,922.86 5,06 U.S.Agencies 538,676,312.71 540,577,554.83 54.22 Money Market Instruments 2719611,489,9E 271,740,670,19 26.32 Other 154,525,§3 155n244,694.07 14.41 Total $1,072,580,459,73 $1,076,558,846.45 100,00% B-11 The Pool is highly liquid, with over 92.84% of the portfolio having a -maturity of less than one year and an average weighted days to maturity of 115 days. Even if no additional deposits were-made into the Pool, the County would be able to meet its cash flow needs for the next six -months. Thematurity, distribution of the pool's portfolio as of October 31, 1998 is presented in the following table. Amount Term to Maturity (Cost Basis) %of Total Less than I year $ 995,704,065 92.84% 1 to 2 years 38,783,086 3.62 2+years to 3 years 13,004,182 1.21 3+years to 4 years 6,552,680 0.62 4+years to 5 years 16,767,103 1.56 Cheater than 5 years 1.659.344 0.15 Total 1,072,580,450 100.00% The mix of investments is designed to ensure that sufficient liquid funds are available to meet disbursement requirements. Funds available at the end of each of the past five fiscal years in excess of disbursement requirements were as follows: Fiscal Year Available funds Ending June 30 (in-millions) 1994 864 1995 869 1996 998 1997 1,135 1998 1,152 Accounting Policies,Reports and Audits The County's accounting policies used in preparation of its audited financial statements conform to generally accepted accounting principles applicable to counties. The County's govermmental funds and fiduciary funds use the modified accrual basis of accounting. This system recognizes revenues when they become available and measurable. Expenditures, with the exception of unmatured interest on general long-term debt, are recognized when the fund liability is incurred. Proprietary funds use the accrual basis of accounting, whereby revenues are recognized when they are earmed and become -measurable, while expenses are recognized when they are incurred. The 'treasurer also bolds certain trust and agency funds not under the control of the Board, such as those of school districts,which are accounted for on a cash basis. The California Govermnent Code requires every county to prepare an annual financial report. The Auditor-Controller prepares the Comprehensive Annual Financial Report for the County. This annual report covers financial operations of the County, County districts and service areas, local autonomous districts and various trust transactions of the County Treasury. Linder Califomia law, independent audits are required of all operating funds under the control of the Board. The County has had independent audits for more than 40 years. B-12 The Government Accounting Standards Board rewires disclosure of certain utters regarding the year 2000 issue. Because of the unprecedented nature of the year 2000 issue, its effects and the success of related remediation efforts will not be fully determinable until the year 2000 or thereafter. Accordingly, insufficient audit evidence exists to support the County's disclosures with respect to the year 2000 issue. As a result, at least some auditors of financial statements for municipal entities, including the County,which are Issued after October 31, 1998, will include a qualified opinion due to the insufficiency of such evidence. The County has never before received a qualified audit. See "CERTAfN RISK FACTORS - Year 2000 Risk" and "APPENDIX C—FINANCIAL STATEMENTS OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30. 1995—Note 21." Additionally, the County Grand Jury may also conduct management audits of certain offices of the County. Funds accounted for by the County are categorized as follows: Genial County Funds. The general County funds consist of the General Fund and other operating funds. The General Fund is used to account for the revenues and expenditures of the County that are not accounted for by other(ands. The other operating funds are used to account for the proceeds from specific revenue sources (other than special assessments) or to account for the financing of specific activities as required by law or administrative regulations. Special District Funds Under Control of Board ofSupervisors. These funds are used to account for the transactions of fire protection districts, flood control and storm drainage districts, sanitation districts and county service areas under the control of the Board. Special District Funds Under Control of Local hoards and School District Funds. These funds are used to account for cash received and disbursed and cash and investments held by the County for districts controlled by local boards. These districts maintain their own accounting records supporting their separate financial statements which are sub;ect to separate audit under California law. Trust and Agency Funds. Trust and Agency funds are used to account for money and other assets received and held as trustee,custodian or agent for individuals and governmental agencies. Presented on the following page is the County's Schedule of Revenues, Expenditures and Changes in Fund Balances as of June 30 for the five most recent fiscal years. More detailed information from the County's audited financial report for the fiscal year ending Jure 30, 1998 appears in Appendix C to this Official Statement. B-13 COUNTY OF CONTRA COSTA GENERAL FUND SCHEDULE oF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES r BUDGET AND ACTUAL,-BUDGETARY BASIS FISCAL,YEARS 1993-94'THROUGH 1997-98 (IN THOUSANDS) 1993-94 1.994-95 1995-96 1996-97 1997-98 REVENUES Faxes $97,743 $89,992 $95,773 $99,974 $101,370 Licenses,pe_rrnits&franchises 6,229 4,978 6,689 7,419 6,476 Fines,forfeitures&penalties 9,789 18,371 17,437 14,082 12,725 Use of money&property 12,279 12,693 13,406 12,062 13,459 Intergovermrnentalrevenues 375,371 383,118 373,167 371,750 378,383 Charges for services 77,835 116,447 99,678 103,913 107,530 Other revenue 10,446 11.635 17,456 18,198 15,083 TOTAL REVENUES 589,692 637,234 623,606 627,398 635,026 EXPENDITURES General government 63,890 67,825 82,256 77,199 83,847 Public protection 152,161 157,135 141,875 150,12'=. 168,054 Health&sanitation 112,659 114,585 115,286 122,676 138,241 Public assistance 231,162 238,859 233,862 218,081 213,246 Education 102 122 130 133 145 Public ways and facilities 11,768 9,454 6,933 9,266 6,965 Recreation and culture 0 0 0 0 0 Merest 5,017 4,469 4,273 4,204 4,302 Capital outlay(1) 3.384 3.477 1.371 2.615 2.947 TOTAL EXPENDITURES 580,143 595,926 585,986 584,295 617,747 Excess of revenues over(under)expenditures 9,549 41,308 37,620 43,103 17,279 OTHER FINANCING SOURCES(USES) Operating transfers :n 28,022 24,266 18,804 24,581 31,318 Operating transfers out (37,405) (71,628) (50,911) (55,844) (42,005) Capital lease fmancing(1) 3J84 1477 1.371 2.615 2.955 TOTAL OTHER FINANCING SOURCES(USES) 5 999) 43 885) 3� 0.736) 2 648) 7 732) Excess(deficiency)of revenues and other financing sources over(under)expenditures and other financing uses 3,550 (2,577) 6,884 14,455 9,547 ND BALANCE AT BEGINNING OF YEAR, as Previously Reported 47,598 50,213 51,570 56,524 68,185 Adjustment to beginning 1-fiand balance ) 4.664 418) 0 0 FUND BALANCE AT BEGINNING OF YEAR,as Restated 47,200 54,877 51,152 56,524 68,185 Residual equity transfers in 0 5 0 0 0 Residual equity transfers out 537) {735 1 {12) 2 97 4) L772 FUND BALANCE at end of year $5 21 $�1g570 $56,524 $68.185 $76.960 These entries are required by'\'COA Statement 5 to disclose the value of fixed assets acquired during the year under lease purchase agreements. T"ne County does not appropriate these amounts since they apply to future years. Source: County Auditor-Controller B-14 County Employees A summary of County employment follows: COUNTY OF CONTRA COSTA COUNTY EMPLOYEES( ) ?umber of As of Permanent June 30 Employees :989 6,463 1990 6,635 991 7,008 992 7,080 1993 6,689 1994 6,658 1995 6,822 1996 6,856 1997 6,974 1998 7,106 if) Excludes temporary or seasonal employees. Source: County Auditor-Controller County employees are represented by 30 bargaining units of 11 labor organizations, the principal ones being Local 1 of the County Employees Association and the Clerical Employees Union which, combined.,represent approximately 34%of all County employees in a variety of classifications. The County has had a positive employee relations program, and has enjoyed successful negotiations of cost effective agreements over the years. The County completed its latest contract negotiations with labor representatives in July 1996, with the agreement providing for, among other things,a t zee percent salary increase through September 30, 1997, a two percent salary increase effective October 1, 1997, and a 3.5% salary increase effective October 1, 1998. The agreement covers approximately 75%of the County's employees and expires in September 1999. Contract negotiations with the County's Deputy Sheriffs and firefighters are ongoing. Pension Plan The Contra Costa County Employees' Retirement Association ("CCCERA") is a cost-sharing multiple-employer defined pension benefit plan governed by the County Employees` Retirement Law of 1937. The plan covers substantially all of the employees of the County, its special districts, the Housing Authority and thirteen other member agencies. The plan provides for retirement, disability, death and survivor benefits, in accordance with the County Employees' Retirement Law. Annual cost-of-living adjustments to retirement benefits can be granted by the retirement Board as provided by State statutes. The CCCERA is divided into three separate benefit sections of the 1937 Act. These sections are known as: General - Tier I, General - Tier II and Safety. Tier I includes all General members fired B-15 before August 1, 1980 and electing not to transfer to Fier II. The Tier II section includes all employees hired on or after August 1, 1980 and all General members electing to transfer from Fier 1. The Safety section covers all employees in active law enforcement, active fire suppression work or certain other "safety" classifications as designated by the CCCERA's Retirement Board. Service retirement benefits are based or age, length of service and final average salary. For the Tier I and Safety sections,the retirement benefit is based on a one-year average salary,in accordance with Government Code Section 31462. For Tier 11,the benefit is based on a three-year average salary. Effective October 1, 1998, a Fier III retirement plan was established for permanent County employees with over five years of service,allowing employees to transfer from flier II to Fier 111. Tier III offers a better retirement plan using'Pier I pay-out levels, except that the more stringent requirements for disability retirement are retained fa om Tier II. The CCCERA issues a stand-alone financial report which is available at its office located at 1355 Willow Way, Suite 221, Concord, California 94520, For additional inforrnation or. the County's pension plan., see "APPENDIX C - FINANCIAL STATEMENTS OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30, 1998 -Note 19." Impact of the Ventura Recision. On August 14, 1997, the Supreme Court of the State of California rendered a decision in the manner of Ventura County deputy Sherfff's Association v. ,hoard of Retirernent of Ventura Count/ Employees'Retirement Association which held that compensation not paid in cash, even if not earned by all employees in the same grade or class, must be included in "compensation earnable" and "final compensation" on which an employee's pension is based. This California Supreme Court decision became final on October 1, 1997,requiring, among other things, certain items such as vacation buy-back to be included in the calculations that determine the retirement benefits that a retiree is eligible to receive. The court decision pertains to defined pension plans governed by the County Employees' Retirement Law of 1937, such as the pension plans of marry counties in the State, including the County. In addition;, two lawsuits against the County on similar issues have been filed by certain retired County employees. Subsequent to the Supreme Court decision, the CCCEI A commissioned act-aarial studies to evaluate and estimate the cost and its associated amortization with respect to the potential unfunded liability arising from the court ruling. While definitive results are not yet available, the County anticipates that any additional costs will be funded over a number of years according to prudent actuarial practices and that the costs will not materially impair its ability to repay the 1,999 Series A Bonds. Lang Term Obligations The County has never defaulted on the payment of principal or interest on any of its indebtedness. Following is a brief summary of the County's general obligation debt, lease obligations and direct and overlapping debt. General Obligation Debt The County has no direct general obligation bonded indebtedness, the last issue having been redeemed in fiscal year 1977-78. The County has no authorized and unissued debt. Lease Obligations. The County has made use of various :ease arrangements with private and public financing entities, nonprofit corporations, and the County Employees' Retirement Association for the use and acquisition of capital assets. "These capital lease obligations have teras ranging from five to 30 years. The longest capital lease ends in 2028. For a complete summary of the County's lease B-16 obligations as of June 30, :998, see "APPENDIX C- FINANCIAL STATEMENTS OF TIME COUNTY FOR THE FISCAL YEAR ENDED JUNE 30, 1998 - Dotes to General Purpose Financial statements - Note 6- Lease Commitments" and"- -Note 7 -Long-Term Obligations" attached hereto. Annual debt service for the County's outstanding lease obligations and pension obligation bonds ("POB")is shown in the table below. Fiscal Year Ending Total Lease Total POB Total Net June 30, Deist Service Debt Service Debt Service() !!lent Service(2) 1999 $8,544,930 $19,370,873 $27,915,802 $24,245,025 2000 23,724,539 31,741,855 55,466,494 47,392,232 2001 24,142,€171 33,527,4.3 57,659,484 49,500,969 2002 24,430,579 35,409,713 59,840,291 51,1€31,632 2003 24,190,734 37,382,933 61,.573,666 53,215,705 2004 24,181,701 39,459,053 63,640,754 55,162,667 2005 24,180,578 41,641,953 65,822,630 57,221,970 21306 24,188,874 43,935,590 68,124,464 59,387,941 2007 24,187,751 46,347,585 70,535,336 51,658,081 2008 24,204,110 48,879,460 73,083,570 64,041,127 2009 22,827,036 51.,543,575 74,370,611 65,156,732 2010 211,610,370 44,576,215 66,186,585 57,290,728 2011 21,608,654 17,892,033 39,500,686 31,930,819 2012 21,613,945 21,613,945 14,444,146 2013 21,613,244 21,613,244 14,950,157 20!4 21,616,106 21,616,106 14,954,215 2015 21,634,558 21,634,558 14,977,479 2016 21,626,887 21,626,887 14,969,344 2017 19,207,779 19,207,779 12,560,478 2018 19,203,379 199203,379 12,.561,785 2019 19,229,680 19,.229,680 9,324,070 2020 17,502,265 17,502,265 11,051,284 2021 17,500,458 17,500,458 8,306,584 2022 14,745,888 14,745,888 8,516,009 2023 14,740,601 14,740,601 29539,421 2024 4,28.,629 4,28.,629 4,179,688 2025 4,283,179 4,28391.79 2,439,719 2026 2,489,000 2,489,000 2,489,000 2027 2,491,500 2,491,500 2,4915500 2028 2 48 500 2.4 3L 50 la aa TOTAL: 538.290.723 j49L7C8.248 $1,029.998.970 a ,.I4= Includes debt service on the 1999 Series A Bonds and excludes debt service on Prior Certificates. Excludes estimated reimbursennent from the State for County hospital debt service and excludes earnings on various deb,service funds. (z> Includes estimated reimbursement from the State for County hospital debt service; earnings on various bond funds and the reduction in debt service obligation when'be debt service reserve fund is liquidated at the maturity of various debt reserves. Source: The County Direct and Overlapping Debt. The County contains numerous tlaunicipalities, school districts and special purpose districts,as well as tae overlapping Bay Area sapid Transit District and the Fast Bay Municipal Utility District,which have issued general obligation bonded and lease indebtedness. Set forth B-17 below is a direct and overlapping debt report (the "Debt Report") prepared by California Municipal Statistics Inc. that summarizes such indebtedness as of January 1, 1999. The Debt report is included for general information purposes only. The County has not reviewed the Debt Report for completeness or accuracy and makes no representations in connection therewith. ]h e Debt Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the County. Such long term obligations generally are not payable from revenues of the County (except as indicated) nor are they necessarily obligations secured by land within the County. In many cases, long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency. B-18 ....................................... ------------- .......... Contra Costa County Estimated Direct and Overlapping Bonded Debt as of January 1, 1999 1998-99 Assessed Valuation: $70,618,556,055 (includes unitary utility va;uation) Redevelopment Incremental Valuation: 6.080,4§1 383 Adjusted Assessed Valuation: $64,538,094,972 OV,wLAPP'NG TAX AND ASSESSMENT DEBT: 10 An It g'le Debt 1/`_/99 Sar.Francisco Bay Area Rapid Transit District 30.73:3% $ 12,638,946 Last Bay Municipal Water District and Special District No.1 48.594&5.859 6,727,444 Martine.,Unified School District 100. 43,407,276 Pittsburg Unified School District and Test Contra Costa Unified School District 100. 24,890,000 Sart Ramon Valley Unified School District a oo. 70,000,000 Sart Ramon Valley Unified School District Lease Tax Obligations 100, 32,690,000 Acalanes and Liberty Union High School Districts 100. 85,384,809 Lafayette School District 100. 27,270,000 Other School Districts 100. 64,096,306 Cities 100. 7,175,000 East Bay Regional Park District 44.653 83,456,457 Other Special Districts 200, 2,915,000 Community Facilities Districts 100. 181,795,000 1915 Act Assessment Bonds(Estimate) 100. 312.883.564 TOTAL GLOSS OVERLAPPING TAX AND ASSESSMENT DEBT $956,329,902 Less: East Bay Municipal Utility District and Special District No.11100%self-supporting) _ 76. 27,444 TOTAL NET OVERLAPPING TAX AND ASSESSMENT DEBT $949,602,458 DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT: Contra Costa County General Fund Obligations 100. % $268,592,000 (1) Contra Costa.County Pension Obligations 1o0. 321,895,000 Contm. Costa County Board of Education Certificates of Participation 100. 3,575,0063 Contra.Costa County Mosquito Abatement District Certificates of Participation 200. 1,885,000 Alameda-Contra Costa Transit District Certificates of Participation 1€.065 2,751,312 Antioch Unified School District Certi:cates of Participation: 100. 15,252,604 San Ramon.Valley Unified School District Educational Facilities Corporation 100. 35,415,000 Other School District Genera'Fund Obligations 0.493-100. 45,323,087 City of Antioch General Fuad Obligations 100. 16,754,256 City of Concord General Fund Obligations 1001. 31,685,030 City of Plemant hill General Fund Obligations 100. 12,960,000 City of Richmond General Fund Obligations 100. 26,750,160 City of San Ramon General Fund Obligations 100, 23,564,980 Other City Genera;Fund Obligations 100. 22,796,376 Hospital Authorities 100. 7,705,000 Other Special District Certificates of Participation 100. 11.250.000 TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT $348,154,775 Less: Sap.Ramon Unified School District Certificates of Participation(self-supporting from:GIC from Bayerische Landesbank) 14,850,000 City of Concord lease bonds(100%se`f-supporting) 1.250,000 TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT $832,054,775 GROSS COMB'NED TOTAL DEBT $1,804,484,677 (2) NET COMBINED TOTAL DEBT $1,781,557,233 (1) Excludes lease revenue bonds to be sold. (2) Excludes tax and revenue anticipation notes,revenue,mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. Ratio§Lo'998-99 Asses=ed Valuation: Total Gross Direct and Overlapping Tax and Assessment Debt................................................1.35% Total Net Direct and Overlapping Tax and Assessment Debt...................................................1.34% Ratios to Adjusted Armed Valuation: Combined Direct Debt ($590,487,000)....................................................................................0.91% GrossCombined Total Debt.....................................................................................................2.8101% NetCombined Total Debt.........................................................................................................2.76% STAT SC`-IDOL BUILDING AID REPAYABLE AS O 6/30/98: $0 B-19 Future Financings In the spring or summer of 1999, the County anticipates financing various specialty clinics at the Contra Costa Regional Medical Center in Martinez, California. In addition, in accordance with usual County practice, the County anticipates the issuance of Tax and Revenue Anticipation Notes for fiscal year 1999-2000. No other major debt financings of new capita': projects are currently scheduled by the County,although the County is exploring the replacement of its main administration building. Insurance and Self-Insurance Programs The County is self-insured for claims relating to public liability (excluding the airport), automobile accidents and medical malpractice. It is the County's policy to appropriate annually sufficient funds to cover the estimated liability of the County for self-insurance claims to be made during the upcoming fiscal year. Whenever a claim is made,the claim is evaluated and a portion of the appropriated flunds is reserved to satisfy the County's estimated liability for such claim. Although the County believes that its past experience enables it to evaluate reasonably its liability for self-insurance claims, no assurance can be made that the amount reserved for such purpose will be adequate, nor can there be any assurance that the funds appropriated to satisfy claims arising during any fiscal year will be sufficient. For information on the County's insurance coverage, see "APPENDrX C - FINANCIAL, STATEMENTS OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30, 1998 - Notes to General Purpose Financial Statements-Note 17" attached hereto. B-20 APPENDIX C FINANCIAL STATEMENTS OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30, 1998 C-1 kTHIS PAGE INTENTIONALLY LEFI'BLANK) ................ Part11er5 Mt. Diablo Plaza Kenneth A.Macias 2175 N.California boulevard Ernest J.Gini Suite:620 Kevin J.O'Connell Walnut Creek,CA 1)451t6 Macias,Gini&Company 1.i., C B'titttl DUO'lC AC Coun'an'S 92.--274-0190 92:;-274-1811;i The Honorable Board of Supervisors County of Contra Costa Martinez,California UNDEPEzNDENT AUDITORS REPORT We have audited the accompanying general-purpose financial statements of the County of Contra Costa, California (County), as of and for the year ended June 30, 1998. These general-purpose financial statements are the responsibility of the County's management. Our responsibility is to express an opinion on these general-purpose financial statements based on our audit. Except as discussed it the following paragraph, we conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits cohtained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general-purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general-purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall general-purpose financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Governmental Accounting Standards Board Technical Bulletin 98-1,Disclosures about Year 2000 Issues, requires disclosure of certain matters regarding the year 2000 issue. The County has included such disclosures in Vote 21, Because of the unprecedented nature of the year 2000 issue, its effects and the success of related remediation efforts will not be fully determinable until the year 2000 and thereafter. Accordingly, insufficient audit evidence exists to support the County's disclosures with respect to the year 2000 issue made in Note 21. Further, we do not provide assurance that the County is or will be year 2000 ready, that the County's year 2000 remediation efforts will be successful in whole or in part, or that parties with which the County does business will be year 2000 ready. In our opinion, except for the effects of such adjustments, if any, as aright have been determined to be necessary had we been able to examine evidence regarding year 2000 disclosures, the general-purpose financial statements referred to above present fairly, in all material respects, the financial position of the County, as of Jure 30, 1.998 and the results of its operations and cash flows of its proprietary fund types for the year then ended in conformity with generally accepted accounting principles, As further described in Note 1 to the general-purpose financial statements, the County adopted the orovisions of GASB Statement No. 31,Accounting and Financial Reporting jbr°Certain Investments and for External Investment fools. In accordance with Government Auditing Standards, we have also issued a report dated December 4, 1998 on our consideration of the County's internal control over financial reporting and on our tests of its compliance with certain provisions of laws,regulations, contracts and grants. OFFSCE LOC:ATIO\\ Sacramento s Los Angeles m Orange County . San Diego Count.v o San Francisco i.ie Arta 1 Our audit was made for the purpose of forming an opinion on the general-purpose financial statements taken as a whole. The combining,individual fund, and individual account group financial statements and schedules listed in the accompanying table of contents are presented for purposes of additional analysis and are not a required part of the general-purpose financial statements of the County. Such information has been subjected to the auditing procedures applied in the audit of the general-purpose financial statements and, in our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to examine evidence regarding year 2000 disclosures, is fairly presented,'in all material respects, in relation to the general-purpose financial statements taken as a whole, The statistical section listed in the accompanying table of contents is presented for purposes of additional analysis and is not a required part of the general-purpose financial statements of the County. Such additional information has not been subjected to the auditing procedures applied in the audit of the general-purpose financial statements and, accordingly,we express no opinion thereon. MACIAS,GINI fir,COMPANY LLP a Certified Pubic Accountants Walnut Creek,California December 4, 1998 2 Af • _ i 1w.ft � e - dam i _ y� COUNTY OF CONTRA COSTA COMBINED BALANCE SHEET-ALL FUND TYPES AND ACCOUNT GROUPS* ;UNE 30,1998 (4n Thousands) Governmental Fund Types Spec:ai Debt Capitan Assets and Other Debits General Revenue Service Pro ects Cash and investments S 122,777 97,956 30,832 23,304 Accounts receivable and accused revenue 69,898 15,643 2,573 37 Inventories 1,662 Due from other Pands 129.892 30,968 52 415 Taxes receivable Advances to other farads 138 13,997 Notes receivable 2,442 Prepaid items and deposits 1,405 334 1,873 Land held for sale 1,739 1,849 Fixed assets,net ' Amount available in debt service funds Amount to be provided for retirement of long-term obligations "Total Assets and Other Debits S 325,772 163,079 35,330 25,606 Liabilities,Equity and Other Credits Liabilities: Warrants outstanding S Short term notes 130,000 Accounts payable and accrued liabilities 38,463 13,099 922 139 Employee benefits payable Due to other funds 60,157 34,251 1,256 1,180 Welfare program advances 7,891 Capital tease obligations Unapportioned taxes Tax loss guarantees Due to other agencies Certificates of participation,net Advances from other funds 2,807 233 Deferred revenue and credits 12,301 6,983 Deferred compensation Notes payable Pension and other bonds payable Special assessment debt with government commitment Other non-current liabilities Total Liabilities 248,812 57,140 2,178 1,549 Equity and Other Credits: Contributed capital Investtnent in general fixed assets Retained earnings. Reserved for debt service Unreserved Fund balances: Reserved 21,833 24,453 33,152 79 Unreserved: Designated 9,446 4,134 21,201 Undesignated 45,681 77,352 2,777 Total Equity and Other Credits 76,960 105,939 33,152 24,057 Total Liabilities,Equity and Other Credits S 325,772 163,079 33,330 25,606 Trust funds are reported in the Combined Statement of Net Assets-Pension and Investment Trust Funds. See accompanying notes to general-purpose fsrsancial statements. 4 Fiduciary ProMetaay bund Types Fund Type Acmint C1mps --ZWeGeneral. (metnoran&m werna) Fixed Long-Term Only) Enterprise Seavloe Agency Assets Obligations Totals 78,796 75,472 300,386 - - 729,523 38,361 884 21,241 348,637 848 2,510 22,308 3,971 17,962 205,569 94,416 94,416 85 14,220 2,442 3,039 6,651 3,588 144,310 573,236 717,526 31,279 31,279 518,929 518,929 287,662 80,327 434,090 573,216 550,208 2.475,290 22,986 22,986 130,000 22,788 73,353 7,869 156,633 4,871 22,936 27,807 28,701 1,191 81,809 208,545 7,891 7,421 8,985 16,406 59,003 59,003 19,509 19,509 71,333 71,333 128,177 126,893 255,070 11,183 14,220 33,895 53,179 171,581 171,581 1,012 2,125 3,137 352,965 352,965 25,121 25,121 1,031 _ 1,031 227,896 74,544 434,090 550,208 1,596,417 29,205 29,205 573,216 $73,216 22,535 22,535 8,026 5,783 13,809 79,517 34,781 125,810 59,766 5,783 573,216 878,873 287,662 80,327 434,090 573,216 - 554,208 2,475,290 A B F.,a `�°° COU ` COUNTY OF CONTRA COSTA IN FUND BALANCES-ALL GOVERNMENTAL FM SES YEAR ENDED,NNE 34,1998 (in Thousands) ( '1k- Speaisl 3.ch 0*) Cameral Revenue Semco Took Revenues: Taxes S 101,370 69,426 6,064 4871 179,331 Licenses,pots and franchise fees 6,476 7,718 14,194 Fines,forfeitures and penalties 12,725 3,524 16,249 Use of money and property 13,459 8,675 18,626 1,408 42,168 intergovernmental 378,383 91,270 420 1,135 471,2118 Charges for services 107,5343 22,938 130,468 Other revenue 15,083 4,660 141 19,W Total Revenues 635,026 207,811 25,114 _ 5,515 873,462 Expenditures: Current: General gove:r moot 83,847 1,939 85+ Public protection 168,054 98,653 266,707 Health and sanitation 138,241 9,626 147,867; Public assistance 213,246 55,387 268,633 Fducation 145 11,629 11,774. Public ways and facilities 6,965 26,106 33,071 Recreation and culture 484 484 Debt Service: Principal 1,375 22,051 160 23,586 Interest 4,302 1,665 34,747 2 40,716 capital outlay 2,947 3,298 1,495 3,562 11,302 Total Expenditures 617,747 210,162 58,2.93 3,724 889,926 Excess(Wictency)of Revenues Over (Under)Expenditures 17,279 (2,351) (33,183) 1,791 (16,454) Other Financing Sources(Uses): Operating transfers in 31,318 8,464 31,493 71,275 Operating transfers out (42,005) (2,947) (2,903) (47,855) Advances from otter funds 1,185 2 1,187 P. s ftm refunding beds 66,913 66,913 Payment to re1$anded bond escrow agent (46,257) (46,257) Capital lease financing 2,955 960 3,915 Total Other FInarwft Sources(Uses) (7,732) 7,662 52,149 (2,901) 49,178 Excess,(Deficiency)of Revemies ars(Other Finam W*urces Over Expenditum wW OtherFbesiaw tg Uses 9,547 5,311 18,966 (1,110) 32,714 F um Balmices at Begbming Of Year, as Previously Reported 68,185 103,619 16,718 22,635 211,157 Adjustments to beginning fund balance (351) (351) Fund Babunces at BegWift of Year, as Restated 68,185 143,268 16,718 22,635 210,846 Residual equity transfer in 772 2,532 3,344 Residual equity transfer out (772) (3,412) (2,532) (6,716) Finard •es at End of Year $ 76,960 105,939 33,152 24,057 240,108 Sec accanpanying notes to general-purpose financial staters ►ts. 7 COUNTY OF CONTRA COSTAE AND CHANGES COMBINED STATEMENT GI'REVENUES,EXPENDITURES ACHANGES IN FUND BALANCES-BUDGET AND ACTUAL o GENERAI,,,SPECIAL REVENUE AND CERTAIN DEBT SERVICE AND CAPITAL PROJECTS FUNDS YEAR ENDED JUNE 30,1998 (In Thousands) General Fund Variance Favorable Budget Actual (Unfavorable) Revenues: Taxes 96,936 101,370 4,434 Licenses,perrmts and franchise fees 7,32: 6,476 (845) Fines,forfeitures and penalties 10,852 12,725 1,873 Use of money and property 14,141 13,459 (682) Intergovermnental 393,530 378,383 (15,147) Charges for services 112,718 107,530 (5,188) Other revenue 16,568 15,083 (1,485) Total Revenues 652,066 635,026 (17,040) Expenditures: Current: General government 109,319 83,847 25,472 Public protection 175,283 168,054 7,229 Health and sanitation 140,674 138,241 2,433 Public assistance; 239,646 213,246 26,400 Education 153 145 8 Public ways and facilities 10,592 6,965 3,627 Recreation and culture 1 1. febt service: Principal Interest 6,085 4,302 1,783 Capiw outlay 2,947 2,947 Total Expenditures 684,700 617,747 66,953 Excess(Deficiency)of Revenues Over (Under)Expenditures (32,634) 17,279 49,913 Either Financing Sources(Uses): Operating transfer in 31,314 31,318 4 Operating trlulsfers out (42,734) (42,005) 729 Advances from other funds Capital lease financing 2,955 2,955 Total Other Financing Sources(Uses) (11,420) (7,732) 3,688 Excess(Deficiency)of Revenues and Other Financing Sources Over(Under)Expenditures and Other Financing Uses (44,054) 9,547 53,601 Fund Balance$(Inuits)at Beglrusing of Year,as Previously Reported 68,1185 68,185 Adjustments to beginning fiend balance Fund Balances(Deficits)at Beginning of Year,as Restated 68,185 68,185 Residual equity transfer in Residual equity transfer out (772) (772) Fund Balances at End ofYear S 24,131 76,960 52,829 See accompanying notes to general-purpose financial statements. Special Revenue Fri Certain Debt Service Funds Catam Capita.Project$Funds Favorable Favorable Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable) Budget Actual (Unfavorable) 69,896 69,026 (970) 2,735 2,446 (289) 2,787 2,971 84 6,210 7,718 1,508 3,112 3,524 412 6,014 8,675 2,661 1,064 1,331 267 530 1,354 824 108,551 91,270 (17,281) 409 420 1t 1,.313 4,135 (174) 25,176 22,938 (2,238) 15.5 (133) 11,404 4,660 (6,744) 14,703 11 0 1 (14,602) 230,363 207,411 (22,552) 4,208 4,197 01) 19,458 5,461 (14,027) 3,422 1,939 1,483 141,636 98,653 42,983 12,118 9,626 2,492 64,811 55,387 9,424 12,819 11,629 1,190 57,457 26,106 31,351 2,057 484 1,573 666 1,375 (709) 7,924 7,921 3 160 160 1,583 1,665 (80) 24,450 23,884 366 2 (2) 3,419 3,298 121 136 5 131 23,197 3,541 19,656 299,990 210,162 89,428 32,510 31,810 700 23,357 3,703 19,654 (69,627) (2,351) 67,276 (28,302) (27,613) 689 (3,869) 1,758 5,627 8,602 8,464 (138) 27,379 30,819 3,440 (2,947) (2,947) (2,903) (2,903) 1,185 1,185 2 2 960 960 7,500 7,662 (138) 27,379 30,819 3,440 (2,903) (2,901) 2 (61,827) 5,311 67,138 (923) 3,206 4,129 (6,772) (1,143) 5,629 103,619 103,619 1,175 1,175 220 21,954 21,734 (351) (351) 103,619 103,268 (351) 1,175 1,175 220 21,954 21,734 772 772 (3,412) (3,412) 41,792 105,939 64,147 252 � 4,381 4,129 (6,552) 20,811 � 27,363 9 COL NTY OF CONTRA COSTA. COMBINED STATEMENT OF REVENUES,EXPENSES AND CHANGES IN RETAINED EARNINGS-ALL PROPRIETARY FUND TYPES YEAR ENDED JUNE 30,1998 (In Thouswds) Proprietary Fund Types (Memorandurr Internai Only) Enterprise Service Totals Operating Revenues: _ Charges for services $ 247,702 26,460 274,162 Intergovernmental 17,130 17,130 Total Operating Revenues 264,832 26,460 291,292 Operating Expenses: Salaries and employee benefits 101,609 286 101,895 Services and supplies 128,322 6,627 134,949 Other charges 7,333 7,333 Benefit and claim expense 19,726 19,726 Depreciation 4,380 4,380 Total Operating Expenses 241,644 26,639 268,283 Operating Income(Loss) 23,188 (179) 23,009 Nonoperating Revenues(Expenses): Investment income 19 3,679 3,698 Interest expense (67) (67) Loss on disposal of fixed assets (47) (47) Total Nonoperating Revenues(Expenses) (95) 3,679 3,584 Income Before operating Transfers 23,093 3,500 26,593 Operating transfers in 13,665 25 13,690 Operating transfers out (37,082) (28) (37,110) Net Income(Doss) (324) 3,497 3,173 Add depreciation on contributed capital 929 929 Increase in Retained Earnings 605 3,497 4,102 Retained Earnings at Beginning of Year 29,956 2,286 32,242 Retained Earnings at End of Year $ 30,561 5,783 36,344 See accompanying:rotes to general-purpose financial statements. 10 COLINTY OF CONTRA COSTA COMBINED STATEMENT OF CASH FLOWS- ALL PROPRIETARY FUND TYPES YEAR ENDED AYNE 3G,19i9 (in Thousandi) Proprietary Fund Types (Memorandum Internal Only) Enterprise service Totals Operating Income(Low) 23,188 (179) 23,009 Adjustments to Reconcile Operating Income(Loss) to Net Cash Provided by(Used for)Operating Activities: Depreciation 4,380 4,380 Fixed assets writedown 205 205 Changes in assets and liabilities: Decrease(increase)in accounts receivable and accrued revenue (20,947) (811) (21,758) Decrease(increase)in inventories (21) (21) Decrease(increase)in amounts due from other funds (3,606) 4,727 1J21 Decrease(increase)in prepaid items and deposits 103 103 increase crease(decrease)in accounts payable and accrued liabilities 3,684 184 3,868 Increase(decrease)in employee benefits payable 396 396 Increase(decrease)in amounts due to other funds 8,142 (2,914) 5,228 Increase(decrease)in deferred revenue and credits 6,565 6,565 Net Cash Provided by Operating Activities 22,089 1,007 23.096 Cash Flows ftm Noncapital Financing Activities- Operating transfers in 13,665 25 13,690 Operating tranders out (37,082) (28) (37,110) Net Cash Used for Noncapital Finw-wing Activities (23,417) ,3 (23,420) Cash Flovrs f1rom Capital and Related Financing Activities: lute-cat paid (67) (67) L-se purchase obligation principal Payment (126) (126) Proceeds from issuance of bonds 3,646 3,646 Proceeds from issuance ofnotes 500 500 Capital contributions 66 66 Acquisitions offixed assets (29,240) (29.240) L,oss-on disposal of axed assets (47) (47) Net Cash Used for Capital and Related Financing Activities (25,268) (25,268) Cash Flom front Investing Activities: Investment income 19 3,679 3,698 Net Cash Provided,by Invading Activities 19 3,679 3,698 Net Increase(Decrease)in Cash and Cash Equivalents (26,577) 4,683 (21,894) Cash sod Cash Equivalents at Beginning of Year 105,373 70,799 176,162 Cash and Cash Equivalents at End of Year 78,796 75,472 134,268 See accompanying not%to general-purpose financial statements. COLLA- TX OF CONTRA COSTA COMMINED STATEMENT OF NET ASSETS- PENSt®N AND INVESTMENT TRUST FUNDS JUNE 30,1998* (Ire Tiscrsnds) Assets: Cash and investments(at fair value) $ 3,127,609 Interest and Esther receivables 12,979 Dose from other funds 47,637 Prepaid expenses/deposits 85 Fixed assets,at depreciated asst 158 Total Assets $ 3,188,468 Liabilities: Securities lending $ 144,452 Employer contributions unearned 9,875 Retirement allowance payables 6,114 Warrants outstanding 49,596 Accounts payable 1,838 Due to other funds 44,774 Investment trades 1,278 Real property deposits 102 Unclaimed contributions 496 Contributions refundable 179 Obligations under reverse repurchase agreement 5,844 Accrued vacations and other payables 47 Total Liabilities 264,595 Net Assets Held in Trust: Pension benefits 2,348,523 Individually directed investment accounts 575,250 Total Net Assets Held in Trust $ .2,923,873 *Pension Trust Fund reported as of December 31, 1997. See accompanying votes to general-purpose financial statements. 12 COLNITY OF CONTRA COSTA COMBINED STATEMENT OF CHANGES IN NET ASSETS- PENSION AND INVESTMENT TRUST FUNDS YEAR ENDED JUNE 30, 1998* (In Thousands) Additions: Employer contributions 36,688 Employee contributions 9,856 Contributions on pooled investments 4,002,915 Investment income 449,465 Total Additions 4,498,924 Deductions: Benefits paid 88,685 Refunds of contributions I,015 Distribution from pooled investments 4,049,160 Adjustments/transfers 49 Administrative and other expenses 2,185 Prepayment discount 1,602 Total Deductions 4,142,696 Net Increase 356,228 Net Assets Held In Trust at Beginning of Year 1,985,880 Cumulative effect of the change in accounting for investments 577,731 Restatement of prior year 622 Net Assets Held In Trust at Beginning of Year, as Restated 2,564,233 Residual equity transfer in 3,412 Net Assets Held In Trust at End of Year $ 2,923,873 Pension Trust Fund reported for Year Ended Decmber 31, 1997. See accompanying notes to general-purpose financial statements. 13 y� A COUNTY OF CONTRA COSTA NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS June 30, 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the County of Contra Costa (the "County"), conform to generally accepted accounting principles as applicable to governmental entities. The following is a summary of the more significant policies: A. Definition of reporting Entity The County of Contra Costa is a political subdivision created by the State of California, As such, it can exercise the powers specified by the Constitution and statutes of the State. The County is governed by a five member elected Board of Supervisors. These financial statements present all the fund types and account groups of the County and its component units. Blended component units, although legally separate entities, are, in substance,part of the County's operations. Blended Co neat Units The Housing Authority of the County of Contra Costa(the"Authority")was established to provide housing for the County's low and moderate income residents. Its board members are the same as the County Board of Supervisors. The financial activities of the Authority are reported in the Special Revenue, Debt Service and Agency Funds and the General Fixed Assets and General long-Terata Obligations Account Groups. The fiscal year of the.Authority ends on March 31 st and its financial activities are reported as of that date. The Contra Costa County Redevelopment Agency (RDA) was established for the purpose of redeveloping certain areas of the County designated as project areas. its board members are the same as the County Berard of Supervisors. The financial activities of the RDA are reported in the Rededelopment Agency Special Revenue,Debt Service and Capital Projects Funds. The Contra Costa County Public Facilities Corporation (PFC) was established to provide financing for the acquisition, construction, improvement and remodeling of public buildings and facilities for the County. The County appoints a voting majority of the governing board and is able to impose its will on the Corporation. The activities of the Corporation are reported in the Financing Agencies Debt Service Fund and the County Hospital Enterprise Fund. The County of Contra Costa Public Financing Authority (PFA) is a joint powers authority consisting of the County and the RDA. The PFA was established to provide for the financing of public improvements, obligations, working capital and liability or other insurance programs of the County and the Agency. The members of the County Board of Supervisors also serve as the Directors of the PFA. The activities of the PFA are reported in the Financing Agencies Debt Service Fund and the County Hospital Enterprise Fund. The Contra Costa County Employees' Retirement Association (CCCERA) was established to provide retirement benefits to employees of the County and other member agencies. The CCCER.A provides services which almost exclusively benefit the County and it is reported as a Pension Trust Fund in the general-purpose financial statements. 15 COUNTY OF COTN9 RA COSTA NOTES TO GENERAL-PURPOSE F1N1A3 CL4,L STATEMENTS June 30, 1998 The County has 41 agencies referred to as County Special Districts and Service Areas. Each is established by the County for the pose of providing specific services in a defined geographic area. Their board members are the same as the County Board of Supervisors. These agencies are reported in Special Revenue Funds. These age:icies and the Special Revenue Fund in which each is reported include: Fire protection - Bethel Island Fire protection District, Contra. Costa Fire Protection District, Crockett-Carquinez Fire Protection District, East Diablo Fire Protection; Flood Control - Flood Control District, Stores Drainage District, Storm Drain Maintenance District#4 and Stora*Drain District No. Z-16; Health and Sanitation - Sanitation Districts Nos. 5, 6, 15 and 19; Service Areas - Service Areas D-2, EM-1, L-100, LIB-2, L,IB-110, LIr3-12, LIB-13, M-1, M-8, M-16, M-17, M-20, M-23, M-25, M-26, M-27, Ivo-28, M-29, R-4, R-7, R-8, R-9, R-10 and RD-4; Law Enforcement - Service Areas P-1, P-2, P-5 and P-6; Ether Special Revenue - Contra Costa County Water Agency. Complete financial statements for each of the individual component units may be obtained at the unit's administrative offices as follows: Housing Authority of the County of Contra Costa 3133 Estudillo Street,Martinez, CA 94553 Contra Costa County Public Facilities Corporation 1220 Morello Ave., Suite 100,Martinez, CA 94553 County of Contra Costa Public Financing Authority, 651 fine Street, 6th Floor,Martinez, CA 94553 Contra Costa County Redevelopment Agency 651 fine Street, 5tl_Floor North Wing, Martinez, CA 94553 County Service Areas, County Auditor-Controller 625 Court Street, Room 103,Martinez, CA 94553 Contra Costa County Employees' Retirement Association. 1355 Willow Way, Suite 221, Concord, CA 94520 B. Fund Accounting The County uses funds and account groups to report its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. A fund is an independent fiscal and accounting entity with a self-balancing set of accounts. An account group, on the other hand, is a financial reporting device designed to provide accountability for certain assets and liabilities that are not recorded in the funds because they do not directly affect net expendable available financial resources. Funds are classified into three categories: governmental,proprietary and fiduciary. Each category, in turns, is divided into separate "fund types". 16 ...._............................ _..................................................................................................... _ _ .............. _.. ......... ......... ......... ......... .......... _ .......... ......... .. ....... ......... ......... .......... ...................... ......... ......... .......... . ........ ....... .. COUNTY OF C'a 3N L 1R A COSTA 'COTES TO GENE-PURPOSE.F1NANCIAL STA'T'EMENTS June 30, 1995 Governmental finds are used to account for all or most of the County's general government activities, including the collection and disbursement of camiwkcd monies (Special revenue Funds), the acquisition or construction of general fixed assets (Capital Projects Funds), and, the servicing of general long-tern; obligations (Debt Service Funds). The General Fund is used to account for all activities of the County not accounted for in one of the other fund types. Proprietary funds are used to account for activities similar to those in the private sector, where the measurement focus is upon determination of net income and capital maintenance. Goods or services from such activities can be provided either to outside parties(Enterprise Funds)or to other departments or agencies primarily within the County(Internal Service Funds). Fiduciary finds are used to account for assets held by the County in a trustee capacity or as an agent for individuals, private organizations, other governments, and/or other funds. These include the Pension and investment Trust Funds and Agency funds. The Pension and Investment Trust Funds are accounted for n essentially the same manner as proprietary funds. Agency funds are custodial in nature (assets equal liabilities)and do not involve measurement of results of orations. C. Basis of Accounting The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using the flow of current financial resources tneasurement focus. Only current assets and current liabilities generally are included on the balance sheet. Fixed assets purchased with governmental funds are recorded in the General Fixed Assets Account Group. !viabilities, which are expected to he liquidated with expendable available resources, are considered c=urrent liabilities and are recorded in the governmental find types; remaining amounts are reported in the General Long-Term, Obligations Account Group, gating statements of the goverrunental funds present increases (i.e., revenues and other financing sources)and decreases(i.e.,expenditures and other financing uses) in net current assets. All proprietary finds and the Pension and investment Trust Funds are accounted for using the now of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with.lie operation of these funds are included on the balance sheet, for proprietary,- funds, or statement of net assets for Pension and Investment Trust .Funds. Fund equity (ire., net total assets) in proprietary fiinds is segregated into contributed capita: and retained earnings components. Proprietary fund type operating statements present increases(e.g., revenuers and decreases(e.g., expenses' in net total assets. The modified accrual'basis of accounting is used by all governmental find types and agency funds. I�neer tl e modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they become booth measurable and available). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Expenditures, other than principal and interest on longterm obligations, are recorded when the related fund liability is incurred.. Principal and interest on general longterm obligations are recorded as fund liabilities when due or;vixen amounts have been accumulated in the debt service fund for payments to be made early in the following year. 17 COb rY OF CONTRA COSTA NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS .lune 30, 1994 Expenditures are controlled by managements at the object level within departments for all adopted budgets, however,the legal level of control is at the department level. Because of the large volume of detail,the budget and actual statements contained in the Comprehensive Annual Financial Report have been aggregated by function. The County prepares a separate Final Budget document which demonstrates legal compliance with budgetary control and is made available to the public by the office of the Auditor-Controller. For fiscal year :997-98, there were no instances in which expenditures exceeded. appropriations. Any amendments of appropriations for a department, or transfers of appropriations between departments, are approved by the Board of Supervisors, as are supplemental appropriations normally financed by unanticipated revenues received d zing the year. Approximately $48,881,000 :n supplemental appropriations were added to the budgets for all governmental .land types during the fiscal year, of which, $37,669,000 was for the general Bund. The Board has delegated authority to the County Administrator to approve transfers of appropriations between object level classifications within a department. Budgeted amounts are reported as amended, Individual arnendrmernts were not material in relation to the original appropriations, All appropriations lapse at year enol. G. Cash Mows For the purposes of the statement of cash flows, the County considers all highly liquid investments with an initial maturity of three months or less to be cash equivalents. flEncumbrances Encumbrance accounting,under which purchase orders,contracts,and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is employed as an. extension of formal budgetary integration in the general, Special Revenue and Capital Projects Funds. Encumbrances outstanding at year end are reported as reservations of fund balances since '-hey do not constitute expenditures or liabilities. 1. Inventories Inventories are valued at cost, which approximates market. governmental Fund inventories are maintained using the Freighted average method. proprietary Fund inventories are maintained using the first-in, first-out method. The costs of Governmental Fund inventories and, Proprietary 'Fund -inventories are recorded as expenditures/expenses at the time individual items are consurrned rather than when purchased. J. Flied Assets Fixed assets are valued at historical cost. Contributed fixed assets are recorded at fair market value at the time received. Certain assets, for which actual costs are not available, have beer, valued on the basis of a professional valuation which deterrm.ned their approximate historical cost. Fixed assets used in governmental fund type operations(general fixed assets)are accounted for in the General Fixed Assets Account group rather than in the governmenrtal binds. Public domain ("infrastructure")general fixed assets consisting of certain improvements other than buildings such as roads, bridges, streets and sidewalks, curbs and graters, drainage systems, and lighting systems are not capitalized as these assets are immovable and of value only to the County. No depreciation has been provided on general faxed assets. 20 COUNTY OF CON-1RA COSTA NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS June 30, 1998 All proprietary fund fixed assets are depreciated using the straight-line method over the following estimated useful lives: buildings, 25-40 years; improvements, 10-20 years; and equipment, 3-20 years. Depreciation recognized on assets acquired or constructed through resources externally restricted for capital acquisitions is closed to the appropriate contributed capital account and reported on the operating statement as an adjustment to retained earnings. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not included in the General Fixed Assets Account Group or capitalized in the,proprietary funds. The capitalization threshold for permanent structures is $5,000. The capitalization threshold for equipment was increased from $1,000 to $3,000 effective July 1, 1997, except for County Hospital equipment for which the threshold was reduced to$500. Interest is capitalized on constriction in progress in the proprietary funds in accordance with Statement of Financial Accounting Standards No. 62, Capitalization of Interest Cost in Situations Involving Certain Tax Exempt Borrowings and Certain Gifts and Grants, Accordingly, interest capitalized is the total interest cost from the date of Ghe borrowing net of any allowable interest carried on temporary investments of the proceeds of those borrowings until the specified asset is ready for its intended use. K Vacation and Sick Leave Under terms of union contracts, County employees are granted,vacation and sick leave in varying amounts. In the event of termination, an employee is reimbursed for accumulated vacation hours. Employees are not reimbursed for accumulated sick leave except management employees who are eligible for a payoff of unused sick leave accruals at resignation. 'Management employees must have a balance of at least 70 percent of their sick leave accruals and have been employed three years or more to be eligible for this benefit. The maximum amount payable under this Sick Leave Incentive Plan is 50 percent of accrued sick leave, however,the amount of sick leave payable is de minimis. Accordingly, no accrual for sick leave has been made in the accompanying financial statements. Accrued vacation at June 30, 1998, is valued at $27,849,000 which includes $22,936,000 attributable to the General and Special Revenue Funds, 54,871,000 recorded in the Entervrise Fund and $42,000 recorded in the Pension Trust Fund. Amounts attributable to the General and Special Revenue Funds are expected to be claimed in future periods and paid with future resources. Accordingly, this liability is reflected in the General Long-Term Obligations Account Group. In proprietary funds, accumulated vacation is recorded as an expense and liability as the benefits accrue to employees. In compliance with GASB Statement No, 16, Accounting for Compensated Absences, the amounts reported include estimated employer liability for taxes and workers'compensation premiums. L. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. 21 COUNTY OF CC31 TTIi A COSTA NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS June 30, 1998 M. Bond and Certificate of;Participation Discounts and Issuance Costs In governmental fund types, bond and certificate of participation discounts, issuance costs and losses on defeasance are recognized in the period incurred. In proprietary fund types, these charges are deferred and amortized over the term of the issuance using the straight line method, which approximates the cffcctive interest method. N. Total Columns on Combined Statements Total columns on the accompanying combined statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations,or cash flows in conformity with generally accepted accounting principles. Such data are not comparable to a consolidation since interfund eliminations have not been.made. 2. CASH AND INVESTMENTS The cash balances of substantially all funds except the pension and Investment Trust Funds are maintained in the County's internal pool and invested by the County Treasurer. As permitted by the Government Code, external depositing entities direct the County Treasurer to make sfiecific investments separate from the pool which are reported in the Investment Trust Fund. The Retirement Board directs the investment activity of the pension Trust Fund. Income from pooled investments is allocated to the funds based on average daily balances. Cash and investments at June 305 1995, (December 31, 1997,for the Pension Trust fund and March 31, 1998, for the Mousing Authority)are as follows(in thousands). County (Including Investment Trust Pension Trust Fund` _ Fund Total Deposits $ 79,618 2,410 82,028 Investments 1,272,876 2,502,228 3,775,104 Total S 1,352,494 2,504,638 3,857,132 A. Deposits Deposits include bank deposits at a carrying amount of $77,244,000. The balance as reported by various financial institutions was $78,435,000 and was entirely covered by depository insurance or collateralized by the pledging financial institutions as required by Section 53652 of the California Government Code. Such collateral is held by the pledging financial institutions` trust department or agent in the County's name. 22 COUNTY OF CON"FRA COSTA. MOTES TO GENES-PURPOSE FINAINCL4,L STATEMENTS Jane 30, 1998 According to Government Code Section 53601,bank obligations such as Certificates of Deposit are considered investments. However, in accordance with generally accepted accounting principles,the County has classified Certificates of Deposit in,the amount of$4,784,€300 as deposits. These Certificates of Deposit are insured or collateralized with securities held by the pledging financial institutions as required by Section 53652 of the California Government Code. Such collateral is held by the pledging financial institutions' trust department or agent in the County's name. Be Investments Statutes authorize the County to invest in obligations of the United States Treasury, Federal agencies, municipalities, commercial paper rated A-1 by Standard& Foor's Corporation or P-1 by Moody's Commercial Paper Record, bankers' acceptances, repurchase agreements, reverse repurchase agreements, medium-term notes, negotiable certificates of deposits, mutual funds and investments in accordance with, the statutory provisions governing the issuance of bonds. Pension Trust Fund investments are authorized by the County Employees' Retirement Law of 1937. Statutes authorize a"prudent investor"guideline as to the form and types of investments which may be purchased. The County's investments and those of the Pension Troost Fund are categorized separately on the following page to indicate the level of custodial credit risk assumed by each investment portfolio for their respective year-ends. Category I includes investments that are insured or registered, or securities held by the County or its agent in the County's name. Category 2 includes uninsured and unregistered investments with the securities held by the counter-party's trust department or agent in the County's name or in the agent's nominee name with subsidiary records listing the County as the legal owner. Category 3 includes =uninsured and unregistered investments, with the securities held by the counter-party or by its trust department or agent but not in the County's name. Investments not evidenced by securities that exist in physical or book form cannot be categorized. The Local Investment Advisory Board (Board) has oversight responsibility for the State Treasurer's Local Agency investment Fund (LAIF). The Board consists of five members as designated by State Statute. The value of the pool shares in LAIF which may be withdrawn is determined on an amortized cost basis, which is different from the fair value of the County's position in the pool. 23 COUNTY OF CONTRA COSTA NOTES TO GENERAL-PURPOSE FINANCIAL,STATEMENTS .lune 30, 1998 Investments at fair value as of June 30, 1998, (December 31, 1997, for the Pension Trust Fund and March 31, 1998,for the Housing Authority)are shown as follows(in thousands): Carrying Category Amount at Fair 1 2 3 Value County(Including Investment Trust Fund) Negotiable certificates of deposit $ 124,813 5,000 129,813 U.S. Government securities 270,771 10,338 281,109 Commercial paper 136,700 9,000 145,700 Medium-term notes 14,205 15,025 29,230 Banker's acceptances 10,000 10,000 Repurchase agreements 187,685 187,685 Total $ 556,489 227,048 783,537 State Treasurer's investment pool 211,877 Guaranteed investment contracts 63,478 Mutual fends 42,364 Deferred compensation 171,620 Total investments $ 1,272,876 Pension Trust Fund Common&preferred stocks $ 1,169,524 1,169,524 Corporate&government bonds 781,480 781,480 Non-cash collateral on securities lending 37,267 37,267 Alternative investments 34,933 34,933 Repurchase agreements 6,250 6,250 Total $ 1,951,004 78;450 2,029,454 Real estate 150,361 Short-term investment pool with fiscal agent 105,763 Securities lending short-term collateral 107,185 investment pool Stocks on loan 17,665 Bonds on loan 85,915 Reverse repurchase agreement 5,885 Total investments $ 2,502,228 24 _ ......... ................ ......... ......... ......... ......... ......... ......... ........ ......... ... ............................... ............... __. ......... ......... ......... ........_.._.._...... ._.... ... ._ COUNTY OF CONTRA COSTA NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS June 30, 1998 Co Other Financial Instruments In accordance with California statutes, the County may invest in a wide variety of investment instruments, including asset hacked securities, such as collateralized mortgage obligations and principal-only strips, forward contracts and reverse repurchase agreements. The Treasurer golds principal-only strip instruments for the benefit of some County school districts. Those school districts utilize the services of an independent financial advisor in determining their investment strategy. The Employees' Retirement Association has investments with trustees who hold hart of their portfolio in collateralized mortgage obligations. The County has entered into one forward contract to obtain a fixed rate of interest on money held for future debt payments. As of June 30, 1998 the County's proportionate share of structured notes and assets backed securities held by LAIF was$9,253,000 or 4.367 percent of the County's investment in LAIF. The investments discussed above,which are included in the accompanying financial statements, represent four percent of total investments. The Treasurer's investment policy was approved by the Board of Supervisors. In accordance with Covernirient Code Sections 27130-27137, an investment oversight coiniiiittee reviews the quarterly investment reports prepared by the'Treasurer. D. Securities Lending by the Employees` Retirement Association(Pension Trust Fund) The Pension Trust Fund lends U.S. Government obligations and domestic and international bonds and equities to various brokers for collateral that will be returned for the same securities plus a fee in the future. The fiscal agent does not provide any loss indemnification to the Pension Trust Fund. The fiscal agent manages the securities lending program and receives cash and securities as collateral. The collateral securities can be pledged or sold by the Pension Trust Fund without borrower default. Collateral cash and securities are pledged at 102 percent and 105 percent of the fair value of domestic securities and cion-domestic securities lent, respectively. There are no restrictions on the amount of securities which can be tent at one time. The term to maturity of the securities loans is generally snatched with the term to maturity of the investment of the cash collateral. Such matching existed at year-end. As with other extensions of credit, the Pension 'frust Fund may bear the risk of delay in recovery or even loss of rights in the collateral should borrowers of the securities fail financially. At year-end,the Pension Trust Fund has no credit risk exposure to borrowers. For financial reporting purposes collateral with fiscal agents on security lending is included with cash and investments in the County's general-purpose financial statements and the offsetting liability is included with accounts payable and accrued liabilities. 25 COUNTY OF CONTRA COSTA NOTES O GENERAL-PURPOSE FINANC1AL STATEMENTS June 30, 1998 3. PROPERTY TAX The County is responsible for assessing, collecting and apportioning property taxes. Taxes are levied for each fiscal year ontaxable real and personal property situated in the County. The levy is based on the assessed values as of the preceding January 1st, which is also the lien date. State code requires tax rates to be set no later than the first workday in September artless the Board of Supervisors elects to extend the deadline to October 3rd. Property taxes on the secured roll are date in two installments: 'November 1st and February lst and become delinquent alter December 10th and April 10th, respectively. Supplemental property taxes are levied based on changes in assessed values between the date of real property sales and construction and the next normal assessment date. The additional supplemental property taxes are prorated front the first day of the month following the date of such occurrence. Property taxes on the unsecured roll are due on the lien date (January 1), and become delinquent if unpaid by August 31 st. Secured property taxes are recorded as revenue when apportioned, in the fiscal year of the levy. The County apportions secured property tax revenue in accordance with the alternate method of distribution prescribed by Section 4705 of the State Revenue and Taxation Code. This alternate method provides for crediting each applicable fund with its total secured taxes upon completion of the secured tax roll, approximately October 1st of each year. Under the alternate apportionment method, specified amounts of penalties and interest collected on delinquent secured taxes are held in trust in the Tax fosses Reserve Agency Fund. This reserve is used to offset the impact of accumulated delinquency remaining at year end. Property taxes which have been collected in advance of the levy year are reported in unapportioned taxes in the Unapportioned Taxes Agency Fund. 4. FIXED ASSETS Following is a summary of changes in general fixed assets for the year ended June 30, 1998, ('March 31, 1998, for the Housing Authority)(in thousands): Balance Balance July 1, June 30, 1997 Additions Deletions Transfers 1998 Land S 36,414 526 (420) 36,520 Buildings&improvements 307,420 12,420 (1,631) 318,209 Buildings&improvements- lease purchase 130,974 8 130,982 Equipment* 82,478 12,882 (21,673) 4,258 77,945 Equipment-lease purchase 10,535 3,907 (624) (4,258) 9,560 Total S 567,821 29,743 _. 24,348 573,216 26 CQLWrY OF CONTRA COSTA DOTES TO GENERAL-PURPOSE FINANCIAL STATLMEN TS June 30, 1998 Enterprise Fund fixed assets at Jame 30, 1998,were as follows(in thousands): Employee health 'Total Fitness County Maintenance Enterprise Airport Center Hospital Organization Funds Land $ 9,003 426 9,429 Buildings&improvements 27,084 54 110,970 73 138,181 Buildings&improvements- lease purchase 3,316 3,316 Equipment* 587 33 28,179 153 28,952 Equipment-lease purchase 47 317 128 492 Total 40,037 87 139,892 354 180,370 Less accumulated depreciation* (9,320) (50) (26,429) (261) (36,060) Net fixed assets $ 30,717 37 113,463 93 144.310 * As indicated in Note 1.1;. ,except for the County hospital, the County increased the capitalization threshold for general faxed assets from $1,000 to$3,000. Consequently, equipment costing less than $3,000 was removed from the accounts. The hook value of the equipment removed from general faxed assets was $11,647,000. The look value of the equipment removed from the Airport Enterprise Fund was $20,000 and the Health Maintenance Organization Enterprise Fund was$136,000. 5. SHORT-TEILM NOTES On June 30, 1998, the County had tax and revenue anticipation notes outstanding in the amount of$130,000,000 with interest at 4.50 percent per annum. The notes were issued July 1, 1997, and redeemed July 1, 1998. The redemption monies were from taxes and other revenues transferred to a fiscal agent during the fiscal year. 'Total interest incurred on these notes during 199798 was$5,850,000. 27 COUNTY OF COIN 1RA COSTA NOTES TO GENERAL-PURPOSE FI ANLL& .STATEMENTS June 30, 1998 6. LEASE COMMITMENTS A< Operating Leases Total rental expense for the year ended June 30, 1998, (March 31, 1998, for Housing Authority) for all operating leases and mouth-to-month lease arrangements amounted to $6,283,000 for the General Fund, $1,254,000 for the Special Revenue Funds and$ 1,150,000 for the Enterprise Funds. At June 30, 1998, arch 31, 1998, for the Housing AuthoritY)the future minimum rental payments required under non-cancelable operating leases for buildings and equipment, other than month-to-month lease arrangements,are as follows(in thousands): Special Fiscal Year Revenue Enterprise Ending June 30, General Fund Funds Funds 1999 S 2,668 109 361 2000 2,097 87 263 2001 1,700 78 180 2002 1,432 177 2003 1,249 108 `hereafter 6,899 1,400 Total $ 16,045 274 2,489 em B. Capital uses The County has capital lease purchase agreements with the Contra Costa County Public Facilities Corporation, the Public Finance Authority and with other third parties. The assets acquired under these lease agreements are included in the County's General Fixed Assets Account Group and in the enterprise funds. The obligations related to these lease purchase agreements are also included in the County's General. Long-Teras Obligations Account Group and in the enterprise funds, and are summarized in Note 7. 28 _........ ........ _....... ......... ......... ......... _._.... ......... ......... ......... ..... ......... ......... ......... ........ ......... ......... ......... ......... ......... ......... .............................. ......... ....................... ................... ......... ._....... ............. ............... . ........ ....... _ _ _ __ COUNTY OF CON`71 A COSTA NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS Jame 30, 1998 7. LONG-TERM OBLIGATIONS Following is a summary of changes in long-term obligations for the year ended June 30, 1995, (*larch 31, 1998, for the(lousing Authority)(in thousands): Balance Balance July 1, June 30, 1997 Additions Retirements 1993 General long-Term Obligations Employee benefits payable $ 22,963 (27) 22,936 Capital lease obligations 29,039 3,915 (23,969) 5,985 Advances from other funds 10,772 1,187 (776) 11.153 Certificates of participation, net 93,290 62,128 (28,525) 126,593 Notes payable 2,940 (815) 2,125 Pension bonds payable 328,610 (6,715) 321,595 Other bonds payable 321,220 (1,150) 31,070 Special assessment debt 26,818 4,785 (6,482) 25,121 Total S 546,652 72,015 (65,459) 550.208 Ent rise Funds Employee benefits payable S 4,475 396 4.871 Capital lease obligations 3,877 3,546 (102) 71,421 Certificates of participation, ret 127,472 705 128,177 Notes payable 536 500 (24) 1,012 Total $ 136,360 5,247 (126) 141,481 29 COUNTY OF C®N71'RA COSTA NOTES TO GENERAL-PURPOSE FLNIANCIAL STATEMENTS June 30, 1998 Following is a schedule of debt payment requirements to maturity for long-terns obligations, excluding advances from other f=inds and employee benefits payable that have indefinite maturities, outstanding at June 30, 1998, (March 31, 1998,for the Housing Authority)(in thousards); General L org-Term Obligations Enterprise Funds Fiscal Year Capital Ponds& Special Noes Ending Lease Notes CEP Assessment &=ease COP* .lune 30, Obligation Payable Obligations Debt Obligations Obligations Total 1999 S 2,429 33,487 13,224 3,351 4,346 10,693 67,530 20.00 2,045 35,252 13,829 3,348 704 10,679 65,857 2001 1,459 36,608 13,733 3,279 783 10,679 66,541 2002 :,190 39,567 13,318 3,228 868 10,656 68,827 2003 1,087 40,346 13,048 2,9:0 833 10,667 68,891 2004-2008 2,308 233,046 54,699 10,742 2,243 53,155 356,193 20092013 459 124,878 31,670 7,111 346 53,003 217,467 Thereafter 127 22,588 53,;58 4,634 43 105,269 185,819 Total 11,104 565,772 206,679 38,603 10,166 264,801 1,097,125 Less amount representing interest (2,119) (210,6821) (79,786) (13,482) (1,733) (119,461) (427,263) Usability at .lune 30' '998 $ 8,985 355,090 126,893 25,121 8,433 145,340 669,862 Enterprise Certificates of Participation (COP) obligations are reported before the original issue discount of $2,164,000 and the deferred amount of refunding of$14,999,000 for a tectal difference of 517,163,000. {0 _. _.. _ ..... _ _ _ ......... ..................................................................................................................................................................................................................................................................................................................... ........... ....._...._. . _........ ......... ......... . .....__. COUNT Y OF CONTRA COSTA NOTES TO GENERAL-PURPOSE F1NANCI L STATEMENTS June 3€3, 1998 Individual issues of bonds, notes and certificates of participation payable at Jane 30, 1998, are as follows (in thousands): Outstanding Original Annual Fina'_ interest at June 30, Issue Issue Installments Payment Rates 1998 FinancingA eg rcges(1) 1988 Copsolidated capital projects $ 61,690 S 2,085-4,395 2008 7.15-7.8% $ 31,955 1992 Consolidated capital projects 37,330 920-2,220 2019 5.5-9.5 31,610 Hospital replacement project 145,340 3,020-4,589 2022 3.75-6.0 145,340 1992-Municipal project 4,750 495-590 2002 4.9-5.5 2,180 1997-A Limited obligation bond 2,523 354-356 2001 5.45 1,943 1997 Capital projects 34,910 400-2,610 2321 3.55-5.10 34,510 1998 Lease revenue refunding bonds 24,695 330-1,745 2024 3.8-5.15 24,695 S 272,233 Special Revenue General Obligation_Bonds(12) Recreation and park 4,485 370-510 2004 4.25-5.10 $ 3,125 Storm drainage 200 5 2005 4.25 35 $ 3,160 Redevel2pment Agency Notes w d Bonds Page 1992 Tax Allocations Bernd(3) 29,315 295-1,740 2023 5.25-7.02 S 21,600 1995A Tax Allocation Bond(3) 1,645 20-115 2025 3.9-7.0 1,6435 1995B Tax Allocation Bond(3) 2,735 40-200 2325 4.25-6.90 2,695 Property(2) 1,200 2002 11.0 1,200 $ 27,100 Special Revenue Notes Payable(4) Sanitation District 5 75 3-8 2000 7.4 S 22 Storm brain 15 A 80 1998 None 22 Service Area I3-2 36 1998 None 17 $ 61 Housigg Authority (at March 31, 1998;(2) Bonds 3,480 230 2007 3.18-5.0 $ 2,010 Pension Obligation Bonds(5) 337,365 4,920-44,56€3 2011 5.55-6.85 S 321,895 General Fund Note Paytble l2%, San Ramon Valley FPD 3;100 432 2000 None $ 864 Footnotes(1;-(5)explained carr next page. 31 COUNTY OF CONTRA COSTA NOTES TO GENERAL-PURPOSE F1NANCIAL STATEMENTS June 30, 1998 Final Outstand: Original Annual Payment Interest at June? Issue Issue Installments Date Rates 1998 Specflal Assessment Debt(6) _ -�-__ East Bates Ave. 91.1 $ 2,105 S 140-230 2006 5.66-6.98% $ 1,640 Hidden Pond Road 93.1 757 35-75 2009 5.88-7.20 630 Kensington 91-1 4,684 150-300 2012 5.25-6.0 3,475 Ivlrack Road 92-1 2,313 15-45 2013 6.4-7.9 480 Pleasant Hill 87-1 8,785 510-770 2004 6.8-7.3 4,405 Pleasant Hill BART 93-5 1,530 45-140 2014 5.44-6.93 1,395 Rancho Paraiso 93-4 5,905 225-545 2016 5.83-7.74 4,905 San Pablo Creek 91-3 540 90-95 1999 6.2-6.4 185 San Ramon Valley 93-3 2,191 265-315 2001 5.93-6.61 1,165 San Ration 89-1 980 65-90 2004 7.55-7.85 545 Wayside Plaza 91-2 2,010 115-190 2006 7.0-7.2 1,345 Pleasant Hill BART CFD 92-1 171 2-20 20I5 8.0 166 Pleasant Hill BART CFD 91-1 4,785 55-505 2016 4.2-5.1 4,785 S 25,121 Airport Enterprise Notes Payable(7 Sate Dept.of Transportation 558 26-53 2010 6.06 3 512 State Dept.of Transportation 300 I5-28 2015 5.08 300 State Dept.of Transportation 200 9-23 2009 5.48 200 S 1,012 NOTES: (1) Debt service payments are made from lease payments by the County General, Special Revenue a Hospital Enterprise Funds to the Public Facilities Corporation and the Public Financing Authority. (2) Debt service payments are made from restricted property taxes and other revenues recorded in General and Debt Service Funds. (3) Debt service payments are made from tax increment financing. (4) Debt service payments are made from drainage fees and sanitation fees. (5) Debt service payments are made from retirement contributions. (6) Debt service payments are made from special assessments levied on properties in each assessor, district. The County administers the assessment and repayment of these bonds. Since ea redemption is allowed, there may be differences between the earnings on money received fry property owners wishing to pay off their debt early and the interest obligation that accumulates their debt between the time they submit funds to the County and the next available redemption ds as stated in the bond's Official Statement. The County has historically funded this difference, and that extent may be obligated in some manner for this debt. (7) Debt service payments are made from operating revenues. There are a number of limitations and restrictions contained in the various bond indentures. County rnanagem+ believes that the County is in compliance with all significant limitations and restrictions. 32 COUNTY OF CON RA COSTA ?COTES TO GENERAL-PURPOSE OSE FINANCIAL STATEMENTS June 30, 1998 A. Issuance of New Debt and Advance Refunding 1. Public Financing Authority In August 1997, the Public Financing Authority issued $34,910,000 in Certificates of Participation (the "new debt")with interest rates ranging from 3.55 to 5.10 percent to advance refund$22,055,000 of 1991 Certificates of Participation(the"old debt")related to the acquisition of buildings at 40 Muir ltd.,and 10, 40, and 50 Douglas Dr. The net proceeds of the new debt amounted to $34,334,000 (including accrued interest received of$91,000, and after an original issue discount of$524,000 and payment of$143,000 underwriters'discount). Of the total of the net proceeds and $2,891,000 residual cash balances related to the old debt, .$22,990,000 was used to purchase securities which are held in an irrevocable trust with an escrow agent to provide for all future debt service payments on the 1991 Certificates. As a result, the 1991 Certificates are considered defeased and the liability for those Certificates has been removed from the General Long-Term Debt Account Group. The new debt proceeds of $13,92£:,000 will finance remodeling of the Sheriffs Dispatch Center and 50 Douglas Dr., construction of additional floor space at 834 Court St. and the purchase of a renovated building at 800 Ferry St. The County decreased its total debt service over the next 23 years by$4,060,000 with this advance refunding and generated an economic gain of$1,897,000. In May 1995, the Public Financing Authority issued $24,695,000 in Lease Revenue Bonds (the "new debt") with interest rates ranging from 3.80 to 5.15 percent to advance refund $22,235,000 of 1994 Certificates of.Participation (the "old debt") related to the acquisition, renovation and refurbishing of various buildings. The net proceeds of the new debt amounted to$24,572,000 (including accrued interest received of$37,000 and after payment of$160,000 of underwriting fees). Of the total of the net proceeds and$2,02.4,000 residual cash balances related to the old debt, $24,209,000 was used to purchase securities which are held in an irrevocable trust with an escrow agent to provide for all future debt service payments on the 1994 Certificates. As a result, the 1994 Certificates are considered defeased and the liability for those Certificates has been removed frons. the General Long-Term, Debt Account Group, The County reduced its total debt service over the next 26 years by $1,145,000 with this advance refunding and generated an economic gain of$878,000. The Public Financing Authority also issued another series of bonds in July 1997 for $2,523,000 with an interest rate of 5.45 percent annually. These bonds financed prepayment of a telecommunications equipment lease for 4 years. 2. AiMprt On July 1, 1997, the County entered into the Lease Escrow and Lease and Lease-Back Agreements with Transoms Funding, Inc. (1997 Lease) to advance refund two existing Airport leases (1994 Leases), pursuant to a crossover refunding. The 1997 Lease, with an interest rate of 5.75 percent, shall be payable from annual gross revenues of the County's Airport Enterprise Fund. The 1997 Lease proceeds of $3,646,000 were used to pay lease costs of$36,000 with the remaining proceeds of$3,610,000 deposited into an escrow fund to be used to refund the 1994 Leases on May 1, 1999. Interest payments are due on November 1 and May 1 of each year. Principal is due on May 1 of each year through May 1, 2005. 33 COUNTY OF COAM"A COSTA NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS Tune 30, 1998 3. SMial Assessment Districts The Commun4 Facilities District (CFD) No. 1991-1 issued Special Tax refunding Bonds with ars interest rate ranging from 4.2 to 5.1 percent in May 1998 for$4,785,000 to advance refund$4,460,000 of 1991 Special'fax Bonds related to facilities improvements. The net proceeds of the new debt amounted to $4,679,000 (after payment of $106,000 of underwriting fees). Of the total of the net proceeds and $738,000 residual cash balances related to the old debt, $4,876,000 was used to purchase securities which are held in an irrevocable trust with an escrow agent to provide for all future debt service payments on the 1994 Certificates. The County is acting as an agent for the property owners. As a result, the 1991 Certificates are considered defeased and the liability for those Certificates has been removed from the General bong-Term Debt Account Group. The CFD reduced its total debt service over the next l8 years by$796,000 with this advance refunding and generated an economic gain of$497,000. At June 30, 1998, the total amount of outstanding obligations considered defeased is$48,750,000. 34 .............. .._..... ......... ......... ......... ......... .... . COUNTY OF CONTRA COSTA NOTES TO GENERAL-PURPOSE F ANCL4,L STATEMENTS June 30, 1998 8, INT'ERFUISIS BALANCES Account balances at June 30, 1998,are as follows(in thousands): Due From Due to Advances From Advances to Other Funds tither Funds tither Funds tither Funds nerat Fund $ 129,892 60,157 1.38 Special Revenue Funds: Storm Drainage 184 2,043 Road 1,560 2,843 Library 364 620 Fire Protection 244 627 Health and Sanitation 427 696 Sezn7ice Areas 566 800 664 FlocKI Control 456 455 10,270 Lav Enforcement 1,027 3,215 Courts&Criminal Justice 20,727 17,998 Recorder/Clerk Modernization 27 69 Other Special Revenue 2,619 1,852 3,063 Land Development 1,665 1,737 Redevelopment Agency 321 39 2,807 Housing Authority 579 792 Child Development 202 465 Debt Service Funds: Recreation 27 Pension Bond 1,228 Assessment Districts 52 Sanitation Bonds l Capital Projects Funds- Assessment Districts 53 Redevelopment Agency 414 1,127 230 Nest County Jail 2 Subtotal S 161,328 96,844 3,037 14,135 (continued) 35 COLN1 1 Y OF CONTRA COSTA NOTES TO GENERAL-PURPOSE FINIANCIAL STATEMENTS June 30, 1998 Due From Due to Advances From Advances to Other Funds Other Funds Other Funds Other Funds Balance Forward from previous page: $ 161,328 96,844 3,037 1.4,135 Enterprise Funds: Airport 634 1,168 Employee Fitness Center 2 409 County Hospital 18,415 15,092 Health Maintenance Organization 3,255 12,024 Major Risk Medical Insurance 2 8 Internal Service Funds: Self-Insurance 3,971 . 1,191 Fiduciary Funds: Agency Funds: Tax Losses Reserve 2,753 Unapportioned Taxes 893 36,721 Other Agencies 14,316 45,088 85 Frust Funds: Investment Trust 45,649 44,774 Pension Trust 1,988 Long-Term Obligations 11,183 _ Subtotal 253,206 253,319 14,220 14,220 Adjustments: Housing Authority reported as of March 31, 1998 (579) (792) Pension Trust reported as of December 31, 1997 (100) Total S 252,527 252,527 14,220 -14,220 (concluded) 36 ..................................................................................................................................................................................................................................................................................................................... ......... ............. ....1 ..1 .....1.1. ... ..... .. .. ..... ........ .......... ........ ......... ......... ......... ........ ...._.................... ..................... ........... ._....... .1.111. COUNTY OF CONTRA COSTA NOTES TO GENERAL-P'URP'OSE FINANCIAL STATEMENTS June 30, 1998 9. RESERVES AND DESIGNATIONS OF FUND BALANCE Following is a summary of reserved and designated fund balances at June 30, 1998,(in thousands): Special Debt Capital General Revenue Service Projects Fund Funds* Funds* Funds Reserved for: Encumbrances $ 19,091 8,838 79 Inventories 1,662 Debt service 31,279 Advances to other funds 138 13,566 Prepaid items and deposits** 942 310 1,873 Land held for sale 1,739 Total $ 21,833 24,453 33,152 79 Designated for: Authorized expenditures $ 3,151 Future projects 21,201 Equipment replacement 6,295 4,134 Total $ 9,446 4,134 21,201 * Housing Authority reported as of March 31, 1998. ** Reserves are less than total prepaid items and deposits because the General Fund advanced $463,000 to sub- grantees who will use the funds for Federal programs during the first quarter of fiscal year 1998-99. As funds are spent,the County is reimbursed by the Federal government. 37 COU.N7Y OF CONTRA COSTA NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS June 30, 1998 10. ADJUSTMENTS TO FUND EQUITY AND NET ASSET HELD IN TRUST Adjustments to fund equity and net assets geld in trust are as follows(in thousands): Special Revenue Funds Trust Fiends Fund Equity and Net Assets held in Trust at Jame 30,1997 103,619 1,985,880 Adjustments: Prior Period Adjustment (341) 622 Cumulative effect of the change in accounting for investments 577,731 Total adjustments (351) � 578,343 Adjusted bund Equity and Net Assets Held in Trust at June 30,1997 103,268 2,564,233 11. RESIDUAL EQUITY'TRANSFERS A residual equity transfer of$772,000 was made to transfer excess family support enforcement funds, restricted by statute to family support collection,efforts, from the General Fund to the Law Enforcement Special Revenue Fund. A residual equity transfer of$3,412,000 was made to transfer the fiends of the Moraga and Orinda Fire Districts from the Fire Protection Special Revenue Funds to the Investment Freest Fund. The Districts consolidated and became a separate legal entity on Jelly 1, 1997. A residual equity transfer of$2,532,000 was made from the Assessment Districts Debt Service Fund to transfer construction fund proceeds to the Assessment Districts Capital Projects Fund 12, DEFICIT RETAINED EARNINGS The Airport Enterprise Fund had a retained deficit of$741,000 due to an accumulation of annual operating losses, including depreciation. This deficit should be elinunatedd as rents are received from anticipated fixed-base operators leasing space at the neer Byron Airport and contractual rent increases at the Buchanan Airport. The Employee Fitness Center Enterprise Fund had a retained deficit of $364,000. Revenues were exceeded by increased lease occupancy, maintenance and repair costs. Under the direction of the Board of supervisors, the County is obligated to fulfill the lease agreement for the Employees Fitness Center until its expiration in the year 2000. In the interim,the Board of Supervisors has directed the County Administrator to attempt to identify parties interested in sub-leasing the facility for a health club. The Regency Fulls.Enterprise Fund had a$430,000 retained deficit. This Fuzed has been operating with contributed capital received from a special district at the time the Fund was established. Three Internal Service Funds had retained deficits at June 30, 1998. The Workers' Compensation Insurance County General Fund had a deficit of $3,858,000, the Automotive Liability insurance Fund had a deficit of $21,000 and the Medical Liability Insurance Fund had a deficit of$4,446,000. 'These Fiends will have sufficient funding from investment earnings and charges to operating funds to cover disbursements as claims are paid. 38 COUNTY OF CONTRA COSTA NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS Matte 34, 1998 13. CONTRIBUTED CAPITAL CHANGES Changes in contributed capital of the Enterprise Rinds for the year ended June 30, 1998, are as follows (in thousands): Health County Maintenance Regency Airport Hospital Organization Mills Total Balance as of July 1, 1997 $ 27,766 802 1,000 500 30.068 Federal and State construction grants 66 66 Depreciation related to grants (902) -(2-7) (929) Balance as of June 30, 1998 $ 26,930 775 1,000 500 29.205 14. SEGMENT INFORMATION FOR ENTERPRISE FUNDS Financial data for the Enterprise Funds for the year ended June 30, 1998,are as follows(in thousands): Employee Health Major Risk Fitness County Maintenance Medical Regency Airport Center Hospi a1 Organization Insurance Hills Total Operating revenues S 2,274 101 184,156 78,197 103 1 264,832 Operating expenses(other than depreciation) 1,823 214 149,011 86,081 1 i3 25 237,264 Depreciation 1,108 11 3,235 26 4,380 Operating income(loss) (657) (124) 31,910 17,910) (7) (24) 23,188 Non-operating revenues, expenses,net (67) 19 (12,) (35) (95) Net operating transfers (55) (31,873) 8,511 (23,417) Net(loss)income $ (779) (105" 25 566 (7) (24) (324) Current capital contribritioras 66 66 Fixed asset acquisitions (382) (28,798) (60) (29,240) Net working capital 3,625 (401) 78,189 5,335 174 70 86,992 Total assets 35,812 47 224,507 26,863 182 251 . 287,662 Capital lease obligations 7,141 208 72 7,421 Certificates of participation,net 128,177 128,177 Total equity(deficit) 26,189 (364) 29,372 4,325 174 70 59,766 39 COUP b Y OF CONTRA COSTA NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENT'S June 30, 1998 The County pays a subsidy to the County Hospital and Health 'Maimenance Organization Enterprise Funds to provide resources for operating costs which are in excess of operating revenues. Subsidies for the last three years are as follows(in thousands): Year Ended June 30, Total Subsidy 1996 5 12,692 1997 15,572 1998 13,665 Subsidies have declined since 1995 as certain health and welfare realignment revenues, previously recorded in the General bund and transferred via subsidy to the Hospital and the Health Maintenance Organization, are now recorded directly to those funds as intergovernmental revenue. In 1997-98, these intergovernmental revenues were $5,710,000 for the Hospital and$11,420,0063 for the Health Maintenance Organization. 15. DEFERRED COMPENSATION€ N PLAN The County and the Housing Authority offer their employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all employees, permits them to defer a portion of their annual salary until future years. ?Monies in the deferred compensation plan are not available to employees until termination, retirement, death, or unforeseen emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those property or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights of the County or the blousing Authority (without being restricted to the provisions of benefits under the plan;, subject only to the claims of the County or the blousing Authority's general creditors. Participants' rights under the plana are equal to those of general creditors of the County in an amount equal to the fair value of the deferred account for each participant. It is the opinion of the County's legal counsel that the County has no liability for losses under the play{ but does have the fiduciary duty of due care that would be required of an ordinary prudent investor. County management believes that it is unlikely the County will;use the assets to satisfy the claims of general creditors in the future. The Housing Authority takes the same position in regards to their plan. As of Juane 30, 1998, the assets of the County's plan, recorded in an agency fund at their fair value, amounted to $170,6313,6300. At March 31, 1998, the assets of the blousing Authority's pian, recorded in an agency fund at their fair value,amounted to 51,568,0630. In August of 1996, the Small Business Job Protection. Act (the "Act") became effective and, among other provisions provides that for a Section 457 Plan to be an eligible plan Wunder the Act, all assets and income of the plan are to be held in trust for the exclusive benefit of plan participants and their beneficiaries. Amounts deferred under plans in existence, however, do not have to be placed in trust until January 1, 1999. .As of Janne 30, 1998, the trusts for the County's plan and the(lousing Authority's plan:have not yet been established. 40 ...................._ ......... ......... ......... ......... ................... .............. ....._. ......... ......... ......... ......... ......... ......... ..._.... ......... .. ......... ..._.... ......... ........ ... ...... ......... __ __ COTUN,TTY OF CONTRA COSTA NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS June 30, 1998 16. MORTGAGE REVENUE BONDS Home mortgage revenue bonds have been issued in the County's name to provide mortgage loans secured by first trust deeds on newly constructed and existing residences. The program provides low interest rate mortgage loans to persons who find it difficult to qualify for conventional mortgages at market rates. The bonds do not constitute an indebtedness of the County. They are payable solely from payments made on and secured by a pledge of the acquired mortgage loans and certain funds and other monies held for the benefit of the bondholders pursuant to the bond indentures. These bonds are not payable from any revenues or assets of the County, and neither the full faith and credit nor the taxing authority of the County, the State, or any political subdivision thereof is obligated for the payment of the principal or interest on the bonds. Accordingly, no liability has been recorded in the General Long-Term Obligations Account Group. The total amount of mortgage revenue bonds outstanding at June 30, 1998,was$34,8 10,000. 17. RISK MANAGEMENT The County self-insures its unemployment, dental, management long-term disability and medical liability exposures, The County is self-insured to $750,000 per occurrence for workers' compensation, and maintains $10 million of excess insurance coverage per occurrence with commercial insurance carriers. The County is self- insured to $1.5 million per occurrence on public and automobile liability (excluding the airport, which is insured for catastrophic losses by a commercial insurance carrier up to $75 million per occurrence) and maintains $10 million -.excess insurance coverage with commercial insurance carriers. All claims are adjusted in-house by the County,except for dental which is adjusted by outside parties. In addition, the County maintains up to $550 million "All. Risk" coverage (including flood insurance) with a $50,000 deductible, and up to $325 million earthquake insurance coverage on all locations with commercial insurance carriers. During the past three years there have been no instances of the amount of claim settlements exceeding insurance coverage. internal Service Funds are used to account for the County's self-insurance activities. It is the County's policy to provide in each fiscal year, by charges to affected operating funds, amounts sufficient to cover the estimated expenditures for self-insured claims. Charges to operating funds are recorded as expenditures/expenses of such funds and revenues of the Internal Service Funds, Accra and payment of claims are recorded in the Internal Service Funds, The County has accrued a liability of$73.4 million at June 30, 1998, for all self-insured claims in the Internal Service Funds which includes an amount for incurred but not reported claims. The self-insurance reserve is based on actuarially determined amounts for workers'compensation,public and automobile liability,and medical liability and based on management's estimates for all other reserves. In the opinion of the County, the amounts accrued are adequate to cover claims incurred but not reported in addition to known claims. 41 COUNTY OF CC3N7;?_A COSTA NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS Juice 30, 1998 Chanes in the Funds'claims liability amount in fiscal years 1997-98 and 1996-97 were(in thousands): Beginning of Current Year Claims Balance at Fiscal Year and Changes in Claim Fiscal Liability Estimates Payments Year End 1997-98 $ 73,169 19,688 (19,504) 733,353 1996-97 59,668 21,022 (17,521) 73,169 The actuarially determined claims liabilities,including incurred but not reported claims,are basted on the estimated ultimate cost of settling the claims, using past experience adjusted for current trends, and any other factors that modify past experience. It also includes incremental claire adjustment expenses. In addition,estimated recoveries or settled and unsettled claims were evaluated in terms of their estimated realizable value and deducted from the liability for unpaid claims. 18. COMMITMENTS AND CONTINGENCIES A. Grants The County participates in a number of Federal and State ,grant programs which are subject to financial and compliance audits by the grantors or their representatives. Audits of certain grant programs through June 30, 1998, have not yet been conducted. Accordingly, the County's compliance with applicable grant requirements will be established at some future date. The amount, of any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time. The County believes that such disallowances, if any, would not have a material effect on the general-purpose financial statements. B. Health Insurance Health care benefits for active and retired employees are jointly financed by the beneficiaries and by the County. Most employees have a choice of participation in four medical plans: Kaiser Permanente, a private health maintenance organization(HMO);Health Net(HN40);Qual-Med, a preferred provider plan(PPO); and the Contra Costa Health Plan. (CCHP), operated by the County Health Services Department. Employees represented by either the Deputy Sheriffs' Association (DSA), District attorney Investigators' Association (DATA), or United Professional Fire Fighters' IAFF Local 1230 are eligible to participate in medical plans administered by the California public Employees' Retirement System(Ca1PERS). For nota-CaIPERS administered:medical plans, the County subverts 79 percent of Kaiser and Health Net, 73 percent of (dual-Med and 98 percent of CC'HP premiums for plan members. The County subvention for CaIPERS administered plans is a flat rate depending or the employees' union representation and the number of dependents covered under the plans. All permanent employees have a choice of three dental plans: a County self-funded plan administered by Delta Dental,and Safeguard A or E plans. The County's self-funded plan is an indemnity program and the Safeguard plans are prepaid programs. The County's contribution to health and dental plans during 1997-98 for active employees was $29,041,000. The County's liability for health care benefits is limited to its annual contribution. 42 COUNTY OF CONTRA COSTA NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS June 30, 1998 C. Post-Employment Benefits Other Than Pensions In addition to providing retirement benefits as described in Note 19, retired employees are allowed to continue participation in the medical and dental plans described above. As of June 30, 1998, there were 3,477 retired employees participating in the health plans, and the County contributed $10,174,000 toward payment of the premiums. The cost of retiree health care is recognized when the County makes its contribution on a pay-as- you-go basis and is accounted for in the General Fund, Special Revenue Library and Fire District Funds, Enterprise Funds,or Fiduciary Funds as appropriate. This post-employment benefit was approved by Board of Supervisors resolution number 264 on August 22, 1961 with an effective date of October 1, 1961. To be eligible, the retiring employee must have been a member of a participating health plan for at least five consecutive years. D. Special Assessment Debt The County is considered to be "obligated in some manner," as defined by Governmental Accounting Standards Board Statement No. 6,Accounting and Financial Reporting far Special Assessments, for its special assessment debt. The County is obligated to foreclose on properties for which owners have failed to pay installments of assessments as they fall due and the County may honor deficiencies to the extent that lien foreclosure proceeds are insufficient. The County's obligation to advance monies to pay debt service in the evert of delinquent assessment installments is limited to the amount of remaining original bond proceeds and installments received. Special assessment debt is included in the County's General Long-Term Obligations Account Group and special assessment transactions are included in the Assessment Districts Debt Service Fund. Debt service payments are made from special assessments of the related special assessment district, E. Pending Legal Matters Numerous lawsuits are pending or threatened against the County. The County has recorded actuarially determined reserves in the Internal Service Funds to adequately cover estimated potential material adverse losses at June 30, 1998, F. Proposition 62 The California Supreme Court has upheld the constitutionality of Proposition 62, a 1986 initiative which required voter approval of all new or increased taxes. The Court's ruling may invalidate certain takes previously collected by the County and disallow these taxes from being collected in the future. The likelihood and amount of these taxes being invalidated is currently unknown and has not been reflected in the general- purpose financial statements. Management does not believe this ruling will materially effect. the County's financial position. 43 COUNTY OF CONTRA COSTA NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS June 30, 1998 Ga Proposition 218 Proposition 218 was approved by the voters in November 1996 and could sharply limit the County's ability to collect new taxes and fees. This measure requires a voter majority approval for all taxes used for "general government purposes" and a two-thirds voter approval for "special taxes" used for defined purposes. Proposition 218 repeals any such taxes imposed after January 1, 1995, that fail to meet these requirements. For these taxes to remain in effect, the local government must obtain voter approval by November €998. The County collected approximately $18.6 million in fees and assessments in 1997-98 which could be subject to the provisions of Proposition 718. None of these fees and assessments are deposited in the County's General Fund. If the County is unable to continue to collect these revenues, the services and programs funded with these revenues would have to be curtailed and/or the County's General Fund might have to be used to support them. The County is unable to predict whether or not in the future it will be able to continue all of these services and prograins or, if they are continued, what amounts klif any) would be used from the County's General Fund to continue to support these activities. 19. €E SION PLAN A. Plan Description The Contra Costa County Employees' Retirement Association.(CCCERA) is a cost-sharing multiple-employer defined benefit pension plan governed by the County Employees' Retirement Law of 1937 (the `x1937 Act";. The plan covers substantially all of the employees of the County, its special districts, the Housing Authority and thirteen other member agencies. The plan provides for retirement, disability, death and survivor benefits, in accordance with the 1937 Act. Annual cost-of-living adjustments to retirement benefits can be granted by the Retirement Board as provided by State statutes. The CCCERA is divided into four separate benefit sections of the 1937 Act. These sections are 'Known as. General -Tier , General -Tier II,General-Tier III and Safety. Tier 1 includes members not mandated to be in Tier II and reciprocal members that elect 'Pier I membership. Fier 11 includes members hired on or after August 1, 1980, by the three employers adopting this benefit provision and their members who elected to transfer from Tier € at that date, Tier III was approved by the Board of Supervisors in January 1998 and implementation will begin in October 1998. Safety includes members in active law enforcement, active fire suppression wor:K or certain,other"Safety„classifications as designated by the Retirement Board. Service retirement benefits are based on age, length of service and final average Wary. For the Tiers I, III and Safety sections,the retirement benefit is based on an average of the 12 highest pay months, in accordance with Government Code Section 31462. For Tier 11,the benefit is based on a 36 month average salary. An initial group of 2,8'711 Tier€I employees with five years service by October 1998 were eligible to irrevocably elect Tier Ill. Members eligible for Tier III are required to elect or decline enrollment. As of June 30, 1998, 2,352 employees elected Tier III. Subsequent enrollments will occur as more employees from Tier II acquire five years of service. 44 COUNTY OF CONTRA COSTA NOTES TO GENERAL-PURPOSE FINANCL4,L S'TA'TEMENTS June 30, 1998 H. Funding Policy Pursuant to provisions of the 1937 Act, the Retirement Board recommends the annual contribution rates for adoption by the Board of Supervisors. New contribution rates, based on the actuarial study as of January 1. 1997,became effective July 1, 1997. The contribution requirements are determined as a.percentage of payroll. The employer rates were calculated on the alternate funding method permitted by Section 31453.5 of the Government Code. The"entry age normal funding" method is used to calculate the rate required to provide all the benefits promised to a new member. Unfunded costs resulting from this calculation are amortized over 13.5 years from the January 1, 1997 valuation date. Active plan members are required to contribute an actuarially determined percentage of their annual covered salary. The required percentage rates vary according to the benefit section and entry age of the employee. The rates in effect during fiscal year 1997-98 (based on covered payroll as of January 1, 1997) ranged from 2.6 percent to 10.5 percent of the employees' annual covered salary. The County employer rates of contribution, calculated as a percentage of the County's covered payroll of $278,422,000 as of January 1, 1997,for fiscal year 199798 were.- General ere:General Members,Tier 1 10.15% General Members,Tier 11 4.68 Safety Members 13.02 The following table shows the County's required contributions and the percentage contributed, for the 1997 calendar year and each of the two preceding years: Annual County Required Percentage Calendar Contribution Contributed Year (ARC) by County 1995 $ 28,147,254 100 1996 31,785,744 100 1997 28,690,877 100 45 COUNTY OF CONTRA COSTA NOTES TO GENERAL,-PURPOSE FINANCIAL STATEMENTS June 30, 1998 C. Ventura Decision The August 14, 1997 California Supreme Court decision in Ventura County Deputy Sheriffs Association v. Board of Retirement changed a previously accepted construction of the statutory framework governing the compensation subject to inclusion in the calculation of pensions under the 1937 .Act. As a result of this decision, all cash remuneration is included in the final compensation except for non-scheduled overtime and employer contributions to deferred compensation plans. The CCCERA has prospectively applied the decision, beginning October 1, 1997. The issue of retroactivity has not been decided and is currently under discussion with the CCCERA.'s attorneys and the employers' attorneys as a result of two lawsuits against the CCCERA. The financial impact of the Ventura decision has not yet been fully determined by the CCCERA, its attorneys and its actuaries. However, it is likely that the Ventura decision will cause a material unfunded liability. 20. MEDICARE AND MEDI-CAL PROGRAMS The County Hospital provides services to :eligible patients under Medi-Cal and Medicare programs. For the year ended ,lune 30, 1995, the Medi-Cal program represented 44 percent and the Medicare program represented approximately 18 percent of the Hospital's gross patient service revenues. Medi-Cal inpatient services are reimbursed on a per diem basis, outpatient services trader a cost-reimbursernent methodology. Medicare inpatient services are reimbursed based upon pre-established rates for diagnostic-related groups. Outpatient services and defined capital and medical education costs related to Medicare beneficiaries are paid based on a cost- reimbursement methodology. Final reimbursement is determined as a result of audits by the intermediary of annual cast reports submitted by the hospital. Deports on the results of such audits have been received through June 30, 1996 and 1997 for Medicare and Medi-Cal, respectively. Adjustments as a result of such audits are recorded in the year the amount can be determined. The "hospital Enterprise Fund accounts receivable of $28,227,000 is reported net of contractual and other allowances of$35,645,000. 21. YEAR 2004 ISSUE(UNAUDITED) Many computer hardware and software systems were designed to record the date year using only the one's and ten's digits and do not record the century. Thus,the yea. 1900 and the year 2000 are considered by these systems to be the same year. Can January 1, 2000, these systems that use the date in their operation or calculations will fail to function or will provide erroneous or unreliable results which could cause a disruption of government services. In addition to equipment normally considered or associated with computers, many other types of equipment contain and depend upon microprocessors for their function. A few examples of this(Imbedded Chip) technology include building access, climate control and security systems, irrigation systems, communications systems and medical equipment. 46 ........................ _....... __ _...... _...... . . . ..............__ COUNTY OF COav'"rRA COSTA NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS June 30, 1993 Since 1995, the County has been vigorously pursuing a program to identify and fiat all affected systems and equipment. Contra Costa's multifaceted program includes remediation in the data centers,wide are network, local area networks, imbedded chips, legal due diligence,business and disaster resumption and recovery planning, and community awareness. In additionto a large commitment of County staff time and the cost of replacement equipment and software, as of Jodie 30, 1993, the County had contracts with vendors totaling$622,000 to assist in the Year 2€00 remediation project. Data center systems will be re€nediated, tested, and placed back izntu production January 1, 1999. This allows for one frill year of sub-module, module, unit, summary, and global system and infrastructure operations well before January 1, 2000. This includes routines that will bridge both two and four digit date data between the county's compliant systems and non-compliant systems. 'Nide Area Network infrastructure components are scheduled for complete remediation by February of 1999,and will be in frill production for nine months prior to January 1,2000. The table below summarizes the status of the County's Year 2000 remediation project as of June 30, 1993. The areas being addressed are on the left and are defined below. Across the top are the four stages of the Year 2000 remediation process as defined in the GASB'technical Bulletin Pio, 93=1. Validation Awareness Assessment Remodia€ion &Westin County Data Center Complete Complete Complete In Progress Interfaces Complete Complete In Progress In progress 'Health Services Data Center Complete Complete In Progress In Progress LAN/Desktop Computers Complete In progress In Progress In Progress Imbedded Chips Complete Complete In Progress In Progress Due Diligence Complete Complete In Progress Planned Community Awareness Complete Complete In Progress Planned Cotarnty Data Center: Mainframe and minicomputer systems that are maintained at the Department of Information Technology's data center. Most are large-scale applications covering areas of criminal justice, property taxes, general government,finance,human resources,etc. WANNII xMmal. Ind rfages: The wide area network (W. is the network that connects to, and is shared and owned by all county departments, Maintaining the WAIN is the responsibility of the Department of Information Technology's staff: External interfaces are electronic connections to other county, state, federal and city computer systems and the interne€. 47 COUNTY OF CONTRA COSTA NOTES TO GENERAL P'€RPOSE FWANCIAL S'TATEMENT'S June 30, 1998 Health Services Data Center: Mainframe and minicomputer systems that are maintained at the Health Services Department data center. These include applications for patient billing, case management, patient and facilities scheduling, hazardous materials information,quality control and provider information. LAN/Desktpp Corn up ters: Local area networks (LANs) are networks of desktop computers and in some cases a minicomputer that are maintained by individual County Departments. Sorne stand-alone desktop computers are maintained by individual County Departments which are also used for important applications. Imbedded Chins: Includes any other equipment that contains an imbedded microprocessor. The General Services Department is coordinating with the other departments to address this equipment. Due Diligence: This is the County's process of documenting its planning, methodology, progress, results and present status of the Year 2000 remediation project. This is done through various means, both electronically and on paper. This also includes related programs of the Office of Emergency Services, Environmental Health, County Fire, County Sheriff, private business organizations,etc. Community Awareness: This is the County's program for communicating a proactive, positive stance with the entire community regarding the County's readiness to deal with the Year 2000 issue. Since 1996, the county has been recognized as a national public sector leader with respect to Year 2000 issues. County senior management and County Year 2000 managers have spent more than two years authoring technical and business issue articles, appearing in government sponsored videos, providing seminars, developing web-based technical and business assistance to other public and private sector organizations. The county has been very proactive and positive about discussing pertinent Year 2000 issues within the local business and government community. The County's Chief Information Officer(00)co--chairs the California State Association of CIO's Year 2000 Intergovernmental Task Force with the State CID. The County's CID has testified before the California State Legislature on two occasions as an expert witness on this subject. The information Technology Exposition and Conference Board of Advisors,and the State of California's Department of Information Technology, selected Contra Costa County to receive its "Executive Sponsorship," "Year 2000 Project Management,"and"Year 2000 Readiness"excellence awards in November of 1998. 22. SUBSEQUENT EVENTS A. 1997-98 Tax and Revenue Anticipation Notes On July 1, 1998,the County issued$107,315,000 of short-term tax and revenue anticipation notes. Interest on the notes is at 5.00 percent on$50,000,000 and at 8.00 percent on$57,315,000. They will mature October 1, 1999. 48 .................. _......... ......... ......... ._I..... ......... ......... ......... ._ .................._ ......... ......... ......... ......... ......... ............................... .. ............ _ ........ APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DCCUNL IENTS Certain provisions of the Site Lease, Facility Lease and the Trust Agreement, not previously discussed in this t7)ficial Statement, are summarized below. These summaries do not purport to be complete or definitive and are qualified in their entirety by reference to the full terms of the documemes. Complete copies of the documents are available upon request fe om the Director of Capital Facilities and Debt l lanagemena . County of Contra Costa, CERTAIN DEl+I1rITIONS The followhig are definitions of certain of the terms defied in the Facility Lease or the Trust Agreement,to which reference is hereby made. The following definitions are equally applicable to both the singular and plural forms of the terrns defined herein. Capitalized terms not otherwise defined herein,will Dave-aie meaning assigned to such tern in the Trust Agreement or,if not defined therein,in the Facility Lease. "Act" means the Joint Exercise of Powers Act (being Chanter 5 of Division 7 of Title 1 of the Government Code of the State,as amended)and all laws amendatory thereof or supplemental thereto, "Additional Payments" means all amounts payable to the Authority or the Trustee or any other person from the County as Additional Payments pursuant to the Facility Lease. "Authority"means the County of Contra Costa Public Financing Authority created pursuant to the Act and its successors and assigns in accordance with the Trust Agreement. "Authorized Denominations"means,with respect to the Fixed late Bonds, $5,000 or any integral *multiple thereof,and with respect to the Variable hate Bonds,$100,000 or any integral=altiple thereof. "Base Rental Payments" means all amounts payable to the Authority from the County as Base Mental Payments pursuant to the Facility Lease. "Bond Insurance Policy" means, with respect only to Bonds insured thereby, any policy or policies of insurance or financial guaranty bond insuring the scheduled payment of the principal of and interest on the Bonds when due. "Bond Insurer"means any insurance company or companies which has or have issued any Bund Insurance Policy. "Bonds" means the 1999 Series A Bonds and all Additional .Bonds. The terra "1999 Series A Bonds"means bonds of the Authority so designated and authorized by and at any time Outstanding pursuant to the Trust Agreement and executed;issued and delivered in accordance with the Trust Agreement. The term"Additional Bonds" means all bonds of the Authority authorized by and at any time Outstanding pursuant to the Trust Agreement and executed, issued and delivered in accordance therewith. The term"Serial Bonds"means Bonds for which no sinking fund payments are provided. The term "Terra Bonds" means Bonds which are payable on or before their specified maturity dates from sinking fiend payments established for that purpose and calculated to retire such Bonds on or before their specified maturity dates. "Bray Courthouse" means a 3 story, type 1 steel frame building in the City of Martinez, California, commonly known and designated as the Bray Courthouse, located at 1020 Ward Street and containing approximately 49,000 square feet, together with site development, landscaping, utilities, equipment, f-arniSnings, improvements and appurtenant and related facilities,located on the Demised premises. D-1 "Business Day" means a day that is not a Saturday, Sunday or legal holiday on which banking institutions in the States of New York or California or the Bond Insurer are authorized to remain closed, or a day on which the Federal Reserve system is closed. "Certificate of the Authority„ means an instrument in writing signed by any of the following officials of the Authority: Chair,Vice-Chair,Executive Director,Assistant Executive Director or Deputy Executive Director or a designee of any such officer,or by any other person(whether or not an officer of the Authority)who is specifically authorized by resolution of the Authority for that purpose. "Certificate of the County"means an instrument in writing signed by any of the following County officials: Chair of the Board of Supervisors,County Administrator of the County or Director, Capital Facilities and Debt Management or by any such officials' duly appointed designee, or by any other officer of the County duly authorized by the Board of Supervisors of the County for that purpose. "Code"means the Internal Revenue Code of 1986,as amended. "Corporation"means Contra Costa County Public Facilities Corporation. "Costs of Issuance"means all items of expense directly or indirectly payable by or reimbursable to the County or the Authority and related to the authorization, execution and delivery of the Facility Lease, the Site Lease, the Trust Agreement and the issuance and sale of the Bonds, including, but not limited to, costs of preparation and reproduction of documents, costs of rating agencies and costs to provide information required by rating agencies, filing and recording fees, fees and charges of the Trustee, legal fees and charges, fees and disbursements of consultants and professionals, premiums of any Bond Insurer, fees and charges for preparation, execution and safekeeping of the Bonds, title search and title insurance fees, fees of the Authority and any other authorized cost,charge or fee in connection with the issuance of the Bonds. "County" means the County of Contra Costa, a County organized and validly existing under the Constitution and general laws of the State. "County Office Building" means a 4 story, class A office building in the City of Martinez, California, commonly known as Summit Centre and designated as the County Office Building, located at 2530 Arnold Drive and containing approximately 118,550 square feet, together with parking, site development, landscaping,utilities,equipment,furnishings,improvements and appurtenant and related facilities. "Courthouse Funds" means the County Criminal Justice Facility Temporary Construction Fund and the Courthouse Temporary Construction Fund established by the County by Resolution No. 82/19, passed on January 5, 1982, and Resolution No. 83/1241, adopted on December 23, 1983, respectively, of the Board of Supervisors of the County,pursuant to Sections 76000 et seq.of the Government Code of the State of California. "Courts Project"means the Bray Courthouse and the Family Law Center. "Debt Service" means, for any Fiscal Year or other period, the sum of(1) the interest accruing during such Fiscal Year or other period on all Outstanding Bonds and Swaps, assuming that all Outstanding Serial Bonds are retired as scheduled and that all Outstanding Term Bonds are redeemed or paid from sinking fund payments as scheduled(except to the extent that such interest is to be paid from the proceeds of sale of any Bonds so long as such funded interest is in an amount equal to the gross amount necessary to pay such interest on the Bonds and is invested in Government Securities which mature no later than the related Interest Payment Date), (2)the principal amount of all Outstanding Serial Bonds maturing during such Fiscal Year or other period, and (3) the principal amount of all Outstanding Term Bonds required to be redeemed or paid (together with the redemption premiums,if any,thereon)during such Fiscal Year or other period. "Demised Premises"means that certain real property situated in the County of Contra Costa, State of California, described in Exhibit A to the Facility Lease, together with any additional real property added thereto D-2 _ ......... ................... ......... ......... ........._._..... ......... ......... ......... ......... ......... ................. _ _ _.............__ ......... ......... ......... ......... ......... ......... .......... _ _ .......... ....... by any supplement or amendment thereto;subject,however,to any conditions,reservations,and easements of record or known to the County. "Event of Default" will have the meaning specified in the Trust Agreement. See "Trust Agreement—Defaults and Remedies." "Facilities" means the Denvsed Premises, the West County Detention Facility, the Bray Courthouse and the Social Services Building or any County buildings, other improvements and facilities, added thereto oA substituted therefor, or any portion thereof, in accordance with the Facility Lease and the Trust Agreement;subject,however,to any conditions,reservations and easements of record known to the County. "Facility Lease" means that certain lease, entitled"Facility Lease (Various Capital Projects)", by and between the County and the Authority,dated as of February 1, 1999, as originally executed and recorded or as it may from time to time be supplemented, modified or amended pursuant to the provisions thereof and of the Trust Agreement. "Family Law Center" means the court center for family law matters, including dissolution of marriage, child custody and alternative dispute resolution to be located in the City of Martinez, California, adjacent to 1111 Ward Street, together with parking, site development, landscaping, utilities, equipment, furnishings, improvements and appurtenant and related facilities,including demolition and environmental mitigation. "Fiscal fear" means the twelve (12) month period terminating on June 30 of each year, or any other annual accounting period hereafter selected and designated by the .Authority as its Fiscal Year in accordance with applicable law. "Fixed Rate Bonds"means Bonds of any Series which bear interest at a fixed interest rate from the date of such Bonds until the maturity or redemption date thereof. "Government Securities" means (1) cash; (2) U.S. Treasury Certificates, Motes and Bonds (including State and Local Government Series--"SLGS"); (3) direct obligations of the D.S. Treasury which have been stripped by the 'Treasury itself, such as CATS, TIGRS and similar securities; (4) Resolution. Funding Corp. (REFCORP) strips (interest component only) which have been stripped by request to the Federal Reserve Bank of New York in boor entry form;(5)pre-refunded municipal bonds rated"Aaa"by Moody's and"AAA"by S&P, or if not rated by Moody's, then pre-refunded bonds that have been pre-refunded with cash, direct J.S. or J.S. guaranteed obligations, or AAA-rated pre-refunded municipal obligations; (6) obligations issued by the following agencies which are backed by the full faith and credit of the U.S.: (a)U.S.Export-Import Bank direct obligations or fully guaranteed certificates of beneficial ownership, (b) Farmers Dome Administration (FmHA) certificates of beneficial ownership, (c)Federal Financing Bark,(d) General Services Administration participation certificates, (e) J.S. Maritime Administration Guaranteed Title XI financing, (f) U.S. Department.. of .Housing and Urban Development (HUD) Project Notes, Local Authority Bonds, New Communities Debentures--J.S. government guaranteed debentures, and U.S. Public blousing Notes and Bonds--U.S. government guaranteed public housing :totes and bonds. "Interest Payment Date"means June 1 and December 1 in each year,commencing Jame 1, 1999, ":Interest Payment Period" means the period from and including each Interest Payment Date (or, for the first Interest Payment Period,the date of the Bonds)to and including the day immediately preceding the next succeeding Interest Payment bate. "Joint bowers Agreement" means the Joint Exercise of Powers Agreement by and between the County and the Contra Costa County Redevelopment Agency, dated April 7, 1992, as originally executed and as it may from time to time be amended or supplemented pursuant to the provisions thereof and of the Trust Agreement. "Juvenile Detention Facility Project"means the financing of a portion of the costs of construction of an addition to the County's existing juvenile detention facility which will house additional beds, located on D-3 Glacier Drive in the City of Martinez, California, including all works, properties and structures comprising said building,together with parking, site development, landscaping, utilities, equipment, furnishings, improve-ments and appurtenant and related facilities. "Los Medanos Project" means certain improvements to the health care facilities in the City of Pittsburg, California, commonly known and designated as the Los Medanos Health Center, located in Pittsburg, California, which is part of the Contra Costa Regional Medical Center, together with parking, site development, landscaping,utilities,equipment,furnishings,improvements and appurtenant and related facilities, "1988 Project" means the refinancing of the acquisition, renovation apd refurbishing of and improvements to the Auditor-Controller's Building, District Attorney's Building, Bray Courthouse, Public Defenders Building,a social services building,County Administration Building, and Sheriff Patrol Investigation and Communication Administration Building, all in the City of Martinez, California, the Municipal Court Building in the City of Concord, California, the County Library Building in the. City of Pleasant Hill, California, the Bast County Social Services Building in the City of Antioch, California, and the financing of the acquisition and installation of various equipment items including cars, trucks, computers and communications equipment and the Countywide Integrated Telecommunication Network System. "1999 Project"means the financing of various capital projects of the County described in Exhibit C to the Facility Lease, including the Family Law Center, the Los Medanos Project, improvements to the Social Services Building, acquisition of the County Office Building, and a portion of the Juvenile Detention Facility Project,as the same may be changed from time to time by the County by ding a notice of change with the Trustee. "Opinion of Counsel"means a written opinion of Bond Counsel. "Outstanding,"when used as of any particular time with reference to Bonds, means(subject to the provisions of the Trust Agreement)all Bonds except (1) Bonds theretofore cancelled by the Trustee or surrendered to the Trustee for cance"atioi (2) Bonds paid or deemed to have been paid within the meaning of the defeasance section of the'Frust Agreement; (3) Bonds deemed tendered but not yet presented for purchase; and (4) Bonds in lieu of or in substitution for which.other Bonds will have been executed,issued and delivered by the Authority pursuant to the Trust Agreement. "Permitted Encumbrances"means (1) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which. the County may, pursuant to the Facility Lease, permit to remain unpaid; (2)easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record as of the date of recordation of the Facility Lease in the office of the County Recorder of the County of Contra Costa and which.the County certifies in writing will not materially impair the use of the Facilities; (3)the Site Lease, as it may be amended from time to time, and the Facility Lease, as it may be amended from time to time; (4) the 'Frust Agreement, as it may be amended from time to time; (5) any right or claim of any mechanic, laborer, materialan, supplier or vendor not filed or perfected in the manner prescribed by law; (6)easements,rights of way,mineral rights, drilling rights and other rights,reservations, covenants, conditions or restrictions to which the Authority and the County consent in writing and certify to the Trustee will not materially impair the ownership interests of the Authority or use of the Facilities by the County; and (7) subleases and assignments of the County which will not adversely affect the exclusion from gross income of interest on the Boards. "Permitted Investments" means any of the following: (1) Government Securities; (2) direct obligations of the United States of America(including obligations issued or held in book-entry form on the boobs of the Department of the Treasury)or obligations the principal of and interest on which are'unconditionally guaranteed by the United States of America;(3)bonds,debentures,notes or other evidence of indebtedness issued or guaranteed D-4 _... _ _.. by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America(stripped securities are only permitted if they have been stripped by the agency itself): (a) Farmers Home Administration (Frnf-iA) certificates of beneficial ownership, (b) Federal Housing Administration (FHA) debentures, (c) General Services Administration participation certificates, (d) Government National Mortgage Association(GNMA or "Ginnie Mae") guaranteed mortgage-backed bonds and guaranteed pass-through obligations(participation certificates), (e)U.S. Maritime Administration guaranteed Title XI financing, and(f)U.S, Department of Housing and Urban Development (HUD) Project Notes and Local Authority Bonds; (4) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself): (a) Federal House Loan Bank Systern senior debt obligations (consolidated debt obligations), (b) Federal Horne Loan Mortgage Corporation (FHLMC or "Freddie Mae") participation certificates (niortgage-backed securities) and senior debt obligations, (c) Federal National Mortgage Association (FINTMA or "Fannie Mae") mortgage-backed securities and senior debt obligations(excluded are stripped mortgage securities which are valued greater than par on the portion of unpaid principal), (d) Student Loan Marketing Association (SLMA or "Sallie Mae") senior debt obligations, (e) Resolution Funding Corp. (REFCORP) strips (interest component only) which have been stripped by request to the Federal Reserve Bank of New York in book entry form, and (f) Farm Credit System.Consolidated systemwide bonds and notes;(5)money market funds registered under the Federal Investment Company Act of 1940,the shares of which are registered under the Federal Securities Act of 1933,and which have a rating by S&P of AAAm-G, AAAm, or AA-m and, if ratted by Moody's, rated Aaa, Aal or Aa2; (6) certificates of deposit secured at all times by collateral described in(2) and/or(3) above(which collateral must be held by a third party and subject to a perfected first security interest held by the Trustee) with a maturity of one year or less and issued by commercial banks,savings and loan associations or mutual savings banks whose short term obligations are rated "A-I+" or better by S&P and "Prime-I" by Moody's; (7) certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC, including BIF and SAIF: (8) investment agreements, including guaranteed investment contracts, acceptable to the Bond insurer; (9) commercial paper rated "Prinie.-1"by Moody's and"A-1+"or better by S&P; (10)bonds or notes issued by any state or municipality lity which is rated by Moody's and S&P in one of the two highest long-term rating categories assigned by such agencies; (11) federal funds or bankers acceptances with a maxinium term of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating of"Prime-I" or"AY' or better by Moody's and "A-I+" or better by S&P; (12) repurchase agreements that provide for the transfer of securities from a dealer bank or securities firm (seller/borrower) to the Trustee (buyer/lender) and the transfer of cash from the Trustee to the dealer bank or securities firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the Trustee in exchange for the securities at a specified date and that satisfy the following criteria: (a) repurchase agreements must be between the municipal entity and dealer banks or securities firms that are (i) on the Federal Reserve reporting dealer list which fall under the jurisdiction of the SIPC and which are rated A or better by S&P and Moody's,or"ii)banks rated"A"or above by S&P and Moody's,and(b)repurchase agreements must include the following: (i) securities that are acceptable for transfer, including those describe in clauses (2) and (3) above, (ii) terms of not more 6ati 30 days, (iii) collateral must be delivered to the municipal entity, trustee (if trustee is not supplying the collateral)or third party acting as agent for the trustee(if the trustee is supplying the collateral)before or simultaneously with payment (perfection by possession of certificated securities), (iv) the trustee must have a perfected first priority security interest in the collateral.(v)collateral must be free and clear of third-party liens and, in the case of an SIPC broker, must not have been acquired pursuant to a repurchase agreement or reverse repurchase agreement, (vi)failure to maintain the requisite collateral percentage, after a two day restoration period, requires the trustee to liquidate collateral, (vii) securities must be valued weekly and marked-to-mark-et at current market price plus accrued interest, (viii) the value of-collateral must be equal to 104% or, if the securities used as collateral are FNTMA or FHLMC securities, 105%, of the amount of cash transferred by the municipal entity to the dealer bank or security firm under the repurchase agreement plus accrued interest and, if the value of securities held as collateral slips below such amount,then additional cash and/or acceptable securities must be transferred;(13)pre- refutided municipal bonds rated"Aaa"by Moody's and "AAA"by S&P or, if the there is no Moody's rating, then pre-refunded bonds pre-refunded with cash, direct U.S. or U.S. guaranteed Obligations, or AAA rated pre-refunded municipal obligations; (14) money markets or mutual funds which are rated by S&P "AAAm-G" or "AAAm" or higher and, if rated by Moody's,are rated"Aaa"or higher,which funds may include funds for which the Trustee,its affiliates or subsidiaries provide investment advisory or other management services; (15) the Local Agency Investment Fund of the State of California; and (16) any other investment approved by the Bond Insurer. The Trustee may conclusively rely on the written instructions of the Authority and the County that such investment is a Permitted Investment. D-5 "Phase of the Project"means the 1988 Project, the 1999 Project or such Subsequent Phase of the Project to which reference is made. ".rincipal Payment Date" means any date on which principal of the Bonds is required to be paid (whether by reason of maturity,redemption or acceleration). "Prior Certificates" or "1988 Certificates" means the Outstanding County of Contra Costa 1988 Certificates of Participation for Consolidated Capital Projects, Equipment Acquisition Program and Countywide Integrated Telecommunications Network,delivered in the original principal amount of$61,690,000, "Project"means the 1988 Project and the 1999 Project and all Subsequent Phases of the Project. "Renal Payment Period" means the twelve month period commencing June 1 of each year and ending the following May 31, and the initial period commencing on the effective date hereof and ending the following May 31. "Reserve Facility"means a surety bond or insurance policy issued to the Trustee, on behalf of the Bondholders, by a company licensed to issue an insurance policy guaranteeing the timely payment of the principal of and interest on the Bonds(a"municipal bond insurer')if such municipal bond insurer shall be rated in the highest rating categories issued by Moody's and by S&P,or a letter of credit issued or confirmed by a state or national bank, or a foreign bank with an agency or branch located in the continental United States, which has outstanding an issue of unsecured long term debt securities rated at least equal to the second highest rating category by Moody's and S&P, or any combination thereof, deposited with the Trustee by the Authority to satisfy, the Reserve Fund Requirement. "Reserve Facility Costs"means amounts owed with respect to repayment of draws on a Reserve Facility, including interest thereon at the rate specified in the agreement pertaining to such Reserve Facility and expenses owed to the provider of a Reserve Facility. "Reserve Fund Requirement"means with respect to all Outstanding Bonds an amount equal to the lesser of(i)the maximum annual debt service attributable to the Outstanding Bonds and(ii) 125%of average annual debt service attributable to the Outstanding Bonds;provided that with respect to the calculation of the Reserve Fund Requirement upon the issuance of an Additional Series of Bonds the Reserve Fund Requirement will be the least of (i) or (ii) above, or the amount derived by the addition of 10% of the proceeds from the sale of such Series of Additional Bonds to the Reserve Fund. "Revenues" means (i)all Base Rental Payments and other payments paid by the County and received by the Authority pursuant to the Facility Lease(but not Additional Payments), and(ii) all interest or other income from any investment,pursuant to the Trust Agreement,of any money in any fund or account(other than the Rebate Fund)established pursuant to the Trust Agreement or the Facility Lease and(iii)Swap Revenues. "Series," whenever used in the Trust Agreement with respect to Bonds, means all of the Bonds designated as being of the same series, authenticated and delivered in a simultaneous transaction, regardless of variations in maturity, interest rate, redemption and other provisions, and any Bonds thereafter authenticated and delivered upon transfer or exchange of or in lieu of or in substitution for(but not to refund) such Bonds as provided in the Trust Agreement. "Site Lease" means that certain lease, entitled "Master Site Lease," between the County and the Authority, dated as of February 1, 1999, as originally executed and recorded or as it may from time to time be supplemented,modified or amended pursuant to the provisions thereof and of the Trust Agreement. "Social Services Building„ means a two-story office building in the City of Antioch, California, commonly known and designated as the East County Social Services Building,located at 4545 Delta Fair Boulevard near Belle Drive and containing approximately 52.,700 square feet, together with parking, site development, D-6 ............................... _...__............................._.........................................................................__.............. _... ......... .......... ........ __... ......... ......... ....._......._.._................... .._... ._...... ......... ......... ......... ._ .......... ....... ....._. ...................._.. ............. _ __ landscaping, utilities, equipment, furnishings, improvements and appurtenant and related facilities, located on the Demised Premises. "State"means the State of California. "Subsequent Phase of the Project" means any and all facilities and buildings for use by the County, whether within or without the County, and all additions, extensions or improvements thereto hereafter added to the Project and hereafter described by a notice to the Trustee, "Supplemental Trust Agreement" means any trust agreement then in full force and effect which has been duly executed and delivered by the Authority and the Trustee amendatory of the Trust Agreement or supplemental to the Trust Agreement; but only if and to the extent that such Supplemental Trust Agreement is executed and delivered pursuant to the provisions of the Trust Agreement. "Swap" means an interest rate swap, cap, floor, collar or other hedging transaction which is entered into by the Authority for the purpose of managing interest rate risk with respect to specified Bonds which are being issued concurrently with the execution of the Swap, which are proposed to be issued in connection with such Swap,or which are{outstanding at the time of execution of such Swap, "Swap Partner"means the entity which is a party to a Swap with the Authority. "Swap Revenues" means the sura: of money due to be paid by a Swap Partner to the Authority pursuant to any Swap subject to any netting of payments provided by lanae applicable Swap. "Swapped Bonds"means the Bonds to which a Swap relates. "Tax Certificate" means the Tax Certificate and Agreement delivered by the Authority and the County at the time of the issuance and delivery of a Series of Bonds,as the same may be amended or supplemented in accordance with its term, "Variable Rate Bonds"means Bonds of any Series which bear interest at a variable:interest rate. "West County Detention Facility" means the approximately 250,000 square feet, 560-bed detention facility located at 5555 Giant Highway in Richmond, California,together with parking, site development, landscaping, utilities, equipment, furnishings, irx provernents and appurtenant and related facilities, located on the Derrdsed Premises. "Written Request of the Authority"means an instrument in writing signed by or ori behalf of the Authority by its Chair, Mice-Chair, Executive Director, Assistant Executive Director or Deputy Executive Director or a designee of any such officer or by any other person (whether or not an officer of the Authority) who is specifically authorized by resolution of the Board of Directors of the Authority to sign or execute such a document on its behalf. "'yWitten Request of the County" rnears an instrument in writing signed by the County Administrator of the County or his designee, or by the Director, Capital Facilities and Debt Management of the County, or by any other officer of the County duly authorized by the Board of Supervisors of the County in writing to the Trustee for that purpose. SITE LEASE The County leases to the Authority and the Authority hires from, the County, on the terms and conditions set forth in the Site Lease, the real property situated in the County of Contra Costa, State of California, and described in Exhibit A attached to the Site Lease, together with any additional real property added thereto by any supplement or amendment thereto, or any real property substituted for all or any portion of such property in D-7 accordance with the Site Lease and the Trust Agreement; subject, however, to any conditions, reservations, and easements of record or known to the County and the buildings and all other facilities located thereon. I he term of the Site Lease as to the Facilities will commence on the date of recordation of the Site Lease in the office of the County Recorder of County of Contra Costa, State of California, or on May 1, 1999 whichever is earlier, and shall end on Jure 15, 2008, for the Social Services Building, June 15, 2016, for the Bray Courthouse, and June 15, 2028, for the Wes', County .Detention Facility, unless such terns is extended or sooner terminated as provided it the Site Lease. If on such dates the Base Rental Payments attributable to the related Facility and all other amounts them daze under the Facility Lease with respect to such Facility, including any Reserve Facility Costs,have not been fully paid,or if the rental or other amounts payable under the Facility Lease have been abated at any time and for any reason,thea the terra of the Site Lease with respect to such Facility shall be extended until 10 days after the Base Rental Payments attributable to such Facility and all other amounts theca due under the Facility Lease with respect to such Facility, including any Reserve Facility Costs, have been fully paid, except that the term of Site Lease as to the respective facilities shall in no event be extended beyond tern(10) years after such respective dates. If prior to such dates the Base Rental Payments attributable to the related Facility and all other amounts then due under the Facility Lease with respect to such Facility, including any Reserve Facility Costs, have been fully paid, the teras of the Site Lease with respect to such Facility shall end 10 days thereafter or upon written notice by the County to the Authority,whichever is earlier. The County covenants that it is the owner in fee of the Demised Premises. Tile County further covenants and agrees that if for any reason this covenant proves to be incorrect, tie County will either institute eminent domain proceedings to condemn the property or institute a quiet title action to clarify the County's title, and will diligently pursue such action to completion. FACILITY LEASE Lease of Facilities The Authority leases to the County and the County leases From the Authority the Facilities, including the Demised Premises; subject,however, to all easements, encumbrances, and restrictions that exist at the time of the commencement of the tern of flue Facility Lease. The County agrees and covenants during the term of the Facility Lease that, except as provided therein, it will use the Facilities for public and County purposes so as to afford the public the benefits contemplated by the Facility Lease. Term; Occupancy T'he term of the Facility Lease will commence on the date of recordation of the Facility Lease in the office of the County Recorder of Contra Costa County, State of California, or on May 1, 1999, whichever is earlier, and will end on June 1. 2028,unless such terra:is extended or sooner terminated as hereinafter provided. If on June 1, 2028,the Bonds or the Reserve Facility Costs have not been fully paid, or if the rental payable under the Facility Lease has been abated at any time and for any reason, then the tern of the facility Lease will be extended until all Bonds and Reserve Facility Costs will be fully paid, except that the terra of the Facility lease will in no evert be extended beyond June 1,2038. if prior to June 1, 2028, all Bonds and Reserve Facility Costs will be fully paid, or provision therefor made,the termof the Facility Lease will Brad 10 days thereafter or upon written notice by the County to the Authority, whichever is earlier. Certain components of the Facilities have lease terms terminating prior to Janne 1, 2028 and such components will cease to be leased under the Facility Lease upon termination of the Authority's leasehold interest therein pursuant to the Site Lease. Purpose of Leas; he County covenants that during the terra of the Facility Lease,except as provided in the Facility Lease, (a) it will use, or cause the use of, the Facilities for public purposes and for the purposes for which the Facilities are customarily used, (b) it will not vacate or abandon the Facilities or any part thereof, and(c) it will not -make any use of the Facilities which would jeopardize in any way the insurance coverage required to be maintained pursuant to the Facility Lease. D-8 ............... _..................................................................................................................... _.. ......... ......... ...... ......... ........ ......... ....... .. ......... ......... ......... ............. _ _ __ __ Substitution The County and the Authority may substitute real property as part of the Facilities for purposes of the Facility Lease, but only as set forffi in the Facility Lease and as described in the Official Statement under the caption'`SECLRITY AND SGURCES OF PAYMEI'T FOR TIDE 1999 SERIES A 1303NDS-- Substitution." Rental Payments Base Rental Payments. The Courty agrees to pay to the Authority, as Base dental Payments for the use aro' occupancy of the Facilities, including the Demised Premises (subiect to the provisions of the Facility Lease) annual rental payments with principal and interest components,the interest components being payable semi- annually, it accordance with the Rental Payment Schedule attached to the Facility Lease as Exhibit B and made a part thereof Base Rental Payments will be calculated on an annual basis,for the twelve-month periods commencing on dune I and ending on May 3I, and each annual Base Rental will be divided into two interest components,due on Decem ber I and June 1, and one principal component, due or: June 1, except that the :fest Base Rental Payment period commences on the date of recordation of the Facility Lease and ends on May 31, 1999, Each Base Rental Payment installr_nei t will be payable on the 15th day of the month immediately preceding its due date and any interest or o`^ser income with respect thereto accruing prior to such due elate. The interest components of the Base Rental Payments will be paid by the County as and constitute interest paid on the prircipal components of the Base Rental ?payments to be paid by the County under the Facility Lease, computed on the basis of a 360-day year com-nosed of twelve 30-day months. Each annual payment of Base Dental (to be payable in installments as aforesaid)will be for the use of the Facilities,including the Dernised Premises. If the term of the Facility Lease will have been extended pursuant the terms thereof, Base Rental Payment installments will continue to be due on.December 1 and June l in each year, and payable prier thereto as hereicaabove described, continuing to and including the date of termination of the Facility Lease. Upon such extension of the Facility Lease, the County will deliver to the Trustee a Certificate setting forth the extended rental payment schedule, which schedule will establish the principal and interest components of the Base Rental Payments so that the principal components will in the aggregate be sufficient to pay all unpaid principal components with interest components sufficient to pay all unpaid interest components plus interest and to pay any Reserve Facility Costs. Additional Payments. 'l"ne County will also pay Such amounts (the `Additional Payments") as Will be rewired by the Authority for the payment of all costs and expenses incurred by the Authority in connection with the execution, performance or enforcement of the Facility Lease or any assignment thereof, the 'Frust Agreement, the deserve Facility, its interest in the Demised Iger wises and the lease of the Facilities to the County, including but not limited to pay hent of all fees, costs and expenses and all administrative costs of the Authority related to the Demised Premises, the Facilities and the Pro?ect, including, without limiting the generality of the foregoiiag, salaries and wages of employees, all expenses, compensation and indemnification of the Trustee payable by the Authority under the Trust Agreement, fees of auditors, accountants, attorneys or architects, and all other necessary administrative costs of the Authority or charges required to be paid by it in order to maintain its existence or to comply with the terms of the Certificates or of the Trust Agreement;but not including in Additional Payments amounts required to pay the principal of or interest on the Bonds or the portion of Reserve Facility Costs related t,-�ereto. Fair Rental Value Such payments of Base Rental Payments for each recital period during the terra of the Facility Lease will constitute the total rental for said rental period and will be paid by the County in each rental payment period for and it consideration of the right of use and occupancy o` and continued quiet use and enjoyment of, the Facilities, during each such period for which said recital is to be paid. The parties to the Facility Lease have agreed and determined flat such total rental payable for each twelve-month period beginning June 1, 1999 represents the fair rental value of the Facilities, including the Demised Premises for each such period. in mating such determination, consideration has been givers to costs of acquisition, design, construction and financing of the Facilities, other obligations of the parties under the Facility Lease, the uses and purroses which may be served by the Facilities and the benefits fherefrorn.which will accrue to were County and the general public. D-g Payment Provisions All payments received will be applied first to the interest components of the Base Rental Payments due under the Facility Lease, then to the principal components of the Base Rental Payments due under the Facility Lease and thereafter to all Additional Payments due under the Facility Lease, but no such application of any payments which are less than the total rental due and owing will be deemed a waiver of any default under the Facility Lease. Rental Abatement The Base Rental Payments and Additional Payments will be abated proportionately (except for that portion of Base Rental Payments attributable to tine Courts Project for which Courthouse Funds are available for the payment thereof), during any period in which by reason of any damage or destruction (other than by condemnation as described under"Prepayment"below) there is substantial interference with the use and occupancy of the Facilities by the County, in the proportion in which the initial cost of that portion of the Facilities rendered unusable bears to the initial cost of the whole of the Facilities, including the Demised Premises. Such abatement will continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any such damage or destruction, the Facility Lease will continue in full force and effect and the County waives any right to terminate the Facility Lease by virtue of any such damage or destruction. Pledge of Courthouse Funds The County agrees that, subject to applicable law, it will utilize moneys in the Courthouse Funds to pay the Authority in immediately available funds (frog: amounts on hand from time to time in the Courthouse Funds)(i)the amount due as Base Renta'attributable to the Courts Project or(ii)the amount Necessary to replenish the portion of the Reserve Fund allocable to the Courts Project. The County's obligation to pay amounts available in the Courthouse Funds for lease of the Courts Project began with the construction of the Bray Courthouse, and shall continue until Bonds allocable to the Courts Project are retired and shall not be subject to the abatement specified in the Facility Lease. Notwiffistanding the foregoing,nothing shall prevent the County from utilizing the Courthouse Funds for any other lawful purpose after the annual amount of Base Rental allocable to the Courts Project has been funded, the obligation hereunder being to utilize any moneys therein available, pursuant to applicable law, including the restricted purposes for which the respective funds may be expended, to pay the Base Rental attributable to the Courts Project when the same is otherwise due and payable or to replenish the Reserve Fund as provided above, but there shall be no obligation on the County to set aside moneys in such fund in each fiscal year in excess of the amount needed in such fiscal year to pay such portion of the Base Rental. Supplemental Reimbursement Account The County agrees to establish and maintain a special account,to be held by the County,known as the "Los Medanos Project Supplemental Reimbursement Account" or other appropriate name (the "Supplemental Reimbursement Account"), and the County agrees and covenants that all supplemental Medical reimbursement received by it with respect to the Los Medanos Project financed with the proceeds of the 1999 Series A Bonds shall be deposited when and as received in the Supplemental Reimbursement Account, and all money on deposit in such account, including earnings thereon:,shall be applied only to the payment of Base Rental Payments allocable to such Bonds due and payable by the County. Pursuant to California Welfare and Institutions Code Section 14085.5, the County hereby pledges that supplemental reimbursements shall be used for the payment of such Kase Rental Payments, and the County hereby incorporates herein the agreement with the State made pursuant to California Welfare and Institutions Code Section 14085.5(b)(5). Appropriations Covenant The County covenants to take such action as may be necessary to include all such Base Rental Payments and Additional Payments due under the Facility Lease in its annual budgets,and to make necessary annual appropriations for all such Base Rental Payments and Additional Payments as will be required to provide funds in 1410 such year for such Base Rental Payments and Additional Payments. The County will deliver to the Authority and the 'Trustee within 60 days of adoption of the County budget a Certificate of the County statmi g that the budget as adopted appropriates all moneys necessary for the payment of Base Rental Payments and Additional Payments under the Facility Lease. Maintenance and Utilities During such time as the County is in possession of the Facilities, all mainteriarce and repair,bath ordinary and extraordinary, of the Facilities will be the responsibility of the County,which will at all tunes maintain or otherwise arrange for the maintenance of the Facilities in first class condition, and the County will pay for or otherwise arrange for the payment of all utility services supplied to the Facilities, which may include, without limitation,janitor service, security,power, gas, telephone, light, heating, ventilation, air conditioning, water and all other utility services, and will pay for or otherwise arrange for payment of the cost of the repair and replacement of the Facilities resulting from ordinary wear and tear or want of care on the part of the County or any assignee or sublessee thereof or any other cause and will pay for or otherwise arrange for the payment of all insurance policies required to be maintained with respect to the Facilities. In exchange for the rental provided iii the Facility Lease,the Authority agrees to provide only the Facilities,including the Demised Premises. Changes to the Project Subject to the Facility Lease, the County will, at its own expense, have the right to remodel the Facilities or to make additions, modifications and improvements to the Facilities, including the Remised Premises. All such additions, modifications and improvements will thereafter comprise part of the Facilities arid be subvect to the provisions sof the Facility Lease. Such additions, modifications and improvements will not in any way damage the Facilities or cause then"to be used for purposes other than those authorized under the provisions of state and federal law; and the Facilities,upon completion of any additions,modifications and improvements made pursuant to the Facility Lease, will be of a value which is at least eaual to the value of the Facilities immediately prior to the making of such additions,modifications and improvements. Installation.of County's Equipment The County and any sublessee may at any time and from time to tirxe, in its sole discretion and at As own expense, install or permit to be installed other items of equipment or other personal property in or upon the Facilities, including the Demised Premises. All such items will remain the sole property of such party, in which neither t'se Authority nor the 'Trustee will have any interest, and may be modified or re-moved by such, party at any time provided that such party will repair and restore any and all damage to the Facilities resulting frorn. the installation,modification or removal of any such items. Taxes The County will pay or cause to be paid all taxes, fees and assessments of any type or nature charged to the Authority or affecting the Facilities or the respective interests or estates therein; provided that with respect to special assessments or other governmental charges that may lawfully be paid in instaHments over a period of years,the County will be obligated to pay only such installments as are required to be paid during the term.of the Facility Lease as and when the same become due. Insurance The County will procure or cause to be procured and maintain or cause to be maintained, throughout the term of the Facility Lease, such insurance as set forth in the Facility Lease and described in tine Official Statement under the caption "SECURITY ANIS SOURCES OF PAYMENT n CSR THE 1999 SEMITES A BONDS—Insurance." Dd11 Eminent Domain If the whole of the Facilities, including the Demised Premises or so much thereof as to render the remainder unusable for the purposes for which it was used by the County will be taker,under the power of eminent domain, tithe term of the Facility Lease will cease as of the day that possession will be so taken. If less than the whole of the Facilities will be taker under the power of eminent domain and the remainder is usable for the purposes for which it was used by the County at the time of such taking,then.the Facility Lease will continue in full force and effect as to such remainder,arid the parties waive the benefits of any law to the contrary,and in such event there will be a partial abatement of the rental due under the Facility Lease in an amount equivalernt to the amount by which the annual payments of principal and interest on the Outstanding Bonds will be reduced by the application of the award it eminent domain to the redemption of outstanding Bonds. So long as any of the Bonds will be outstanding, any award made in emirsent domain proceedings for taking the Facilities,including the Demised Premises or any portion thereof will be paid to the Trustee and applied to the prepayment of the Base Rental Payments as provided in the Facility Lease. Any such award grade after all of the Base Rental Payments and Additional Payments have beer. fully paid,or provision therefor made,will be paid to the to the County. Prepayment the County will prepay on any date from insurance (including proceeds of title insurance) and ernianent domain proceeds,to the extent provided in the Facility Lease(provided,however,that in the event of partial damage to or destruction of the Facilities caused by perils covered by insurance, if in the judgment of the Authority the insurance proceeds are sufficient to repair, reconstruct or replace the damaged or destroyed portion of the Fbacilades, such proceeds will be held by the Trustee and used to repair, reconstruct or replace the damaged or destroyed portion of the Facilities, pursuant to the procedure set forth in the Facility Lease for proceeds of insurance),all or any part of Base Rental Payments then unpaid so that the aggregate annual amounts of Base Rental Payments which will be payable alter such prepayment date will be as nearly proportional as practicable to the aggregate annual amounts of Base Rental Payments unpaid prior to the prepayment date (takiang into account the reduction in Base Rental allocable to future interest on the Bonds that are redeemed), at a prepayment amount equal to the redemption payment of the n aximum arnount of Bonds, including the principal thereof and the interest thereon to the date of redemption,plias any applicable premium redeemable from such proceeds. The County may prepay, from any source of available farads, all or any portion of Base Rental Payments by depositing with the Trustee moneys or securities as provided in the Trust Agreement sufficient to defense Bonds corresponding to such Base Rental Payments when due; provided that the County furnishes the Trustee with.an Opinion of Counsel that such deposit will not cause interest on the Bonds to be includable in gross income for federal income tax purposes. The County agrees that if following such prepayment the Facilities are damaged or destroyed or taken by eminent domain,it is not entitled to,and by such prepayment waives the right of, abatement of such prepaid Base Rental Payments and will not be entitled to any reimbursement of such Fuse Rental Payments. When(i) there will have been deposited with the Trustee at or prior to the dare dates of the Base Rental Payments or date when tine County may exercise its option to purchase the Facilities or any portion_ or item thereof,it trust for the bernefit of the Owners of the Bonds and irrevocably appropriated and set aside to the payment of the Base Rental Payments or option price, sufficient moneys and Permitted Investments described it subsection (1) of the definition thereof, not redeemable prior to maturity, the principal of and interest on which when due will provide money sufficient to pay all principal, premium, if any, and interest on the Bonds to the dace date of the Bonds or date when. the County may exercise its option to purchase the Facilities, as the case may be; (ii) all requirements of the Truest Agreement leave been satisfied; and(iii)an agreement will have been entered into with the Trustee for the payrnent of its fees and expenses so long as any of the Bonds will remain unpaid, then and in that event the right, title and interest of the authority in the Facility Lease and the obligations of the County under the Facility Lease will thereupon cense, terminate,become void and be cornpletely discharged and satisfied(except for the right of the Authority and tune obligation of the County to have such moneys and such Permitted Investments applied to ,he payment of tine Base Rental Payments or option price) and the Authority's interest in and title to the Project or applicable portion.or item thereof will be transferred and conveyed to the County. D-12 Option to Purchase The County will have the option to purchase the Authority's interest in any part of Facilities upon payment of an option price consisting of moneys or securities of the category specified in clause(1)of the definition of Permitted Investments(not callable by the issuer thereof prior to maturity)in an amount sufficient(together with the increment, earnings and interest on such securities) to provide ,imds to pay the aggregate amount for the entire remaining term of the Facility Lease of the part of the total rent under the Facility Lease attributable to such part of the Facilities(determined by reference to the proportion which the cost of such part of the Facilities bears to the cost of all of the Facilities). Any such payment will be made to the Trustee and will be treated as rental payments and will be applied by the Trustee to pay the principal sof the Bonds and interest on the Bonds and to redeem Bonds if such Bonds are subject to redemption pursuant to the terms of the Trust Agreement. Upon the snaking of such payment to the Trustee and the satisfaction of all requirements set forth in the Trust Agreement, among other things, title to such part of the Facilities, including the portion of the Demised Prendses upon which such parr of the Facilities is located will vest in the County and the term of the Facility Lease will end as to such Facilities,including the portion of the Demised Premises upon which such part of the Facilities is'Located. Sale of Personal Property The County, in its discretion,may request the Authority to sell or exchange any personal property which may at any time constitute a part of the Facilities, and to release said personal property from the Facility Lease, if (a) in the opinion of the County the property so sold or exchanged is no longer required or useful in connection with the operation of the Facilities, (b) fhe consideration to be received from the property is of a value substantially equal to ¢pie value of the property to be released, and(c) if the value of any such property will:, in the opinion of the Authority, exceed the amount of$1,00,000, the Authority will have been furnished a certificate of aro independent engineer or other qualified independent professional consultant(satisfactory to tale Authority)certifying the value thereof and farther certifying that such property is no longer required or useful in connection with the operation,of the Facilities. In the event of any such sale,the full amount of the money or consideration received for the personal property so sold and released will be paid to the Authority, Any money so paid to the Authority may, so long as the County is not in default under any of the provisions of the Facility Lease, be used upon the Written Request of the County to purchase persona;property,which property will become a part of the Facility Leased grader the Facility Lease. Defaults and Remedies if the County will fail to pay any rental payable gander the Facility Lease when the same becomes due,time being expressly declared to be of the essence of the Facility Lease,or the County will fail to keep,observe or perform any other term, covenant or condition contained in the Facility Lease to be kept or performed by the County for a period of 60 days after notice of the same has been given to the County by the Authority or the Trustee or for such additional time as is reasonably required, in the sole discretion of the Authority, to correct the same, or upon the happening of any of the events specified in the Facility Lease (any such case above being an "Event of Defaulf f,the County will be deemed to be in default under the Facility Lease and it will be lawful for tlie Authority to exercise any and all remedies available pursuant to lain or granted pursuant to the Facility Lease. Upon any such default, the Authority,in addition to all other rights and remedies it may have at law, will have the option to do any of the following: (1) To terminate the Facility Lease in the manner hereinafter provided on account of default by the County, notwithstanding any re-entry or re•-letting of the Facilities as hereinafter provided for in subparagraph(2)below, and to re-enter the Facilities and remove all persons in possession thereof and all personal property whatsoever situated upon the Facilities and place such personal property in storage in any warehouse or other suitable place located within the County of Contra Costa, California. In the event of such termination, the County agrees to surrender ininiediately possession of the Facilities, without let or hindrance, and to pay the Authority all damages recoverable at law that the Authority may incur by reason of default by the County, including, without limitation, any costs, loss or damage whatsoever arising out of, in connection with, or incident to any such ;e-entryupon the Facilities and removal and storage of such property by the Authority or its duly authorized agents in accordance with the provisions contained in the Facility Lease. Neither notice to pay ret or to deliver up possession of the Facilities givers pursuant to law nor any entry or re-envy by the Authority nor any proceeding iia D-13 unlawful detainer, or otherwise, brought by the Authority for the purpose of effecting such reentry or obtaining possession of the Facilities nor the appointment of a receiver upon initiative of the Authority to protect the Authority's interest under the Facility Lease will of itself operate to terminate the Facility Lease, and no termination of the Facility Lease on account of default by the County will be or become effective by operation of law or acts of the parties to the Facility Lease, or otherwise, unless arid until the Authority wit: have given written notice to the County of the election on the part of the Authority to terminate the Facility Lease, The County covenants and agrees that no surrender of the Facilities or of the remainder of the term of the Facility Lease or any termination of the Facility Lease will be valid in any manner or for any purpose whatsoever unless stated or accepted by the Authority by such written notice. (2) Without terminating the Facility Lease, (i)to collect each installment of rent as it becomes due and enforce any other terms or provision thereof to be kept or performed by the County, regardless of whether or not the County has abandoned the Facilities,or(ii)to exercise any and all rights of entry and reentry upon the Facilities. In the event the Authority does not elect to terminate the Facility Lease in the nianizner provided for in subparagraph (1) above, the County will remain liable and agrees to keep or perform all covenants and conditions contained in the Facility Lease to be kept or performed by the County and,if the Facilities are not re-let, to pay the full amount of the rent to the end of the terra of the Facility Lease or,in the event that the Facilities are re- to pay any deficiency in rent that results therefrom; and further agrees to pay said rent and/or rent deficiency punctually at the same throe and in the same manner as hereinabove provided for the payment of rent under the Facility Lease (without acceleration), notwithstanding the fact that the Aut=hority may have received in previous years or may receive thereafter in subsequent years rental in excess of the rental specified in the Fac=ility Lease, and iotwathstanding any entry or re-entry by the Authority or suit in unlawful detainer, or otherwise, brought by the Authority for the purpose of effecting such entry or re-entry or obtaining possession of the Facilities. Should the Authority elect to enter or reenter as provided in the Facility Lease, the County irrevocably appoints the Authority as the agent and attorney-in-fact of the County to re-let the Facilities,or any part thereof,from time to Larne,either iii t::e Authority's name or otherwise, upon such terms and conditions and for such use and period as the Authority may deem advisable, and to remove all persons in possession thereof and all personal property whatsoever situated upon the Facilities and to place such personal property in storage in any warehouse or other suitable place located in the County of Contra Costa, California, for(to the extent permitted by law)the account of and at the expense of the County, and the County (to the extent permitted by law) exempts and agrees to save harmless the Authority from any costs, loss or damage whatsoever arising out of, in connection with, or incident to any such re-entry upon and re-letting of the Facilities and removal and storage of such property by the Authority or its duly authorized agents in accordance with the provisions contained in the Facility Lease. The County agrees that the terms of the Facility Lease constitute full and sufficient notice of the right of the Authority to re-let the Facilities and to do all other acts to maintain or preserve the Facilities as the Authority deems necessary or desirable in the event of such re-entry without effecting a surrender of the Facility lease, and further agrees that no acts of the Authority in effecting such re-letting will constitute a surrender or termination of the Facility Lease irrespective of the use or the term for which such re-le ding is made or the terms and conditions of such re-letting, or otherwise, but that, on the contrary, in the event of such default by the County the right to terminate the Facility Lease will vest in the Authority to be effected in the sole and exclusive manner provided for in subparagraph(1) above. The County further waives the right to any rental obtained by the Authority in excess of the rental specified in the Facility Lease and conveys and releases such excess to the Authority as compensation to the Authority for its services in re-letting the Facilities or any part thereof. The County further agrees to the extent permitted by law to pay the Authority the reasonable cost of any alterations or additions to the Facilities necessary to place the Facilities in condition for re-letting immediately upon notice to the County of the completion and installation of such additions or alterations. If(1) the County's interest in the Facility Lease or any part thereof is assigned or transferred, either voluntarily or by operation of law or otherwise, without the written consent of ene Authority, as hereinafter provided for, or (2) the County or any assignee will file any petition or institute any proceeding under any act or acts, state or federal, dealing with or relating to the subject or subjects of bankruptcy or insolvency, or under any arniendmenst of such act or acts, either as a bankrupt or as an insolvent, or as a debtor, or in any similar capacity, wherein or whereby the County asks or seeks or prays to be adjudicated a bankrupt,or is to be discharged from any or all of the County's debts or obligations,or offers to the County's creditors to effect a composition or extension_of time to pay the County's debts or asks,seeks or prays for reorganization or to effect a plan of reorganization,or for a readjustment of the County's debts, or for any other similar relief,or if any such petition or any such proceedings of the same or similar kind or character be filed or be instituted or taken against the County, or if a receiver of the D-11 4 business or of the property or assets of the County will be appointed by any court,except a receiver appointed at the instance or request of the Authority, or if the County will make a general. or any assigisment for the benefit of the County's creditors, or if(3) the County will abandon or vacate the Facilities,then the County will be deemed to be in default under the Facility Lease. The Authority will it no event be in default in the performance of any of its obligations under the Facility Lease or unposed by any statute or rule of lava unless and until the Authority will have failed to perform such obligations within. 60 days or such additional time as is reasonably required to correct any such default after notice by the County to the Authority properly specifying wherein the Authority has failed to perform any such obligation. In the event of default by the Authority, the County will be entitled to pursue any remedy provided by law. In addition to the other remedies set forth in the Facility Lease,upon the occurrence of an event of default as described in the Facility Lease, the Authority will be entitled to proceed to protect and enforce the rights vested in the Authority by the Facility Lease or by law. The provisions of the Facility Lease and the duties of the County and of its trustees, officers or employees will be enforceable by the Authority by mandamus or other appropriate suit, actions or proceeding in any court of cor npetert jurisdiction. Without limiting the generality of the foregoing,the Authority will have the right to bring the following actions: (1) Accounti-zg. By action or suit in equity to require the County and its trustees, officers and employees and its assigns to account as the trustee of an express trust. (2) Irjuncti . By action or suit in equity to enjoin any acts or things which may be unlawful or in vio'atiorn of the rights of the Authority. (3) Mandamus. By mandamus or other snit, action or proceeding at law or in equity to enforce the Authority's rights against the County(anal its board,officers and employees)and to compel the County to perform and carry out its duties and obligations under the law and its covenants and agreements with the County as provided in the Facility Lease. Each and all of the remedies given to the Authority under the Facility Lease or by any law now or hereafter enacted are cumulative and the single or partial exercise of any right,power or privilege under the Facility Lease will not impair the right of the Authority to other or further exercise thereof or the exercise of any or all other rights, powers or privileges. The terse"re-let" or"re-letting" as used in tae Facility Lease will include, but not be limited to,re-letting by means of the operation by the Authority of the Facilities. If any statute or rule of law validly will limit the remedies giver-, to the Authority under the Facility Lease,the Authority nevertheless will be entitled to whatever remedies are allowable under any statute or rule of law. In the evert the Authority will prevail in any action brought to enforce any of the terms and provisions of the Facility Lease,the County agrees to pay a reasonable amount as and for attorney's fees incurred by the Authority in attempting to enforce any of the remedies available to the Authority under the Facility Lease, whether or not a lawsuit has been filed and whether or not any lawsuit culrninnates in a judgment. TRUST AGREEMENT The Trust Agreement provides for, among other things,the issuance, execution and delivery of the Bonds and sets fort: the terms thereof, the creation of certain of the funds and accounts described herein, certain covenants of the Authority, defines events of default and remedies therefor, and sets forth the rights and responsibilities of the Trustee. Certain provisions of the Trost Agreement setting forth the terms of the 1994 Series A Bonds, the redemption provisions thereof and the use of the proceeds of the 1999 Series A Bonds are set forth elsewhere in this Official Statement. See"'I HE 1999 SERIES A BONES." D-15 Pledge of Revenues All Revenues,any other amounts(including proceeds of the sale of the Bonds)held by the Trustee in any fund or account established under the Trust Agreement(other than. amounts on deposit in the Rebate Fund created pursuant to the'Trust Agreement) and any other amounts (excluding Additional Payments)received by the Authority in respect of the Facilities are irrevocably pledged and assigned to the payment of the interest and premium, if any, on and principal of the Bonds and Reserve Facility Costs as provided in the'frust Agreement and the suras due and payable by the Authority in connection with any Swaps, and the Revenues and other amounts pledged finder the Frust Agreement will not be used for any other purpose while any of the Bonds remain Outstanding or Reserve Facility Costs remain unpaid; provided, however, that out of the Revenues and other moneys there may be applied such sures for such purposes as are permitted under the Trust Agreement. This pledge will constitute a pledge of and charge and first lien upon the Revenues, all other amounts pledged under the 'Trust Agreement and all other moneys on deposit in the funds and accounts established :ander the Trust Agreement (excluding amounts on deposit in the Rebate Fund created pursuant to the Trust Agreement) for the payment of the interest on and principal of the Bonds and Reserve Facility Costs in accordance with the terms of the Trust Agreement and t.he Bonds and the sums due and payable by the Authority in connection with any Swaps. Creation of Funds and Accounts In order to carry out and effectuate the pledge, assignment, cliarge and lien contained in the Trust Agreement,the Trustee agrees to maintain in trust for Bondholders so long as any Bonds will be Outstanding Slander the Trust Agreement the following Funds and Accounts. All Revenues and all other amounts pledged and assigned under the'Trust Agreement will be accounted for through and held in trust in the Revenue Fund, and the Trustee will have no beneficial right or interest in any of the Revenues except only as provided in the Trust Agreement. Revenue Fund. All money in the Revenue Fund will be set aside by the Trustee in the following respective special accounts within the Revenue Fund in the following order of priority: (a) Interest Account. On or before each interest Payment Date, the Trustee will set aside from the Revenue Fund and deposit in the Interest Account that amount of money which is equal to the amount of interest becoming due and payable on all Outstanding Bonds on such Interest Payment mate. All mon=ey in the Interest Account will be used and withdrawn:by the'Trustee solely for the purpose of paying the interest on the Fonds and Swaps as it will become due and payable(including accrued interest on any Bonds purchased or redeemed prior to maturity)- (b) Principal Account. On or before each June 1, corna ening June 1, 1999, the"Trustee will set aside from the Revenue Fund and deposit in the Principal Account an amount of money equal to the amount of all sinking fund payments required to be made on such ,lune I into the respective sinking fund accounts for all Outstanding Terra Bonds and the principal amount of all Outstanding Serial Bonds maturing on such June 1. All money in the Principal Account will be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Bonds as it will become due and payable,whether at maturity or redemption, except that any money in any Sinking Account will be used and withdrawn by the Trustee only to purchase or to redeem or to pay Terni Bonds for which such Sinking Account was created. On each Principal Payment Date,following payment of principal of and 'interest on the Bonds,any excess amount on deposit in the Revenue Fund shall be transferred to the Reserve Fund to the extent necessary to increase the amount therein to the Reserve Fund Requirement or to pay any Reserve Facility Costs then due and owing and any excess shall then be returned to the County as an excess payment of Base Rental Payments. Reserve Fund. All money in the Reserve Fund will be deposited with,used and withdrawn by the Trustee solely for the purpose of furnding the Interest Account or the Principal Account, in that order, in the event of any deficiency in either of such accounts on a Principal Payment Date or Interest Payment Date, except that so long as the Authority is not in default under the'frust Agreement,any cash amounts in the Reserve Fund in excess of the D-16 _................. __ _ __ Reserve Fund Requirement will be withdrawn from.the Reserve Fund and transferred to the Revenue Fund on each Interest Payment Date, following the payment of any amounts due on such date or, if so directed by the Authority, deposited into a Project Fund during construction of any Project, The Trustee will -notify the County and each Bond Insurer if any withdrawal is made from the Reserve Fund for the purpose of funding the Interest Account or the Principal Account. If the Reserve Fund Requirement is satisfied by a Reserve Facility, the Trustee will draw on such Reserve Facility in accordance with its terms, in a timely manner, to the extent necessary to fund any such deficiency in the Interest Account or the Principal Account, The Authority shall repay solely from Revenues any draws under a Reserve Facility and any Reserve Facility Costs related thereto. Interest shall accrue and be payable on such draws and expenses from the date of payment by a Reserve Facility Provider at the rate specified in the agreement with respect to such Reserve Facility. Before any drawing may be made on a Reserve Facility,the Trustee shall'have withdrawn ala cash and investments in the Reserve Fund to replenish the Principal Account and the Interest Account. If any obligations are due and payable under the Reserve Facility, any new funds deposited into the Reserve Fund shall be used and withdrawn by the Trustee to pay such obligations, The pledge of the Revenues by the -Authority to secure fthe payment of the Reserve Facility Costs is on a basis that is subordinate to the pledge of Revenues to the Trustee for the Bonds. Amounts in respect of Reserve Facility Costs;paid to a Reserve Facility provider shall be credited first to expenses due,then to the interest due and then to principal due. As at.id to the siren t payments are made to a Reserve Facility provider on account of principal due,the coverage under the Reserve Facility will be increased by a like amount,subject to the terms of the Reserve Facility. Draws on all,Reserve Facilities on which there is available coverage shall be made on a pro-rata basis (calculated by reference to the coverage then available thereunder) after applying all available cash, and investments in the Reserve Fund. Payment of Reserve Facility Costs and reimbursement of araounts with respect to other Reserve Facilities shall be made on a pro-rata basis prior to the replenishment of any cash drawn from the Reserve Fund. If the Authority shall fail to pay any Reserve Facility Costs in accordance wird the above requirements, a Reserve Facility provider shall be entitled to -exercise any and all legal and equitable remedies available to it,including those provided under this Trust Agreement other than(i)acceleration of the maturity of the Bonds or(ii)remedies which would adversely affect Owners ofthe Bonds, The Authority may,with the consent of the Bond Insurer, satisfy the Reserve Fund Requirement at any time by the deposit with the Trustee for the credit of the Reserve Fund of a Reserve Facility, If the Authority causes a cash-funded Reserve Fund to be replaced with a Reserve Facility meeting the require ments set forth in the Trust Agreement, amounts on deposit in the Reserve Fund will, upon Written Request of the Authority to the Trustee, be transferred, subject to the receipt by the Authority of an Opinion of Counsel that such transfer will not cause the interest on the Bonds to be included in gross income for purposes of federal income taxation, to the County and applied for any lawful purpose. Application of Insurance Proceeds In faze event of any damage to or destruction of any par,of the Facilities covered by insurance,tile Authority, with the consent or at the direction of the Bond Insurers,will cause the proceeds of such insurance to be the Facilities, a d I utilized for the repair, reconstruction or replacement of the darnaged or destroyed portion o'. he r the Trustee will hold said proceeds in a fund established by the Trustee for such purpose separate and apart from all I - 2111 be appliedto the otmer funds designated the"Insurance and Condemnation Fund",to the end that such proceeds will 't was repair,reconstruction or replacement of the Facilities to at least the same good order,repair and condition as i in prior to the damage or destruction, insofar as the same may be accomplished by the use of said proceeds. The County will file a Certificate of the County with the Trustee that sufficient funds frons insurance proceeds or from any funds legally available to the County, or from any combination thereof, are available in the event it elects to repair, reconstruct or replace the Facilities. Unless such requirement is waived in writing by the Bond Insurers the Trustee will invest said proceeds in Permitted Investments pursuant to the Written Request of the County, as agent for the Authority under the Facility Lease, and withdrawals of said proceeds will be made firom time to time upon D-17 the filing with the Trustee of a written Request of the County, stating that the County has expended moneys or incurred liabilities m an amount equal to the amount therein stated for the purpose of the repair, reconstruction or replacement of the Facilities, and specifying the items for which such moneys were expended, or such liabilities were incurred, in reasonable detail. Any balance of such proceeds not required for such repair, reconstruction or replacement and the proceeds of use and occupancy insurance will be paid to the Trustee as Base Rental Payments and applied in the manner provided by the Trust Agreement, Alternatively, the County, with the consent or at the direction of the Bond Insurers, if the proceeds of such insurance together with any other moneys then available for such purpose are sufficient to prepay all, in case of damage or destruction it whole of the Facilities, or that portion, in the case of partial damage or destruction of the Facilities, of the Base Rental Payments and all other amounts relating to the damaged or destroyed portion of the Facilities, may elect not to repair, reconstruct or replace the damaged or destroyed portion of the Facilities and thereupon will cause said proceeds to be used for the redemption of Outstanding Bonds pursuant to the applicable provisions of the Trust Agreement, The County will not apply the proceeds of insurance as set forth ire the Tryst Agreement to redeem the Bonds in part due to damage or destruction of a :arfion of the Facilities unless the Base Rental Payments on the undamaged portion of the Facilities will be sufficient to pay the initially-schedulied principal and interest on the Bonds retraining unpaid after such redemption. Investments Subject to certain provisions of the Trust Agreement, all money held by the Trustee in any of the accounts or funds established pursuant thereto will be invested in Permitted Investments at the Written Request of the Authority or,if no instructions are received,in money market finds described in paragraph 3 of the definition of Permitted Investments. Such investments will,as nearly as practicable,mature on or before the dates on which such money is anticipated to be needed for disbursement under the Trost Agreement;provided,however,that moneys in the Reserve Fund will be invested n Permitted Investments with a term to maturity not exceeding 5 years. For purposes of this restriction,Permitted Investments containing a repurchase option or put option by the investor will be treated as having a mat:.�rity of no longer than such option. Ali interest or profits received on any money so invested in the 1999 Project Fund, the Reserve Fund and the 1999 Series A Capitalized Interest Account will be deposited in the 1999 Project Fund until completion of the 1999 Project and thereafter will be deposited first in the ?reserve Fund, to the extent necessary to make amounts on deposit in the Reserve Fund equal to the Reserve Fund Requirement,and then in the Revenue Fund. Additional Bands :lye Authority may at any time, with the consent of each Bond Insurer, issue Additional Bonds pursuant to a Supolemental Trust Agreement, payable from the Revenues as provided in the Trust Agreement and secured by a pledge of and charge and her, upon the Revenues as provided in the Trust Agreement equal to the pledge, charge and leen securing the Outstanding Bonds theretofore issued under the Trust Agreement, but only subject to the following specific conditions, which are made conditions precedent to the issuance of any such Additional Bonds: (a) The Authority will be in compliance with all agreements and covenants contained in the Trust Agreement. (b) 'r'he Supplemental Frust Agreement will require that the proceeds of the sale of such Additional Bonds will be applied to the acquisition(by purchase or lease)of facilities to be added to the Facilities or for the refunding of Outstanding Fonds. (c) The Supplemental Trust Agreement will provide, if necessary, that from such proceeds or other sources an amount will be deposited in the Reserve Fund so that following such deposit there will be on deposit in tape Reserve bund an amount at least equal to the Reserve Fund Requirement. (d) The aggregate principal amount of Bonds issued and at any time Outstanding under the Trust Agreement will not exceed any limit unposed by law, by the Trust Agreement or by any Supplemental frust Agreement. D-18 ............................... .. ......... ......... ......... ......... ......... ......... ......... _......_ _..... ....... ......... ......... .......... ............... ...._........_..... ......... __ __ (e) The Facility lease will have been amended, if necessary, so that the Base Rental Payments payable by the County thereunder in each Fiscal Year will at least equal Debt Service,including Debt Service on the Additional Bonds,in each Fiscal Year. (f) The Facility Lease will have been amended so as to lease to the County the project being financed from the proceeds of such Additional Bonds or facilities of comparable worth and econormic life and such facilities will be ready for immediate use and occupancy by the County, (g) if the proceeds of such Additional Bonds are to be used, in whole or in part, to finance construction on real property not described in the Facility Lease or the additional Facilities to be leased are not situated on property described in the Facility Lease, (1) a site lease will have been executed so as to lease to the Authority such additional real property; and (2) the Facility Lease will have been amended so as to lease to the County such additional real property. (h) To the extent practicable the principal payments will be,lune 1. Limitations on the Issuance of Obligations Payable from Revenues The Authority will not, so lung as any of the Bonds are Outstanding, issue any obligations or securities,however denominated,payable in whole or in part from Revenues except the following: (a) Bonds of any Series authorized pursuant to the Trust Agreement; (b) Agreements providing for a Reserve Facility; (c) Swaps payable on a parity with the Bonds and which will have, when executed, an equal lien and charge upon the Revenues,provided that the following conditions to the execution of such Swaps are satisfied: (1) The Authority shall be in compliance with all agreements and covenants contained in the Trust Agreement; (2) The Authority shall have filed with the Trustee a Certificate of the Authority certifying that the requirements of the Trust Agreement have been satisfied;and (3) The Authority shall have notified Moody's and Seel'of the proposed Swap and shall have determined that the execution of the Swap would not cause the reduction or withdrawal of the current rating from such rating agencies on the Bonds. (d) Obligations owing with respect to a Reserve Facility, including principal, interest and fees relating thereto; provided such obligations shall be payable on a subordinate basis to principal and interest on the Bonds. (e) Obligations which are junior and subordinate to the payment of the principal, premium, interest and reserve fund requirements for the Bonds and which subordinated obligations are payable as to principal, premium; interest and reserve fund requirements,if any,only out of Revenues after the prior payment of all amounts then required to be paid hereunder from Revenues for principal,premium,interest and reserve fund requirements for the Bonds, as the same become due and payable and at the times and in the manner as required in the Trust Agreement. Covenants of Authority The Authority covenants it will not make any pledge or assignment of or place any charge or lien upon the Revenues except as provided in the 'Trust Agreement, and will not issue any bonds, notes or obligations payable from the Revenues or secured by a pledge of or charge or lien upon the Revenues except as provided in tine Trust Agreement, D-19 The Authority covenants it will promptly collect all seas and charges due for the occupancy or use of the acilities as the same become due, and will promptly and vigorously enforce its rights against any tenant or other person who does not pay such rents or charges as they become slue. The Authority will at all times maintain and vigorously enforce all of its rights under the Facilities Lease. Defaults and Remedies Events of Default Events which constitute an "event of default" under the T rust Agreement include: (a) if default will be grade by the Authority in the dare aind punctual payr ent of the interest on any Bond when and as the sauce will become due and payable; (b) if default will be made by the Authority in the due and punctual payment of the principal of or redemptions premium, if any, on any Bond when and as the same will become due and payable, tivhether at maturity as therein expressed or by proceedings for redemption; (c) if default wiTa be grade by the Authority in the peemr saance of any of the other agreements or covenants required in the Trust Agreement to be performed by the Authority, and such default will have continued for a period of 60 days or such additional time(with respect to agreements or covenants that cannot be corrected or performed within such 60 day period but the correction of which is being diligently pursued by the Authority) as is reasonably required to correct any such default after the Authority will have been given notice in writing of such default by the Trustee or by the applicable Bond Insurer; (d) if the Authority will file a petition or answer seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein,or if a court of competent jurisdiction will approve a petition filed with or without the consent of the Authority seeking arrangement or reorganization under the federal,ban1 ruptcy laws or any otherapplicable law of the United.States of America or any state therein, or if under the provisions of any other law for t ie relief or aid of debtors any court of competent jurisdiction will assume custody or control of the Authority or of the whole or any substantial part of its property;or (e) if ani Evert of Default has occurred under the F acilAy lease; Acceleration ref fonds. In each and every case during the continuance of an Event of Default the Trustee may,with the consent of each Bond Insurer and upon the written request of the Bondholders of not less than a majority in aggregate principal amount of the Bonds then Outstanding and with the prior written consent of each Bond Insurer,will,by notice in writing to tree A.stliority,declare the principal of all Bonds theca Outstanding and the interest accrued thereon to be daze and payable immediately, and capon any such declaration the same will become due and payable, anything contained in the'Trust Agreement or in the Bonds to the contrary r•otwitlistan ing. The Trustee will promptly notify all Bondholders by first class-sail of any such event of default which is continuing of which a Responsible Officer has actual knowledge or written notice. T his provision, however, is subject to the condition that if at any time after the principal 01 the Bonds then Outstanding will have been so declared due and payable and before any judgment or decree for the payment of the money due will have been obtained or entered the Authority will deposit with. the 'Trustee a sura sufficient to pay all matured interest on all the Bonds and ail, pri.�rcipal of the Bonds matured prior to such declaration,with interest at the rate borne by such Bonds on such overdue interest and principal, and the reasonable fees and expenses of the Trustee and each Bond Insurer, and any and all other defaults known to the Trustee loth er than in the payment of interest on and principal of the Bonds due and payable solely by reason of such declaration' will have been rnade good or cured to the satisfaction of the Trustee and each Bond Ins'.irer or provision dee-sed by the Trustee and by each Bond Insurer to be adequate will brave been made therefor, then and in every such case the Trustee or the Bondholders of riot less than a majority in aggregate principal amount of Bonds then Outstanding,by written,notice to the Authority and to the Trustee with the written consent or at the direction of each Bone.Insurer, may on behalf of the Bondholders of all the Bonds then Outstanding rescind and annul such declaration and its D-20 consequences; but no such rescission and anrnuhreent will extend to or will affect any subsequent default or will impair or exhaust any right or power consequent thereon. No acceleration of the Bonds (or annulment thereof) t nay be rnnade without obtaining the prior written consent of each Bond Insurer. In the event the maturity of the Bonds is accelerated,each Bond Insurer may elect, in its sole discretion, to pay accelerated principal and interest accrued or accreted, as applicable, on such principal to the date of acceleration(to the extent unpaid by the Authority)and the Trustee will be required to accept such.amounts. Upon payment of such accelerated principal and interest accrued to the acceleration date as provided above, such respective Bond Insurer's obligations under the corresponding Bond Insurance policy will be fully discharged. Application of Funds Upon Acceleration. All moneys in the accounts and finds held pursuant to the Trus;: Agreement upon the date of the declaration of acceleration by the Trustee as provided in the Trust Agreement and all Revenues (other than Revenues on deposit in the Rebate Fund) thereafter received by the Authority under the Trust Agreement will be transmitted to the Trustee and will be applied by the Trustee in the following,order— Fir st,to the payment of the reasonable fees,costs and expanses of the Trustee in providing for the declaration of such evert of default and carrying out its duties under this Agreement, including reasonable cornpeansation to their accountants and counsel together with: interest on any amounts advanced as provided in the Trust Agreement and thereafter to the payment of the reasonable costs and expenses of the Bondholders, if any, in carrying out the provisions of this Article,including reasonable compensation to their accountants and counsel; Sgcojid, upon presentation of the several Bonds, and the stamping thereon of the amount of the payment f only partially paid or upon the surrender thereof if frilly paid, to the payment of the,whole amount then owing and unpaid upon the Bonds for interest and principal, with (to the extent permitted by law) interest on the overdue interest and principal at the rate borne by such Bonds, and in case such money will be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, then:to the payment of ssach interest, principal and(to the extent permitted by law) interest on overdue interest and principal without preference or priority among such interest, principal and interest on overdue interest and principal ratably to the aggregate of such interest, principal and interest on overdue interest and principal;and `I°hir ,to the payment of all amounts payable to each Bond Insurer. Limitation arra Bondholders' night to Sue. No Bondholder of any Bond issued under the Trust Agreement will have the right to institute any suit, action or proceeding at law or equity, for any rernedy under or upon the Trust Agreement,unless(a)such Bondholder will have obtained the prior written consent of the applicable Bond Insurer and will have previously given to the Trustee written notice of the occurrence of are event of default as defined in the Trust Agreement; (b) the Bondholders of at least a majority in aggregate principal amount of all the Bonds then Outstanding will have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its own name and the Bond Insurer, if any, will have consented to such request; (c) said Bondholders will have tendered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee will have refused or omitted to comply with such request for a period of 60 days after such request will have been received by, and said tender of indemnity will have been rxnade to,the Trustee. Branch Insurance. The Bond Insurer,acting alone,shall have the right to direct all remedies in the event of a default. The Bond Insurer shall be recognized as the registered owner of each bond which it insures for the purposes of exercising all rights and privileges available to bondholders. For bonds which it insures, the Bond Insurer shall have the right to institute any suit, action, or proceeding at law or in equity,,ender the same terns as a bondholder in accordance with applicable provisions of the governing documents. Other than the usual redemption provisions,any acceleration of principal payments must be subject to the Bond Insurer's prior written consent. D-21 Amendment of Documents Trust Agreement, The Trust Agreement and the rights and obligations of the Authority and of the Bondholders may be amended at any time by a Supplemental Trust Agreement which will become binding when the written consents of the Bond Insurers and the Bondholders of a majority in aggregate principal amount of the Bonds thein Outstanding, exclusive of Bonds disqualified as provided in the Trust Agreement, are filed with the Trustees provided that if such modification or amendment will, by its terms, not take effect so long as any Bonds of any particular maturity or Series remain Outstanding,the consent of the Owners of such Bonds will not be required and such Bonds will not be deemed to be Outstanding for the purpose of any calculation of Bonds Outstanding under the Trust Agreement. No such amendment will (l) extend the maturity of or reduce the interest rate on or amount of interest on or,principal of or redemption premium, if any, on any Bond without the express written consent of the applicable Bond Insurer and the Bondholder of such Bond,or(2)permit the creation by the Authority of any pledge of or charge or lien upon:the Revenues as provided in the Trust Agreement superior to or on a parity with the pledge, charge and liencreated by the'Trust Agreement for the benefit of the Bonds and Swaps,or(3)reduce the percentage of Bonds required for the written consent to any such amendment, or (4) modify any rights or obligations of the Trustee,the Authority,or the County without their prior written assert thereto,respectively, The Trust Agreement and the rights and obligations of the Authority and of the Bondholders may also be amended at any time by a Supplemental Tryst Agreement which will become binding upon adoption, with the consent of each. Bond Insurer, but without the consent of any Bondholders, for any purpose that will not materially adversely affect the interests of the Bondholders,including(without limitation)for any one or more of the following purposes (a) to add to the agreements and covenants required in the Trust Agreement to be performed by the Authority other agreements and covenants thereafter to be performed by the Authority, or to s,,srrender any right or power reserved in the'Trust Agreement to or conferred in the Trust Agreement on the Authority; (b) to snake suchh provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained in the Trust Agreement or in regard to questions arising under tine Trust Agreement which the Authority may deem desirable or necessary; (e) to provide for the issuance of any Additional Bonds and to provide the terms of such Additional Bonds, subject to the conditions and upon compliance with the procedure set forth in the Trust Agreement(which will be deemed not to adversely affect Bondholders); (d) to add to the agreements and covenants required in the Trust Agreement,such agreements and covenants as may be necessary to qualify the Trust Agreement under the Trust Indenture Act of 1939;or (e) to add any provisions required by the provider of a surety bond, insurance policy or letter of credit under the Trust Agreement. Any Supplemental Trust Agreement entered into pursuant to this paragraph will not,, for purposes of this paragraph,materia.ly adversely affect the interest of the Bondholders so long as(w)all Bonds are insured by a Bons Insurance Policy or Variable Rate Bonds, (x) each Bond Insurer will have given its written consent to such Supplemental'Trust Agreement,(y)each Bond Insurer will at the time of such consent be rated in the highest Rating Category by S&P and Moody's and(z) if there are Variable Rate Bonds, the Supplemental Trust Agreement shall not become effective until notice thereof shall have been given to Bondholders and 30 days shall have passed during which time Owners of the Variable Rate Bonds shall have had the opportunity to tender their Bonds for purchase. Facility Lease. The Authority will not supplement, amend,modify or terminate any of the teras of the Facility Lease, or consent to any such supplement,amendment,modification or termination,without the prior written consent of the Trustee and each Bond Insurer. The Trustee will give such written consent if such supplement, amendment, modification or termination (a) will not materially adversely affect the interests of the Bondholders or result in any material impairment of the security given for the payment of the Bonds(provided that such supplement, amendment or modification will not be deemed to have such adverse effect or to cause such D-22 material impairment solely by reason of providing for the payment of Additional Bonds as required by the rust Agreement or substitution of real property pursuant to the Facility Lease), (b) is to add to the agreements, conditions, covenants and terms required to be observed or performed thereunder by any party thereto, or to surrender any right or power therein reserved to the Authority or the County, (c) is to cure, correct or supplement any ambiguous or defective provision contained therein, (d) is to accommodate any substitution in accordance with the Facility Lease, (e) is to modify the legal description of the Facilities to conform to the requirements of title insurance or otherwise to add or delete property descriptions to reflect accurately the description of the parcels intended or preferred to be included therein, or substituted for the Facilities pursuant to the provision of the Facility Lease, or(f) if the Trustee first obtains the written consent of the Bondholders of a majority in principal amount of the Bonds then Outstanding to such supplement, amendment, modification or termination; rovide , that no such supplement,amendment,modification or termination will reduce the amount of Base Rental Payments to be made to the Authority or the Trustee by the County pursuant to the Facility Lease to an amo-- t less than the scheduled principal and interest payment on the Outstanding Bonds, or extend the time for making such payments, or permit the creation of any lien prior to or on a parity with the lien created by the Trust Agreement on the Base Dental Payments(except as expressly provided in the Facility Lease), in each case without the written consent of all of the Bondholders of the Fonds then Outstanding. Any supplement, amendment or modification entered into pursuant to clause (a) of the immediately preceding paragraph will not, for purposes of the Trust Agreement,be deemed to materially adversely affect t<7e interest of the Bondholders or result in any material impairment of the security given for the payment of the Bonds so long as(i)all Bonds are insured by a Bond Insurance policy, (ii) each Bond Insurer will have given its written consent to such supplement,amendment or modification, and(iii) each Bond Insurer will at the time of such consent be rated in the highest Rating Category by S&P and Moody's. Discharge of Trust Agreement If the Authority will pay or cause to be paid or there will otherwise be paid to the Bondholders of all Outstanding Bonds the interest thereon and principal thereof and redemption premiums, if any, thereon at the times and in the manner stipulated in the 'Trust Agreement and therein, and the Authority will pay in full all other anounts due under the Trust Agreement and under the Facility Lease, then the Bondholders of such Bonds will cease to be entitled to the pledge of and charge and lien upon the Revenues as provided in the Trust Agreement, and all agreements, covenants and other obligations of the Authority to the Bondholders of such Bonds under the Trust Agreemeait will thereupon cease, terminate and become void and be discharged and satisfied. In such event, the Trustee will execute and deliver to the Authority all such instruments as may be necessary or desirable to evidence such discharge and satisfaction., the Trustee will pay over or deliver to the Audhority all money or securities held by it pursuant to the Trust Agreement which are not required for the payment of the interest on and principal of and redemption premiums, if any, on such Bonds and for the payment of all other amounts due under the Trust Agreement and under the Facility Lease. Any Outstanding Bonds will prior to the maturity date or redemption date thereof be deemed to have been paid within the meaning of and with the effect expressed in the Frust Agreement in case any of such Bonds are to be redeemed on any date prior to their maturity date, the Authority will have given to the Trustee in form satisfactory to it irrevocable instructions to provide notice in accordance with the Trust Agreement, (2) there will have been deposited with the Trustee (A)money in an amount which will be sufficient and/or(B) noncallable Government Securities, the interest on and principal of which when paid will provide money which., together with the money, if any, deposited with the Trustee at the same time, will be sufficient, in the opinion of an Independent Certified-Public Accountant,to pay when due the interest to become due on such Bonds on and prior to the maturity date or redemption date thereof,as the case may be, and the principal of and redemption premiums, if any, on such Bonds, ar.d(3) in the event such Bonds are not by their terms snub ect to redemption within the next succeeding 60 days, the Authority will have given the Trustee in form satisfactory to it irrevocable instructions to mail as soon as practicable, a notice to the Bondholders of such Bonds that the deposit required by clause (2) above has been made with the 'Trustee and that such Bonds are deemed to have been paid in accordance with the Trust Agreement and stating the maturity date or redemption date upon which money is to be available for the payment of the principal of and redemption premiums, if any,on such Bonds. D-23 In the event of an advance refunding (i) the Authority will cause to be delivered, on the deposit date and upon any reinvestment of the defeasance amount, a report of an independent firm of nationally recognized certified public accountants("Accountants99)verifying the sufficiency of the escrow established to pay the Bonds in full on the maturity date or redemption date ("Verification"), (ii) the escrow agreement will provide that no (A) substitution of a defeasance obligation will be permitted except with another defeasance obligation and upon delivery of a new Verification and (B) reinvestment of a defeasance obligation will be permitted except as contemplated by the original Verification or upon_delivery of a new Verification, and(iii)there will be delivered an Opinion of Bond Counsel to the effect that the Bonds are no longer"Outstanding"under the Trust Agreement; each Verification and defeasance opinion will be addressed to the Authority, each applicable Bond Insurer and the Trustee. In the event a forward purchase agreement is to be used in connection with such escrow such agreement will be subject to the approval of each Bond Insurer. Notwithstanding anything in the Trust Agreement to the contrary, in the event that the principal and/or interest due on the Bonds will be paid by a Bond Insurer pursuant to its Bond Insurance Policy, the Bonds will remain Outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid by the Authority, acid the assignment and pledge of the Revenues and all covenants, agreements and other obligations of the Authority to the Owners will continue to exist and will run to the benefit of the Bond Insurer, and the Bored Insurer will be subrogated to the rights of such Owners. The'Trustee U.S. Bank Trust National Association will serve as the initial Trustee for the Bonds for the purpose of receiving all money which the Authority is rewired to deposit with the Trustee under the Trust Agreernent and for the purpose of allocating, applying and using such money as provided in the Trust Agreement and for the purpose of paying the interest on and principal of and redemption premium s, if any, on the Bonds presented for payment,with the rights and obligations provided in the'Frust Agreement. The Authority agrees that it will at all times maintain a Trustee having a principal office in California. The Authority,unless there exists any Event of Default as defined in the'Frust Agreement,may at any time and, at the request of a Bond Insurer for any breach of the trusts set forth in the Trust Agreement, will remove the Trustee initially appointed and any successor thereto and may appoint a successor or successors thereto by an instrument in writing; :�atz. vided,that any such successor will`ve a bards,banking institution, or trust company, having(or whose parent holding company has)a combined capital(exclusive of borrowed capital) and surplus of at least$50,000,000 and subject to supervision or examination:by federal or state authority and acceptable to the Bond Insurer. if such bank, banking institution, or trust company publishes a report of condition at least annually, pursuant to law or to the rea-uiremernts of any supervising or examining authority above referred to, then for the purpose of the 'Frust Agreement the combined capital and surplus of such bank, banking institution, or trust company will be deemed to be its combined capital and surplus as set forth in its most recent report of condition so Fubli shed. The s rustee may at any time resign by giving written notice of such resignation to the Authority and the Bond Insurer, and by mailing by first class trail to the Bondholders notice of such resignation. Upon receiving such notice of resignation, the Authority will promptly appoint a successor Trustee by an instrument in writing. Any removal or resignation of a Trustee and appointment of a successor Trustee will become effective only upon the acceptance of appointment by the successor Trustee. The successor Trustee will send notice of its acceptance by first class mail to the Bondholders. If, within 30 days after notice of the removal or resignation of the Trustee no successor Trustee will have been appointed and will have accepted such appointment, the removed or resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, which court may thereupon, after such notice, if any, as it may deem proper and prescribe and as may be required by law, appoint a successor'Trustee having the qualifications required by the Trust Agreement. Each Bond insurer will have the right to remove the Trustee without cause following any Event of Default or any draw on the Reserve Fund. D-24 ...._...................................................................... ..._. _ __ 1111..... ......... ............. ........ ........ ........ ......... ......... ......... .......... . ....... _. ................_ ......... ... ......1.111.11,1111_ __ __ APPENDIX E PROPOSED FORM OF BOND COUNSEL OPINION sclosing date] County of Contra Costa Public Financing Authority Mardnez,California County of Contra Costa Public Financing Authority Lease Revenue Bonds(Refunding and Various Capital Projects), 1999 Series A (Final Opinion) Ladies and Gentlemen: We have acted as bond counsel in connection with the issuance by the County of Contra Costa Public Financing Authority(the "Authority") of$74,685,000 aggregate principal amount of County of Contra Costa Public Fi=nancing Authority Lease Revenue Bonds(Refunding and Various Capital Projects), 1999 Series A(the"Series 1999 Bonds"), issued pursuant to Article 4 of Chapter 5 of Division 7 of Title 1 of the California government Code and a Trust Agreement, dated as of February 1, 1999, between the Authority and U.S. Bank Trust National Association, as Trustee (the "'Trust Agreement"). Capitalized terms not otherwise defined herein shall have the meanings ascribed (hereto in the Trust Agreement. In such connection,we have reviewed the Trust Agreement, the Facility Lease,the Tax Certificate, opinions of counsel to the Authority,the County and the Trustee,certificates of the Authority,the County,the Trustee and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. Certain agreements, requirements and procedures contained or referred to in the Trust Agreement, the Facility Lease, the Tax Certificate and other relevant documents may be changed and certain actions (including, without limitation,defeasance of the Bonds)may be taken or omitted under the circumstances and subject to the teres and conditions set forffi in such documents. leo o;�inion is expressed herein as to any.Bond or the interest thereon if any such change occurs or action is taken or omitted upon the advice or approval of counsel other than ourselves. The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions maybe affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine,or to inform any person,whether any such actions are taken or omitted or events do occur,and we disclaim any obligation to update this opinion. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties,other than the Authority and. the County. We have not undertaken to verify independently, and have assumed, the accuracy of the factual matters represented., warranted or certified in the documents, and of the legal conclusions contained in the opinions,referred to in the second paragraph hereof. Furthermore,we have assumed compliance with all covenants and agreements contained in the Trust Agreement,the Facility Lease and the Tax Certificate,including(without limitation) covenants and agreements compliance with which is necessary to assure that future actions,omissions or events will not cause interest or.the Series 1999 Bonds to be included in gross income for federal income tax purposes, In addition,we call attention to the fact that the rights and obligations under the Series 1999 Bonds, the'Frust Agreement,the Facility.Lease and the'Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, reorganization, arrangernent, fraudulent conveyance, moratorium and other laws relating to or affecting creditors'rights,to the application of equitable principles,to the exercise of judicial discretion in appropriate cases,and E-1 to the limitations on legal remedies against joint powers agencies and counties in the State of California. We express no opinion with respect to any indemnification,contribution,penalty,choice of law,choice of forum or waiver provisions contained in the foregoing documents,nor do we express any opinion with,respect to the state or quality of title to, or interest in, any of the real or personal property described in or subject to the lien of the Facility Lease or the Trust Agreement or the accuracy or sufficiency of the description of any such property contained therein. Finally, we undertake no responsibility for the accuracy,completeness or fairness of the official statement or other offering material relating to the Series 1999 Bonds and express no opinion with respect thereto. Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: 1. The Series 1999 Bonds constitute the valid and binding limited obligations of the Authority. 2. The Trust Agreement has been duly executed and delivered by the Authority and,assuaging due authorization, execution and delivery by the Trustee, constitutes a valid and binding obligation of the Authority. The'frust Agreement creates a valid pledge, to secure the payment of the principal of and interest on the Series 1999 Bonds, of the Revenues, any other amounts (including proceeds of the sale of the Series 1999 Bonds) held by the Trustee in any of the funds and accounts established pursuant to the Trust Agreement(other than amounts on deposit it the Rebate Fund)and any other amounts(other than Additional Payments)received by the Authority with respect to the Facilities, subject to the provisions of the Trust Agreem.ent permitting the application thereof for the purposes and on the terms and conditions set forth in the Trust Agreement. 3, The Facility Lease has been executed and delivered by, and constitutes the valid and binding obligation of,the County and the Authority. 4. The Series 1.999 Bonds are not a debt, liability or obligation of the County or of any of the public agencies that are parties to the joint powers agreement creating the Authority.Neither the faith and credit nor the taxing powers of the County,the State of California or any political subdivision thereof is pledged to the payment of the principal of,or redemption premium,if any,or interest on,the Series 1999 Bonds. S. Interest on the Series 1999 Bonds is excluded from gross income for federal income tax purposes under Section '103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. Interest on the Series 1999 Bonds is not a specific preference iters for purposes of the federal individual or corporate alternative minimum taxes, although we observe that interest on the Series 1999 Bonds is included in adjusted current earnings when calculating corporate alternative minimum taxable income. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on,the Series 1999 Bonds. Faitlifi:lly yours, ORRICK,HERRINGTON&SUTCLIFFE LLP per E-2 _...................... _...._............................................... __ ................................................................................................._ _ - .. _. ......... ..............._...... _ APPENDIX F PROPOSED FORM OF CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement (the "Disclosure Agreement") is executed and delivered by the COUNTY OF CONTRA COSTA, California (tire "County"), and Q.J.S. BANK TRUST NATIONAL ASSOCIATION, as trustee (the "Trustee") in connection with the issuance by the County of Contra Costa Public Financing Authority(the"Authority")of$ Lease Revenue Bonds(Refunding and Various Capital Projects), 1999 Series A (the "Bonds"). The Bonds are being issued pursuant to a Trust Agreement dated as of February 1, 1999,between the Authority and the Trustee (the "Frust Agreement'). Pursuant to the Facility Lease (Various Capital Facilities), dated as of February 1, 1999 (the "Facilities Lease"), the County has covenanted to comply with its obligations hereunder and to assume all obligations for Continuing Disclosure with respect to the Bonds. 'I`he County,the Trustee and the Dissemination Agent covenant and agree as follows: SECTION 1. Purnoseoof. the Disclosure Agreement. :his Disclosure Agreement is being executed and delivered by the County, the'Trustee and the Dissemination Agent for the benefit of the Holders and Beneficial Owners of the Bonds and ia*n order to assist the Participating Underwriters in complying with S.E.C.Rule 15c2-12(b)(5). SECTION IE3N 2. DffDi . . In addition to the definitions set forth in. the Trust Agreement, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section,the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the County pursuant to, and as described in, sections 3 and 4 of this Disclosure Agreement. "Beneficial Owner"shall mean any person which has or shares the power,directly or indirectly,to make investznient decisions concerning the ownership of any Bonds (including persons holding Bonds through nominees,depositories or other intermediaries). "Disclosure Representative"shall mean the County Administrator,Director, Capital Facilities and Debt Management or his or her designee,or such other officer or employee as the County shall designate in writing to the Trustee from time to time. "Dissemination Agent"shall mean the County,or any successor Dissemination Agent,which may be designated in writing by the County and which has fled with the Trustee a written acceptance of such designation. "Listed Events"shall rearm any of the events listed in Section 5(a)of this Disclosure Agreement. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The National Repositories approved by the Securities and Exchange Commission as of the date of this Agreement are set forth in Exhibit B. "Participating Underwriter" shall mean any of the original underwriters of t:°ne Bonds required to comply with the Reale in connection with offering of the Bonds. "Repository"shall mean each National Repository and the State Repository. "Rule"shall znearn Rule 15c2-12(b)(5)adopted by the Securities and Exchange Corm-nissiorn Hander the Securities Exchange Act of 1934,as the same may be amended from time to tian:e. "State"shall mean the State of California. F-1 "State Repository" shall mean any public or private repository or entity designated by the State as the state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Agreement,there is no State Repository. SECTION 3. provision of Annual Regorts. (a) The County shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the County's fiscal year(presently June 30), commencing with the report for the I998-1999 Fiscal Year, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate docurnents comprising a package, and:-nay include by reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the County may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by flat date. If the County's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(f). (b) Not later than fifteen(15) Business Days prior to the date specified in subsection(a) for providing the Annual Report to Repositories, the County shall provide the Annual Report to the Dissemination Agent and the 'Trustee (if the Trustee is not the Dissemination Agent); provided, however, that the County may distribute the Annual Report itself after providing written notice to the Trustee and the Dissemination Agent. If by such date, the "Trustee has not received a copy of the Annual Report, the Trustee shall contact the County to determine if the County is in compliance with the first sentence of this subsection(b). (c) If the Trustee is unable to verify that an Annual Report has been provided to Repositories by the date required in subsection(a), the Trustee shall send a notice to each Repository, the Municipal Securities Rulemaking Board and the State Repository,if any,in substantially the forth attached as Exhibit A. (d) The Dissemination Agent shall: (i) deter-nine each year prior to the date for providing the Annual Report the name and address of each National Repository and the State Repository,if any;and (ii) to the extent the County has provided the Annual Report to the Dissemination Agent, file a report with the County and (if the Dissemination Agent is not the Trustee) the Trustee certifying that free Annual Report has been provided pursuant to this Disclosure Agreement,stating the date it was provided and listing all the Repositories to which it was provided. SECTION 4. Content of Annual Regorts. The County's Annual Report shall contain or include by reference the following: 1, The audited financial statements of the County for the prior fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Doverental Accounting Standards Board, If the County's audited financial staternents are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain una edited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited firiancial statements shall be filed in the same irianner as the Annual Report when they become available. 2. Numerical and tabular information for the immediately preceding Fiscal Year of the type contained in the Official Statement under the following captions: (a) "SECURITY AND SOURCES OF PAYMENT FOR THE 1999 SERIES A BONDS—Base Rental Payments"(report changes in DEBT SERVICE SCHEDULE); F-2 ...._................... .. ......... ......... ......... ......... ......... ......... ................................ ............................... .... ........ . ........ .._..._.. ....... ....... .........._. _,.. ............... ............ ..........................._..... .. _........... .................................. ..._...... (b) "APPENDIX B --- COUNTY FINANCIAL INFORMATION — 1996-97 and 1997-98 County General Fund Budgets"(update table entitled GENERAL FUND BUDGETS); (c) "APPENDIX B — COUNTY FINANCIAL INFORMATION — The Contra Costa County Investment Pool"(update various tables); (d) "APPENDIX B -- COUNTY FINANCIAL INFORMATION -- Ad Valorem Property Taxes" (update table entitled SUMMARY OF ASSESSED VALUATIONS ANIS AD VALOREM PROPERTY TAXATION); (e) "APPENDIX B — COUNTY FINANCIAL INFORMATION — Accounting Policies,Reports and Audits"(update table entitled GENERAL FUND BALANCE SHEET); (f) "APPENDIX B — COUNTY FINANCIAL INFORMATION --- Accounting Policies, Deports and Audits" (update table entitled SCHEDULE OF REVENUES, EXPENDITTLiRES AND CHANGES IN FUND BALANCES); (g) "APPENDIX B — COUNTY FINANCIAL INFORMATION —Long Term Obligations--General Obligation.(Debt"and"--Lease Obligations"(update financial information). Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the County or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. if the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The County shall clearly identify each such other document so included by reference. SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the County shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds,if material: 1. principal and interest payment delinquencies; 1 non-payment related defaults; 3. modifications to rights of Holders of Bonds; 4. optional,contingent or unscheduled bond calls; 5. defeasances; 6. rating changes; 7. adverse tax opinions or events adversely affecting the tax-exempt status of the Bonds; g. unscheduled draws on the debt service reserves reflecting financial difficulties; 9. unscheduled draws on credit enhancements reflecting financial difficulties; 103 substitution of credit or liquidity providers,or their failure to perform;and 11. release,substitution or sale of property securing repayment of the Bonds. (b) The Trustee shall, promptly upon obtaining actual knowledge at its principal corporate trust office as specified in Section 12 hereof of the occurrence of any of the Listed Events, contact the Disclosure F-3 Representative, inform,such person of the event, and request that the County promptly notify the Trustee in writing whether or not to report the event pursuant to subsection(f r; provided that, failure by the 'Trustee to so notify the Disclosure Representative and make such request shall not relieve the County of its duty to report Listed Events as required by this Section 5. (c) Whenever the County obtains knowledge of the occurrence of a Listed Event, whether because of a notice from the Trustee pursuant to subsection(b) or otherwise, the County shall as soon as possible determine if such event would be material under applicable federal securities laws. (d) If the County has determined that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the County shall promptly notify the Trustee in writing. Such notice shalt instruct the Trustee to report the occurrence p-aursuant to subsection(f). (e) If in respor se to a request under subsection (b), the County determines that the Listed Event would not be material under applicable federal securities taws, the County shall so notify the 'Trustee in writing and instruct the Trustee not to report the occurrence. (f) If the Trustee has been insftucted by the County to report the occurrence of a Listed Event, the "Trustee shall file a notice of such occurrence with the Municipal Securities Rulemaking Board and the State Repository. :Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(4) and (5) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Bonds varsuant to the Trust Agreement, (g) The 'Trustee may conclusively rely on an opinion of counsel that the County's instructions to the Trusteesunder this Section 5 comply with the requirements of the yule. SECTION 6. Terrninati�n of IZ or urtin ,ligation. Each pasty's obligations under this Disclosure Agsee hent shalt terminate upon the legal defeasance, prior redemption or payment in hull of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the County shall give notice of such termination in the same manner as for a Listed Event under Section 5(f), SECTION 7. Dissemination Aizent, The County may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Agent,with or without appointing a successor Dissemination Agent.The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the.County pursuant to this Disclosure Agreement. If at any time there is not any other designated Dissemination Agent, the County shall be the Dissemination agent. SEC TION 8. Amendment: Waiver. 1Notwitlustau ding any other provision of this Disclosure Agreement, the County, the Trustee and the Dissemination Agent may amend this Disclosure Agreement(and the Trustee and the Dissemination Agent shall agree to any amendment so requested by the County provided such amendment does not impose any greater duties, nor risk of liability, on the Trustee or the Disseminatior Agent, as the case may be), and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or 5(a), it may only be mane in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or stat<.,s of an obligated person with respect to the Bonds, or the type of business conducted; (b) The undertaking,as amended or taking into account such waiver,would,in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amnendments or interpretations of the Rule, as well as any change in circumstances;and E_4 (c) The amendment or waiver either(i)is approved by the Holders of the Bonds in the same manner as provided it the Trust Agreement for amendments to the Trust Agreement with.the consent of Holders, or (ii) does not, in the opinion of the Trustee or nationally recognized bond counsel, materially iurlpair the interests of the Holders or Beneficial Owners of the Bonds, In the event of any amendment or waiver of a provision of this Disclosure Agreem- etrt, the County shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type(or,in the case of a change of accounting principles, on,the presentation) of financial information or operating data being presented by the County. In addition, if the amendment relates to the acco,.w-ting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the sante manner as for a Listed Event under Section 5(f),and(iii)the Annual Report for the year in which the change is made should present a comparison(in narrative form and also,if feasible,in quantitative forni)between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. SECTION 9, Additional hnf�orrnatji n. Nothing in this Disclosure Agreement shall be deemed to prevent the County from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event,in addition to that which is required by this Disclosure Agreement, If the County chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the County shall have no obligation under this Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 10. Defgult. In the event of a failure of the County, the Trustee or the Dissemination Agent to comply with any provision of this Disclosure Agreement, the Trustee (and, at the written request of any Participating Underwriter or the Holders of at least 25% aggregate principal amount of Outstanding Bonds, shall,but only to the extent indemnified to its satisfaction), or any Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the County, the Trustee or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement- A default under this Disclosure Agreement shall not be deemed art. Event of Default under the Trust Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the County,the Trustee and the Dissemination Agent to comply with this Disclosure Agreement shall be an act-Ion to compel performance. SECTIO 11. Duties. Ira munities and Liabilities of Trustee and Dissemination Agent. The Dissemination Agent and the Trustee shall have only such duties as are specifically set forth in this Disclosure Agreement, and the County, to the extent permitted by law, agrees to indemnify and save the Dissemination Agent and the Trustee, their officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses(including attorneys fees)of defending against any claim of liability,but excluding liabilities due to the D-issernination Agent's or Trustee's respective negligence or willful misconduct. The obligations of the County under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. SECTION, 12. Notifies. Any notices or conimunications to or among any of the parties to this Disclosure Agreement may be given as follows: To the County: County of Contra Costa County Administrator's Off-ice 651 Pine Street,6"Floor Martinez,CA 94553-0063 Attention: Laura W.Lockwood,Director of Capital Facilities and Debt Management Telephone: (925)646-1228 Fax: (925)335-1098 F-5 OH&S DRAFT 2/11/99 Recording requested by and return to: COUNTY OF CONTRA COSTA c/o Orrick, Herrington & Sutcliffe LLP Old Federal Reserve Bank Building 400 Sansome Street San Francisco, California 94111 Attention: Mary A. Collins, Esq. FACILITY LEASE (VARIOUS CAPITAL PROJECTS) by and between COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY and the COUNTY OF CONTRA COSTA Dated as of February 1, 1999 THIS TRANSACTION IS EXEMPT FROM FILING FEES PURSUANT TO CALIFORNIA GOVERNMENT CODE SECTION 6103 AND TRANSFER TAXES PURSUANT TO CALIFORNIA REVENUE AND TAXATION CODE SECTION 11928 DOCSSFI:30830:;.8 40511 10 TM4 TABLE OF CONTENTS Page ARTICLEI DEFINITIONS.................................................................................................. 2 SECTION1.01. Definitions......... ........................................... ...... ........ ........ 2 ARTICLE 11 LEASE OF DEMISED PREMISES AND PROJECT; TERM ..........--.......... 5 SEC'T'ION 2.01. Lease of Facilities ......................................................... ....................... 5 SECTION 2,02. Tenn; Occupancy..................................................... ....-..........—...:....15 SECTION2.03. Substitution.................................................. ................. ...................... 5 ARTICLE III RENTAL PAYMENTS; USE OF PROCEEDS............................................... 6 SECTION 3.01. Base Rental Payments......... ......................................... .......................6 SECTION 3.02. Additional Payments............_............................................................... 7 SECTION 3.03. Fair Rental Value.......................... ....................................................... 8 SECTION 3.04. Payment Provisions............................... .......................... ................... 8 SECTION, 3.05. Appropriations Covenant. ........ ..................... .................. ................... 9 SECTION 3.06. Rental Abatement....................................... ........................................ 10 SECTION 3.07. Use of Proceeds.................... ............ ...................... ..................... 10 SECTION 3.08. Pledge of Courthouse Funds............................................................... 10 SECTION 3.09. Supplemental Reimbursement Account.............................................. 10 ARTICLE IV MAINTENANCE; ALTERATIONS AND ADDITIONS ............................. I I SECTION 4.0 1. Maintenance and Utilities .......... ................................ ...................... I I SECTION 4.02. Changes to the Project....- ............................................................. SECTION 4.03. Installation of County's Equipment.................................................... 11 ARTICLEV INSURANCE.............................................. ........... ...................... ................ 12 SECTION 5.01. Fire and Extended Coverage Insurance................. ...........................- 12 SECTION 5.02. Liability Insurance ................................................ ............................. 13 SECTION 5.03. Rental Interruption or Use and Occupancy Insurance........................ 14 SECTION 5.04. Worker's Compensation.............. ................................... ......--......... 14 SECTION 5.05. Title Insurance............ .................................................... ................... 14 SECTION 5.06. Insurance Proceeds; Form of Policies................................................. 14 ARTICLE VI DEFAULTS AND REMEDIES...................................................................... 15 SECTION 6.01. Defaults and Remedies........................... ............................................ 15 SECTION6.02. Waiver......................... ......... ............................................................. 18 ARTICLE VII EMINENT DOMAIN; PREPAYMENT............................... .......................- 19 SECTION 7.01. Eminent Domain............ .................. ................................... ............. 19 DOCSSFI:308303.8 40511_,10 TM4 i - ^ TABLE OF Page SECTION7.02. Prop .......... ............................................................. ................. l9 SEC7}ON7.03. Option to Purchase; Sale ofPersonal Property............ ...................... 20 ARTICLE VIII C(]l/ENAINTTS....................... ............................... ....... ........... ....................Zl SECTION8.01. Right of Entry.................................... .................................................2{ SECTION8.02. Liens..................................................................... ..............................2l SECTION 8.03. Quiet Enjoyment'^^~`~~'^-~^^~^~~^~^~''^'^~'^~''^^'`~—''-''~''^`` 22 SECTION 8.04. Authority Not Liable.................................... ....................... ...... .......22 SECTION 8.05. Assignment and Subleasing.............. -.................. ............................22 SECTION 8.06. Title b}Facilities ..........................................................^.— ................22 SECTION 8.07. Tax Covenants...................................................... .............................. 23 SECTION 8.08. Continuing Disclosure.....................................—. ..............................24 SECTION8.09. Taxes....................................................................,...................... .......24 SECTION 8.10. ,s Purpose .........~..~......`.......~.....^...—.......—...'24 SEC7IONIT@.1}, Purpose OfLease............................... ................................................. 24 ARTICLE IX DISCLAIMER OF ; VENDOR'S ; USEOF THE FACILITIES...................................................... ....................25 SECTION 9.01. Disclaimer ofWarranties...................—.........................'.'^'-^^'—.''25 SECTION 9.02. Vendor's Warranties................................................-.................... ....25 SECTION 9.03. Use of the Facilities............................................. ................................ 25 ARTICLEX MIS ............. ............. .......................................................... 26 SECTION l0.OI. LawGoverning........................... ........................................................l0 SECTION }0.02. Notices.^'^^^^^'—^^-^-^^^^^^^^—^^—^`~`^..................'^~^—^—'' 26 SECTION 10.03. Validity and ............................................................ 27 SECTION, 10.84. Net-INTet-Net Lease .............................................. ...............................27 SECTION 10.05. Section Headings...................................................... ..........................27 SECTION 1([@6. Amendment or Termination.................. ....... ..................... ............. 27 SECTION10.07. ExecutiOn...... .............. ................. ..................................................... 27 EXHIBITThe Facilities.................. ....................................................................................Arl EXHIBIT B Base Rental Payment Schedule............................................ ..........................-..B-I EXHIBITThe Project................ ...................................................... ................. ................. C-1 uoCSsF1308303.8 40511umTM4 FACILITY LEASE (VARIOUS CAPITAL PROJECTS) This Facility Lease, dated as of February 1, 1999, by and between COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY (the "Authority"), a joint powers authority duly organized and existing under and by virtue of the laws of the State of California, as lessor, and the COUNTY OF CONTRA. COSTA (the "County"), a body corporate and politic and a Dolitical subdivision of the State of California, as lessee; WITNESSETH : In consideration of the mutual covenants herein, the parties hereto agree as follows: WHEREAS, the County has determined to finance various capital projects of the County as set forth in Exhibit__C hereto(the"1999 Project"); WHEREAS, $61,690,000 aggregate principal amount of the County's 1988 Certificates of Participation for Consolidated Capital Projects, Equipment Acquisition Program and Countywide Integrated Telecommunications Network (the "Prior Certificates") were executed and delivered pursuant to a Trust Agreement, dated as of July 1, 1988, by and among the County, the Contra Costa County Public Facilities Corporation (the "Corporation") and U.S. Bank Trust National Association, as successor trustee (the "Prior Trustee"), for the purpose of refinancing certain County lease obligations including the acquisition of and improvements to the Auditor-Controllers Building, District Attorneys Building, Bray Courthouse, Public Defenders Building, a social services building, County Administration Building, and Sheriff Patrol Investigation and Communication Administration Building, all in the City of Martinez, California, the Municipal Court Building in the City of Concord, California, the County Library Building in the City of Pleasant Hill, California, the East County Social Services Building in the City of Antioch, California, and financing of various equipment including cars, trucks, computers and communications equipment and the Countywide Integrated Telecommunication Network System(the "1988 Project"); WHEREAS the Corporation acquired the 1988 Project and pursuant to a lease agreement, dated as of July 1, 1988 (the "Prior Facility Lease"), between the Corporation and the County, which lease or memorandum thereof was recorded in the office of the County Recorder of the County of Contra Costa on July 26, 1988 under Recorder's Serial Number 88-126419, the Corporation leased the 1988 Project to the County; WHEREAS, pursuant to an assignment agreement, dated as of July 1, 1988, between the Corporation and the Prior Trustee, the lease payments made by the County under the Prior Facility Lease ("Prior Base Rental") were assigned to the Prior Trustee to pay the principal and interest represented by the Prior Certificates; WHEREAS, the Authority intends to assist the County in refinancing the Prior Certificates and financing the 1999 Project by issuing the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 1999 Series A (the "1999 Series A Bonds"); DOIC:SSF 1:308303.8 40511-110 TM4 WHEREAS, pursuant to the Letter of Instructions to the Prior Trustee, dated as of February 1, 1999, certain proceeds of the 1999 Series A Bonds and certain other funds were deposited into an escrow fund (the "Escrow Fund") and irrevocably pledged to repay the Prior Base Rental and the Prior Certificates; WHEREAS, upon such deposit the 1988 Project will vest in the County; WHEREAS, the County will lease to the Authority certain capital assets of the County (the"Facilities")pursuant to the Site Lease; WHEREAS, the County will lease back the Facilities from the Authority pursuant to the terms of this Facility Lease; WHEREAS, the Authority intends to assist the County by financing the construction, renovation and acquisition for the County of certain other County facilities together with site development, landscaping,utilities, fixtures, furnishings, equipment, improvements and appurtenant and related facilities (the "Subsequent Phases of the Project," and collectively with the 1988 Project and the 1999 Project, the"Project"); and WHEREAS, under this Facility Lease, the County will be obligated to make base rental payments to the Authority for the lease of the Facilities and such other facilities as may ftorn time to time be leased hereunder; NOW, THEREFORE, in consideration of the mutual covenants herein, the parties hereto agree as follows ARTICLE I DEFINITIONS SECTION 1.01. Definitions. Unless the context otherwise requires, the terms defined in this Section shall, for all purposes of this Lease, have the meanings herein specified, which meanings shall be equally applicable to both the singular and plural forms of any of the terms herein defined. Capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in the Trust Agreement. Additional Payments The term "Additional Payments" means all amounts payable to the Authority or the Trustee or any other person from the County as Additional Payments pursuant to Section 3.02 hereof. Architects The term "Architects" means the architects, engineers or designers of any Project or portion thereof, and any successor or successors to any thereof. DOCSsr91:308303.8 2 Authorily The term "Authority„ means (i) County of Contra Costa Public Financing Authority, acting as lessor hereunder; (ii) any surviving, resulting or transferee entity; and (iii) except where the context requires otherwise, any assignee of the Authority. Base Rental Payments The term "Base Rental Payments" means all amounts payable to the Authority from the County as Base Rental Payments pursuant to Section 3.01 hereof. Bgse Rental Payment Schedule The term "Base Rental Payment Schedule" means the schedule of Base Rental Payments payable to the Authority from the County pursuant to Section. 3.01 hereof and attached hereto as Exhibit B. Contractors The term "Contractors" means the construction contractor for any portion of the 1999 Project or any Subsequent Phase of the Project and any successor or successors to any thereof. Cop2orat on The term "Corporation" means Contra Costa County Public Facilities Corporation. Courthouse Funds The term "Courthouse Funds" means the County Criminal Justice Facility Temporary Construction Fund and the Courthouse Temporary Construction Fund established by the County by Resolution No. 82/19, passed on January 5, 1982, and Resolution No. 83/1241, adopted on December 23, 1983, respectively, of the Board of Supervisors of the County, pursuant to Sections 76000 et seq. of the Government Code of the State of California. County The term "County" means the County of Contra Costa, California, a body corporate and politic and a political subdivision of the State of California. Demised Premises The term "Demised Premises" means that certain real property situated in the County of Contra Costa, State of California, described in Exhibit A attached hereto and made a part hereof, together with any additional real property added thereto by any supplement or amendment hereto; subject, however, to any conditions, reservations, and easements of record or known to the County. I)OCSSF I:308303.8 3 40511-110 TM4 Event of Default The term "Event of Default" shall have the meaning specified in Section 6.01 hereof. Facilities The term "Facilities" shall mean the Demised Premises, the West County Detention Facility, the Bray Courthouse and the Social Services Building or any County buildings, other improvements and facilities, added thereto or substituted therefor, or any portion thereof, in accordance with this Facility Lease and the Trust Agreement as set forth more fully in Exhibit A hereto, subject, however, to any conditions, reservations and easements of record known to the County. Lease The term. "Lease" means this lease, as originally executed and recorded or as it may from time to time be supplemented, modified or amended pursuant to the provisions hereof and of the "frust Agreement. 1988 Project The term "1988 Project" means the refinancing of certain County lease obligations including the Auditor-Controllers Building, District Attorneys Building, Bray Courthouse, Public Defenders Building, a social services building, County Administration Building, and Sheriff Patrol Investigation and Communication Administration Building, all in the City of Martinez, California, the Municipal Court Building in the City of Concord, California, the County Library Building in the City of Pleasant Mill, California, the East County Social Services Building in the City of Antioch, California, and financing of various equipment including cars, trucks, computers and communications equipment and the Countywide Integrated Telecommunication Network System. 1999 Project The term "1999 Project"means the capital projects described in Exhibit C hereto. 1999 SeriesA Bonds The term. " 1999 Series A Bonds" means the Bonds designated "1999 Series A" issued by the Authority under and pursuant to Section 2.01 of the Trust Agreement. Phase of the Project The term "Phase of the Project"means the 1988 Project, the 1999 Project or such Subsequent Phase of the Project to which reference is made. DOCSSr 1:30830'3.8 4 4051 1-1 10 TMA Rental Pa Hent Reriod The term "Rental Payment Period" means the twelve month period commencing June 1 of each year and ending the following May 31, and the initial period commencing on the effective date hereof and ending the following May 31. Trust Agreement The term "Trust Agreement" means the trust agreement, dated as of February 1, 1999, by and among the Trustee, the Authority and the County, pursuant to which the Trustee will execute and deliver the 1999 Series A Bonds, as originally executed or as it may from time to time be supplemented, modified or amended by a Supplemental Trust Agreement entered into pursuant to the provisions of the Trust Agreement. ARTICLE Ii LEASE OF DEMISED PREMISES AND PROJECT; TERMI SECTION 2.01. Lease of Facilities. The Authority hereby leases to the County and the County hereby leases from the Authority the Facilities, including the Demised Premises, subject, however, to all easements, encumbrances, and restrictions that exist at the time of the commencement of the term of this Lease, The County hereby agrees and covenants during the term of this Lease that, except as hereinafter provided, it will use the Facilities for public and County purposes so as to afford the public the benefits contemplated by this Lease. SECTION 2.02. Term•,•, Occupancy. The term of this Lease shall commence on the date of recordation of this Lease in the office of the County Recorder of Contra Costa County, State of California, or on May 1, 1999 whichever is earlier, and shall end on June 1, 2008, for the Social Services Building, June 1, 2016, for the Bray Courthouse, and June 1, 2028, for the test County Detention Facility, unless such term is extended or sooner terminated as hereinafter provided. If on such dates, the Bonds corresponding to the Base Rental Payments attributableto the related Facility and all other amounts then due hereunder with respect to such Facility, including any Reserve Facility Costs, shall not be fully paid, or if the rental payable hereunder with respect to such Facility shall have been abated at any time and for any reason, then the term of this Lease with respect to such Facility shall be extended until all Bonds corresponding to the Base Rental Payments attributable to such Facility and all other amounts then due hereunder with respect to such Facility, including any Reserve Facility Costs, shall be fully paid, except that the term of this Lease as to the respective Facilities shall in no event be extended beyond ten (10) years after such respective dates. If prior to such dates, all Bonds corresponding to the Base Rental Payments attributable to the related Facility and all other amounts then due hereunder with respect to such Facility, including any Reserve Facility Costs, shall be fully paid, or provision therefor made, the term of this Lease with respect to such Facility shall end ten (10) days thereafter or upon written notice by the County to the Authority, whichever is earlier. SECTION 2.03. Substitution. The County and the .Authority may substitute real property as part of the Facilities for purposes of the Facility Lease, but only after the County DC)C;SSF I;305303.8 5 405;1-3 W TM4 shall have received the written consent of the Band Insurer and shall have filed with the Authority and the Trustee, with copies to each rating agency then providing a rating for the Bonds, all of the following: (a) Executed copies of the Facility Lease or amendments thereto containing the amended description of the Facilities, including the Demised Premises, including the legal description of the Demised Premises as modified if necessary. (b) A Certificate of the County with copies of the Facility Lease or a Site Lease, if needed, or amendments thereto containing the amended description of the Facilities stating that such documents have been duly recorded in the official records of the County Recorder of the County. (c) A Certificate of the County, together with an appraisal performed by an independent appraiser, evidencing that the annual fair rental value of the Facilities which will constitute the Facilities after such substitution will be at least equal to 140% of the maximum amount of Base Rental Payments becoming due in the then current year ending May 31 or in any subsequent year ending May 31. (d) A Certificate of the County stating that, based upon review of such instruments, certificates or any other matters described in such Certificate of the County, the County has good merchantable title to the Facilities which will constitute the Facilities after such substitution. The term "Good Merchantable 'Title" shall mean such title as is satisfactory and sufficient for the needs and operations of the County. (e) A Certificate of the County stating that such substitution does not adversely affect the County's use and occupancy of the Facilities. . (f) An Opinion of Counsel (as such term is defined in the Trust Agreement) stating that such amendment or modification (i) is authorized or permitted by the Constitution and laws of the State and this Trust Agreement, (ii) complies with the terms of the Constitution and laws of the State and of this Trust Agreement; (iii) will, upon the execution and delivery thereof, be valid and binding upon the Authority and the County; and (iv) will not cause the interest on the Bonds to be included in gross income for federal income tax purposes. ARTICLE III RENTAL PAYMENTS; USE OF PROCEEDS SECTION 3.01. Base Rental Payments. The County agrees to pay to the Authority, as Base Rental Payments for the use and occupancy of the Facilities, including the Demised Premises (subject to the provisions of Sections 3.04, 3.06 and 7.01 of this Lease) annual rental payments with principal and interest components, the interest components being payable semi-annually, in accordance with the Rental Payment Schedule attached hereto as Exhibit B and made a part hereof. Base Rental Payments shall be calculated on an annual basis, for the twelve-month periods commencing on .lune I and ending on May 31, and each annual Base Rental shall be divided into two interest components, due on December 1 and June 1, and DOCSSF I.308303.8 6 4051 1-1 Eta TM4 one principal component, due on June 1, except that the first Base Rental Payment period commences on the date of recordation of the Facility Lease and ends on May 31, 1999. Each Base Rental Payment installment shall be payable on the fifteenth (15th) day of the month immediately preceding its due date and any interest or other income with respect thereto accruing prior to such due date. The interest components of the Base Rental Payments shall be paid by the County as and constitute interest paid on the principal components of the Base Rental Payments to be paid by the County hereunder, computed on the basis of a 360-day year composed of twelve 30-day months, Each annual payment of Base Rental (to be payable in installments as aforesaid) shall be for the use of the Facilities,including the Demised Premises. If the term of this Lease shall have been extended pursuant to Section 2.02 hereof, Base Rental Payment installments shall continue to be due on December 1 and June 1 in each year, and payable prior thereto as hereinabove described, continuing to and including the date of termination of this Lease. Upon such extension of this Lease, the County shall deliver to the Trustee a Certificate setting forth the extended rental payment schedule, which schedule shall establish the principal and interest components of the Base Rental Payments so that the principal components will in the aggregate be sufficient to pay all unpaid principal components with interest components sufficient to pay all unpaid interest components plus interest and to pay any Reserve Facility Costs. If at any time the Base Rental hereunder shall not have been paid by the County, for any reason whatsoever, and no other source of funds shall have been available to male the payments of principal and interest on the Bonds, the principal and interest components of the Base Rental shall be recalculated by the County to reflect interest on the unpaid principal components at the rate or rates specified in the Trust Agreement and to pay Reserve Facility Costs as provided in the agreement with respect to the Reserve Facility, and a revised Exhibit B to this Facility Lease shall be prepared by the County and supplied to the Authority and the Trustee reflecting such reallocation SECTION 3.02, Additional Payments. The County shall also pay such amounts (herein called the "Additional Payments") as shall be required by the Authority for the payment of all costs and expenses incurred by the Authority in connection with the execution, performance or enforcement of this Lease or any assignment hereof, the Trust Agreement, the Reserve Facility, its interest in the Demised Premises and the lease of the Facilities to the County, including but not limited to payment of all fees, costs and expenses and all administrative costs of the Authority related to the Demised Premises, the Facilities and the Project, including, without limiting the generality of the foregoing, salaries and wages of employees, all expenses, compensation and indemnification of the Trustee payable by the Authority under the Trust Agreement, fees of auditors, accountants, attorneys or architects, and all other necessary administrative costs of the Authority or charges required to be paid by it in order to maintain its existence or to comply with the terms of the Certificates or of the Trust Agreement,but not including in Additional Payments amounts required to pay the principal of or interest on the Bonds or the portion of the Reserve Facility Costs related thereto. Such Additional Payments shall be billed to the County by the Authority or the Trustee from time to time, together with a statement certifying that the amount billed has been paid by the Authority or by the Trustee on behalf of the Authority, for one or more of the items DOC:SSF 1:308303.8 7 40511-110 TM4 above described, or that such amount is then payable by the Authority or the Trustee for such. items. Amounts so billed shall be paid by the County to the billing party within 30 days after receipt of the bill by the County. The County reserves the right to audit billings for Additional Payments although exercise of such right shall in no way affect the duty of the County to make full and timely payment for all Additional Payments. The Authority has issued and may in the future issue bonds and has entered into and may in the future enter into leases to finance facilities other than the Facilities and the Project. The administrative costs of the Authority shall be allocated among said facilities and the Facilities, as hereinafter in this paragraph provided. The fees of the Trustee under the Trust Agreement, and any other expenses directly attributable to the Facilities shall be included in the Additional Payments payable hereunder. The fees of any trustee or paying agent under any indenture securing bonds of the Authority or any trust agreement other than the Trust Agreement, and any other expenses directly attributable to any facilities other than the Facilities, shall not be included in the administrative costs of the Facilities and shall not be paid from the Additional Payments payable hereunder. Any expenses of the Authority not directly attributable to any particular project of the Authority shall be equitably allocated among all such projects, including the Project, in accordance with sound accounting practice. In the event of any question or dispute as to such allocation, the written opinion of an independent firm of certified public accountants, employed by the Authority to consider the question and render an opinion thereon, shall be a final and conclusive determination as to such allocation. The Trustee may conclusively rely upon the Written Request of the Auth6rity, with the approval of the Assistant County Administrator - Finance of the County, or by a Director, Capital Facilities and Debt Management of the County, or a duly authorized representative of the County, endorsed thereon, in making any determination that costs are payable as Additional Payments hereunder, and shall not be required to make any investigation as to whether or not the items so requested to be paid are expenses of operation of the Facilities. SECTION 3.03. Fair Remal Value. Such payments of Base Rental Payments for each rental period during the term of this Lease shall constitute the total rental for said rental period and shall be paid by the County in each rental payment period for and in consideration of the right of use and occupancy of, and continued quiet use and enjoyment of, the Facilities, including the Remised Premises during each such period for which said rental is to be paid. The parties hereto have agreed and determined that such total (excluding Defeased Base Rental Payments) rental payable for each twelve-month period beginning June 1 represents the fair rental value of the Facilities, including the Demised Premises for each such period. In making such determination, consideration has been given to costs of acquisition, design, constr-action and financing of the Facilities, other obligations of the parties under this Lease, the uses and purposes which may be served by the Facilities and the benefits therefrom which will accrue to the County and the general public. SECTION 3.014. Payment Provis ons. Each installment of rental payable hereunder shall be paid in lawful money of the United States of America to or upon the order of the Authority at the corporate trust office of the Trustee in Los Angeles, California, or such other place as the Authority shall designate. Any such installment of rental accruing hereunder which shall not be paid when due and payable under the terms of this Lease shall bear interest at the rate of twelve percent (12%) per annum, or such lesser rate of interest as may be permitted by DOCSSF 1:308303.8 8 40511 10 TM4 law, from the date when the same is due hereunder until the same shall be paid. Notwithstanding any dispute between the Authority and the County, the County shall make all rental payments when due without deduction or offset of any kind and shall not withhold any rental payments pending the final resolution of such dispute. In the event of a determination that the County was not liable for said rental payments or any portion thereof, said payments or excess of payments, as the case may be, shall be credited against subsequent rental payments due hereunder or refunded at the time of such determination. Amounts required to be deposited by the County with the Trustee pursuant to this Section on any date shall be reduced to the extent of amounts on deposit in the Base Rental Payment Fund, the Interest Fund or the Principal Fund and available therefor. All payments received shall be applied first to the interest components of the Base Rental Payments due hereunder, then to the principal components of the Base Rental Payments due hereunder and thereafter to all Additional Payments due hereunder, but no such application of any payments which are less than the total rental due and owing shall be deemed a waiver of any default hereunder. Rental is subject to abatement as provided in Section 3.46. Nothing contained in this Lease shall prevent the County from making from time to time contributions or advances to the Authority for any purpose now or hereafter authorized by law, including the making of repairs to, or the restoration of, the Facilities in the event of damage to or the destruction of the Facilities. SFCTI{ 'fir 3.45. An�propriations ovenant. The County covenants to take such action as may be necessary to include all such Base Rental Payments and Additional Payments due hereunder in its annual budgets, to snake necessary annual appropriations for all such Base Rental Payments and Additional Payments as shall be required to provide funds in such year for such Base Rental Payments and Additional Payments. The County will deliver to the Authority and the Trustee within sixty (64) days of adoption of the County budget a Certificate of the County stating that the budget as adopted appropriates all moneys necessary for the payment of Base Rental Payments and Additional Payments hereunder. The covenants on the part of the County herein contained shall be deemed to be and shall be construed to be duties imposed by law and it shall be the duty of each and every public official of the County to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the County to carry out and perform the covenants and agreements in this Lease agreed to be carried out and performed by the County. The Authority and the County understand and intend that the obligation of the County to pay Base Rental Payments and Additional Payments hereunder shall constitute a current expense of the County and shall not in any way be construed to be a debt of the County in contravention of any applicable constitutional or statutory limitation or requirement concerning the creation of indebtedness by the County, nor shall anything contained herein constitute a pledge of the general tax revenues, funds or moneys of the County. Base Rental Payments and Additional Payments due hereunder shall be payable only from current funds which are budgeted and appropriated or otherwise legally available for the purpose of paying Base Rental Payments and Additional Payments or other payments due hereunder as DOCSSF i:308303.8 9 i0 Tv[4 consideration for use of the Facilities. This Lease shall not create an immediate indebtedness for any aggregate payments which may become due hereunder in the event that the term of the Lease is continued. The County has not pledged the full faith and credit of the County, the Mate of California or any agency or department thereof to the payment of the Base Rental Payments and Additional Payments or any other payments due hereunder. SECTION 3.06. Rental Abaalement. The Base Rental Payments and Additional Payments shall be abated proportionately (except for that portion of Base Rental Payments attributable to the Courts Project for which Courthouse Funds are available for the payment thereof), during any period in which by reason of any damage or destruction (other than by condemnation which is hereinafter provided for) there is substantial interference with the use and occupancy of the Facilities by the County, in the proportion in which the initial cost of that portion of the Facilities rendered unusable bears to the initial cost of the whole of the Facilities,. including the Demised Premises. Such abatement shall continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any such damage or destruction, this Lease shall continue in full force and effect and the County waives any right to terminate this Lease by virtue of any such damage or destruction. SECTION 3.07. Use of Proceeds. The parties hereto agree that the proceeds of the 1999 Series A Bonds will be used to finance the 1999 Project and to refinance the 1988 Project by defeasing the Prior Certificates, to establish the Reserve Fund referred to in the Trust Agreement and to pay the costs of issuing the 1999 Series A Bonds and incidental and related expenses. SECTION 3.08. Pledgee of Courthouse Funds. The County agrees that, subject to applicable law, it will utilize moneys in the Courthouse Funds to pay the Authority in immediately available funds (from amounts on hand from time to time in the Courthouse Funds) (i) the amount due as Base Rental attributable to the Courts Project or (ii) the amount necessary to replenish the portion of the Reserve Fund allocable to the Courts Project. The County's obligation to pay amounts available in the Courthouse Funds for lease of the Courts Project began with the construction of the Bray Courthouse, and shall continue hereunder until Bonds allocable to the Courts Project are retired and shall not be subject to the abatement specified in Section 3.06. Notwithstanding the foregoing,nothing shall prevent the County from utilizing the Courthouse Funds for any other lawful purpose after the annual amount of Base Rental allocable to the Courts Project has been funded, the obligation hereunder being to utilize any moneys therein available, pursuant to applicable law, including the restricted purposes for which the respective funds may be expended,to pay the Base Rental attributable to the Courts Project when the same is otherwise due and payable or to replenish the Reserve Fund as provided above, but there shall be no obligation on the County to set aside moneys in such fund in each fiscal year in excess of the amount needed in such fiscal year to pay such portion of the Base Rental. SECTION 3.09. Suplemental Reimbursement Account. In consideration for the agreements and covenants of the Authority herein, the County hereby agrees to establish and maintain a special account, to be held by the County, known as the "Los Medanos Project Supplemental Reimbursement Account" or other appropriate name (the "Supplemental Reimbursement Account"), and the County agrees and covenants that all supplemental MediCal DOC:'SSR:3083113.8 10 40511-1101 TM reimbursement received by it with respect to the Los Medanos Project financed with the proceeds of the 1999 Series A Bonds shall be deposited when and as received in the Supplemental Reimbursement Account, and all money on deposit in such account, including earnings thereon, shall be applied only to the payment of Base Rental Payments allocable to such Bonds due and payable by the County. Pursuant to California Welfare and Institutions Code Section 14085.5, the County hereby pledges that supplemental reimbursements shall be used for the payment of such Base Rental Payments, and the County hereby incorporates herein the agreement with the State made pursuant to California Welfare and Institutions Cade Section 14085.5(b)(5). ARTICLE IV MAINTENANCE; ALTERATIONS AND ADDITIONS SECTION 4.01. Vlarltenance and Utilities. During such time as the County is in possession of the Facilities, all maintenance and repair, both ordinary and extraordinary, of the Facilities shall be the responsibility of the County, which shall at all times maintain or otherwise arrange for the maintenance of the Facilities in first class condition, and the County shall pay for or otherwise arrange for the payment of all utility services supplied to the Facilities, which may include, without limitation, ignitor service, security, power, gas, telephone, light, heating, ventilation, air conditioning, water and all other utility services, and shall pay for or otherwise arrange for payment of the cost of the repair and replacement of the Facilities resulting from ordinary wear and tear or want of care on the part of the County or any assignee or sublessee thereof or any other cause and shall pay for or otherwise arrange for the payment of all insurance policies required to be maintained with respect to the Facilities. In exchange for the rental herein provided, the Authority agrees to provide only the Facilities, including the Demised Premises. SECTION 4.02. Changes to.the Project. Subject to Section 8.02 hereof, the County shall, at its own expense, have the right to remodel the Facilities or to make additions, modifications and improvements to the Facilities, including the Demised Premises. All such additions, modifications and improvements shall thereafter comprise part of the Facilities and be subject to the provisions of this Lease. Such additions, modifications and improvements shall not in any way damage the Facilities or cause them to be used for purposes other than those authorized under the provisions of state and federal law; and the Facilities, upon completion of any additions, modifications and improvements made pursuant to this Section, shall be of a value which is at least equal to the value of the Facilities immediately prior to the making of such additions, modifications and improvements. SECTION 4.03. Installation-of—County's Equipment. The County and any sublessee may at any time and from time to time, in its sole discretion and at its own expense, install or permit to be installed other items of equipment or other personal property in or upon the Facilities, including the Demised Premises. All such items shall remain the sole property of such party, in which neither the Authority nor the Trustee shall have any interest, and may be modified or removed by such party at any time provided that such party shall repair and restore any and all damage to the Facilities resulting from the installation, modification or removal of any such items. Nothing in this Lease shall prevent the County from purchasing items to be DOCSSF1:308303.8 11 40511-1 I O 1 N44 installed pursuant to this Section under a conditional sale or lease purchase contract, or subject to a vendor's lien or security agreement as security for the unpaid portion of the purchase price thereof, provided that no such lienor security interest shall attach to any part of the Facilities. ARTICLE V INSURANCE SECTION 5.01, Fire and Extended Coverage lnsurance. The County shall procure or cause to be procured and maintain or cause to be maintained, throughout the term of this Lease, insurance against loss or damage to any structures constituting any part of the Facilities by fire and lightning, with extended coverage insurance, vandalism and malicious mischief insurance and sprinkler system leakage insurance and earthquake insurance, if available on the open market from reputable insurance companies at a reasonable cost, as determined by the County. Said extended coverage insurance shall, as nearly as practicable, cover loss or damage by explosion,windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. Such insurance shall be in an amount equal to the replacement cost (without deduction for depreciation) of all structures constituting any part of the Facilities, excluding the cost of excavations, of grading and filling, and of the land (except that such insurance may be subject to deductible clauses for any one loss of not to exceed $250,000 or comparable amount adjusted for inflation or more in the case of earthquake insurance), or, in the alternative, shall be in an amount and in a form sufficient (together with moneys held under the Trust Agreement), in the event of total or partial loss, to enable all outstanding Bonds to be redeemed. In the event of any damage to or destruction of any part of the Facilities, caused by the perils covered by such insurance, the Authority, except as hereinafter provided, shall cause the proceeds of such insurance to be utilized for the repair, reconstruction or replacement of the damaged or destroyed portion of the Facilities, and the Trustee shall hold said proceeds separate and apart from all other funds, in a special fund to be designated the "Insurance and Condemnation Fund," to the end that such proceeds shall be applied to the repair, reconstruction or replacement of the Facilities to at least the same good order, repair and condition as they were in prior to the damage or destruction, insofar as the same may be accomplished by the use of said proceeds. The Trustee shall permit withdrawals of said proceeds from time to time upon receiving the Written Request of the Authority, stating that the Authority has expended moneys or incurred liabilities in an amount equal to the amount therein requested to be paid over to it for the purpose of repair, reconstruction or replacement, and specifying the items for which such moneys were expended, or such liabilities were incurred. Any balance of said proceeds not required for such repair, reconstruction or replacement shall be treated by the Trustee as Base Rental Payments and applied in the manner provided by Section 5.02 of the Trust Agreement. Alternatively, the Authority, at its option, with the written consent of the County, and if the proceeds of such insurance together with any other moneys then available for the purpose are at least sufficient to redeem an aggregate principal amount of outstanding Bonds, equal to the amount of Ease Rental attributable to the portion of the Facilities so destroyed or damaged (determined by reference to the proportion which the cost of such portion of the Facilities bears to the cost of the Facilities), may elect not to repair, reconstruct or replace the damaged or DOCSSFI:308303.8 12 40511-1lG TM4 destroyed portion of the Facilities and thereupon shall cause said proceeds to be used for the redemption of outstanding Bonds pursuant to the provisions of the Trust Agreement. The Authority and the County shall promptly apply for Federal disaster aid or State of California disaster aid in the event that the Facilities are damaged or destroyed as a result of an earthquake occurring at any time. Any proceeds received as a result of such disaster aid shall be used to repair, reconstruct, restore or replace the damaged or destroyed portions of the Facilities, or, at the option of the County and the Authority, to redeem outstanding Bonds if such use of such disaster aid is permitted. As an alternative to providing the insurance required by the first paragraph of this Section, or any portion thereof, the County may provide a self insurance method or plan of protection if and to the extent such self insurance method or plan of protection shall afford reasonable coverage for the risks required to be insured against, in light of all circumstances, giving consideration to cost, availability and similar plans or methods of protection adopted by public entities in the State of California other than the County. So long as such method or plan is being provided to satisfy the requirements of this Lease, there shall be filed annually with the Trustee a statement of an actuary, insurance consultant or other qualified person (which may be the Risk '_Manager of the County), stating that, in the opinion of the signer, the substitute method or plan of protection is in accordance with the requirements of this Section and, when effective, would afford reasonable coverage for the risks required to be insured against. There shall also be filed a Certificate of the County setting forth the details of such substitute method or plan. In the event of loss covered by any such self insurance method, the liability of the County hereunder shall be limited to the amounts in the self insurance reserve fund or funds created under such method. SECTION 5.02. Liability Insurance. Except as hereinafter provided, the County shall procure or cause to be procured and maintain or cause to be maintained, throughout the term, of this Lease, a standard comprehensive general liability insurance policy or policies in protection of the Authority and its members, directors, officers, agents and employees and the Trustee, indemnifying said parties against all direct or contingent loss or liability for damages for personal injury, death or property damage occasioned by reason of the operation of the Facilities, with minimum liability limits of $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of$200,000 for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy in the amount of$3,000,000 covering all such risks. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance carried by the County. As an alternative to providing the insurance required by the first paragraph of this Section, or any portion thereof, the County may provide a self insurance method or plan of protection if and to the extent such self insurance method or plan of protection shall afford reasonable protection to the Authority, its members, directors, officers, agents and employees and the Trustee, in light of all circumstances, giving consideration to cost, availability and similar plans or methods of protection adopted by public entities in the State of California other than the County. So long as such method or plan is being provided to satisfy the requirements of this Leases there shall be filed annually with the Trustee a statement of an actuary, independent DOCSSP i:308303.8 13 40511-1 14 i 114 insurance consultant or other qualified person (which may be the Risk Manager of the County), stating that, in the opinion of the signer, the substitute method or plan of protection is in accordance with the requirements of this Section and, when effective, would afford reasonable protection to the Authority, its members, directors, officers, agents and employees and the Trustee against loss and damage from the hazards and risks covered thereby, There shall also be filed a Certificate of the County setting forth the details of such substitute method or plan. SECTIONT 5.03. Rental Interruption or Lse and Ogcul2ancy Insurance. The County shall procure or cause to be procured and maintain or cause to be maintained, rental interruption or use and occupancy Insurance to cover loss, total or partial, of the rental income from or the use of the Facilities as the result of any of the hazards covered by the insurance required by Section 5.01 hereof(provided with respect to earthquake insurance, only if available on the open market from reputable insurance companies at a reasonable cost, as determined by the County), in an amount sufficient to pay the part of the total rent hereunder attributable to the portion of the Facilities rendered unusable (determined by reference to the proportion which the cost of such portion bears to the cost of the Facilities) for a period of at least two years, except that such insurance may be subject to a deductible clause of not to exceed two hundred fifty thousand dollars ($250,000) or a comparable amount adjusted for inflation (or more in the case of earthquake coverage). Any proceeds of such insurance shall be used by the Trustee to reimburse to the County any rental theretofore paid by the County under this Lease attributable to such structure for a period of time during which the payment of rental under this Lease is abated, and any proceeds of such insurance not so used shall be applied as provided in Section 3.01 (to the extent required for the payment of Base Rental) and in Section 3.02 (to the extent required for the payment of Additional Payments) and any remainder shall be treated as Revenue under the Trust Agreement. SECTION 5.04. 'Worker's Qomnensation. The County shall also maintain worker's compensation insurance issued by a responsible carrier authorized under the laws of the State of California to insure its employees against liability for compensation under the Worker's Compensation Insurance and Safety Act now in force in California, or any act hereafter enacted as an amendment or supplement thereto. As an alternative, such insurance may be maintained as part of or in conjunction with any other insurance carried by the County. Such insurance may be ;maintained by the County in the form of self-insurance. SECTION 5.05. Title Insurance. The County shall obtain, for the benefit of the Authority, upon the execution and delivery of this Lease title insurance on the Dernised Premises, in an amount equal to the aggregate principal amount of the 1999 Series A Bonds, issued by a company of recognized standing duly authorized to issue the same, subject only to Permitted Encumbrances. SECTION 5.06. Insurance Proceeds: Form of Policies. All policies of insurance required by Sections 5.01 and 5.03 hereof shall name the County, the Authority and the Trustee as insured and shall contain a lender's loss payable endorsement in favor of the Trustee substantially in accordance with the form approved by the Insurance Services Office and the California Bankers Association. The Trustee shall, to the extent practicable, collect, adjust and receive all moneys which may become due and payable under any such policies, may compromise any and all claims thereunder and shall apply the proceeds of such insurance as DOCSsF=.:30$303.8 14 40511-11?TM4 provided in Sections 5.01 and 5.03. All policies of insurance required by this Lease shall provide that the Trustee and the Bond Insurer shall be given thirty (30) days notice of each expiration thereof or any intended cancellation thereof or reduction of the coverage provided thereby. The Trustee shall not be responsible for the sufficiency of any insurance herein required and shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by the County. The County shall pay when due the premiums for all insurance policies required by this Lease, and shall promptly furnish evidence of such payments to the Authority. The County will deliver to the Authority and the Trustee and the Bond Insurer on or before September 15 in each year a written Certificate of an officer of the County stating whether such policies satisfy the requirements of this Lease, setting forth the insurance policies then in force pursuant to this Article, the names of the insurers which have issued the policies, the amounts thereof and the property and risks covered thereby, and, if any self-insurance program is being provided, the annual report of an actuary, independent insurance consultant or other quali led person containing the information required for such self-insurance program and described in Sections 5.01, 5.02 and 5.04. Delivery to the Trustee of the certificate under the provisions of this Section shall not confer responsibility upon the Trustee as to the sufficiency of coverage or amounts of such policies. If so requested in writing by the Trustee, the County shall also deliver to the Trustee certificates or duplicate originals or certified copies of each insurance policy described in such schedule. The County shall deliver to the Bond Insurer, upon request, a copy of the policy providing for any rental interruption or use and occupancy insurance required by Section 5.03. Any policies of insurance provided by a commercial insurer to satisfy the requirements of Sections 5.01, 5.02 or 5.03 hereof shall be provided by a commercial insurer rated A or better by Best or in one of the two highest rating categories by S&P and by Moody's. ARTICLE VI DEFAULTS AND REMEDIES SECTION' 6.01. Defaults and Remedies. (a) If the County shall fail to pay any rental payable hereunder when the same becomes due, time being expressly declared to be of the essence of this Lease, or the County shall fail to keep, observe or perforin any other term, covenant or condition contained herein to be kept or performed by the County for a period of sixty (6+0) days after notice of the same has been given to the County by the Authority or the Trustee or for such additional time as is 'reasonably required, in the sole discretion of the Authority, to correct the same, or upon the happening of any of the events specified in subsection (b) of this Section (any such case above being an "Event of Default"), the County shall be deemed to be in default hereunder and it shall be lawful for the Authority to exercise any and all remedies available pursuant to law or granted pursuant to this Lease. Upon any such default, the Authority, in addition to all other rights and remedies it may have at law, shall have the option to do any of the following: (1) To terminate this Lease in the manner hereinafter provided on account of default by the County, notwithstanding any re-entry or re-letting of the Facilities as DocssF1308303.8 15 40511-1xa 1W.4 hereinafter provided for in subparagraph (2) hereof, and to re-enter the Facilities and remove all persons in possession thereof and all personal property whatsoever situated upon the Facilities and place such personal property in storage in any warehouse or other suitable place located within the County of Contra Costa, California. In the event of such termination, the County agrees to surrender immediately possession of the Facilities, without let or hindrance, and to pay the Authority all damages recoverable at law that the Authority may incur by reason of default by the County, including,without limitation, any costs, lass or damage whatsoever arising out off; in connection with, or incident to any such re-entry upon the Facilities and removal and storage of such property by the Authority or its duly authorized agents in accordance with the provisions herein contained. Neither notice to pay rent or to deliver up possession of the Facilities given pursuant to law nor any entry or re-entry by the Authority nor any proceeding in unlawful detainer, or otherwise, brought by the Authority for the purpose of effecting such re-entry or obtaining possession of the Facilities nor the appointment of a receiver upon initiative of the Authority to protect the Authority's interest under this Lease shall of itself operate to terminate this Lease, and no termination of this Lease on account of default by the County shall be or become effective by operation of law or acts of the parties hereto, or otherwise, unless and until the Authority shall have given written notice to the County of the election on the part of the Authority to terminate this Lease. The County covenants and agrees that no surrender of the Facilities or of the remainder of the terra hereof or any termination of this Lease shall be valid in any manner or for any purpose whatsoever unless stated or accepted by the Authority by such written notice. (2) Without terminating this Lease, (i) to collect each installment of rent as it becomes due and enforce any other terms or provision hereof to be kept or performed by the County, regardless of whether or not the County has abandoned the Facilities, or (ii) to exercise any and all rights of entry and re-entry upon the Facilities. In the event the Authority does not elect to terminate this Lease in the manner provided for in subparagraph (1) hereof, the County shall remain liable and agrees to keep or perform all covenants and conditions herein contained to be kept or performed by the County and, if the Facilities are not re-let, to pay the full amount of the rent to the end of the term of this Lease or, in the event that the Facilities are re-let, to pay any deficiency in rent that results therefrom; and further agrees to pay said rent and/or rent deficiency punctually at the same time and in the same manner as hereinabove provided for the payment of rent hereunder (without acceleration), notwithstanding the fact that the Authority may have received in previous years or may receive thereafter in subsequent years rental in excess of the rental herein specified, and notwithstanding any entry or re-entry by the Authority or suit in unlawful detainer, or otherwise, brought by the Authority for the purpose of effecting such entry or re-entry or obtaining possession of the Facilities. Should the Authority elect to enter or re-enter as herein provided, the County hereby irrevocably appoints the Authority as the agent and attorney-in-fact of the County to re-let the Facilities, or any part thereof, from time to time, either in the Authority's name or otherwise, upon such terms and conditions and for such use and period as the Authority may deem advisable, and to remove all persons in possession thereof and all personal property whatsoever situated upon the Facilities and to place such personal property in storage in any warehouse or other suitable place located in the County of Contra Costa, California, for (to the extent permitted by law) the account of and at the expense of the County, and the County (to the extent permitted by law) hereby exempts and agrees to save harmless the Authority from any costs, loss or damage whatsoever arising out of, in connection with, or incident to any such re-entry upon and re-letting of the Facilities and DOCSSF 1:308303.8 16 40511:-11 O TM4 removal and storage of such property by the Authority or its duly authorized agents in accordance with the provisions herein contained. The County agrees that the terms of this Lease constitute full and sufficient notice of the right of the Authority to re-let the Facilities and to do all other acts to maintain or preserve the Facilities as the Authority deems necessary or desirable in the event of such re-entry without effecting a surrender of this Lease, and further agrees that no acts of the Authority in effecting such re-letting shall constitute a surrender or termination of this Lease irrespective of the use or the term for which such re-letting is made or the terms and conditions of such re-letting, or otherwise, but that, on the contrary, in the event of such default by the County the right to terminate this Lease shall vest in the Authority to be effected in the sole and exclusive manner provided for in sub-paragraph (1) hereof The County further waives the right to any rental obtained by the Authority in excess of the rental herein specified and hereby conveys and releases such excess to the Authority as compensation to the Authority for its services in re-letting the Facilities or any part thereof. The County further agrees to the extent permitted by law to pay the Authority the reasonable cost of any alterations or additions to the Facilities necessary to place the Facilities in condition for re-letting immediately upon notice to the County of the completion and installation of such additions or alterations. The County hereby waives any and all claims for damages caused or which may be caused by the Authority in re-entering and taking possession of the Facilities as herein provided and all claims for damages that may result from the destruction of or injury to the Facilities and all claims for damages to or loss of any property belonging to the County, or any other person, that may be in or upon the Facilities. (b) If(1) the County's interest in this Lease or any part thereof be assigned or transferred, either voluntarily or by operation of law or otherwise, without the written consent of the Authority, as hereinafter provided for, or (2) the County or any assignee shall file any petition or institute any proceeding under any act or acts, state or federal, dealing with or relating to the subject or subjects of bankruptcy or insolvency, or under any amendment of such act or acts, either as a bankrupt or as an insolvent, or as a debtor, or in any similar capacity, wherein or whereby the County asks or seeks or prays to be adjudicated a bankrupt, or is to be discharged from any or all of the County's debts or obligations, or offers to the County's creditors to effect a composition or extension of time to pay the County's debts or asks, seeks or prays for reorganization or to effect a plan of reorganization, or for a readjustment of the County's debts, or for any either similar relief, or if any such petition or any such proceedings of the same or similar kind or character be filed or be instituted or taken against the County, or if a receiver of the business or of the property or assets of the County shall be appointed by any court, except a receiver appointed at the instance or request of the Authority, or if the County shall male a general or any assignment for the benefit of the County's creditors, or if (3) the County shall abandon or vacate the Facilities, then the County shall be deemed to be in default hereunder. (c) The Authority shall in no event be in default in the performance of any of its obligations hereunder or imposed by any statute or rule of law unless and until the Authority shall have failed to perform such obligations within sixty (60) days or such additional time as is reasonably required to correct any such default after notice by the County to the Authority property specifying wherein the Authority has failed to perform any such obligation. In the event of default by the Authority, the County shall be entitled to pursue any remedy provided by law. DOCSSF 1:3(38303.8 1 4051 1-1 10 TM4 (d) In addition to the other remedies set forth in this Section, upon the occurrence of an event of default as described in this Section, the Authority shall be entitled to proceed to protect and enforce the rights vested in the Authority by this Lease or by law. The provisions of this Lease and the duties of the County and of its trustees, officers or employees shall be enforceable by the Authority by mandamus or other appropriate suit, action or proceeding in any court of competent jurisdiction. Without limiting the generality of the foregoing, the Authority shall have the right to bring the following actions: (1) Accounting. By action or suit in equity to require the County and its trustees, officers and employees and its assigns to account as the trustee of an express trust. (2) hn c , By action or suit in equity to enjoin any acts or things which may be unlawful or in violation of the rights of the Authority. (3) Mandamus. By mandamus or other suit, action or proceeding at law or in equity to enforce the Authority's rights against the County (and its board, officers and employees) and to compel the County to perform and carry out its duties and obligations under the law and its covenants and agreements with the County as provided herein. The exercise of any rights or remedies under this Lease shall not permit acceleration of Base Rental Payments. Each and all of the remedies given to the Authority hereunder or by any law now or hereafter enacted are cumulative and the single or partial exercise of any right, power or privilege hereunder shall not impair the right of the Authority to other or further exercise thereof or the exercise of any or all other rights, powers or privileges. The term "re-let" or "reletting" as used in this Section shall include,but not be limited to, re-letting by means of the operation by the Authority of the Facilities. If any statute or rule of law validly shall limit the remedies given to the Authority hereunder, the Authority nevertheless shall be entitled to whatever remedies are allowable under any statute or rule of law. In the event the Authority shall prevail in any action brought to enforce any of the terms and provisions of this Lease, the County agrees to pay a reasonable amount as and for attorney's fees incurred by the Authority in attempting to enforce any of the remedies available to the Authority hereunder, whether or not a lawsuit has been filed and whether or not any lawsuit culminates in a judgment. SECTION 6.02. Waiver. Failure of the Authority to take advantage of any default on the part of the County shall not be, or be construed as, a waiver thereof, nor shall any custom or practice which may grow up between the parties in the course of administering this instrument be construed to waive or to lessen the right of the Authority to insist upon performance by the County of any term, covenant or condition hereof, or to exercise any rights given the Authority on account of such default. A waiver of a particular default shall not be deemed to be a waiver of the same or any subsequent default. The acceptance of rent hereunder shall not be, or be construed to be, a waiver of any term, covenant or condition of this Lease. DOCSSF i:308303.8 18 40511-110 TM4 ARTICLE VII EMINENT DOMAIN; PREPAYMENT SECTION 7.01. Eminent Domain. If the whole of the Facilities, including the Demised Premises or so much thereof as to render the remainder unusable for the purposes for which it was used by the County shall be taken under the power of eminent domain, the term of this Lease shall cease as of the day that possession shall be so taken. If less than the whole of the Facilities shall be taken under the power of eminent domain and the remainder is usable for the purposes for which it was used by the County at the time of such taking, thea this Lease shall continue in full force and effect as to such remainder, and the parties waive the benefits of any law to the contrary, and in such event there shall be a partial abatement of the rental due hereunder in an amount equivalent to the amount by which the annual payments of principal and interest on the Outstanding Bonds will be reduced by the application of the award in eminent domain to the redemption of outstanding Bonds. So long as any of the Bonds shall be outstanding, any award made in eminent domain proceedings for taking the Facilities, including the Demised Premises or any portion thereof shall be paid to the Trustee and applied to the prepayment of the Base Rental Payments as provided in Section 7.02. Any such award made after all of the Base Rental Payments and Additional Payments have been fully paid, or provision therefor made, shall be paid to the to the County. SECTION 7.02. Prepay. (a) The County shall prepay on any date from insurance (including proceeds of title insurance) and eminent domain proceeds, to the extent provided in Sections 5.01 and 7.01 hereof(provided,however, that in the event of partial damage to or destruction of the Facilities caused by perils covered by insurance, if in the judgment of the Authority the insurance proceeds are sufficient to repair, reconstruct or replace the damaged or destroyed portion of the Facilities, such proceeds shall be held by the Trustee and used to repair, reconstruct or replace the damaged or destroyed portion of the Facilities, pursuant to the procedure set forth in Section 5.011 for proceeds of insurance), all or any part of Base Rental Payments then unpaid so that the aggregate annual amounts of Base Rental Payments which shall be payable after such prepayment date shall be as nearly proportional as practicable to the aggregate annual amounts of Base Rental Payments unpaid prior to the prepayment date (taking into account the reduction in Base Rental allocable to future interest on the Bonds that are redeemed), at a prepayment amount equal to'the redemption payment of the maximum amount of Bonds, including the principal thereof and the interest thereon to the date of redemption, plus any applicable premium redeemable from such proceeds. (b) The County may prepay, from any source of available funds, all or any portion of Base Rental Payments by depositing with the Trustee moneys or securities as provided in Article X of the Trust Agreement sufficient to defease Bonds corresponding to such Base Rental Payments when due, provided that the County furnishes the Trustee with an Opinion of Counsel that such deposit will not cause interest on the Bonds to be includable in gross income for federal income tax purposes. The County agrees that if following such prepayment the Facilities are damaged or destroyed or taken by eminent domain, it is not entitled to, and by such prepayment waives the right of, abatement of such prepaid Base Rental Payments and shall not be entitled to any reimbursement of such Base Rental Payments. L70C5SF I:378303.8 1 40511-1 10 TM4 (c) Before making any prepayment pursuant to this article, the County shall, within five (5) days following the event creating such right or obligation to prepay, give written notice to the Authority and the Trustee describing such event and specifying the date on which the prepayment will be made, which date shall be not less than forty-five (45) days from the date such notice is given. (d) When (1) there shall have been deposited with the Trustee at or prior to the due dates of the Base Rental Payments or date when the County may exercise its option to purchase the Facilities or any portion or item thereof, in trust for the benefit of the Owners of the Bonds and irrevocably appropriated and set aside to the payment of the Base Rental Payments or option price, sufficient moneys and Permitted Investments described in subsection (1) of the definition thereof in the Trust Agreement, not redeemable prior to maturity, the principal of and interest on which when due will provide money sufficient to pay all principal, premium., if any, and interest on the Bonds to the due date of the Bonds or date when the County may exercise its option to purchase the Facilities, as the case may be; (2) all requirements of Section 10.01 of the Trust Agreement have been satisfied; and (3) an agreement shall have been entered into with the Trustee for the payment of its fees and expenses so long as any of the Bonds shall remain unpaid, then and in that event the right, title and interest of the Authority herein and the obligations of the County hereunder shall thereupon cease, terminate, become void and be completely discharged and satisfied (except for the right of the Authority and the obligation of the County to have such moneys and such Permitted Investments applied to the payment of the Base Rental Payments or option price) and the Authority's interest in and title to the Project or applicable portion or item thereof shall be transferred and conveyed to the County. In such event, the Authority shall cause an accounting for such period or periods as may be requested by the County to be prepared and filed with the Authority and evidence such discharge and satisfaction, and the Authority shall pay over to the County as an overpayment of Base Rental Payments all such moneys or Permitted Investments held by it pursuant hereto other than such moneys and such Permitted Investments as are required for the payment or prepayment of the Base Rental Payments or the option price and the fees and expenses of the Trustee, which moneys and Permitted Investments shall continue to be held by the Trustee in trust for the payment of Base Rental Payments or the option price and the fees and expenses of the Trustee, and shall be applied by the Authority to the payment of the Base Rental Payments or the option price and the fees and expenses of the Trustee. SECTIO 7.03. ti n to Purchase ale of Personal Presperty. The County shall have the option to purchase the Authority's interest in any part of Facilities, including the Demised Premises upon payment of an option price consisting of moneys or securities of the category specified in clause (1) of the definition of the term Permitted Investments contained in Section 1.01 of the Trust Agreement (not callable by the issuer thereof prior to maturity) in an amount sufficient (together with the increment, earnings and interest on such securities) to provide funds to pay the aggregate amount for the entire remaining term of this Lease of the part of the total rent hereunder attributable to such part of the Facilities (determined by reference to the proportion which the cost of such part of the Facilities bears to the cost of all of the Facilities). Any such payment shall be made to the Trustee and shall be treated as rental payments and shall be applied by the Trustee to pay the principal of the Bonds and interest on the Bonds and to redeem Bonds if such Bonds are subject to redemption pursuant to the terms of the Trust Agreement. Upon the making of such payment to the Trustee and the satisfaction of all DOICSSFI:308303.8 20 40511 10 Thio requirements set forth in Section 10.01 of the Trust Agreement, (a) the Base Rental thereafter payable under this Lease shall be reduced by the amount thereof attributable to such part of the Facilities and theretofore paid pursuant to this Section, (b) Section 3.06 and this Section of this Lease shall not thereafter be applicable to such part of the Facilities, (c) the insurance required by Sections 5.01, 5.02 and 5.03 of this Lease need not be maintained as to such part of the Project, and (d) title to such part of the Facilities, including the portion of the Demised Premises upon which such part of the Facilities is located shall vest in the County and the terra of this Lease shall end as to Facilities, including the portion of the Demised Premises upon which such part of the Facilities is located. The County, in its discretion, may request the Authority to sell or exchange any personal property which may at any time constitute a part of the Facilities, and to release said personal property from this Lease, if(a) in the opinion of the County the property so sold or exchanged is no longer required or useful in connection with the operation of the Facilities, (b) the consideration to be received from the property is of a value substantially equal to the value of the property to be released, and (c) if the value of any such property shall, in the opinion of the Authority, exceed the amount of$100,000, the Authority shall have been furnished a certificate of an independent engineer or other qualified independent professional consultant (satisfactory to the Authority) certifying the value thereof and further certifying that such property is no longer required or useful in connection with the operation of the Facilities. In the event of any such sale, the full amount of the money or consideration received for the personal property so sold and released shall be paid to the Authority. Any money so paid to the Authority may, so long as the County is not in default under any of the provisions of this Lease, be used upon the Written Request of the County to purchase personal property, which property shall become a part of the Facilities leased hereunder. The Authority may require such opinions, certificates and other documents as it may deem necessary before permitting any sale or exchange of personal property subject to this Lease or before releasing for the purchase of new personal property money received by it for personal property so sold. ARTICLE VIII COVENANTS SECTION 8.01. Ri httoof Entry. The Authority and its assignees shall have the right to enter upon and to examine and inspect the Facilities, including the Demised Premises during reasonable business hours (and in emergencies at all times) (a) to inspect the same, (b) for any purpose connected with the Authority's or the County's rights or obligations under this Lease, and(c) for all other lawful purposes. SECTION 8.02. Liens. In the event the County shall at any time during the term of this Lease cause any changes, alterations, additions, improvements, or other work to be done or performed or materials to be supplied, in or upon the Facilities, the County shall pay, when due, all suras of money that may become due for, or purporting to be for, any labor, services, materials, supplies or equipment furnished or alleged to have been furnished to or for the County in, upon or about the Facilities and shall keep the Facilities free of any and all mechanics' or materialmen's liens or other liens against the Facilities or the Authority's interest therein. In the event any such lien attaches to or is filed against the Facilities or the Authority's DOCSSF1.308303.8 21 40511-?10 TM4 interest therein, the County shall cause each such lien to be fully discharged and released at the time the performance of any obligation secured by any such lien matures or becomes due, except that if the County desires to contest any such lien it may do so in good faith. If any such lien shall be reduced to final judgment and such judgment or such process as may be issued for the enforcement thereof is not promptly stayed, or if so stayed and said stay thereafter expires, the County shall forthwith pay and discharge said judgment. The County agrees to and shall, to the maximum extent permitted by law, indemnify and hold the Authority and the Trustee and their respective members, directors, agents, successors and assigns, harmless from and against, and defend each of them against, any claim, demand, loss, damage, liability or expense (including attorney's fees) as a result of any such lien or claim of lien against the Facilities or the Authority's interest therein. SECTION 8.03. Quiet Enjoyment. The parties hereto mutually covenant that the County, by keeping and performing the covenants and agreements herein contained and not in default hereunder, shall at all times during the term of this Lease peaceably and quietly have, hold and enjoy the Facilities, including the Demised Premises without suit, trouble or hindrance from the Authority. SECTION 8.04. AUthorjty Not Liable. The Authority and its members, directors, officers, agents and employees shall not be liable to the County or to any other party whomsoever for any death, injury or damage that may result to any person or property by or from any cause whatsoever in, on or about the Facilities. The County, to the extent permitted by law, shall indemnify and hold the Authority and its members, directors, officers, agents and employees, harmless from, and defend each of them against, any and all claims, liens and judgments arising from the construction or operation of the Facilities, including, without limitation, death of or injury to any person or damage to property whatsoever occurring in, on or about the Facilities regardless of responsibility for negligence, but excepting the active negligence of the person or entity seeking indemnity. SECTION 8.05. A.ssig=ent and Subleasing. Neither this Lease nor any interest of the County hereunder shall be mortgaged, pledged, assigned, sublet or transferred by the County by voluntary act or by operation of law or otherwise, except with the prior written consent of the Authority, which, in the case of subletting, shall not be unreasonably withheld; provided such subletting shall not affect the tax-exempt status of the interest on the Bonds. Neither this Lease nor any interest of the County hereunder shall be sublet by the County by voluntary act or by operation of law except with the prior written consent of the Bond Insurer (except for the portions of the Project for which subleases were in effect on February 1, 1990. No such mortgage, pledge, assignment, sublease or transfer shall in any event affect or reduce the obligation of the County to make the Base Rental Payments and Additional Payments required hereunder. SECTION 8.05. Title to Facilities. During the terra of this Lease, the Authority shall hold a leasehold estate to the Facilities and any and all additions which comprise fixtures, repairs, replacement or modifications thereof, except for those fixtures, repairs, replacements or modifications which are added thereto by the County and which may be removed without damaging the Facilities, and except for any items added to the Facilities by the County pursuant to Section 4.02 hereof. This provision shall not operate to the benefit of any DccssR:308303,8 22 40511-1 tQ TM4 insurance company if there is a rental interruption covered by insurance pursuant to Section 5.03 hereof. Upon the termination or expiration of this Lease, the Authority shall execute such conveyances, deeds and other documents as may be necessary to evidence the ownership of the Facilities, including the Demised Premises by the County and to clarify the title of the County on the record thereof. SECTION 8.07. Tax Covenants. The County and the Authority will not make any use of the proceeds of the obligations provided herein or any other funds of the County or the Authority which will cause such obligations to be "arbitrage bonds" subject to federal income taxation by reason of Section 148 of the Code. The County and the Authority will not make any use of the proceeds of the obligations provided herein or any other funds of the County or the Authority which will cause such obligations to be "federally guaranteed" and subject to inclusion in gross income for federal income tax purposes by reason of Section 149(b) of the Code. To that end, so long as any rental payments are unpaid, the County and the Authority, with respect to such proceeds and such other funds, will comply with all requirements of such Sections 148 and 149(b) and all regulations of the United States Department of the Treasury issued thereunder to the extent that such requirements are, at the time, applicable and in effect. The County further covenants that it will not use or permit the use of the facilities financed or refinanced by the proceeds of the Bonds by any person not an `exempt person" within the meaning of Section 141(a) of the Code or by an "exempt person" (including the County) in an "unrelated trade or business", in such manner or to such extent as would result in the inclusion of interest received hereunder in gross income for federal income tax purposes under Section 103 of the Code. If at any time the County is of the opinion that for purposes of this Section it is necessary to restrict or limit the yield on or change in any way the investment of any moneys held by the Trustee or the County or the Authority under this Lease or the Trust Agreement, the County shall so instruct the Trustee or the appropriate officials of the County in writing, and the Trustee or the appropriate officials of the County, as the case may be, shall take such actions as may be necessary in accordance with such instructions. In furtherance of the covenants of the County set forth above, the County will comply with the Tax Certificate and will instruct the Trustee in writing as necessary to comply with the Tax Certificate. The Trustee and the Authority may conclusively rely on any such written instructions, and the County hereby agrees to hold harmless the Trustee and the Authority for any loss, claim, damage, liability or expense incurred by the Authority for any actions taken by the Authority in accordance with such instructions. The County and the Authority shall at all times do and perform all acts and things permitted by law which are necessary or desirable in order to assure that the interest on the Bonds will be excluded from gross income for federal income tax purposes and shall take no action that would result in such interest not being excluded from gross income for federal income tax purposes. DOCSSF I1,308303.8 23 41051,1-]10 TM4 SECTION 8.08. Continuing Disclosure. The County hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Agreement. Notwithstanding any other provision of this Lease, failure of the County to comply with the Continuing.Disclosure Agreement shall not be considered an event of default hereunder; however, the Trustee may (and, at the request of any Participating Underwriter(as defined in the Continuing .Disclosure Agreement) or the Holders of at least 25% aggregate principal amount of 1999 Series A Bonds Outstanding and provided satisfactory indemnification is provided to the Trustee, shall) or any Bondholder may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to compel the County to comply with its obligations under this Section 8.08. SECTION 8.09. Taxes. The County shall pay or cause to be paid all taxes and assessments of any type or nature charged to the Authority or affecting the Facilities or the respective interests or estates therein, provided that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the County shall be obligated to pay only such installments as are required to be paid during the term of this Lease as and when the same become due. The County shall also pay directly such amounts, if any, in each year as shall be required by the Authority for the payment of all license and registration fees and all taxes (including, without limitation, income, excise, license, franchise, capital stock, recording, sales, use, value-added, property, occupational, excess profits and stamp taxes), levies, imposts, duties, charges, withholdings, assessments and governmental charges of any nature whatsoever, together with any additions to tax, penalties, fines or interest thereon, including, without limitation, penalties, fines or interest arising out of any delay or failure by the County to pay any of the foregoing or failure to file or furnish to the Authority or the Trustee for filing in a timely manner any returns, hereinafter levied or imposed against the Authority or the Facilities, the rentals and ether payments required hereunder or any parts thereof or interests of the County or the Authority or the Trustee therein by any governmental authority. The County may, at the County's expense and in its name, in good faith contest any such taxes, assessments and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Authority or the Trustee shall notify the County that, in the opinion of independent counsel, by nonpayment of any such items, the interest of the Authority in the Facilities will be materially endangered or the Facilities, or any part thereof, will be subject to loss or forfeiture, in which event the County shall promptly paysuch taxes, assessments or charges or provide the Authority with full security against any toss which may result from nonpayment, in form satisfactory to the Authority and the Trustee. SECTION 8.10. AftQrity's Purpose. The Authority covenants that, prior to the discharge of this Lease, it will not engage in any activities inconsistent with the purposes for which the Authority is organized. SECTION 8.11. Purpose of Lem, The County covenants that during the term of this Lease, except as hereinafter provided, (a) it will use, or cause the use of, the Facilities for public purposes and for the purposes for which the Facilities are customarily used, DOCSSF i:308303.8 24 4^,51 i-:10 TM4 (b) it will not vacate or abandon the Facilities or any part thereof, and (c) it will not make any use of the Facilities which would jeopardize in any way the insurance coverage required to be maintained pursuant to Article V hereof. ARTICLE IX DISCLAIMER OF WARRANTIES; VENDOR'S WARRANTIES; USE OF THE FACILITIES SECTION 9.41. Disclaimer. of Wgnanties. THE AUTHORITY MAKES NO AGREEMENT, WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY, FITNESS FOR PARTICULAR. PURPOSE OR FITNESS FOR USE OF THE FACILITIES OR THE PROJECT, OR WARRANTY WITH RESPECT THERETO. THE COUNTY ACKNOWLEDGES THAT THE AUTHORITY IS NOT A MANUFACTURER OF THE FACILITIES OR THE PROJECT OR A DEALER THEREIN, THAT THE COUNTY LEASES THE FACILITIES AS-I , IT BEING AGREED THAT ALL OF THE AFOREMENTIONED RISKS ARE TO BE BORNE BY THE COUNTY. In no event shall the Authority be liable for any incidental, indirect, special or consequential damage in connection with or arising out of this Lease or the existence, furnishing, functioning or the County's use of any item or products or services provided for in this Lease. SECTION 9.012. Vendor's Warranties. The Authority hereby irrevocably appoints the County its agent and attorney-in-fact during the term of this .Lease, so long as the County shall not be in default hereunder, to assert from time to time whatever claims and rights, including warranties of the Facilities or the Project, which the Authority may have against the manufacturers, vendors and contractors of the Facilities or the Project. The County's sole remedy for the breach of such warranty, indemnification or representation shall be against the manufacturer or vendor or contractor of the Facilities or of the Project, and not against the Authority, nor shall such matter have any effect whatsoever on the rights and obligations of the Authority with respect to this Lease, including the right to receive full and timely payments hereunder. The County expressly acknowledges that the Authority makes, and has made, no representation or warranties whatsoever as to the existence or availability of such warranties of the manufacturer, vendor or contractor. SECTION 9.43. Use of the Facilities. The County will not install, use, operate or maintain the Facilities improperly, carelessly, in violation of any applicable law or in a manner contrary to that contemplated by this Lease. The County shall provide all permits and licenses, if any, necessary for the installation and operation of the Facilities. In addition, the County agrees to comply in all respects (including, without limitation, with respect to the use, maintenance and operation of the Facilities) with all laws of the jurisdictions in which its operations may extend and any legislative, executive, administrative or judicial body exercising any power or jurisdiction over the Facilities; provided, however, that the County may contest in good faith the validity or application of any such law or rule in any reasonable manner which does not, in the opinion of the Authority, adversely affect the estate of the Authority in and to the Facilities or its interest or rights under this Lease. 1 OCSSF i 3U8303.8 25 4051 1-1 10 TM4 ARTICLE X MISCELLANEOUS SECTION 10.41. Law_Governing. This Lease shall be governed exclusively by the provisions hereof and by the laws of the State of California as the same from time to time exist. SECTION 10.02. Notices. All notices, statements, demands, consents, approvals, authorizations, offers, designations, requests, agreements or promises or other communications hereunder by either party to the other shall be in writing and shall be sufficiently given and served upon the other party if delivered personally or if mailed by United States registered mail, return receipt requested,postage prepaid: If to the County: County of Contra Costa c/o Clerk of the Board of Supervisors County Administration Building 651 Pine Street Martinez, California 94553 With respect to insurance matters: County of Contra Costa Risk Manager Risk Management Department 2534 Arnold Drive Martinez, California 94553 cc: General Service Administration Attn: Carol Chan 1220 Morello Avenue, Suite 100 Martinez, CA 94553 If to the Authority: County of Contra Costa Public Financing Authority c/o County Administrator County Administration Building 651 Pine Street Martinez, California 94553 If to the Trustee: U.S. Bank Trust National Association 550 South Hope Street, Suite 500 Los Angeles, California. 90017 !)OCSSr"I.303303.8 26 40511-1 10 TM4 or to such ether addresses as the respective parties may from time to time designate by notice in writing. A copy of any such notice or other document herein referred to shall also be delivered to the 'Trustee. SECTION 10.03. Validity and Severability. If for any reason this Lease shall be held by a court of competent jurisdiction to be void, voidable, or unenforceable by the Authority or by the County, or if for any reason it is held by such a court that any of the covenants and conditions of the County hereunder, including the covenant to pay rentals hereunder, .,s unenforceable for the full term hereof, then and in such event this Lease is and shall be deemed to be a lease under which the rentals are to be paid by the County annually in consideration of the right of the County to possess, occupy and use the Facilities, and all of the rental and ether terms, provisions and conditions of this Lease, except to the extent that such terms, provisions and conditions are contrary to or inconsistent with such holding, shall remain in full force and effect. SECTION 10.04. 'yet-Nei-Net Lease. This Lease shall be deemed and construed to be a "net-net-net lease" and the County hereby agrees that the rentals provided for herein shall be an absolute net return to the Authority, free and clear of any expenses, charges or set-offs whatsoever. SECTION 10.05. Section Headings. All section headings contained herein are for convenience of reference only and are not intended to define or limit the scope of any provision of this Lease. SECTION 10.06. Amendment or Termination. The Authority and the County may at any time agree to the amendment or termination of this Lease; provided, however, that the Authority and the County agree and recognize that this Lease is entered into in accordance with the terms of the Trust Agreement, and accordingly, that any such amendment or termination shall only be made or effected in accordance with and subject to the terms of the Trust Agreement. SECTION 10.07. Execution. This Lease may be executed in any number of counterparts, each of which shall be deemed to be an original, but all together shall constitute but one and the same Lease. It is also agreed that separate counterparts of this Lease may separately be executed by the Authority and the County, all with the same force and effect as though the same counterpart had been executed by both the Authority and the County. DOC,SSIy 1:308303.8 27 40511-110 Th 4 IN WITNESS WHEREOF, the Authority and the County have caused this Lease to be executed by their respective officers thereunto duly authorized, all as of the day and year first above written. COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY, as Lessor By: Chair Attest: Philip J. Batchelor, Executive Director and Secretary By Director, Capital Facilities and Debt Management, County of Contra Costa COUNTY OF CONTRA COSTA, as Lessee SEAL; By Chair of the Board of Supervisors County of Contra Costa, State of California Attest. Philip J. Batchelor, Clerk of the Board of Supervisors and County Administrator By Chief Clerk Approved as to form: County Counsel DOCSS 1:3os?o3.8 40511-110 TM4 EXHIBIT A The Facilld All that certain real property situated in the County of Contra Costa, State of California, described as follows: Facilat Location West County Detention Facility 5555 Giant Highway Richmond, California Bray Courthouse 1020 Ward Street Martinez, California Social Services Building 4545 Delta Fair Boulevard Antioch, California DO SSF1:3083©3.8 40511-1 10 TM4 A-1 FXHISII S-_g aeent I8 Payment Schedule County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 1999 Series A Total Semiannual Fiscal Year DateBase Rental I Base Rental 611/99 2,429,934.17 2,429,954.17 1211199 1,706,931.25 611/00 3,916,931.25 5,623,862.50 1211100 1,662,731.25 6/1101 4,322,731.35 5,985,462.50 12/1101 1,609,531.25 611102 4,374,531.25 5,984,062.50 1211102 1,554,231.25 611103 4,439,231.25 5,993,462.50 1211/03 1,496,531.25 6/1104 4,496,531.25 5,993,062.50 1211104 1,436,531.25 611105 4,551,531.25 5,988,062.50 1211105 1,374,231.25 611/06 4,609,231.25 5,983,462.50 121110+6 1,309,531.25 6/1/07 4,674,531.25 5,984,062.50 1211107 1,242,231.25 611108 4,747,231.25 5,989,462.50 12/1/08 1,154,606.25 611109 3,759,606.25 4,914,212.50 1211/09 1,099,901.25 6/1/10 3,824,901.25 4,924,802.50 12/1110 1,041,995.00 611111 3,876,995.00 4,918,990.00 1211/11 979,625.00 611112 3,944,625.00 4,924,250.00 1211/12 901,793.75 611/13 4,016,793.75 4,918,587.00 12/1/13 820,025.00 6/1114 4,100,025.00 4,920,050.00 12/1/14 733,925.00 6/1/15 4,186,925.00 4,922,850.00 1211/15 643,231.25 611/16 4,273,231.25 4,916,462.50 12/1/16 547,943.75 611/17 1,937,943.75 2,485.887.50 1211117 514,931.25 6/1118 1,969,931.25 2,484,862.50 12/1/18 480,375.00 6/1119 2,005,375.00 2,485,750.00 1211/19 442,250.00 611/20 2,042,250.00 2,484,500.00 1211/20 402,230.00 6/1/21 2,087,250.00 2,489,500.00 1211121 360,125.00 611122 2,130,125.00 2,490,250.00 12/1122 315,875.00 611123 2,170,875.00 2,486,750.00 1211/23 269,500.00 6/1124 2,219,500.00 2,469,000.00 1211124 220,750.00 611125 2,270,750.00 2,491,500.00 12/1125 169,500.00 6/1126 2,319,500.00 2,489,000.00 1211126 115,750.00 611/27 2,375,750.00 2,491,500.00 1211127 59,250.00 611128 2,429,250.00 2x488,500.00 Total 1259172,121.67 125,172,121.67_ EXHIBIT C 1999 PROJECT F ciiity ocation Family Lave Center and associated facilities Adjacent to 1111 Ward Street Martinez, CA Social Services Building 4545 Delta Fair Boulevard Antioch, CA Sheriff s Building 1980 Muir Road Martinez, CA Juvenile Detention Facility Glacier Drive Martinez, CA Los Medanos Project Loveridge Road Pittsburg, CA DOCSSF I:308303.8 405;1-110 TV14 C-1 OIC&S DRAFT 2/11/99 LETTER.OF INSTRUCTIONS To: U.S. BAI K TRUST NATIONAL ASSOCIATION, as successor trustee under a Trust Agreement, dated as of July 1, 1988, by and among U.S. Bank Trust National Association, the Contra Costa County Public Facilities Corporation and the County of Contra Costa(the"Prior Trust Agreement") Re: Defeasance of County of Contra Costa 1988 Certificates of Participation for Consolidated Capital Projects, Equipment Acquisition Program and Countywide Integrated Telecommunications Network Ladies and Gentlemen: This Letter of Instructions, dated as of February 1, 1999, is from the COUNTY OF CONTRA COSTA, a political subdivision of the State of California (the "County"), to U.S. BANK TRUST NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America(the "Prior Trustee") and pursuant to the Prior Trust Agreement. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Prior"frust Agreement. RECITALS You are advised that the County of Contra Costa Public Financing Authority (the "Authority") duly issued $74,685,000 of County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 1999 Series A (the "Refunding Bonds"), under and pursuant to the Trust Agreement, dated as of February 1, 1999, by and between U.S. Bank Trust National Association, as trustee ("the Trustee") and the Authority (the "Trust Agreement") for the purpose, among others, of providing funds to you for the defeasance of the Outstanding County of Contra Costa 1988 Certificates of Participation for Consolidated Capital Projects, Equipment Acquisition Program and Countywide Integrated Telecommunications Network, delivered in the original aggregate principal amount of $61,690,000(the"Prior Certificates"). This Letter of Instructions provides for the creation of a fund to be known as the Prior Certificates Escrow Fund (the "Escrow Fund") to be established and -maintained by the Prior Trustee, and provides for the deposit in the Escrow Fund of certain of the proceeds of the Refunding Bonds and other moneys. The County has taken action to cause to be issued to the Prior Trustee for deposit in or credit to the Escrow Fund certain cash, securities and investments consisting of certain direct and general obligations of the United States of America, or obligations that are unconditionally guaranteed as to principal and interest by the United States of America, that are not subject to redemption prior to their respective stated maturities (the "Escrow Securities"). The initial Escrow Securities are listed on Schedule I attached hereto and made a part hereof, and are in an amount which, together with the income or increment to accrue on such Escrow oocs,F3:3 1 4675.E Securities, will be sufficient, as certified by Deloitte &Touche LLP, certified public accountants, to pay the amounts required pursuant to Section 3. Escrow Securities shall not include unit investment trusts or mutual funds. NI STRUCTIQNS Section 1. Establishment and Maintenance of Escrow Fund. The Prior Trustee shall establish and maintain pursuant to these irrevocable instructions the Escrow Fund until all amounts due as represented by the Prior Certificates have been paid. The Prior Trustee shall hold the securities, investments and moneys in the Escrow Fund at all times as a special fund and separate trust account. All securities, investments and moneys in the Escrow Fund are hereby irrevocably pledged, subject to the provisions of Section 2 and Section 7 hereof, to secure the payment of the Prior Certificates. Section 2. Investment of Escrow Fund. (a) The County shall take all remaining necessary action to enable the Prior Trustee to register in the name of the Prior Trustee, for the account of the Escrow Fund, the Escrow Securities. The Prior Trustee shall use proceeds of the Refunding Bonds in the amount of $32,387,349.01 and moneys held pursuant to the Prior Trust Agreement in the amount of $164,335.59 and certain available moneys of the County in the amount of $844,747.50 and deposited into the Escrow Fund to purchase the Escrow Securities and establish the initial cash balance in the Escrow Fund. (b) The Prior Trustee shall reinvest at the written direction of the County any cash portion of the Escrow Fund in .Escrow Securities. Any such reinvestment shall be made in securities the principal of and interest on which is payable at such times and in such amounts as will be sufficient (together with the other securities, investments and moneys in the Escrow Fund) to pay the Prior Certificates in accordance with Section 3 and consistent with the then currently applicable report of the nationally recognized firm of independent certified public accountantsdelivered with respect to the Escrow Fund. The Prior Trustee shall not be liable or responsible for any loss resulting from any investment made pursuant to this Letter of Instructions and in full compliance with the provisions hereof. Section 3. Payment and Prepayment of Prior Certificates. The Prior Trustee agrees to deposit, to the extent such funds are received in the Escrow Fund, the principal of and interest on all Escrow Securities held for the account of the Escrow Fund promptly as such principal and interest become due, and to apply such principal and interest, together with other moneys and the principal of and interest on other securities deposited in the Escrow Fund, to the payment of the principal and interest represented by the Prior Certificates when due to and including June 1, 1999 and to the payment of the principal and prepayment premium represented by the Prior Certificates on June 1, 1999. Upon payment of all Prior Certificates, the Prior Trustee shall transfer any moneys or securities remaining in the Escrow Fund, to the extent not required for any fees or expenses of the Prior Trustee, to the County. Section 4. Notice of Prepa ent. The County hereby irrevocably directs the Prior Trustee, and the Prior Trustee agrees, to give notice of the prepayment of the Prior DO SSF1:314675.4 2 Certificates on .Tune 1, 1999 in the time, form and manner as specified by the Prior Trust Agreement. Section S. Possible Deficiencies. If at any time the Prior Trustee shall know that the moneys in the Escrow Fund, including the anticipated proceeds of the Escrow Securities, will not be sufficient to make all payments required by Section 3 hereof. the Prior Trustee shall notify the County in writing as soon as reasonably practicable of such fact and the amount of such deficiency; provided, however, the Prior Trustee shall have no liability whatsoever hereunder if it shall fail to give such notice as contemplated above. Thereupon the County shall use its best efforts to obtain and deposit with the Prior Trustee for deposit in the Escrow Fund, from any legally available moneys, such additional moneys as may be required to meet fully the aggregate amounts to become due and payable on the Prior Certificates as the same become due. The Prior Trustee shall in no manner be responsible for the County's failure to make any such deposit. Section 6. Unclaimed Moneys. Any moneys held by the Prior Trustee in trust for the payment and discharge of any of the Prior Certificates which remain unclaimed for two (2) years after the date when such Prior Certificates are to have been retired or prepaid in accordance with Section 3 shall be repaid by the Prior Tr=ustee to the County as its absolute property free from trust, and the Prior Trustee shall thereupon without further action on the part of the County be released and discharged with respect thereto and the owners of the Prior Certificates shall look only to the County for the payment of such certificates; provided, however, that before being required to make any such payment to the County, the Prior Trustee may, at the expense of the County, (1) cause to be published once a week for two (2) successive weeks in a financial newspaper a notice that said moneys remain unclaimed and that, after a date named in said notice, which date shall not be less than thirty (30) days after the date of the first publication of such notice, the balance of such moneys then unclaimed will be returned to the County, and (2) cause to be mailed, for and on behalf of the County, a copy of such notice, postage prepaid, not less than thirty (30) nor more than sixty (60) days prior to said date named in said notice, to the respective registered owners of any of said Prior Certificates. The instructions herein shall constitute the Written Request of the County for purposes of Section 10.02 of the Prior Trust Agreement, Section 7. Substitution of Securities. Upon the written request of the County, subject to the conditions and limitations hereinafter set forth and applicable government rules and regulations, the Prior Trustee shall sell, redeem or otherwise dispose of the securities in the Escrow Fund, if there are substituted therefor, from the proceeds of such securities, other Escrow Securities as hereinafter provided. The County will not exercise any powers which would have the effect of causing any of the Refunding Bonds to be "arbitrage bonds" as defined in Section 148 of the Internal Revenue Code of 1986 and the regulations of the United States Department of the Treasury issued thereunder. The Prior Trustee shall dispose of the securities in the Escrow Fund and purchase substitute Escrow Securities only upon receipt of-- (a) a written report of a nationally recognized firm of independent certified public accountants acceptable to the Prior Trustee to the effect that the substitute Escrow Securities will mature in such principal amounts and earn interest in such amounts and at such times so that sufficient moneys will be available to pay, as the same become due, all principal, premium, if any, and interest represented by the Prior Certificates; and DOC'SSF1:314675.4 3 (b) a legal opinion of nationally recognized bond counsel to the effect that such disposition of the securities in the Escrow Fund and purchase of substitute Escrow Securities will not cause the Refunding Bonds or the Prior Certificates to be "arbitrage bonds" as defined in Section 148(f) of the Internal Revenue Code of 1986 and the regulations of the United States Department of the Treasury issued thereunder. Section 8. Fees and Expenses of Prior Trustee. The County by this Letter of Instructions, agrees to pay the fees and expenses of the Prior Trustee incurred as a result of this Letter of Instructions and the acceptance thereof by the Prior Trustee; provided, however, that in no event shall such fees or expenses incurred by the Prior Trustee be deducted from, or constitute a lien against, the Escrow Fund. Section 9. Liabilities and Oblizations of Prior Trustee. The Prior Trustee shall have no obligation to mare any payments or disbursement of any type or incur any financial liability in the performance of its duties under this Letter of Instructions unless the County shall have deposited sufficient funds therefor with the Prior Trustee. The Prior Trustee may rely and shall be protected in acting upon the written instructions of the County or its agents relating to any matter or action as Prior Trustee under this Letter of Instructions. The obligations hereunder shall not create any obligation upon the Prior Trustee in excess of that provided under the Trust Agreement. The County, to the extent permitted by law, covenants to indemnify and hold harmless the Prior Trustee against any loss, liability or expense, including legal fees, incurred in connection with the performance of any of its duties hereunder, except the Prior Trustee shall not be indemnified against any loss, liability or expense resulting from its negligence or willful misconduct. The Prior Trustee may consult with counsel of its own choice (which may be counsel to the County) and the opinion of such counsel shall be full and complete authorization to take or suffer in good faith any action in accordance with such opinion of counsel. The Prior Trustee shall not be responsible for any of the recitals or representations contained herein. The Prior Trustee shall not be liable for the accuracy of any calculations provided as to the sufficiency of the moneys or Escrow Securities deposited with it to pay the principal, interest or premiums, if any, represented by the Prior Certificates. The Prior Trustee shall not be liable for any action or omission of the County under this Letter of Instructions or the Prior Trust Agreement. Whenever in the administration of this Letter of Instructions the Prior Trustee 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 Prior Trustee, be deemed to be conclusively proved and established by a certificate of an authorized representative of the County, and such certificate shall, in the absence of negligence or willful misconduct on the part of the Prior Trustee, be full warrant to the Prior Trustee for any DOCSSrt:}!467=.a 4 action taken or suffered by it under the provisions of this Letter of Instructions upon the faith thereof. The Prior Trustee may conclusively rely, as to the truth or accuracy of the statements and correctness of the opinions and calculations provided, and shall be protected and indemnified, in acting, or refraining from acting, upon any written notice, instruction, request, certificate, document or opinion furnished to the Prior Trustee signed or presented by the proper party, and it need not investigate any fact or matter stated in such notice, instruction, request, certificate or opinion. Section 10. Miscellaneous. This setter of Instructions may not be amended by the parties hereto unless there shall first have been filed with the County and the Prior Trustee (i) a written opinion of nationally recognized bond counsel stating that such amendment will not adversely affect the exclusion from gross income for federal income tax purposes of interest represented by the Prior Certificates or on the Refunding Bonds, and(ii)unless such amendment is not materially adverse to the interests of the registered owners of the Prior Certificates, the written consent of all the registered owners of the Prior Certificates then outstanding. DOCSSF I:3;4675.a 5 Section 11. Severability. If any section, paragraph, clause or provision of this Letter of Instructions shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such section, paragraph, clause or provision shall not affect any of the remaining provisions of this Letter. COUNTY OF CONTRA COSTA By Chair of the Board of Supervisors County of Contra Costa, State of California Attest. Philip J. Batchelor, Clerk of the Board of Supervisors and.County Administrator By: Chief Clerk Approved as to form; County Counsel U.S. BANK TRUST NATIONAL ASSOCIATION, as Prior Trustee By Authorized Officer DOC'SSF i:314675.4 SCHEDULE i Escrow SmLnties United Mates Treasury Obligations as set Porth below: Cash in the amount of$8.10. State and Local Government Series efr nd5r Sond Proceeds and other available moneys Escrow: Purchase Type of Type of Maturity First Int Par Total Date S =i SI GS Date Pmt Date A our Rase Gast March 4, 1999 SLGS Certificate June 1, 1999 lune 1, 1999 33,396,425.00 4.44% 33,396,425.00 DOCSSFt:3146,75.4 I-1 OH&S DRAFT 2/11/99 CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement (the "Disclosure Agreement") is executed and delivered by the COUNTY OF CONTRA COSTA, CALIFORNIA (the "County"), and U.S. BANK TRUST NATIONAL ASSOCIATION, as trustee (the "Trustee") in connection with the issuance by the County of Centra Costa Public Financing Authority (the "Authority") of $74,685,000 Lease Revenue Bonds (Refunding and Various Capital Projects), 1999 Series A (the "Bonds"). The Bonds are being issued pursuant to a Trust Agreement dated as of February 1, 1999, between the Authority and the Trustee (the "Trust Agreement"). Pursuant to the Facility Lease (Various Capital Projects), dated as of February 1, 1999 (the "Facilities Lease"), the County has covenanted to comply with its obligations hereunder and to assume all obligations for Continuing Disclosure with respect to the Bonds. The County, the Trustee and the Dissemination Agent covenant and agree as follows: SECTION' 1. Purpose of the Disclasure Agfeement. This Disclosure Agreement is being executed and delivered by the County, the Trustee and the Dissemination Agent for the benefit of the Molders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriters in complying with S.E.C. Rule 15c2-12(b)(5). SECTION 2. Definitions. In addition to the definitions set forth in the Trust Agreement, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings. "Annual Report" shall mean any Annual Report provided by the County pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Beneficial Owner" shall mean any person which has or shares the power, directly or indirectly, to make investment decisions concerning the ownership of any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries). "Disclosure Representative" shall mean the County Administrator, Director, Capital Facilities and Debt Management or his or her designee, or such other officer or employee as the County shall designate in writing to the Trustee from time to time. "Dissemination Agent" shall mean the County, or any successor Dissemination Agent, which may be designated in writing by the County and which has filed with the Trustee a written acceptance of such designation. "Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Agreement. "National Repository„ shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The National Repositories approved by the Securities and .Exchange Commission as of the date of this Agreement are set forth in Exhibit B. DOCSsr .312sc4.4 "Participating Underwriter" shalt mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Repository" shall mean each'National Repository and the State Repository. "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "State" shall mean the State of California. "State Repository" shall meant any public or private repository or entity designated by the State as the state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Agreement, there is no State Repository. SECTION 3. Provision of Annual Re orts. (a) The County shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the County's fiscal year (presently .lune 30), commencing with the report for the 1998-1999 Fiscal Year, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the County may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the County's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(t). (b) Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report to Repositories, the County shall provide the Annual Report to the Dissemination Agent and the Trustee (if the Trustee is not the Dissemination Agent), provided, however, that the County may distribute the Annual Report itself after providing written notice to the Trustee and the Dissemination Agent. If by such date, the Trustee has not received a copy of the Annual Report, the Trustee shall contact the County to determine if the County is in compliance with the first sentence of this subsection(b). (c) If the Trustee is unable to verity that an Annual Report has been provided to Repositories by the date required in subsection (a), the Trustee shall send a notice to each Repository, the Municipal Securities Rulemaking Board and the State Repository, if any, in substantially the form attached as Exhibit A. (d) The Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and the State Repository, if any; and DOCSsrI.312564.4 2 (ii) to the extent the County has provided the Annual Report to the Dissemination Agent, file a report with the County and (if the Dissemination Agent is not the Trustee) the Trustee certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all the Repositories to which it was provided. SECTION 4. Content of Annual Reports. The County's Annual Report shall contain or include by reference the following: 1. The audited financial statements of the County for the ,prior fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the County's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. 2. Numerical and tabular information for the immediately preceding .Fiscal Year of the type contained in the Official Statement under the following captions: (a) "SECURITY AND SOURCES OF PAYMENT FOR THE 1999 SERIES A BONDS -- Base Rental Payments" (report changes in DEBT SERVICE SCHEDULE), (b) "APPENDIX B — COUNTY FINANCIAL INFORMATION -- 1996-97 and 1997-98 County General Fund Budgets" (update table entitled GENERAL FUND BUDGETS); (c) "APPENDIX B — COUNTY FINANCIAL INFORMATION -- County Investment Pool"(update various tables); (d) "APPENDIX B -- COUNTY FINANCIAL INFORMATION -- Ad Valorem Property Taxes" (update table entitled SUMMARY OF ASSESSED VALUATIONS AND AD VALOREM PROPERTY TAXATION FOR FISCAL YEARS 1989-90 THROUGH 1998-99); (e) "APPENDIX B — COUNTY FINANCIAL INFORMATION — Accounting Policies,Reports and Audits"; (f) "APPENDIX B -- COUNTY FINANCIAL INFORMATION -- Accounting Policies, Reports and Audits" (update table entitled SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES); (g) "APPENDIX B — COUNTY FINANCIAL INFORMATION — Long Term Obligations -- General Obligation Debt" and "--Lease Obligations" (update financial information). DOOSsrI.312564.4 3 Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the County or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The County shall clearly identify each such other document so included by reference. SECTION 5. Rene ortin of Significant Events. (a) Pursuant to the provisions of this Section 5, the County shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: 1. principal and 'interest payment delinquencies; 2. non-payment related defaults; 3. modifications to rights of Holders of Bonds, 4. optional, contingent or unscheduled bond calls; 5. defeasances; 6. rating changes; 7. adverse tax opinions or events adversely affecting the tax-exempt status of the Bonds; 8, unscheduled draws on the debt service reserves reflecting financial difficulties; 9. unscheduled draws on credit enhancements reflecting financial difficulties; 10. substitution of credit or liquidity providers, or their failure to perform; and 11. release, substitution or sale of property securing repayment of the Bonds. (b) The Trustee shall, promptly upon obtaining actual knowledge at its principal corporate trust office as specified in Section 12 hereof of the occurrence of any of the Listed Events, contact the Disclosure Representative, inform such person of the event, and request that the County promptly notify the Trustee in writing whether or not to report the event pursuant to subsection ( ); provided that, failure by the Trustee to so notify the Disclosure Representative and make such request shall not relieve the County of its duty to report Listed Events as required by this Section 5. (c) Whenever the County obtains knowledge of the occurrence of a Listed Event, whether because of a notice from. the Trustee pursuant to subsection (b) or otherwise, the CDOC'SSF 1:31 256:4.4 4 County shall as soon as possible determine if such event would be material under applicable federal securities laws. (d) If the County has determined that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the County shall promptly notify the Trustee in writing. Such notice shall instruct the Trustee to report the occurrence pursuant to subsection(f). (e) If in response to a request under subsection (b), the County determines that the Listed Event would not be material under applicable federal securities laws, the County shall so notify the Trustee in writing and instruct the Trustee not to report the occurrence. (f) If the Trustee has been instructed by the County to report the occurrence of a Listed Event, the Trustee shall file a notice of such occurrence with the Municipal Securities Rulemaking Board and the State Repository. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(4) and(5)need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Bonds pursuant to the Trust Agreement. (g) The Trustee may conclusively rely on an opinion of counsel that the County's instructions to the Trustee under this Section 5 comply with the requirements of the Rule. SECTION 6. Termination of RgRortin Obligation. Each party's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the County shall give notice of such termination in the same manner as for a Listed Event under Section 5(f). SECTION" 7. Dissemination Agent. The County may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the County pursuant to this Disclosure Agreement. If at any time there is not any other designated Dissemination Agent, the County shall be the Dissemination Agent. SECTION 8. Amendments Waiver. Notwithstanding any other provision of this Disclosure Agreement, the County, the Trustee and the Dissemination Agent may amend this Disclosure Agreement (and the Trustee and the Dissemination Agent shall agree to any amendment so requested by the County provided such amendment does not impose any greater duties, nor risk of liability, on the Trustee or the Dissemination Agent, as the case may be), and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or 5(a), it may only be made in connection with a change in circumstances that arises from a rDOCSSF#:312564.4 5 change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bonds,or the type of business conducted; (b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) The amendment or waiver either (i) is approved by the Holders of the Bonds in the same manner as provided in the Trust Agreement for amendments to the Trust Agreement with the consent of Holders, or (ii) does not, in the opinion of the Trustee or nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the Bonds. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the County shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the County. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed :Event under Section 5(f), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the County from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the County chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the County shall have no obligation under this Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 147. Default. In the event of a failure of the County, the Trustee or the Dissemination Agent to comply with any provision of this Disclosure Agreement, the Trustee (and, at the written request of any Participating Underwriter or the Holders of at least 25% aggregate principal amount of Outstanding Bonds, shall, but only to the extent indemnified to its satisfaction), or any Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the County, the Trustee or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default ander the Trust Agreement, and the sale remedy under this Disclosure Agreement in the event of any failure of the County, the Trustee and the 00CSS:r1.12564.4 6 Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. SECTION 11. Duties, Immunities and Liabilities of Trustee and Dissemination A mt,. The Dissemination Agent and the Trustee shall have only such duties as are specifically set forth in this Disclosure Agreement, and the County, to the extent permitted by law, agrees to indemnify and save the Dissemination Agent and the Trustee, their officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's or Trustee's respective negligence or willful misconduct. The obligations of the County under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. SECTION 12. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows: To the County: County of Contra Costa. County Administrator's Office 651. Pine Street, 6h Floor Martinez, CA 94553-0063 Attention: Laura W. Lockwood, Director of Capital Facilities and Debt Management Telephone: (925) 646-1228 Fax: (925) 335-1098 If to the Trustee: U.S. Bank Trust National Association One California Street, Suite 400 San Francisco, CA 94111 Attention: Corporate Trust Department Telephone: (415)273-4519 Fax: (415) 273-4592 Any person may,by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent. SECTION 13. Bengficiaries. This Disclosure Agreement shall inure solely to the benefit of the County, the Trustee, the Dissemination Agent, the Participating Underwriters and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. DOC'SSF 1.3 12554.4 7 SECTION 14. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Date: February 1, 1999. COUNTY OF CONTRA COSTA By Chair of the Board of Supervisors County of Contra Costa, State of California Attest: Philip J. Batchelor, Clerk of the Board of Supervisors and.County Administrator By Chief Clerk Approved as to form: County Counsel U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee By Authorized Officer DOC SSF1.342564A EXHIBIT A NOTICE TO REPOSITORIES OF FAILURE TO FILE ANT, i-UAL REPORT Name of County: County of Centra Costa Name of Issue: County of Contra Costa Pudic Facilities Financing Authority Lease Revenue Bonds(Refunding and Various Capital Projects), 1999 Series A Date of Issuance: NOTICE IS HEREBY GIVEN that the County of Contra Costa (the "County") has not provided an Annual Report with respect to the above-named Bands as required by Section 8.08 of the Facility Lease (Various Capital Projects), dated as of February 1, 1999, by and between the County of Contra Costa Public Financing Authority and the County. The County anticipates that the Annual Report will be filed by Dated: U.S. BAND.TRUST NATIONAL ASSOCIATION, on behalf of COUNTY OF CONTRA COSTA cc: County of Contra Costa DOC'gsrt;312564.4 A-1 EXHIBIT B The Nationally Recognized Municipal Securities Information Repositories approved by the Securities and Exchange Commission as of the date of the Disclosure Agreement are as follows: Bloomberg Municipal Repository P.O.Box 840 Princeton, NJ 08542-0840 (609) 279-3200/(609) 279-3204 to order documents (609) 279-5962 or(609) 279-5963 (FAX) Internet address: MUNIS@bloornberg.com Contact: Lena Panich JJ Kenny Information Services The Repository 65 Broadway, 16th Floor New York, NY 10006 (212) 770-4568 (212.) 797-7934 (FAX) e-mail address:joan-horai@a mcgrawhill.com Contact: Ms. Joan Horai, Repository Thomson NRIMSIR Secondary Market Disclosure 395 Hudson Street, 3rd Floor New Fork, NY 10014 (212) 807-5001 (2.12) 989-2078 (FAX) Contact: Carolyn Chin e-mail address: Diselosure@muller.com DDC Data,Inc. One Executive Drive Fort Lee,N.J. 07024 (201) 346-0701. (201) 947-0107 (FAX) Contact: NRMSIR. Internet address: nrtnsir@dpedata.com ooCssr1;312564.4 B-1 NEW ISSUE—BOOK ENTRY ONLY DATINGS: ® See"RATINGS"herein. In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, based upon existing laws, regulations, rulings and court decisions, and assuming among other matters, compliance with certain covenants, interest on the 1999 Series A Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. In the further opinion of Bond Counsel, interest on the 1999 Series A Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes,although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income.Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of the interest on, the 1999 Series A Bonds. See "TAX MATTERS"herein. $74,685,000 -; COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY LEASE REVENUE BONDS (REFUNDING AND VARIOUS CAPITAL PROJECTS), 1999 SERIES A Dated.February 1,1999 Due:June 1,as shown on inside cover The County of Contra Costa Public Financing Authority Lease Revenue Bonds(Refunding and Various Capital Projects), 1999 Series A(the"1999 Series A Bonds")are being issued(i)to refund and defense the County of Contra Costa 1988 Certificates of Participation dated as of July 1,1988 and(ii)to finance various capital projects of the County of Contra Costa,California(the "County„). See "PLAN OF FINANCE" and "ESTIMATED SOURCES AND USES OF FUNDS." Interest on the 1999 Series A Bonds will be payable on June I and December 1 of each year,commencing June 1,1999.The 1999 Series A Bonds will be initially delivered in book-entry form, registered in the name of Cede c& Co. as nominee of The Depository Trust Company,New York,New York("DTC").Principal of,redemption premium,if any,and interest on the 1999 Series A Bonds will be paid by U.S.Bank Trust National Association,as Trustee,to DTC.DTC is required to remit such principal and interest to its Participants for disbursement to the beneficial owners of the 1999 Series A Bonds. See "THE 1999 SERIES A BONDS—Book-Entry Only System."The 1999 Series A Bonds are subject to optional and mandatory redemption as described herein. Payment of the principal of and interest,when due,on the 1999 Series A Bonds maturing on and after June 1,2002,will be insured by a municipal bond insurance policy to be issued concurrently with the delivery of the 1999 Series A Bonds by MBIA Insurance Corporation.The 1999 Series A Bonds maturing on June 1 in the years 1999 through 2001 will not be insured. AMBL4 The 1999 Series A Bonds are being issued pursuant to a Trust Agreement,dated as of February 1,1999,between the County of Contra Costa Public Financing Authority (the "Authority„) and the Trustee. The 1999 Series A Bonds are limited obligations of the Authority payable solely from certain revenues of the Authority, consisting primarily of Base Rental Payments(as defined herein)to be made by the County to the Authority pursuant to a Facility Lease (Various Capital Projects),dated as of February 1,1999,between the Authority and the County.Pursuant to the Facility Lease,the County will lease the Facilities(defined herein)from the Authority.The County has covenanted in the Facility Lease to take such action as may be necessary to include Base Rental Payments in its annual budgets and to make the necessary annual appropriations therefor.The County has agreed in the Facility Lease to make all Base Rental Payments,subject only to abatement in the event of damage to or destruction or condemnation of all or a portion of the Facilities which results in substantial interference with the County's use and occupancy of the Facilities. THE 1999 SERIES A BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY AND ARE NOT SECURED BY A LEGAL OR EQUITABLE PLEDGE OF,OR CHARGE OR LIEN UPON,ANY PROPERTY OF THE AUTHORITY OR ANY OF ITS INCOME OR RECEIPTS, EXCEPT THE REVENUES (AS DESCRIBED HEREIN). NEITHER THE FULL FAITH AND THE CREDIT OF THE AUTHORITY NOR THE COUNTY IS PLEDGED FOR THE PAYMENT OF THE INTEREST ON OR PRINCIPAL OF THE 1999 SERIES A BONDS.NEITHER THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE 1999 SERIES A BONDS NOR THE OBLIGATION TO MAKE BASE RENTAL PAYMENTS UNDER THE FACILITY LEASE CONSTITUTES A DEBT,LIABILITY OR OBLIGATION OF THE AUTHORITY OR THE COUNTY FOR WHICH EITHER ENTITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH EITHER ENTITY HAS LEVIED OR PLEDGET) ANY FORM OF TAXATION. THE AUTHORITY HAS NO TAXING POWER. MATURITY SCHEDULE, CUSIP NUMBERS, PRINCIPAL AMOUNTS,INTEREST BATES AND PRICES (see inside cover) The 1999 Series A Bonds will be offered when,as and if issued and received by the Underwriters,subject to approval of validity by Orrick, Herrington & Sutcliffe LLP, San.Francisco, California, Bond Counsel. Certain other legal matters will be passed upon for the Underwriters by Brown & Wood LLP, San Francisco, California, Underwriters' Counsel, and for the County and the Authority by County Counsel. C.M. de Crinis&Co.,Inc.served as Financial Advisor to the County in connection with the issuance of the 1999 Series A Bonds. The 1999 Series A Bonds, in book-entry form, will be available for delivery through DTC on or about March 4, IW9. Bear, Stearns & Co. Inca Merrill Lynch & Co. THIS COVER PAGE CONTAINS INFORMATION FOR REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS TRANSACTION. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. Dated:January 21, 1999 MATURITY SCHEDULE (Base CUSIP Number: 21226P) $56,995,000 Serial Bonds Maturity Date CUSIP Principal Interest Price/ Maturity Date CUSIP Principal Interest Price/ (June 1) Number Amount Rate Yield (June 1) Number Amount Rate Yield 1999 AY4 $1,275,000 4.00% 3.00% 2010 BK3 $2,725,000 4.25% 4,30% 2000 AZl 2,210,000 4.00 3.25 2011 BLI 2,835,000 4.40 100 2001 BA5 2,660,000 4.00 3.50 2012 BM9 2,965,000 5.25 4.500(') 2002 13133 2,765,000 4.00 3.55 2013 BN7 3,115,000 5.25 4.600(') 2003 BCi 2,885,000 4.00 3.65 2014 BP2 3,280,000 5.25 4.700(') 2004 13D9 3,000,000 4.00 3.75 2015 BQO 3,455,000 5.25 4.750(') 2005 BE7 3,115,000 4.00 3.85 2016 BR8 3,630,000 5.25 4.800(2) 2006 BF4 3,235,000 4.00 3.95 2017 BS6 1,390,000 4.75 4.875 2007 BG2 3,365,000 4.00 4.05 2018 BT4 1,455,000 4.75 4.950 2008 13II0 3,505,000 5.00 4.15 2019 BUI 1,525,000 5.00 100 2009 BJ6 2,605,000 4.20 100 $17,690,000 5.00%Term Bond due June 1,2028,Priced to Yield 5.11%,CUSIP Number 21226PBV9 (Plus Accrued Interest from February 1,1999) ' Priced to call at 101%of par on June 1,2009. (2)Priced to par call on June 1,2011. No dealer,broker, salesperson or other person has been authorized by the County or the Authority to give any information or to make any representation other than those contained herein and, if given or made, such other information or representation must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of any offer to buy nor shall there be any sale of the 1999 Series A Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers of the 1999 Series A Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of facts. The information set forth herein has been obtained from the County or the Authority and from other sources and is believed to be reliable but is not guaranteed as to accuracy or completeness. The information and expressions of opinions herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall,under any circumstances, create any implication that there has been no change in the affairs of the County or the Authority since the date hereof. This Official Statement is submitted in connection with the sale of the 1999 Series A Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose, unless authorized in writing by the County. All summaries of the documents and laws are made subject to the provisions thereof and do not purport to be complete statements of any or all such provisions. All capitalized terms used herein, unless noted otherwise, shall have the meanings prescribed in the Trust Agreement and the Facility Lease. This Official Statement, including any supplement or amendment hereto, is intended to be deposited with one or more nationally recognized municipal securities information repositories. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 1999 SERIES A BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY Joe Canciamilla Donna Gerber Chair Vice-Chair Philip J.Batchelor Kenneth J. Corcoran Executive Director and Secretary Treasurer COUNTY OF CONTRA.COSTA,CALIFORNIA BOARD OF SUPERVISORS OF THE COUNTY Joe Canciamilla (District 5) Chair John Gioia Gayle B.Uilkema (District 1) (District 2) Donna Gerber Dark DeSaulnier (District 3) (District 4) 'dice-Chair COUNTY OFFICIALS Philip J.Batchelor Clerk of the Board and County Administrator Laura W. Lockwood Director, Capital Facilities and Debt Management Kenneth J. Corcoran William J. Pollacek Auditor-Controller Treasurer-Tax Collector Victor J.Westrnan Steph=en L. Weir County Counsel County Clerk-Recorder SPECIAL SERVICES B04ND COUNSEL FINANCIAL ADVISOR Orrick,Herrington&Sutcliffe LLIP C.M. de Crinis&Co.,inc. San Francisco,California Sausa ito,California VERIFICATION AGENT TRUSTEE A.�'D ESCROW AGENT Deloitte&Touche LLP U.S.Bank Trust National Association Houston,Texas San.Francisco,California i (THIS PAGE, INTENTIONALLY LEFF BLANK) FABLE OF CONTENTS e INTRODUCTION-............................................e.........................,.<,...,..........................,..............................1 Authorityfor Issu.ance.....................<...................,..............e................,.e..............,...................,....,..2 PLANOF FINANCE...-o .........+<....e.,.<................e....e........,e..<....e.,.........e....e.e..e.........o..................................2 Planof Refunding .......................................................................................................<...................2 The1999 Project.................. .......... .............. ..................... ................... ...... ......................3 ESTIMATED SOURCES ANT USES OF FUNDS.....e.......<....,.<.......................<.........,......e...,........>,.........5 THEFACiL,rTIES.....................................................................................................<..........,.............,..........5 THE1999 SERIES A BONDS .....................................<...................e.,............,.<..........,.,....,< .......6 GeneralProvisions...................................................................................<...................,..............<....6 RedemptionProvisions .<..........................................................<...,........,.,................,....,.,.,........,,..e,7 Noticeof Redemption....<.................................................................................................................8 Selection of 1999 Series A Bonds for Optional R.edemption.....e.....................................................8 Effectof Redemption.....................................................e.................................,....e,......,,<....,...........8 SECURITY AND SOURCES OF PAYMENT FOR THE 1999 SERIES A EQNDS.................................8 General............................................................................................................................................e8 Pledgeof Revenues...................<....,...........,........................e............,.,.<..,........,,.,....,...e..............<..10 EaseRental Payments.,..................................................................................................................10 Pledge of Courthouse Funds .........<........................................................>................,..,.e.e...............12 ReserveFund................. .......... ....... ........... ................................. ......... .........13 Suhstitution..................................................................<........................................,........................13 Insurance....................................................................................................................>,....,.............14 AdditionalBonds...........................................................................................................................15 BONDINSI~` ANCE....................<..,....,..................<................,,........e.....................,..................e............,.16 ThePolicy and the Insurer......................................................................................e..,...,...............16 Disclaimer.........<............................................................................................................................18 DEET SER ,TILE RESERVE FUND SURETY BOND ............................................................................e 18 CERTAINRISS FACTORS..........................................................................+............<................ ..............19 LimitedObligation--..... ......—.... .... ..... ........ ............................... .......................................19 .Ease Rental Payments................................................................<..,.,................................,,..,.........19 Abatement......................................................................................................................................20 Defaultand Remedies....................................................................................................................20 Limitationson Remedies..........e.e...................................................................................................21 Riskof Earthquake..........................................e.,.....................<................,.....................,...............21 HazardousSubstances.........,.<........................................................................................................21 Year2000 Risk-............----............—..................................................................... ....... ..........22 CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES,REVENUES AND APPROPRIATION'S....................e........,........,..........................,.........................,.................,,..............24 Article XIII A of the California Constitution................................................................................<24 i � Legislation Implementing Article XIII A........................ —~. .......... ... ......................---......24 � Article XIII Bofthe California Cuowbtotion.....--.—.......... ...... ...... ........... ................---....24 Ard ole XIII Cand Article XIII I}........... ........ ........—. .... .... ........ ....... ...................—_. ... .25 Proposition62 ........ ......... ........ ................... ........ ... ...... .................. ..................-..— .......%6 l8?.... ........... ...._...... ........... —............. ......................— ..................—.. ... ...27 FutureInitiatives ... .................. ............ —.— ....... —_—............. ............... ............ ................28 If{E � AwTouOoITz —...---_--.---_...—~.---------_—_.--...~--.--.—_28 ' THECOl3�TY—.......... ...... ........ — ........ ....... ...................... ................ ........ —..2@ � RATINGS-.... _ .......... ...... ........ .........-._-.---._--.............. ..........—....... ........ ---. ......Z9 ' LITIGATION......... ...... — ...... — .... ...... ..................... ..— ....... ... —............ ................ .—...... —29 � ` � TAXMATTERS. .—_..... ...... ...........---...... .... ...---.......... ............... ........................ ...... ...........2g ' ' � LEGAL MATTERS ...^~^^~^...---...... ..................... ........~~^—... .... — .... ....................---. ....-3l ` ' CONTINUING DISCLOSURE ` ...... ......--~^^ ..........--''~^----........ —'~~ ...... ......_—_.---....3l � � VERIFICATION � OF MATHEMATICAL COMPUTATIONS.... ........ ...... ............. ...... --......... —...3l � � � VmDERvvmITIN\z .......................---......---........ ...-- .....................----............ _. ........—.......32 � , , MISCELLANEOUS INFORMATION.................. — ...... ..----...... ....— .... ......................... ........... �32 APPENDIX A — GENERAL COUNTY, ECONOMIC,AND DEMOGRAPHIC INFORMATION.................... ...... .........~.........— ...... .................... .......—.—.—A,l APPENDIX — COUNTY FDNANTC{ATL INFORMATION ................ .... ............................ ----]B-I APPENDIX — FINANCIAL STATEMENTS OF THE COUNTY FOR TB£FISCALlEAR ENDED JUNE 3O, l990 ..... ...... ... ,.................. --.....................................--__C-1 APPENDIX — SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS......................... ................................—........... ......I}-1 APPENDIX — {RC}P(}8ED FORM(}FBOND COUNSEL OPINION........---...................,........-E'I APPENDIX F — PROPOSED FORM OF CONTINUING IJI8CL{}QTjIQE AGREEMENT—.............F-1 APPENDIX(} — BOOK-ENTRY ONLY SYSTBM......—.......................... .........................�.�..�......G-1 APPB2�I�IXIl — SPECIMEN D�UNICIP/�LB(J�JI}INSlJRAI�CI�P��I.IC�� ........ ii OFFICIAL STATEMENT $74,685,000 COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY LEASE REVENUE BONDS (REFUNDING AND VARIOUS CAPITAL PROJECTS), 1999 SERIES A INTRODUCTION This Official State-ment (which includes the cover page and Appendices hereto) (the "Official Statement") provides certain -Information concerning the issuance of County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital. Projects), 1999 Series A(the .999 Series A Bonds"), in an aggregate principal amount of$74,685,000 by the County of Contra Costa Public Fir.an,..ng Authority (the "Authority"). The 1999 Series A Bonds are limited obligations of the Authority payable solely ftorn Revenues (as hereinafter defined) consisting primarily of base rental payments to be made by the County of Contra Costa (the "County"), as rent for the Facilities (as defined herein). The County will lease the Facilities to the Authority pursuant to a Master Site Lease, dated as of February 1, 1999 (the "Site Lease"). The Facilities will be leased-back by the County pursuant to a Facility Lease(Various Capital Projects), dated as of February 1, 1999 (the "Facility Lease"),between the County,as lessee, and the Authority, as lessor. All real property leased by the County from the Authority under the Facility Lease in connection with the Facilities is herein referred to as the "Derniged Premises." The 1999 Series A Bonds are being issued (i) to refund and defense the County's 1988 Certificates of Participation, dated as o1cJuly 1, 1988 (the "Prior Certificates") and(ii) to finance various capital projects of the County(the "1999 Project," and together with the 1988 Project(as defined below), the "Project"). In addition, the Authority will utilize proceeds of the 1999 Series A Bonds to fund a Reserve Facility and to Day certain costs associated with the issuance of the 1999 Series A Bonds. See "PLAN of FiNAN-cE11 and"EsIrIMATED SOURCES AND USES OF FUNDS," The Prior Certificates were executed and delivered on July 1, 1988 in the original aggregate principal amount of $61,690,000 to (a) refinance the acquisition, renovation and refurbishing of and improvements to the following facilities located in the County: the Auditor-Controller's Building, the District Attorney's Building, the Public Defender's Building, a social services building, the County Administration Building, the Bray Courthouse and the Sheriff Patrol Investigation and Communication Administration Building, all located in the City of Martinez, California, the Municipal Court Building in the City of Concord, California, the County Library Building in the City of Pleasant Hill, California, and the East County Social Services Building in the City of Antioch,California and(b)finance the acquisition and installation of various equiprnent items including cars, trucks, computers and communication equiprInerit and the Countywide Integrated Telecommunication Network System(the 11 1988 Project"). The 1999 Series A Bonds will be issued pursuant to a Trust Agreement, dated as of February 1, 1999 (the "Trust Agreement"), between the Authority and U.S. Bank Trust National Association, as trustee (the "Trustee"). Pursuant to the Trust Agreement,the Authority will pledge to the Trustee, for the benefit of the Bondholders, all of the Revenues, consisting primarily of base rental payments (the "Base Rental Payments")made by the County to the Authority under the Facility Lease, and will assign its right, as may be necessary,to enforce payment of Base Rental Payments. The Authority may in the future issue additional bonds under the Trust Agreement ("Additional Bonds") secured on a parity with the 1999 Series A Bonds. See "SECURITY AND SOURCES OF PAYMENT FOR THE 1999 SERIES A BONDS v Additional Bonds." The 1999 Series A Bonds, together with any Additional Bonds issued pursuant to the Trust Agreement,are herein referred to as the "Bonds." The County has covenanted under the Facility Lease that so long as the Facilities are available for the County's use and occupancy, it will take such action as may be necessary to include all Base Rental Payments and Additional .Payments (as defined below) in its annual budgets and to make the necessary annual appropriations therefor, including the appropriation of applicable amounts from its Courthouse Funds(as defined below). See "SECURITY AND SOURCES OF PAYMENT FOR THE 1999 SEINE'S A BONDS." As additional security for the 1999 Series A Bonds, payment of the principal of and interest on the 1999 Series A Bonds maturing on and after June 1, 2002 (the "Insured 1999 Series A Bonds") when due will be insured by a municipal bond insurance policy to be issued by MBIA Insurance Corporation (the "Insurer") simultaneously with the delivery of the 1999 Series A Bonds. The 1999 Series A Bonds maturing on June 1 in the years 1999 through 2001 (the "Uninsured 1999 Series A Bonds") will not be insured. See"BOLD INSURANCE./, Base Rental Payments are subject to complete or partial abatement resulting from substantial interference with the use and occupancy by the County of the Facilities (except for the portion of Base Rental Payments attributable to the Courts Project for which Courthouse Funds are available for the payment thereof) caused by damage to or destruction or condemnation of the Facilities. See "CERTAIN RISK FACTORS" and "SECURITY AND SOURCES OF PAYMENT FOR THE 1999 SERIES A BONDS - Pledge of Courthouse Funds." Abatement of Base Rental Payments under the Facility Lease could result in 1999 Series A Bondholders receiving less than the full amount of principal and interest on the 1999 Series A Bonds, except to the extent proceeds of insurance are available or there are moneys in the Reserve Fund (as described herein) to make payments of principal of or interest on the 1999 Series A Bonds (or the relevant portion thereof)during periods of abatement of Base Rental. Summaries of certain provisions of the principal legal documents relating to the 1999 Series A Bonds are contained in Appendix D. The summaries and descriptions in this Official Statement of the Trust Agreement, the Facility Lease, the Site Lease, the Continuing Disclosure Agreement, the Letter of Instructions and other agreements relating to the 1999 Series A Bonds are qualified in their entirety by reference to such documents, and the descriptions herein of the 1999 Series A Bonds are qualified in their entirety by the form thereof and the information with respect thereto included in such documents. All capitalized terms used herein, unless noted otherwise, shall have the meanings prescribed in the Trust Agreement and the Facility Lease. See "APPENDIX D — SUMMARY OF CERTAT PROVISIONS OF PRINCIPAL,LEGAL DOCUMENTS—Certain Definitions." Authority for Issuance The 1999 Series A Bonds are being issued pursuant to the Constitution and the laws of the State, resolutions adopted by the Authority and the County on December 8, 1998 and the Trust Agreement. PIAN OF FINANCE Pian of Refunding Concurrently with the delivery of the 1999 Series A Bonds,the Prior Certificates will be refunded and defeased. In connection with the Prior Certificates, the County leased the 1988 Project from the 2 Contra Costa County Public Facilities Corporation (the "Corporation") pursuant to a lease agreement, dated as of July 1, 1988 (the "Prior Facility Lease")with the Corporation, which,pursuant to a Site Lease dated as of July 1, 1988 (the "Prior Site Lease"), had leased the 1988 Project from the County. Pursuant to an assignment agreement between the Corporation and U.S. Bank Trust National Association, as successor to Bank of America National Trust and Savings Association (the "Prior 'Trustee"), the lease payments to be made by the County under the Prior Facility Lease (the "Prior Base Rental") were assigned to the Prior Trustee to pay the principal and interest represented by the Prior Certificates. Pursuant to the Letter of Instructions to the Prior Trustee, dated as of February 1, 1999, certain proceeds of the 1999 Series A Bonds, certain other County fbnds and certain funds from the Prior Certificates will be deposited into an escrow fund (the "Escrow Fund") for the prepayment of the Prior Base Rental and the Prior Certificates, following which no Prior Certificates will remain outstanding. The Prior Facility Tease and Prior Site Lease will terminate and the 1988 Project will vest in the County. As of.the date hereof, the Prior Certificates are outstanding in the aggregate principal amount of $31,955,000. The :Honeys required to refund the Prior Certificates will come from a portion of the net proceeds of the 1999 Series A Bonds and certain other available funds. Such funds will be applied to purchase direct obligations of the United States of America (the "Government Securities"). The Government Securities will be held by the Prior Trustee together with an initial cash deposit, sufficient (i)to pay the principal and interest with respect to the Prior Certificates on June 1, 1999,and(ii) to prepay the then outstanding Prior Certificates on June 1, 1999 at a prepayment price equal to the principal amount of the Prior Certificates then outstanding plus a prepayment premium of two percent of such principal amount. See "VERIFICATION OF MATHEMATICAL COMPUTATIONS." Neither the maturing principal of such Government Securities nor the interest income thereon will be available to pay the principal of or interest on the 1999 Series A Bonds. Set forth below are the Prior Certificates to be paid or defeased by this issue: County of Contra Costa 1988 Certificates of Participations (to be paid at maturity or prepaid on June 1, 1999) Maturity Date (June 1) Coupon Par Amount Cali Date 1999 730% $ 3,095,000 --- 2000 7„45 3,475,000 6/1/1999 2001 7.60 3,580,000 6/1/1999 2002 7.70 3,835,000 6/1/1999 2003 7.75 4,120,000 5/1/1999 2004 7.75 4,395,000 6/1/1999 2005 7.80 2,085,000 6/1/1999 2006 7.80 2,234,000 6/1/1999 2007 7.80 2,495,000 6/1/1999 2008 7.80 2o645o000 6/1/1999 TOTAL. $31,955,000 The 1999 Project A portion of the proceeds of the 1999 Series A Bonds will be used to finance various capital projects of the County (the "1999 Project"), The County presently anticipates that the capital projects 3 described below will constitute the 1999 project, although the County may change the 1.999 project from time to time by filing a notice of charge with the Trustee. Except for the East County Social Services Building, which is a portion of the Facilities, the facilities presently anticipated to be unproved as part of the 1999 project are not Facilities to be leased pursuant to the Facility Lease. The County intends to finance 130,900 square feet of tenant improvements to the Los Medanos Health Center ("LosMedanos"), located in the City of Pittsburg, California, which will be part of the Contra. Costa Regional Medical Center, the County's public hospital system. The County intends to convert the first,third, fourth and fifth floors of Los Medanos for use as an:.anent care clinic and various other health. clinics. Tenant improvements may also include equipment for these clinics. The County is leasing the facility fixom the Los Medanos Hospital District. The improvements are anticipated to be completed during 1999 and will cost approximately 8 million. The County intends to finance construction: of the Family Law Center and associated parking, to be located adjacent and connected to a County building at 111,1 Ward Street in the City of Martinez, California, The Family Law Center is the court center for family law matters, including dissolution of marriage, child custody and alternate dispute resolution. The facility is anticipated to be completed over the next two years and will cost approximately $8.5 million, which annaount includes costs of site development, landscaping, utilities, equipment, furnishings, improvements and appurtenant and related facilities,including demolition and environmental mitigation. The County intends to use $5.0 million of proceeds as a portion of its required :match for State funds as well as certain ineligible costs cinder a State program hon the construction of local correctional facilities. The County intends to construct an addition to the County's existing juvenile detention: facility located on Glacier Drive in the City of Martinez, California. The existing facility was completed in 1987 and is comprised of 120,000 square feet. Once State funding is obtained, construction is estimated to last two to three years. The County anticipates applying for a State grant to Band the remaining portion of the addition:that is estimated to cost a total of between $30 million and $35 million. If State funding is not granted,the County will use these proceeds for other eligible capital projects. T'he County intends to finance the acquisition of, and tenant improvements for, a building located at 2530 Arnold Dnve in the City of Martinez,California(the "County Office Building")to serve as a--new County office building. Acquisition and improvement of the facility and the purchase of equipment will cost approximately$18.5 million. The County intends to finance approximately $1.3 million of improvements to its East County Social Services Building located at 4545 Delta Fair Boulevard in the City of Antioch, Califomia, which improvements will be made while the County continues to have use and possession of the building. For additional information regarding the East County Social Services Building, see "THE FACILITIES." 4 ESTIMATED SOURCES AND USES OF FUNDS The following table sets forth the estimated sources and uses of funds related to the issuance of the 1999 Series A Bonds. Sqnrce 1 1999 Series A Bond Proceeds........................... ................ ....... S 74,685,000 Less: Underwriters'Discount..............--......... ........... ...... (435,857) (1)... .......... ............................... -164, Funds related to the Prior Certificates 337 Prepaid Base Rental on Prior Certificates................................................... 844,747 Net Origival Issue Premium... ...................-........ ..........-.... ...--. 905,431 Accrued InteresP'..... ...... ................ 31-1,612 Total Sources....... .............. .........—........ —76,48-1,270 USU EscrowFund............................ ................ ........... ................ .. ........ 33,407,685 Capitalized Interest Account' ) 13 -....-.1...... ................ 697,436 Interest AccounP....... .............--........... ................................. 317,612 1999 Project Fund .................................. .................................... 41,27/7,537 Municipal Bond Insurance and Reserve Surety Premium.s....... ......... $481,000 Costs of Issuance(4) _......... ................._................. ...........--............... 300,000 Total Uses ....... ...................... ......... ......... ....... $76,481,270 (1) Represents balance in the Lease Fund, Insurance Reserve Fund, Payment F-upd, Maintenance and Operation Fund and Trust Administrat-ion Fund of the Prior Certificates. (2) Represents interest on the 1999 Series A Bonds from their dated date to their delivery date. (3) Represents capitalized interest through December 1, 1999 on the portion of the 1999 Series A Bonds allocable to the County Office Building. (4) Includes legal and professional fees,title search and title inTarance fees,printing costs and other costs of issuance. THE FACILITIES The County will lease the Facilities to the Authority pursuant to the Site Lease, and the Authority will lease-back such facilities to the County pursuant to the Facility Lease. The County is committed to the use of the Facilities as County properties. Pursuant to the Facility Lease, the County may substitute other properties for the Facilities upon meeting certain conditions. See "SECURJTY AND SOURCES OF PAYMENT FOR T11E 1999 SERiEs A BONDS—Substitution." The Facilities consist of the West County Detention Facility, the Bray Courthouse and the East County Social Services Building and the respective sites thereof(collectively, the "Facilities"), each as further described below. Each of the Facilities includes site development, landscaping, utilities, equipment, furnishings, iniprovernents and appurtenant and related facilities located on the Demised Premises. 5 Approx. Original Approx. Building Appraised Completion Acreage Square Tern,of Site Value(!) Facility Address Date of Site Footage Lease (millions) West County Detention 5555 Giant highway 1991 47.4 243,300 2028 $63.00 Facility Richmond,California Bray Courthouse ?020 ward Street 19886�1 0,6 48,900 2016 10-35 Mar Inez,California East County Social 4545 Delta Fair Eiv . 13$8 4.9 52,700 2008 5.00 Services Building Antioch,California TOTAL: $78.35 ;1) used upon independent appraisals completed in December 1998. (�> A third story to the facility was completed.in 1992. The "west County Detention Facility is a 540 bed jail facility that is comprised of eight one- and two-story buildings, each of which has concrete block exterior walls with steel reinforcing, concrete floors, and a roof structure that is concrete with tar and gravel over a concrete deck, The Bray Courthouse contains the Superior Cotte facilities of the County and is a three-story building built with reinforced concrete with steel framing, with a concrete deck roof covered with tar and gavel, and with a concrete floor. The East County Social Services Building serves as a primary location for delivery of social services to residents in the eastern portion of the County and is a two-story office building built on concrete perimeter foundations 'having a concrete slab floor, structural steel walls witti stucco and rustic exterior,and a pitched,metal covered roof. THE 1999 SERIES A BONDS General Provisions The 1999 Series A Bonds are limited obligations of the Authority payable solely from revenues consisting primarily sof Base Dental Payments to be made by floe County under the Facility Lease. The 1999 Series A Bonds will be prepared in the form of fully registered certificates and, when executed and delivered, will be registered in the name of Cede & Co., as -nominee of The Depository Trust Company,New York,New York("DTC"). DTC will act as securities depository of the 1999 Series A Bonds. Ownership interests in the 1999 Series A Bonds may be purchased in book-entry form only, in the denominations hereinaPer set fords. See"Boob-Entry On' System"below. Ownership interests in 1999 Series A Bonds will be in $5,000 denominations or any integral nultiple thereof. Interest on the 1999 Series A Bonds will be calculated on the basis of a 3613-day year composed of twelve 3£1-day months and is payable on June 1 and December 1 (each an "Interest Payment Date") of each:year, commencing June 1, 1999. The 1999 Series A Bonds will be dated and bear interest fron^February 1, 1999. The 1999 Series A.Bonds will rr attze on the dates (each a "Maturity Date") and in the principal amounts, and the interest payable thereon will be computed at the rates, all as set forth on the inside cover page of this Official Statement. 6 Redemption Provisions Optional Redemption. The :999 Series A Bonds maturing on or prior to June 1, 2009 are not subject to optional redemption. The 1999 Series A Bonds maturing on or after J,,ine 1, 2010 are subject to redemption p-noc to their respective stated maturities, at the written direction of the Authority, from any moneys deposited by the Authority or the Co-Lmty, as a whoic or in part on any date(in such maturities as are designated in writing by the Authority to the Trustee) on or after June 1, 2009 at the following redemption prices (expressed as a percentage of the principal aincimt of the 1999 Series A Bonds called for redemption)plus accrued interest thereon to the date fixed for redemption,as follows: Redemption Period i — a—te—sil-211-c-11U.-Yel denn tion price June 1,2009 t1rough May 31,2010 101 % June 1,20:0 through May 31,2011 100.5 June 1,20 1-1 and thereafter 100 Mandatory Sinking Fund Redemption. The 1999 Series A Bonds maturing on June 1, 2028 are subject to mandatory sinking fund redemption prior to their stated maturity,in part on June I of each year on or after J;Une 1, 2020, by lot, from and in the amount of fhe mandatory sinking account payment due and payable on such dates, at a redemption price equal to the surr. of the principal amount thereof plus accrued interest thereon to the redemDtion. date, -without premium, in the amounts and on the dates set forth below: 1999 Series A Bonds Maturing on Junel,2028 Sinking Fund Payment Date (June I) Amount 2020 $1,600,000 2021 1,685,000 2022 1,770,000 2023 1,8559000 2.324 1,9509000 2025 2,050,000 2026 2,150,000 2027 2,260,000 2028* 2,370,000 Extraordinary Redemption. The 1999 Series A Bonds are subject to redemption by the Authority on any date prior to their respective stated maturities, upon notice as provided in the Trust Agreement, as a whole or in part by lot within each stated maturity of the 1999 Series A Bonds in Authorized Denominations, from prepayments of Base Rental Payments made by the County fion the-.net proceeds received by the County due to the taking of the Facilities or portions thereof under the power of eminent dotnain, or from the net proceeds of title insurance or insurance received for damage to or desal-uefior of the Facilities or portions thereoE under the circumstances described in the Trust Agreement 7 and the Facility Lease. See "SECURITY AND SOURCES OF PAYMENT FOR THE 1999 SERiEs A BONDS n Insurance." The redemption price will be equal to the principal amount of the 1999 Series A Bonds to be redeemed and accrued interest thereon to the date of redemption, without premium, Whenever less than all of the Outstanding Bonds are to be redeemed on any one date, the Trustee will select, in accordance with written ins-.actions from the Authority, the Bonds to be redeemed so that the aggregate annual amounts of principal of and interest on the Bonds which will be payable after such redemption date will be as nearly proportional as practicable to the aggregate annual amounts of principal of and interest on the Bonds outstanding prior to such redemption date. Notice of redemption Notice of redemption is to be mailed, first class postage prepaid, to the respective Owners of any 1999 Series A Bonds designated for redemption at their addresses appearing on the registration books required to be kept by the 'Trustee not less than 30 nor more than 50 days prior to the redemption date. Each notice of redemption wwrill state the date of such notice, the date of issue of the Bonds, the Series, the redemption date, the redemption place, the redemption price, and the CUSIP number 6f the maturity or maturities, and will designate the serial numbers of the 1999 Series A Bonds to be redeemed, and in the case of each. 1999 Series A Bond called for redemption in part, state the amount which is to be redeemed. Each such notice wild also state that from and after the redemption date, interest on the 1999 Series A Bonds to be redeemed will cease to accrue. Failure to receive such notice will not invalidate any of the proceedings taken in connection with such redemption. Selection of 1999 Series A Bonds for Optional Redemption The Aufierity will designate which maturities of Bonds are to be redeemed. Whenever less than all the Outstanding 1999 Series A Bonds maturing on any one date are to be redeemed, the Trustee will select the 1999 Series A Bonds of such maturity date to be redeemed from the Outstanding 1999 Series A Bonds payable on such maturity date by lot. For purposes of such selection, 1999 Series A Bonds will be deemed to be composed of$5,000 portions, and any such portion may be separately redeemed. In the event 1999 Series A Bonds subject to sinking fund redemption are designated for redemption, the Authority may designate which sinking account payments are allocated to such redemption. Effect of redemption If notice of redemption has been duly given as aforesaid and money for the payment of the redemption price of the 1999 Series A Bonds called for redemption is held by the Trustee, then on the redemption date designated in such notice .999 Series A Bonds so called for redemption will become due and payable,and from and after the date so designated interest on such 1999 Series A Bonds will cease to accrue, and the Owners of such 1999 Series A Bonds will have no rights in respect thereof except to receive payment of the redemption price thereof. SECURITY AND SOURCES OF PAYMENT FOR THE 1999 SERIES A BONDS General The Bonds are secured by the Revenues, which consist primarily of Base Rental Payments to be made by the County under the Facility Lease. Pursuant to the Facility Lease, the Authority leases the Facilities to the County. As rental for the use and occupancy of the Facilities, the County covenants to pay Base Rental Payments to the Trustee. The Base Rental Payments, which are subject to abatement (except for that portion of Kase Rental Payments attributable to the Courts Project for which Courthouse 8 Funds are available for the payment thereof)are calculated to be sufficient to pay principal of and interest on the Bonds when due. The County has covenanted in the Facility Lease to include all Base Rental Payments in its annual budgets and to make the necessary annual appropriations therefor, The Authority will pledge the Base Rental Payments to the Trustee for the benefit of the Owners of the Bonds. By the 15th day of the month immediately preceding each Interest Payment Date, the County must pay to the Trustee Base Rental Payments (to the extent required under the Facility Lease) which will be sufficient to pay, when due, the scheduled principal of and interest on the Bonds. Base Rental Payments are not subject to acceleration. As additional security for the 1999 Series A Bonds maturing on and after June 1, 2002, payment of the principal of and interest, when due, on the Insured 1999 Series A Bonds when due will be insured by a municipal bond insurance policy to be issued by MBIA Insurance Corporation simultaneously with the delivery of the 1999 Series A Bonds. See"BOND INSURANCE." Under the Facility Lease, the County agrees to pay Additional Payments for the payment of all expenses and all costs of the Authority and the Trustee related to the Facilities, including expenses of the Irustee payable by the Authority under the Trust Agreement, and fees of accountants, attorneys and consultants. The County is responsible for repair and maintenance of the Project during the term of the Facility Lease. The Base Rental Payments will be abated proportionately (except for the portion of Base Rental Payments attributable to the Courts Project, which will not be abated to the extent Courthouse Funds are available for the payment thereof), during any period in which by reason of any damage to or destruction of the Facilities, there is substantial interference with the use and occupancy of the Facilities by the County, in the proportion in which the cost of that portion of the Facilities rendered unusable bears to the cost of the whole of the Facilities. See "SECLIRITY AND SOURCES OF PAYMENT FOR THE 1999 SERIES A BONDS - Pledge of Courthouse Funds," During any such period of abatement, except to the extent that amounts held by the Trustee in the Revenue Fund or the Reserve Fund are otherwise available to pay the Bonds, revenues will not be available to pay the Bonds. Such abatement will continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any such damage or destruction, the Facility Lease will continue in full force and effect and the County waives any right to terminate the Facility Lease by virtue of any such damage or destruction. If the whole of the Facilities, including the Demised Premises, or so much therefor as 'to render the remainder-unusable, is taken under power of eminent domain,the term of the Facility Lease will cease as of the day possession is so taken. If less than the whole of the Facilities is taken by eminent domain, there will be a partial abatement of the rental due under the Facility Lease in an amount equivalent to the amount by which.the annual payments of principal of and interest on the Bonds then Outstanding will be reduced by the application of the award in eminent domain to the redemption of Outstanding Bonds. Should the County default under the Facility Lease, the Authority may (i) terminate the Facility Lease and take possession of the Facilities or (ii) retain the Facility Lease and may seek to hold the County liable for all Base Rental Payments and Additional Payments thereunder(without acceleration) as they become due on an annual basis. See "APPENDIX D- SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS— Facility Lease - Default and Remedies." Base Rental Payments and Additional Payrnerts may not be accelerated. See "CERTAr.N, RISK FACTORS." 9 Pledge of Revenues The Revenues consist primarily of the Base Rental Payments made by the County to the Authority In accordance with the Trust Agreement, all Revenues are irrevocably pledged to and will be used for the punctual payment of interest and premium, if any, on and principal of the Bonds and Reserve Facility Casts and the suras due and payable by the Authority in connection with any Swaps and will not be used for any other purpose while any of the Bonds remain Outstanding; provided, however, that out of the revenues may be applied such sums as are permitted under the, Trust Agreement. This pledge constitutes a first lien on the Revenues in accordance with the terms of the Trust Agreement. The Authority has directed that all Base Rental Payments be paid directly to the Trustee to be held in trust by the Trustee in the Revenue Fund for the benefit of the Bondholders. The County has covenanted under the facility Lease that as long as t ae Facilities are available for the County's use and occupancy, it will take such action as may be necessary to include all Base Rental Payments and Additional Payments due sunder the Facility Lease in its annual budgets and to make the necessary annual appropriations therefor. Base Rental Payments Base Rental Payments are calculated on an annual basis, for twelve-month periods commencing son June 1 and ending on. May 1, and each annual Base Rental Payment will be divided into two interest components,dare on June 1 and December 1, and one principal component, due on June 1, except that the first Base Rental Payment period will commence on the date of recordation of the Facility Lease and ends on May 31, 1999. Each Base Rental Payment with respect to the 1999 Series A Bonds will be payable on the 15th day of the month immediately preceding its due date. Each annual Base Rental Payment (to be payable in installments as aforesaid) will be for the use of the Facilities for the twelve-month period com-mencing on June 1 of the period in which such installments are payable (except the first Base Dental period which will ccinmence on the date of recording of the Facility Lease). The Trust Agreement requires that Base Rental Payments be deposited in the Revenue Fund maintained by the Trustee. Im accordance with the Trust Agreement, the Trustee will transfer such amounts as are necessary to the Interest Account or the Principal Account, as the case may be, to pay principal of and interest on the Bonds as the sante become due and payable. On each Principal Payment Date, following the payment of principal of and interest on tare Bonds,any excess arnount in the Revenue Fend will be transferred to the Reserve Fund, as necessary, and thereafter returned to the County, See "APPEENDI%D- SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL I;3ocUMENTS e Frust Agreement-Creation of Funds and Accounts." THE OBLIGATION OF THE COUNTY TO MAKE BASF RENTAL PAYMENTS IS AN €3BLICA.TION PAYABLE FROM AMOUNTS IN THE GENERAL FTUTIND AND THE COURTHOUSE FTUNDS OF THE COUNTY, AND DOES NOT CONSTITUTE A DEBT OF THE COUNT`' OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL, SUBDIVISION, THEREOF IN CO'-.NTTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION OR AN OBLIGATION FOR WHICH THE COUNTY MI UST LEVY OR PLEDGE, OR HAS LEVIED OR PLEDGED, ANTY FORM OF TAXATION. The following table shows the debt service schedule relating tothe l999 Series A Bonds. DEBT SERVICE SCHEDULE Amnual Principal Semi-knoual Payment Date Payments Interest Payments Total Fiscal Year Total 06/81/99 $1,275,000 $1`154°954.17 S2`429,954.17 $2^429,454.17 �2/01/99 1.706,931.25 1.786,93I.25 06/01/00 2,2I0,000 1`700,931.25 3`916,93I.25 5.023'862.50 12/01/00 1'662.73125 I.602,731.25 O8/OI/0l 2,660,000 1'662,731.25 4.322'731.25 5`985,462.50 12/01/01 1,609'531.25 1,609,531.25 06/01/02 2,765,000 1.609'531.25 4.374,53125 5,904,08150 12/01/02 1°554,23115 1,554`23I.25 06/)1/03 2`885'000 1,554,231.25 4,439,231.25 5,993,462.50 12/01/03 1,496,53 115 1,498,531.25 06/01/04 3`000,008 1^496,531.25 4,496'531.25 5,993,062.50 12/01/04 11`436'531.25 I,436,531.25 06/01/05 3,115,000 1,436,531.25 4°551`531.25 5°988,062.58 12/01/05 1,374,23I15 1,374,231.25 06/01/06 3,235'000 1,374'231.25 4,609,231.25 5.983.462.50 12/01/06 1'309,53I.25 1.309,531.25 06/01/07 3,385,000 1.309,531.25 4'674,5311.25 5,984'062.50 I2/01/07 1'24I,231.25 1,242,23 115 06/01/08 3`505`000 1.242,231.25 4,747,231.25 5^989,462.50 l,2/01/O8 l,l54,dU6.25 1,154,60615 06/01/09 2^805,008 1,154,006.25 3,759,606.25 4`914'212.50 12/01/09 1,099,901.25 1,099,9011.25 06/01/10 2,725,000 1,099,901.25 3,024'90I.25 4`924'00150 12/01/10 1,041'995.00 1'041^995.00 86/01/11 2.035,800 1,04I,995.08 3,876'495.00 4,918,990.00 l2/01/11 979,025.QU 979^025.00 06/01/12 2,965,000 979'625.00 3`944,625.00 4,924,250.8O 12/01/12 9011,793.75 901'793.75 06/01/13 3,115,000 901'793.75 4`016,793.75 4.910,587.50 13/81/13 820,025.00 820,035.00 06/01/14 3,200.000 820`025.00 4`I00,025.00 4,920.858.00 12/011/14 733'925.00 733,925.00 0(101/15 3,455"000 733,925.00 4'180`925.00 4,923^850.80 12/01/15 643,231.25 643,231.25 06/01/16 3,630,000 643'231.25 4.273,231.25 4,916,462.50 12/01/16 547`943.75 547`943.75 06/81/17 1.390.000 547,943.75 1'937,943.75 2,405`887.50 i2/01/17 514,931.25 5I4,931.25 06/01/18 1,455,000 514`931.25 1`969'93l25 2,484,062.50 12/01/1.8 480,375.80 480,375.00 06/01/19 1,525,000 480,375.00 3,005,375.00 2,405,750.00 12/01/19 442.250.00 442,250.00 06/01/20 1^000,0000) 442,250.00 2`042,250.00 2,484'500DO 11 Annual Principal Semi-Annual Payment Bate Payments Interest Payments Total Fiscal Year Total 2/01/20 402,250.00 402,250.00 06/01/21 1,685,0000) 402,250.00 2,087,250.00 2,489,500.00 12/01/21 360,125.00 360,11 25.00 06/01/22 1,770,0000) 360,125.00 2,130,125.00 2,490,250.00 12/01/22 315,875.00 315,875.00 06/01/23 1,855,0000) 315,875.00 2,170,875.00 2,485,750.00 12/01/23 269,500.00 269,500.00 06/01/24 1,950,000`;) 269,500,00 29219,500.00 2,489,000.00 12/01/24 220,750.00 2204750.00 06/01/25 2,050,0000) 220,750.00 2,270,750.00 2,491,500.00 12/01/25 169,500,00 169,500.00 06/01/26 2,150,0000) 169,500.00 2,319,500.00 2,489,000.00 12/01/26 115,750.00 115,750.00 06/01/27 29260,0000% 1154750.00 2,375,750.00 2,491,500.00 12/01/27 59,250.00 59,250.00 06/01/28 2,370,000 59,250.00 2,429 250.00 20488.500.00 TOTAL $74,b85,000 $50.487,121.67 125.172.121.67 $125.172.121.67 t4) Reflects mandatory sinking fart€payment for If5e Tema Bond due on Jane t,2028. Pledge of Courthouse Farads The County has covenanted that, subject t0 applicable law, it will utilize moneys in the County's Criminal Justice Facility 'Temporary Construction Fund and Courthouse 'Temporary Construction .Fund (collectively,the "Courthouse Funds")to pay the Authority in immediately available funds(from.amounts on hand from time to time in the Courthouse Funds) (i) the amount clue as Base Rental attributable to financing the Bray Courthouse and the Family Lady Center (collectively, the "Courts .Project") or (ii) the amount necessary to replenish the portion of the Reserve Fund allocable to the Courts Project. The County's obligation: to snake amounts in the Courthouse Funds available for court facilities began in 1982 and 1983. The pledge of such funds t0 repay the Courts Project debt service was approved Dy the Board of Supervisors on December 8, 1998 and will continue until the 1999 Series A Bonds allocable to the Courts Project mature or are defeased, The County's obligation to rake payments from the Courthouse Funds is not subject to abatement, Notwithstanding the foregoing, nothing will prevent the County from utilizing the Courthouse Funds for any other lawful purpose after the annual amount of .Base Dental allocable to the Courts Project has been funded, the only obligation under the Facility Lease being that the County must utilize any moneys therein available, pursuant,to applicable law, including the restricted purposes for which the respective funds may be expended, to pay the Kase Rental attributable to the Courts Project when the same is otherwise due and payable or to replenish the Reserve Fund as specified below, but there is no obligation on the County to set aside moneys in such fund in each fiscal year in excess of the amount needed in such fiscal year to pay such portion of the Base Rental, The average annual amount of revenues received from the Courthouse Funds over the past ten years is $2.1 million and the amount of Base Rental allocable to the Courts Project is estimated to be $1.7 million annually. 12 Reserve Fuad The'Trust Agreement requires the Reserve Fund to be funded in an amount equal to the Reserve Fund Regairement, which will be equal to $5,337,183 upon the initial delivery of the 1999 aeries A Bonds with cash, permitted investments, a surety bond, an insurance policy, or a letter of credit, or any combination thereof, as further described in the Trust Agreement. The Reserve Fund..Requirement will be satisfied through the issuance of a surety bored issued by MBIA Insurance Corporation, which is also insuring the Insured 4999 Series A Bonds. See "APPENDix FD-o SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS— Trust Agreement— Creation of Funds and Accounts-- Reserve Fund" and"DEBT SERVICE�,SI R'VE FUND SURETY BOND." Moneys its the Reserve Fund will be applied solely for the purpose of funding the Interest Account or the Principal Account, in that order, it the event of any deficiency in either of such accounts on an Interest Payment Bate or a Principal Payment Date; provided that, so long as the Authority is not in default under the Trust Agreement, certain excess amounts in the Reserve Fund will be transferred to the Revenue Fund or, if so directed by the authority, deposited into a Project Fund during construction of any Project. The'Frust Agreement requires that,as a condition to the issuance of Additional Bonds,an.ar:ount will be deposited in the Reserve Fund so that the following such deposit there will be on deposit in the Reserve Fund an amount at least equal to the Reserve Fund Requirement, For the definition of the tears "Reserve Fund Requirement," see "APPHNI Dj CD s SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS S—Certain Definitions." See also, "DEBT SERVICE REsERvE FUND SURE 'Y BOND.If Substitution The County and the Authority, with the written consent of the Insurer, may substitute other real property as part of the Facilities for purposes of the Facility Lease provided the County has filed with the Authority and the Trustee, with copies to each rating agency then providing a rating for the Bonds, all of the following: (a) Executed copies of the Facility :Lease or amendments thereto containing the mended description of the Facilities, including the Remised Premises, including the legal description of the TDeinaised Premises as modified, if necessary. (b) A Certificate of the County with copies of the Facility Lease or a Site Lease,if needed,or amendments thereto containing the amended desc;-iptior of the Facilities stating that such documents have been duly recorded in the official records of the County Recorder of the County. (c) A Certificate of the County, together with an appraisal perforrsed by ars independent appraiser, evidencing that the annual fair rental value of the Facilities which will constitute the Facilities after such stabstitution will be at least equal to 100% of the maxi-mum amount of Base Rental Payments becoming slue in the diens current year ending May 31 or in any subsequent year ending May 31. (d) A Certificate of the County stating that, based upon review of such instruments, certificates or any other matters described in such Certificate of the County, the County has good merchantable title to the Facilities which will constitute the Facilities after such substitution. The term "good merchantable title" shall rb.eai such title as is satisfactory and sufficient for the needs and operations of the County. (e) A Certificate of the County stating that such substitution does not adversely affect the County's use and occupancy of the Facilities. 13 (f) An Opinion of Bond Counsel stating that such amendment or modification (i) is authorized or permitted by the Constitution and laws of the State and the Trust Agreement; (ii) complies with the terms of the Constitution and laws of the State and of the Trust Agreement; (iii) will, upon the execution and delivery thereof, be valid and binding upon the Authority and the County, and(iv) will not cause the interest on the Bonds to be included in gross income for federal income tax purposes, Tliere is no requirement that any Substitute Facilities be of the same or a similar nature or function as the then existing Facilities. The Insurer may require additional conditions to the Substitution of Facilities. Insurance The Facility Lease requires the County to maintain or cause to be maintained,throughout the term of the Facility Lease, insurance against loss or damage to any structures constituting any part of the Facilities by fire and lightning, with extended coverage insurance, vandalism and malicious mischief insurance and sprinkler system leakage insurance, and earthquake insurance, if available on the open market f<°orn reputable insurance companies at a reasonable cost as determined by the County. Such extended coverage insurance will, as nearly as practicable, cover loss or damage by explosion,windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. Such insurance will be in an amount equal to the replacement cost(without deduction for depreciation) of all stmictures constituting any part of the Facilities, excluding the cost of excavations, of grading and filling, and of the land(except that such insurance may be subject to deductible clauses for any one loss of not to exceed $260,000 or comparable amount adjusted for inflation or more in the case of earthquake insurance), or in the alternative, will be in an amount and in a form sufficient (together with moneys held under the 'frust Agreement), in the event of total loss, to enable all Bonds then Outstanding to be redeemed. In the event of any damage to or destruction of any part of the Facilities caused by the perils covered by such insurance, the Authority, except as hereinafter provided, will cause the proceeds of such insurance to be utilized for the repair, reconstruction or replacement of the damaged or destroyed portion of the Facilities, to at least the same condition as they were in prior to the damage or destruction, insofar as the same may be accomplished by the use of said proceeds. The Trustee will hold such proceeds in the Insurance and Condemnation Fund and will permit withdrawals upon written request for such purposes, Any balance of said proceeds not required for such repair, reconstruction or replacement will be treated by the Trustee as Base Rental Payments and applied in the manner provided by the Trust Agreement. Alternatively, if the proceeds of such insurance together with any other moneys then available for the purpose are at least sufficient to redeem an aggregate principal amount of Outstanding Bonds equal to the amount of Base Rental attributable to the portion of the Facilities so destroyed or damaged (determined by reference to the proportion which the cost of such portion of the Facilities bears to the cost of the Facilities), the Authority, with the written consent of the County, may elect not to repair, reconstruct or replace the damaged or destroyed portion of the Facilities and thereupon will cause said proceeds to be used for the redemption of Outstanding Bonds pursuant to the provisions of the Frust Agreement. The Authority and the County covenant to promptly apply for federal or State disaster aid in the event that the Facilities are damaged or destroyed as a result of an earthquake occurring at any time. Any proceeds received as a result of such disaster aid will be used to repair, reconstruct, restore or replace the damaged or destroyed portions of the Facilities, or, at the option of the County and the Authority, to redeem Outstanding Bonds if such use of such disaster aid is permitted. As an alternative to providing the fire and extended coverage insurance, or any portion thereof, required by the Facility Lease, the County may provide a self-insurance method or plan of protection if 14 and to the extent such self insurance method or plan of protection will afford reasonable coverage for the risks required to be insured against, in light of all circumstances, giving consideration to cost, availability and similar plans or methods of protection adopted by public entities in the State other than the County, So long as such method or plan is being provided to satisfy the requirements of the Facility Lease, there will be fled with the trustee a statement of an actuary, insurance consultant or other qualified person (which may be the Risk Manager of the County), stating that, in the opinion of the signer, the substitute method or plan of protection is in accordance with the requirements of the Facility Lease and, when effective, won ld afford reasonable coverage for the risks required to be insured against. There will also be filed a certificate of the County setting forth the details of such substitute method or plan. In the event of loss covered by any such self-insurance method, the liability of the County under the Facility Lease will be limited to the amounts in the sell insurance reserve fund or funds created under such method. The Facility Lease requires the County to maintain or cause to be maintained, rental interruption or use and occupancy insurance to cover loss, total or partial, of the rental income from or the use of the Facilities as the result of any of the hazards covered by the fire and extended coverage insurance required by the Facility Lease described in the preceding paragraphs (provided with respect to earthquake insurance, only if available on the open market from reputable insurance companies at a reasonable cost, as deterrained by the County), in an amount sufficient to pay the part of the total rent attributaole to the portion of the Facilities rendered unusable (determined by reference to the proportion which the cost of such portion bears to the cost of the Facilities) for a period of at least two years, except that such insurance may be subject to a deductible clause of not to exceed $250,000 (or comparable amount adjusted for inflation or more in the case of earthquake coverage). .Any proceeds of such insurance will be used by the Trustee to reimburse to the County any rental theretofore paid by the County under the Facility Lease attributable to such structure for a period of time during which the payment of rental under the Facility Lease is .abated, and any proceeds of such insurance not so used will be applied to pay Base Rental aynner is and additional Payments. The County also agrees to deliver to the Authority title insurance on the Demised Pren ises, subject only to Permitted Encumbrances, in an amount equal to the .aggregate principal amount. of the 1999 Series A Bonds. The County is not required under the Facility Lease to purchase commercial insurance 0 cover damage due to earthquake. However, the County has purchased an earthquake insurance policy for all of its property, including the Facilities, through the California State .Association of Counties Excess Insurance Authority. The County's current earthquake insurance policy expires on March 31, 2001. No assurance can be given that the County will continue to maintain earthquake insurance, See "APPENI DT B-COUNTY FINANCIAL INFORMATION--Insurance." The County is also required to obtain certain liability insurance coverage i. protection of the Authority and the Trustee, See 11APPENDix D — SUMMARY OF CER'T'AIN PROVISIONS OF PRINCIPAL LEGA-11 DC3cum- ENTS—Facility Lease-Insurance." Additional Bands Additional Bonds may, with the consent of the Insurer, be issued or.a parity with the 1999 Serres A.Bonds upon the terms and subject to the conditions set forth in the".frust Agreement, See "AP1> NDiX D — SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DocuMENTS — TRUST AGREEMEN"°— Additional Bonds." 15 BONDINSURANCE The Policy and the Insurer The following information has been furnished by MBIA Insurance Corporation(the "Insurer") for use in this Official Statement. Reference is made to Appendix H for a specimen of the Insur°er's policy (the"Policy") The Policy unconditionally and irrevocably guarantees the full and complete payment required to be made by or on behalf of the Authority to the Trustee or its successor of an amount equal to (i) the principal of (either at the stated maturity or by an advancement of maturity pursuant to a mandatory sinking fund payment) and interest on the Insured 1999 Series A Bonds as such payments will become due but will not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a :mandatory sinking fund payment, the payments guaranteed by the Policy will be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any owner of the Insured 1999 Series A Bonds pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such owner within the meaning of any applicable bankruptcy law(a"Preference"), The Policy does not insure against loss of any redemption premium which may at any time be payable with respect to any Insured 1999 Series A Bond. The Policy does not, under any circumstance, insure against loss relating to: (i) optional or mandatory redemption (other than mandatory sinking fund redemption); (ii)any payments to be made on an accelerated basis; (iii)payments of the purchase price of Insured 1999 Series A Bonds upon tender by an owner thereof; or (iv) any Preference relating to (i) through (iii) above. The Policy also does not insure against nonpayment of principal or interest with respect to the Insured 1999 Series A Bonds resulting from the insolvency, negligence or any other act or omission of the Trustee or any other paying agent for the 1999 Series A Bonds. Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by the Insurer from the Trustee or any owner of an Insured 1999 Series A Bond the payment of an insured amount for which is then due, that such required payment has not been made, the Insurer on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of finds, in an account with Citibank, N.A., in New Fork, New `fork, or its successor, sufficient for the payment of any such insured amounts which are then due. Upon presentment and surrender of such Insured 1999 Series A Bonds or presentment of such other proof of ownership of the Insured 1999 Series A Bonds, together with any appropriate instruments of assignment to evidence the assignment of the insured amounts due on the Insured 1999 Series A.Bonds as are paid by the Insurer, and appropriate instruments to effect the appointment of the Insurer as agent for such owners of the Insured 1999 Series A Bonds in any legal proceeding related to payment of insured amounts on the Insured 1999 series A Bonds as are paid by the Insurer, such instruments being in a form satisfactory to State Street Bank and Trust Company,N.A., State Street Bank and Trust Company, N.A. will disburse to such owners or the Trustee payment of the insured amounts due on such Insured 1999 Series A Bonds, less any arnount held by the Trustee for the payment of such insured amounts and legally available therefor. The Insurer is the principal operating subsidiary of MBIA Inc., a New Fork ,stock Exchange listed company(the "Company"). The Company is not obligated to pay the debts of or claims against the Insurer. The Insurer is domiciled in the State of New York and licensed to do business in and subject to 16 regulation. under the laws of all 50 states, the District of Colurnbia, the Cornr:ron ealth of Puerto Mico, the commonwealth of the Northern Mariana Islands, the Virgin Islands of the United States and the Territory of Guam, The Insurer has two European branches, one ire the Republic of France and the other in the Kingdom of Spain. Neter York has laves prescribing minimum capital requirements, limiting classes and concentrations of 4Investments and requiring the approval of policy rates and forms. State laves also regulate the amount of both the aggregate and individual risks that may be insured, the payment of dividends by the Insurer,changes in control and transactions arnong affiliates. Additionally,the Insurer is required to maintain contingency reserves on its liabilities irs certain amounts and for certain periods of time, Effective February i7, 1998, the Company acquired all sof the outstanding stock of Capital Markets Assurance Corporation ("CMAC") through a merger with its parent CapMA.0 Holdings Inc. Pursuant to a reinsurance agreement, CMAC has ceded all of its net insured risks(including any amounts due but unpaid from third party reinsurers), as well as its unearned premiums and contingency reserves to the Insurer. 'Ihhe Company is not obligated to pay the debts of or claims against CMAC. As of December 31, 1997,the Insurer had admitted assets of$5.3 billion (audited),total liabilities of$3.5 billion (audited), and total capita: and surplus of$1.8 billion (audited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. As of September 30, 1998, the Insurer had admitted assets of$6.3 billion (unaudited), total liabilities of $4.1 billion(unaudited), and total capital and surplus of$2.2 billion (unaudited)determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. Furldherrnore, copies of the Insurer's year end financial statements prepared in accordance with statutory accounting practices are available without charge from the Insurer. A copy of the Annual Deport on Forma 1€1-K of the Company is available from. the Insurer or the Securities and Exchange Commission. The address of the Insurer is 113 ding Street, Armonk, New Fork 10504. The telephone number of the Insurer is(914)273-4545. Moody's Investors Service,Inc.rates the claims paying ability of the Insurer"Aaa." Standard chi Poor's Ratings services, a division. of The McCraw-.rill Companies, Inc., rates the claims paying ability of the Insurer"AAA," Fitch IBCA, Inc, (formerly Imown as Fitch Investors Service,L.P.)rates the claims paying ability of the Insurer"AAA." Each rating of the Insurer should be evaluated independently. The ratings reflect the respective rating agency's current assessment of the creditworthiness of the Insurer and its ability to pay claims on its policies of insurance. Any further explanation as to the significance of the above ratings may be obtained only*orn the applicable rating agency, `I bye above ratings are not recommendations to buy, sell or hold the Insured 1999 Series A Bonds, and such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of the Insured 1999 Series A Bonds. The Insurer does not guaranty the market price of the Insured 1999 series A Bonds,nor does it guaranty that the ratings on the Insured 1999 Series A Bonds will not be revised or withdrawn. In the event the .Insurer were to become insolvent, any claims arising under a policy of financial guaranty it s=urance are excluded from coverage by the California Insurance Guaranty Association, 17 established pursuant to Article 14.2 (eornmencing with Section 1063)of Chapter 1 of Part 2 of Division 1 of the California Insurance Code. There can be no assurances that payments made by the Insure- representing interest on the Insured 1999 Series A Bonds will be excluded from Toss income, for federal tax purposes, in the event of nonappropriation by the County. Disclaimer The information relating to the Insurer and the Policy contained above has been furnished by the Insurer. No representation is grade by the County or the authority as to the accuracy, completeness or adequacy of such information or as to the absence of material adverse changes in the condition of the Insurer subsequent to the date of this Official Statement. Additional financial information with respect to the .Insurer is on file with the State of New York Insurance Department. Prospective purchasers of the Bonds may contact such Insurance Department to obtain such information. See appendix H attached hereto for a specimen of the Policy, NO ASSTvRANICE CAN BE GIVEIN THAT THE INSURER WILL BE ABLE TO MEET ITS OBLIGATIONS U-NI DER THE POLICY. DEBT SERVICE RESERVE FUND SURETY BOND The Insurer has issued its commitment to the County to issue a surety bond (the "Debt Service Reserve Fund Surety Bond"). The.Debt Service Reserve Fund Surety Bond will provide that upon notice f°om the Trustee to the Insurer to the effect that insufficient amounts are on deposit in the Principal Account and the Interest account to pay the principal of (at maturity or pursuant to mandatory redemption..requirements)and interest on the 1999 series A Bonds,the Insurer will promptly deposit with the Trustee an amount sufficient to pay the principal of and interest on the 1999 Series A Bonds or the available amount of the Debt Service Resene Fund Surety Bond, whichever is less. Upon the later of. (i)three (3; days after receipt by the Insurer of a Demand for Payment in the form attached to the Debt Service deserve Fund Surety Bond, duly executed by the Trastee; or (ii) the payment date of the 1999 Series A Bonds as specified in. the Demand for Payment presented by the Trustee to the Insurer, the Insurer will make a deposit of funds in an account with State Street Bank and TtQt Company, N.A,, in New York, New York, or its successor, sufficient for the payment to the Trustee of arnounts which are then due to the Trustee(as specified in the Demand for Payment) subject to the Surety Bond Coverage. The available amount of the.Debt service Reserve Fund Surety Bond is the initial face amount of the Debt Service deserve Fund Surety Band less the amount of any previous deposits by the Insurer with the Trustee which have not been reimbursed by the County. The County and the Insurer will enter into a Financial Guaranty Agreement dated February 1, 1999 (the "Agreement"). Pursuant to the Agreement, the County :s required to re=imburse the Insurer, within one: year of any deposit, the ar roust of such deposit grade by the Insurer with the Trustee under the Debt Service Reserve Fund Surety Bond. Such reimbursement shall be grade only after all required deposits to the Principal Account and the, Interest Account have been made. Under the tears of the Agreement, the Trustee is required to reimburse the Insurer, with interest, until the face armount of the Debt Service Reserve Fund S ety Bond is reinstated before any Revenues are disbursed to the County, leo optiona redemption of 1999 Series A Bonds may be made uratic the Insurer's Debt Servide Reserve Fund Surety Bond is reinstated. The Debt Service Reserve Fund Surety Bond will be held by the Trustee in the Reserve Fund and is provided as an. alternative to the County 18 depositing funds equal to the Reserve Fund Requirement for outstanding 1999 Series A Bonds. 'Me Debt Service Reserve Fund Surety Bond will be issued in the face amount equal to the Reserve Fund Requirement as of the initial issuance of the 1999 Series A Bonds and the premium therefor will be fully paid by the County at the time of delivery of the 1999 Series A Bonds, CERTAIN RISK FACTORS The following factors, along with the other information in this Official Statement, should be considered by potential investors in evaluating the p=urchase of 1999 Series A Bonds. However, the following does not purport to be an exhaustive listing of risks and other considerations which may be relevant to investing in the 1999 Series A Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. Limited Obligation The 1.999 Series A Bonds are not county debt and are `united obligations of the Authority. Neither the fall faith and credit of the.Authority nor the County is pledged for the payment of the interest on or principal of the 1933 Series A Bonds nor for the payment of Base Rental Payments. The Authority has no taxing power. The obligation of the County to pay Base Rental Payments when due is an obligation payable from amounts in the General Fund of the County. The obligation of the County to make Base Rental Payments under the Facility Lease does not constitute an obligation of the county for which the County is obligated to levy or pledge any form of taxation or for which the County has levied or pledged any form of taxation. Neither the 1999 Series A Bonds nor the obligation of the County to make Base Rental Payments under the Facility Lease constitute a debt or indebtedness of the Authority, the County, the State or any of its political subdivisions, within the meaning of any constitutional or statutory debt limitation or restrictions. Base Rental Payments General The Base Rental Payments due under the Facility Lease (and insurance, payment of costs of repair and maintenance of the Facilities, taxes and other govermnental charges and assessments levied against the Facilities) are not secured by any pledge of taxes or any other revenues of the County but are payable from any funds lawfully available to the County. The County will incur other obligations in the future payable from the same sources as the Base Rental Payments. In the event the County's revenue sources are less than its total obligations, the County could choose to fund other municipal services before malting Base Rental Payments, The same result could occur if, because of State constitutional limits on expenditures, the County is not permitted to appropriate and spend all of its available revenues. The County's appropriations, however, have never exceeded the limitations on appropriations underArticle-XIII B of the California Constitution. Covenant to Budget and Appropriate.rate. Pursuant to the Facility Lease, the county covenants to tape such action as may be necessary to include Base Rental Payments due in its annual budgets and to make necessary appropriations for all such.payments. Such covenants are deemed to be duties imposed by law, and it is the duty of the public officials of the County to rake such action and do such things as are required by law in the perfo—mance of the official duty of such officials to enable the County to carry out and perforin such covenants, A court, however, in its discretion may decline to enforce such covenants. Upon issuance of the 1.999 Series A Bonds, Bond Counsel will render its opinion (substantially in the form: of"APPETDix E—PROPOSED FORM CSE BOND cOt,71tiSEL OPT TON" herein) to the effect that, subject to the limitations and qualifications described therein, the Facility Lease constitutes a valid and binding 19 obligation of the County. As to the Authority's practical realization of remedies upon default by the County, see "Default and Remedies" and"Limitations on Remedies"below. Abatement In the event of loss or substantial interference in the use and occupancy of the Facilities by the County caused by damage or destruction or condemnation of the Facilities, Base Rental Payments(except for the portion of debt service attributable to the Courts Project, which will not be abated to the extent Courthouse Funds are available for the payment thereof') will be subject to abaternent. In. the event that the Facilities, if damaged or destroyed by an insured casualty, could not be replaced during the period of time that proceeds of the County's rental interruption insurance will be available in lieu of Base Rental Payments plus the period for which funds are available from the Reserve Fund or the Revenue Fund, or in the event that casualty insurance proceeds or condemnation proceeds are insufficient to provide for complete repair or replacement of such component of the Facilities or redemption of the Bonds, there could be insufficient funds to make payments to Owners in full. See APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF LEGAL DOCUMENTS—Facility Lease—Abatement." The County's obligation to make payments fi-orn the Courthouse Funds for the Courts Project is not subject to abatement. See "SECURITY AND SOURCES OF.PAYMENT FOR THE 1999 SERIES A BONDS e Pledge of Courthouse Funds." Default and Remedies The enforcement of remedies provided in the Facilities Lease and Trust Agreement could prove both expensive and time consuming. The Trustee has do interest in the Authority's title to the Demised Premises, has no right to terminate the Facility Lease or reenter or relet the Facilities. Upon the occurrence of one of the "events of default" described below, the County will be deemed to be in default under the Facility Lease and the Authority may exercise any and all remedies available pursuant to law or granted pursuant to the Facility Lease. Upon any such default, including a failure to pay Base Rental Payrnents, the Authority may either (1) terminate the Facility Tease and recover certain damages or (2) without terminating the Facility Lease, (i)continue to collect rent from the County on an annual basis by seeping a separate judgment each year for that year's defaulted Base Rental Payments and/or (ii) reenter the Facilities and relet them. In the event of default, there is no right to accelerate the total Base Rental Payments due over the terra of the Facility Lease, and the Trustee has no possessory interest in the Facilities and is not empowered to sell the Facilities. Events of default under the Facility Lease include (i) the failure of the County to make rental payments under the Facility Lease when the same become due and payable, or (ii) the failure of the County to keep, observe or perform any term, covenant or condition of the Facility Lease to be kept or performed by the County for a period of 60 days after notice of the same has been given to the County, and(iii)the bankruptcy or insolvency of the County. The 'Trustee may elect to proceed against the County to recover damages pursuant to the Facility Lease. Any suit for money damages would be subject to statutory and judicial limitations on lessors' remedies under real property leases, other terms of the Facility Lease and limitations on legal remedies against public agencies in the State, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest, 20 Limitations on remedies The rights and remedies provided in the Trust Agreement and Facility Lease may be limited by, and are subject to, the provisions of federal bankruptcy lavas and to other laws or equitable principles that may affect the enforcement of creditors rights. In addition, judicial action against public agencies in California is subject to certain limitations. Under Chapter 9 of the Bankruptcy Code (Title 11, United States Code), which governs the bankruptcy proceedings for public agencies such as the County, there are no involuntary petitions in bankruptcy. If the County were to file a petition under Chapter,9 of the Bankruptcy Code, the Bondholders, the Trustee and the Authority could be prohibited from taking any steps to enforce their rights under the Facility Lease, and from taking any steps to collect amounts due from the County under the Facility Lease. All legal opinions with respect to the enforcement of the.Facility Lease and the Trust Agreement will be expressly subject to a qualification that such agreements may be limited by bankruptcy, reorganization, insolvency, moratorium or other, similar laws affecting creditors' rights generally and by applicable principles of equity if equitable remedies are sought. Risk of Earthquake There are severa'_ earthquake faults in the greater San Francisco Bay Area that potentially could result in damage to buildings, roads, bridges, and property within. the County in the event of an earthquakes Fast experiences, including the 1989 Lorna Prieta earthquake, have resulted in minimal damage to the infrastructure and property in the County, Earthquake faults that could affect the County include the San Andreas and Hayward Faults west of the County and the Calaveras Fault within portions of t'he County. The Facility Lease does not require the County to maintain insurance or, the Facilities against certain riskss such as earthquakes. However, the County has purchased an earthquake insurance policy that expires, on. March 31, 2001 to cover all County property, including the Facilities. See "SECL,`�t.ITY AND 8OU:CES OF PAYMENT FOR THE 1999 SERiEs A BO S—Insurances" Hazardous Substances Owners and operators of real property may be required by law to remedy conditions of the property relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental response, Compensation and Liability Act of 1980, sometimes referred to as "CERCLA" or the "Superfund Act," is the most well known and widely applicable of these laws, but California lavas with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly and adversely affect the operations and finances of the County. The County knows of no existing hazardous substances which require remedial action on or near tete Demised Premises. However, it is possible that such substances do currently or potentially exist and that tate County is not aware of theist. 21 Year 2000 I= The year 2000 presents potential problems for computerized data files and computer programs that receive and process date information. Many computer applications were written with the year represented by the last two digits of the year and the first two digits were implied, thus conserving data storage space. Thus, the year 1900 and the year 2000 are considered by these applications to be the same year. On January 1, 2000, applications that use the date in their operation or calculation may fail. to function or may provide erroneous or unreliable results, When developed, these applications were not expected to be in operation at the end of the century; however, many of these applications continue to be used by governments and businesses. In addition to equipment normally considered or associated with computers, many other types of equipment contain and depend upon microprocessors for their function. A few examples of this (Imbedded Chip)technology include building access, climate control and security systems, irrigation systems, communications systems and medical equipment. The County's operations could be adversely impacted by its cornputer applications as well as those of its vendors, contractors and other organizations. If not fixed, the failure of these systems and equipment could cause loss of life, financial resources and a disruption of government services, However, since 1995 the County has been vigorously pursuing a program to identify and fix affected systems and equipment. In addition to a large commitment of County staff`time and the cast of replacement equipment and software, as of Jure 30, 1998, the County had contracts with vendors totaling $577,000 to assist in the Year 2000 remediation project. The County has also notified many of its business partners and is in the process of defining compatible external interfaces. Despite these measures,the County cannot guarantee that the County and all of its business partners will have addressed their year 2000 problems by January 1, 2000. Potential risk factors associated with year 2000 issues include the passibility of a disruption or delay of revenues to the County and the possibility of delayed payments to Bondholders as a result of the various possible disruptions. The table below summarizes the status of the County's Year 2000 remediation project as of Weaker 16, 1998. The areas being addressed are on the left and defined below. Across the top are the four stages of the Year 2000 remediation process as defined in the GASB Technical Bulletin No. 98-1, 22 Validation& Awareness Assessment Remediation Testing County Data Center(' Complete Complete Complete goi ag WAN/ExterrsalInterfaces(2) Complete Complete Expected Expected Completion: Completion: Jan. 1999 Feb. 1999 Health Servioes Data Complete Complete Expected Expected Center(3) Completion, Completion- Sept. 1.999 Sept, 1999 LANA /Desktop Computers(4) Complete Ongoing Expected Expected Completion: Completion: Jame 1999 June 1999 Imbedded.ChipsComplete Complete Ongoing Ongoing Dae Diligence Corrnplete Complete tangoing Planed Com un ty Awareness(7) Complete Complete Ongoing Planned '1) Consists of th.e a mainframe and nunicomputer systems that are niai twined at the Deparu ent of Information Technology's (DoI k) data center. l',ilost are large-scale application covering areas of crin-tonal justice, property taxes,general government,fmarce,hen resources,etc. t2, The wide area network(WAN)is the:network that connects to,and is shared and owned by all County departments. Maintaining the WANN is the responsibility of DoIT staff External interfaces are elecLrornic connections to other County,State,federal and city computer syster ns and the irntertnet. `3' Consists of m- air�..frarne and minicomputer systems that are maintained at the Health Services Department data center. These include applications for patient billing,case management,patient and facilities scheduling,hazardous materials informations,quality control and provider information. ts, Local area networks (LANs) are networks of desktop computers and in sore cases a mirdompute.- that are maintained by individual County departments. Some stand-alone desktop computers are maintained by individual County deparLmernts which are also used for import-t applications. (3, Includes any other equipment that contains an imbedded microprocessor. The General Services Departrxnent is coordinating with the other departments to address thas equip-Ment. (6) This is the Colmty`s process of documenting its planning,methodology,progress, results w d present status of t:°se Year 2000 r=errnediadon project. This is done through various means, both electronically and on paper. T1,is also includes related programs of the Office of Emergency Services, Ernviror rental Health, County Fire, County Sheriff,private business organizations,etc. This is the Co rty's program for co:nrnua-nicatirng a proactive,positive stance with t1he entire community regarding the C o-nnty's readiness to deal with the Year 2000 issue. Source: County Audited.Financia"Statements for Year Ended June 30, 1998. ?'he Government.AccoaritIng Standards Board respires disclosure of certain matters regarding the year 2000 issue. Because of the unprecedented nature of the year 2000 issue, its effects and the success of related remediation efforts will not be fully determinable until the year 2000 or thereafter. Accordingly,irnsua ncient audit evidence exists to support the County's disclose res with respect to the year 2000 issue. As a resuit, at least some auditors of finamcia`_• statements for municipal entities, including the County, which are issued after October 31, 1998, wi`=l include a qualified opinion due to the insufficiency 23 of such evidence. See "APPENDIX C—FINANCIAL STATEMENTS OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30, 1998—Note 21 —Year 2000 Issue." CONSTITUTIONAL AND S`I"AA`I`U'I'ORY LIMITATIONS ON TAXES, REVENIJES AND APPROPRIATIONS Article XIII A,of the California Constitution In 19789 California voters approved proposition 13, adding Article X111 A to the California Constitution., article XIII A was subsequently amended in 1986, as discussed below. article XIII A limits the aanount of any ad valorem tax or.real property to I% of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service on indebtedness approved by the voters prig to July 1, 1.978 and on bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978 by two-thirds of the voters vesting on such indebtedness. Article XIH A demes fall cash value to mean "the county assessor's valuation of real broperty as shown- on hownon the 1975-76 tax bill under "full cash" or thereafter, the appraised value of real property when purchased, newly constr�.�cted, or a change in ownership have occurred after the 1975 assessment." This full cash val.l ue may be increased at a rate not to exceed 2%per year to account for inflation. Article XIII A has subsequently been amended to permit reduction of the "full cash value" base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the "full cash value" base in the event of reconstruction of property damaged or destroyed in a disaster. Legislation Implementing Article XIII A Legislation has been enacted and amended a number of tunes since 1978 to implement Article XIII A. Under current law, local agencies are no longer pennitted to levy directly any property tax (except to pay voter-approved indebtedness). The 1%property tax is automatically levied by the County and distributed according to a formula among taxing agencies. The formula apportions the tax rough=ly in proportion to the relative shares of taxes levied prior to 1979. Increases of assessed valuation resulting frorn reappraisals of property due to new construction, change in ownership or from the 2% annual adjustment are allocated among the various jurisdictions in the "taxing area" based upon their respective "situs." any such allocation made to a local agency continues as park of its allocation in future years. Article XIII B of the California.Constitution On October 6, 1979, California voters approved Proposition 4, known, as the Gann Initiative, which added Article .XIII B to the California Constitution. Propositions 98 and 111, approved by the California voters in 1988 and 1990, respectively, substantially modified Article X111 B. The principal effect of Article X111 B is to limit the annual appropriations of the State and any city, county, school district, authority, or other political subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted for changes in the cost of living and population. The initial version of Article XIII B provided that the "base year" for establishing an appropriations limit was the 1978-79 fiscal year, which was then adjusted annually to reflect changes in population, consumer prices and certain increases in the cost of services provided by these public agencies. Proposition 111 revised the method for making annual adjustments to the appropriations limit by redefining changes in the cost of living and in population. It also required that beginning in fiscal year 1990-91 each appropriations limit must be 24 recalculated using the actual 1986-87 appropriations limit and making the applicable annual adjustments as if the provisions of Proposition 111 haat been in effect. .Appropriations subject to :imitations of a local government under Article XIII B include generally any authorization to expend during a fiscal year the proceeds of taxes levied by or for that entity and the proceeds of certain Mate subventions to that entity, exclusive of refunds of taxes. Proceeds of taxes include, but are not lirnited to all tax revenues plus the proceeds to an entity of government from.(1) regulatory licenses, user charges and user fees (but only to the extent such proceeds exceed the cost of providing the service or regulation), (2) the investment of tax revenues, and (.3) certain subventions received from the State. Article X111 B permits any government entity to change the appropriations limit by a vote of the electors in conformity with statutory and constitutional voting effective for a maximum of four years. As amended by Proposition 111, Article X11113 provides for testing of appropriations limits over consecutive two-year periods. If an entity's revenues in any two-year period exceed the amounts permitted to be spent over such period,the excess has to be returned by revising tax rates or fee schedules over the subsequent two years, As amended by Proposition 98, Article XIII B provides for the payment of a portion, of any excess revenues to a fund established to assist in financing certain school needs. Appropriations for "qualified capital outlays" are excluded from the limits of Proposition 111. The County is of the opinion that debt service on the 1999 Series A Bonds and capital outlays for the Project are excluded from the limits imposed by Proposition 111 The County's Article XIII B limit for the 1998-99 Fiscal Year budget is $3,024,348,425 and 1998-99 Fiscal Year budget appropriations subject to limitation are $152,999,254. For Fiscal Year 1998-99, the County therefore anticipates that it will be under its limit by $2,871,349,171. The County has never exceeded its Article X111 B appropriations limit. The Base Dental Payments to be:Wade by the County pursuant to the Facility Lease with respect to the 1999 Series A Bonds are not subject to an appropriations limit. Article X.111 C and Article X111 D On November 5, 1996, the voters of the State approved Proposition 218, known as the "Right to Vote on'faxes .Acta" Proposition 218 adds Articles XIII C and XIII D to the California Constitution and contains a number of interrelated provisions affecting the ability of the County to levy and collect both existing and future taxes, assessments, fees and charges. 'rhe interpretation and application of Proposition 218 will ultimately be determined by the courts with respect to a number of the matters discussed below, and it is not possible at this time to predict with certainty the outcome of such determination. Article XIII C requires that all new local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes of the County require a majority vote and taxes for specific purposes,even if deposited in the County's General Fund,require a two-thirds vote. Further, any general purpose tax which the County imposed, extended or increased without voter approval after December 31, 1994 may continue to be imposed only if approved by a majority vote in an election which must be held within two years of November 5, 1996. The County believes that no existing County- imposed taxes deposited into its General Fund will be affected by the votes approval requirernents of Proposition 218, although as indicated below certain tax levies may be affected by Proposition 62. The voter approval requirements of Proposition 218 reduce the flexibility of the County to raise revenues for the General Fund, and no assurance can be given that the County will be able to impose, extend or increase such taxes in the future to rneet increased expenditure needs. 25 Article XIII D also adds several provisions making it generally more difficult for local agencies to levy and maintain fees, charges, and assessments for municipal services and programs. These provi- sions include, among other things, (i) a prohibition against assessments which exceed the reasonable cost of the proportional special benefit conferred on a parcel, (ii) a requirement that assessments must confer a "special benefit," as defined in Article X11I D, over and alcove any general benefits conferred, (iii) a majority protest procedure for assessments which involves the wiling of notice and a ballot to the record owner of each affected parcels a public hearing and the tabulation of ballots weighted according to the proportional financial obligation of the affected party, and (iv) a prohibition against fees and charges which are used for general gove=.ental services, including polices fire or library services, where the service is available to the public at large in substantially the same manner as it is to property owners. The County estimates that in Fiscal Year 1998-99 it will collect approximately $19.0 million in fees and assessments which could be subject to the provisions of Article X111 D. however, none of these fees or assessments are deposited in the Conn- ty's General Fund. if the County is unable to continue to collect these revenues, the services and programs funded with these revenues would have to be curtailed and/or the County General Fund might have to be used to support lema The County is unable to predict whether or not in the future it will be able to continue all existing services and programs funded by the fees, charges and assessments in light of Proposition 218 or, if these services and programs are continued, what amounts (if any) would be used from the County's General Fund to continue to support these activities. Article X111 C also removes`•_imitations on the initiative power in matters of reducing or repealing local taxes, assessments, fees or charges. No assurance can be given that the voters of the County will not, in the future, approve an initiative or initiatives which reduce or repeal local taxes, assessments, fees or charges currently cornpnsing a substantial part of the County's General Fund. If such repeal ar reduction occurs, the County's ability to pay Base Rental Payments under the Facility Please could be adversely affected. Proposition 62 €3n September 28, 1995, the California Supreme Court affirmed the lower court decision in Santa Clara Caunv Local Transportation Authority v. Guardino, 11 Cal. 4th 220 (1995) ("Guarding"). The action held invalid a half-cent sales tax to be levied by the Santa Clara County focal Transportation Authority because it was approved by a majority but not two-thirds of the voters in Santa Clara County voting on fhe tax. The California Supreme Court decided the tax was invalid ander Proposition 62, a statutory initiative adopted at the November 4, 1986 election that(a) requires that any neva or higher taxes for general govern mental purposes unposed by local governmental entities be approved by a majority vote of the voters of the governmental entity voting in an election on the tax, (b) requires that any special tax (defined as taxes levied for other than general governmental purposes) imposed by a local governmental entity be approved by a two-thirds vote of the voters of the governmental entity voting in an election on the tax, (c)restricts the use of revenues frown a special tax to the purposes or for the service for which the special tax was imposed, (d) prohibits the imposition of ad valorem taxes on real property by local governmental entities except as permitted by Article XIII A of the California Constitution, (e)prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local govermm-nental entities, (f)required that any tax imposed by a local governmental entity on or after August 1, 1985 be ratified by a majority vote of the voters voting in an election on the tax within two years of November 5, 1986 or be terminated by November 15, 1988 and (g) requires a reduction of ad valorem property taxes allocable to the jurisdiction imposing a tax not in compliance with its provisions equal to one dollar for each dollar of revenue attributable to the invalid tax, for each year that the tax is collected° 26 In deciding Guardino on Proposition 62 grounds, the Court disapproved the decision in City of Woodlake v. Logan, 23€3 Cal. App. 3d 1058 (199 1) ("Woodlake"), where the Court of Appeal had held portions of Proposition 62 unconstitutional as a referendum on taxes prohibited by the California Constitution. The California Supreme Court determined the.the voter approval requirement of Proposi- tion 62 is a condition precedent to the enactment of each tax statute to which it applies, while referendum refers to a process invoked only after a statate has been enacted.Numerous taxes to which Proposition 62 would apply were unposed or increased without any voter approval in reliance on Woodlaxke. The Court noted as apparently distinguishable,but did not confirm, the decision in City of Westminster v. County Of Orange, 204 Cal. App. 3d 626 (1988), that held unconstitutional the section of Proposition 62 requiring voter approval of taxes imposed during the "window period" of August 1, 1985 until November 5, 1986, Proposition 62 as ars initiative statute does not have the same level of authority as a constitutional initiative,but is akin to legislation adopted by the State Legislature. The County has two taxes to which Proposition 62 could apply: a business license tax enacted in 1991, which generates approximately $800,000 per year, and a transient occupancy tax, ars increase in which was enacted in 1990, that generates approximately$800,000 per year(approximately$120,000 per year of which is froze the 1990 increase). The County has joined Esther counties with similar taxes in pursuing legislation which would require that only future such taxes be subject to Proposition 62 and that prior taxes be given legislative relief. Proposition 187 At the November 8, 1994 General Election, California voters approved Proposition 187, an initiative statute, which makes illegal aliens ineligible for public social services, public health care services (unless pu suant to an emergency services request under federal law), and public school education at elementary, secondary and post-secondary levels. Among other things, Proposition 187 also requires state and local agencies to report persons who are suspected illegal aliens to the California Attorney General and the United States Irnmigration and Naturalization Service(the"INS"). The Legislative Analyst estimated the most significant fiscal effects of Proposition l 87 would fall into the following three categories; Program Savings. The State and local governments (primarily counties) would realize savings from denying certain benefits and services to personas who cannot document their citizenship or legal immigration status. The savings to State and local governments statewide could be in the range of$200 million annually,based on the current estimated use of these services and benefits by illegal immigrants. Verification Costs, The State, local governments, and schools would incur significant costs to verify citizenship or immigration status of students, parents, persons seeping health care or social services, and persons who are arrested. Ongoing arnual costs could be in the terns of millions of dollars, with first-year costs considerably higher(potentially in excess of$100 million). Potential Losses of° eller al Funds. Proposition 187 places at risk up to $15 billion annually in California alone in federal funding for education, health and welfare programs due to conflicts with federal requirements. Opponents of Proposition 187 filed at least eight laws pits(which were subsequently consolidated) chahernging the constitutionality and validity of the measure. On larch 18, 1998, a 6i ted States District Court judge entered a final judgment in the case,holdinzg key portions of the measure unconstitutional and permanently enjoining the State from implementing those sections which would have required law enforcement, teachers and social services and health care workers to verify a person's immigration states 27 and subsequently report illegal immigrants to authorities and deny thein social services, health care and education benefits. An appeal by the State Attorney General was filed with the Ninth Circuit Court of .Appeals on Larch 25, 1998. Due to uncertainties surrounding the future legal interpretations and court decisions with respect to the constitutionality of Proposition 187, the County is not able to estimate the future fiscal and operational impacts of this initiative statute on the County. Future Initiatives Article XIII A,Article XIII B, .Article XIII C,Article XIII D, Proposition 62 and Proposition 187 were each adopted as treasures that qualified for the ballot through California's initiative process. From time to time other initiative measures could be adopted, further affecting the County's revenues. THE AUTHORITY The Authority is a Joint powers authority, organized pursuant to a Joint Exercise of Dowers Agreement, dated as of April 7, 1992 (the "JPA Agreement"), between the County and the Contra Costa County Redevelopment Agency. The JPA Agreement was entered into pursuant to the California Government Code, commencing with Section 6500. The Authority is a separate entity constituting a public instrumentality of the State of California and was formed for the public purpose of assisting in financing and refinancing projects for the benefit of the County. The Authority is governed by a five member Board of Directors. The Board of Supervisors of the County constitutes the Board of Directors of the Authority. The Executive Director and Secretary of the Authority is the County Administrator and Clerk of the Board of Supervisors, the Assistant Executive Director is the County Community Development Director, the Deputy Executive Director is the County Deputy Director-Redevelopment, and the Treasurer is the County's Auditor-Controller. The Authority's powers include,but are not:united to,tI:e power to issue bonds and to sell such bonds to public or private purchasers at public or by negotiated sale. The Authority is entitled to exercise the powers common to its members and necessary to accomplish the purposes for which it was farmed. These powers include the power to snake and enter into contracts; to employ agents and employees; to acquire, construct, manage, maintain and operate buildings,works or improvements;to acquire,hold or dispose of property within the County; and to incur debts,liabilities or obligations. THE COUNTY The County of Conga Costa lies northeast of San Francisco and is the ninth most populous county in California. The County seat is in the City of Martinez. Major industries in the County include oil refining and telecommunications. The fiscal year 1998-99 General Fund Budget of the County totals approximately$741 million. For certain economic, demographic and financial infonniation with respect to the County, see "APPEN?ix A - GENERAL. i.OuNTY, ECONOMIC AND DEMOGRAPHIC INFORMATION," "APPENt Dix B - COU:VTY FINANCIAL, INFORMATION" and S1APPE�i7iX C - FiNANICIAL. STATEMENTS OF THE COUNTY FOR THE FISCAL.YEAR ENDED JUNE 30, 1998." 28 RATINGS Moody's investors Service s'Moody's) and Standard & Poor's, a division of the McGraw-Hill Companies, Inc. ("S&P"), have assigned the Insured 1999 Series A Bonds the ratings of "Aaa" and "AAA," respectively, with the understanding that upon delivery of the 1999 Series A Bonds the Policy insuring payment when due of the principal of and interest on the Insured 1999 Series A Bonds will be issued by the Insurer. Moody's and S&P have assigned the Uninsured 1999 Series A Bonds the ratings of "Al" and"A+,"respectively. Certain information was supplied by the Authority and the County to the rating agencies to be considered in evaluating the 1999 Series A Bonds. Such ratings express only the views of the rating agencies and are not a recommendation to buy, sell or hold the 1999 Series A Bonds. There is no assurance that such ratings will continue for any given period of time or that.they will not be reduced or withdrawn entirely by the rating agencies, or either of them, if in their, or its,judgment eircurn.stanoes so warrant. The Authority, the County and the Trustee undertake no responsibility to oppose any such revision or withdrawal. Any such downward revision or withdrawal may have an adverse effect on the market price of the 1999 Series A Bonds LITIGATION At the time of delivery of and payment for the 1999 Series A Bonds, the County and the Authority will each certify that there is no action, suit, litigation, inquiry or investigation before or by any court, governmental agency, public board or body served, or to the best knowledge of the County or the Authority threatened, against the County or the Authority in any material respect affecting the existence of the County or the Authority or the titles of their officers to their respective offices or seeking to prohibit, restrain or enjoin the sale or delivery of the 1999 Series A Bonds, the Trost .Agreement, the Facility .Lease, the Site Lease or the payment of Base Dental Payments or challenging, directly or indirectly, the location of the Facilities, or the proceedings to lease the Facilities from the Authority. Various legal actions are pending against the County. The aggregate amount of the uninsured liabilities of the County which may result f:orn all legal claims currently pending against it will not,in the opinion of the County, materially affect the County's finances or impair its ability, to make Base Dental Payments under the Facility Lease. TAX MATTERS In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, based upon an analysis of existing lags, regulations, rulings and court decisions, and assuming, among other .natters, compliance with certain covenants, interest on the 1999 Series A Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the "Code") and is exempt from. State of California personal income taxes. Bond Counsel is of the opinion that interest on the 1999 Series A Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative niininium taxable income. A complete copy of the proposed form of opinion of Bond Counsel is set forth in Appendix E hereto. The difference (if any) between the issue price of any maturity of the 1999 Series A Bonds and the amount to be paid at maturity of such 1999 Series A Bonds (excluding amounts stated to be interest 29 and payable at least annually over the term of such 1999 Series A Bonds) constitutes "original issue discount," the accrual of which, to the extent properly allocable to each owner €hereof, is treated as interest which is excluded from grass income for federal income tax purposes and State of California personal income taxes. For this purpose, the issue price of a particular maturity of the 1999 Series A Bonds is the first price at which a substantial amount of such maturity of the 1999 Series A Bonds is sold to the public (excluding bond houses,brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). 'l a-e original issue disco-ant with respect to any maturity of the 1999 Series A Bonds accrues daily over the term to maturity of such 1999 Series A Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between cornpounding dates). The accruing original issue discount is added to the adjusted basis of such 1999 Series A Bonds to determine taxable gain or loss upon.. disposition (including sale, prepayment, or payment or.matin ty) of such 1999 Series A Bonds. Owners of the 1999 Series A Bonds should consult their own tax advisors with respect to the tax consequences of ownership of 1999 Series A Bonds with original issue discount, including the treatment of purchasers who do not purchase such. 1999 Series A Bonds in the original offering to the public at the first price at which a substantial amount of such 1999 Series A Bonds are sold to the public. 1999 Series A Bonds purchased, whether at original issuance or otherwise, for an amount greater than their principal amount payable at maturity (or, in some cases, at their earlier call date) ("Premium Bonds") will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium for bonds, like premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax exempt interest received, and a purchaser's basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such purchaser. Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances. The Code imposes various restrictions,conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the 1999 Series A Bonds. The Authority and the County have covenanted to comply with certain reswictions designed to assure that interest on the 1999 Series A Bonds will not be included in gross income for federal income tax purposes. Failure to comply with these covenants may result in interest on the 1999 Series A Bonds being included in federal gross income, possibly from the date of issuance of the 1999 Series A Bonds. The opinion of Bond Counsel assumes compliance with these covenants, Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the 1999 Series A Bonds may adversely affect the value of the 1999 Series A Bonds or the tax status of interest on the 1999 Series A Bonds. Further, no assurance can be given that pending or future legislation or amendments to the Code, if enacted into law, or any proposed legislation or amendments to the Code will not adversely affect the value of, or the tax status of interest on, the 1999 Series A Bonds. Prospective Bondholders are urged to consult their own tax advisors with respect to proposals to restructure the federal income tax. Certain agreements,requirements and procedures contained or referred to in the Trust Agreement, the Facility Tease, the Tax Certificate and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the 1999 Series A Bonds)may be taken or orr itted,under the circumstances and subject to the terns and conditions set forth in such documents. Bond Counsel expresses no opinion as to any 1999 Series A Bond or the interest thereon if any such change occurs or action is taken upon the advice or approval of counsel other than Bond Counsel. Although Bond Counsel has rendered an opinion that interest on the 1,999 Series A Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of the 1999 Series A Bonds, or the accrual or receipt 30 of interest on the 1999 Series A Bonds,may otherwise affect a Bondholder's federal or State tax liability. 'rhe nature and extent of these other tax consequences will depend upon the Bondholder's particular tax status and the Bondholder's other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences LEGAL MATTERS Orrick, Herrington & Sutcliffe LLP, San Francisco, California, Bond Counsel, will render an opinion with respect to the validity of the 1999 Series A Bonds. Copies of such approving opinion will be availably, at the time of delivery of the 1999 Series A Bonds. The form of the legal opinion proposed to be delivered by Bond Counsel is included as Appendix B to this Official Statement, Bond Counsel undertakes no responsibility for the accuracy, completeness, or fairness of this Official Statement. Certain legal matters will be passed upon for the County and the Authority by County Counsel. Certain legal matters will be passed upon for the Underwriters by Brown& Wood LLP, San Francisco, California, Underwriters' Counsel, who undertakes no responsibility to the Owners of the 1999 Series A Bonds for the accuracy, completeness, or fairness of this Official Statement. Compensation paid to Bond Counsel and Underwriters' Counsel is contingent on the sale of the 1999 Series A Bonds. CONTINUING DISCLOSURE The County will undertake all responsibilities for any continuing disclosuYe to Owners of the 1999 Series A Bonds as described below. The County will enter into a Continuing Disclosure Agreement, to be dated the date of delivery of the 1999 aeries A Bonds (the "Continuing Disclosure Agreement"), which provides for certain disclosure obligations on the part of the County. Under the Continuing Disclosure Agreement, fhe County grai:: covenant for the benefit of Owners and Beneficial Owners of the 1999 Series A.Bonds to provide certain financial information and operating data relating to the County by not later than nine months after the end of its fiscal year (which fiscal year currently ends on June 30), commencing with ta.e report for the fiscal year ending June 30, 1999 (the "Anpual Report"), and to provide notices of the occurrence of certain enumerated events (the "Listed Events"), if material, The Annual Deport is to be fled with each Nationally Recognized Municipal Securities Information Repository and with any then-existing State Repository for the State of California (collectively, the "Repositories"). Currently, there is no State Repository for the State of California. The notices of material events are to be filed with the Municipal Securities Rulemaking Board. These covenants will be made in order to assist the Underwriters in complying with Securities and Exchange Commission Rule 15c2m12(b)(5) (the "Rule"). The County has not failed to comply with any prior such undertaking under the Rule. For a forrn of flne Continuing Disclosure Agreement, see "APPENM F—PROPOSED Fc)Rm CDP CONT I TINUING DISCLC?suaE.AoR-EEMENT. VERIFICATION OF MATHEMATICAL COMPUTATIONS The accuracy of(a) the mathematical computations of the adequacy of the maturing principal of and interest earned on the direct obligations of the United States of America to provide for (i) the payment, when due, of the principal and interest with respect to the Prior Certificates to and including June 1, 1999, (ii)the prepayment of the Prior Certificates on June 1, 1999 at a prepayment price equaz to the principal amount of the Prior Certificates thea outstanding plus a prepay-menu premium of 102% of such principal amount, and(b) the mathematical computations of the actuarial yield or,the 1999 Series A Bands will be verified by Deloitte & Touche LLP, independent accountants (the "Verification Agent").. 31 The 'Verification Agent will verify from the information provided to theme the mathematical accuracy as of the date of the closing on the 1999 Series A Bonds of(1) the computations contained in the provided schedules to determine that the anticipated receipts from: the securities and cash deposits listed in the underwriters' schedules, to be held in escrow, will be sufficient to pay, when due, the principal, interest and call premium payment requirements, if any, of the prior Certificates, and (2) the computations of yield on the '1999 Series A Bonds contained in the provided schedules used by Bond Counsel in its determination that the interest on the 1999 Series A Bonds is excluded from gross income for federal income tax purposes. The Verification Agent will express no opinion on the assumptions provided to them,nor as to the exemption from taxation of the interest on the 1999 Series A Bonds. UNDERWRITING T•he 1999 Series A Bonds are to be purchased by Bear, Stearns & Co. Inc. and Merrill synch & Co. (the "Underwriters"). The Underwriters have agreed to p=urchase the 1999 Series A Bonds at a price of$75,154,573.54(which is equal to the principal amount of the 1.999 Series A Bonds talus a net original issue premium of$905,431.00 less the Underwriters'discount of$435,857.45),plus accrued interest. The Underwriters will purchase all of the 1999 Series A Bonds if any are purchased. The 1999 Series A Bonds may be offered and sold to certain dealers (including dealers depositing said 1999 series A Bonds into investment trusts) and others at prices lower than the initial public offering price, and the public offering price may be changed from:time to time by the Underwriters. MISCELLANEOUS INFORMATION References are made herein to certain documents and reports which are brief summaries thereof which do not purport to be complete or definitive and reference is made to such documents and reports for full and complete statements of the contents thereof. .Any statements in this Official Statement involving:natters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the Authority and the purchasers or Owners of any of the 1999 Series A Bonds. The execution and delivery of this Official Statement has been duly authorized by the Authority and approved by the County. COUNTY OF CONTRA COSTA PUBLIC FINANCING AU'T'HORITY By: /s/ Kr ipl Batchelor Executive Director 32 APPENDIX A GENERAL COUNTY ECONOMIC AND DEMOGRAPHIC INFORIMATION General Contra Costa County(the "County")wasincorporated in 1850 as one of the original 27 counties of the State sof California(the "State"),with the City of Martinez as the County Seat. It is one of the nine counties in the San Francisco-Oakland Bay Area. The County covers about 733 square miles and extends from the northeastern shore of Sari Francisco Bay easternly about 50 miles to San Joaquin County. The County is bordered on the south and wrest by Alameda County and on the north by Suisun and San Pablo Bays. The western and northern shorelines are highly industrialized, while the anterior sections are suburban/residential, comrr.ercial and light industrial. The County contains 18 incorporated cities, including Richmond in the west,Antioch in the northeast, and Concord in the middle. A large part of the interior of the County is served by the Bay Area lapid Transit District ("BART"), a situation that has encouraged the expansion of both residential and commercial development. In addition, economic development along the Interstate 680 corridor in the County has been substantial and accounted for significant job creation in the Cities of Concord, Walnut Creek, and San Damon. County Government The County has a general law form of government. A five-member Board of Supervisors,each of whom is elected to a four-year terra, serves as the County's legislative body. Also elected are the County Assessor, Auditor-Controller, Clerk-Recorder, District Attorney-public, administrator, Sheriff Coroner and Treasurer-Tax Collector, A County administrative Officer appointed by the Board of Supervisors runs the day-to-day business of the County. Population The California State Department of Finance reported that the County's population stood at 900,700 as of January 1998,an increase of 12.9% since 1990. The County's population grew 21,5% during the 1980s, a moderate acceleration from the 17.7% growth rate achieved in the decade of the 1970s. As detailed in the table below, population growth within the County has been positive since 1980 in every city. The strongest growth is concentrated in the eastern portions of the County, particularly in Clayton, Antioch and Brentwood, although strong growth was noted in Hercules and Richmond, situated in the western part of the County, In addition, of particular significance is the resumption of population growth in the western portion of the County, particularly in. Pinole, richmond and San Pablo. Each of these cities experienced population declines during the 197€19, but a number of factors have gradually reversed the population. erosion. The availability of rapid transit, close proximity to the major employment Dubs in San Francisco and Oakland, and relatively affordable existing and new housing have combined to attract more residents to these cities. The unincorporated regions of the County registered a 37.2% increase in population since 1980. A-] COUNTY OF CONTRA COSTA POPULATION(l) Special Census 1960 1970 1975 1980 1_990 1938 Antioch 17,305 28,060 33,215 42,683 60,900 79,300 Brentwood 2,186 2,649 3,662 4,434 7,500 a 7,000 Clayton ^^ 1,385 19790 4,325 7,1 50 10,600 Concord 36,208 85,164 94,673 103,763 110,900 113'5400 17anville� 26,143 31,200 39,150 El Cerrito 25,437 25,490 22,950 22,731 22,850 23,600 Hercules 310 252 121 5;963 16,4€10 19,050 Lafayette de 20,484 19,628 20,837 23,450 24,000 Martinez 9,604 16,506 18,702 22,582 3.,700 36,100 Moraga ^^ 14,205 14,418 15,014 15,850 ;6,550 Or€nda' 17,070 16,650 10,150r Pinole 6,064 15,850 15,337 14,253 17,000 18,450 Pittsburg 19,06 . 20,651 24,347 33,465 47,250 52,200 Pleasant Hill. -- 24.610 25,398 25,547 31,550 32,500 Richmond 71,584 79,043 70,126 74,676 86,600 92,800 San Pablo 19,687 21,46` 19,392 '_9,7543 25,000 26,40€3 San Ramon' -a sa 20,51-1 35,100 43,500 Walnut Creek 9,903 39,844 46,034 54,033 60,400 63,200 unincorporated 11680 16035 173.036 1 ,551 1100 175,_70 Total 409,03Q 558389 582, 29 656 s 1 7 7 600 900 650 California _':5717104 18136,045 21,185.000 668 14- 2,8a55&000 33,252000 Totals 'say not equalsums due to independdrt rounding. Dates of incorporation: Danville(7/1/82); O inda 47/1/85,); San Ramon(7/€/83). Te 1990 Census Report created €980 population levels for these cities prior to official incorporation. Source: united States Census: €960-1990;State Department ofFinemce: €998, Industry and Employment The County has one of the fastest-growing work forces among Bay Area counties,with growth i;, its employment base being driven primarily by the need to provide services to an, increasing local population. The County has experienced an immigration of white-collar jobs due to the relocation of companies from costlier locations l.n the Bay Area. The combined impact of population growth and immigration has resulted in significant Job creation in the County, with the 1997 job base of 312,800 having grown about 10% since 1992. As shown below, the County's labor force stood. at 472,700 in 199T With average 1997 unemployment rates of 4.1% and 6.3% for the County and the State, respectively, the County has achieved a lover unemployment rate than the State in each of the past six years. A-2 COUNTY OF CONTRA COSTA EMPLOYMENT AND UNEMPLOYMENT OF SI3iBENT LABOR FORCE NAGE AND SALARY WORKERS BY INDUSTRY ANNUAL AVERAGES(IPS THOUSANDS) 19921993 1994 1995 1996 1997 Civilian Labor Force`!) 445.6 448,5 454.0 456.0 46015 472.7 Employment 416.6 419.4 426,0 429.9 437.9 4531 County Unemployment 29.0 29.1 28.0 26.1 22.6 19.6 Unemployment Rate: County 6.5% 6.5% 61% 5.71 4.9% 4,1% State of California 8.5% 9.2% 8.6% 7.8% 7.2/0 6.3% 'image and Salary Employment(2) 1992 1993 1994 1995, 1996 1997 Agriculture 1.4 1.3 1.2 1.0 1,0 1.2 Mining and Construction 19.1 19.8 19.8 19.7 20.5 22.2 Manufacturing 31.1 28.8 27.2 26.6 26.13 26.0 Transportation and public Utilities 18.5 18.8 20.2 20.3 19.8 20.5 Wholesale Trade 11.6 10.2 10.5 10.6 11.8 12.6 Retail Trade 55.4 56.5 56.2 56,1 56.2 57,0 Finance,Insurance,and Real Estate 27.8 29.0 28.4 26.7 26.0 27.7 Services 74.6 76.4 81,0 86.7 93.1 99.2 Government 44.0 44.8 44.8 45.1 453 46.4 TOTAL(3) 283.9 284.8 289.3 292.7 2973 312.8 (S) Based on place of residence. (`) ;lased on Mace of work. 0) "Total"-nay not be precise due to independent rounding. Source: State of California,Employment Development Departrr:ent,Labor Market information Division,March 1997'benchmark. ajor Employers MaJor industries in the County include petroleum refining, steel manufacturing, prefabricated metals, chemicals, electronic equipment, paper products, services and food processing. Most of the Countys heavy manufacturing is located along the County's northern boundary fronting on the Suisun and San Pablo Bays leading to San Francisco Bay and the pacific Ocean. Descriptions of major employers in selected industries follow. Petroleum and Petroleum Products. The production of petroleum products formed the initial basis of industrial development in the County. Currently, three companies manufacture products from crude oil. The largest in terms of capacity is Chevron Corporation's ("Chevron") Richmond Refinery, which began operations in 19132 and is the company's oldest and third-largest refinery. The Richmond refinery, located on 3,000 acres, has a capacity of 365,000 barrels per day. The refinery produces a complete line of petroleum products .and imports the bulk of the crude oil from Alaska. Shipping facilities include the company's own wharf, which is capable of handling four tankers at a time, making it the largest in the Bay Area its terms of tonnage. Chevron operates a fleet of 37 tankers, of which seven are for intrastate business. Petroleum products are also shipped by track and by two railroad carriers as A-3 well as distributed by pipeline. The company has completed construction of a $160 million natural-gas- fired cogeneration plant to ftalfill its own requirements for electricity and stem. A number of Chevron's divisions are located throughout the County. Chevron Products Company is located in Richmond where 1,777 employees work at an oil refinery and.management office. Chevron Research and Technology Company, located in Richmond, is the only non-,geological research arm of the company. This facility employs 402 people and is used by Chevron Research in its continuing program to improve the efficiency of conventional auto, aircraft and marine fuels. Chevron accounting Division is located in a 400,000 square foot building in Concord where 1,328 employees operate the accounting and credit card center for Chevron's entire domestic operations, Chevron also operates a facility in San Ramon where 2,397 employees are involved in computer, marketing, consumer services and other administrative functions and in Walnut Creek where 246 employees work in various divisions. Chevron is the fifth largest company in the San Francisco Bay Area (as measured by market capitalization)and is one of the largest employers in the County. The company has approximately 5,320 employees located among its various facilities in the County. Shell Oil Company, recently merged with Texaco to become Equilon Enterprises LLC ("Equilon"), began operating in Martinez in 1915. The Martinez defining Company, located on 1,100 acres, is a combined oil refinery and industrial chemical production plant. It is one of three facilities on the West Coast that supply all Shell-brand products to the western states. The complex currently has the capacity to process about 145,000 to 160,000 barrels of crude oil per day. About 70%-80/0 of this crude oil is transferred via the company's pipeline from California oil fields, while the remainder is shipped from Alaska. Equilon's docking facilities can handle two tankers and two barges simultaneously. Finished petroleum products are shipped via a company owned pipeline, Southern Pacific Railroad's pipeline,and by rail car and truck. Equilon employees in the County total approximately 930, of whom approximately 880 work at the Martinez complex and 50 work from their homes to provide marketing services to Shell and Texaco gas stations. Tosco Refining Company, a wholly owned subsidiary of Tosco Corporation ("Tosco"), operates an oil refinery at Rodeo between the cities of Richmond and Martinez, a distribution terminal for Northern California at Richmond,which began operations in 1896, occupies 1,100 acres and processes up to 100,000 barrels of raw materials per day. 'There are 600 full-time employees at the refinery and 75 at the distribution terminal. Tosco also operates a second refinery with a capacity of 150,000 barrels per day at Avon near Martinez and a carbon plant on Franklin Canyon Road near Highway 4 in the County. Total Tosco employment in the County is approximately 1,200° Tosco recently announced a major restructuring of its San Francisco Area Refinery Complex, which includes the facilities in Richmond and Rodeo. This restructuring will affect production capacity but is not expected to have a major impact on employment. A-4 In order to comply with State and federal clean air laws, the County's major oil refineries have built new facilities to produce cleaner gasoline and other products. The refinery projects are known as "Clean Fuels projects." Following are the locations and sizes of each of the dean Fuels projects that employ a significant number of County residents. County of Contra Costa Clears Fuel projects Investment CqMnan C f man) Chevron Corp. Richmond $ 540 Tosco Corp. Avon 404 Shell Oil Co. Martinez 1,300 Tosco Corp. Rodeo 300 Total ILS-O0 Health Care. One of the Bay Area's largest private employers, Kaiser Permanente Medical Group has approximately 3,300 employees in the County. Kaiser provides medical coverage to about one in three Bay Area residents and operates hospital and clinic facilities in Martinez, Antioch and Walnut Creek and is scheduled to open a major facility in Richmond in 1999. Telephone Services. The San Ramon Chamber of Commerce has reported that SIC (formerly known as"Pacific Telesis"), a major provider of telephone services, employs approximately 7,500 people at its Bishop Ranch offices in the County. Ams The following table provides a listing of major companies headquartered or located in the County and their recent employment levels. Major Employers in Bay Area. with Employees in the County(!) Primary Bay area Worldwide Firm Locations Product or Service Empl2yment EpWloyment Bank of aeric 2$ San Francisco Banking 34,095 90,500 Safeway,Inc. Pleasanton Grocery Stores 16,500 147,000 PG&E Corp. San Francisco Electricity and Gas 13,270 23,500 Wells Fargo&Co. Sara Francisco Banking 10,700 33,100 Chevron Corp. San Francisco Energy 8,398 34,186 SBC San Ramon Telephone Service 7,500 N/A Longs Drugs Walnut geek retail Drug Stores 4,490 16,500 Tosco refining Company='' richmond Oil Defining 1,200 N/A Bio-Rad Laboratories Hercules Diagnostic Products 1,050 2,535 USS-POSCO Industries Pittsburg Steel Manufacturing 1,000 1,000 E'quilon Enterprises LLC(3) Martinez Oil refining 930 NN/A Pixar Animation richmond Computer Animation 400 400 Western Staff'Services Inc, Walnut geek Staffing Services 300 1,200 Tri-Valley Growers San Ramon Growers Cooperative 298 2,500 Giga-Tronics Inc. San Ramon Electronics Equipment 225 225 Central Garden&Pet Lafayette Consumer Products 200 3,00€4 Shoe Pavilion richmond Foot retailer 200 400 Quickrespon,se Services Richmond Computer Services 200 230 Finet Holdings Corp. Walnut geek heal Estate Services 136 169 Onyx Farms Inc, Richmond Cancer research 120 120 Source: The San Francisco Chronicle, "The Chronicle 500,"April '1 998. `z} Prior to merger with NationsBank of Charlotte,North Carolina.. `3) Data obtained directly frons company. Measures of Income Cowing to the presence of relatively high-wage skilled jobs and wealthy residents, the County achieves high rankings among all California counties on a variety of income measurements. For example, as reported in the 1998 Sales and Marketing Management Survey of Buying.Power, the County's median household effective buying income for the 1997 calendar year of$48,476 was in the top five among all California counties, According to the U. S. Department of Commerce's Bureau of Economic analysis, the County's per capita personal income of $31,246 in 1995 was the fifth highest among California counties. The medians for the State were$36,483 (household income)and$24,090(per capita income). A-6 Commercial Activit Commercial activity comprises ars important part of the County's economy,with dollars generated by taxable transactions totaling approximately$9.3 billion in 1997. COUNTY OF CONTRA COSTA AxAHLE TR15fIN S33CTIONS 1993 TO 1997 (1N THOUSANDS) 1993 994 19 _996.. 199 a; Apparel Stores 276,507 $ 263,835 $ 246,879 $ 261,695 5 277,962 General Merchandise Stores 1,156,€i50 :,166,2€14 1,223,187 1,213,152 1,283,994 Specialty Sures 720,715 754,092 817,531 890,623 957,5€18 Food Stores 435,502 428,585 433,694 458,877 478,924 Packaged Liquor Stares 40,707 38,242 39,972 4.2,925 44,700 Eat.ng and Drinking Places 549,473 563,770 591,767 625,283 664,184 Home Furnishings and Appliances 333,179 273,1!0 270,691 283,020 323,400 uild 8 Mater'•als and Fann 591,710 Implements 461,036 492,850 493,436 543,324 Service Stations 510,835 5€1E,073 551,686 538,840 780,857 Autornovve and Vehicle Beaters, Parts and Supplies 542,469 868,1395 92 63 1,046,980 1.143.170 'dotal Retail Outlets $5,266,404 $5,353,437 $5,608,735 $5,945,099 $6,556,188 Business and Personal Services $ 313,314 $ 326,664 $ 33€1,063 $ 365,029 All Otner Outlets 51,896,702 JLL13 €164 2<400.957 %L265 76 5283139414 �taa X11ut3ets $79476,420 $7,818,165 $8,339,755 $8,5715,704 $9,277,41 Source: Sia e Board of Equalization Much of the County's commercial activity is concentrated in central business districts of the cities and :unincorporated towns. In addition, door regional shopping centers and numerous smaller centers serve County residents. The regional centers, located in the cities of Richmond, Concord, Walnut Creek and Antioch are each anchored by at least three major department stores. The lamest regional shopping center in the County is Sun Valley Shopping Center, Concord, which features 130 stores including Macy's, Sears,J. C. Penney's and-Mervyn's. 1n addition.,Price Costco's large warehouse stares are located in Richmond and Martinez and Sam's Cl=ub is located in Concord. The County is served by all major banks including Bank of America.and "Wells Fargo Bark, 1n addition there are numerous local barks and branches of smaller California and foreign banks. There are over 30 savings and loan associations in the County, including Home Savings, Great Western, San Francisco Federal and California Federal. Construction Activity The value of residential building activity decreased slightly in 1997, although it remains above the lowest level reached in 1991 when the recent California recession was at its deepest pointe T'he overall decline was a result of decreased multi-family unit construction, while the single-family sector posted a marginal gain. A-7 Within cities in the County, Brentwood accounted for the lamest percentage (18.2%) of total valuation growth in 1997 at$106.3 million, The following table provides a summary of building permit valuations and number of neva dwelling units authorized in the County since 1988. COUNTY OF C®iiT`I°RA COSTA BUILDING PERMIT VALUATIONS 1988 a 1997 Valuation($millions) _ -.- -- Number of New Dwelling Units Residential Single Multiple Year QN,ew Nonresidential Total Family _amil 'Total 1988 $785,925 $214,201 $1,000,126 5,853 2,171 8,024 1989 863,313 264,020 1,127,333 5,504 2,214 7,723 199€3 560,193 252,443 812,536 3,132 1,149 4,281 1991 488,939 196,165 585,104 2,705 1,275 3,980 1992 638,714 207,094 845,812 3,274 614 3,893 1993 590,135 183,156 773,291 3,026 451 3,477 1994 694,395 166,160 865,555 3.682 230 3,912 1995 619,685 190,443 810,128 2,137 618 3,755 1946 584,108 N/A N/A 3,094 450 3,580 1397 582,793 N/A N/A 3,105 381 3,485 Note: Totals may not be precise due to independent rounding Sources: Data Resources Inc.: 1988; Economic sciences Corporation: 1984-1997. In terms of major construction projects in the County, approximately $2.5 billion was recently spent by several major oil refiners to comply with federal clean fuels guidelines (see"Major Employers- Petroleum and Petroleum products"). In addition, $506 million was spent by BART on its extension to the West pittsburg/13aypoint region of the County, and $450 million of new construction was completed by the Contra Costa Water District on the Los Vaqueros Reservoir in the eastern portion of the County. Approximately $8.6 billion of construction projects are currently approved or underway in the County, including a $2.2 billion development known as "Dougherty Valley" that will add 11,000 new homes to the County's housing stock and construction projects totaling more than $1 billion on three major bridges. Other major subdivisions are also approved that will add $4.6 billion in new home construction, primarily in the eastern half of the County. Approximately $2.6 billion of projects are pending approval, including a project known as "Cowell Ranch," which involves $1.0 billion of construction spending on 5,000 residential units. Transportation Availability of a broad transportation network has been one of the major factors in the County's economic and population growth. Interstate 80 connects the western portion of the County to San Francisco, Sacramento and points north to Interstate 5, the major north-south highway from Mexico to Canada. Interstate 680 connects the central County communities to the rest of the Bay .Area via State Routes 4 and 24,the County's major east-west arteries. On April 23, 1992, Caltrans began ?Northern California's largest freeway interchange reconstruction project at the intersection of Interstate 680 and Highway 24 in Walnut Creek. The $315 million project will add traffic lanes, ars elevated bypass, and redesigned access patterns. With the A-8 majority of the work being conducted at night,the project is scheduled to finish in 1999. Caltrans is also widening Interstate 80 in the western portion of the County at a project cost of$200 million. In addition to private automobiles, ground transportation is available to County residents from the following service providers: Central Contra Costa Transit Authority ("CCCTA") provides local bus service to the central area of the County including Walnut Creek,Pleasant Hill and Concord. BART connects the County to Alameda County, San Francisco and Daly City and Colina in San Mateo with two main lines, one from the San Francisco area to Richmond and the other to the Concord/Walnut Creek/Pittsburg area. In December 1996, BART opened its Pittsburg/Bay Point station in the northeast area of the County. Construction of the 7.8 mile above-ground access down the middle of Highway 4 and the widening of Highway 4 in the affected region was completed at a cost of approximately $506 million. BART finished construction of a 14 mile extension to the City of Pleasanton in nearby Alameda County at a cost of$517 million in May 1997. BART now has 39 stations and 95 Miles of roadway in its system. BART is currently in the process of building an extension to the San Francisco International Airport expected to be completed by 2003. AC Transit, a daily commuter bus service based in Oakland, provides local service and connects Contra Costa communities to San Francisco and Oakland. Cather bus and rail passenger service is provided by Greyhound. The Santa Fe and Union Pacific Railroads' main lines service the County, both in the industrial coastal areas and the inland faun section. Commercial water transportation and docking facilities are available through a number of port and marina locations in the County. The Port of Richmond on San Pablo Bay and several privately owned industrial docks on both San Pablo and Suisun Bays serve the heavy industry located in the area. The fort of Richmond, owned and operated by the City of Richmond, covers 202 acres and handles nearly 20 million metric tons annually. The majority of the shipments are bulk liquids with the remainder consisting of scrap metal,autos,and gypsum rock. Major scheduled airline passenger and freight transportation for County residents is available at either Oakland or San Francisco International Airports, located about 20 and 30 miles,respectively, from the County. In addition there are two general aviation fields,one at Byron and the other at Concord. A-9 Agriculture The County is comprised of 470,400 acres, with over half(254,445) of these acres allocated to farmlands and harvested cropland. In 1997, the total gross value of agricultural products and crops reached$95.8 million. The value of agricultural production since 1993 is illustrated in the table below. COUNTY OF CONTRA COSTA AGRICULTURAL PRODUCTION, 1993-97 1993 _ _ 1994 __----1995 -- 1996 1997 Nursery products $24,940,000 $25,409,000 $21,782,000 $26,219,000 $31,288,000 Livestock&poultry 7,045,1€10 3,656,000 3,444,000 4,658,400 5,708,000 Field crops 10,115,500 11,122,000 10,616,900 12,281,800 €2,695,700 Vegetable&seed 15,06 7,500 20,242,500 19,037,000 19,899,000 20,033,000 crops Fruit and nut craps 13,131,700 13,155,900 14,967,500 15,294,000 18,520,000 Livestock,apiary& poultry products 59760.950 5.17100 5,970,430 7,250,4931 7,597.420 Total $717,060,850 $80,118,080 $75,817,830 $85,622,590 $95,842,120 Source:�Contm Costa County]Departrent of Agriculture. Environmental Control Services 'eater. The Bast Bay Municipal utilities District ("EBMUD") and the Contra Costa County Water District ("CCCWD") supply water to the County, BBN4UD, the second largest retail water distributor west of the Mississippi, supplies water to the western part of the County. ?'ninety-five percent of its supply is the Mokelumne River stored at the 68 billion gallon capacity Pardee Ilam. RB1v UD is entitled to 325 million gallons per day under a contract with the state Water Resources Control Board, plus an additional 32.5 million gallons per day under a contract with the U.S. Water and Power Resources Service (formerly the U.S. Bureau of Reclamation), EBMUD does not plass to draw on its federal entitlement for the foreseeable future. CCCWD obtains its water from the Sacramento-San Joaquin Delta and serves 400,000 customers in Concord, Pleasant Hill, 'Martinez, Clayton, Pittsburg and Antioch. It is entitled under a contract with the US. Water and Power Resources Service to 195,000 acre-feet per year. Water sold has ranged between 80,000 and 110,000 acre-feet annually. In additions, a number of industrial users and several municipalities draw water directly from the Sacs Joaquin. River under their owns riparians rights, so that actual water usage in the service area averages about 125,000 acre-feet annually. To provide expanded water storage capacity, CCCWD recently constructed the Los Vaqueros Reservoir south of the City of Antioch at an estimated project cost of$450 million. Buser. Sewer services for the County are provided by approximately 20 sanitation districts and municipalities, Federal and State environmental requirements,plus grant.money available from these two sources,have resulted in about 14 agencies upgrading, expanding and/or building new facilities. Flood Control The Contra Costa County Flood Control District has been in operation since 6951 to plan, build, and operate flood control projects in unincorporated areas of the County except for the lie€ta area on its eastern border. The Delta is interspersed with inland waterways which fall under the A-10 jurisdiction of the U.S. Corps of Engineers and the State Department of Water resources. The District has recently completed construction of the gest Antioch Capacity Improvement project. Education and Community Services Public school education in the County is available through nine elementary school districts, two high school districts and seven unified school districts. These districts provide 132 elementary schools, 36 middle, junior high and intermediate schools, 27 high schools, and a number of preschool, adult school, and special education facilities. In addition, there are 121 private schools with six or more students in the County. School enrollment in January of 1998 numbered approximately 150,534 students in public schools and 16,838 students in regular graded private schools. The County's average SAT scores exceed regional, State and national averages. In addition, while County secondary school enrollment went up 14%from 1992993 to 1996-97,the County's dropout rate went dawn 32% in the same period. Higher education is available in the County through a combination of two-year community colleges and four-year colleges. The Contra Costa County Community College District has campuses in Richmond, pleasant bill and Pittsburg. California State University at Hayward opened a branch opus, called Contra Costa Center, in the City of pleasant Hill where late afternoon and evening classes in business, education and liberal arts are offered. In addition, the California State University currently has a campus in Concord. St. Mary's College of California, a four-year private institution, is located on a 100-acre campus in Moraga. Also located within the County is John F. Kennedy University. In addition, County residents are within easy commuting distance of the University of California, Berkeley. Approximately 64% of County residents have attended college, and approximately 49% of County residents have completed four or more years of college. Where are nine privately operated hospitals and one public hospital in the County, with a combined total of 1,900 beds. Three of the private hospitals are run by Kaiser Permanente, the lamest health maintenance organization in the United States, Kaiser is presently expanding its Richmond hospital,which was built in 1995. Critical care beds will be added in early 1999,with new surgical suites and a full service emergency department opening by the end of 1999. The public hospital is Contra Costa. Regional Medical Center,a facility that the County completely rebuilt and opened to the public in January 1998 on the existing campus in Martinez. A-11 S. Continuing Disclosure Agreement, dated as of February 1, 1999 (the "Continuing Disclosure Agreement), by and between the County and the Trustee, 6. Official Statement relating to the Bonds (the"Official Statement"); and 7. Bond Purchase Contract, dated January 21, 1999 (the "Purchase Contract"), among the Authority, the County and Bear, Stearns & Co. Inc. and Merrill Lynch & Co., as underwriters; WHEREAS, this Board has been presented with forms of each document numbered 1 through S referred to above, and this Board has examined and approved the form of each such document and desires to authorize, ratify and confirm the issuance and sale of not to exceed $74,685,000 aggregate principal amount of the Bonds and the execution of such documents in substantially such forms and the consummation of such financing; and WHEREAS, this Board has been presented with copies of documents numbered 6 and 7 referred to above, and this Board has examined each such document and desires to ratify and confirm the execution of such documents; and WHEREAS, the County has full legal right, power and authority under the Constitution and the laws of the State of California to enter into the transactions described herein; NOW, THEREFORE, BE IT RESOLVED by the Board of Supervisors of the County of Contra Costa, California, as follows: Secti l.. The foregoing recitals are true and correct. , cam 2. The issuance and sale of the Bonds and the terms of the Bonds as set forth in the Trust Agreement are hereby authorized,ratified and confirmed. Ste. The execution and delivery of the Trust Agreement, the Site Lease, the Facility Lease, the Letter of.Instructions and the Continuing Disclosure Agreement, each in substantially the form presented to this Board with such changes therein as may be approved or required by the officer of the County executing such documents, such approval to be conclusively evidenced by the execution and delivery thereof, are hereby authorized and confirmed. Sc„�014. The Purchase Contract in the form presented to this Board and the execution and delivery thereof is hereby ratified and confFrrned. Section . The Official Statement describing the Bonds and the execution and delivery thereof is hereby ratified and confirmed. Sectio 1..6. The schedule of base rental payments set forth in jMI-AA hereto is approved and is hereby determined to be the schedule of base rental payments to be paid pursuant to the Facility Lease. DOCSSF i:330389.2 2 C ion 7. All actions taken or to be taken by the offices and agents of the County with respect to the issuance and sale of the Bonds are hereby authorized, ratified and confirmed. DOCSSP:33038,.2 3 S-cction 8. This Resolution shall take effect from and after its adoption. PASSED AND ADOPTED this 23 d day of February, 1999, aL " 4of the Board of Supervisors County of Contra Costa, California 3t [Seal] ATTEST; Philip J. Batchelor,Clerk of the Board of Supervisors and County Administrator By DepuV Clerk of the Board of Supervisors of the County of Contra Costa, State of California. oocssFI:330389.2 4 E7{HIBI A--ease Rental Payment ent h duce County of Contra Costa public Financing Authority Lease Revenue Bands (Refunding and Various Capital projects), 1999 Series A Total r;'emlian"U3, Fiscal Year Date Base Rental Base Rental— €11199 2,429,954.17 2,429,954.17 12/1/99 1,706,931.25 6/1100 3,916,931.25 6,623,862.50 1211/00 1,662,731.25 6/1101 4,322,731.23 5,985,462.50 12/1101 1,609,531.25 611102 4,374,531.25 5,984,062.50 12/1102 1,554,231.25 6/1/03 4,439,231.25 5,993,462.50 1211103 1,496,531.35 6/1/04 4,496,531.25 5,993,062.50 1211104 1,436,531.245 611/05 4,551,531.25 5,988,062.50 1211105 1,374,331.25 611/06 4,609,231.35 5,983,462.50 1211106 1,309,531.25 611107 4,674,531.23 5,984,062.50 12/1107 1,342,331.35 611106 4,747,231.25 5,989,462.50 1211108 1,154,606.25 611/09 3,759,606.25 4,914.212.50 12/1109 1,099,901.25 611/10 3,624,901.25 4,924,802.50 1211110 1,041,985.00 6/i 111 3,876,995.00 4,918,990.00 12/1111 979,625.00 6/1112 3,944,635.00 4,924,250.00 1211112 901,793.75 611113 4,016,793.75 4,916,587.50 1211/13 820,025.00 611/14 4,100,025.00 4,920,050.00 1211/14 733,925.00 611/15 4,186,925.00 4,922,850.00 12/1/15 643,231.25 611/16 4,273,231.35 4,916,463.50 1211/16 547,943.75 6/1117 1,937,943.75 2,485,867.50 1211/17 514,931.25 6/1/18 1,969,931.25 2,484,662.50 12/1118 460,375.00 611119 2,005,375.00 2,465,750.00 1311119 442,250.00 611/20 2,042,250.00 2,484,500.00 1111120 402,250.00 611121 2,067,250.00 2,489,500.00 13/1/21 360,125.00 611122 2,130,135.00 2,450,250.00 1211122 315,675.00 611123 2,170,875.00 2,486,750.00 1211/23 269,500.00 611/24 2,219,500.00 2,489,000.00 1211/24 220,750.00 611125 2,370,750.00 2,491,500.00 12/1/25 169,500.00 6/1126 2,319,500.00 2,469,000.00 12/1/26 115,750.00 6/1/27 2,315,760.00 2,491,500.00 12/1127 59,250.00 6/1/26 2,429,250.00 2,486,500.00 Total 125,172,121.67 1 25,172 121.67 LE ' .CERTIEIQATE Ann Cervelli, Deputy Clerk of the Board of Supervisors of the County of Contra Costa, hereby certify as follows: The foregoing is a full, true and correct copy of a resolution duly adapted at a regular meeting of the Board of Supervisors of said.County duly and regularly held at the regular meeting place thereof on the 23rd day of February, 1999, of which meeting all of the members of said Board of Supervisors had clue notice and at which a majority thereof were present; and at said meeting said resolution was adopted by the following vote: Suoervzsors Gioia, Uilltema, Gerber , DeSaulnier and Canciamilla AIN: - None NOES: Bone ABSENT: Mone An agenda of said meeting was posted at least 96 hours before said meeting at 651 Pine S t • , Martinez, California, a location freely accessible to members of the public, and a brief general description of said resolution appeared on said agenda. I have carefully compared the same with the original minutes of said meeting on file and of record in my office; the foregoing resolution is a full, true and correct copy of the original resolution adopted at said meeting and entered in said minutes, and said resolution has not been amended, modified or rescinded since the date of its adoption, and the same is now in full force and effect. WITNESS my hand and the seal of the County of Contra Costa this 2 3rdday of February, 1999. Deputy Clem of the Board of Supervisors of the County of Contra Costa, State of California [Seal] DOC SSP:330383.2 OH&S DRAFT 2/11/99 TRUST AGREEMENT between the COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY and U.S. BANK.TRUST NATIONAL ASSOCIATION, as Trustee Elated as of February 1, 1999 $74,585,000 County of Contra Costa Public Financing Authority Lease Revenue Bonds(Refunding and Various Capital Projects), 1999 Series A - r I)OCSSF 1:308375.7 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; EQUAL SECURITY .................. ........................................... 3 SECTION 1.01. Definitions................... ............................__............... ..................... 3 SECTION 1.02. Equal Security.................. ......................................... .......__.... 20 SECTION 1.03. Interpretation........................ ................. ...... ...... ..........................20 ARTICLE11 TIDE BONDS ...... ............... ........-... ....................................-.................... ....20 SECTION 2.01. Authorization of Bonds; 1999 Series A Bonds............................... 20 SECTION 2.02. Terms of the 1999 Series A Bonds................................................. 21 SECTION 2.03. Form of 1.999 Series A Bonds.........................................................23 SECTION 2.04. Execution of 1999 Series A Bonds.................................................23 SECTION 2.05. Transfer and Payment of Bonds...................................................... 23 SECTION 2.06. Exchange of Bonds................................... ................................. 24 SECTION 2.07. Bond Registration Books................................................................24 SECTION 2.08. Mutilated, Destroyed, Stolen or Lost Bonds; Temporary Bonds.............................................................................................. 24 SECTION 2.09. Special Covenants as to Book-Entry Only System for 1999 SeriesA Bonds... ..................................... ................................... 21; ARTICLE III ISSUANCE OF BONDS ............................... ........................................—......27 SECTION 3.01. Procedure for the Issuance of 1999 Series A Bonds................ ......27 SECTION 3.02. 1999 Project Fund........................................ 28 SECTION 3.03. Conditions for the Issuance of Additional Bonds........................... 28 SECTION- 3.04. Proceedings for Authorization of Additional Bonds ...................... 29 SECTION 3.05. Limitations on the Issuance of Obligations Payable from Revenues.........;.................... .......................................................... 30 ARTICLE IV REDEMPTION OF BONDS.................. ................. ................. ........... 31 SECTION 4.01, Extraordinary Redemption..............................................................31 SECTION 4.02. Optional Redemption....... .....................................i........................ 31 SECTION 4.03. Mandatory Sinking Fund Redemption............................................ 31 SECTION 4.04. Selection of Bonds for Redemption............ ..................... ......... ... 32 SECTION 4.05. Notice of Redemption; Cancellation; Effect of Redemption.......... 32 ARTICLEV REVENUES................ ................ .................................................................... 33 SECTION 5.01. Pledge of Revenues..... .................................................. ............ 33 SECTION 5.02. Receipt and Deposit of Revenues in the Revenue Fund................. 33 DOCS Sµt:3()8375.7 i TABLE OF CONTENTS (continued) Page SECTION 5.03. Establishment and Maintenance of Accounts for Use of Money in the Revenue Fund; Reserve Fund................................... 34 SECTION 5.04. Application of Insurance Proceeds .................__.....__.... ........ ... 38 SECTION 5.05. Deposit and Investments of Money in Accounts and Funds........... 39 ARTICLE VI COVENANTS OF THE AUTHORITY...........................................................40 SECTION 6.01. Punctual Payment and Performance.................... ............. ........40 SECTION 6.02. Against Encumbrances........ .................... ....... ...................... .......40 SECTION 6.03. Tax Covenants; Rebate Fund.............................................. ........ ...40 SECTION 6.04. Accounting Records and Reports....................................................41 SECTION 6,05. Prosecution and Defense of Suits ................................................... 42 SECTION 6.06. Further Assurances.................................. ...........................__....._ 42 SECTION 6,07. Maintenance of Revenues ..... ............................................ ......42 SECTION 6.08. Amendments to Facility Lease........................................................ 42 SECTION 6.09. Leasehold Estate.............................. ...................... ................. ....43 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES OF BONDHOLDERS .............. 44 SECTION 7.01. Events of Default and Acceleration of Maturities ..........................44 SECTION 7.02. Application of Funds Upon Acceleration.......................................45 SECTION 7.03. Institution of Legal Proceedings by Trustee.................._..............46 SECTION7.04. Non-Waiver......................................................._ .................... ......46 SECTION 7.05. Actions by Trustee as Attorney-in-Fact...... ............................ ...... 46 SECTION 7.06. Remedies Not Exclusive.................................................................47 SECTION 7.07. Limitation on Bondholders' Right to Sue.... ............ __....... 47 ARTICLEVIII THE TRUSTEE........................ .................................................. ........47 SECTION 8.01. The Trustee................I..... ...........­...I............­....................... .....47 SECTION 8.02. Liability of Trustee .............. ........ .......................................... ..._48 SECTION 8.03. Compensation and Indemnification of Trustee............................... 50 SECTION 8.04, Compliance with Continuing Disclosure Agreement..................... 51 ARTICLE IX AMENDMENT OF THE TRUST AGREEMENT .......................................... 51 SECTION 9.01. Amendment of the Trust Agreement ... ................ ........ ............ 51 SECTION 9.02. Disqualified Bonds.................... .............................. ..................... 53 DOCSSFL308375.7 ll TABLE OF CONTENTS (continued) Page SECTION 9.03. Endorsement or Replacement of Bonds After Amendment........... 53 SECTION 9.04. Amendment by Mutual Consent..................................................... 53 ARTICLE X DEFEASANCE............--.............................. ............................................. .... 53 SECTION 10.01. Discharge of Bonds.................................................................... .... 53 SECTION 10.02. Unclaimed Money...... ............... ...... ............. ....................... ....... 54 ARTICLE XI MUNICIPAL BOND INTSUR-kNCE; 1999 RESERVE FACILITY................ 55 SECTION 11.01. Concerning the 1999 Series A Bond Insurer.................................. 55 SECTION 11.02. Payments Under the Bond Insurance Policy................................... 57 SECTION 11.03. Provisions Relating to the 1999 Reserve Facility........................... 58 ARTICLEXII MISCELLANEOUS ....................................................................... ...... .......... 59 SECTION 12.01. Liability of Authority Limited to Revenues..................................... 59 SECTION 12.02. Benefits of this Trust Agreement Limited to Parties; Bond Insurer and Third Party Beneficiaries..... ........... .......................... 59 SECTION 12.03. Successor Is Deemed Included In All References To Predecessor .......................................... ......................................... 59 SECTION 12.04. Execution of Documents by Bondholders ...................................... 59 SECTION 12.05. Waiver of Personal Liability........................................................... 60 SECTION 12.06. Acquisition of Bonds by Authority.................................................60 SECTION i2.07. Destruction of Cancelled Bonds....... ................... ........ .............— 60 SECTION 12.08. Content of Certificates...... ........................................... .................. 60 SECTION 12.09. Publication for Successive Weeks.................................................. 61 SECTION 12.10. Accounts and Funds.......................................................... ......... ...61 SECTION 12.11. Business Day...... ............ ............. ........ ........................................ 61 SECTION 12.12. Notices;Notices to Rating Agencies..............................................61 SECTION 12.13. Article and Section Headings and References....... ................ .......62 SECTION 12.14. Partial Invalidity.,..................................... ................. .................... 62 SECTION 12.15. Governing Law.............. .......................................... ..................— 62 SECTION 12.16. Execution in Several Counterparts........................... .............. ... 62 Execution............—.............................................................................................................. .......64 Exhibit A Form of 1999 Series A Bond.... ....................................... ................................A-1 Exhibit B Schedule of Trustee Fees.............................................................. ..............B-1 DOCSSFI:308375.7 iii THIS TRUST AGREEMENT dated as of February 1, 1.999 (the "Trust Agreement"), by and between the COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY (the "Authority"), a joint powers agency and U.S. Bank Trust National Association., a national banking association organized and existing under the laws of the United States of America and qualified to accept and administer the trusts hereby created, as trustee (the "Trustee"), WITNESSETH WHEREAS, the Authority is a joint exercise of powers authority duly organized and operating pursuant to Article 1 of Chapter S of Division 7 of Title 1 of the Government Code of the State of California(hereinafter,the"Act"); WHEREAS, Article 4 of the Act authorizes and empowers the Authority to issue bonds to assist local agencies in financing projects and programs consisting of certain public improvements or working capital or liability and other insurance needs whenever a local agency determines that there are significant public benefits from so doing, WHEREAS, the County of Contra Costa has determined that the consummation of the transactions contemplated in the Facility Lease (as hereinafter defined) and this Trust Agreement will result in significant public benefits; WHEREAS, the Authority is empowered pursuant to the Facility Lease and the aforementioned Article 4 of the Act to cause the lease of the Facilities (as hereinafter defined), and to cause the financing and the refinancing of the Project (as hereinafter defined) through the issuance of its bonds; WHEREAS, $61,690,000 aggregate principal amount of the County's 1988 Certificates of Participation for Consolidated Capital Projects, Equipment Acquisition Program and Count, Integrated Telecommunications Network (the "Prior Certificates") were executed and delivered pursuant to a Trust Agreement, dated as of July 1, 1988, by and among the County, the Contra Costa County Public Facilities Corporation (the "Corporation") and U.S. Bank Trust National Association, as successor trustee (the "Prior Trustee"), for the purpose of refinancing certain County lease obligations including the acquisition of and improvements to the Auditor-Controllers Building, District Attorneys Building, Public Defenders Building, a social services building, County Administration Building, Bray Courthouse, and Sheriff Patrol Investigation and Communication Administration Building, all located in the City of Martinez, California, the Municipal Court Building in the City of Concord, California, the County Library Building in the City of Pleasant Hill, California, the East County Social Services Building in the City of Antioch, California and financing of various equipment including cars, trucks, computers and communications equipment and the Countywide Integrated Telecommunication Network System (the "1988 Project"), WHEREAS the Corporation acquired. the 1988 Project and pursuant to a lease agreement, dated as of July 1, 1988 (the"Prior Facility Lease"), between the Corporation and the County, which lease or memorandum thereof was recorded in the office of the County Recorder DOC SSF 1:308375.7 of the County of Contra Costa on July 26, 1988 under Recorder's Serial Number 88-126419, the Corporation leased the 1988 Project to the County; WHEREAS, pursuant to an assignment agreement, dated as of July 1, 1988, between:the Corporation and the Prior Trustee, the lease payments made by the County under the Prior Facility lease ("Prior Base Rental") were assigned to the Prior Trustee to pay the principal and interest represented by the Prior Certificates; WHEREAS, the County has determined to finance various capital projects as set forth in Exhibit C to the Facility Lease (the"1999 Project"); WHEREAS, the Authority intends to assist the County in refinancing the acquisition and improvement of the 1988 Project and in financing the 1999 Project by issuing the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 1999 Series A(the"1999 Series A Bonds"); WHEREAS, pursuant to the Letter of Instructions to the Prior Trustee, dated as of February 1, 1999, certain proceeds of the 1999 Series A Bonds will be deposited into an escrow fund (the "Escrow Fund") and irrevocably pledged to repay the Prior Base Rental and the Prior Certificates.on June 1, 1999; WHEREAS, upon such deposit the 1988 Project will vest in the County, WHEREAS, the County will lease to the Authority certain capital assets of the County (the "Facilities")pursuant to the Site Lease (as hereinafter defined); WHEREAS, the County will lease back the Facilities from the Authority pursuant to the terms of the Facility lease; WHEREAS, the Authority intends to assist the County by financing the construction, renovation and acquisition for the County of certain other County facilities together with site development, landscaping, utilities, fixtures, furnishings, equipment, improvements and appurtenant and related facilities (the "Subsequent Phases of the Project," and collectively with the 1988 Project and the 1999 Project, the"Project"); and WHEREAS, the Authority has authorized the issuance of the 1999 Series A Bonds, in an aggregate principal amount not to exceed eighty-five million dollars ($85,000,000) to assist in financing and refinancing the Project; WHEREAS, to reduce the borrowing costs of the Authority and the base rental payments of the County, and to help the financing of the Project from which significant public benefit will be achieved, the 1999 Series A Bonds shall be issued pursuant to Article 4 of the Act; WHEREAS, to provide for the authentication and delivery of the Bonds (as hereinafter defined), to establish and declare the terms and conditions upon which the Bonds are to be issued and secured and to secure the full and timely payment of the principal thereof and DOCSsr1:30975.7 2 premium, if any, and interest thereon, the Authority has authorized the execution and delivery of this Trust Agreement; WHEREAS, the Authority has determined that all acts and proceedings required by law necessary to make the Bonds, when executed by the Authority, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal obligations of the Authority payable in accordance with their terms, and to constitute this Trust Agreement a valid and binding agreement of the parties hereto for the uses and purposes herein set forth, have been done and taken, and have been in all respects duly authorized; NOW, THEREFORE, THIS TRUST AGREEMENT WITNESSETH, that in order to secure the full and timely payment of the principal of, premium, if any, and the interest on all Bonds at any time issued and outstanding under this Trust Agreement, according to their tenor, and to secure the performance and observance of all the covenants and conditions therein and herein set forth, and to declare the terms and conditions upon and subject to which the Bonds are to be issued and received, and in consideration of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds by the holders thereof, and for other valuable consideration, the receipt whereof is hereby acknowledged, the Authority does hereby covenant and agree with the Trustee, for the benefit of the respective holders from time to time of the Bonds, as follows: ARTICLE I DEFINITIONS, EQUAL SECURITY SECTION 1.01. Definitions. Unless the context otherwise requires, the terms defined in this Section shall for all purposes hereof and of any Supplemental Trust Agreement and of any certificate, opinion, request or other document herein or therein mentioned have the meanings herein specified, unless otherwise defined in such other document. Capitalized terms not otherwise defined herein shall have the meaning assigned to such terms in the Facility Lease. Accreted Interest The term "Accreted Interest" means, with respect to Capital Appreciation Bonds, as of the date of calculation, the Accreted Value thereof minus the Denominational Amount thereof. Accreted Value The term"Accreted Value" means, with respect to Capital Appreciation Bonds, as of the date of calculation, the Denominational Amount thereof plus the interest accrued thereon to such date of calculation, compounded from the date of initial delivery at the interest rate thereof on each June 1 and December 1, as determined in accordance with the Supplemental Trust Agreement authorizing such Bonds, assuming in any year that such Accreted Value increases in equal daily amounts on the basis of a year of three hundred sixty (360) days composed of twelve (12)months of thirty(30) days each. DX)CSS:I;308375.7 3 Act The term "Act" means the Joint Exercise of Powers Act (beim Chapter 5 of Division 7 of Title 1 of the Government Code of the State, as amended) and all laws amendatory thereof or supplemental thereto. Authority The term "Authority" means the County of Contra Costa Public Financing Authority created pursuant to the Act and its successors and assigns in accordance herewith. Authorized Denominations The term "Authorized Denominations" means, with respect to the Fred Rate Bonds, $5,000 or any integral multiple thereof, and, with respect to the Variable Rate Bonds, $100,000 or any integral multiple thereof. Bond Counsel The term "Bond Counsel" means counsel of recognized national standing in the field of law relating to municipal bonds, appointed by the Authority. Bond_Insurance Policy The term "Bond Insurance Policy" means, with respect only to Bonds insured thereby, any policy or policies of insurance or financial guaranty bond insuring the scheduled payment of the principal of and interest on the Bonds when due and issued by a Bond Insurer. Bond Insurer The term "Bond Insurer" means any insurance company or companies which has or have issued any Bond Insurance Policy insuring the scheduled payment of the principal of and interest on any Outstanding Bonds or any series or portion thereof when due. The Bond Insurer for the Insured 1999 Series A Bonds is irIBIA.Insurance Corporation, its successors and assigns. Bond Year The terra "Bond Year" means the twelve (12)-month period ending on .lune I of each year to which reference is made. Bondholder; Owner, Owner The term "Bondholder," `.`Owner" or "Owner" means any person who shall be the registered owner of any Outstanding Bond. DOC'SSN:308375.7 4 Bands 1,999 SeritaADonds, Insured 1999 SgriesA Bonds Additional Bands e 'a1 Band Term Bands The term "Bonds"means the 1999 Series A Bonds and all Additional Bonds. The term "1999 Series A Bonds" means all bonds of the Authority authorized by and at any time Outstanding pursuant hereto and executed, issued and delivered in accordance with Section 2.02(a) and Section 3.01. The term "Insured 1999 Series A Bonds" means the 1999 Series A Bands maturing on or after June 1, 2002. The term "Additional Bonds" :Weans all bonds of the Authority authorized by and at any time Outstanding pursuant hereto and executed, issued and delivered in accordance with Article III. The term "Serial Bonds" means Bonds for which no sinking fund payments are provided. The terra "Term Bonds" means Bonds which are payable on or before their specified maturity dates from sinking fund payments established for that purpose and calculated to retire such Bonds on or before their specified maturity dates. Brahouse The term "Bray Courthouse" means a 3 story, type 1 steel frame building in the City of Martinez, California, commonly known and designated as the Bray Courthouse, located at 1020 Ward Street and containing approximately 49,000 square feet, together with site development, landscaping, utilities, equipment, furnishings, improvements and appurtenant and related facilities, located on the Demised Premises. Business Day The term "Business Day" means a day that is not a Saturday, Sunday or legal holiday on which banking institutions in the State of New York or California or the 1999 Series A Bond Insurer are authorized to remain closed, or a day on which the Federal Reserve system is closed. Capital Appreciation Bonds The term "Capital Appreciation Bonds" means Bonds the interest on which is compounded semiannually on each Interest Payment Date to the maturity date as specified in the accreted value table for such Bonds in an exhibit to a Supplemental Trust Agreement. Certificate of the Authority The term "Certificate of the Authority" means an instrument in writing signed by any of the following officials of the Authority: Chair, Vice-Chair, Executive Director, Assistant Executive Director or Deputy Executive Director or a designee of any such officer, or by any other person (whether or not an officer of the Authority) who is specifically authorized by resolution of the Authority for that purpose. Certificate of the County The term "Certificate of the County„ means an instrument in writing signed by any of the fallowing County officials: Chair of the Board of Supervisors, County Administrator of the County or Director, Capital Facilities and Debt Management or by any such officials' duly DO ssF;:309375.7 5 appointed designee, or by any other officer of the County duly authorized by the Board of Supervisors of the County for that purpose. Code The term "Code"means the Internal Revenue Code of 1986, as amended. Continuing Disclos re Agreement The term "Continuing Disclosure Agreement" shall mean that certain Continuing Disclosure Agreement executed by the County and the Trustee dated the date of issuance and delivery of the 1999 Series A Bonds, as originally executed and as it may be amended from time to time in accordance with the terms thereof. Costs of Issuance The term "Costs of Issuance" means all items of expense directly or indirectly payable by or reimbursable to the County or the Authority and related to the authorization, execution and delivery of the Facility Lease, the Site Lease, this Trost Agreement and the issuance and sale of the Bonds, including, but not limited to, costs of preparation and reproduction of documents, costs of rating agencies and costs to provide information required by rating agencies, fling and recording fees, fees and charges of the Trustee, legal fees and charges, fees and disbursements of consultants and professionals,premiums of any Bond Insurer, fees and charges for preparation, execution and safekeeping of the Bonds, title search and title insurance fees, fees of the Authority and any other authorized cost, charge or fee in connection with the issuance of the Bonds. Costs of Issuance Fund The term "Costs of Issuance Fund" means the fund by that name established pursuant to section 3.01. Count The term "County" means the County of Contra Costa, a County organized and validly existing under the Constitution and general laws of the State. County Office Building The term"County Office Building" means a 4 story, class A office building in the City of Martinez, California, commonly known as Summit Centre and designated as the County Office Building, located at 2530 Arnold Drive and containing approximately 118,550 square feet, together with parking, site development, landscaping, utilities, equipment, furnishings, improvements and appurtenant and related.facilities. D0C'SSF;.30?375.7 6 Courts Project The term "Courts Project" means the Bray Courthouse and the Family Law Center. Current Interest Bonds The term "Current Interest Bonds" means Bonds the interest on which is payable on each Interest Payment Date to the maturity date for each such Bond. Debt Service The term "Debt Service" means, for any Fiscal Year or other period, the sum of (1) the interest accruing during such Fiscal Year or other period on all Outstanding Bonds and Swaps, assuming that all Outstanding Serial Bonds are retired as scheduled and that all Outstanding Term Bonds are redeemed or paid from sinking fund payments as scheduled (except to the extent that such interest is to be paid from the proceeds of sale of any Bonds so long as such funded interest is in an amount equal to the gross amount necessary to pay such interest on the Bonds and is invested. in Government Securities which mature no later than the related Interest Payment Date), (2) the principal amount of all Outstanding Serial Bands maturing during such Fiscal Year or other period, and (3) the principal amount of all Outstanding Term Bonds required to be redeemed or paid (together with the redemption premiums, if any, thereon) during such Fiscal Year or other period; provided, that the foregoing shall be subject to adjustment and recalculation as follows. (a) with respect to Capital Appreciation Bonds, the Accreted Value payment shall be deemed a principal payment and interest that is compounded and paid as Accreted Value shall be deemed clue on the scheduled redemption or payment date of such Capital Appreciation Bond; and (b) with respect to Swaps and Swapped Bonds, the interest payments shall be adjusted to give effect to the Swap in such manner and to such extent (1) as may be required under generally accepted accounting principles, consistently applied or (2) in the absence of requirements imposed by generally accepted accounting principles, as shall be stated in a Certificate of the Authority (which Certificate shall be delivered to the Trustee concurrently with the later of the issuance of the Swapped Bonds or the execution of the Swap) in such manner as shall present fairly the reasonably expected Debt Service on the Swap and Swapped Bonds after the execution of the Swap; and (c) with respect to Variable Rate Bonds, the interest payments shall be calculated at a rate equal to 150% of the highest rate borne by such Bonds in the last 12 months. Remised Premises The term "Demised Premises" means that certain real property situated in the County of Centra Costa, State of California, described in Exhibit A to the Facility Lease, together with any additional real property added thereto by any supplement or amendment F1OCSSF?:308375.7 7 thereto; subject, however, to any conditions, reservations, and easements of record or known to the County. DQnominational Amount The term "Denominational Amount" means, with respect to Capital Appreciation Bonds, the initial offering price thereof, which represents the principal amount thereof, and, with respect to the Current Interest Bonds, the principal amount thereof. DeDository The term "Depository" means DTC or another recogrsized securities depository selected by the Authority which maintains a book-entry system for the Bonds. Dissemination Aizent The term "Dissemination Agent" means the Trustee or any successor appointed under the Continuing Disclosure Agreement. DT The terra"DTC *means The Depository Trust Company, New York, New York. Escrow Agent The term "Escrow Agent" means U.S. Bank Trust National Association, as Prior Trustee, or its successor thereto. Escrow Fuad The terga "Escrow Fund' :Weans the fund of the same name defined in the Letter of Instructions. Event ofDfault The term"Event of Default"shall have the meaning specified in Section 7.01. Facilities The term "Facilities" means the Demised Premises, the Nest County Detention Facility, the Bray Courthouse and the Social Services Building or any County buildings, other improvements and facilities, added thereto or substituted therefor, or any portion thereof, in accordance with the Facility Lease and the Trust Agreement as set forth more fully in Exhibit A to the Facility Lease; subject, however, to any conditions, reservations and easements of record known to the County. DOCSSF 1:308375.7 Facility Lease The term. "Facility Lease" means that certain lease, entitled "Facility Lease (Various Capital Projects)", by and between the County and the Authority, dated as of February 1, 1999, which lease or a memorandum thereof was recorded in the office of the County Recorder of the County of Contra Costa on as document No. , as originally executed and recorded or as it may from time to time be supplemented, modified or amended pursuant to the provisions hereof and thereof, Family Law enter The terra "Family Law Center" means the court center for family law matters, including dissolution of marriage, child custody and alternative dispute resolution to be located in the City of Martinez, California, adjacent to 1111 Ward Street, together with parking, site development, landscaping, utilities, equipment, furnishings, improvements and appurtenant and related facilities, including demolition and environmental mitigation, Financial Quaran=t &Legement The term "Financial Guaranty Agreement" mean the Financial Guaranty Agreement, effective as of February 1, 1999, between the County and the 1999 Reserve Facility Provider. Financial Newsnaner The term "Financial Newspaper" means The Wall Street Journal or The Bond Buyer, or any other newspaper or journal printed in the English language, publishing financial news, and selected by the Authority. Fiscal Year The term "Fiscal Year" means the twelve (12) month period terminating on J=ane 30 of each year, or any other annual accounting period hereafter selected and designated by the Authority as its Fiscal Year in accordance with applicable law. Fixed.Rate Bonds The terns "Fixed Rate Bonds"means Bonds of any Series which bear interest at a fixed interest rate from the date of such Bonds until the maturity or redemption date thereof Government Securities The term "Government Securities" means (1) cash; (2) U.S. Treasury Certificates, Notes and Bunds (including State and Local Govemment Series--"SLGS"); (3) direct obligations of the U.S, T'reasury which have been stripped by the Treasury itself, such as CATS, TIGRS and similar securities; (4) Resolution Funding Corp. (REFCORP) strips (interest component only) which have been stripped by request to the Federal Reserve Bank of New York in book entry form; (5)pre-refunded municipal bonds rated "Aaa" by Moody`s and "AAA." by SBP, or if not }OCSSFI:08375.7 9 rated by Moody`s, thea pre-refunded bonds that have been pre-refunded with cash, direct U.S. or U.S. guaranteed obligations, or AAA-rated pre-refunded municipal obligations; (6) obligations issued by the fallowing agencies which are backed by the full faith and credit of the U.S.; (a)U.S. Export-Import Bank direct obligations or fully guaranteed certificates of beneficial ownership, (b) Farmers Home Administration (FmHA) certificates of beneficial ownership, (c) Federal Financing Bank, (d) General Services Administration participation certificates, (e)U.S. Maritime Administration Guaranteed Title XI financing, (f) U.S. Department of Housing and Urban Development (HUD) Project Notes, Local Authority Bonds, New Communities Debentures--U.S. government guaranteed debentures, and U.S. Public Housing Nates and Bonds--U.S. government guaranteed public housing notes and bonds. Independent Certified Public Accountant The term "Independent Certified Public Accountant" means any certified public accountant or firm of such accountants duly licensed and entitled to practice and practicing as such under the laws of the State or a comparable successor, appointed and paid by the Authority, and who, or each of whom-- (1) is in fact independent according to the Statement of Auditing Standards No. I and not under the domination of the Authority or the County; (2) does not have a substantial financial interest, direct or indirect, in the operations of the Authority or the County, and (3) is not connected with the Authority or the County as a member, officer or employee of the Authority or the County, but who may be regularly retained to audit the accounting records of and make reports thereon to the Authority or the County. Interest Payment D tie The term. "Interest Payment Date" means June 1 and December 1 in each year, commencing June 1, 1999. Interest Pavment Period The term "Interest Payment Period" means the period from and including each Interest Payment Date (or, for the first Interest Payment Period, the date of the Bonds) to and including the day immediately preceding the next succeeding Interest Payment Date. Joint Powers Az,reement The term "Joint Powers Agreement" means the Joint Exercise of Powers Agreement by and between the County and the Contra Costa County Redevelopment Agency, dated April 7, 1992, as originally executed and as it may from time to time be amended or supplemented pursuant to the provisions hereof and thereof. DOCSsr1:308375.7 10 Juvenile Detention Facility Proiect The term"Juvenile Detention Facility Project"means the financing of a portion of the costs of construction of an addition to the County's existing juvenile detention facility which will house additional beds, located on Glacier Drive in the City of Martinez, California, including all works, properties and structures comprising said building, together with parking, site development, landscaping, utilities, equipment, furnishings, improvements and appurtenant and related facilities. Letter of Instructions The term "Letter of Instructions" paeans that certain Letter of Instructions by and between the Escrow Agent and the County, dated as of February 1, 1999, providing for the defeasance and prepayment of the Prior Certificates. Los Med oar s Project The term "Los Medanos Project" means certain improvements to the health care facilities in the City of Pittsburg, California, commonly known and designated as the Los Medanos Health Center, located in the City of Pittsburgh, California, together with parking, site development, landscaping, utilities, equipment, furnishings, improvements and appurtenant and related facilities located on the Demised Premises. Moodv's The term "Moody's" means Moody's Investors Service a corporation duly organized and existing under and by virtue of the laws of the State of Delaware, and its successors and assigns, except that if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency selected by the County and acceptable to each Bond Insurer. 1999 Proiect The terra "1999 Project" means the financing of various capital projects of the County as set forth in :Exhibit C to the Facility Lease, including the Fancily Law Center, the Los Medanos Project, improvements to the Social Services Building, acquisition of the County Office Building, a portion of the Juvenile Detention Facility Project, and payment of any costs associated with the financing of said projects, as the same may be changed from time to time by the County by ding a notice of change with the Trustee. 1999 Proiect Fund The terns "1999 Project Fund" means the fund by that name established pursuant to Section 3.02. DO 'SS1"i:;£18375.7 11 1999 Reserve,Facility The term "1999 Reserve Facility" mean the surety band, effective as of February 1, 1999, issued by the 1999 Reserve Facility Provider. 1999 Reserve Facility_Provider The term "1999 Reserve Facility Provider" means MBIA Insurance Corporation, as issuer of the 1999 Reserve Facility. 1999 Series A Bond Insurer The term "1999 Series A Bond. Insurer" means MBIA Insurance Corporation or any successor thereto. Opinion of Counsel The term"Opinion of Counsel"means a written opinion of Bond Counsel. Qutstandin The term "Outstanding," when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 9.02) all Bonds except (1) Bonds theretofore cancelled by the Trustee or surrendered to the Trustee for cancellation; (2) Bonds paid or deemed to have been paid within the meaning of Section 10.01, (3) Bonds deemed tendered but not yet presented for purchase; and (4) Bonds in lieu of or in substitution for which other Bonds shall have been executed, issued and delivered by the Authority pursuant hereto. Permitted Encumbrances The term"Permitted Encumbrances"means (1) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the County may, pursuant to the Facility Lease, permit to remain unpaid; (2) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record as of the date of recordation of the Facility Lease in the office of the County Recorder of the County of Contra Costa and which the County certifies in writing will not materially impair the use of the Facilities; (3)the Site Lease, as it may be amended from time to time and the Facility Lease, as it may be amended from time to time; (4) this Trust Agreement, as it may be amended from time to time; (5) any right or claim of any mechanic, laborer, materialman, supplier or vendor not filed or perfected in the manner prescribed by law; (b) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions to which the DOCSSF 1.308375.7 12 Authority and the County consent in writing and certify to the Trustee will not materially impair the ownership interests of the Authority or use of the Facilities by the County; and (7) subleases and assignments of the County which will not adversely affect the exclusion from gross income of interest on the Bonds. Permitted Invest .e.ents The term "Permitted Investments" means any of the following: (1) Government Securities; (2) direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the .Department of the Treasury) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America; ( )bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the .following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): (a) Farmers Home Administration (FmHA) certificates of beneficial ownership, (b)Federal housing Administration (FHA) debentures, (c) General Services Administration participation certificates, (d) Government National Mortgage Association (GNMA or"Ginnie Mae") guaranteed mortgage-backed bonds and guaranteed pass- through obligations (participation certificates), (e) U.S. Maritime Administration guaranteed Title XI financing, and (f)U.S. Department of Housing and Urban Development (HUD) Project Notes and Local Authority Bonds; (4) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit C.T.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself): (a)Federal Home Loan Bank System senior debt obligations (consolidated debt obligations), (b)Federal Home Loan Mortgage Corporation (FHLMC or "Freddie Mac") participation certificates (mortgage-backed securities) and senior debt obligations, (c) Federal National Mortgage Association (FNMA or "Fannie Mae") mortgage-backed securities and senior debt obligations (excluded are stripped mortgage securities which are valued greater than par on the portion of unpaid principal), (d) Student Loan Marketing Association (SLMA or "Sallie Mae") senior debt obligations, (e) Resolution Funding Corp. (RFFCORP) strips (interest component only) which have been stripped by request to the Federal Reserve Bank of New fork in book entry form, and (f) Farm Credit System Consolidated systemwide bonds and notes; (5) money market funds registered under the Federal Investment Company Act of 1940, the shares of which are registered under the Federal Securities Act of 1933, and which have a rating by S&P of AAAm-G, AAAm, or AA-m and, if rated by Moody's, rated Aaa, Aal or Aa2; (6) certificates of deposit secured at all tunes by collateral described in (2) and/or (3) above (which collateral must be held by a third party and subject to a perfected first security interest held by the Trustee) with a maturity of one year or less and issued by commercial banks, savings and lean associations or mutual savings banks whose short term obligations are rated "A-1+" or better by S&P and "Prime-1" by Moody's; (7) certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC, including BIF and SAIF; ( ) investment agreements, including guaranteed investment contracts, acceptable to the Bond Insurer; (9) commercial paper rated "Prime-l" by Moody's and "A-1+" or better by &P; (10) bonds or notes issued by any state or municipality which is rated by Moody's and S&P in one of the two highest long-termm rating categories assigned by such agencies; (11) federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating of"Prime-1" or "A3" or better by Moody's and "A-.l+" or DOCssF 1:309375.7 13 better by S&P; (12) repurchase agreements that provide for the transfer of securities from a dealer bank or securities firm (seller/borrower) to the Trustee (buyer/lender) and the transfer of cash from the Trustee to the dealer bank or securities firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the Trustee in exchange for the securities at a specified date and that satisfy the following criteria: (a) repurchase agreements must be between the municipal entity and dealer banks or securities firms that are (i) on the Federal Reserve reporting dealer list which fall under the jurisdiction of the SIPC and which are rated A or better by S&P and Moody's, or (ii) banks rated "A" or above by S&P and Moody's, and (b) repurchase agreements must include the following: (i) securities that are acceptable for transfer, including those describe in clauses (2) and (3) above, (ii) terms of not more than 30 days, (iii) collateral must be delivered to the municipal entity, Trustee (if Trustee is not supplying the collateral) or third party acting as agent for the Trustee (if the Trustee is supplying the collateral) before or simultaneously with payment (perfection by possession. of certificated securities), (iv) the Trustee must have a perfected first priority security interest in the collateral, (v) collateral must be free and clear of third-party liens and, in the case of an SIPC broker, must not have been acquired pursuant to a repurchase agreement or reverse repurchase agreement, (vi) failure to maintain the requisite collateral percentage, after a two day restoration period, requires the Trustee to liquidate collateral, (vii) securities must be valued weekly and marked-to-market at current market price plus accrued interest, (viii) the value of-collateral must be equal to 104% or, if the securities used as collateral are FNMA or FI.ILMC securities, 105%, of the amount of cash transferred by the municipal entity to the dealer bank or security firm under the repurchase agreement plus accrued interest and, if the value of securities held as collateral slips below such amount, then additional cash and/or acceptable securities must be transferred; (13) pre-refunded municipal bonds rated "Aaa" by Moody's and "AAA„ by S&P or, if the there is no Moody's rating, thea pre-refunded bonds pre-refunded with cash, direct U.S. or U*.S. guaranteed obligations, or AAA rated pre-refunded municipal obligations; (14) money markets or mutual funds which are rated by S&P "AAAm-U" or "AAAm" or higher and, if rated by Moody's, are rated "Aaa" or higher, which funds may include funds for which the Trustee, its affiliates or subsidiariesprovide investment advisory or other management services; (15) the Local Agency Investment Fund of the State of California; and (15) any other investment approved by the Bond Insurer. The Trustee may conclusively rely on the written instructions of the Authority and the County that such investment is a Permitted Investment. Person The term "Person" means a corporation, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof. Phase of the Project The term"Phase of the Project"means the 1999 Project or such Subsequent Phase of the Project to which reference is made. DOCSS 1:308375.7 14 Principal Office The term "Principal Office" refers to the office of the Trustee noted in Section 12.12 and such other offices as the Trustee may designate from time to time. Principal Pg3Mept Date The term "Principal Payment Date" means any date on which principal of the Bonds is required to be paid(whether by reason of maturity,redemption or acceleration).. Prior Certificates The term "Prior Certificates" means the County's $61,690,000 1.988 Certificates of Participation for Consolidated Capital Projects, Equipment Acquisition Program. and Countywide Integrated Telecommunications Network, dated July 1, 1988, evidencing proportionate ownership interest of the owner thereof in payments to be made by the County as rental for certain land and facilities pursuant to a lease agreement, dated as of July 1, 1988, by and between the County and the Contra Costa County Public Facilities Corporation. Prior Trust Agreement The term "Prior Trust Agreement" means that certain trust agreement dated as of July 1, 1958, among the Contra Costa. County Public Facilities Corporation, the County and the Prior Trustee authorizing the execution and delivery of the Prior Certificates. Prior Trustee The term "Prior Trustee" means E.I.S. Bank Trust National Association, as trustee for the Prior Certificates. Project The term. "Project" means the 1958 Project and the 1999 Project and all Subsequent Phases of the Project. Rating Categga The term "Rating Category"means one of the general long-term (or short-term, if so specifically provided) rating categories of either Moody's and S&P, without regard to any refinement or gradation of such rating category by a numerical modifier or otherwise. Redemption Date The term "Redemption Date" shall mean the date fixed for redemption of any Bonds. ocCssF1:09375.7 15 I2edemDtion Price The term "Redemption Price" means, with respect to any Bond (or portion thereof), the principal amount of such Bond (or portion) plus the applicable premium, if any, payable upon redemption thereof pursuant to the provisions of such Bond and this Trust Agreement, Record Date The term "Record Date" means the close of business on the fifteenth (15th) calendar day(whether or not a Business Day) of the month preceding any Interest Payment Bate. Representation Letter The term"Representation Letter"means the blanket letter of representation of the Authority to ITC or any similar letter to a substitute depository. Reserve Facility The term"Reserve Facility" means a surety bond or insurance policy issued to the Trustee, on behalf of the Bondholders, by a company licensed to issue an insurance policy guaranteeing the timely payment of the principal of and interest can the Bonds (a"municipal bond insurer") if such municipal bond insurer shall be rated in the highest rating categories issued by Moody's and by S&P, or a letter of credit issued or confirmed by a state or national bank, or a foreign bark with an agency or branch located in the continental United States, which has outstanding an issue of unsecured long term debt securities rated at least equal to the second highest rating category by Moody's and S&P, or any combination thereof, deposited with the Trustee by the Authority to satisfy the Reserve Fund Requirement. Reserve Facility Costs The term "Reserve Facility Costs" means amounts owed with respect to repayment of draws on a Reserve Facility, including interest thereon at the rate specified in the agreement pertaining to such Reserve Facility and expenses owed to the provider of a Reserve Facility. Reserve Fuad The term. "Reserve Fund" means the fund of that name established pursuant to Section 5.03(d). Reserve Fuad Requirement The term "Reserve Fund Requirement" means with respect to all Outstanding Bonds an amount equal to the lesser of(i) the maximum annual debt service attributable to the Outstanding,Bonds and (ii) 125% of average annual debt service attributable to the Outstanding Bonds; provided that with respect to the calculation of the Reserve Fund Requirement upon the issuance of an Additional Series of Bonds the Reserve Fund Requirement shall be the least of(i) DoCssF 1:308375.7 16 or(ii) above, or the amount derived by the addition of 10% of the proceeds from the sale of such Series of Additional Bands to the Reserve Fund. Rgsponsibl Officer The term "Responsible Officer" means any officer of the Trustee assigned to administer its duties under this Trust Agreement. Revenues The term "Revenues" means (i) all Base Rental Payments and other payments paid by the County and received by the Authority pursuant to the Facility Lease (but not Additional Payments), and (ii) all interest or other income from any investment, pursuant to Section 5. 35, of any money in any fund or account (other than the Rebate Fund) established pursuant to this Trust Agreement or the Facility Lease, and(iii) Swap Revenues. Serie The term "Series," whenever used herein with respect to Bonds, means all of the Bonds designated as being of the same series, authenticated and delivered in a simultaneous transaction, regardless of variations in maturity, interest rate, redemption and other provisions, and any Bonds thereafter authenticated and delivered upon transfer or exchange of or in lieu of or in substitution for(but not to refund)such Bonds as herein provided, Site Lease The term "Site Lease" means that certain lease, entitled "Master Site Lease," by and between the County and the Authority, dated as of February 1, 1999, which lease or a memorandum thereof was recorded its the office of the County Recorder of the County of Contra Costa on as document No. , as originally executed and recorded or as it may from time to time be supplemented, modified or amended pursuant to the provisions hereof and thereof. Social Services Buildiniz The term"Social Services Building"means a two-story office building in the City of Antioch, California, commonly known and designated as the East County Social Services Building, located at 4545 Delta Fair Boulevard near Belle Drive and containing approximately 52,700 square feet, together with parking, site development, landscaping, utilities, equipment, furnishings, improvements and, appurtenant and related facilities, located on the Demised Premises. a—& The term "S&P" means Standard & Poor's, a division of the McGraw-Dill Companies, Inc,, and its successors and assigns, except that if such entity shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term DOCSSr1:308375.7 17 SP shall be deemed to refer to any ether nationally recognized securities rating agency selected by the County and acceptable to each Bond Insurer. State The term"State"means the State of California. State Controller The term"State Controller"means the Controller of the State. ubsegPue I Phase of the Project The term "Subsequent Phase of the Project" means any and all facilities and buildings for use by the County, whether within or without the County, and all additions, extensions or improvements thereto hereafter added to the Project and hereafter described by a notice to the Trustee. Supplemental Trust Agreement The terra "Supplemental Trust Agreement"means any trust agreement then in full force and effect which has been duly executed and delivered by the Authority and the Trustee amendatory hereof or supplemental hereto; but only if and to the extent that such Supplemental Trust Agreement is executed and delivered pursuant to the provisions hereof Swan The term "Swap" means an interest rate swap, cap, floor, collar or other :Hedging transaction which is entered into by the Authority for the purpose of managing interest rate risk with respect to specified Bonds which are being issued concurrently with the execution of the Swap, which are proposed to be issued in connection with such Swap, or which are Outstanding at the time of execution of such Swap. Swag Partner The term "Swap Partner" means the entity which is a party to a Swap with the Authority. Swap Revenues The term "Swap Revenues" means the sum of money due to be paid by a Swap Partner to the Authority pursuant to any Swap subject to any netting of payments provided by the applicable Swap. Swapped Bonds The term"Swapped Bonds"means the:Bonds to which a Swap relates. DOCSSR:30837"7 18 Tax Certificate The term"Tax Certificate"means the Tax Certificate and Agreement delivered by the Authority and the County at the time of the issuance and delivery of a Series of Bonds, as the same may be amended or supplemented in accordance with its terms. Trust Aare=gnt The term"Trust Agreement"means this Trust Agreement, dated as of February 1, 1999, between the Authority and the Trustee, as originally executed and as it may from time to time be amended or supplemented by all Supplemental Trust Agreements executed pursuant to the provisions hereof. Trustee The term "Trustee" means U.S. Bank Trust National Association, or any other association or corporation which may at any time be substituted in its place as provided in Section 8.01. Variable Rate Bonds The term "Variable Rate Bonds" means Bonds of any Series which bear interest at a variable interest rate. West Cou=betention Facility The term "West County Detention Facility„ means the approximately 250,000 square feet, 560-bed detention facility located at 5555 Giant Highway in Richmond, California, together with parking, site development, landscaping, utilities, equipment, furnishings, improvements and appurtenant and related facilities, located on the Demised Premises. Written Reguest of the Authority The term "Written Request of the Authority" means an instrument in writing signed by or on behalf of the Authority by its Chair, Vice-Chair, Executive Director, Assistant Executive Director or Deputy Executive Director or a designee of any such officer or by any other person (whether or not an officer of the Authority) who is specifically authorized by resolution of the Board of Directors of the Authority to sign or execute such a document on its behalf. Written Request of the Co� r tv_ The term "Written.Request of the County" means an instrument in writing signed by the County Administrator of the County or his designee, or by the Director, Capital Facilities and Debt Management of the County, or by any other officer of the County duly authorized by the Board of Supervisors of the County in writing to the Trustee for that purpose. DOCSSF1:309375.7 19 SECTION 1.02. Equal Security. In consideration of the acceptance of the Bonds by the Bondholders thereof, this Trust Agreement shall be deemed to be and shall constitute a contract among the Authority, the Trustee and the Bondholders from time to time of all Bonds authorized, executed, issued and delivered hereunder and then Outstanding to secure the full, timely and final payment of the interest on and principal of and redemption premiums, if any, on all Bonds which may from time to time be authorized, executed, issued and delivered hereunder, subject to the agreements, conditions, covenants and provisions contained herein, and all agreements and covenants set forth herein to be performed by or on behalf of the Authority shall be for the equal and proportionate benefit, protection and security of all Bondholders of the Bonds without distinction, preference or priority as to security or otherwise of any Bonds over any other Bonds by reason of the number or date thereof or the time of authorization, sale, execution, issuance or delivery thereof or for any cause whatsoever, except as expressly provided herein or therein. SECTION 1.03. Interpretation. Unless the context otherwise indicates, words expressed in the singular shall include the plural and vie versa and the use of the neuter, masculine, or feminine gender is for convenience only and shall be deemed to mean or include the neuter, masculine or feminine gender, as appropriate. Headings of articles and sections herein and the table of contents hereof are solely for convenience of reference, do not constitute a part hereof and shall not affect the meaning, construction or effect hereof. ARTICLE 11 THE BONDS SECTION 2.01. Authorization of Bonds, 1999 Series A Bonds. (a) Bonds may be issued hereunder from time to time in order to obtain moneys to carry out the purposes of the Authority. The maximum principal amount of Bonds which may be issued hereunder is not limited. The Bonds are designated generally as "County of Contra Costa Public Financing Authority Lease Revenue Bonds," each Series thereof to bear such additional designation as may be necessary or appropriate to distinguish such Series from every other Series of Bonds. The Bonds may be issued in such Series as from time to time shall be established and authorized by the Authority, subject to the covenants, provisions and conditions herein contained. (b) An initial Series of Bonds is hereby created and designated"County of Contra. Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 1999 Series A." The aggregate principal amount of 1999 Series A Bonds which may be issued and Outstanding under this Trust Agreement shall not exceed $74,685,000. (c) The Authority has reviewed all proceedings heretofore taken relative to the authorization of the 1999 Series A Bonds and has found, as a result of such review, and hereby finds and determines that all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in the issuance of the 1999 Series A Bonds do exist, have happened and have been performed in due time, form and manner as required by law, and that the Authority is now duly authorized, pursuant to each and every DOCSSFl:308375.7 20 requirement of the Act, to issue the 1999 Series A Bonds in the form and manner provided herein for the purpose of providing funds to finance and refinance the Project, and that the 1999 Series A Bonds shall be entitled to the benefit, protection and security of the provisions hereof. (d) The validity of the issuance of the 1999 Series A Bonds shall not be dependent on or affected in any way by the proceedings taken by the Authority for the finance and refinancing of the Project or by any contracts made by the Authority or its agents in connection therewith, and shall not be dependent upon the performance by any person, firm or corporation of his or its obligation with respect thereto. The recital contained in the 1999 Series A Bonds that the same are issued pursuant to the Act and pursuant hereto shall be conclusive evidence of their validity and of the regularity of their issuance, and all 1999 Series A Bonds shall be incontestable from and after their issuance. The 1999 Series A Bonds shall be deemed to be issued, within the meaning hereof, whenever the definitive 1999 Series A Bonds (or any temporary 1999 Series A Bonds exchangeable therefor) shall have been delivered to the purchaser thereof and the proceeds of sale thereof received. SECTION 2.42. Terms of the 1999 Series A Bonds. (a) The 1999 Series A Bonds shall be issued in the aggregate principal amount of $74,685,444. The 1999 Series A Bonds shall be dated as of February 1, 1999, shall be issued only in fury registered form in Authorized Denominations (not exceeding the principal amount of 1999 Series A Bonds maturing at any one time), and shall mature in the years and in the principal mounts and bear interest at the rates as set forth in the following schedule, subject to prior redemption as described in Article Iii hereof. DOC'ssr I:3^08375.7 21 County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 1999 Series A Maturity Date (June 1) Principal Amount Interest Rate 1999 $1,275,000 4.000% 2000 2,210,000 4.000 2001 2,660,000 4.000 2002 2,765,000 4.000 2003 2,885,000 4.000 2004 3,000,000 4.000 2005 3,115,000 4.000 2006 3,235,000 4.000 2007 3,365,000 4,000 2008 3,505,000 5.000 2009 2,605,000 4.200 2010 2,725,000 4.250 2011 2,835,000 4.400 2012 2,965,000 5.250 2013 3,115,000 5.250 2014 3,280,000 5.250 2015 3,455,000 5.250 2016 3,630,000 5.250 2017 1,390,000 4.750 2018 1,455,000 4.750 2019 1,525,000 5.000 2028* 17,690,000 5.000 *Term.Bond The 1999 Series A Bonds shall bear interest at the rates set forth above, payable commencing June 1, 1999, and semiannually thereafter on June 1 and December 1 in each year. The 1999 Series A Bonds shall bear interest from the Interest Payment Date next preceding the date of registration thereof, unless such date of registration is an Interest Payment Date, in which event they shall bear interest from such date, or unless such date of registration is prior to the Record Date for the first Interest Payment Date, in which event they shall bear interest from their dated date. The amount of interest so payable on any Interest Payment Date shall be computed on the basis of a 360-day year consisting of twelve 30-day months. (b) Payment of interest on the 1999 Series A Bonds due on or before the maturity or prior redemption thereof shall be paid by check mailed by first class mail on each Interest Payment Date to the person in whose name the Bond is registered as of the applicable Record Date for such Interest Payment Date at the address shown on the registration books maintained by the Trustee pursuant to Section 2.07; provided, however, that interest on any Series of Bonds shall be paid by wire transfer or other means to provide immediately available funds to any DOCSSFI:308375.7 22 Owner of at least $1,000,000 in aggregate principal amount of such Series of Bonds, at its option, according to wire instructions given to the Trustee in writing for such purpose and on file as of the applicable Record Date preceding the Interest Payment Date. (c) Interest on any Bond shall cease to accrue (i) on the maturity date thereof, provided that there has been irrevocably deposited with the Trustee an amount sufficient to pay the principal amount thereof, plus interest accrued thereon to such date; or (ii) on the redemption date thereof, provided there has been irrevocably deposited with the Trustee an amount sufficient to pay the Redemption Price thereof, plus interest accrued thereon to such date. The Owner of such Bond shall not be entitled to any other payment, and such Bond shall no longer be Outstanding and entitled to the benefits of this Trust Agreement, except for the payment of the principal amount or Redemption Price, of such Bond, as appropriate, from moneys held by the Trustee for such payment. (d) The principal of the Bonds shall be payable by check in lawful money of the United States of America at the Principal Office of the Trustee. No payment of principal shall be rade on any Bond unless and until such Bond is surrendered to the Trustee for cancellation. (e) The Trustee shall identify all payments (whether made by check or by wire transfer) of interest,principal, and premium by CL SIP number of the related Bonds. SECTION 2.03. Form of 1999 Series A Bonds. The 1999 Series A Bonds and the authentication and registration endorsement and assignment to appear thereon shall be substantially in the forms set forth in Exhibit A hereto attached and by this reference herein incorporated. SECTION 2.04. Execution of 1999 Sys A Bonds. The Chair or the Executive Director of the Authority is hereby authorized and directed to execute each of the 1999 Series A Bonds on behalf of the Authority and the Secretary or Assistant Secretary of the Authority is hereby authorized and directed to countersign each of the 1999 Series A Bonds on behalf of the Authority. The signatures of such officers may be by printed, lithographed or engraved by facsimile reproduction. In case any officer whose signature appears on the 1999 Series A Bonds shall cease to be such officer before the delivery of the 1999 Series A Bonds to the purchaser thereof, such signature shall nevertheless be.valid and sufficient for all purposes as if such officer had remained in office until such delivery of the 1999 Series A Bonds. Only those 1999 Series A Bonds bearing thereon a certificate of authentication in the form hereinbefore recited, executed manually and dated by the Trustee, shall be entitled to any benefit, protection or security hereunder or be valid or obligatory for any purpose, and such certificate of the Trustee shall be conclusive evidence that the 1999 Series A Bonds so authenticated have been duly authorized, executed, issued and delivered hereunder and are entitled to the benefit, protection and security hereof. SECTION 2.05. Transfer and Payment of Bonds. Any Bond may, in accordance with its terms, be transferred in the books rewired to be kept pursuant to the provisions of Section 2.07 by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation accompanied by delivery of a DOC CSF 1:308375.7 23 duly executed written instrument of transfer in a form acceptable to the Trustee. Whenever any Bond or Bunds shall be surrendered for transfer, the Authority shall execute and.the Trustee shall authenticate and deliver to the transferee a neva Bond or Bonds of the same Series and maturity for a like aggregate principal amount of Authorized Denominations. The Trustee shall require the payment by the Bondholder requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer as a condition precedent to the exercise of such privilege. The Authority and the Trustee may, except as otherwise provided herein, deem and treat the registered owner of any Bond as the absolute owner of such Bond for the purpose of receiving payment thereof and for all other purposes, whether such Bond shall be overdue or not, and neither the Authority nor the Trustee shall be affected by any notice or knowledge to the contrary; and payment of the interest on and principal of and redemption premium, if any, on. such Bond shall be made only to such registered owner, which payments shall be valid and effectual to satisfy and discharge liability on such Bond to the extent of the sum or sums so paid. The Trustee shall not be required to register the transfer of or exchange any Bonds which has been selected for redemption in whole or in part, from and after the clay of mailing of a notice of redemption of such Bond selected for redemption in whole or in part as provided in Section 4. 34 or during the period established by the Trustee for selection of Bonds for redemption. SECTION 2.06. Exchange of Bonds. Bonds may be exchanged at the Principal Office of the Trustee for a like aggregate principal amount of Bonds of the same Series and maturity of other authorized denominations. The Trustee shall require the payment by the Bondholder requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange as a condition precedent to the exercise of such privilege. The Trustee shall not be required to exchange any Bond which has been selected for redemption in whole or in part, from and after the clay of mailing of a notice of redemption of such Bond selected for redemption in whole or in part as provided in Section 4.04 or during the period established by the Trustee for selection of Bonds for redemption. SECTION 2.07. Bond Registration Books. The Trustee will keep at its office sufficient books for the registration and transfer of the Bonds, which during normal business hours shall be open to inspection by the Authority, and upon presentation for such purpose the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer the Bonds in such books as hereinabove provided. SECTION 2.08. Mutilated.Destroyed, Stolen or Lost Bonds. Temporary Bonds. If any Bond shall become mutilated, the Trustee, at the expense of the Bondholder, shall thereupon authenticate and deliver a new Bond of like tenor and amount in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be cancelled. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence be satisfactory to the Trustee and indemnity satisfactory to the Trustee and the 1999 Series A Bond Insurer shall be given, the D005SP1:308375.7 24 Trustee, at the expense of the Bondholder, shall thereupon authenticate and deliver a new Bund of like tenor in lieu of and in substitution for the Bond so lost, destroyed or stolen. The Trustee may require payment of a reasonable sum for each new Bond issued under this Section 2.08 and of the expenses which may be incurred by the Authority and the Trustee in the premises. Any Bond issued under the provisions of this Section in lieu of any .Bond alleged to be lost, destroyed or stolen shall be equally and proportionately entitled to the benefits of this Trust Agreement with all other Bonds of the same Series secured by this Trust Agreement. Neither the Authority nor the Trustee shall be required to treat both the original Bond and any replacement Bond as being Outstanding for the purpose of determining the principal amount of Bonds which may be issued hereunder or for the purpose of determining any percentage of Bonds Outstanding hereunder, but both the original and replacement Bond shall be treated as one and the same. The Bands issued under this Trust Agreement may be initially issued in temporary form exchangeable for definitive Bonds when ready for delivery. The temporary Bonds may be printed, lithographed or typewritten, shall be of such denominations as may be determined by the Authority, shall be in fully registered form and may contain such reference to any of the provisions of this Trust Agreement as may be appropriate. Every temporary Bond shall be executed and authenticated as authorized by the Authority, in accordance with the terms of the Act. If the Authority issues temporary Bonds it will execute and furnish definitive Bonds without delay and thereupon the temporary Bands may be surrendered, for cancellation, in exchange therefor at the Principal Office of the Trustee, and the Trustee shall deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized denominations. Until so exchanged, the temporary Bonds shall be entitled to the same benefits under this Trust Agreement as definitive Bonds delivered hereunder. SECTION 2.09. Special Covenants as to Bgok-Entry Onl,System for 1999 Series A Bonds. (a) Except as otherwise provided in subsections (b) and (c) of this Section 2.09, all of the 1999 Series A Bonds initially issued shall be registered in the name of Cede & Co., as nominee for DTC, or such other nominee as DTC shall request pursuant to the Representation Letter. Payment of the interest on any 1999 Series A Band registered in the name of Cede& Co. shall be made on each Interest Payment Date for such 1999 Series A Bonds to the account, in the mariner and at the address indicated in or pursuant to the Representation Letter. (b) The 1999 Series A Bonds initially shall be issued in the form of a single authenticated fully registered bond for each stated maturity of such 1999 Series A Bonds, representing the aggregate principal amount of the 1999 Series A Bonds of such maturity. Upon initial issuance, the ownership of all such 1999 Series A Bonds shall be registered in the registration records maintained by the Trustee pursuant to Section 2.07 in the name of Cede & Co., as nominee of DTC, or such other nominee as DTC shall request pursuant to the Representation Letter. The Trustee, the Authority and any paying agent may treat DTC (or its nominee) as the sole and exclusive owner of the 1999 Series A Bonds registered in its name for the purposes of payment of the principal or redemption price of and interest on such 1999 Series A Bonds, selecting the 1999 Series A Bonds or portions thereof to be redeemed, giving any OCSSF1:308375.7 25 notice permitted or required to be given to Bondholders hereunder, registering the transfer of 1999 Series A Bonds, obtaining any consent or other action to be taken by Bondholders of the 1999 Series A Bonds and for all other purposes whatsoever; and neither the Trustee nor the Authority or any paying agent shall be affected by any notice to the contrary. Neither the Trustee nor the Authority or any paying agent shall have any responsibility or obligation to any "Participant" (which shall mean, for purposes of this Section 2.09, securities brokers and dealers, banks, trust companies, clearing corporations and other entities, some of whom directly or indirectly own DTC), any person claiming a beneficial ownership interest in the 1999 Series A Bonds under or through DTC or any Participant, or any other person which is not shown on the registration records as being a Bondholder, with respect to (i) the accuracy of any records maintained by DTC or any Participant, (ii) the payment by DTC or any Participant of any amount in respect of the principal or redemption price of or interest on the 1999 Series A Bonds, (iii) any notice which is permitted or required to be given to Bondholders of 1999 Series A Bonds hereunder, (iv) the selection by DTC or any Participant of any person to receive payment in the event of a partial redemption of the 1999 Series A Bonds, or (v) any consent given or other action taken by DTC as Bondholder of 1999 Series A Bonds. The Trustee shall pay all principal of and premium, if any, and interest on the 1999 Series A Bonds only at the times, to the accounts, at the addresses and otherwise in accordance with the Representation Letter, and all such payments shall be valid and effective to satisfy fully and discharge the Authority's obligations with respect to the payment of the principal of and premium, if any, and interest on the 1999 Series A Bonds to the extent of the sum or sums so paid. Upon delivery-by DTC to the Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place of its then existing nominee, the 1999 Series A Bonds will be transferable to such new nominee in accordance with subsection(e)of this Section 2.09. (c) In the event that the Authority determines that the 1999 Series A Bonds should not be maintained in book-entry form, the Trustee shall, upon the written instruction of the Authority, so notify DTC, whereupon DTC shall notify the Participants of the availability through DTC of bond certificates. In such event, the 1999 Series A Bonds will be transferable in accordance with subsection (e) of this Section 2.09. DTC may determine to discontinue providing its services with respect to the 1999 Series A Bonds or a portion thereof, at any time by giving written notice of such discontinuance to the Authority or the Trustee and discharging its responsibilities with respect thereto under applicable law. In such event, the 1999 Series A Bonds will be transferable in accordance with subsection (e) of this Section 2.09. If at any time DTC shall no longer be registered or in good standing under the Securities Exchange Act or other applicable statute or regulation and a successor securities depository is not appointed by the Authority within 90 days after the Authority receives notice or becomes aware of such condition, as the case may be, then this Section 2.09 shall no longer be applicable and the Authority shall execute and the Trustee shall authenticate and deliver certificates representing the 1999 Series A Bonds as provided below. Whenever DTC requests the Authority and the Trustee to do so, the Trustee and the Authority will cooperate with DTC in taping appropriate action after reasonable notice to arrange for another securities depository to maintain custody of all certificates evidencing the 1999 Series A Bonds then Outstanding. In such event, the 1999 Series A Bonds will be transferable to such securities depository in accordance with subsection(e) of this Section 2.09, and thereafter, all references in this Trust Agreement to DTC or its nominee shall be deemed to refer to such successor securities depository and its nominee, as appropriate. DOC SSS I:30937 S.7 26 (d) Notwithstanding any other provision of this Trust Agreement to the contrary, so long as all 1999 Series A Bonds Outstanding are registered in the name of any nominee of DTC, all payments with respect to the principal of and premium., if any, and interest on each such 1999 Series A Bond and all notices with respect to each such 1999 Series A Bond shall be made and given, respectively, to DTC as provided in or pursuant to the Representation Letter. (e) In the event that any transfer or exchange of 1999 Series A Bonds is authorized under subsection (b) or (c) of this Section 2.09, such transfer or exchange shall be accomplished upon receipt by the Trustee from the registered owner thereof of the 1999 Series A Bonds to be transferred or exchanged and appropriate instruments of transfer to the permitted transferee, all in accordance with the applicable provisions of Sections 2.05 and 2.06. In the event 1999 Series A Bond certificates are issued to Bondholders other than Cede & Co., its successor as nominee for DTC as holder of all the 1999 Series A Bonds, another securities depository as holder of all the 1999 Series A Bonds, or the nominee of such successor securities depository, the provisions of Sections 2.05 and 2.06 shall also apply to, among other things, the registration, exchange and transfer of the 1999 Series A Bonds and the method of payment of principal of,premium, if any, and interest on the 1999 Series A Bonds. ARTICLE III ISSUANCE OF BONDS SECTION 3.01. Procedure dor the Issuance of 1999 Series, A Bonds. At any time after the sale of the 1999 Series A Bonds in accordance with the Act, the Authority shall execute the 1999 Series A Bonds for issuance hereunder and shall deliver them to the Trustee, and thereupon the 1999 Series A Bonds shall be authenticated and delivered by the Trustee to the purchaser thereof upon the Written Request of the Authority and upon receipt of payment therefor from the purchaser thereof. Upon receipt of payment for the 1999 Series A Bonds from the purchaser thereof (other than the amount to be paid directly to the Bond Insurer as the premium for the Bond insurance Policy ($321,=000) and 1999 Reserve Facility ($160,000)), the Trustee shall, unless otherwise instructed by the Authority, transfer or deposit the proceeds received from such sale to the following respective parties or to the following respective accounts or funds, in the following order of priority: (i) deposit in the Interest Account created pursuant to Section 5.03 hereof, the amount of$317,612.41, which is equal to interest accrued on the 1999 Series A Bonds from their dated date to the date of issuance thereof; deposit the sum of $697,435.52 in the 1999 Series A Capitalized Interest Account; (iii) deposit the sum of$300,000 to the Costs of Issuance Fund, which fund is hereby created and which fund the Trustee hereby covenants and agrees to :-maintain. All money in the Costs of Issuance Fund shall be used and withdrawn by the Trustee to pay the Costs of Issuance of the 1999 Series A Brands upon receipt of a Written Request of the Authority, filed with the Trustee, each of which shall be sequentially numbered and shall state the person(s) to whom payment is to be made, the DOCSSF i:308375.7 27 amount(s) to be paid, the purpose(s) for which the obligation(s) was incurred and that such payment is a proper charge against said fund. On August 1, 1999, or upon the earlier Written Request of the Authority, any remaining balance in the Costs of Issuance Fund shall be transferred to the Project Fund and the Costs of Issuance Fund shall be closed; (iv) transfer the sum of $32,387,349.01, to the Escrow Agent for deposit in the Escrow Fund; and (v) deposit the amount of $41,288,789.01 in the 1999 Project Fund. SECTION 3.02. 1999 Project Fund. The Trustee hereby agrees to establish and maintain so long as any Bonds are Outstanding the 1999 Project Fund (the "1999 Project Fund") (the initial payment into which is provided for in Section 3,01). The moneys in the 1999 Project Fund shall be disbursed by the Trustee upon the Written Request of the Authority, with the approval of the Assistant County Administrator—Finance of the County, or the Director, Capital Facilities and Debt Management of the County, or the duly authorized representative or representatives of any of the above, endorsed thereon, for the payment of costs relating to the financing and completion of the Project. SECTION? 3.03. Csonditions for the Issuance of Additional Bonds. The Authority may at any time, with the consent of each Brand Insurer, issue Additional Bonds pursuant to a Supplemental Trust Agreement, payable from the Revenues as provided herein and secured by a pledge of and charge and lien upon. the Revenues as provided herein equal to the pledge, charge and lien securing the Outstanding Bonds theretofore issued :hereunder, but only subject to the following specific conditions, which are hereby made conditions precedent to the issuance of any such Additional Bonds: (a) The Authority shall be in compliance with all agreements and covenants contained herein.. (b) The Supplemental Trust Agreement shall require that the proceeds of the sale of such Additional Bonds shall be applied to the acquisition(by purchase or lease) of facilities to be added to the Facilities or for the refunding of Outstanding Bonds, (c) The Supplemental Trust Agreement shall provide, if necessary, that from such proceeds or other sources an amount shall be deposited in the Reserve Fund so that following such deposit there shall be on deposit in the Reserve Fund an amount at least equal to the Reserve Fund Requirement. (d) The aggregate principal amount of Bonds issued and at any time Outstanding hereunder shall not exceed any limit imposed by law, by this Trust Agreement or by any Supplemental Trust Agreement, (e) The Facility Lease shall have been amended, if necessary, so that the Base Rental Payments payable by the County thereunder in each Fiscal Year shall at least equal Debt Service, including Debt Service on the Additional Bonds, in each Fiscal Year. 7OC'SSFt:308375.7 28 (f) The Facility Lease shall have been amended so as to lease to the County the project being financed from the proceeds of such Additional Bonds or facilities of comparable worth and economic life and such facilities shall be ready for immediate use and occupancy by the County. (g) If the proceeds of such Additional Bonds are to be used, in whole or in part, to finance construction on real property not described in the Facility Lease or the additional Facilities to be leased are not situated on property described in the Facility Lease, (1) a site lease shall have been executed so as to lease to the Authority such additional real property; and (2) the Facility Lease shall have been amended so as to lease to the County such additional real property. (h) To the extent practicable the principal payments shall be June 1. SBCTIONI T 3.04. Proceedings for Authorization of Additional Bonds. Whenever the Authority and the County shall determine to execute and deliver any Additional Bonds pursuant to Section 3.03, the Authority and the Trustee shall enter into a Supplemental Trust Agreement providing for the issuance of such Additional Bonds, specifying the maximum principal amount of such Additional Bonds and prescribing the terms and conditions of such Additional Bonds. The Supplemental Trust Agreement shall prescribe the form or forms of such Additional Bonds and, subject to the provisions of Section 3.03, shall provide for the distinctive designation, denominations, method of numbering, dates, payment dates, interest rates (or method of determining the rates, if variable), interest payment dates, provisions for redemption (if desired) and places of payment of principal and interest. Before such Additional Bonds shall be issued, the County and the Authority shall file or cause to be filed the following documents with the Trustee: (a) An Opinion of Counsel setting forth that (1) such Counsel has examined the Supplemental Trust Agreement and the amendment to the Facility Lease and the site lease required by Section 3.03(e), (f) and (g); (2) the execution and delivery of the Additional Bonds have been sufficiently and duly authorized by the County and the Authority; and (3) said amendment to the Facility Lease and the site lease if any, when duly executed by the County and the Authority, will be valid and binding obligations of the County and the Authority. (b) A Certificate of the Authority stating that the requirements of Section 3.02 have been met and the approval of each Bond Insurer has been obtained. (c) A certified copy of a resolution or ordinance of the County authorizing the execution of the amendments to the Facility Lease required by Section 3.03(e), (f) and(g). (d) An executed counterpart or duly authenticated copy of any amendment to the Facility Lease required by Section 3.03(e), (f) and(g). (e) A Certificate of the County stating that the insurance required by Sections 5.01, 5.02 and 5.03 of the Facility Lease is in effect. Tae`CSSFI:309375.7 29 (f) If the proceeds of such Additional Bonds are to be used, in whole or in part, to finance construction or acquire facilities on real property not then described in the Facility Lease, an executed counterpart or duly authenticated copy of"the site lease required by Section 3.03(8). (g) A title insurance policy insuring the Authority's leasehold or fee title in the real property on which the Facilities are located, and, if the proceeds of such Additional :Bonds are to be used to finance construction on real property not then described in the Facility Lease, a title insurance policy insuring the Authority's leasehold or fee title in such real property, or, at the option of the Authority, an opinion of counsel or Certificate of the County or such other evidence of the Authority's or County's leasehold or fee interest in such real property as shall be acceptable to the Authority. (h) The written consent(s) of the Bond Insurer(s). Upon the delivery to the Trustee of the foregoing instruments and upon the Trustee's receipt of Certificates of the County and of the Authority stating that all applicable provisions of this Trust Agreement have been complied with (so as to permit the issuance of the Additional Bonds in accordance with the Supplemental Trust Agreement then delivered to the Trustee), the Trustee shall execute and deliver said Additional Bonds in the aggregate principal amount specified in such Supplemental Trust Agreement to, or upon the Written Request of, the Authority. SECTION 3.05. Limitations on the Issuance of Obligations Payable from. Revenues. The Authority will not, so long as any of the Bonds are Outstanding, issue any obligations or securities, however denominated, payable in whole or in part from Revenues except the following: (a) Bonds of any Series authorized pursuant to Section 3.04; (b) Agreements providing for a Reserve Facility; (c) Swaps payable on a parity with the Bonds and which will have, when executed, an equal lien and charge upon the Revenues, provided that the following conditions to the execution of such Swaps are satisfied: (1) The Authority shall be in compliance with all agreements and covenants contained herein; (2) The Authority shall have filed with the Trustee a Certificate of the Authority certifying that the requirements of Section 3.03(e)have been satisfied; and (3) The Authority shall have notified Moody's and S&P of the proposed Swap and shall have determined that the execution of the Swap would not cause the reduction or withdrawal of the current rating from such rating agencies on the Bonds. (d) Obligations owing with respect to a Reserve Facility, including principal, interest and fees relating thereto; provided such obligations shall be payable on a subordinate iasis to principal and interest on the Bonds. DOC CSF 1:3{)83°75.7 30 (e) Obligations which are junior and subordinate to the payment of the principal, premium, interest and reserve fund requirements for the Bonds and which subordinated obligations are payable as to principal, premium, interest and reserve fund requirements, if any, only out of Revenues after the prior payment of all amounts then required to be paid hereunder from Revenues for principal, premium, interest and reserve fund requirements for the Bonds, as the same become due and payable and at the times and in the manner as required in this Trust Agreement. ARTICLE IV REDEMPTION OF BONDS SECTION 4.01, Extraordinary Redemption. The 1999 Series A Bonds are subject to redemption by the Authority on any date prior to their respective stated maturities, upon notice as hereinafter provided, as a whole or in part by lot within each stated maturity in integral multiples of Authorized Denominations, from prepayments made by the County pursuant to Section 7.02 of the Facility Lease, at a redemption price equal to the sum of the principal amount thereof, without premium, plus accrued interest thereon to the Redemption Date. Whenever less than all of the Outstanding Bonds are to be redeemed on any one date, the Trustee shall select, in accordance with written directions from the Authority, the Bonds to be redeemed in part from the Outstanding Bonds so that the aggregate annual principal amount of and interest on Bands which shall be payable after such Redemption Date shall be as nearly proportional as practicable to the aggregate annual principal amount of and interest on Bonds Outstanding prior to such Redemption Date. SECTION 4.02, Optional R.edem tp ion. The 1999 Series A Bonds maturing on or prior to June 1, 2009, are not subject to optional redemption. The 1999 Series A Bonds maturing on or after June 1, 2010, are subject to redemption prior to their respective stated maturities at the written direction of the Authority, from any moneys deposited try the Authority or the County, as a whole or in part on any date (in such maturities as are designated in writing by the Authority to the Trustee) on or after June 1, 2009, at the following redemption prices (expressed as percentages of the principal amount of 1999 Series A Bonds called for redemption), together with accrued interest to the date fixed for redemption: Redemption Period (dates inclusivet Redemption Price June 1, 2009 through May 31, 2010 101% June 1, 2010 through May 31,2011 100.5 June 1, 2011 and thereafter 100 SECTION 4.03, Mandatory Sinking, Fund Redemption. The 1999 Series A Bonds maturing on June 1, 2028, upon notice as hereinafter provided, shall also be subject to mandatory sinking fund redemption prior to maturity, in part on June 1 of each year on and after ,Tune 1, 2020, by lot, from and in the amount of the mandatory sinking account payments set forth in Section 5.03 at a redemption price equal to the sum of the principal amount thereof plus accrued interest thereon to the redemption date, without premium. DOC'S>F 3:508375.7 31 SECTION 4.04. Selection of Bonds for Redemption. The Authority shall designate which maturities of Bonds are to be redeemed. If less than all Outstanding Bonds of the same Series maturing by their terms on any one date are to be redeemed at any one time, the Trustee shall select the Bonds of such maturity date to be redeemed by lot and shall promptly notify the Authority in writing of the numbers of the Bonds so selected for redemption. For purposes of such selection, Bonds shall be deemed to be composed of multiples of minimum Authorized Denominations and any such multiple may be separately redeemed. In the event Term Bonds are designated for redemption, the Authority may designate which sinking account payments are allocated to such redemption. SECTION 4,05. Notice of Redemption, Cancellation; Effect of Redemption. Notice of redemption shall be mailed by first-class mail by the Trustee, not less than thirty (30) nor more than sixty (60) days prior to the redemption date to the respective Bondholders of the Bonds designated for redemption at their addresses appearing on the registration books of the Trustee. Each notice of redemption shall state the date of such notice, the date of issue of the Bonds, the Series, the redemption date, the Redemption Price, the place or places of redemption (including the name and appropriate address of the Trustee), the CUSIP number (if any) of the maturity or maturities, and, if less than all of any such maturity is to be redeemed, the distinctive certificate numbers of the Bonds of such maturity, to be redeemed and, in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on said date there will become due and payable on each of said Bonds the redemption price thereof, together with interest accrued thereon to the redemption date, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered at the address of the Trustee specified in the redemption notice. Failure to receive such notice shall not invalidate any of the proceedings taken in connection with such redemption. The Authority may, at its option, prior to the date fixed for redemption in any notice of redemption rescind and cancel such notice of redemption by Written Request to the Trustee and the Trustee shall mail notice of such cancellation to the recipients of the notice of redemption being cancelled. If notice of redemption has been duly given as aforesaid and money for the payment of the redemption price of the Bonds called for redemption is held by the Trustee, then on the redemption date designated in such notice Bonds so called for redemption shall become due and payable, and from and after the date so designated interest on such Bonds shall cease to accrue, and the Bondholders of such Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. All 1999 Series A Bonds redeemed pursuant to the provisions of this Article shall be cancelled by the Trustee and shall be destroyed with a certificate of destruction furnished to the Authority upon its request and shall not be reissued. DOCSSFI:308375,7 32 ARTICLE V REVENUES SECTION 5.01. Pledge of Revenues. (a) All Revenues, .any other amounts (including proceeds of the sale of the Bands) held by the Trustee in any fund or account established hereunder(other than amounts on deposit in the Rebate Fund created pursuant to Section 6.03) and any other amounts (excluding Additional Payments) received by the Authority in respect of the Facilities are hereby irrevocably pledged and assigned to the payment of the interest and premium, if any, on and principal of the Bonds and Reserve Facility Costs as provided herein, and the sums due and payable by the Authority in connection with any Swaps, and the Revenues and other amounts pledged hereunder shall not be used for any other purpose while any of the Bonds remain Outstanding or Reserve Facility Costs remain unpaid; provided, however, that out of the Revenues and other moneys there may be applied such sums for such purposes as are permitted hereunder. This pledge shall constitute a pledge of and charge and first lien upon the Revenues, all other amounts pledged hereunder and all other moneys on deposit in the funds and accounts established hereunder (excluding amounts on deposit in the Rebate Fund created pursuant to Section 6.03) for the payment of the interest on and principal of the Bonds and Reserve Facility Costs in accordance with the terms hereof and thereof and the sums due and payable by the Authority in connection with any Swaps. (b) At least three (3) Business Days prior to each date on which a Base Rental Payment is due, pursuant to the Facility Lease, the Trustee shall notify the County of the amount of the installment of Base Rental Payment needed to pay the principal of and interest on the Bonds due on the next following Interest Payment Date. Any failure to send such notice shall not affect the County's obligation to make timely payments of installments of Base Rental Payments. SECTION 5.02. Receipt and Deposit of Revenues in the Revenue Fund. In order to carry out and effectuate the pledge, assignment, charge and lien contained herein, the Authority agrees and covenants that all Revenues (other than Swap Revenues) and all other amounts pledged hereunder when and as received shall be received by the Authority in trust hereunder for the benefit of the Bondholders and shall be transferred when and as received by the Authority to the Trustee for deposit in the Revenue Fund (the "Revenue Fund"), which fund is hereby created and which fund the Trustee hereby agrees and covenants to maintain in trust for Bondholders so long as any Bonds shall be Outstanding hereunder. The County has been directed to pay all Base Rental Payments directly to the Trustee. If the Authority receives any Base Rental Payments, it shall hold the same in trust as agent of the Trustee and shall immediately transfer such Base Rental payments to the Trustee. All Revenues (other than Swap Revenues) and all other amounts pledged and assigned hereunder shall be accounted for through and held in~rust in the Revenue Fund, and the Trustee shall have no beneficial right or interest in any of the Revenues except only as herein provided. All Revenues and all other amounts pledged and assigned hereunder, whether received by the Authority in trust or deposited with the Trustee as herein provided, shall nevertheless be allocated, applied and disbursed solely to the DOCSSr::308375.7 33 purposes and uses hereinafter in this Article set forth, and shall be accounted for separately and apart from all other accounts, funds, money or other resources of the Trustee. (b) In order to carry out and effectuate the pledge, charge and lien on Swap Revenues contained herein, the Authority agrees and covenants that all Swap Revenues shall be transferred when received to the Trustee for deposit in the Interest Account. SECTION 5.03, Establishment and Maintenance of Accounts for Use of Money in the Revenue Fund: Reserve Fund. (a) Revernue Fund. Subject to Section 6.03, all money in the Revenue Fund shall be set aside by the Trustee in the following respective special accounts or funds within the Revenue Fund (each of which is hereby created and each of which the Trustee hereby covenants and agrees to cause to be maintained)in the following order of priority: (1) Interest Account, and (2) Principal Account. All money in each of such accounts shall be held in trust by the Trustee and shall be applied, used and withdrawn only for the purposes hereinafter authorized in this Section. On each Principal Payment Date, following payment of principal of and interest on the Bonds, any excess amount on deposit in the Revenue Fund shall be transferred to the Reserve Fund to the extent necessary to increase the amount therein to the Reserve Fund Requirement or to pay any Reserve Facility Costs then due and owing and any excess shall then be returned to the County as an excess payment of Base Rental Payments. (b) Interest Account. On or before each Interest Payment Bate, the Trustee shall set aside from the Revenue Fund and deposit in the Interest Account that amount of money which is equal to the amount of interest becoming due and payable on all Outstanding Bonds on such Interest Payment Date. No deposit need be made in the Interest Account if the amount contained therein and available to pay interest on the Bonds and Swaps is at least equal to the aggregate amount of interest becoming due and payable on all Outstanding Bonds and Swaps on such Interest Payment Bate. All money in the Interest Account shall be used and withdrawn by the Trustee solely for the purpose of paying the interest on the Bonds and Swaps as it shall become due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity). (c) Principal Account. On or before each June 1, commencing June 1, 1999, the Trustee shall set aside from the Revenue Fund and deposit in the Principal Account an amount of money equal to the amount of all sinking fund payments required to be made on such June 1 into the respective sinking fund accounts for all Outstanding Term Bonds and the principal amount of all Outstanding Serial Bonds maturing on such June 1. DOC'SSY71:30837:.7 34 No deposit need be made in the Principal Account if the amount contained therein and available to pay principal of the Bonds is at least equal to the aggregate amount of the principal of all Outstanding Serial Bonds maturing by their terms on such June I plus the aggregate amount of all sinking fund payments required to be made on such June I for all Outstanding Term Bonds. The Trustee shall establish and maintain within the Principal Account a separate subaccount for the Term Bonds of each Series and maturity, designated as the " Sinking Account" (the "Sinking Account"), inserting therein the Series and maturity (if more than one such account is established for such Series) designation of such Bonds. With respect to each Sinking Account, on each mandatory sinking account payment date established for such Sinking Account, the Trustee shall apply the mandatory sinking account payment required on that date to the redemption (or payment at maturity, as the case may be) of Term Bonds of the Series and maturity for which such Sinking Account was established, upon the notice and in the manner provided in Article IV; provided that, at any time prior to selection of Bonds for redemption, the Trustee may, upon the Written Request of the Authority, apply moneys in such Sinking Account to the purchase of Term Bonds of such Series and maturity at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account), as may be directed by the Authority, except that the purchase price (excluding accrued interest) shall not exceed the redemption price that would be payable for such Bonds upon redemption by application of such mandatory sinking account payment. If, during the twelve-month period immediately preceding said mandatory sinking account payment date, the Trustee has purchased Tenn Bonds of such Series and maturity with moneys in such Sinking Account, such Bonds so purchased shall be applied, to the extent of the full principal amount thereof, to reduce said mandatory sinking account payment. The Trustee shall establish and maintain within the Principal Account a Sinking Account for the 1999 Series A Tenn Bonds maturing on June 1, 2028. Subject to the terms and conditions set forth in this Section and Section 4.03, the Term Bonds maturing on June 1, 2028, shall be redeemed (or paid at maturity, as the case may be) by application of mandatory sinking account payments in the amounts and upon the dates as follows: Term Bonds Sinking Account Mandatory Sinking Account Mandatory Sinking Payment Date (June-1) Account Payments 2020 $1,600,000 2021 1,685,000 2022 1,770,000 2023 1,855,000 2024 1,950,000 2025 2,050,000 2026 2,150,000 2027 2,260,000 2028* 2,370,000 DOC'SSF 1:30937`.7 35 *Maturity All money in the Principal Account shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Bonds as it shall become due and payable, whether at maturity or redemption, except that any money in any Sinking Account shall be used and withdrawn by the Trustee only to purchase or to redeem or to pay Term Bonds for which such Sinking Account was created. (d) Reserve Fund. The Authority hereby agrees to establish a separate fund titled the"Reserve Fund"to be held by the Trustee. All money in the Reserve Fund shall be deposited with, used and withdrawn by the Trustee solely for the purpose of funding the Interest Account or the Principal Account, in that order, in the event of any deficiency in either of such accounts on a Principal Payment Date or Interest Payment Date, except that so long as the Authority is not in default hereunder, any cash amounts in the Reserve Fund in excess of the Reserve Fund Requirement shall be withdrawn from the Reserve Fund and transferred to the Revenue Fund on each Interest Payment Date, following the payment of any amounts due on such date or, if so directed by the Authority, deposited into a Project Fund during construction of any Project. The Trustee shall notify the County and each Bond Insurer if any withdrawal is made from the Reserve Fund for the purpose of finding the Interest Account or the Principal Account. If the Reserve Fund Requirement is satisfied by a Reserve Facility, the Trustee shall draw on such Reserve Facility in accordance with its terms and the terms hereof, in a timely manner, to the extent necessary to fund any such deficiency in the Interest Account or the Principal Account. The Authority shall repay solely from Revenues any draws under a Reserve Facility and any Reserve Facility Costs related thereto. Interest shall accrue and be payable on such draws and expenses from the date of payment by a Reserve Facility provider at the rate specified in the agreement with respect to such Reserve Facility. Before any drawing may be made on a Reserve Facility, the Trustee shall have withdrawn all cash and investments in the Reserve Fund to replenish the Principal Account and the Interest Account. If any obligations are due and payable under the Reserve Facility, any new funds deposited into the Reserve Fund shall be used and withdrawn by the Trustee to pay such obligations. The pledge of the Revenues by the Authority to secure the payment of the Reserve Facility Costs is on a basis that is subordinate to the pledge of Revenues to the Trustee for the Bonds. Amounts in respect of Reserve Facility Costs paid to a Reserve Facility provider shall be credited first to the expenses due, then to interest due and then to principal due. As and to the extent payments are made to a Reserve Facility provider on account of principal due, the coverage under the Reserve Facility will be increased by a like amount, subject to the terms of the Reserve Facility. Draws on all Reserve Facilities on which there is available coverage shall be made on a pro-rata basis (calculated by reference to the coverage then available thereunder) after applying all available cash and investments in the Reserve Fund. Payment of Reserve Facility Costs and reimbursement of amounts with respect to other Reserve Facilities shall be made on a pro-rata basis prior to the replenishment of any cash drawn from the Reserve Fund. 04CSS '�M:308375.7 36 If the Authority shall fail to pay any Reserve Facility Costs in accordance with the above requirements, a Reserve Facility provider shall be entitled to exercise any and all legal and equitable remedies available to it, including those provided under this Trust Agreement other than (i) acceleration of the maturity of the Bonds or (ii) remedies which would adversely affect Owners of the Bonds. This Trust Agreement shall not be discharged until all Reserve Facility Costs owing to a Reserve Facility provider shall have been paid in full. The Authority's obligation to pay such amounts shall expressly survive payment in full of the Bonds. The Authority may, with the consent of each Bond Insurer, satisfy the Reserve Fund Requirement at any time by the deposit with the Trustee for the credit of the Reserve Fund of a Reserve Facility, or any combination thereof. (i) Surety Bond or Insurance Policy. A surety bond or insurance policy issued to the Trustee, on behalf of the Bondholders, by a company licensed to issue an insurance policy guaranteeing the timely payment of the principal of and interest on the Bonds (a °`municipal bond insurer") may be deposited in the Reserve Fund to meet the Reserve Fund Requirement if such municipal bond insurer shall be rated in the highest rating categories issued by Moody's and by S&P. The term of such surety bond or insurance policy shall be equal to the tern- of the Series of Bonds which it secures. In the event a surety bond or insurance policy is deposited in the Reserve Fund in accordance with this Section, notice of that event shall be given to Moody's and to S&P by the Authority. (ii) Letter of credit. A letter of credit may be deposited in the Reserve Fund to meet the Reserve Fund Requirement, provided that any such letter of credit must be issued or confirmed by a state or national bank, or a foreign bank with an agency or branch located in the continental United States, which has outstanding an issue of unsecured long terra debt securities rated at least equal to the second highest rating category by Moody's and S&P. In the event a letter of credit is deposited in the Reserve Fund in accordance with this Section, notice of that event shall be given to Moody's and to S&P by the Authority. In the event that the rating on the unsecured long-term debt securities of the bank which has issued or confirmed any letter of credit is withdrawn or reduced by Moody's or S&P to a rate below the requirements set forth above, the Authority will obtain a substitute or replacement letter of credit within thirty (30) days from the date of such reduction or withdrawal from a state, national or foreign bank meeting the requirements set forth above to the extent that, in the judgment of the Authority, such a substitute or replacement letter of credit is available upon reasonable terms and at a reasonable cast, or will deposit into the Reserve Fund a replacement surety bond or insurance policy meeting the requirements of this Section 5.03, or the Authority shall deposit cash or other Permitted Investments meeting the requirements of Section 5.05 (to the extent the same are available from Revenues), in order to provide that there will be on deposit in the Reserve Fund an amount equal to the Reserve Fund Requirement. Unless the Bonds have been fully paid and retired, the Trustee shall draw the full amount of any letter of credit credited to the Reserve Fund for such Bonds on the third Business Day preceding the date such letter of credit (taking into account any extension, renewal or r oc Ssr I:308375.7 37 replacement thereof) would otherwise expire, and shall deposit moneys realized pursuant to such draw in the Reserve Fund. {iii} Release-f Moneys in Reserve Fund. If the Authority causes a cash-funded Reserve Fund to be replaced with a Reserve Facility meeting the requirements of either (i) or (ii) above, amounts on deposit in the Reserve Fund shall, upon Written Request of the Authority to the Trustee, be transferred, subject to the receipt by the Authority of an Opinion of Counsel that such transfer will not cause the interest on the Bonds to be included in gross income for purposes of federal income taxation, to the County and applied for any lawful purpose. (e) Canitalized Interest Account. The Authority hereby agrees to establish and maintain a separate account designated the "1999 Series A Capitalized Interest Account," which account shall be held by the Trustee. The Trustee shall transfer on or before each Interest Payment Date from the 1999 Series A Capitalized Interest Account to the Trustee for deposit into the Interest Account moneys in the amount needed to pay a portion of the Interest Payments on the Bonds on such Interest Payment Date allocable to the Facilities. Such amounts are as follows: Amount of Date Capitalized Interest June 1, 1999 $227,254.27 December 1, 1999 470,181.25 Upon completion of the 1999 Project, any remaining amounts in the 1999 Series A Capitalized Interest Account shall be transferred to the Authority and deposited into the Reserve Fund to the extent necessary to increase the amount therein to the Reserve Fund Requirement and any excess shall be transferred to the County to be used in any manner that does not adversely affect the exclusion from gross income of interest on the Bonds. SECTION 5.04. Apr�licat-on of Insurance Proceeds. In the event of any damage to or destruction of any part of the Facilities covered by insurance, the Authority, with the consent or at the direction of the Bond Insurers, shall cause the proceeds of such insurance to be utilized for the repair, reconstruction or replacement of the damaged or destroyed portion of the Facilities, and the Trustee shall hold said proceeds in a fund established by the Trustee for such purpose separate and apart from all other funds designated the "Insurance and Condemnation Fund", to the end that such proceeds shall be applied to the repair, reconstruction or replacement of the Facilities to at least the same good order, repair and condition as it was in prior to the damage or destruction, insofar as the same may be accomplished by the use of said proceeds. The County shall file a Certificate of the County with the Trustee that sufficient funds from insurance proceeds or from any funds legally available to the County, or from any combination thereof, are available in the event it elects to repair, reconstruct or replace the Facilities. Unless such requirement is waived in writing by the Bond Insurers the Trustee shall invest said proceeds in Permitted Investments pursuant to the Written Request of the County, as agent for the Authority under the Facility Lease, and withdrawals of said proceeds shall be made from time to time upon the filing with the Trustee of a Written Request of the County, stating that the County DOCSSP1:308375.7 38 has expended moneys or incurred liabilities in an amount equal to the amount therein stated for the purpose of the repair, reconstruction or replacement of the Facilities, and specifying the items for which such moneys were expended, or such liabilities were incurred, in reasonable detail. Any balance of such proceeds not required for such repair, reconstruction or replacement and the proceeds of use and occupancy insurance shall be paid to the Trustee as Base Rental Payments and applied in the manner provided by Section 5.01. Alternatively, the County, with the consent or at the direction of the Bond Insurers, if the proceeds of such insurance together with any other moneys then available for such purpose are sufficient to prepay all, in case of damage or destruction in whole of the Facilities, or that portion, in the case of partial damage or destruction of the Facilities, of the Base Rental Payments and all other amounts relating to the damaged or destroyed portion of the Facilities, may elect not to repair, reconstruct or replace the damaged or destroyed portion of the Facilities and thereupon shall cause said proceeds to be used for the redemption of Outstanding Bonds pursuant to the applicable provisions of Section 4.01. The County shall not apply the proceeds of insurance as set forth in this Section 5.04 to redeem the Bonds in part due to damage or destruction of a portion of the Facilities unless the Base Rental Payments on the undamaged portion of the Facilities will be sufficient to pay the initially- scheduled principal and interest on the Fonds remaining unpaid after such redemption. SECTION 5.05. De osis and Investments of Money in Accounts and Funds. Subject to Section 6.03, all money held by the Trustee in any of the accounts or funds established pursuant hereto shall be invested in Permitted Investments at the Written Request of the Authority or, if no instructions are received, in money market funds described in paragraph 3 of the definition of Permitted Investments. Such investments shall, as nearly as practicable, mature on or before the dates on which such money is anticipated to be needed for disbursement hereunder; provided, however, that moneys in the Reserve Fund shall be invested in Permitted Investments with a term to maturity not exceeding five(5)years. For purposes of this restriction, Permitted Investments containing a repurchase option or put option by the investor shall be treated as having a maturity of no longer than such option. All interest or profits received on any money so invested in the 1999 Project Fund and the Reserve Fund and 1999 Series A Capitalized Interest Account shall be deposited in the 1999 Project Fund until completion of the 1999 Project and shall thereafter be deposited first in the Reserve Fund, to the extent necessary to make amounts on deposit in the Reserve Fund equal to the Reserve Fund Requirement, and then in the Revenue Fund. The Trustee shall value Permitted Investments held in the Reserve Fund no later than Tune 1 and December 1 in each year; provided that for purposes of this Section the value of any such Permitted Investment shall be an amount equal to the lesser of the cost or the fair market value of such Permitted Investment. The Trustee and its affiliates may act as principal, agent, sponsor or advisor with respect to any investments. The Trustee shall not be liable for any losses on investments made in accordance with the terms and provisions of this Trust Agreement. Investments purchased with funds on deposit in the .Revenue Fund shall mature not later than the payment date or redemption date, as appropriate, immediately succeeding the investment. Subject to Section 6.03, investments in any and all funds and accounts except for the Rebate Fund may be commingled for purposes of making, holding and disposing of investments; notwithstanding provisions herein for transfer to or holding in particular funds and DOCSSF1:.08375.7 39 accounts amounts received or held by the Trustee hereunder, provided that the Trustee shall at all times account for such investments strictly in accordance with the funds and accounts to which they are credited and otherwise as provided in this Trust Agreement. ARTICLE"VI COVENANTS OF THE AUTHORITY SECTION 6.01. :Punctual Pa,,,Ment and Performance. The Authority will punctually pay out of the Revenues the interest on and principal of and redemption premiums, if any, to become due on every Bond issued hereunder in strict conformity with the terms hereof and of the Bonds, and will faithfully observe and perform all the agreements and covenants to be observed or performed by the Authority contained herein and in the Bonds. SECTION 6.02. AgainistEncumbrances. The Authority will not make any pledge or assignment of or place any charge or lien upon the Revenues except as provided in Section. 5.01, and will not issue any bonds, notes or obligations payable from the Revenues or secured by a pledge of or charge or lien upon the Revenues except as provided in Section 3.04. SECTION 6.03. Tax Covenants: Rebate Fund. (a) In addition to the accounts created pursuant to Section 5.03, the Trustee shall establish and maintain a fund separate from any other fund or account established and maintained hereunder designated as the Rebate Fund. There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to the Tax Certificate. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust, to the extent required to satisfy the Rebate Requirement(as defined in the Tax Certificate), for payment to the United States of America. Notwithstanding the provisions of Sections 5.01, 5.02, 5.05, 9.01 and t0.01, relating to the pledge of Revenues, the allocation of money in the Revenue Fund, the investments of money in any fund or account, the application of funds upon acceleration and the defeasance of Outstanding Bonds, all amounts required to be deposited into or on deposit in the Rebate Fund shall be governed exclusively by this Section 6.03 and by the Tax Certificate (which is incorporated herein by reference). The Trustee shall be deemed conclusively to have complied with such provisions if it follows the written directions of the Authority, and shall have no liability or responsibility to enforce compliance by the Authority with the terms of the Tax Certificate. (b) Any funds remaining in the Rebate Fund with respect to a Series of Bonds after redemption and payment of all such Series of Bonds and all other amounts due hereunder or under the Facility Lease relating to such Series of Bonds, or provision made therefor satisfactory to the Trustee and the 1999 Series A Bond Insurer, including accrued interest and pay-ment of any applicable fees and expenses of the Trustee and satisfaction of the Rebate Requirement (as defined in the Tax Certificate), shall be withdrawn by the Trustee and remitted to or upon the Written Request of the Authority. (c) The Authority shall not use or permit the use of any proceeds of the Bonds or any funds of the Authority, directly or indirectly, to acquire any securities or obligations, and DOCS;F I.308375.7 40 shall not take or permit to be taken any other action or actions, which would cause any of the Bonds to be an "arbitrage bond' within the meaning of Section 148 of the Cade, "private activity bond" within the meaning of Section 141(a) of the Code, or "federally guaranteed" within the meaning of Section 149(b) of the Code and any such applicable requirements promulgated from time to time thereunder and under Section 103(c) of the Internal Revenue Code of 1954, as amended. The Authority shall observe and not violate the requirements of Section 148 of the Code and any such applicable regulations. The Authority shall comply with all requirements of Sections 148 and 149(b) of the Code to the extent applicable to the Bonds. In the event that at any time the Authority is of the opinion that for purposes of this Section 6.03(c) it is necessary to restrict or to limit the yield on the investment of any moneys held by the Trustee under this Trust Agreement, the Authority shall so instruct the Trustee under this Trust Agreement in writing, and the Trustee shall take such action as may be necessary in accordance with such instructions. (d) The Authority and the Trustee (as directed by the Authority) specifically covenant to comply with the provisions and procedures of the Tax Certificate; provided that the Trustee shall not be 'pound by this covenant if an Event of Default has occurred and is continuing. (e) The Authority shall not use or permit the use of any proceeds of the Bonds or any funds of the Authority, directly or indirectly, in any manner, and shall not take or omit to take any action that would cause any of the Bonds to be treated as an obligation not described in Section 103(a) of the Code. (f) Notwithstanding any provisions of this Section 6.03, if the Authority shall provide to the Trustee an Opinion of Counsel that any specified action required under this Section 6.03 or the Tax Certificate is no longer required or that some further or different action is required to maintain the exclusion from federal income tax of interest on the Bonds, the Trustee and the Authority may conclusively rely on such opinion in complying with the requirements of this Section., and, notwithstanding Article IX hereof, the covenants hereunder shall be deemed to be modified to that extent. (g) The foregoing provisions of this Section. 6.03 shall not be applicable to any Series of Bonds or the proceeds thereof that the Authority determines upon the issuance thereof are to be taxable bonds, the interest on which is intended to be included in the gross income of the Owner thereof for federal income tax.purposes. SECTION 6.04. Accounting Records and Reports. The Trustee will keep or cause to be kept proper books of record and accounts in which complete and correct entries shall be made of all transactions relating to the receipts, disbursements, allocation and application of the Revenues, and such books shall be available for inspection by the Authority at reasonable hours and under reasonable conditions. The Trustee shall provide to the Authority monthly statements covering the funds and accounts held pursuant to the Trust Agreement. Not more than one hundred eighty (180) days after the close of each Fiscal Year, the Trustee shall furnish or cause to be furnished to the Authority a complete financial statement covering receipts, disbursements, allocation and application of Revenues for such Fiscal Year. The Authority shall keep or cause to be kept such information as is required under the Tax Certificate. DO SSH%109375.7 41 SECTION 6.05. Prosecution and Deferse of Suits. The Authority will defend against every suit, action or proceeding at any time brought against the Trustee upon any claim to the extent arising out of the receipt, application or disbursement of any of the Revenues or to the extent involving the failure of the Authority to fulfill its obligations hereunder; provided, that the Trustee or any affected Bondholder at its election may appear in and defend any such suit, action or proceeding. The Authority will indemnify and hold harmless the Trustee against any and all liability claimed or asserted by any person to the extent arising out of such failure by the Authority, and will indemnify and hold harmless the Trustee against any reasonable attorney's fees or other reasonable expenses which it may incur in connection with any litigation to which it may become a party by reason of its actions hereunder, except for any loss, cost, damage or expense resulting from the negligence or willful misconduct by the Trustee. Notwithstanding any contrary provision hereof, this covenant shall remain in full force and effect even though all Bonds secured hereby may have been fully paid and satisfied. SECTION 6.06. Further Assurances. Whenever and so often as reasonably requested to do so by the Trustee or any Bondholder, the Authority will promptly execute and deliver or cause to be executed and delivered all such other and further assurances, documents or instruments, and promptly do or cause to be done all such other and further things as may be necessary or reasonably required in order to further and more fully vest in the Bondholders all rights, interests, powers, benefits, privileges and advantages conferred or intended to be conferred upon them hereby. SECTION 6.07. Maintenance of Revenues. The Authority will promptly collect all rents and charges due for the occupancy or use of the Facilities as the same become due, and will promptly and vigorously enforce its rights against any tenant or other person who does not pay such rents or charges as they become due. The Authority will at all times maintain and vigorously enforce all of its rights under the Facility Lease. SECTION 6.08. Amendments to Facility Lease. The Authority shall not supplement, amend, modify or terminate any of the terms of the Facility Lease, or consent to any such supplement, amendment, modification or termination, without the prior written consent of the Trustee and each Bond Insurer. The Trustee shall give such written consent if such supplement, amendment, modification or termination (a) will not materially adversely affect the interests of the Bondholders or result in any material impairment of the security hereby given for the payment of the Bonds (provided that such supplement, amendment or modification shall not be deemed to have such adverse effect or to cause such material impairment solely by reason of providing for the payment of Additional Bands as required by Section 3.03(e) or substitution of real property pursuant to Section 2.03 of the Facility Lease), (b) is to add to the agreements, conditions, covenants and terms required to be observed or performed thereunder by any party thereto, or to surrender any right or power therein reserved to the Authority or the County, (c) is to cure, correct or supplement any ambiguous or defective provision contained therein, (d) is to accommodate any substitution in accordance with Section 2.03 under the Facility Lease, (e) is to modify the legal description of the Facilities to conform to the requirements of title insurance or otherwise to add or delete property descriptions to reflect accurately the description of the parcels intended or preferred to be included therein, or substituted for the Facilities pursuant to the provision of Section 2.04 of the Facility Lease, or (f) if the Trustee first obtains the written consent of the Bondholders of a majority in principal amount of the Bonds then Outstanding to DOC'ssF I:3aas75.7 42 such supplement, amendment, modification or termination; 21ovided, that no such supplement, amendment, modification or termination shall reduce the amount of Base Rental Payments to be made to the Authority or the Trustee by the County pursuant to the Facility Lease to an amount less than the scheduled principal and interest payment on the Outstanding Bonds, or extend the time for making such payments, or permit the creation of any lien prior to or on a parity with the lien created by this Trust Agreement on the Base Rental Payments (except as expressly provided in the Facility Lease), in each case without the written consent of all of the Bondholders of the Bonds then Outstanding. Any supplement, amendment or modification entered into pursuant to clause (a) of the immediately preceding paragraph shall not, for purposes of this Section 6.08, be deemed to materially adversely affect the interest of the Bondholders or result in any material impairment of the security given for the payment of the Bonds so long as (i) all Bonds are insured by a Bond Insurance Policy, (ii) each Bond Insurer shall have given its written consent to such supplement, amendment.or modification, and(iii) each Bond Insurer shall at the time of such consent be rated in the highest Rating Category by S&P and Moody's. SECTION 6.09. Leasehold Fstate. The Authority will be on the date of the delivery of the Bonds the owner and lawfully possessed of the leasehold estate described in the Facility Lease, and the Facility Lease will be on the date of delivery of the Bonds a valid subsisting demise for the term therein set forth of the property which it purports to demise. At the time of the delivery of the Bonds the County will be the owner in fee simple of the premises described therein, and the Facility Lease will be lawfully made by the County, and the covenants contained in the Facility Lease on the part of the County will be valid and binding. At the time of the delivery of the Bonds, the Authority will have good right, full power and lawful authority to lease said leasehold estate, in the manner and form provided in the Facility Lease, and the Facility Lease will be duly and regularly executed. Without allowance for any days of grace which may or might exist or be allowed by law or granted pursuant to any terms or conditions of the Facility Lease, the Authority will in all respects promptly and faithfully keep, perform and comply with all the terms, provisions, covenants, conditions and agreements of the Facility Lease to be kept, performed and complied with by it. The Authority will not do or permit anything to be done, or omit or refrain from doing anything, in any case where any such act done or permitted to be done, or any such omission of or refraining from action, would or might be a ground for declaring a forfeiture of the Facility Lease, or would or might be a ground for cancellation or termination of the Facility Lease by the lessee thereunder. The Authority will promptly deposit with the Trustee (to be held by the Trustee until the title and rights of the Trustee under this Trust Agreement shall be released or reconvened) any and all documentary evidence received by it showing compliance with the provisions of the Facility Lease to be performed by the Authority. The Authority, immediately upon its receiving or giving any notice, communication or other document in any way relating to or affecting the Facility Lease, or the leasehold estate thereby created, which may or can in any manner affect the estate of the lessor or of the Authority in or under the Facility Lease, will deliver the same, or a copy thereof, to the Trustee. DOC'SSF1:308375=7 43 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES OF BONDHOLDERS SECTIO?�r 7.01. Events of Default and Acceleration of Maturities. If one or more of the following events(herein called"events of default") shall happen,that is to say: (a) if default shall be made by the Authority in the due and punctual payment of the interest on any Bond when and as the same shall become due and payable; (b) if default shall be made by the Authority in the due and punctual payment of the principal of or redemption premium., if any, on any Bond when and as the same shall become due and payable,whether at maturity as therein expressed or by proceedings for redemption, (c) if default shall be made by the Authority in the performance of any of the other agreements or covenants required herein to be performed by the Authority, and such default shall have continued for a period of sixty (60) days or such additional time (with respect to agreements or covenants that cannot be corrected or performed within such sixty (60) day period but the correction of which is being diligently pursued by the Authority) as is reasonably required to correct any such default after the Authority shall have been given notice in writing of such default by the Trustee or by the applicable Bond Insurer; (d) if the Authority shall file a petition or answer seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if a court of competent jurisdiction shall approve a petition filed with or without the consent of the Authority seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if under the provisions of any other law for the relief or aid of debtors any court of competent jurisdiction shall assume custody or control of the Authority or of the whole or any substantial part of its property; or (e) if an Event of Default has occurred under Section 6.01 of the Facility Lease; then and in each and every such case during the continuance of such event of default the Trustee may, with the consent of each Bond Insurer and upon the written request of the Bondholders of not less than a majority in aggregate principal amount of the Bonds then Outstanding and with the prior written consent of each Bond Insurer, shall, by notice in writing to the Authority, declare the principal of all Bonds then Outstanding and the interest accrued thereon to be due and payable immediately, and upon any such declaration the same shall become due and payable, anything contained herein or in the Bonds to the contrary notwithstanding. The Trustee shall promptly notify all Bondholders by first class mail of any such event of default which is continuing of which a Responsible Officer has actual knowledge or written notice. This provision, however, is subject to the condition that if at any time after the principal of the Bonds then Outstanding shall have been so declared due and payable and before any judgment or decree for the payment of the money due shall have been obtained or entered the Authority shall deposit with the Trustee a sum sufficient to pay all matured interest on all the Bonds and all principal of the Bonds matured prior to such declaration, with interest at the rate ooCssFI:308375.7 44 borne by such Bonds on such overdue interest and principal, and the reasonable fees and expenses of the Trustee and each Bond Insurer, and any and all other defaults known to the Trustee (other than in the payment of interest on and principal of the Bonds due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Trustee and each Bond Insurer or provision deemed by the Trustee and by each Bond Insurer to be adequate shall have been made therefor, then and in every such case the Trustee or the Bondholders of not less than a rna:Jority in aggregate principal amount of Bonds then Outstanding, by written notice to the Authority and to the Trustee with the written consent or at the direction of each Bond Insurer, may on behalf of the Bondholders of all the Bonds then Outstanding rescind and annul such declaration and its consequences; but no such rescission and annulment shall extend to or shall affect any subsequent default or shall impair or exhaust any right or power consequent thereon. No acceleration of the Bonds (or annulment thereof) may be made without obtaining the prior written consent of each Bond Insurer. In the event the maturity of the Bonds is accelerated, each Bond Insurer may elect, in its sole discretion, to pay accelerated principal and interest accrued or accreted, as applicable, on such principal to the date of acceleration (to the extent unpaid by the Authority) and the Trustee shall be required to accept such amounts. Upon payment of such accelerated principal and interest accrued to the acceleration date as provided above, such respective Bond Insurer's obligations under the corresponding Bond Insurance Policy shall be fully discharged. SECTION 7.02. Application of Funds Upon Acceleration. All moneys in the accounts and funds provided in Sections 3.01, 3.02, 5.02, 5.03 and 5.05 upon the date of the declaration of acceleration by the Trustee as provided in Section 7.01 and all Revenues (other than Revenues on deposit in the Rebate Fund) thereafter received by the Authority hereunder shall be transmitted to the Trustee and shall be applied by the Trustee in the following order-- First, to the payment of the reasonable fees, costs and expenses of the Trustee in providing for the declaration of such event of default and carrying out its duties under this Agreement, including reasonable compensation to their accountants and counsel together with interest on any amounts advanced as provided herein and thereafter to the payment of the reasonable costs and expenses of the Bondholders, if any, in carrying out the provisions of this Article, including reasonable compensation to their accountants and counsel; Sego d, upon presentation of the several Bonds, and the stamping thereon of the amount of the payment if only partially paid or upon the surrender thereof if felly paid, to the payment of the whole amount then owing and unpaid upon the Bonds for interest and principal, with (to the extent permitted by law) interest on the overdue interest and principal at the rate borne by such Bonds, and in case such money shall be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, then to the payment of such interest, principal and (to the extent permitted by law) interest on overdue interest and principal without preference or priority among such interest, principal and interest on overdue interest and principal ratably to the aggregate of such interest, principal and interest on overdue interest and principal; and Thir , to the payment of all amounts payable to each Bond Insurer. DOC'SSF t:308375,i 45 SECTION 7.03. lnstrtution of Legal Proceedings by Trustee. If one or more of the events of default shall happen and be continuing, the Trustee may, and upon the written request of the Bondholders of a majority in principal amount of the Bonds then Outstanding, and in each case upon being indemnified to its reasonable satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of the Bondholders of Bonds under this Trust Agreement and under Article VI of the Facility Lease by a suit in equity or action at law, either for the specific performance of any covenant or agreement contained herein, or in aid of the execution of any power herein granted, or by mandamus or other appropriate proceeding for the enforcement of any other legal or equitable remedy as the Trustee shall, with the consent or at the direction of each Bond Insurer, deem most effectual in support of any of its rights and duties hereunder. SECTION 7.04. Non-Waiver. Nothing in this Article or in any other provision hereof or in the Bonds shall affect or impair the obligation of the Authority, which is absolute and unconditional, to pay the interest on and principal of and redemption premiums, if any, on the Bonds to the respective Bondholders of the Bonds at the respective dates of maturity or upon prior redemption as provided herein from the Revenues as provided herein pledged for such payment, or shall affect or impair the right of such Bondholders, which is also absolute and unconditional, to institute suit to enforce such payment by virtue of the contract embodied herein and in the Bonds. No waiver of an Event of Default shall be granted without obtaining the prior written consent of each Bored Insurer. A waiver of any default or breach of duty or contract by the Trustee or any Bondholder shall not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Trustee or any Bondholder to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or shall be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Bondholders by the Act or by this Article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee or the Bondholders. If any action, proceeding or suit to enforce any right or exercise any remedy is abandoned, the Authority, the Trustee and any Bondholder shall be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken. SECTION 7.05. Actions by Trustee as Attorney-in-Fact. Any action, proceeding or suit which any Bondholder shall have the right to bring to enforce any right or remedy hereunder may be brought by the Trustee for the equal benefit and protection of all Bondholders, whether or not the Trustee is a Bondholder, and the Trustee is hereby appointed (and the successive Bondholders, by taking and holding the Bonds issued hereunder, shall be conclusively deemed to have so appointed it) the true and lawful attorney-in-fact of the Bondholders for the purpose of bringing any such action, proceeding or suit and for the purpose of doing and performing any and all acts and things for and on behalf of the Bondholders as a class or classes as may be advisable or necessary in the opinion of the Trustee as such attorney- in-fact. DOC'SSF t:308375.7 46 SECTION 7.06. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Bondholders is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law. SECTION 7.07. Limitation on Bondholders'_Right to Sue. No Bondholder of any Bond issued hereunder shall have the right to institute any suit, action or proceeding at law or equity, for any remedy under or upon this Trust Agreement, unless (a) such Bondholder shall have obtained the prior written consent of the applicable Bond Insurer and shall have previously given to the Trustee written notice of the occurrence of an event of default as defined in Section 7.01; (b) the Bondholders of at least a majority in aggregate principal amount of all the Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its own name and the Bond Insurer, if any, shall have consented to such request; (c) said Bondholders shall have tendered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of sixty (60) days after such request shall have been received by, and said tender of indemnity shall have been made to, the Trustee. Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Bondholder of Bonds of any remedy hereunder; it being understood and intended that no one or more Bondholders of Bonds shall have any right in any manner whatever by his or their action to enforce any right under this Trust Agreement, except in the manner herein provided, and that all proceedings at law or in equity to enforce any provision of this Trust Agreement shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Bondholders of the Outstanding Bonds. ARTICLE VIII THE TRUSTEE SECTION 8.01. The Trustee. U.S. Bank Trust National Association shall serve as the initial Trustee for the Bonds for the purpose of receiving all money which the Authority is required to deposit with the Trustee hereunder and for the purpose of allocating, applying and using such money as provided herein and for the purpose of paying the interest on and principal of and redemption premiums, if any, on the Bonds presented for payment, with the rights and obligations provided herein. The Authority agrees that it will at all times maintain a Trustee having a principal office in California. The Authority, unless there exists any Event of Default as defined in Section 7.01, may at any time and, at the request of a Bond Insurer for any breach of the trusts set forth herein, shall remove the Trustee initially appointed and any successor thereto and may appoint a successor or successors thereto by an instrument in writing; provided, that any such successor shall be a bark, banking institution, or trust company, having(or whose parent holding company DOC'SSF?:308375.7 47 has) a combined capital (exclusive of borrowed capital) and surplus of at least fifty million dollars ($50,000,000) and subject to supervision or examination by federal or state authority and acceptable to the Bond Insurer. If such bank, banking institution, or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purpose of this Section the combined capital and surplus of such bank, banking institution, or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Trustee may at any time resign by giving written notice of such resignation to the Authority and the Bond Insurer, and by mailing by first class mail to the Bondholders notice of such resignation. Upon receiving such notice of resignation, the Authority shall promptly appoint a successor Trustee by an instrument in writing. Any removal or resignation of a Trustee and appointment of a successor Trustee shall become effective only upon the acceptance of appointment by the successor Trustee. The successor Trustee shall send notice of its acceptance by first class mail to the Bondholders. If, within thirty (30) days after notice of the removal or resignation of the Trustee no successor Trustee shall have been appointed and shall have accepted such appointment, the removed or resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, which court may thereupon, after such notice, if any, as it may deem proper and prescribe and as may be required by law, appoint a successor Trustee having the qualifications required hereby. Each. Bond Insurer shall have the right to remove the Trustee without cause following any Event of Default or any draw on the Reserve Fund. The Trustee is hereby authorized to pay or redeem the Bonds when duly presented for payment at maturity or on redemption prior to maturity. The Trustee shall cancel all Bonds upon payment thereof or upon the surrender thereof by the Authority and shall destroy such Bonds and a certificate of destruction shall be delivered to the Authority upon its request. The Trustee shall keep accurate records of all Bonds paid and discharged and cancelled by it. The Trustee shall, prior to an event of default, and after the curing of all events of default that may have occurred, perform such duties and only such duties as are specifically set forth in this Trust Agreement and no implied duties or obligations shall be read into this Trust Agreement. The Trustee shall, during the existence of any event of default (that has not been cured), exercise such of the rights and powers vested in it by this Trust Agreement, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. SECTION 8.02. Liability of Trustee. The recitals of facts, agreements and covenants herein and in the Bonds shall be taken as recitals of facts, agreements and covenants of the Authority, and the Trustee assumes no responsibility for the correctness of the same or makes any representation as to the sufficiency or validity hereof or of the Bonds, or shall incur any responsibility in respect thereof other than in connection with the rights or obligations assigned to or imposed upon it herein, in the Bonds or in law or equity. The Trustee shall not be liable in connection with the performance of its duties hereunder except for its own negligence or willful misconduct. DOCSSFI:308375.7 48 The Trustee shall not be bound to recognize any person as the Bondholder of a Bond unless and until such Bond is submitted for inspection, if required, and such Bondholder's title thereto satisfactorily established, if disputed. The Trustee shall not be liable for any error of judgment made in good faith, unless it shall be proved that the Trustee was'negligent in ascertaining the pertinent facts. The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of any Bond Insurer and the Bondholders of not less than a majority (or any lesser amount that may direct the Trustee in accordance with this Agreement) in aggregate principal amount of the Bonds at the time Outstanding, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this".frust Agreement. The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Agreement at the request, order or direction of any of the Bondholders pursuant to the provisions of this Trust Agreement unless such Bondholders shall have offered to the Trustee reasonable security or indemnity against the reasonable costs, expenses and liabilities that may be incurred therein or thereby. The Trustee has no obligation or liability to the Bondholders for the payment of the interest on, principal of or redemption premium, if any, with respect to the Bonds from its own funds; but rather the Trustee's obligations shall be limited to the performance of its duties hereunder. The Trustee shall not be deemed to have knowledge of any event of default (except payment defaults) unless and until a Responsible Officer shall have actual knowledge thereof or a Responsible Officer of the Trustee shall have received written notice thereof at its Principal Office, including, but not limited to, written notice from the Bond Insurer, if any. The Trustee shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein or of any of the documents executed in connection with the Bonds, or as to the existence of a default or event of default thereunder. The Trustee shall not be responsible for the validity or effectiveness of any collateral given to or held by it. The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through attorneys-in-fact, agents or receivers, but shall be answerable for the negligence or misconduct of any such attorney-in-fact, agent or receiver. The Trustee shall be entitled to advice of counsel and other professionals concerning all matters of trust and its duty hereunder, but the Trustee shall not be answerable for the professional malpractice of any attorney-in-law or certified public accountant in connection with the rendering of his professional advice in accordance with the terms of this Trust Agreement, if such attorney-in-law or certified public accountant was selected by the Trustee with due care. The Trustee shall not be concerned with or accountable to anyone for the subsequent use or application of any moneys which shall be released or withdrawn in accordance with the provisions hereof. DOC'SSFI:308375.7 49 Whether or not therein expressly so provided, every provision of this Trust Agreement, the Facility Lease or related documents relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Article. The Trustee makes no representation or warranty, express or implied, as to the title, value, design, compliance with specifications or legal requirements, quality, durability, operation, condition, merchantability or fitness for any particular purpose for the use contemplated by the Authority or County of the Facilities or the Project. In no event shall the Trustee be liable for incidental, indirect, special or consequential damages in connection with or arising from the Facility Lease or this Trust Agreement for the existence, furnishing or use of the Facilities or the Project. The Trustee shall be protected in acting upon any notice, resolution, requisition, request (including any Written Request of the Authority or the County), consent, order, certificate, report, opinion, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. Before the Trustee acts or refrains from acting, the Trustee may consult with counsel, who may be counsel of or to the Authority, with regard to legal questions, and the opinion of such counsel shall be fall and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. Whenever in the administration of its rights and obligations hereunder the Trustee shall deem it necessary or desirable that a matter be established or proved prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed)may, in the absence of bad faith on the part of the Trustee, be deemed to be conclusively proved and established by a Certificate of the Authority, which certificate shall be full warrant to the Trustee for any action taken or suffered under the provisions hereof upon the faith thereof, but in its discretion the Trustee may in lieu thereof accept other evidence of such matter or may require such additional evidence as it may deem reasonable. No provision of this Trust Agreement shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance or exercise of any of its duties hereunder, or in the exercise of its rights or powers. In determining whether the rights of the Bondholders will be adversely affected by any action taken pursuant to the terms and provisions of this Trust Agreement, the Trustee shall consider the effect on the Bondholders as if there were no Bond Insurance Policy, unless the Bond Insurer consents to such action. SECTION 8.03. Comnensation and Indemnification of jnrlstee. The Authority covenants to pay (but solely from Additional Payments) to the Trustee from time to time, and the Trustee shall be entitled to, compensation upon the terms set forth in Exhibit B hereto for all services rendered by it in the exercise and performance of any of the powers and duties hereunder of the Trustee, and the Authority will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee, in accordance with any of the provisions of this Trust Agreement (including the reasonable compensation and the reasonable expenses and disbursements of their counsel (including the DOCSSFI:308375.7 50 allocated reasonable fees and disbursements of in-house counsel) and of all persons not regularly in their employ) except any such expense, disbursement or advance as may arise from their negligence or willful misconduct. The Authority, to the extent permitted by law, shall indemnify, defend and hold harmless the Trustee against any loss, damage, liability or expense incurred without negligence or willful misconduct on the part of the Trustee arising out of or in connection with the acceptance or administration of the trusts created hereby, including reasonable costs and expenses (including reasonable attorneys' fees and disbursements) of defending itself against or investigating any claim or liability in connection with the exercise or performance of any of its powers hereunder. The rights of the Trustee and the obligations of the Authority under this Section 8.03 shall survive the discharge of the Bonds and this Trust Agreement and the resignation or removal of the Trustee. SECTION 8.04. Compliance with Continuing Disclosure Agreement. Pursuant to Section 8.08 of the Facility Lease, the County has undertaken all responsibility for compliance with continuing disclosure requirements, and the Authority shall have no liability to the Owners of the Bonds or any other person with respect to S.E.C. Rule 15c2-12. The County has agreed that so long as it shall act as the Dissemination Agent under the Continuing Disclosure Agreement, it will perform all of the provisions thereof to be performed by the Dissemination Agent. Notwithstanding any other provision of this Trust Agreement, failure of the County to co inply with the Continuing Disclosure Agreement shall not be considered an Event of Default; however, any Bondholder or Beneficial Owner may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the County to comply with its obligations under Section 8.08 of the Facility Lease or under this Section 8.04. For purposes of this Section, "Beneficial Owner" means any person which has or shares the power, directly or indirectly, to make investment decisions concerning ownership of any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries)." ARTICLE IX AMENDMENT OF THE TRUST AGREEMENT SECTION 9.01. Amendment-of tht _ E -Iru§t Agreement. . (a) This Trust Agreement and the rights and obligations of the Authority and of the Bondholders may be amended at any time by a Supplemental Trust Agreement which shall become binding when the written consents of the Bond Insurers and the Bondholders of a majority in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in Section 9.02, are filed with the Trustee; provided. that if such modification or amendment will, by its terms, not take effect so long as any Bonds of any particular maturity or Series remain Outstanding, the consent of the Owners of such Bonds shall not be required and such Bonds shall not be deemed to be Outstanding for the purpose of any calculation of Bonds Outstanding under this Section. No such amendment shall (1) extend the maturity of or reduce the interest rate on or amount of interest on or principal of or redemption premium, if any, on any Bond without the express written consent of the applicable Bond Insurer and the Bondholder of such Bond, or(2) permit the creation by the Authority of any pledge of or charge or lien upon the Revenues as provided herein superior to or on a parity with the pledge, DDC SSF1:308375.7 51 charge and lien created hereby for the benefit of the Bonds and Swaps, or (3) reduce the percentage of Bonds required for the written consent to any such amendment, or (4) modify any rights or obligations of the Trustee, the Authority, or the County without their prior written assent thereto, respectively. It shall not be necessary for the consent of the Bondholders to approve the particular form of any Supplemental Trust Agreement, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Authority and the Trustee of any Supplemental Trust Agreement pursuant to this subsection(a), the Trustee shall mail a notice on behalf of the Authority, setting forth in general terms the substance of such Supplemental Trust Agreement to the Bondholders at the addresses shown on the registration books maintained by the Trustee. Any failure to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplemental Trust Agreement. (b) The Trust Agreement and the rights and obligations of the Authority and of the Bondholders may also be amended at any time by a Supplemental Trust Agreement which shall become binding upon adoption, with the consent of each Bond Insurer, but without the consent of any Bondholders, for any purpose that will not materially adversely affect the interests of the Bondholders, including (without limitation) for any one or more of the following purposes -- (i) to add to the agreements and covenants required herein to be performed by the Authority other agreements and covenants thereafter to be performed by the Authority, or to surrender any right or power reserved herein to or conferred herein on the Authority; (ii) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained herein or in regard to questions arising hereunder which the Authority may deem desirable or necessary; (iii) to provide for the issuance of any Additional Bonds and to provide the terms of such Additional Bonds, subject to the conditions and upon compliance with the procedure set forth in Article III (which shall be deemed not to adversely affect Bondholders); (iv) to add to the agreements and covenants required herein, such agreements and covenants as may be necessary to qualify the Trust Agreement under the Trust Indenture Act of 1939; or (v) to add any provisions required by the provider of a surety bond, insurance policy or letter of credit under Section 5.03(4). Any Supplemental Trust Agreement entered into pursuant to this paragraph shall not, for purposes of this paragraph, materially adversely affect the interest of the Bondholders so long as (w) all Bonds are insured by a Bond Insurance Policy or are Variable Rate Bonds, (x) each Bond Insurer shall have given its written consent to such Supplemental Trust Agreement, (y) each Bond Insurer shall at the time of such consent be rated in the highest Rating Category by S&P and Moody's and (z) if there are Variable Rate Bonds, the Supplemental Trust Agreement shall DoCssF 1:308375.7 52 not become effective until notice thereof shall have been given to Bondholders and thirty (30) days shall have passed during which time Owners of the Variable Rate Bonds shall have had the opportunity to tender their Bonds for purchase. SECTION 9.02. Disqualified Bonds. Bonds owned or held by or for the account of the Authority shall not be deemed Outstanding for the purpose of any consent or other action or any calculation of Outstanding Bonds provided in this Article, and shall not be entitled to consent to or take any other action provided in this Article. SECTION 9.03. Endorsement or Rgplacement of Bonds After Amendment. After the effective date of any action taken as hereinabove provided, the Authority may determine that the Bonds may bear a notation by endorsement in form approved by the Authority as to such action, and in that case upon demand of the Bondholder of any Outstanding Bonds and presentation of his Bond for such purpose at the office of the Trustee a suitable notation as to such action shall be made on such Bond. If the Authority shall so determine, new Bonds so modified as, in the opinion of the Authority, shall be necessary to conform to such action shall be prepared and executed, and in that case upon demand of the Bondholder of any Outstanding Bond a new Bond or Bonds shall be exchanged at the office of the Trustee without cost to each Bondholder for its Bond or Bonds then Outstanding upon surrender of such Outstanding Bonds. SECTION 9.04. Amendment by Mutual Consent. The provisions of this Article shall not prevent any Bondholder, with the consent of the applicable Bond Insurer from accepting any amendment as to the particular Bonds held by him, provided that due notation thereof is made on such Bonds. ARTICLE X DEFEASANCE SECTION 10.01. Discharge of Bonds. (a) If the Authority shall pay or cause to be paid or there shall otherwise be paid to the Bondholders of all Outstanding Bonds the interest thereon and principal thereof and redemption premiums, if any, thereon at the times and in the manner stipulated herein and therein, and the Authority shall pay in full all other amounts due hereunder and under the Facility Lease, then the Bondholders of such Bonds shall cease to be entitled to the pledge of and charge and lien upon the Revenues as provided herein, and all agreements, covenants and other obligations of the Authority to the Bondholders of such Bonds hereunder shall thereupon cease, terminate and become void and be discharged and satisfied. In such event, the Trustee shall execute and deliver to the Authority all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, the Trustee shall pay over or deliver to the Authority all money or securities held by it pursuant hereto which are not required for the payment of the interest on and principal of and redemption premiums, if any,on such Bonds and for the payment of all other amounts due hereunder and under the Facility Lease. (b) Any Outstanding Bonds shall prior to the maturity date or redemption date thereof be deemed to have been paid within the meaning of and with the effect expressed in OC'SSF1:308375.7 53 subsection (a) of this Section if(1) in case any of such Bonds are to be redeemed on any date prior to their maturity date,the Authority shall have given to the Trustee in form satisfactory to it irrevocable instructions to provide notice in accordance with Section 4,05, (2) there shall have been deposited with the Trustee (A) money in an amount which shall be sufficient and/or (B) noncallable Government Securities, the interest on and principal of which when paid will provide money which, together with the money, if any, deposited with the Trustee at the same time, shall be sufficient, in the opinion of an Independent Certified Public Accountant, to pay when due the interest to become due on such Bonds on and prior to the maturity date or redemption date thereof, as the case may be, and the principal of and redemption premiums, if any, on such Bonds, and (3) in the event such Bonds are not by their terms subject to redemption within the next succeeding sixty (60) days, the Authority shall have given the Trustee in form satisfactory to it irrevocable instructions to mail as soon as practicable, a notice to the Bondholders of such Bonds that the deposit required by clause (2) above has been made with the Trustee and that such Bonds are deemed to have been paid in accordance with this Section and stating the maturity date or redemption date upon which money is to be available for the payment of the principal of and redemption premiums, if any, on such Bonds. (c) In the event of an advance refunding (i) the Authority shall cause to be delivered, on the deposit date and upon any reinvestment of the defeasance amount, a report of an independent firm of nationally recognized certified public accountants ("Accountants") verifying the sufficiency of the escrow established to pay the Bonds in full on the maturity date or redemption date (`Verification"), (ii) the escrow agreement shall provide that no (A) substitution of a defeasance obligation shall be permitted except with another defeasance obligation and upon delivery of a new Verification and (B) reinvestment of a defeasance obligation shall be permitted except as contemplated by the original Verification or upon delivery of a new Verification, and (iii) there shall be delivered an Opinion of Bond Counsel to the effect that the Bonds are no longer "Outstanding" under the Trust Agreement; each Verification and defeasance opinion shall be addressed to the Authority, each applicable Bond Insurer and. the Trustee. In the event a forward purchase agreement is to be used in connection with such escrow such agreement shall be subject to the approval of each Bond insurer. (d) Notwithstanding anything herein to the contrary, in the event that the principal anchor interest due on the Bonds shall be paid by a Bond insurer pursuant to its Bond Insurance Policy, the Bonds shall remain Outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid by the Authority, and the assignment and pledge of the Revenues and all covenants, agreements and other obligations of the Authority to the Owners shall continue to exist and shall run to the benefit of the Bond Insurer, and the Bond Insurer shall be subrogated to the rights of such Owners. SECTION 10.02. Unclaimed Money. Anything contained herein to the contrary notwithstanding, any money held by the Trustee in trust for the payment and discharge of any of the Bonds or interest thereon which remains unclaimed for two(2)years aver the date when such Bonds or interest thereon have become due and payable, either at their stated maturity dates or by call for redemption prior to maturity, if such money was held by the Trustee at such date, or for two (2) years after the date of deposit of such money if deposited with the Trustee after the date when such Bonds have become due and payable, shall be repaid by the Trustee to the Authority as its absolute property free from trust, and the Trustee and the applicable Bond D0C-'SSF 1:308375.7 54 Insurers shall thereupon be released and discharged with respect thereto and the Bondholders shall not look to the 'Trustee or the applicable Bond Insurer for the payment of such Bonds; provided, however, that before being required to make any such payment to the Authority, the Trustee may, and at the request of the Authority shall, at the expense of the Authority, cause to be published once a week for two (2) successive weeks in a Financial Newspaper of general circulation in Los Angeles and in San Francisco, California, and in the same or a similar Financial Newspaper of general circulation in New York, New York, a notice that such money remains unclaimed and that, after a date named in such notice, which date shall not be less than thirty (30) days after the date of the first publication of each such notice, the balance of such money then unclaimed will be returned to the Authority. ARTICLE XI MUNICIPAL BOND INSURANCE; 1999 RESERVE FACILITY SECTION 11.01. Concerniinthe 1999 Series A Bond Insurer. Notwithstanding any other provision hereof; so long as the Bond Insurance Policy shall be in full force and effect, the Authority and the Trustee hereby agree to comply with the following provisions: (a) The 1999 Series A Bond Insurer shall be deemed to be the sole Owner of the Insured 1999 Series A Bonds for the purpose of exercising any voting right or privilege or giving any consent or direction or taping any other action that the Owners of the Insured 1999 Series A Bonds are entitled to take pursuant to Article VII and Article VIII hereof: The 1999 Series A Bond Insurer shall have the exclusive right to initiate or direct proceedings upon an Event of Default and shall be entitled to request the Trustee to intervene in judicial proceedings that affect the Insured 1999 Series A Bonds or the security therefor; provided that the Trustee shall have the right in its sole discretion to commence an action to enforce the payment of its fees and expenses hereunder. Bondholder's direction or institution of remedies upon an Event of Default shall be subject to the prior written consent of the 1999 Series A Bond Insurer. (b) Copies of any modification or amendment to the Trust Agreement or the Facility Lease, shall be sent by the Authority to the Bond Insurer, S&P and Moody's at least ten (10) days prior to the effective date thereof. (c) The 1999 Series A Bond Insurer shall, to the extent it makes any payment of principal of or interest on the Insured 1999 Series A Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Bond Insurance Policy. (d) The 1999 Serres A Bond Insurer shall have the right to advance any payment required to be made by the County or the Authority in order to prevent an Event of Default under the Trust Agreement and the Trustee shall be required to accept such advance. The Authority shall be required to reimburse the 1999 Series A Bond Insurer for any such advance. (e) The rights granted under the Trust Agreement and the Facility Lease to the 1999 Series A Bond Insurer to request, consent to or direct any action are rights granted to the 1999 Series A Bond Insurer in consideration of its issuance of the Bond Insurance Policy. Any DOC'SSFI:308375.7 55 exercise by the 1999 Series A Bond Insurer of such rights is merely an exercise of the 1999 Series A Bond Insurer's contractual rights and shall not be construed or deemed to be taken for the benefit or on behalf of the 1999 Series A Bondowners, nor does such action evidence any position of the 1999 Series A Bond Insurer, positive or negative, as to whether 1999 Series A Bondowners' consent is required in addition to consent of the 1999 Series A Bond Insurer. (f) Amounts paid by the 1999 Series A Bond Insurer under the Bond Insurance Policy shall not be deemed paid for purposes of the Trust Agreement and the Insured 1999 Series A Bonds relating to such amounts shall remain Outstanding and continue to be due and owing until paid in accordance with the Trust Agreement. The Trust Agreement shall not be discharged unless all amounts due or to become due to the 1999 Series A Bond Insurer have been paid in ull. (g) The 1999 Series A Bond Insurer shall be provided by the Authority or the Trustee (with respect to items (i)to (iv) only) with the following information: (i) Notice of any draw upon, or deficiency due to market fluctuation in the amount on deposit in, the Reserve Fund within two Business bays after knowledge thereof other than(i)withdrawals of amounts in excess of the Reserve Fund Requirement and(ii)withdrawals in connection with a refunding of Insured 1999 Series A Bonds; (ii) Notice of any failure of the Authority to make any required deposit into the revenue Fund within two Business Days of knowledge thereof; notice of any other Event of Default known to the Trustee within five Business Days after knowledge thereof; (iii) Prior notice of the advance refunding or redemption of any of the Insured 1999 Series A Bonds, including the principal amount, maturities and CUSIP numbers thereof; (iv) Notice of the resignation or removal of the Trustee and the appointment of, and acceptance of duties by, any successor thereto; (v) A full original transcript of all proceedings relating to the execution of any amendment or supplement to the Trust Agreement; (vi) All reports, notices and correspondence to be delivered under the terms of the Trust Agreement and, on an annual basis, copies of the audited financial statements and annual budget of the Authority; and (vii) If the Trustee has notice that any Bondholder has been required to disgorge payments of principal or interest on the Insured 1999 Series A Bonds to a trustee in bankruptcy or creditors or others pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such. Bondholder within the meaning of any applicable bankruptcy laws, then the"Trustee shall notify the 1999 Series A Bond Insurer or its designee of such fact by telephone or telegraphic notice,confirmed in writing by registered or certified mail. r)OCSSF1:308315.7 56 (viii) Such additional information as the 1999 Series A Bond Insurer from time to time may reasonably request. (h) The 1999 Series A Bond Insurer shall have the right to give notice of an Event of Default. SECTION' 11.02. Payments -Under , theBond Insurance Policy. Notwithstanding any other provision hereof, so long as the Bond Insurance Policy shall be in full force and effect, the Authority and the Trustee hereby agree to comply with the following provisions: (a) If, on the second Business Day, and again on the Business Day, prior to the interest payment date or principal payment date or the date to which Bond maturity has been accelerated ("Payment Date") there is not on deposit with the Trustee, after making all transfers and deposits required under the Trust Agreement, moneys sufficient to pay the principal of and interest on the 1999 Series A Bonds due on such Payment Date, the Trustee shall give notice to the 1999 Series A Band Insurer and to the Insurance Paying Agent by telephone or telegraph., confirmed in writing by registered or certified marl, of the amount of such deficiency on such Business Day, If such deficiency is made up in whole or in part prior to or on the Payment Date, the Trustee shall so notify the Bond Insurer and the Insurance Paying Agent. If, on the Business Day prior to the related Payment Date, there continues to be a deficiency in the amount available to pay the principal of and interest on the 1999 Series A Bonds due on such Payment Date, the Trustee shall make a claim under the Bond Insurance Policy and give notice to the 1999 Series A Bond Insurer and the Insurance Paying Agent (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency. (b) The Trustee is hereby irrevocably designated, appointed, directed and authorized to act as attorney-in-fact for Bondholders as follows. (i) If and to the extent there is a deficiency in amounts required to pay interest on the Insured 1999 Series A Bonds, the Trustee shall (a) execute and deliver to State Street Bank and Trust Company, N.A., or its successors under the Bond Insurance Policy (the "Insurance Paying Agent"), in form satisfactory to the Insurance Paying Agent, an instrument appointing the Band Insurer as agent for such Bondholders in any legal proceeding related to the payment of such interest and an assignee to the Bond Insurer of the claims for interest to which such deficiency relates and which are paid by the Bond Insurer, (b)receive as designee of the respective Bondholders (and not as Trustee) in accordance with the tenor of the Bond Insurance Policy payment from the Insurance Paying Agent with respect to the claims for interest so assigned, and (c) disburse the same to such respective Bondholders, and (ii) If and to the extent of a deficiency in amounts required to pay principal of the Insured 1999 Series A Bonds, the Trustee shall (a) execute and deliver to the Insurance Paying Agent in form satisfactory to the Insurance Paying Agent an instrument appointing the Bond Insurer as agent for such Bondholders in any legal proceeding relating to the payment of such principal and an assignment to the Bond Insurer of any of the Insured 1999 Series A Bonds surrendered to the Insurance Paying DOCS SF?:308375.7 57 Agent or so much of the principal amount thereof as has not previously been paid or for which moneys are not held by the Trustee and available for such payment (but such assignment shall be delivered only if payment from the Insurance Paying Agent is received), (b) receive as designee of the respective Bondholders (and not as Trustee) in accordance with the tenor of the Bond Insurance Policy payment therefor from the Insurance Paying Agent, and (c) disburse the same to such Bondholders. (c) The Trustee shall keep a complete and accurate record of all funds deposited by the 1999 Series A Bond Insurer and Insurance Paying Agent and the allocation of such funds to payment of interest and principal in respect of any Insured 1999 Series A Bonds. The 1999 Series A Bond Insurer shall have the right to inspect such records at reasonable times upon one Business Day's prior notice to the Trustee. (d) Rights of the 1999 Series A Bond Insurer to direct or consent to actions under the Trust Agreement or the Facility Lease shall be suspended during any period in which the 1999 Series A Bond Insurer is in default in its payment obligations under the Bond Insurance Policy (except to the extent of amounts previously paid by the 1999 Series A Bond Insurer and due and owing to the 1999 Series A Bond Insurer) and shall be of no force or effect in the event the Bond Insurance Policy is no longer in effect or the 1999 Series A Bond Insurer asserts that the Bond Insurance Policy is not in effect. SECTION 11.03. Provisions Relating to 1999 Deserve Facility. (A) In the event it is necessary to draw on the 1999 Reserve Facility to pay the principal of or interest on the 1999 Series A Bonds, the Trustee shall deliver a Demand for Payment (in the form attached to the 1999 Reserve Facility) at least three days prior to the date on which funds will be required to make such payment. (B) The Trustee shall pay to the 1999 Reserve Facility Provider the amount necessary to pay all accrued and unpaid interest on amounts drawn under the 1999 Reserve Facility from Revenues. (C) Before the Trust Agreement can be discharged and terminated under Section 10.01, the 1999 Reserve Facility Provider must be paid all amounts owed to it under the terms of the Financial Guaranty Agreement. (D) The Trustee shall be responsible for maintaining adequate records, verified with the 1999 Reserve Facility Provider, as to the amount available to be drawn at any given time 'under the 1999 Reserve Facility and as to the amounts paid and owing to the 1999 Reserve Facility Provider under the terms of the Financial Guaranty Agreement. (E) The 1999 Series A Bonds may not be redeemed pursuant to Section 4.02 unless all amounts owed to the 1999 Reserve Facility Provider under the terms of the Financial Guaranty Agreement have been paid in full. oCssF1;308375.7 58 ARTICLE XII MISCELLANEOUS SECTION 12.01. Liability of Authority Limited to Revenues. Notwithstanding anything contained herein,.the Authority shall not be required to advance any money derived from any source other than the Revenues as provided herein for the payment of the interest on or principal of or redemption premiums, if any, on the Bonds or for the performance of any agreements or covenants herein contained. The Authority may, however, advance funds for any such purpose so long as such funds are derived from a source legally available for such purpose. The Bonds are limited obligations of the Authority and are payable, as to interest thereon, principal thereof and any premiums upon the redemption of any thereof, solely from.the Revenues as provided herein, and the Authority is not obligated to pay them except from the Revenues. All the Bonds are equally secured by a pledge of and charge and lien upon the Revenues, and the Revenues constitute a trust fund for the security and payment of the interest on and principal of and redemption premiums, if any, on the Bonds as provided herein. The Bonds are not a debt of the County, the State or any of its political subdivisions, and neither the County, the State nor any of its political subdivisions is liable thereon, nor in any event shall the Bonds be payable out of any funds or properties other than those of the Authority as provided herein. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory limitation or restriction. SECTION 12.02. Benefits of this Trust A erent Limited to PartiesZ Bond Insurer and Third Partv Beneficiaries. Nothing contained herein, expressed or implied, is intended to give to any person other than the Authority, the Trustee, any Bond Insurer, and the Bondholders any right, remedy or claim under or by reason hereof. Any agreement or covenant required herein to be performed by or on behalf of the Authority or any member, officer or employee thereof shall be for the sole and exclusive benefit of the Authority, the Trustee, any Bond Insurer, and the Bondholders. To the extent that the Trust Agreement confers upon or gives or grants to any Bond Insurer any right, remedy or claim under or by reason of the Trust Agreement, such Bond Insurer is hereby explicitly recognized as being a third-party beneficiary Hereunder and may enforce any such right remedy or claim conferred, given or granted hereunder. SECTION? 12.03. Successor Is Deemed Included In A'l References To Predecessor. Whenever herein either the Authority or any member, officer or employee thereof or of the State is named or referred to, such reference shall be deemed to include the successor to the powers, duties and functions with respect to the Project that are presently vested in the Authority or such member, officer or employee, and all agreements and covenants required hereby to be performed by or on behalf of the Authority or any member, officer or employee thereof shall bind and inure to the benefit of the respective successors thereof whether so expressed or not. SECTION 12.04. Execution of Documents by Bondholders. Any declaration, request or other instrument which is permitted or required herein to be executed by Bondholders DOC"SSF 1:308375.7 59 may be in one or more instruments of similar tenor and may be executed by Bondholders in person or by their attorneys appointed in writing. The fact and date of the execution by any Bondholder or his attorney of any declaration, request or other instrument or of any writing appointing such attorney may be proved by the certificate of any notary public or other officer authorized to make acknowledgments of deeds to be recorded in the state or territory in which he purports to act that the person signing such declaration, request or other instrument or writing acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer. The ownership of any Bonds and the amount, maturity, number and date of holding the same may be proved by the registration books relating to the Bonds at the Principal Office of the Trustee. Any declaration, request, consent or other instrument or writing of the Bondholder of any Bond shall bind all future Bondholders of such Bond with respect to anything done or suffered to be done by the Trustee or the Authority in good faith and in accordance therewith. SECTION 12.05. Waiver of Personal Liability. No member, officer or employee of the Authority or the County shall be individually or personally liable for the payment of the interest on or principal of or redemption premiums, if any, on the Bonds by reason of their issuance, but nothing herein contained shall relieve any such member, officer or employee from the performance of any official duty provided by the Act or any other applicable provisions of law or hereby. SECTION 12.06. Acquion of Bonds by Authority. All Bonds acquired by the Authority, whether by purchase or gift or otherwise, shall be surrendered to the Trustee for cancellation. SECTION 12.07. Destruction of Cancelled Bonds. Whenever provision is made for the return to the Authority of any Bonds which have been cancelled pursuant to the provisions hereof, the Authority may,by a Written Request of the Authority, direct the Trustee to destroy such Bonds and furnish to the Authority a certificate of such destruction. SECTION 12.08. Content of Certificates. Every Certificate of the Authority with respect to compliance with any agreement, condition, covenant or provision provided herein shall include (a) a statement that the person or persons making or giving such certificate have read such agreement, condition, covenant or provision and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements contained in such certificate are based; (c) a statement that, in the opinion of the signers, they have made or caused to be made such examination or investigation as is necessary to enable there to express an informed opinion as to whether or not such agreement, condition, covenant or provision has been complied with, and (d) a statement as to whether, in the opinion of the signers, such agreement, condition,covenant or provision has been complied with. Any Certificate of the Authority may be based, insofar as it relates to legal :natters, upon an Opinion of Counsel unless the person making or giving such certificate knows that the Opinion of Counsel with respect to the matters upon which his certificate may be based, as aforesaid, is erroneous, or in the exercise of reasonable care should have known that the same DOC'SSF t:308375.7 60 was erroneous. Any (pinion of Counsel may be based, insofar as it relates to factual matters pnformation with respect to which is in the possession of the Authority, upon a representation by an officer or officers of the Authority unless the counsel executing such Opinion of Counsel knows that the representation with respect to the matters upon which his opinion may be based, as aforesaid., is erroneous, or in the exercise of reasonable care should have known that the same was erroneous. SECTION 12.09. Publication for uccessive Weeks. Any publication required to be made hereunder for successive weeks in a Financial Newspaper may be made in each instance upon any Business Day of the first week and need not be made on the same Business Day of any succeeding week or in the same Financial Newspaper for any subsequent publication, but may be made on different Business Days or in different Financial Newspapers, as the case may be. SECTION 12.10. Accounts and Funds. Any account or fund required herein to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee either as an account or a fund, and may, for the purposes of such accounting records, any audits thereof and any reports or statements with respect thereto, be treated either as an account or a fund; but all such records with respect to all such accounts and funds shall at all times be maintained in accordance with corporate trust industry standards and with due regard for the protection of the security of the Bonds and the rights of the Bondholders. SECTION 12.11. Business Day. When any action is provided for herein to be done on a day named or within a specified time period, and the day or the last day of the period falls can a day which is not a Business flay, such action may be performed on the next ensuing Business Day with the same effect as though performed on the appointed day or within the specified period. SECTION' 12.12. Notices: Notices to R_ating,Agencies. All written notices to be given hereunder shall be given by mail to the party entitled thereto and to the Bond Insurer at the addresses set forth below, or at such other addresses as such parties may provide to the other party in writing from time to time,namely: If to the Authority: County of Contra Costa Public Financing Authority c/o County Administrator County of Contra Costa County Administration Building 651 Pine Street Martinez,California 94553 If to the Trustee: U.S. Bank Trust National Association 550 South Hope Street, Suite 500 Los Angeles, California 90017 DOC'SSF i:30-9375.7 61 If to the County; County of Centra Costa c/o Cleric of the Board of Supervisors County of Contra Costa County Administration Building 651 Pine Street Martinez, California 94553 If to the Series 1999 Bond Insurer: MBIA Insurance Corporation 600 Montgomery Street San Francisco, California 94111 Attn: Insured Portfolio Management Department The Trustee shall give written notice to Moody's and S&P of the redemption or defeasance of any Bonds, the amendment of the Facility Lease or Trust Agreement, any change in the Trustee, and the deposit of a surety bond, insurance policy, or letter of credit in the Reserve Fund in accordance herewith. SECTION 12.13. Article and Section Headings and References. The headings or titles of the several articles and sections hereof and the table of contents appended hereto shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof. All references herein to "Articles,""Sections" and other subdivisions or clauses are to the corresponding articles, sections, subdivisions or clauses hereof, and the words "hereby... •`herein... "hereof.. "hereto," "herewith," •`hereunder" and other words of similar import refer to this 'frust Agreement as a whole and not to any particular article, section, subdivision or clause hereof. SECTION 12.14. Partial Invalidity. If any one or more of the agreements or covenants or portions thereof required hereby to be performed by or on the part of the Authority or the Trustee shall be contrary to law, then such agreement or agreements, such covenant or covenants or such portions thereof shall be null and void and shall be deemed separable from the remaining agreements and covenants or portions thereof and shall in no way affect the validity hereof or of the Bonds, and the Bondholders shall retain all the benefit, protection and security afforded to them under the Act or any other applicable provisions of law. The Authority and the Trustee hereby declare that they would have executed and delivered this Trust Agreement and each and every Cather article, section, paragraph, subdivision, sentence, clause and phrase hereof and would have authorized the issuance of the Bonds pursuant hereto irrespective of the fact that any one or more articles, sections, paragraphs, subdivisions, sentences, clauses or phrases hereof or the application thereof to any person or circumstance may be held to be unconstitutional, unenforceable or invalid. SECTION 12.15. Caverning,Law. This Trust Agreement shall be governed exclusively by the provisions hereof and by the laws of the State as the same from time to time exist. SECTION 12.16. Execution in Several Count Marts. This Trust Agreement may be executed in any number of counterparts and each of such counterparts shall for all nOc'ssa;,:308375.7 62 purposes be deemed to be an original; and all such counterparts, or as many of them as the Authority and the Trustee shall preserve undestroyed, shall together constitute but one and the sante instrument, DOC'SSPi:308375,7 63 IN WITNESS WHEREOF, the COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY has caused this Trust Agreement to be signed in its name by its Chair, and U.S. BANK TRUST NATIONAL ASSOCIATION, in token of its acceptance of the trusts created hereunder, has caused this Trust Agreement to be signed by one of the officers thereunder duly authorized, all as of the day and year first above written. COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY By: Chair Attest: Philip J. Batchelor, Executive Director and Secretary By: Director, Capital Facilities and Debt Management, County of Contra Costa U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee By: Authorized Officer Acknowledged: COUNTY OF CONTRA COSTA By: Chair of the Board of Supervisors County of Contra Costa, State of California DOCSSF1:308375.7 64 EXHIBIT A [FORM OF 1999 SERIES A BOND! No. COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY LEASE REVENUE BONDS (REFUNDING AND VARIOUS CAPITAL PROJECTS), 1999 SERIES A NEITHER THE FULL FAITH AND CREDIT OF THE AUTHORITY NOR THE COUNTY OF CONTRA COSTA IS PLEDGED FOR THE PAYMENT OF THE INTEREST ON OR PRINCIPAL OF THE BONDS AND NO TAX OR OTHER SOURCE OF FUNDS OTHER. THAN THE REVENUTS HEREINAFTER REFERRED TO IS PLEDGED TO PAY THE INTEREST ON OR PRINCIPAL OF THE BONDS. NEITHER THE PAYMENT OF THE PRINCIPAL OF NOR INTEREST ON THE BONDS CONSTITUTES A DEBT, LIABILITY OR OBLIGATION OF THE COUNTY OF CONTRA COSTA OR THE CON'TR.A. COSTA COUNTY REDEVELOPMENT AGENCY, THE PARTIES TO THE AGREEMENT CREATING THE AUTHORITY. Interest Maturity Dated Rate Date Date COSI /© June 1, February 1, 1999 21226P___ REGISTERED OWNER: CEDE & CO. PRINCIPAL SUM: DOLLARS The COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority, duly organized and validly existing under and pursuant to the laws of the State of California(the "Authority"), for value received, hereby promises to pay (but only out of the Revenues hereinafter referred to) to the registered owner identified above or registered assigns, on the maturity date specified above (subject to any right of prior redemption hereinafter provided for) the principal sum specified above, together with interest on such principal surra, from the interest payment date next preceding the date of authentication of this DOC CSF 1:308375.7 A-1 Bond (unless this Bond is registered as of an interest payment date or during the period from the fifteenth calendar day of the month preceding an interest payment date to such interest payment date, in which event it shall bear interest from such interest payment date, or unless this Bond is authenticated prior to May 15, 1999, in which event it shall bear interest from the Dated Date specified above) until the principal hereof shall have been paid at the interest rate per annum specified above, payable on June 1, 1999, and semiannually thereafter on each June 1 and December 1. Interest due on or before the maturity or prior redemption of this Bond shall be payable only by check mailed by first-class mail to the registered owner hereof; provided that upon the written request of a Bondholder of$1,000,000 or more in aggregate principal amount of Bonds of the Series of which this Bond is a part received by the Trustee (defined hereinafter) prior to the applicable record date, interest shall be paid by wire transfer in immediately available funds. The principal hereof is payable in lawful money of the United States of America upon presentation of this Bond at the principal office of the Trustee. This Bond is one of a duly authorized issue of bonds of the Authority designated as its "County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects)" (the "Bonds") unlimited as to principal amount and is one of a duly authorized series of such Bonds known as "1999 Series A" (the "1999 Series A Bonds") issued in an aggregate principal amount of $74,685,000, all of like tenor and date (except for such variations, if any, as may be required to designate varying numbers, maturities and interest rates), and is issued under and pursuant to the provisions of the Joint Exercise of Powers Act (being Chapter 5 of Division 7 of Title 1 of the California Government Code, as amended) and all laws amendatory thereof or supplemental thereto (the "Act") and under and pursuant to the provisions of a trust agreement, dated as of February 1, 1999 (as amended from time to time, the "Trust Agreement"), between the Authority and U.S. Bank Trust National Association, as trustee (together with any successor as trustee under the Trust Agreement, the "Trustee") (copies of the Trust Agreement are on file at the principal office of the Trustee in Los Angeles, California). The Bonds are issued to provide funds to refinance the acquisition, construction, improvement, equipping, remodeling and refinancing of certain public buildings and related facilities, located in the County of Contra Costa (as more fully defined in the Trust Agreement, the `Project"). The Bonds are limited obligations of the Authority and are payable, as to interest thereon and principal thereof, solely from certain proceeds of the Bonds held in certain funds and accounts pursuant to the Trust Agreement and the revenues (as more fully defined in the Trust Agreement, the "Revenues") derived from Base Rental Payments and other payments made by the County of Contra Costa (the "County„), and all interest or other investment income thereon, pursuant to the Facility Lease (Various Capital Projects), dated as of February 1, 1999 (as amended from time to time, the"Facility Lease"),by and between the Authority and the County, and the Authority is not obligated to pay the interest or premium,, if any, on and principal of the Bonds except from the Revenues. All Bands are equally and ratably secured in accordance with the terms and conditions of the Trust Agreement by a pledge and assignment of and charge and lien upon the Revenues, and the Revenues constitute a trust fund for the security and payment of the interest or premium, if any, on and principal of the Bonds as provided in the Trust Agreement. The full faith and credit of the Authority, the Contra Costa County Redevelopment Agency (the "Agency") and the County are not pledged for the payment of the interest or premium, if any, on or principal of the Bonds. No tax shall ever be levied to pay the interest on or principal of the Bunds. The Bonds are not secured by a legal or equitable pledge of or charge caOCSSP:308375.7 A-2 or lien upon any property of the Authority or any of its income or receipts except the Revenues, and neither the payment of the interest on nor principal (or premium, if any) of the Bonds is a debt, liability or general obligation of the Authority, the County or any member of the Authority for which such entity is obligated to levy or pledge any form of taxation. Additional bonds payable from the Revenues may be issued which will rank equally as to security with the Bonds, but only subject to the conditions and upon compliance with the procedures set forth in the Trust Agreement. Reference is hereby made to the Act and to the Trust Agreement and any and all amendments thereof and supplements thereto for a description of the terms on which the Bonds are issued, the provisions with regard to the nature and extent of the Revenues, the rights of the registered owners of the Bonds, security for payment of the Bonds, remedies upon default and limitations thereon, and amendment of the Trust Agreement (with or without consent of the registered owners of the Bonds); and all the terms of the Trust Agreement are hereby incorporated herein and constitute a contract between the Authority and the registered owner of this Bond, to all the provisions of which the registered owner of this Bond, by acceptance hereof, agrees and consents. The Bonds are subject to redemption by the Authority on any date prior to their respective stated maturities, upon notice as hereinafter provided, as a whole or in part by lot within each stated maturity in integral multiples of Authorized Denominations so that the aggregate annual principal amount of and interest on the Bonds which shall be payable after such redemption date shall be as nearly proportional as practicable to the aggregate annual principal amount of and interest on the Bonds Outstanding prior to such redemption date, from prepayments of Base Rental Payments made by the County from the proceeds received by the County due to a taking of the Facilities or portions thereof under the power of eminent domain and from the net proceeds of title insurance or insurance received for material damage or destruction to the Facilities or portions thereof received by the Authority from the County, all as provided in and under the circumstances and terms prescribed in the Facility Lease and the Trust Agreement, at the principal amount thereof plus interest accrued thereon to the date fixed for redemption,without premium. The 1999 Series A Bonds maturing on June 1, 2028, upon notice as provided in the Trust Agreement, shall also be subject to mandatory sinking fund redemption prior to maturity, in part on June 1 of each year on and after June 1,2020,by lot, from and in the amount of the mandatory sinking account payments set forth in the Trust Agreement at a redemption price -equal to the sura of the principal amount thereof plus accrued interest thereon to the redemption date,without premium. The 1999 Series A Bonds maturing on or prior to June 1, 2009, are not subject to optional redemption. The 1999 Series A Bonds maturing on or after June 1,2010, are subject to redemption prior to their respective stated maturities at the written direction of the Authority, from any moneys deposited by the Authority or the County, as a whole or in part on any date (in such maturities as are designated in writing by the Authority to the Trustee) on or after June 1, 2009, at the following redemption prices (expressed as percentages of the principal amount of 1999 Series A Bonds called for redemption), together with accrued interest to the date fixed for redemption. DOCSSFI:305375.7 A-3 Redemption Period dilates inclusive) Rgdemption price June 1, 2009 through May 31, 2010 101% June 1, 2010 through May 31, 2011 100.5 June 1, 2011 and thereafter 100 Notice of redemption of this Band shall be given by first-class mail not less than thirty (30) days nor more than sixty(60) days before the redemption date to the registered owner of any Bond selected for redemption, subject to and in accordance with provisions of the Trust Agreement with respect thereto. If notice of redemption has been duly given as aforesaid and money for the payment of the above-described redemption price is held by the Trustee, then this Bond shall, on the redemption date designated in such notice, become due and payable at the above-described redemption price; and from and after the date so designated, interest on this Bond shall cease to accrue and the registered owner of this Bond shall have no rights with. respect hereto except to receive payment of the redemption price hereof. If an Event of Default (as defined in the Trust Agreement) shall occur, the principal of all Bonds may be declared due and payable upon the conditions, in the manner and with the effect provided in the Trust Agreement. The Trust Agreement provides that in certain events such declaration and its consequences may be rescinded by the folders of not less than a majority in aggregate principal amount of the Bonds then outstanding or by the Trustee. This Bond is transferable only on a register to be kept for that purpose at the above-mentioned corporate trust office of the Trustee by the registered owner hereof in person or by the duly authorized attorney of such owner upon payment of the charges provided in the Trust Agreement and upon surrender of this Bond together with a written instrument of transfer satisfactory to the Trustee duly executed by the registered owner or the duly authorized attorney of such owner, and thereupon a new fully registered Bond or Bonds in the same aggregate principal amount in authorized denominations will be issued to the transferee in exchange therefor. The .Authority and the Trustee may deem and treat the registered owner hereof as the absolute owner hereof for the purpose of receiving payment of the interest hereon and principal hereof and for all other purposes, whether or not this Bond shall be overdue, and neither the Authority nor the Trustee shall be affected by any notice or knowledge to the contrary; and payment of the interest on and principal of this Bond shall be made only to such registered owner, which payments shall be valid and effectual to satisfy and discharge liability on this Bond to the extent of the sum or sums so paid. This Bond shall not be entitled to any benefit, protection or security under the Trust Agreement or become valid or obligatory for any purpose until the certificate of authentication hereon endorsed shall have been executed and dated by the Trustee, DOC'SSF?:308375,7 A-4 It is hereby certified and recited that all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by the Act, and by the Constitution and laws of the State of California, that the amount of this Bond, together with all other indebtedness of the Authority, does not exceed any limit prescribed by the Constitution or laws of the State of California and is not in excess of the amount of Bonds permitted to be issued under the Trust Agreement. IN WITNESS WHEREOF, the County of Contra Costa Public Financing Authority has caused this Bond to be executed in its name and on its behalf by the manual or facsimile signature of the Chair of the Authority and countersigned by the manual or facsimile signature of the Secretary of said Authority, and has caused this Bond to be dated as of the Dated Date specified above. COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY B Chair Countersigned: Secretary DOCSSFI:308375.7 A-5 L OF CERTIFICATE OF AUTHENTICATION TO APPEAR ON 1999 SERIES A BONDS] This is one of the Bonds described in the within-mentioned Toast Agreement which has been registered and authenticated on 31999. U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee By Authorized Signatory DOC'SSFI:308375.7 A-6 STATEMENT OF INSURANCE MBIA Insurance Corporation (the "Insurer") has issued a policy containing the following provisions, such policy being on file at U.S. Bank Trust National Association, as Trustee in Los Angeles, California, The Insurer, in consideration of the payment of the premium and subject to the terms of this policy, hereby unconditionally and irrevocably guarantees to any owner, as hereinafter defined, of the following described obligations, the full and complete payment required to be made by or on behalf of the County of Contra Costa Public Financing Authority (the `Issuer") to U.S. Bank Trust National Association or its successor (the "Paying Agent") of an amount equal to (i) the principal of(either at the stated maturity or by any advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Obligations (as that term is defined below) as such payments shall become due but shall not be so paid(except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed hereby shall be made in such amounts and at such times as such payments of principal would have been clue had there not been any such acceleration), and(ii)the reimbursement of any such payment which is subsequently recovered from any owner pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such owner within the :Weaning of any applicable bankruptcy law. The amounts referred to in clauses (i) and (ii) of the preceding sentence shall be referred to herein collectively as the "Insured Amounts." "Obligations" shall mean: $68,540,0€30 County of Contra Costa Public Financing Authority Lease:Revenue Bonds(Refunding and Various Capital Projects), 1999 Series A(maturing on or after June 1, 2002) Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by the Insurer from the Paying Agent or any owner of an Obligation the payment of an Insured Amount for which is then due, that such required payment has not been made, the Insurer on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with State Street Bank and Trust Company, N.A., in New "York, New York, or its successor, sufficient for the payment of any such Insured Amounts which are then due. Upon presentment and surrender of such Obligations or presentment of such other proof of ownership of the Obligations together with any appropriate instruments of assignment to evidence the assignment of the Insured Amounts due on the Obligations are paid by the Insurer, and appropriate instruments to effect the appointment of the Insurer as agent for such owners of the Obligations in any legal proceeding related to payment of Insured Amounts on the Obligations, such instruments being in a form satisfactory to State Street Bank and Trust Company, N.A., State Street Bank and Trust Company, N.A. shall disburse to such owners or the Paying Agent payment of the Insured Amounts due on such. Obligations, less any amount held by the Paying Agent for the payment of such Insured Amounts and legally available therefor. This policy does DOCSSF 1.308375.7 A-7 not insure against loss of any prepayment premium which may at any time be payable with respect to any Obligation. As used herein, the term "owner" shall mean the registered owner of any Obligation as indicated in the books maintained by the Paying Agent, the Issuer, or any designee of the Issuer for such purpose. The term owner shall not include the Issuer or any party whose agreement with the Issuer constitutes the underlying security for the Obligations. Any service of process on the Insurer may be made to the Insurer at its office located at 113 King Street, Armonk, New York 10504. This policy is non-cancelable for any reason. The premium on this policy is not refundable for any reason including the payment prior to maturity of the Obligations. In the event the Insurer were to become insolvent, any claims arising under a policy of financial guaranty insurance are excluded from coverage by the California Insurance Guaranty Association, established pursuant to Article 14.2 (commencing with Section 1063) of Chapter 1 of Part 2 of Division 1 of the California Insurance Code. MBIA INSURANCE CORPORATION DOCSsr 1:348375.7 A-8 [FORM OF ASSIGNMENT TO APPEAR ON 1999 SERIES A BONDS] For value received the undersigned hereby sells, assigns and transfers unto (Taxpayer Identification Number: ) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer the within bond on the books kept for registration thereof, with full power of substitution in the premises. NOTE: The signature to this Assignment must correspond with the name as written on the face of the Bond in every particular, without alteration or enlargement or any change whatever. Dated: PLEASE INSERT SOCIAL SECURITY NUMBER, TAXPAYER IDENTIFICATION NUMBER OR OTHER IDENTIFYING NUMBER OF ASSIGNEE: Signature Guaranteed: NOTE: Signature must be guaranteed by an eligible guarantor institution. DOf"SSF?:305375.7 A-9 EXH IT B Schedule of Trustee Fees DO 'SSF1.3D8375.7 B`1 OZ/08/99 MON 14:22 FAX 415 339 8945 CM DECRINIS ORRICK COLLINS X011 r-.rig,,C4 FEE SCHEDUL LE Trustee, Registrar and Paying Agent COUNTY OF CONTRA COSTA LEASE REVENUE BOND$, 1999 REFUNDING SERIES A (Various Capital Projects) .Approximately 561.7 Million Principal Amount I ACCF2TAXCE FEE: $1,000.110 This fm rovers the exarninati=by the Trustee of the governing instruments and all supporting docurnerstation, authentication of grids for delivery to DTC; set up of required records and accounts, Payable at CIosing IL TRU'STEE'S COUNSEL FEE (not to exceed): $1,500.00 Payable at Closing. III ESCROW AGENT SERVICES: 1988 Ceartificates of Participation Escrow(bine 1, 1999 call date) S 300.00 One time fie payable at Closing, N ^gyp NOTE: This fee will.be r�..a�ind if we are appointed as trustee for the refunding bonds. JV.V. ANS NVAL ADMIXISTRATION FEE: S2,O oxo This feat covers Ordinary Trustee Services, such a+nall=ance of records, ra=ipt and allocation of Revenues, oorrespondeace,and preparation and distribution of mondo acc«unmg statez Mets, , Also includes services as Reglst ar and Paying Agent for book entry only Bre. Payable annually in advance. V. ACTIVITY CHARGES (if applicable): Trades- Open MarkeVDirected, per transaction S 75.00 J,io ChaW for depolts to or withdrawal%ftm our voonoy xasrlw Mtual ttmd sweep vehicles. Disbursement of fbnds, each draw request $ 15.00 V1. OUT-OF-POCKET EXPENSES: At Cast 'M EXTRAORDINARY SERVICES AND EXPENSES: Reasonable fws attd expenses will be charged for Extraordinary Services not covered herein. November 12, 199$ rObank$ TOTAL P.02 OH&S DRAFT 2/11/99 Recording requested by and return to: COUNTY OF CONTRA COSTA c/o Orrick, Herrington& Sutcliffe LLP Old Federal Reserve Bank Building 400 Sansome Street San Francisco, California 94111 Attention; Mary A. Collins, Esq. MASTER SITE LEASE by and between the COUNTY OF CONTRA COSTA and the COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY Dated as of February 1, 1999 THIS TRANSACTION IS EXEMPT FROM FILING FEES PURSUANT TO CALIFORNIA GovERNMENT CODE SECTION 6103 AND TRANSFER TAXES PURSUANT TO CALIFORNIA R.EvENuE AND TAXATION CODE SECTION 11928 D0C'SSF I%108199,8 TABLE OF CONTENTS Page SECTION1. Demised Premises............................................................................................2 SECTION2. Term..............................................................................................„.......,.......... 2 SECTION3. Rental...............................................................................................................2 SECTION4. Purpose.............................................................................................................2 SECTION 5. Environmental Law and Regulations.............................. ......... ................. .... 3 SECTION 6. Environmental Compliance .............................................................................4 SECTION7. Owner in Fee.......,............................................................................................ 5 SECTION 8. Assignments and Subleases.............................................................................6 SECTION 9. Right of Entry; Easements............................................................................... 6 SECTION10. Termination...................................................................................................... 5 SECTION11. Default.............................................................................................................. 6 SECTION12. Quiet Enjoyment.............................................................................................. 7 SECTION 13. Waiver of Personal Liability............................ 7 SECTION14. Taxes................................................................................................................ 7 SECTION 15. Eminent Domain.............................................................................................. 8 SEC'T'ION 16. Partial Invalidity............................................................................................... 8 SECTION17. Notices........ ................................................................................................. 8 SECTION18. Section Headings ............................................................................................. 8 SECTION19. Amendment...................................................>.................................................. 8 SECTION20. Execution..............................>......,.............,................................,,................... 8 Exhibit A - Description of Facilities D0CSS r i:308198.8 _t- MASTER SITE LEASE This Master Site Lease, dated as of February 1, 1999 (this "Lease" or "Site Lease"), by and between the COUNTY OF CONTRA COSTA, a political subdivision organized and existing under and by virtue of the laws of the State of California (the "County"), as lessor, and the COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY, a public entity and agency, duly organized and existing pursuant to an Agreement entitled "Joint Exercise of Powers Agreement",by and between the County of Contra Costa and the Contra Costa County Redevelopment Agency(the"Authority"), as lessee; W1iNESSETH. WHEREAS, the County heretofore caused to be executed and delivered its 1988 Certificates of Participation for Consolidated Capital Projects, Equipment Acquisition Program and Countywide Integrated Telecommunications Network (the "1988 Certificates") in the aggregate ,principal amount of $61,690,000, pursuant to a Trust Agreement, dated as of July 1, 1988 (the "1988 Trust Agreement"), among the County, the Contra Costa County Public Facilities Corporation (the "Corporation") and U.S. Bank Trust National Association, as successor trustee (the "Prior Trustee") for the purpose of refinancing certain facilities for the County; WHEREAS, the County has determined that it is in its best interests to prepay the outstanding 1988 Certificates and to finance additional facilities for the County, WHEREAS, the County of Contra Costa Public Financing Authority (the "Authority") has agreed to issue $74,685,000 aggregate principal amount of its Lease Revenue Bonds (Refunding and Various Capital Projects), 1999 Series A (the "1999 Series A Bonds"), pursuant to a Trust Agreement, dated as of February 1, 1999 (the "Trust Agreement"), by and between the Authority and U.S. Bank Trust National Association, as trustee (the "Trustee"), for the purpose of prepaying the outstanding 1988 Certificates and financing additional facilities for the County; WHEREAS, the Authority will use the proceeds of the 1999 Series A Bonds and certain other funds to pay to the County the rental due hereunder for the Facilities (as hereinafter defined), and the County will use the proceeds of the 1999 Series A Bonds to prepay the 1988 Certificates and to make a deposit into the 1999 Project Fund; WHEREAS,the Authority will lease back the Facilities to the County pursuant to the Facility Lease(Various Capital Projects), dated as of February 1, 1999 (the"Facility Lease"), between the Authority, as lessor, and the County, as lessee(capitalized terms used herein and not otherwise defined herein have the meanings assigned thereto in the Facility Lease); and WHEREAS, under the Facility Lease, the County will be obligated to mare base rental payments to the Authority for the lease of the Facilities; NOW,THEREFORE, IT IS HEREBY MUTUALLY AGREED as follows: DOC:SSF l:368 6 98.8 SECTION 1. Demised Premises. The County hereby leases to the Authority and the Authority hereby hires from the County, on the terms and conditions hereinafter set forth, the real property situated in the County of Contra Costa, State of California, and described in Exhibit A attached hereto and made a part hereof(the "Facilities"), together with any additional real property added thereto by any supplement or amendment hereto, or any real property substituted for all or any portion of such property in accordance with this Lease and the Trust Agreement; subject, however, to any conditions, reservations, and easements of record or known to the County and the buildings and all other facilities located thereon. The site of the Facilities (exclusive of the buildings and improvements located thereon) is sometimes referred to herein as the"Demised Premises." SECTION 2. 'Perm The term of this Lease as to the Facilities shall commence on the date of recordation of this Lease in the office of the County Recorder of County of Contra Costa, State of California, or on May 1, 1999 whichever is earlier, and shall end on June 15, 2008, for the Social Services Building, June 15, 2016, for the Bray Courthouse, and June 15, 2028, for the West County Detention Facility, unless such term is extended or sooner terminated as hereinafter provided. If on such dates the Base Rental Payments attributable to the related Facility and all other amounts then due under the Facility Lease with respect to such ;Facility, including any Reserve Facility Costs, shall not be fully paid, or if the rental or other amounts payable under the Facility Lease with respect to such Facility shall have been abated at any time and for any reason, then the term of this Lease with respect to such Facility shall be extended until ten (10) days after the Base Rental Payments attributable to such Facility and all other amounts then due under the Facility Lease with respect to such Facility, including any Reserve Facility Costs, shall be fully paid, except that the terra of this Lease as to the respective Facilities shall in no event be extended beyond ten(10)years after such respective dates. If prior to such dates the Base Rental Payments attributable to the related Facility and all other amounts then due under the Facility Lease with respect to such Facility, including any Reserve Facility Costs, shall be fully paid, the terra of this Lease with respect to such Facility shall end ten (10) days thereafter or upon written Notice by the County to the Authority, whichever is earlier. SECTION 3. Rental The Authority shall pay to the County as and for rental hereunder an amount equal to the sura of the amount of the proceeds of the 1999 Series A Bonds to be deposited in the 1993 Project Fund and the amount of the proceeds of the 1999 Series A Bonds to be transferred to the Escrow Agent for deposit in the Escrow Fund pursuant to the Trust Agreement. SECTION 4. Pur case. The Authority shall use the Facilities solely for the purpose of leasing the Facilities to the County pursuant to the Facility Lease and for such purposes as may be incidental thereto; provided, that in the event of default by the County under the Facility Lease the Authority may exercise the remedies provided in the Facility Lease. D0CSSP1:308i98.8 2 SECTION 5. Environmental Law and Rejulations. (a) Definitions used in this Section 5 and in Section 6. "Asbestos Containing Materials" shall mean material in friable form containing more than one percent (1%) of the asbestiform varieties of (a) chrysotile (serpentine); (b) crocidolite (ricbeckite); (c) amosite (cummington-itegrinerite); (d) anthophyllite; (e) tremolite; and (f) antinolite. "Asbestos Operations and Maintenance Plan" shall mean that written plan for the Facilities relating to monitoring and maintaining all Asbestos Containing Materials used or located on the Demised Premises. "Environmental Regulations" shall mean all Laws and Regulations, now or hereafter in effect, with respect to Hazardous Materials, including, without limitation, the Comprehensive Environmental Response, Compensation, and. Liability Act, as amended (42 U.S.C. Section 9601, et se .) (together with the regulations promulgated thereunder, "CERCLA"), the Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 6901, et sem.) (together with the regulations promulgated thereunder, "RCRA"), the Emergency Planning and Community Right-to-Know Act, as amended (42 U.S.C. Section 1.1001, et sec.) (together with the regulations promulgated thereunder, ""Title 111"), the Clean Water Act, as amended (33 U.S.C. Section 1321, etsem.) (together with the regulations promulgated. thereunder, "CWA"), the Clean Air Act, as amended (42 U.S.C. Section 7401, et §,gq.) (together with the regulations promulgated thereunder, "CAA") and the Toxic Substances Control Act, as amended (15 U.S.C. Section 2601., et sea.) (together with the regulations promulgated thereunder, "TSCA"), and any state or local similar laws and regulations and any so-called local, state or federal"superfund"or"superlien"law. "Hazardous Materials" shall mean any material amount of flammable explosives, polychlorinated biphenyl compounds, heavy metals, chlorinated solvents, cyanide, radon, petroleum products, asbestos or any Asbestos Containing Materials, methane, radioactive materials, pollutants, hazardous materials, hazardous wastes, hazardous, toxic, or regulated substances or related materials, as defined in CERCLA, RCRA, CWA, CAA, TSCA and Title 111, and the regulations promulgated pursuant thereto, and in all other Environmental Regulations applicable to the County, any of the Demised Premises or the business operations conducted by the County thereon. "Laws and .Regulations" shall mean any applicable law, regulation, code, order, rule, judgment or consent agreement, including, without limitation, those relating to zoning, building, use and occupancy, fire safety, health, sanitation, air pollution, ecological matters, environmental protection, hazardous or toxic materials, substances or wastes, conservation, parking, architectural barriers to the handicapped, or restrictive covenants or other agreements affecting title to the Facilities or the Demised Premises (b) No portion of the Demised Premises is located in an area of high potential incidence of radon which has an unventilated basement or subsurface portion which is occupied DOCssFE:308198.8 3 or used for any purpose other than the foundation or support of the improvements to such Demised Premises. (c) The County has not received any notice from any insurance company which has issued a policy with respect to the Facilities or from the applicable state or local government agency responsible for insurance standards (or any other body exercising similar functions) requiring the performance of any repairs, alterations or other work, which repairs, alterations or other work have not been completed at the Facilities. The County has not received any notice of default or breach which has not been cured under any covenant, condition, restriction, right-of-way, reciprocal easement agreement or other easement affecting Demised Premises which is to be performed or complied with by it. SECTION 6. Environmental Com 1p fiance (a) ?Neither the County nor the Authority shall use or permit the remised Premises or any part thereof to be used to generate, manufacture, refine, treat, store, handle, transport or dispose of, transfer, produce or process Hazardous Materials, except, and only to the extent, if necessary to maintain the improvements on the Demised Premises and then, only in compliance with all Environmental Regulations, and any state equivalent laws and regulations, nor shall it permit, as a result of any intentional or unintentional act or omission on its part or by any tenant, subtenant, licensee, guest, invitee, contractor, employee and agent, the storage, transportation, disposal or use of Hazardous Materials or the pumping, spilling, leaking, disposing of, emptying, discharging or releasing(hereinafter collectively refered to as "Release") or threat of Release of Hazardous Materials on, from or beneath the Demised Premises or onto any other real property excluding, however, those Hazardous Materials in those amounts ordinarily found in the inventory of an office building, the use, storage, treatment, transportation and disposal of which shall be in compliance with all Environmental Regulations. Upon the occurrence of any Release or threat of Release of Hazardous Materials, the County shall promptly commence and perform, or cause to be commenced and performed promptly, without cost to the Trustee, the Authority or the Bond Insurer (as defined in the Trust Agreement), all investigations, studies, sampling and testing, and all remedial, removal and other actions necessary to clean up and remove all Hazardous Materials so Released, on, from or beneath. the Demised Premises, in compliance with all Environmental Regulations. Notwithstanding anything to the contrary contained herein, underground storage tanks shall only be permitted subject to coaripliance with subsection (d) and only to the extent necessary to maintain the improvements on the Demised Premises. (b) The County and the Authority shall comply with, and shall cause its tenants, subtenants, licensees, guests, invitees, contractors, employees and agents to comply with, all Environmental Regulations, and shall keep the Demised Premises free and clear of any liens imposed pursuant thereto (provided,however, that any such liens, if not discharged, may be bonded). The County and the Authority shall cause each tenant, and use its best efforts to cause all of such tenant's subtenants, agents, licensees, employees, contractors, guests and invitees and the guests and invitees of all of the foregoing to comply with all Environmental Regulations with respect to the Demised Premises, provided, however, that notwithstanding that a portion of this covenant is limited to the County and the Authority's use of its best efforts, the Authority and the DOCSSF 1:30819&8 4 County shall remain solely responsible for ensuring such compliance and such limitation shall not diminish or affect in any way the County and the Authority's obligations contained in subsection (c) hereof as provided in subsection (c) hereof. Upon receipt of any notice from any Person with regard to the Release of Hazardous Materials on, from or beneath the :Demised Premises, the County and the Authority shall give prompt written notice thereof to the Trustee and the Bond Insurer(and, in any event, prior to the expiration of any period in which to respond to such notice under any Environmental Regulation). (c) Irrespective of whether any representation or warranty contained in Section 5 is not true or correct, the County and the Authority shall, to the extent permitted by law, defend, indemnify and hold harmless the Trustee and the Bondholders and the Bond Insurer, its partners, depositors and each of its and their employees, agents, officers, directors, trustees, successors and assigns, from and against any claims, demands, penalties, fines, attorneys' fees (including, without limitation, attorneys' fees incurred to enforce the indemnification contained in this Section 6), consultants' fees, investigation and laboratory fees, liabilities, settlements (five (5) Business Days' prier notice of which, the Authority or the Trustee or the Bond Insurer, as appropriate, shall have delivered to the County and the Authority), court costs, damages, losses, costs or expenses of whatever kind or nature, known or unknown, contingent or otherwise, occurring in whole or in part, arising out of, or in any way related to, (i) the presence, disposal, Release, threat of Release, removal, discharge, storage or transportation of any Hazardous Materials on, from or beneath the Demised Premises, (ii) any personal injury (including wrongful death) or property damage (real or personal) arising;out of or related to such Hazardous Materials, (iii) any lawsuit brought or threatened, settlement reached (five (5) Business Days' prior notice of which the Authority or the Trustee or the Bond Insurer, as appropriate, shall have delivered to the County and the Authority), or governmental order relating to .Hazardous Materials on, from or beneath any of the Dernised Premises, (iv) any violation of Environmental Regulations or subsection (a) or (b) hereof by it or any of its agents, tenants, employees, contractors, licensees, guests, subtenants or invitees, and (v) the imposition of any governmental lien for the recovery of environmental cleanup or removal costs. To the extent that the Authority or the County is strictly liable under any Environmental Regulation, its obligation to the Trustee, Bondholders and the Bond Insurer and the other indemnitees under the foregoing indemnification shall likewise be without regard to fault on its part with respect to the violation of any Environmental Regulation which results in liability to any indemnitee. Its obligations and liabilities under this Section 6(c) shall survive any termination of the Facility Lease or exercise of any remedies thereunder, and the satisfaction of all Bonds. (d) The County and the Authority shall conform to and carry out a reasonable program of maintenance and inspection of all underground storage tanks, and shall maintain, repair, and replace such tanks only in accordance with Laws and Regulations, including but not limited to Environmental Regulations. SECTION 7. Owner in Fee The County covenants that it is the owner in fee of the Demised Premises. The County further covenants and agrees that if for any reason this covenant proves to be incorrect, the County will either institute eminent domain proceedings to condemn the property or institute DOCSsr1:308.,)8.8 5 a quiet title action to clarify the County's title, and will diligently pursue such action to completion. The County further covenants and agrees that it will hold the Authority and the Bondowners harmless from any loss, cost or damages resulting from any breach by the County of the covenants contained in this Section. SECTION 8. Assignments and Subleases Unless the County shall be in default under the Facility Lease, the Authority may not assign its rights under this Lease or sublet the Demised Premises and the Facilities, except pursuant to the Facility Lease, without the written consent of the County, which consent may be withheld in the County's sole and absolute discretion. Upon the occurrence of a default by the County under the Facility Lease, the Authority may assign or sell its rights under this .Lease or sublet the Demised Premises and the Facilities,without the consent of the County. SECTION q. Right of Entry; Easements The County reserves the right for any of its duly authorized representatives to enter upon the Demised Premises at any reasonable time to inspect the same or to male any repairs, improvements or changes necessary for the preservation thereof. The County agrees, upon written request from the Authority, to grant to the Authority a nonexclusive easement of ingress and egress for persons, vehicles and utilities, twenty (20) feet wide, from each parcel of the Demised Premises not having access to a public street, and appurtenant to such parcel, over property owned by the County to a public street. The County may, at any time, satisfy its obligation contained in the preceding sentence as to any such parcel of the Demised Premises by ,granting to the Authority an easement complying with the requirements of the preceding sentence from such parcel of the Demised Premises to a public street. SECTION 10. Termination The Authority agrees, upon the termination of this Lease, to quit and surrender the Demised Premises in the same good order and condition as the same were in at the time of commencement of the term hereunder, reasonable wear and tear excepted, and the Authority further agrees that any permanent improvements and structures existing upon the Demised Premises at the time of the termination of this Lease shall remain thereon and title thereto shall vest in the County. Upon the exercise of the option to purchase set forth in Section 7.03 of the Facility Lease and upon payment of the option price required by said section, the terra of this Lease shall terminate as to the portion of the Demised Premises upon which the part of the Facilities being so purchased is situated. SECTION 11.. D�g faul . In the event the Authority shall be in default in the performance of any obligation on its part to be performed under the terms of this Lease, which default continues for one DocssFI:308,tgg.s 6 hundred and eighty (180) days following notice and demand for correction thereof to the Authority and the Trustee, the County may exercise any and all remedies granted by law, except that no merger of this Lease and of the Facility Lease shall be deemed to occur as a result thereof; provided, however, that the County shall have no power to terminate this Lease by reason of any default on the part of the Authority if such termination would affect or impair any assignment or sublease of all or any part of the Demised Premises then in effect between the Authority and any assignee or subtenant of the Authority (other than the County under the Facility Lease). So long as any such assignee or subtenant of the Authority shall duly perform the terms and conditions of this Lease, such assignee or subtenant shall be deemed to be and shall become the tenant of the County hereunder and shall be entitled to all of the rights and privileges granted under any such assignment; provided, further, that so long as any Bonds are outstanding and unpaid in accordance with the terms thereof, the rentals or any part thereof payable to the Authority or Trustee shall continue to be paid to the Trustee on behalf of the Bondowners. SECTION 12. Quiet Enjg=ent. The Authority at all times during the term of this Lease, shall peaceably and quietly have,hold and enjoy all of the Demised Premises. SECTION 13. Waiver of Personal Liability. All liabilities under this Lease on the part of the Authority shall be solely liabilities of the Authority, as a public entity and agency, and the County hereby releases each and every member, director, officer, agent or employee of the Authority of and from any personal or individual liability under this Lease. No member, director, officer, agent or employee of the Authority shall at any time or under any circumstances be individually or personally liable under this Lease to the County or to any other party whomsoever for anything done or omitted to be done by the Authority hereunder. The Authority and its members, directors, officers, agents, employees and assignees shall not be liable to the County or to any other party whomsoever for any death, injury or damage that may result to any person or property by or from any cause whatsoever in, on or about the Demised Premises, the Facilities and the 1999 Project. The County, to the extent permitted by law, shall indemnify and hold the Authority and its members, directors, officers, agents, employees and assignees, harmless from, and defend each of them against, any and all. claims, liens and judgments arising from the construction or operation of the Demised Premises, the Facilities or the 1999 Project, including, without limitation, death of or injury to any person or damage to property whatsoever occurring in, on or about the Demised Premises, the Facilities regardless of responsibility for negligence, but excepting the active negligence of the person or entity seeking indemnity. DOCSSM i:308 i 98.8 '7 SECTION 14. Taxes. The County covenants and agrees to pay any and all assessments of any kind or character and also all taxes, including possessory interest taxes, levied or assessed upon the Demised Premises or the Facilities. SECTION 15, Eminent Domain. In the event the whole or any part of the Demised Premises or the Facilities is taken by eminent domain proceedings, the interest of the Authority shall be recognized and is hereby determined to be the amount of the then unpaid or outstanding Bonds and all other amounts due under the Trust Agreement and the Facility Lease attributable to such part of the Facilities and shall be paid to the Trustee, and the balance of the award, if any, shall be paid to the County. SECTION 16. Partial Invalidity If any one or more of.the terms, provisions, covenants or conditions of this Lease shall to any extent be declared invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, the finding or order or decree of which becomes final, none of the remaining terms, provisions, covenants and conditions of this Lease shall be affected thereby, and each provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. SECTION 17. Notices. All notices, statements, demands, consents, approvals, authorizations, offers, designations, requests or other communications hereunder by either party to the other shall be in writing and shall be sufficiently given and served upon the other party if delivered personally or if mailed by United States registered or certified mail, return receipt requested, postage prepaid, and, if to the County, addressed to the County in care of County of Contra, Costa, County Administration Building, 651 Pine Street, Martinez, California 94553, or if to the Authority, addressed to the County in care of the County Clerk, County of Contra Costa Public Financing Authority, County Administration Building, 651 Pine Street, Martinez, California 9455.3, in all cases with a copy to the Trustee, or to such other addresses as the respective parties may from time to time designate by notice in writing. SECTION 18. Section Headings. All section headings contained herein are for convenience of reference only and are not intended to deme or limit the scope of any provision of this lease. SECTION 19. Amendnigni.. The Authority and the County may at any time agree to the amendment of this Lease; 12Iovided, how ver, that the Authority and the County agree and recognize that this Lease is entered into in accordance with the terms of the Trust Agreement, and accordingly, that any D0CSSF1:308198.8 8 such amendment shall only be made or effected in accordance with and subject to the terms of the Trust Agreement. SECTION 20. Execution. This Lease may be executed in any number of counterparts, each of which shall be deemed to be an original, but all together shall constitute but one and the same Lease. It is also agreed that separate counterparts of this Lease may separately be executed by the County and the Authority, all with the same force and effect as though the same counterpart had been executed by both the County and the Authority. nocssFt:308198.8 9 IN WITNESS WHEREOF, the County and the Authority have caused this Lease to be executed by their respective officers thereunto duly authorized, all as of the day and year first above written. COUNTY OF CONTRA COSTA, as Lessor By - Chair of the Board of Supervisors County of Contra.Costa, State of California [SEAL] Attest: Philip J. Batchelor, Clerk of the Board of Supervisors and County Administrator By Chief Clerk Approved as to Form: By: County Counsel COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY, Lessee By Chair Attest: Philip J. Batchelor, Executive Director and Secretary By Director, Capital Facilities a<nd Debt Management, County of Contra Costa DOCSSE 1:308198.8 EXHIBIT A IDescription of Facilities All that certain real property situated in the County of Contra Costa, State of California,described as follows. Facili Location West County Detention Facility 5555 Giant Highway Richmond, California Bray Courthouse 1020 Ward Street Martinez, California Social Services Building 4545 Delta Fair Boulevard Antioch, California DOCSSr r:3081 s8.s A-1