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Resolution 1981-08 r .......- ,5458A-206a . t " '- .L.,.. -r: _~.~ -~ . WMAM:GAL:ep DRAFT NO. ~:GAL:rva 09/02/80 ~?, 1-' 1 "J1:t8 1 RESOLUTION NO. 81- 8 A RESOLUTION PROVIDING FOR THE ISSUANCE OF SEWER REVENUE BONDS, FIXING THE FORM OF BONDS AND PROVIDING COVENAN~S FOR THEIR PROTECTION SEWER REVENUE BONDS OF 1980 (INDENTURE) RESOLVED, by the City Council of the City of Gilroy, California, that RECITALS WHEREAS, this City is authorized to acquire, construct, own or operate an enterprise comprising all or any part of a system, plant, works and facilities used for, or useful for, the purpose of collecting, treating or disposing of sewage, waste or storm water, including drainage~ WHEREAS, under the City of Gilroy Sewer Revenue Bond Ordinance, revenue bonds may be authorized by resolution of this Council to provide funds for acquiring, constructing and financing additions, extensions, replacements and improvements to said enterprise; WHEREAS, under said ordinance the interest rate on such revenue bonds is limited to 8% per annum; and WHEREAS, by Title 5, Division 2, Part 1, Chapter 3, Article 7 (commencing with Section 53530) of the Government Code, this Council is authorized to provide in its discretion that such revenue bonds bear interest at a higher rate but not to exceed 10% per annum; NOW, THEREFORE, IT IS RESOLVED, DETERMINED, and ORDERED, as follows: RESOLUTION NO. 81 - 8 . ,. v 1_, i . . ~.1 t " ARTICLE I GENERAL PROVISIONS 1.01. Proceedings. The proceedings have been conducted and the Bonds shall be issued pursuant to the City of Gilroy Sewer Revenue Bond Ordinance. 1.02. Definitions. Unless the context otherwise requires, as used herein and in any certificate, opinion or document issued in relation hereto, the terms herein have the following meanings: Annual means with respect to the Fiscal Year of the Entity. Bond Law means the provisions of the City of Gilroy Sewer Revenue Bond Ordinance, including the applicable provisions of the Revenue Bond Law of 1941, and Title 5, Division 2, Part 1, Chapter 3, Articles 7, 10 and 11 of the Government Code of the State of California. Bond Year means the period between the dates of Maturity of the annual series of Bonds. Bondholder, Holder of Bonds or Holder means, in the case of a Bond which is an instrument registered as to principal only, or fully registered, a Person in whose name such Bond is registered in the Bond Register, and in the case of a Bond which is an instrument issued in bearer form and which evidences a principal obligation or an interest obligation but which is not registered as to principal or fully registered, a Person who is in possession thereof. Bonds means all instruments issued in bearer or registered form by the Entity and authorized and at any time outstanding pursuant to this Indenture and all Supplemental Resolutions, including such instruments as evidence a principal (including a redemption premium, if any) obligation, or an interest obligation, or both. Charges means fees, tolls, rates and rentals prescribed by the Legislative Body for the use of the Enterprise and the services or facilities thereof, including, without limiting the generality of the foregoing, availability of service charges. Clerk or Secretary means the person elected or appointed as the Clerk or Secretary of the Entity and its Legislative Body. Enterprise means the facilities and the portion thereof of the Entity for the collection, treatment and disposal of industrial wastewater and sewage, including collecting, trunk line and outfall sewers, treatment and disposal plant, pumping stations, and any other works, property or structures used for or useful for industrial wastewater and sewage collection, treatment and disposal, existing on -2- 4 1, . . I I 1 i tJ the date hereof, together with all additions and improvements to said facilities hereafter acquired or constructed; Enterprise does not include the facilities nor that portion of facilities for the collection, treatment and disposal of domestic and nonindustrial sewage, nor any additions or improvements to such facilities. Entity means the City of Gilroy, California. Federal Securities means United states Treasury notes, bonds, bills, or certificates of indebtedness, or other evidences of indebtedness for which the full faith and credit of the United states of America is pledged for the payment of principal and interest; obligations issued by federal intermediate credit banks, federal land banks, banks for cooperatives or the Ten~essee Valley Authority; obligations, participations, or other instruments of or issued by, or fully guaranteed as to principal and interest by, the Federal National Mortgage Association, federal home loan banks or the Federal Home Loan Bank Board; and obligations, participations, or other instruments of, or issued by, a federal agency or a United states Government-sponsored enterprise, including, without limitation, the Federal Financing Bank, the United states Postal Service, the Student Loan Marketing Association, the Government National Mortgage Association and the Federal Home Loan Mortgage Corporation. Financial Newspaper means a newspaper or journal printed in the English language, publishing financial news and selected by the Fiscal Agent. First Redemption Date means the earliest possible Redemption Date for the Bonds. Fiscal Agent means Bank of America National Trust and Savings Association, appointed by the Entity in Section 7.01 and acting as an independent trustee with the duties and powers herein provided, and its successors and assigns, or any other corporation or association which may at any time be substituted in its place, as provided in Section7.01. Fiscal Year means the fiscal year of the Entity which is from July I to June 30, both inclusive. Gross means, when used with reference to Revenues or a designated portion thereof, Annual Revenues, or such designated portion, of the Enterprise. Improve means to reconstruct, replace, extend, repair, better, equip, embellish or otherwise improve. Independent Engineer means any individual or firm of engineers having special knowledge and experience in the utility field, appointed and paid by the Entity, and who, or each of whom: -3- . I..., ',.. . . I I . J (a) Is in fact independent and not under domination of the Entity; (b) Does not have any direct ,financial interest, or any material indirect financial interest, in the Entity; (c) Is not connected with the Entity as an officer or employee of the Entity, but who may be regularly retained to make annual or other periodic reports to the Entity. Independent Public Accountant means any public accountant or firm of public accountants duly licensed, certified or registered or entitled to practice and practicing as such under the laws of the State of California, appointed and paid by the Entity, and who, or each of whom: (a) Is in fact independent, and not under domination of the Entity; (b) Does not have any direct financial interest, or any material indirect financial interest, in the Entity; (c) Is not connected with the Entity as an officer or employee of the Entity, but who may be regularly retained to make annual or other similar audits of the books of the Entity. Indenture means this resolution as originally adopted by the Legislative Body providing for the issuance of the Bonds, fixing the form thereof and providing covenants for their protection. Bond. Interest Payment Date means a Stated Maturity of interest of a Legislative Body means the City Councilor other legally provided governing body of the Entity. Maturity means the date on which the principal of a Bond becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. Net Revenues means Gross Revenues, after deducting all sums expended therefrom for management, operation, maintenance and repair thereof, including all incidental costs, fees and expenses properly chargeable thereto. paying Agent means any Person authorized by the Entity to pay the principal of, redemption premium, if any, or interest on any Bonds. -4- l. ~ . . I 1 Person means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. Presiding Officer means the Mayor or other legally provided person elected by the Legislative Body as principal officer of the Entity. project means the portion (which may but need not necessarily be the whole) of the Enterprise, or of the redemption or retirement of Bonds, the costs of which are to be paid from the proceeds of a particular Series. Redemption Date means the date fixed for redemption of any Bond by or pursuant to this Indenture and any Supplemental Resolution. Redemption Price means the price at which any Bond is to be redeemed on a Redemption Date by or pursuant to this Indenture and any Supplemental Resolution. Registrar means the Fiscal Agent or the Treasurer, whichever shall be so designated from time to time by the Legislative Body to perform the duties of Registrar hereunder. Revenues means all Charges received for, and all other income and receipts derived from the operation of the Enterprise or arising from the Enterprise, including (without limiting the generality thereof) all amounts deposited in any fund to secure or to provide for the payment of the Bonds, amounts received as penalties upon delinquent Charges, and amounts received resulting from the investment of all such Charges, income, receipts and amounts. Excluded from such definition are sums collected from users of the Enterprise and required by condition of State or Federal law or regulation to be held, distributed or used for a special, designated or limited purpose. Series means the Bonds described in a particular Series Resolution. Series Resolution means a Supplemental Resolution which is adopted pursuant to Article II of this Indenture. Stated Maturity means the date specified in a Bond as the fixed date on which the principal, or interest, or both, as the case may be, is due and payable. Supplemental Resolution means a resolution of the Legislative Body which is adopted pursuant to this Indenture. Treasurer or Finance Officer means the individual designated pursuant to law to perform the duties of Treasurer of the Entity. -5- , I If ~ . . 1.03. Conditions Precedent. All acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of the Bonds have existed, have happened and have been performed in due time, form and manner as required by law, and the Entity is now authorized, pursuant to each and every requirement of law, to issue the Bonds in the form as provided herein. 1.04. Public Interest. The public interest, economy and general welfare will be served by the issuance of Bonds for the funding, refunding, acquisition, construction, improving and financing of the Enterprise, including all expenses incidental thereto or connected therewith. 1.05. Purpose. Bonds shall be issued to pay the costs and expenses of the acquisition, construction, improvement and financing of the Enterprise, including the acquisition of lands, easements and facilities necessary therefor, and all costs incidental thereto, pursuant to the Bond Law. 1.06. Project Costs. The total estimated cost of each project, including costs of construction, improvement and acquisition, costs of the redemption or retirement of Bonds, and engineering and other fees and incidental expenses (including the discount on the sale of any Bonds), if any, shall be stated in the applicable Series Resolution. 1.07. Separate Fund. The Entity, during the term of the Bonds, will operate the Enterprise as a separate and distinct agency and will create and maintain a separate and distinct special fund and account for the Enterprise into which all Revenues shall be allocated and from which all disbursements herein provided, relating to the Enterprise, shall be made, until the satisfaction and discharge of all covenents, agreements and other obligations of the Entity under the Indenture as provided in Article XI. 1.08. Legality. If any section, paragraph, subdivision, sentence, clause or phrase of this Indenture shall for any reason be adjudged by any court of competent jurisdiction to be unconstitutional, unenforceable or invalid, such judgment shall not affect the validity of the remaining portion of this Indenture. The Legislative Body hereby declares it would have adopted this Indenture and each and every other section, paragraph, subdivision, sentence, clause or phrase hereof and would have authorized the issuance of the Bonds pursuant hereto irrespective of the fact that anyone or more sections, paragraphs, subdivisions, sentences, clauses or phrases of this Indenture may be held to be unconstitutional, unenforceable or invalid. 1.09. Equal Security. This Indenture shall be deemed to be and shall constitute a contract between the Entity and the Holders from time to time of the Bonds; and the covenants and agreements herein set forth to be performed on behalf of the Entity shall be for the equal and proportionate benefit, security and protection of all Holders of -6- . c '1 . . t T" : I Bonds without preference or priority as to security or otherwise of any of the Bonds over any of the others by reason of the Series thereof or the number or date thereof or the time of sale, execution or delivery thereof, or otherwise for any cause whatsoever, except as otherwise expressly provided in this Indenture. -7- L T . . l t. I ~ ARTICLE II AUTHORIZATION AND ISSUANCE OF BONDS 2.01. Authorization and Designation of Bonds. Bonds designated as "City of Gilroy Sewer Revenue Bonds of 1980ft are hereby authorized to be issued by the Entity under this Indenture and the Bond Law. The maximum principal amount of Bonds which may be issued hereunder is not limited; subject, however, to the right of the Entity, which is hereby reserved, to limit or restrict the aggregate principal amount of Bonds which may at any time be issued or outstanding hereunder. Bonds may be issued in one or more Series as from time to time shall be established and authorized by the Entity pursuant to one or more Series Resolutions. The designation of such Bonds shall include, in addition to the name "Sewer Revenue Bonds of 1980", such further appropriate particular designation for the Bonds of each Series as the Entity may determine. 2.02. General Conditions for the Issuance of Bonds. The Entity may at any time issue a Series payable from the Revenues and other funds as herein provided and secured by a lien and charge upon the Revenues and such other funds equal to the lien and charge securing the Bonds theretofore or thereafter issued hereunder, subject to the existence of the fOllowing conditions precedent to the issuance of any such Series: (a) The Entity shall not at the time of the issuance of such Bonds be in default hereunder unless the Bonds are for refunding such defaulted obligation. (b) The issuance of such Series shall have been duly authorized pursuant to the Bond Law; the issuance of such Series shall have been provided for by a Series Resolution which shall specify the following: (1) The Project for which such Series is to be issued, including a provision requiring the proceeds of such Series to be applied solely for (i) the funding, acquisition, construction, improving and financing of the Enterprise or portion thereof or for (ii) the refunding of any Series or of the Bonds, including payment of costs incidental to or connected with such refunding, or for any combination of such purposes; (2) The authorized principal amount and series designation of such Series; -8- , t.. " . . I 1_ I ! (3) The date and the Stated Maturity or Stated Maturities of the Bonds of such Series, provided that (i) each such Stated Maturity or Stated Maturities shall fall on January 1 or July 1, except that as to instruments evidencing principal obligations, January 1, (ii) all the Bonds of such Series of like Stated Maturity shall be identical in all respects except as to denominations, number and the form thereof, which may differ as to negotiability, and (iii) fixed serial Stated Maturities or minimum annual sinking fund requirements, or any combination thereof, shall be established in amounts sufficient to provide for the payment of all of the Bonds of such Series on or before their respective Stated Maturities; (4) The semiannual Interest Payment Dates for the Bonds of such Series, except that the first such Interest Payment Date may be up to, or may be, but shall not be more than, one year following the date of the Bonds of such Series; (5) The denomination or denominations and method of numbering of the Bonds of such Series; (6) The place or places of payment of the interest and principal (and redemption premiums, if any) of the Bonds of such Series; (7) The redemption premiums and redemption terms, if any, for the Bonds of such Series; (8) The amount and due date of each sinking fund account payment, if any, for the Bonds of such Series; (9) The form of the Bonds of such Series; and (10) Such other provisions as are necessary or appropriate and not inconsistent with this Indenture. 2.03. Special Condition for the Issuance of Enterprise Bonds. One or more Series may be issued from time to time in such prrnCIPaI amount for each such Series as is determined by the Entity for a Project consisting of the funding, acquisition, construction, improving and financing of the Enterprise or portion thereof, including payment of expenses incidental to or connected therewith, subject to the following specific conditions precedent to the issuance of any such Series: -9- 't. '\ . . I I (a) The Entity and all persons receiving or proposing to receive service from the Enterprise shall have entered into an agreement substantially the same as the Sewer Revenue Agreement dated as of Ffebruary 17, 1981, and the obligations of any such Person shall have been guaranteed if and as provided by paragraph 6 thereof. (b) Consistent with the other covenants and requirements of this Indenture, charges shall have been established by the Entity such that the Net Revenues to be received by the Entity shall aggregate a sum equal to at least 1.25 times the principal of and interest on the Bonds regularly maturing on each Stated Maturity within each 12 month period; provided, that any such conditions may be waived or modified by the written consent of the Bondholders representing seventy-five percent (75%) of the then outstanding Bonds. 2.04. Special Condition for the Issuance of Refunding Bonds. One or more Series may be issued from time to time in such principal amount for each such Series sufficient to provide funds as is determined by the Entity for a Project consisting of refunding any Series of Bonds or of the Bonds, inCluding (a) All Bonds to be refunded by them; (b) All expenses incident to the calling, retiring, or paying of the outstanding Bonds and the issuance of the refunding Bonds, including the difference in amount between the par value of the refunding Bonds and any amount less than that for which the refunding Bonds may be sold; (c) Either (i) interest upon the refunding Bonds from the date of sale thereof to the date of payment of the outstanding Bonds or to the date upon which the outstanding Bonds will be paid pursuant to call or agreement with the Holders, or (ii) interest upon the outstanding Bonds from the date of sale of the refunding Bonds to the date of payment of the outstanding Bonds or to the date upon which the outstanding Bonds will be paid pursuant to call or agreement with the Holders; -10- r L ,T I I . . I [ (d) Any redemption premium necessary in the calling or retiring of the outstanding Bonds; and subject to the following specific conditions precedent to the issuance of any such Series: (a) The Entity and all Persons receiving or proposing to receive service from the Enterprise shall have entered into an agreement substantially the same as the Sewer Revenue Agreement dated as of February 17, 1981, the execution and delivery of which by the Entity has been authorized by Resolution No. , A Resolution confirming and Authorizing Execution and Delivery of Sewer Revenue Agreement, adopted February 17, 1980, by the Legislative Body, and the obligations of any such Person shall have been guaranteed if and as provided by paragraph 6 thereof. (b) Consistent with the other covenants and requirements of this Indenture, Charges shall have been established by the Entity such that the Net Revenues to be received by the Entity shall aggregate a sum equal to at least 1.25 times the principal of and interest on the Bonds regularly maturing on each stated Maturity within each 12 month period; provided, that any such conditions may be waived or modified by the written consent of the Bondholders representing seventy-five percent (75%) of the then outstanding Bonds. 2.05. Subordinate Lien Bonds. Nothing in this Indenture shall be deemed to limit or restrict the power of the Entity to issue additional obligations payable from but inferior as to the lien of any of the then outstanding Bonds on the Revenues without compliance with the provisions of this Article or of any other provision of this Indenture. 2.06. Reserved Rights - Refunding Bonds. For the purpose of curing a default or threatened default, the Legislative Body may issue and, with the consent of the Holder, exchange a Series for maturing or matured Bonds or sell them and use the proceeds thereof to pay said Bonds; provided that the principal of the new Bonds shall be made to mature after the Maturity of the outstanding Bonds. In any event, the final maturity of such new Bonds shall not extend later than forty (40) years from their date. -11- . t '1' . . ARTICLE III FORM, TERMS, NATURE, E~ECUTION, DELIVERY AND REGISTRATION OF BONDS 3.01. Form of Bonds and Coupons. The form of Bonds, whether bearer or registered, shall be substantially as provided in the Series Resolution relating to the specific Series of Bonds. The interest obligation of a Bond shall be represented by coupons, attached at the time of payment to the Entity for the Bonds of a Series of which it is a part and payable upon each Interest Payment Date and in the amounts for interest then becoming due, unless the Bond is fully registered. Any coupon representing interest which shall have become due before the delivery by the Entity to its purchaser of the Bond to which it is attached shall be detached and cancelled prior to such delivery. 3.02. Interest - Before and After Maturit~. Each Bond issued with attached coupons shall bear interest from its date except as herein otherwise provided for matured coupons. Each fully registered Bond shall bear interest from the Interest payment Date next preceding the date of authentication and registration thereof unless the date of authentication and registration is an Interest Payment Date, in which event from such Interest Payment Date, or unless the date of authentication and registration is prior to the first Interest Payment Date, in which event it shall bear interest from its date, except as provided in Section 3.03 for multiple advances. If sufficient moneys to pay the principal of (redemption premium, if any) and interest on any Bond on the due date have been made available in the fund provided therefor, no interest shall accrue thereafter with respect to such Bond; otherwise, in the case of fully registered Bonds and the principal of Bonds registered as to principal, only, without presentation, and in other cases, if presented on the due date, the principal of such Bond shall continue to bear interest at the rate stated therein, and such matured interest amount shall bear interest from its due date at the rate stated in the Bonds to which it appertains until moneys have been made so available. 3.03. Multiple Advances. In the event the state of California, or the United States of America, through any agency thereof, is the purchaser of a single fully registered Bond representing the Bonds of a Series, said single Bond shall be deemed to evidence Bonds from time to time delivered to, and paid for by such agency. The aggregate principal amount of the Bonds of such Series shall not in such case exceed the aggregate payments by the agency for said Bond, as said payments and the dates thereof are endorsed thereon, and a principal amount of the Bonds of such Series of the longest maturities equivalent, in appropriate multiples, to the difference between such -12- t. ',1 I t . . I I aggregate principal amount and such aggregate payments shall be deemed under the Series Resolution to be unissued. Interest on said single Bond shall be determined on the agency's aggregate payments for said single Bond from the respective dates thereof, as said payments and dates thereof are endorsed on said single Bond. 3.04. Where Payable. The principal and interest on the Bonds shall be payable in lawful money of the united states of America at the principal corporate trust office of the Fiscal Agent of the Entity in San Francisco, California, or successor, or at such paying Agents or correspondent banks as may, but need not, be from time to time designated by the Entity. principal and interest on fully registered Bonds and principal on Bonds registered as to principal only, shall be paid by check, draft or warrant mailed to the Holder at the address as it appears on the register maintained in the office of the Registrar, except that the principal thereof shall be paid only upon surrender of the Bonds to the Fiscal Agent. Should a single fully registered Bond be issued to represent all of the Bonds of a Series, payments made thereon, regardless of when made, shall be applied first to interest to the due date and next to principal. Other payments, regardless of the source of funds from which such payments may be made, shall, after payment of interest to the due date, be applied to the principal last to become due under the said registered Bond and shall not affect the obligation of the Entity to pay the remaining installments as scheduled. 3.05. Transfer of Registered Bonds. Any fully registered Bond may, in accordance with its terms, be transferred upon the books required to be kept pursuant to the provisions of Section 3.07 hereof, by the Holder, or by the Holder's duly authorized attorney, upon surrender of such fully registered Bond for cancellation, accompanied by delivery of a written instrument of transfer, in a form approved by the Registrar, duly executed. Whenever any fully registered Bond shall be surrendered for transfer, the Entity shall cause to be executed and shall deliver a new fully registered Bond or Bonds, of the same Series, interest rate or rates and maturity or maturities and for a like aggregate principal amount. No transfers of fully registered Bonds shall be required to be made during the fifteen (15) days next preceding each Interest Payment Date. All transfers and registration of fully registered Bonds pursuant to this section shall be made under such reasonable regulations as the Registrar may prescribe and shall be at the expense of the Holder of the Bonds; any taxes or other governmental charges required to be paid with respect to transfer and registration shall be paid by the Holder of the Bond requesting such transfer and -13- t ,I . . I 1 registration as a condition precedent to the exercise of such privilege except that the authentication and registration of a fully registered Bond issued at the time of payment to the Entity for the Bonds of the Series of which it is a part shall be without expense to its Holder. 3.06. Transfer and Registration of Bearer Bonds. All Bonds issued in bearer form shall be negotiable and transferable by delivery, unless registered as to principal in the manner hereinafter provided. The Holder of any such Bond may have the ownership of the principal thereof registered on the books required to be kept pursuant to the provisions of Section 3.07 hereof, and such registration shall be noted on the Bonds. After such registration, no transfer shall be valid unless made on said books at the request of the Holder or by the Holder's duly authorized attorney and similarly noted on the Bond1 but such Bonds may be discharged from registration by being in like manner transferred to bearer and thereupon negotiability and transferability by delivery shall be restored: and such Bond may again and from time to time be registered or transferred to bearer, as before. Such registration, however, shall not affect the negotiability of the coupons, and every such coupon shall continue to be negotiable and transferable by delivery merely and shall remain payable to bearer. All transfers, registrations and discharges from registration of Bonds issued in bearer form pursuant to this Section shall be made under such reasonable regulations as the Registrar may prescribe and shall be at the expense of the Holders of the Bonds: any taxes or other governmental charges required to be paid with respect to the same shall be paid by the Holder of the Bond requesting such transfer, registration or discharge/from registration, as a condition precedent to the exercise of such privilege. 3.07. Bond Register. There shall be kept by the Registrar sufficient books for the registration and transfer of the Bonds and, upon presentation for such purpose, the Registrar shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said register, Bonds as hereinbefore provided. 3.08. Exchange of Bonds. Fully registered Bonds may be exchanged at the office of the Registrar for a like aggregate principal amount of Bonds issued in bearer form of authorized denominations of the same Series, interest rate or rates and Maturity or Maturities (or for a like aggregate principal amount of fully registered Bonds of other authorized denominations of the same Series, interest rate or rates and Maturity or Maturities), and Bonds issued in bearer form, whether or not registered as to principal, may be exchanged for a like aggregate principal amount of fully registered Bonds of authorized denominations of the same Series, interest rate or rates and Maturity or Maturities. All Bonds issued in bearer form surrendered for exchange and delivered in exchange shall have attached thereto all unmatured coupons appertaining thereto (and any matured coupons but -14- t ',1 1 I . . I 1 I 1 unpaid). All exchanges shall be made under such reasonable regulations as the Registrar may prescribe and shall be at the expense of the Holders of the Bonds. The Registrar shall require the payment by the Holder of the Bond requesting such exchange'of any tax or other governmental charge required to be paid with respect to such exchange. No such exchange shall be required to be made during the fifteen (15) days next preceding each Interest payment Date. 3.09. Source of Payment. The Bonds shall recite they are issued pursuant to the Bond Law and that they are payable solely from the Revenues. 3.10. Bonds Not a Debt. The Bonds, including interest thereon, shall not be a debt of the Entity, nor a charge, lien or encumbrance, legal or equitable, upon any of its properties or upon any of its income or receipts or revenues, other than the Revenues of the Enterprise which have been pledged to the payment thereof as herein provided. 3.11. Entity Credit Not Encumbered. No recourse shall be had for the payment of the Bonds, including the interest thereon, or any part thereof, against the General Fund of the Entity, nor shall its credit or authority to levy or receive taxes be deemed to be pledged thereto, and the Holders of the Bonds shall never have the right to compel the exercise of the taxing power on behalf of the Entity or the forfeiture of any of its properties for the payment of Bonds, including the interest thereon. 3.12. Bonds a Special Obligation. All Bonds which may be issued in accordance with the terms and conditions hereof shall be special obligations of the Entity and shall be payable from and secured by a lien upon the Gross Revenues of the Enterprise as herein provided. 3.13. Execution of Bonds. Each of the Bonds shall be executed by the Entity by the signIng, either manually or by printed, lithographed, or engraved facsimile signature, (a) In the case of Bonds issued in bearer form, by the presiding Officer, by the countersigning manually by the Secretary, and by the printing, engraving, stamping or affixing of the official seal of the Entity, as to Bonds evidencing a principal obligation, (b) In the case of Bonds issued in bearer form, by the Treasurer, as to Bonds evidencing an interest obligation, (c) In the case of Bonds issued in fully registered form, by the Presiding Officer, by the countersigning manually by the Secretary, and by the printing, engraving, stamping or affixing of the official seal of the Entity. -15- , l It 1 1 I . . Such signing, countersigning and sealing shall constitute and be a sufficient and binding execution of each of said Bonds except that fully registered Bonds shall not be entitled to any benefit under this Indenture or any Series Resolution or become valid or obligatory for any purpose until the certificate of authentication and registration thereon endorsed shall have been manually signed by the Registrar. 3.14. Continuin9: Valid!.!L.of Signatures. If any officer whose signature or counterSIgnature appears on the Bonds ceases to be such officer before delivery of the Bonds, such signature or countersignature is nevertheless valid and sufficient for all purposes as if such officer had remained in office. Any Bond may be signed and countersigned on behalf of the Entity,by such persons as at the actual date of the execution of such Bond shall be the proper officers of the Entity although at the nominal date of such Bond any such person shall not have been such officer of the Entity. 3.15. Preparation and Delivery of Bonds. The Secretary is directed to cause Bonds of suitable quality to be lithographed, printed, or engraved to comply with the provisons hereof, and to procure their execution by the proper officers, and to deliver them when so executed to the Treasurer, who shall safely keep the same until they have been sold by the Entity. The Treasurer shall deliver the Bonds to the purchasers thereof on receipt of the issue price therefor. The Presiding Officer and Secretary are further authorized and directed to make, execute, and deliver to the purchasers of the Bonds a signature and nO-litigation certificate in the form usually required by purchasers of municipal bonds, generally certifying to the genuineness and due execution of the Bonds, and further certifying to all facts that in their knowledge are relative to any litigation which mayor might affect the Entity, and said officers or the Bonds, and the Treasurer is authorized and directed to make, execute, and deliver to the purchasers of the Bonds a Treasurer's receipt in the form usually required by purchasers of municipal bonds, evidencing the payment of the issue price of the Bonds, which receipt shall be conclusive evidence that said purchase price has been paid and has been received by the Entity. Any purchaser or subsequent taker or Holder of the Bonds is hereby authorized to rely upon and shall be justified in relying upon any such signature and nO-litigation certificate and Treasurer's receipt with respect to the Bonds executed pursuant to the authority of this Indenture. -16- " t .f' t I . . I ! 3.16. Temporary Bonds. Any Series of Bonds may be initially issued in temporary form exchangeable for definitive Bonds when ready for delivery. The temporary Bonds may be printed, lithographed or typewritten, shall be of such denominations as may be determined by the Entity, shall be without coupons and may contain such reference to any of the provisions of this Indenture as may be appropriate. Every temporary Bond shall be executed by the Entity upon the same conditions and in substantially the same manner as the definitive Bonds. If the Entity issues temporary Bonds, it will execute and furnish definitive Bonds without delay, and thereupon the temporary Bonds may be surrendered, for cancellation, in exchange therefor at the office of the Treasurer, and the Treasurer shall deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of the same Series and Maturity or Maturities. Until so exchanged, the temporary Bonds shall be entitled to the same benefits under this Indenture as definitive Bonds. 3.17. Mutilated, Destroyed, Lost and Stolen Bonds. If (a) any mutilated Bond is surrendered to the Fiscal Agent or the Entity receives evidence to its satisfaction of the destruction, loss or theft of any Bond, and (b) there is delivered to the Entity such security or indemnity as may be required by it to save it harmless, then in the absence of notice to the Entity that such Bond has been acquired by a bona fide purchaser, the Entity shall execute, and if the Bond be in fully registered form upon request of the Entity, the Registrar shall authenticate, and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Bond, a new Bond of like date, tenor, maturity and amount, bearing the same number or numbers, and with such notations as the Entity shall determine. In case any such mutilated, destroyed, lost or stolen Bond has become or is about to become due and payable, the Entity in its discretion may, instead of issuing a new Bond pay such Bond. Upon the issuance of a new Bond, the Entity may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Fiscal Agent and the Registrar) connected therewith. -17- ~ . . , J Every new Bond issued in lieu of any destroyed, lost or stolen Bond shall constitute an original additional contractual obligation of the Entity, whether or not the destroyed, lost or stolen Bond shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Bonds duly issued hereunder. However, the Entity and the Fiscal Agent shall not be required to treat both the original Bond and any duplicate Bond as being outstanding for the purpose of determining the principal amount of Bonds which may be issued hereunder or for the purpose of determining any percentage of Bonds outstanding hereunder or for the purpose of any coverage condition or covenant hereunder, but both the original and duplicate Bond shall be treated as one and the same. 3.18. Transcript. The Secretary is hereby authorized to prepare and furnish to the purchasers of Bonds provided to be issued hereunder a complete set of certified copies of all ordinances, resolutions and documents relating to the issuance of such Bonds, and of all other proceedings and records of the Legislative Body pertinent thereto. 3.19. Certified Copies. The Secretary is hereby directed to provide a certified copy of this Resolution to the Treasurer and to the Fiscal Agent. -18- I ~c L ~ ' I I . . 1 I r ARTICLE IV CALLABLE BONDS AND PROCEDURE 4.01. Callable Bonds. Any Bonds subject to call and redemption prior to maturity pursuant to a Series Resolution shall be redeemable at the option of the Entity, upon notice being given as provided in this Article, at such times, upon payment of such redemption premiums, if any, and upon such terms (in addition to and consistent with the terms contained in this Article) as may be specified in the Series Resolution authorizing the issuance of such Bonds. The Entity may also, from time to time, purchase any or all of the outstanding Bonds of a Series at prices offered, provided that if Bonds of such Series are then callable, the purchase price is equal to or less than the Redemption Price of such Bonds then callable. All Bonds purchased shall be cancelled by the Fiscal Agent and shall not again be reissued. 4.02. Determination to Call and Redeem or purchase. The option of the Entity to call and redeem, or purchase, Bonds may be exercised by the Treasurer on behalf of the Entity if less than all of the Bonds of any Series maturing on any single date are to be called and redeemed, or purchased, otherwise not. Whether the option is exercised by the Entity or by the Treasurer on behalf of the Entity, if less than all of the Bonds of any Series are to be called for redemption, the Treasurer shall select the Bonds (including the principal amount of a fully registered Bond) to be redeemed from the outstanding Bonds of such Series not previously called for redemption by Maturity in accordance with the Series Resolution and by lot as to Bonds having the same Maturity, in such manner as the Treasurer shall deem appropriate and fair. The Treasurer shall promptly notify the Fiscal Agent in writing of the exercise of the option, whether by or on behalf of the Entity, and if less than all of the Bonds of a Series are to be called, the Bonds selected for redemption at least 45 days (unless shorter notice shall be satisfactory to the Fiscal Agent) and not more than 60 days prior to the date proposed for redemption or if Bonds are to be purchased, the Bonds to be purchased, on or prior to the date of purchase. 4.03. Notice of Redemption. The Fiscal Agent shall cause notice of redemption to be given in the name of the Entity. Notice of redemption shall be published at least once not less than thirty (30) days nor more than sixty (60) days prior to the date of redemption in one or more Financial Newspapers of general circulation in San Francisco and Los Angeles, California, and in the same or similar Financial Newspapers of general circulation in each city in which a paying Agent has been appointed for the Bonds of such Series to be redeemed. Such notice shall also be mailed by registered or certified mail not less than thirty (30) days peior to the Redemption Date to the Holder as shown by the records of the Registrar. -19- ,I I I . . 1 4.04. Form of Notice. The notice of redemption shall: (a) State the Redemption Date1 (b) State the Redemption price; (c) State the numbers and Maturity of the Bonds to be redeemed; provided, however, that whenever any call includes all of the Bonds of a Maturity, the numbers of the Bonds of such Maturity need not be stated1 (d) Require that such Bonds be surrendered at a designated office of the Fiscal Agent or at the office of any paying Agent, including all interest coupons maturing subsequent to the Redemption Date if Bonds issued in bearer form are called, or where there is to be partial redemption of a fully registered Bond, where authorized hereunder, may require the Holder of such Bond, in lieu of surrendering such Bond for a new Bond, to endorse on the reverse of such Bond, or other suitable place, a notation of partial redemption, in form satisfactory to the Treasurer; (e) Require that Bonds which at the time of call are payable otherwise than to bearer shall be accompanied by appropriate instruments of assignment to the Entity duly executed1 and (f) Give notice that further interest on such Bonds will not accrue after the designated Redemption Da te. 4.05. Receipt of Notice Unnecessary. The actual receipt by the Holder of any Bond of notice of such redemption shall not be a condition precedent to redemption, and failure to receive such notice shall not affect the validity of the proceedings for the redemption of such Bonds or the cessation of interest on the Redemption Date. 4.06. Certificate of Notice Conclusive. A certificate by the Fiscal Agent that notice of call and redemption has been given as herein provided shall be conclusive as against all parties, and no Holder of a Bond whose Bond is called for redemption may object thereto or object to the cessation of interest on the Redemption Date fixed by any claim or showing that he failed to actually receive such notice of call and redemption. 4.07. Redemption Funds. On or prior to the Redemption Date or purchase date, the Treasurer shall deposit with or otherwise make available to the Fiscal Agent moneys for the purpose and sufficient to redeem the Bonds designated in the notice of redemption or identified as to be purchased, together with the estimated call and redemption, or -20- I r I t 1 . . I T IT purchase, expenses. Said moneys must be set aside or be available solely for that purpose and shall be applied on or after the Redemption Date or purchase date to the payment of the Bonds to be redeemed or purchased, as the case may be, and shall be used only for that purpose. Interest due on or prior to the Redemption Date or purchase date shall be paid from funds allocated to the Bond Account. 4.08. Effect of Notice of Redemption. When notice of redemption has been given substantially as provided herein and when the amount necessary for the redemption of the Bonds called for redemption is set aside for that purpose, the Bonds designated for redemption shall become due and payable on the Redemption Date thereof, and, upon presentation and surrender of said Bonds to the Fiscal Agent (or endorsement, in lieu of surrender, in the case of partial redemption of a single fully registered Bond representing a Series), including all interest coupons maturing after the Redemption Date (except as to fully registered Bonds), and, if any of said Bonds are registered, upon the appropriate assignment thereof, such Bonds shall be redeemed and paid out of such moneys. No interest will accrue on such Bonds called for redemption or on interest thereon after the Redemption Date specified in such notice, and the Holders of the Bonds so called for redemption after such Redemption Date shall look for the payment of such Bonds only to said moneys. All Bonds redeemed shall be cancelled forthwith by the Fiscal Agent and shall not be reissued. All interest coupons pertaining to any redeemed Bonds, which coupons have matured on or prior to the Redemption Date, shall continue to be payable to the respective Holders thereof but shall not accrue further interest. All unpaid interest payable at or prior to the Redemption Date upon fully registered Bonds shall continue to be payable to the respective Holders of such Bonds, or their order, but shall not accrue further interest. If any Bond called for redemption shall not be so paid upon surrender thereof for redemption, the Redemption price shall, until paid, bear interest from the date noticed for redemption at the rate borne by the Bond. 4.09. Partial Redemption of Registered Bond. Upon surrender of any fully registered Bond redeemed in part only, there shall be executed and delivered, without expense to the Holder, a new Bond or Bonds of the same Series of authorized denominations equal in aggregate principal amount to and in exchange for the unredeemed portion of the Bond surrendered and of the same interest rate or rates and the same Maturity or Maturities, which new Bond or Bonds may be, at the option of the Holder, either in bearer or fully registered form. If a single fully registered Bond is issued to represent a Series of Bonds, the Holder of such Bond may, in lieu of surrendering such Bond for a new Bond, endorse on the reverse of such Bond or other suitable place a notation of such partial redemption, in such form as may be satisfactory to the Treasurer and under such conditions as the Treasurer may approve. Such partial redemption shall be valid upon payment of the amount thereby required to be paid to such Holder, and the Entity shall be released and discharged from all liability to the -21- 1 r I I . . I T r T extent of such payment irrespective of whether such endorsement shall or shall not have been made by such Holder and irrespective of any error or omission in such endorsement. 4.10. Registration, Transfer or Exchange Limitation. No registration, transfer or exchange involving fully registered Bonds or bearer Bonds registered as to principal only shall be required to be made during the fifteen (15) days next preceding the giving of a notice of redemption pursuant to section 4.03 and no transfer or exchange shall be required of any Bonds so noticed for redemption. -22- l , : r r . . I I I 1 ARTICLE V REVENUES AND ACCOUNTS 5.01. Pled~e of Revenues; Revenue Fund. All of the Revenues are hereby irrevocably pledged to the security of and punctual payment of the interest on and principal of and redemption premiums, if any, on the Bonds, and the Revenues shall not be used for any other purpose while any of the Bonds remain outstanding; except that out of the Revenues there may be apportioned such sums, for such purposes, as are expressly permitted by this Article and by Article VI. This pledge shall constitute a first and exclusive lien on the Revenues for the payment of the Bonds in accordance with terms hereof and thereof. All of the Revenues, except as otherwise provided by Sections 6.12 and 6.16, shall, so long as any Bonds shall be outstanding hereunder, be allocated by the Entity to the "City of Gilroy Sewer Revenue Bonds of 1980 Revenue Fund" (hereinafter called the "Revenue Fund"), which fund is hereby created and which fund the Entity hereby covenants and agrees to establish and maintain so long as any Bonds shall be outstanding hereunder. 5.02. Receipt and Allocation of Revenues. The Entity covenants and agrees that all Revenues, except as provided by Section 5.01, will be received and held by the Entity in trust hereunder and will be allocated to the Revenue Fund and will be accounted for through and held in trust in the Revenue Fund, and deposited only as provided hereunder, except that the Entity may withdraw such amounts in the Revenue Fund as may be necessary to make refunds of amounts paid in advance for sewer service, which such sewer service was not thereafter made available or provided, or to reimburse such amount or amounts erroneously paid by any public agency vested with capacity rights in the Enterprise. 5.03. Establishment of Accounts for Revenues. A Gross Revenues Account, a Bond Account, and a Surplus Account are hereby established within the Revenue Fund, each of which the Entity hereby covenants and agrees to maintain or cause to be maintained. The Treasurer shall administer transfers between all accounts. Amounts allocated to the Bond Account shall be deposited with the Fiscal Agent. All Revenues allocated to the Revenue Fund and to each separate account therein shall be held in trust and shall be applied, used and withdrawn only as hereinafter provided. 5.04. Lien. The Bonds shall be equally secured by a pledge of, and charge and lien upon, the Revenues, without priority for number, Bond date, Bond execution date, Bond sale date, Bond delivery date, or otherwise. 5.05. Gross Revenues Account. All Revenues allocated to the Revenue Fund shall be allocated to the Gross Revenues Account. -23- I r f . . I 1 r ! 5.06. Bond Account. Amounts allocated to the Revenue Fund shall be allocated to the Bond Account, as follows: (a) Interest. On or before the 20th day of each month, beginning with the month next succeeding the month in which Bonds are delivered to a purchaser in return for the issue price, the Treasurer shall allocate from the Gross Revenues Account to the Bond Account an equal alliquot portion of the amount of interest becoming due and payable on the next succeeding Interest Payment Date, taking into consideration any amounts previously allocated to such account. (b) principal. On or before the 20th day of each month, beginning with the month next succeeding the month in which Bonds are delivered to a purchaser in return for the issue price, the Treasurer shall allocate from the Gross Revenues Account to the Bond Account an equal alliquot portion of the amount necessary to accumulate the aggregate amount of principal becoming due and payable on outstanding Bonds on the next succeeding stated Maturity of principal, taking into consideration any amounts previously allocated to such account. (c) Deposit. At the time of each monthly allocation and on or before the 20th day of each month, the Treasurer shall transfer to and deposit with the Fiscal Agent the allocated amount. (d) Use of Account. Amounts allocated to the Bond Account and deposited with the Fiscal Agent shall used and withdrawn by the Fiscal Agent solely for the purpose of paying interest on and principal of the Bonds as the same shall become due and payable. Any amount required to be allocated to the Bond Account may be prepaid in whole or in part by being earlier allocated to the Bond Account and in that event, the transfer which has been so prepaid need not be made at the times appointed therefor. In any event, all sums required for the payment thereof shall be allocated to the Bond Account at least 10 days prior to the stated Maturity of any Bonds. 5.07. Maintenance and Operation of Enterprise. If the interest on and principal of the Bonds are paid when due, amounts for the necessary and reasonable maintenance and operation costs of the Enterprise, comprising, but not limited to, the reasonable expenses of management, repair and other expenses necessary to maintain and preserve the Enterprise in good repair and working order (including billing and collection expenses) shall be allocated by the Treasurer from the Gross Revenues Account and used for such purposes. -24- r T I . . \ I 1 r 5.08. Surplus Account. Amounts allocated to the Revenue Fund shall be allocated to the Surplus Account, as follows: (a) Annual Allocation. Annually, on or prior to January 1 of each year, the Treasurer shall allocate the remaining balance in the Gross Revenues Account to the Surplus Account, except such amount as the Treasurer estimates will be required to pay expenses authorized by Section 5.07 to be paid, prior to the time that sufficient Gross Revenues will be received to pay for such expenses. (b) Use of Account. Amounts allocated to the surplus Account shall be used for the following purposes: (i) to pay expenses authorized by Section 5.07 to be paid which are in excess of the estimated or budgeted amount or for which no estimate or budget exists; (ii) to pay the costs of replacements, extensions, improvements, or unusual or extraordinary maintenance and repairs to the Enterprise; (iii) (A) until the First Redemption Date, to pay the purchase price of such Bonds as shall be tendered for repurchase by the Holder; (B) upon and after the First Redemption Date, and on each Interest payment Date thereafter, to pay the purchase price or Redemption price of such Bonds as either shall be called for redemption or shall be tendered for repurchase by the Holder; and (iv) to purchase or pay principal of (redemption premium, if any) and interest on general obligation bonds, revenue bonds, notes and other evidences of indebtedness which have been or may hereafter be issued on behalf of the Entity for the purposes of the Enterprise; but shall, if in excess of amounts necessary to pay the purchase price or Redemption price referred to in subparagraph (iii), be reallocated to the Gross Revenues Account if the balance in such account is insufficient for the purposes of the Account. (c) Transfer to Entity. Provided that all requirements of this Indenture and each Supplemental Resolution then required to be performed have been fully -25- l c r J . I . . I T 1 T accomplished, the Entity may from time to time allocate, transfer and withdraw any balance in the Surplus Account for any lawful purposes of the Entity including Entity general fund purposes. . 5.09. Deposit and Investment of Revenue Fund. (a) Deposits. Except as otherwise provided hereunder, amounts allocated to the Revenue Fund shall be held in time or demand deposits in any bank or trust company (which may include the Fiscal Agent) authorized to accept deposits of public funds and shall be secured at all times by such obligations as are required by law and to the fullest extent required by law, except such amounts as are at the time invested in accordance with this section. (b) Investments. All amounts allocated to each of the following accounts and not estimated to be required for use within the time specified for such account or part thereof may be invested as follows: (i) Gross Revenues Account: may, and at the direction of the Entity shall, be invested by the Treasurer in any lawful investment maturing on or prior to the date on which such amounts are estimated to be required to be paid out: (ii) Bond Account: may, and at the direction of the Entity shall, be invested by the Fiscal Agent in Federal Securities maturing on or prior to the date on which such amounts are estimated to be required to be paid out: (iii) Surplus Account: may, and at the direction of the Entity shall, be invested by the Treasurer in any lawful investment. Amounts received from deposits or investments shall, upon receipt, be allocated to the Gross Revenues Account and shall be the first amounts expended. The Fiscal Agent may act as principal or agent in the making or disposing of any deposit or investment. The Fiscal Agent shall not be responsible for any loss on the disposition of any deposit or investment except as provided by Section 7.03. -26- l , T I . . 1 T 1 T 5.10. No Restriction on Other Powers. Nothing in this Indenture shall be construed to prevent the Entity from exercising any powers which it may otherwise have, nor prevent the Entity from satisfying its obligation to pay costs of maintenance and operation from such moneys other than those mentioned herein as are legally available for such purpose, including taxes. -27- l r r I f I . . 1 I 1 r ARTICLE VI COVENANTS BY THE ENTITY . 6.01. Covenants. For the protection and security of the Bonds, the Entity covenants and agrees to and with the Holders of the Bonds, as provided in this Article VI. 6.02. Acquire project. It will commence the acquisition, .construction and completion of any project for which proceeds of the Bonds have been obtained and continue the same with all practical dispatch and in a sound and economical manner so as to complete the same as soon thereafter as possible. 6.03. Operate Enterprise. It will operate the Enterprise in an efficient and economical manner and prescribe, revise and collect such Charges in connection therewith that the services or facilities of the Enterprise may be furnished at the lowest possible cost consistent with sound economy, prudent management, and the security and payment of the Bonds. 6.04. Good Repair. It will operate, maintain, preserve and keep the Enterprise and every part thereof in good repair, working order and condition. 6.05. Preserve Security. It will preserve and protect the security of the Bonds and the rights of the Holders thereof, and warrant and defend such rights against the claims and demands of all persons whomsoever. It will collect and hold in trust the Revenues pledged to the payment of the Bonds and apply such Revenues only as provided by this Indenture. In this connection, and without limiting the generality of the foregoing, so long as any of the Bonds are outstanding, the Entity will enforce the covenants and obligations of the other parties to the agreement referred to in Section 2.03 or 2.04 as a specific condition precedent to the issuance of a Series, including the obligations of a Person who shall have guaranteed any of the obligaions of one of such other parties to such agreement, and the Entity will not enter into any agreement with any such other party or any such guarantor amending, modifying or otherwise changing such agreement or guarantee thereof, or consenting to any of such, except as provided by Article VIII hereof. 6.06. Collect Revenues. It will collect and hold in trust the Revenues pledged to the payment of the Bonds and apply such Revenues only as provided by this Indenture. 6.07. Service Bonds. It will pay and cause to be paid punctually the principal of the Bonds and the interest thereon on the date or dates and at the place or places and in the manner mentioned in the Bonds and in accordance with this Indenture and any Supplemental Resolution. -28- l r r I r I . . I I I I 6.08. Pay Claims. It will pay and discharge any and all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien or charge upon the Revenues of the Enterprise, or any part of said Revenues, or any funds in the hands of the Fiscal Agent prior or superior to the lien of the Bonds or which might become a lien or claim upon the Enterprise or otherwise impair the security of the Bonds, to the end that the priority and security of the Bonds shall be fully preserved and protected. 6.09. Sales or Encumbrances. It will not mortgage or otherwise encumber, sell, lease or dispose of the Enterprise or any part thereof, nor enter into any lease or agreement which would impair or impede the operation of the Enterprise or any part thereof necessary to secure adequate Revenues for the payment of the principal and interest of the Bonds, or which would otherwise impair or impede the rights of the Holders of the Bonds with respect to such Revenues or the operation of the Enterprise without provision for the retirement of the Bonds then outstanding from the proceeds thereof; provided, however, that material, equipment and land worn out or not needed for the efficient and proper operation of the Enterprise may be sold without the consent of the Bondholders if the proceeds thereof are applied to the improvement or extension of the Enterprise or to the retirement of the Bonds. 6.10. No Free Service. It will not permit any part of the Enterprise to be used or taken advantage of free of charge by any person, firm or corporation or by the state of California or the United States of America, or by any public corporation, political subdivision, city, county, district or agency of either, including this Entity. 6.11. No Competition. It will not acquire, construct, operate or maintain, and will not permit any other public or private corporation or agency or any persons whatsoever to acquire, construct, operate or maintain within the boundaries of the Entity or within any part thereof, any system or utility competitive with the Enterprise. 6.12. Insurance. Except as herein provided, it will procure and keep in force insurance upon all buildings and structures of the Enterprise and the machinery and equipment therein, which are usually insured by Entities operating like property, in good and responsible insurance companies. The amount of the insurance shall be such as may be required to adequately protect the Entity and the Holders of the Bonds from loss due to any such casualty, and, in the event of any such loss, the proceeds shall be used to repair or restore the Enterprise or for the payment of the Bonds issued hereunder. In the event of any damage to or destruction of the Enterprise caused by the perils covered by such insurance, the proceeds of such insurance shall be applied to the repair, reconstruction or replacement of the damaged or destroyed portion of the Enterprise. The Entity shall cause such work of repair, reconstruction or replacement to begin -29- l r f r r 1 . . 1 T 1 r promptly after such damage or destruction shall occur and to continue, and to be properly completed, as expeditiously as possible. If the proceeds received by reason of any such loss shall exceed the costs of such repair, reconstruction or replacement, 'the excess shall be deposited in the Revenue Fund and applied as provided therefor for Gross Revenues. Alternatively, if the proceeds of such insurance are sufficient to enable the Entity to retire all outstanding Bonds, the Entity may elect not to repair, reconstruct or replace the damaged or destroyed portion of the Enterprise, and thereupon, such proceeds shall be applied to redeem or purchase all outstanding Bonds in the manner specified in Section 6.l6(a). If at any time fOllowing an analysis of insurance needs and costs by the Entity, the Legislative Body determines that self-insurance or coinsurance is more appropriate and cost effective than continued maintenance of insurance with a qualified insurance company, and approves a program which provides substantially the same amount of coverage as would otherwise be provided hereunder, such self-insurance or coinsurance program may be substituted for all or any part of the required commercial insurance, unless such substitution would result in a significant reduction of security to the Bondholders. 6.13. Fidelity Bonds. It will procure suitable fidelity bonds covering all of its officers and other employees charged with the operation of the Enterprise and the collection and disbursement of Revenues therefrom. 6.14. Engineers. It will employ consulting engineers of acknowledged reputation, skill and experience in the construction and operation of the Enterprise or any unusual or extraordinary items of extensions or betterments as shall be required from time to time, all reports, estimates and recommendations of such consulting engineers to be filed with the Secretary and furnished to the purchaser of the Bonds if requested. 6.15. Audit and Report. (a) It will employ an Independent Public Accountant who shall prepare and file with the Treasurer and Fiscal Agent and make available to the purchaser of the Bonds, if requested, annually within one hundred twenty (120) days after the close of each Fiscal Year on June 30, commencing in the year 1981, an audited statement (prepared in accordance with generally accepted accounting principles) for the preceding Fiscal Year which shall include: (1) Balance Sheet. A balance sheet including balances of all Funds and Accounts herein created. -30- '- r 1 r r I . . (2) Revenue and payments. A statement in detail of the Revenue receipts and the disbursements from said Revenues of the Enterprise. (3) Insurance. A statement as to the insurance carried by it, including a brief description of each policy as to its coverage and name of company issuing it. (4) Customers. The number of customers classified by rate or Charge for service groups, the number of properties connected to the Enterprise and the number of applications for services on hand but not connected. (5) Billing. The annual billings and the average periodic billings per user or other customer or property. (6) Rate Schedules. The schedules of the rates and Charges prescribed by the rate ordinance then in effect. (7) Recapitulation. A recapitulation of Funds and Accounts created by this Indenture into which are put moneys derived from the operation of the Enterprise or arising from the Enterprise and from the sale of the Bonds, which shall show balances at the beginning of the period, deposits and withdrawals made during the period and balances at the end of the period and, also, deposit requirements for Funds and Accounts during the next succeeding fiscal period. (8) Comments. Comments of the accountant relative to the fulfillment of the provisions of this Indenture and the manner in which the Enterprise has been operated and his recommendations for improving the operation of the Enterprise. (b) The Entity will cause to be prepared and filed with the Clerk and the Treasurer, annually within one hundred twenty (120) days after the close of each Fiscal Year (commencing with the Fiscal Year ending June 30, 1981) a summary statement showing the amount of the Revenues and the disbursements from the Revenues, in reasonable detail, for the preceding Fiscal Year, and a -31- 1 T ! T 1- r I I t I . . 1 T I r general statement of the financial and physical condition of the Enterprise. The Entity will furnish a copy of such summary statement to any Holder upon request, and will furnish to the Trea'surer such reasonable number of copies thereof (not exceeding 200 copies) as may be required for distribution to investment bankers, securities dealers and others interested in the Bonds. 6.16. Eminent Domain. If all or any part of the Enterprise shall be taken by eminent domain proceedings, the net proceeds realized by the Entity therefrom shall be deposited by the Treasurer or the Fiscal Agent in a special fund in trust and shall be applied and disbursed by the Entity subject to the fOllowing conditions: (a) If such proceeds are sufficient to provide for the payment of the entire amount of principal on all of the then outstanding parity lien Bonds so as to enable the Entity to retire all of such outstanding parity lien Bonds, either by call prior to maturity or by payment at Maturity or partly by call prior to Maturity and partly by payment at Maturity, the Entity shall promptly direct the use of the proceeds for either of the following alternatives: (i) The Legislative Body may determine to retire all of such Bonds, in which event it shall direct the Fiscal Agent to, and the Fiscal Agent shall, provide for the application of such moneys to such retirement and to the payment of such interest. The balance of such moneys, if any, shall be transferred to the Entity and shall be available for use by the Entity for any lawful purpose. (ii) The Legislative Body may determine to apply such proceeds to the cost of additions or improvements to the Enterpris~. The Legislative Body may determine to apply such proceeds to the cost of additions or improvements to the Enterprise if (a) the Entity first secures an Independent Engineer's report containing (1) the loss in Gross Revenues, if any, suffered, or to be suffered, by the Entity by reason of such eminent domain proceedings, (2) a general description of the additions or improvements then proposed to be acquired by the Entity from such proceeds, and (3) an estimate of the additional Gross Revenues to be derived from such additions or improvements; and (b) the Legislative Body, on the basis of such Engineer's report, determines -32- L r J I J ) . . that such additional Gross Revenues will sufficiently offset the loss of Revenues resulting from such eminent domain proceedings so that the ability of the Entity to meet its obligations hereunder will not be substantially impaired. Such determination by the Legislative Body shall be final and conclusive. The Entity shall then promptly proceed with the construction of the additions or improvements substantially in accordance with such Engineer's report. Payments for such construction shall be made from such eminent domain proceeds. Any balance of such proceeds not required by the Entity for the purposes aforesaid shall be deposited in the Revenue Fund and applied as provided therefor for Gross Revenues. (b) If such proceeds are insufficient to provide the moneys required for the purposes set forth in the foregoing subsection (a), the Legislative Body shall by resolution determine to apply such proceeds for the following purpose, subject to the conditions hereinafter in this subsection (b) set forth: (i) The Legislative Body may determine to apply such proceeds to the purchase or call of outstanding parity lien Bonds if (a) the Entity first secures an Independent Engineer's report containing (1) the loss in Gross Revenues, if any, suffered, or to be suffered, by the Entity by reason of such eminent domain proceedings, and (2) a general description of the portion of the Enterprise affected: and (b) the Legislative Body on the basis of such Engineer's report, determines that such reduced Revenues will be substantially in the same proportion to the Gross Revenues (prior to such reduction) as the principal amount of the Bonds outstanding after application of such proceeds to the purchase or call of Bonds bears to the aggregate principal amount of all the outstanding Bonds. Such determination by the Legislative Body shall be final and conclusive. In that event, such proceeds shall be applied to the purchase or call of such outstanding Bonds. If the Entity is unable to call or purchase in lieu of call, or deems it inadvisable to purchase when Bonds are not callable, outstanding Bonds in amounts sufficient to exhaust such proceeds, the remainder of such moneys shall be held in trust and applied to the payment of Bonds evidencing a -33- I I . .l r 1 r . . I , I , principal obligation as the same become due by their terms, and, pending such application, such remaining moneys may be deposited and invested, as specified by Article V for 'amounts allocated to the Gross Revenues Account. (c) If such eminent domain proceedings have had no effect or, at the most, a relatively immaterial effect upon the Revenues and the security of the then outstanding Bonds, and an Independent Engineer's report filed with the Legislative Body so concludes, the Legislative Body may so determine. Such determination by the Legislative Body shall be final and conclusive and, the eminent domain proceeds shall forthwith be deposited in the Revenue Fund and applied as provided therefor for Gross Revenues. 6.17. Ratio of Net Revenue Coverage. Consistent with the other covenants and requirements of this Indenture, the Entity covenants that it will at all times establish, maintain and collect Charges sufficient to provide Net Revenues which will equal not less than 1.25 times the aggregate amount of the principal of and interest on the Bonds regularly maturing on each Stated Maturity within the next succeeding 12 months. The Entity may make adjustments from time to time in such rates, fees and Charges and may make such classifications thereof as it deems advisable but shall not reduce such rates, fees and Charges below those then in effect unless an Independent Engineer's report reflects that the Net Revenues from such reduced rates, fees and Charges will at all times meet the requirements hereof. 6.18. Unconditional Obligation. Except only as provided herein for alteration of the Bonds or this Indenture, nothing in this Indenture or in the Bonds contained shall affect or impair the obligation of the Entity, which is absolute and unconditional, to pay the principal of and interest on the Bonds to the respective Holders of the Bonds at the respective dates of Maturity, as herein provided, and out of the Revenues herein pledged for such payment, or affect or impair the right of action, which is also absolute and unconditional, of such Holders to institute suit to enforce such payment by virtue of the contract embodied in the Bonds. 6.19. performance of Essence. The performance of the duties prescribed in this Indenture and in the Bond Law by the Entity or its proper officers, agents or employees is of the essence of the Entity's contract with the Bondholders. -34- 1 r r r , 1 . . 1 I 1 T 6.20. Recourse to Bond Law. Each taker and subsequent Holder of the Bonds has recourse to all of the provisions of this Indenture and of the Bond Law and is bound by their terms. 6.21. Indenture is Covenant. Each and all of the terms of this Indenture shall be and constitute a covenant on the part of this Entity to and with each and every Bondholder from the time Bonds are issued hereunder. 6.22. Continuing Agreement. This Indenture and the covenants, agreements, provisions and conditions herein contained constitute a continuing agreement with the Holders of all of the Bonds issued or to be issued hereunder and from time to time outstanding, to secure the full and final payment of the principal of (premiums, if any) and the interest on all Bonds which may from time to time be executed and delivered hereunder. 6.23. Period of Agreement. Whenever all of the outstanding Bonds and all interest then accrued thereon shall have been fully paid or discharged, the agreements in this Indenture contained shall cease and terminate, and the Entity shall be under no further obligation to apply the Revenues of the Enterprise as herein required, or otherwise to do or perform any of the covenants, conditions or agreements in this Indenture contained. 6.24. Arbitrage. The Entity covenants that upon and after the First Redemption Date of the Bonds and on each Interest Payment Date thereafter, such Bonds shall be called for redemption to the extent that amounts allocated to the Surplus Account are sufficient therefor and are not required for any of the other authorized purposes of such account. 6.25. Statement as to Compliance. The Entity will cause to be prepared and filed with the Clerk and the Fiscal Agent, annually within one hundred twenty (120) days after the close of each Fiscal Year on June 30, commencing in the year 1981, a written statement signed by the Presiding Officer and by the Treasurer, stating, as to each signer thereof, that a review of the activities of the Entity during such year and of performance under this Indenture has been made under his supervision and to the best of his knowledge, based on such review, the Entity has fulfilled all its obligations under this Indenture throughout such year, or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to him and the nature and status thereof. -35- .,- r I J I I . . I T ARTICLE VII THE FISCAL AGENT AND THE PAYING AGENTS 7.01. The Fiscal Agent. The Bank of America National Trust and savings Association, through its principal corporate trust office in San Francisco, California, is hereby appointed Fiscal Agent for the Entity for the purpose of receiving all moneys which the Entity is required to deposit with the Fiscal Agent hereunder and to alloc~te, use and apply the same and to transfer funds as required to itself as paying Agent, and to any paying Agents hereafter appointed, as provided in this Indenture. The Entity covenants that it will maintain a Fiscal Agent having a principal office in the State of California, so long as any Bonds are outstanding. The Entity may at any time remove the Fiscal Agent initially appointed, and any successor thereto, and may appoint a successor or successors thereto, provided that any such successor shall be a bank or trust company doing business and having a principal office in the State of California, authorized under the laws of such state to exercise corporate trust powers, having a combined capital and surplus of at least ten million dollars ($10,000,000), and subject to supervision or examination by federal or state authority. If such bank or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this section the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Fiscal Agent may at any time resign by giving written notice to the Entity and by giving to the Holders of the Bonds notice by publication of such resignation, which notice shall be published once a week for two successive weeks in one or more Financial Newspapers of general circulation in San Francisco or LoS Angeles, California. Upon receiving such notice of resignation, the Entity shall promptly appoint a successor Fiscal Agent by an instrument in writing. Any resignation or removal of the Fiscal Agent and appointment of a successor Fiscal Agent shall become effective only upon acceptance of appointment by the successor Fiscal Agent. The Fiscal Agent is hereby authorized to redeem the Bonds when duly presented for payment at Maturity or Stated Maturity, as the case may be, or to purchase identified Bonds, and to cancel all Bonds upon payment thereof and return the same so cancelled, or provide certificates of destruction thereof, to the Entity. The Entity shall from time to time, subject to any agreement between the Entity and the Fiscal Agent then in force, pay to the Fiscal Agent compensation for its services, reimburse the Fiscal Agent -36- \ r J , r 1 . . 1 T 1 r for all its advances and expenditures, including but not limited to advances to and fees and expenses of independent accountants, counsel and engineers or other experts employed by it in the exercise and performance of its powers and duties hereunder, and indemnify and save the Fiscal Agent harmless against liabilities not arising from its own negligence or willful misconduct which it may incur in the exercise and performance of its powers and duties hereunder. 7.02. The paying Agents. The Entity may appoint paying Agents for the Bonds of any Series pursuant to Supplemental Resolutions. Each paying Agent shall signify its acceptance of the duties and obligations imposed upon it by the Indenture by executing and delivering to the Entity and to the Fiscal Agent a written acceptance thereof. The Entity may remove any paying Agent and any successor thereto, and appoint a successor or successors thereto; provided, however, that any such paying Agent designated by the Entity shall continue to be a paying Agent of the Entity for the purpose of paying the interest on and principal of and redemption premiums, if any, on the Bonds of such Series until the designation of a successor as such paying Agent or until expressly relieved of such obligation by written release of the Entity. The Entity covenants that it will maintain a paying Agent having a principal office in San Francisco, California, so long as any Bonds are outstanding, in the event that a principal office of the Fiscal Agent shall not be located in San Francisco or Los Angeles, California. Each paying Agent is hereby authorized to redeem Bonds of the Series for which it has been appointed when duly presented to it for payment or redemption, which Bonds shall thereafter be delivered to the Fiscal Agent for cancellation and returned to the Entity, if required. The paying Agent shall keep accurate records of all Bonds paid and discharged. 7.03. Liability of Agents. The recitals of facts, covenants and agreements herein and in the Bonds contained shall be taken as statements, covenants and agreements of the Entity, and neither the Fiscal Agent nor any paying Agent assumes any responsibility for the correctness of the same, or makes any representation as to the validity or sUfficiency of the Indenture or of the Bonds, or shall incur any responsibility in respect thereof, other than in connection with the duties or obligations herein or in the Bonds assigned to or imposed upon it. Neither the Fiscal Agent nor any Paying Agent shall be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. 7.04. Notice to Agents. The Fiscal Agent and any paying Agent shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, Bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Fiscal Agent and any paying Agent may -37- ~ r J f I , . . 1 1 1 1 consult with counsel, who may be counsel to the Entity, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered hereunder in good faith and in accordance therewith. Neither the Fiscal Agent nor any paying Agent shall be bound to recognize any person as the Holder of a Bond unless and until such Bond is submitted for inspection, if required, and his title thereto satisfactorily established, if disputed. Whenever in the administration of its duties under this Indenture the Fiscal Agent or any paying Agent shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of bad faith on the part of the Fiscal Agent or the paying Agent, be deemed to be conclusively proved and established by a certificate of the Entity and such certificate shall be full warrant to the Fiscal Agent or the paying Agent for any action taken or suffered under the provisions of the Indenture or any Supplemental Resolution, but in its discretion the Fiscal Agent or any Paying Agent may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as it may deem reasonable. -38- ~ r r ] 1 I . . ] T J T ARTICLE VIII MODIFICATIONS 8.01 Modifications. From and after the sale and delivery of any of the Bonds, no amendment, alteration or modification of the Bonds or of this Indenture which will impair, impede or lessen the rights of the Holders of the Bonds then outstanding shall be made without the prior written consent, or alternatively, the prior consent given at a Bondholders' meeting, of the Holders of at least sixty percent (60%) of the aggregate principal amount of affected Bonds then outstanding, unless a higher percentage or different method is otherwise provided for or unless the amendment, alteration or modification be as otherwise authorized herein. No such modification or amendment shall extend the Maturity of or reduce the interest rate on, or otherwise alter or impair the obligation of the Entity to pay the interest or principal or redemption premiums at the time and place and at the rate and in the currency provided therein of any Bond without the express written consent of the Holder of such Bond, nor reduce the percentage of Bonds required for the written consent to any such amendment or modification. 8.02. Amendment without Consent. This Indenture and the rights and obligations of the Entity and of the Holders of the Bonds may also be modified or amended at any time by a Supplemental Resolution which shall become binding upon adoption, without the consent of any Holders of Bonds, but only to the extent permitted by law and only for anyone or more of the following purposes: (a) To add to the covenants and agreements of the Entity in this Indenture contained, other covenants and agreements thereafter to be observed, or to surrender any right or power herein reserved to or conferred upon the Entity; (b) To make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in this Indenture or in regard to questions arising under this Indenture, as the Entity may deem necessary or desirable and not inconsistent with this Indenture, and which shall not adversely affect the interest of the Holders of the Bonds; or (c) To provide for the issuance of a Series of Bonds, and to provide the terms and conditions under which such Series of Bonds may be issued, subject to and in accordance with the provisions of Article II. -39- ~ r t J I I . . 1 T IT 8.03. Consent Binding. Any amendment, alteration or modification which shall have received the consent of the Holders of the percentage of said outstanding Bonds as provided in Section 8.01 of this Article shall be binding on the Holders of all of the Bonds, including coupons appertaining thereto, either attached to or detached from the Bonds. If any alteration, amendment or modification shall affect less than all outstanding Bonds, then the provisions of Section 8.01 of this Article shall apply only to the Bonds affected by the amendment, alteration. or modification. 8.04. Calling Bondholders' Meeting. If the Legislative Body shall desire or shall be required to obtain the consent of the Bondholders to a proposed action, it may adopt a resolution calling a meeting of the Bondholders affected by the proposed action for the purpose of considering the action, the consent to which is desired or required. 8.05. Discretion of Legislative Body. The place, date and hour of holding the meeting and the date or dates of publishing and mailing notice shall be determined by the Legislative Body in its discretion. 8.06. Notice of Meeting. Notice to Bondholders specifying the purpose, place, date and hour of the meeting shall be given by mail and by publication at least once not less than thirty (30), nor more than sixty (60) days prior thereto in one or more Financial Newspapers circulated in San Francisco or Los Angeles. The notice shall set forth the nature of the proposed action, consent to which is desired or required. 8.07. List of Owners. The Treasurer shall prepare and deliver to the chairman of the meeting a list of the names and addresses of Bondholders, to the extent known by him, together with a statement of the Maturities, series and numbers of th~ Bonds held by each, and no Bondholder shall be entitled to vote at the meeting unless his name appears upon the list or unless, at the meeting, he shall present his Bond or Bonds or a certificate of deposit thereof. 8.08. Certificate of Deposit. Holders of bearer Bonds may deposit them with a bank, trust company, investment banker, bond dealer or broker within or without the State, and obtain from the depositary a certificate of deposit which shall constitute proof of ownership and entitle the depositor named therein to vote upon filing it with the Treasurer, who shall add it to the list of owners. The Treasurer may designate a depositary where the Bonds may be deposited, which shall be an agency for that purpose. 8.09. Limit on Voting. No Bondholder shall be permitted to vote with respect to a larger aggregate principal amount of Bonds than is set against his name on the list, unless he shall produce the additional Bonds upon which he desires to vote or a certificate of deposit. -40- ~. ( r . . 8.10. Attendance and voting by Proxy. Attendance and voting by a Bondholder at the meeting may be by proxy. An owner of fully registered Bonds may, by an instrument in writing under his hand, appoint any person as his proxy to vote at the meeting for him, and that instrument when presented at the meeting shall be sufficient to entitle that person to vote as the proxy of said owner. Any person may vote as the proxy of the owner of a bearer Bond on presentation of the Bond or certificate of deposit thereof and an instrument in writing under the hand of the Bondholder appointing the person as his proxy to vote at the meeting for him, or if the instrument in writing has been delivered to the agency designated by the Entity at the time the Bond was delivered to the agency as provided for in Section 8.08 of this Article and the person's name appears on the list delivered by the Treasurer to the chairman of the meeting, the certificate of deposit may verify him as the proxy of the owner of said bearer Bond. 8.11. Quorum and Procedure. A representation of at least sixty percent (60%) in aggregate principal amount of the Bonds affected by the proposed action and then outstanding shall be necessary to constitute a quorum at the meeting of Bondholders, but less than a quorum may adjourn the meeting, from time to time, and the meeting may be held as so adjourned without further notice, whether the adjournment shall have been by a quorum or less than a quorum. 8.12. Officers. The Legislative Body shall, by an instrument in writing, appoint a temporary chairman of the meeting, and the meeting shall be organized by the election of a permanent chairman and a secretary. 8.13. Votes. At the meeting, each Bondholder shall be entitled to one vote for each $1,000 principal amount of Bonds with respect to which he shall be entitled to vote, and the vote may be given in person or by proxy. The Legislative Body, by its duly authorized representative, may attend the meeting of the Bondholders, but shall not be required to do so. 8.14. Vote Required. At the meeting, there shall be submitted for the consideration and action of the Bondholders a statement of proposed action, consent to which is desired or required, and if the action shall be consented to and approved by the Bondholders in person or by proxy holding at least sixty percent (60%) of the aggregate principal amount of the Bonds affected by the proposed action and then outstanding, the chairman and the secretary of the meeting shall so certify in writing to the Legislative Body, and the certificate shall constitute complete evidence of the consent of the Bondholders. 8.15. Disqualified Bonds. Bonds owned or held by or for the account of the Entity or the District (but excluding Bonds held in any employees' retirement fund) shall not be deemed outstanding for the purpose of any consent or other action or any calculation of outstanding Bonds in this Article provided for, and shall not be -41- ~ r r ! T 1 . . 1 l , T entitled to consent to, or take any other action in, this Article provided for. 8.16. Certificate of Notice Conclusive. The actual receipt by a Bondholder of the notice required to be given by Section 8.06 of this Article shall not be a condition precedent to the undertaking, notice of which is required to be given, and failure to receive notice shall not affect the validity of the proceedings thereat or prevent the notice from having the effect intended by the giving of notice, provided that notice has been published and has also been mailed to Bondholders to the extent known to the Treasurer. No irregularity in the form of the notice shall affect its validity provided notice has been given. A certificate signed by the chairman and secretary of the meeting shall be conclusive evidence, and the only competent evidence, of the matters stated in the certificate relating to the proceedings taken at the meeting as against all parties, and it shall not be open to a Bondholder to show that he failed to receive notice. 8.17. Filing Certificate. The certificate shall be filed in the office of the Treasurer and shall be kept on file so long as the Bonds and the interest thereon are outstanding and unpaid. A duplicate original, if there is one, and, if not, then a reproduced copy thereof, including the signatures thereon, shall be filed by the Entity with the pape~s of the proceedings authorizing the issuance of the Bonds. 8.18. Endorsement or Replacement of Bonds After Amendment. After the effective date of any action taken as hereinabove prOVIded, the Entity may determine that the Bonds shall bear a notation, by endorsement in form approved by the Entity, as to such action, and in that case upon demand of the Holder of any Bond outstanding at such effective date and presentation of his Bond for the purpose at the office of the Registrar, and at such additional offices as the Registrar may select and designate for that purpose, a suitable notation as to such action shall be made on such Bond. If the Entity shall so determine, new Bonds so modified as, in the opinion of the Entity, shall be necessary to conform to such action shall be prepared and executed, and in that case upon demand of the Holder of any Bond outstanding at such effective date, such new Bonds shall be exchanged at the office of the Registrar and at such additional offices as the Registrar may select and designate for that purpose without cost to each Holder, for Bonds then outstanding, upon surrender of such outstanding Bonds with all unmatured coupons appertaining thereto. 8.19. Agreement and Agreement Guaranty Amendments without Consent. The Entity and the other parties at the time to the agreement referred to in Section 2.03 or 2.04 as a specific condition precedent to the issuance of a Series, including a Person which shall have guaranteed any of the obligations of one of such other parties to such agreement, may, without the consent of or notice to the Bondholders, enter into or consent to any amendment, change or modification of such agreement, (a) as may be required by the agreement or the guarantee of -42- *. t r I I 1 . . ~ obligations thereunder, or (b) for the purpose of curing any ambiguity or formal defect or omission, or (c) in connection with amendments to be made in the project or any part thereof when and to the extent required or permitted by the agreement, or (d) in connection with any other change therein which does not adversely affect the interest of the Holders of the Bonds. 8.20. Agreement and Agreement Guaranty Amendments With Consent of Bondholders. Except as provided by Section 8.19 of this Indenture, the Entity shall not enter into or consent to any amendment, change or modification of such agreement or the guarantee of obligations thereof without the prior written consent, or alternatively, the prior consent given at a Bondholder's meeting, of the Holders of the percentage of said outstanding Bonds provided in Section 8.01 of this Article. Any amendment, alteration or modification which shall have received such consent shall be binding on the Holders of all of the Bonds, including coupons appertaining thereto, either attached to or detached from the Bonds. 8.21. Amendment by Mutual Consent. The provisions of this Article shall not prevent any Holder of Bonds from accepting any amendment as to the particular Bonds held by him, provided that due notation is made on such Bonds. -43- ~ T r I r \ . . 1 T 1 f ARTICLE IX DEFAULT 9.01. Event of Default. One or more of the events provided in this Section shall constitute an event of default: (a) principal. A default in the due and punctual payment of the principal of a Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption, by declaration or otherwise, and such default shall have continued for a period of thirty (30) days: (b) Interest. A default in the due and punctual payment of an installment of interest of a Bond when and as the interest installment shall become due and payable, and such default shall have continued for a period of thirty (30) days: (c) Covenants. A default in the observation of any of the covenants, agreements or conditions herein on the Entity's part or in the Bonds contained, and such default shall have continued for a period of sixty (60) days: or (d) Bankruptcy. The filing by the Entity of a petition or answer seeking reorganization or arrangement under the Federal bankruptcy laws or other applicable laws or statutes of the United States of America, or the approval of such a petition by a court of competent jurisdiction, filed with or without the consent of the Entity, seeking reorganization under the Federal bankruptcy laws or other applicable laws or statutes of the United States of America or the assumption of control of the Entity or of the whole or any substantial part of its property by a court of competent jurisdiction under the provisions of other laws for the relief or aid of debtors. 9.02. Acceleration. Upon the happening of an event of default, the Holders of not less than fifty percent (50%) in aggregate principal amount of the Bonds at the time outstanding by notice in writing to the Entity, may declare the principal of all of the Bonds then outstanding and the interest accrued thereon to be due and payable immediately, and upon such declaration the same shall become and shall be immediately due and payable. No such acceleration shall be declared or become effective solely for the reason that all or any part of the principal and interest is paid within the period specified in Section 9.01{a) or -44- ~ r r I . . 1 t , r (b) by, or with moneys received from, a reputable municipal bond insurer or any state or Federal Agency. 9.03. Application of Funds. All of any Gross Revenues pledged to the payment and security of the Bonds, including all sums in all of the Funds and Accounts provided therefor upon the date of the happening of an event of default, and all sums thereafter received therefor by the Entity and transmitted to the Fiscal Agent shall be applied by it, upon presentation of the several Bonds, and the stamping thereon of the payment if only partially paid, or upon the surrender thereof if fully paid, in the order provided in Sections ~/O~ through 9fO~7 of this Article. 9.04. Costs and Expenses. Said moneys shall be applied to the payment of the costs and expenses of the Bondholders in declaring an event of default, including reasonable compensation to their agents, attorneys and counsel, and to the payment of the costs and expenses of the Fiscal Agent in carrying out the provisions of this Article, if any, including reasonable compensation to its agents, attorneys and counsel. 9.05. Interest on Undue Bonds. In case the principal of the Bonds shall not have become due and shall not then be due and payable, said moneys shall be applied to the payment of the interest in default in the order of Stated Maturity, with interest after maturity as provided by Section 3.02. 9.06. principal and Interest on Due Bonds. In case the principal of the Bonds shall have become and shall be then due and payable, said moneys shall be applied to the payment of the principal and interest of the Bonds in the order of the Maturity or Stated Maturity, as the case may be, of the principal and interest, with interest after maturity as provided by Section 3.02. 9.07. Insufficient Funds. In case the moneys shall be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, under Sections 9.05 and 9.06 of this Article, then the moneys shall be applied to the payment, first of interest and then of principal, ratably to the aggregate of the interest or principal then due to the persons entitled thereto without discrimination or preference, with interest after maturity as provided by Section 3.02. 9.08. Maintenance and Operation Costs. Any moneys remaining shall be used for the payment of the maintenance and operation costs of the Enterprise and only thereafter for any other authorized purpose. 9.09. Refunding Defaulted Bonds. The Entity may refund any defaulted Bonds by the issuance of new Bonds pursuant to this Indenture in which event the action shall be deemed to avoid or cure a default under this Article. with the consent of the Bondholder, the refunding Bonds may be exchanged for the Bonds refunded. -45- ~ f I f r , . . , ~ 1 r ARTICLE X REMEDIES OF BONDHOLDERS 10.01. Bondholder Remedies. Subject to any contractual limitations binding upon the Holders of the Bonds (including, but not limited to, limitations upon the exercise of a remedy to the Bondholders holding a specific proportion or percentage of the Bonds) , the Holders of the Bonds shall have the rights, for the equal benefit and protection of all Holders of Bonds similarly situated, as provided in this Article. 10.02. Accounting. By action or suit in equity, they may require the Entity and the Legislative Body and other officers, agents and employees to account as the trustee of an express trust. 10.03. Injunction. By action or suit in equity, they may en}Oln acts or things which may be unlawful or violate the rights of the Bondholders. 10.04. Mandamus. By mandamus or other suit, action or proceeding at law or in equity, they may enforce their rights against the Entity and its Legislative Body and other officers, agents and employees, and require and compel it or them to perform and carry out its and their duties and obligations under the law and its and their covenants and agreements with Bondholders. 10.05. Cumulative. No remedy conferred by this Article or by the law is intended to be exclusive of any other remedy, but each remedy is cumulative and in addition to every other remedy and may be exercised without exhausting and without regard to any other remedy conferred by this Article or by law. 10.06. Waiver. No waiver of a default or breach of duty or contract by any Bondholder shall extend to or shall affect subsequent default or breach of duty or contract or shall impair rights or remedies thereof. 10.07. Delays. No delay or omission of a Bondholder to exercise a right or power accruing upon a default shall impair the right or power or shall be construed to be a waiver of the default or acquiescence thereof. 10.08. Enforcement. Every substantive right and every remedy conferred upon the Bondholder may be enforced and exercised from time to time and as often as may be deemed expedient. 10.09. Status Quo. In case an action, suit or proceeding to enforce a right or exercise a remedy shall be brought or taken and then discontinued or abandoned, or shall be determined adversely to the -46- 1:... 1 J , . . 1 ! 1 r Bondholders, then, and in every case, the Entity and the Bondholders shall be restored to their former positions and rights and remedies as if no suit, action or proceedings has been brought or taken. 10.10. Actions by Fiscal Agent. Any suit, action or proceeding which any Bondholder shall have the right to bring to enforce any right or remedy hereunder may be brought by the Fiscal Agent for the equal benefit and protection of all Bondholders similarly situated, and the Fiscal Agent is hereby appointed (and the successive respective Holders of Bonds issued hereunder, by taking and holding the same, shall be conclusively deemed so to have appointed it) the true and lawful attorney-in-fact of the respective Bondholders for the purpose of bringing any such suit, action, or proceeding and to do and perform any and all acts and things for and on behalf of the respective Bondholders as a class or classes, as may be necessary or advisable in the opinion of the Fiscal Agent as such attorney-in-fact. -47- ~ T r 1 . . I ARTICLE XI DEFEASANCE 11.01. Discharge of Indebtedness. (a) If the Entity shall payor cause to be paid, or there shall otherwise be paid, to the Holders of all outstanding Bonds the principal (redemption premiums, if any) and interest due or to become due thereon, at the times and in the manner stipulated therein and in this Indenture and all Supplemental Resolutions, then the Holders of such Bonds and coupons shall cease to be entitled to the pledge of Revenues, and all covenants, agreements and other obligations of the Entity to the Holders of such Bonds under the Indenture shall thereupon cease, terminate and become void and be discharged and satisfied. In such event, the Fiscal Agent shall cause an accounting for such period or periods as shall be requested by the Entity to be prepared and filed with the Entity and, upon the request of the Entity shall execute and deliver to the Entity all such instruments as may be desirable to evidence such discharge and satisfaction, and the Fiscal Agent and the paying Agents shall pay over or deliver to the Entity all moneys or securities held by them pursuant to this Indenture which are not required for the payment of principal (redemption premiums, if any) or interest on Bonds. (b) Bonds for the payment or redemption of which moneys shall have been set aside (through deposit by the Entity or otherwise) to be held in trust by the Treasurer for such payment or redemption at the Maturity or Stated Maturity, as the case may be, shall be deemed, as of the date of such setting aside, to have been paid within the meaning and with the effect expressed in subsection (a) of this section. (c) All outstanding Bonds of any Series shall, prior to the Maturity or Stated Maturity, as the case may be, be deemed to have been paid within the meaning and with the effect expressed in subsection (a) of this section if: (1) In case any of such Bonds are to be redeemed on any date prior to their Stated Maturity, the Entity shall have given to the Fiscal Agent in form satisfactory to it, irrevocable instructions to publish notice of redemption of such Bonds on said date, -48- 1 1 ~ r L r r , . "1 1 11 r . . (2) There shall have been deposited with the Fiscal Agent either moneys in an amount which shall be sufficient, or Federal Securities (including any Federal Securities issued or held in book-entry form on the books of the Department of the Treasury of the United States of America) the principal of and the interest on which when paid will provide moneys which, together with the moneys, if any, deposited with the Fiscal Agent at the same time, shall be sufficient to pay when due the principal (redemption premiums, if any) . and interest due and to become due on such Bonds on and prior to the Stated Maturity or Maturity thereof, as the case may be, and (3) In the event such Bonds are not by their terms subject to redemption within the next succeeding sixty (60) days, the Entity shall have given the Fiscal Agent in form satisfactory to it, irrevocable instructions to publish, as soon as practicable, at least in one or more Financial Newpapers of general circulation in San Francisco and Los Angeles, California, and in the same or a similar Financial Newspaper of general circulation in each city in which a paying Agent has been appointed for the Bonds to be redeemed, a notice to the Holders of such Bonds that the deposit required by (2) above has been made with the Fiscal Agent and that such Bonds are deemed to have been paid in accordance with this section and stating such Maturity or Stated Maturity upon which moneys are to be available for the payment of the principal (redemption premiums, if any), and interest on such Bonds. . (d) Neither Federal Securities nor moneys deposited with the Fiscal Agent pursuant to this section or principal or interest payments on any such Federal Securities shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the interest on and principal and redemption premiums, if any, of such Bonds; provided that any cash received from such principal or interest payments on such Federal Securities deposited with the Fiscal Agent, if not then needed for such purpose, shall, to the extent practicable, be reinvested in Federal Securities maturing at times and in amounts sufficient to pay when due the principal and interest and redemption premiums, if any, to become due on such Bonds on and prior to Maturity or Stated Maturity thereof, as the case may be, and amounts received resulting from such -49- l y- ( r ." r . . ", 1 ." f I reinvestments shall be paid over to the Entity as received by the Fiscal Agent, free and clear of any trust, lien or pledge. For the purposes of this section, Federal Securities shall mean and include only such securities as are not subject to redemption prior ~o their maturity. 11.02. Unclaimed Moneys. Anything in this Indenture to the contrary notwithstanding, any moneys held by the Fiscal Agent 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 Stated Maturity or Maturity, if such moneys were held by the Fiscal Agent at such date, or for five years after the date of deposit of such moneys if deposited with the Fiscal Agent after the said date when such Bonds become due and payable, shall, at the written request of the Entity, be repaid by the Fiscal Agent to the Entity as its absolute property and free from trust, and the Fiscal Agent shall thereupon be released and discharged with respect thereto and the Bondholders shall look only to the Entity for the payment of such Bonds: provided, however, that before being required to make any such payment to the Entity, the Fiscal Agent shall, at the expense of the Entity, cause to be published at least once in one or more Financial Newspapers of general circulation in San Francisco and Los Angeles, California, and in the same or in a similar Financial Newspaper of general circulation in each city in which a Paying Agent has been appointed, a notice that said moneys remain unclaimed and that, after a date named in said notice, which date shall not be less than thirty (30) days after the date of the first publication of such notice, the balance of such moneys then unclaimed will be returned to the Entity. . -50- " "( . I ,. ~ . . · 1 ,. . . ARTICLE XII MISCELLANEOUS 12.01. Benefits of the Indenture Limited to Parties. Nothing in the Indenture expressed or implied, is intended to give to any person other than the Entity, the Treasurer, the Fiscal Agent, the paying Agents and the Holders of Bonds, any right, remedy or claim under or by reason of this Indenture. Any covenants, stipulations, promises or agreements in this Indenture contained by and on behalf of the Entity or the Treasurer shall be for the sole and exclusive benefit of the Fiscal Agent and the Paying Agents and the Holders of the Bonds. 12.02. Content of Certificates and Opinions. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include (a) a statement that the person or persons making or giving such certificate or opinion have read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of the signers, they have made or caused to be made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of the signers, such condition or covenant has been complied with. Any such certificate made or given by an officer of the Entity may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate may be based, as aforesaid, are erroneous, or in the exercise of reasonable care should have known that the same were erroneous. Any such certificate or opinion or representation made or given by counsel may be based, insofar as it relates to factual matters, information with respect to which is in the possession of the Entity, upon the certificate or opinion of or representations by an officer or officers of the Entity, unless such counsel knows that the certificate or opinion or representations with respect to the matters upon which his certificate, opinion or representation may be based, as aforesaid, are erroneous, or in the exercise of reasonable care should have known that the same were erroneous. 12.03. Execution of Documents by Bondholders. Any request, declaration or other instrument which this Indenture may require or permit to be executed by Bondholders may be in one or more instruments of similar tenor, and shall be executed by Bondholders in person or by their attorneys appointed in writing. -51- ~ \ . ~, , . . . ~. ~f ( Except as otherwise herein expressly provided, the fact and date of the execution by any Bondholder or his attorney of such request, declaration or other instrument, or of such writing appointing such attorney, may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state or territory in which he purports to act, that the person signing such request, declaration or other instrument or writing acknowledged to him the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such notary public or other officer. Except as otherwise herein expressly provided, the amount of Bonds transferable by delivery held by any person executing such request, declaration or other instrument or writing as a Bondholder, and the numbers thereof, and the date of his holding such Bonds, may be proved by a certificate which need not be acknowledged or verified, satisfactory to the Fiscal Agent, executed by a trust company, bank or other depositary wherever situated, showing that at the date therein mentioned such person had on deposit with such depositary the Bonds described in such certificate. Continued ownership after the date of deposit stated in such certificate may be proved by the presentation of such certificate if the certificate contains a statement by the depositary that the Bonds therein referred to will not be surrendered without the surrender of the certificate to the depositary, except with the consent of the Fiscal Agent. The Fiscal Agent may nevertheless in its discretion require further or other proof in cases where it deems the same desirable. The ownership of registered Bonds and the amount, maturity, number and date of holding the same shall be proved by the registration books provided for herein. Any request, declaration or other instrument in writing of the Holder of any Bond shall bind all future Holders of such Bond with respect to anything done or suffered to be done by the Entity in good faith and in accordance therewith. 12.04. Waiver of personal Liability. No member of the Legislative Body, officer, agent or employee of the Entity shall be individually or personally liable for the payment of the interest on or principal of or redemption premiums, if any, on the Bonds~ but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law or this Indenture. 12.05. Destruction of Cancelled Bonds. Whenever in this Indenture proviSIOn is made for the surrender to the Entity of any Bonds which have been paid or cancelled pursuant to the provisions of the Indenture, the Fiscal Agent may destroy such Bonds and furnish to the Entity a certificate of such destruction. -52- .. ~. "' " 6' . ~ " 1 . ~~::. 1"'- 12.06. Effective Date of this Resolution. This Resolution shall take effect from and after its passage and approval. * * * * * I hereby certi~y that the foregoing resolution was duly and regularly adopted and passed by the city Council of the City of Gilroy, California, at a regular meeting thereof held on the l7thday of February , 1981, by the following vote of the members thereof: AYES, and in favor thereof, Councilmembers: ALBERT, CUN~INGHAM, HUGHAN, LINK, PATE, TAYLOR and GOODRICH. NOES, Councilmembers: None ABSENT, Councilmembers: None APPROVED: o/~~ -53-