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Home My WebLink About1994-09-06; Housing & Redevelopment Commission; 258 Exhibit 10; Family Housing Revenue Refunding Bondsg . l&FUNDING ISSUE - BOOK ENTRY ONLY RATING: Standard & Poor’s: In the opinion of Bond Counsel, assuming continti~ CoIllpliance with certain tax covenants, interest on the Bonds is exempt from present State of California Personal income taxes and IS excluded from gross income for federal income tax existing statutes, regulations, rulmgs and court decisions, except for interest on any Bond for any riod durin tar t%m I: urposes under is held b a JJ erson who is a “substantial user” of the facilities financed b the Bonds or a “rela person” wi .w ‘ch such Bond Section 03 )(13) of the Internal Revenue Code of 1954, as amended. h the meaning of terest on the Bonds is not an item of tax reference for purppef of the alternative minimum tax imposed on individuals and coxPorations. However, see “TAX EXE Ii&J ON” for a $gf~~gon of the ~~mative minimum tax imposed on corporations and certain other federal tax consequences of ownership of the 2.: $15,115,ooc@ CARLSBAD HOUSING AND REDEVELOPh,iENT COMMISSION MULTIFAMILY HOUSING REVENUE REFUNDING BONDS, SERIES A OF 1994 (SEASCAPE VILLAGE PROJECT) Initial Interest Rate: % Maturity Date: December 1.2005 Mandatory Teni Date: Dated: 2 Date of Deliverv The Bonds are issuable only as full of The Depository Trust Company, New I? registered bonds, without coupons, registered in the name of Cede & Co. as nominee ork, New York (“DTC”) and will be available to ultimate purchasers (the “Beneficial Owners”) under the book entry only system maintained by DTC throu Participants. e brokers and dealers who are, or act through., DTC Beneficial Owners will not be entitled to receive physical de ‘very of the Bonds. So long as the Bonds bear mterest at a Short Term Rate, as described herein, beneficial ownership of the Bonds may be acquired in denominations of $100,000 and integral multiples thereof (except that one Bond may be issued m the denomination of $115,000). Principal, redemption price and interest on the Bonds will be payable initially to DTC by First Trust of California, National Association, .q trustee (the “Trustee”).. So lon to DTC Partu~pants 1s the responsibrhty of D f as DTC.or its nominee remains the registered owner, disbursement of such payments of DTC Participants, as described herem. C and disbursement of such payments to the Beneficial Owners 1s the responslbrlity From the date of d WEEKLY RATE. The Bonds are bemg issued by the Carlsbad Housing and Redevelopment Commission (the “Issuer”) to finance the acquisition, construction and installation of a 208 unit residentml rental apartment complex located in Carlsbad, California (the ‘Project”). Pursuant to an Indenture of Trust dated as of !! payments made to the Trustee by Seascape Apartme& l., 1994 (the “Indenture”), between the Issuer and the Trustee, rmci llmois Corporation (the “Owner”), will be used to it P al of and interest on the Bonds when due, (ii) the redemption price of the Bonds, (iii) the purchase price of the Bon B ay (i) the s tendered y ho ders thereof and (iv) the purchase price of Bonds purchased in lieu of redemption. Under a surety bond (the “Surety Bond”), issued by CONTINENTAL CASUALTY COMPANY an Illinois insurance co an (the “Surety”), the Surety amount sufficient to pay 1) “f!g e principal of and interest as a result of a redemption at the optton of the Owner), or (iv) the purchase price of the Bonds purchased in h (or earlier as provided %?giG Bond under certain circumstances described “Liquidity Surety Bond”) $ urc will unt sufficient to pay the purchase price of the %==%B ay to the Trustee, if moneys from other on ten ered for purchase at the option of the holders thereof. The Liquidity Surety Bond expires on (or earlier as provided therein). circumstanw described herein. The Indenture permits the substitution of an alternate liqmdity facility under the THE BONDS ARE SUBJECT TO REDEMPTION PRIOR TO MATURITY UNDER CERTAIN OTHER CKRCUMSTANCES AS DESCRIBED HEREIN. SEE “RISKS TO THE BONDHOLDERS” AND “REDEMPTION OF BONDS.” The Bonds will be limited obligations of the Issuer and, except to the extent payable from Bond proceeds and investment income, will be pa alternate security ti able solely from the payments to be made b en in effect, from amounts drawn under the E .tht Owner, from amounts drawn under the Surety Bond or any uidity Surety Bond or an alternate li uidity facili and from certain funds led edundertheIndenture. THEBONDS ARE IE&l’ED OBLIGATIONS 08 THE IS&R PAYAB& SOLELY FROMTHE~U~TESTA~P~EDUNDWTHEINDENTURE INCLUDINGPAYMENTSMADEUNDERTHECREDIT FACILITY. THE BONDS ARE NOT A DEBT OF THE ISSUER, THE ClTY OF CARLSBAD, THE STATE OF CALIFORNIA OR ANY POLJTICAL SUBDMSION THEREOF WITHIN THE MEANING OF ANY CONSTlTUTlONAL OR STATUTORY DEBT LIMlTATION. NEITHER THE FAITH AND CREDIT, NOR THE TAXING POWER OF THE ISSUER, THE CITY OF CARLSBAD, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF ARE PLEDGED FOR THE .TF%2s15124.1 (2533691.2 (0 2s33691.3 Iodlhpd) PAYMENT OF THE BONDS; NOR IN ANY EVENT SHALL, THE BONDS BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN THOSE OF THE ISSUER SPECIFICALLY PL&DGED THEREFOR. PAYMENT OF THE BONDS, INCLUDING THE PRINCIPAL AND PURCHASE PRICE THEREOF, $@ PREMIUM, IF ANY, AND THE INTEREST THEREON, WILL BE MADE SOLELY FROM THE FUNDS AND OBLIGXIIONS DULY PLEDGED THEREFOR AS DESCRIBED IN THIS OFFICIAL STATEMENT. THERE WILL BE NO PLEDGE OF ANY OF THE CREDIT OR THE TAXING POWER OF THE STATE, OR ANY POLITICAL SUBDMSION OF THE STATE, TO THE OBLIGATIONS OF THE BONDS AND NO OWNER OF ANY OF THE BONDS CAN EVER SUBMIT A CLAIM AGAINST ANY SUCH CREDIT OR TAXING POWER. THE ISSUER HAS NO TAXING POWER. A.G. EDWARDS & SONS, INC. pte: f &.W2n&er 13, 1994 .:... ::<:: .:.>: s-FzB15124.1 (2m691.2 *, 2533691.3 IdiEd} 2 NO DEALER, BROKER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED BY THE ISSUER, THE OWNER, THE SURETY, OR THE UNDERWRITER TOGIVEANYINFORMATIONORTOMAKEANY REPRESENTA’IIONS, OTHER THAN THOSE CONTAINED IN THIS OFFICIAL STATEMENT, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUER, THE OWNER, THE SURETY, OR THE UNDERWRITER. THIS OFFICIAL STATEMENT DOES NOT CONSTlTUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THE BONDS BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MARE SUCH OFFER, SOLICITATION OR SALE. THE INFORMATION UNDER THE CAPTION “THE ISSUER” HAS BEEN OBTAINED FROM THE ISSUER. THE INFORMATION SET FORTH UNDER THE CAPTIONS “THE SURETY BOND,” “THE IJQUIDITY SURETY BOND,” “CONTINENTAL CASUALTY COMPANY,” “APPENDIX B - CERTAIN INFORMATION CONCERNING CONTINENTAL, CASUALTY COMPANY” AND “APPENDIX C - FORMS OF SURETY BONDS” HAS BEEN FURNISHED BY CONTINENTAL CASUALTY COMPANY. THE INFORMATION SET FORTH HEREIN UNDER THE CAPTION “THE PROJECT AND THE OWNER” HAS BEEN FURNISHED BY THE OWNER. ALL OTHER INFORMATION CONTAINED HEREIN HAS BEEN OBTAINED FROM OTHER SOURCES THAT ARE BELIEVED TO BE RELIABLE, BUT SUCH INFORMATION IS NOT GU ARANTEED AS TO ACCURACY OR COMPLETENES SBY,ANDITISNOTTOBE CONSTRUED TO BE THE REPRESENTATION OF, THE SURETY, THE LIQUIDITY FACILITY ISSUER, THE owNER,THEuNDERwRITER OR THE ISSUER. THE INFORMATION AND EXPRESSIONS OF OPINION HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE, AND NEJTHER THE DEIIVERY OF THIS OFFICIAL STATEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER, CONTINENTAL CASUALTY COMPANY OR THE OWNER DESCRIBED HEREIN SINCE THE DATE HEREOF. Continental Casualty Company in its capacity as Surety and issuer of the Liquidity Surety Bond assumes no responsibility for and makes no representation as to the advisability of investing in the Bonds, inchulmg the tax-exempt status of the Bonds. Continental Casualty Company has provided the sections entitled “THE SURETY BOND, ” “THE LIQUIDITY SURETY BOND,” “CONTINENTAL CASUALTY COMPANY,” “APPENDIX B-CERTAIN INFORMATION CONCERNING CONTINENTAL CASUALTY COMPANY” and “APPENDIX C-FORMS OF SURETY BONDS.” Continental Casualty Company does not warrant and is not in any manner responsible for the adequacy, completeness or accuracy of any part of this Official Statement, except for the information stated in the aforementioned sections, which information, when taken as a whole, is represented by Continental Casualty Company to be accurate statements or summaries of the matters therein set forth and to present fairly the information purported to be shown. The information stated in the aforementioned sections is subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances create any implication that there has been no change in such information since the date of this Official Statement. Under the Indenture, Continental Casualty Company has no responsibility to the purchaser or holder of any Bond in respect of the state or federal tax treatment of any payment of interest, premium or principal or any other payment thereon, whether received from the Issuer, the Owner, Continental Casualty Company or others. IN CONNECI’ION WITH THIS OFFERING THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH TEND TO SI’ABIIJZE OR MAINTAIN THE MARKET PRICE FOR THE BONDS ABOVE THE LEVELS WHICH WOULD OTHERWISE PREVAIL. SUCH ACTMTIES, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. m?-2s15124.1 (2me91.2 Y, 2.93691.3 Idid) TABLE OF CONTENTS &g INTRODUCTION............................................................. 1 THEISSUER . ..~..............~.........................,..............~.., SECURWYFORTHEBONDS .................................................... 2 PledgeUndertheIndentun .................................................. 3 TheLoanAgreementandtheNote ............................................. 3 TheFirstDeedofTmst; theSecondDeedofTrwt;theIntercreditorAgzwment ................. 3 SOURCESANDUSESOFFUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 THESURETYBOND.. ........................................................ 4 Alternatesecurity ........................................................ 6 THELTQUIDITYS~BOND .................................................. 6 TheLiquiditySuretyBond .................................................. 6 Altema~LiquidityFacility .................................................. 8 CONTINENTALCASUALTYCOMPANY............................................. 8 THEPROJECTAND~OWNER ................................................. 9 TheProject ........................................................... 9 TheoWner ............................................................ 10 RISKSTOl7-IEBONDHOLDERS .................................................. 10 Non-recourse Obligation ................................................... 10 OtherFactors .......................................................... 11 DESCIUPTlONOFTHEBONDS ................................................... 12 General .............................................................. 12 BookEutryOnlySystem ................................................... 12 DiscontinuationofBookEntrySystem ........................................... 14 Transfer and Exchange Upon Discontinuation of Book Eutry System; Replacement Bonds ........... 14 InterestRates .......................................................... 15 Conversion of Interest Rate .................................................. 16 Redemption of Bonds ..................................................... 17 Optional Redemption ................................................ 17 Extraordinary f Redemption ............................................ 17 Mandatory Redemption ............................................... f JJ Notice of Redemption: Procedure for Selection ................................ 18 Tender of Bonds for Purchase ................................................ 19 Payment of Purchase Price .................................................. 20 2 SUMMARY OF CERTAIN PROVISIONS OF THE JND ENTURE .............................. 22 SourceofPayment ....................................................... 22 FundsandAccounta ...................................................... 22 LapseofPayment ........................................................ 24 Investments ........................................................... 25 EventsofDefault ........................................................ 25 Remedies ............................................................. 25 Intercreditor Agreement; Control by g @reti ...................................... 26 Direction of Proceedings ................................................... 26 LimitationsonRightsofOwnersofBonds ........................................ 26 sF%2sl%?4.I (2m691.2 lo E33691.3 lullid) i 41206-7-Ms1a2994 . Table of Contents kont’dl: Supplemental Indentuw .................................................... 27 Consent of Bondholders to Amendments .......................................... 28 Amendments to Certain Other Documents ......................................... 28 Discharge ............................................................ 28 SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT ......................... 29 TheLoan ............................................................. 29 Prepayment of the Loan .................................................... 29 TheCreriitFaciiity .................................................... . . $8 The Liquidity Facility ..................................................... 30 EventsofDefault ........................................................ 31 Payments by Credit Facility Issuer ............................................. 32 Term of Agreement ....................................................... 32 SUMMARYOFCERTAINPROVTSIONSOFTHEFIRSTDEEDOFTRUST . . . . . . . . . . . . . . . . . . . . . . . 32 SUMMARY OF CERTAIN PROVISIONS OF THE REIMBURSEMENT AGREEMENT . . . . . . . . . . . . . . . . 34 SUMMARY OF CERTAIN PROVISIONS OF THE LIQUIDITY FACIJJTY AGREEMENT . . . . . . . . . . . . . . 35 ~OFSECONDDEEDOFTRUST . . . . . . . . . . . . . . . . . . . 36 SUMMARY OF CERTAIN PROVISIONS OF THE INTERCREDITOR AGREEMENT . . . . . . . . . . . . . . . . . 36 1 THE REGuLAT0Ry AGREEMENT 37 .................. Project Restrictions ....................................................... 37 Tenant Income and Rental Restrictions ........................................... 37 Term ............................................................... 38 Enforcement ........................................................... 38 TAxExEMIllON............................................................ 38 UNDERWRITTNG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 RATINGS.................................................................. 39 INTERESTSOFCERTAMPARTIES................................................ 40 CERTAlNLEGALMATIERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 ABSENCE OF LJTIGATION REGARDING THE BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..- lvIlSCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 APPENDIXA;CERTAINDEFINlTIONS ............................................. fi APPENDIX B ; CERTAIN INFORMATION CONCERNING CONTINENT ALCASUALTYCOMPANY .... ..u APPENDMC;FORMSOFSURE’lYBONDS ......................................... .u APPENDIXD$‘ROPOSEDFORMOFOPINIONOFBONDCOUNSEL ........................ .u .!G-.%2s15124.1 (2s33691.2 0 2s35691.5 raibd) Official Statement Relating to $15,115,ooo Multifamily Housing Revenue Refunding Bonds, Series A of 1994 (Seascape Village Project) INTRODUCTION This Official Statement, which includes the cover page and Appendices hereto, provides certain information relating to the sale by the Carlsbad Housing and Redevelopment Commission (the “Issuer”) of its $15,115,000 $ Multifamily Housing Revenue Refunding Bonds, Series A of 1994 (Seascape Village Project) (the “Bonds”). Terms used in this Official Statement, if not defined when first used, have the meanings given them in Appendix A hereto. YIhe Bonds are being issued pursuant to Chapter 1 of Part 2 of Division 24 of the Health and Safety Code of the State of California (the “Act”), and under and p ursuant to that certain Indenture of Trust (the “Indenture”), dated as of September 1,1994, between the Issuer and First Trust of California, National Association, as trustee (the “Trustee”) for the owners of the Bonds. The Issuer will use the proceeds of the Bonds to make a loan to Seascape Apartments, Inc. (the “Owner”) which will, in turn, use the proceeds of the loan to reimburse Continental Casualty Company for a draw on its existing surety bond, to be utilized to redeem all of the Issuer’s Multifamily Housing Revenue Bonds (Seascape Village Project) Series 1985 B (the “Prior Bonds”), currently outstanding in the principal amount of $15,115,000. The Prior Bonds were issued for the purpose of providing funds to finance the acquisition, construction and installation of a 208-u& residential rental apartment complex located in the City of Carlsbad, California (the “Project”). See “THE PROJECT AND THE OWNER. ” The loan to the Owner will be made pursuant to a Loan Agreement (the “Loan Agreement”), dated as of September 1, 1994, between the Issuer and the Owner and will be evidenced by a secured promissory note (the “Note”) of the Owner in favor of the Issuer. The Loan Agreement and the Note provide that the Owner shall make payments thereunder sufficient to pay when due (whether at maturity, upon optional or mandatory redemption, acceleration or otherwise) the principal of, premium, if any, and purchase price of and interest on the Bonds, and certain fees and expenses as provided in the 8 Loan Agreement. The Owner’s obligations to make the payments required by the Loan Agreement, the Note and that certain Reimbursement Agreement (the “Reimbursement Agreement”), dated as of September 1,1994, between the Owner and Continental Casualty Company, an Illinois Insurance Company, as surety (the “Surety”), will be secured by a First Deed of Trust, Assignment of Rents and Security Agreement (the “First Deed of Trust”), dated as of September 1, 1994, from the Owner $ for the benefit of the Issuer and the Surety, granting, subject to Permitted Encumbrances, a first priority mortgage lien on and security interest in the Project and collaterally assigning all leases, rents and profits inuring from or in connection with the Project. The Issuer will assign certain of its rights in the Loan Agreement, the Note and its interests in the First Deed of Trust to the Trustee pursuant to the Indenture and an Assignment of First Deed of Trust Documents dated as of September 1, 1994, from the Issuer to the Trustee (the “First Assignment”). Concurrently with and as a condition to the issuance of the Bonds, the Surety will issue, as security for the Bonds, a surety bond (the “Surety Bond”). Under the Surety Bond, and subject to the terms and conditions thereof, including receipt of a proper notice of claim, the Surety will be obligated to pay to the Trustee, if moneys from other sources are unavailable on or before an amount suflicient to pay the principal of and interest on the Bonds when due, and the purchase price of Bonds subjec; to mandatory purchase or purchase in lieu of redemption. See “THE SURETY BOND” and “SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT.” The Surety Bond expires on (or such earlier or later time as provided therein) and may be replaced at or prior to expiration as provided in the Indenture. In the event the Owner fails to make payments due under the Loan Agreement in respect of the purchase price of the Bonds tendered at the option of the Holder thereof, the Trustee is required to file a claim under a separate, additional surety bond (the “Liquidity Surety Bond”) issued by Continental Casualty Company (in such capacity, the “Liquidity Facility Issuer”) to enable the Trustee to provide moneys to the Tender Agent to make such payments. See “THE IJQUIDITY SURETY BOND” herein and Appendix C hereto. ‘Ihe Liquidity Surety Bond expires on (or such earlier SFZ-2sI5IU.l (2s33491.2 P 2s33691.3 laaid} 4rm8-7amLww94 or later time as provided therein) and may be replaced at or prior to expiration as provided in the Indenture. See “THE . LIQUIDITY SURETY BOND - Alternate Liquidity Facility” herein. The Owner’s f obligations to reimburse the Surety for, among other things, amounts paid by the Surety under the Surety Bond, are set forth in the Reimbursement Agreement and are secured by the First Deed of Trust Documents and the Second Deed of Trust Documents (as such terms are hereinafter defined). The Issuer, the Trustee, and the Surety will enter into an Intercreditor Agreement, dated as of September 1,1994, under which the Surety shall have the exclusive right to accelerate the Bonds or the Note or to exercise any of the other rights, remedies or options which any of them may have under the Note, the Loan Agreement, the First Deed of Trust or certain other security documents, so long as the Surety Bond is in effect and an Event of Default has not occurred under the Indenture. See “SECURITY FOR THE BONDS-The First Deed of Trust; The Second Deed of Trust; ‘lhe Intercreditor Agreement” and “S UMMARY OF CERTAIN PROVISIONS OF THE INTERCREDITOR AGREEMENT. ” Certain restrictions relating to the income composition of the occupants and the use of the Project were placed on the Project pursuan t to the Regulatory Agreement and Declaration of Restrictive Covenants dated as of April 1, 1985 (the “Prior Regulatory Agreement”). At the time of issuance of the Bonds, the Owner, the Issuer and the Trustee will enter into @ & Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants, dated as of September 1,1994 (the “Regulatory Agreement”). FAILURE OF THE OWNER OR ITS ASSIGNS TO COMPLY WITH CERTAIN OF THE COVENANTS CONTAINED IN THE REGULATORY AGREEMENT COULD RESULT IN THE LOSS OF THE EXEMPTION OF INTEREST ON THE BONDS FROM FEDERAL INCOME TAXATION. SEE .f VISIONS QF TH.l$ REGULATORY AGREEMENT” AND “TAX EXEMPTION.c: PRO Brief descriptions of the Issuer, the security for the Bon&$ $including the Surety Bonq a the Liquidity Surety Bondl, the Surety, the Project and the Owner, the Bonds, the Indenture, the Loan Agreement, the First Deed of Trust and the Regulatory Agreement are included in this Official Statement. ALL REFERENCES HEREIN TO THE INDENTURE, THE LOAN AGREEMENT, THE SURETY BOND, THE LIQUIDITY SURETY BOND, THE FIRST DEED OF TRUST, THE REGULATORY AGREEMENT AND OTHER DOCUMENTS AND AGREEMENTS ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO SUCH DOCUMENTS AND AGREEMENTS, COPIES OF WHICH ARE AVAILABLE FOR INSPECTION AT THE OFFICES OF THE TRUSTEE. THE ISSUER The Issuer of the Bonds is the Carl&ad Housing and Redevelopment Commission. pursuant to the Act to engage in certain activities related to the provision of decent, safe and adequate housing for persons residing in the City of Carlsbad, California including the financing of multifamily housing through the issuance of obligations such as the Bonds.@ SECURITY FOR THE BONDS THE BONDS ARE LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM THE TRUST ESTATEPLEDGEDUNDERTHEINDENTURE,INCLUDINGPAYMENTS MADEUNDERTHECREDITFACILITY. THE BONDS ARE NOT A DEBT OF THE ISSUER, THE CITY OF CARLSBAD, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CON STITWITONAL OR STATUTORY DEBT LIMITATION. NEITHER THE FAITH AND CREDlT, NOR THE TAXING POWER OF THE ISSUER, THE CITY OF CAIUSBAD, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF ARE PLEDGED FOR THE PAYMENT OF THE BONDS; NOR IN ANY EVENT SHALL THE BONDS f m PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN THOSE OF THE ISSUER SPECIFICALLY PLEDGED THEREFOR. PAYMENT OF THE BONDS, INCLUDING THE PRINCIPAL AND PURCHASE PRICE THEREOF, REDEMPTION sFzzs15174.1 @w6913 b 2s33691.3 UdliIrd) 2 41208-7als1arw94 PREMlUM,IFANY,ANDTHEWTEREST THEREON, WILL BE MADE SOLELY FROM THE FUNDS AND OBLIGATIONS DULY PLEDGED THEREFOR AS DESCRIBED IN THIS OFFICIAL STATEMENT. THERE WILL BE NO PLEDGE OF ANY OF THE CREDIT OR THE TAXING POWER OF THE STATE, OR ANY POLiTlCAL SUBDMSION OF TEE STATE, TO THE OBLIGATIONS OF THE BONDS AND NO puRcHAsER. OWNER s WLDER OF ANY OF THE BONDS CAN EVER SUBhET A CLAIM AGAINST ANY SUCH CREDIT OR TAXING POWER. THE ISSUER HAS NO TAXING POWER. Pledge Under the Indenture Pursuant to the Indenture, the Bonds are secured by an assignment and pledge of, and security interest in, (i) all of the Issuer’s right, title and interest in and to moneys in and investments of all funds and accounts created under the Indenture, f except any moneys held in the Rebate Fund and the Bond Purchase Fund or the proceeds of the Bonds, (ii) all of the Issuer’s right, title and interest in, to and under the Loan Agreement and the Note, including all payments due under the Loan Agreement and all installments payable to the Issuer with respect to the loan p ursuant to the Loan Agreement, except for the rights of the Issuer to receive payments of certain fees and expenses and its rights to indemnification (collectively, the “Reserved Rights”), pursuant to the Loan Agreement, (iii) all of the Issuer’s right, title and interest in, to and under the First Deed of Trust, subject to the prior rights and interests granted to the Credit Facility Issuer therein and in the Intercreditor Agreement, (iv) all of the Issuer’s right, title and interest in, to and under the Credit Facility and the Liquidity Facility issued by the Credit Facility Issuer and the Liquidity Facility Issuer, respectively, to the Trustee for the benefit of the Bondholders securing the Owner’s obligations with respect to payment of the Bonds (but not other obligations) under the Loan Agreement, and (v) any and all property, rights and interests of every kind or description which may be sold, transferred, conveyed, assigned, pledged, mortgaged or delivered to the Trustee as additional security under the Indenture. The Loan Agreement and the Note Pursuant to the Loan Agreement, the Issuer will make the loan for the benefit of the Owner in an amount equal to the aggregate principal amount of the Bonds. The Owner’s obligation to repay its Loan will be evidenced by the Note. The Owner will be obligated under the Loan Agreement to make such payments at such times as shall be sufficient, when added to the amounts otherwise available under the Indenture, to pay the principal of, premium, if any, and interest on the Bonds when due, whether at maturity, by optional or mandatory redemption or by acceleration. The Owner also will be obligated under the Loan Agreement to pay the purchase price of the Bonds tendered to the Purchase Agent but not remarketed and the purchase price of Bonds purchased in lieu of redemption. ‘Ihe obligations of the Owner under the Loan Agreement and Note are non-recourse, secured only by the properties and liens specifically conveyed or encumbered as security therefor, including the Project. Certain obligations of the Owner under the Loan Agreement are not enforceable personally against the Owner or against any assets of the Owner, except to the extent of the Owner’s interest in the properties and assets encumbered by the First Deed of Trust. The First Deed of Trust: the Second Deed of Trust: the Intercreditor APreement The Owner will enter into the First Deed of Trust to create a mortgage lien on the Project and _a collateral assignmentof the rents and the profits from or in connection with the Project, as security for, among other things, the obligations of the Owner under the Loan Agreement, the Note and the Reimbursement Agreement. The Owner will also enter into a Second Deed of Trust, Assignment of Rents and Security Agreement, dated as of September 1, 1994 (the “Second Deed of Trust”), for the benefit of the Surety, to create a mortgage lien on the Project and p collateral assienment & the rents and profits from or in connection with the Project, as security for the obligations of the Owner under the Reimbursement Agreement, which lien will be inferior to the lien created by the First Deed of Trust. Enforcement of the remedies and the lien under the First Deed of Trust is subject, however, to the terms of the Intercreditor Agreement described below. As security for the Bonds, the Issuer will assign the Loan Agreement, the Note and m the First Deed of Trust and all of its right, title and interest thereunder (except the Reserved Rights) to the Trustee pursuant to the Indenture and the Assignment of First Deed of Trust Documents dated as of September 1, I994 from the Issuer to the Trustee (the “First Assignment” or the “Assignment”). The Issuer, the Trustee and the Surety will agree in the Intercreditor Agreement that, so long as the Surety Bond is in effect and no Event of Default has occurred under and as defined in the Indenture, the Surety shall have the right to take any and all actions and to exercise all rights and remedies under the Loan Agreement, the sFs2sl5124.1 (2s3365x.2 k. 2s3491.3 ledlid) 3 41aog7MS14Bn5Iw Note, the Reimbursement Agreement, the First Deed of Trust and the Second Deed of Trust (other than those constituting Reserved Rights), includmg the right to diit the Trustee to accelerate the Bonds or the Owner’s obligations under the Loan Agreement or the Note, or to foreclose the First Deed of Trust and/or the Second Deed of Trust. The Intercreditor Agreement provides that so long as the Surety Bond is in effect and no Event of Default has occurred under and as defined in the Indenture, the Issuer and the Trustee may not take any action to accelerate the Bonds or the Note or to foreclose the lien of the First Deed of Trust, or to exercise any other rights (including the granting of any consents or the exercise of any discretion under the First Deed of Trust or to require the performance of the covenants thereunder) or enforce any other remedies provided for in the First Deed of Trust or any other Fit Deed of Trust Document, without the prior written consent of the Surety. This provision does not restrict or limit (i) the f application by the Trustee of any funds held under the Indenture in accordance with the terms thereof, or (ii) the submission of sny claim and the collection and application of moneys paid under the Surety Bond in accordance with the terms of the Surety Bond and the Indenture, or (iii) the taking by the Trustee or the Issuer of any action to enforce the provisions of the Regulatory Agreement, provided that (1) the Issuer or the Trustee shall have given the Surety 8 at least 60 days’ @ prior written notice of the Owner’s noncompliance with the Regulatory Agreement and the actions required to cure such noncompliance, (2) the Surety shall not have undertaken appropriate actions or proceedmgs to effect such compliauce and (3) any action taken by the Trustee or the Issuer shall not cause or result in any acceleration of the Bonds or of the indebtedness evidenced by the I Note or any foreclosure sale or a discharge or impairment of any lien and security interest on the mortgage property securing the obligations of the Owner $ In the event the Surety or its designee shall become the legal or beneficial owner of the Project by foreclosure, purchase or deed in lieu of foreclosure the Surety agrees under the Intercreditor Agreement to execute and deliver to the Issuer and the Trustee an instrument ‘in writing assuming and agreeing to perform the obligations of the Owner under the Regulatory Agreement and the ban Agreement from and after the date of such acquisition, subject to the benefit, however, of the non-recourse provisions contained therein. See “SUMMARY OF CERTAIN PROVISIONS OF THE INTERCREDITOR AGREEMENT.” SOURCES AND USES OF FUNDS Sources of Funds: Funds held under the Indenture for Prior Bonds Proceeds of Bonds $ Uses of Funds: Reimbursement to Surety for redemption of Prior Bonds cost of Issuance Deposit to Interest Account Total THE SURETY BOND $ The Suretv Bond. Under the Surety Bond the Surety will be obligated to pay to the Trustee, subject to the terms and conditions thereof, including the receipt of proper notices of claim from the Trustee, and if moneys from other sources are unavailable therefor, sn amount sufficient to pay ;cfie 1 Bond) on or before DdlChC (unless m&#&& (A) the principal of and interest on the Bonds when due, (B) the redemption price of Bonds which are subject to redemption (see -- “DESCRIPTION OF THE BONDS - Redemption of Bonds”) other than as a result of redemption at the option of the Owner, (C) the purchase price of Bonds which are subject to mandatory tender by the Holders thereof (see - -“DESCRIPTION OF THE BONDS - Tender of Bonds for Payment of Purchase Price”) and (D) the purchase price of sF%2s15124.1 (2s33691.2 (0 2s33691.3 dlkd) 4 4ral6-7Ms1~m Bonds which are purchased in lieu of redemption, all as provided in the Indenture. ‘Ihe Trustee shall file with the Surety m as of 11 :CKl a.m. Trustee Time a notice of claim under the Surety Bond for the payments described in the preceding sentence seven Business Days prior to the applicable Payment Date (as defined in the Surety Bond) (an “Initial Surety Bond Notice of Claim”) for an amount equal to the difference between the amount held by the Trustee and available to make such payment and the amount due on such Payment Date. A second # notice of claim (an “Amended Surety Bond Notice of Claim”) is to be filed by the Trustee with the Surety by 11:OO A.M. Trustee’s Tie on each Payment Date which will update the related Initial Surety Bond Notice of Claim and will, among other things, reduce the amount payable on that Payment Date by the amounts which have subsequently become available to make such payment since the filing of the related Initial Surety Bond Notice of Claim. Subject to the terms and conditions of the Surety Bond, inchuimg receipt of proper notices of claim, the Surety will be required to honor and make payment in respect of any such claim by 2:00 P.M. Trustee’s Time on the later of (1) the Payment Date stated in the Initial Surety Bond Notice of Claim or (2) the seventh Business Day after presentation of the Initial Surety Bond Notice of Claim. In addition, under the terms of the Surety Bond, (i) if a petition of bankruptcy is filed by or against the Owner under the United States Bankruptcy Code or any other bankruptcy or similar act which is not dismissed pursuant to a final court order not subject to appeal (an “Event of Bankruptcy”) (1) within 367 days, if the Surety owns any of the corporate stock of the Owner and the Owner is the obligor under the First Deed of Trust Documents, or (2) within 91 days, after a payment to any Bondholder (other than an Excluded Bondholder (as such term is defined in the Surety Bond and the Indenture; such Excluded Bondholders include the Issuer, the Owner, any Affiliate of either of them and, in certain instances, the Surety) or the Trustee for the account of an Excluded Bondholder) of (A) the principal of and interest on the Bonds when due, (B) the redemption price of Bonds which are subject to redemption other than as a result of redemption at the option of the Owner, (C) the purchase price of Bonds which are subject to mandatory tender by the Holders thereof or (D) the purchase price of Bonds which are purchased in lieu of redemption, any of which shall have become due on or before the Termination Date (as hereinafter defined) from a source other than a payment by the Surety of a claim on the Surety Bond or a payment from the purchasers of Bonds upon a remarketing of such Bonds, and (ii) if in addition an order is entered by a wurt of competent jurisdiction holding that all or any portion of such payment is an avoidable preference or avoidable transfer within the meaning of the United States Bankruptcy Code, or is an avoidable preference under other applicable state or Federal bankruptcy statutes, and (iii) if, in any such case, such order is final and not appealable or the period for appeal therefrom has expired without appeal having been taken, the Surety will pay to the Trustee upon written demand from the Trustee all or any portion of such payment which is determined by a final order of a court of competent jurisdiction to wnstitute such an avoidable preference or avoidable transfer within the meaning of the United States Bankruptcy Code or an avoidable preference under other applicable state or Federal bankruptcy statutes and which any owner of Bonds (other than an Excluded Bondholder or the Trustee for the account of an Excluded Bondholder) is required to disgorge because of such determination (such amounts being collectively referred to in this Official Statement as “Preferential Payments”). The Surety may require that any Bondholder seeking payment or reimbursement for a Preferential Payment for the reasons indicated in the immediately preceding sentence (x) submit documents and showings evidencing such Bondholder’s entitlement to payment and the authorisation of the Trustee to act as such Bondholder’s representative and (y) execute and deliver an instrument of assignment with respect to such Bondholder’s claim for such payment in such bankruptcy proceedings, all in a form reasonably satisfactory to the Surety. ‘Ihe Surety’s obligation to pay or reimburse a Bondholder for a Preferential Payment is subject to the following conditions: (i) Prompt notification of the Surety by the Trustee or any Bondholder if they become aware of litigation which could result in any payments by the Owner which are secured by the Surety Bond becoming Preferential Payments, and (ii) ‘Ihe Surety having the right to assume the defense of any litigation in the name of and on behalf of the Bondholders and the Trustee relating to claims or causes of action which wuld result in any payments secured by the Surety Bond becoming Preferential Payments. The Surety shall have the right to select wunsel in any such litigation. Each Bondholder shall secure the Surety the rights to prosecute or provide for the defense of any action and all appeals thereof and permit the Surety to use the name of the Bondholder for that purpose. The Bondholders shall cooperate with the Surety and give all reasonable aid in defending such action or affecting a settlement or in any other lawful act which in the opinion of the Surety is necessary or desirable to establish the Bondholder’s title to the payments being attacked as Preferential Payments. sFms15124.1 (293691.2 Y) 2sw691.5 dimed) 5 IF THE SURETY IS PREJUDICED BY THE FAILURE OF ANY BONDHOLDER TO FURNISH THE w REQUIRED COOPERATION, THE SURETY’S OBLIGATIONS TO PAY OR REIMBURSE SUCH BONDHOLDER FOR PREFEREN’DALPAYMENTS $&4& TERMINATE. Upon any payment under the Surety Bond, the Surety will be subrogated to the rights possessed under the Indenture and the Trust Estate by the Trustee, the Issuer and the Bondholders so paid and to the rights of the Issuer and Trustee under the First Deed of Trust Documents to the extent of such payment. The Surety Bond will terminate upon the earliest of (i) (or such later date to which coverage of the Surety Bond may be extended by endorsement in accordance with the terms thereof), (ii) at the written election of the Surety on any date designated by the Surety if on such date the Surety is the owner of sll outstanding Bonds, (iii) the effective date of any Alternate Security deposited with the Trustee pursuant to the Indenture, (iv) the date the Surety Bond is released by the Trustee to the Surety as provided in the Indenture or (v) the date on which all outstanding Bonds are paid in full or such payment is provided for and the lien of the Indenture is discharged pursuan t to the Indenture (the “Termination Date”). However, unless the Trustee has released the Surety from such Obligations, the right of the Trustee to file claims for payment under the Surety Bond will extend beyond such Termination Date in respect of claims for payments which shall have become due prior to the Termination Date or on account of any amount required to be paid to a Bondholder (other than an Exchuled Bondholder or the Trustee for the account of an Excluded Bondholder) because of a Preferential Payment. The Surety shall have no liability under the Surety Bond (i) for the payment of any Bonds tendered by a Holder thereof or (ii) for any payment of principal, interest or any other payments on the Bonds after the date on which an Alternate Security shall be deposited with the Trustee p ursuant to the Indenture or the date the Surety Bond is released and delivered to the Surety by the Trustee. A COPY OF THE PROPOSED FORM OF THE SURETY BOND IS ATTACHED AS APPENDIX C HERETO. THE SUMMARY OF THE SURETY BOND HERElN IS QUALKFIED IN ITS ENTIRETY BY REFERENCE TO THE SURETY BOND FOR THE DETAILED PROVISIONS THEREOF. Alternate Securitv Pursuant to the Loan Agreement, the Owner has the right to provide an Alternate Security at any time, provided that the Alternate Security satisfies certain conditions set forth in the Loan Agreement and the Indenture (See “SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT--The Credit Facility”). The Surety Bond and any Alternate Security are herein referred to, wllectively, as the “Credit Facility.” If during a Short Term Rate Period an Alternate Security is substituted for a Credit Facility prior to the expiration date of the Credit Facility or in accordance with certain provisions of the Indenture, all of the Bonds will be subject to mandatory tender to the Trustee. See “REDEMPTION OF BONDS - Mandatory Redemption” and “S UMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT-‘Ihe CreditFacility.” THE IJQUlDlTY SU-REIY BOND Under the Liquidity Surety Bond the Liquidity Facility Issuer will be obligated to pay to the Trustee, subject to the terms and conditions thereof, including receipt of proper notices of claim from the Trustee snd if moneys from other sources are unavailable therefor, an amount sufficient to pay the purchase price of Bonds which have been optionally tendered by the Holders thereof during a 8 We&v Rate Period. The Trustee shall file with the Liquidity Facility Issuer a notice of claim under the Liquidity Surety Bond for the payment of the purchase price of Bonds optionally tendered on the sixth day prior to each Purchase Date (as defined in the Liquidity Surety Bond) ( an “Initial L,iquidity Surety Bond Notice of Claim”) for an amount equal to the purchase price of the Bonds payable on the Purchase Date in excess of the funds, if any, available to pay such purchase price on that Purchase Date. A second 8 notice of claim (an “Amended Liquidity Surety Bond Notice of Claim”) is to be filed by the Trustee with the Liquidity Facility Issuer by 1190 A.M. Trustee’s Time on each Purchase Date which will update the related Initial Liquidity Surety Bond Notice of Claim and will, among other things, reduce the amount payable on that Purchase Date by the principal amount of Bonds which have been remarketed or purchased by the Owner since the date of the filing of the related Initial Liquidity Surety Bond Notice of Claim. ism?s15124.1 {2s35691.2 lo 2535691.5 did) 6 4124x-7Ms1~m . Subject to the terms and wnditions of the Liquidity Surety Bond, including receipt of proper notices of claim, the Surety will be required to honor and make payment in respect of any claim by 200 P.M. Trustee’s Time on the later of (1) the Purchase Date stated in an Initial Liquidity Surety Bond Notice of Claim or (2) the sixth day after presentation of an Initial Liquidity Surety Bond Notice of Claim. In addition, under the terms of the Liquidity Surety Bond, (i) if an Event of Bankruptcy occurs within (a) 367 days, if the Owner owns the Project and the Liquidity Facility Issuer owns any of the corporate stock of the Owner, or otherwise (b) 91 days after a payment to any Bondholder (other than an Excluded Bondholder) of the purchase price of Bonds tendered at the option of such Bondholder which shall have become due on or before the Liquidity Facility Termination Date (as hereinafter defined) from a source other than a payment by the Liquidity Facility Issuer of a claim on the Liquidity Surety Bond and provided the Trustee has not previously released the Liquidity Surety Bond in accordance with the terms of the Indenture, (ii) if in addition an order is entered by a wurt of competent jurisdiction holding that all or any portion of such payment is an avoidable preference or avoidable transfer within the meaning of the United States Bankruptcy Code or is an avoidable preference under other applicable state or Federal bankruptcy statutes, and (iii) if, in any such case, such order is fmal and not appealable or the period for appeal therefrom has expired without appeal having been taken, the Liquidity Facility Issuer will pay to the Trustee upon written demand from the Trustee all or any portion of such payment which is determined by a final order of a court of competent jurisdiction to wnstitute a Preferential Payment. The liquidity Facility Issuer may require that any Bondholder seeking payment or reimbursement for a Preferential Payment (i) submit documents and showings evidencing such Bondholder’s entitlement to payment and the authorization of the Trustee to act as such Bondholder’s representative and (ii) execute and deliver an instrument of assignment with respect to such Bondholder’s claim for such payment in such bankruptcy proceedings, all in a form reasonably satisfactory to the Liquidity Facility Issuer. The Liquidity Facility Issuer’s obligation to pay or reimburse a Bondholder for a Preferential Payment is subject to the following conditions: (i) Prompt notification of the Liquidity Facility Issuer by the Trustee or any Bondholder if they become aware of litigation which could result in any payments by the Owner which are secured by the Surety Bond or the Liquidity Surety Bond becoming Preferential Payments, and (ii) The Liquidity Facility Issuer having the right to assume the defense of any litigation in the name of and on behalf of the Bondholders and the Trustee relating to claims or causes of action which could result in any payments secured by the Liquidity Surety Bond becoming Preferential Payments. The Liquidity Facility Issuer shall have the right to select wunsel in any such litigation. Each Bondholder shall secure to the Liquidity Facility Issuer the right to prosecute the defense of any action and all appeals therefrom and permit the Liquidity Facility Issuer to use the name of the Bondholder for this purpose. The Bondholders shall cooperate with the Liquidity Facility Issuer and give all reasonable aid in defending such action or affecting a settlement or in any other lawful act which in the opinion of the Liquidity Facility Issuer is necessary or desirable to establish the Bondholder’s title to the payments being attacked as Preferential Payments. If the Liquidity Facility Issuer is prejudiced by the failure of any Bondholder to furnish the required cooperation, the Liquidity Facility Issuer’s obligations to pay or reimburse such Bondholder for a Preferential Payment && terminate. The Liquidity Surety Bond will &n&rate upon the earliest of(i) , (ii) on the next Interest Payment Date which is at least forty-five days after notice from the Liquidity Facility Issuer is received by the Trustee that an Event of Default has occurred under- as defined in 8 the Liquidity Facility Agreement, (ii) the effective date of any Alternate Liquidity Facility which is delivered to the Trustee pursuant to the Indenture, (iv) the effective date of an Alternate Security delivered to the Trustee pursuant to the Indenture, (v) the occurrence of an Event of Default under and as defined in the Indenture but only in the event the Liquidity Facility Issuer and the Credit Facility Issuer are not the same entity, (vi) the date the Bonds are redeemed in whole, (vii) the date the Bonds are subject to mandatory tender for purchase, (viii) any Conversion Date, (ix) the termination or expiration date of the Surety Bond, or (x) the date on which all outstanding Bonds are paid in full or such payment is provided for and the lien of the Indenture is discharged pursuant to the Indenture (the “Liquidity Facility Termination Date”). However, unless the Liquidity Facility shall have been released to the Liquidity Facility Issuer by the Trustee, the right of the Trustee to file claims for payment under the Liquidity Surety Bond will extend beyond such Termination Date in respect of claims for payments which shall have become due prior to the Termination Date or on account of any amount required to be paid to a Bondholder (other than an Excluded Bondholder or the Trustee for the account of an Excluded Bondholder) because of a Preferential Payment of principal of or interest on the Bonds, unless the mx?sl5124.1 (2s33691.2 to2m691.3 did) 7 4120&7.h4SIax?5/94 Trustee has previously released the Liquidity Surety Bond in accor&tce with the provisions of the related Indenture. The Surety shall have no liability under the Liquidity Surety Bond (i) for the payment of any Bonds tendered by a Bondholder or (ii) for any Preferential Payment after the date on which an Alternate Security shall be deposited with the Trustee pursuant to the Indenture or the date the liquidity Surety Bond is released and delivered to the Surety by the Trustee. A COPY OF THE PROPOSED FORM OF THE LIQUIDITY SURETY BOND IS ATTACHED AS PART OF APPENDIX C HERETO. THE SUMMAR Y OF THE LIQUIDlTY SURETY BOND HEBETN IS QUALIFIED IN lTS ENTRElY BY REFERENCE TO THE LIQUIDITY SURETY BOND FOR THE DETAILED PROVISIONS THEREOF. Pursuant to the Indenture and the Loan Agreement, the Owner has the right to provide an Alternate Liquidity Facility at any time, provided that the Alternate Liquidity Facility satisfies certain conditions set forth in the Loan Agreement and the Indenture and ~3wner is required, if the existing Liquidity Facility is expiring, to provide an Alternate Liquidity Facility or an extension of the existing Liquidity Facility. If an Alternate Liquidity Facility is substituted for an existing Liquidity Facility (other than an Alternate Liquidity Facility which is in the form of a Liquidity Facility # _amendmenQ, the Bonds will be subject to mandatory tender to the Trustee in accoklance with the provisions of the Indenture. See “SUMMAR Y OF CERTAIN PROVISIONS OF THE INDENTURE - Alternate Liquidity Facility” and ‘SUMMARY OF CERTAIN PROVISIONS OF THE LoAN AGREEMENT - The Liquidity Facility” herein. CONTINENTAL CASUALTY COMPANY The following information has been provided in its entirety by Continental Casualty Company (“Continental “) for inclusion herein. Neither the Issuer nor the Underwriter have independently verified any of such information nor have they made an independent determination of the financial position of the Surety. There can be no assurance that the following information is indicative of the future financial position of the Surety. Continental is organized under the insurance laws of the State of Jllinois. The principal office of the Surety is at CNA Plaza, Chicago, Illinois 60685. Continental is licensed to do business in all states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands and is qualified in all provinces of Canada. Continental also holds a United States Department of the Treasury Certificate E as an acceptable surety on federal bonds. Continental, and the insurance industry in general, are subject to wmprehensive regulation in&ding regulation of advertising, premiums charged, insurance products and investments. The insurance departments of each of the jurisdictions in which the Surety operates are the principal regulatory bodies. Continental’s insurance operations assume and cede insuranw with other i.tuums and reinsurers. Reinsurance arrangements are utilixed to limit maximum loss, provide greater diversification and minimke exposure on larger risks. The cediig of insurance does not discharge the liability of the primary insurer. The obligations of the primary insurer in a reinsurance arrangement are not thereby assumed by, enforceable against or direct obligations of any such other insurer or reinsurer. The claims-paying abiity of Continental under the Surety Bond and the liquidity Surety Bond will have been rated by Standard & Poor’s # m (“S&P”) in wmrection with the issuance of the Bonds. NEITHER CONTINENTAL, THE OWNER, THE TRUSTEE NOR THE ISSUER WILL HAVE ANY OBLIGATION TO MAINTAIN SUCH CREDIT RATING. CERTAIN SELECTED FINANCIAL INFORMATION CONCERNING CO NTINENTAL IS CONTAINED IN APPENDIX B HERETO. THE INFORMATION CONTAINED HEREINANDINAPPENDIXBHERETG HAS BEEN FURNISHED BY CONTINENT AL AND IS NOT GUARANTEED AS TO lT!3 ACCURXY OR COMPLETENESS BY THE OWNER, THE ISSUER OR THE UNDERWRTI’ER. ksF2-~15124.1 (7s33691.2 b 2su691.3 sdliard) TH.EPRoJEcrANDTHEowNER The hicct The Project is located on an approximately f 2 acre site located on Seascape Drive between Caminito De Las Hondas on the North and Buttercup Road on the South, in Carl&ad, California. The Project’s address is 6938 Seascape Drive, Carlsbad, San Diego County, California 93277. The Project wnsists of 17 bu&lmgs; 15 detached two-story walk-up ant buildings containing a total of 208 apartments units and a one-story clubhouse/office building containing a tenant lounge, laundry room, exercise room, kitchen and the rental and management offices for the Project and a lanai building containing rest rooms and a laundry room. The Project also includes two swimmin g pools and spas, two lighted tennis wurts, # picnic areas, a greenbelt area incorporating a jogging path and big trail and carport parking. Of the 208 units, which contain a total living area of approximately 167,604 square feet, E g are one bedroom/one bath units of approximately 662 square feet, 88 are two bedroom/one bath units of approximately 878 square feet, 16 are two bedroom/hvo bath units of approximately 906 square feet and 60 are two bedroom/two bath units of approximately 906 square feet and 60 are two bedroom/two bath units of approximately 937 square feet. Kitchens in each unit contain a built-in oven/range, refrigerator, garbage disposal and dishwasher. Smoke detectors are also provided in each unit. On-site parking consists of approximately 470 spaces, including approximately 262 uncovered surface spaces, and 208 carport spaces. Construction of the Project wss wmpleted in 1986. As of July 1, 1994, approximately 97% of the apartment units comprising the Project were occupied by tenants. The Project is currently managed by Co& Management Corporation. In May of 1985, pursuant to an Indenture of Trust, dated as of April 1, 1985 (the “Prior Indenture”) between the Issuer and First Trust of California, National Association, as successor trustee thereunder (the “Prior Trustee”), the Issuer issued the Prior Bonds. Under the provisions of the Prior Indenture and a Loan Agreement, dated as of April 1, 1985, between the Issuer and FincoIn Seascape$& California Limited Partnership (the “Original Developer”), the proceeds of the sale of the Prior Bonds were used to pay the costs of issuing the Prior Bonds, to fund a debt service reserve fund under the Prior Indenture (the “Prior Reserve Fund”) and to pay certain costs of squiring and wnstructing the Project. The provisions of the Prior Loan Agreement and the Original Developer’s Secured Note A and Secured Note B, both dated as of May 21, 1985 (collectively, the “Prior Notes”) obligated the Original Developer to make payments of principal and interest on the Prior Bonds when due. On the date of issuance of the Prior Bonds, the Surety issued a Surety Bond No. 1667165 (the “Prior Surety Bond”) to secure certain payments of principal and interest on the Prior Bonds. In order to evidence the Original Developer’s obligation to repay the Surety for any payment made by the Surety under the Prior Surety Bond, the Original Developer executed and delivered to the Surety the Original Developer’s Reimbursement Agreement, dated as of April 1, 1985 (the “Prior Reimbursement Agreement”). The Original Developer’s obligationsunder the Prior Loan Agreement, the Prior Notes and the Prior Reimbursement Agreement were secured by a Deed of Trust, Assignment of Rents and Security Agreement dated as of April 1, 1985 (the “Prior First Deed of Trust”) from the Original Developer to a trustee for the benefit of the Issuer and the Surety. Pursuant to the Prior Indenture and an Assignment of Deed of Trust, dated as of April 1, 1985, the Issuer assigned its interest in the Prior Fiit Deed of Trust to the Prior Trustee. The Original Developer’s obligations under the Prior Reimbursement Agreement were also secured by a Second Deed of Trust, Assignment of Rents and Security Agreement, dated as of April 1, 1985 (the “Prior Second Deed of Trust”) from the Original Developer to a trustee for the benefit of the Surety. The Original Developer failed to make monthly payments on the Prior Notes commencing on or about January 1989 and from time to time thereafter, in each case giving rise to separate Events of Default under each of the Prior Loan Agreement, the Prior First Deed of Trust, the Prior Second Deed of Trust and the Prior Reimbursement Agreement. Because of these defaults, the Prior Reserve Fund has been fully depleted and the Surety has been required to make claim payments under its Prior Surety Bond. In December of 1990, a foreclosure action relating to the Prior First Deed of Trust and the Prior Second Deed of Trust (collectively, the “Prior Deeds of Trust”) was filed by the Surety in the Superior Court of the State of California for the County of San Diego (the “State Court”). In October of 1991, p ursuant to a joint “Stipulation and Order” thereon, the court ordered that a receiver be appointed for the project. sF%?s151u.1 (2933691.2 lo xw913 Icdhd) . In August of 1993, the Surety commenced a nonjudicial foreclosure of the Project. In December of 1993, the Surety executed an Assignment of Deed of Trust, assigning all of the Surety’s beneficial interest under the Prior Second Deed of Trust to Seascape Apartments, Inc., an Illinois corporation, a wholly owned subsidiary of the Surety. In December of 1993, Seescage Apartments, Inc., an Illinois corporation, purchased the Project by virtue of being the successful bidder at the foreclosure sale and the Trustee’s Deed Upon Sale was recorded in the real estate records of the San Diego County Recorder’s Office. The Project has generated sufficient revenues to pay its operating expenses but the excess of reven- over operating expenses (“Net Operating Income”) has not been sufficient to provide the amounts required for payment of the current principal and interest on the Prior Bonds when due. ‘Ihe Owner may use reven~ from the Project or borrowed funds from other sources, if available, to make certain repairs, improvements and replacements at the Project. If made, expenditures for repairs, improvements and replacements will reduce the revenues available for operating expenses or to make payments under the Note and Loan Agreement. The Owner is unable to predict whether future Net Operating Income will be sufficient to make payments under the Note and Loan Agreement in the amount needed for payment of principal and interest due on the Bonds and it is possible that the Surety will be required to pay claims under its Surety Bond to pay principal and interest on the Bonds. See “RISKS TO m BONDHOLDERS” and “REDEMPTKON OF BONDS - Mandatory Redemption.” The Owner has a copy of an appraisal of the Project completed for its counsel g in December, 1993 that states that as of the date of the appraisal, the appraised value of the Project f was leas than the outstanding principal amount of the Prior Bonds. Based on the appraisal, the Owner believes that the present fair market of the Project is substantially less than the principal amount of the Bonds. There can be no assurance that funds sufficient to pay the principal amount of the Bonds at maturity or earlier redemption could be obtained through the sale or refinancing of the Project. In the event that funds are not otherwise available for payment of the principal of the Bonds when due, the Surety would be required to pay a claim therefore under its Surety Bond in accordance with its terms. The Owner, at some time in the future, may sell the Project to a related or an unrelated entity, but the timing, terms and circumstances of any such sale, or whether such a sale can or will be made, is unknown at this time. The Owner The Owner is a corporation created under the laws of the State of Illinois on November 8, 1993. The corporation was qualified to do business under the laws of the State of California on November 10, 1993. It is presently expected that the Owner’s sole significant asset will be the Project. The Owner is a wholly owned subsidiary of the Surety. The Owner is represented by Staff Counsel to the Surety. The Surety has no liability for the debts of the Owner other than the Surety’s obligations under the Surety Bond and the Liquidity Surety Bond. RISKS TO THE BONDHOLDERS THE BONDS ARE SUBJECI’ TO CERTAIN RISKS. PROSPECI’IVE PURCHASERS OF THE BONDS SHOULD MARE SUCH INVESTIGATIONS AND OBTAIN SUCH ADDITIONALINFORMATION DIRECTLY FROM THE OWNER AND OTHERS AS THEY DEEM ADVISABLE IN CONNECTION WITH THEJR EVALUATION OF THE SUITABII.JTY OF THE BONDS FOR INVESTMENT. Non-recourse Obligation. The Bonds are limited obligations of the Issuer. Payment of the principal of and interest on the Bonds will be secured by and payable solely from payments to be made under the ban Agreement and the Note, from moneys paid pursuant to the Credit Facility and in certain citcumstances, amounts, if any, real&d pursuant to any exercise of remedies under the Loan Agreement and the First Deed of Trust. The obligations of the Owner (or any future owner of the Project) under the Loan Agreement and the Note are not enforceable personally against the Owner and such obligations are secured only by the properties and liens specifically conveyed or encumbered as security therefor, including the Project. No representation or assurance can be given to the effect that the Project will generate sufficient revenues to enable the Owner to meet its payment obligations under the Loan Agreement and the Note. See “SUMMARY OF CERTAlN PROVISIONS OF THE LOAN AGREEMENT.” Notwithstandmg any default by the Owner, payment of the principal of sFx?s1512*.I (293691.2 ID 7sB691.3 ledhld} 10 412m-l~sl48n5/94 l and interest on the Bonds will be secured by the Credit Facility, and the purchase price of the Bonds tendered for purchase to the purchase Agent during # Weekly Rate periods will be secured by the Liquidity Facility. Neither the Credit Facility nor the Liquidity Facility will’ be a source of payment in the event of any faihne of the Owner to provide moneys to fund any optional redemption of the Bonds. See “SECURITY FOR THE BONDS”; “THE SURETY BOND” and “THE LIQUIDITY SURETY BOND. ” In the event that the Surety is unable to pay the principal of and interest on the Bonds as such payments become due, the Bonds will be payable solely from moneys received by the Trustee pursuant to the Loan Agreement and the First Deed of Trust Documents. The Credit Facility and the Liquidity Facility should be evaluated by prospective purchasers as @e for the payment of the principal, redemption price and purchase price of and interest on the Bonds. No assurance or representation whatsoever is made as to whether other revenues would be sufficient for such purpose in the event there is a default under either the Credit Facility or the Liquidity Facility. Other Factors. prospective purchasers of the Bonds should consider carefully all possible factors which may result in the Bonds being redeemed prior to maturity or interest on the Bonds being deemed taxable from their date of issuance. The following list of possible factors, while not setting forth all the factors which might be relevant, contains some of the factors which should be considered prior to purchasing Bonds: Early Redemntion or Mandatorv Tender. The Bonds may be redeemed prior to maturity, without premium, under certain circumstances. For example, the Credit Facility Issuer has the right under the Indenture to diit the redemption of the Bonds upon the occurrence of an Event of Default under and as defined in the Loan Agreement, the Reimbursement Agreement, the Fii Deed of Trust or the Second Deed of Trust; provided, however, that so long as the Surety owns a majority of the stock of the Owner and the Owner owns the project, a default redemption caused by nonpayment cannot be called by the Surety under the provisions of the Indenture. The project has encountered substantial difficulties in operations during its operating history and the success of future operations is uncertain (See “THE PROJECT AND THE OWNER” above). The Bonds may also be redeemed prior to maturity, without premium, as a result of the payment of casualty insurance proceeds or condemnation awards. See “REDEMPTION OF BONDS-Mandatory Redemption” herein. During a Short Term Rate Period, the Owner may, with the prior written consent of the Credit Facility Issuer, cause the redemption of the Bonds, without premium. See “REDEMPTlON OF BONDS-Optional Redemption” herein. The Bonds also may be subject to mandatory tender to the Trustee, without premium, prior to maturity. See “DESCRIFI’ION OF THE BONDS - Tender of Bonds for Purchase.” Vacancies: Effect on Exemotion of Interest From Federal Income Taxes. The economic feasibility of the Project depends in large part upon it bemg substantially occupied. The Owner is required to maintain the Project as “residential rental property; ” and to have at least 20% of the units in the project occupied (or treated as occupied) by persons whose income for federal tax law purposes does not exceed 80% or less of area median gross income for the area in which the project is located, See REGULATORY AGREEMENT” and “TAX EXEMPTION.” There can be no assurance that the Owner will be able to rent units to comply with these requirements or at rentals which will enable it to make timely payments on the Note. The exclusion of interest on the Bonds from gross income for federal income tax purposes is dependent upm continuing compliance by the Owner with various requirements includiig certain of the requirements ‘red herein; however, the enforcement remedies available to the Issuer and the Trustee are severely limited. see REGUUTORY AGREEMENT” and “TAX EXEMPTION” herein. There is no provision for payment of additional interest or w premium if interest on the Bonds becomes subject to federal income taxes. There will be no certifications or affidavits delivered by the Original Developer or the Receiver relating to their compliance with the provisions of the Code relating to the tax- exempt nature of the prior Bonds or the Bonds. Value of Proiect. The Owner believes that the present fair market value of the Project is worth substantially less than the aggregate principal amount of the Bonds. Proceeds from the foreclosure of the Project sF2-~151U.l (zs3~12 IO 2m3691.3 fcdlid) 11 412n6-7alsl~m would therefore probably not be suflicient to pay the principal of and interest on the Bonds. Principal payments on the Bonds will, however, be secured by the Credit Facility during the term of the Credit Facility. In the event the Credit Facility Issuer fails to perform its obligations under the Credit Facility, the Bondholders may not receive payment of the principal of or interest on their Bonds. Comnetine Facilities. The Issuer may Gnance other facilities, or other facilities may be financed, developed, constructed and operated by other unrelated parties, that could compete with the Project for tenants. Any competing facilities, if so constructed, could adversely affect occupancy and reven~ of the Project. DESCRIPTION OF THE BONDS General The Bonds will be issued in the aggregate principal amount of $15,115,000. ‘Ihe Bonds shall mature on @ s. The Indenture does not authorize the issuance of additional bonds. The Bonds are issuable as fully registered bonds without coupons in Author&d Denominations. The principal of and premium, if any, on the Bonds shall be payable upon the presentation and surrender of the Bonds at the Principal Office of the Trustee, as Paying Agent, as the same shall become due and payable. Payment of the interest on each Bond shall be made by the Paying Agent by check mailed to the Holder thereof as of the Record Date, at the address shown on the registration books kept by the Registrar. A Holder of $1,000,000 or more in principal amount of Bonds may be paid interest at a Daily, Weekly, Monthly, Quarterly, Semi-Annual or Fixed Rate by wire transfer to an account in the continental United States if the Holder makes a written request to the Trustee at least 15 days before the Record Date specifying the account address. One fully registered Bond will be issued in the name of Cede & Co., as nominee of the Depository Trust Company, New York, New York (“DTC”) as registered owner of all Bonds. See “Book Entry Only System” below. So long as the Bonds bear interest at a Short Term Rate, beneficial ownership of the Bonds may be acquired in denominations of $100,000 and integral multiples of thereof (except that one Bond may be issued in the denomination of (115,000). During any Fixed Rate Period, beneficial ownership of the Bonds may be aquired in denominations of $5,000 or integral multiples thereof. Book Entrv Onlv Svstem DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities, registered in the name of Cede & Co. (DTC’s partnership nominee). One fully-registered Bond certificate will be issued for the Bonds, in the aggregate principal amount of the Bonds, and will be deposited with DTC. DTC is a limited-purpose trust company organixed under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuan t to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its Participants deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computer&d book-entry changes in Participants’ accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants (“Direct Participants”) include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchsnge, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indiit Participants”). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indiit Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing ssw2Sls124.1 (7s33491.2 to 2%3%91.3 la4kdj 12 41206-7Aewm25/94 details of the transaction, as well as periodic statements of their holdings, from the Direct or Indiit Participant through which the Beneficial Owner entered into the transaction. Transfm of ownership interests in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To faciitate subsequent transfers, all Bonds deposited by Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. The deposit of Bonds with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Diit Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. ‘Ibe Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indiit Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to Cede & Co. If leas than all of the Bonds are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the Bonds. Under its usual procedures, DTC would mail an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.‘s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Bonds will be made to DTC. DTC’s practice is to credit Direct Participants’ accounts on the payable date in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not receive payment on the payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the paying agent, the Trustee or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the Issuer or the Trustee, disbursement of such payments to Direct Participants shall be the responsibiity of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providiig its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Issuer or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered, as described below. The Issuer, acting in conjunction with the Credit Facility Issuer or the Owner, may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered, as described below. NEITHER THE ISSUER, THE OWNER, THE CREDIT FACILITY ISSUER, THE IJQUIDITY FACILITY ISSUER NOR THE TRUSTEE SHALL HAVE ANY RESPONSIBILITY OR OBIJGATION TO ANY DTC PARTICIPANT OR ANY BENEFICIAL OWNER OR ANY OTHER PERSON NOT SHOWN ON THE REGISTRATION BOOKS OF THE TRUSTEE AS BEING A BONDHOLDER WITH RESPECT TO EITHER: (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT, (2) THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL, OWNER IN RESPECT OF THE PRINCIPAL OR REDEMPTION OR PURCHASE PRICE OF OR INTEREST ON THE BONDS; (3) THE DELIVERY OR THE TIMELINESS OF ANY NOTICE TO ANY BENEFICIAL, OWNER WHICH IS REQUIRED OR P ERhETlED UNDER THE TERMS OF THE INDENTURE TO BE GIVEN TO THE OWNER OF THE BONDS; OR (4) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS BONDHOLDER. sFx!s151u.1 (293691.2 *) ?s33691.3 zcdlid) 13 412c%-7ads1atn/94 Discontinuation of Book Entry &tern The book entry system described above may be discontin~ at any time if either: (a) DTC determines to resign as securities depository for the Bonds; or (b) the Issuer determines that the continuation of the system of book entry transfers through DTC (or through a successor securities depository), is not in the best interesta of the Issuer; or (c) the Credit Facility Issuer, the Issuer, or, with the prior written consent of the Credit Facility Issuer, the Owner determines that it is desirable that certificates mpresenting the Bonds be delivered to the Bondholders. In either of such events (unless the Issuer appoints a successor securities depository) the Bonds will be delivered in registered certificate form to such persons and in such maturities and principal amounts as may be designated in writing by DTC, without any liability on the part of the Issuer or the Trustee for the accuracy of such designation. Transfer and Exchange Uoon Discontimration of Book Entrv Svstem: Renlacement Bonds The Registrar will be required to maintain at its principal office a register, in which, subject to such reasonable regulations as it may prescribe, the Registrar will provide for the registration and transfer of Bonds in accordance with the Indenture. The Issuer, the Trustee, the Credit Facility Issuer, the Liquidity Facility Issuer, the Owner, the Paying Agent, the Purchase Agent and any other person shall treat the person in whose name any Bond is registered on the Bond Register as the absolute Holder of such Bond for the purpose of making and receiving payment of the principal or purchase price thereof, interest and premium, if any, thereon and neither the Issuer, the Trustee, the Credit Facility Issuer, the Liquidity Facility Issuer, if any, nor the Owner shall be bound by any notice or knowledge to the contrary. Upon discontinuation of the book entry system, except for Bonds being remarketed in connection with optional or mandatory tenders, each Bond will be transferable only by presenting it at the principal office of the Registrar, duly endorsed for transfer and accompanied by an assignment duly executed by the owner or the owner’s author&d representative in a form acceptable to the Registrar. All Bonds will be exchangeable upon the presentation and surrender thereof at the principal office of the Registrar for a Bond or Bonds in any Authorixed Denomination, in aggregate principal amount equal to the unpaid principal amount of Bonds presented for exchange. Except when the Bonds bear interest at a f M Rate, the Registrar may charge the owner of a Bond a sum sufficient to reimburse it for the cost of printing each new Bond issued upon any exchange or transfer except in the case of (a) the exchange of temporary Bonds for definitive Bonds issued at the time of original issuance or (b) the first exchange or transfer of any Bond or Bonds issued at the time of the original issuance of definitive Bonds or (c) the exchange of Bonds surrendered for exchange upon partial redemption thereof or partial purchase in lieu of redemption. When Bonds bear interest at a Short Term Rate, all exchanges and transfers will be without charge to the Bondholders except that the Issuer or Registrar may require the Bondholder to pay a sum su&ient to cover (i) any tax or other governmental charge imposed in co~ection with such transfer or exchange, or (ii) all reasonable expenses incurred in connection with the issuance of replacement Bonds. During any Fixed Rate Period, the Registrar will not be required to transfer or exchange any Bond during the period commencing 15 days before the selection of the Bonds for redemption and ending on the date the related notice of redemption is mailed, or any Bond seIected for redemption. To the extent permitted by law, upon receipt by the Registrar of evidence satisfactory to the Registrar of the loss, theft, destruction or mutilation of any Bond and of indemnity and security reasonably required by the Issuer, the Trustee, the Liquidity Facility Issuer (during a $$ Weekly Rate Period) and the Credit Facility Issuer to hold each of them harmless and upon surrender and cancellation of such Bond if mutilated, the Issuer shall execute, and the Registrar shall authenticate and deliver, a new Bond of the same maturity and of like tenor and bearing a different number, in lieu of such lost, stolen, destroyed or mutilated Bond. The Issuer and the Trustee may require from such Bondholder the payment of a sum sufficient to reimburse them for all reasonable expenses incurred by them in connection with the issuance of each new Bond, including the charges of the Registrar. In the event that any such mutilated, lost, destroyed or stolen Bond has become or is about to become due and payable, the Trustee in its discretion may, instead of issuing a replacement Bond, pay such Bond. s2-2slSl~.l @caeK!2 to 2sj3491.3 dined) 14 Interest Rates The Bonds will bear interest from their date of issue until payment of the principal or redemption price thereof shall have been made or provided for in accordance with the provisions of the Bonds and the Indenture, whether at maturity, upon redemption or otherwise. Interest will be computed on the basis of (i) a year of 365 or 366 days, as appropriate, for the actual number of days elapsed, for each Intereat Period during which the Bonds bear interest at a Daily, Weekly, Monthly, Commercial Paper Rate or Liquidity Facility Rate, and (ii) a year of 360 days and twelve 30day months for each Interest Period during which the Bonds bear interest at a Quarterly, Semi-Annual or Fixed Rate. The Bonds shall bear interest in one of the following interest rate modes, unless held by the Credit Facility Issuer or the Liquidity Facility Issuer, if any, and subject to change in modes in the manner, at the time or times and under the conditions specified in the Indenture and described herein: (i) Daily Rate; (ii) weekly Rate; (iii) Monthly Rate; (iv) Quarterly Rate; (iv) Semi-Annual Rate; (vi) Commercial Paper Rate; or (vii) Fixed Rate. Each interest rate made other than Weekly Rate is referred to at times in this Official Statement as an “Alternate Rate.” This Offkial Statement relates only to the terms and provisions of the Bonds while the Bonds bear interest at a Weekly Rate. Interest on the Bonds - Weeklv Rate. Interest on the Bonds initially will be payable at the rate specified on the cover of this Official Statement from the date of issue until , 1994, and thereafter at the Weekly Rate until the earlier of conversion of the interest rate on the Bonds to an Alternate Rate or payment in full of the Bonds (whether at maturity or redemption or acceleration prior to maturity) or unless the Bonds bear interest at the Liquidity Facility Rate or the Credit Facility Rate. The Weekly Rate will be determined by the Remarketing Agent on @ Tuesdav of each calendar week or, if any such 8 m is not a Business Day, on the first f Busmess Day areafter (the “Weekly Rate Determination Date”). Each Weekly Rate will be f following the Weekly Rate Determination Date through and including the next g Weekly Rate Determination ffective date of a change to $ m Rate); provided that the initial Weekly Rate shall be effective from and in&ding the Closing Date through and including the 8 next succeeding the Closing Date. Each Weekly Rate shall be the minimum rate nw (as determined by the Remarketing Agent) for the Remarketing Agent to sell the Bonds on the Weekly Rate Determination Rate at their principal amount plus accrued interest, if any. The Bondholders will not automatically receive notice of Weekly Rates; however, the Trustee will confirm the effective interest rate by telephone or in writing to any Bondholder who requests it in any manner. The setting of the rates and the calculation of interest payable on the Bonds as provided in the Indenture , including, without limitation, the Owner, the Issuer, the Credit Facility Issuer, all registered owners (or beneficial owners) of the Bonds and the Remarketing Agent. Failure of the Remarketing Agen; or the Trustee to give any of the notices described in the Indenture, or any defect therein, shall not affect the interest rate to be borne by any of the Bonds nor conversion to a different method of calculating interest nor in any way change the rights of the registered owners of the Bonds to have their Bonds redeemed in accordance with the Indenture. sFz-2slsl%.l (2533691.2 b 2553691.3 ledlid) 15 Liauiditv Facilitv Rate. During any period that Bonds are owned by the Liquidity Facility Issuer by reason of a draw or claim on the Liquidity Facility, such Bonds will bear interest at the Liquidity Facility Rate from and includiig the date such Bonds are so purchased by the Liquidity Facility Issuer to but excluding the date such Bonds are sold by the Liquidity Facility Issuer (through a remarketing of Bonds or otherwise) to another Person. Credit Facilitv Rate. During any period that Bonds are owned by the Credit Facility Issuer by reason of a draw or claim on the Credit Facility, such Bonds will bear interest at the Credit Facility Rate from and including the date such Bonds are so purchased by the Credit Facility Issuer to but excluding the date such Bonds are sold by the Credit Facility Issuer (through a remarketing of Bonds or otherwise) to another Person. Invaliditv of Weekly Rate. In the event that (i) calculation of the Weekly Rate is held to be invalid or unenforceable by a court of law for any Weekly Rate Period or (ii) the Remarketing Agent fails to anno~ce the Weekly Rate for any Interest Period, the Weekly Rate for the Interest Period shall be 90% of the interest rate applicable to 13-week United States Treasury bills on the basis of the average per annum discount rate at which such 13-week Treasury bills shall have been sold at the most recent weekly Treasury auction. Conversion of Interest Rate Subject to the provisions of the Indenture, the Owner, with the prior written consent of the Credit Facility Issuer and provided no Event of Default shall have occurred and be continuing under and as defined in the First Deed of Trust Documents or any of the Second Deed of Trust Documents, the Credit Facility Issuer under certain circumstances, may change the method of determinin g the intent rate on the Bonds to an Alternate Rate on any Interest Payment Date by providing the notices and meeting the conditions contained in the Indenture. The Bonds shall be subject to mandatory tender for purchase on the date of any proposed conversion, subject to cancellation of such tender as described below, See ‘DESCRIPTION OF THE BONDS - Tender of Bonds for Purchase” herein. When a change in the interest rate determination method is to be made, the Trustee will notify the Bondholders by first class mail at least # $&@J days before the effective date of the change. Tbe notice will state the following: * :.:.:. *.:; &J that all Bonds are subject to mandatory tender on the Purchase Date at a Purchase Price equal to the principal amount thereof plus interest accrued thereon to the Purchase Date; f&iJ the date and time by which and the address at which the Bonds should be surrendered for mandatory purchase; conversion from a Short Term Rate to a Fixed Term Rate. such tender shall be cancelled and the Bonds shall #&J thathHld t e o ers do not have the right to elect to retain their Bonds and that such Bonds shall be deemed tendered on the Purchase Date, whether or not such Bonds are surrendered;~ $! that after the purchase Date and upon payment to the Purchase Agent of the Purchase Price therefor, the Holders will have no further rights with respect to the Bonds except the right to receive such Purchase Rice upon surrender of the Bonds to the Purchase Agent, endorsed for transfer in blank, and that such Holders will have no right to interest accruing on the Bonds after the Purchase Date& A second notice of mandatory tender shall be sent by certified mail, return receipt requested, not more than sixty (60) days after a Purchase Date, to each Holder of a Bond subject to tender for purchase who has not presented such Bond within thirty (30) days following the Purchase Da@ S s -of an defect therein shall affect the sufficien SF-Z-2slSI24.1 (2s33691.2 y, 2s33491.3 ledlid) 16 41m8-7-Msl9Bn5/94 In the event of the failure of any conditions contained in the Indenture upon conversion from a Weekly Rate to an . Alternate Rate, the mandatory tender shall be cancelled and the Bonds shall continue to bear interest at a Weekly Rate so long as a Liquidity Facility complying with the requirements of the Indenture shall remain in effect at least through the first Interest Payment Date following the date of the proposed conversion; the Trustee shall provide the Bondholders of written notice of the cancellation of such mandatory tender. In the event of a failure of the conversion from the Weekly Rate to a Fixed Rate when the liquidity Facility is expiring, the Bonds shall be purchased on the scheduled mandatory tender date from proceeds of a drawing on the Credit Facility. Maximum Interest Rate. Notwithstanding any other provision of the Bonds or the Indenture, interest payable on the Bonds may never exceed the highest lawful rate of interest allowed to be paid on the Bonds tim time to time by law now or hereafter in effect. Redemvtion of Bonds As described herein, the Owner and the Surety each has the right in certain situations to purchase Bonds in lieu of redemption. See “PURCHASE OF BONDS-Purchase of Bonds In Lieu of Redemption. ” All the redemptions and purchases of Bonds in lieu of redemption will be made in immediately available funds on the redemption or purchase date and will be at a redemption or purchase price of 100% of the principal amount of the Bonds being redeemed or purchased (unless a premium is required as provided below) plus interest acc~ed to the redemption or purchase date (in the case of a purchase on any date other than an Interest Payment Date), except that the interest accruing at a Daily or Weekly Rate will be paid following the redemption or purchase date. Bonds which have been tion but before the redemption date will be purchased pursuan ttothe tender. Ontional Redemotion When interest on the Bonds is payable at a Weekly Rate, the Bonds may be redeemed? without arcmium, in whole or in part at the option of the Owner with the prior written consent of the Credit Facility Issuer $$ on any date at a redemption price equal to the principal amount thereof plus any acc~ed interest thereon to the Redemption Date. Extraordinarv .__ ?% Redemption . . . _. The Bonds will be subject to redemption, as a whole and in part, (a) on any date by the Issuer upon the written direction of the Owner with the prior written consent of the Credit Facility Issuer upon occurrence of any event described in paragraph (ij$ g (ii) @ below, (b) at the $ m of the Credit Facility Issuer if an Event of Default has occurred and is continuing under and ss defined in any of the First Deed of Trust Documents or the Second Deed of Trust Documents or an event has occurred or failed to occur which, with the passage of time or the giving of notice, or both, would constitute an Event of Default under and as defined in any of the First Deed of Trust Documenta or Second Deed of Trust Documents @a (c) at the dike&ion of the Credit Facility Issuer upon the occurrence of an event described in paragraph (iii) immediately below. (i) The Project or any portion thereof is demolished, destroyed or damaged by fire or other casualty;$ (ii) The Project or any portion thereof shall have been taken under the exercise of the power of eminent domain by any governmental authority or conveyed in lieu of such taking or under threat thereof; or (iii) If the Credit Facility Issuer elects to cause all the Bonds to be redeemed upon the foreclosure of a lien upon the Project or delivery of a deed in lieu of foreclosure and the subsequent transfer of the Project & J+Gndatorv Redemotion The Bonds will be subject to mandatory redemption (or purchased in lieu of redemption with respect to paragraphs (ii), (iii), (iv) and (v) below) prior to the discharge of the lien of the Jndenture&vattion price eaua! p the minciml amount them-& upon the occurrence of any of the following events: sFms15124.1 (2sm91.2 0 2sm91.3 ?.dlid) 17 41206-7Ms1anv94 (i) as a whole on any date or in part on any Interest Payment Date, from any Net Pmceeds &gs such &m is defined in the First Deed of Trust) which the Credit Facility Issuer requires to be applied to the redemption of the Bonds pursuan ttotheFirstDeedofTrustortheSecondDeedofTrus~ (ii) as a whole or in part8 on the earliest date for which notice of redemption can be given, upon receipt by the Trustee of written notice from the Credit Facility Issuer requesting such redemption, specifying the principal amount of Bonds to be redeemed, and stating that (A) an Event of Default has occurred and is continuing under and as defined in the Loan Agreement, the Reimbursement Agreement, the First Deed of Trust or the Second Deed of Trust, or (B) if the Credit Facility is a letter of credit and the Credit Facility Issuer will not reinstate its letter of credit following a draw thereon for the interest on an Interest Payment Dateg ; (iii) as a whole, but not in part, on the earliest date for which notice of such redemption can be given, ifaDet ermination of Taxability shall have occurred; (iv) as a whole or in part with respect to any Bonds purchased by the Credit Facility Issuer as a result of mandatory tenders for purchase, purchased in lieu of redemption pursuant to the Indenture or purchased from the Liquidity Facility Issuer, which are held by the Credit Facility Issuer as registered owner thereof on any date after such purchase, upon written notice from such Credit Facility Issuer to the Trustee, the Owner and the Issuer demanding such redemption; or (v) as a whole or in part with respect to any Bonds which have been tendered for purchase at the option of the Holders thereof and have not been remarketed and are held by the Liquidity Facility Issuer for one hundred eighty (180) days or more (the “hfinimum Holding Period”) on any date occurring after the h4inimum Holding Period upon written notice from the Liquidity Facility Issuer to the Trustee, the Owner and the Issuer demanding such redemption. Notice of RedemDtion: Procedure for Selection Except as described below, notice of redemption shall be given by the Trustee not less than 30 days nor more than 60 days prior to the date iixed for redemption (the “Redemption Date”) by first-zlass mail postage prepaid to the Credit Facility Issuer and the registered owner of each Bond to be redeemed, at the address of such registered owner as shown in the Bond Register. The redemption notice will include the following information: (i) the numbers of the Bonds to be redeemed, giving the individual certificate number of each Bond to be redeemed (or stating that all Bonds between two stated certificate numbers, both inclusive, are to be redeemed); (ii) the CUSIP numbers, if available, of all Bonds bemg redeemed; (iii) in the case of a partial redemption of Bonds, the principal amount of each Bond being redeemed; (iv) the 8 maturity date of each Bond being redeemed; (v) the place or places where amounts due upon such redemption will be payable; (vi) the date of such notice, the Redemption Date and the redemption price; (vii) that Bonds to be redeemed must be surrendered for redemption at the redemption price at the Principal Office of the Trustee together with, in the case of Bonds to be purchased in lieu of redemption or if payment is to be made other than to the Holder, a written instrument of assignment duly executed by the registered owner or his duly author&d attorney; and that interest will stop accruing as of the Redemption Date on all Bonds to be redeemed on such date whether or not properly delivered to the Trustee; and (viii) if applicable, that the Bonds am subject to purchase in lieu of redemption as provided in the Indenture. A second notice of redemption will be sent by fimt-class mail, return receipt requested, not more than 60 days after a Redemption Date, to each Holder of a Bond called for redemption who has not presented such Bond within 30 days following the Redemption Date. Failure to give notice by mail to the Holder of any Bond designated for redemption or any defect therein with respect to particular Bonds shall not affect the validity of the pmceedings for the redemption of any other Bond. Failure to give notice by mail to any depositary or information service or to give any second notice or any defect therein shall not affect the validity of the pmceediigs for the redemption of any Bond. In the event of the redemption of less than all of the outatsndiig Bonds, the Trustee shall select Bonds, or portions thereof, for redemption 8 by lot in any manner which the Trustee in its sole discretion shall deem appropriate and fair. Bonds which have theretofore been selected for redemption shall not be deemed outstanding for purposes of such procedure. Upon proper notice, the Bonds or portions thereof so called for redemption, unless purchased in lieu of redemption, shall become due and payable on the Redemption Date so designated at the applicable redemption price. From and after the SF-Z-2sI5lU.I (2s33691.2 to 2s33691.3 iuulmxl) 18 4lim7MSIatL5194 Redemption Date, interest on the Bonds or portions thereof so called for redemption shall cease to accrue, such Bonds or portions thereof shall cease to be entitled to any benefit or security under the Indenture, and the Holders thereof shall have no rights in respect of such Bonds or portions thereof except to receive payment of the redemption price thereof and interest acc~ed to the Redemption Date from moneys held for that purpose. Tender of Bonds for Purchase Ontional Tender for Purchase. While the Bonds bear interest at a Weekly Rate, the Holders thereof Iother &luded Bondholders) shall have the right to tender their Bonds (or portions thereof in Author&d Denominations) for purchase by the Purchase Agent at a Purchase Price equal to the principal amount thereof (or of such portions) plus accrued intereat thereon to the Purchase Date, upon written notice to the Purchase Agent, on a Busmess Day, stating the Business Day (which shall be a date not leas than seven (7) days nor more than twenty (20) days after the notice is delivered), on which the Bonds are to be purchased. The Bonds must be delivered to the Purchase Agent by lo:30 a.m. Trustee Tie on the Purchase Date. Each notice shall specify (i) the principal amount, CUSIP number, certificate number and stated maturity of the Bond to which the notice relates, (ii) the principal amount of such Bond to be purchased, (iii) the Purchase Date on which such Bond is to be purchased and (iv) payment instructions with respect to the Purchase Price. As long as the Bonds are issued in book-entry only form, each notice shall additionally provide evidence satisfactory to the Purchase Agent that the party delivering the notice is the Beneficial Owner of the Bonds and, if the Beneficial Owner is other than a Participant, identify the Participant through whom the Beneficial Owner will direct the transfer. Mandatorv Tender for Purchase. ‘Ibe Bonds shaIl be subject to mandatory tender for purchase at a Purchase Price equal to the principal amount thereof plus acc~ed interest thereon to the Purchase Date on the following dates: (i) on (A) each Conversion Date or (B) on each date which would have been a Conversion Date except for the failure to satisfy the conditions of a Conversion Date set forth in the Indenture (except for a proposed conversion from a ‘$ IJVeeklv Rate to a Fixed Rate where the Liquidity Facility is not scheduled to expire); (ii) on the last Interest Payment Date during a Short Term Rate Period (A) prior to a Liquidity Facility Termination Date unless the term of such Gquidity Facility is extended (see “THE IJQUIDITY SURETY BOND” herein), (B) which is the effective date of delivery of an Alternate Liquidity Facility (other than a Liquidity Facility Amendment) delivered in substitution for the existing Liquidity Facility which is not expiring or (C) which would have been the effective date of the Alternate Liquidity Facility if the provisions of the Indenture relating to the delivery of an Alternate Liquidity Facility had been satisfied; (iii) on the last Interest Payment Date prior to the Termination Date of a Credit Facility. unless the term (iv) on the Interest Payment Date during a Short Term Rate Period (A) which is the effective date of delivery of an Alternate Security in substitution for an existing Credit Facility which is not terminating or expiring or (B) which would have been the effective date of the Alternate Security if the conditions for the provision of an Alternate Security under the Indenture had been satisfied; (v) on the first Interest Payment Date during a Short Term Rate Period which is at least forty-five (45) days after receipt by the Trustee of notice from the Liquidity Facility Issuer of the occurrence of an Event of Default under and as defined in the Liquidity Facility Agreement; and (vi) on the Interest Payment Date which is at least forty-five (45) days after the date of any failure to purchase Bonds tendered at the option of the Holders thereof. Notice of Mandators Tender. Not less than thirty (30) days prior to the date on which any Bonds are subject to mandatory tender for purchase, the Trustee shall provide written notice thereof to the Holders of the Bonds by first-class mail, postage prepaid, at such Holders’ registered addresses, which notice shall state: (i) that all Bonds are subject to mandatory tender on the Purchase Date at a Purchase Price equal to the principal amount thereof plus interest accrued thereon to the Purchase Date, fsF%?s151%.1 (2s33491.2 to 2s33491.3 sdlid) 19 412m-7Msl41mm (ii) the date and time by which and the address at which such Rends should be surrendered for mandatory purchase; (iii) the conditions, if any, to such mandatory purchase and the consequences of the failure of such (iv) that the Holders do not have the right to elect to retain their Bonds and that such Bonds shall be deemed tendered on the Purchase Date whether or not such Bonds are surrendered; and (v) that after the Purchase Date and upon payment to the Purchase Agent of the Purchase Price therefor, the Holders will have no further rights with respect to such Bonds except the right to receive such Purchase Price upon surrender of such Bonds to the Purchase Agent, endorsed for transfer in blank, and that, such Holders will have no right to interest accruing on such Bonds a& the Purchase Date. A second notice of mandatory tender shall be sent by certified mail, return receipt requested, not more than sixty (60) days after a Purchase Date, to each Holder of a Bond subject to mandatory tender for purchase who has not presented such Bond within thirty (30) days following the Purchase Date. Failure to give notice by mailing to the Holder of any Bond designated for mandatory repurchase or to any depositary or information service of any defect therein with respect to particular Bonds shall not affect the validity of the proceedings for the mandatory repurchases of such Bond. J%vment of Purchase Price Manner and Sources of Pavment of Purchase Price. The Purchase Price of a Bond which has been tendered to the Purchase Agent shall be paid (a) in immediately available funds by the close of business on the Purchase Date by wire transfer to the bank account in the United States directed in writing by the Bondholder to the Purchase Agent, or (b) in the absence of such direction, in the same manner as an interest payment would be made to such Bondholder. Bonds tendered for purchase shall be purchased at a Purchase Price in immediately available funds qual to the principal amount thereof, plus accrued interest where applicable, but solely From the following sources in the order of priority indicated: (i) proceeds from the remarketing of such Bonds pursuant to the Indenture; (ii) money deposited with the Trustee by or on behalf of the Owner pursuant to the Loan Agreement; (iii) when the Bonds have been tendered at the option of the Holder, proceeds from a draw, claim or purchase under the Liquidity Facility; (iv) when the Bonds have been tendered as a result of a mandatory tender for purchase or when the Bonds are being purchased in lieu of redemption, money on deposit in the Interest Account to pay the interest component of the Purchase Price of such Bonds; (v) when the Bonds have been tendered as a result of a mandatory tender for purchase or when the Bonds are being purchased in lieu of redemption, proceeds from a draw or claim under the Credit Facility; and (vi) when the Bonds have been tendered at the option of the Holder, moneys provided by the Credit Facility Issuer at its option as described below. Neither the Trustee nor the Purchase Agent shall have any obligationto purchase Bonds with any source other than as described in & preceding sentence. Remarketing procteds. The Remarketing Agent will use its best efforts to nmarket Bonds tendered or to be tendered for purchase by the Holders thereof and will cause the proceeds of any such remarketing to be deposited with the Trustee or Purchase Agent pursuant to the Indenture. There will be no remarketing of Bonds if a Determination of Taxability hall ham ocxmmd. ‘IEcre will be remarketing of Bonds during the continuance of an Event of Default under and as defined in the Inda&um or an event which, with the passage of time or the giving of notice o both, may become an Event of Default only in the sole discretion of the Remarketing Agent. Drawings under Liauiditv Facilitv to Pay Ootional Tenders. In the event that money from the sources described in (i) or (ii) of the paragraph entitled “Manner and Sources of Payment of Purchase Price” above is not available to purchase all Rends which are to be tendered for purchase at the option of the Holder, the Trustee shall give such noticea, and take such other actions as may be required under the Liquidity Facility on or prior to a Purchase Date such that the Liquidity Facility Issuer will be required to deposit with the Trustee an amount qual to the difference between the Purchase Price of sm?sI5IY.I (2s33491.2 to 2fB3691.3 ?cdIidJ 20 4Izl6-7MSIuv25!94 all such Bonds which are to be purchased on such Purchase Date and the amount on deposit with the Trustee or Purchase Agent which is available to pay the Purchase Price. Credit Facilitv Drawines to Pav Gntional Tenders. In the event that a sufficient amount of money from the sources described in (i), (ii) or (iii) of the paragraph entitled “Manner and Sources of Payment of Purchase Price” above is not available to purchase all Bonds which have been tendered at the option of the Holder by 290 p.m., Trustee Time, on the Remarketing Date, the Trustee shall immediately notify the Credit Facility Issuer of that fact and (unless the Credit Facility requim the Trustee to make a draw or claim against the Credit Facility to pay such deficiency) that the Credit Facility Issuer shall have the option, at its sole and absolute discretion, to purchase or cause to be purchased by a third party all or any portion of such Bonds on the Remarketing Date at the Purchase Price. To exercise this option, the Credit Facility Issuer must deliver to the Trustee by 3:00 p.m., Trustee Time, on the Remarketing Date, written notice of its intent to purchase the Bonds specifying the principal amount of the Bonds to be so purchased and provide to the Trustee immediately available funds to effect such purchase. Unless the Credit Facility permits the Trustee to make a claim or draw against the Credit Facility for payment of the Purchase Price of Bonds tendered, at the option of the Holders thereof, in the event there is insufficient money deposited under clauses (i), (ii) or (iii) of the paragraph entitled “Manner and Sources of Payment of Purchase Price, ” the notice from the Credit Facility Issuer to the Trustee shall include a written amendment or endorsement to the Credit Facility permitting such draw or claim which amendment or endorsement shall not constitute an Alternate SecUIity. Credit Facilitv Drawings to Pav Mandators Tenders. In the event that a sufficient amount of money from the sources described in (i), (ii) or (iv) of the paragraph entitled “Manner and Sources of Payment of Purchase Price” above is not available to purchase all Bonds which are subject to mandatory tender for purchase, the Trustee shall give such notices, and take such other actions as may be required under the Credit Facility prior to a Purchase Date such that the Credit Facility Issuer will be required to deposit with the Trustee an amount equal to the difference between the Purchase Price of all Bonds which are to be purchased on such Purchase Date and the amount on deposit with the Trustee :$ available to pay the Purchase ..:.:. Price of such Bonds. Bonds Deemed Tendered. On the Purchase Date, if moneys for the Purchase Price of all Bonds to be purchased on such date shall be held by the Trustee or the Purchase Agent so as to be available therefor on said date, from and after the Purchase Date, such Bonds shall be deemed tendered by the Holders thereof, replacement Bonds may be issued and delivered purchase to the Indenture, and the former Holders of the Bonds shall have no rights in respect of the tendered Bonds except to receive payment of the Purchase Price thereof from money held for that purpose. Remarket& Agent. A.G. Edwards & Sons, Inc. has been appointed as the initialRemarketing Agent for the Bonds. Any successor Remarketing Agent shall be approved by the Owner and the Credit Facility Issuer and shall be a member of the National Association of Securities Dealers, Inc., having a capitalization of at least $25,000,000 and author&d by law to perform all the duties imposed upon it by the Indenture, The Remarketing Agent may at any time resign and be discharged of the duties and obligations by giving at least 90 days written notice to the Trustee, the Issuer, the Owner, the Purchase Agent, the liquidity Facility Issuer and the Credit Facility Issuer, provided that no resignation shall take effect until a successor Remarketing Agent shall have been appointed by the Owner with the consent of the Credit Facility Issuer and the Liquidity Facility Issuer, and such su ccessor Remarketing Agent shall have accepted such appointment. The Remarketing Agent may be removed by the Chvner upon 30 days notice with the consent of the Issuer, the Credit Facility Issuer and the Liquidity Facility Issuer. If an Event of Default has occurmd under and as defined in any of the First Deed of Trust Documents or any of the Second Deed of Trust Documents, or an event has occurred or failed to occur which with the passage of time or the giving of notice, or both, would result in an Event of Default under and as defined in any of the First Deed of Trust Documents or any of the Second Deed of Trust Documents, then the Owner shall have no right to remove the Remarketing Agent, and the Credit Facility Issuer shall have the sole right to remove the Remarketing Agent. The Issuer may by written direction, with the prior written consent of the Credit Facility Issuer and the Liquidity Facility Issuer, remove the Remarketing Agent at the time specified in such direction, which time shall be sufficient to enable the Owner to provide the Remarketing Agent with 30 days’ notice of its removal. In the event that the Remarketing Agent resigns or is removed, or is dissolved, or if the property or afftirs of the Remarketing Agent are taken under the control of any state or federal court or administrative body because of a bankruptcy or insolvency, or for any other reason, the Owner shall appoint a successor Remarketing Agent, with the prior written consent of the Credit Facility Issuer and the Liquidity Facility Issuer. .9?%2sI5I24.1 (2sM91.2 to 2s33491.3 Iedkd) 21 4l2w7-Msl4BNl94 SUMMARY OF CERTAIN PROVISIONS OF THEINDENTURE The Bonds will be issued pursuan t to, and secured by, the Indenture. The following is a summary of certain provisions of the Indenture, which is qualified in its entirety by reference to the Indenture. Source of Payment The Bonds, together with interest thereon, and premium, if any, are special limited obligations of the Issuer payable solely from the mvm~e-s arising from the pledge and assignment of the payments on the Note and the Loan Agreement and pursuant to the Credit Facility or the Liquidity Facility and the other funds and moneys initially or thereafter pledged and assigned to the Trustee p ursuant to the Indenture. The Bonds will constitute a valid claim of the respective Holders thereof against such revenues, amounts and moneys, all of which are pledged to secure the payment of the principal of, premium, if any, and interest on the Bonds, and which shall be utilixed for no other purpose, except as expressly authorized in the Indenture. The Bonds will be special, limited obligations of the Issuer payable solely from the payments to be made on the Owner’s Note from amounts payable under the Loan Agreement and from certain funds pledged under the Indenture. The Bonds will not constitute an indebtedness or an obligation of the Issuer, the State or any political subdivision of the State or an obligation thereof within the meaning of any constitutional limitation or statutory provision or a charge against the general credit or taxing power, if any, of any of them. No Holder of the Bonds will have any right to compel any exercise of the taxing power, if any, of the Issuer, the State or any political subdivision of the State to pay the principal of the Bonds, or the interest or premium, if any, thereon. Payment of the Bonds, including the principal thereof, redemption premium, if any, and the interest thereon, will be made solely from the funds and obligations duly pledged therefor as described in this Official Statement. There will be no pledge of any of the credit or the taxing power, if any, of the Issuer, the State or any political subdivision of the State, to the obligations of the Bonds and no owner of any of the Bonds can ever submit a claim against any such credit or taxing power. The Issuer has no taxing power. Funds and Accounts The Indenture establishes or provides for the following Funds and Accounts: (i) a Revenue Fund, and therein an Interest Account, a Principal Account, a Tax and Insurance Reserve Account, a Redemption Account and an Administrative Expenses Account, (ii) a Rebate Fund, (iii) a Bond Purchase Fund, (iv) a Project Loan Fund and (v) special temporary funds and accounts, including a Bond proceeds Fund. Revenue Fund. The Trustee will deposit in or transfer to the Revenue Fund all payments upon the Note and under the Loan Agreement as and when received (except any payments made pursuan t to the Credit Facility will be deposited in a separate, segregated account), including all investment income thereon; provided, however, that (i) payments made by the Owner pursuant to the Note for the optional redemption of Bonds will be deposited by the Trustee directly into the Redemption Account, (ii) payments made by the Owner in respect of the purchase price of Bonds which have been optionally tendered by the Holders thereof will be transferred from the Trustee to the Purchase Agent and deposited by the Purchase Agent into the Bond Purchase Fund and (iii) payments made by the Owner in respect of the purchase price of the Bonds which are to be purchased in lieu of redemption will be deposited by the Trustee directly into the Bond Purchase Fund. Moneys in the Revenue Fund shall be invested in accordance with the provisions of the Indenture. (See “Investments” below). The Trustee shall disburse amounts on the deposit in the Revenue Fund and available for such purpose at the times and in the amounts set forth below and in the following order of priority: (3 on each Interest Payment Date, Redemption Date and maturity date of the Bonds, to the Interest Account an amount which, together with amounts already on deposit therein, is sufficient to pay the interest on the Bonds coming due on such Interest Payment Date, Redemption Date or maturity date, excluding any amounts due upon Liquidity Facility Issuer Bonds, Credit Facility Issuer Bonds or Owner Bonds; @I on each Interest Payment Date, Redemption Date and maturity date of the Bonds, to the Principal Account an amount which, together with amounts already on deposit therein, is sufficient to pay the principal of and sF2-2slJ124.1 (zm691.2 10 2s336!x.3 #&lid} 22 41208-7-Ms1at25/94 premium, if any, on any Bonds coming due (whether upon maturity or redemption) on such Interest Payment Date, Redemption Date or maturity date, excluding any amounts due upon optional redemption of the Bonds at the Owner’s election and excluding any amounts due upon Liquidity Facility Issuer Bonds, Credit Facility Issuer Bonds or Owner Bonds; (iii) on each Interest Payment Date, Redemption Date and maturity date of the Bonds, to the payment first to interest and then to principal due and unpaid on Liquidity Facility Issuer Bonds plus any additional interest owing on such Bonds pursuant to the Liquidity Facility; 09 on each Interest Payment Date, Redemption Date and maturity date of the Bonds, to the payment fkst to interest and then to the principal due and unpaid on Credit Facility Issuer Bonds; 69 on each Interest Payment Date, Redemption Date and maturity date of the Bonds, to the payment first of interest and then of principal due and unpaid on Owner Bonds, and then as a credit to the next payment of interest or interest and principal due on the Note; provided no Event of Default has occurmd and is continuing under and as defined in the Loan Agreement, any of the other First Deed of Trust Documents or any of the Second Deed of Trust Documents, and further provided that (A) the Credit Facility Issuer provides written notice to the Trustee that to the best of the Credit Facility Issuer’s knowledge no Event of Default has occurred and is continuing under and as defined in any First Deed of Trust Document or Second Deed of Trust Document, and no event has occurred or failed to occur which, with the passage of time or the giving of notice or both, would constitute an Event of Default under and as defined in any of the First Deed of Trust Documents or the Second Deed of Trust Documents, and (B) during a Short Term Rate Period, the Liquidity Facility Issuer provides written notice to the Trustee that to the best of the Liquidity Facility Issuer’s knowledge no Event of Default has occurred and is continuing as that term is defined in the Liquidity Facility Agreement and no event has occurred or failed to occur which with the passage of time or the giving of notice, or both, would constitute an Event of Default under and as detied in the Liquidity Facility Agreement. If an Event of Default has occurred and is continuing under and as defined in the Loan Agreement, any of the other First Deed of Trust Documents or any of the Second Deed of Trust Documents, or if the Trustee does not receive any notice required by clause (A) or (B) of this paragraph, moneys remaining in the Revenue Fund on each Interest Payment Date, Redemption Date and stated maturity date shall be paid first to the Credit Facility Issuer to pay or reimburse the Credit Facility Issuer any amounts due and owing under the Reimbursement Agreement, and then to the Liquidity Facility Issuer to pay or reimburse the Liquidity Facility Issuer any amounts due and owing under the Liquidity Facility Agreement. Interest Account. The Trustee shall apply moneys on deposit in the Interest Account to pay intereat on the Bonds as it becomes due, excluding amounts due on Liquidity Facility Issuer Bonds, Credit Facility Issuer Bonds and Owner Bonds. Princioal Account. The Trustee shall apply moneys on deposit in the Principal Account to pay principal on the Bonds as it becomes due and at maturity or upon redemption of the Bonds excluding any optional redemption during Fixed Rate Periods and excludiig amounts due Liquidity Facility Issuer Bonds, Credit Facility Issuer Bonds or Owner Bonds. Redemotion Account. The Trustee shall deposit any prepayment of the Note made in connection with the optional redemption of the Bonds into the Redemption Account. Money on deposit in the Redemption Account shall be held by the Trustee for the periods set forth in the Indenture at which time such money shall be set aside by the Trustee to pay principal of, redemption premium, if any, on the Bonds to be redeemed as a result of an optional prepayment of the Note by the Owner. If an Event of Bankruptcy occurs any time prior to the time such money becomes Eligible Money, the Trustee shall transfer such money to the Interest Account of $& Revenue Fund. Administrative Exnenses Account. The Trustee shall establish and maintain so long as any of the Bonds are outstanding the Administrative Expenses Account as a separate account within the Revenue Fund. The Trustee shall deposit into the Administration Expenses Account amounts received from or at the direction of the Owner for the payment of costs of issuance of the Bonds. Any balance n maining in the Administrative Expend Account after the payment of all Administrative Expenses then due shall be transferred to the Revenue Fund and used for the purposes specified in the Indenture. Tax and Insurance Reserve Account. The Trustee shall establish and maintain so long as any of the Bonds am outstanding, a Tax and Insurance Reserve Account as a separate account within the Revenue Fund. Money on deposit in the Tax and Insurance Reserve Account will be applied by the Trustee to pay, or reimburse the Owner for the payment of, taxes and insurance premiums of the Project. Upon the occurrence of an Event of Default under and as defined in the Loan ..3F2-2s15124.1 pw691.2 10 2s33691.3 redbd) 23 4l!me27+swm25M Agreement or any of the First Deed of Trust Documents or the Second Deed of Trust Documents of which the Trustee has actual notice, however, money may not be withdrawn from the Tax and Insurance Reserve Account without prior written consent of the Credit Facility Issuer, and, upon the written direction of the Credit Facility Issuer, money in the Tax and Insurance Reserve Account shall be transferred for deposit to such other account of the Revenue Fund as is designated in fund to nav such real estate taxes and insurance-to the date when thev are due an! pavable. The amounts of such deWsits shall pal estate taxes and insurance memiums to become due within said thirteen (13) month Period. The Owner shall $& by the Credit Facility Issuer -Owner to fund the Tax and Insurance Reserve Account 8. Rebate Fund. lbe Owner shall be required to deposit with the Trustee the amounts required to be paid by Section 148(f) of the Code and any Regulations promulgated thereunder. ‘Ibe Trustee shall deposit any payments received from the Owner for such purposes into the Rebate Fun@ for the purpose of rebating such funds to the United States. Neither the Issuer, the Trustee, the Bondholders nor any other person shall have any rights in or claim to such moneys. Bond Purchase Fund. The Purchase Agent is author&d to establish the Bond Purchase Fund as a trust account under the Indenture for the purpose of receiving moneys to be deposited with the Trustee for the purchase of Bonds tendered for purchase pursuant to the Indenture. Such money shall include proceeds of the remarketing of Bonds, funds deposited by the Owner in accordance with the Loan Agreement, funds transferred from the Trustee representing proceeds of a claim or drawing under the Liquidity Facility and funds transferred from the Trustee representing proceeds of a claim or drawing under the Credit Facility. It shall be the duty of the purchase Agent to hold in the Bond Purchase Fund the money for the purchase of any Bonds deemed delivered on any Remarketing Date in accordance with the Indenture (“Undelivered Bonds”) without liability for interest thereon (i) for the benefit of the former owners of any such Undelivered Bonds who shall thereafter be restricted exclusively to such moneys for any claim of whatever nature on their part under the Indenture or on, or with respect to such Undelivered Bonds & (ii) for the benefit of the Iiquidity Facility Issuer to the extent such moneys Pmiect Loan Fund. The Trustee shall deposit all Insurance F%ceeds and Awards (as both terms are defined in the First Deed of Trust) in the Project Loan Fund for disbursement in accordance with the provisions of the First Deed of Trust . SDecial or Temoorary Funds and Accounts. The Trustee may establish and maintain for so long as is necessary one or more special or temporary funds and accounts as may be required from time to time by the Indenture and to establish one or more special trust accounta when necessary under and in accordance with the terms of the First Deed of Trust Documents Nohvithstandmg any provisions of the Indenture, any moneys held by the Trustee in trust for the payment of the principal or redemption price of, or interest on, any Ron& and remainin g ~claimed for two years after the date on which the principal of all of the Bonds has become due and payable (whether at maturity or upon call for redemption or by declaration as provided in the Indenture), if such moneys were so held at such date, or two years after the date of deposit of such moneys if deposited after said date when all of the Rends became due and payable, shall be paid to the Credit Facility Issuer free from the lien created by the Indenture, and all liability of the Issuer and the Trustee with respect to such moneys shall thereupon cease, and no Bondholder shall have any rights with respect to such moneys. ta?zA?s15124.1 (2533691.2 10 2s334491.3 mdlkd) 24 . ‘IXe Trustee shall invest moneys in the funds and accounts (except as otherwise provided in the Indenture and subject to federal tax rebate restrictions) in Eligible Investments at the diition of an Author&d Representative, so long as no Event of Default shall exist under and as defined in the Loan Agreement or if such Event of Default shall exist or an event had occurred or failed to occur which, with the giving of notice or the passage of time or both, would constitute such an Event of Default, the Credit Facility Issuer will have the right to direct the investment of such moneys, subject to certain terms and conditions set forth in the Indenture, by giving written notice of its intention to do so to the Trustee and the Owner. Eventa of Default Each of the following events will constitute an Event of Default under the Indenture: (i) the failure to make due and punctual payment of the principal of and interest on any outstanding Bond when due (whether at the stated maturity thereof, or upon proceedings for redemption thereof (other than when the redemption is an optional redemption) or upon the stated maturity thereof by de&ration or acceleration); provided, however, that no such Event of Default shall be deemed to exist under this paragraph (i) unless and until the Trustee shall have submitted claims or draw requests p ursuant to the Credit Facility and the Credit Facility Issuer shall fail to make payment of such claims or draw requests in accordance with the terms and conditions of the Credit Facility and if such failure is due to any stay, injunction or restraining order by a court or administrative body having jurisdiction, the continuance of such failure for 120 consecutive days; or (ii) if the Surety (or such other Credit Facility Issuer subject to the Liquidation Act) is the Credit Facility Issuer, the entry of a decree or order by a court of competent jurisdiction appointing a receiver, liquidator, rehabilitator or conservator for the Surety (or such Credit Facility Issuer subject to the Liquidation Act) in a delinquency proceeding applicable to the Surety (or such other Credit Facility Issuer subject to the Liquidation Act) under, and as defined in, the Liquidation Act, or in any reciprocal state statute as defined therein, and the continuance of any such decne or order unstayexl and in effect for 120 consecutive days; or (iii) the Credit Facility Issuer shall commence a voluntary case or other proceeding in liquidation, reorganization or bankruptcy or consent to any such case or proceeding against it, or an involuntary case or other proceeding is commenced against it seeking such relief and remains unstayed for 120 days, or an order for relief is entered. Remedies Upon the occurrence and continuance of any such Event of Default under the Indenture, the Trustee may proceed and, upon the written request of the registered Holders of a majority in principal amount of the outstanding Bonds shall pureed, in its own name, subject to the provisions of the Indenture to protect and enforce the rights of the registered Holders of the Bonds, by any of the following Rmediea as the Trustee, being advised by counsel, shall deem most effectual to protect and enforce such rights: (i) by mandamus or other suit, action or proceeding at law or in quity, to enforce all rights of the registered owners of the Bonds or the Trustee, includiig the acceleration of the full indebtedness due under the Note, the collection of all sums due and unpaid under the Credit Facility or the Liquidity Facility, if appropriate, the exercise of remedies under the Loan, the Fiit Deed of Trust Documents, and the right to require the Issuer to receive and collect revenues adkquate to carry out the covenants and agreements with the registered owners of the Bonds and to perform its duties under the Act; (ii) by action or suit upon the Bonds limited, upon recovery thereunder, to the available revenues and assets pledged under the Indenture, (iii) by action or suit in quity, to require the Issuer to account as if it were the trustee of an express trust for the registered owners of the Bonds for the revenuea and assets pledged under the Indenture; (iv) by action or suit in equity to enjoin any acta or things which may be unlawful or in violation of the rights of the registered owners of the Bonds; s?aslslu.l (?sM91.2 10 2s33491.3 edlid} 25 41xu7afls1mi94 (v) to declare the entire principal amount of all outstanclmg Bonds and the &em& accrued thereon to be immediately due and payable, whereupon the entire outstanding principal amount of, and accrued interest on, the Bonds shall become due and payable immediately; provided, however, if all arrears of interest upon such Bonds, and interest on overdue installments of interest (to the extent permitted by law) at the rate borne by the Bonds, and the principal and redemption premium, if any, on all outstanding Bonds which shall have become due and payable otherwise than by acceleration, and all other sums payable, except the principal of, and interest on, the Bonds which by such declaration shall have become due and payable, shall be paid, together with the reasonable expenses of the Trustee, including reasonable attorneys’ fees paid or incurred, the Trustee may annul such declaration of maturity and its consequences; provided further, however, if all outstanding Bonds shall have been declared to be due and payable at the request of the registered owners of not less than a majority in aggregate principal amount of the outstanding Bonds, the Trustee may not annul such declaration without (A) the prior written consent of the registered ownem of a majority in aggregate principal amount of the outstanding Bonds; and (E) written evidence that the Credit Facility and the Liquidity Facility, if appropriate, have been reinstated to the full amount available under each of them immediately prior to such Event of Default (less any amount equal to the amount of Bonds which have been redeemed, if any). No such waiver, rescission and annulment shall extend to or affect any subsequent default or impair any right or remedy consequent thereon and any waiver and annulment described in this paragraph shall be binding on all Bondholders; or (vi) in the event that all out&ruling Bonds are declared due and payable, to sell, assign or otherwise dispose of all of the revenues and assets pledged under the Indenture free and clear of the lien of the Indenture. Upon the occurrence of any such Event of Default, and upon the filing of a suit or other commedlccment of judicial proceedings to enforce the rights of the Bondholders, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver or kceivers of the revenues and of the assets pledged under the Indenture, pen&mg such proceedings, with such powers as the court making such appointment shall confer, provided that such receiver or receivers shall be granted broad powers subject, however, to the supervision of the Trustee. Intercreditor Agreement: Control byASur&y . . . . Notwithstanding any other provisions of the Indenture to the contrary, the Trustee shall not, without the prior written consent, or upon the direction, of the @ @etv, or in accordance with the Intercreditor Agreement, exercise any right or remedy under the First Deed of Trust Documents (including, without limitation, any right to accelerate the indebtedness evidence by the Note or to foreclose and/or cause the sale of any rights or properties subject to the lien of the First Deed of Trust or any other First Deed of Trust Document) so long as !# no Event of Default shall have occurred and be continuing under E :.:.:. ; provided that this restrigtion and the provisions of the In&creditor Agreement shall in no way limit the right of the Trustee to exercise its obligations under the Indenture not expressly limited by the foregoing, including, without limitation, to apply moneys on deposit under the Indenture to the payment of principal or the purchase price (payable as a result of Bonds purchased pursuan t to a mandatory tender or in lieu of redemption) of, premium, if any, and interest on, the Bonds when due, to mske a claim or draw for payment under the Credit Facility or to give notices required under the Indenture. Direction of Proceedmns If an Event of Default shall have occurred under and as defined in the Indenture and be continuing, the registered owners of a majority in aggregate principal amount of the outdanding Bonds shall have the right to direct the method of conducting all remedial proceedings to be taken by the Trustee, provided that such direction shall not be otherwise than in accordance with law or the provisions of the Indenture or result in personal liability for the Trustee. Limitations on Rkhts of Owners of Bonds No registered owner of any Bond shall have any right to institute any suit, action, msndamus or other proceeding in equity or at law, or for the protection or enforcement of any right under the Indenture unless an Event of Default shall have occurred under and as defined in the Indenture and such registered owner shall have given to the Trustee written notice of such Event of Default or breach of duty on account of which such suit, action or proceeding is to be taken, and unless the registered owners of not less than a majority in principal amount of the outstanding Bonds shall have made written request of the Trustee after the right to exercise such powers or right of action, as the case may be, shall have occurred, and shall have afforded the Trustee a reasonable opportunity either to pmceed to exercise its powers, and unless there shall also have mY2sl5124.1 (2s33691.2 u) -1.3 redlid) 26 41208-7abcww25194 been offered to the Trustee reasonable security and indemnity against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee shall have refused or neglected to comply with such request within a reasonable time; and such notification, request and offer of indemnity shall be in every such csse, at the option of the Trustee, conditions precedent to the execution of the powers under the Indenture or for any other remedy or by law. Suunlemental Indentures The Issuer and the Trustee may, from time to time and at any time, without the consent of registered owners of Bonds, execute and deliver indentures supplemental to the Indenture for the following purposes: (i) to make any change which shall not materially adversely affect the interests of the owners of Bonds; (ii) to cure any defect, omission, conflict or ambiguity in the Indenture, including, without limitation, any cure made in order to wmply with the Act, the Code or the Trust Indenture Act of 1939; (iii) to grant to or confer upon the Trustee for the benefit of the registered owners of Bonds any additional tights, remedies, powers, authority or security which may lawfully be granted or coderred and which am not contrary to or inconsistent with the Indenture as theretofore in effect; (iv) to add to the covenants and agreements of the Issuer in the Indenture, other covenants and agreements to be observed by the Issuer which are not contrary to or inconsistent with the Indenture as theretofore in effect; (v) to add to the limitations and restrictions in the Indenture, other limitations and restrictions to be observed by the Issuer which are not contrary to or inconsistent with the Indenture as theretofore in effect; (vi) to confirm, as further assurance, any pledge under the Indenture, and the subjection to any claim, lien or pledge created or to be created by the Indenture of the revenues arising from the pledge of any moneys, securities, funds or other parts of the Trust Estate; (vii) to make any change requested by the Credit Facility Issuer other than a change requiring consents of all affected Bondholders; (viii) to evidence the substitution of, or to wmply with the requirementa of any alternate Security or alternate Liquidity Facility, or to evidence a permitted sale or transfer of the Project other than a change requiring the consent of Bondholders. fix) to make any change which, in the opinion of Bond Counsel, is required to preserve the exclusion from gross income of interest on the Bonds for federal income tax purposes; (x) to facilitate the discharge of the lien of the I&denture; (xi) to wmply with the existing provisions of the Credit Facility or the Liquidity Facility; (xii) to subject to the Indenture additional revenues, properties or collateral; (xiii) to evidence the succession of a new Trustee, Purchase Agent or Paying Agent under the Indenture or to provide for a Co-Paying Agent or Co-Registrar in addition to the Trustee; or (xiv) to modify, alter, amend or supplement the Indenture in any other respect on any date of mandatory purchase under the Indenture or during any Short Term Rate Period, not less than thirty days before the effective date of the modification, alteration, amendment or supplement, the Trustee sends notice of the proposed modification, alteration, amendment or supplement to the Bondholders and the Bondholders have the right to tender their Bonds before such effective date or otherwise if the effective date of the modification, alteration, amendment or supplement wrresponds with the effective date of a remarketing of all outstanding Bonds such that the purchasers of the remarketed I3ond.s have been sent notice of such modification, alteration, amendment or supplement prior to their purchase of Bonds. sFms15124.1 (2s33691.2 !a 2s33c91.3 lcdlimd) 27 412ca-7usl~l94 Consent of Bondholders to Amendments The registered Holders of not less than a majority of the aggregate principal amount of outstanding Bonds have the right from time to time to consent to and approve the execution and delivery by the Issuer and the acceptance by the Trustee of any supplemental indenture as shall be approved by the Issuer for the purposes of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Indenture. Notwithstanding the foregoing, the consent of all affected registered Holders shall be necessary in connection with (i) a change in the times, amounts or currency of payment of the principal of, premium, if any, or interest on, or purchase price of, any outstanding Bond, or a reduction in the principal amount or redemption price, or the dates or terms of redemption of any outstanding Bond or the rate of interest thereon, or (ii) the creation of a claim or lien upon tbe proceeds of a claim or draw under the Credit Facility or the Liquidity Facility payable to the registered Holders of the Bonds with respect to which such claim or draw shall be in accordance with the Indenture, or (iii) the creation of a preference or priority of any Bond or Bonds over any other Bond or Bonds, or (iv) any change which in the opinion of Bond Counsel will have an adverse effect on the exclusion of interest from gross inwme for federal income tax purposes, or (v) a reduction of the aggregate principal amount of the Bonds required for wnsent under the Indenture. Amendments to Certain Other Documents Without the consent of or notice to the registered Holders of the Bonds, the Trustee, the Issuer, the Owner and the Credit Facility Issuer may enter into any modification or amendment of the Loan Agreement, any First Deed of Trust Document, any Second Deed of Trust Document and any other d ocument relating to or affecting the Loan, and may wnsent to any such modification or amendment, provided that such modification or amendment is made (i) for the purpose of curing any ambiguity, conflict, defect or omission in such document, (ii) in wmection with any permitted sale or transfer of the Project to a new owner by the Owner or any foreclosure sale or transfer in lieu of foreclosure or any other sale or transfer, (iii) in accordance with the Regulatory Agreement and the Intercreditor Agreement, (iv) in accordance with the special tax wvenants of the Loan Agreement, (v) in wnnection with any author&d supplement or amendment to the Indenture, (vi) in connection with the issuance of an Alternate Security or Alternate Liquidity Facility, (vii) in wnnection with any other change therein requested by the Credit Facility Issuer, which change does not require approval of all affected Bondholders, or (viii) at any time that the Indenture may be amended as described in paragraph (xiv) under #%UMMARY OF CERTAIN ~OVISIONS OF THE INDENTURE - Supplemental Indentures” above; provided, however, that, so long as no Event of Default has occurred and is continuing under and as defined in the Indenture, neither the Issuer nor the Trustee may enter into any modification or amendment with the Owner of any First Deed of Trust Document, any Second Deed of Trust Document or any other instrument or document relating to or affecting the Loan, or consent to any such modification or amendment, or grant any wnsent or waiver thereunder without the express written consent of the Credit Facility Issuer. Without the consent of or notice to Bondholders, the Issuer, the Owner or the Trustee and the Remarketing Agent, with the prior written consent of the Credit Facility Issuer and the Liquidity Facility Issuer (during any Short Term Rate Period), may consent to any document amending, changing or modifying the Remarketing Agreement, and shall deliver a wpy of such document to the Issuer and the Trustee. Discharge If and when the whole amount of the principal, premium, if any, and interest due and payable upon all of the Bonds shall be paid from Eligible Money, or provision shall have been made for the payment of the same from Eligible Money, and when all other sums payable under the Indenture and under the Loan Agreement and the First Deed of Trust Documents are paid in full, then the right, title and interest of the Tmatee in and to the Trust Estate, including all covenants, agreements and other obligations of the Issuer, the Credit Facility Issuer, the Liquidity Facility Issuer and the Owner to the Bondholders shall thereupon cease, terminate and become void and be discharged and satisfied, includmg any right of any mandatory redemption of the Bonds p ursuant to the terms of the Indenture or the Bonds (includmg, without limitation, redemption pursuant to the provisions of the Indenture described in paragraphs (i), (ii), (iii) and (iv) under “REDEMITION -Mandatory Redemption”). In such event, provided that such payment is firorn Eligible Money, or (i) one year, if the Owner is a corporation and if the Credit Facility Issuer owns any corporate stock of the Owner, or (ii) 91 days, if the Credit Facility Issuer has no ownership interest in the Owner, shall have elapsed following the last payment made on the Bonds from a source other than Eligible Money during which period no Event of Rankmptcy shall have occurred, the Trustee shall release and return the Credit Facility. SFZ-2slJ124.1 (2sw91.2 lo 2s3wI3 x,uicsd) 28 412cu-7~sIoBR5Iw SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT The proceds of the Bonds will be loaned by the Issuer to the Owner p ursuant to the Loan Agreement. The following is a summary of certain provisions of the Loan Agreement, which is qualified in its entirety by reference to the Loan Agreement. The Loan The Issuer will, upon the terms and conditions set forth in the Loan Agreement, make the Loan to the Owner from the proceeds of the Bonds. The Owner will use such pmceeds to effect the refundmg of the Prior Bonds. The Owner will execute and deliver the Note to evidence the Loan. See “lNTRODUCTION” and “THE PROJECT AND THE OWNER.” Under the LOan Agreement, the Owner will be obligated to pay an amount sufficient for the payment in full of the Bonds, including (i) the total interest becoming due and payable on the Bonds on the respective dates of payment thereof, (ii) the total principal becoming due on the Bonds (whether at maturity, by redemption or acceleration or otherwise), (iii) the redemption premium, if any, that may be payable upon the redemption of Bonds prior to maturity, (iv) the purchase price of Bonds to be purchased in lieu of redemption, and (v) the purchase price of Bonds which have been tendered and have not been remarketed. The Owner will also be obligated to pay the fees of the Credit Facility Issuer, the Liquidity Facility Issuer, the Purchase Agent, the Paying Agent, the Issuer and the Remarketing Agent, and certain administrative fees and expenses, including the Trustee’s annual fee. The obligation of the Owner to make the payments required to be made under the Loan Agreement and the Note shall be absolute and unconditional, and shall not be subject to abatement, diminution, postponement or deduction (whether for taxes or otherwise), or to any defense, setoff, recoupment or wunterclaim which the Owner may have or assert against the Issuer, the Trustee, the Credit Facility Issuer, the Liquidity Facility Issuer, any Holder of a Bond or any other person. Notwithstandiig the foregoing, the liability of the Owner is limited to its interest in the Project, and any action wmmenced to enforce the obligations of the Owner under the Loan Agreement and the Note will not be enforceable personally against the Owner or any assets of the Owner, except in respect of the interests of the Owner in the Project and other assets subject to the lien of the First Deed of Trust Documents. Notwithstandmg the foregoing, certain amounts paid to the Trustee or Bondholders on behalf of the Owner will be credited against the Owner’s obligations to make certain payments. Prenavment of the Loan The Owner may prepay the Loan and the Note with the prior written wnsent of the Credit Facility Issuer as a whole or in part on any date on which Bonds may be redeemed (See “REDEMPTION OF BONDS-OptionalRedemption”). Under the Indenture, the following will be conditions precedent to the Owner’s right to exercise its election to prepay the Note and to cause the redemption of Bonds, in addition to the prior written wnsent of the Credit Facility Issuer: (i) the deposit of cash with the Trustee at Ieast 367 days prior to the date notice of redemption is mailed to Bondholders or (ii) prior to the date notice of redemption is mailed to Bondholders, delivery of (A) a direct pay letter of credit in favor of the Trustee issued by a banking institution which letter of credit would not result in the lowering of the rating of the Bonds if it were delivered as an Alternate Security, accompanied by a letter or letters from the Rating Agency or Rating Agencies then rating the Bonds confirming such fact, (B) a redemption guaranty bond in f&or of the Trustee issued by a fmancial institution which bond would not result in the lowering of the rating of the Bonds if it were delivered as an Alternate Security, accompanied by a letter or letters from the Rating Agency or Agencies then rating the Bonds wnt%ning such fact, (C) Eligible Money, (D) an amendment to the Credit Facility to permit draws to pay the optional redemption price or (E) any combination of (A), (B), (C) and (D), in an amount which with investment earnings thereon, would equal the full redemption price and accrued interest to the anticipated redemption date. The Credit Facilitv The Owner will be required under the Loan Agreement to provide a Credit Facility securing the payment of principal and interest on the Bonds so long as the Bonds are outstanding. Unless replaced or extended, from the date of the issuance of the Bonds to and including , the Credit Facility will be the Surety Bond provided by the Surety. See .5s2-~15124.1 (2933691.2 to 2s33691.3 n!d&md) 29 41zc%-7Asww2w4 “SECURITY FOR THE BONDS-Surety Bond and Surety. ” Failure to replace or extend the Credit Facility prior to such date will result in Mandatory Redemption of the Bonds. The Owner may deliver an Alternate Security in substitution at any time for the Credit Facility then in effect, provided that the following conditions are satisfied: (i) the Alternate Security shall provide for, secure or insure the payment of all pticipd and interest becoming due and payable on the Bonds (whether at stated maturity, by redemption, purchase in lieu of redemption or by acceleration) and the purchase price of Bonds which are subject to mandatory tender; (ii) the Alternate Security must permit drafts or claims thereunder for any amounts for which drawings or claims could be made under the Credit Facility previously in effect, and shall have a term extending at least 15 days after an Interest Payment Date; (iii) the Alternate Security must provide that it cannot terminate before its stated expiration date unless it is replaced by a qualified Alternate Security or all Bonds then outstanding are paid at maturity or upon acceleration or redemption from Eligible Moneys or a draw or claim on the Credit Facility; (iv) during a Fixed Rate Period, each Alternate Security must result in the Bonds receiving a rating by a Rating Agency which is equal to the rating assigned to the Bonds by the Rating Agency immediately prior to the substitution of the Alternate Security during a Fixed Rate Period (or if that Rating Agency did not rate the Bonds, its equivalent rating); (v) the Alternate Security must meet the Credit Facility Rating Requirement; and (vi) the delivery to the Issuer, the Trustee, the Remarketing Agent and the Liquidity Facility Issuer of certain opinions of counsel to the obligor under the Alternate Security and of Bond Counsel. An Alternate Security may be a surety bond, insurance policy, letter of credit, stand-by fimclmg agreement, bond purchase agreement or any other credit facility. The Credit Facility may be extended beyond its existing term if the Owner delivers to the Trustee a Credit Facility Amendment extending the term of the Credit Facility, together with (i) an opinion of Counsel to the Credit Facility Issuer stating, among other things, that such Credit Facility Amendment is a legal, valid and bmdmg obligation of the obligor under the Credit Facility Amendment, and (ii) written evidence from the Rating Agency that the rating on the Bonds will not be reduced. If the Trustee does not receive such evidence from the Rating Agency, the Bonds will be subject to redemption. See “REDEMPTION--Mandatory Redemption. ” The Liauiditv Facility The Owner will be required under the Loan Agreement to provide a Liquidity Facility whenever the Bonds bear interest at a 8 m Rate. Each Liquidity Facility must be approved in writing by the Credit Facility Issuer and must be an irrevocable agreement executed by a commercial bank, insurance company or other financial institutionpursuant to which the Liquidity Facility Issuer agrees to pay, on each Remarketing Date, the deficiency in the amount of money held by the Trustee or the Purchase Agent necessary to pay the Purchase Price of Bonds tendered to the Purchase Agent. See “PURCHASE Of BONDS-The Liquidity Facility. ” The Owner may deliver at any time, with the prior written consent of the Credit Facility Issuer, an Alternate Liquidity Facility in substitution for the Liquidity Facility then in effect provided that the following wnditions are satisfied: (i) the Alternate Liquidity Facility must permit drawings or claims thereunder for any amounts for which drawings or claims could be made under the Liquidity Facility previously in effect, including amounta secured by such Liquidity Facility which could be recaptured as Preferential Payments, (ii) each Alternate Liquidity Facility must result in the Bonds receiving a short term rating by a Rating Agency which is at least equal to the Liquidity Facility Rating Requirement and (iii) the delivery to the Issuer, the Trustee, the Purchase Agent, the Remarketing Agent and the Credit Facility Issuer of certain opinions of wunsel to the obligor under the Alternate Liquidity Facility and of Bond Counsel. An Alternate Iiquidity Facility may be a surety bond, bond insurance, letter of credit, stand-by fbnclmg or bond purchase agreement or any other liquidity facility. The Liquidity Facility may be extended beyond its existing term if the Owner delivers to the Trustee an executed copy of the Liquidity Facility Amendment along with (i) the written consent of the Credit Facility Issuer, (ii) opinions of Counsel to the Liquidity Facility Issuer and Bond Counsel stating, among other things, that such Liquidity Facility is a legal, valid and binding obligation of the Liquidity Facility Issuer, (iii) sn amount sufficient to pay all reasonable costs in wnnection with the extension and (iv) evidence Erom the Rating Agency as to the rating or ratings to be in effect following the extension. If the Liquidity Facility is not properly extended, the Bonds will be subject to tender for purchase. See “DESCRIPTION OF THE BONDS - Tender of the Bonds for Purchase. * t3Fx?sI5124.1 (2s)36913 ro 2s336913 9ldl&d} 30 Events of Default Each of the following events will wnstitute an “Event of Default” under the Loan Agreementi (i) The Owner shall fail to make certain paymenta in respect of the principal and interest due on the Note at the times required thereunder; (ii) l%e Owner shall fail to wmply with the provisions regarding the substitution of AItemate Security or Alternate Liquidity Facility and the wntinuation of such failure for a period of 10 days or more; (iii) The Owner shall fail to comply with or to perform any one or mom of the wvenants, conditions or agreementa on its part to be observed or performed under the Loan Agreement or in the Note (other than a default described in clause (i) or (ii) above), for a period of 30 days atter written notice specifying such breach or failure and requesting that it be remedied, is given to the Owner by the Trustee, the Issuer or the Credit Facility Issuer; provided, however, that in the event such breach or failure is such that it cannot be wrrected within such 3O-day period, the same will not wnstitute an Event of Default thereunder if wrrective action is instituted by the Owner within the 3O-day period and is diligently pursued and is corrected within 90 days after such notice; (iv) Any Event of Default under any of the other First Deed of Trust Documents shall occur and be continuing, but only if the Credit Facility Issuer in its sole discretion notifies the Trustee and the Issuer in writing that such event has occurred and is to wnstitute an Event of Default under the Loan Agreement; or (v) Any Event of Default under the Reimbursement Agreement or any of the other Second Deed of Trust Documents shall occur and be wntinuing, but only if the Credit Facility Issuer in its sole discretion notifies the Trustee and the Issuer in writing that such event has occurred and that it is to wnstitute an Event of Default under the Loan Agreement. The Events of Default referred to in paragraph (iv) above include, but are not limited to, (i) any default occurring in the due and punctual payment or deposit of moneys required under the Note or the First Deed of Trust, (ii) the failure of the Owner to maintain the insurance coverage required by the First Deed of Trust and Second Deed of Trust, (iii) the occurrence of a prohibited transfer as defied in the First Deed of Trust and Second Deed of Trust, (iv) any default occurring in the due and punctual performance of, or wmpliance with any of the terms, wvenants, wnditions or agreements wntained in the First Deed of Trust or Second Deed of Trust (other than as described in the preceding clauses (i) through (ii)) and the wntinuance of such default for 30 days after written notice of such default is given to the Owner by the Issuer, the Surety or the Trustee, (v) the Owner’s kilure to pay when due any payment obligation (as defined in the Reimbursement Agreement) and such failure continues for five days after notice thereof to the Owner, of the failure by the Owner to deposit funds in accordance with the Reimbursement Agreement immediately upon demand, or (vi) the Owner’s failure to comply with or perform any covenant, condition or provision of the Reimbursement Agreement (other than those defined ss an Event of Default) therein and the same remainin g uncured for 30 days after written notice thereof is given to the Owner. Remedies for Failure to Perform. Subject to the terms and conditions of the Intercreditor Agreement, the Credit Facility Issuer shall have the sole right to declare an Event of Default under and as defined in the Loan Agreement and if such an Event of Default occurs under the Loan Agreement and is wntimiing, then the Trustee may, with the written consent of the Credit Facility Issuer (except in the case of an Event of Default under and as detied in the Indenture), and upon receipt of written direction from the Credit Facility Issuer shall, declare the principal on the Note and all other payments under the Note to be immediately due and payable. So long as no Event of Default has occurred and is wntinuing under and as defined in the Indenture, the Trustee and the Issuer may act only at the Credit Facility Issuer’s written discretion. Upon the occurrence of an Event of Default under and as defined in the Loan Agreement, the Trustee, in its discretion, may, but only with the written wnsent of the Credit Facility Issuer (unless sn Event of Default has occurred under and as defined in the Indenture), and upon the written direction of the Credit Facility Issuer shall, exercise one or more of the following remedies subject in all respects to the provisions relating thereto in the Indenture and the Intercreditor Agreementz (i) through its duly author&d agents, have access to and inspect, examine and make copies of, the books, records and accounts of the Owner during normal business hours, upon reasonable notice; sF%?s151u.1 (2s33691.2 ID 2s33691.3 ledlkd) 31 41208-7-kc31~194 (ii) petition a court of wmpetent jurisdiction for the appointment of a receiver to take possession of and manage and operate the Project in wnformity with the provisions of the Loan Agreement and the Regulatory Agreement; (iii) take whatever action at law or in equity may appear necessary or desirable to enforce observance or performance of any covenant, condition or agreement of the Owner under the Loan Agreement, the Note and the First Deed of Trust Documents, and to collect the amounts then due and thereafter to become due consistent with the limited obligations of the Owner under the Ioan Agreement and the Note; or (iv) exercise any remedy available under the First Deed of Trust Documents or at law or in equity. .Paments bv Credit Facilitv Issuer The Credit Facility Issuer will, to the extent of any payments made pursuant to the Credit Facility or otherwise, be subrogated to all rights of the Issuer or its assigns (including, without limitation, the Trustee) as to all obligations of the Owner with respect to which such payments will be made by the Credit Facility Issuer, but, so long as any of the Bonds remain outstanding under the terms of the Indenture, such right of subrogation on the part of the Credit Facility Issuer will be in all respects subordiite to all rights and claims of the Bondholders to receive payments of principal, premium, if any, and interest which is or will become due and payable on the Bonds and to receive the Purchase Price of the Bonds purchased under the Indenture. The Issuer and the Trustee will execute and deliver any instrument reasonably requested by the Credit Facility Issuer to evidence such subrogation and the Trustee will assign its rights in any obligations of the Owner with respect to which payment of the principal thereof (including Purchase Price), accrued interest thereon and other amounts with respect thereto will be made by the Credit Facility Issuer. Term of Atzreement The Loan Agreement will be in full force and effect from the date of the Loan Agreement and will continue in effect until the last to occur of (a) the first date on which there are no Bonds outstanding, or (b) the date which is 91 days after all payment obligations by the Owner under the Loan Agreement have been paid in full, if during such 91 day period no Event of Rankruptcy has occurred under and as defined in the Loan Agreement as to the Owner, or (c) the first day on which the lien of the Indenture is discharged in accordance with the provisions of the Indenture. SUMMARY OF CERTAIN PROVISIONS OF THE FIRST DEED OF TRUST The following, in addition to information provided elsewhere herein, gummarizes certain provisions of the First Deed of Trust, to which document in its entirety reference is made for the detailed provisions thereof. As security for the payment and performsnce of the Owner’s obligations to pay the indebtedness under the Note and to secure all of the Owner’s other obligations and the payment of all other sums which may be due and owing to the Issuer under the Loan Agreement and to the Surety under the Reimbursement Agreement, and to secure any additional amount hereafter loaned by the Issuer or Surety to the Owner, any other indebtedness or obligation of the Owner to the Issuer or the Surety or any present or future demands the Issuer or Surety may have against the Owner, and to secure the performance and observance of all wv~ts and provisions wntained in the Lean Agreement, the Reimbursement Agreement and the First Deed of Trust, the Owner will execute and deliver the First Deed of Trust in favor of the Issuer and the Surety. ‘Ihe First Deed of Trust will grant a first mortgage lien on and perfected first security interest in and to the Project site, all improvements wnstructed thereon, certain personal property thereon, all leases of the Project or any part thereof, and the rents, royalties, issues, revenues, profits and proceeds of the foregoing, includiig insurance proceeds and condemnation awards (the “Deed of Trust Property”). Under the First Deed of Trust, the Owner agrees to maintain and repair the Project and to pay or cause to bc paid all taxes and discharge all liens, other than Permitted Encumbrances, subject to certain rights to wntest any tax or lien upon compliance with certain requirements of the First Deed of Trust. The Owner agrees to insure the Project in specified amounts. If no Event of Default shall then exist under and as defined in the First Deed of Trust, the Owner may elect to prepay the indebtedness secured by the First Deed of Trust (including the indebtedness under the Note) and/or to pay the s2as151u.1 (2533691.2 10 2s365x3 rod&d) 32 412c%-7aAs1aR5m costs of restoring, repairing, replacing or rebuilding the Project to a condition satisfactory to the Credit Facility Issuer, subject to the conditions, and in accordance with the provisions of, the Fii Deed of Trust. If any portion of or interest in the Project is taken by the exercise of eminent domain, then, if no Event of Default has occurred under and as defined in the First Deed of Trust, at the option of the Owner, the net proceeds from the eminent domain proceeding shall be applied to the indebtedness secured by the First Deed of Trust (including prepayment of the Note) and/or the restoration and repairing of the Project or the replacement of the Project, subject to the terms and provisions of the First Deed of Trust. The Owner has agreed not to allow, without the prior written consent of the Credit Facility Issuer, any @ , except as expressly permitted by the First Deed of Trust. Any one or more of the following events shall wnstitute an Event of Default under the Fit Deed of Trust: (i) If any default shall occur in the due and punctual payment or deposit of moneys required under the Note or the First Deed of Trust as and when the same is due and payable; or (ii) If the Owner shall fail to maintain in effect the insurance wverages required by the First Deed of Trust; or (ii) If certain prohibited transfers of the Project or interests therein shall occur; or (iv) If any representation or warranty made by the Owner in any of the Financing Documents or in any certificate, statement, notice, demand or request made or delivered by the Owner pursuant to or in connection with the First Deed of Trust or any other Financing Documents shall prove to be untrue or inwrrect in any material reaped; or (v) If any Event of Default shall occur under and as defined in the Loan Agreement, the Reimbursement Agreement, or the Second Deed of Trust, the Regulatory Agreement, or the Indenture; or (vi) If any default shall occur in the due and punctual performance of, or wmpliance with any of the terms, covenants, conditions or agreements contained in the Fit Deed of Trust (other than as described in the preceding clauses (i) and (v) of this paragraph and the wntinuance of such default for thirty (30) days after written notice thereof shall be given to the Owner. In the event of the occurrence of an Event of Default under and as defined in the First Deed of Trust, the Credit Facility Issuer may accelerate the Note and foreclose the First Deed of Trust, and the Credit Facility Issuer shall be afforded all of the other remedies of a beneficiary of a deed of trust under the laws of the State of California and of a secured party under the Uniform Commercial Code as it is in effect under the laws of the State of California (together with other remedies stated in the First Deed of Trust). So long as the Credit Facility is outstanding and no Event of Default has occmred under and as defined in the Indenture, the right to grant consents, to grant waivers, to compel wmpliance with the provisions thereof, to exercise discretion, to send notices, and to otherwise exercise any and all remedies or rights under the First Deed of Trust may be taken by the Surety acting alone and without the need to obtain any wnsent or approval from the Trustee, the Issuer, any Bondholder or any other person. As security for the Bonds, the Issuer will assign the Loan Agreement, the Note and the First Deed of Trust to the Trustee. sF%2s15124.1 (2s33691.2 0 7s33691.3 lvzdhd) 33 SUMMARY OF CERTAIN PROVISIONS OF THE REIMRURSEMENT AGREEMENT The following, in addition to information provided elsewhere herein, summarizcs certain provisions of the Reimbursement Agreement, to which document in its entirety reference is made for the detailed provisions thereof. The Owner will enter into the Reimbursement Agreement with the Surety providing for payment and reimbursement to the Surety by the Owner of all amounts which the Surety shall pay under the Surety Bond or shall advance to cure defaults by the Owner under the First Deed of Trust Documents and the Second Deed of Trust Documents, together with interest on such amounts and fees and expenses incurred enforcing the Surety’s rights and all other sums due to the Surety under the other Financing Documents. The following wnstitute Events of Default under the Reimbursement Agreementz (a) If the Owner fails to pay when due any Payment Obligation (as defined in the Reiibumement Agreement) and such failure wntinuea for 5 days after notice thereof to the Owner, or if the Owner shall fail to deposit funds in accordance with the Reimbursement Agreement immediately upon demand (the term “when due” shall include, without limitation, the demand by the Surety for payment in acundance with the terms of the Reimbursement Agreement); or (b) If the Owner shall fail to comply with or perform any covenant, condition or provision of the Reimbursement Agreement (other than those referred to in paragraph (a) above) and the same remains uncured for 30 days after written notice thereof shall be given to the Owner; or (c) If an Event of Default under and as defined in the Loan Agreement, the First Deed of Trust or the Second Deed of Trust shall occur and be continuing. If such an Event of Default under the Reimbursement Agreement shall occur and be continuing, the Surety, in its discretion, may in addition to other remedies available to it under the Reimbursement Agreement, at law or in equity, or under any of the other Financing Documents, exercise one or more of the following remedies: (a) Declare the Payment Obligations and the Owner’s obligations under the Reimbursement Agreement and the other Second Deed of Trust Documents immediately accelerated and due and payable in the full principal amount of all Bonds then outstandiig under the Indenture plus all interest accrued and unpaid thereon to the date of such Event of Default (whether or not the Bonds shall have been declared due and payable or called for redemption by reason of such Event of Default), plus the amount of all other Payment Obligations then outstanding and unpaid under the Reimbursement Agreement, together with interest thereon until paid at the Increased Rate (as defined in the Reimbursement Agreement) without presentment, demand, protest or notice of any kind (except sa expressly provided for in the Reimbursement Agreement), all of which are hereby expressly waived, and regardless of whether the Surety has paid or advanced any moneys under it Surety Bond or paid any amounts to purchase the Bonds in lieu of redemption and whether or not any claim has been made or any liability has been determined or any claim, loss or payment is imminent under the Surety Bond; or (b) Assert or exercise, or cause the Issuer and/or the Trustee to assert or exercise, any or all of the rights and remedies provided in the Reimbursement Agreement, in the First Deed of Trust or in the Second Deed of Trust or as othemise provided in the Financing Documents or by law or equity; or (c) Furnish notice to the Owner to pay (and the Owner agrees that immediately upon receipt of such notice it will pay) to the Surety cash in an amount equal to the maximum amount then available to be drawn under the Surety Bond, assuming all Bonds outstanding under the Indenture were called for redemption within 60 days thereafter and compliance with all conditions for drawing under the Surety Bond together with interest thereon at the Increased Rate; or (d) Take such other action as shall be permitted by the Financing Documents or by law or equity. sl%!s15124.1 (2s1M91.2 lo 293691.3 did) 34 . P The Owner shall immediately reimburse the Surety for all sums paid by the Surety pursuant to or as author&d by . the Reimbursement Agreement and the other Financing Documents. The Surety is expressly authorixed by the Owner to pay the debt service on the Bonds on the date due and to cure any default which may occur under any First Deed of Trust Document without regard to the expiration of any applicable grace period thereunder, and the Owner shall reimburse the Surety for all sums expended or obligations incurred by the Surety in effecting such cure, together with interest thereon at the Increased Rate as stated in the Reimbursement Agreement. Nothing in the Reimbursement Agreement or in the other Second Deed of Trust Documents shall in any way limit or affect the right of the Surety to exercise any and all rights and remedies under any of the other Financing Documents, wnferred upon the Surety thereby or in the event the Surety becomes the owner of any or all of the Bonds or shall be subrogated to the rights of the Issuer, the Trustee or any Bondholder thereunder. The Surety may exercise any and all rights under each of the Second Deed of Trust Documents and, as provided therein, each of the other Financing Documents, cumulatively and successively, and no delay or failure of the Surety in the exercise of any right or remedy under the Reimbursement Agreement or under the Second Deed of Trust Documents or the other Financing Documents shall affect any such right or remedy, nor shall any single or partial exercise thereof preclude any further exercise thereof, and no action taken or omitted by the Surety shall be deemed to be a waiver of any such right or remedy. SUMMARY OF CERTAIN PROVISIONS OF THE IJQUIDRY FACIUIY AGREEh4ElV.I’ The following, in addition to information provided elsewhere herein, summa&~ certain provisions of the Liquidity Facility Agreement, to which document in its entirety reference is made for the detailed provisions thereof. The Owner will enter into the Liquidity Facility Agreement with the Surety providing for payment and reimbursement to the Surety by the Owner of all amounts which the Surety shall pay under the Liquidity Surety Bond. The following constitute Events of Default under the Liquidity Facility Agreement: (a) If the Owner fails to pay when due any Payment Obligation (as deflned in the Liquidity Facility Agreement) or to repurchase Bonds from the Surety within the time period provided in the liquidity Facility Agreement; or (b) If the Owner shall fail to comply with or perform any covenant, condition or provision of the Liquidity Facility Agreement (other than those referred to in paragraph (a) above) and the same remains uncured for 30 days after the Surety has notified the Owner of such failure; provided, however, that such non-compliance or non- performance shall not constitute an Event of Default if the same relates to a non-monetary default which cannot be cured within such thirty (30) day period and the Owner diligently pursues remedy of the same. In such event the Owner shall have sixty (60) days after the Surety has notified the Owner of such failure to comply or perform before the same shall be an Event of Default under the Liquidity Facility Agreement; or (c) If an Event of Default under and as defined in the Loan Agreement, the First Deed of Trust, the Second Deed of Trust or the Reimbursement Agreement shall occur and be wntinuing. If such an Event of Default under the Liquidity Facility Agreement shall occur and be wntinuing, the Surety, in its disc&k, muy in addition to other remedies available to it under the Liquidity Facility Agreement, at law or in equity, exe&se one or more of the following remedies: (a) Deliver written notice of such an Event of Default to the Trustee at the Surety’s sole discretion, directing the Trustee to declare a mandatory tender of all the outstanding Bonds under the Indenture# (b) Furnish notice to the Owner to pay (and the Owner agrees that immediately upon receipt of such notice it will pay) to the Surety cash in an amount equal to the maximum amount then available to be drawn under the Surety Bond, assuming all Bonds outstandmg under the Indenture were called for redemption or otherwise declared to be immediately due and payable within sixty (60) days thereafter and wmpliance with all conditions for drawing thereunder; g go@ 7 kss2-2sl5lU.l (?s3369L2 *) n3w1.3 dlkd} 35 412%-7MS1~/2%94 (c) Take such other action as is permitted by law or equity. THE SECOND DEED OF TRUST The Owner will enter into the Second Deed of Trust with the Surety which shall evidence and secure the Owner’s obligations to the Surety under the Reimbursement Agreement and under the other Second Deed of Trust Documents. The Second Deed of Trust will grant junior and subordinated mortgage liens and security interests in and to the same properties and rights as are mortgaged and assigned, and in and to which security interests are granted, under the First Deed of Trust. The Second Deed of Trust will contain substantially the same terms, wvenants, conditions and provisions as the First Deed of Trust described under the caption “SUMh4AR Y OF CERTAIN PROVISIONS OF THE FIRST DEED OF TRUST”, although the Second Deed of Trust is for the benefit of the Surety only. SUMMARY OF CERTAIN PROVISIONS OF THE INTERCREDITOR AGREEMENT The following, in addition to information provided elsewhere herein, sunm&zs certain provisions of the Inter-creditor Agreement, to which document in its entirety reference is made for the detailed provisions thereof. The Issuer, the Trustee and the Surety will enter into an Intercreditor Agreement with respect to the exercise of certain rights, remedies and options by the respective parties under the Financing Documents. Among other provisions, the Intercxcditor Agreement will provide that so long as the Surety Bond shall be in effect and no Event of Default under and as defined in certain provisions of the Indenture shall have occurred and be continuing, the following provisions shall be applicable: (i) Upon the occurrence of an Event of Default under and as defmed in the Reimbursement Agreement, the Loan Agreement or under any of the other Financing Documents, the Surety shall be permitted and is author&d to take any and all actions and to exercise any and all rights, remedies and options which it or the Trustee or the Issuer may have under the Financing Documents, including the right to direct the Trustee to accelerate the Bonds or to call the Bonds for redemption, to accelerate the Owner’s obligations under the Note, the Loan Agreement and/or the Reimbursement Agreement, to exercise other rights and remedies under the First Deed of Trust Documents and/or the Second Deed of Trust Documents, to foreclose the First Deed of Trust and/or the Second Deed of Trust (or accept a deed in lieu of foreclosure) and sell or otherwise realixe upon the property mortgaged, pledged and assigned to the Surety under the First Deed of Trust and/or the Second Deed of Trust without objection or interference by the Issuer or the Trustee. (ii) Neither the Issuer nor the Trustee shall take any action to declare the outatandmg balance of the Bonds or the Note to be due pursuan t to the default remedies section of the Indenture or the Loan Agreement or to foreclose the lien of the First Deed of Trust or sell the Granted Property (or any portion thereof) described therein, or to exercise any other rights or to enforce any other remedies provided for in the First Deed of Trust or any other First Deed of Trust Document against any property described therein, without the prior written consent of the Surety. This provision shall not restrict or limit (a) the application by the Trustee of any funds held under the Indenture in accordance with the terms thereof, or (b) the submission of any claim and the collection and application of moneys paid under the Surety Bond in accordance with the terms of the Surety Bond and the Indenture, or (c) the taking by the Trustee and/or the Issuer of any action to enforce the provisions of the Regulatory Agreement (as defined in the Indenture) or (d) making demand upon the Owner for payment of fees of the Trustee and/or the Issuer and taking such action under the Loan Agreement to collect such fees, subject to the provisions of the Intercreditor Agreement and the Fit Deed of Trust Documents; provided that (i) the Trustee shall have given the Surety at least 60 days’ prior written notice of the Owner’s nonwmpliance with the Regulatory Agreement of which a Responsible Officer (as defined in the Indenture) has actual knowledge (unless immediate action is otherwise required to respond to a temporary injunction or other emergency proceedmg or to avoid entry of a default judgment) and the actions required to cure such noncompliance, (ii) the Owner or the Surety shall not have undertaken appropriate actions or proceedings to effect such compliance and (iii) any action taken by the Trustee or the Issuer shall not cause or result SFZ-2sl5124.1 (2s3Wl.2 u) 2m691.3 ?cdkd) 36 41206-7~Sl9BN~ in any acceleration of the Bonds or of the indebtedness evidenced by the Note or any foreclosure sale or a discharge or impairment of any lien and security intemst on the Granted Property securing the obligations of the Chvner under the First Deed of Trust Documents or the Second Deed of Trust Documents. (ii) In the event the Surety or its designee shsll become the legal or beneficial owner of the Project by foreclosure, purchase or deed in lieu of foreclosure, the Surety or its designee shall execute and deliver to the Issuer and the Trustee an instrument in writing assuming and agreeing to perform the obligations of the Owner under the Regulatory Agreement, the Loan Agreement and the Note from and after the date of such acquisition, with the benefit, however, of the nonrecourse provisions wntained in the First Deed of Trust Documents. (iv) The Issuer and the Trustee agree that they will cooperate with the Surety and take or refrain from taking any and all action, including joining in such proceedings at law or in equity and executing such documents as the Surety may request and direct to enforce the obligations of the Owner under the Financing Documents and the Regulatory Agreement, and in order to assure that the rents and other revenues, profits and proceeds from the Project (including without limitation any proceeds of insurance), which are pledged and assigned to the Trustee and the Surety jointly under the First Deed of Trust Documents and secondarily to the Surety alone under the Second Deed of Trust Documents, shall be available, after the payment of any and all costs and expenses incurred in the collection thereof, to pay and perform any outstanding and unpaid obligations of the Owner under the Loan Agreement and the other Financing Documenta, subject to the Surety’s rights of subrogation, and in such order and manner as the Surety shall determine subject to the Indenture. THE REGULATORY AGREEMENT The following is a summary of certain provisions of the Regulatory Agreement, which is qualified in its entirety by reference to the Regulatory Agreement. The Regulatory Agreement is designed to assure compliance by the Owner and any assignee with the requirements of Section 103(b)(4)(A) of the 1954 Code, which must be satisfied in order to maintain the exclusion of interest from gross income for federal income tax purposes. See “TAX EXEMPTION. ” Proiect Restrictions Under the Regulatory Agreement, the Owner acknowledges and agrees that the Project has been and will be owned, managed and operated as “residential rental property,” within the meaning of Section 103(b)(4)(A) of the 1954 Code. To that end, the Owner will mske the dwelling units in the Project available for lease to the general public and will not, among other things, lease any dwelling unit in the Project $ or use any portion of the Project as a hotel, motel, dormitory, fraternity house, sorority house, rooming house, nursing home, hospital, sanitarium, rest home or trailer court or park. The Owner may not give preference in renting units in the Project to any particular class or group of persons, other than lower-income tenants. Tenant Income and Rental Restrictions Under the Regulatory Agreement, all of the dwelling units in the Project must be rented or available for rental on a continuous basis (the “Rental Requirement”) and at least 2096 of the dwelling units in the Project which are available for occupancy either (i) must be occupied by Low or Moderate Income Tenants or (ii) must be held available for occupancy by or Low or Moderate Income Tenants (the “Low or Moderate Income Occupancy Requirement”). The Regulatory Agreement requires the Chvner to obtain and maintain on tile certifications wntaining the information required by Section 103(b)(4)(A) of the 1954 Code from each Low or Moderate Income Tenant. The Owner are and submit to the Trustee Low or Moderate Income Occupancy Requirement. sF2a1517A.1 ps33cm.2 (0 2smw.3 redlid) 37 The 8 Regulatory Agreement f shall remain in full force and effect for the Qualified Project Period End is However, the provisions of the Regulatory Agreement will automatically terminate in the event of involuntary noncompliance caused by fire, seizure, requisition, foreclosure, transfer of title by deed in lieu of foreclosure, change in a federal law or an action of a federal authority after the date the Bonds are issued which prevents compliance with the covenants expressed therein, or condemnation or similar event, but only if, within a reasonable period all Bonds are redeemed and paid in full. Enforcement If the Owner defaults in its obligations under the Regulatory Agreement, the Issuer or the Trustee, acting on its own behalf or on behalf of the Issuer, subject to certain notice and other requirements, may take whatever action at law or in equity or otherwise, whether for specific performance or such other remedy as may be deemed most effectual by the Trustee to enforce the obligations of the Owner under the Regulatory Agreement. TAX EXEMPTION [subjecttoBondCounselReview] Section 103(b)(4)(A) of the 1954 Code provides that intereat on certain governmental obligations, such as the Bonds, substantially all of the proceeds of which are to be used to provide financing for projects for “residential rental property” shall be exempt from federal income tax if at all times during the Qualified Project Period 20% or more of the completed rental units in the project (15% in the case of certain targeted area projects) are to be occupied by individuals of “low or moderate income” as defined in Section 103@)(12)(C) of the 1954 Code. The United States Department of the Treasury has issued regulations (the “Regulations”) setting forth requirements for wmpliance with Section 103@)(4)(A) of the 1954 Code. The Regulations require, among other things, that (a) the 20% requirement (or the 15% requirement, as applicable) of Section 103@)(4)(A) of the 1954 Code must be met on a continuous basis during the Qualified Project Period, and (b) during the longer of the Qualified Project Period, or the remainin g term of the obligations used to provide financing for a project, each of the units in the Project must be rented or available for rental to the general public on a continuous basis. Under the Regulations the failure to satisfy the foregoing requirements on a wntinuous basis or the failure to satisfy any of the other requirements of the Regulations will, unless wrrected within a reasonable period of not less than 60 days after such noncompliance is first discovered or should have been discovered, cause loss of the taxexempt status of the Bonds as of the date of issuance of the Bonds, irrqective of the date such noncompliance actually occuned. The Issuer has established in the Regulatory Agreement requirements, procedures and safeguards which it believes to be sufficient to ensure compliance with the requirements of Section 103(b)(4)(A) of the 1954 Code and the Regulations with respect to the Project to be financed with the proceeds of the Bonds. Such requirements, procedures and safeguards are incorporated into the Loan Agreement and the Regulatory Agreement. However, no assurance can be given that in the event of a breach of any of the provisions or covenants described above, the remedies available to the Issuer, the Surety or the Trustee csn be judicially enforced in such manner as to assure compliance with Section 103(b)(4)(A) of the 1954 Code and therefore to prevent the loss of tax exemption of interest on the Bonds. Section 148 of the 1986 Code provides that interest on the Bonds will not be excludable from gross income for federal income tax purposes unless (a) the investment of the proceeds of the Bonds meets certain arbitrage requirements and (b) certain “excess” eamings on such investments are rebated to the United States of America (collectively, the “Arbitrage Restrictions”). The Owner has covenanted in the Loan Agreement that it will wmply with such Restrictions. In the event of noncompliance by the Owner with the Arbitrage Restrictions, interest on the Bonds would be taxable for federal income tax purposes from the date of issuance of such Bonds. The Owner hss also covenanted to comply with certain other applicable provisions of the 1954 Code and the Code which are mqrired as a condition to the exclusion from gross income of interest on the Bonds for federal income tax purposes. The 1954 Code and the 1986 Code include requirements which the Issuer and the Owner must continue to meet after the issuance of the Bonds in order that interest on the Bonds not be included in gross income for federal income tax purposes. sm2.%51%.1 (2s33691.2 to 29336913 ledlid) 38 412&1*(s148/25/94 The Issuer’s or the Owner’s faihue to meet these requirements may cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to their date of issuance. The Issuer and the Owner have wvenanted in the Regulatory Agreement and Loan Agreement to take the actions required by the 1954 Code and the 1986 Code in order to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds. In the opinion of Bond Counsel, assuming continuing compliance by the Issuer and the Gwner with certain tax wvenants, interest on the Bonds is excluded from gross income for federal income tax purposes under existing statutes, regulations, rulings and court decisions, except for interest on any Bond for any period during which such Bond is held by a person who is a “substantial user” of the facilities financed by the Bonds or a “related person” within the meaning of Section 103(b)(13) of the 1954 Code. Interest on the Bonds is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and wrporations; however, interest on the Bonds is taken into acwunt in determining adjusted current earnings for purposes of computing the alternative minimum tax imposed on corporations. Except as described above, Bond Counsel will express no opinion regarding the federal inwme tax wnsequences resulting from the ownership of, receipt or accrual of interest on, or disposition of the Bonds. Prospective purchasers of Bonds should be aware that the ownership of Rends may result in other collateral federal tax wnsequences, including (i) the denial of a deduction for interest on indebtedness incurred or continued to purchase or carry Rends or, in the case of a financial institution, that portion of the owner’s interest expense allocable to interest on a Bond, (ii) the reduction of the loss reserve deduction for property and casualty insurance wmpanies by 15% of certain items, including interest on the Bonds, (iii) for taxable years beginning before 1996, the inclusion of interest on Bonds in “modified alternate minimum taxable income” for purposes of the environmental tax imposed on corporations, (iv) the inclusion of interest on Bonds in the earnings of certain foreign corporations doing business in the United States for purposes of a branch profits tax, (v) the inclusion of interest on Bonds in the passive income subject to federal income taxation of certain Subchapter S corporations with Subchapter C earnings and profits at the close of the taxable year and (vi) the inclusion in gross income of interest on Bonds by recipients of certain Social Security and Railroad Retirement benefits. A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendii D. UNDERWRITING A.G. Edwards & Sons, Inc. (the “Underwriter”) has agreed to purchase the Bonds from the Issuer pursuant to a Bond Purchase Agreement, dated 1994, at a price equal to 100% of the principal amount thereof. Underwriter is committed to take and pay for h of the Bonds if any are taken. The The Underwriter will receive a fee of $ for the underwriting of the Bonds. ‘Ihe Owner has agreed under the Bond Purchase Agreement to indemnity the Underwriter and the Issuer against certain losses, claims, damages or liabilities. A.G. Edwards & Sons, Inc. will also act as Remarketing Agent and will be paid fees for the performance of its obligations in this capacity. RATINGS Standard Poor’s Corporation has assigned the respective long term and short term ratings of ” ’ totheBonds. Such credit ratings are based on the credit of the Surety and the Liquidity Facility Issuer and reflect only the view of such credit rating agency. An explanation of the significance of such credit rating may be obtained from the credit rating agency. There is no assurance tbat such credit rating will continue for any given period of time or that it will not be revised or withdrawn entirely by such credit rating agency if, in its judgment, circumstances so warrant. Neither the Issuer nor the Underwriter have undertaken any responsibility either to bring to the attention of the owners of the Bonds any proposed change in or withdrawal of such credit ratings or to oppose any such proposed revision. Any such downward change in or withdrawal of such credit rating may have an adverse effect on the market price of the Bonds. sF%?s151u.1 (2s35691.2 Y) 2s3691.3 redlid) 39 INTERESTS OF CERTAIN PARTIES It should be noted that the Owner is wholly f owned by Continental Casualty Company and therefore these parties are not presently dealing at arms’ length, nor are they repmsented by separate wunsel. CERTAIN LEGAL MATTERS All legal matters related to the authori&ion, issuance, sale and delivery of the Bonds are subject to the approval of Stradling, Yocca, Carlson & Rauth, Newport Beach, California, Bond Counsel. Certain legal matters will be passed upon for the Underwriter by ita counsel, Orrick, Herrington & Sutcliffe, San Francisco, California, for the Owner, the Surety and the Liquidity Facility Issuer by their corporate wunsel~~ and for the Issuer by the City Attorney of the City of Carlsbad. . ABSENCE OF LITIGATION REGARDING THE BONDS On the date of delivery of the Bonds, the Issuer and the Owner will each deliver a certificate to the effect that, as of such date and to the knowledge of such parties, there are no legal proceedings pending or threatened against them to restrain or enjoin the issuance, sale or delivery of the Bonds or the payment, collection or application of the proceeds thereof or of the revenues and other moneys and securities pledged or to be pledged under the Indenture or in any way contesting or affecting any authority for or the validity of the Bonds or the Indenture. In addition, the Surety will deliver a certificate to the effect that, as of such date to the best of its knowledge, there is no litigation pending or threatened in any way contesting or affecting the validity or enforceability of the Surety Bond or the Liquidity Surety Bond. MIscELLANEous The foregoing summari es do not purport to be complete and are expressly made subject to the exact provisions of the complete documents. Copies of the Indenture, the Loan Agreement, the First Deed of Trust Documents, the Second Deed of Trust Documents, the Surety Bond, the Liquidity Bond, the Intercreditor Agreement, the Reimbursement Agreement and the Liquidity Facility Agreement are on file at the office of the Trustee and may be obtained upon request. All estimates and other statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as rcprwentatio~ of fact. It is anticipated the CUSIP identification numbers will be printed on the Bonds, but neither the failure to print such numbers on any Bond nor any error in the printing of such numbers shall constitute cause for a failure or refusal by the purchaser thereof to accept delivery of and pay for any Bonds. The attached Appendices are integral parts of this Official Statement and must be read together with all of the foregoing statements. The Issuer has furnished only the information included herein under the section entitled “THE ISSUER. ” The Owner has reviewed the information wntained herein which relates to it, the Project, its property and operations, and has approved all such information for use within this Official Statement. imxm51u.1 (2933691.2 lo 2s33691.3 atdlhcd) 40 41208-7A4s14BNl94 APPENDIX A CERTAIN DWINITIONS The following tern have the following meanings when used in the Loan Agreement, the Indenture or this Official Statement: *Alternate Liquidity Facility” means any guaranty agreement, letter of credit, bond insurance policy, standby funding or bond purchase agreement, surety bond or other arrangement substituted for the Liquidity Facility or the Alternate Liquidity Facility then in effect which Alternate Liquidity Facility complies with the terms and conditions of the Indenture. The term “Alternate Liquidity Facility” shall include any Liquidity Facility Amendment which complies with the requirement of the terms and conditions of the Indenture. To the extent that the then curtcIlt Credit Facility qualifies as a Liquidity Facility, and the Credit Facility Issuer provides a written statement to the Trustee that such Credit Facility shall also be deemed a Liquidity Facility, “Alternate Liquidity Facility” shall refer to those portions of the Credit Facility that so qualify. “Alternate Security” means any Credit Facility (other than the Surety Bond) which complies with the terms and conditions of the Indenture. ‘Ihe term “Alternate Security” shall include any Credit Facility as extended by a Credit Facility Amendment which complies with the terms and conditions of the Indenture. “Authorized Denomination” means denominations of $lOO,ooO and any integral multiple thereof during any Short Term Rate Period (except that one Bond may be issued in the denomination of $115,000) and in denominations of $5,000 or any integral multiple thereof during any Fixed Rate Period. ‘Author&d Representative” means any person or persons at the time designated to act on behalf of the Owner by written certificate furnished to the Issuer, the Trustee, the Liquidity Facility Issuer (while the L,iquidity Facility remains in effect) and the Credit Facility Issuer containing the specimen signature of such person or persons and signed on behalf of the Owner by the President, any Vice President or any Assistant Secretary of the Owner (if the Owner is a corporation) or by a general partner of the Owner (if the Owner is a partnership). The owner may change an Author&d Representative at any time by filing a certificate aforesaid. “Beneficial Owner” means the beneficial owner of an interest in the Bonds as shown in the records of the Securities Depository or its Participants. “Bond Counsel” means a firm of nationally mgnized attorneys at law selected by the Issuer and experienced in the financing of facilities for non-exempt persons through the issuance of revenue bonds the interest on which is excluded from gross income for federal income tax purposes. “Bond Purchase Agreement” means the Bond Purchase Agreement among the Issuer, the Owner and A.G. Edwards & Sons, Inc., as Underwriter. “Bondholder” or “Holder” or “registered owner” means the person in whose name any Bond is registered at the time of ref-nce on the Bond Register. “Busiiws Day” means any day other than a Saturday, Sunday or a day when banks are authorized or required to be closed under the laws of the state or states where the respective Principal Offices of the Trustee, any Purchase Agent or the Remarketing Agent are located or the state or states in which are located the offices of the Credit Facility Issuer and the Liquidity Facility Issuer at which claims or draws under the Credit Facility and Liquidity Facility, if any, may be made and on which the New York Stock Exchange is not scheduled to be closed. “Code” means the Internal Revenue Code of 1986, as amended, together with corresponding and applicable final, temporary or proposed regulations and revenue rulings issued or amended with respect thereto by the Treasury Department or Internal Revenue Service of the United States. “1954 Code” means the Internal Revenue Code of 1954, as amended prior to the enactment of the Tax Reform Act of 1986, together with corresponding and applicable final, temporary or proposed regulations and revenue rulings issued or amended with respect thereto by the Treasury Department or Internal Revenue Service of the United States. sF2-2sl5174.1 (2533691.2 to zme91.3 lcdbd) A-l . “Commercial Paper Rate” means the interest rate on the Bonds set by the Remarketing Agent for a Commercial Paper Rate Period as provided in the Indenture. “Commercial Paper Rate Period” means with respect to any Bond, the period (which may be from 15 to 270 days) determined for each Bond as provided in the Indenture. “Conversion Date” means (i) the effective date of a change in the method of de&mining the interest rate on the Bonds from a Fixed Rate to a Short Term Rate or from a Short Term Rate to a Fixed Rate or another Short Term Rate and (ii) the effective date of the reset of a Fiied Rate to a new rate or rates for a new Fixed Rate Period of the same or different duration. “Credit Facility” means the Surety Bond or any Alternate Security meeting the requirements of the Indenture. To the extent the Credit Facility is also a Liquidity Facility, the term “Credit Facility” shall not include those provisions that constitute the Liquidity Facility. “Credit Facility Amendment” means any amendment to a Credit Facility which is given by a Credit Facility Issuer to extend the term of its own Credit Facility. “Credit Facility Issuer” initially means the Surety and includes the provider of any Alternate Security. To the extent that the Credit Facility Issuer is also the Liquidity Facility Issuer, the term “Credit Facility Issuer” shall refer to such Person solely in its capacity as issuer of the Credit Facility. “Credit Facility Rating Requirement” means that the delivery of the Credit Facility will result in the Bonds bearing a long-term rating of not lower than A from s&P (if S&P then rates the Bonds) or A f?om Moody’s (if Moody’s then rates the Bonds), and that, to the beat knowledge of a responsible officer of the Credit Facility Issuer, the Credit Facility Issuer is not then under credit review (with negative implications) by the Rating Agency. In the event a Rating Agency other than Moody’s or S&P has been appointed, the foregoing requirement shall be deemed to refer to the most nearly equivalent rating issued by such Rating Agency. “Daily Rate” means an interest rate on the Bonds which is set by the Remarketing Agent on a daily basis pursuant to the Indenture. “Determination of Taxability” means a judgment or order of a court of competent jurisdiction which is final (either because the time for appeal thereof has expired or because the judgment or order is issued by a court having final appellate jurisdiction over the matter and is not subject to collateral attack), or a notice of deficiency, ruling or decision of the Internal Revenue Service which is final (because no action has been taken to cause such ruling or decision to be administratively or judicially reviewed and the time for taking such action has expired), in any case as a result of a proceeding in which the Owner and/or the Credit Facility Issuer and/or the Issuer had an opportunity to participate (to the extent such participation is allowed by law), to the effect that the interest on the Bonds is includable for federal income tax purposes in the income of any recipient thereof subject to federal income taxes, except during such period as the Bonds are owned by a “substantial user” of the Project or a “related person, ” within the meaning of Section 103(b) of the 1954 Code, which fiual determination of taxability was based upon a determination that there was a failure to comply with the provisions of the Regulatory Agreement relating to the use of the Prior Bonds proceeds or relating to the occupancy of completed units in the Project, or based upon a determination that a violation of Section 148 of the Code has occurred. “Eligible Investments” means any of the following which at the time are legal investments for fiduciaries under the laws of the State for moneys held under the Indenture which are then proposed to be invested thereim (a) Government Securities; (b) bonds, debentures, notes or other evidences of indebtedness issued by any of the following: Bank for Cooperatives; Federal Intermediate Credit Banks; Federal Home Loan Banks; Export-Import Bank of the United States; federal land banks; Federal National Mortgage Association; Government National Mortgage Association; Federal Fiicing Bank, Small Business Administration; or any other agency or instrumcznality of the United States of America, created by an Act of Congress, substantially similar to the foregoing in its legal relationship to the United States of America; provided that no investment shall be made in obligations of the type described in this clause (b) which does not constitute a full faith and credit obligation of the United Statea of America without the prior approval of the Credit Facility Issuer; (c) interest- bearing time or demand deposits, certificates of deposit, or other similar banking arrangements (including deposits or arrangements with the Trustee or its Affiliates), provided that the deposits are fully insured by the Federal Deposit Insurance sF22s151u.1 (2s33691.2 to 253691.3 ledlid) A-2 412cu7Afswxn5i94 Corporation, and that the depository institution as of its latest published report of condition prior to any such investment has a combined capital, surplus and undivided profits of at least $25,000,000; (d) contracts for the purchase and sale of obligations which are Eligible Investments as described in (a) or (b) above, provided that if the parties with which the contracts are made are not members of the Federal Reserve System, or if the parties, including members of the Federal Reserve System, will not agree to set aside and otherwise identify, to the satisfaction of the Credit Facility Issuer, the obligations described in (a) and (b) above covered by such contracts as security or reserve therefor in an amount at least equal to the face value of such contract, then the obligations shall be delivered to and held by the Trustee during the term of the contracts; (e) one or more investment contracts approved by the Credit Facility Issuer with one or more financial institutions approved by the Credit Facility Issuer and having a credit rating of one of the three highest credit ratings available by a nationally mcognixed rating agency and as of its latest published report of condition prior to any such investment a combined capital, surplus and undivided profits of at least $25,000,000; (f) taxexempt municipal bonds qualifying for exemption from the arbitrage rebate requirements of Section 148 of the code; and (g) tax-exempt money market funds or U.S. Treasury obligation funds (or comparable funds comprised of Government Securities) including funds for which the Trustee, its affiliates or subsidiaries provide investment advisory or other management services. All such obligations or securities (or, as to (d) or (e) above, the contracts for purchase and sale, but not necessarily the underlying obligations or securities or investment contracts) shall mature no later than the date the proceeds thereof shall be required for payments under the Indenture, unless otherwise diited by the Credit Facility Issuer. “Eligible Money” means (a) original proceeds of the Prior Bonds and the Bonds held in any fund or account under the Indenture, together with investment earnings on such proceeds; (b) money paid by the Owner to the Trustee pursuant to the Loan Agreement, together with investment earnings on such moneys, if, at the time of such payment and, thereafter, (i) for a period of at least one year if the Chvner is a partnership or if the Credit Facility Issuer or the Liquidity Facility Issuer owns any corporate stock of the Owner, no Event of Bankruptcy relating to the Owner has occurred, or (ii) for a period of at least 91 days, no Event of Bankruptcy shall have occurred; (c) proceeds of the sale by the Remarketing Agent of the Bonds to purchasers other than the Chvner or the Issuer; (d) money received by the Trustee from the Liquidity Facility Issuer as a payment under the Liquidity Facility to the extent that such money is not furnished by and does not come into the possession of the Owner; (e) money received by the Trustee from the Credit Facility Issuer as a payment under the Credit Facility; (f) proceeds of bonds issued for the purpose of refundiig the Bonds, together with investment earnings on such proceeds, provided that such proceeds are paid directly to the Trustee for the benefit of the Holders of the Bonds and do not come into the possession of or under the control of the Owner and provided that the Trustee has received an unqualified opinion of nationally recognized bankruptcy counsel to the effect that payments of such amounts to Bondholders would not be preferential payments as defined in the Indenture; and (g) money which is derived from any other source if the Trustee has received an unqualified opinion of bankruptcy counsel experienced in bankruptcy matters to the effect that payment of such amounts to Bondholders would not be preferential payments as defined in the Indenture; provided that under all circumstances above, if the Owner is also the Credit Facility Issuer, any moneys paid by the Owner shall automatically be deemed Eligible Money. “Event of Bankruptcy” means the filing of a petition by or against the Owner under the United States Bankruptcy Code or any other bankruptcy or similar act of the United States or any state which may now or hereinafter be enacted, which is not dismissed p ursuant to a final court order not subject to appeal. “Excluded Bondholder” means any one or more of the following Persons: the Owner, the Issuer, any affiliate of either of them (of which fact the Trustee shall have written notice) and the Credit Facility Issuer to the extent that it is a Bondholder pursuant to its rights of subrogation or otherwise pursuant to the Credit Facility, the Indenture or the Liquidity Facility. “%inancing Documents” means the Indenture, the First Deed of Trust Documents and the Second Deed of Trust Documents. “First Deed of Trust” means that certain First Deed of Trust, Assignment of Rents and Security Agreement, dated as of September 1, 1994, from the Owner to a trustee for the benefit of the Issuer and the Credit Facility Issuer, securing the obligations of the Owner under the Loan Agreement, the Note and the Reimbursement Agreement, granting a first priority mortgage lien on and security interest in the Project and collaterally assigning all leases, rents and profits inuring from or in connection with the Project, together with all amendments and supplements thereto. ca?M.5Ys121.1 (2sm91.2 to 293691.3 redlid} A-3 “First Deed of Trust Documenta” mesn, collectively, the Note, the Losn Agreement, the First Deed of Trust, the Reimbursement Agreement, all financing and continuation statements filed to perfect the liens and security interests granted thereby and all other documents, instruments and agreements executed and delivered by the Owner to evidence or secure the obligations of the Chvner under the Note, the Loan Agreement and the Reimbursement Agreement (other than the Second Deed of Trust Documents) as such d ocuments, instruments and agreements may be amended and supplemented from time to time, but not including the Regulatory Agreement. “Fixed Rate” means an interest rate payable on the Bonds during any Fixed Rate Period for a period of no less than one year and ending on the day before a June 1 or a December 1, set by the Remarketing Agent pursuant to the Indenture. “Fixed Rate Period” means any period in which interest on the Bonds will be payable at a Fixed Rate. “Government Securities” means direct obligations of the United States of America and obligations on which the timely payment of which is fully guaranteed by the full faith and credit of the United States of America, including securities or receipts evidencing ownership interests in obligations or specified portions (such as principal or interest) of such obligations. “Initial Rate” means the interest rate set forth on the cover of this Official Statement. “Interest Payment Date” means, during any period in which the Bonds bear interest at (1) a Daily Rate & a Weekly Rate8 ,or a Monthlv Rate. the First Busin- of the next calendar month, (ii) a Commercial Paper Rate, the first day after the applicable Commercial Paper Rate Period; (iii) $ a Quarterly Rate or a Semi-annual Rate, the first day of the month following the Interest Period, and (iv) a Fiied Rate, each June 1 and December 1 during the Fixed Rate Period. “Interest Period” means, during any period in which the Bonds bear interest at (i) a Daily Rate, Weekly Rate or Monthly Rate, a calendar month (or in the case of the Daily Rate or Weekly Rate, a portion thereof for the first Interest Period); (ii) a Commercial Paper Rate, a period from 15 to 270 days as determined for each Bond pursuan t to the Indenture; (iii) a Quarterly Rate, a period of three full calendar months ending on the last day of the third calendar month; (iv) a Semi- Annual Rate, a period of six full calendar months ending on the last day of the sixth calendar month; and (v) a Fixed Rate, a period of not less than 365 days (except for the initial Fixed Rate Period which shall not be less than 6 months) and ending on the day before the next June 1 or December 1. “Liquidation Act” means the Uniform Insurem Liquidation Act as enacted in the State of Illinois at Section 833.1 through 833.13 of the Illinois Insurance Code (Ill. Rev. Stat. 1985 Ch. 73, par. 833.1-833.13), as amended. “Liquidity Agreement” or “Liquidity Facility Agreement” mesns the agreement between the Chvner and the Liquidity Facility Issuer pursuant to which the Liquidity Facility has been issued and/or pursuan t to which the Chvner agrees to reimburse the Liquidity Facility Issuer for any amounts paid under the Liquidity Facility. ‘Liquidity Facility” means any guarsnty agreement, letter of credit, bond insurance policy, standby funding or bond purchase agreement, surety bond or other arrangement which complies with the requirements of the Indenture and any Alternate Liquidity Facility. “Liquidity Facility Amendment” means any amendment to a Liquidity Facility which is given by a Liquidity Facility Issuer to extend the term of its own Liquidity Facility. “Liquidity Facility Issuer” means the provider of an Alternate Liquidity Facility pursuan t to the Indenture. “Liquidity Facility Issuer Bonds” means Bonds held by the Liquidity Facility Issuer (or an affiliate of the Liquidity Facility Issuer) or its successors and assigns pursuant to the Iiquidity Facility. “Liquidity Facility Rating Requirement” means that the delivery of the Liquidity Facility will result in the Bonds hearing a short-term rating of not lower than A-l from S&P (if s&P then rates the Bonds) or MlG2 from Moody’s (if Moody’s then rates the Bonds) and that, to the best knowledge of a responsible officer of the Liquidity Facility Issuer, the Liquidity Facility Issuer is not then under credit review (with negative implications) by the Rating Agency. In the event a t3F2A?slS124.1 ps33691.2 to 2s3691.3 rdkd) A-4 4Im6MB=IMS1al25~ Rating Agency other than Moody’s or s&P has been appointed as provided herein, the foregoing requirement shall be deemed to refer to the most nearly equivalent rating issued by such Rating Agency. “Monthly Rate” means an interest rate payable on the Bonds for a period of one month (or portion thereof for the first period) set by the Remarketing Agent pursuan t to the Indenture. “Moody’s” means Moody’s Investors Service, a corporation organ&d and existing under the laws of the State of Delaware, its successors and assigns, and, if such corporation shall for any reason no longer perform the functions of a securities rating agency, “Moody’s” shall be deemed to refer to any other nationally recognixed rating agency designated by the Credit Facility Issuer. “Note” or “Secured Note” means the Secured Note executed by Owner evidencing the Owner’s obligations under the Loan Agreement. “Participants” means Broker-Dealers, banks and other financial institutions and other Persons for whom, from time to time, the Securities Depository effects book-entry transfers and pledges of securities deposited with the Securities Depository. “Paying Agent” means the Trustee or any other Paying Agent and any successor thereto appointed in accordance with the Indenture. “Permitted Encumbrances” means as of any particular time: (a) zoning laws and use regulations and other similar reservations, rights and restrictions then applicable from time to time to the Project and which are not violated by the Project or the use thereof; (b) the rights reserved to or vested in any municipality or public authority by the terms of any right, power, permit or provision of law to terminate such right, power or permit, or to purchase, condemn, appropriate, recapture or designate a purchaser of the Mortgaged Property or any part thereof; (c) any lien for taxes and any mechanic’s lien, which are not, in the case of taxes, delinquent and, in the case of mechanic’s liens, due and payable, in all cases, or the amount or validity of which are being contested in accordance with the provisions of the First Deed of Trust respecting the contest of such Liens; (d) the Loan Documents; (e) the rights of tenants (as tenants only) under the leases of the dwelling units in the Project; (f) the Second Deed of Trust Documents, and other liens securing obligations of the Owner to, or approved in writing by, the Credit Facility Issuer from time to time, which are junior and subordii to the lien of the First Deed of Trust and the Second Deed of Trust; (g) utility and other essements and Liens constituting a Permitted Encumbrance under and as defined in the Second Deed of Trust; (h) the Regulatory Agreement and (i) any other encroachment, encumbrance, exception specifically described as a Permitted Encumbrance on Exhibit B attached to the First Deed of Trust. “Person” or “person” means one or more, ss applicable, natural person, partnership, corporation or other legally constituted entity. “Purchase Date” means any day on which Bonds are to be purchased upon tender pursuan t to the Indenture. “Quarterly Rate” means an interest rate 0: the Bonds, for a period of three calendar months, set by the Remarketing Agent pursuan& to the Indenture. “Rating Agency” means Moody’s and/or S&P, and their 8ucce88019 and assigns, so long as each of them is then rating the Bonds. “Record Date” means, during any period in which the Bonds bear intereat at (i) a Daily Rate, Weekly && Commercial Paner Rate, or Monthly Rate, the E _second Business Day before the Interest B Period; and $$jJ a Quarterly Rate, Semi-annual Rate or a Fixed Rate, the fifteenth day of the month before the Interest Payment Date. “Redemption Date” means any date fixed by the Trustee as a date upon which Bonds are to be redeemed prior td their stated maturity. “Registrar” means the entity designated under the Indenture or any successor thereto appointed in accordance with the Indenture. SF%2slmA.l {2s33491.2 (0 2s33691.3 ledlid) A-5 “Remarketing Agent” means the entity appointed in accordance with the Indenture and any successor appointed pursuant thereto, which is initially A.G. Edwards & Sons, Inc. “Remarketing Agreement” means that certain Remarketing Agreement, dated as of September 1,1994, between the Remarketing Agent and the Owner. “Remarketing Date” means each Redemption Date upon which Rends are to be purchased in lieu of redemption and remarketed as provided in the Indenture. “Second Deed of Trust” means that certain Second Deed of Trust, Assignment of Rents and Security Agreement, dated as of September 1,1994, granted by the Owner to a trustee for the benefit of the Credit Facility Issuer, securing the obligations of the Owner under the Reimbursement Agreement, granting a second priority mortgage on and security interest in and to the Project, and collaterally assigning all leases, rents and profits inuring from or in connection with the Project, together with all supplements and amendments thereto. “Second Deed of Trust Documents” means, collectively, the Second Deed of Trust, the Reimbursement Agreement, and all financing and continuation statements filed to perfect the liens and security interests granted thereby and all other documents, instruments and agreements executed and delivered by the Chvner to evidence or secure the obligations under the Reimbursement Agreement (other than the First Deed of Trust Documents) as such documents, instruments and agreements may be amended or supplemented from time to time. “Securities Depository” means DTC and its successors and assigns, or any other securities depositary which agrees to follow the procedures required to be followed by a securities depositary in connection with the Bonds and which is selected by the Owner, with the prior written consent of the Credit Facility Issuer, or by the Credit Facility Issuer, with notice to the Issuer, the Trustee, the Tender Agent and the Remarketing Agent, in the event that (i) the current Securities Depository resigns from its function as depositary of the Bonds or (ii) the use of the Securities Depository is discontinued pursuant to the Indenture. “Semi-Annual Rate” means an interest rate on the Bonds for a period of six months which is set by the Remarketing Agent pursuant to the Indenture. “Short Term Rate” m- the Daily, Weekly, Monthly, Quarterly, Semi-Annual or Commercial Paper Rate. “Short Term Rate Period” means any period when interest on the Bonds is calculated at a Short Term Rate. “S&P” means Standard Poor’s Ratings Group, a corporation organ&d and existing under the laws of the State of New York, its successors and assigns, and, if such corporation shall for any reason no longer perform the functions of a securities rating agency, “S&P” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Credit Facility Issuer. “State” means the State of California. “Trust Eatate” means all of the moneys, properties and rights described in Clauses A through E of the Granting Clauses of the Indenture. “Trustee Tie” means, as of any date, the time then in effect in the city in which the Trustee (or the Purchase Agent in connection with the procedures relating to tenders of Bonds for purchase) is located for the transaction of business between banks in accordance with applicable Clearing House Rules which may mean daylight savings time, and initially means California time. “Weekly Rate” means an interest rate on the Bonds which is set by the Remarketing Agent on a weekly basis pursuant to the Indenture. sF-.&2s15124.1 {293691.2 10 2s36913 redlid) A-6 s?z-x3l5l2A.l {2s336!31.2 !a 293691.3 aedlkd) APPENLXX B CERTAIN INFORMATION CONCERNING CONTINENTAL CASUALTY COMPANY In, COiUEJ B-l 41alu-7usMw2.5/94 sFx?s15124.1 (x333691.2 to 2s33691.3 lcdliad) APPENDIX C FORMS OF SURETY BONDS In, COMEJ C-l sFws15124.1 (2s336!I1.2 to 2sxEJl.3 redid) APPENDIX D PROPOSED FORM OF OPINION OF BOND COUNSEL D-l