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HomeMy WebLinkAbout04-Water Department C 'Y OF SAN BERNARr ""0 - REQlJ~ST FOR COUNCIL AC ~ION From: Bernard C. Kersey, Ex-Officio Secretary Dept: Board of Water Commissioners Subject: Sale of Sewer Revenue Refunding Bonds- 1986 Date: February 7, 1986 J;}3Jifo I . Synopsis of Previous Council action: Resolution No. 83-98 - Authorize issuance of Sewer Revenue Refunding Bond Anticipation Notes Issue of 1983. Resolution No. 84-97 - Authorize issuance of Renewal Sewer Revenue Refundin" Bond Anticipation Notes. 1 ! Recommen<:led motion: I i .~ SEE ATTACHED ,- 11 1 l t 1 Contact person: Bernard Kersey Phone: 383-5393 Supporting data attached: Yes Ward: All FUNDING REQUIREMENTS: Amount: $234,175 Source: . Sewer Fund C F;",",~~r;C~, ~c'jf!)f,~ 1- Council Notes: 75-0262 Agenda Item NO/~- j l~ '/ CITY OF SAN BERNARDINO, CALIFORNIA AGENDA FEBRUARY 13, 1986 Common Council 1. RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO, CALIFORNIA, PROVIDING FOR THE SALE OF CITY OF SAN BERNARDINO, CALIFORNIA, SEWER REVENUE REFUNDING BONDS, ISSUE OF 1986 (REGIONAL WASTEWATER TREATMENT PLANT PROJECT) 2. RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO, CALIFORNIA, APPROVING AND ACCEPTING A PROPOSAL TO PROVIDE BOND COUNSEL, CONSULTING AND UNDERWRITING SERVICES IN CONNECTION WITH THE ISSUANCE OF THE CITY OF SAN BERNARDINO, CALIFORNIA, SEWER REVENUE REFUNDING BONDS, ISSUE OF 1986 (REGIONAL WASTEWATER TREATMENT PLANT PROJECT) 3. RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO, CALIFORNIA, AMENDING RESOLUTION NO. 83-93, AS AMENDED, AND AUTHORIZING THE ISSUANCE OF CITY OF SAN BERNARDINO, CALIFORNIA, SEWER REVENUE REFUNDING BONDS, ISSUE OF 1986 (REGIONAL WASTEWATER TREATMENT PLANT PROJECT), OF SAID CITY AND PROVIDING THE TERMS AND CONDITIONS FOR THE ISSUANCE OF SAID REFUNDING BONDS l484S CIT OF SAN BERNARDH ) - REQUEr"T FOR COUNCIL ACT"...,N STAFF REPORT The City Staff has presented to you for your consideration three resolutions with regard to the sale and issuance of the City of San Bernardino, California, Sewer Revenue Refunding Bonds, Issue of 1986 (Regional Wastewater Treatment Plant Project) (the "Bonds") by the City of San Bernardino for the purpose of paying in full the City of San Bernardino, Renewal Sewer Revenue Refunding Bond Anticipation Notes, Issue of 1984 (the "1984 Notes"). The three resolutions are the actions that will be required at this time of the City Council in connection with the authorization for the issuance of the Bonds in an aggregate principal amount equal to $2,600,000 for such refunding. The principal amount of the Bonds has been determined to take into account the amount necessary to meet the payment of the 1984 Notes on their maturity date, being March 15, 1986. The first resolution entitled "Resolution of the rlayor and Conunon Council of the City of Accepting a Proposal to San Bernardino, California, Approving and Provide Bond Counsel, Consulting and Underwriting Services in Connection With the Issuance of the City of San Bernardino, California, Sewer Revenue Refunding Bonds, Issue of 1986 (Regional Wastewater Treatment Plant Project)" appoints the law firm of Sabo & Gondek as Bond Counsel in connection with this issuance and also approves fliller & Schroeder Financial, Inc., as Financial Consultant to the City in connection with the issuance of the Bonds. The second resolution entitled "Resolution of the flayor and Conunon Council of the City of San Bernardino Providing for the Sale of City of San Bernardino, California, Sewer Revenue Refunding Bonds, Issue 75-0264 cr Y OF SAN BERNARD'.~O - REQUF'~T FOR COUNCIL AC....ON STAFF REPORT of 1986 (Regional Wastewater Treatment Plant Project)" is the Resolution of Sale which authorizes the sale of the Bonds and the invitation for bids for the purchase of the Bonds, consents to the Financial Consultant acting as underwriter, orders the publication of the Notice Inviting Bids and the Notice of Intention to Sell Bonds, authorizes and directs the Financial Consultant to distribute an Official Statement in the form as submitted to the City and generally authorizes and directs either the Financial Consultant and/or Bond Counsel to open the bids, to receive and record receipt of all bids and to present the bids for the sale of the Bonds and any other necessary documentation required for the refunding to the Mayor and Conunon Council. The Bond sale date has been set for March 6, 1986, to enable the City to obtain the best interest rates and the most bids possible. The terms and condi tions of the sale of the Bonds are set forth in the Notice Inviting Bids and are similar to other publicly sold bonds of the City and the Redevelopment Agency. i ! j 1 I i i The final resolution entitled "Resolution of the <Iayor and Conunon Council of the City of San Bernardino, California, Amending Resolution No. 83-93, As Amended, and Authorizing the Issuance of City of San Bernardino, California, Sewer Revenue Refunding Bonds, Issue of 1986, of said City and Providing the Terms and Conditions for the Issuance of Said Refunding Bonds" is the Resolution of Issuance which amends Resolution No. 83-93 of the flayor and Common Council .adopted on flarch 24, 1983, as amended by Resolution Nos. 83-97 and 84-98 (collectively, the "1983 Resolut ion") which, as ini t ially adopted, authorized the issuance of sewer revenue refunding bonds for the purpose of refunding the outstanding Se"er Revenue Bonds, Election 1957, Series 1, 2 and 3 (the 75.0264 -2- CI1 OF SAN BERNARDIf ) - REQUEr -- FOR COUNCIL ACT' )N STAFF REPORT "Refunded Bonds") and provides for the proposed terms and conditions of the issuance of the Bonds. The original proceedings for the sale of sewer revenue refunding bonds were initiated in 1983 but after receipt of bids in 1983 and upon consideration of certain circumstances then occurring in the municipal bond market, the ~layor and Conunon Council rejected the bids received for the refunding bonds. Since the refunding of the Refunded Bonds was required to take place on April 1, 1983, the Mayor and Conunon Council determined to proceed to issue revenue bond anticipation notes (the "1983 Notes") to accomplish the refunding that could not be accomplished under the 1983 Resolution and to pay certain necessary maintenance and oper-ation costs of the sewer system, and to sell the refunding bonds at such later time as the municipal bond market stabilized. On flarch 21, 1984, the flayor and Conunon Council issued certain renewal sewer revenue refunding notes for the payment of the 1983 Notes and further amended the 1983 Resolution pursuant to Resolution No. 84-98. The Resolution of Issuance as submitted to you at this time, by amending the 1983 Resolution, maintains the basic terms and conditions for the issuance of refunding bonds as set forth in the 1983 Resolution and the effective date of the 1983 Resolution, being March 24, 1983, but incorporates necessary technical modifications required at this time. The issuance of the Bonds is structured so that the 1984 Notes will be paid in full from the proceeds of the sale of the Bonds on March 15, 1986, which is the maturity date of the 1984 Notes. It is proposed that the Bonds will be issued in a prIncipal amount equal to $2,600,000, dated as of March 1, 1986, bearing interest at the rates per annum to be bid by the successful bidder and maturing on March I of each year of maturity through and including March 1, 2001. 75.0264 -3- CIl . OF SAN BERNARDI' ~ - REQUE T FOR COUNCIL ACT IN STAFF REPORT It is proposed tha t the Bonds will be issued on flarch 14, 1986, so that it will then be possible to retire the 1984 Notes on their maturity date, This requires that the Bonds be issued in a relatively short period of time after the bids have been received and the Bonds have been awarded. The Financial Consultant and Bond Counsel have proposed that the Bonds be rated by either Standard & Poor's Corporation or :loody's Investor Services to assure the City of the lowest possible interest rate. The Financial Consultant and Bond Counsel will be further pursuing the obtaining of the necessary rating in connection I<ith this financing so as to produce the lowest financing cost possible to the City and upon the most advantageous terms to the City. Additionally, because of the pending federal tax legislation which would restrict most other types of municipal bonds, there are virtually no new issues coming to market at this time. The Bonds as proposed to be issued are not affected by the pending federal tax legislation. Staff Recommendation Staff recommends approval of the attached resolutions which would permit the City to undertake the sale and issuance of the Bonds and to retire the 1984 Notes. 75-0264 -4- SBE07"-2/l453S/]c 02/06/86 RESOLUTION NO, /(, /0 RESOLUT 1(\1' Of THE: ttel, YOR AND COMMON COUNC I L Of THE CIT'; O~ S;;1; BERNARDINC, CALIFORNIA, AMENDING RESOLUTION NO. 83-93, AS AMENDED, AND AUTHORIZING noE I 55Ul'.NCE or CITY OF SAN BERNARDINO, CALIFOR' :A, SEWER REVENUE REFUNDING BONDS, ISSUE or 1980 (REGIONAL WASTEWATER TR"'ATMFNT PT,l\N'T' PROJECT), OF SAID CITY AND PROVIDING THE TERMS AND CONDITIONS FOR THE ISSUANCE OF SAID REFUNDING BONDS WHEREAS, pursuant to Ordinance No. 2170, a special municipal election was held in the City of San Bernardino, California (the "City"), on June 11, 1957, for the purpose of submitting to the qualified voters of said City the proposition of issuing sewer revenue bonds of said J:ity in the amount of $4,900,000 pursuant to the City Charter and the Revenue Bond Law of 1941 (Chapter 6, Part 1, Division 2, Title 5 of the Government Code of the State of California) (the "Revenue Bond Law") for the following purposes, to wit: The acquisition, construction and financing by the City of San Bernardino of additions to and improvements (other than repairs) of the sewage collection, treatment and disposal system of said city, consisting of a new sewage treatment plant, trunk, interceptor and outfall sewers, a sewer ventilating system, pumping stations, effluent reclamation works with pumping stations, pipelines and spr~ading grounds, and including the acquisition of all land, easements, pipe, pumps, machinery, equipment and other property necessary for any of the foregoing, and including engineering, inspection and lega 1 fees, costs of the issuance of the revenue bonds, bond reserve funds and other costs and expenses incidental to or connected with such acquisition, construction and financing; and WHEREAS, said proposition was approved by the votes of more than a majority of all the voters voting on said proposition at said special election, and this City was authorized to issue said sewer revenue bonds as provided in said Revenue Bond LawX and WHEREAS, pursuant to Resolution No. 4708, the Mayor and Common Council of the City issued $3,000,000 of the total authorized principal amount of Bonds designated, maturing and being callable and redeemable prior to maturity as follows: Designation: SEWER REVENUE BONDS, ELECTION 1957, SERIES 1. Date April 1, 1958, - 1 - f Matu~i::es ~nd Interest Rate Year c: Maturity (April 1) principal Amount 1950 1960 1961 1962 1963 196~ 1965 1966 1967 1968 1969 1970 1971 1972 1973 1986 $ 70,000 50,000 55,000 55,000 60,000 60,000 65,000 70,000 70,000 75,000 75,000 80,000 85,000 90,000 90,000 1,950,000 Redemption Date and Premiums April 1, 1983 ; and Interest Rate Retired Retired Retired Re~ired Retired Retired Retired Retired Retired Retired Retired Retired Retired Retired Retired 3.4% 3/4% WHEREAS, pursuant to Resolution No. 5532, the Mayor and Common Council of the City issued $1,000,000 of the total authorized principal amount of Bonds designated, maturing and being callable and redeemable prior to maturity as follows: Designation: SEWER REVENUE BONDS, ELECTION 1957, SERIES 2 Date April 1, 1960 Maturities Year of Maturity (April 1) 1961 1962 1963 1964 1965 1966 1967 1968 1969 Principal Amount $ 15,000 20,000 20,000 25,000 25,000 25,000 30,000 30,000 30,000 - 2 - Interest Rate Retired Retired Retired Retired Retired Retired Retired Retired Retired gat.ur:::es Yea: of Maturity (.=-.Dri1 1) Principal .Amount Interest Rate 1970 1971 1972 1973 1990 30,000 30,000 30,000 30,000 660,000 Retired Retired Retired Retired 4% Redemption Dates and Premiums April 1, 1983 3/4% ; and WHEREAS, pursuant to Resolution No. 9335, the Mayor and Common Council of the City issued the final $900,000 of the total authorized principal amount of Bonds designated, maturing and being callable and redeemable prior to maturity as follows: Desionation: SEWER REVENUE BONDS, ELECTION 1957, SERIES 3 Date: October 1, 1968 Maturities and Interest Rate Year of Maturity Principal Interest (April 1) Amount Rate 1969 $ 40,000 Retired 1970 15,000 Reti red 1971 15,000 Retired 1972 15,000 Retired 1973 20,000 Retired 1974 20,000 Retired 1975 20,000 Retired 1976 20,000 Retired 1977 20,000 Retired 1978 20,000 Retired 1979 20,000 Retired 1980 20,000 Retired 1981 20,000 Retired 1982 25,000 Retired 1983 25,000 4.80 1984 25,000 4 90 1985 30,000 4.90 1986 30,000 4 90 1987 30,000 4.90 1988 30,000 5.00 - 3 - \"E:a r c,: r~atur i ty (Aoril 1) Principc.l Amount Interes: Rate 198C 1990 1991 1992 1993 1994 1995 1996 1997 1998 40,000 40,000 40,000 40,000 40,000 40,000 50,000 50,000 50,000 50,000 5,00 5.00 5.00 5.00 5,10 5.10 5.10 5.10 5 10 5,10 Callable Option: The Bonds maturing on or prior to April L 1984, shall not be subject to call or redemption prior to maturity, The Bonds maturing on or after April 1, 1985, or any of them, may be called before maturity and redeemed, at the option of the City, on April 1, 1982, or on any interest payment date thereafter prior to maturity, at a redemption price for each redeemable Bond equal to the principal amount thereof plus one-fourth of one percent (1/4%) for each year, or fraction of a year, from the redemption date to the maturity date; and WHEREAS, for the purposes of this Resolution, Sewer Revenue Bonds, Election 1957, Series 1, 2 and 3, collectively referred to as the "Refunded Bonds"; and the above are herein WHEREAS, pursuant to Ordinance No. 2170, the ftecessary and ~asonable Maintenance and Operation Costs of the Enterprise (which include the--reasonable exp~ses of billing and collection of service charges, management, repair and other expenses necessary to maintain and preserve the sewer system and said works in good repair and working order) shall be paid from the ~ Bevenues of the~terprise prior to the payment of the principal and interest on the Refunded Bonds and sums for other security funds which may be provided; and WHEREAS, pursuant to section 16 of Resolution Nos. 4708, 5532 and 9335 approving the issuance of the Refunded Bonds, all monthly sums sufficient for the jiecessary and Reasonable~aintenance and ~eration Costs of the ~nterprise shall be apportioned from the Gross Revenues of the .s.nterprise and transferred within the Sewer Fund to the M & 0 Account prior to the payment of sums into the Sinking Account and the Reserve Account; and WHEREAS, pursuant amounts on deposit in the fallowing: to the Sewer Section 149 Fund sha 11 of be the City Charter used to pay the (a) costs of effluent the necessary and reasonable the sewer system, including reclamation works, which maintenance and operation any sewage treatment and include the reasonable - 4 - expenses 0:: billing ane ccllec~ion of selNe:- charges, manageme;;:, repair and othe~ expenses necessary to maintai~ and preserve tne sewer systeJ. and said works in good repair and working order; (b) the principal and interest of bonds issued for sewer purposes; ( c) the Mayo r providing any payments specifically authorized or and Common Counci 1 in any ordinance or for the issuance of said bonds; requi fee by resolution (d) amounts, as the ~layor for the payment of the costs of or additions to the sewer system sewer purposes, and Common Council may direct, extensions and improvements of and said works or for any other WHEREAS, Gross Revenues of in the Sewer Fund payments from^.the Section 149 ot'the Law; and pursuant to Section 134 of the City Charter the the Enterprise shall be transferred to and placed as required by Section 134 of the Charter and Sewer Fund shall be made only as provided by Charter, this Resolution and the Revenue Bond WHEREAS, on February 21, 1983,~ consultants to the City proposed that the City initiate proceedings~for the refundlng at the Refunded Bonds and the Mayor and Common Council adopted Resolution No. 83-55 providing for the sale of the hereinafter referred to Refunding Bonds; and WHEREAS, proceedings for the sale of the Refunding Bonds were duly held and taken, notices of sale published and notices of call and redemption prior to maturity published pursuant to the California Government Code Section 54388; and WHEREAS, on March 24, 1983, the Mayor and Common Council also adopted the Resolution of Issuance of the Refunding Bonds, herein referred to as the "1983 Resolution of Issuance", being Resolution No. 83-93 entitled: "Resolution of the Mayor and Common Council of the City of San Bernardino, Authorizing the Issuance of Sewer Revenue Refunding Bonds, Issue of 1983, of said City and Providing the Terms and Conditions for the Issuance of said Refunding Bonds," which authorized the issuance of certain sewer revenue refunding bonds for the purpose of refunding the Refunded Bonds which refunded bonds were to be secured by a pledge of and lien upon, and payable as to the principal thereof and interest thereon and any premiums upon the redemption thereof, solely from the Net Revenues of the Enterprise, such ~et Revenues of the 1:..nterprise being defined as the amount of Gross Revenues of the 1<.nterprise remaining after payment therefrom of the Necessary and Reasonable Maintenance and Operation Costs of the Enterprise (as defined in the 1983 Resolution of Issuance); and WHEREAS, Section 19 of required that after the uses the and 1983 Resolution of transfers specified Issuance in said - 5 - SectlCr. 2.~ hEld ~eeL dLly perforrrec:. any re~s.::..n:..n~ money derivec rro:7 the Ne: Reve~ues c~ the En:erprlse shEll: De used exclusively tor the followln~ purposes: (2) To make 'the Treat~en: ?lant Sublease, as ot N::)ver:.oer 1, 1973; payments 8ated as required of .';ugus'.:: under 1,1970. the Sewoge as amended (b) To pay the cost of unusual or extraordinary -.:::,aintenance and....::,Peration costs of the Enterprise; (c) To pay interest: on any bonded debt incurred for the improvement of the Enterprise; (d) To pay the principal of any such debt; (e) To pay the principal of, interest and premiums on Bonds called prior to maturity; (f) To pay the principal of, interest and premiums on Bonds purchased in the open market at prices offered at or below the sum required to be paid in the event of redemption by call; (g) To pay the principal of and interest on Bonds which may hereafter be issued pursuant to Section 22 hereof, of equal parity or subordinate as to the lien thereof to the lien of the Bonds, and the premium upon any of such Bonds called or purchased prior to maturity; (h) To pay the costs of extensions and improvements of or additions to the Enterprise for any other sewer purpose; and (i) For ,any lawful purpose not prOhibited by the Charter. ;and WHEREAS, as a result of the consideration of all the facts and circumstances taking place in the municipal bond market at the time of sa Ie of the Refunding Bonds, the Mayor and Common Counci I rejected the bids received for the Refunding Bonds as being unsatisfactory as to price which, under the Revenue Bond Law, permitted the CitYAto either readvertise the sale of the Refundinq Bonds at public sale or sell the Refunding Bonds at private sale. It was expected that, due to the bill introduced into the United States Congress (H.R. 1635, hereinafter referred to as the "pickle Bill"), the distortion in the municipal bond [llarket would continue until at least April 15, 1983, and perhaps for some time thereafter as the municipal bond market absorbed inventory accumulated during the short period. The refunding of the Refunded Bonds, however, was required to take place on April 1, 1983, to be effective in accomplishing the goal originally contemplated when the Refunding Bonds were offered for sale. Accordingly, the Mayor and Common Council, as part of the proceedings for rejecting the bids as being unsatisfactory as to price, determined to proceed pursuant to - 6 - Article 1:.5 of the F\eventl'2 Bond La'....- tc lSS'.....:E- re\'e;".UE- bone anticip2:ion notes, tc acc::~plish trlf' refundin8 whicr, coul:5 no~ De acco!T,p~ished under the 1922 Resolution cf Issuance v.'itf,out paYlnc; extrc interest costs du,=:: tC the temporary distDr:=ion 0: thE: municipal bond marke:., 'and to sell the Refunding BonO.;: pursuant tc ths- 198'3 Resolution of Issuance, as tne same presen:1Y exists or as ~men6e~, at such time as ths municipal bond marke~ s:aoilizes; and WHEREAS, the Mayor and Common Council determined to proceed pursuant to Article II,S of the Revenue Bone La~ to lssue an aggregate principal amount equal to $2,600,000 of revenue bond anticipation notes entitled "City of San Bernardino, Sewer Revenue Refunding Bond Anticipation Notes, Issue or 1983" (the "1983 Notes"), a portion of proceeds which were used to accomplish the refunding of the Refunded Bonds, and to sell the Refunding Bonds pursuant to the 1983 Resolution of Issuance, as the same may be amended, at such later time as the same became feasible; and I I 1 , WHEREAS, in accordance with Ordinance No. 2170, the City Charter, the Revenue Bond Law and the 1983 ResoilitTon of Issuance a portion of the proceeds from the revenue bond anticipation notes issued as the 1983 Notes were used to accomplish the refunding or the Refunded Bonds and a portion of such proceeds were deposited to the M & 0 Account of the Sewer Fund for the payment of the Necessary and Reasonable Maintenance and Ooeration Costs or the Enterorise as required pursuant to Section 149 of the Charter and for the payment of certain unusual and extraordinary maintenance and operation costs of the Enterprise; and - - WHEREAS, a portion of the proceeds of 1983 Notes~ were required for the payment of certain extraordinary repairs to the Enterprise and certain Necessary and ~easonable ~aintenance and Operation Costs of the ~nterprise prior to the payment of the principal of, premium, if any, and interest on the Refunded Bonds; and WHEREAS, the Mayor and Common Council determined on March 21, 1984, pursuant to Resolution No. 84-97 (the "1984 Resolution") , to 1ssue and sell a suff1c1ent amount of C1ty or San Bernard1no, Renewal Sewer Revenue Refunding Bond Anticipation Notes, Issue of 1984 (the "1984 Notes,,), pursuant to Article 11.5 of the Revenue Bond Law, to pay the principal amount of the 1983 Note~ maturing on March 30, 1984, and to amend Resolution No. 83-93 pursuant to Resolution No. 84-98 (Resolution No. 83-93 together with any and all amendments and supplements thereto adopted prior to the date of this Resolution, including said Res91ution Nos. 83-97 and 84-98, shall be known as the "1983 Resolution of Issuance"); and WHEREAS, the Mayor and Common Council deems it necessary to amend the 1983 Resolution of Issuance and to issue and sell at this time a sufficient amount of City of San Bernardino, California, Sewer Revenue Refunding Bonds, Issue of 1986 (Regional Wastewater Treatment Plant Project), as authorized pursuant to the 1983 Resolution of Issuance and this Resolution, to pay the principal - 7 - arrc".;~: ., :-he ~ Notes^Or thE:: n3':.urity date, being Marer; ~~Ot. a:. aacregate orlnclpal amount equal :0 S~,600.000, autn0~ized pu~sua~: to Calitornia Government Code Sectio~ 5466:. E, as NOW, THEREFORE, THE SM\ BERN;',RDINO, U.LIFORNI.~., .1..5 fO:"'LO\'JS: ~~YOR AND COMMON COUNCIL OF THE CITY Of DO HEREBY RESOLVE, DETERMINE AND ORDER Section 0, Amendment of Resolution, Resolution No, 83-93, adopted by "he t,\ayor and Common Counci 1 on March 24, 1983, as amended by Resolution Nos, 83-97 and 84-98, adopted 01' the City on March 21, 1984, lS hereby amended to read in its entirety as provided in Sections 2 through 34, inclusive, as hereinafter set forth, Section 2, Definitions. following terms shall have the context otherwise requires: As used following in this Resolution meanings, unless the the "Bonds" or "said Bonds" means the "City of San Bernardino, California, Sewer Revenue Refunding Bonds, Issue of 1986 (Regional Wastewater Treatment Plant Project)", authorized by this Resolut10n "Bondholder" or "Holder of Bonds" or any similar term, means any person who shall be the registered owner or his duly authorized attorney, trustee, representative or assign of any Outstanding Fully Registered Bond, For the purpose of Bondholders' voting rights or consents, Bonds owned by or held for the account of the City, directly or indirectly, shall not be counted. "Charter" or "City Charter" means the City Charter of the City of San Bernardino. "City" means the City of San Bernardino, California, "City Treasurer" means the officer who is the City. or "Treasurer", "Treasurer of the City" then performing functions of Treasurer of "Enterprise" means the enterprise defined in said Ordinance No. 2170 calling the election for the authorization by the voters of the Refunded Bonds~as follows: "the entire sewer system (including all buildings. systems, plants, works, facilities or undertakings used for or useful in the collection, treatment or disposal of sewage and the reclamation of effluent therefrom) of the City of San Bernardino as such system now exists, together with all improvements and extensions to said system later constructed or acquired, including the improvements and extensions made wi th funds derived f rom the sa Ie of the revenue bonds herein proposed to be issued." - 8 - ":i5::a~ .';qen:" mea!:s tne ~isc~~ ";?en~ eppcir::e:: by :h~ Cl:Y pursuan: .t~ this Resolution. tc W~_. Securi:~' Pcc~~i= Natiana: Bank, its successors and - asslgns, ond any other cc.rporat:lon or associatio!"". whicr. may a: any time be substitu:ec If; itz place, as proviaed ~.. thIS Resol~:ion. 1\ "Fiscal Year" and ending O~ the next means the year perIod following June 30th. beginnint;:: on Lluly ~ c: 1- "~ - "Gross Revenues a: the Enterprise" means all charges received for sewer serVlce and all other lncome and recelpts derived from the operations of the Enterprise, including any sewage treatment and effluent reclamation works, or arlsing from the Enterprise of said works, and includes all revenues (as defined in Section 54315 of the Government Code) received by the City from the services and facilities of the Enterprise, Fees received pursuant to San Bernardino Code Section 13,08.050 and other fees referred to in Section 15 hereof, which are received for a special purpose, are not part of the Gross Revenues of the Enterprise. "Independent Financial Consultant," "Independent Engineer" or "Independent Certified Public Accountant" means any individual or firm engaged in the profession involved, appointed by the City, and who, or each of whom, has a favorable reputation in the field in which his opinion or certificate will be given, and: (1 ) City; and is in fact independent and not under domination of the (2) does not have any substantial interest, direct or indirect, with the City; and (3) is not employee of the City, reports to the City. connected bu t who with may be the City as an officer or regularly retained to make obtained totaling Year. "Maximum Annual Debt Service" means the largest of the sums for any Fiscal Year after the computation is made, by the following "Annual Debt Service" for each such Fiscal (1) The principal amount of all serial Bonds and serial Parity Bonds payable in such Fiscal Year; and term with Fund (2) The amount of Minimum Sinking Fund Payments for Parity Bonds to be made in such Fisc<:ll Year in accordance the applicable schedule or schedules of Minimum Sinking Payments'; and (3) The interest which would be due during such Fiscal Year on the aggregate principal amount of Bonds and Parity Bonds which would be outstanding in such Fiscal Year if the Bonds and Parity Bonds outstanding on the date of such computation were to mature or be redeemed in accordance with the - 9 - :7,3tu~i:;' s::::hedul-= or sche::5ule~ in.- :he serla: Parity Bones an:: the schedule or schedules or MinlII'ur:- Sinking Fund Payments rDr terrr Parity Bonds. At -the tllTie and for the purpose of making su~~ computation, the amoun~ of tefIT Parity Bonds already retired in advance of the above-men,:ioned schedule or schedules sh21~ be deducted pro ra~a :ro~ the re~aining amounts thereo~. "Mayor the Cit:f\acting and Common Council" means the legislative under and pursuant to the City Charter, body of "Necessary and Reasonable Maintenance and Operation Costs of the Enterprise" include the necessary and reasonable maintenance and operation costs of the Enterprise (which include the reasonable expenses of billing and collection of service charges management, repair and other expenses necessary to maintain and preserve the Enterprise in good repair and working order). "Net Revenues of Revenues of the Enterprise Necessary and Reasonable Enterprise. the Enterprise" means the amount of Gross remaining after payment therefrom of the Maintenance and Operation Costs of the "Opinion of Counsel" means a written opinion of an attorney or firm of attorneys of favorable reputation in the field of municipal bond law. Any opinion of such counsel may be based upon, insofar as it relates to factual matters, information which is in the possession of the City as shown by a certificate or opinion of, or representation by, an officer or officers of the City, unless such counsel knows, or in the exercise of reasonable care should have known, that the certificate or opinion or representation with respect to the matters upon which his opinion may be based, as aforesaid, is erroneous. "Outstanding", as to the Bonds, means that they are unpaid or that provision for the full payment and discharge thereof at maturity or upon redemption thereof prior to maturity through the setting apart in the Bond Service Fund or in the Redemption Account or in a special trust fund (as the case may be) of money and/or securities, as provided in Section 4 hereof, sufficient to insure the payment at maturity or redemption thereof prior to maturity has not been made. For the purpose of determining whether the required consent of Bondholders has been obtained pursuant to Section 29 hereof, Bonds should directly or indirectly by the City ("Issuer-Owned Bonds") shall not be counted. . There are no term Bonds in this issue and these provisions regarding term Parity Bonds and Minimum Sinking Fund Payments therefor are inserted in the event the City issues term parity Bonds in accordance with the provisions of this Resolution. - 10 - "F2~i:'.- Sonas" ::le3ns any bonds, notes, interirr cer:i::icc.:es, debentures c:- oche: DOligations of whatever nature issued by the Ci~y, 0: any other governmental or private person with wnc:c. the Cit:y may contract, whice-, payments to service the same. and/or provlde security' eherefor, shall rank on a parity with the paymenr:s Of. the Bonds, al~ a::: authorized or required by Section 23 he~eo:. "Refunded Bonds" means, collectivelL the Sewer Revenue Bonds, Election 1957, Series 1,2and 3 referred to in the recitals hereof which were refunded with a portion of the proceeds of the 1983 Note~ "Revenue Bond Law" means the Revenue Bond LaH of 1941 as cited in the recitals hereof "Series Resolutions" means the several Mayor and Common Counci 1 of the City providing the SeHer Revenue Bonds, Election 1957, Series 1, Resolutions of the for the issuance of 2 and 3. "SeHer Section 143 of Revenues of the fund" means the special fund established pursuant to the Charte," into which shall be deposited the Gross Enterprise as required by Section 134 of the Charter. Section 3, Amount, Issuance, Purpose and Nature of Bonds. That under and pursuant :0 t:he Charter and t~ Revenue Bond Law-,- A sewer revenue refunding bonds of the City of San Bernardino in the amount-of $2, 600,000 shall be issued for the purpose stated herein and desiqnated as the "City of San Bernardino, California, Sewer Revenue Refunding Bonds, Issue of 1986 (Reqional Wastewater Treatment Plant ProJect)," The Bonds shall be and are special obligations of the CityAand shall be and are secured by a pledge of and lien upon, and shall be and are a charge upon, and shall be and are payable as to the principal thereof and interest thereon and any premiums upon the redemption of any thereof, solely from the Net Revenues of the Enterprise, such Net Revenues being hereby pledged, charged and assigned for the security of the Bonds. The proceeds of the Bonds shall be used by the City for the purpose of payinq the principal of the 1984 Note9'\> maturing on March 15, 1986, by paying the same so that, in accordance with the Resolution authorizing the issuance of the }.984 Note:;il, referred to in the recitals hereof, the lien of said Resolutioh, including, without limitation, the pledge of Net Revenues of the Enterprise thereunder, shall thereupon cease, terminate and become void and be discharged and satisfied, and the 1984 Note~ and interest increments thereon shall no longer be deemed to be outstanding and unpaid. In connection therewith: (a) Section 15 hereof, provides for a portion of the proceeds of the sale of the Bonds to be paid to the Fiscal Agent for the 1984 NotesA in sufficient time to accomplish their payment in full on March 15, 1986. Upon delivery of the Bonds hereunder, such sums are to be deposited and to be used as provided in this Resolution, - 11 - (t) The Ci:y ond/or the fIscsl Ageil:, 2:: tne case :nay bE, s.na.:l take all actIon necessary tc: pay, retire an':; defeasE: tne 198':' Notes as se! forth ic (c) belov;, includinc;;, v.~ithDut llfr.l t"'a:lcn , alf\ac~ions required by this Resolutioc Ie) The City hereby directs the City Treasurer and the Fisc2l Aaer.: for the 198~ Notes, anc the fIscal Aaent tC pi>y upon their rr,aturity Of, t1arch 1~ 198E, and hereby gives the fisc2l Agent notice that such payment shall be o~ March 1~, 1986, all as more particularly set forth in this Resolution, Section ~, Eaualityof Bonds, Pledoe of Revenues, Pursuant to the Revenue Bond Law and this Resolution, the Bonds sha 11 be equa 111' secured by a pledge, cha rge and 1 ien upon the Net Revenues of the Enterprise without priority for number, date of the Bonds, date of sale, date of execution^or date of delivery, and the payment of the interest on and principal of such Bonds and any premiums upon the redemption of any thereof shall be and are secured by an exclusive pledge, charge and lien upon the Net Revenues of the Enterprise, and all of the Net Revenues of the Enterprise are hereby pledged, charged and assigned for the security of said Bonds, and such Net Revenues of the Enterprise and any interest earned on the Net Revenues of the Enterprise shall constitute a trust fund for the security and payment of the interest on and principal of said Bonds, and so long as any of the Bonds or interest thereon are unpaid said Net Revenues of the Enterprise and interest thereon shall not be used for any other purpose, except as permitted by this Resolution, and shall be held in trust for the benefit of the Bondholders and shall be applied pursuant to this Resolution, or to this Resolution as modified pursuant to provisions herein. Nothing in this Resolution shall preclude (a) the redemption prior to maturity and payment of the Bonds of this issue from proceeds of refunding bonds issued under the Revenue Bond Law^ as the same now exists or as hereafter amended, or under the Charter of the City or under any other law of the State of California; (b) the--rssuance subject to the limitations in Section 23 hereof of addi t iona 1 indebtedness ev idenced by revenue bonds, notes, interim certificates, debentures or other obligations of whatever nature, issued by the City, or any governmental or private person with whom the City may contract, which payments rank on a parity with the Bonds, payable out of the Net Revenues of the Enterprise. If the City shall payor cause to be paid, or shall have made provision to pay upon maturi ty or upon redemption prior to maturity, to the Holders of the Bonds, the principal of, premium, if any, and interest to become due thereon, through setting aside trust funds or setting apart in a reserve fund or special trust account created pursuant to this Resolution or otherwise, or through the irrevocable segregation for that purpose in some sinking fund or other fund or trust account with a fiscal agent or otherwise, funds sufficient therefor, including, but not limited to, interest earned to be earned on Federal Securities, then the lien of this Resolution, including, without limitation, the pledge of the Net - 12 - Re',!enue:: '-.P tne Ef,:er;:rise, anc cl_ ottJ~:. riahts g:antec hereby, sha~~ thereup:Jr. ceaS~t ~errninate anc beCOil1E: VOIC aLd be discharged and sa:15:1ec, anc the prlDcipa: of, prerrllur:-" .l._ any, and interest O~ ~ne Bo~ds shal~ no lonaer be deemed tc be Outstandinc and unpaid; providec, however, tha:"nothing in this Resol~ior: shall require the depOS1-: 0: more thar; such Federa: SeCUfl:lES 2.S rrLay be sufficien:., takln~ l~tO aCCDun: both the prlnclpa~ arr:OUI~: 0: suc~ Federal Secur 1 t.ies anc the int.erest t.o become due ther,JL. to implement any refundln~ 0: the Bonds, In such even~, the fiscal Agen~ shall cause ar: accounting for such period or perl ods as sha II be requested by the City to be prepared and filed wlth the City, ane the fiscal Agent, upon the request of the City, shall release the rights of the Bondholders under this Resolution and execute and deliver to the City all such instruments as may be dirable to evidence such release, discharge and satisfaction, and the Fiscal Agent shall pay over or deliver to the City all moneys or securities held by it pursuant to this Resolution which are not required for the payment or redemption of Bonds not theretofore surrendered for such payment or redemption, and the Bonds shall no longer be considered to be AOutstandin'Y\ As used in this paragraph, "Federal Securities" means United States Treasury notes, bonds, bills or certificates of indebtedness, or Obligations for which the faith and credit of the United States are pledged for the timely payment of principal and interest; bonds, consolidated bonds, collateral trust debentures, consolidated debentures, or other obligations issued by federal land banks or federal intermediate credit banks established under the Federal Farm Loan Act, as amended, and Farm Credit Act of 1971, debentures and consolidated debentures issued by the Central Bank for Cooperatives and banks for cooperatives established under the Farm Credit Act of 1933, as amended, and the Farm Credit Act of 1971, bonds or debentures of the Federal Home Loan Bank Board established under the Federal Home Loan Bank Act, bonds of any federal home loan bank established under said act and stocks, bonds, debentures, participations and other obligations of or issued by the Government National Mortgage Association and the Federal Home Loan Mortgage Corporation; and bonds, notes or other Obligations issued by the Federal Financing Bank, the United States Postal Service, or issued or assumed by the International Bank for Reconstruction and Development, the Tennessee Valley Authority, the Inter-American Development Bank, the Government Development Bank for Puerto Rico, or the Asian Development Bank and any other types of Federal Securities authorized by law to be and for refunding purposes at the time that such refunding occurs. Provision sh311 be made by the City, satisfactory to the Fi sca 1 Agent, for the publ icat ion, at lea s t twice, at an interva 1 of not less than seven (7) days between publications, in a financial newspaper or journal, of a notice to the Holders of such Bonds that such funds are so available for such payment. Section 5. No General City Liability. The general fund of the City^is not liable for the payment of the Bonds or their interest, nor is the credit or taxing power of the City~ledged for the payment of the Bonds or their interest or premium, if any. The - 13 - Holder:; c: tho:.:- Bonds shall no: co;.:pel the exerc::.se of the :oxing pO'Ner 0:" .the City!\or the forfeiture 0: ~ny 0: its property. The principdl of and lnteres: -on tne Bonds and any premlums upon the redemption of any there!:?: are not a deb~ 0: tne City^no-: a legal or equitable pledge. charge. lien Aor encumDrance, upor. any of lts property, c: upor. a_ny 0: it~ inc.ome, r.ecelptS^o: .revenues, except the Ne:: Revenues or: the En::erprlse WhlCr: are, unaer tne terms of this Resolution and the Revenue Bond Law, pledged to the payment of ~ Bonds and interes:, Section 6. Descriotion of Bonds. The Bonds shall be in the principal sum of $2,600,000, shall be numbered in consecut:ive numerical order from one (1) upwards, and shall be of the denomination of $5,000 or any integral multiple thereof. Said Bonds shall be designated CITY OF SAN BERNARDINO, CALIFORNIA, SEWER REVENUE REFUNDING BONDS, ISSUE OF 1986 (REGIONAL WASTEWATER TREATMENT PLANT PROJECT), shall be dated March 1, 1986, and shall be payable in consecutive numerical order on March 1 in each year of maturity in the amounts for each of the several years as follows: Year of Maturity Principal ^ (March 1) Amount 1987 $100,000 1988 105,000 1989 115,000 1990 120,000 1991 130,000 1992 140,000 1993 150,000 1994 165,000 1995 175,000 1996 190,000 1997 205,000 1998 220,000 1999 240,000 2000 260,000 2001 285,000 Section 7. Interest. Said Bonds shall bear interest at the rates per annum to be established by resolution of the City upon the sale of the Bonds. All interest shall be payable sem1annually on March 1 and September 1 of each year, commencing September 1, 1986. Each Bond shall bear interest until the principal sum thereof has been paid; provided, however, that if funds are available for the payment thereof in full accordance with the terms of this Resolution, said Bond shall then cease to bear interest. Agent as March 1, exchanges The Fully Registered Bonds shall be numbered by the Fiscal the Fiscal Agent shall determine and shall be dated as of 1986, except that Fully Registered Bonds issued upon and transfers of Fully Registered Bonds shall be dated so - 14 - the.: DC GCiir. c,r less c: .:.nteres: shall :-esu~: fror:. sucr, exchange 0:- tronsfe~. Eacr. Fully Registered Bond shall bear interest from the interes: paymen~ date nex': 'precedino the date thereof unless (i) it lS datec cs 0: an lntefes: payrnen: date, ir: which even': it shall bea: lnte:res: iroIT that interes: pay:nen~ date, or (ii) i: is dated priv~ tC the firs: interes': pay;r,en: da:e, ir. whicr. even: it shal~ bea~ interes: fro~ March:, 1986. Interes: or. Fully Registered Bones shall be paid by the Fiscal Agent (OUe of the appropriate funds) by check or draft mailed on the int:erest payment date to the reglscered owner as his name and address appears on the Bond Registec kept by the Fiscal Agent at the close of business on the fifteenth (15th) day preceding the interest payment date, Section 8. Place of Payment, The Bonds, the interest thereon and any premiums upon the redemption thereof prior to maturity shall be payable in lawful money of the United States of America and (except for interest only on the Bonds which is payable by check or draft as stated above) shall be payable at the principal corporate trust office of Security Pacific National Bank, Fiscal Agent for the City in Los Angeles, California, Section 9, Forms of Bonds and Conversion. The Fully Registered Bonds shall be substantially in the form attached hereto and by this reference incorporated herein, marked "Exhibit A". Such form is hereby approved and adopted as the form of such Bonds and of the redemption, exchange, registration and assignment provisions pertaining thereto, with necessary or appropriate variations, omissions and insertions as permitted or required by this Resolution. Any Bonds issued pursuant to this Resolution may be initially issued in temporary form exchangeable for definitive Bonds when the same are ready for delivery. The temporary Bonds may be printed, lithographed or typewritten, shall be of such denominations as may be determined by the City, shall be without coupons and may contain such reference to any of the provisions of this Resolution as may be appropriate, Every temporary Bond shall be executed by the City and be issued by the Fiscal Agent upon the same conditions and in substantially the same form and manner as the definitive Fully Registered Bonds. If the City issues temporary Bonds, it will execute and furnish definitive Bonds without delay, and, thereupon, the temporary Bonds shall be surrendered for cancellation at the principal corporate trust office of the Fiscal Agent in Los Angeles, California, and the City shall deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Fully Registered Bonds without coupons of authorized denominations of this same issue. Until so exchanged, the'temporary Bonds shall be entitled to the same benefits under this Resolution as definitive Bonds of the same issue delivered hereunder, except that any interest which has accrued thereon shall not be paid until the exchange has been accomplished, Section 10. Execution of Bonds. The Mayor of the City and the City Clerk of the City are hereby authorized and directed to execute the Bonds by their manual or facsimile signatures, and the - 15 - -- City ':ler}'. is hereby au:horized an:: directed to cause the corporate seal of the City to be imprinted ~hereo~. The foregoing officers are hereby authorized and directed to execute the Bonds i'r, accordance with this Section, If any City office!" wnose manual or facsimile signature appears on the Bond~ ,- , ceases to be such officer before delivery of t.llii-Bonds, nlS or ner signature is as effective as if he or she had remained in office. The Fiscal Agent shall authenticate the Bonds on registration and/or change to effectuate the registration and exchange provisions set forth herein, and only such of the Bonds as shall have endorsed thereon a Certificate of Authentication, substantially in the form set forth in Exhibit A, duly executed by the Fiscal Agent, shall be entitled to any rights, benefits^ or security under this Resolution. No Fully Registered Bond shall- be valid or obligatory for any purpose unless and until such Certificate of Authentication shall have been duly executed by the Fiscal Agent, and such Certificate of Authentication of the Fiscal Agent upon any such Fully Registered Bond shall be conclusive and the only evidence that such Fully Registered Bond has been duly authenticated and delivered under this Resolution. The Fiscal Agent.s Certi ficate of Authentication on any Fully Registered Bond shall be deemed to have been duly executed if executed by an authorized officer of the Fiscal Agent, but it shall not be necessary that the same officer execute the Certificate of Authentication on all of the Fully Reglstered Bonds that may be issued hereunder at anyone time. Section 11. Types of Bonds, Registration and Exchanqe. The Bonds shall be issued as fully registered Bonds payable to the registered owner (herein sometimes referred to as "Fully Registered Bonds"). A Fully Registered Bond or Fully Registered Bonds may be exchanged for a Fully Registered Bond or Fully Registered Bonds, Transfer of ownership of a Fully Registered Bond or Fully Registered Bonds shall be made by exchanging the same for a new Fully Registered Bond or Fully Registered Bonds. All of such exchanges shall be made in such manner and upon such reasonable terms and conditions as may from time to time be determined and prescribed by the City; provided, however, no such exchange shall be made between the fifteenth (15th) day preceding any interest payment date and such interest payment date, Such exchanges shall be free of any costs or charges to the person, firm or corporation requesting such exchange, except for any tax or governmental charge that may be imposed in connection with such exchange. Each Fully Registered Bond issued pursuant to this Resolution shall be of a denomination which is $5,000 or a whole multiple thereof and shall be of the same issue. Section 12. Bond Reqister. The Fiscal Agent will keep or cause to be kept at its principal corporate trust office in the City of Los Angeles, California, sufficient books for the registration and transfer of the Bonds, which shall at all time be open to inspection by the City; and, upon presentation for such - 16 - -- purpOSE, tne :;~SC2~ Agent sh21~, unde: such as it IT,cY. prescrioE I register or transfer / or or transferrec, on said reoister, the Bonds as - - reas'JnablE: regul2tion5 ca~SE to be registered herelnbefore provided, Section 13. Maturitv. Call and Redemption 0: Bonds Prior to /-., The Bonds maturing or or prior to March 1, 1993, shall not be subject to call or redemption !H10r to maturity, The Outstanding Bonds maturing on or after March 1, 192..:i, may be called before maturity and redeemed at the option of the City, in whole from the proceeds of refunding bonds and other available funds, or in whole or in part from any other source of funds, on March 1, 1993, or on any interest payment date thereafter prior to maturity, Ifless than all of the Bonds Outstanding are to be so redeemed at anyone time, the Bonds to be redeemed shall be redeemed in inverse order of maturity and within a maturity by lot. Bonds so called for redemption shall be redeemed at a redemption price for each redeemed Bond equal to the principal amount thereof, plus accrued interest to the redemption date and a premium (percentage of principal amount) if redeemed on the following dates: Redemption Dates Premium March 1, March 1, Ma rch 1. March 1, and September 1, and September I, and September 1. and thereafter ^ ^ Bonds may be called on March I, 1996, and on any interest payment date thereafter, without premium. The interest payment date on which Bonds are to be presented for redemption is hereinafter sometimes called the "redemption date" 1993 19l1 1922- 1996 192.1 19.2j 1922 1-112% T o .. 71112% o % - B, Call and Redemption. The Mayor and Common Council of the City may by resolution direct the call and redemption prior to maturi ty of Bonds by the Fiscal Agent in such amounts as funds are available therefor and shall give notice to the Fiscal Agent of such redemption at least sixty (60) days prior to the redemption date. C. Notice of Redemption. Notice of redemption prior to maturity (except as provided below) shall be given by publication at least once prior to the redemption date in a financial newspaper or journal, printed in the English language, of national circulation and customarily published on each business day in the City of New York, New York, such publication to be not les& than thirty (30) nor more than sixty (60) days prior to such redemption date. In the case of refunding, notice shall also be given as provided in Section 3 hereof. Notice of redemption shall also be mailed, not less than thirty (30) nor more than sixty (60) days prior to the redemption date, (i) to the original purchaser(s) of the Bonds (in the case of a syndicate, to the 'manager thereof) and (ii) to the registered owner of each such Bond at the address of such registered owner as it appears on the bond register of the Fiscal Agent or at such other - 17 - adjrcs.::: ;:::J::r. ~e~istered owner may have filec 1,.-.'ith the fisc21 Agen: for suc:-. ;-,U~?:;se; bu: nei~her failure to mail such no:::ice nor any defec: 1L (ifl)" notice so mailed shall affect the sufficiency of the proceedlna: tJC the redemption of any at the Bonds, The notice of redemp~io~ snaIl (a) state the redemption date; (b) state the redemptlon ;:rIce: (c) state the numbers at the Bonds to be redeemed; provide,:', hO'...lever, that whenever any ca~: includes all of the Qytstandln: Bonds, the numbers of the Bonds need not be stated; (d) state, as ~c any Bonds redeemed in pan only, the registered Bond numbers an:': tne principa: portion thereof to be redeemed; and-(e) state tha: interest on the prInclpa" portion at the Bonds so designated for redemption shall cease to accrue f rom and after such redemption date and that on said date there shall become due and payable on each of such Bonds the redemption price thereof, The actual receipt by the Holder of any Bond of notice of such redemption shall not be a condi tion precedent to redemption, and failure to receive such notice shall not affect the validity of the proceedings for the redemption of such Bonds or the c~ssation of interest on the redemption date, Notice of redemption of Bonds shall be given by the Fiscal Agent for and on behalf of the City at the expense of the City. ^ The F i sca 1 Agent sha 11, on or befo re the date of publication of said notice of redemption, mail a similar notice, postage prepaid to any person, firm or corporation that originally purchased Bonds from the City, As to any Fully Registered Bonds so called for redemption, the Fiscal Agent shall, on or before the date of publication of said notice of redemption, mail a similar notice, postage prepaid, to the respective registered owners thereof at the addresses appearing on the Bond Register. ~ ~ notices required by this section shall be given by the Fiscal Agent. A certificate by the Fiscal Agent that notice of call and redemption has been given to the original purchasers and to Holders of Fully Registered Bonds as herein provided shall be conclusive as against all parties, and no Bondholder whose Fully Registered Bond is called for redemption may object thereto or object to the cessation of interest on the redemption date fixed by any claim or showing that he failed to actually receive such notice of call and redemption. D. Redemption Fund. Prior to the redemption date the Fiscal Agent shall establish, maintain and ho19 in trust a separate account which is hereby created for the purpose of this Resolution to be described or known as CITY OF SAN BERNARDINO, CALIFORNIA, SEWER REVENUE REFUND I NG BONDS, I SSUE OF 1986 (REG IONAL WASTEWATER TREATMENT PLANT PROJECT), REDEMPTION FUND (hereinafter sometlmes referred to as "Redemption Fund"), and prior to the redemption date there must be set aside in said Redemption Fund moneys available for the purpose and sufficient to redeem, at the premiums, if any, payable as provided in this Resolution, the Bonds designated in such - IS - r~ .:-' - . ::., :" E:::=t;'~::- - - _ _ r-. ., ',. !""1O::"': c::- ~ =.; <:: ::- ,,;.', 5 C. J.. '2 _ .~: :. r. ~ ":" p '--, :: ~.~: Q r;__ S t; 0 ~ . t": ;::: ~ 1 -= = :. . ,....::.. . -:: r,t" rece:-:-:f:':..} (- ::,:;:. t:- t (, P 3 Y~;'2:1 -=- \. ;: r 1 r;::: 1 ;.' 2 ~ 0 L:: p r eT llj" , :edeerr:e~ UpO~ rresent~~ic:. an~ s~:rend~~ or:y,l () f :. rlt:' Be;l::::' ::: '.,.~"" _' u,_, 8:::-;r,c~, . 2ln= Srl~ ~ _ "--,~ lJSeC r.iL 1 y fo: ':.na-:: p:":'~;:'C__. !-_::y 1,,:erE-S-_ dL~'::: :::H. ca:::i;:; UpDL FI"':'~ 1\- :::-=:,::s'.::er'2':::; bG:l:::::: .sLal~ C',- p=-.:. ::': :rt= ::-eOel.':j:tl')L r:( paId fr~~ sai~ hon~ S~r\'lcE Fu~~. ?ar:id~ Rede;;,otiof: of F',::~\.- Re8is:e!:'2': BCind:::, --- su:rend'2:- '--'_ a::y Fu~ly Re?lstered Eon=.:. r12oee;:-eG yo:: ::,n.:..y, :-'LE:- City snal~ execute and toe FIscal Agen: snal: autnentlcate ana deliver tC the registered owner thereof, at the expense 0: the Cit.y, a nev; B:JDC or Bonds or authorized denominations equal 10 aggregatE: prlnclpa: amount to the unredeemed portior. of the Fully Registered Bond surrendered and of the same lnteres: rate or rates and same maturity or maturities, which new Bond or Bonds shall be a Fully Registered Bond or Fully Registered Bonds, The registered owner of any Fully Registered Bond may, in lieu of surrendering such Bond for a ne'''' Bond, endorse on the reverse of such Fully Registered Bond a notation of such partial redemption, in such form as may be satisfactory to the City and the Fiscal Agent and under such conditions as the Fiscal Agent may approve, Such partial redemption sha 11 be val i d upon payment of the amount thereby requ i red to be paid to such registered owner, and the City and the Fiscal Agent shall be released and discharged from all liability to the extent of such payment irrespective of whether such endorsement shall or shall not have been made on the reverse of such Fully Registered Bond by such registered owner and irrespective of any error or omission in such endorsement, ;..J~'::"iL F. Effect of Redemption. Notice of redemption having been duly given as aforesaid, and moneys for payment of the principal of, premium, if any, and interest payable upon redemption of the Bonds being set aside as aforesaid, the Bonds, or parts thereof, as the case may be, so called for redemption shall, on the redemption date, become due and payable at the redemption price specified in such notice, interest on the Bonds, or parts thereof, as the case may be, so called for redemption shall cease to accrue, and said Bonds, or parts thereof, as the case may be, shall cease to be entitled to any lien, benefit or security under this Resolution, and the Holders of said Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof, and, in the case of partial redemption of Fully Registered Bonds, to also receive a new Bond or Bonds for the unredeemed balance as aforesaid. All unpaid interest on or prior to the redemption continue to be payable to the interest thereon, installments which shall have matured date designated in such notice shall respective Holders thereof but without All Bonds, or parts thereof, as the case may be, redeemed pursuant to the provisions of this Section shall be cancelled upon surrender thereof and delivered to, or upon the order of, the City. - 19 - If after all of the Bonds have been redeemed and cancelled or paid and cancelled there are moneys remaining in said Redemption Fund, said moneys shall be transferred to the Sewer Fund; provided, howe'ler, that if said moneys are part of the proceeds of refunding bonds said moneys shall be transferred to the fund or account created for the payment of principal of and interest on such refunding bonds, Section 14, Funds and Accounts, In the City Treasury of the City in the Sewer Fund (which Fund exists under Section 143 of the Charter) there is hereby continued the following account: 1. Sewer Maintenance and Operation Account sometimes called the "M & 0 Account"). (herein There is hereby created with the Fiscal Agent the following Funds: 1. City of San Bernardino, California, Sewer Revenue Refunding Bonds, Issue of 1986 (Regional Wastewater Treatment Plant Project), Costs of Issuance Fund (herein sometimes called the "Costs of Issuance Fund"); 2. City of Refunding Treatment sometimes San Bernardino, Bonds, Issue of Plant project), called the "Bond California, Sewer Revenue 1986 (Regional Wastewater Bond Service Fund (herein Service Fund"); and 3. City of Refunding Treatment sometimes San Bernardino, California, Sewer Revenue Bonds, Issue of 1986 (Regional Wastewater Plant project), Reserve Fund (hereIn called the "Reserve Fund"). So long as any of the Bonds or the interest thereon remains Q.b!istanding and unpaid (or in law thereof defeased), the moneys in the foregoing Funds and Accounts shall be used for no purposes other than those required or permitted by this Resolution and the Revenue Bond Law. Section 15. Disposition of Bond Proceeds, For the purpose of ensuring the application of the proceeds received from the sale of the Bonds and other moneys on deposit in the funds and pccounts established pursuant to the 1984 Resolution to the purposes set forth in the recitals hereof, for WhICh saId Bonds are to be issued, the proceeds of the sale of the Bonds and such other moneys shall be paid to the Fiscal Agent and shall be deposited and expended by the Fiscal Agent as set forth below. In addition, the City shall pay to the Fiscal Agent a City contribution in an amount equal to^, that amount to be set forth in a certificate of the Cit (the "CIty ontrlbutlon") which shall be expended by the Fiscal Agent for the payment of the costs incurred in connection with the issuance of the Bonds, including the underwriter's discount, all as set forth below: - 20 - (a) Costs of Issuance Fund: U[Jon delivery of the Bonds, the Fiscal Agent shall deposit the City Contribution into the Cost of Issuance Fund in an amount as set forth in a certificate duly executed by an authorized City Representative. All Costs of Issuance shall be paid from the Cost of Issuance Fund to those persons entit led thereto or to the appropriate Ci ty fund to be reimbursed therefor, It is recognized that the Costs of Issuance Fund may be over funded initially because of the necessity to rely upon estimates pending receipt of the final bills, statements and invoices for the costs any remaining balance in the Cost of Issuance Fund after all of the foregoing payments have been made shall be transferred to the ~ Fund, (b) Bond Service Fund: Upon delivery of the Bonds, the Fiscal Agent shall deposit from such proceeds into the Bond Service Fund an amount equal to the interest accrued on the Bonds from their date to the date of their delivery, and any premium on their sale. (c) Reserve Fund: Upon delivery of the Bonds, the Fiscal Agent shall depositJ\an amount equal to the Maximum Annual Debt Service into the Reserve Fund from other moneys on deposit in the funds and accounts establ1shed pursuant to the 19841 Resolution and moneys of the City available for such purpose, (d) Proceeds Fund: Concurrently with the delivery of the Bonds to the purchasers thereof, the Fiscal Agent shall pay to the Fiscal Agent for the 1984 Notes for deposit in the Redemption Fund created by the"l984 R~olution the balance of the proceeds of the sale of the Bonds, At the same time, the Treasurer shall pay to the Fiscal Agent for the 1984 Notesf\for deposit in the Redemption Funds created by the 1984 Resolution such additional amounts from funds and accounts held pursuant to the 1984 Resolution as shall be set forth in a Certificate executed by an appropriate City Representative, based upon computations made by the Independent Financial Consultants, all to the end that the 1984 Note~ which are subject to being paid in full on their maturity on 'March 15, 1986, will be so paid. Any interest earned on such deposit shall be paid to the City for deposit into the Sewer Fund. Section 16. Sewer Fund, The Gross Revenues of the Enterprise shall continue to be transferred to and placed 1n the Sewer Fund as required by Section 134 of the Charter and the 1983 Resolution of Issuance, and thereafter so long as any of the Bonds are Outstanding, the Gross Revenues of the Enterprise shallbe paid into the Sewer Fund, and payments from the Sewe~ Fund shall be made only as provided by Section 149 of the Charter, the 1983 Resolution of Issuance, this Resolution and the Revenue Bond Law. Notwithstanding the foregoing, at the direction of the City Treasurer, there shall be established in the Sewer Fund such account or accounts as are necessary to properly account for and maintain as separate trust funds all connection fees which have been and may continue to be changed to private persons and/or public agencies and - 21 - -- - are requi red to be used for the payment of the costs of extensions and improvements of or additions to the Enterprise or any parts thereof. Such sums shall remain in such account or accounts until expended, pursuant to Section 149 of the Charter for the purposes for which such connection fees have and may continue to be charged, Section 17, Maintenance and Operation Account. Monthly sums sufficient for the Necessary and Reasonable Maintenance and Operation Costs of the Enterprise (and to maintain in the M & 0 Account a reasonably required reserve and replacement fund not to exceed three (3) months":" estimated Necessary and Reasonable Maintenance and Operation Costs of the Enterprise) shall be apportioned from the Gross Revenues of the Enterprise and transferred at the direction of the Treasurer within the Sewer Fund to the M & 0 Account, and immediately thereafter, the balance, i.e" the Net Revenues of the Enterprise, shall be transferred to the Fiscal Agent and applied as hereinafter provided in this Resolution. Section IS. Bond Service Fund. Upon delivery of the Bonds to the purchasers thereof, any accrued interest paid by said purchasers shall be placed in the Bond Service Fund. On the date of the Bonds and thereafter, so long as any of the Bonds are Outstanding, on the first day of each calendar month, there shall be set aside and transferred from the Net Revenues of the Enterprise paid to the Fiscal Agent for deposits into the Bond Service Fund at least one-sixth (l/6th) of the interest which will become due and payable on Outstanding Bonds and any Parity Bonds within the next ensuing six (6) months and also at least one-twelfth (l/l2th) of the principal amount of such Bonds and any Parity Bonds which will mature and be payable within the next ensuing twelve (l2) months, so that at least the full amount required to pay, as it becomes due, the interest on such Bonds and any Parity Bonds and any maturity or installment of principal of such Bonds and any Parity Bonds shall be set aside in the Bond Service Fund at least one (1) month prior to the date the installment of interest and/or principal become due, No such transfer need be made prior to the actual delivery of the Bonds and Pa r i ty Bonds, if any, to the purchase r thereof; provided, however, that if the Bonds and Parity Bonds, if any, are issued and delivered subsequent to their date there shall be set aside, transferred to and placed with the Fiscal Agent in the Bond Service Fund on the first (1st) day of the calendar month subsequent to the date of delivery sums at least sufficient, together with other transfers of the same amount made on the first (1st) day of each calendar month thereafter, to provide in said Bond Service Fund one (1) month prior to the payment date of the first (lst) installment of interest and/or principal on such Bonds and Parity Bonds, if any, the full amount of such interest and/or principal, Any amount required to be set aside, transferred to and placed with the Fiscal Agent in the Bond Service Fund may be prepaid in whole or in part by being earlier set aside, transferred to and placed in the Bond Service Fund and in that event the monthly transfer which has been so prepaid need not be made at the time appointed therefor. In any event. at least one (1) month prior to the due date of any maturity )2 - -- or installment of principal of and/or interest on Bonds any^Parity Bonds, all sums required for the payment thereof must be on deposit in such Bond Service Fund in cash, All such sums shall be so transferred from the sums which the Treasurer has received into the Sewer Fund as hereinbefore provided, except for transfers to said Fund from the Reserve Fund, as hereinafter provided in this Resolution, It is hereby directed that such sums be so set aside through transfers made in such amounts as may be necessary to comply with the foregoing provisions of this Section, Money set aside and placed in said Bond Service Fund shall remain therein until from time to time expended for the payment of such principal and interest, and shall not be used for any other purpose whatever, except tha t any such money so set as ide and placed in sa i d Bond Service Fund which at any time may be in excess of the amount which at that time is required by the terms of this Section to be in the Bond Service Fund in cash may be temporarily invested as hereinafter provided; provided, however, that such investment shall not affect the obligation of the Clty through the Fiscal Agent to cause the full amount required by the terms of this Section to be available in said Bond Service Fund in cash at the time required by the terms of this Section. If, at the time any Bond is presented for payment, the moneys in the Bond Service Fund are insufficient to make such payment, money sufficient for such payment shall be transferred from the Reserve Fund to said Bond Service Fund. Any money remaining in said Bond Service Fund after payment in full (including interest) of the Bonds and Parity Bonds, if any, may be transferred to the Sewer Fund. The Bonds and Pa r i ty Bonds, if any, sha 11 reci te tha t they are payable from the Sewer Fund, but said Bonds and Parity Bonds, if any, notwithstanding such recital, shall be paid from the Bond Service Fund, which is derived from the Sewer Fund. Section 19. Reserve Fund. On the date of delivery of the Bonds there shall be immediately placed in the Reserve Fund 1!.!!. amount equal to^ that as aforesaid to be set forth in a certificate of the Clty, ana--fhereafter there shall be maintained in said Reserve Fund an amount at least equal to the Maximum Annual Debt Service, Moneys in the Reserve Fund shall be used solely for the purpose of paying the principal of and interest on~the Bonds and any Parity Bonds in the event that the moneys in the Bond Service Fund are insufficient therefor and for that purpose may be withdrawn and transferred to the Bond Service Fund. No payment need be made into the Reserve Fund so long as there shall be in the Reserve Fund a sum at least equal to the Maximum Annual Debt Service. Whenever moneys are withdrawn from the Reserve Fund for the purposes provided in thi s Sect ion, the amount in the Reserve Fund. sha 11 be res to red to the amount required in this Section by transfers from Surplus. Any amount in the Reserve Fund in excess of the Maximum Annual Debt Service shall be transferred to Surplus, Section 20, required or permitted by any remaining balance Enterprise derived from Surplus. After the monthly transfers Section 17, IS and 19 hereof have been made of the amount of Net Revenues of the the Sewer Fund during the preceding month - 23 - shall be used for the restoration, if necessary, of the Reserve Fund as provided in Section 19 hereof. After the above transfers and uses have been :nade and all other covenants of the City contained herein have been duly performed, any money derived from the Net Revenues of the Enterprise (herein sometimes referred to as "Surplus") sha 11 be set aside in the City Treasury in such account or accounts as may be established by the City Treasurer, or otherwise, therefor to be used for any of the following purposes exclusively: ( a ) To ma ke the Treatment Plant Sublease, as of November 1, 1973; payments required dated as of August unde r the Sewage 1, 1970, as amended (b) To pay the cost of unusual or extraordinary ~intenance and QPeration costs of the Enterprise; (c) To pay interest on any bonded debt incurred for the improvement of the Enterprise; (d) To pay the principal of any such debt; (e) To pay the principal of, interest and premiums on Bonds called prior to maturity; ([) To pay the principal of, interest and premiums on Bonds purchased in the open market at prices offered at or below the sum required to be paid in the event of redemption by call; (g) To pay the principal of and interest on bonds which may hereafter be issued pursuant to Section 23 hereof, of equal parity or subordinate as to the lien thereof to the lien of the Bonds, and the premium upon any of such Bonds called or purchased prior to maturity; (h) To pay the costs of extensions and improvements of or additions to the Enterprise for any other sewer purpose; and (i) For any lawful purpose not prOhibited by the Charter. No moneys shall be otherwise paid or transferred therefrom unless all of the requirements of this Resolution then required to be performed have been fully accomplished. Section 21. Deposit and Investment of Moneys in Funds, Subject to the provisions of Covenant 16 of Section 22 hereof, all moneys held by the Treasurer and/or the Fiscal Agent hereunder, except such moneys which are at the time invested, shall be held in time or demand deposits in any bank, trust company or other company or association authorized to accept deposits of public funds (inCluding the banking department of the Fiscal Agent) and shall be secured as required by law, - 24 - 110neys in the Se'..Jer Fund, in the M & 0 Account thereof, may from time to time be invested by the City Treasurer, and moneys in the other Funds held by the Fiscal Agent may, and, upon written request of the City, shall be invested by the Fiscal Agent as permitted by law, subject to the following restrictions: (a) Moneys in the Sewer Fund, in the M & 0 Account thereof, shall be invested only in obligations which will by their terms mature not later than the date the City estimates the moneys represented by the particular investment will be needed for withdrawal from such Fund or Account. (b) Moneys in the Bond Service Fund shall be invested only in obligations which will by their terms mature on such dates as to ensure that before each interest payment date there will be in such Fund, from matured obligations and other moneys already in such Fund, cash equal to the interest, principal and redemption premiums, if any, payable on such date, as may be recommended from time to time by the opinion of an Independent Financial Consultant appointed by the City. (c) Moneys ln the Reserve Fundl\~ be invested either in Federal Securities or such other investment obligations, securities or other investment arrangements as may be legal under the laws of the State and as directed by the Treasurer, WhlCh wlll by thelr terms mature on such dates as to ensure that before each interest payment date there will be in such Fund from matured obligations and other moneys already in such Fund, cash equal to the interest and/or principal payable on such date, as may be recommended from time to time by the opinion of an Independent Financial Consultant appointed by the City.^ (d) Moneys in the Sewer Fund as "Surplus" may be invested in any legally authorized investments in such manner as seems reasonably likely at the time of investment to maximize the earnings thereon, all at the discretion of the Treasurer. Obligations purchased as an investment of moneys in any of said Account and Funds shall be deemed at all times to be a part of such Account or Funds and the interest accruing thereon and any gain realized from such investment shall be credited to such Account or Funds and any loss resulting from any such authorized investment shall be charged to such Account or Funds without liability to the City or the officers and employees thereof or to the Fiscal Agent The City or the Fiscal Agent, as the case may be, shall sell at the best price obtainable or present for redemption any obligation so purchased whenever it shall be necessary to do so in order to provide moneys to meet any payment or transfer from any Account or Funds as required by this Resolution. For the purpose of determining at any given time the balance in any such Account or Funds, any such investment shall be valued at the face amount thereof, Notwithstanding any other provision of this paragraph, interest earnings on the amounts on deposit in the Reserve Fund, to - 25 - the extent the Minimum as Surplus, not otherwise requi red to Reserve Fund Requirement, maintain shall be 1n the Reserve transferred and Fund used Section 22, Covenants, So long as any of the Bonds and any Parity Bonds are Outstanding, the City makes the following covenants with the Bondholders under the provisions of the City Charter and the Revenue Bond Law^(to be performed by the City or its proper officers, agents or employees) which covenants are necessary, convenient and desi rable to secure the Bonds and any Parity Bonds and tend to make them more marketable; provided, however, that said covenants do not require the City to expend any funds other than the Gross Revenues of the Enterprise or the Net Revenues of the Enterprise, as the context may require, Covenant 1. Punctual Payment. The City shall duly and punctually payor cause to be paid the principal of and interest on every Bond and Parity Bond, if any, together with the premium thereon, if any be payable on the date, at the place and in the manner ment ioned in the Bonds and Pa r i ty Bonds, if any, 1\ and in accordance with this Resolution, and that the payments into the Bond Service Fund and the Reserve Fund shall be made, all in strict conformity with the terms of said Bonds and Parity Bonds, if any, of this Resolution, and that it shall faithfully observe and perform all of the conditions, covenants and requirements of this Resolution and all resolutions supplemental thereto and of the Bonds and Parity Bonds, if any, and that time of such payment and perf 0 rmance is of the essence of the City's contract with the Bondholders. Covenant 2. Discharge Claims, In order to fully preserve and protect the priority and security of the Bonds and Parity Bonds, if any, the City shall pay from the Gross Revenues of the Enterprise and discharge all lawful claims for labor, materials and supplies furnished for or in connection with the Enterprise which, if unpaid, may become a lien or charge upon the Gross Revenues of the Enterprise prior or superior to the lien of the Bonds and Parity BOnds~^if any, and impair the security^of the Bonds and Parity Bonds, if any, The City shall also pay from the Gross Revenues of the Enterprise all taxes and assessments or other governmental charges lawfully levied or assessed upon or in respect of the Enterprise or upon any part thereof or upon any of the Gross Revenues of the Enterprise, Covenant 3, Accomplish Purpose. As soon as funds are available therefor, the City shall commence the accomplishment of the purposes for which the Bonds and Parity Bonds, if any, are issued and shall continue the same to completion with all practical dispatch and in an economical manner. Covenant 4, Operate Enterprise in Economical Manner. The City shall operate the efficient and economical manner and maintain Enterprise in good repair and working order. Efficient Enterprise in and preserve and an the - 26 - Covenant 5, Against Sale, The Enterprise shall not be mortgaged or otherwise encumbered, sold, leased, pledged, any charge placed thereon, or disposed of as a whole or substantially as a whole unless such sale or other disposition be so arranged as to provide for a continuance of payments into the Sewer Fund sufficient in amount to permit payment therefrom of the principal of and interest on and premiums, if any, due upon the redemption thereof, of the Bonds and Parity Bonds, if any, payment of which is required to be made out of the Net Revenues of the Enterprise, and also to provide for such payments into the Reserve Fund as are required under the terms of this Resolution. The Gross Revenues of the Enterprise, the Net Revenues of the Enterprise, or any other funds pledged or otherwise made available to secure payment of the principal of and interest on the Bonds and Parity Bonds, if any, shall not be mortgaged, encumbered, sold, leased, pledged, any charge placed thereon, or disposed of or used except as authorized by the terms of this Resolution. The City further covenants that it will not enter into any agreement which impairs the operation of the Enterprise or any part of it necessary to secure adequate Net Revenues of the Enterprise to pay the principal and interest of the Bonds and Pa ri ty Bonds, if any, or which otherwi se wou Id impa i r the rights of the Bondholders with respect to the Net Revenues of the Enterprise or the operation of the Enterprise. If any substantial part of the Enterprise is sold the payment therefor shall either be used for the acquisition and/or construction of improvements and extensions of the Enterprise or shall be placed in the Bond Service Fund or the Redemption Fund and shall be used to payor call Outstanding Bonds in the manner provided in this Resolution, Covenant 6. Insurance. A. The City shall procure and maintain insurance on the Enterprise with responsible insurers in such amounts and against such risks (including accident to or destruction of the Enterprise) as are usually insurable in connection with similar enterprises, which such insurance shall be in an amount at least sufficient to enable the City to retire all Outstanding Bonds and Parity Bonds, if any. In the event of any damage to or destruction of the Enterprise caused by the perils covered by such insurance, the net proceeds of such insurance shall be applied to the repair, reconstruction or replacement of the damaged or destroyed portion of the Enterprise. The City shall cause such repair, reconstruction or replacement to begin promptly after such damage or destruction shall occur and to continue and to be properly completed as expeditiously as possible, and shall payout of the net proceeds of such insurance all costs and expenses In connection with such repair, reconstruction or replacement so that the same shall be completed and the Enterprise shall be free and clear of all liens and claims, If the net proceeds received by reason of any such loss shall exceed the costs of such repair, reconstruction or replacement, the excess shall be deposited by the City in the Sewer Fund, - 27 - -- ----- - -- Alternatively, if the net proceeds of stich insurance are sufficient to enable the city to retire all Outstanding Bonds and Parity Bonds, if any, the City may elect not to repair, reconstruct or replace the damaged or destroyed portion of the Enterprise, and thereupon such net proceeds shall be paid to the Fiscal Agent and applied to redeem or purchase all Outstanding Bonds and Parity Bonds, if any, in the manner specified in Section 13 of this Resolution, Without limiting the generality of the foregoing, the City shall also comply with the following provisions of this Covenant, B, The City shall procure and maintain suitable and adequate fidelity insurance or bonds on all officers and employees of the City handling or responsible for any of the Gross Revenues of the Enterprise. C, The City shall procure and obtain a policy of title insurance from a recognized title insurance company insuring the City for the full cost of the future acquisition of any real property in fee simple acquired comprising any portion of the Enterprise, excluding any improvements thereon. D. The City shall procure and maintain public liability insurance covering claims against the City for bodily injury or death, or damage to property occasioned by reason of the ownership or operation of the Enterprise, such insurance to afford protection in such amounts and against such risks as are usually covered in connection with similar enterprises, E, All policies of insurance required to be maintained herein shall provide that an authorized City representative and the Fiscal Agent shall be given thirty (30) days' written notice of any intended cancellation thereof or reduction of coverage provided thereby, Covenant 7. Records and Accounts. The City shall keep proper books of record and accounts of the Enterprise, separate from all other records and accounts, in which complete and correct entries shall be made of all transactions relating to the Enterprise. Said books shall at all reasonable times be subject to the inspection of not less than ten percent (10%) of the Bondholders or their representatives authorized in writing. The City shall cause the books and accounts of the Enterprise to be audited annually by an Independent Certified Public Accountant (a reasonable time after the close of the Fiscal Year so that the Summary Statement hereinafter referred to can be pub"fished) and shall make available for inspection by the Bondholders at the office of the City Clerk of said City, at the office of the City Treasurer thereof and at the office of the Fiscal Agent, a copy of the report of" the Independent Certified Public Accountant. without limiting the generality of the foregoing, such annual audit shall include the following: - 2i3 - (a) Balance Sheet. A balance sheet including balances of all Funds and Accounts herein continued or created, (b) cash receipts Enterprise, Revenue and Payments, and di.sbursements of A the statement income and in detai 1 expenses of of the the (c) Insurance, A statement the City relating to the Enterprise, of each policy as to its coverage and as to the insurance carried by including a brief description name of company issuing it, (d) Customers. The number of customers classified by rate or charge for serVlce groups, (e) Billing, The annual billings and the average monthly billings by service group. (f) Rate Schedules. The schedules prescribed by the rate ordinance then in effect. of the charges (g) Recapitulation. A recapitulation of Funds and Accounts continued or created by this Resolution into which ar<=A deposited moneys derived from the operation of the Enterprise and from the sale of any Bonds or Parity Bonds, if any, issued therefor or in connection therewith, which shall show balances at the beginning of period and balances at the end of the period; and also the monthly deposit requirements for Funds and Accounts during the next succeeding fiscal period. (h) Comments. Comments relative to the fulfillment of the provisions of this Resolution. The City shall cause to be published annually, not more than one hundred and twenty (120) days after the close of each fiscal year a summary statement showing the amount of Gross Revenues of the Enterprise and-the amount of all other funds collected which are required to be pledged or otherwise made available as security for payment of principal of and interest on the Bonds and Parity Bonds, if any, the disbursements from such Gross Revenues of the Enterprise and other funds in reasonable detail, and a general statement of the financial and physical condition of the Enterprise (the "Summary Statement"). The Ci ty sha 11 fu rni sh a copy of the Summa ry Sta tement to any Bondholder upon request. In connection with the audits and the preparation of the Summary Statemen~ the Clty and-- its offic~ agents, employees, counsel and auditors shall, to the extent that such document involves any other public entity, be entitled to rely on any audited or certified statements of such entity. Covenant 8, No Free Service. Except to the extent that the City is required under agreements and/or contracts existing on - 29 - the effective date o[ this Resolution, no service from the Enterprise sha 11 be furnished or rendered to the Uni ted States of America, the State of California, any municipal or public corporation (other than the City) or district or public agency or any private corroration or person free, and that, except to the extent that the City is required under agreements and/or contracts existing on the effective date of this Resolution, no such service shall be rendered to the united States of America, the State of California, any municipal or public corporation (other than the City) or district or any private corporation or person at rates lower than those charged other persons for similar serVlce; provided, however, that not withstanding the foregoing the City may continue any agreement and/or contract with the United States of America, the State of California, any municipal or public corporation (other than the City) or district or public agency on substantially the same basis as to free service and rates as are in existence on the effective date of this Resolution; and, provided, however, further, that notwithstanding any provision of this Covenant 8, the City shall comply with any obligation validly imposed by law. No building or other real property of the Enterprise shall be furnished free to the City, but the City shall pay into the Sewer Fund the reasonable rental value of any property so used, and reasonable and proper charges for service rendered or quarters furnished to the Enterprise shall be paid to the City from the Sewer Fund. The City shall maintain and enforce valid regulations for the payment of bills for sewer service and such regulations shall provide that the charges for sewer service shall be collected together with and not separately from charges for water service rendered by the City, and, except for sewer users not being rendered water service by the City, charges for sewer service shall be billed upon the same bill as charges for water service and collected as one item, and the City shall discontinud water service to any user whose water and sewer bill has not been paid within the time fixed by said regulations, which shall not be more than sixty (60) days from the date the water and sewer bill became delinquent; and-;- for sewer users not being rendered water service by the City such regulations shall provide that the City shall discontinue service to any user whose sewer bill has not been paid within the time fixed by said regulations, which shall not be more than sixty (60) days from the date the sewer bill became delinquent Covenant 9. Rates and Charges, The City hereby covenants that pursuant to Section 134 of the City Charter and the Revenue Bond Law, it shall levy and collect charges for sewer service which shall be at least sufficient to pay the following amounts in the order set forth: (a) The Necessary and Reasonable Maintenance and Operation Costs of the Enterprise; (b) The principal of Parity Bonds as payments required the Bonds; and interest on the Bonds and they become due and payable to be made into the Reserve Fund any and for - 30 - (c) All payments Resolution; required for compliance fdi th this (d) Any other payment or payments specifically authorized or required by this Resolution; and the charges shall be so fixed that, during each Fiscal Year, after the payment of item designated (a) of this Section the Net Revenues of the Enterprise available for the payment: of item designated (b) shall be at least 1.25 times the amount payable under said (b) and at least one ( 1) times the amounts payable under said (c) and (d) (this requlrement to be considered as a minimum and not as preventing the City from changing any minimum amounts payable under items (c) and (d)), Covenant 10. Compliance with Conditions Precedent, Upon the date of issuance of the Bonds, all conditions, acts and things required by law or by the Resolution to exist, to have happened or to have been performed precedent to or in the issuance of such Bonds shall exist, have happened and have been performed, and^ such Bonds shall be within every limit prescribed by law. Covenant 11. Eminent Domain Proceeds. If all or any part of the Enterprise shall be taken by eminent domain proceedings, the net proceeds realized by the City therefrom shall be deposited by the City with the Treasurer in a special fund in trust and applied by the City to the cost of acquiring or constructing or financing improvements to the Enterprise if: (A) the City first secures and files with the Treasurer an Independent Engineer's Certificate showing (i) the estimated loss in annual Net Revenues of the Enterprise, if any, suffered, or to be suffered, by the City by reason of such eminent domain proceedings, (ii) a general description of the improvements to the Enterprise then proposed to be acquired or constructed by the City from such net proceeds, and (iii) an estimate of the additional Net Revenues of the Enterprise to be derived from such improvements; and (B) the Treasurer, on the basis of such Independent Engineer's Certificate, determines that such additional Net Revenues of the Enterprise will sufficiently offset the loss of Net Revenues of the Enterpris8,\ resulting from such eminent domain proceedings so that the ability of the City to meet its obligations hereunder will not be substantially impaired, which determination shall be final and conclusive. If the foregoing conditions are met, the City shall then promptly proceed with the acquisition or construction or financing of such improvements substantially in accordance with such Independent Engineer's Certificate and payments therefor shall be made by the Treasurer from such net proceeds and from other moneys of the City lawfully available therefor, and any balance of such net proceeds not required by the City for the purposes aforesaid shall be deposited in the Sewer Fund. If the foregoing conditions are not met, then such net proceeds shall be paid to the Fiscal Agent for deposit in the Redemption Fund and application pro rata, among the various maturities, to the redemption or purchase of the Bonds and Parity Bonds, if any, then Outstanding in the proportion which the - 31 - principal amount of the Outstanding Bonds and parity Bonds, if any, bears to the aggregate principal amount of all Bonds and Parity Bonds, if any, then Outstanding, If the Fiscal Agent is unable to purchase or redeern Bonds and Parity Bonds, if any, In amounts sufficient to exhaust the available moneys allocable to the Bonds and Parity Bonds, if any, the remainder of such moneys shall be held in trust by the Fiscal Agent and applied to the payment of the Bonds and Parity Bonds, if any, as the same become due by their terms, and, pending such application, such remaining moneys may be invested by the Treasurer in the manner provided in Section 21, If such eminent domain proceedings have had no effect, or at most a relatively immaterial effect, upon the Net Revenues of the Enterprise and the security of the Bonds and Parity Bonds, if any, and an Independent Engineer's Certificate to such effect has been filed with the Treasurer, the Treasurer may so determine, which such determination by the Treasurer shall be final and conclusive and, upon notice thereof, the City shall forthwith deposit such net proceeds in the Sewer Fund. Covenant 12. Power to Issue Bonds and Make Pledges. The City is duly authorized pursuant to the Charter and the Revenue Bond Law^to create and issue the Bonds and to adopt this Resolution and to pledge the Net Revenues of the Enterprise, the Funds and Accounts and other moneys, securities, funds and property purported to be pledged by this Resolution in the manner and to the extent provided in this Resolution. The Bonds and the provisions of this Resolution are and will be valid and legally enforceable obligations of the City in accordance with their terms and the terms of this Resolution. The City shall at all times, to the extent permitted by law, defend, preserve and protect the pledge of the Net Revenues of the Enterprise, the Funds and Accounts and other moneys, securities, funds and property pledged under this Resolution and all the rights of the Bondholders under this Resolution against all claims and demands of all persons whomsoever. Covenant 13. Further Assurances. Whenever and so often as requested so to do by the Treasurer or the Fiscal Agent, the City will promptly execute and delivery or cause to be executed and delivered all such other and further instruments, documents or assurances, 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 Treasurer, the Fiscal Agent and the Bondholders all rights, interest, powers, benefits, privileges and advantages conferred or intended to be conferred upon them by this Resolution. Covenant 14. Unconditional Obligation, Except only as provided herein for alteration of the Bonds or this Resolution, nothing in this Resolution or in the Bonds^ shall affect or impair the obligation of the City, which is absolute and unconditional, to pay the principal of, interest and premium, if any, on the Bonds to the respective Holders of the Bonds" at the respective dates of maturity, or upon prior redemption, as herein provided or affect or - 32 - impair the right of action, unconditional, of such Holders payment by virtue of the contract Bond Law and this Resolution, which is also absolute and to institute suit to enforce such embodied in the Bonds, ~the Revenue Covenant 15, Agreement and Performance Thereof, The performance of the duties prescribed in this Resolution,^the Charter and the Revenue Bond Law by the City or its proper officers agents or employees, is of the essence of the City's contract with the Bondholders, Each subsequent Holder of the Bonds has recourse to all of the provisions of this Resolution, ^ the Charter and the Revenue Bond Law and is bound by the i r terms. Each and a 11 of the terms of this Resolution shall be and constitute a covenant on the part of the City to and with each and every Bondholder from the time the Bonds are issued hereunder. The Resolution, the Charter and the Revenue Bond Law and the covenants, agreements, provisions and conditions herein contained, constitute a continuing agreement with the Holders of all of the Bonds issued or to be issued hereunder and then Outstanding, to secure the full and final payment of the principal and redemption price of and the interest on all Bonds which may from time to time be executed and delivered hereunder. Whenever all of the Bonds and all interest then accrued thereon shall have been fully paid, discharged or defeased, the agreements in this Resolution contained shall cease and terminate,~and the City shall be under no further Obligation to apply the Revenues as herein required, or otherwise to do or perform any of the covenants, conditionsAor agreements contained in this Resolution, Covenant 16. Non-Arbitrage. The City hereby covenants that it will make no use of the proceeds of the Bonds at any time during the term thereof which, if such use had been reasonably expected on the date of issue of the Bonds, would have caused the Bonds to be arbitrage bonds within the meaning of Section 103(c) of the Internal Revenue Code of 1954, as amended, and any applicable regulations promulgated thereunder. Section 23. Issuance of Parity, Refunding and Additional Bonds, A. Issuance of Parity Bonds. No additional bonds shall be issued or other Obligations incurred which shall be payable from the Net Revenues of the Enterprise and constitute a lien thereon which shall have priority over the Bonds and any parity Bonds, The City may issue additional bonds, notes, certificates of participation or other obligations of whatever nature lssued by the Clty or any other governmental or prlvate person wlth whom the Clty may contract, payable from and secured by a lien on the Net Revenues on a parity with the lien of any of the then outstanding Bonds (the "Parity Bonds"), subject to the provisions of this Section, 1. Such Parity Bonds shall be duly authorized in the manner provided by law, and the Mayor and Common Council shall adopt a resolution or resolutions providing for the issuance of such parity Bonds and, specifying the maximum principal amount thereof and describing the terms and conditions of such Parity Bonds, ~ 3 3 ~ such are such 2_ The City shall not, at the time of Parity Bonds, be in default hereunder unless for funding or refunding defaulted Bonds or default, the issuance of the Parity Bonds otherwise curing 3, The Net Revenues of the Enterprise for the last Fiscal Year preceding the date of adoption by the Mayor and Common Council of the Resolution providing for the issuance of such Parity Bonds, audited as provided in Covenant 7 of Section 22 hereof, as shown by a certificate of an Independent Certified Public Accountant on fi Ie with the City and Fiscal Agent; plus (i) an a llowance for increases in the Net Revenues of the Enterprise for such Fiscal Year from any additions, extensions or improvements to the Enterprise to be acquired, cons t ructed 0 r financed wi th the proceeds of such Pa r i ty Bonds or with the proceeds of any Bonds previously issued, and also for Net Revenues of the Enterprise from any such additions, extensions or improvements which have been made from moneys from any source but which, during all or any part of such Fiscal Year, were not in service, all in an amount equal to seventy-five percent (75%) of the estimated additional average annual Net Revenues of the Enterprise to be derived from such additions, extensions or improvements for the first thirty-six (36) months in which each such addition, extension or improvement is to be in operation, all as shown by an Independent Engineer's Certificate on file with the City and the Fiscal Agent; (ii) an allowance for increases in the Net Revenues of the Enterprise to be received as compensation to the City for collecting and/or transporting and/or treating and/or disposing of sewage or other wastes under a contract or contracts execute2~ with the united States of America,^the State of California or any municipal or public corporation or district, or any private corporation or person but which, during all or part of such Fiscal Year or last completed twelve-month period, were not received, all in an amount equal to seventy-five percent (75%) of the es t ima ted addi t iona 1 average annual Net Revenues of the Enterprise to be derived under such contract or contracts for the first thirty-six (36) month period of service under the contract involved, all as shown by an Independent Engineer' s Certificate on file with the City and the Fiscal Agent; and (iii) an allowance for increases in the Net Revenues of the Enterprise arising from any increases in the charges which became effective prior to the issuance of such Parity Bonds but which, during all or any part of such Fiscal-Year, were not in effect, in an amount equal to seventy-five percent (75%) of the amount by which the Net Revenues of the Enterprise would have been increased if such increase in charges had been in effect during the whole of such Fiscal Year, as shown by an Independent Engineer's Certificate on file with the City and the Fiscal Agent; ~ 34 ~ shall equal the Bonds issuance of at least 1,25 times and Pari ty Bonds in such Parity Bonds, the any Maximum Annual future Fisca 1 Debt Year Service on after the 4, The resolution providing for the issuance of the Parity Bonds shall provide for an increase in the amount in the Reserve Fund so that there shall, after issuance of the Parity Bonds and at all times thereafter, be on deposit therein-a sum equal to the Maximum Annual Debt Service computed as to the aggregate principal amount of all Bonds to be Outstanding following the issuance of the Parity Bonds, B. Nothing in this Resolution shall be deemed to limit or restrict the power of the City to issue additional bonds payable from Surplus on a basis which is subordinate as to the lien of any of the Net Revenues to the Outstanding Bonds and Parity Bonds (in this Resolution sometimes referred to as "Junior Lien Bonds"), without compliance with the provisions of this Section or of any other provisions of this Resolution, C. The Mayor and Common Counci 1 may refund the Bonds or Parity Bonds, if any, in any manner, which at the time of such refunding may be permitted by law. The refunding bonds may be on a parity of lien with all or a portion of the refunded Bonds. Nothing herein shall prohibit the Mayor and Common Council from issuing such refunding bonds as Junior Lien Bonds, For the purpose of curing a default or threatened default, the Mayor and Common Council may issue additional bonds and exchange such bonds for maturing or matured Bonds or Parity Bonds, if any, or sell them and use the proceeds thereof to pay said Bonds or Parity Bonds, if any, provided that the new bonds shall be made to mature after the maturity of the Bonds or Parity Bonds, if any, Funding or refunding bonds may be issued in such principal amount as may be authorized by law, D, The issuance of types of debt obligations other than Bonds issued as Parity Bonds or as Junior Lien Bonds IS specifically authonzed and required by this Resolution. Such other types of debt". obligations which may be issued as parity Bonds or Junior Lien Bonds, as the case may be, may include, without limitation, debt issued by a joint powers authority, the Redevelopment Agency of the City of San Bernardino, or any public or private authority, agency or person through lease with the City or otherwise or through lease participation certificates, conditional sale certificates or lease purchase certificates or any other financially feasible means.^ Section 24. The Fiscal Aqent and the Payinq Aqents. A. Appointment of Fiscal Aqent. Security Pacific National Bank in Los Angeles, California, is hereby appointed Fiscal Agent for the City to act as the agent and depositary of the City for the purpose of receiving all moneys required to be paid to the Fiscal Agent hereunder, to allocate, use and apply the same, to hold, receive and disburse the funds pledged or held hereunder, and otherwise to hold all the offices and perform all the functions and - 35 - - -- ... - duties provided in this Resolution to be held and perforned by the Fiscal Agent, The Fiscal Agent shall signify its acceptance of the duties and obligations imposed upon it by this Resolution by executing and delivering to the City a written acceptance thereof; and by executing and delivering such acceptance, the Fiscal Agent shall be deemed to have accepted such duties and obligations, but only upon the terms and conditions set forth in this Resolution. The City may remove the Fiscal Agent initially appointed or any successor thereto and in such case shall forthwith appoint a successor thereto but any successor shall be a bank or trust company doing business and having an office in the City of Los Angeles, having a combined capital and surplus of at least $50,000,000. The Fiscal Agent herein appointed or any substituted Fiscal Agent may at any time resign as such by writing filed with the City in which event the City shall forthwith appoint a substitute Fiscal Agent and the resignation shall become effective upon such appointment, In the event that the Fiscal Agent or any successor becomes incapable of acting as such, the Agency shall forthwith appoint a substitute Fiscal Agent. Any bank or trust company into which the Fiscal Agent may be merged or with which it may be consolidated shall become the Fiscal Agent without action of the City, The Fiscal Agent may become the owner of any of the Bonds authorized by this Resolution with the same rights it would have had if it were not the Fiscal Agent. The Fiscal Agent shall have no duty or obligation whatsoever to enforce the collection of or to exercise diligence in the enforcement of the collection of funds assigned to it hereunder, or as to the correctness of any amounts received, but its liability shall be limited to the proper accounting for such funds as it shall actually receive. The recitals of fact and all promises, covenants and agreements herein and in the Bonds shall be taken as statements, promises, covenants and agreements of the City, and the Fiscal Agent assumes no responsibility for the correctness of the same, and makes no representations as to the validity or sufficiency of this Resolution or of the Bonds and shall incur no responsibility in respect thereof, other than in connection with the duties or obligations herein or in the Bonds assigned to or imposed upon the Fiscal Agent, The Fiscal Agent shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or default, Section 25. Lost, Stolen, Destroyed or Mutilated Bonds, In the event that any Bond is lost, stolen, des.troyed or mutilated, the City will cause to be issued a new Bond similar to the original to replace the same in such manner and upon such reasonable terms and conditions, including the payment of costs and the posting of a surety bond if the City deems such surety bond necessary, as may from time to time be determined and prescribed by resolution. The City may authorize such new Bond to be signed and authenticated in such manner as it determines in said resolution. - 3G - - ---- Section 26, Cancellation of Bonds. All Bonds ~~...- _..- surrendered to the Fiscal Agent of the City for payment upon maturity or for redemption shall upon payment therefor be cancelled immediately and forthwith transmitted to the Treasurer of the City. All of the Bonds surrendered to the Treasurer for redemption shall upon payment therefor be cancelled immediately, Any Bonds purchased by the City as authorized herein shall be cancelled forth'dith and shall not be reissued. All of the cancelled Bonds shall remain in the custody of the Treasurer until destroyed pursuant to due authorization, Events of Default and Remedies, Section 27, A, Event of Default. One or more of the following events (herein called "Events of Default") shall constitute an event of default : 1. Principal. If default shall be punctual payment of the principal of any Bond shall become due and payable, whether at expressed, by proceedings for redemption, otherwise; or made in the due and when and as the same maturity as therein by declaration^ or 2, Interest, If default shall be made in the due and punctual payment of any installment of interest of any Bond when as such interest installment shall become due and payable; or 3. Covenants. If default shall be made in the observation of any of the covenants, agreements or conditions on its part herein or in the Bonds contained, and such default shall have continued for a period of sixty (60) days; or 4. Bankruptcy. If the City shall file a petition or answer seeking reorganization or arrangement under the Federal Bankruptcy laws or other applicable laws or statutes of the united States of America, or if a court of competent jurisdiction shall approve a petition, filed with or without the consent of the City, seeking reorganization under the Federal Bankruptcy laws or any other applicable laws or statutes of the united States of America, or if, under the Federal Bankruptcy laws or 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 City or of the whole or any substantial part of its property. B. Acceleration. In each and every Event of Default, the Fiscal Agent, or the Holders of not less than sixty-six and two-thirds percent (66-2/3%) in aggregate principal amount of the Bonds at the time Outstanding shall be entitled, upon notice in writing to the City, to declare the principal of all of the Bonds then Outstanding hereunder and the interest accrued thereon to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in this Resolution or in the Bonds contained to the contrary notwithstanding; provided, however, that no such acceleration shall ~ 37 - be made in the case of a default under subsections A 1 and 2 above, if such default has been cured within thirty (30) days of the date thereof. C, Application of Funds, When acceleration has declared under subsection B above, all of the Net Revenues of Enterprise shall be applied by in the following order: been the 1, Costs and Expenses, To the payment of the costs and expenses the Bondholders in declaring such Event of Default, including reasonable compensation to their agents, attorneys and counsel, and to the payment of the costs and expenses of the Fiscal Agent in carrying out the provisions of this Section, including reasonable compensation to its agents, attorneys and counsel; 2. Interest on Undue Bonds, In case the principal of the Bonds shall not have become due and shall not then be due and payable, to the payment of the interest in default in the order of the maturity of the installments of such interest, with interest on the overdue installments at the same rate, such payments to be made ratably to the persons entitled thereto without discrimination or preference; 3. Principal and Interest on Due Bonds. In case any principal of the Bonds shall have become and shall be then due and payable, to the payment of the whole amount then owing and unpaid upon the Bonds for the principal and interest, with interest on the overdue principal and installments of interest at the same rate; and 4. Insufficient Funds. In case such moneys shall be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, then to the payment of such principal and interest without preference or priority of principal over interest, or of interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest then due, D. Procedure for Application to Bonds. No application of funds to the Bonds shall be made except upon presentation of the several Bonds, and the stamping thereon of the payment, if only partially paid, or upon the surrender thereof if fully paid. E. Refundi ng Def au 1 ted Bonds. The Ci ty may refund any defaulted Bond as to which the maturity has been accelerated by the issuance of a new bond maturing after the maturity of the last Bond issued hereunder, but otherwise on a parity as to payment of interest with the Bonds issued hereunder, and with the consent of the Holder thereof, exchange such Bonds for such matured Bond, or, without his consent, issue and sell said refunding bond and pay said def au 1 ted Bond, and in such event such act ion sha 11 be deemed to cure such default hereunder. The F, Proceedings Constitute Contract; provisions of this Resolution and of the Bondholder resolutions Remedies, providing - 38 - for the sale of the Bonds and awarding the Bonds and fixing the interest rate or rates thereon shall constitute a contract between the City and the Bondholders and the provisions thereof shall be enforceable by any Bondholder for the equal benefit and protection of all Bondholders similarly situated by mandamus, accounting, mandatory injunction or any other suit, action or proceeding at law or in equity that is now or may hereafter be authorized under the laws of the State of California in any court of competent jurisdiction, Said contract is made under and is to be construed in accordance with the laws of the State of California. No remedy conferred hereby upon any Bondholder is intended to be exclusive of any other remedy, but each such remedy is cumulative and in addition to every other remedy and may be exercised without exhausting and without regard to any other remedy conferred by the Revenue Bond Law or any other law of the State of California, No waiver of any default or breach of duty or contract by any Bondholder shall affect any subsequent default or breach of duty or contract or shall impair any rights or remedies on said subsequent default or breach, No delay or omission of any Bondholder to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed as a waiver of any such default or acquiescence therein, Every substantive right and every remedy conferred upon the Bondholders may be enforced and exercised as often as may be deemed expedient. In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken, and the Bondholder shall prevail, said Bondholder shall be entitled to receive from the Net Revenues of the Enterprise reimbursement for reasonable costs, expenses, outlays and attorney's fees and should said suit, action or proceeding be abandoned, or be determined adversely to the Bondholders then, and in every such case, the City and the Bondholders shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. After the issuance and delivery of the Bonds this Resolution and supplemental resolutions thereto shall be irrepealable, but shall be subject to modification to the extent and in the manner provided in Sections 28 ^and 2~ inclusive, of this Resolution, but to no greater extent ana in no other manner. Section 28. Supplemental Resolutions. A. The City may, without the consent of the Bondholders as provided in Section 29, adopt at any time or from time to time Supplemental Resolutions for anyone or more of the following purposes, and any such Supplement a 1 Reso lu t ion sha 11 become effective in accordance with its terms upon the filing with the Fiscal Agent of a copy thereof certified by the City Clerk: (1) To add additional covenants and agreements of the City for the purpose of further securing the payment of the Bonds; - J 'J - (2) To prescribe further limitations and restrictions upon the issuance of Parity Bonds and Junior Lien Bonds and the incurring of indebtedness by the City from the Net Revenues of the Enterprise; (3) To surrender any right, power or privilege reserved to or conferred upon the City by the terms of this Resolution; (4) To confirm as further assurance any pledge under and the subjection to any lien, claim or pledge created or to be created by the provisions of this Resolution of the Net Revenues of the Enterprise and the Accounts and/or Funds or of any other moneys, securities or funds; (5) To cure any ambiguity or defect or inconsistent provision in this Resolution or to insert such provisions clarifying matters or questions arising under this Resolution as are necessary or desirable, provided that such modifications do not adversely affect the rights of the Bondholders, B, Supplemental Resolutions Effective with Consent of Bondholders. The provisions of this Resolution may also be modified at any time or from time to time by a Supplemental Resolution, subject to the consent of Bondholders in accordance with and subjec~ to the provisions of Section 29 hereof, such Supplemental Resolution to become effective upon the filing with the Fiscal Agent of a copy thereof certified by the City Clerk, C. General provisions Relating to Supplemental Resolutions, This Resolution shall not be modified or amended in any respect except in accordance with and subject to the provisions of this Section 28 and Section 29. Nothing contained in this Section 28 or Section 29 shall affect or limit the right or obligation of the City to execute and deliver to the Fiscal Agent or any Paying Agent any instrument elsewhere in this Resolution provided or permitted to be delivered to the Fiscal Agent or any Paying Agent. A copy of every Supplemental Resolution adopted by the City when filed with the Fiscal Agent shall be accompanied by an Opinion of Counsel stating that such Supplemental Resolution has been duly and lawfully adopted in accordance with the provisions of this Resolution, is authorized or permitted by this Resolution and is valid and binding upon the City and enforceable in accordance with its terms, The Fiscal Agent is hereby authorized to accept delivery of a certified copy of any Supplemental Resolution permitted or authorized pursuant to the provisions of this Resolution and to make all further agreements and stipulations which may be contained herein, and, in taking such action, the Fiscal Agent shall be fully protected in relying on Opinion of Counsel that such Supplemental Resolution is authorized or permitted by the provisions of this Resolution, - 40 - Section 29, .~--- Consent of Bondholders. A, The consents of Bondholders are required by this Section for the amendment, waiver or modification of any provision of this Resolution no~ referred to in Section 28; provided, however, that modification or amendment shall be made under or pursuant to this Resolution, which shall, without the express consent of the Bondholder affected, reduce the amount of any Bond, reduce the interest rate or premium, It any, payable thereon, extend its maturity or terms for paying interest thereon or change the monetary medium in which principal and interest or premlum, if any, is payable or reduce the percentage of consent required for amendment or modification, Any act relating to such amendment, waiver or modification consented to by Bondholders holding sixty-six and two-thirds percent (66-2/3%) in aggregate principal amount of the Bonds, exclusive of Issuer-OwnedABonds as hereinafter defined, shall be binding upon the Holders oC all of the Bonds and shall not be deemed an infringement of any of the provisions of this Resolution or of said Revenue Bond Law, whatever the character of such act may be, and may be done and performed as fully and freely as if expressly permitted by the terms of this Resolution, and after such consent relating to such specified matters has been given, no Bondholder shall have any right or interest to object to such action or in any manner to question the propriety thereof or to enjoin or restrain the City or any officer thereof from taking any action pursuant thereto. B. Calling Bondholders' Meetinq. desire to obtain any such consent it shall Bondholders, by resolution, for the purpose action, the consent to which is desired. If the City shall call a meeting of of considering the C. Notice of Meeting. Notice specifying the purpose, place, date and hour of such meeting shall be published once in a financial newspaper or journal of national circulation published in the City of New York, New York not less than sixty (60) days and not more than ninety (90) days prior to the date fixed for the meeting. Such notice shall set forth the nature of the proposed action, consent to which is desired. The Fiscal Agent shall, on or before the first publication of such notice, mail a similar notice, postage prepaid, to the respective registered owners thereof at their addresses appearing on the Bond Register, The place, date and hour of holding such meeting and the date or dates of publishing and mailing such notice shall be determined by the City, in its discretion. The actual receipt by any Bondholder of notice of any such meeting shall not be a condition precedent to the holding of such meeting, and failure to receive such notice shall not affect the validity of the proceedings thereat. A certificate by the Fiscal Agent, approved by resolution of the Mayor and Common Council of said City, that the meeting has been called and that notice thereof has been given as herein provided shall be conclusive as against all - ~ 1 - parties and it shall not be open to any Bondholder to sho'd that he failed to receive notice of such meeting, D, VotiD~9 Oualifications, Any Bondholder may, prior to any such meeting, deliver his Bond or Bonds to the Fiscal Agent, and shall thereupon be entitled to receive an appropriate receipt for the Bond or Bonds so deposited, calling for the redelivery of such Bond or Bonds at any time after the meeting. The Fiscal Agent shall prepare and deliver to the Chairman of the meeting a list of the names and addresses of the registered owners of Bonds, with a statement of the maturities and serial numbers of the Bonds held and deposited by each of such Bondholders, and no Bondholder shall be entitled to vote at such meeting unless his name appears upon such list or unless he shall present his Bond or Bonds at the meeting or a certificate of deposit thereof, satisfactory to the Fiscal Agent, executed by a bank or trust company. No Bondholder shall be permitted to vote with respect to a larger aggregate principal amount of Bonds than is set against his name on such list, unless he shall produce the Bonds upon which he desires to vote, or a certificate of deposit thereof as above provided, E. Issuer-Owned Bonds. The City shall present at the meeting a certificate, signed and verified by the City Treasurer, stating the maturities and serial numbers of all Bonds owned by, or held for account of, the City, directly or indirectly, No person shall be permitted at the meeting to vote or consent with respect to any Bond appearing upon such certificate, or any Bond which it shall be established at or prior to the meeting is owned by the City, directly or indirectly, and no such Bond (in this resolution referred to as "Issuer-Owned Bond") shall be counted in determining whether a quorum is present at the meeting. F. Quorum and Procedure, A representation of at least sixty-six and two-thirds percent (66-2/3%) in aggregate principal amount of the Bonds then Outstanding (exclusive of Issuer-Owned Bonds) shall be necessary to constitute a quorum at any meeting of Bondholders, but less than a quorum may adjourn the meeting from time to time, and the meeting may be held as so adjourned without further notice, whether such adjournment shall have been had by a quorum or by less than a quorum. The City shall, by an instrument in writing, appoint a temporary chairman of the meeting, and the meeting shall be organized by the election of a permanent chairman and a secretary. At any meeting each Bondholder shall be entitled to one vote for every $5,000 principal amount of Bonds with respect to which he shall be entitled to vote as aforesaid, and such vote may be given in person or by proxy duly appointed by an instrument in writing presented at the meeting. The City, by its duly authorized representative, may attend any meeting of the Bondholders, but shall not be required to do so, G. Vote Required. At any such meeting held as aforesaid there shall be submitted for the consideration and action of the Bondholders a statement of proposed action, consent to which IS desired, and if such action shall be consented to and approved by ,12 - Bondholders holding at least sixty-six and two-thirds percent (66-2/3%) 1n aggregate amount of the Bonds then Outstanding (exclusive of Issuer-Owned Bonds) the chairman and secretary of the meeting shall so certify 1n writing to the City, and such certificate shall constitute complete evidence of consent of Bondholders under the provisions of this Resolution, A certificate signed and verified by the chairman and the secretary of any such meeting, shall be conclusive evidence and the only competent evidence of matters stated in such certificate relating to proceedings taken at such meeting, Section 30. Execution of Instruments by Bondholders and Proofs of Ownership of Bonds. A, Evidence of Signatures of Bondholders and Ownership of Bonds. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by this Resolution to be signed or executed by Bondholders may be in any number of concurrent instruments of similar tenor, and may be signed or executed by such Bondholders in person or by their attorneys or agents appointed by an instrument in writing for that purpose. Proof of the execution of any such instrument, or of any instrument appointing any such attorney or agent, and of the holding and ownership of Bonds shall be sufficient for any purpose of this Resolution (except as otherwise herein provided), if made in the following manner: 1, The fact and date of the execution of any Bondholder or his attorney or agent of any such instrument and of any instrument appointing any such attorney or agent, may be proved by delivery of a certificate, which need not be acknowledged or verified, of an office of any bank, or trust company, or of any notary public, or other officer authorized to take acknowledgements, Where any such instrument is executed by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership, such certificate shall also constitute sufficient proof bf his authority; and 2. The ownership of registered Bonds shall be proved by the bond register held by the Fiscal Agent under the provisions of this Resolution. Nothing contained in this Section shall be construed as limiting the Fiscal Agent to such proof, it being intended that the Fiscal Agent may accept any other evidence of the matters herein stated which may seem sufficient. Any reques.t or consent of the Holder of any Bond shall bind every future Holder of the same Bond in respect of anythi ng done 0 r suf f e red to be done by the Ci ty, the Fiscal Agent or any Paying Agent in pursuance of such request or consent, - /13 - Section 31, Miscellaneous, ----~ A, Preservation and Inspection of Documents. All documents received by the Fiscal Agent and Treasurer or any Paying Agent under the provisions of this Resolution shall be retained in its possession and shall be subject at all reasonable times to the inspection of the City, the Fiscal Agent or any Paying Agent, and, upon written request of not less than five percent-(5%) in principal amount of the Holders of the Outstanding Bonds, Bondholders and their agents and representatives, any of whom may make copies thereof. B, Parties of Interest, Nothing in this Resolution, or adopted pursuant to the provisions hereof, expressed or implied, is intended to or shall be construed to confer upon or to give to any person or party other than the City, Fiscal Agent, Paying Agents and the Holders of the Bonds any rights, remedies or claims under or by reason of this Resolution or any covenants, condition or stipulation thereof; and all covenants, stipulations, promises and agreements in this Resolution contained by or on behalf of the City shall be for the sole and exclusive benefit of the City, Fiscal Agent and paying Agents and the Holders from time to time of the Bonds. C. No Recourse Under Resolution or on Bonds, All covenants, stipulations, promises, agreements and obligations of the City contained in this Resolution shall be deemed to be the covenants, stipulations, promises, agreements and obligations of the City and not of any officer or employee of the City in his individual capacity, and no recourse shall be had for the payment of the principali\of, premium, if any, or interest on the Bonds or for any claim based thereon or on this Resolution against any officer or employee of the City or any person executing the Bonds, D, CUSIP: CUSIP identifications numbers will be imprinted on the Bonds, but such numbers shall not constitute a part of the contract evidenced by the Bonds and no liability shall hereafter attach to the Agency or any of the officers or agents thereof because of or on account of said numbers. Any error or omission with respect to said numbers shall not constitute cause for refusal by the successful bidder to accept delivery of and pay for the Bonds. E, Headinqs. Any headings preceding the text of the several Sections hereof, and any table of contents or marginal notes appended to copies hereof, shall be solely for convenience or reference and shall not constitute a part of this Resolution, nor shall they affect its meaning, construction or effect. F. Conflict. All resolutions or parts of resolutions or other proceedings of the City in conflict herewith shall be and the same are repealed insofar as such conflict exists. sha 11 Section 32, be deemed to Future restrict Contracts, Nothing herein contained or prohibit the City from making ~ 44 - contracts or creating bonded or other indebtedness payable from the general fund of the City or from taxes or any source other than the Net Revenues of the Enterprise as defined herein and the general fund of the City shall not include the Net Revenues of the Enterprise, and no contract or other obligation payable from the general fund of the City shall be payable from the Net Revenues of the Enterprise unless specifically authorized pursuant to Section 23 hereof, Section 33, Severability. If any covenant, agreement or provision, or any portion thereof, contained in this Resolution, or the application thereof to any person or circumstance, is held to be unconstitutional, invalid or unenforceable, the remainder of this Resolution and the application of any such covenant, agreement or provision, or portion thereof, to other persons or circumstances shall be deemed severable and shall not be affected thereby, and this Resolution and the Bonds issued pursuant hereto shall remain valid and the Bondholders shall retain all valid rights and benefits accorded to them under this Resolution and the Constitution and laws of the State of California and the Charter of the City. - 45 - Section 34, effect upon adoption. Effective Date, This Resolution shall take I HEREBY adopted by the San Bernardino at held on the the following vote, CERTIFY Mayor a that the foregoing and Common Council resolution oft he meeting was du ly City of thereof, 1986 , by day of to wi t : AYES: Council Members NAYS: jj ,~),. I >;//, "':'" 1)1.'" ,[:2.<; . :1. ABSENT: "'--,'; :'J"" ,Ii /11", City Clerk day of The foregoing resolution is hereby approved this , 1986. Mayor of the City of San Bernardino Approved as to form: City Attorney - 46 - EXHIBIT A [FORM OF FULLY REGISTERED BOND] UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF SAN BERNARDINO CITY OF SAN BERNARDINO, CALIFORNIA SEWER REVENUE REFUNDING BOND ISSUE OF 1986 (Regional Wastewater Treatment Plant Project) Fully Registered Bond No, R $5,000 (1) THE CITY OF SAN BERNARDINO, a municipal corporation and a charter city, duly organized and existing under and pursuant to the Constitution and laws of the State of California (hereinafter sometimes called "City"), FOR VALUE RECEIVED, hereby promises to pay, solely from the Net Revenues of the Enterprise so available in the Sewer Fund, as hereinafter provided, to the Registered Owner set forth above, or registered assigns (herein sometimes referred to as "registered owner"), subject to the right of prior redemption hereinafter mentioned the Principal Sum stated above maturing on the Maturity Date and bearing interest at the Interest Rate set forth above and to pay such registered owner on the interest payment date by check or draft mailed to him as his name and address appear on the register kept by the Fiscal Agent at the close of business on the fifteenth (15th) day preceding the interest payment, interest on such principal sum from the interest payment date next preceding the date hereof (unless (i) the date hereof is an interest payment date, in which event from the interest payment date, or (ii) the date hereof is prior to September 1, 1986, in which event from March 1, 1986) until the principal hereof shall have been paid or provided for in accordance with the Resolution hereinafter referred to, interest payable semiannually on March 1 and September 1 in each year commencing on September 1, 1986, Both principal and interest and any premium upon the redemption prior to maturity of all or part thereof are payable in lawful money of the United States of America; and (except for interest which is payable by check or draft as stated above) are payable at the principal corporate trust office of Security Pacific National Bank, Fiscal Agent for the City, in Los Angeles, California. ---- (2) This Bond and the interest hereon and any premium upon the redemption hereof are not a debt of the City of San Bernardino, nor a legal or equitable pledge, charge, lien or encumbrance upon any of its property or upon any of its income, receipts or revenues except the revenues of the municipal sewer system pledged to its payment, and the principal and interest of this Bond and any premium upon the redemption hereof are payable solely from the revenues - 1 - pledged to its payment, to wit, the Net Re'lenues (as defined 1n the Resolution hereinafter referred to) f rom the sewer system of the City, and said City is not obligated to pay such principal, interest and premium except from said Net Revenues of the Enterprise. The Sewer Fund is established under and pursuant to the Charter of the City and the Revenue Bond LawA (as hereinafter defined), and under the provisions of the Resolution author1zing the 1ssuance of this Bond, the Gross Revenues of the Enterprise (as defined in the ResoTution hereinafter referred to) received from the services and facilities or arising from the entire sewer system of the City are required to be deposited in the City Treasury to the credit of said Sewer Fund and used only for the purposes authorized by said Resolution, including the payment of the Necessary and Reasonable Maintenance and Operation Costs (as defined in the Resolution hereinafter referred to) of the sewer system and the payment from the Net Revenues of the Enterprise of the principal of and interest o~the 1ssue of ~onds of which this 1S one, (3) This is one of a duly authorized issue of Bonds of the City in the aggregate principal amount of $2,600,000, designated "City of San Bernardino, California, Sewer Revenue Refunding Bonds, Issue of 1986 (Regional Wastewater Treatment Plant Proiect)," "the Bonds", all of which have been issued pursuant to the Charter of the City and the Revenue Bond Law of 1941 (being Chapter 6, Part I, Division 2, Title 5 of the Government Code of the State of California) (the "Revenue Bond Law") for the purpose of refunding the outstanding notes of sa1d C1ty entitled "City of San Bernardino, Renewal Sewer Revenue Refunding Bond Anticipation Note, Issue of 1984" (the "1984 Notes") and the creation of said issue and the terms and conditions of the Bonds are provided for by the resolution of the Mayor and Common Council of said City authorizing the Bonds adopted February 13, 1986, designated Resolution No, and this reference incorporates said Resolution and said Chapter 6 herein, and by acceptance hereof the holder of this Bond assents to said terms and conditions. Said Resolution is adopted under, and this BondAis issued under and are to be construed in accordance with the laws of the State of California. (4) By the terms of said Revenue Bond Law and by covenant expressed in said Resolution, the City is obligAed to levy and collect charges for service from the Enterprise of the City such as to provide revenues sufficient to pay the Necessary and Reasonable Maintenance and Operation Costs of the^ Enterprise and the principal of and interest on the Bonds as they become due and payable in addition to all other payments required for compliance with said Resolution, are prohibited from issuing bonds having any priority with respect to payment from the sewer system revenues, and are subject to conditions with respect to any sale of said sewer system. In the manner provided in the Resolution, any or all of the obligations referred to in this paragraph and certain other obligations mentioned in said Resolution may be waived with the consent of the holders of sixty-six and two-thirds percent (66-2/3%) in aggregate principal amount of the Outstanding Bonds, exclusive of l.,ssuer-Owned ~onds, unless the modiflCation or amendment is for the - 2 - purpose of curing ambiguities, defects, etc., In Itlhich case no Bondholder's consent is required. (5) Unless this Bond matures on or prior to 19 it is callable and redeemable prior to maturity as follows: [insert call provisions] (6) This Bond is issued in fully registered form (herein sometimes -referred to as "Fully Registered Bond") and is non-negotiable, This Bond may be exchanged for a like aggregate principal amount of^BOnds of other authorized denominationsAof the same issue, all as more fully set forth in the Resolution. This Bond is transferable by the registered owner hereof, in person or by his attorney duly authorized in writing, at the principal corporate trust office of the Fiscal Agent in the City of Los Angeles, California, but only in the manner subject to the limitations and upon payment of the charges provided in the Resolution, upon surrender and cancellation of this Bond. Upon such transfer a new Fully Registered Bond of authorized denomination or denominations for the same aggregate principal amount of the same issue will be issued to the transferee in exchange therefor. No exchange or transfer shall be made between the fifteenth (l5th) day preceding any interest payment date and such interest payment date, (7) The City, the Fiscal Agent and any Paying Agent may treat the registered owner hereof as the absolute owner hereof for all purposes, and the Agency, the Fiscal Agent and any Paying Agent shall not be affected by any notice to the contrary. (8) This Bond shall not be entitled to any benefit under the Resolution, or become valid or obligatory for any purpose until the Certificate of Authentication hereon endorsed shall have been signed by the Fiscal Agent. (9) It is hereby certified and recited that any and all acts, condi t ions and things requ i red to exi s t, happen and to be performed precedent to and in the incurring of the indebtedness evidenced by this Bond payable from the Net Revenues of the Enterprise and in the issuance of this Bond exist, have happened, and have been performed in due time, form and manner as required by the Constitution, the Charter of the City and the laws of the State of California, and that this Bond, together with all other indebtedness of the City pertaining to the aforesaid sewer system, is within every debt and other limit prescribed by the Constitution, the Charter of the City and the laws of the State of California. - 3 - IN WITNESS WHEREOF, said City of San Bernardino has caused this Bond to be signed by the Mayor and the City Clerk of said City by their facsimile signatures and the corporate seal of said City to be imprinted hereon all as of the day of 1986, Mayor of the City of San Bernardino, California ATTEST: City Clerk of the City of San Bernardino, California (SEAL) -1 - [FORM OF CERTIFICATE OF AUTHENTICATION OF FULLY REGISTERED BONDS] This IS one of the Fully Registered Bonds described In the within-mentioned Resolution, Fiscal Agent By Authorized Officer [FORM OF ENDORSEMENT ON FULLY REGISTERED BONDS] This Fully Registered Bond (issued in fully registered form without coupons) is issued inl\the denomination of $5,000, or any whole multiple thereof", aggregating the face value hereof; and Fully Reqistered Bonds of this same issue and of the denomination of $5,000 will be issued in exchange for this Bond in the manner, with the effect and under the terms and conditions stated on the face of the Bond and in the Resolution referred to therein. - 5 -