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Resolution No. 5309 ~' . ORIGINAL ,..... CITY OF VERNON, CALIFORIIIA RESOLUTION NO. 5309 RESOLUTION OF THE CITY UJU.llKaJ.I OF TSB CITY OF VERNON, CALIFORNIA, AUTHORIZING THE ISSUANCE OF BCIIIB TO FINANCE COSTS OF THE BLECTlU:C SYS'1'!X OF SAID CITY (Adopted Augwrt 19, 1986) " .,.., . SECTION 101 SECTION 102 SECTION 103 SECTION 201 SECTION 202 SECTION 203 SECTION 204 SECTION 205 SECTION 206 SECTION 301 SECTION 302 SECTION 303 SECTION 304 SECTION 305 SECTION 306 SECTION 307 SECTION 401 TABLE OF CONTENTS* Paqe ARTICLE I DEFINITIONS AND STATUTORY AUTHORITY Def ini tions. . . . . . . . . . . . . . . . . . . . . Authority for this Resolution... Resolution to Constitute 1 11 Contract. . . . . . . . . . . . . . . . . . . . . . 11 ARTICLE n: AUTHORIZATION AND ISSUANCE OF BONDS Authorization of Bonds.......... 1 General Provisions for Issuance of Bonds....................... 1 1986 Project Bond............... 4 Additional Project Bond......... 4 Refunding Bond.................. 6 Credit Obligation............... 8 ARTICLE In GENERAL TERMS AND PROVISIONS OF BONDS Mediwa of paym.nt: Form and Date: Letter. and Numb.rs..... 1 1 1 Leqanda. . . . . . . . . . . . . . . . . . . . . . . . . Execution and Authentication.... Exchange, Transfer and R.gi.tration.................. Regulation. With Re.p.ct to EXchange. and Tran.f.rs....... Bond. Mutilat.d, De.troy.d, Stol.n or Lq.t................ Temporary Bond.................. 2 3 3 3 ARTICLE IV REDEMPl'ION 01' BONDS Privil.ge of Red..ption and R.d..ption Pric............... 1 *Thi. Tabl. of Cont.nts was not a part of the Resolution as adopted. SECTION 402 SECTION 403 SECTION 404 SECTION 405 SECTION 406 SECTION 501 SECTION 502 SECTION 503 SECTION 504 SECTION 505 SECTION 506 SECTION 507 SECTION 508 SECTION 509 SECTION 510 SECTION 511 SECTION 512 SECTION 513 SECTION 601 SECTION 602 SECTION 603 SECTION 604 TABLE OF CONTENTS (Continued) Redemption at the Election or Direction of the City......... Redemption Otherwise Than at city's E1.ction or Dir.ction.. S.l.ction of Bonds to b. ~..citlElJl"cl. . . ... .. . . . . . . . . . . . . . . Notice of Redemption............ paym.nt of Red..med Bonds....... ~... .... . Page 1 1 1 2 2 ARTICLE V ESTABLISHMENT OF FUNDS AND APPLICATION THEREOF Th. P1.dqe Eff.ct.d by the R.so1ution. . . . . . . . . . . . . . . . . . . . Establishment of Funds and Accounts. . . . . . . . . . . . . . . . . . . . . . Construction Fund............... R.venues and Revenu. Fund....... Disposition of Rev.nu........... Debt Service Fund--Debt Service Account. . . . . . . . .. . . . . . . . . . .. . . D.bt S.rvic. Fund--Debt s.rvic. R.serv. Account............... Bond Anticipation Not. Fund..... Subordinat.d Ind.bt.dne.s Fund.. Continq.ncy Fund................ General Res.rv. Fund............ Bond Anticipation Not........... Subordinat.d Indebtedn.ss....... AR'l'ICLB VI DEPOSITARXES OF MONEYS, SECURITY FOR DEPOSITS AND INVESTMENT OF FUNDS Depo.itari...................... 1)"~c)lIjl1:lI. . . . . . . . . ... . . . . . . . . . . ... Inv.stment of c.rtain Fund...... Valuation and Sale of Inv..tm.nt.................... 4 --i1 -- 1 1 2 4 4 6 7 8 8 9 10 12 12 1 1 2 .t ..... SECTION 701 SECTION 702 SECTION 703 SECTION 704 SECTION 705 SECTION 706 SECTION 707 SECTION 708 SECTION 709 SECTION 710 SECTION 711 SECTION 712 SECTION 713 SECTION 714 SECTION 715 SECTION 716 SECTION 717 SECTION 718 SECTION 719 SECTION 801 SECTION 802 SECTION 803 SECTION 804 SECTION 805 SECTION 806 TABLE OF CONTENTS (Continued) ARTICLE VII PARTICULAR COVENANTS OF THE CITY paym.nt of Bonds................ Extension of Payment of Bonds... Offic.. for Servicing Bonds..... Furth.r Assuranc................ Power to Issue Bonds and Pledge Revenues and Other Funds...... Creation of Liens1 Sale and Lease of Property............. Con.ulting Engineer............. Annual Budg.t................... Op.ration and Maint.nance of the Enterprise. . . . . . . . . . . . . . . . .. . . Rate., Fee. and Charge.1 Enforcement................... Maint.nance of Insuranc.1 Recon.truction1 Application of Insurance Proc.eds............ Account. and R.port............. paym.nt of Tax.. and Charg...... No Diminution of Right.......... Gov.rnm.ntal R.organization..... Tax Cov.nants................... Right. and Lic.n................ General. . .. . . . . .. . .. . . . . . . . . . . . . Notification to Rating Agency... ARTICLB vzn: EVENTS OF DEFAULT AND REMEDIES OF BONDHOLDERS Ev.nt. of Default............... Accounting and Examination of R.cord. After Default......... Application of R.v.nu.. and Oth.r Money. After Default.... Appointa.nt of R.c.iv.r......... proc..ding. Brought by Tru.t.... R..triction on Bondholder'. Action. . . . . . . . . . . . . . . . . . . . . . . . 6 -- iii -- Page 1 1 1 1 2 2 4 4 4 4 6 7 8 8 9 9 10 10 10 1 2 3 5 5 SECTION 807 SECTION 808 SECTION 809 SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION 901 902 903 904 905 906 907 908 909 910 911 912 913 SECTION 1001 SECTION 1002 SECTION 1003 TABLE OF CONTENTS (Continued) Remedies Not Exclusive.......... Effect of Waiver and Other Circumstances................. Notice of Default............... ARTICLE IX CONCERNING THE FIDUCIARIES Trustee; Appointment and Acceptance of Duties.......... Payinq Aqents; Appointment and Acc.ptance of Duti.s.......... Responsibilities of Fiduciaries. Evidence on Which Fiduciaries May Act........................ CompensatIon.................... C.rtain permitt.d Acts.......... Resiqnation of Trust............ Removal of Truste............... Appointment of Succes.or Trustee Tran.fer of Riqht. and Property to Successor Trust............ M.rq.r or Consolidation......... Adoption of Auth.ntication...... R.siqnation or Removal of Payinq Aqent and Appointm.nt of Successor. . . . . . . . . . . . . . . . . . . . . ARTICLE X SUPPLEMENTAL RESOLUTIONS Supplemental Resolutions Eff.ctive upon Filinq With the ~~II1:..ta. .. .'. . . . . . . . . . . .. . . . . . . Supplem.ntal Re.olutions Effective With Consent of Bondhold.r.. . . . . . . . . . . . . . . . . . . General Provi.ion.............. -- iv -- " ..... Page 7 7 7 1 1 1 2 3 4 4 4 4 5 6 6 6 1 3 3 '"" RESOLUTION NO. 5309 RESOLUTION OF THE CITY COUlfCIL OF THE CITY OF VERNON, CALIFORNIA, AUTHORIZING TaB ISSUANCE OF BOII'm TO FINANCE COSTS OF THE ELECTRIC SYSTEX OF SAID CITY BE IT RESOLVED by the City Council of the city of Vernon, California as follows: ARTICLE I DEFINITIONS ARD STATUTORY AU'l'BORITY SECTtOR 101. DefinitianB. The followinq terms shall, for all purposes of the Resolution, have the fOllowing meaninqs: Accountant'. Certificate shall mean a certificate signed by an independent certified public accountant or a firm of inde- pendent certified public accountants of recognized standinq, who may be the accountant or firm of accountants who ~eqularly audit the books of the City. Accruec:l Agg~egat:e Debt Service shall mean, as of any date of calculation, an amount equal to the sum of the amounts of accrued Debt Service with respect to all Series of Bonds, calcu- latinq the accrueel Debt Service with respect to each series as an amount equal to the sum of (i) interest on the Bonds of such Series accrued and unpaiel and to accrue to the end of the then current calendar month, and (ii) Principal Installments due and unpaid anel that portion of the Principal Installment for such Series next due whiCh woulel have accrued (if deemed to accrue in the manner set forth in the definition of Debt Service) to the end of such calanclar month. Act shall mean the Revenue Bonel Law of 1941, Title 5, Division 2, Part 1, Chapter 6 of the Government Code of the state of Califomia, as ..eneleel anel supplemented. Addi tioDal proj ect shall mean any portion (Whether then in existence or not) of the Enterprise designated by the City as an Additional Project in a Supplemental Resolution. Additional Project Bonds shall mean Bonds authenticated .... and delivered on original issuance pursuant to Section 204. Aqqreqate Debt Service for any period shall mean, as of any date of calculation, the sum of the amounts of Debt Service for such period with respect to all Series of Bonds; provided, however, that in computing such Aggregate Debt Service for any future period, any Variable Interest Rate Bonds shall be deemed to bear interest at all times to the maturity thereof at the Maximum Interest Rate applicable thereto. Annual Budqet shall mean the annual budget of the Enterprise, as amended or supplemented, adopted or in effect for a particular Fiscal Year as provided in Section 708. Authorized Newspaper shall mean a newspaper of general circulation in the City of Los Angeles, California or a daily newspaper or financial journal published in the Borough of Manhattan, city and State of New York. Authorized Officer of the City shall mean the Mayor of the City, the City Administrator, the City Clerk or any officer, employee or agent of the City authorized by resolution filed with the Trustee to perform the act or sign the document in question. Bond or Banda shall mean any bond or bonds, as the case may be, authenticated and delivered pursuant to Section 203, 204 or 205 hereof, toqether with bonds in lieu of orin substitution for which other bonds shall have been authenticated and delivered pursuant to Article III or Section 406 or Section 1106 hereof. Bond Anticipation Not. or Notes shall mean any note referred to in, and complying with, the provisions of Section 512. Bond Anticipation Note Fund shall mean the Bond Anticipation Note Fund established in Section 502. Bondholder or Holder shall mean any person who shall be the registered owner of any Bond or Bonds. Bond .eqill'trar shall mean the Trustee and any other bank or trust company orqanized. under the laws of any state or national bankinq association appointed. by the City to perform the duties of Bond Reqistrar enumerated in Section 304 and Section 703. City shall mean the City of Vernon, california, a munici- pal corporation and political SUbdivision of the state of California. -I-2- Construction Fund shall mean the Construction Fund established in Section 502. Consultinq Enqineer shall mean the engineer or engineer- ing firm or corporation having a favorable reputation for skill and experience in the field of engineering of electric utility systems of comparable size and character as the Enterprise at the time retained by the City pursuant to Section 707 to perform the acts and carry out the duties provided for such Consulting Engineer in the Resolution. Continqency Fund shall mean the Contingency Fund estab- lished in Section 502. Continqency .Fund. Requirement shall mean, at any date of calculation, an amount equal to $2,500,000 or such greater amount as the City shall determine from time to time, with the advice of the Consulting Engineer, is required by Prudent Utility Practice. Cost shall mean, with respect to any part of the Enterprise (including the 1986 Project or any Additional Project but subject to any limitation contained in the Act with respect to distribution facilities), the City's costs and expenses attribut- able or allocable to the study, determination of feasibility, planning, designing, acquiring, constructing, installing and financing thereof, placing the same in operation, and obtaining all governmental approvals, certificates, permits and licenses with respect thereto, including, but not limited to, any good faith or other similar payment or deposits required in connection with the purchase of the Enterprise or any part thereof, the cost of acquisition by or for the City of real and personal property, whether tangiDle or intangible, or any interests therein, costs of physical construction and costs of the City incidental to such construction or acquisition, the cost of acquisition of initial fuel or fuel inventory and working capital and reserves therefor and for additional fuel inventories, the costs of capacity or entitlement purchases, the costs of any additions, repairs ,renew- als, replace.ents, expansions, betterments, extensions and improvements to any part of the Enterprise, the costs of the retiring from service, the decommissioning or the disposal of gen- eration, transmis.ion or distriDution facilities, the cost of any indemnity or surety Donds and premiums on insurance during con- struction, preliminary investigation, stUdy, feasiDility and development costs, engineering fees and expenses, contractors' fees and expenses, the costs of labor, materials, equipment and utility services and supplies, legal and financial advisory fees and expense.~ financing costs, fee. and expenses of the Fiduciarie., administration and general overhead expenses and costs of keepinq accounts and making reports required by the Resolution prior to or in connection with the completion of construction, amounts, if any, required by the Resolution to be -I-3- paid into the Debt Service Fund to provide, among other things, for interest on the Bonds during construction and for a reasonable- period thereafter (such period not to exceed, however, 12 months) and to provide for the Debt Service Reserve Requirement or to be paid into the Revenue Fund or the Contingency Fund or the General Reserve Fund for any of the respective purposes thereof upon the issuance of any Series, payments when due (whether at the maturity of principal or the due date of interest or upon redemption) on any indebtedness of the City incurred for the Enterprise, includ- ing Bond Anticipation Notes, Subordinated Indebtedness and other indebtedness, incurred in respect of any of the foregoing, and initial working capital and reserves therefor, and shall include reimbursements to the City for any of the above items theretofore paid by or on behalf of the city. It is intended that this defin- ition be broadly construed to encompass all costs, expenses and liabilities of the City related to the Enterprise which on the date of the Resolution or in the future shall be permitted to be funded with the proceeds of Bonds pursuant to the provisions of California law. The definition of Cost shall not include Operating Expenses. Cost of Issuance Account shall mean the account by that name established in the Construction Fund by the second sentence of subsection 2 of Section 503 hereof. Credit Obligation shall mean any obligation of the city incurred for the Enterprise having a duration greater than five (5) years under a contract, lease, installment sales agreement or other instrument first entered into after the date of adoption of this ReSOlution, to make payments for property, services or com- modities, including capacity and energy, incurred for the Enterprise whether or not the same are made available, furnished or received, or any other obligation of the City incurred for the Enterprise having a duration greater than five (5) years, under which the City lends credit to or guarantees debts, claims or other obligations of any other person for the purpose of obtaining property, service., commodities, including capacity and enerqy, for the Enterprise, only to the extent such obligation requires payment from a designated fund or account created under the Resolution. Debt StlrYice for any period shall mean, as of any date of calculation and with respect'to any Series of Bonds, an amount equal to the sum of (i) interest accruing during such period on Bonds of such Series, except to the extent that such interest is to be paid fro. deposits in the Debt Service Account in the Debt Service Fund made fro. Bond proceeds and (ii) that portion of each Principal Installment for such Series which would accrue during such period if such Principal Installment were deemed to accrue daily in equal amounts from the next preceding Principal Installment due date for such Series (or, if there shall be no -I-4- ~ such preceding Principal Installment due date, from a date one year preceding the due date of such Principal Installment or from the date of issuance of the Bonds of such Series, whichever date is later). Such interest and Principal Installments for such Series shall be calculated on the assumption that no Bonds of such Series Outstanding at the date of calculation will cease to be outstanding except by reason of the payment of each principal Installment on the due date thereof. Debt Service Fund shall mean the Debt Service Fund estab- lished in Section 502. Debt Service Reserve Requirement shall mean, as of any date of calculation, an amount equal to the greatest amount of interest accrued or to accrue for the then current or any single future Fiscal Year for all Series of Bonds which have any Bonds Outstandinq, calculated as of the date or dates of original issu- ance thereof whether or not all of the Bonds of such Series are Outstandinq on the date of calculation; provided, however, that if any Bonds of a Series are no longer outstandinq as a result of a refundinq, the Debt Service Reserve Requirement shall be calcu- lated as if the Bonds of such Series so refunded were no longer outstandinq. For the purposes of the foreqoinq calculation, it shall be assumed that Variable Rate Bonds will bear interest at all times at the Maximum Interest Rate applicable thereto. Depositary shall mean any bank or trust company orqanized under the laws ot any state of the United states or any national bankinq association selected by the City as a depositary of moneys and securities held under the provisions of the Resolution, and may include the Trustee. Electric Depart.ent shall mean the Light and Power Department of the City of Vernon, California, or its successor in function. Enterpris. shall mean the entire electric system of the City now existinq or hereafter acquired by lease, contract, pur- chase or otherwise or constructed by the City, including any interest or participation or riqhts of the City in any facilities used in whole or in part in connection with or for said system, toqether with any additions, repairs, renewals, replacements, expansions, betterments, extensions and improvements to said system or any part thereof hereafter constructed or acquired and toqether with all lands, eas..ents, interests in land, licenses and riqhts of way of the City and all other works, property, structure., equipment of the City and contract riqhts and other tanqible and intanqible assets of the City now or hereafter owned or used in connection with, or related to said system. -I-5- Estimated Debt service on unissued Bonds shall mean, with ~ respect to any period, all Debt Service which the Consul ting- Engineer estimates will accrue during such period on all Unissued Bonds which the Consulting Engineer estimates will be OUtstanding during such period. Such estimate shall be calculated on the assumptions that with respect to each additional Series of Unissued Bonds to be issued: (i) interest shall accrue on such Unissued Bonds at a rate equal to the interest cost with respect to the Series of Bonds being authenticated and delivered for which such calculation is required, calculated on the basis of the aver- age rate of interest actually payable on such Series of Bonds (using the true interest cost method of calculation); provided, however, that if such Series contains Variable Interest Rate Bonds, the Maximum Interest Rate applicable thereto shall be used in computing such av.erage, (ii) Debt Service on such Unissued Bonds will accrue on a substantially level annual basis (the maxi- mum variation between any two years not to exceed 10%) commencing in the estimated year of completion of the Additional Project to which such Bonds relate, and (iii) the term Of such Unis.sued Bonds, computed frOm the date of estimated issuance thereof, will be thirty years, or such shorter term as may be determined by a certificate of an Authorized Officer of the City. For the purpose of calculating the average rate of interest, the Consulting Engineer may rely on the City'S financial consultant as to the method of calculating true interest cost. Event or Bankruptcy shall mean the filing of a petition commencing a case by the City under the Federal Bankruptcy Code or any other applicable bankruptcy or similar law or prQCeeding for the relief of creditors. Event or Dera~t shall have the meaning given to such term in section 801. Federal Bankruptcy COde shall mean the Bankruptcy Reform Act of 1978, as amended, constituting Title 11, United States Code. Fiduciary shall mean the Trustee, any Paying Agent, the Bond Registrar, any Depositary, or any or all of them, as may be appropriate. Piscal. Year shall mean the then current annual accounting period of the Electric Departmant for its general accounting purposes. General Reserve Pu.nd shall mean the General Reserve Fund established in section 502. Generally Accepted Accounting PrinCiples shall mean accounting principles, methods and terminology followed and -I-6- .. construed for privately owned power companies which are engaged in business comparable to the business of the Electric Department, as amended from time to time. Inves'blent Securities shall mean and include any securi- ties, if and to the e~tent the same are at the time legal for investment of City funds. Maximum Interest Rate shall mean, with respect to any particular Variable Interest Rate Bonds, a numerical rate of interest, which shall be set forth in the supplemental Resolution authorizing such Bonds, that shall be the maximum rate of interest such Bonds may bear at any particular time; provided that such Maximum Interest Rate shall in no event exceed the maximum rate of interest permitted bylaw. Mini.ua Interest Rate shall mean, with respect to any particular Variable Interest Rate Bonds, a numerical rate of interest which may (but need not) be set forth in the Supplemental Resolution authorizing such Bonds, that shall be the minimum rate of interest such Bonds may bear at any particular time. Net Revenues for any period shall mean the Revenues during such period less the Operating Expenses during such period. Operating' Expenses shall mean all actual maintenance and operation costs ot the Enterprise incurred by the City in any par- ticular Fiscal Year or period to which said term is applicable or charges made therefor during such Fiscal Year or period, but only if such charges are considered operating expenses in conformity with Generally Accepted Accounting Principles, including amounts reasonably required to be set aside in reserves for items of Operating Expenses the payment of which is not then immediately required. Such Operating Expenses shall include, but are not limited to, expenses tor ordinary repairs, renewals and replace- ments of the Enterprise, salaries and wage., employees' health, hospitalization, pension and retirement expenses, fees for ser- vices, material. and supplies, rents, administrative and general expense., insurance expen.e., legal, engineering, accounting and financial advisory tees and expenses and costs of other consulting and technical service., taxes (except as .et forth in the follow- ing paragraph), payments in lieu ot taxes and other governmental charge., tuel cost., costs ot purchased power and transmission service, payments under the Power Sales Contract dated as of July 1, 1981, by and between Southern California Public Power Authori ty and the City, as amended and supplemented, and payments on Credit Obligations permitted under Section 209, and any other current expenses or obligations required to be paid by the City -1-7- under the provisions of the Resolution or by law, all to the extent properly allocable to the Enterprise, and the fees and. expenses of the Fiduciaries. Such Operating Expenses do not include depreciation or obsolescence charges or reserves therefor, amortization of intan- gibles or other bookkeeping entries of a similar nature, interest charges and charges for the payment of principal, or amortization, of bonded or other indebtedness df the City, costs, or charges made therefor, for capital additions, replacements, betterments, extensions or improvements to or retirements from the Enterprise which under Generally Accepted Accounting Principles are properly chargeable to the capital account or the reserve for depreciation, and do not include losses from the sale, abandonment, reclassifi- cation, revaluation or other disposition of any properties of the Enterprise nor such property items, including taxes and fuel, which are capitalized pursuant to the then existing accounting practice of the City. Operating Expenses shall also not include any voluntary transfers to the General Fund of the City. Opinion of Counsel shall mean an opinion in writing signed by an attorney or firm of attorneys (who maybe counsel to the City) selected by the City. Outstandinq, when used with referenoe to Bonds, shall mean, as of any date of calculation, Bonds theretofore or there- upon being authenticated and delivered under the Resolution except: (i) Bonds cancelled by the Trustee at or prior to such date; (ii) Bonds (or portions of Bonds) for the payment or redemption of which moneys, equal to the principal amount or Redemption Price thereof, as the case may be, with interest to the date of maturity or redemption date, shall be held in trust under the Resolution and set aside for such payment or redemption (whether at or prior to the maturity or redemption date), provided that if such Bonds (or portions of Bonds) are to be redeemed, notice of such red8Dlption shall have been given as in Article IV provided or provision satisfactory to the Trustee shall have been made for the giving of such notice; (iii) Bonds in lieu of or in substitution for which other Bonds shall have been authenticated and delivered pursuant to Article III or Section 406 or 1106; and (tv) Bonds deemed to have been paid as provided in subsection 2 of Section 1201. -I-8- Paying Agent shall mean any bank or trust company organized under the laws of any state of the United states or any national banking association designated as paying agent for the Bonds of any Series, and its successor or successors hereafter appointed in the manner provided in the Resolution. Principal Installment shall mean, as of any date of cal- culation and with respect to any Series, so long as any Bonds thereof are Outstanding, (i) the principal amount of Bonds of such Series due on a certain future date for which no Sinking Fund Installments have been established, or (ii) the unsatisfied bal- ance of any Sinking Fund Installments due on a certain future date for Bonds of such Series, plus the amount of the sinking fund redemption premiums, if any, which would be applicable upon redemption of such Bonds on such future date in a principal amount equal to said unsatisfied balance of such Sinking Fund Installments, or (iii) if such future dates coincide as to differ- ent Bonds of such Series, the sum of the above, as applicable. 1986 Project shall mean the hydroelectric facility of approximately 120 MW known as the Bear Butte Hydroelectric Project as generally described in the Report of Resource Management International Inc. to the City Council, dated AUgust 27, 1986, and shall include all lands, easements and interests in land, licenses, rights of way, works, property, structures, equipment, contract rights, tangible and intangible assets relating thereto and owned (in whole or in part) by the City. 1986 Project Account shall mean the account by that name established in the Construction Fund by clause (i) of subsection 2 of Section 503 hereof. 1986 Project Bands shall mean the Bonds authenticated and delivered pursuant to Section 203 hereof. Prudent utility Practice shall mean. any of the practices, methods and acts which, in the exercise of reasonable judgment, in the light of the facts, including but not limited to the prac- tices, methods and acts engaged in or approved by a significant portion of the electrical utility industry prior thereto, known at the time the decision was made, would have been expected to accom- plish the desired result at the lowest reasonable cost consistent with reliability, safety and expedition. It is recognized that Prudent utility Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather is a spectrum of possible practices, methods or acts which could have been expected to accomplish the desirec1result at // the lowest reasonable cost consistent with reliability, safety and expedition. -1-9- Redemption Price shall mean, with respect to any Bond, the principal amount thereof plus the applicable premium, if any, payable upon redemption thereof pursuant to such Bond or th~ Resolution. Refunding Bonds shall mean all Bonds, whether issued in one or more Series, authenticated and delivered on original issu- ance pursuant to Section 205, and any Bonds thereafter authenti- cated and delivered in lieu of or in substitution for such Bonds pursuant to Article III or Section 406 or Section 1106. Resolution shall mean this Resolution as from time to time amended or supplemented by Supplemental Resolutions in accor- dance with the terms hereof. Revenue Fund shall mean the Revenue Fund established in Section 502. Revenues shall mean (i) all revenues, fees, income, rents and receipts earned by the City from or attributable to the owner- ship and operation of the Enterprise, including all revenues attributable to the Enterprise or to the payment of the costs thereof received by the City under any contract for the sale of power, energy, transmission or other service from the Enterprise or any part thereof or any contractual arrangement with respect to the use of the Enterprise or any portion thereof or the services, output or capacity thereof, (ii) the proceeds of any insurance covering business interruption loss relating to the Enterprise, and (iii) interest earned on any moneys or investments (other than in the Construction Fund) held pursuant to the Resolution and required to be paid into the Revenue Fund, all as determined in accordance with Generally Accepted Accounting Principles. Series shall mean all of the Bonds authenticated and delivered on original issuance and identified pursuant to this Resolution or the Supplemental Resolut:ton authorizing such Bonds as a separate Series of Bonds, or any Bonds thereafter authenti- cated and delivered in lieu of or in substitution for such Bonds pursuant to Article III or Section 406 or 1106, regardless of variations in maturity, interest rate, Sinkinq FUnd Installments, or other provision.. SinltiDq Fund InstallJaent shall mean an amount so desig- nated which is established pursuant to clause (h) of paragraph (3) of subsection 1 of Section 202. / Subordinated Indebtedness shall mean any evidence of debt.. referred to in, and complying with, the provisions of Section 513. -1-10- Subordinated Indebtedness Fund shall mean the Subordinated Indebtednes$ Fund established in Section 502. Suppleaental Resolution shall mean any resolution supple- mental to or amendatory of the Resolution, adopted by the City in accordance with Article x. Trust Estate shall mean (i) the proceeds of the sale of the Bonds, (ii) the Revenues, and (iii) all Funds established by the Resolution including the investment income, if any, thereof. Trus~ee shall mean First Interstate Bank of California, and its successor or suocessors and any other corporation or asso- ciation which may at any time be substituted in its place pursuant to the Resolu~ion. Unissued Bonds shall mean, at any date, Bonds not there- tofore issued and not then being issued which the Consulting Engineer estimates will be required to be issued to provide funds to pay all or any part of the Cost of any Additional Project for which Additional proj ect Bonds have theretofore been issued or are then being issued. Variable In~ere.t Ra~e shall mean an interest rate to be borne by a Series of Bonds or anyone or more maturities within a Series of Bonds Which is not a fixed rate of interest. Variable Intares~ Rate Benda shall mean Bonds which bear a Variable Interest Rate. Except where the context otherwise requires, words importing the singular number shall include the plural number and vice versa, and words importing persons shall include firms, asso- ciations, corporations, districts, agencies and bodies. All references in the Resolution to Articles, sections, and other subdivisions are to the corresponding Articles, Sections or subdivisions ot the ReSOlution, and the words herein, hereof, hereunder and other words ot similar import refer to the ~Resolution as a whole and not to any particular Article, Section or subdivision ot the Resolution. The headings or titles of the several articles and sections,ot the Resolution, and any Table of Contents appended to copies ot the Resolution, shall be solely for convenience ot reterence and shall not attect the meaning, con- struction or ettect ot the Resolution. SBCTIOR 102. Authori~y tor thi. Resolutian. This Resolution is adopted pursuant to the provisions of the Act. SEC'l'IOR 103. Resolu~ion to Constitute cont:ract. In consideration ot the purchase and aoceptance ot any and all of the -I-11- Bonds authorized to be issued hereunder by those who shall hold the same from time to time, the Resolution shall be deemed to be- and shall constitute a contract between the City and the Holders from time to time of the Bonds; and the pledge and assignment made in the Resolution and the covenants and agreements therein set forth to be performed on behalf of the City shall be for the equal benefit, protection and security of the Holders of any and all of the Bonds, all of which, regardless of the time or times of their authentication and delivery or maturity, shall be of equal rank without preference, priority or distinction of any of the Bonds over any other thereof except as expressly provided in or permit- ted by this Resolution. -I-12- ARTICLE II AUTHORIZATION AND ISSUANCE OF BOIIDS SECTION 201. Authorization of~. 1. This Resolu- tion authorizes Bonds of the City to be desiqnated as "Electric System Revenue Bonds". The aqqreqate principal amount of the Bonds which may be executed, authenticated and delivered under the Resolution is not limited except as may hereafter be provided in the Resolution or as may be limited by law. 2. The Bonds may, if and when authorized by the City pursuant to one or more Supplemental ReSOlutions, be issued in one or more Series, and the desiqnation thereof, in addition to the name "Electric System Revenue Bonds", shall include such further appropriate particular desiqnation added to or incorporated in such title for the Bonds of any particular Series as the City may determine. Each Bond shall bear upon its face the designation so determined for the Ser~es to which it belonqs. 3. Nothinq contained in the Resolution shall be deemed to preclude or restrict the consolidation pursuant to a Supplemental Resolution of any Bonds of any two or more separate Series authorized pursuant to such Supplemental Resolution to be issued pursuant to any of the provisions of Section 203, 204 or 205 into a sinqle Series of Bonds for purposes of sale and issu- ance; provided that each of the tests, conditions and other requirements contained in Sections 202, 203, 204 and 205 as appli- cable to each such separate Series shall be met and complied with. Except as otherwise provided in this subsection or in such Supplemental ReSOlution, such a consolidated Series shall be treated as a sinqle Series of Bonds for all purposes of the Resolution. SBCT:IOlf 202. General ProvisiolUl for Is...."1C8 of Bonds. 1. All (but not le.s than all) the Bonds of each Series of Bonds shall be executed by the City for issuance under the Resolution and del i vered to the Trustee and thereupon shall be authenticated by the Trust.e and by it delivered to the City or upon its order, but only upon the receipt by the Trustee of the followinq moneys and documents, all dated as of the date of such delivery: (1) An Opinion of Counsel of recognized standinq in the field of law relatinq to municipal bonds to the effect that (i) the City has the riqht and power under the Act as amended to the date of such Opinion to adopt the Resolution, and the Resolution has been duly and law- fully adopted by the City, is in full force and effect and is valid and bincllnq upon the City and enforceable in accordance with its terms, and no other authorization for -II-l- the Resolution is required; (ii) the Resolution creates the valid pledge and assignment which it purports to create of the Revenues, moneys, securities and funds held or set aside under the Resolution for the benefit of the Bonds subject to the application thereof to the purposes and on the conditions permitted by the Resolution; and (iii) the Bonds of such Series are valid and binding obligations of the City as provided in the Resolution and enforceable in accordance with their terms, and entitled to the benefits of the Resolution and of the Act as amended to the date of such Opinion, and such Bonds have been duly and validly authorized and issued in accordance with law, includinq the Act as amended to the date of such opinion, and in accordance with the Resolution; pro- vided, that such Opinion may take exception for limita- tions imposed by or resultinq from bankruptcy, insolven- cy, moratorium, debt adjustment, reorganization or other laws affeetinq creditors' rights qenerally and may state that no opinion is beinq rendered as to the availability of any particular remedy; (2) A written order as to the authentication and delivery of such Bonds, siqned by an Authorized Officer of the city; (3) A copy of the Supplemental Resolution authoriz- inq such Bonds, certified by an Authorized Officer of the City, which shall, amonq other provisions, specify: (a) The authorized principal amount, desiqnation and Series of such Bonds; (b) The purposes for which such Series of Bonds is beinq issued, which shall be (i) the purpose specified in Section 203, (ii) one of the purposes speci- fied in Section 204 or (iii) the refundinq of Bonds as provided in Section 205; (c) The date, and the maturity date or dates, of the Bonds of such Series; (d) The interest rate or rates of the Bonds of such Series and the interest payment dates therefor, provided that the interest rate shall be identical for all such Bonds of like maturity and, with respect to any Variable Interest Rate Bonds of such Series of Bonds, the method. of deter- mininq the Variable Interest Rate, includinq a Maximum Interest Rate and, if the City so determines, a Minimum Interest Rate applicable 'thereto 1 (e) The denominations of, and the manner of datinq, numberinq and letterinq, the Bonds of such Series, provided that such Bonds shall be denominations of $5,000 or any multiple thereof as authorized by such Supplemental Resolution 1 (f) The Payinq Aqent or Payinq Aqentsand the place or places of payment of the principal and Redemption Price, if any, of, and interest on, the Bonds of such Seriesl (q) The Redemption Price or Prices, if any, and, subject to -II-2- Article IV, the redemption terms, if any, for the Bonds of such Series; (h) The amount and due date of each Sinking Fund Installment, if any, for Bonds of like matu- rity of such Series, provided that each Sinking Fund Installment due date shall fall upon an interest payment date for such Bonds; (i) If $0 determined by the City, provisions for the sale of the Bonds of such Series; (j) The amount (or the method of determining the amount), if any, to be deposited from the proceeds of such Series of Bonds in the Debt Service Account in the Debt Service Fund and provisions for the application thereof to the payment of all or a portion of the interest on such Series of Bonds or any other Series of Bonds; (k) The amount, if any, to be deposited from the proceeds of such Series of Bonds in the Debt Service Reserve Account; (1) The amount, if any, to be deposited from the proceeds of such Series of Bonds in the Contingency Fund; (m) The amount, if any, to be deposited in the Revenue Fund, from the proceeds of such Series of Bonds for reserves for working capital and the acquisition of fuel; (n) The amount, if any, to be deposited from the proceeds of such Series of Bonds in the General Reserve Fund; (0) Such other terms and provisions as shall be determined by the City in connection with the issuance and sale of any Series of Bonds; and (p) The forms of the Bonds of such Series and of the Trustee's certificate of authentica- tion; (4) Except in the case of the 1986 Project Bonds, the amount, if any, necessary for deposit in the Debt Service Reserve Account in the Debt Service Fund so that such Account shall equal the Debt Service Reserve Requirement calculated immediately after the authentica- tion and delivery of such Series of Bonds; (5) Except in the case of the 1986 Project Bonds, the amount, if any, necessary for deposit in the Contingency Fund so that such Fund shall equal the dif- ference between (i) the Contingency Reserve Requirement calculated immediately after the authentication and delivery of such Series and (ii) the difference between amounts withdrawn from the Contingency Fund pursuant to Section 510 and the amounts deposited in such Fund at such date pursuant to subsection (5) of Section 505; (6) The amount, if any, to be deposited in the Revenue Fund; (7) Except in the case of 1986 Project Bonds or Refunding Bonds, a certificate of an Authorized Officer of the City stating that the City is not in default in -II-3- the performance of any of the covenants, conditions, agreements or provisions .contained in the Resolution; and (8) Such further documents, moneys and securities as are required by the provisions of Section 203, 204 or 205 or Article X or any Supplemental Resolution adopted pursuant to Article X. 2. All the Bonds of eaoh Series of like maturity shall be identical in all respects, except as to denominations and numbers. After the original issuance of Bonds of any Series, no Bonds of such Series shall be issued except in lieu of or in sub- stitution for other Bonds of suoh Series pursuant to Article III or Section 406 or 1106. SECTION 203. 1986 Project Bands. 1. There is hereby authorized an issue of Bonds under the Resolution the first Series of which shall be desiqnated "1986 Project" and which may be issued in series from time to time for the purpose of financing the Cost of the 1986 Project. 2. Prooeeds, including accrued interest, of each Series of the 1986 Project Bonds authenticated and delivered upon origi- nal issuance pursuant to this section 203 shall be. applied simul- taneously with the delivery of such Bonds, as shall be provided in the Supplemental Resolution authorizing such Series. SECTION 204. Additional Project: Bands. 1. 0 n e 0 r more Series of Additional Project Bonds may be authenticated and delivered upon original issuance at any time, and from time to time for the purpose of providing funds to pay .all or any portion of the Cost of any Additional Project. 2. Each. Supplemental Resolution authorizing the issuance of a Series of Additional Project Bonds shall specify the Additional Project for which the proceeds of such Series of Additional Project Bonds will be applied. 3. Except as otherwise provided in this Section 204, each such Series of Additional Project Bonds shall be authenti- cated and delivered by the Trustee upon original issuance upon receipt by the Trustee ( in addition to the documents set forth. in Section 202) ot the tollowing documents, all dated as ot the date of such delivery (unl... the Trustee shall accept any of such doc- uments bearinq a prior date): (1) A Certiticate ot an Authorized Ofticer of the City setting torth for any period ot twelve consecutive calendar months within the eighteen calendar months next preceding the date ot the authentication and delivery of such Series ot Bonds (A) the Net Revenues for such period -II-4- or, in the event any adjustment of rates shall have been adopted by the City during such twelve month period, an estimate of the Net Revenues for such period which would have resulted if such rate adjustment had been in effect for the entire twelve month period and (B) the Aggregate Debt Service during the twelve-month period so selected with respect to all Series of Bonds which were then outstanding excluding from Aggregate Debt Service any Principal Installment or a portion thereof which was paid from the issuance of indebtedness of the city; and show- ing that such Net Revenues for that period were equal to at least 1.25 times the Aggregate Debt Service as so cal- culated for that period; (2) (i) A certificate of the Consulting Engineer estimating the Net Revenues (assuming the latest sched- uled completion dates of such Additional Project and any other uncompleted portions of the Enterprise then under construction) for the then current Fiscal Year and each succeeding Fiscal Year to and inCluding the third Fiscal Year succeeding the estimated year of the date of comple- tion of the Additional Project being financed from the proceeds of such series of Additional Project Bonds; and (ii) A certificate of the COnsultinq Engineer show- ing the sum of Aggregate Debt Service on all Bonds to be outstanding after the issuance of such Series of Additional Project Bonds plus Estimated Debt Service on Unissued Bonds for each of the Fiscal Years set forth in the certificate delivered pursuant to paragraph (2)(i) above and Showing that, for each such Fiscal Year, the Net Revenues estimated in such certificate for such Year is not less than the sum of (a) 1.25 times the Aggregate Debt Service for such Fiscal Years plus (b) the Estimated Debt Service on Unissued Bonds, if any, for such Fiscal Year. For purposes of this clause (ii), Estimated Debt Service on unissued Bonds shall be calculated on the basis that such Debt Service shall be as nearly equal as practicable in each Fiscal Year, that such unissued Bonds shall bear interest calculated at the average rate of interest payable on the last Series of Bonds authenti- cated and delivered (using the true interest cost method of calculation) or such other rate as shall be deemed appropriate by the Consulting Engineer and be of such tera as shall be deemed appropriate by the Consulting Engineer and approved by the City'S financial advisor. 4. Notwi thstanding any other provision of the Resolution to the contrary, the provisions of subsection 3 of this Section 204 shall not apply to (A) any Series of Additional Project Bonds all of the proceeds of which are to be applied to -II-5- pay the Cost of any Additional Project which consists of additions, repairs, renewals and replacements, improvements; expansions or corrections of any damage or loss to the Enterprise (or any part thereof) necessary, in the opinion of the Consulting Engineer (as expressed in a certificate delivered to the Trustee), to keep the Enterprise (or any part thereof) in good operating condition or to prevent a loss of revenues therefrom to the extent that the cost thereof cannot reasonably be paid from the Contingency Fund or from insurance proceeds or to comply with the requirements of any governmental agency having jurisdiction over the Enterprise; provided that any such Additional Project shall not include any additional generating facilities; or (B) any Series of Additional Project Bonds all of the proceeds of which are to be applied to pay a portion of the Cost of any Additional Project and for which a certificate of the Consulting Engineer has been delivered pursuant to subsection 5 of this Section 204. 5. I f. and to the extent necessary, as shown in the cer- tificate of the Consulting Engineer referred to hereinafter, one or more Series of Additional Project Bonds .ay be authenticated and delivered upon original issuance at any time or from time to time for the purpose of providing additional funds for the payment of the Cost of any Additional Project with respect to which the certificates referred to in subsection 3 of this Section 204 were filed in connection with the issuance of the initial Series of Additional Project Bonds issued to pay the Cost of such Additional Project, in an aggregate principal amount for all Series of such Bonds that will provide the City with funds equal, as nearly as practicable, to the completion requirement for such Additional Project, as set forth in a certificate of the Consulting Engineer which shall be delivered to the Trustee upon authentication and delivery of each such Series of Bonds. Such completion require- ment shall be an amount which, together with all other funds of the City available or estimated to be available for such Additional Project (as stated in a certificate of. any Authorized Officer of the City) is, as nearly as practicable, necessary and sufficient, in the opinion of the Consulting Engineer, to complete the payment of the Cost of such Additional Project. 6. The proceeds, including accrued interest, of the Additional Project Bonds of each Series shall be applied simulta- neously with the delivery of such Bonds, as provided in the Supplemental Resolution authorizing such Series. SBCTIOH 205. Refunding Banda. 1. One or more Series of Refunding Bonds may be authenticated and delivered upon origi- nal issuance to refund by exchange or otherwise all Outstanding Bonds of one or more Series or one or more maturities within a Series. Refunding Bonds shall be issued in a principal amount sufficient, toqether with other moneys available therefor, to accomplish such refunding and to make the deposits in the Funds -II-6- and Accounts under the Resolution required by the prov~s~ons of the Supplemental Resolution authorizing such Bonds but in no event in excess of the aggregate principal amount permitted under the Act. 2 . Refunding. BOnds of. each series issued to refund Bonds other than by exchange shall be authenticated and delivered by the Trustee only upon receipt by the Trustee (in addition to the docu- ments required by Section 202) of the fOllowing documents, all dated as of the date of such delivery: (a) Irrevocable instructions to the Trustee, satisfactory to it, to give due notice of redemption of all the Bonds to be refunded on a redemption date or dates specified in such instructions; (b) If the Bonds to be refunded are not by their terms subject to redemption within the next succeeding 60 days, irrevocable instructions to the Trustee, satisfactory to it, to mail the notice pro- vided for in Section 1201 to the Holders of the Bonds being refunded; and (c) Either (i) moneys in an amount sufficient to effect payment at the applicable Redemption Price of the Bonds to be refunded together with accrued interest on such Bonds to the redemption date, which moneys shall be held by the Trustee or anyone or more of the Paying Agents in a separate account irrevocably in trust for and assigned to the respec- tive Holders of the Bonds to be refunded, or (ii) Investment Securities in such principal amounts, of such maturities, bearing such interest, and other- wise having such terms and qualifications and any moneys, as shall be necessary to comply with the provisions of subsection 2 of Section 1201, which Investment Securities and moneys shall be held in trust and used only as provided in said subsection 2. 3. The proceeds, including accrued interest, of the Refunding Bonds of each Series shall be applied simultaneously with the delivery of such Bonds for the purposes of making depos- its in such funds and accounts as shall be provided by the Supplemental Resolution authorizing such Series of Refunding Bonds and shall be applied to the refunding purposes thereof in the manner provided in said Supple.ental Resolution. 4. Refunding Bonds of each Series which will be used to refund by an exchange shall be authenticated and delivered by the -II-7- Trustee only upon receipt by the Trustee (in addition to the documents required by Section 202) of: (a) Irrevocable instructions from the City to prov ide for the exchange of such Refunding Bonds for the Bonds being refunded thereby; and (b) Such further documents or evidences of the sati.sfaction of conditions as may be required by provisions of the Supplemental Resolutions authoriz- ing the Bonds being refunded that provides for the refunding by such an exchange. SECTI:OH 206. Credit Obligations. Amounts to be paid by the City with resp.ct to any credit Obligation shall constitute Operating Expenses only (i) if they would be so considered under Generally Accepted Accounting Principles or (ii) otherwise, if at the time such Credit Obliqation is entered into, the City shall file with the Trustee a certificate of the Consulting Engineer stating that, in its opinion, (1) the making of such payments as Operating Expenses will not impair the City's abilities to comply with the covenant set forth in Section 710 hereof during the next 10 Fiscal Years or 3 years beyond the commerci.al operation date of the project to which such Credit Obligations relate, whichever is later and (ii) the properties, services orCOD1Dlodities expected to be furnished pursuant to such Credit Obligation Can be economi- cally and efficiently utilized in accordance with Prudent utility Practice by the City to meet its power and energy requirements. If the amounts to be paid by the City for such credit Obligations do not constitute Operating Expense., then such amounts shall be paid out of the Subordinated Indebtedness Fund or the General Reserve Fund. -II-8- , , ARTICLE III GENERAL TERIIS AND PROVISIONS OF BOHr6 SECTION 301. MediUll of Payment7 Fona and De:te7 Letters and Huabers. 1. The Bonds shall be payable, with respect to interest, principal and Redemption Price, in any coin or currency of the United states of America which at the time of payment is 1eqal tender for the payment of public and private debts. 2 . The Bonds of each Series shall be issued only in the form of fully registered Bonds without coupons unless otherwise authorized by a Supplemental Resolution. 3. Each Bond shall be numbered as provided in the Resolution or the Supplemental Resolution authorizinq the Series of which such Bond is a part and so as to be distinquished from every other Bond. 4. The Bonds of each Series shall be dated as provided in the Supplemental Resolution authorizinq the Bonds of such Series. Except as otherwise provided herein, Bonds of each Series shall bear interest from their date. SECTION 302. Leqends. The Bonds of each Series may contain or have endorsed thereon such provisions, specifications and descriptive words not inconsistent with the provisions of the Resolution .a may be necessary or desirable to comply with custom, the rule. of any securities exchanqe or commission or brokeraqe board, or otherwise, as may be determined by the City prior to the authentication and delivery thereof. SECTION 303. Execution and Authentication. 1. The Bonds shall be executed in the name of the City by the manual or facsimile signature of its Mayor, and its corporate seal (or a facsimile thereof) shall be impressed, imprinted, enqraVed or oth- erwise reprOduced thereon and attested by the manual or facsimile siqnatureof the City Clerk of the City, or in such other manner as may be required or permitted by law. In case any one or more of the officers who shall have siqned or sealed any of the Bonds shall cease to be such officer before the Bonds so signed and sealed shall have been authenticated and delivered. by the Trustee, such Bonds ..y, nevertheles., be authenticated and delivered as herein provided, and may be issued as if the persons who siqned or sealed such Bond. had not ceased to hold such offices. Any Bond of a Series may be signed and sealed on behalf of the City by such persons as at the time of the execution of such Bonds shall be duly authorized or hold the proper office in the City, althouqh at the date borne by the Bond. of such Series such persons may not have been so authorized or have held such office. -III-l- 2. The Bonds of each Series shall bear thereon a certif- icate of authentication, in the form set forth in the supplemental_ Resolution authorizing such Bonds, executed manually by the Trustee. Only such Bonds as shall bear thereon such certificate of authentication, shall be entitled to any right or benefit under the Resolution, and no Bond shall be valid or obligatory for any purpose until such certificate of authentication shall have been duly executed by the Trustee. Such certificate of the Trustee upon any Bond executed on behalf of the City shall be conclusive evidence that the Bond so authenticated has been duly authenti- cated and delivered under the Resolution and that the Holder thereof is entitled to the benefits of the Resolution. SECTION 304. EXchanqe, Transfer and Reqistration. 1. The Bonds shall be transferable only upon the books of the City, which shall be kept for such purposes at the corporate trust office of the Trustee as Bond Registrar, by the registered owner thereof in person or by his attorney duly authorized in writing, upon surrender thereof together with a written instrument of transfer satisfactory to the Bond Registrar duly executed by the registered owner or his duly authorized attorney. Upon the trans- fer of any such Bond the City shall issue in the name of the transferee a new Bond or Bonds of the same aggregate principal amount and Series and maturity as the surrendered Bond. 2. The registered owner of any Bond or Bonds of one or more denominations shall have the right to exchanqesuch Bond or Bonds for a new Bond or Bonds of any denomination of the same aggregate principal amount and Series and maturity of the surren- dered Bond or Bonds. Such Bond or Bonds shall be exchanqed by the City for a new Bond or Bonds upon the request of the registered owner thereof in person or by his attorney duly authorized in writing, upon surrender of such Bond or Bonds together with a written instrument requesting such exchange satisfactory to the Bond Registrar duly executed by the registered owner or his duly authorized attorney. 3. The City and each Fiduciary may deem and treat the person in whose name any Bond shall be registered upon the books of the City as the absolute owner of such Bond, whether such Bond shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal and Redemption Price, if any, of and interest on such Bord and for all other purposes, and all such payments so made to any such reqistered owner or upon his order shall be valid and effectual to satisfy and discharge the liabil- ity upon such Bond to the extent of the sum or sums so paid, and neither the City nor any Fiduciary shall be affected by any notice to the contrary. The City agrees to ind-.nify and .save each Fiduciary harmless from and against any and all loss, cost, charge, expense, judgment or liability incurred by it, acting in -III-2- good faith and without negligence under the Resolution, in so treating such registered owner. SEerIOR 305. Regulations With Respect to F.Yr-",,1'lqes and Transfers. In all cases in which the privilege of exchanging or transferring Bonds is exercised, the City shall execute and the Trustee shall authenticate and deliver Bonds in accordance with the provisions of the Resolution. All Bonds surrendered in any such exchanges or transfers shall forthwith be delivered to the Trustee and cancelled or retained by the Trustee. For every such exchange or transfer of Bonds, whether temporary or definitive, the City or the Bond Registrar may make a charge sufficient to reimburse it for any tax, fee or other governmental charge required to be paid with respect to such exchange or transfer. Neither the City nor the Bond Registrar shall be required (a) to exchange or transfer Bonds of any Series for a period of 15 days next preceding an interest payment date on the Bonds of such Series or next preceding any selection of Bonds to be redeemed or thereafter until after the exchange or mailing of any notice of redemption; or (b) to exchange or transfer any Bonds called for redemption. SEerIOR 306. Bands 1e1'til.at:ed, Dest:rayed, Stolen or IDst. If any Bond becomes mutilated or is lost, stolen or destroyed, the City shall execute and the Trustee shall authenticate and deliver a new Bond of like date of issue, maturity date, principal amount and interest rate per annum as the Bond so mutilated, lost, stolen or destroyed, provided that (i) in the case ot such mutilated Bond, such Bond is first surrendered to the Trustee, (ii) in the case ot any such lost, stolen or destroyed Bond, there is first furnished evidence ot such loss, theft or destruction satisfactory to the Trust.. and the City together with indemnity satisfactory to the Truste. and the City, (iii) all other reasonable require- ments at the Trustee and the City (provided that the City shall have advised the Trustee of any such requirements) are complied with, and (iv) expenses in connection with such transaction are paid by the Holder. Any Bond surrendered for exchanqe shall be cancelled. Any such new Bonds issued pursuant to this Section in substitution tor Bonds alleged to be destroyed, stolen or lost shall constitute original additional contractual obligations on the part at the City, whether or not the Bonds so alleged to be destroyed, stolen or lost be at any time enforceable by anyone, and shall be equally secured by and entitled to equal and propor- tionate bene tits with all other Bonds issued uncler the Resolution, in any moneys or securities held by the City or any Fiduciary for the benefit of the Holders of the Bonds. SBerIOR 307. Te.porary Bands. 1. Until the defini- tive Bonds of any Series are prepared, the City may execute, in the same manner as i. provided in section 303, and, upon the request of the City, the Trustee shall authenticate and deliver, "'III-3- in lieu of definitive Bonds, but subject to the same prov1s1ons, limitations and conditions as the definitive Bonds, one or more" temporary Bonds substantially of the tenor of the definitive Bonds in lieu of which such temporary Bond or Bonds are issued, and with such omissions, insertions and variations as may be appropriate to temporary Bonds. The City at its own expense shall prepare and execute definitive Bonds and, upon the surrender of such temporary Bonds, the Trustee shall authenticate and, without charge to the Holder thereof, deliver in exchange therefor, such definitive Bonds of the same aggregate principal amount and Series and matu- rity as the temporary Bonds surrendered. Until so exchanged, the temporary Bonds shall in all respects be entitled to the same ben- efits and security as definitive Bonds authenticated and issued pursuant to the Resolution. 2. All temporary Bonds surrendered in exchange either for another temporary Bond or Bonds or for a definitive Bond or Bonds shall be forthwith cancelled by the Trustee. -III-4- " ARTICLE IV , ' REDEMPTION OF BONDS SECTION 401. Privi1eqe of Red.-ption and Rede.ption Price. Bonds subject to redemption prior to maturity pursuant to this Resolution or a Supplemental Resolution shall be redeemable, upon notice as provided in this Article rv, at such times, at such Redemption Prices and upon such terms in addition to the terms contained in this Article rv as may be specified in the Resolution or in the Supplemental Resolution authorizing such Series. SECTION 402. RedeJaPtion at the Election or Direction of the City. In the ease of any redemption of Bonds at the election or direction of the City, the City shall give written notice to the Trustee of its election or direction so to redeem, of the redemption date, of the Series, and of the principal amounts of the Bonds of each maturity of such Series to be redeemed (which Series, maturities and principal amounts thereof to be redeemed shall be determined by the City in its sole discretion, subject to any limitations with respect thereto contained in the Resolution). Such notic:e shall be given at least 60 days prior to the redemption date or such shorter period as shall be acceptable to the Trustee. In the event notiee of redemption shall have been given as in Section 405 provided, there shall be paid prior to the red.mption date to the appropriate payinq Aqenta an amount in cash which, in addition to other moneys, if any, available therefor held by such Paying Agents, will be suffici.nt to redeem on the redemptiondat. at the Redemption Price thereof, plus interest accrued and unpaid to the redemption date, all of the Bonds to be redeemed. The City shall promptly notify the Trustee in writing of all such payments by it to a Paying Agent other than the Truste.. SEeTIO. 403. Rede.ption Otherwise Than at City's Election or Directian. Whenever by the terms of the Resolution the Trustee is required or authorized to redeem Bonds otherwise than at the .l.ction or direction of the City, the Trustee shall sel.ct the Bonds to b. rede..a, give the notiee of redemption for and on behalf of and at the exp.ns. of the City, and payout of moneys available th.r.for the R.demption Pric. thereof, plus interest accru.d and unpaid. to the redemption date, to the appro- priat. Paying Agent. in accordanc. with the terms of this Article IV and, to the .xtent applicable, section 506. SECTIO. 404. Selection of Boncl8 b) be Rlde--d. If fewer than all of the Bonds of like maturity of any Series shall b. called for prior r.demption, the particular Bonds or portions of Bonds to be r.d....d shall b. s.l.ct.d by the Truste. in such mann.r as the Trust.e in its discretion may deem fair and -IV-l- appropriate; provided, however, that the portion of any Bond of a " denomination of more than $5,000 to be redeemed shall be in the- principal amount of $5,000 or a multiple thereof, and that, in selecting portions of such Bonds for redemption, the Trustee shall treat each such Bond as representing that number of Bonds of $5,000 denomination which is obtained by dividing the principal amount of such Bond to be redeemed in part by $5,000. SECTION 405. Notice of Redemption. When the Trustee shall receive notice from the City of its election or direction to redeem Bonds pursuant to Section 402, and when redemption of Bonds is authorized or required pursuant to Section 403, the Trustee shall give notice, in the name of, on behalf of and at the expense of the City, of the Redemption of such Bonds, which notice shall specify the Series and maturities of the Bonds to be redeemed, the redemption date and the place or places where amounts due upon such redemption will be payable and, if fewer than all of the Bonds of any like Series and maturity are to be redeemed, the let- ters and numbers or other distinguishing marks of such Bonds so to be redeemed, and, in the case of Bonds to be redeemed in part only, such notice shall also specify the respective portions of the principal amount thereof to be redeemed. Such notice shall further state that on such date there shall become due and payable upon each Bond to be redeemed the Redemption Price thereof, or the Redemption Price of the specified portions of the principal thereof in the case of Bonds to be redeeIIled in part only, together with interest accrued to the redemption date, and that from and after such date interest thereon shall cease to accrue and be payable. The Trustee shall give such notice by publication in a newspaper of general circulation in the City of Los Angeles, California and in aclaily newspaper or financial journal publiShed in the Borough of Manhattan, City and State of New York, and by mailing such notice to all registered owners of the 1986 Bonds to be redeemed at their addresses as they appear on the registration books maintained by the Trustee as bond registrar, said notice to be at least 25 days prior to the redemption date. Failure of the registered owner of any Bonds which are to be redeemed to receive any such notice shall not affect the validity of the proceedings for the redemption of Bonds. SECTIOlf 408. payaent of! Red-.d Bands. Notice having been given in the manner provided in Section 405, the Bonds or portion. thereof! so called for redemption shall become due and payable on the redemption date so designated at the Redemption Price, plus interest accrued and unpaid to the redemption date, and, upon pre.entation and surrender thereof at the office speci- fied in such notice, such Bonds, or portions thereof, shall be paid at the Redemption Price, plus interest accrued and unpaid to the redemption date. If there shall be drawn for redemption less than all of a Bond, the City shall execute and the Trustee shall authenticate and the Paying Agent shall deliver, upon the -IV-2- surrender of such Bond, without charge to the owner thereof, for the unredeemed balance of the principal amount of the Bonds so surrendered, Bonds of like Series and maturity in any of the authorized denominations. If, on the redemption date, moneys for the redemption of all the Bonds or portions thereof of any like Series and maturity to be redeemed, together with interest to the redemption date, shall be held by the Paying Agents so as to be available therefor on said date and if notice of redemption shall have been mailed as aforesaid, then, fram and after the redemption date interest on the Bonds or portions thereof of such Series and maturity so called for redemption shall cease to accrue and became payable. If said moneys shall not be so available on the redemp- tion date, such Bonds or portions thereof shall continue to bear interest until paid at the same rate as they would have borne had they not been called for redemption. -IV-3- - . . ARTICLE V ESTABLISHMENT OF FUNDS AHD APPLICATIOIf THEREOF SECTION SOl.. The Pl.edqe Effected by the Resol.ution. 1. The Bonds shall be special obligations of the City payable solely from and secured as to the payment of the principal and Redemption Price thereof, and interest thereon, in accordance with their terms and the provisions of the Resolution solely by the Trust Estate, and the Trust Estate hereby is pledged and assigned to the Trustee for the benefit of the holders of the Bonds subject only to the prOVisions of the Resolution permitting the applica- tion of the Trust Estate for the purposes and on the terms and conditions set forth in the Resolution. 2 . The Bonds shall not constitute a general indebtedness or a pledge of the full faith and credit of the City within the meaning of any constitutional or statutory provision or limitation of indebtedness. No Bondholder shall ever have the right, directly or indirectly, to require or compel the exercise of the ad valorem taxing power of the City or the forfeiture of any prop- erty of the City, including the Enterprise, for the payment of the principal of or interest on the Bonds or the making of any pay- ments hereunder. The Bonds and the obligations evidenced thereby shall not be payable from, nor constitute a lien on, any property or fund of the City, including the general fund of the City, other than the Trust Estate as herein provided. The principal and redemption price of and interest on the Bonds are not a debt of the City, nor a legal or equitable pledge, charqe, lien or encum- brance, upon any of the City's property, or upon any of its income, receipts, or revenues except the Trust Estate. 3. Nothinq contained in the Resolution shall be con- strued to prevent the City from acquirinq, constructing or financ- inq throuqh the issuance of its bonds, note. or other evidences of indebtedness any facilities which do not constitute a part of the Enterprise for the purposes of the Resolution or from securing such bonds, note. or other evidences of indebtedness by a mortgage of the facilities so financed or by a pledge of, the revenues therefrom or any lea.e or other aqreement with respect thereto or any revenue. derived from such lease or other aqreement: provided that such bonds, note. or other evidences of indebtedness shall not be payable out of or secured by the Trust Estate, and neither the cost of such facilities nor any expenditure in connection therewith or with the financinq thereof shall be payable from the Trust Estate. SECTIOlf 502. Establish:aeDt of Funds and Accaunt:s. The following Funds are hereby established: -V-l- (1) Construction Fund, to be held by the Trustee, ~ . (2) Revenue Fund, to be held by the City, (3) Debt Service Fund, to be held by the Trustee, consisting of a Debt Service Account and a Debt Service Reserve Account, (4) Bond Anticipation Note Fund, to be held by the Trustee, (5) Subordinated Indebtedness Fund, to be held by the Trustee, (6) Contingency Fund, to be held by the City, and (7) General Reserve Fund to be held by the city. SECTIOlf 503. Construction Fund. 1. There shall be paid into the Construction Fund the amounts required to be so paid by the provisions of this Resolution and any Supplemental Resolutions thereto, and there may be paid into the Construction Fund, at the option of the City, any moneys received for or in connection with the Enterprise by the City from any other source, unless required to be otherwise applied as provided by the Resolution. Amounts in the Construction Fund shall be applied to the Cost of the Enterprise in the manner provided in this Section subject to the provisions of any Supplemental Resolution. 2. There shall be established within the Construction Fund a separate account for (i) the 1986 Project and (ii) any Additional Project the Cost of which is to be paid out of the Construction Fund. There shall also be established within the Construction Fund a separate account to facilitate the payment of those items of Cost which constitute the city's costs and expenses attributable or allocable to the issuance and sale of the Bonds. Any such accounts may be divided by the City into two or more subaccounts. 3 . The proceeds of insurance maintained pursuant to the Resolution against physical loss of or damage to the Enterprise, or of contractors' performance bonds with respect thereto, per- taininq to the period of construction thereof, shall be paid into the appropriate separate account in the Construction Fund. 4. Th. Trustee shall make payments from the Constructio.n Fund, except payments and withdrawals pursuant to SUbSection 5 of this Section 503, in the amounts, at the times, in the manner, and on the other terms and conditions set forth in this subsection. Before any such payment shall be made, the City shall file with the Trustee its requisition therefor, signed by an Authorized -V-2- Officer of the City, stating in respect of each payment to be made (a) the particular account or subaccount established within the Construction Fund from which such payment is to be made, (b) the name and address of the person, firm or corporation to whom pay- ment is due, (c) the amount to be paid, and (d) the particular item of the Cost to be paid and that the cost or the obligation in the stated amount is a proper charge against the Construction Fund which has not been previously paid. The Trustee shall issue its check for each payment required by such requisition or shall by inter bank transfer or other method arrange to make the payment required by such requisition and promptly provide the City with written evidence thereof. 5. Notwithstanding any of the other provisions of this Section, to the extent that other moneys are not available there- for, amounts in the Construction Fund shall be applied to the pay- ment of Principal Installments of and interest on Bonds when due. 6 · The completion of construction of the 1986 Proj ect or any Additional Project shall be evidenced by a certificate or cer- tificates of an Authorized Officer of the City which shall be filed with the Trustee, stating (i) that such 1986 Project or Additional Project, as the case may be, has been completed, (ii) the date of such completion and (iii) the amount, if any, required in the opinion of the signer or signers for the payment of any remaininq part of the Cost thereof. Upon the filinq of such cer- tificate, the balance in the separate account in the Construction Fund established therefor in excess of the amount, if any, stated in such certificate shall be paid over or transferred to the Trustee for deposit in the Debt Service Reserve Account in the Debt Service Fund, if and to the extent necessary to make the amount in such account equal to the then current requirement for such account pursuant to clause (ii) of paragraph (2) of Section 505, and any balance shall be transferred to the City for deposit (a) in the General Reserve Fund for the purchase or retirement of Bonds or (b) transferred to a separate account or accounts estab- lished in the Construction Fund for application to the Cost of one or more Additional Projects. 7. If at any time the City shall elect to cancel the 1986 Project or any Additional Project, it may do so only by deliverinq to the Trustee (i) a resolution of the City formally declaring the cancellation of such Project and the reasons there- for, (ii) an opinion of the Consultinq Engineer to the effect that such cancellation is in accordance with Prudent Utility Practice, and (iii) a certificate or certificates signed by an Authorized Officer of the City, statinq the amount, if any, required in the opinion of the siqner for the payment of any remaininq part of the Cost of such Project. Upon the filing of the documents required by the precedinq sentence, the balance in the separate account in the Construction Fund established for such Project in excess of -V-3- the amount, if any, stated in the certificate of the Authorized Officer of the City shall be paid over to the TrUstee for deposit- in the Debt Service Account in the Debt Service Fund for applica- tion to the retirement, by purchase or redemption pursuant to Article IV hereof, of. the Bonds of the Series from which such pro- ceeds were derived. If, subsequent to the filing of suchcertifi- cate of an Authorized Officer of the City it shall be determined that any amounts specified in such certificate as being required for the payment of any remaining part of the Cost of such Project are no longer so required, such fact shall be evidenced by a cer- tificate or certificates signed by an Authorized Officer of the City filed with the Trustee stating such fact, and any amounts shown therein as no longer being required shall be transferred to the Trustee for application as provided in the preceding sentence. SECTlOlf 504. Revenues and Revenue Fund. Immediately after the receipt of any Revenues, but in no event in more than 10 days, the City shall deposit such Revenues in the Revenue Fund. SECTlOlf 505. Disposition of Revenues. Except as oth- erwise provided by the Supplemental Resolution authorizing the 1986 project Bonds, on or before the last business day of each calendar month commencing in the month in which Bonds are issued, the Revenues actually received by the City and deposited into. the Revenue Fund shall be applied, to the extent available, only in the following manne.r and in the followinq order of priority (such application to be made in such a manner so as to assure good funds in such Funds and Accounts on the last business day of such month) : (1) Each month the City shall pay from the Revenue Fund such sums as are necessary to meet Operating Expenses for such month: (2) The City shall next forward to the Trustee, for deposit in the Debt Service Fund (i) for credit to the Debt Service Account, the amount, if any, required so that the balance in said Account shall equal the Accrued Aggregate Debt Service: provided that, for the purposes of computinq the amount on deposit in said Account, there shall be excluded the amount, if any, set aside in said Account fro. the proceeds of Bonds less that amount of such proceeds to be applied, in accordance with any Supplemental .Resolution authorizinq a Series of Bonds, to interest accruecl and unpaid and to accrue on Bonds to the last day of the then current calendar month: (ii) for credit to the Debt Service Reserve Account, the amount required for such account to equal the Debt Service Reserve. Requirement. In the event that there are insufficient moneys in the Revenue Fund to make such -V-4- required deposits, the available moneys in the Revenue Fund shall be allocated first to the Debt Service Account and the balance to the Debt Service Reserve Account; (3) The City shall next forward to the Trustee, for deposit in the Bond>Anticipation Note Fund, the amount, if any, required so that the balance in said Fund. shall equal all interest on OUtstanding Bond Anticipation Notes accrued and unpaid and to accrue to the end of the then current calendar month: provided that, for the purpose of computing the amount on deposit in said Account, there shall be excluded the amount, if any, set aside in said Account from the proceeds of Bond Anticipation Notes less that amount of such proceeds to be applied, in accordance with any resolution, agreement or contract relating to the issuance of such Bond Anticipation Notes, to the pay- ment of interest accrued and unpaid and to accrue on Bond Anticipation Notes to the last day of the then current calendar month: (4) The City shall next forward to the Trustee for deposit in the Subordinated Indebtedness Fund an amount equal to the sum of (i) the amounts required as payments with respect to any Credit Obligation requirinq payment from the Subordinated Indebtedness Fund, to the extent provided in said Credit Obligation, and (ii) the amounts required to pay principal or sinking fund installments of and interest on each issue of Subordinated Indebtedness and reserves therefor, as required by the resolution, indenture or other instrument securing such issue of Subordinated Indebtedness: (5) The City shall next pay into the Contingency Fund an amount equal to the sum of 1/12 of each amount withdrawn from such Fund pursuant to Section 510: pro- vided that no further payment shall be required with respect to any such withdrawal when 12 such payments shall have been made with respect thereto: and (6) After makinq the above deposits and retaining such amount in the Revenue Fund for workinq capital as the City may determine, the City shall next pay into the General Reserve Fund the remaining balance, if any, of moneys in the Revenue Fund. At such time as the total amount held in the Debt Service Account and the Debt Service Reserve Account shall be sufficient to fully pay all Outstandinq Bonds in accordance with their terms (includinq Principal Installments of, and interest thereon), no further deposits shall be required to be made into such Accounts, -V-5- and the Bonds shall no longer be deemed Outstanding pursuant to the Resolution. .. SECTION 506. Debt Service Fund--Debt Service Account. 1. The Trustee shall payout of the Debt Service Account to the respective Paying Agents (i) on or before each interest payment date for any of the Bonds the amount required for the interest payable on such date; (ii) on or before each Principal Installment due date, the amount required fo~ the Principal Installment pay- able on such due date; and (iii) on or before any redemption date for the Bonds, the amount required for the payment of interest on the Bonds then to be redeemed. Such amounts shall be applied by the Paying Agents on and after the due dates thereof. The Trustee shall also payout of the Debt Service Account to the Paying Agents the accrued interest included in the purchase price of Bonds purchased for retirement. 2. Amounts accumulated in the Debt Service Account with respect to any Sinking Fund Installment (together with amounts accumulated therein with respect to interest on the Bonds for which such Sinking Fund Installment was established) may and, if so directed by the City, shall be applied by the Trustee, on or prior to the 60th day preceding the due date of such Sinking Fund Installment, to (i) the purchase of Bonds of the Series and matu- rity for Which Such Sinking Fund Installment was established, or (ii) the redemption at the applicable sinking fund Redemption Price, pursuant to Article IV, of such Bonds, if then redeemable by their terms. After the 60th day but on or prior to the 40th day preceding the due date of such Sinking Fund Installment, any amounts then on deposit in the Debt Service Account (exclusive of amounts, if any, set aside in said Account which were deposited therein from the proceeds of Bonds) may and, if so directed by the City, shall be applied by the Trustee to the purchase of Bonds of the Series and maturity for which such Sinking Fund Installment was established in an amount not eXCeeding that necessary to com- plete the retirement of the unsatisfied balance of such Sinking Fund Installment. All purchases of any Bonds pursuant to this subsection 2 shall be made at prices not exceeding the applicable Sinking fund Redemption Price of SUch Bonds plus accrued interest, and such purchases shall be made by the Trustee as directed by the City. The applicable sinking fund Redemption Price (or principal amount of maturing Bonds) of any Bonds so purchased or redeemed shall be deemed to constitute part of the Debt Service Account until such Sinking Fund Installment Date, for the purpose of cal- culating the amount of SUch Account. As soon as practicable after the 40th day precedinq the due date of any such Sinking Fund Installment, the Trustee shall proceed to call for redemption, by giving notice as provided in Section 405, on such due date Bonds of the Series and maturity for Which such Sinking Fund Installment was establ ished (except: in the case of Bonds maturinq on a Sinking Fund Installment date) in such amount as shall be necessary to -V-6- complete the retirement of the unsatisfied balance of such Sinking Fund Installment. The Trustee shall payout of the Debt Service Account to the appropriate Pating Agents, on or before such redemption date (or maturity date), the amount required for the redemption of the Bonds so called for redemption (or for the pay- ment of such Bonds then maturing), and such amount shall be applied by such Paying Agents to such redemption (or payment). All expenses in connection with the purchase or redemption of Bonds shall be paid by the City from the Revenue Fund pursuant to a schedule provided by the Trustee and by the Paying Agents and approved by the city. 3. The amount, if any, deposited in the Debt Service Account from the proceeds of each Series of Bonds or transferred to the Debt Service Account from the 1986 Project Account or any Additional Project Account pursuant to a Supplemental Resolution shall be set aside in such Fund and applied to the payment of interest on the Bonds of such Series (or on the Refunding Bonds issued to refund such Bonds) as the same becomes due and payable. 4. In the event of the refunding of one or more Series of Bonds, the Trustee shall, upon the written direction of the City, withdraw from the Debt Service Account amounts accumulated therein with respect to Debt service on the Bonds being refunded and deposit such amounts with itself as Trustee to be held for the paYment of the principal or Redemption Price, if applicable, and interest on the Series ot Bonds or the maturities of the Series of Bonds being refunded: provided that such withdrawal shall not be made unless (a) immediately thereafter the Series of Bonds being refunded shall be deemed to have been paid pursuant to subsection 2 of Section 1201, and (b) the amount remaining in the Debt Service Account in the Debt Service Fund after such withdrawal shall not be less than the requirement of such Account pursuant to subsection 2 of Section 505. SBC'llOlI 507. Deb~ Service PmId.--Deb~ Service Reserve Accoun~. 1. If on the final day of any month the amount in the Debt Service Account shall be less than the amount required to be in such Account pursuant to paragraph (2) of Section 505 and there shall not be on deposit in the contingency Fund, in the Bond Anticipation Note Fund, in the Subordinated Indebtedness Fund or in the General Reserve Fund available moneys to cure such defi- ciency, the Trustee shall apply amounts from the Debt Service Reserve Account to the extent necessary to cure the deficiency. 2. Whenever the moneys on deposit in the Debt Service Reserve Account shall exceed the Debt Service Reserve Requirement with respect to all Series at Bonds, such excess shall be depos- ited in the Revenue Fund. -V-7- 3. Whenever the amount in the Debt Service Reserve Account, together with the amount in the Debt Service Account, is' su.fficient to pay in full all outstandinqBonds in accordance with their terms (including principal or applicable sinking fund Redemption Price and interest thereon), the funds on deposit in the Debt Service Reserve Account shall be transferred to the Debt Service Account. SECTIOM 508. Bond Anticipation Mote Fund. 1. Subj ect to subsection 2 hereof, the Trustee shall apply amounts in the Bond Anticipation Note Fund to the payment of principal of and interest on Bond Anticipation Notes in accordance with the provi- sions of, and subject to the priorities and limitations and restrictions provided in, the resolution, agreement or contract relating to the issuance of such Bond Anticipation Notes. 2. If at any time the amount in the Debt Service Account in the Debt Service Fund shall be less than the requirement of such Account pursuant to paragraph (2) of Section 505, or the amount in the Debt Service Reserve Account shall be less than the Debt Service Reserve Requirement, and there shall not be on deposit in the General Reserve Fund, the Subordinated Indebtedness Fund or the Contingency Fund available moneys sufficient to cure either such de~iciency, then the Trustee shall withdraw from the Bond Anticipation Note fund and deposit in the Debt service Account or the Debt Service Reserve Account, as the case may be, the amount necessary (or all the DlOneys in said Fund, if less than the amount necessary) to make up such deficiency. SECTIOlf 509. Subordinated Indebtedness Fund. 1. Subj ect to subsection 2 hereof, the Trustee shall apply amounts in the Subordinated Indebtedness Fund (subject to the provisions of, and to the priorities and limitations and restrictions pro- vided in, the contract, lease, installment sales agreement or other instrument relating to each Credit Obligation and the reso- lution, indenture or other instrument securing each issue of Subo~dinated Indebtedness) to the payment of (i) the amounts required as payments with respect to any credit Obligation requir- ing payment from the Subordinatacl Indebtedness Fund, to the extent provided in said Credit Obligation, and (ii) the amounts required to pay principal or sinkinq fund installments of and interest on each issue of Subordinated Indebtedness and reserves therefor in accordance with the provisions of, and subject to the priorities and limitations and restrictions provided in, the resolution, indenture or other instrument authorizing or securing each issue of the Subordinated Indebtedness. 2. If at any time the amounts in the Debt Service Account, or the Debt Service Reserve Account shall be less than the current requirements of such accounts, respectively, pursuant to Section 505 and there shall not be on deposit in the General -V-8- Reserve Fund or the Contingency Fund available moneys sufficient to cure such deficiency, then the Trustee shall withdraw from the Subordinated Indebtedness Fund and deposit in the Debt Service Account or the Debt Service Reserve Account in that priority, as the case may be, the amount necessary (or all the moneys in said Fund, if less than the amount necessary) to make up such deficiency. 3. Subject to the provisions of,and to the priorities and limitations and restrictions provided in, the contract, lease, installment sales agreement or other instrument relating to each Credit Obligation and the resolution, indenture or other instru- ment securing each issue of Subordinated Indebtedness, amounts in the Subordinated Indebtedness Fund which 'the City at any time determines to be in excess of the requirements of such Fund, may, at the discretion of the City, be transferred to the General Reserve Fund. Notwithstanding any provision of this Resolution to the contrary, no Fiduciary shall be deemed to have knowledge of the existence of any facts or conditions which would prohibit the making of any deposit or transfer to or withdrawal or payment from the SUbordinated Indebtedness Fund, unless and until such Fiduciary shall have received written notice thereof from the City, any Bondholder, any other Fiduciary or the holder or repre- sentati ve of any class of obligation senior to those who are to be paid from the Subordinated Indebtedness Fund, and no Fiduciary shall be liable or responsible for accepting any such deposit or transfer or makinq any such payment or withdrawal unless and until it has been deemed to have such knowledge. SECTIOM 5l.0. Continqency Fund. 1. Subj ect to subsection 3, amounts in the Contingency Fund shall be applied to the costs of major renewals, replace- ments, repairs, additions, betterments, enlargements and. improve- ments to the Enterprise and the payment of extraordinary operation and maintenance cost. and contingencies, including the costs of scheduled, emergency or other interchange service, payments with respect to the prevention or correction of any unusual loss or damage in connection with the Enterprise or to prevent a loss of revenue therefrOJl, all to the, extent not provided for in the then current Annual Budqet or by reserves in the Revenue Fund or from the proceed. of Bond. or from amounts on deposit in the General Reserve Fund. 2. No payments shall be made from the continqency Fund if ,and to the extent that the proceeds of insurance or pthertmoneys recoverable as the result of damage, if any, are available to pay such cost. -V-9- 3. If at any time the amounts in the Debt Service Account or the Debt Service Reserve Account in the Debt Service ~ Fund shall be less than the current requirements of such Accounts, respectively, pursuant to Section 505, and there shall not be on deposit in the General Reserve Fund available moneys sufficient to cure such deficiency, then the City, upon requisition by the Trustee, shall transfer from the Contingency Fund to the Trustee for deposit in the Debt Service Account or Debt Service Reserve Account (in that priority) the amount necessary (or all the moneys in said Fund if less than the amount necessary) to make up such deficiency. 4. To the extent not required to meet a deficiency as required in subsection 3 of this Section 510, if at any time the amount deposited in the Bond Anticipation Note Fund shall be less than the amount required by paragraph (3) of Section 505, and if there shall not be on deposit in the General Reserve Fund avail- able moneys sufficient to cure any such deficiency, then the City shall pay to the Trustee from the Contingency Fund, and the Trustee shall deposit in the Bond Anticipation Note Fund, an amount (or all the moneys in the Contingency Fund if less than the amount required) which, together with the amounts available in the General Reserve Fund, will be sufficient to make up such deficiency. 5. To the extent not required to meet a deficiency as required in subsection 3 or 4 of this Section 510, if at any time the amount deposited in the Subordinated Indebtedness Fund shall be less than the amount required by paraqraph (4) of Section 505, and if there shall not be on deposit in the General Reserve Fund available moneys sufficient to cure any such deficiency, then the Trustee shall transfer from the Contingency Fund to the Subordinated Indebtedness Fund an amount (or all the moneys in the Contingency Fund if less than the amount required) which, together with the amounts available in the General Reserve Fund, will be sufficient to make up such deficiency. 6. Any balance of moneys and securities in the Contingency Fund in excess of the contingency Fund Requirement not required to meet any such deficiencies in the Debt Service Fund, the Bond Anticipation Note Fund or the Subordinated Indebtedness Fund which are not needed for any of the purposes for which the Continqency Fund was established, shall be transferred to the Revenue Fund, if and to the extent deemed necessary by the City to make up any deficiencies in such Fund, and thereafter any remain- ing balance shall be deposited in the General Reserve Fund. SECTIOlf 5l.1. General Reserve Fund. 1. The City shall transfer from the General Reserve Fund moneys in the following amounts and in the following order of priority: (i) to the Revenue Fund to make up any deficiency in amounts available for -V-10- Operating Expenses, (ii) to the Trustee for deposit in the Debt Service Account and the Debt Service Reserve Account in the Debt Service Fund the amount necessary (or all the moneys in the General Reserve Fund if less than the amount necessary) to make up any deficiencies in payments to said Accounts required by paragraph (2) of section 505, (.iii) in the event of any transfer of moneys from the Debt Service Reserve Account to said Debt Service Account, to the Trustee for deposit in said Debt Service Reserve Account the amount of the deficiency in such Account resulting from such transfer, (iv) to the Trustee for deposit in the Bond Anticipation Note Fund the amount necessary (or all the moneys in the General Reserve Fund if less than the amount necessary) to make up any deficiencies in payments to said Fund required by paragraph (3) of Section 505, (v) to the Trustee for deposit in the Subordinated Indebtedness Fund the amount necessary (or all the moneys in the General Reserve Fund if less than the amount necessary) to make up any deficiencies of payments to said Fund required by paragraph (4) of Section 505, and (vi) to the Contingency Fund the amount necessary (or all the moneys in the General Reserve Fund if less than the amount necessary) to make up any deficiencies in payments to said Fund required by paragraph (5) of Section 505. Such transfers shall be made not- withstanding any other provision of the Resolution requiring deposits in the General Reserve Fund to be applied to the purchase or redemption of Bonds. 2. Amounts in the General Reserve Fund not required to meet a deficiency as required in subsection 1 of this Section shall upon determination of the City be applied to or set aside for anyone or more of the following: (a) the purchase or redemption of any Bonds, and expenses in connection with the purchase or redemption of any Bonds or any reserves which the ci ty determines shall be required for such purposes: (b).payments of amounts required as payments wi th respect to credit Obligations requiring payment from the General Reserve Fund to the extent provided in such Credit Obligations: (c) payments into any separate account or accounts established in the Construction Fund for application to the purposes of such account: (d) payments of the Cost of the Enterprise: (e) transfers to the Revenue Fund for the pur- pose of rate stabilization: and -V-ll- (f) any other lawful purpose of the Enterprise, the Electric Department or the City; provided, further, that, sUbject to the provisions of subsection 1, amounts deposited in the General Reserve Fund and required by the Resolution to be applied to the purchase or redemption of Bonds shall be applied to such purpose. 3. Upon any purchase or redemption pursuant to this Section of Bonds of any Series and. maturity for which Sinking Fund Installments shall have been establiShed, there shall be credited toward each such Sinking Fund Installment thereafter to become due (other than the next such date) an amount bearing the same ratio to such Sinking Fund Installment as the total principal amount of such Bonds so purchased or redeemed bears to the total amount of all such Sinking Fund Installments to be so credited. The portion of any such Sinking Fund Installment remaining after the deduction of any such amounts credited toward the same (or the original amount of any such Sinking Fund Installment if no such amounts shall have been credited toward the same) shall constitute the unsatisfied balance of such Sinking Fund Installment for the pur- pose of calculation of Sinking Fund Installments due on a future date. SECTIOlf 5l.2. Bond Anticipation lfotes. The City may, at any time and from time to time, issue Bond Anticipation Notes the interest on which is payable out of, and may be secured by a pledge of, such amounts in the Bond Anticipation Note Fund as may from time to time be available for the purpose of payment thereof as provided in Section 508 and the principal of which is payable out of, and may be secured by a pledge of, such amounts of Bond proceeds in the construction Fund as may from time to time be available for the purpose of the paYment thereof as provided in Section 503: p~ovided, however, that (i) such Bond Anticipation Notes shall be issued only for the purpose of payments into any separate account or accounts established in the Construction Fund for application to the purpose of such account and for payment into the Bond Anticipation Note Fund for application to the pay- ment of all or a portion of the interest on Bond Anticipation Notes, and (ii) any pledqe of amounts in the Bond Anticipation Note Fund or the Construction Fund pursuant to this Section 512 shall be, and shall be expressed to be, subordinated in all respects to the pledge and assignment of the Revenues, moneys, securities and funds created by the Resolution as security for the Bonds. SECTIOlf 5l.3. Su1)ordinatecl IDd~ecIn{IF.. 1. To finance any Cost at the Enterprise, the City uy, at any time, or from time to time, issue SUbordinated Indebtedness payable. out of, and which may be secured by a security interest in or pledge and assignment of such amounts in the Subordinated Indebtedness Fund -V-12- as may from time to time be available for the purpose of payment thereof as provided in Section 509; provided, however, that any such security interest in or pledge and assignment shall be, and shall be expressed to be, subordinate in all respects to the pledge and assignment of the Trust Estate created by the Resolution as security for the Bonds. No such Subordinate Indebtedness shall be issued unless an Authorized Officer of the City shall file with the Trustee a certificate that the City is not in default under the Resolution. 2. The resolution, indenture or other instrument, including any Supplemental Resolution, securing each issue of Subordinated Indebtedness shall contain provisions (which shall be binding on all holders of such Subordinated Indebtedness) not more favorable to the holders of such Subordinated Indebtedness than the following: (a) In the event of any insolvency or bank- ruptcy proceedings, and any receivership, liquida- tion, reorganization or other similar proceedings in connection therewith, relative to the city or to its creditors, as such, or to its property, and in the event .ot any proceedings for voluntary liquidation, dissolution or other winding up of the City, whether or not invol ving insolvency or bankruptcy, the hold- ers of all Bonds and Bond Anticipation Notes then Outstanding shall be entitled to receive payment in full of all principal and interest due on all such Bonds and Bond Anticipation Notes in accordance with the provisions of the Resolution before the holders of the Subordinated Indebtedness are entitled to receive any payment from the Trust Estate on account ot principal (and premium, if any) or interest upon the Subordinated Indebtedness. (b) In the event that any issue of Subordinated Indebtedness is declared due and pay_ able before its expressed maturity because of the occurrence of an event of default (under circum- stances when the provisions of (a) above shall not be applicable), the holders of all Bonds and Bond Anticipation Notes Outstanding at the time such Subordinated Indebtedness so becODl8S due and paYable because of such occurrence of such an event ot default shall be entitled to receive payment in full of all principal and interest on all such Bonds and Bond Anticipation Notes before the holders ot the Subordinated Indebtedness are entitled to receive any accelerated payment from the Trust Estate of principal. (ard premium, if any) or interest upon the Subordinated Indebtedness. -V-13- (0) If any Event of Default with respect to the Bonds or Bond Anticipation Notes shall have occurred and be continuing (under circumstances. when the provisions of (a) above shall not be applicable), the holders of all Bonds and Bond Anticipation Notes then Outstanding shall be enti- tled to receive payment in full of all principal and interest then due on all such Bonds and Bond Anticipation Notes before the holders of the Subordinated Indebtedness are entitled to receive any payment from the Trust Estate of principal (and premium, if any) or interest upon the Subordinated Indebtedness. (d) No. Bondholder or holder of Bond Anticipation Notes shall be prejudiced in his right to enforce subordination of the Subordinated Indebtedness by any act or failure to act on the part of the city. (e) The'Subordinated Indebtedness may provide that the provisions (a), (b), (c) and (d) above are solely for the purpose of defining the relative rights of the Holders of the Bonds and Bond Anticipation Notes on the one hand, and the holders ot Subordinated Indebtedness on the other hand, and that nothing therein shall impair, as between the City and the holders of the Subordinated Indebtedness, the obligations of the City, which are unconditional and absolute, to pay to the holders thereof the principal thereot and premium, if any, and interest thereon in accordance with its terms, nor shall anything therein prevent the holders of the Subordinated Indebtedness from exercising all remedies otherwise permitted by applicable law or thereunder upon default thereunder, subject to the rights under (a), (b), (c) and (d) above of the holders of Bonds and Bond Anticipation Notes t.o receive cash, property or securitiea otherwise pay- able or deliverable to the holders of the SUbordinated Indebtedness: and the Subordinated Indebtedness may provide that, insofar as a trustee or payinq aqent for such Subordinated Indebtedness is concerned, the foreqoinq provisions shall not prevent the application by such trustee or paying aqent of any money. deposited with such trustee or payinq aqent for the purpose of the payment of or. on account of the principal (and premium, if any) and interest on such Subordinated Indebtedness it such trustee or payinq agent did not have knowledge at -V-14- the time of such application that such payment was prohibited by the foregoing provisions. 3. Any issue of Subordinated Indebtedness may have such rank or priority with respect to any other issue as May be pro- vided in the resolution, indenture or other instrument, including any SuppleMental Resolution, securing such issue of Subordinated Indebtedness and may contain such other provisions as are not in conflict with the provisions of the Resolution. -V-15- , . . ARTICLE VI DEPOSITARIES OF MOHEYS, SECURITY lOR DEPOSITS AHD INVESTMENT OF !"ORIS SECTION 601. Depositaries. 1. All moneys held by the Trustee under the provisions of the Resolution shall be deposited with the Trustee, and the Trustee at the written request of an Authorized Officer shall deposit such moneys with one or more Depositaries appointed by the city. All moneys held by the City under the Resolution shall be deposited in one or more Depositaries in trust for the city. All moneys deposited under the provisions of the Resolution with the Trustee or any Depositary shall be held in trust and applied only in accordance with the provisions of the Resolution, and each of the Funds established by the Resolution shall be a trust fund for the pur- poses thereof. 2. Each Depositary shall be a bank or trust company organized under the laws of any state of the United states or a national banking association which is willing and able to accept the office on.reasonable and customary terms and authorized by law to act in accordance with the provisions of the Resolution. SBCTIOlf 602. DePOsit:s. 1. The provisions of this section 602 deal with moneys not invested pursuant to Section 603. No moneys shall be deposited with any Depositary in any amount exceedinq 10% of the amount which an officer of such Depositary shall certifY to the City and the Trustee as the total of the paid-up capital and surplus of such Depositary. 2. All Revenues and other moneys held by any Depositary under the Resolution may be placed on demand or time deposit, if and as directed by the City, provided that such deposits shall permi t the moneys so held to be available for use at the time when needed. The Depositary shall not be liable for any loss or depre- ciation in value resulting from any investment made pursuant to the Resolution. All such moneys deposited with a Fiduciary, acting as a Depositary, may be made in the commercial banking department of any Fiduciary which may honor checks and drafts on such deposit with the __ force and effect as if it were not such Fiduciary. All moneys held by any Fiduciary, as such, may be deposited by such Fiduciary in its bankinq department on demand or, if and to the extent directed by the City and acceptable to such Fiduciary, on time deposit, provided that such moneys on deposit be available for use at the time when needed. Such Fiduciary shall allow and credit on such moneys such interest, if any, as it customarily allows upon similar funds of similar size and under similar condition or as required by law. -VI-l- 3. All moneys held under the Resolution by the Trustee or any Depositary shall be (a) either (1) continuously and fully insured by the Federal Deposit Insurance Corporation, or (2) con- tinuously and fully secured by lodging with the Trustee, as custo- dian, as collateral security, such securities as are authorized by California law to secure deposits of pUblic funds having a market value (exclusive of accrued interest) not less than the amount of such moneys, and (b) in such other manner as may then be required by applicable Federal or state of California laws and regulations and applicable state laws and regulations of the state in which the Trustee or such Depositary (as the case may be) is located, regarding security for, or granting a preference in the case of, the deposit of trust funds: provided, however, that it shall not be necessary for the Fiduciaries to give security under this sUb- section 3 for the dep9sit of any moneys with them held in trust and set aside by them for the payment of the principal or Redemption Price of or interest on any Bonds, or for the Trustee or any Depositary to give security for any moneys which shall be represented by obligations or certificates of deposit purchased as an investment of such moneys. 4. All moneys deposited with the Trustee and each Depositary shall be credited to the particular fund or Account to which such moneys belong. SECTIOlf 603. Invest:ment of certain Funds. 1. Moneys held in the Debt Service Account in the Debt Service Fund and. the Debt Service Reserve Account in the Debt Service Fund shall be invested and reinvested by the Trust.. to the fullest extent prac- ticable in Investment Securities which mature not later than at such times as shall be necessary to provide moneys when needed for paYments to be made from such Accounts, and in the case of the Debt Service Reserve Account not later than ten years from the date of such investment. SUbject to the terms of any resolutions, agreements or other contracts relating to the is.suance of Bond Anticipation Notes, moneys in the Bond Anticipation Note Fund shall be invested and reinvested to the fullest extent practicable in Investment Securities which mature not later than such times as shall be necessary to .provide moneys when needed for payments to be made from such Fund. Subject to the terms of any resolutions, indentures,or other instruments securinq any issue of Subordinated Indebtedness, moneys in the Subordinated Indebtedness Fund shall be invested and reinvested to the fullest extent prac- ticable in Investment Securities which mature not later than such times as shall be necessary to provide JK)neys when needed for pay- ments to be made from said Fund. Moneys held in the Revenue Fund and the Construction Fund may be invested and reinvested in Investment Securities Which mature not later than such times as shall be necessary to provide moneys when needed for. payments to be made from such Funds. Moneys in the Contingency Fund and. the General Reserve Fund may be invested in Investment Securities -VI-2- . . - which mature within five years from the date of such investment, and in any case the Investment Securities in such Funds or in the Accounts therein shall mature not later than such times as shall be necessary to provide moneys when needed to provide payments from such Funds or Accounts. The Trustee shall make all such investments of moneys held by it in accordance with written instructions received from any Authorized Officer of the city. The City may instruct the Trustee, in making any investment in any Investment Securities with moneys in any Fund or Account estab- lished under the ReSOlution, to combine such moneys with moneys in any other Fund or Account, but solely for purposes of making such investment in such Investment Securities. 2. Interest (net of that which represents a return of accrued interest paid in connection with. the purchase of any investment) and realized qains earned on any moneys or investments in such Funds and Accounts, other than the Construction Fund. and the Subordinated Indebtedness Fund, shall be paid into the Revenue Fund or into any Fund or Account established hereunder as directed by an Authorized Officer of the City or by a resolution of the Ci ty. Interest earned on any moneys or investments in a separate account in the Construction Fund shall be held in such account for the purposes thereof. Subject to the terms of any resolutions, indenture. or other instruments securinq any issue of Subordinated. Indebtedness, net interest earned on any moneys or investments in the Subordinated Indebtedness Fund shall be paid into the Revenue Fund: provided, however, that, subject to such terms, such inter- est earned prior to the date of commercial operation of any part of the Enterprise such Subordinated Indebtedness was issued for shall be paid into the account in the Construction Fund applicable to such part. 3. Nothinq in the Resolution shall prevent any Investment Securities acquired as investments of funds held under the ReSOlution from being issued or held in book-entry form on the books of the Department of the Treasury of the United States. 4. Any Fund or Account required by this Resolution to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee either as a fund or an account, ancl may, for the purposes of such records, any audits thereof and any reports or statements with respect thereto, be treated either as a fund or as an account. Investments in any and all such Funds or Accounts may be commingled for purposes of makinq, holdinq and disposing of invest.nts, notwithstandinq pro- visions herein tor transfer to or holdinq in a particular Fund or Account amounts received or held by the Trustee hereunder, pro- vided that the Trustee shall at all times account for such invest- ments strictly in accordance with the;articular Fund or Account to which they are credited and otherwise as provided in this Resolution. -VI-3- SECTION 604. Valuation and Sale of Inve~ts. Obligations purchased as an investment of moneys in any Fund cre-. ated under the provisions of the Resolution shall be deemed at all times to be a part of such Fund and any profit realized from the liquidation of such investment shall be credited to such Fund and any loss resulting from the liquidation of such investment shall be charged to the respective Fund. In computing the amount in any Fund created under the provisions of the Resolution for any purpose provided in the Resolution, obligations purchased as an investment of moneys therein shall be valued at the amortized cost of such obligations, exclusive of accrued interest unless such obligations do no.t mature or are not redeemable at the option of the holder thereof in less than five years from the date of valuation, in which case such obligations shall be valued at the amortized cost of such obligations or at the market price thereof, whichever is lower, exclusive of accrued interest. Except as otherwise provided in the Resolution, the Trustee shall sell at the best price obtainable, or present for redemption, any obligation so purchasecl as an investment whenever it shall be requested in writing by an Authorized Officer of the City so to do or whenever it shall be necessary in order to pro- vide moneys to meet any payment or transfer from any Fund held by it. The Trustee shall not be liable or responsible for making any such investment in the manner provided above or for any loss resulting from any such investment. -VI-4- ARTICLE VII PARTICULAR COVE1fU'.l'S OF THE CITY The City covenants and agrees with the Trustee and the Bondholders as follows: SECTIOlf 70l.. payaent of Banda. The City shall duly and punctually payor cause to be paid, but solely from the Revenues and the proceeds of the Bonds pledged therefor by the Resolution, the principal or Redemption Price of every Bond and the interest thereon, at the dates and places and in the manner mentioned in the Bonds according to the true intent and meaning thereof. SECTIOlf 702. Extension of PaYment of Banda. The City shall not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of any claims for interest by the fundinq of such Bonds or claims for interest or by any other arrangement and in case the maturity of any of the Bonds or the time for payment of any such claims for interest shall be extended, such Bonds or claims for interest shall not ba entitled, in case of any default under the Resolution, to the benefit of the Resolution or 'to any payment out of Revenue. or Funds established by the Resolution, including the investments, if any, thereof, pledged uncler the Resolution or the moneys ( except moneys held in trust for the payment of particular Bonds or claima for interest pursuant to the Resolution) held by the Fiduciaries, except subject to the prior payment of the prin- cipal of all Bonds Outstanding the maturity of which has not been extended and of such portion of the accrued interest on the Bonds as shall not be represented by such extended claims for interest. Nothinq herein shall be deemed to limit the right of the City to issue Refundinq Bonds and such issuance shall not be deemed to constitute an extension of maturity of Bonds. SKC'1'%O. 703. Offic_ for Servicinq Bands. The C it Y shall a~ all time. maintain one or more agencies in Los Angeles, California, where Bond. may be presented for payment and shall at all times maintain one or more aqencies in Los Angeles, California, where Bonds may be presented for registration or transfer, and where notices, demands and other documents may be served upon the City in respect of the Bonds or of the ResOlution. .The City hereby appoints the Trustee as the Bond Reqistrar to maintain the agency for the reqistration or transfer of Bonds, and for ~he service upon the City of such notices, demands and other documents, and as Paying Agent. SBC'1'%OIf 704. Pur1:her A8auraDc1e. At any and all times the City shall, as far as it may be authorizecl by law, comply with -VII-l- any reasonable request of the Trustee to pass, make, do, execute, acknowledge and deliver, all and every such further resolutions,. acts, deeds, conveyances, assignments, transfers and assurances as may be necessary or desirable for the better assuring, conveying, granting, pledging, assigning and confirming all and singular the rights, Revenues and other moneys, securities and funds hereby pledged or assigned, or intended so to be, or which the City may become bound to pledge or assign. SEcrION 705. Power to Issue Bonda and Pledge Revenues and Other Funds. The City is duly authorized under all appli- cable laws to create and issue the Bonds and to. adopt the Resolution and to pledge the Revenues and other moneys, securities and funds purported to be pledged by the Resolution in the manner and to the extent provided in the Resolution. Except to the extent otherwise provided in the ReSOlution, the Revenues and other moneys, securities and funds so pledged are and will be free and clear of any pledge, lien, charge or encumbrance thereon or with respect thereto prior to, or of equal rank with, the pledge and assignment created by the ReSOlution, and all corporate or other action on the part of the City to that end has been and will be duly and validly taken. The Bonds and the provisions of the Resolution are and will be the valid and. legally enforceable obli- gations of the City in accordance with their terms and the terms of the Resolution. The City shall at all times, to the extent permitted by law, defend, preserve and protect the pledge of the Revenues and other moneys, securities.and funds pledged under the Resolution and all the rights of the Bondholders under the Resolution against all claims and demands of all persons whomsoever. SECTIOlf 706. Creation of Liens: Sal.e and Lease of Property. 1. The City shall not issue any bonds, notes, deben- tures, or other evidences of indebtedness of similar nature, other than the Bonds, payable out of or secured by a pledge or assign- ment of the Revenues or other moneys, securities or funds held or set aside by the City or by the Fiduciaries under the Resolution and shall not create or cause to be created any lien or charge on the Revenues, or such moneys, securities or funds: provided, how- ever, that nothinq contained in the Resolution shall prevent the City from issuinq or incurring, if and to the extent permitted by law: (i) evidences of indebtedness (a) payable out of moneys in the Construction Fund as part of the Cost of the Enterprise, or (b) payable out of, or secured by a pledge and assiqnment of, Revenues to be received on and after such date as the pledge of the Revenues provided in the Resolution shall be discharged and satisfied as provided in Section 1201, -VII-2- (ii) Bond Anticipation Notes as provided in Section 512, (iii) Subordinated Indebtedness as provided in section 513, or (iv) bonds, notes, debentures or other evidences of indebtedness payable out of the General Reserve Fund. 2. No part of the Enterprise shall be sold, leased, mortgaged or otherwise disposed of, except as follows: (1) The City may sell or exchange at any time and from time to time any property or facilities constituting part of the Enterprise only if, prior to such transac- tion, either (a) an Authorized Officer of the City shall determine that such property or facilities are not useful in the operation of the Enterprise, or (b) the book value of property or facilities sold or exchanged in such transaction is not more than 1% of the book value of the total assets of the Enterprise immediately prior to such transaction or (c) the City shall file with the Trustee a certificate of the Consulting Engineer stating that, in its opinion, the sale or exchange of such property o~ facilities will not impair the ability of the City to comply during the current or any future Fiscal Year with the provisions of Section 710. The proceeds of any such sale or exchange not used to acquire other property nec- essary or desirable for the safe or efficient operation of the Enterprise shall forthwith be deposited in the Revenue Fund or the Contingency Fund, as determined by an Authorized Officer of the City: and (2) In addition to any agreement currently in effect to which the City is a party relating to the ownership or operation of any part of the Enterprise or the use of the output thereof, the City may lease or make contracts or grant licenses for the operation of, or make arrangements for the use of, or grant easements or other rights with respect to, any part of the Enterprise, pro- vided that any such lease, contract, license, arrange- ment, easement or right (i) does not impede the operation by the City or its agents of the Enterprise and (ii) does not in any manner impair or adversely affect the rights or security of the Bondholders under the Resolution; and provided, further, that if the book value of the property to be covered by any such lease, contract, license, arrangement, easement or other right is in excess of 1% of the book value of the total assets of the City at such time, the City shall first file with the Trustee a certificate of an Authorized Officer of the City setting -VII-3- forth a determination of the City Council of the City that the action of the City with respect thereto does not result in a breach of the conditions under this clause (2). Any payments received by the City under or in connection with any such lease, contract, license, arrangement, easement or right in respect of the Enterprise or any part thereof shall constitute Revenues. 3. Notwithstanding any other provision of the ReSOlution, the City shall not issue any bonds, notes, debentures or other evidences of indebtedness, other than the first series of 1986 Project Bonds in the principal amount of $125,000,000, having any claim upon the 1986 Project Account prior to March 1, 1990. SECTION 707. Consulting Enqineer. The C i t Y s hall employ a Consulting Engineer for the purpose of performing and carrying out the duties imposed on the Consulting Engineer by the Resolution. SECTION 708. Annual Budget. For each Fiscal Year fol- lowing delivery of any Bonds hereunder the City shall prepare and adopt a budget for the Enterprise for the next ensuing .Fiscal Year. Any such Annual BUdget may be amended from time to time by the City. Following adoption of such budget, or any amendment thereof, the City shall file with the Trustee a certificate that such budget provides adequate Revenues to discharge its obliga- tions under the Resolution. If necessary, the City shall immedi- ately increase rates if and when any such increase is required to produce budgeted anticipated Revenues. SECTION 709. Operation and Maintenance of the Enterprise. The City shall at all times use its best efforts to operate or cause to be operated the Enterprise properly and in an efficient and economical manner, as required by the Act and con- sistent with Prudent utility Practice, and shall use its best efforts to maintain, preserve, reconstruct and keep the same or cause the same to be so maintained, preserved, reconstructed and kept, with the appurtenances and every part and parcel thereof, in good repair, working order and condition, and shall from time to time make, or use its best efforts to cause to be made, all neces- sary and proper repairs, replacements and. renewals so that at all times the operation of the Enterprise may be properly and advanta- geously conducted. SECTION 7l.0. Rates, Pees and Charqes, Enforcement. 1. The City shall at all times prescribe, revise and collect rates, fees and charges for the use or the sale of the output, capacity or service of the Enterprise as provided in the Act and so that in each twelve month period such rates, fees and charges, together with other Revenues reasonably expected to be available -VII-4- during such period, are reasonably expected to yield Net Revenues during such twelve month period sufficient for the payment of the sum of the following: (a) An amount equal to the sum of 1.25 times the Aggregate Debt Service for such twelve month period; (b) the amount, if any, to be paid during such twelve month period into the Debt Service Reserve Account in the Debt Service Fund (other than amounts required to be paid into such Account out of the proceeds of Bonds); (c) All other charges or liens whatsoever pay- able out of Revenues during such twelve month period, and, to the extent not otherwise provided for, all amounts payable on Subordinated Indebtedness and Credit Obligations; Cd) the amount, if any, to be paid during such twelve month period into the Contingency Fund; and (e) Operating Expenses for such twelve month period. 2. Promptly upon any material change in the circum- stances Which were not contemplated at the time such rates and charges were most recently reviewed, but not less frequently than once in each Fiscal Year, the City shall review the rates and charges so established and shall promptly revise such rates and charges as necessary to comply with the foregoing requirements, provided that such rates and charges shall in any event produce moneys sufficient to enable the City to comply with all its cove- nants under the Resolution. 3. No free service or service otherwise than in accor- dance with the established rates, fees and charges shall be fur- nished by the Enterprise, which rates, fees and. charges shall not permit the granting of preferential rates, fees or charges among the users of the same class of customers. If and to whatever extent the City receives the services and facilities of the Enterprise, it shall pay for such services and. facilities accord- ing to the City's established rate schedule, and the amounts so paid shall be included in the amount of Revenues. 4. In estimating Aggregate Debt Service on any Variable Rate Bonds for purposes of paragraph 1 of this Section 710, the City shall be entitled to assume that such Variable Rate Bonds will bear such interest rate or rates as the City shall determine; provided, however, that the interest rate or rates assumed shall -VII-5- not be less than the interest rate borne by such Variable Rate Bonds at the time of determination of Aggregate Debt Service. . 5. The City shall compel the prompt payment of rates, fees, rentals and charges imposed for service rendered by the Enterprise, and to that end will vigorously enforce all of the provisions of any ordinance or resolution of the City having to do with electric charges and any other Enterprise charges, and all of the rights and remedies permitted the City under law. The City by this Section expressly covenants and agrees to exercise and enforce every right and remedy legally available to it to the end that such rates, fees, and charges will be enforced and promptly collected to the full extent of the law. - . , SECTION 711. Maintenance of Insurance1 Reconstruction1 Application of Insurance Proc~. 1. The City shall provide protection for the Enterprise both in accordance with the require- ments of all agreements, if any, to which the City may at the time be a party with respect to joint ownership by the City with others of electric, water, wastewater, or other Enterprise facilities, and in accordance with Prudent utility Practice. Said protection may consist of insurance, self insurance and indemnities. The City will keep, or cause to be kept, the works, plants and facili- ties comprising the properties of the Enterprise insured, and will carry such other insurance against fire and other risks, accidents or casualties at least to the extent and of the kinds that insur- ance is usually carried by utilities operating like properties. Any insurance shall be in the form of policies or contracts for insurance with insurers of good standing, shall be payable to the City and may provide for such deductibles, exclusions, limita- tions, restrictions and restrictive endorsements customary in pol- icies for similar coverage issued to entities operating properties similar to the properties of the Enterprise. Any self insurance shall be in the amounts, manner and of the type provided by enti- ties operating properties similar to the properties of the Enterprise. Within one hundred and twenty (120) days after the close of each Fiscal Year the City will file with the Trustee a certificate (i) describing in reasonable detail the insurance then in effect and any program of self insurance then in effect pursu- ant to the requirements of this paragraph and stating whether such insurance complies in all respects with such requirements, and (ii) stating whether during such year the Enterprise has suffered damage or destruction in an amount of more than $500,000 and, if so, the amount of insurance proceeds received on account of such damage or destruction and specifying the reasonable and necessary cost of reconstruction or replacement. 2. In the event of any loss or damage to the Enterprise covered by insurance, the City will, with respect to each such loss, promptly repair, reconstruct or replace the parts of the Enterprise affected by such loss or damage to the extent necessary -VII-6- to the proper conduct of the operation of the business of the Enterprise, shall cause the proceeds of such insurance to be applied for that purpose to the extent required therefor, and pending such application shall hold the proceeds of any insurance policy covering such damage or loss in trust to be applied for that purpose to the extent required therefor. Any excess insur- ance proceeds received by the City shall be transferred to the Revenue Fund. SECTION 712. Accounts and Reports. 1. The City shall keep or cause to be kept proper books of record and account (separate from all other records and accounts) in which complete and correct entries shall be made of its transactions relating to the Enterprise and each Fund and Account established under the Resolution and all other books and papers of the City, including insurance policies, relating to the Enterprise, shall at all times be subject to the inspection of the Trustee, the Consulting Engineer and the Holders of an aggregate of not less than 5% in principal amount of the Bonds then outstanding or their represen- tatives duly authorized in writing. 2. The Trustee shall advise the City after the end of each calendar month of the transactions during such month period relating to each Fund and Account held by it under the Resolution. The City shall advise the Trustee promptly after the end of each fiscal quarter of transactions during such quarter relating to each Fund held by it under the Resolution. 3. The City shall annually, within 120 days after the close of each Fiscal Year (the first such report to be filed with respect to the Fiscal Year ending June 30, 1987), file with the Trustee and with the Consulting Engineer, and otherwise as pro- vided by law, a financial statement in reasonable detail for the preceding Fiscal Year showing the Revenues, all expenditures from the Revenues for operation and maintenance of the Enterprise and other expenditures from the Revenues applicable to the Enterprise, together with a balance sheet in reasonable detail reflecting the financial condition of the City, including the balances of all funds relating to the Enterprise as of the end of such Fiscal Year, which financial statement and balance sheet shall be accom- panied by an Accountant's Certificate. Such Accountant's Certificate shall also state ,whether or not, to the knowledge of the signer, the City is in default with respect to any of the cov- enants, agreements or conditions on its part contained in the ReSOlution, and if so, the nature of such default. 4. In the event that the items filed pursuant to paragraph 3 of this Section 712 show that the Revenues for the preceding Fiscal Year did not comply with the provisions of Section 710 hereof, then the Consulting Engineer shall promptly file with the City and the Trustee a certificate stating specific -VII-7- changes in operation procedures or reV1S1ons in rates, fees and_ charges, or both, which may be made and which will, in the aggre- gate, in its opinion, result in Revenues estimated as sufficient to make up any existing deficiency. Within 30 days of receipt of any such Certificate the City shall be entitled to present to the Consulting Engineer, for .its consideration, alternative reconunen- dations for the purpose of remedying any such deficiency in Revenues. The City covenants and agrees to effect the changes, revisions or both, which the Consulting Engineer determines, after consideration of the recommendations of the City, will, in the aggregate, produce Revenues estimated as sufficient to make up such deficiency as promptly as reasonably possible. The Consulting Engineer shall promptly ~ile a certificate setting forth such determination with the City and the Trustee. 5. The City shall cause a registered engineer of the state of California who may be an employee of the City, to prepare and file with the Trustee, no later than 60 days following the end of each Fiscal Year period, beginning with the first full Fiscal Year ending after the adoption of the Resolution, a report or survey with respect to the operation and maintenance of the prop- erties constituting the Enterprise, the making of necessary and proper renewals and replacements thereof and the status of the Annual Budget and the construction budget applicable to any part of the Enterprise which shall be under construction. Such report or survey shall be in sufficient detail to show whether the City has performed and complied with the covenants contained in the ReSOlution relating to such matters. 6. The reports, statements and other documents required to be furnished to the Trustee pursuant to any provisions of the ReSOlution shall be available for the inspection of Bondholders at the office of the Trustee and shall be mailed to each Bondholder who shall file a written request therefor with the City. The City may charge for such reports, statements and other documents, a reasonable fee to cover reproduction, handling and postage. SECTIOlf 7l.3. PaYment of Taxes and QJarqes. The City will from time to time duly pay and. discharge, or cause to be paid and discharged, all taxes, assessments and other governmental charges, or required payments in lieu thereof, lawfully imposed upon the properties of the .City or upon the rights, revenues, income, receipts, and other moneys, securities and funds of the City when the same shall become due (including all rights, moneys and other property transferred, assigned or pledged under the ReSOlution), and all lawful claims for labor and material and sup- plies, except those taxes, assessments, charges or claims which the City shall in good faith contest by proper legal proceedings if the City shall in all such cases have set aside on its books reserves deemed adequate with respect thereto. -VII-8- , . . SECTION 714. No Diainution of Rights. The City will not enter into any contract or arrangement, nor take any action, the results of which might impair or diminish the rights of the Holders of the Bonds. The City shall not, without a certificate of the Consulting Engineer stating that such action will not mate- rially impair or diminish the rights of the Holders of the Bonds, voluntarily give up any service area of the Enterprise, and the City shall in good faith resist all efforts which may result in the diminution of such service area. The City shall not surrender its power and authority to fix and maintain rates and conditions for services of the Enterprise, and the City shall in good faith resist all efforts which may result in the abridgement or diminu- tion of any such power and authority. SECTION 715. Governmental Reorganization. Notwithstanding any other provisions of this ReSOlution, this Resolution shall not prevent any lawfUl reorganization of the gov- ernmental structure of the City, including a merger or consolida- tion of the City with another public body or the transfer of a pUblic function of the City to another public body, provided that any reorganization which affects the Enterprise shall provide that the Enterprise shall be continued as a single enterprise and that any public body which succeeds to the ownership and operation of the Enterprise shall also assume all rights, powers, obligations, duties and liabilities of the City under this Resolution and per- taining to all Bonds. Except as permitted in this Section 715, the City shall not cause or permit its corporate existence to be abolished and shall resist all attempts to contract or diminish the territorial limits of the City or the service area of the Enterprise. SECTION 7l.6. Tax Covenants. The City covenants that it will not take any action or fail to take any action with respect to the investment of proceeds of any Bonds or in any other respect which would result in the Bonds constituting "arbitrage bonds" within the meaning of Section 103(c) of the Internal Revenue Code of 1954, as amended, (the "Code") and of all regula- tions of the United States Department of the Treasury issued thereunder, to the extent that such regulations are, at the time, applicable and in effect on the date of issuance of the Bonds. The City covenants that it will not use any proceeds of the Bonds or any other funds held under this Resolution for any purpose which would cause any Bonds to be subject to treatment as "industrial development bonds" as defined in Section 103 of the Code as then in effect. In this regard, the City covenants that it has not entered into and will not enter into, amend., modify or otherwise alter power sales contracts (or other contracts with respect to the regulated output of the project financed with Bond proceeds) that result or would resUlt in (x) more than 25 percent of the "subparagraph (5) output" (within the meaning of -VII-9- Treas. Reg. s 1.103-7(b) (5)) of any project financed with Bond_ proceeds being sold pursuant to contract, on a take and payor take or pay basis, to one or more persons each of whom (i) is not an "exempt person" within the meaning of Treas. Reg. S-1.103-7(b) (2), and (ii) makes a guaranteed minimum payment exceeding three percent of the average annual debt service with respect to the Bonds and (y) payment made or to be made with respect to such power sales contract or contracts by such nonex- empt person or persons exceeding 25 percent of the "total debt service" (within the meaning of Treas. Reg.. Ii 1.103-7(b) (5)) with respect to the Bonds; provided, however, that the City may amend, modify, alter or enter into power sales contracts (or other con- tracts with respect to the regulated output of the project financed with Bond proceeds) of such types if the City first obtains an unqualified opinion of Bond Counsel that such action will not impair the exemption from Federal income taxation of interest paid on the Bonds. In addition, the City covenants that it will not sell or lease any proj ect financed with Bond proceeds if such sale or lease would adversely affect the tax-exempt status of interest paid on the Sands. The city further covenants that it will not enter into any contract, agreement or arrangement with a person who is not a "governmental unit" within the meaning of Section 103(b) (3) (A) of the Code with respect to the use, opera- tion or output of the facilities being financed with more than the lesser of $4,999,999 or 4.9% on an aggregate basis of Bond pro- ceeds on a take or pay basis, unless such contract, agreement or arrangement, in the opinion of counsel of recognized standing in the field of law relating to municipal bonds, would not adversely affect the tax-exempt status of the Bonds. SECTION 7l.7. Rights and Lic~. The City shall at all times undertake reasonable efforts to perfect, protect and maintain all rights, permits, licenses, exemptions and claims nec- essary for the operation of the Enterprise. SECTION 7l.8. General. 1. The City shall do and per- form or cause to be done and performed all acts and things required to be done or performed by or on behalf of the City under the provisions of the Act and the Resolution. 2. Upon the date of authentication and delivery of any of the Bonds, all conditions, acts and things required by law and the Resolution to exist, to have happened and to have been per- formed precedent to and in the issuance of such Bonds shall exist, have happened and have been performed and the issue of such Bonds, together with all other indebtedness of the City, shall comply in all respects with the applicable laws of the State of California. SECTIOlf 719. Notification to Rating Aqency. The City hereby agrees to furnish to any rating agency which shall have issued a rating on any Series of Bonds written notification of -VII-IO- , . ~ (i) any change in the Trustee or (ii) any material change in the Resolution. -VII-11- . . . ARTICLE VIII EVENTs OF DEFAULT AlfD REMEDIES OF BONDHOLDERS SECTION 801. Events of Defaul.t. Each of the following events is hereby defined as and declared to be and shall consti- tute an Event of Default: (i) if default shall be made in the due and punc- tual payment of the principal or Redemption Price of any Bond when and as the same shall become due and payable, whether at maturity or by call or proceedings for redemp- tion, or otherwise: (ii) if default shall be made in the due and punc- tual payment of any installment of interest on any Bond or the unsatisfied balance of any Sinking Fund Installment, when and as such interest installment or Sinkinq Fund Installment shall become due and payable; (iii) if default shall be made by the City in the performance or observance of any Other of the covenants, agreements or conditions on its part in the Resolution or in the Bonds contained, and such default shall have con- tinued for a period of 60 days after written notice spec- ifying such default and requiring that it shall have been remedied is given to the City by the Trustee or to the City and to the Trustee by the Holders of not less than 25' in principal amount of the Bonds Outstanding: (iv) if the City shall commence a voluntary case under the Federal bankruptcy laws, as now or hereafter constituted, or any other applicable Federal or State bankruptcy, insol veney or other similar law now or here- after in effect, or shall, other than to secure the Bonds, consent to the appointment of or taking possession by a custodian or receiver or liquidator or trustee or assiqnee or sequestrator (or similar official) of it or of its property, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as such debts become due or shall take any action in furtherance of any of the foregoing: then, and in each and every such case, so long as such Event of Default shall not have been remedied, unless the principal of all the Bonds shall have already become due and payable, either the Trustee (by notice in writing to the City), or the Holders of not less than 25' in principal amount of the Bonds Outstandinq (by notice in writinq to the City and the Trustee), may declare the -VIII-l- principal of all the Bonds then outstanding, and the interest accrued thereon, to be due and payable immediately, and upon any such declaration the same shall became and be immediately due and payable, anything in the Resolution or in any of the Bonds Con- tained to the contrary notwithstanding. The right of the Trustee or of the Holders of not less than 25% in principal amount of the Bonds to make any such declaration as aforesaid, however, is subject to the condition that if, at any time after such declara- tion, but before the Bonds shall have matured by their terms, all overdue installments of interest upon the Bonds, together with interest on such overdue installments of interest to the extent permitted by law and the reasonable and proper charges, expenses and liabilities of the Trustee, and. all other sums then payable by the City under the Resolution (except the principal of, and inter- est accrued since the next preceding interest date on, the Bonds due and payable solely by virtue of such declaration) shall either be paid by or for the account of the City or provision satisfac- tory to the Trustee shall be made for such payment, and all defaults under the Bonds or under the Resolution (other than the payment of. principal and interest due and. payable solely by reason of such declaration) shall be made good or be secured to the sat- isfaction of the Trustee or provisions deemed by the Trustee to be adequate shall be made therefor, then and in every such case the Holders of a majority in principal amount of the Bonds Outstandinq, by written notice to the City and to the Trustee, may rescind such declaration and annul such default in its entirety, or, if the Trustee shall have acted itself, and if there shall not have been theretofore delivered to the Trustee written direction to the contrary by the Holders of a majority in principal amount of the Bonds then Outstanding, then any such declaration shall ipso fact.o be deemed to be rescinded and any such default and its consequences shall ipso facto be deemed to be annulled, but no such rescission and annulment shall extend to or affect any subse- quent default or impair or exhaust any right or power consequent thereon. NotWithstanding anything to the contrary expressed in this Resolution, the Trustee shall not be deemed to have knowledge of any Event of Default hereunder unless and until it shall have actual knowledge thereof, or shall have received written notice thereof, at its principal corporate trust office in IDs Angeles, California. Except as otherwise expressly provided herein, the Trustee shall not be bound to ascertain or inquire as to the per- formance or observance of any of the terms, conditions, covenants or agreements herein or of any of the documents executed in con- nection with the Bonds or as to the existence of an Event of Default hereunder or thereunder. SECTIOlf 802. ~. aDd ~h.ticn of Records After Default. 1. The City covenants that if an Event of Default shall have occurred and shall not have been remedied, the books of -VIII-2- record and accounts of the City and all other records relating to the Enterprise shall at all times be subject to the inspection and use of the Trustee and of its agents and attorneys. 2 . The City covenants that if an Event of Default shall have occurred and shall not have been remedied, the City, upon demand of the Trustee, will account, as if it were the trustee of an express trust, for all Revenues and other moneys, securities and funds pledged or held under the Resolution for such period as shall be stated in such demand. SECTIOlf 803. Application of Revenues and Other Moneys After Defaul.t. 1. The City covenants that if an Event of Default shall have occurred and shall not have been remedied, the City, upon the demand of the Trustee, shall pay over or cause to be paid over to the Trustee (i) forthwith, all moneys, securities and funds then held by the City in any FUnd. under the Resolution, and (ii) all ReVenues as promptly as practicable after receipt thereof. 2. During the continuance of an Event of Default, the Trustee shall apply all moneys, securities, funds and Revenues received by the Trustee pursuant to any right given or action taken under the provisions of this Article as follows and in the following order: (i) Fees and expenses of Fiduciaries - to the pay- ment of the reasonable and proper fees, charqes, expenses and liabilities of the Fiduciaries: (ii) Operating Expenses - to the payment of the amounts required for reasonable and necessary Operating Expenses and for the reasonable renewals, repairs and replacements of the Enterprise necessary in the judgment of the Trustee (or its agent or agents which are actively managing the Enterprise) to prevent a loss of Revenues. For this. purpose the books of record and accounts of the City relatinq to the Enterprise shall at all times be subject to the inspection of the Trustee and its repre- sentatives and agents during the continuance of such Event of Default: (iii) Principal or Redemption Price and Interest - to the payment of the interest and principal or Redemption Price then due on the Bonds, as follows: (a> unless the principal of all of the Bonds shall have become due and payable, First: Interest - To the payment to the persons entitled thereto of all installments of interest -VIII-3- then due in the order of the maturity of such installments, together with accrued and unpaid interest on the Bonds theretofore called for redemption, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; and Second: Principal or Redemption Price - To the payment to the persons entitled thereto of the unpaid principal or Redemption Price of any Bonds which shall have become due, whether at maturity or by call for redemption, in the order of their due dates, and, if the amount available shall not be sufficient to pay in full all the Bonds due on any date, then to the payment thereof ratably, according to the amounts of principal or Redemption Price due on such date, to the persons enti- tled thereto, without any discrimination or preference. (b) if the principal of all of the Bonds shall have become due and payable, to the payment of the principal and interest then due and unpaid upon the Bonds without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other install- ment of interest, or of any Bond over any other Bond, ratably, according to the amounts due respec- tively for principal and interest, to the persons entitled thereto without any discrimination or pref- erence except as to any difference in the respective rates of interest specified in the Bonds. 3. If and whenever all overdue installments of interest on all Bonds, together with the reasonable and proper fees, charges, expenses and liabilities of the Fiduciaries, and all. other sums payable by the City under the ReSOlution, including the principal and Redemption Price of and accrued unpaid interest on all Bonds which shall then be payable, shall either be paid by or for the account of the City, or provision satisfactory to the Trustee shall be made for such payment, and all defaults under the Resolution or the Bonds shall be made good or secured to the sat- isfaction of the Trustee or provision deemed by the Trustee to be adequate shall be made therefor, the Trust.. shall pay over to the City all moneys, securities and funds then remaininq unexpended in the hands of the Trustee (except moneys, securities and funds deposited or pledged, or required by the terms of the Resolution to be deposited or pledged, with the Trustee), and thereupon. the City and the Trustee shall be restored, respectively, to their former positions and rights under the Resolution. No such payment over to the City by the Trustee nor such restoration of the City -VIII-4- and the Trustee to their former positions and rights shall extend to or affect any subsequent default under the Resolution or impair any right consequent thereon. SECTION 804. Appointment of Receiver. The T r us tee shall have the right to apply in an appropriate proceeding for the appointment of a receiver of the Enterprise. SECTION 805. Proceedinqs Brouqht by Trustee. 1 . I f an Event of Default shall have occurred and shall not have been remedied, then and in every such case, the Trustee, by its agents and attorneys, may proceed, and upon written request of the Holders of not less than 25% in principal amount of the Bonds outstanding shall proceed, to protect and enforce its rights and the rights of the Holders of the Bonds under the Resolution forth- with by a suit or suits in equity or at law, whether for the spe- cific performance of any covenant herein contained, or in aid of the execution of any power herein granted or any remedy granted under the Act, or for an accounting aqainst the City as if the City were the trustee of an express trust, or in the enforcement of any other leqal or equitable right as the Trustee, being advised by counsel, shall deem most effectual to enforce any of its riqhts or to perform any of its duties under the Resolution. 2. All rights of action under the Resolution may be enforced by the Trustee without the possession of any of the Bonds or the production thereof at the trial or other proceedings, and any such suit or proceedings instituted by the Trustee shall be brought in its name. 3. The holders of not less than a majority in principal amount of the Bonds at the time Outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power con- ferred upon the Trustee, provided that the Trustee shall have the right to decline to follow any such direction if the Trustee shall be advised by counsel that the action or proceeding so directed may not lawfully be taken, or if the Trustee in good faith shall determine that the action or proceedinq so directed would involve the Trustee in personal liability or be unjustlY prejudicial to the Bondholde~s not parties to such direction. The Truste. shall not be liable with respect to any action taken or omitted to be taken by it in accordance with the provisions of this subsection 805.3. 4. Upon commencing a suit in equity or upon other com- mencement of judicial proceedings by the Trustee to enforce any right under the Resolution, the Trustee shall be entitled to exercise any and all rights and powers conferred in the Resolution -VIII-5- and provided to be exercised by the Trustee upon the occurrence of. any Event of Default. 5. Regardless of the occurrence of an Event of Default, the Trustee shall have power to, but unless requested in writing by the Holders of a majority in principal amount of the Bonds then Outstanding, and furnished with reasonable security and indemnity, shall be under no obligation to, institute and. maintain such suits and proceedings as it may be advised shall be necessary or expedi- ent to prevent any impairment of the security under the Resolution by any acts which may be unlawful or in violation of the ReSOlution, and such suits and proceedings as the Trustee may be advised shall be necessary or expedient to preserve or protect its interests and the interests of the Bondholders. SECTION 806. Restriction on Bondholder' s Action. 1. No Kolder of any Bond shall have any right to institute any suit, action or proceeding at law or in equity for the enforcement of any provision of the Resolution or the execution of any trust under the .Resolution or for any remedy under the Resolution, unless. such Holder shall have previously given to the Trustee written notice of the happening of an Event of Default, as pro- vided in this Article, and the Holders of at least 25% in princi- pal amount of the Bonds then Outstanding shall have filed a writ- ten request with the Trustee, and shall have offered it reasonable opportunity, either to exercise the powers granted in the Resolution or by the Act or by the laws of California or to insti- tute such action, suit or proceedinq in its own name, and unless such Holders shall have offered to the Trustee adequate security and indemnity against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee shall have refused to comply with such request for a period of 60 days after receipt by it of such notice, request and offer of indemnity, it being under- stood and intended that. no one or more Holders of Bonds shall have any right in any manner whatever by his or their action to affect, disturb or prejUdice the pledge created by the ReSOlution, or to enforce any right under the Resolution, except in the manner therein provided: and that all proceedings at law or in equity to enforce any provision of the Resolution shall be instituted, had and maintained in the manner provided in the ReSOlution and for the equal benefit of all Holders of the outstandinq Sonds, subject only to the provisions of Section 702. 2. Nothinq in the Resolution contained shall affect or impair the obligation of the City, which is absolute and uncondi- tional, to pay at the respective dates o~ maturity and places therein expressed the principal of and premium, if any, and inter- est on the Bonds to the respective Holders thereof, or affect or impair the right of action, which is also absolute and unconditional, of any Holder to enforce such payment of his Bond. -VIII-6- , . " SECTION 807. Remedies Not Exclusive. No remedy by the terms of the Resolution conferred upon or reserved to the Trustee or the Bondholders is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under the Resolution or existing at law, including under the Act, or in equity or by statute on or after the date of adoption of the Resolution. SECTIOlf 808. Effect of Waiver and other circullstances. 1. No delay or omission of the Trustee or any Bondholder to exer- cise any right or power arising upon the happening of an Event of Default shall impair any right or power or shall be construed to be a waiver of any such Event of Default or be an acquiescence therein: and every power and remedy given by this Article to the Trustee or to the Bondholders may be exercised from time to time and as often as may be deemed expedient by the Trustee or by the Bondholders. 2. The Holders of not less than 66-2/3' in aggregate principal amount of the Bonds at the time Outstanding, or their attorneys-in-fact duly authorized, may on behalf of the Holders of all of the Bonds waive any past default under the Resolution and its consequences, except a default in the paYment of interest on or principal of or premium, if any, on any of the Bonds. No such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTIOlf 809. Notice of Default. The Trustee shall, as soon as practicable after receipt of knowledge of an Event of Default, mail written notice of the occurrence of any Event of Default to each registered owner of Bonds then outstanding at his address, if any, appearing on the registration books of the City. -VIII-7- ARTICLE IX CONCERNING THE FIDUCIARIES SECTION 901. Trustee, Appointment and Acceptance of Duties. The Trustee shall signify its acceptance of the duties and obligations imposed upon it by the Resolution and all other agreements with the City by executing and delivering to the City a written acceptance thereof, and by executing such acceptance, the Trustee shall be deemed to have accepted such duties and. obliga- tions with respect to all the Bonds thereafter to be validly issued, but only, however, upon the terms and conditions set forth in the Resolution. SECTIOlf 902. payinq Aqents, AppointEnt and Acceptance of Duties. 1. The City shall appoint one or more Paying Agents for the Bonds of each Series, and may at any time or from time to time appoint one or more other Paying Aqents having the qualifica- tions set forth in Se~tion 913 for a successor Paying Agent. The Trustee may be appointed a Paying Agent. 2. Each Paying Aqent shall signify its acceptance of the duties and Obligations imposed upon it by the Resolution by exe- cuting and delivering to the City and to the Trustee a written acceptance thereof. 3. Unless otherwise provided, the principal corporate trust offices of the paying Agents are designated as the respec- tive offices or agencies of the City for the payment of the inter- est on and principal or Redemption Price of the Bonds. SECTION 903. Responsibilities of Fiduciaries. 1. The recitals herein and in the Bonds contained shall be taken as the statements of the City, and. no Fiduciary assumes any responsi- bility for the correctness of the same. No Fiduciary makes any representation as to the validity or sufficiency of the Resolution or of any Bonds issued thereunder or as to the security afforded by the ReSOlution, and no Fiduciary shall incur any liability in respect thereof. The Trustee shall, however, be responsible for its representation contained in its certificate of authentication on the Bonds. No Fiduciary shall be under any responsibility or duty with respect to the application of any moneys paid by such Fiduciary in accordance with the provisions of the Resolution to or upon the order of the City or to any other Fiduciary. No Fiduciary shall be under any obligation or duty to perform any act which would involve it in expense or liability or to institute or defend any suit in respect thereof, or to advance any of its own moneys, unless properly indemnified. Subject to the provisions of subsection 2 of this Section 903, no Fiduciary shall be liable in connection with the performance of its duties hereunder except for -IX-l- its own negligence or misconduct. No Fiduciary shall be liable. for any error of judgment, made in good faith, unless it is proved that such Fiduciary was negligent in ascertaining the pertinent facts'. 2. The Trustee, prior to the occurrence of an Event of Default and after the curing of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in the Resolution. In case an Event of Default has occurred (whiCh has not been cured) the Trustee shall exercise such of the rights and powers vested in it by the ReSOlution, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. Any provision of the Resolution relating to action taken or to betaken by the Trustee or to evidence upon which the Trustee may rely shall be SUbject to the provisions of this Section 903. 3. The Trustee has no obligation or liability to the Bondholders for the payment of interest, principal or Redemption Price with respect to the Bonds: but rather the Trustee's sole obligations are to administer, for the benefit of the City and the Bondholders, the various Funds and Accounts established in the ReSOlution and held by the Trustee. 4. The Fiduciaries may execute any of the trusts or powers hereof and perform the duties required of them hereunder by or through attorneys, agents, or receivers, and. shall be entitled to advice of counsel concerning all matters of trust and their duties hereunder, and no Fiduciary shall be answerable for the default or misconduct of any such attorney, agent, or receiver selected by it with reasonable care. 5. No provision of this Resolution shall require any Fiduciary to expend or risk its own funds or otherwise incur any financial liability in the performance or exercise of any of its duties hereunder, or in the exercise of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably as.ured to it. 6. The permissive right of the Fiduciaries to do things enumerated in this Resolution shall not be construed as a duty. SBCTIOlf 904. Evidence on Which Piduciaries May Act. 1. Each FidUCiary, upon receipt of any notice, resolution, request, consent, order, certificate, report, opinion, bond, or other paper or document furnished to it pursuant to any provision of the ReSOlution, shall examine such instrument to determine whether it conforms to the requirements of the Resolution and shall be protected in acting upon any such instrument believed by -IX-2- . . . it to be genuine and to have been signed or presented by the proper party or parties. Each Fiduciary may reasonably consult with counsel, who mayor may not be of counsel to the City, and the opinion of such counsel shall be full and complete authoriza- tion and protection in respect of any action taken or suffered by it under the Resolution in good faith and in accordance therewith. 2. Whenever any Fiduciary shall deem it necessary or desirable that a matter be proved or established prior to taking or SUffering any action under the Resolution, such matter (unless other evidence in respect thereof be therein specifically prescribed) may be deemed to be conclusively proved and estab- lished by a certificate of an Authorized Officer of the City, and such certificate shall be full warrant for any action take~ or suffered in good faith under the provisions of the Resolution ~pon the faith thereof: but in its discretion the Fiduciary may in lieu thereof accept other evidence of such fact or matter or may require such further or additional evidence as may seem reasonable to it. 3. Except as otherwise expressly provided in the Resolution, any request, order, notice or other direction required or permitted to be furnished pursuant to any provision thereof by the City to any Fiduciary shall be sufficiently executed in the name of the City by an Authorized Officer of the City. SBCTIOlf 905. Compensation. Prior to its appointment, each Fiduciary shall file with the City a negotiated schedule of anticipated fees and charqes for services to be performed pursuant to the Resolution. The City shall pay to each Fiduciary from time to time pursuant to such schedule reasonable compensation for all services rendered under the Resolution, and also all reasonable expenses, charges, counsel fees and.. other diSbursements, inClUding those of its attorneys, agents, and. other persons not regularly in is employ, incurred in and about the performance of their powers and duties under the ReSOlution, and each Fiduciary shall have a lien therefor on any and all funds at any time held by it under the Resolution. Subject to the provisions of Section 903 and. to the extent permitted by law, the City further aqreesto indemnify and hold harmless each Fiduciary and. their officers, employees and agents from and aqainst any and all losses, claims, damages, liabilities or expenses, of every conceivable kind, character and nature whatsoever, including, but not limited to, losses, claims, damages, liabilities, or expenses arising out of, resulting from or in any way connected with (1) the 1986 Project, the Enterprise to be financed, or the conditions, occupancy, use, possession, conduct or management of, or work done in or about, or from the planning, design, acquisition, installation or construction of such facilities or any part thereof: (2) the sale of any Bonds and the carrying out of any of the transactions contemplated by the -IX-3- " ' Bonds or the Resolution or (3) any untrue statement cr alleged. untrue statement of any material fact or omission or alleged omis~ sion to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading in any official statement or other disclosure docu- ment utilized in connection with the issuance and sale of the Bonds. The City'S obligations hereunder shall remain valid and binding notwithstanding maturity and payment of the Bonds. SECTIOlf 906. Certain Peraitted Acts. Any Fiduciary may become the owner of any Bonds, with the same rights it would have if it were not a Fiduciary. To the extent permitted by law, any Fiduciary may act as depositary for, and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Bondholders or to effect or aid in any reorganization growing out of the enforcement of the Bonds or the ReSOlution, whether or not any such committee shall represent the Holders of a majority in principal amount of the Bonds then Outstanding. SECTIOlf 907. Resignation of Trustee. The Trustee may at any time resign and be discharged from the duties and obliga- tions created by the Resolution by giving not less than 60 days' written notice to the City, and mailing notice thereof, specifying the date when such resignation shall take effect, to the regis- tered owners of the Bonds then Outstanding, and such resignation shall take effect upon the day specified in such notice unless previously a successor shall have been appointed by the City or the Bondholders as provided in Section 909, in which event such resignation shall take effect immediately on the appointment of such successor. . . . SECTIOlf 908. Removal o~ Trustee. The Trustee may be removed at any time by an instrument or concurrent instruments in writing, filed with the Trustee, and signed by the Holders of a majority in principal amount of the Bonds then Outstanding or their attorneys-in-fact duly authorized, excluding any Bonds held by or for the account of the City. The City may remove the Trustee at any time, except during the existence of an Event of Default, for cause. SECTIOlf 909. AppointJaent of Successor Trustee. 1. In case at any time the Trustee shall resign or shall be removed or shall become incapable of acting, or shall be adjudged a bank- rupt or insolvent, or if a receiver, liquidator or conservator of the Trustee, or of its property, shall be appointed, or if any public officer shall take charge or control of the Trustee, or of its property or affairs, a successor may be appointed by the Holders of a majority in principal amount of the Bonds then Outstanding, excluding any Bonds held by or for the acc.ount of the ci ty, by an instrument or concurrent instruments in writing signed -IX-4- and acknowledged by such Bondholders or by their attorneys-in-fact duly authorized and delivered to such successor Trustee, notifica- tion thereof being given to the City and the predecessor Trustee; provided, nevertheless, that unless a successor Trustee shall have been appointed by the Bondholders as aforesaid, the City by a duly executed written instrument signed by an Authorized Officer of the City shall forthwith appoint a Trustee to fill such vacancy until a successor Trustee shall be appointed by the Bondholders as authorized in this Section 909. After such appointment of a suc- cessor Trustee, the City shall mail notice of any such appointment by it or the Bondholders to the registered owners of the Bonds then Outstanding. Any successor Trustee appointed by the City shall, immediately and without further act, be superseded by a Trustee appointed by the Bondholders. 2. If in a proper case no appointment of a successor Trustee shall be made pursuant to the foregoing provisions of this Section within 45 days after the Trustee shall have given to the City written notice as provided in Section 907 or after a vacancy in the office of the Trustee shall have occurred by reason of its inability to act, the Trustee or the Holder of any Bond may apply to any court of competent jurisdiction to appoint a successor Trustee. Said court may thereupon, after such notice, if any, as such court may deem proper, appoint a successor Trustee. 3. Any Trustee appointed under the provisions of this section in succession to the Trustee shall be a bank or trust com- pany or national banking association, having capital stock, sur- plus and undivided earnings aggregating at least $50,000,000, if there be such a bank or trust company or national banking associa- tion willing and able to accept the office on reasonable and cus- tomary terms and authorized by law to perform all the duties imposed upon it by the Resolution. SBCTIOlf 9l.0. Transfer of Riqhts and Property to Successor Trustee. Any successor Trustee appointed under the Resolution shall execute, acknowledge and deliver to its predeces- sor Trustee, and also to the City, an instrument acceptinq such appointment, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become fully vested with all moneys, estates, properties, riqhts, powers, duties and obli- gations of such predecessor Trustee, with like effect as if origi- nally named as Trustee, but the Trustee ceasing to act shall nev- ertheless, on the written request of the City, or of the successor Trustee, execute, acknoWledge and deliver such instrument of con- veyance and further assurance and. do such other things as may rea- sonably be required for more fully and certainly vesting and con- firming in such successor Trustee all the right, title and inter- est of the predecessor Trustee in and to any property held by it under the ReSOlution, and shall pay over, assign and deliver to the successor Trustee any money or other property subject to the -IX-5- trusts and conditions herein set forth. Should any deed,_ conveyance or instrument in writing from the City be reasonably required by such successor Trustee for more fully and certainly vesting in and confirming to such successor Trustee any such estates, rights, power and duties, any and all such deeds, convey- ances and instruments in writing shall, on request, and so far as may be authorized by law, be executed, acknowledged and. delivered by the City. The City shall promptly notify the Paying Agents of the appointment of any such successor Trustee. SECTIOlf 91l.. Herger or Consolidation. Any co mp any into which any Fiduciary may be merged or converted or with which it may be consolidated or any company reSUlting from any merger, conversion or consolidation to which it shall be a party or any company to which any Fiduciary may sell or transfer all or sub- stantially all of its corporate trust business, provided such com- pany shall be a bank or trust company organized under the laws of any state of the United states or a national banking association and shall be authorized by law to perform all duties imposed upon it by the Resolution, shall be the successor to such Fiduciary without the execution or filing of any paper or the performance of any further act. SECTIO. 9l.2. Adoption of Authentication. In case any of the Bonds contemplated to be issued under the Resolution shall have been authenticated but not delivered, any successor Trustee may adopt the certificate of authentication of any predecessor Trustee so authenticating such Bonds and deliver such Bonds so authenticated: and, in case any of the said Bonds shall not have been authenticated, any successor Trustee may authenticate such Bonds in the name of the predecessor Trustee, or in the name of the successor Trustee, and in all such cases such certificate shall have the full force which it is anywhere in said Bonds or in the ReSOlution provided that the certificate of the Trustee shall have. SECTIOlf 9l.3. Resignation or ReIaaVAl of Payinq Aqentand Appoin'blent of Successor. 1. Any Paying Agent may at any time resign and be discharged of the duties and obligations created by the Resolution by qivinq at least 60 days' written notice to the City, the Trustee, and the other Paying Agents. Any Paying Agent may be removed at any time by an instrument filed with such Paying Agent and the Trustee and signed by an Authorized Officer of the City. Any Successor Paying Agent shall be appointed by the City and shall be a bank or trust company organized under the laws of any state of the United states or national banking association, haVing capital stock, surplus and undivided earnings aqqregating at least $5,000,000, and willing and able to accept the office on reasonable and customary terms and authorized by law to perform all the duties imposed upon it by the Resolution. -IX-6- . . . 2. In the event of the resignation or removal of any Paying Agent, such Paying Agent shall pay over, assign and deliver any moneys held by it as Paying Agent to its successor, or if ' there be no successor, to the Trustee. In the event that for any reason there shall be a vacancy in the office of any Paying Agent, the Trustee shall act as such Paying Agent. -IX-7- - . . ARTICLE X SUPPLEMElfTAL RESOLUTIONS SECTION l.00l.. Supplemental. Resol.utions Effective Upon Filing With the~. For anyone or more of the following . purposes and at any time or from time to time, a Supplemental Resolution of the City may be adopted, which, upon the filing with the Trustee of a copy thereof certified by an Authorized Officer of the City, shall be fu:.ly effective in accordance with its terms: (1) To close the Resolution against, or provide limitations and restrictions in addition to the limita- tions and restrictions contained in the Resolution on, the authentication and delivery of Bonds or the issuance of other evidences of indebtedness: (2) To add, to the covenants and agreements of the City in the Resolution, other covenants and agreements to be observed by the City which are not contrary to or inconsistent with the Resolution as theretofore in effect: (3) To add, to the limitations and restrictions in the Resolution, other limitations and restrictions to be observed by the City which are not contrary to or incon- sistent with the Resolution as theretofore in effect; (4) To authorize Bonds of a Series and, in connec- tion therewith, specify and determine the matters and things referred to in Sections 201, 202, 203, 204 or 205 hereof, and also any other matters and thinqs relative to such Bonds which are required by the Resolution or are not contrary to or inconsistent with the Resolution as theretofore in effect, or to u.nd, modify or rescind any such authorization, specification or determination at any time prior to the first authentication and delivery of such Bonds; (5) To authorize, in. compliance with all applicable law, Bonds of each Series to be issued in the form of coupon bonds registrable as to principal only and, in connection therewith, specify and determine the matters and thinqs relative to the issuance of such coupon Bonds, includinq provisions relatinq to the timing and. manner of provision of any notice required to be given hereunder to the Holders of such coupon Bonds, which are not contrary to or inconsistent with the Resolution as theretofore in effect, or to amend, modify or rescind any such -X-l- authorization, specification or determination at any time prior to the first authentication and delivery of such coupon Bonds; - . , (6) To authorize, in compliance with all applicable law, Bonds of each Series to be issued in the form of Bonds issued and held in book-entry form on the books of the City or any Fiduciary appointed for that purpose by the City and, in connection therewith, make such addi- tional changes herein, not adverse to the rights of the Holders of the Bonds, as are necessary or appropriate to accomplish or recognize such book-entry form Bonds and specify and determine the matters and things relative to the issuance of such book-entry from Bonds as are appro- priate or necessary; (7) To authorize Subordinated Indebtedness of a Series and, in connection therewith, specify and deter- mine such matters and things relative to such SUbordinated Indebtedness which are not contrary to or inconsistent with the Resolution as theretofore in effect, or to amend, modify or rescind any such. authori- zation, specification or determination at any time prior to the first authentication and delivery of such Subordinated Indebtedness: (8) To confirm, as further assurance, any pledge or assignment under, and the subjection to, any security interest, pledge or assignment created or to be created by, the Resolution, of the Revenues or of any other moneys, securities or funds; (9) To modify any of the provisions of the Resolution in any other respect whatever, provided that (i) such modification shall be, and be expressed to be, effective only after all Bonds of each Series outstanding at the date of the adoption of such Supplemental Resolution shall cease to be Outstanding, and (ii) such Supplemental Resolution shall be specifically referred to in the text of all Bonds of any Series authenticated and delivered after the date of the adoption of such Supplemental Re.olution and of Bonds issued in exchange therefor or in place thereof: (10) To cure any ambiguity, supply any omission, or cure or correct any defect or inconsistent provision in the Resolution: or (11) To insert such provisions clarifying matters or questions arising under the Resolution as are -X-2- . . . necessary or desirable and are not contrary to the Resolution as theretofore in effect. SECTION 1002. Supplemental Resolutions Effective with Consent of Bondholders. At any time or from time to time, a Supplemental Resolution may be adopted subject to consent by Bondholders in accordance with and subject to the provisions of Article XI, which Supplemental Resolution, upon the filing with the Trustee of a copy thereof certified by an Authorized Officer of the City and upon compliance with the provisions of said Article XI, shall become fully effective in accordance with its terms as provided in said Article xt. SECTIOlf l.003. General Provisions. 1. Prior to the issuance and delivery of the 1986 Project Bonds, the terms and conditions of the Resolution and the rights and Obligations of the City and the Bondholders may be modified or amended in any respect without the consent of any person, upon the adoption by the City of one or more Supplemental Resolutions. 2. After the issuance and delivery of the 1986 Project Bonds, the Resolution shall not be modified or amended in any respect except as provided in and in accordance with and. subject to the provisions of this Article X and Article XI. Nothing in this Article X or Article XI contained shall affect or limit the right or obligation of the City to adopt, make, do, execute, acknowledge or deliver any resolution, act or other instrument pursuant to the provisions of Section 704 or the right or Obliga- tion of the City to execute and deliver to any Fiduciary any instrument which elsewhere in the Resolution it is provided shall be delivered to said Fiduciary. 3. Any Supplemental Resolution referred to and. permitted or authorized by Section 1001 may be adopted by the City without the consent of any of the Bondholders, but shall become effective only on the conditions, to the extent and. at the time provided in said Section. Except for a SUpplemental Resolution adopted pursu- ant to subsection (4) of Section 1001, the copy of every Supplemental Resolution when filed with the Trustee 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 the ReSOlution, is authorized or permitted by the ReSOlution, and is valid and bindinq upon the City in accordance with its terms. 4. The Trustee is hereby authorized to accept the deliv- ery of a certified copy of any supplemental Resolution referred to and permitted or authorized by Sections 1001 or 1002 and to make all further agreements and stipulations which may be therein contained, and the Truste., in taking such action, shall be fully protected in relyinq on an Opinion of Counsel that such -X-3- Supplemental Resolution is authorized or permitted by the. provisions of the Resolution. . . . 5. No Supplemental Resolution shall change or modify any of the rights, liabilities or obligations of any Fiduciary without its written assent thereto. -X-4- \.... 0# . , . ARTICLE XI AMENDMENTS SECTION 1l.01. Mailing. Any provision in this Article for the mailing of a notice or other paper to Bondholders shall be fully complied with if it is mailed postage prepaid only (i) to each registered owner of Bonds then outstanding at his address, if any, appearing upon the registration books of the City and (ii) to the Trustee. SECTION 1102. Powers of Amen~. Any modification or amendment of the Resolution and of the rights and obligations of the City and of the Holders of the Bonds thereunder, in any partiCUlar, may be made by a Supplemental Resolution, with the written consent given as provided in Section 1103, (i) of the Holders of not less than a majority in principal amount of the Bonds Outstanding at the time such consent is given, and (ii) in case less than all of the several Series of Bonds then outstanding are affected by the modification or amendment, of the Holders of not less than a majority in principal amount of the Bonds of each Series so affected and Outstanding at the time such consent is given, and (iii) in case the modification or amendment changes the terms of any Sinkinq Fund Installment, of the Holders of not less than a majority in principal amount of the Bonds of the particular Series and maturity entitled to such Sinking Find Installment and outstanding at the time such consent is given: provided, however, that if such modification or amendment will, by its terms, not take effect so long as any Bonds of any specified like Series and maturity remain outstanding the consent of the Holders of such Bonds shall not be required and such Bonds shall not be deemed to be Outstanding for the purpose of any calculation of outstanding Bonds under this Section. No such modification or amendment shall permit a change in the terms of redemption or maturity of the principal of any Outstanding Bond or of any installment of inter- est thereon or a reduction in the principal amount or the Redemption Price thereof or in the rate of interest thereon with- out the consent of the Holder of such Bond, or shall reduce the percentages or otherwise affect the classes of Bonds the consent of the Holders of which is required to effect any such modifica- tion or amendment, or shall chanqe or modify any of the rights, liabilities or obligations of any Fiduciary without its written assent thereto. For the purposes of this Section, a Series shall be deemed to be affected by a modification or amendment of the Resolution if the same adverselyaff8Cts or diminishes the rights of the Holders of Bonds of such Series. SECTIOlf l.103. CODII8Dt: of Bondholdarll. The City may at any time adopt a Supplemental Resolution makinq a modification or amendment permitted by the provisions of Section 1102 to take -XI-l- effect when and as provided in this Section. A copy of SUch. Supplemental Resolution (or brief summary thereof or reference thereto), together with a request to Bondholders for their consent thereto, shall be mailed by the City to Bondholders, (but failure to mail such copy and request shall not affect the validity of the Supplemental Resolution when consented to as in this Section provided). Such Supplemental Resolution shall not be effective unless and until (i) there shall have been filed with the Trustee (a) the written consents of Holders of the percentages of Outstanding Bonds specified in Section 1102 and (b) an Opinion of Counsel statinq that such Supplemental Resolution has been duly and lawfully adopted and filed by the City in accordance with the provisions of the ReSOlution, is authorized or permitted by the ReSOlution, and is valid and binding upon the City and enforceable in accordance with its terms, and (ii) a notice shall have been given as hereinafter in this Section 1103 provided. Each such consent shall be effective only if accompanied by proof of the holdinq, at the date of such consent, of the Bonds with respect to which such consent is given, which proof shall be such as is per- mitted by S.ction 1202. A certificate or certificates executed by the Trustee and filed with the City stating that it has examined such proof and that such proof is sufficient in accordance with Section 1202 shall be conclusive that the consents have been given by the Hold.rs of the Bonds described in such certificate or cer- tificates of the Trustee. Any such consent shall be binding upon the Holder of the Bonds giving such consent and, anything in Section 1202 to the contrary notwithstanding, upon any subsequent Holder of such Bonds and of any Bonds issued in exchange therefor (whether or not such subsequent Holder thereof has notice thereof) unless such consent is revoked in writing by the Holder of such Bonds giving such consent or a subsequent Holder thereof by filing with the Trust.e, prior to the time when the written statement of the Trustee hereinafter in this Section 1103 provided for is filed, such revocation and, if such Bonds are transferable by delivery, proof that such Bonds are held by the signer of such revocation in the manner permitted by Section 1202. The fact that a consent has not be.n revoked may likewise be proved by a certif- icat. of the Trust.. filed with the City to the effect that no revocation thereof is on file with the Trust.... At any time after the Holders of the required percentages of Bonds shall have filed their cons.nts to the Supplemental R.solution, the Trustee shall make and file with the City a.written statement that the Holders of such r.quir.d percentages of Bonds have filed such consents. Such written statements shall b. conclusive that such consents have been so filed. At any time thereaft.r, notice stating in substance that the Supplemental Resolution (which may be r.ferred to as a Supplem.ntal Resolution adopted by the City on a stated date, a copy of which is on file with the Trustee) has been con- sented to by the Hold.rs of the required percentages of Bonds and will be effective as provided in this Section 1103, may be given to Bondhold.rs by the City by mailing such notice to Bondholders . . (< -XI-2- " . . . SECTIOlf 1l.05. Exclusion of Banda. Bonds owned or held by or for the account of the City shall not be deemed outstanding for the purpose of consent or other action or any calculation of Outstanding Bonds provided for in this Article XI, and the City shall not be entitled with respect to such Bonds to give any con- sent or take any other action provided for in this Article. At the time of any consent or other action taken under this ArtiCle, the City shall furnish the Trustee a certificate of an Authorized Officer of the City, upon which the Trustee may rely, describing all Bonds so to be excluded. SBCTIOH 1106. lfotation on Banda. Bonds authenticated and delivered after the effective date of any action taken as in Article X or this Article XI provided may, and, if the Trustee so determines, shall bear a notation by endorsement or otherwise in form approved by the City and the Trustee as to such action, and in that case upon demand of the Holder of any Bond outstanding at -XI-3- ': "',. such effective date and presentation of his Bond for the purpose- at the corporate trust office of the Trustee or upon any transfer or exchange of any Bond Outstanding at such effective date, suit- able notation shall be made on such Bond or upon any Bond issued upon any such transfer or exchange by the Trustee as to any such action. If the City or the Trustee shall so determine, new Bonds so modified to conform to such action shall be prepared, authenti- cated and delivered and. upon demand of the Holder of any Bond then Outstanding shall be exchanged, withol.lt cost to such Bondholder, for Bonds of the same Series and maturity then Outstanding, upon surrender of such Bonds. , . , -XI-4- \,lo< :: ~ , . ARTICLE XII MISCELLANEOUS SECTION 1201. Defeasance. 1. If the City shall pay or cause to be paid, or there shall otherwise be paid, to the Holders of all Bonds the principal or Redemption Price and inter- est due or to become due thereon, at the times and in the manner stipulated therein and in the ReSOlution, then the pledge of any Revenues, and other moneys and securities pledged under the Resolution and all covenants, agreements and other obligations of the City to the BondhOlders, shall thereupon cease, terminate and become void and be diSCharged and satisfied. In such event, the Trustee shall cause an accountinq tor such period or periods as shall be requested by the City to be prepared and filed with the City and, upon the request of the City, shall execute and deliver to the City all such instruments as may be desirable to evidence such discharge and satisfaction, and the Fiduciaries shall pay over or deliver to the City all moneys or securities held by them pursuant to the Resolution which are not required for the payment of principal or Redemption Price, if applicable, on Bonds not thereto tore surrendered for such payment or redemption. If the City shall payor cause to be paid, or there shall otherwise be paid, to the Holders of all Outstanding Bonds of a particular Series, or of a partiCUlar maturity within a Series, the principal or Redemption Price and interest due or to became due thereon, at the times and in the manner stipulated therein and in the Resolution, such Bonds shall cease to be entitled to any lien, benefit or security under the ReSOlution, and all covenants, agreements and Obligations of the City to the Holders of such Bonds shall thereupon cease, terminate and become void and be dis- charged and satisfied. 2. Bonds or interest installments for the payment or redemption of which moneys shall have been set aside and shall be held in trust by the Paying Aqen1:s' (through deposit by the City of funds for such payment or rMAlIption or otherwise) at the maturity or redemption date thereof shall be deemed to have been paid within the meaninq and with the effect expressed in subsection 1 of this Section. All OUtstanding Bonds of any Series, or of any maturity within a Series, shall prior to the maturity or redemp- tion date thereof be deemed to have been paid within the meaning and with the effect expressed in subsection 1 of this Section if (a) in case any of said Bonds are to be redeemed on any date prior to their maturity, the City shall have given to the Trustee irrev- ocable written instructions to the Trustee to mail as provided in Article IV notice of redemption of such Bonds on said date, (b) there shall have been deposited with the Trustee either moneys in an amount which shall be SUfficient, or Investment Securities (inClUding any Investment Securities issued or held in book-entry -XII-l- form on the books of the Department of the Treasury of the United. States) the principal of and the interest on which when due will provide moneys which, together with the moneys, if any, deposited with the Trustee at the same time, shall be sufficient, to pay when due the principal or Redemption Price and interest due and to become due on said Bonds on or prior to the redemption date or maturity date thereof, as the case may be, and (c) in the event said Bonds are not by their terms subject to redemption within the next succeeding 60 days, the City shall have qiven the Trustee in form satisfactory to it irrevocable instructions to mail a notice to the Holders of such Bonds that the deposit required by (b) above has been made with the Trustee and that said Bonds are deemed to have been paid in accordance, with this Section and stat- ing such maturity or redemption date upon which moneys are to be available for the payment of the principal or Redemption Price on said Bonds. Neither Investment Securities nor moneys deposited with the Trustee pursuant to this Section nor principal or inter- est payments on any such Investment Securities shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal or Redemption Price and interest on. said Bonds 1 provided that any cash received from such principal or interest payments on such Investment Securities deposited with the Trustee, (A) to the extent such cash will not be required at any time for such purpose, shall be paid over to the City as received by the Trustee, free and clear of any trust, lien or pledge securing said Bonds or otherwise existing under the Resolution, and (B) to the extent such cash will be required for such purpose at a later date, shall, to the extent practicable, be reinvested in Investment Securities maturing at times and in amounts sufficient to pay when due the principal or Redemption Price and interest to become due on said Bonds on or prior to such redemption date or maturity date thereof, as the case may be, and interest earned from such reinvestments shall be paid over to the City, as received by the Trustee, free and clear of any trust, lien or pledge. For the purposes of this section, Investment Securities shall mean and include only such securities as are direct obligations of the United States or obligations for the payment of which the full faith and credit of the United States is pledged, which shall not be subject to redemption prior to their maturity other than at the option of the holder thereof. 3. For purposes of determininq whether Variable Rate Bonds shall be deemed to have been paid prior to the maturity or redemption date thereof, as the case may be, by the deposit of moneys, or Investment Securities and moneys, if any, in accordance with the second sentence of subsection 2 of Section 1201, the interest to come due on such Variable Rate Bonds on or prior to the maturity date or redemption date thereof, as the case may be, shall be calculated at the Maximum Interest Rate: provided, however, that if on any date, as a result of such Variable Rate Bonds having borne interest at less than such Maximum Interest -XII-2- ", . . .,l " Rate for any period, the total amount of moneys and Investment Securities on deposit with the Trustee for the payment of interest on such Variable Rate Bonds is in excess of the total amount which would have been required to be deposited with the Trustee on such date in respect of such Variable Rate Bonds in order to satisfy the second sentence of subsection 2 of section 1201, the Trustee shall, if requested, by the City, pay the amount of such excess to the City free and clear of any trust, lien, security interest, pledge or assignment securing the Bonds or otherwise existing under the Resolution. 4. Anything in the Resolution to the contrary notwith- standing, any moneys held by a Fiduciary in trust for the payment and discharge of any of the Bonds which remain unclaimed for five years after the date when such Bonds have become due and payable, either at their stated maturity dates or by call for earlier redemption, if such moneys were held by the Fiduciary at such date, or for five years after the date of deposit of such moneys if deposited with the Fiduciary after the said date when such Bonds become due and payable, shall, at the written request of the City, be repaid by the Fiduciary to the City, as its absolute property and free from trust, and the Fiduciary shall thereupon be released and discharged with respect thereto and the Bondholders shall look only to the City for the payment of such Bonds: pro- vided, however, that before being required to make any such pay- ment to the City, the Fiduciary shall, at the expense of the City, cause to be published a notice at least twice, at an interval of not less than 7 days between publications, in an Authorized Newspaper and shall mail to each person registered as the Bondholder of a Bond on which said moneys remain unclaimed a notice at such person's address as it appears on the registration books maintained by the Trustee as bond registrar. such notice shall state that said moneys remain unclaimed and that, after a date named in said notice, which date shall be not less than 30 days after the date of the mailing or first publication of such notice, the balance of such moneys then unclaimed will be returned to the city. SECTIOlf l.202. Evidence of Signat.'ans a:nd Bandbolders and OWnership of Bond8. 1. Any request, consent, revocation of con- sent or other instrument which the Resolution may require or permit to be signed and executed by the Bondholders may be in one or more instruments of similar tenor and shall be signed or exe- cuted by such Bondholders in person or by their attorneys appointed in writing. Proof of (i) the execution of any such instrument, or of an instrument appointing any such attorney, or (ii) the holding by any person of the Bonds shall be sufficient for any purpose of the Resolution (except as otherwise therein expressly provided) if made in the following manner, or in any other manner satisfactory to the Trustee, which may nevertheless -XII-3- .,. - , in its discretion require further or other proof in cases where it. deems the same desirable: (1) The fact and date of the execution by any Bondholder or his attorney of such instruments may be proved by a guarantee of the signature thereon by a bank or trust company or member of the New York stock Exchange or by the certificate of any notary public or other offi- cer authorized to take acknowledgments of deeds, that the person signing such request or other instrument acknowl- edged to him the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such notary public or other officer. Where such execution is by an officer of a corporation or association or a member of a partnership, on behalf of such corporation, associa- tion or partnership, such signature guarantee, certifi- cate or affidavit shall also constitute sufficient proof of his authority. (2) The amount of Bonds transferable by delivery held by any person executing any instrument ~sa Bondholder, the date of his holding such Bonds, and. the numbers and other identification thereof, may be proved by a certificate, which need not be acknowlec1qed or veri- fied, inform satiSfactory to the Trustee, executed by the Trustee or by a member of a financial firm or by an officer of a bank, trust company, insurance company, or financial corporation or other depositary wherever situa- ted, showing at the date therein mentioned that such person exhibited to such member or officer or had on deposit with such depositary the Bonds described in such certificate. Such certificate may be given by a member of a financial firm or by an officer of any bank, trust company, insurance company or financial corporation or depositary with respect to Bonds owned by it, if accept- able to the Trustee. 2. The ownership of Bonds registered otherwise than to bearer and the amount, numbers and other identification, and date of holdinq the same shall be proved by the registration books. 3 . Any request or consent by the owner of any Bond shall bind all future owners of such Bond in respect of anything done or suffered .to be done by the City or any Fiduciary in accordance therewith. SBCTION l.203. Moneys Be1d for ParticuJ.ar Bands. The amounts held by any Fiduciary for the payment of the interest, principal or Redemption Price due on any date with respect to partiCUlar Bonds shall, on and after such date and pending such -XII-4- .... "" payment, be set aside on its books and held in trust by it for the Holders of the Bonds. SECTION 1204. Preservation and Inspection of ~'l'lllAnts. All documents received by any Fiduciary under the provisions of the Resolution shall be retained in its possession and shall be subject at all reasonable times to the inspection of the City, any other Fiduciary, and any Bondholder and their agents and their represen~tives, any of whom may make copies thereof. SECTION l.205. Parties Interested Herein. Nothing in the Resolution expressed or implied is intended or shall be con- strued to confer upon, or to give to, any person or corporation, other than the City, the Fiduciaries and the Holders of the Bonds any right, remedy or claim under or by reason of the Resolution or any covenant, condition or stipulation thereof; and all the cove- nants, stipulations, promises and agreements in the Resolution contained by and on behalf of the City shall be for the sole and exclusive benefit of the City, the Fiduciaries, and the Holders of the Bonds. SECTIOlf l.206. No Recourse on the Bands. No member of the City and no officer, agent or employee of the City shall be individually or personally liable for the payment of the principal or Redemption Price or interest on the Bonds. SBCTIOlf l.207. Publication of lfotice; Suspension of Publication. 1. Any publication to be made under the provisions of the Resolution in successive weeks or on successive dates may be made in each instance upon any business day of the week and need not be made in the same Authorized Newspaper for any or all of the successive publications but may be made in a different Authorized Newspaper. 2. If, because of the temporary or permanent suspension of the publication or general circulation of any Authorized Newspaper or for any other reason, it is impossible or impractical to publish any notice pursuant to the Resolution in the manner herein provided, then such publication in lieu thereof as Shall be made with the approval of the Trustee shall constitute a suffi- cient publication of such notice. SBCTIOlf l.208. Severabil.ity of Invalid Provisions. If anyone or more of the covenants or agreements provided in the Resolution on the part of the City or any Fiduciary to be per- formed should be contrary to law, then such covenant or covenants or agreement or agreements shall be deemed severable from the remaining covenants and agreements, and shall in no way affect the validity of the other provisions of the Resolution. -XII-5- ,.., .... SECTION 1209. Repeal of Inconsistent Resolutions. Any resolution of the City, and any part of any resolution, inconsistent with the Resolution is hereby repealed to the extent of such inconsistency. . SECTION 1210. Saturdays, Sundays and Holic:lays. In any case where the date for any transfer to any Fund or Account established by the Resolution or for the payment of the principal of, the Redemption Price of, or interest on an~ Bond shall not be a business day in the city in which such transfer or payment is to be made, such transfer or payment in such city may be made on the next succeedinq business day with the same force and effect as if made on the date provided in the Resolution and no additional interest shall be payable on any Bond by reason of the postpone- ment of transfer or payment through operation of this Section 1210. -XII-6- . . \.... '0- ... ARTICLE XIII BOND FORMS AND EPnCTIVE DATE SECTION 1.30l.. Forms of Bonds and Trustee's certificate of Authentication. Subject to the provisions of the Resolution, the forms of the Bonds of each Series, and the Trustee's Certificate of Authentication, shall be of Substantially the tenor set forth .in the Supplemental Resolution authorizing the issuance of such Bonds. -XIII-l- SECTION 1302. Effective Date. This Resolution shall. take effect immediately. .. ADOPTED, SIGNED AND APPROVED this nineteenth day of August, 1986. [SEAL] ATTEST: /5----- 1//;I/L/t4 City.Clerk -XIII-2- .~). ... "... .. . Exhibit A ACCEPTANCE OF OFFICE OF TRUSTEE AHD PAYING AGENT [DATE] City of Vernon, California [Address] Dear Sirs: The undersigned hereby accepts the duties and obligations of Trustee imposed upon the undersigned by Resolution No. of the City Council of tne City of Vernon, California (the "City") adopted August 19, 1986, as supplemented by Resolution No. of said City Council adopted August 19, 1986 (collectively, the "ReSOlution"). The undersigned in its capacity as trustee hereby also accepts the duties and obli9ations of Bond Registrar and Paying Agent for the 1986 Project Bonds of the City imposed upon the undersigned by the Resolution. FIRST INTERSTATE BANK OF CALIFORNIA By: Attest: [Title] By: Title -XIII-3- "'II'l .. . 1 2 3 4 5 6 ,.. , 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 STATE OF CALIFORNIA ) ) ss. COUNTY OF LOS ANGELES ) I, BRUCE V. MALKENHORST, City Clerk of the City of Vernon, do hereby certify that the foregoing Resolution, being Resolution No. 5309, was duly adopted by the City Council of the City of Vernon, and was approved by the Mayor of said City at a special meeting of the City Council held on Tuesday, August 19, 1986. l~f~t~ 1/4~vi~ BRUCE V. MALKENHORST, City Clerk (SEAL)