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86R-089 CITY OP ARAIIBIII RBSOLtJ'J.'IOR RO. 86R-89 RESOLUTION OP THE CI'l'Y COURCIL OF 'l'BB CI'l'Y ~ ARABEIIl, CALIPORRIA, AtrlIIORIIIBG TIIB ISSUARCB OP $129,275,000 ELECTRIC RBVBROE BOROS, ISSUE OP 1986, OF TIIB CI'l'Y; PROVIDIBG TIIB 'l'BRMS AIm CONDITIONS POR THE ISSUANCB OP SUCH B(R)S, AIm APPROVIBG mB BXBCO'1'IOR AIm DBLIYBRY ~ All ESCROW AGREEIIBR'l IN CORRBCTIOR TIIERBIII'ftI ADOPTED: MARCH 4, 1986 Section 1. Section 2. Section 3. Section 4. Section 5. Section 6. Section 7. Section 8. Section 9. Section 10. Section 11. Section 12. Section 13. Section 14. Section 15. Section 16. Section 17. Section 18. Section 19. Section 20. Covenant Covenant TABLE OP CONTENTS ~ DEFINITIONS. 6 . . . . . . EQUALITY OF BONDS, PLEDGE OF REVENUES. . . . . . . . . . . . . . . 9 PURPOSE OF BONDS. . . . . .10 . . . . . . . SPECIAL OBLIGATIONS; NO GENERAL CITY LIABILITY. ....... . . . . . .10 DESCRIPTION OF BONDS. . .10 . .11 PLACE OF PAYMENT. . . . . . . . . EXECUTION AND AUTHORIZATION OF BONDS. ................ .12 REGISTRATION AND TRANSFER. . .12 REDEMPTION OF BONDS. . .13 . .15 FUNDS AND ACCOUNTS. . DISPOSITION OF BOND PROCEEDS AND CERTAIN AVAILABLE MONEYS. . . . . . . . .17 REVENUE ACCOUNT. . .18 . . . . . . . . . . BOND SERVICE ACCOUNT; IDC ACCOUNT; SINKING ACCOUNT. ........... .18 M&O ACCOUNT. .21 .21 . . . . . . . . . . . . . RESERVE FUND. . . . . . . . . . . . . . R&R ACCOUNT. . .22 . . . . . . . . . . . . SURPLUS FUND. . . .22 . . . . . . . . . . . INVESTMENTS. .22 .23 . . . . . . . . . . . . . WARRANTY. . . . . . . . . . . . . . . . COVENANTS. .. . . 1. Punctual Payment. 2. Discharge Claims. . . . . . . . . .23 . . . . . . . .23 . . . . . . . .24 -i- TABLB OP CONTBNTS, Continued ~ Covenant 3. Operate Enterprise in Efficient and Economical Manner. . . . . . . . . . . . . .24 Covenant 4. Against Sale, Eminent Domain, Existing and Future Agreements. . . . . . . . . . . .24 Covenant 5. Insurance. . . . . . . . . .25 Covenant 6. Records and Accounts. . . . . . .25 Covenant 7. Collection of Charges. . . . . .26 Covenant 8. Rates and Charges. . . . . . . .26 Covenant 9. No Priority for Additional Indebtedness. . . . . . . . . . .27 Covenant 10. Limits on Parity Bonds. . . . . .27 Covenant 11. Arbitrage. . . . . . . . . .28 Covenant 12. Tax Covenant. . . . . . . . . . .28 Covenant 13. provisions and Restrictions with Respect to Defeasance. . . .29 Section 21. LOST, STOLEN, DESTROYED, OR MUTILATED BONDS. . . . . . . . .30 Section 22. CANCELLATION OF BONDS. . . . . . . . . .31 Section 23. CONSENT OF BONDHOLDERS. . . .31 Section 24. BOND FORM . . . . . . . . . . . .34 Section 25. TEMPORARY BONDS. . . . . . . . . . . . .40 Section 26. AUTHORIZATION OF ESCROW AGREEMENT. . . .40 Section 27. RESOLUTION CONSTITUTES CONTRACT. . . . .41 Section 28. DEFEASANCE. . . . . . . . . . . . . . . .42 Section 29. FUTURE CONTRACTS. . . . . . . . . . . . .42 Section 30. SEVERABILITY. . . . . . . . . . . . . . .42 Section 31. SUBSTITUTES. . . . . . . . . . . . . . .42 Section 32. EFFECTIVE DATE. . . . . . . . . . . . . .43 -ii- CITY OP ANAHBIM RESOLUTION NO. 86R-89 RBSOLU~IO. OP THB CITY COURCIL OP THB CITY OP ARABEIM, CALIPORRIA, AUTHORIZING THB ISSUANCE OP $129,275,000 ELBCTRIC RBVEROB BORDS, ISSUB OP 1986, OP THB CITY; PROVIDING THB TBRIIS AM) CClIlITIORS POR 'l'BB ISSOAHCB c:. SOCII BORDS; ARD APPROVING THE BXBCO'fIOR AND DELIVERY OP AN BSCROW AGRBEIIBR'l' IN COHHBCTIOR THBREWI'.rB WHBREAS, the City of Anaheim (the "City") is a municipal corporation organized and existing under a charter duly and regularly adopted pursuant to the provisions of the Constitution of the State of California (the "Charter") 1 and WHBRBAS, Section 1210 of the Charter ("Section 1210") pro- vides as follows: "Bonds which are payable only out of such revenues as may be specified in such bonds may be issued when the City Council by ordinance shall have established a procedure for the issuance of such bonds. Such bonds, payable only out of revenues, shall not constitute an indebtedness or gen- eral obligation of the City. No such bonds payable out of revenues shall be issued without the assent of a majority of the voters voting upon the proposition for issuing the same at an election at which such proposition shall have been duly submitted to the qualified electors of the City. "It shall be competent for the City to make contracts and covenants for the benefit of the holders of any such bonds payable only from revenues and which shall not con- stitute a general obligation of the City for the establish- ment of a fund or funds, for the maintaining of adequate rates or charges, for restrictions upon further indebted- ness payable out of the same fund or revenues, for restric- tions upon transfer out of such fund, and other appropriate covenants. Money placed in any such special fund for the payment of principal and/or interest on any issue of such bonds or to assure the application thereof to a specific purpose shall not be expended for any other purpose what- ever except for the purpose for which such special fund was established and shall be deemed segregated from all other funds of the City and reserved exclusively for the purpose for which such special fund was established until the purpose of its establishment shall have been fully accomplished. -Notwithstanding the foregoing, the City may sell and issue at any time and from time to time revenue bond antic- ipation notes (including renewal revenue bond anticipation notes) in anticipation of the revenue bonds authorized by the voters on June 2, 19811 provided that the aggregate principal amount of such revenue bond anticipation notes and revenue bonds outstanding in accordance with their terms at anyone time shall not exceed $92 million. Such revenue bond anticipation notes may be sold, issued and secured in such manner and subject to such terms and condi- tions as the City Council may prescribe by ordinance; pro- vided that such revenue bond anticipation notes shall not constitute an indebtedness or general obligation of the City of Anaheim and are not to be secured by the taxing power of said City"; and Notwithstanding the foregoing, the City may also sell and issue at any time and from time to time revenue bond anticipation notes (including renewal revenue bond antici- pation notes) in anticipation of any electric or water rev- enue bonds theretofore or hereafter authorized by the voters; provided the (i) the aggregate principal amount of such electric revenue bonds in anticipation of which such electric revenue bond anticipation notes and the electric revenue bond anticipation notes were issued outstanding in accordance with their terms at anyone time shall not exceed the principal amount of such electric revenue bonds authorized by the voters and (ii) the aggregate principal amount of such water revenue bond anticipation notes and the water revenue bonds in anticipation of which such water revenue bond anticipation notes were issued outstanding in accordance with their terms at anyone time shall not exceed the principal amount of such water revenue bonds authorized by the voters. Such revenue bond anticipation notes may be sold, issued and secured in such manner and subject to such terms and conditions as the City Council may prescribe by ordinance; provided that such revenue bond anticipation notes shall not constitute an indebtedness or general obligation of the City of Anaheim and are not to be secured by the taxing power of said City. Notwithstanding the foregoing, the City may also sell and issue at any time and from time to time revenue antici- pation notes (including renewal revenue anticipation notes) in anticipation of the receipt of revenues of the City's water and electric utilities; provided that the aggregate principal amount of such revenue anticipation notes outstanding in accordance with their terms at anyone time -2- shall not exceed, for each of such utilities, an amount equal to 25' of the gross revenue earned by the respective utility during the immediately preceding fiscal year as set forth in the audited financial statements of such utility for such year. Such revenue anticipation notes may Qe sold, issued, and secured in such manner and subject to such terms and conditions as the City Council may prescribe by ordinance; provided that such revenue anticipation notes shall not constitute an indebtedness or general obligation of the City of Anaheim and are not to be secured by the taxing power of said City."; and WHBRBAS, Ordinance No. 2980 of the City Council, as amended by Ordinance No. 4158 and by Ordinance No. 4328, incorporating cer- tain sections of the Revenue Bond Law of 1941 (Chapter 6, Part 1, Division 2, Title 5 of the Government Code of the State of California), establishes a procedure for the issuance of electric revenue bonds as provided for in Section 1210; and WHBRBAS, pursuant to Section 1210, Ordinance No. 2980 and Resolution No. 74R-615 of the City Council, a special municipal elec- tion was held in the City on March 4, 1975, for the purpose of sub- mitting to the qualified voters of the City the following proposition: "In order to provide more economical electrical ser- vice, shall the City of Anaheim be authorized to finance the construction and acquisition of facilities, property and rights related to the generation, transmission and dis- tribution of electrical energy by issuing revenue bonds, not payable from property taxes, in an amount not to exceed 150 Million Dollars?"; and WHBRBAS, said proposition (the "1975 Proposition") was approved by the votes of more than a majority of all the voters voting on the 1975 Proposition at said special municipal election; and WHBRBAS, of said authorized amount of $150,000,000, the City has heretofore issued $6,000,000 electric revenue bonds desig- nated "Electric Revenue Bonds, Issue of 1976," $12,500,000 electric revenue bonds designated "Electric Revenue Bonds, Second Issue (Subordinated) of 1976," $84,000,000 electric revenue bonds desig- nated "Electric Revenue Bonds, Issue of 1980," $18,000,000 electric revenue bonds designated "Electric Revenue Bonds, Issue A of 1982" and $10,000,000 electric revenue bonds designated nE1ectric Revenue Bonds, Issue A of 1983"; and WHBRBAS, pursuant to Section 1210, Ordinance No. 2980, as amended, and Resolution No. 82R-391 of the City Council, a special municipal election was held in the City on November 2, 1982, for the -3- purpose of submitting to the qualified voters of the City the following proposition: "In order to provide a more economical market for the remaining electric revenue bonds authorized by a majority of the voters in 1975 to provide more economical electric service, shall City Council Resolution No. 74R-615 be amended to eliminate from such Resolution the maximum rate of interest (eight percent) which may be paid on such bonds and to provide instead in such Resolution that the City Council shall, at or prior to the time of sale of any such bonds, establish by resolution a maximum rate of interest which may be paid on the bonds then being sold?"; and WHBRBAS, said proposition (the "1982 Proposition") was approved by the votes of more than a majority of all the voters voting on the 1982 Proposition at said special municipal election; and WHBRBAS, pursuant to Section 1210, Ordinance No. 2980, as amended, and Resolution No. 81R-138 of the City Council, a special municipal election was held in the City on June 2, 1981, for the pur- pose of submitting to the qualified voters of the City the following proposition: "In order to obtain substantial savings and provide more economical electric service, shall the City of Anaheim be authorized to finance the construction and acquisition of facilities, property and rights related to the San Onofre Nuclear Generating Station and the generation and transmission of electric energy by issuing revenue bonds and revenue bond anticipation notes and any combination thereof, not payable from property taxes, in an aggregate principal amount outstanding in accordance with their terms at anyone time not to exceed $92 million?"; and WHBRBAS, said proposition (the "1981 Proposition") was approved by the votes of more than a majority of all the voters voting on the 1981 Proposition at said special municipal election; and waBaBAs, of said authorized amount of $92,000,000, the City has heretofore issued $52,000,000 electric revenue bonds designated "Electric Revenue Bonds, Issue B of 1982" and $40,000,000 electric revenue bonds designated "Electric Revenue Bonds, Issue B of 1983"; and WHBREAS, pursuant to the 1981 Proposition, Ordinance No. 4252, as amended, and Resolution No. 81R-455 of the City Council, the City provided for the issuance of up to $80,000,000 Electric -4- Revenue Bond Anticipation Notes to be paid from the proceeds of an issue of electric revenue bonds entitled "Electric Revenue Bonds, Issue of 1981" authorized by Resolution No. 81R-379 of the City Council, as supplemented by Resolution No. 82R-238 of the City Council; and WHBRBAS, Section 1210.1 of the Charter ("Section 1210.1"), added to the Charter pursuant to a vote of a majority of all the voters on June 2, 1981, provides as follows: "Electric and water refunding revenue bonds may be issued to purchase, redeem or retire any bonds heretofore or hereafter issued pursuant to Section 1210 or this Section 1210.1, whenever the City Council determines that (1) costs of the City will be reduced by the refunding of any bonds, or (2) issuance of the refunding bonds will oth- erwise be financially advantageous to the City. If as a result of the issuing of refunding bonds pur- suant to this Section 1210.1, the water or electric utility of the City shall, in any Fiscal Year, realize a reduction in principal and interest on debt issued to finance such utility when the principal and interest paid on the refund- ing bonds in such Fiscal Year is compared to the principal and interest that would have been payable on the refunded bonds in such Fiscal Year, the City Council shall, not later than the last day of the next succeeding Fiscal Year, adjust rates of such utility, if necessary, to reflect fully such reduction in principal and interest payments as a reduction in costs of service of such utility. All provisions of Section 1210 are applicable to refunding bonds, except that notwithstanding Section 1210 no additional election shall be required to authorize their issuance."; and WHBRBAS, Ordinance No. 4414 of the City Council, incor- porating, among other things, certain sections of the Revenue Bond Law of 1941 (Chapter 6, Part 1, Division 2, Title 5 of the Government Code of the State of California), establishes a procedure for the issuance of refunding electric revenue bonds as provided for in Section 1210.1; and WBBRBAS, the City has heretofore issued $80,400,000 elec- tric refunding revenue bonds designated "Electric Revenue Bonds, Issue C of 1983" pursuant to Section 1210.1; and WHBRBAS, this City Council deems it necessary to issue for the purposes hereinafter set forth, $129,275,000 principal amount of electric refunding revenue bonds pursuant to Section 1210.1 and Section 1210, to be designated "Electric Revenue Bonds, Issue of -5- 1986"; and the Electric Revenue Bonds, Issue of 1986, shall be on a parity with the City's outstanding Electric Revenue Bonds, Issue of 1972, Electric Revenue Bonds, Issue of 1976, Electric Revenue Bonds, Issue of 1980 Electric Revenue Bonds, Issue A of 1983, Electric Revenue Bonds, Issue B of 1983, and Electric Revenue Bonds, Issue C of 1983 and any other parity electric revenue bonds which may be issued in the future by the City; and WHBRBAS, pursuant to Section 1210.1 this City Council hereby determines that costs of the City will be reduced by the refunding of those Electric Revenue Bonds, Issue A of 1983, Electric Revenue Bonds, Issue B of 1983 and Electric Revenue Bonds, Issue C of 1983, maturing on or after October 1, 1995 such refunding to be accomplished through the issuance of the Electric Revenue Bonds, Issue of 1986; ROW, THBREFORE, the City Council of the City of Anaheim, California, DOBS HBREBY RESOLVE, DETBRKIRB ARD ORDBR as follows: SBCrIOR 1. Definitions. As used in this Resolution: (a) "Annual Debt Service" as computed from time to time under Covenant 10 of Section 20 hereof with respect to any Fiscal Year means the amount of principal (including required payments into any sinking account established for the Bonds or any Parity Bonds) and interest which will become due and payable or will accrue in such Fiscal Year on outstanding Bonds and Parity Bonds. (b) "Authorized Investments" means any obligations in which the City may lawfully invest its funds. (c) "Bonds" means the electric revenue bonds to be designated "Electric Revenue Bonds, Issue of 1986" issued under this Resolution. (d) "City" means the City of Anaheim, California. (e) WCity Council" means the City Council of the City. <f) "Enterprise" means the entire electric system of the City, including all improvements and extensions later constructed or acquired. (g) "Escrow Account" means the account so designated established pursuant hereto and the Escrow Agreement. (h) "Escrow AgentW means the Escrow Agent which is a party to the Escrow Agreement. -6- (i) "Escrow Agreement" means the Escrow Agreement executed and delivered pursuant to Section 26 hereof, as amended and supplemented from time to time. (j) "Finance Director" means the Finance Director of the City. (k) "Fiscal Agent" means the fiscal agent under the 1972 Bond Resolution. (1) "Fiscal Year" means the year period beginning on July 1 and ending on the next following June 30. (m) "Gros& Revenues" means all rates, fees and charges for providing electric service to persons and real property and all other fees, rents and charges and other income derived by the City, from the ownership, operation, use or services of the Enterprise. (n) "Maintenance and Operation Expenses" means the reasonable and necessary current expenses of maintaining, repairing and operating the Enterprise, including City administrative expenses directly attributable to electric system functions, but excluding depreciation, interest and amortization, all computed in accordance with sound accounting principles and consistent with existing account- ing practices of the City. (0) "Maximum Annual Debt Service" as computed from time to time under Section 15 and Covenant 10 of Section 20 hereof means the largest of the sums obtained for the Fiscal Year of computation or any Fiscal Year thereafter by totaling the following for each such Fiscal Year: (1) The principal amount of all serial Bonds and serial Parity Bonds payable in such Fiscal Year and outstanding at the date of such computation; (2) The minimum sinking account payments, if any, pay- able in such Fiscal Year with respect to the term Bonds and any term Parity Bonds outstanding at the date of such computation; and (3) The interest which would be due during such Fiscal Year on the aggregate principal amount of Bonds and Parity Bonds which would be outstanding in such Fiscal Year if the serial Bonds and serial parity Bonds out- standing on the date of such computation are retired as they mature and if the term Bonds and any term Parity Bonds outstanding on the date of such computation, if any, are retired as scheduled in this -7- Resolution and in the resolution providing for the issuance of such term Parity Bonds. (p) "Net Revenues" of the Enterprise means the amount of the Gross Revenues less the Maintenance and Operation Expenses. (q) "1972 Bond Resolution" means Resolution No. 72R-83 of the City Council, adopted March 14, 1972, authorizing the issuance of the 1972 Bonds. (r) "1972 Bonds" means the $8,000,000 electric reve- nue bonds designated "Electric Revenue Bonds, Issue of 1972" referred to in the recitals hereof. (s) "1976 Bond Resolution" means Resolution No. 76R- 149 of the City Council, adopted March 30, 1976, authoriz- ing the issuance of the 1976 Bonds. (t) "1976 Bonds" means the $6,000,000 electric reve- nue bonds designated "Electric Revenue Bonds, Issue of 1976" referred to in the recitals hereof. (u) "1980 Bond Resolution" means Resolution No. 80R-457 of the City Council, adopted October 10, 1980, authorizing the issuance of the 1980 Bonds. (v) "1980 Bonds" means the $84,000,000 electric reve- nue bonds designated "Electric Revenue Bonds, Issue of 1980" referred to in the recitals hereof. (w) "1982 Bond Resolution" means Resolution No. 82R- 238 of the City Council, adopted May 7, 1982, as amended by Resolution No. 82R-257, adopted May 18, 1982, authorizing the issuance of the 1982 Bonds. (x) "1982 Bonds" means the $70,000,000 electric reve- nue bonds designated "Electric Revenue Bonds, Issue A of 1982" and "Electric Revenue Bonds, Issue B of 1982." Cy) "1983 Bond Resolution" means Resolution No. 83R-171 of the City Council, adopted April 27, 1983, authorizing the issuance of the 1983 Bonds. (z) w1983 Bonds" means the $10,000,000 electric reve- nue bonds designated "Electric Revenue Bonds, Issue A of 1983," the $40,000,000 electric revenue bonds designated "Electric Revenue Bonds, Issue B of 1983" and the $80,400,000 electric revenue bonds designated "Electric Revenue Bonds, Issue C of 1983." -8- (aa) "Ordinance No. 2980" means Ordinance No. 2980 of the City Council, adopted on November 9, 1971, as amended by Ordinance No. 4158, adopted on September 9, 1980, and by Ordinance No. 4328, adopted on April 27, 1982. (bb) "Ordinance No. 4414" means Ordinance No. 4414 of the City Council, adopted on April 26, 1983. (cc) "Parity Bonds" means the outstanding 1972 Bonds, the 1976 Bonds, the 1980 Bonds, the 1983 Bonds and any other revenue bonds, revenue notes or other similar evi- dences of indebtedness heretofore or hereafter issued for the acquisition, construction and financing of extensions of, additions to, repairs and replacements to, renewals of, and improvements of the Enterprise, payable out of the rev- enues and which, as provided in this ReSOlution, rank on a parity with the Bonds. (dd) "Parity Bond Resolution" means any resolution authorizing the issuance of Parity Bonds. (ee) "Refunded Bonds" means those Electric Revenue Bonds, Issue A of 1983, Electric Revenue Bonds, Issue B of 1983 and Electric Revenue Bonds, Issue C of 1983, maturing on or after October 1, 1995. (ff) "Registrar" means Bank of America National Trust and Savings Association. (gg) "Resolution" means this Resolution No. 86R-89 of the City Council. (hh) "Treasurer" means the Treasurer of the City. SBCTION 2. Equality of Bonds, Pledge of Revenues. Pursuant to Section 1210 and Section 1210.1 of the City Charter, Ordinance No. 4414 and this ReSOlution, the Bonds and all Parity Bonds outstanding shall be equally secured by a pledge, charge and lien upon the Gross Revenues of the Enterprise without priority for number, date of bonds, date of sale, date of execution, or date of delivery, and the payment of the interest on and principal of the Bonds and all Parity Bonds outstanding and any premiums upon the redemption of any thereof shall be and are secured by an exclusive pledge of and charge and lien upon the Gross Revenues of the Enterprise, and all of the Gross Revenues of the Enterprise are hereby pledged, charged and assigned for the security of the Bonds and all Parity Bonds, and such Gross Revenues and any interest earned on the Gross Revenues shall constitute a trust fund for the security and payment of the interest on and principal of the Bonds and all parity Bonds and so long as any of the Bonds and all Parity Bonds outstanding or interest thereon are unpaid, the Gross Revenues and -9- interest thereon shall not be used for any other purpose, except as permitted by this Resolution and any Parity Bond Resolutions, and shall be held in trust for the benefit of the bondholders and shall be applied pursuant to this Resolution, or to this Resolution as mod- ified pursuant to provisions herein, and to any Parity Bond Resolutions. Nothing in this Resolution shall preclude: (a) the redemp- tion prior to maturity of any Bonds subject to call and redemption or payment of said Bonds at maturity from proceeds of refunding bonds issued under Section 1210.1 of the city Charter as the same now exists or as hereafter amended, or under any other law of the State of California; (b) the issuance, subject to the limitations contained herein, of Parity Bonds; or (c) the issuance of additional indebted- ness payable solely from surplus moneys in the Surplus Fund pursuant to Section 17 hereof. SECTION 3. Purpose of Bonds. Under and pursuant to Section 1210.1 of the City Charter and Ordinance No. 4414 and in accordance with the authorizations stated in the recitals hereof, the Bonds shall be issued for the purpose of advance refunding the Refunded Bonds, including the payment of costs and expenses inciden- tal thereto. SBCTIOR 4. Special <X>ligations; No General City Liability. The Bonds shall be special obligations of the City and shall be pay- able as to the principal thereof and interest thereon and any premium upon the redemption of any thereof solely from the Gross Revenues. The general fund of the City is not liable for the payment of the Bonds or their interest, nor is the credit or taxing power of the City pledged for the payment of the Bonds or their interest. The holders of the Bonds or coupons, if any, shall not be entitled to compel the exercise of the taxing power by the City or the forfeiture of any of its property. The principal of and interest on the Bonds and any premium upon the redemption of any thereof are not a debt of the City or a legal or equitable pledge, charge, lien or encumbrance upon any of its property or upon any of its income, receipts or reve- nues, except the Gross Revenues. SBettl0R 5. Description of Bonds. The Bonds shall all be in the denomination of $5,000, and the Bonds, shall each be numbered consecutively from 1 upwards. The Bonds shall be designated "ELECTRIC REVENUE BONDS, ISSUE OF 1986". The Bonds shall be dated March 1, 1986, and shall be payable on October 1 in each year of maturity in the amounts for each of the several years, shall bear interest from their date payable semi-annually on the first days of April and October of each year, commencing October 1, 1986, as follows: -10- Principal Interest Year Amounts Rate 1987 $ 985,000.00 5.000% 1988 1,030,000.00 5.250 1989 1,085,000.00 5.500 1990 1,145,000.00 5.700 1991 1,210,000.00 5.900 1992 1,285,000.00 6.000 1993 1,360,000.00 6.100 1994 1,445,000.00 6.200 1995 5,930,000.00 6.400 1996 6,280,000.00 6.500 1997 6,770,000.00 6.600 1998 7,260,000.00 6.700 1999 7,685,000.00 6.800 2000 8,300,000.00 6.850 2001 8,955,000.00 6.900 2004 30,665,000.00 5.750 2007 37,885,000.00 5.750 The City Council hereby determines that the maximum rate of interest which may be paid on the Bonds equals the highest interest rate set forth above. Each Bond shall bear interest from the inter- est payment date next preceding the date of its authentication, unless such Bond is authenticated on an interest payment date, in which event from such interest payment date, or unless such Bond is authenticated as of a day during the period from the day after the record date immediately preceding an interest payment date to such interest payment date, inclusive, in which event such Bond shall bear interest from such interest payment date; provided, however, that if the date of authentication of any Bond shall be prior to September 15, 1986, such Bond shall bear interest from March 1, 1986; provided, further, that if, as shown by the records of the Registrar, interest on the Bonds shall be in default, Bonds issued in exchange for Bonds surrendered for transfer or exchange shall bear interest from the interest payment date to which interest has been paid in full on the Bonds surrendered or if no interest has been paid, March 1, 1986. The Bonds maturing in the years 1987 to 2001, inclusive, are sometimes referred to herein as .seria1 Bonds. and the Bonds maturing in the years 2004 and 2007 are sometimes referred to herein as "term Bonds.. SBC'l'IOR 6. Place of paYJlellt. Each Bond shall bea r interest from its date until the principal sum thereof has been paid; provided, however, that if at the maturity date of any Bond or if the -11- same is redeemable and has been duly called for redemption, funds are available for the payment or redemption thereof in full accordance with the terms of this Resolution, said Bonds shall then cease to bear interest. The Bonds and the interest thereon shall be payable in lawful money of the United States of America at the Corporate Agency Division of Bank of America National Trust and Savings Association in Los Angeles or San Francisco, California, or at the option of the holder, at any other paying agent of the City in New York, New York. Interest on the Bonds shall be payable by check or draft mailed to the registered owner on the registration records maintained by the Registrar, determined as of the close of business on the 15th day of the calendar month immediately preceding an inter- est payment date (including the date on which the principal of a Bond is to be paid). SBCTION 7. Bxecution and Authorization of Bonds. The Mayor of the City and the Treasurer are hereby authorized and directed to sign the Bonds by their printed, lithographed or engraved facsimile signatures, and the City Clerk of the City is hereby autho- rized and directed to countersign the Bonds by his or her facsimile signature and to affix thereto or otherwise reproduce thereon the corporate seal of the City. The Bonds shall bear thereon a certificate of authentica- tion, in substantially the form set forth in Section 24 of the Resolution, executed manually by the Registrar. Only such Bonds as shall bear thereon such certificate of authentication shall be enti- tled to any right or benefit under the Resolution and no Bond shall be valid or obligatory for any purpose until such certificate of authentication shall have been duly executed by the Registrar. Such certificate of the Registrar upon any Bond executed on behalf of the City shall be conclusive evidence that the Bond so authenticated has been duly authenticated and delivered under the Resolution and that the owner thereof is entitled to the benefits of the Resolution. SBCTIOR 8. Registration and Transfer. The Bonds shall be issued in fully registered form. The Bonds shall be transferable only upon the books of the City, which shall be kept for such pur- poses at the Securities Services Division in San Francisco of the Registrar, bf the registered owner thereof in person or by his attor- ney duly authorized in writing, upon surrender thereof together with a written instrument of transfer satisfactory to the Registrar duly executed by the registered owner or his duly authorized attorney. Upon the transfer of any such registered Bond, the Registrar shall issue in the name of the transferee a new registered Bond or Bonds of the same aggre9ate principal amount and maturity as the surrendered Bond. The Reglstrar may, with the concurrence of the City, designate an additional office where transfer of registered Bonds may be effected by the Registrar provided in this Section. -12- The city and each paying agent may deem and treat the person in whose name any Bond shall be registered upon the books of the City as the absolute owner of such Bond, whether such Bond shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal or redemption price, if any, of and inter- est on such Bond and for all other purposes, and all such payments so made to any such registered owner or upon his order shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid, and neither the City nor any paying agent shall be affected by any notice to the contrary. The City agrees to indemnifY and save each paying agent harmless from and against any and all loss, cost, charge, expense, judgment or liability incurred by it, acting in good faith and without negligence under the Resolution, in so treating such registered owner. In all cases in which the privilege of exchanging Bonds or transferring registered Bonds is exercised, the Registrar shall authenticate and deliver Bonds in accordance with the provisions of the Resolution. All Bonds surrendered in any such exchanges or transfers shall forthwith be delivered to the Registrar and cancelled by the Registrar and returned to the City. For every such exchange or transfer of Bonds, whether temporary or definitive, the City or the Registrar may make a charge sufficient to reimburse it for any tax, fee or other governmental charge required to be paid with respect to such exchange or transfer. Neither the City nor the Registrar shall be required to transfer or exchange any Bonds for a period of 15 days next preceding any selection of Bonds to be redeemed or thereafter until after the first publication or mailing of any notice of redemption or any Bonds called for redemption. SECTION 9. Redemption of Bonds. The Bonds maturing on or after October 1, 1996 (except the Bonds maturing October 1, 2004 and October 1, 2007) may be redeemed prior to maturity, at the option of the City, on and after April 1, 1996, in whole at any time or in part on any interest payment date, at the following redemption prices, expressed as a percentage of the principal amount, together with accrued interest to the date of redemption: Redeaption Periods (Dates Inclusive) Redellption price 102% 101 100 April 1, 1996 through March 31, 1997 April 1, 1997 through March 31, 1998 April 1, 1998 through thereafter The Bonds maturing on October 1, 2004 and October 1, 2007 may be redeemed prior to maturity at the option of the City on or after April 1, 1996, in whole at any time or in part on any interest payment date, at the principal amount thereof, together with accrued interest to the date of redemption. -13- The term Bonds are also subject to mandatory sinking fund redemption prior to maturity at the principal amount thereof plus accrued interest to the redemption date as provided in Section 13 hereof. The term Bonds to be so redeemed shall be selected by lot within the maturity to which such redemption relates. Allor any of the Bonds subject to redemption may be called for redemption at anyone time. If less than all of the Bonds are redeemed at anyone time, such Bonds shall be redeemed by lot within each maturity. The interest payment date on which Bonds which are called are to be presented for redemption is herein sometimes called the "redemption date." (a) Notice of Redeaption. The Registrar shall, at least 30 days but not more than 60 days prior to the redemption date, mail by first class, postage prepared, a notice to the registered owners thereof at the addresses appearing on the registration records main- tained by the Registrar, as of the date of such notice of the intended redemption of the Bonds. The notice of redemption shall (a) state the redemption date; (b) state the redemption price; (c) state the numbers and date of maturity of the Bonds to be redeemed; pro- vided, however, that whenever any call includes all of the outstand- ing Bonds subject to redemption, the numbers of the Bonds need not be stated; (d) require that such Bonds be surrendered at the Corporate Agency Division of Bank of America National Trust and Savings Association in Los Angeles or San Francisco, California, or at the option of the holder, at any other paying agent of the City in New York, New York; and (e) give notice that further interest on such Bonds will not accrue after the designated redemption date. If this Resolution is amended to permit the Bonds to be issued in coupon form, a similar notice of the intended redemption shall be published once in a newspaper of general circulation in the City of Anaheim, California, and once in a daily newspaper or financial journal pub- lished in or near the Borough of Manhattan, New York, said pUblica- tions to be at least 30 days but not more than 60 days prior to the redemption date. The actual receipt by the holder of any Bond of notice of such redemption shall not be a condition precedent to redemption, and failure to receive such notice shall not affect the validity of the proceedings for redemption of such Bonds or the cessation of interest on the redemption date. The mailed notice or notices required by this section shall be given by the Registrar. A certificate by the Registrar that notice of call and redemption has been given to hold- ers of registered Bonds as herein provided shall be conclusive as against all parties, and no bondholder whose Bond is called for redemption may object thereto or object to the cessation of interest on the redemption date fixed by any claim or showing that he failed to receive actual notice of call and redemption. -14- (b) Redemption pund. Prior to the redemption date there shall be established a redemption fund to be described as the Electric Revenue Bonds Redemption Fund (herein referred to as the "Redemption Fund"), and prior to the redemption date there shall be set aside in the Redemption Fund moneys available for the purpose and sufficient to redeem, at the prices payable as in this Resolution provided, the Bonds designated in such notice of redemption. Said moneys shall be set aside in the Redemption Fund solely for that pur- pose and shall be applied on or after the redemption date to payment of the Bonds to be redeemed upon presentation and surrender of such Bonds. Any accrued interest due on or prior to the redemption date upon Bonds shall be paid from the Bond Service Account. If, after all of the Bonds have been redeemed and cancelled or paid and can- celled, there are moneys remaining in the Redemption Fund, said moneys shall be transferred to the Revenue Account; provided, how- ever, that if said moneys are part of the proceeds Qf refunding bonds said moneys shall be transferred to the fund or account created for the payment of principal of and interest on such refunding bonds. The Redemption Fund may also be used to provide for the redemption of outstanding Parity Bonds. (c) Bffect of the Rotice of Redeaption. When notice of redemption has been given, and when the amount necessary for the redemption of the Bonds called for redemption is set aside for that purpose in the Redemption Fund, the Bonds designated for redemption shall become due and payable on the redemption date, and upon presen- tation and surrender of said Bonds at the place specified in the notice of redemption, such Bonds shall be redeemed and paid at said redemption price out of the Redemption Fund, and no interest will accrue on such Bonds called for redemption after the redemption date specified in such notice, and the holders of said Bonds so called for redemption after such redemption date shall look for the payment of such Bonds only to said Redemption Fund. All Bonds redeemed shall be cancelled forthwith and shall not be reissued. All unpaid interest payable at or prior to the redemption date upon shall continue to be payable to the respective registered owners of such Bonds, or their order, but without interest thereon. S~IOR 10. Punds and Accounts. A. The Treasurer shall continue to maintain the following funds and accounts, heretofore created under the 1972 Bond Resolution, the 1976 Bond Resolution and Resolution No. 76R-276 of the City Council and pursuant to Section 1210 of the City Charter, so long as any of the Bonds remain outstanding: (1) Electric Revenue Fund, and the following accounts within said fund: (a) Electric Revenue Bonds, Bond Service Account (the "Bond Service Account"); -15- (b) Electric Revenue Bonds, Issue of 1972, Electric System Maintenance and Operation Account (the -M&O Account"); and (c) Electric Revenue Bonds, Issue of 1972, Electric System Renewal and Replacement Account (the "R&R Account"); and (2) Electric System Surplus Revenue Fund (the "Surplus Fund"). B. The Fiscal Agent shall continue to maintain the follow- ing funds so long as any of the 1972 Bonds remain outstanding: (1) Electric Revenue Bonds, Issue of 1972, Electric System Revenue Bond and Interest Fund (the "Bond Service Fund"); and (2) Electric Revenue Bonds, Issue of 1972, Electric System Revenue Bond Reserve Fund (the "Reserve Fund"). From and after the retirement of all of the 1972 Bonds (or the date on which provision for such retirement has been made so that they are no longer outstanding within the meaning of the 1912 Bond Resolution) the Reserve Fund shall be maintained by the Treasurer so long as any of the Bonds remain outstanding. c. The Treasurer shall continue to maintain the following accounts in the Electric Revenue Fund so long as any of the 1980 Bonds remain outstanding: (1) Electric Revenue Bonds, Issue of 1980, Construction Account (the "1980 Construction Account"); (2) Electric Revenue Bonds, Issue of 1980, Interest During Construction Account (the "1980 IDC Account"); and (3) Electric Revenue Bonds, Issue of 1980, Sinking Account (the -1980 Sinking Account"). D. The Treasurer shall continue to maintain the following accounts in the Electric Revenue Fund so long as any of the 1983 Bonds remain outstanding: (1) Electric Revenue Bonds, Issue A of 1983, Construction Account (the "1983 A Construction Account"); and (2) Electric Revenue Bonds, Issue B of 1983, Construction Account (the "1983 B Construction Account"). -16- E. The Treasurer shall continue to maintain the following accounts in the Electric Revenue Fund so long as any of the Bonds remain outstanding: (1) Electric Revenue Bonds, Electric System Revenue Account (the "Revenue Account"); (2) Electric Revenue Bonds, Interest During Construction Account (the "IDC Account"); and (3) Electric Revenue Bonds Sinking Account (the "Sinking Account"). F. The following additional account is hereby created in the Electric Revenue Fund and shall be maintained by the Treasurer so long as any of the Bonds remain outstanding: (1) Electric Revenue Bonds, Issue of 1986, Cost of Issuance Account (the "1986 Costs of Issuance Account"). G. Additional accounts in the Electric Revenue Fund may be created by subsequent resolutions of the City Council. SBCTIOB 11. Disposition of Bond Proceeds and certain Available Moneys. A. Simultaneous with the issuance and delivery of the Bonds, the following transfers and deposits of moneys which are attributable to, or derived from proceeds of, the Bonds, shall be made: (1) The amount necessary, if any, to cause the amount in the Reserve Fund to equal the Maximum Annual Debt Service for the 1972 Bonds, the 1976 Bonds, the 1980 Bonds, the 1982 Bonds, the 1983 Bonds, and the Bonds shall be transferred to the Fiscal Agent and deposited in the Reserve Fund. (2) An amount which, when combined with amounts transferred to the Escrow Account as provided in Paragraphs Band C of this Section 11, shall be sufficient to purchase Escrow Securities (as defined in the Escrow Agre..ent), the principal and interest on which when due, will provide moneys which will be sufficient to pay (a) the principal of and redemption price on April 1, 1993 of the Refunded Bonds and (b) interest to become due on the Refunded Bonds on and prior to April 1, 1993. (3) The amount of the accrued interest received by the City with respect to the Bonds shall be deposited in the Bond Service Account. -17- (4) The remainder of the original proceeds of the Bonds shall be deposited in the 1986 Costs of Issuance Account. B. Simultaneous with the issuance and delivery of the Bonds, all or any portion of the moneys in the Reserve Fund, if any,. in excess of an amount sufficient to provide a balance in the Reserve Fund equal to Maximum Annual Debt Service (upon the authentication and delivery of the Bonds) and specified in writing by the Public utilities General Manager, Public utilities-Assistant General Managers, City Treasurer or Finance Director of the City, shall be transferred to the Escrow Fund. C. Simultaneous with the delivery of the Bonds, that por- tion of the moneys in the Bond Service Account (constituting moneys previously held in such Account) equal to the amount of interest scheduled to be paid on April 1, 1986 with respect to the Refunded Bonds and specified in writing by the Public Utilities General Manager, Public utilities-Assistant General Managers, City Treasurer or Finance Director of the city, shall be transferred to the Escrow Account. SB~IOR 12. Revenue AccolDlt. The Treasurer shall deposit the Gross Revenues of the Enterprise as received in the Revenue Account. On or before the twentieth day of each calendar month, the Finance Director shall withdraw the entire amount on deposit in the Revenue Account and shall allocate and deposit such amount in the indicated priority to the following accounts and fun ds . SEC'lIOH 13. Bond Service Account; IDe Account; Sinking Account. First, so long as any of the Bonds are outstanding, in addition to but on a parity with the transfers to the Bond Service Fund and the 1980 Sinking Account required by Section 14 of the 1972 Bond Resolution and Section 13 of the 1980 Bond Resolution: A. The Finance Director shall allocate to the Bond Service Account the fOllowing amounts: (1) one-sixth of the interest which will become due and payable on the outstanding Bonds and parity Bonds (other than the 1972 Bonds) within the next ensuing six months, except that, with respect to any interest payment date, the monthly sum allocated shall be the interest which will become due and payable on such interest payment date less any portion of such interest which has been provided for (a) in the case of the 1980 Bonds, by the transfers to the Debt Service Account fran the 1980 roc Account required pursuant to the 1980 Resolution, the transfers required with respect to the 1980 Bonds pursuant to Section 13(B) hereof, or any other transfers required with respect to the -18- 1980 Bonds by any parity Bond Resolution, (b) in the case of the Bonds, by the transfers required with respect to the Bonds pursuant to Section 13(C) hereof, or any other trans- fers required with respect to the Bonds by any Parity Bond Resolution, and (c) in the case of any other parity Bonds, any transfers required with respect to such Parity Bonds by any other Parity Bond Resolution; and (2) one-twelfth of the principal amount which will mature and be payable on the outstanding serial Bonds and serial Parity Bonds (other than the 1972 Bonds) within the next ensuing twelve months. B. The Finance Director shall allocate to the Sinking Account, each month during the twelve-month period preceding the dates set forth below, in addition to any amounts which may be speci- fied in any Parity Bond Resolution with respect to any term Parity Bonds to be issued by the City in the future, one-twelfth of the amount set forth below in order to pay the principal of the respec- tive amounts of term Bonds which shall be called and redeemed on the dates set forth below, unless such amounts are used to purchase term Bonds as provided in this Section: Term Bonds Maturing October 1, 2004 Sinking Account Redelllption Date (October 1) Mount: 2002 2003 2004 (final maturity) $ 9 , 5 90 ,000 10,200,000 10,875,000 Term Bonds Maturing October 1, 2007 Sinking Account Redeaption Date (October 1) MOunt 2005 2006 2007 (final maturity) $ 11,550,000 12,735,000 13,600,000 C. In any event, such sums shall be allocated from the Revenue Account to the Bond Service Account and the Sinking Account so that the full amount required to pay, as it becomes due, the interest on said Bonds and Parity Bonds (other than the 1972 Bonds) and any installment of principal on said Bonds and Parity Bonds (other than the 1972 Bonds and, with respect to sinking fund -19- payments, the 1980 Bonds) shall be set aside in the Bond Service Account and the Sinking Account at least five days prior to the date the installment of interest or principal becomes due. If for any reason in any month there are insufficient amounts in Revenue Account to make all required deposits in the Bond" Service Account, the Bond Service Fund, the 1980 Sinking Account and the Sinking Account, then the amounts available shall be allocated pro rata towards the required deposits and the deficiencies shall be added to and become a part of the allocations required for the fol- lowing calendar month. Any moneys required to be set aside in the Bond Service Account or the Sinking Account may be prepaid in whole or in part by being earlier set aside therein, and in that event the monthly allo- cation which has been so prepaid need not be made at the time appointed therefor. Each monthly transfer may be reduced by an amount equal to any investment income received during its preceding calendar month on moneys in the Bond Service Account or the Sinking Account. The Bonds shall recite that they are payable from the Electric Revenue Fund, but notwithstanding such recital shall be paid from the Bond Service Account, or from the Redemption Fund estab- lished in accordance with Section 9(b) of this Resolution. Moneys in the Sinking Account shall be used to redeem any outstanding term Bonds and parity term bonds (other than the 1972 Bonds and the 1980 Bonds) at the times and in the amounts as provided i.n this Section and any parity Bond Resolution. Any such call and redemption of term Bonds shall be made in accordance with Section 9 hereof, and for that Qurpose moneys in the Sinking Account may be transferred to the Reoemption Fund for the payment of principal upon redemption of any term Bonds called for redemption prior to maturity. Moneys in the Sinking Account may also be used, prior to the date when any term Bonds or parity term bonds (other than 1972 Bonds or 1980 Bonds) are selected by lot, in lieu of (or partially in lieu of) mandatory call and redemption on the next succeeding sinking fund redemption date, for the purchase of any such term Bonds or parity teeD bonds (other than 1972 Bonds or 1980 Bonds) at a purchase price (including brokerage and other fees) not exceeding par plus accrued interest. If after all of the Bonds and any Parity Bonds have been redeemed and cancelled or paid and cancelled (or provision is made therefor) there are moneys remaining in the Bond Service Account, the Sinking Account or the Reserve Fund, said mon~s may be transferred to the Revenue Account. -20- SBCTIOR 14. M&O Account. Second, so long as any of the Bonds are outstanding, the Finance Director shall allocate to the M&O Account amounts sufficient for the payment of the Maintenance and Operation Expenses of the Enterprise as said expenses become due and payable. Amounts in the M&O Account shall be used solely to pay Maintenance and Operation Expenses. SBCTIOR IS. Reserve Pond. Third, so long as any of the Bonds are outstanding, the Finance Director shall transfer to the Reserve Fund an amount sufficient to provide a balance in the Reserve Fund equal to Maximum Annual Debt Service. Moneys in the Reserve Fund shall be used solely for the purpose of paying the principal of and interest on the outstanding Bonds and any outstanding Parity Bonds, in the event that moneys in the Bond Service Fund (in the case of the 1972 Bonds) or the Bond Service Account or the 1980 Sinking Account (in the case of the 1980 Bonds), or the Bond Service Account or the Sinking Account (in the case of the Bonds and any other Parity Bonds) are insufficient therefor. For that purpose, the Fiscal Agent or the Treasurer, as appropriate, shall withdraw and transfer sufficient moneys fram the Reserve Fund to the Bond Service Fund, the Bond Service Account, the 1980 Sinking Account or the Sinking Account, as the case may be. If at any time the moneys in the Reserve Fund are insufficient to make all such required transfers, the available moneys in the Reserve Fund shall be distributed pro rata towards the required deposits. Prior to the transfer from the Revenue Account pursuant to Section 12 hereof in each month, moneys in the Reserve Fund in excess of Maximum Annual Debt Service may be withdrawn fram the Reserve Fund and transferred to the Revenue Account. If on the first day of a Fiscal Year in which the Maximum Annual Debt Service calculated excluding such Fiscal Year is less than the Maximum Annual Debt Service calculated including such Fiscal Year (in both cases after giving effect to any proposed redemption or refunding of any outstanding Bonds or Parity Bonds during such Fiscal Year), then in each month during such Fiscal Year, prior to the transfer from the Revenue Account pursuant to Section 12 in each month, there may be transferred from the Reserve Fund to the Revenue Account an amount equal to one-twelfth of the difference between the two calculations of Maximum Annual Debt Service. For purposes of calculating amounts required to be in the Reserve Fund during such Fiscal Year, the amounts so transferred shall be deemed to be on deposit in the Reserve Fund. Such amounts shall be used only for the purposes set forth in Section 3 hereof or to pay the principal of Bonds or Parity Bonds at maturity, by redemption or by purchase at a purchase price (including brokerage and other fees) not exceeding par plus accrued interest. -21- SBCTIOR 16. RiR Account. Fourth, so long as any of the Bonds are outstanding, the Finance Director shall allocate to the R&R Account an amount equal to 1% of the Gross Revenues received in the preceding calendar month until a balance is established, or reestab- lished, therein equal to 2% of the depreciated book value of the land, general plant and equipment which constitute the net utility plant of the Enterprise. The moneys contained in the R&R Account shall be used for transfer to the Bond Service Account, to the Bond Service Fund, to the 1980 Sinking Account or to the Sinking Account, as the case may be, to prevent default in payment of the principal and interest on the Bonds or any Parity Bonds, or for extraordinary maintenance and repairs, renewals and replacements to the Enterprise, but not for additions to and extensions of the Enterprise: provided, however, that when moneys are used for such purpose or purposes, they shall be returned by the transfer of an additional 1% of the Gross Revenues of the preceding calendar month commencing no later than 90 days after such use, until such balance is reestablished. If at any time the balance in the R&R Account exceeds the mlnlmum balance herein identified, said excess may be transferred to the Revenue Account. SBCTIOR 17. Surplus PuDd. All moneys remaining in the Revenue Account after all transfers required hereunder have been made, and all covenants contained herein have been duly performed, shall be transferred to the Surplus Fund. Moneys in the Surplus Fund not required to be transferred for any other purpose to any other account in the Electric Revenue Fund pursuant to this Section or any Parity Bond Resolution shall be applied to the payment of the principal of and interest on the City's Electric Revenue Anticipation Notes issued pursuant to Section 1210 of the City Charter and Ordinance No. 4417 to the extent required by the resolution(s) pursuant to which such notes are issued and there- after, to the extent available, may be (1) used for the redemption of any outstanding Bonds or Parity Bonds which are subject to call and redemption prior to maturity or for the purchase fram to time in the open market of any outstanding Bonds or Parity Bonds whether or not subject to call and redemption (irrespective of the maturity or number of such Bonds or Parity Bonds) at prices and in such manner, either at public or private sale, or otherwise, as the Treasurer in his or her discretion may determine, but such purchase price (including brokerage and other charges, but excluding accrued interest) shall not exceed the principal amount or the redemption price of the callable Bonds or Parity Bonds on the next redemption date, whichever is less; or (2) used for any lawful purpose of the City, including but not limited to the secur1ty and payment of other indebtedness incurred in connection with the Enterprise. SBCTIOR 18. Investaents. Ob 1 i gat ion s pur c has e d as investments of moneys in any of the funds and accounts in which -22- investments are authorized shall be deemed at all times to be a part of such funds and accounts and any income realized from such invest- ments shall be credited to such funds and accounts and any losses resulting from such investments shall be charged to such funds and accounts; provided, however, that any income derived fram investment of proceeds of the 1983 Bonds in the IDC Account shall, when received, be transferred to the 1983 A Construction Account and the 1983 B Construction Account, proportionately with the respective original principal amounts of 1983 A Bonds and 1983 B Bonds. The Fiscal Agent or the Treasurer, as the case may be, shall sell at the best price obtainable or present for redemption any obligations so purchased whenever it may be necessary to do so in order to provide moneys to meet any payment or transfer from such funds and accounts. For the purpose of determining at any given time the balance in any such funds and accounts, any such investments constituting a part of such funds and accounts shall be valued at the then estimated or appraised market value of such investments. Moneys in all funds and accounts described in Section 10 hereof shall be invested only in Authorized Investments, except that so long as any of the 1972 Bonds are outstanding, amounts in the Revenue Account, the M&O Account, the R&R Account, the Bond Service Fund and the Reserve Fund shall be invested only in direct obligations of or obligations guaranteed by the United States of America, or certificates of deposit of recog- nized banks or trust companies fully secured by direct obligations of or obligations guaranteed by the United States of America. All investments of moneys in such funds and accounts shall mature not later than such times as the Treasurer estimates such moneys shall be needed for the purposes for which such moneys are held. SBCTIOB 19. Warran~y. The City shall preserve and pro- tect the security of the Bonds and the rights of the bondholders and warrant and defend their rights against all claims and demands of all persons. SBCTIOB 20. Covenants. So long as any of the Bonds are outstanding, the City makes the following covenants with the bond- holders under the provisions of Section 1210 of the City Charter (to be performed by the City or its proper officers, agents or employees) which covenants are necessary, convenient and desirable to secure the Bonds and tend to make them more marketable; provided, however, that said covenants do not require the City to expend any moneys other than the Gross Revenues of the Enterprise. COVenant 1. Punctual Payment. The City covenants that it will duly and punctually payor cause to be paid the principal of and interest on every Bond issued hereunder, together with the premium thereon, if any be payable, on the date, at the place and in the manner mentioned in the Bonds and coupons and in accordance with this Resolution, and that the payments into the Bond Service Account, the Sinking Account and the Reserve Fund will be made, all in strict conformity with the terms of the Bonds and of this Resolution, and -23- that it will faithfully observe and perform all of the conditions, covenants and requirements of this Resolution and all resolutions supplemental thereto and of the Bonds issued hereunder, and that time of such payment and performance is of the essence of the City's con- tract with the bondholders. Covenant 2. Discharge Cl~. The City covenants that in order to preserve and protect the priority and security of the Bonds the City shall pay from amounts available in the O&M Account and dis- charge all lawful claims for labor, materials and supplies furnished for or in connection with the Enterprise which, if unpaid, may become a lien or charge upon the property or Gross Revenues of the Enterprise prior or superior to the lien of the Bonds and impair the security of the Bonds. The City shall also pay from amounts avail- able in the O&M Account all taxes and assessments or other governmen- tal charges lawfully levied or assessed upon or in respect of the Enterprise or upon any part thereof or upon any of the revenues thereof. Covenant 3. Operate BDterprise in Bfficient and Bconcaical Manner. The City covenants to operate the Enterprise in an efficient and economical manner and to operate, maintain and preserve the Enterprise in good repair and working order. Covenant 4. Against Sale, Bainent Do.ain, Bxisting and Future Agreements. Except as provided herein, the City covenants that the Enterprise shall not be mortgaged or otherwise encumbered, sold, leased, pledged, any charge placed thereon, or disposed of as a whole or substantially as a whole unless such sale or other disposi- tion be so arranged as to provide for sums adequate to provide for the immediate payment of the principal of and interest on and premi- ums, if any, due upon the call and redemption thereof, of the Bonds. The City further covenants that the Gross Revenues of the Enterprise or any other funds pledged or otherwise made available to secure pay- ment of the principal of and interest on the Bonds shall not be mort- gaged, encumbered, sold, leased, pledged, any charge placed thereon, or disposed of or used except as authorized by the terms of this Resolution. The city further covenants that it will not enter into any agreement which impairs the operation of the Enterprise or any part of it necessary to secure adequate revenues to pay the principal of and interest on the Bonds or which otherwise would impair the rights of the bondholders with respect to the Gross Revenues of the Enterprise. If any substantial part of the Enterprise is sold, the payment therefor shall either be used for the acquisition and/or con- struction of improvements and extensions of the Enterprise or shall be placed in the appropriate funds or accounts and shall be used to payor call and redeem the outstanding Bonds and any parity Bonds in the manner provided in this Resolution or in any Parity Bond Resolution. -24- The city covenants that any amounts received as awards as a result of the taking of all or any part of the Enterprise by the lawful exercise of eminent domain, if and to the extent that such right can be exercised against such property of the City, shall either be used for the acquisition and/or construction of improve- ments and extension of the Enterprise or shall be placed in the appropriate funds or accounts and shall be used to payor call and redeem the outstanding Bonds and any Parity Bonds in the manner pro- vided in this Resolution or in any parity Bond Resolution. The City will not sell, lease or otherwise encumber any part of the Enterprise except properties or facilities no longer useful or necessary to its efficient and economical operation. Any proceeds from the sale or disposition of any part of the Enterprise shall be placed in the Revenue Account. Covenant 5. Insurance. The City covenants that it shall at all times maintain with responsible insurers all such insurance on the Enterprise as is customarily maintained by similar utilities sys- tems with respect to works and properties of like character against accident to, loss of or damage to such works or properties and against loss of revenues. If any useful part of the Enterprise shall be damaged or destroyed such part shall be restored to use. The money collected from insurance against accident, loss or damage shall be used for repairing or rebuilding the lost, damaged or destroyed works and properties, and to the extent not so applied, shall be applied to the retirement of outstanding Bonds and any Parity Bonds issued for the Enterprise and for such purpose paid into the appro- priate funds or accounts. The money collected from any loss of reve- nues insurance shall be deposited in the Revenue Account. The City shall also maintain with responsible insurers worker's compensation insurance and insurance against public liabil- ity and property damage to the extent reasonably necessary and obtainable to protect the City and the bondholders. Notwithstanding the foregoing, the City may provide any insurance required by this Covenant 5 through a self-insurance program. Covenant I. Records and Accounts. The City covenants that it shall keep proper books of record and accounts of the Enterprise, separate from all other records and accounts, in which complete and correct entries shall be made of all transactions relat- ing to the Enterprise. Said books shall at all times be subject to the inspection of the holders of not less than 10% of the outstanding Bonds or their representatives authorized in writing. The City covenants that it will cause the books and accounts of the Enterprise to be audited annually by an independent certified public accountant or firm of certified public accountants -25- and shall furnish a copy of the audit report, upon request, to any bondholder. Covenant 7. Collection of Charges. The City will permit no free use or services of the Enterprise. The City will pay promptly into the Revenue Account from the City's General Fund (9r other available funds) for all City use and services of the Enterprise. The City will not grant or establish within any class of service preferential or discriminatory rates, fees or charges for use and services of the Enterprise. For the purposes of setting such rates, fees and charges, service located outside the city limits of the City of Anaheim may be considered as separate classes of service. The City covenants that it shall at all times during the period any of the Bonds are outstanding maintain and enforce valid regulations for the payment of bills for electric service and that such regulations shall at all times during such period provide that the City shall discontinue electric service to any user whose elec- tric bill has not been paid within the time fixed by said regulations. Covenant 8. Rates and Charges. The City shall and hereby covenants that it shall prescribe, revise and collect such charges for the services and facilities of the Enterprise which, after making allowances for contingencies and error in the estimates, shall be at least sufficient to pay the following amounts in the order set forth: (a) The interest on and principal payments (including any sinking account payments) of the outstanding Bonds and parity Bonds as they become due and payable; (b) All current expenses for the necessary and rea- sonable Maintenance and Operation Expenses of the Enterprise as said expenses become due and payable: (c) All payments required for compliance with this Resolution including transfers required to be made from the Revenue Account to other funds and accounts; and (d) All payments required to meet any other obliga- tions of the City which are charges, liens or encumbrances upon or payable from the Gross Revenues of the Enterprise; and the charges shall be so fixed that the Net Revenues shall at least equal 1.10 times the amounts payable under (a), provided that so long as any of the 1972 Bonds remain outstanding said charges shall be so fixed that the Net Revenues shall at least equal 1.25 times the amounts payable under (a). For purposes of this Section, Net Revenues shall include all investment income on all accounts established in the Electric Revenue Fund and on all other funds -26- established for the benefit of the holders of outstanding Bonds or Parity Bonds. Covenant 9. No Priority for Additional Indebtedness. The City covenants that no additional indebtedness shall be incurred pursuant to Section 1210 and other provisions of the City Charter or any law of the State of California having any priority in payment of principal or interest out of the Gross Revenues of the Enterprise over the Bonds. Covenant 10. Liaits on Parity~. (a) Parity bonds may be issued to finance or re-finance any repairs, improvements, enlargements or extensions of the Enterprise, provided that the City covenants that no such additional indebtedness evidenced by revenue bonds, revenue notes or any other evidence of indebtedness payable out of the Gross Revenues of the Enterprise and ranking on a parity with the Bonds shall be created or incurred unless: Pirst: The City is not in default under the terms of this Resolution. Second: The Net Revenues of the Enterprise, calculated on sound accounting principles, as shown by the books of the City for each of the last two com- pleted Fiscal Years prior to the adoption of the reso- lution approving the sale of such additional indebted- ness as shown by an audit certificate or opinion of an independent certified public accountant or firm of certified public accountants employed by the City, plus, at the option of the City, the allowance for earnings hereinafter set forth in subparagraph (c) of this covenant, shall have amounted to at least 1.10 times the Annual Debt Service in the Fiscal Year next succeeding the Fiscal Year in which such additional indebtedness is incurred on all outstanding Bonds and Parity Bonds, and, so long as any of the 1972 Bonds remain outstanding, at least 1.25 times the Maximum Annual Debt Service in any Fiscal Year thereafter on all indebtedness to be outstanding immediately subse- quent to the incurring of such additional indebtedness. (b) Parity Bonds may also be issued to refund outstanding Bonds or parity Bonds if, after giving effect to the application of the proceeds thereof either (i) Annual Debt Service will not be increased in any Fiscal Year in which Bonds or Parity Bonds (outstanding on the date of issuance of such refunding Parity Bonds, but excluding such refunding parity Bonds) not being refunded are outstanding, or (ii) the Net Revenues of the Enterprise, calculated on sound accounting principles, as shown by the books of the City for each of the last two completed Fiscal Years prior to the adoption of -27- the resolution approving the sale of such additional indebtedness as shown by an audit certificate or opinion of an independent certified public accountant or firm of certified public accountants employed by the City, plus, at the option of the City, the allowance for earnings hereinafter set forth in subparagraph (c) of this covenant, shall have amounted to at least 1.10 times the Annual Debt Service in the Fiscal Year next succeeding the Fiscal Year in which such additional indebtedness is incurred on all outstanding Bonds and parity Bonds; provided, however, that nothing contained in this subparagraph (b) shall limit the City's power to issue Parity Bonds to refund the out- standing 1972 Bonds as a whole. (c) For the purposes of this covenant, the following may be added to the Gross Revenues of the Enterprise for the purpose of applying the restrictions contained in this covenant: An allowance for earnings arising from any increase in the charges made for service from the Enterprise which has become effective prior to the incurring of such additional indebtedness but which, during all or any part of said last two completed Fiscal Years, was not in effect, in an amount equal to 95% of the amount by which the Gross Revenues should have been increased if such increase in charges had been in effect during the whole of said last two co~ pleted Fiscal Years, as shown by the certificate or opinion of an independent certified accountant or firm of certified public accountants employed by the City. (d) For purposes of this Section, Net Revenues shall include all investment income on all accounts established in the Electric Revenue Fund and on all other funds established for the ben- efit of the holders of Bonds or Parity Bonds. Covenant 11. Arbitrage. The City covenants that under no circumstances shall any initial investment, subsequent investment or reinvestment of the proceedS of the Bonds be made in such a manner as to result in the loss of exemption from federal income taxation of interest on the Bonds. Covenant 12. ~az CovenuK. In order to maintain the exemption from Federal income taxation of interest on the Bonds, and for no other purpose, the City covenants to comply with each applica- ble requirement of the Tax Reform Bill of 1985 (H.R. 3838), as adopted by the United States House of Representatives on December 17, 1985 (the -Bill-) exce~t any such requirement with respect to which the City receives an oplnion of counsel of recognized standing in the field of law relating to municipal bonds to the effect that continu- ing compliance by the City with such requirement of the Bill is not required in order to maintain the Federal income tax exemption of interest on the Bonds. In furtherance of this covenant, the City -28- agrees to comply with the H.R. 3838 Letter of Instructions (the "Letter-) provided to the City by Mudge Rose Guthrie Alexander & Ferdon, as Co-Bond Counsel, on the date of issuance and delivery of the Bonds as such Letter may be amended from time to time, as a source of guidance for compliance with the Bill. The provisions of this Covenant 12 of Section 20 shall no longer be of any force or effect upon receipt of an opinion of counsel of recognized standing in the field of law relating to municipal bonds to the effect that noncompliance with the applicable requirements of the Bill will not change the then current Federal income tax status of the interest on the Bonds. Notwithstanding any other provision of the Resolution to the contrary, upon the City's failure to observe, or refusal to comply with, the above covenant the Holders of any Parity Bonds other than the Bonds, shall not be entitled to exercise any right or remedy provided to Bondholders under the Resolution or otherwise based upon the City's failure to observe, or refusal to comply with, the above covenant. Covenant 13. ProvisioDS and Restrictions with Respect to Defeasance. (1) In the event the City shall seek, prior to the maturity or redemption date thereof, to pay or cause to be paid, within the meaning and with the effect expressed in Section 28 hereof, all then outstanding Bonds, and the pro- visions of Covenant 12 of Section 20 hereof shall then be of any force or effect, then, notwithstanding the provi- sions of Section 28 hereof, such Bonds shall not be deemed to have been paid within the meaning and with the effect expressed in Section 28 unless, in addition to all other requirements of Section 28 hereof: (a) The City shall have delivered to the escrow agent for the Bonds a certificate of an authorized officer (the -Certificate-) to the effect that: (i) the City is then in compliance with Covenant 12 of Section 20 hereof; and (ii) the City has irrevocably deposited with such escrow agent such moneys, securities, documents and other things and issued such irrevocable instructions to such escrow agent and the Registrar so that any remain- ing and continuing applicable requirements of the Bill, with respect to the Bonds, from compliance with which the City has not theretofore been relieved under the -29- provisions of Section 28 hereof, are ministerial and reportorial in nature; and (iii) the City has irrevocably authorized such escrow agent, and delegated to such escrow agent the authority, to perform such remaining and continuing applicable requirements on the City's behalf, and such escrow agent has undertaken so to do; and (b) There shall have been delivered to such escrow agent an opinion of counsel of recognized standing in the field of law relating to municipal bonds to the effect that based upon the matters set forth in the Certificate described in (a) above and assuming compliance by such escrow agent with its undertaking described in (a) (iii) above, no further action by or on the part of the City will be required under the applicable requirements of the Bill to main- tain the Federal income tax exemption of interest on the Bonds. (2) In the event the City shall seek, prior to the maturity or redemption date thereof, to payor cause to be paid, within the meaning and with the effect expressed in the Resolution, less than all of the outstanding Bonds, and the provisions of Covenant 12 of Section 20 hereof shall then be of any force or effect, then, notwithstanding the provisions of Section 28 hereof, the Bonds which the City then seeks to payor cause to be paid shall not be deemed to have been paid within the meaning and with the effect expressed in Section 28 hereof unless there shall have been delivered to the escrow agent for the Bonds an opinion of counsel of recognized standing in the field of law relating to municipal bonds to the effect that either (i) noncompliance thereafter with the applicable provisions of the Bill will not change the then current Federal income tax status of the interest on such Bonds, or (ii) there are no provisions of the Bill which must thereafter be complied with by the City in order to maintain the Federal income tax exemption of interest on such Bonds. SIICl'IOB 21. Lost, Stolen, Destroyed, or Mutilated Bonds. In the event that any Bond or any interest coupon pertaining thereto is lost, stolen, destroyed or mutilated, the City will cause to be issued a new Bond or coupon similar to the original to replace the same in such manner and upon such reasonable terms and conditions, including the payment of costs and the posting of a surety bond if the City deems such surety bond necessary, as may from time to time be determined and prescribed by resolution. The City may authorize -30- such new Bond or coupon or coupons to be signed and authenticated in such manner as it determines in said resolution. S~IO. 22. Cancellation of Bonds. All Bonds and cou- pons surrendered to any paying agent of the City for payment upon maturity or for redemption shall upon payment therefor be cancell~d immediately. Any Bonds purchased by the City as authorized herein together with all unpaid coupons pertaining thereto shall be can- celled forthwith and shall not be reissued. SECTION 23. Consent of Bondholders. The con s e n t s 0 f bondholders provided for in this Section shall relate solely to the amendment, waiver or modification of the covenants specified in Section 20 hereof and shall not be effective to waive or modify any other provisions of this Resolution or any other proceedings for the issuance of the Bonds. Any act relating to the amendment, waiver or modification of any of the said covenants consented to by bondholders holding 60% in aggregate principal amount of the outstanding Bonds, exclusive of Bonds, if any, owned by the City, shall be binding upon the holders of all of the Bonds and shall not be deemed an infringe- ment of any of the provisions of this Resolution, whatever the char- acter of such act may be, and may be done and performed as fully and freely as if expressly permitted by the terms of this Resolution, and after such consent relating to such specified matters has been given, no bondholder shall have any right or interest to object to such action or in any manner to question the propriety thereof or to enjoin or restrain the City or any officer thereof from taking any action pursuant thereto. Bondholders may consent by affirmative vote at a bondholders' meeting or may consent in writing without a meeting, all as hereinafter provided. No such amendment, waiver or modification shall be made which will permit (a) a change in the maturity or term of redemption of the principal of any Bond or any installment of interest thereon or a reduction in the principal amount of or redemption price or redemption premium or rate of interest upon any Bond without the con- sent of the holder of such Bond; or (b) a reduction of the percentage of the principal amount of Bonds the vote or consent of which is required to effect any such amendment. (a) Calling Bondholders' lIeetinge 1ft h e C i t Y s hall desire to obtain any such consent it may call a meeting of bondhold- ers, by resolution, for the purpose of considering the action, the consent to which is desired. (b) Botiee of lIeetinge Notice specifying the purpose, place, date and hour of such meeting shall be published once in a financial newspaper or journal of national circulation published in or near the City of New York, New York, not less than sixty days and -31- not more than ninety days prior to the date fixed for the meeting. Such notice shall set forth the nature of the proposed action, con- sent to which is desired. The City Clerk of the City shall, on or before the first publication of such notice, mail a similar notice, postage prepaid, to the respective registered owners thereof at their addresses appearing on the Bond registry books. The place, date and hour of holding such meeting and the date or dates of publishing and mailing such notice shall be determined by the City, in its discretion. The actual receipt by any bondholder of notice of any such meeting shall not be a condition precedent to the holding of such meeting, and failure to receive such notice shall not affect the validity of the proceedings thereat. A certificate by the City Clerk, approved by resolution of the City Council, that the meeting has been called and that notice thereof has been given as herein pro- vided shall be conclusive as against all parties and it shall not be open to any bondholder to show that he failed to receive notice of such meeting. (c) voting Qualifications. Any bondholder may, prior to any such meeting, deliver his Bond or Bonds to any agency designated by the City for the purpose, and shall thereupon be entitled to receive an appropriate receipt for the Bond or Bonds so deposited, calling for the redelivery of such Bond or Bonds at any time after the meeting. The Treasurer shall prepare and deliver to the chairman of the meeting a list of the names and addresses of the registered owners of Bonds, with a statement of the maturities and serial num- bers of the Bonds held and deposited by each of such bondholders, and no bondholder shall be entitled to vote at such meeting unless his name appears upon such list or unless he shall present his Bond or Bonds at the meeting or a certificate of deposit thereof, satisfac- tory to the City, executed by a bank or trust company. No bondholder shall be permitted to vote with respect to a larger aggregate princi- pal amount of Bonds than is set against his name on such list, unless he shall produce the Bonds upon which he desires to vote, or a cer- tificate of deposit thereof as above provided. (d) IS8uer-owned Bonds. The City covenants that it will present at the meeting a certificate, signed and verified by one member of the city Council and by the Treasurer stating the maturi- ties and serial numbers of all Bonds owned by, or held for account of, the city, directly or indirectly. No person shall be permitted at the meeting to vote or consent with respect to any Bond appearing upon such such certificate, or any Bond which it shall be established at or prior to the meeting is owned by the City, directly or indi- rectly, and no such Bond (in this Resolution referred to as an "issuer-owned BondR) shall be counted in determining whether a quorum is present. -32- (e) Quorum and Procedure. A representation of at least 60% in aggregate principal amount of the Bonds then outstanding (exclusive of issuer-owned Bonds) shall be necessary to constitute a quorum at any meeting of bondholders, but less than a quorum may adjourn the meeting from time to time, and the meeting may be held as so adjourned without further notice, whether such adjournment shall have been had by a quorum or by less than a quorum. The City shall, by an instrument in writing, appoint a temporary chairman of the meeting, and the meeting shall be organized by the election of a per- manent chairman and a secretary. At any meeting each bondholder shall be entitled to one vote for every $5,000 principal amount of Bonds with respect to which he shall be entitled to vote as afore- said, and such vote may be given in person or by proxy duly appointed by an instrument in writing presented at the meeting. The City, by its duly authorized representative, may attend any meeting of the bondholders, but shall not be required to do so. (f) Vote Required. At any such meeting held as aforesaid there shall be submitted for the consideration and action of the bondholders a statement of proposed action, consent to which is desired, and if such action shall be consented to and approved by bondholders holding at least 60% in aggregate amount of the Bonds then outstanding (exclusive of issuer-owned Bonds) the chairman and secretary of the meeting shall so certify in writing to the City, and such certificate shall constitute complete evidence of consent of bondholders under the provisions of this Resolution. A certificate signed and verified by the chairman and the secretary of any such meeting shall be conclusive evidence and the only competent evidence of matters stated in such certificate relating to proceedings taken at such meeting. (g) Written Consent of Bondholders. If the City shall desire to obtain any such consent in writing, without a meeting of bondholders, the City Council may, by resolution, propose the action, to which consent is desired. A copy of such resolution, together with a request to bondholders for their consent to the action pro- posed therein, shall be published once in a financial newspaper or journal of national circulation published in or near the City of New Yor k, New York. If any of the Bonds shall be so registered as to be payable otherwise than to bearer, the City Clerk of the City shall, on or before the publication of such resolution and request, mail a copy thereof to each registered owner at the address appearing on the bond registry books. The actual receipt by any bondholder of such resolution and request shall not affect the validity of the proceedings for the obtaining of such consent. A certificate by said City Clerk, approved by resolution of the city Council, that said resolution and request has been published and mailed as herein provided shall be conclusive as against all parties, and it shall not be open to any -33- bondholder to show that he failed to receive such resolution and consent. Each written consent shall be accompanied by proof of ownership of the Bonds for which such consent is given. Proof of ownership shall be made in such manner as shall be prescribed by the resolution proposing the action. Any such written consent shall be binding upon the holder of the Bonds giving such consent and on any subsequent holder (whether or not such subsequent holder has notice thereof) unless such consent is revoked in writing by the holder giving such consent or by the subsequent holder. To be effective, any revocation of consent must be filed before the adoption of the resolution accepting consents as hereinafter provided. After the holders of at least 60% in aggregate principal amount of the Bonds then outstanding (exclusive of issuer-owned Bonds) shall have consented in writing, the City Council shall adopt a resolution accepting such consents and such resolution shall con- stitute complete evidence of the consent of bondholders under this Resolution. (h) publication of Consent. Notice specifying the amend- ment, waiver or modification that has received the consent of bond- holders as required by this section shall be published once in a financial newspaper or journal of national circulation published in or near the City of New York, New York, not less than sixty days fol- lowing the final action in the proceedings for the obtaining of such consent. Said notice is only for the information of bondholders and failure to publish such notice or any defect therein shall not affect the validity of the proceedings theretofore taken in the obtaining of such consent. SECTIOR 24. Bond Fora. Subject to the provisions of the Resolution, the Bonds shall be issued in registered form, and the form of the Bonds and the Registrar's Certificate of Authentication shall be substantially as follows: -34- [BOND FORM] URITED STATES OP ARBRIC& S'.rATE OP CALIFORHIA COOR'rY OF ORANGE CITY OP ANABEIII ELBCTRIC RBVEROB BaRD, ISSOB OF 1986 No. Interest Rate: Maturity Date: Dated Date: CU SI P: The CITY OP ANABBIII, a municipal corporation situated in the County of Orange, State of California (the .City.), FOR VALUE RECEIVED, hereby promises to pay, solely from the Electric Revenue Fund, as hereinafter provided, to or registered assigns, on the Maturity Date stated hereon, upon presentation and surrender of this bond, the sum of OOLLARS, with interest thereon at the Interest Rate per annum stated hereon, payable semiannually on the first day of April and October of each and every year, commencing October l, 1986, until the City's obligation with respect to the pay- ment of such pr incipal sum shall be discharged. Such interest shall be payable from the most recent interest payment date next preceding the date hereof to which interest has been paid, unless the date hereof is an April 1 or october 1 to which interest has been paid, in which case from the date hereof, or unless the date hereof is prior to September 15, 1986, in which case from March 1, 1986, or unless the date hereof is between a record date and the next succeeding interest payment date, in which case fram such interest payment date; provided, further, that if, as shown by the records of the Registrar, interest on the 1986 Bonds shall be in default, 1986 Bonds issued in exchange for 1986 Bonds surrendered for transfer or exchange shall bear interest from the interest payment date to which interest has been paid in full on the 1986 Bonds surrendered or if no interest has been paid, March l, 1986. The terms and provisions of this bond and definitions of certain terms used herein are continued on the reverse side of this bond and such continued terms and provisions and definitions shall for all purposes have the same effect as though fully set forth on the front of the bond. This bond shall be negotiable, subject with respect to transfer to the provisions for registration set forth on the reverse hereof and in the Resolution. It is hereby certified and recited that any and all acts, conditions and things required to exist, to happen and to be -35- performed precedent to and in the incurring of the indebtedness evidenced by this bond and in issuance of this bond exist, have ha~ pened, and have been performed in due time, form and manner as required by the Constitution and laws of the State of California and the Ci ty Charter and that this bond, together with all other indebt- edness of the city pertaining to the City's electric system, is: within every debt and other limit prescribed by the Constitution and laws of the State of California and the City Charter. This bond shall not be entitled to any benefit under the Resolution or be valid or become obligatory for any purpose until this bond shall have been authenticated by the execution by the Registrar of the Registrar's Certificate of Authentication hereon. IN WITNBSS WHBREOF, the City of Anaheim has caused this bond to be signed by the Mayor and the City Treasurer of the City by their facsimile signatures, countersigned by the City Clerk of said City by her facsimile signature, and sealed with the corporate seal of the City, and has caused this bond to be dated March l, 1986. lIayor COUlftBRSIGNBD: Ci t:y Clerk Ci ty Treasurer ( SBAL) -36- [FORM OF CERTIFICATE OF AUTHENTICATION ON ALL BONDS] REGISTRAR'S CERTIFICATE OF AUTHENTICATION This bond is one of the Bonds delivered pursuant to the within-mentioned Resolution. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION Registrar By: Authorized Officer Date of Authentication and Registration: -37- [REVERSE OF BOND] Both principal of and interest on this bond are payable in lawful money of the United States of America. The principal on this bond and any premium upon the redemption thereof are payable at the Securities Services Division of Bank of America National Trust and Savings Association in Los Angeles or San Francisco, California, or, at the option of the holder, at any other paying agent of the City in New York, New York. Interest on this bond shall be payable by check or draft mailed to the registered owner on the registration records maintained by the Registrar, determined as of the close of business on the l5th day of the calendar month immediately preceding an inter- est payment date (including the date on which the principal of a Bond is to be paid). This bond is one of a duly authorized issue of bonds of the City designated "Electric Revenue Bonds, Issue of 1986" (the bonds), all of which have been issued pursuant to Section l210 or Section 1210.1 of the City Charter, Ordinance No. 4414 of the City Council (the "Ordinance"), for the purpose of advance refunding that portion of the City's Electric Revenue Bonds, Issue A of 1983, Electric Revenue Bonds, Issue B of 1983 and Electric Revenue Bonds, Issue C of 1983 maturing on or after October 1, 1995 and the creation of said issue and the terms and conditions of the bonds are provided for by the resolution of the City Council authorizing the bonds and the bonds of the City designated "Electric Revenue Bonds, Issue of 1986, adopted March 4, 1986, designated Resolution No. 86R-89 (the "Resolution"), and this reference incorporates the Resolution and Section 1210 and Section l210.1 of the City Charter and the Ordinance, and by acceptance hereof the holder of this bond assents to said terms and conditions. The Resolution is adopted under, and this bond is to be construed in accordance with, the City Charter, the Ordinance and the laws of the State of California. This bond and the interest hereon and any premium upon the redemption hereof are not a debt of the City, nor a legal or equita- ble pledge, charge, lien or encumbrance upon any of its property or upon any of its income, receipts, or revenues, except the Gross Revenues (as defined in the Resolution) of the City's electric system pledged to its payment, and the principal of and the interest on this bond and any premium upon the redemption hereof are payable solely from the Gross Revenues of the City's electric system pledged to its payment and said City is not obligated to pay such principal, inter- est and premium except from said Gross Revenues. The Electric Revenue Fund is established under and pursuant to Section 1210 of the City Charter, the Ordinance and the Resolution, and under the provi- sions of the Resolution the Gross Revenues of the City's electric system are required to be deposited to the credit of the Electric Revenue Fund and used only for the purposes authorized by the Resolution, including the payment of principal and interest of the bonds. -38- By the terms of Section l2l0 of the City Charter and the Ordinance and by covenant expressed in the Resolution, the City is obligated to prescribe, revise and collect charges for the services and facilities of the electric system of the City such as to provide revenues sufficient to pay the interest on and principal of the bonds as they become due and payable in addition to all other payments required for compliance with the Resolution and the necessary and reasonable maintenance and operation costs of the City's electric system, is prohibited from issuing bonds having any priority with respect to payment from the Gross Revenues of the City's electric system, and is subject to conditions with respect to any sale of said electric system. In the manner provided in the Resolution, any or all of the obligations referred to in this paragraph and certain other obligations mentioned in the Resolution may be waived with the consent of the holders of 60% in aggregate principal amount of the outstanding bonds, exclusive of issuer-owned bonds. If this bond matures on or after October l, 1996 (except bonds maturing on October 1, 2004 and October 1, 2007), it is redeem- able in the manner and subject to the terms and provisions, and with the effect, set forth in the Resolution referred to on the face of this bond, at the option of the City, on and after April l, 1996, in whole at any time or in part on any interest payment date. Notice of such redemption shall be mailed first-class, postage prepaid to the owner of record of this bond as of the date of such notice, which shall be at least 30 days' prior to the date fixed for redemption. Such redemption at the following redemption prices, expressed as a percentage of the principal amount, together with accrued interest to the date of redemption: Redeaption Periods (Dates Inclusive) April 1, 1996 and March 31, 1997 April 1, 1997 and March 31, 1998 April 1, 1998 and thereafter RedeaDtion Price 102% 101 100 If this bond matures on October 1, 2004 or October 1, 2007, it is subject to redemption at the principal amount thereof, together with accrued interest to the date of redemption, commencing on April l, 1996, as more fully set forth in the Resolution. If this Bond matures on October l, 2004 or October l, 2007, it is subject to mandatory sinking fund redemption prior to maturity at the principal amount thereof plus accrued interest to the redemp- tion date as more fully set forth in the Resolution. The Bonds are issuable in the form of registered Bonds without coupons in the denominations of $5,000 or any integral multiple of $5,000. The owner of any Bond or Bonds may surrender the same (together with a written inetrument of transfer satisfactory to -39- the Registrar duly executed by the registered owner or his duly authorized attorney) at the Securities Services Division of Bank of America National Trust & Savings Association in San Francisco, California, as Registrar, in exchange for an equal aggregate princi- pal amount of registered Bonds of any other authorized denominations. Such exchanges shall be in the manner, subject to the conditions and upon the payment of the charges provided in the Resolution. This bond is transferable, as provided in the Resolution, only upon the books of the City kept for that purpose at the above-mentioned Securities Services Division of the Registrar, by the registered owner hereof in person, or by his duly authorized attor- ney, upon surrender of this bond together with a written instrument of transfer satisfactory to the Registrar duly executed by the regis- tered owner or his duly authorized attorney, and thereupon a new reg- istered bond or bonds of this series, without coupons and in the same aggregate principal amount, shall be issued to the transferee in exchange therefor as provided in the Resolution, and upon payment of the charges therein prescribed. The City and the paying agents of the City may deem and treat the person in whose name this bond is registered as the absolute owner hereof for the purpose of receiving payment of, or on account of, the principal and interest due hereon and for all other purposes. S~IOR 25. ~e.porary Bonds. Any Bonds may be initially issued in temporary form exchangeable for definitive Bonds. The te~ porary Bonds may be printed, lithographed or typewritten, shall be of such denominations as may be determined by the City, shall be without coupons and may contain such reference to any of the provisions of this Resolution as may be appropriate. Every temporary Bond shall be executed and sealed by the City in substantially the same manner as provided in Section 7 hereof. If the City issues temporary Bonds it will execute and furnish definitive Bonds without delay and thereupon the temporary Bonds may be surrendered for cancellation at the office of the Treasurer, and the Treasurer shall deliver in exchange for such temporary Bonds an equal aggregate principal amount of defini- tive Bonds of the same interest rates and maturities. Until so exchanged, the temporary Bonds shall be entitled to the same benefits under this Resolution as definitive Bonds issued hereunder. SBCTIOR 26. Authorization of Escrow Agr~t. The City Council hereby approves the Escrow Agreement, dated as of March 1, 1986, relating to the defeasance of the Refunded Bonds, by and between the City and the Escrow Agent in substantially the form presented to this meeting, with such changes as the Mayor of the City shall approve (such approval to be conclusively evidenced by his exe- cution of such Agreement). The City Council hereby creates the Escrow Account provided for in such Escrow Agreement, such Account to be held and applied in accordance with the Escrow Agreement. -40- The City Council hereby authorizes the Mayor to execute the Escrow Agreement on behalf of the City and to deliver the Escrow Agreement to the proper officials of Bank of America NT&SA. S~IOR 27. Resolution Constitutes Contract. The pro- visions of this Resolution shall constitute a contract between tne City and the bondholders and the provisions hereof shall be enforce- able by any bondholder for the equal benefit and protection of all bondholders similarly situated by mandamus, accounting, mandatory injunction or any other suit, action or proceeding at law or in equity that is now or may hereafter be authorized under the laws of the State of California in any court of competent jurisdiction. Said contract is made under and is to be construed in accordance with the laws of the State of California. No remedy conferred hereby upon any bondholder is intended to be exclusive of any other remedy, but each such remedy is cumula- tive and in addition to every other remedy and may be exercised with- out exhausting and without regard to any other remedy conferred by the Charter, Ordinance No. 2980, Ordinance No. 4414 or any law of the State of California. No waiver of any default or breach of duty or contract by any bondholder shall affect any subsequent default or breach of duty or contract or shall impair any rights or remedies on said subsequent default or breach. No delay or omission of any bond- holder to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed as a waiver of any such default or acquiescence therein. Every substantive right and every remedy conferred upon the bondholders may be enforced and exercised as often as may be deemed expedient. In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and the bondholder shall prevail, said bondholder shall be entitled to receive from the Electric Revenue Fund reimbursement for reasonable costs, expenses, outlays and attorneys' fees and should said suit, action or proceeding be aban- doned, or be determined adversely to the bondholders then, and in every such case, the City and the bondholders shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. Prior to the issuance and delivery of the Bonds, the terms and conditions of this Resolution and the rights and obligations of the City and of the holders of the Bonds and coupons thereunder may be modified or amended in any respect without the consent of any person, upon the adoption by the City of one or more supplemental resolutions. After the issuance and delivery of the Bonds, this Resolution shall be irrepealable, but shall be subject to modifica- tion to the extent and in the manner provided in this Resolution, but to no greater extent and in no other manner. -41- SBCTIOR 28. Defeasance. Allor any portion of the Bonds shall no longer be deemed to be outstanding and unpaid if the City shall have made adequate provision for the payment, in accordance with the Bonds and this Resolution, of the principal, interest and premium, if any, to become due thereon at maturity or upon call and redemption prior to maturity. Such provision shall be deemed to be adequate if the City shall have irrevocably set aside, in a special trust fund or account, moneys which when added to the interest earned or to be earned from the investment or deposit thereof shall be suf- ficient to make said payments as they become due. Moneys so set aside may be invested in any direct obligations of, or obligations guaranteed by, the United States of America, in which the City may lawfully invest its money. SBCTIOR 29. Future Contracts. Nothing herein contained shall be deemed to restrict or prohibit the City from making con- tracts or creating bonded or other indebtedness payable fram the gen- eral fund of the City or from taxes or any source other than the Gross Revenues of the Enterprise, and fram and after the sale of the Bonds the general fund of the City shall not include the Gross Revenues of the Enterprise and no contract or other obligation pay- able from the general fund of the City shall be payable from the Gross Revenues of the Enterprise, except as provided herein. SECTION 30. Severability. If any provision, or any por- tion thereof, contained in this Resolution, or the application thereof to any person or circumstance is held to be unconstitutional, invalid or unenforceable, the remainder of this Resolution and the application of any such provision, or portion thereof, to other per- sons or circumstances shall be deemed severable and shall not be affected thereby, and this Resolution and the Bonds shall remain valid and the bondholders shall retain all valid rights and benefits accorded to them under this Resolution, the City Charter and the Constitution and laws of the State of California. SECTION 31. Substitutes. The Mayor Pro-Tempore, any Deputy City Clerk, and any duly authorized substitute for the Finance Director or the Treasurer, may act in the place and stead of the Mayor, the City Clerk, the Finance Director and the Treasurer, respectively, in the performance of any and all things authorized or provided for in this Resolution, including the signing of Bonds and coupons. -42- S~IOB 32. Bffective Date. This Resolution shall take effect immediately. ADOP~BD, SIGRBD ARD APPROVED this fourth day of March, 1986. A~~ [SEAL] Attest: ;~~ ~?{S~ City Clerk -43- STATE OF CALIFORNIA COUNTY OF ORANGE CITY OF ANAHEIM ) ) SSe ) I, Leonora N. Sohl, City Clerk of the City of Anaheim, do hereby certify that the foregoing Resolution No. 86R-89 was intro- duced and adopted at a regular meeting provided by law, of the City Council of the City of Anaheim held on the 4th day of March, 1986, by the following vote of the members thereof: AYES: NOES: ABSENT: COUNCIL MEMBERS: COUNCIL MEMBERS: COUNCIL MEMBERS: Kaywood, Overholt, Pickler and Roth None Bay AND I FURTHER certify that the Mayor of the City of Anaheim signed said Resolution No. 86R-89 on the 4th day of March, 1986. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the City of Anaheim this 4th day of March, 1986. ~~7t~ CITY CLERK OF THE CITY OF ANAHEIM (SEAL) I, 1..,EONORA N. SOHL, City Clerk of the Cit:~{ of Anaheim, do hereby certify that the foregoing is the original of Resolution No. 86R-89 duly passed and adopted by the Anaheim City Council on March 4, 1986. ~~~S'~ City Clerk -44-