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Home My WebLink AboutRES NO 197-04RESOLUTION NO. I ~} 7" 0 4 RESOLUTION APPROVING FORM AND SUBSTANCE OF pRELIMINARY OFFICIAL STATEMENT AND BOND pURCHASE CONTRACT, AUTHORIZING MODIFICATIONS THERETO, AUTHORIZING EXECUTION THEREOF, AND AUTHORIZING RELATED DOCUMENTS AND ACTIONS CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO. 03-3 (SEVEN OAKS WEST III/BRIGHTON PLACE II/FAIRWAY OAKS SOUTH) WHEREAS, in connection with the proposed issuance, sale and delivery of the City of Bakersfield, Limited Obligation Improvement Bonds, Assessment District No. 03-3 (Seven Oaks West HI/Brighton Place II/Fairway Oaks South) (the "Bonds"), the City of Bakersfield (the "City") has retained Pillsbury Winthrop LLP as Disclosure Counsel ("Disclosure Counsel"), to assist the City in the preparation of a Preliminary Official Statement for use and distribution by RBC Dain Rauscher, as Underwriter of the Bonds (the "Underwriter") in connection with issuance, sale and distribution of the Bonds to the public; and WHEREAS, Disclosure Counsel has filed with the City Clerk of the City (the ,, · ,, Preliminary Official Statement (the "Preliminary Official Statement"), Ctty Clerk ) a proposed and this City Council hereby finds and determines that it is in the public interest and for the public benefit that the Preliminary Official Statement be approved; and WHEREAS, Disclosure Counsel has also prepared and filed with the City Clerk a proposed Bond Purchase Contract, which has been reviewed and approved as to form by Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the City for the Bonds. DOCSSFl:750529.1 40213-32 SS4 NOW, THEREFORE, THE CITY COUNCIL HEREBY FINDS, DETERMINES AND RESOLVES as follows: SECTION 1. APPROVAL OF PRELIMINARY OFFICIAL STATEMENT. This City Council hereby approves the Preliminary Official Statement, and in connection therewith, hereby finds, determines and declares (1) that the facts contained in the Preliminary Official Statement as presented on the date hereof are true and correct in all material respects and (2) that the Preliminary Official Statement neither contains any untrue statement of a material fact nor omits to state any material fact necessary to make any statement therein not misleading in light of the cimumstances under which it was made. The Preliminary Official Statement shall be deemed "nearly final" for purposes of compliance with U.S. Securities and Exchange Commission Rule 15c(2)-12, and the Finance Director of the City (the "Finance Director") is hereby authorized, upon request of the Underwriter, to execute and deliver a certificate respecting such finality along with the Preliminary Official Statement. This City Council hereby authorizes the making of corrections to or additions to the Preliminary Official Statement by supplement or amendment thereto or by appropriate insertions into the Preliminary Official Statement. The Underwriter is authorized to distribute the Preliminary Official Statement in connection with its offering of the Bonds to the public, leading to the sale of the Bonds to the Underwriter, as evidenced by execution of the Bond Purchase Contract. SECTION 2. EXECUTION AND DISTRIBUTION OF OFFICIAL STATEMENT AUTHORIZED. This City Council hereby authorizes the Finance Director to execute the Official Statement to be substantially derived from the Preliminary Official DOCSSFl:750529A 2 ~ 40213-32 SS4 O/~l~ I~4~ [ Statement. The Underwriter is authorized to distribute the Official Statement in connection with its offering or reoffering of the Bonds to the public. This City Council hereby authorizes the preparation of an Official Statement to be substantially derived from the Preliminary Official Statement. SECTION 3. BOND PURCHASE CONTRACT APPROVED. The proposed Bond Purchase Contract is hereby approved as to form and substance, and once Schedule I thereto has been completed to the satisfaction of the Finance Director, the Finance Director is hereby authorized to execute the same. The Finance Director is further authorized to approve changes and modifications to said Bond Purchase Contract prior to execution, which approval shall be conclusively demonstrated by execution thereof by the Finance Director; provided that (1) the principal amount of the Bonds shall not exceed $6,625,000, (2) the average coupon interest rate (exclusive of bond discount) shall not exceed seven percent (7.00%) per annum, and (3) the bond discount (including both Underwriter's discount and original issue discount, if any) shall not exceed two percent (2.0%) of the principal amount of the Bonds. SECTION 4. AUTHORIZATION FOR RELATED ACTIONS. Any appropriate officer, employee or representative of the City is hereby authorized to take any action and to execute and deliver any document reasonably required to accomplish the issuance, sale and delivery of the Bonds. DOCSSFl:750529A 40213-32 SS4 3 ORIGINAL I HEREBY CERTIFY that the foregoing resolution was passed and adopted by the Council of the City of Bakersfield at a regular meeting thereof held on June 9, 2004, by the following vote: NOES: ABSTAIN: ABSENT: CAR , BE AM, MAG RD, CO H, HAN , SULLIVAN, SALVAGGIO COUNC ILMEMB ERX~.J~- COUNCILMEMBER ~ COUNCILMEMBER ~ COUN CILMEMBER ~'~'YL$L~ City Clerk and Ex Officio O Clerk of the Council of the City of Bakersfield APPROVED HARVEY L. APPROVED AS TO FORM: ORRICK, HERRINGTON & SUTCLIFFE LLP COUNTERSIGNED: VIRG1NIA GENNARO City Attorney DOCSSFl:750529.1 40213-32 SS4 4 PRELIMINARY OFFICIAL STATEMENT DATED NEW ISSUE BOOK-ENTRY ONLY SYSTEM _,2004 NO RATING In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, based upon an analysis of existing laws, regulations, rulings, and court decisions and assuming (among other things) compliance with certain covenants, interest on the Bonds is excluded fi.om gross income for federal tax purposes and is exempt from State of California personal income taxes. In the opinion of Bond Counsel, interest on the Bonds is not a specific preference item for purposes of the federal individual and corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings in calculating federal corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding any other tax consequences caused by the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See "TAX MATTERS." CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO. 03-3 (SEVEN OAKS WEST III/BRIGHTON PLACE Il/FAIRWAY OAKS SOUTH) LIMITED OBLIGATION IMPROVEMENT BONDS Dated: Date of Delivery Due: September 2, as shown below The Bonds described herein (the "Bonds") are special, limited obligation bonds being issued by the City of Bakersfield, California (the "City"), to finance the acquisition of certain public improvements specially benefiting properties located within the boundaries of the City's Assessment District No. 03-3 (Seven Oaks West Ill/Brighton Place II/Fairway Oaks South) (the "Assessment District"). The Assessment District was formed and the acquisition of the improvements will be undertaken as authorized under the provisions of the Municipal Improvement Act of 1913 (Division 12 of the California Streets and Highways Code) and Section 13.08.070 of the Municipal Code of the City. The Bonds are being issued pursuant to the provisions of the Improvement Bond Act of 1915 (Division 10 of the California Streets and Highways Code) (the "1915 Act"). The Bonds are issuable only as fully registered Bonds in the denomination of $5,000 each or any integral multiple thereofi Principal, interest at maturity or upon earlier redemption, as applicable, and premium, if any, with respect to the Bonds will be payable upon presentation and surrender thereof at the corporate trust office of U.S. Bank National Association, the paying agent, registrar, and transfer agent for the Bonds (the "Paying Agent"), in St. Paul, Minnesota. Interest on the Bonds {other than the final payment of interest, which is payable upon surrender of the Bonds) will be payable from their date of delivery, commencing [CONFIRM:I March 2, 2005, and thereafter semiannually on March 2 and September 2 (each an "Interest Payment Date") in each year by check of the Paying Agent mailed on each lnterest Payment Date to the persons in whose names such Bonds are registered at the close of business on the fifteenth day of the calendar month immediately prior to an Interest Payment Date (or, in the case of an owner of at least $1,000,000 in principal amount of the Bonds who so requests in writing prior to the close of business on the fifteenth day of the month immediately preceding such Interest Payment Date, by wire transfer). The Bonds will be issued initially in book-entry only form through the book-entry system of The Depository Trust Company, New York, New York. See "BOOK-ENTRY ONLY SYSTEM." The Bonds are subject to redemption on any Interest Payment Date in advance of maturity at the option of the City upon giving at least thirty (30) days prior notice and upon payment of the principal thereof and interest accrued thereon to the date of redemption, plus any applicable redemption premium, as more fully described herein. The Term Bonds maturing on September 20__ are also subject to mandatory redemption in part prior to their stated maturity, as more fully described herein. Further development of parcels within the Assessment District, transfers of property ownership, and other similar circumstances could result in prepayment of all or part of the assessments. Such prepayment would result in redemption of a portion of the Bonds prior to their stated maturities. * Preliminary; sut~iect to change Q)~; ~ ~k~(~,~ 20497276v2 2x. ~ ORIGINAL Under the provisions of the 1915 Act, installments of principal and interest sufficient to meet annual debt service requirements with respect to the Bonds shall be included on the regular Kern County tax bills sent to owners of property against which there are unpaid assessments. The portion of the annual installments for the payment of principal of and interest on the Bonds is to be paid into the Redemption Fund, to be held by the Finance Director, and will be used to pay debt service on the Bonds as it becomes due. To provide funds for payment of the Bonds and the interest thereon as a result of any delinquent assessment installments, the City will establish a Special Reserve Fund and deposit therein Bond proceeds in the original amount of $ ......... . Additionally, the City has covenanted that, under certain circumstances, by no later than October 1 in any year, it will file an action in superior court to foreclose the lien on each delinquent assessment, as more particularly described herein. 1F A DELINQUENCY OCCURS IN THE PAYMENT OF ANY ASSESSMENT INSTALLMENT, THE CITY WILL HAVE A DUTY ONLY TO TRANSFER INTO THE REDEMPTION FUND THE AMOUNT OF THE DELINQUENCY OUT OF THE SPECIAL RESERVE FUND. THIS DUTY OF THE CITY IS CONTINUING DURING THE PERIOD OF DELINQUENCY, ONLY TO THE EXTENT OF FUNDS AVAILABLE FROM THE SPECIAL RESERVE FUND, UNTIL REINSTATEMENT, REDEMPTION, OR SALE OF THE DELINQUENT PROPERTY. THERE IS NO ASSURANCE THAT SUFFICIENT FUNDS WILL BE AVAILABLE FROM THE SPECIAL RESERVE FUND FOR THIS PURPOSE. THUS, IF, DURING THE PERIOD OF DELINQUENCY, THERE ARE INSUFFICIENT AVAILABLE FUNDS, A DELAY MAY OCCUR IN PAYMENTS TO THE OWNERS OF THE BONDS. IN ACCORDANCE WITH SECTION 8769(b) OF THE 1915 ACT, THE CITY HAS DETERMINED THAT IT WILL NOT OBLIGATE ITSELF TO ADVANCE FUNDS FROM ITS TREASURY TO CURE ANY DEFICIENCY IN THE REDEMPTION FUND. This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. MATURITY SCHEDULE $ Serial Bonds Maturity Principal Interest Price/ Maturity Principal Interest Price/ (September 2) Amount Rate Yield CUSIP ~n No. (September 2) Amount Rate Yield CtJSIP Id)No. $ __% Term Bond Due September 2, 20__- Price: __% (CUSIP o) No. ) (I) Copyright 2004, American Bankers Association CUSIP data herein is provided b5 Standmd & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, lnc Thisdataisn~in~¢nde~dt~createadatabaseandd~esn~s¢rveinanywavasasubstitute~r~h¢CUS~Pservices THE BONDS ARE NOT SECURED BY THE GENERAL TAXING POWER OF THE CITY, THE COUNTY OF KERN (THE "COUNTY"), THE STATE OF CALIFORNIA (THE "STATE"), OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE, AND NEITHER THE CITY, NOR THE COUNTY, NOR THE STATE, NOR ANY OTHER POLITICAL SUBDIVISION OF THE STATE HAS PLEDGED ITS FULL FAITH AND CREDIT FOR THE PAYMENT OF THE BONDS. The Bonds are being offered when, as, and if issued by the City and received by the Underwriter, subject to prior sale and to the approval of validity by Orrick, Herrington & Sutcliffe LLP, San Francisco. California, Bond Counsel, and the approval of certain matters for the City by the City Attorney of the City of Bakersfield. Certain other legal matters will be passed on by Pillsbury Winthrop LLP, Los Angeles. California, as disclosure counsel to the City. It is expected that the Bond' in definitive form will be available for delivery in New }'or/{. New York, on or about .2004. RBC DAIN RAUSCHER Dated: ,2004 20497276v2 OR!GIN:L No dealer, broker, salesperson or other person has been authorized by the City or the Underwriter to give any information or to make any representations other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor will there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. This Official Statement is not to be construed to be a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly described herein, are intended solely as such and are not to be construed as representations of fact. The information set forth herein has been obtained from the City and other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness, and it is not to be construed as a representation by the City. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder will, under any circumstances, create any implication that there has been no change in the affairs of the City or the Assessment District since the date hereof. The Underwriter has provided the foIIowing sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. IN CONNECTION WITH TH[S OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. ORImN~. AREA MAP KERN NTY The City of Bakersfield, California, the county seat of the County of Kern, is located at the southern end of California's San Joaquin Valley. Bakersfield is approximately I10 miles north of Los Angeles and 290 miles south &San Francisco. CITY OF BAKERSFIELD Mayor and City Council Harvey L. Hall, Mayor Irma Carson, Councilmember First Ward Susan M. Benham, Councilmember Second Ward Mike Maggard, Councilmember Third Ward David R. Couch, Vice Mayor, Councilmember Fourth Ward Harold Hanson, Councilmember Fifth Ward Jacquie Sullivan, Councilmember Sixth Ward Mark C. Salvaggio, Councilmember Seventh Ward City Staff Alan Tandy, City Manager Virginia Gennaro, City Attorney Pamela A. McCarthy, City Clerk Raul M. Rojas, Public Works Director Gregory J. Klimko, Finance Director BONDCOUNSEL Orrick, Herrington & Sutcliffe LLP San Francisco, California ASSESSMENT ENGINEER Wilson & Associates Fresno, California PAYING AGENT, REGISTRAR, AND TRANSFER AGENT U.S. Bank National Association Los Angeles, Cali£omia PROPERTY APPRAISER Launer & Associates, Inc. Bakersfield, California DISCLOSURE COUNSEL Pillsbury Winthrop LLP Los Angeles, California TABLE OF CONTENTS Page INTRODUCTORY STATEMENT ............................................................................................................................... I The Bonds .............................................................................................................................................................. 1 The Assessment Dis~'ict ......................................................................................................................................... 1 Property Ownership ................................................................................................................................................ I Improvements ......................................................................................................................................................... 2 Assessments ............................................................................................................................................................ 2 Appraisal ...................................................... ' ......... 2 Security for the Bonds ............................................................................................................................................ 3 Reserve Fund .......................................................................................................................................................... 3 Foreclosure ............................................................................................................................................................. 3 Assessment Delinquencies ..................................................................................................................................... 3 Book-Entry Only System ............................... .4 Continuing Disclosure ............................................................................................................................................ 4 Forward-Looking Statements ............................... 4 Miscellaneous ......................................................................................................................................................... 4 SOURCES AND USES OF FUNDS ............................................................................................................................. 4 THE BONDS ................................................................................................................................................................. 5 Purpose of the Bonds .............................................................................................................................................. 5 Authority for Issuance ............................................................................................................................................ 5 General ...................................................... ' .............. 6 Transfer and Exchange of Bonds ............................................................................................................................ 6 Bonds Mutilated, Destroyed, or Lost ...................................................................................................................... 7 Redemption ............................................................................................................................................................ 78 Effect of Redemption; Defeasance ......................................................................................................................... Refunding Bonds .................................................................................................................................................... 8 Disposition of Surplus from the Improvement Fund .............................................................................................. 8 Investment of Bond Proceeds ................................................................................................................................. 8 Security for the Bonds ............................................................................................................................................ 9 Special Reserve Fund ........................................................................................................................................... 10 Redemption Fund Deficiencies .......................... ....... 11 Covenant to Commence Superior Court Foreclosure ........................................................................................... 11 Priority of Lien ..................................................................................................................................................... 11 Tax Covenants ...................................................................................................................................................... 12 Debt Service Schedule .......................................................................................................................................... 13 BOOK-ENTRY ONLY SYSTEM .............................................................................................................................. 14 THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS .. . ....... 15 General ................................................................................................................................................................. 15 Description of the Community Areas and the Improvements ..............................................................................16 Estimated Improvement Costs .............................................................................................................................. 18 Method of Assessment Spread ............................................................................................................................. 20 OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT ......21 Ownership of Property in the Assessment District ............................................................................................... 21 . 21 C&C California .................................................................................................................................................... Fairway Oaks South ............................................................................................................................................. ~23 Development and Financing Plans ....................................................................................................................... Assessment Roll ................................................................................................................................................... 26 Utilities ................................................................................................................................................................. 27 Flood and Earthquake Zones ................................................................................................................................ 27 Zoning ......................................................................................... 27 .................................. 27 Tax Delinquencies ..................................................................................................................................... 28 Env ronmental Review ............................................................................................................................... Bulk Value-to-Assessment Lien Ratio ................................................................................................................. 28 Direct and Overlapping Debt ................................................................................................................................ 30 SPECIAL RISK FACTORS ........................................................................................................................................ 31 General ................................................................................................................................................................. 31 Risks of Real Estate Secured Investments Generally ........................................................................................... 31 Availability of Funds to Pay Delinquent Assessment Installments ...................................................................... 31 Hazardous Substances .......................................................................................................................................... 32 Endangered and Threatened Species .................................................................................................................... 32 Factors Which May Affect Land Development .................................................................................................... 33 Private Improvements; Increased Debt ................................................................................................................. 33 Subordinate Debt; Payments by FDIC and other Federal Agencies ..................................................................... 33 Property Values .................................................................................................................................................... 34 Concentration of Ownership ................................................................................................................................. 35 Tax Delinquencies ................................................................................................................................................ 35 Limited Obligation of the City Upon Delinquency .............................................................................................. 35 Bankruptcy and Foreclosure ................................................................................................................................. 36 Economic, Political, Social and Environmental Conditions ................................................................................. 37 Articles XIIIA and XIIIB of the California Constitution ...................................................................................... 37 Articles XIIIC and XIIID of the California Constitution ...................................................................................... 39 Future Initiatives ................................................................................................................................................... 39 Covenant to Commence Superior Court Foreclosure ...........................................................................................39 Price Realized Upon Foreclosure ......................................................................................................................... 40 Priority of Lien ..................................................................................................................................................... 41 Refunding Bonds .................................................................................................................................................. 41 Absence of Market for Bonds ............................................................................................................................... 41 Loss of Tax Exemption ........................................................................................................................................ 41 ENFORCEABILITY OF REMEDIES ........................................................................................................................ 41 ABSENCE OF MATERIAL LITIGATION ................................................................................................................ 42 CERTAIN INFORMATION CONCERNING THE CITY ......................................................................................... 42 TAX MATTERS ......................................................................................................................................................... 42 APPROVAL OF LEGALITY ..................................................................................................................................... 43 UNDERWRITING ...................................................................................................................................................... 43 NO RATING ............................................................................................................................................................... 43 CONTINUING DISCLOSURE ................................................................................................................................... 43 MISCELLANEOUS .................................................................................................................................................... 44 APPENDIX A - CITY OF BAKERSFIELD ECONOMIC, FINANCIAL, AND DEMOGRAPHIC INFORMATION ............................................................................................. A-1 APPENDIX B - APPRAISAL ................................................................................................................................... B-1 APPENDIX C - FORM OF OPINION OF BOND COUNSEL ................................................................................ C-I APPENDIX D - ASSESSMENT DIAGRAM ........................................................................................................... D-1 APPENDIX E - ASSESSMENT ROLL AND VALUE-TO-LIEN DATA ............................................................... E-1 APPENDIX F - CONTINUING DISCLOSURE CERTIFICATES .......................................................................... F-1 OFFICIAL STATEMENT $ CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO. 03-3 (SEVEN OAKS WEST Ill/BRIGHTON PLACE II/FAIRWAY OAKS SOUTH) LIMITED OBLIGATION IMPROVEMENT BONDS INTRODUCTORY STATEMENT THIS INTRODUCTORY STATEMENT IS SUBJECT IN ALL RESPECTS TO THE MORE COMPLETE INFORMATION IN THIS OFFICIAL STATEMENT, INCLUDING THE COVER PAGE AND APPENDICES HERETO, AND THE OFFERING OF THE BONDS TO POTENTIAL INVESTORS IS MADE ONLY BY MEANS OF THE ENTIRE OFFICIAL STATEMENT. The Bonds The purpose of this Official Statement, which includes the cover page and the appendices hereto, is to set forth certain information concerning the issuance and sale by the City of Bakersfield, California (the "City"), of $ * in principal amount of its City of Bakersfield, Assessment District No. 03-3 (Seven Oaks West Ill/Brighton Place Il/Fairway Oaks South), Limited Obligation Improvement Bonds (the "Bonds"), for Assessment District No. 03-3 (Seven Oaks West Ill/Brighton Place Il/Fairway Oaks South) (the "Assessment District"). The Bonds are issued pursuant to the Improvement Bond Act of 1915, being Division 10 of the California Streets and Highways Code (the "1915 Act"), the Charter and Municipal Code of the City, and Resolution No. , adopted by the City Council of the City (the "City Council") on ,2004 (the "Bond Resolution"). The Assessment District The Assessment District was formed and the assessments have been levied in accordance with the Municipal Improvement Act of 1913, being Division 12 of the California Streets and Highways Code (the "1913 Act") and Section 13.08.070 of the Municipal Code of the City. Proceedings for the formation of the Assessment District were commenced by the City Council pursuant to property owner petitions filed by Castle & Cooke California, Inc., a California corporation ("C&C California"), and Fairway Oaks South, LP, a California limited partnership ("Fairway Oaks South"), as the owners at the date of the filing thereof of more than 60% of the assessable land within the Assessment District. See "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT." The Assessment District is comprised of three separate Community Areas in northwest and southwest Bakersfield that are identified as (i) the Seven Oaks West 111 Area, (ii) the Brighton Place 1I Area, and (iii) the Fairway Oaks South Area (collectively, the "Community Areas"). The Assessment District boundaries are shown on the assessment diagram, a copy of which is attached hereto as APPENDIX D. For a further description of the Assessment District and the Community Areas, see "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS - General." Property Ownership C&C California owned approximately 86.51% of the assessed property in the Assessment District prior to the recording of the notice of assessment and currently owns approximately % of the assessed property in the Assessment District. As of ,2004, C&C California has sold __ lots in the Seven Oaks West III Area and lots in the Brighton Place II Area to merchant builders. Fairway Oaks South owned approximately 10.70% of the assessed property in the Assessment District prior to the recording of the notice of assessment. Fairway Oaks has not sold, and does not intend to sell, any lots in the Fairway Oaks South Area to merchant builders. Prebmlnary; subject to change C&C California is developing the Seven Oaks West III Area and the Brighton Place I1 Area and Fairway Oaks South is developing the Fairway Oaks South Area, which Community Areas will, together, bear 100% of the total assessment lien. The property within the Assessment District is involved in various stages of the land development process. See "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT" for a description of the planned development of the respective Community Areas. Improvements Proceeds from the sale of the Bonds issued pursuant to the Assessment District proceedings will be used to finance (i) the acquisition of certain public infrastructure improvements for each of the three Community Areas, which improvements will be owned by the City and operated and maintained by the City (collectively, the "Improvements"); (ii) the cost to pay off existing parcel assessments in the Seven Oaks West 11i Area confirmed pursuant to City of Bakersfield Assessment District No. 01-2 (Seven Oaks West Il/River Walk/Southern Oaks) ¢~AD 01-2"); and (iii) the payment of certain incidental costs and expenses related to the acquisition of the Improvements, the Assessment District proceedings, and the Bond issuance, including the establishment ora Special Reserve Fund for the Bonds and the funding of capitalized interest on the Bonds through September 2, 2004. For a further description of the Community Areas and the Improvements, see "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS - Description of the Community Areas and the Improvements." The Improvements are proposed to be financed by the City in accordance with the terms and conditions of Acquisition and Disclosure Agreement No. 04-055, effective March 10, 2004, between the City and C&C California (the "C&C California Acquisition Agreement"), and Acquisition and Disclosure Agreement No. 04-056, effective March 10, 2004, between the City and Fairway Oaks South (the "Fairway Oaks South Acquisition Agreement" and, together With the C&C California Acquisition Agreement, the "Acquisition Agreements"), and, upon their completion, are proposed to be acquired by the City using funds provided through the Assessment District proceedings. The land within each of the three respective Community Areas in the Assessment District specially benefited by the Improvements has been assessed to pay the estimated cost of the Improvements and certain financing costs related thereto. See "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS Estimated Improvement Costs." The City Council, pursuant to Resolution No. _, adopted on ,2004, confirmed the amount of assessments remaining unpaid for the Assessment District in the aggregate amount of $6,625,000. The Bonds are secured by the assessments as hereinafter described under the heading "THE BONDS - Security for the Bonds." The total assessment lien is greater than the aggregate principal amount of the Bonds being issued due to a decrease in the amount of capitalized interest required with respect to the Bonds. Appraisal An appraisal dated as of April 24, 2004 (the "Appraisal"), of the property within the Assessment District that is subject to the lien of the assessments has been prepared for the City by Launer & Associates, Inc., Bakersfield, California (the "Appraiser"). The assumptions and limitations regarding the appraised valuations are set forth in the Appraisal, which is attached hereto as APPENDIX B. Certain considerations relating to the Appraisal are discussed under the heading "SPECIAL RISK FACTORS." See also "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT Bulk Value to Assessment Lien Ratio." The complete Appraisal is on file with the City. The City makes no representations as to the accuracy or completeness of the Appraisal. See APPENDIX E for a listing of the ratio of the appraised value of each assessed parcel to the amount of the assessment lien against such parcel. The appraised values of the Assessment District property reflected in the Appraisal have been determined assuming, among other things, the completion of the Bond-financed Improvements. See "THE ASSESSMENT DISTRICT AND THE 1M?ROVEMENTS Description of the Community Areas and the Improvements" and "OX3fNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT" for descriptions of the plans of C&C California and Fairway Oaks South for the development of the property within the Assessment District. Security for the Bonds The Bonds are issued upon and secured by the unpaid assessments and, together with interest thereon, constitute security for the redemption and payment of the principal of the Bonds and the interest thereon. All the Bonds are secured by the moneys in the Redemption Fund created pursuant to the Assessment District proceedings and by the unpaid assessments levied to provide for payment of said acquisition of the Improvements, and, including principal and interest, are payable exclusively out of the Redemption Fund. The unpaid assessments represent fixed liens on the parcels of land assessed under the proceedings. They do not, however, constitute the personal indebtedness of the owners of said pamels. Under the provisions of the 1915 Act, assessment installments sufficient to meet annual debt service on the Bonds are to be collected on the regular Kern County ~x bills sent to owners of proper~ within the Assessment District against which there are unpaid assessments. These annual installments are to be paid into the Redemption Fund, which will be held by the Finance Director and used to pay Bond principal and interest as they become due. The installments billed against each parcel of property each year represent a pro rata share of the total principal and interest coming due that year, based on the percentage which the unpaid assessment against that property bears to the total of unpaid assessments within the Assessment District. The Bonds are not secured by the general taxing power of the City, the County of Kern (the "County"), the State of California (the "State"), or any other political subdivision of the State, and neither the City, nor the County, nor 1he State, nor any other political subdivision of the State has pledged its full faith and credit for the payment of the Bonds. Reserve Fund The City will establish a Special Reserve Fund (the "Special Reserve Fund") in the amount of $ from Bond proceeds, which amount will be transferred to the Redemption Fund in the event of delinquencies in the payment of the assessment installments to the extent of such delinquencies. The Special Reserve Fund will be maintained, from assessment installment payments and from proceeds of redemption or sale of parcels with assessment delinquencies, in an amount equal to the least of (i) 10% of the proceeds of the Bonds, (ii) the maximum annual debt service on the Bonds, or (iii) 125% of the average annual debt service on the Bonds, less any amounts transferred to the Redemption Fund when assessments are paid following the issuance of the Bonds, as determined from time to time (the "Reserve Requiremem"). See "THE BONDS Special Reserve Fund." The City has covenanted that it will, no later than October 1 in any year, file an action in the Superior Court of the County to foreclose the lien on each delinquent assessment if (i) the sum of uncured assessment delinquencies for the preceding fiscal year exceeds 5% of the assessment installments posted to the tax roll for that fiscal year and (ii) the amount in the Special Reserve Fund is less than the Reserve Requirement. See "THE BONDS Covenant to Commence Superior Court Foreclosure" and "SPECIAL RISK FACTORS Covenant to Commence Superior Court Foreclosure." Assessment Delinquencies If a delinquency occurs in the payment of any assessment installment, the City has a duty to transfer into the Redemption Fund the amount of the delinquency out of the Special Reserve Fund. This duty of the City is continuous during the period of delinquency, until reinstatement, redemption, or sale of the delinquent property. There is no assurance that funds will be available for such purpose and if, during the period of delinquency, there are insufficient moneys in the Special Reserve Fund, a delay may occur in payments to the owners of the Bonds. As authorized by the 1915 Act, the City has elected not to obligate itself to advance available funds from its treasury to cure any deficiency which may occur in the Redemption Fund by reason of the failure of a property owner to pay an assessment installment when due. If there are additional delinquencies after depletion of funds in the Special Reserve Fund, the City is not obligated to transfer into the Redemption Fund the amount of such delinquencies out of any other available moneys of the City. Book-Entry Only System The Bonds will be initially issued and registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). Payment of principal of and interest on the Bonds to the Beneficial Owners (as defined below) will be made in accordance with the procedures of DTC, described below. See "BOOK-ENTRY ONLY SYSTEM." Continuing Disclosure The City and C&C Califomia have each covenanted in its respective Continuing Disclosure Certificate for the benefit of Bondholders to provide an annual or semi-annual report, as applicable, containing certain financial information and operating data relating to the Assessment District and the property in the Assessment District and to provide notices of the occurrence of certain enumerated events, if material. The form of such Continuing Disclosure Certificates are attached hereto as "APPENDIX F CONTINUING DISCLOSURE CERTIFICATES." These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5), as it may be amended from time to time. See "CONTINUING DISCLOSURE." Fairway Oaks South, as owner of property in the Assessment District that, when aggregated with all other property in the Assessment District owned by Fairway Oaks South or its affiliates, is subject to a lien of less than twenty percent (20%) of the annual assessment securing payment of the Bonds, does not have an obligation to provide continuing disclosure information and has not entered into a continuing disclosure certificate. Forward-Looking Statements This Official Statement contains statements relating to future results that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. When used in this Official Statement, the words "estimate," "forecast," "intend," "expect" and similar expressions identify forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material. See also "SPECIAL RISK FACTORS" herein. Miscellaneous Set forth herein are brief descriptions of the Bonds, the Assessment District, the Community Areas, the Improvements, the City, the Bond Resolution, C&C California, Fairway Oaks South, and certain other matters. Such descriptions and the discussions and information contained herein do not purport to be comprehensive or definitive. All references in this Official Statement to documents, the Bonds, and the Assessment District proceedings are qualified in their entirety by references to such documents and the City's resolutions setting forth the terms and descriptions thereof. Copies of the Bond Resolution and other documents described in this Official Statement may be obtained from the City. The City's address for such purpose is: City of Bakersfield, 1501 Truxtun Avenue, Bakersfield, California 93301, Attention: Finance Director; telephone number (661) 326-3030. SOURCES AND USES OF FUNDS The proceeds of the sale of the Bonds will be deposited with the Finance Director in trust pursuant to the terms of the Bond Resolution in the amounts set forth below. The moneys in the Improvement Fund established for the Bonds will be used to acquire or otherwise finance the Improvements, to pay off existing parcel assessments in the Seven Oaks West I11 Area confirmed pursuant to AD 01-2, and to pay certain costs associated with the issuance and delivery of the Bonds. A portion of the net proceeds of the Bonds will be deposited in the Special Reserve Fund. Capitalized interest on the Bonds from their dated date to September 2, 2004, will be deposited into the Redemption Fund. The estimated sources and uses of funds for the Bonds are summarized as follows: Sources of Funds Principal Amount of Bonds $ Total $ Uses of Funds Improvement Fund Special Reserve Fund Redemption Fund Underwriter's Discount Total (I) Includes costs of issuance of approximately $ . (2) Represents capitalized interest on the Bonds fi.om their dated date to September 2, 2004. THE BONDS Purpose of the Bonds Proceeds from the sale &the Bonds will be used to finance (i) the Improvements, which are comprised of the acquisition and/or construction of certain public improvements within the three Community Areas, (ii) the cost to pay off existing parcel assessments in the Seven Oaks West I11 Area confirmed pursuant to AD 01-2, and (iii) the payment of incidental costs, including but not limited to costs of issuance, as described in the section herein entitled "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS - Description of the Community Areas and the Improvements." Authority for Issuance The Assessment District proceedings are being conducted pursuant to the 1913 Act, Section 13.08.070 of the Municipal Code of the City, and a Resolution of Intention No. 1320, adopted by the City Council of the City on December 10, 2003. The Bonds, which represent the unpaid assessments levied against privately owned property in the Assessment District, are issued pursuant to the provisions of the 1915 Act and the Bond Resolution approving the issuance of the Bonds under the 1915 Act and the terms thereof. In the proceedings being used by the City for the Assessment District, all costs either are estimated or are ascertained prior to the construction or acquisition of the improvements, right-of-way, or property involved. Under such proceedings, the assessments are then levied, cash collections are made, and bonds are sold to represent unpaid assessments. The money obtained from cash collections and bond proceeds is used by the City in payment for the improvements to be acquired, for the property or rights-of-way (if any) to be acquired, and for incidental expenses and expenses of the Bond issue. C&C California and Fairway Oaks South have each waived the cash collection period and no such cash collections were made. Assessment district proceedings can be initiated by either a petition or by the City Council without a petition. Petitions filed with the City Council and signed by C&C California and Fairway Oaks South, respectively, the owners of more than 60% of the assessable land within the Assessment District at the time of such filing, initiated the proceedings for the Assessment District. The property owner petitions were accepted by resolution of the City Council adopted on December 10, 2003. OR!Gh~?,L After the proceedings were initiated, Wilson & Associates, Fresno, California (the "Assessment Engineer"), prepared a written report, which contains, among other things, the list of improvement costs and the amount of the assessments to be levied against the parcels in the Assessment District. The assessments were levied on the basis of the special benefit to be derived by such parcels fi.om the Improvements. (See "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS Method of Assessment Spread.") The Assessment Engineer's written report was filed with the City Clerk on February 27, 2004, and was approved by the City Council in preliminary form on Mamh 10, 2004. The Assessment Engineer's written report in final form was filed with the City Clerk on April 16, 2004. The public hearing required by law was held on April 28, 2004. The property owners in the Assessment District had the right to protest the levy of the proposed assessments in writing prior to or at the commencement of the hearing and to be heard at the hearing. No such protests were made. In accordance with Article XIIID of the State Constitution, the property owners were also requested to submit ballots, weighted according to the proportional financial obligation of the affected property, in favor of or opposition to the assessment. All ballots submitted by property owners were in favor of the assessment. See "SPECIAL RISK FACTORS - Articles XIIIC and XIIID of the California Constitution." Upon conclusion of the hearing, the City Council tabulated the ballots and adopted its resolution confirming the assessments and ordering the acquisition of improvements. The assessments confirmed by the City were based on the improvement costs listed in the Assessment Engineer's final written report (the "Engineer's Report"). After confirmation, the assessments became liens against the assessed parcels by recordation of a notice of assessment. The property owners in the Assessment District waived published and mailed notice of the opportunity to pay all or a portion of the assessments in cash within thirty (30) days of the recording of the assessments, which recording was made in the Office of the Superintendent of Streets on April 29, 2004, and in the Office of the County Recorder on May 4, 2004. No cash payments were made by the property owners. General The Bonds will be issued in fully registered form, without coupons, in the denomination of $5,000 each or in any integral multiple thereofi The Bonds will be dated the date of delivery, and will bear interest at the rates per annum, will mature on the dates (each a "Principal Payment Date"), and will mature in the amounts set forth on the front cover pages of this Official Statement. Interest on the Bonds is payable on [CONFIRM:] March 2, 2005, and thereaKer semiannually on March 2 and September 2 (each an "Interest Payment Date"). Principal, interest at maturity or upon earlier redemption, if applicable, and premium, if any, with respect to the Bonds will be payable at the corporate trust office of U.S. Bank National Association, as paying agent, registrar, and transfer agent (the "Paying Agent"), in St. Paul, Minnesota, upon presentation and surrender of the Bonds. Interest (other than at maturity or upon earlier redemption) on the Bonds will be payable by check of the Paying Agent mailed on each Interest Payment Date to the owners of record at the addresses shown on the registration books maintained by the Paying Agent for such purposes (the "Registration Books") as of the fifteenth day of the month immediately prior to an Interest Payment Date (or, in the case of an owner of at least $1,000,000 in principal amount of the Bonds who so requests in writing prior to the close of business on the fil~eenth day of the month immediately preceding such Interest Payment Date, by wire transfer). Transfer and Exchange of Bonds Any Bond may be transferred or exchanged upon surrender of such Bond for cancellation, accompanied by delivery of a written instrument of transfer or authorization for exchange, duly executed in a form approved by the Paying Agent. The Paying Agent shall not be obligated to make any transfer or exchange of any Bond during the period commencing with the fifteenth day of the month immediately preceding each Interest Payment Date and ending on such Interest Payment Date. The City may require the Bond Owner requesting such transfer or exchange to pay any tax or other governmental charge required to be paid with respect to such transfer or exchange. 6 Bonds Mutilated, Destroyed, or Lost If any Bond becomes mutilated, the City, at the expense of the Owner of such Bond, will execute, and the Paying Agent will authenticate and deliver, a new Bond in exchange and substitution for the Bond so mutilated, but only upon surrender by the owner of the Bond so mutilated. Every mutilated Bond so surrendered will be canoe}ed. If any Bond becomes lost or destroyed, evidence of such loss or destruction may be submitted to the City and, if such evidence is approved by the City and indemnity satisfactory to the City is given, the City, at the expense of the Owner, will execute, and the Paying Agent will authenticate and deliver, a new Bond in lieu of and in replacement for the Bond so lost or destroyed. The owner must pay all costs of issuance of the new Bond. Redemption Optional Redemption and Prepayment of Bonds. Any Bond or portion thereof in the amount of $5,000 or any integral thereof outstanding may be called for redemption prior to maturity on any Interest Payment Date upon payment of the principal, plus accrued interest to the date of redemption, together with a redemption premium (calculated as a percentage of the par value of Bonds being redeemed) as set forth in the following table: Redemption Dates I March 2 and September 2) September 2, 2004 through September 2, 2014 March 2, 2015 and September 2, 2015 March 2, 2016 and September 2, 2016 March 2, 2017 and thereafter Redemption Premium 3.0% 2.0% 1.0% 0.0% No interest will accrue on a Bond beyond the Interest Payment Date on which said Bond is called for redemption. Notice of redemption must be given to the registered owner of the Bond by registered or certified mail or by personal service at least thirty (30) days prior to the redemption date, as provided in the 1915 Act. In accordance with the 1915 Act, the Finance Director will select Bonds for redemption in such a way that the ratio of outstanding Bonds to issued Bonds will be approximately the same in each annual series insofar as possible. Within each annual series, Bonds shall be selected for redemption by lot. Further development of the parcels in the Assessment District, a transfer of proper~ ownership, and other similar circumstances could result in prepayment of all or part of the assessments. Such prepayment would result in redemption of a portion of the Bonds prior to their stated maturities. Mandatory Redemption of Term Bonds The Bonds maturing on September 2, 20__ (the "Term Bonds"), are subject to mandatory advance redemption in part prior to their stated maturity, as authorized under the Bond Resolution. The redemption shall occur on September 2 in the following years and in the following principal amounts, together with interest accrued on such amounts to the date fixed for redemption, and shall be without premium: Year Principal Amount 20__ $ 20 20__ 20__ (maturity) If the Bonds are redeemed in part, as described under the subheading "Optional Redemption and Prepayment of Bonds" above, the principal of the Term Bonds to be redeemed on each of the payment dates set forth above shall be modified by deducting the principal amount of the Bonds redeemed in $5,000 increments as proportionally as practicable from the principal amounts set forth above. Effect of Redemption; Defeasance From and after the date fixed for redemption pursuant to the Bond Resolution, if funds available for the payment of the principal of and interest (and redemption premium, if any) on the Bonds or portion of Bonds so called for redemption have been duly provided, then Bonds or portion of Bonds so called for redemption will become due and payable at the redemption price therein specified, and from and after such date (unless the Cig, shall default in the payment of the redemption price or interest) such Bonds or portions of Bonds shall be defeased and shall cease to be entitled to any benefit or security under the Bond Resolution (other than the right to receive payment of the redemption price and interest) and shall cease to bear interest. Receipt of notice of redemption by the owner of a Bond shall not be a condition precedent to redemption and failure by the owner of a Bond to actually receive such notice of redemption shall not affect the validity of the proceedings for the redemption of such Bond or the cessation of interest. Refunding Bonds Pursuant to thc Refunding Act of 1984 for 1915 Improvement Act Bonds (Division 11.$ of the California Streets and Highways Code), thc City may issue refunding bonds for the purpose of redeeming thc Bonds. The City may issac and sell refunding bonds without giving notice to and conducting a hearing for thc owners of property in the Assessment District, or giving notice to thc owners of the Bonds, if thc City Council finds that: (A) Each estimated annual installment of principal and interest on thc rcassessmcnt to secure the refunding bonds is less than thc corresponding annual installment of principal and interest on the portion of the original asscssmant being superseded and supplanted by the same percentage for all subdivisions of land within thc Assessment District. Any amount added to the annual installmants on the reassessmcnt duc to a dclinquancy in payment on thc original assessment need not be considered in this calculation; (B) The number of years to maturity of all refunding bonds is not more than the number of years to the last maturity of the Bonds; and (C) The principal amount of the reassessment on each subdivision of land within the Assessment District is less than the unpaid principal amount of the portion of the original assessment being superseded and supplanted by the same pementage for each subdivision of land within the Assessment District. Any amount added to a reassessment because of a delinquency in payment on the original assessment need not be considered in this calculation. Upon issuing refunding bonds, the City Council could require that the Bonds be exchanged for refunding bonds on any basis which the City Council determines is for the City's benefit, if the Bondowners consent to the exchange. As an alternative to exchanging the refunding bonds for the Bonds, the City could sell the refunding bonds and use the proceeds to pay the principal of and interest and redemption premium, if any, on the Bonds as they become due, or advance the maturity of the Bonds and pay the principal of and interest and redemption premium thereon. Disposition of Surplus from the Improvement Fund The amount of any surplus remaining in the Improvement Fund after completion of the acquisition of the Improvements and payment of all claims shall be applied as a credit to the assessments or to call Bonds, all as provided in the 1913 Act. Investment of Bond Proceeds Moneys held in the Improvement, Redemption, and Special Reserve Funds created pursuant to the Bond Resolution shall be invested by the Finance Director in accordance with generally applicable City investment policies, subject to State law and federal tax regulations governing the investment of tax-exempt bond proceeds. Investment income on moneys in the Redemption Fund shall be retained therein. Proceeds of the investment of amounts in the Improvement Fund and the Special Reserve Fund will be deposited into an Investment Earnings Fund, to be established and maintained by the Finance Director. Moneys in the Investment Earnings Fund will be rebated, to the extent required by law, to the federal government. To the extent that moneys in the Investment Earnings Fund are not required for rebate to the federal government, as determined by the Finance Director as of June 30 of each year, such moneys shall be transferred to the Special Reserve Fund until the balance therein is equal to the Reserve 13.equirement. The remaining balance, if any, in the Investment Earnings Fund will be transferred, first, to the Improvement Fund until the lmprovemants are completed and such fund is closed and, thereafter, to the Redemption Fund to be used, in the discretion of the Finance Director, as a credit upon the annual installments of assessments or for the advance retirement of Bonds. Security for the Bonds The Bonds are issued upon and secured by the unpaid assessments against the property in the Assessment District, together with interest thereon, and said unpaid assessments, together with interest thereon, constitute security for the redemption and payment of the principal of the Bonds and the interest thereon. The Bonds are further secured by the moneys in thc Redemption Fund and the Special Reserve Fund created pursuant to thc Assessment District proceedings. Principal of and interest and redemption premiums, if any, on the Bonds are payable exclusively out of the Redemption Fund. The assessments and each installment thereof and any interest and penalties thereon constitute a lien against the parcels of land on which the assessments are levied until the same are paid. Such lien is subordinate to all fixed special assessment liens previously imposed upon the same property, but has priority over all existing and future private liens and over all fixed special assessment liens that may thereafter be created against the property. Such lien is co-equal to and independent of the lien for general property taxes and special taxes, including, without limitation, special taxes created pursuant to the "Mello-Roos Community Facilities Act of 1982" (being Chapter 2.5, Part l, Division 2, Title 5 of the Government Code of the State of California) (the "Mello-Roos Act"), whenever created against thc property. Upon the issuance of the Bonds, none of the property in the Assessment District will be subject to any other special assessment lien created under the 1913 Act. All or a portion of the Brighton Place Il Area is located in an existing Assessment District No. 96-1 ("AD 96-1"); however, all of the previous AD 96-1 assessment liens have been paid in full. All or a portion of the Seven Oaks West Ill Area is located in an existing Assessment District No. 96-2 ("AD 96-2"); however, all of thc previous AD 96-2 assessment liens have been paid in full. The Seven Oaks West llI Area is currently subject to an existing AD 01-2 assessment; however such assessment will be paid in full upon the issuance of the Bonds from a portion of the proceeds thereof. The property within the Brighton Place II Area is subject to an existing special tax lien created by Community Facilities District No. 92-1 of the RNR School Financing Authority ("RNR CFD No. 92-1") pursuant to thc Mello-Roos Act. The amount of special taxes, if any, to which property within RNR CFD No. 92-1 is subject varies based upon the zoning, the entitlements, and the type and level of development of such properW. See "THE BONDS - Priority of Lien." None of the property within the Assessment District is within, or is subject to the existing special tax lien created by, Community Facilities District No. 96-1 of the Lakeside Union Elementary School District. The Bonds are not secured by the general taxing power of the City, the County, the State, or any other political subdivision of the State, and neither the City, nor the County, nor the State, nor any other political subdivision of the State has pledged its full faith and credit for the payment thereof. Although the unpaid assessments constitute fixed liens on the parcels assessed, they do not constitute the personal indebtedness of the owners of said parcels. Furthermore, there can be no assurance as to the ability or the willingness of such owners to pay the unpaid assessments. In addition, there can be no assurance that the present owners will continue to own all or any of said parcels. The unpaid assessments will be collected in annual installments, together with interest on the declining balance, on the County tax roll on which general taxes on real property are collected, and am payable and become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest afl'er delinquency as do said general taxes. Notwithstanding the City's covenant to commence foreclosure proceedings in connection with delinquent assessments, the property upon which the assessments were levied is subject to the same provisions for sale and redemption as are properties for nonpayment of general taxes. The annual assessment installments are to be paid into the Redemption Fund, which will be held by the Finance Director and used to pay the principal of and interest on the Bonds as they become due. The installments billed against all of the parcels of property in the Assessment District subject to the assessments will be equal to the total principal and interest coming due on all of the Bonds that year, plus, with respect to each parcel in the Assessment District, an additional amount to cover the administrative charges of the City. Special Reserve Fund Out of the proceeds of the sale of the Bonds, the City Council will set aside into a Special Reserve Fund the amount of $ . Thc Special Reserve Fund will be maintained, from assessment installment payments and from proceeds of redemption or sale of parcels with assessment delinquencies, in an amount equal to the least of (i) 10% of the proceeds of the Bonds, (ii) the maximum annual debt service on the Bonds, or (iii) 125% of the average annual debt service on the Bonds, less any amounts transferred to the Redemption Fund when assessments are paid following the issuance of the Bonds, as determined from time to time (the "Reserve Requirement"). The Special Reserve Fund will constitute a trust fund for the benefit of the owners of the Bonds. The Special Reserve Fund will be maintained, used, transferred, reimbursed, and liquidated as follows: (a) Whenever there are insufficient funds in the Redemption Fund to pay the next maturing installment of principal of or interest on the Bonds, an amount necessary to make up such deficiency will be transferred from the Special Reserve Fund, to the extent of available funds, to the Redemption Fund. The amounts so advanced will be reimbursed from the proceeds of redemption or sale of the parcel for which payment of delinquent installments of the assessments and interest thereon has been made from the Special Reserve Fund. In the event that the Special Reserve Fund is completely depleted from such advances prior to reimbursement from resales of property or delinquency redemptions, payments to the owners of the Bonds will be dependent upon reimbursement of the Special Reserve Fund. (b) if any assessment or any portion theranf is prepaid prior to the final maturity of the Bonds, the amount of principal of the assessment to be prepaid will be reduced by an amount which is in the same ratio to the original amount of the Special Reserve Fund as the original amount of the prepaid assessment bears to the total original amount of unpaid assessments originally securing the Bonds. The reduction in the amount of principal prepaid shall be compensated for by a transfer of like amount from the Special Reserve Fund to the Redemption Fund. (c) All proceeds from the investment of moneys in the Special Reserve Fund will be deposited into an Investment Earnings Fund, to be established and maintained by the Finance Director. Moneys in the Investment Earnings Fund will be rebated, to the extent required by law, to the federal government. To the extent that moneys in the Investment Earnings Fund are not required for rebate to the federal government, as determined by the Finance Director as of June 30 of each year, such moneys shall be transferred to the Special Reserve Fund until the balance therein is equal to, as of the date of calculation, the Reserve Requirement. Amounts in the Special Reserve Fund can never exceed the Reserve Requirement. See "THE BONDS Investment of Bond Proceeds." (d) When the balance in the Special Reserve Fund is sufficient to retire all Bonds then outstanding (whether by advance retirement or otherwise), the amount of the Special Reserve Fund will be transferred to the Redemption Fund, and the remaining installments of principal and interest not yet due from the assessed property owners will be canceled without payment, and the Special Reserve Fund will be liquidated upon the retirement of the Bonds. (e) In the event that the balance in the Special Reserve Fund at the time of liquidation exceeds the am°unt necessary to retire all Bonds then outstanding, the excess will be paid to the owners of the assessed parcels in the Assessment District provided, however, that, if the excess is less than $1,000, such excess may be transferred by the Finance Director to the General Fund of the City. The need to make advances from the Special Reserve Fund may result in its total depletion prior to reimbursement from resales of property or delinquency redemptions. In that event, there could be a default in payments to owners of the Bonds, the curing of which would be dependent upon reimbursement of the Special Reserve Fund. Redemption Fund Deficiencies If there are not sufficient funds in the Special Reserve Fund to fully cover a Redemption Fund deficiency and the City Council determines that there is a deficiency in the Redemption Fund to pay the principal of and interest on the Bonds such that there will be an ultimate loss accruing to the owners of the Bonds, the City will pay to the owners of the Bonds a proportionate share of the principal and interest due on the Bonds based on the percentage that the amount on deposit in the Redemption Fund is of the total amount of the unpaid principal of the Bonds and the interest thereon. Thereatler, as moneys representing payments of the assessments are periodically deposited into the Redemption Fund, similar proportionate payments will be made to the owners of the Bonds, all in accordance with the procedures set forth in the 1915 Act. If there are not sufficient funds in the Special Reserve Fund to fully cover a Redemption Fund deficiency and it is determined by the Finance Director that there will not be an ultimate loss to the owners of the Bonds, the Finance Director is required to direct the Paying Agent to pay matured Bonds as presented and pay interest on the Bonds when due as long as there are available funds in the Redemption Fund, in the following order of priority: (1) all matured interest payments shall be made before the principal of any Bonds is paid; (2) interest on Bonds of earlier maturity shall be paid before interest on Bonds of later maturity; (3) within a single maturity, interest on lower-numbered Bonds shall be paid before interest on higher-numbered Bonds; and (4) the principal of Bonds shall be paid in the order in which the Bonds are presented for payment. This procedure could result in some matured Bonds not being redeemed and interest on the Bonds not being fully paid on the due dates. Such matured Bonds would not be fully redeemed and such delayed interest would not be paid until funds are available from a foreclosure sale of the property having the delinquent assessment installments. Covenant to Commence Superior Court Foreclosure The 1915 Act provides that in the event any assessment or installment thereof or any interest thereon is not paid when due, the City may order the institution of a court action to foreclose the lien of the unpaid assessment. In such an action, the real proper~ subject to the unpaid assessment may be sold at judicial foreclosure sale. This foreclosure sale procedure is not mandatory. However, in the Bond Resolution, the City has covenanted with the Bondowners that, in the event any assessment or installment thereof, including any interest thereon, is not paid when due, the City will, no later than October I in any year, file an action in the Superior Court of the County to foreclose the lien on each delinquent assessment if (i) the sum of uncured assessment delinquencies for the preceding fiscal year exceeds 5% of the assessment installments posted to the tax roll for that fiscal year, and (ii) the amount in the Special Reserve Fund is less than the Reserve Requirement. In the event such Superior Court foreclosure or foreclosures are necessary, there may be a delay in payments to Bondowners pending prosecution of the foreclosure proceedings and receipt by the City of the proceeds of the foreclosure sale. It is also possible that no bid for the purchase of the applicable property would be received at the foreclosure sale. See "SPECIAL RISK FACTORS - Covenant to Commence Superior Court Foreclosure." Priority of Lien Each assessment (and any reasscssment) and each installment thereof, and any interest and penalties thereon, constitutes a lien against the parcel of land on which it was imposed until the same is paid. Such a lien is subordinate to all fixed special assessment liens previously imposed upon the same property, but has priority over all private liens and over all fixed special assessment liens that may thereal~er be created against the property. Such a lien is co-equal to and independent of the lien for general property taxes and special taxes, including, without limitation, special taxes created pursuant to thc Mello-Roos Act, whenever created against the property. Following the issuance of the Bonds, none of the property in the Assessment District will be subject to any other special assessment lien created under the 1913 Act. The Seven Oaks West 11I Area is subject to an existing AD 01-2 assessment; however such assessment will be paid in full upon the issuance of the Bonds from a portion of the proceeds thereof. The property within the Brighton Place Il Area, however, is subject to an existing special tax lien created by RNR CFD No. 92-1 pursuant to the Mello-Roos Act. The amount of special taxes, if any, to which property within RNR CFD No. 92-1 is subject varies based upon the zoning, the entitlements, and the type and level of development of such property. For fiscal year ending June 30, 2004, the property within the Brighton Place I1 Area is subject to the following RNR CFD No. 92-1 special taxes: No special taxes are collected from property for which no final tract map has been recorded. (Final tract maps have been recorded for all property within the Assessment District.) Upon recordation ora final tract map and if no building permit has been issued for a subdivision lot prior to March I of the prior fiscal year, an annual special tax, which is currently $121.89 (which may be increased by 2% each fiscal year) per subdivision lot acre of subject property, is payable. Upon the issuance of a residential building permit for a lot or parcel prior to March 1 of the prior fiscal year, a one-time special tax payment, which is currently $1.25 (which may be increased each fiscal year based upon the percentage change in the designated construction cost index) per building square foot, is payable, and such parcel is subject to an annual special tax payment, which is currently $477.87 (which may be increased by 2% each fiscal year) per unit. In the alternative, at the time of issuance of such residential building permit, the owner of such parcel may prepay a specified amount, in which case the one-time special tax payment and the annual special tax described above will not be levied on such pamel. The prepayment amount is currently $8,643.00 (which may be increased each fiscal year based upon the percentage change in a designated construction cost index). C&C California has indicated that it does not intend to pay the specified prepayment amount of the special tax for any parcel within the Brighton Place I1 Area. Thus, the annual special tax will be payable by all property owners within the Brighton Place 11 Area after the parcels therein are developed. [CONFIRM:I C&C California has reported that all building permits required for the planned development in the Brighton Place II Area have been obtained. Each assessment (and any reassessment) and each installment thereof, and any interest and penalties thereon, constitutes a lien against the parcel of land on which it was imposed until the same is paid. Such a lien is subordinate to all fixed special assessment liens previously imposed upon the same property, but has priority over all private liens and over all fixed special assessment liens that may thereafter be created against the property. Such a lien is co-equal to and independent of the lien for general property taxes and special taxes, including, without limitation, special taxes created pursuant to the Mello-Roos Act, whenever created against the property. Tax Covenants Pursuant to the Bond Resolution, the City has covenanted that it will not make any use of the proceeds of the Bonds which would cause the Bonds to become "arbitrage bonds" subject to Federal income taxation pursuant to the provisions of Section 148(a) of the [ntarnal Revenue Code of 1986, as amended (the "Code"), or to become "Federally-guaranteed obligations" pursuant to the provisions of Section 149(b) of the Code, or to become "private activity bonds" pursuant to the provisions of Section 141(a) of the Code. To that end, the City will comply with all applicable requirements of the Code and all regulations of the United States Department of Treasury issued thereunder to the extent such requirements are, at the time, applicable and in effect. Debt Service Schedule Set forth below is the debt service schedule for the Bonds. Annual Bond Debt Service Principal Period Ending Maturing .Interest d) Total Bond Debt Service Totals $ $ (1) Capitalized interest on the Bonds has been fimded through September 2, 2004. Source: RBC Dain Rauscher Inc. BOOK-ENTRY ONLY SYSTEM The Bonds will be initially delivered in the form of one fully registered Bond for each of the maturities of the Bonds, registered in the name of Cede & Co., as nominee of DTC, as registered owner of all the Bonds. The following description of DTC and its book-entry system has been provided by DTC and has not been verified for accuracy or completeness by the City, and the City shall have no liability in respect thereof. The City shall have no responsibility or liability for any aspects of the records maintained by DTC relating to or payments made on account of beneficial ownership, or for maintaining, supervising, or reviewing any records maintained by DTC relating to beneficial ownership, of interests in the Bonds. DTC is a limited purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants (the "Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book- entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Secarities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner") is in turn to be recorded on the Direct and lndirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. or such other name as requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions and defaults. Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners or in the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. REDEMPTION NOTICES SHALL BE SENT BY THE PAYING AGENT TO DTC. IF LESS THAN ALL OF THE BONDS ARE BEING REDEEMED, DTC'S PRACTICE IS TO DETERMINE BY LOT THE AMOUNT OF THE INTEREST OF EACH DIRECT PARTICIPANT IN SUCH ISSUE TO BE REDEEMED. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Bonds. Under Ets usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments with respect the Bonds will be made to Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the City or the Paying Agent, on the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC (or its nominee), the Paying Agent, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Paying Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to Beneficial Owners is the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services with respect to the Bonds at any time by giving reasonable notice to the City or the Paying Agent. Under such cimumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered in accordance with the terms of the Bond Resolution. THE INFORMATION 1N THIS SECTION CONCERNING DTC AND DTC'S BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM SOURCES THAT THE CITY BELIEVES TO BE RELIABLE, BUT IT TAKES NO RESPONSIBILITY FOR THE ACCURACY THEREOF. THE CiTY CANNOT AND DOES NOT GIVE ANY ASSURANCES THAT DTC WILL DISTRIBUTE PAYMENTS TO DTC PARTICIPANTS OR THAT PARTICIPANTS OR OTHERS WILL DISTRIBUTE PAYMENTS WITH RESPECT TO THE BONDS RECEIVED BY DTC OR ITS NOMINEES AS THE REGISTERED OWNER, ANY REDEMPTION NOTICES, OR OTHER NOTICES TO THE BENEFICIAL OWNERS, OR THAT THEY WILL DO SO ON A TIMELY BASIS, OR THAT DTC WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS The information under this heading is taken primarily from the Engineer's Report for the Assessment District prepared by Wilson & Associates, Fresno, California, which Engineer s Report s on file wtth the Cty, and from information provided by C&C California and Fairway Oaks South. The Assessment District was formed in accordance with the 1913 Act and Section 13.08.070 of the Municipal Code of the City. Proceedings for the formation of the Assessment District were commenced by the City Council pursuant to property owner petitions filed by C&C California and Fairway Oaks South, who, at the time the petition was filed, were the owners of over 60% of the assessable land within the Assessment District. The petitions were accepted by an approving resolution of the City Council, adopted on December 10, 2003, and the petitions are on file with the City Clerk of the City. The Assessment District is comprised of three (3) separate Community Areas in northwest and southwest Bakersfield generally described as (i) the Seven Oaks West 11I Area, containing approximately 225.5 acres and generally bounded by White Lane on the south, Allen Road on the west, Ming Avenue and Tract Nos. 6030 and 6055 on the north, and various pamel lines of the golf course parcels within Pamel Map No. 10617 - Phases A and B, also identified as Tract No. 6086 ("Tract 6086"), Tract No. 6087 ("Tract 6087"), Tract No. 6150 ("Tract 6150"), Tract No. 6151 ("Tract 6151 "), Tract No. 6199 ("Tract 6199"), and Tract No. 6223 ("Tract 6223"), (ii) the Brighton Place II Area, containing approximately 55.0 acres and generally bounded by the Rio Bravo Canal on the southwest, Jewetta Avenue on the southeast and east, and the noah boundary of the right-of-way for the proposed Kern River Freeway on the noah, also identified as Tract No. 6185 ("Tract 6185"), and (iii) the Fairway Oaks South Area, containing approximately 30.5 acres and generally located at the southwest comer of the intersection of Old River Road and the Southern Pacific Railroad right-of-way, also identified as Tract No. 6079 Unit One ("Tract 6079 Unit One"). The three irregularly shaped Communily Areas are located within a rectangular section of northwest and southwest Bakersfield that has a north-to-south dimension of approximately three and three-quarters miles as measured from the noah end of the Brighton Place Il Area to the south end of the Fairway Oaks South Area and a west-to-east dimension of approximately two miles as measured from the westerly boundary of the Seven Oaks West Ill Area to the easterly boundary of the Fairway Oaks South Area. Each of the three Community Areas is involved in various stages of the land development entitlement and/or site development process. See "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT.' The Assessment District boundaries are shown on the assessment diagram, consisting of fourteen (14) sheets, entitled "ASSESSMENT DIAGRAM OF C1TY OF BAKERSFIELD ASSESSMENT DISTRICT NO. 03-3 (SEVEN OAKS WEST III/BRIGHTON PLACE II/FAIRWAY OAKS SOUTH), COUNTY OF KERN, STATE OF CALIFORNIA," a copy of which is attached hereto as APPENDIX D. Proceeds from the sale of the Bonds issued pursuant to the Assessment District proceedings will be used to finance (i) the Improvements, which are generally described as the acquisition of certain public infrastructure improvements for each of the three Community Areas, which Improvements will be owned by the City and operated and maintained by the City, (ii) the cost to pay off existing parcel assessments in the Seven Oaks West Ill Area confirmed pursuant to AD 01-2, and (iii) the payment of certain incidental costs and expenses related to the acquisition of the Improvements, the Assessment District proceedings, and the Bond issuance, including the establishment of a Special Reserve Fund for the Bonds. The Improvements described above are proposed to be financed by the City in accordance with the terms and conditions of the Acquisition Agreements, as applicable. The Acquisition Agreements set forth the procedure by which the Improvements are to be constructed and installed by C&C California or Fairway Oaks South, as applicable, and, upon their completion, acquired by the City using funds provided through the Assessment District proceedings. The scope of the Improvements includes the acquisition by the City of off-site and/or on-site (in-tract) subdivision improvements and the payment of incidental costs that are already required or that are expected by C&C California or Fairway Oaks South, as applicable, to be required to be installed as conditions of final subdivision or site plan approvals, as applicable, within the three Community Areas. Each of the three Community Areas is a separate assessment area within the Assessment District. The costs financed by the Assessment District for the acquisition of the respective Improvements located within or adjacent to each of the three Community Areas have been allocated only to the parcels that are located within the Community Area to be served by those Improvements. Bond proceeds are not expected to be used for the acquisition of land, easements, or rights-of-way. Description of the Community Areas and the Improvements The information under this subheading has been provided by the Engineer's Report, C&C California, or Fairway Oaks South, as applicable, and has not been verified for accuracy or completeness by the City, and the City shall have no liability with respect thereto. The current development plans for the respective Community Areas within the Assessment District are subject to change. Furthermore, the current plans are subject, in large part, to the financial resources and construction and marketing capabilities and efforts of C&C California and Fairway Oaks South, as applicable, and the builders or other persons to whom the parcels within the Assessment District are sold. There can be no assurance that such development will occur as described herein, or that it will occur at all. Seven Oaks West III Area The Seven Oaks West 111 Area boundaries encompass an approximately 225.5-acre block of land that is planned for subdivision into a combined total of 503 R-1 lots (as defined in the section entitled "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT Zoning"), one commercial use parcel, two park site lots, and two storm drain sump lots pursuant to Tract 6086, Tract 6087, Tract 6150, Tract 6151, Tract 6199, and Tract 6223. C&C California is the subdivider of Tract 6086, Tract 6087, Tract 6150, Tract 6151, Tract 6199, and Tract 6223. Accordingly, all of the Improvements for the Seven Oaks West III Area are related to the development of those subdivisions and are generally described as improvements in and along White Lane, Allen Road, and Chamber Boulevard that are required to be constructed, or are expected by C&C California to be required to be constructed, as conditions of approval for those subdivisions. The general location and extent of the planned Improvements for White Lane include completion on the westbound half of the street (north half of the street) plus one eastbound center traffic lane from Windermere Street to Allen Road along the frontage of Tract 6223, to its full design width, complete with excavation, paving, curb, gutter, sidewalk, street lights, utility trench, comer sign monuments and subdivision block wall, 16-inch diameter waterline with fire hydrants, 2-inch diameter irrigation service and appurtenances, and median deposit for both sides of the street. The general location and extent of the planned Improvements for Allen Road from Chamber Boulevard to White Lane, along the frontage of Tract 6223, include completion of the northbound half of the street (east half of the street) to its full design width, complete with excavation, paving, curb, gutter, sidewalk, street lights, utility trench, subdivision block wall, 16-inch diameter waterline with fire hydrants, 2-inch diameter irrigation service and appurtenances, and median deposit for both sides of the street. The general location and extent of the planned Improvements for Chamber Boulevard from the west boundary of exiting Tract No. 6045 ("Tract 6045") westerly to Allen Road includes completion of the entire street (both sides) to its full design width, complete with excavation, paving, curb, gutter, sidewalk, median curb, street lights, utility trench, corner sign monuments and subdivision block wall, 24- and 18-inch diameter storm drain pipelines with manholes, catch basins and appurtenances, and 12- and 8-inch diameter waterline with fire hydrants and appurtenances. The general location and extent of the planned Improvements on the south side of Chamber Boulevard from Windermere Street to the west boundary of Tract 6045 include construction of subdivision block wall and comer sign monuments. Also included in the scope of the Seven Oaks West I11 Area Improvements are C&C California's incidental costs for design engineering, construction stalking, soils and materials analysis and testing, plan check and inspection fees, improvement bonds, and bid documents, all as itemized in the Engineer's Report. Brighton Place H Area The Brighton Place Il Ama boundaries encompass an approximately 55.0-acre block of land that is planned for subdivision into 176 R-1 lots, one common area (recreation) lot, and one water recharge basin/future freeway right-of-way parcel pursuant to Tract 6185. C&C California is the subdivider of Tract 6185. Accordingly, all of the Improvements for the Brighton Place 11 Area are related to the development of that subdivision and are generally described as improvements in Jewetta Avenue and various City development fees that are required to be constructed and/or paid, or are expected by C&C California to be required to be constructed and/or paid, as conditions of approval for that subdivision. The general location and extent of the planned Improvements for Jewetta Avenue include the construction of a traffic signal at the intersection of Milverton Way and Jewetta Avenue. The planned City development fees funded as part of the Improvements for the Brighton Place Il Area include the Water Availability Fee and Regional Transportation Impact Fee for Tract 6185 (as such terms are defined and required by the City). Also included in the scope of the Brighton Place I1 Area Improvements are C&C California's incidental costs for design engineering, construction staking, soils and materials analysis and testing, plan check and inspection fees, improvement bonds, and construction inspection fees, all as itemized in the Engineer's Report. Fairway Oaks South Area The Fairway Oaks South Area boundaries encompass an approximately 30.5-acre block of land that is planned for subdivision into a total of 59 R-I lots, one super lot (planned for future subdivision into 60 R-1 lots pursuant to Tentative Tract No. 6079), and one storm drain sump lot. Fairway Oaks South is the subdivider of Tract 6079 Unit One. Accordingly, all of the Improvements for the Fairway Oaks South Area am related to the development of that subdivision and are generally described as improvements in and along Old River Road, and in- tract/on-site sewer and storm drain improvements that are required to be constructed, or are expected by Fairway Oaks South to be required to be constructed, as conditions of approval for that subdivision. The general location and extent of the planned Improvements for the Old River Road street improvements include completion of the southbound half of the street (west half of the street) to its full design width, along the frontages of Tentative Tract No. 6079, Unit One and Unit Two (fi.om the Southern Pacific Railroad right-of-way on the north to the future Snowdon Avenue in Tract 6079 Unit One on the south), complete with excavation, paving, curb, gutter, sidewalk, median curb, and street lights. The general location and extent of the planned Improvements for the Old River Road water system improvements include completion of the waterline from the end of the existing waterline located approximately 700 feet north of the Southern Pacific Railroad right-of-way southerly to future Snowdon Avenue, including 12-inch diameter waterline, fire hydrants, irrigation services, approximately 100 feet of bore under the railroad right-of-way, and appurtenances. The general location and extent of the planned in-tract/on-site sewer Improvements in Tentative Tract No. 6079 include construction of the in-tract/on-site sewer system for Tentative Tract No. 6079, complete with 10- and 8-inch diameter sewer line from Mountain Vista Drive easterly to Old River Road (from west to east boundaries of Tentative Tract No. 6079), in future Lerwick Avenue, Cobblestone Avenue, and Snowdon Avenue, complete with manholes and clean outs. The general location and extent of the planned in- tract/on-site storm drain Improvements in the Fairway Oaks South Area include construction of the in-tract/on-site storm drain system, complete with 36-, 30-, 24-, and 18-inch diameter pipelines with manholes and catch basins, and a complete storm drain sump with all required excavations, outlet structures, catch basins, block wall, and gates, all located within the boundaries of Tract 6079 Unit One. Also included in the scope of the Fairway Oaks South Area Improvements are Fairway Oaks South's incidental cost for design engineering, all as itemized in the Engineer's Report. Estimated Improvement Costs Set forth below are the confirmed assessment amounts with regard to the estimated costs of the Improvements and other costs relating to the Assessment District proceedings, as described in the Engineer's Report. A copy of the Engineer's Report is on file with the City. ENGINEER'S STATEMENT OF TOTAL ASSESSMENT City of Bakersfield Assessment District No. 03-3 (Seven Oaks West Ill/Brighton Place Il/Fairway Oaks South) ACTIVITY DESCRIPTION SEVEN OAKS WEST Ill AREA IMPROVEMENT COST A. IMPROVEMENTS B. INCIDENTALS C. TOTAL SEVEN OAKS WEST 111 AREA IMPROVEMENT COST 2. BRIGHTON PLACE Il AREA IMPROVEMENT COST A. IMPROVEMENTS B. INCIDENTALS C. TOTAL BRIGHTON PLACE Il AREA IMPROVEMENT COST 3. FAIRWAY OAKS SOUTH AREA IMPROVEMENT COST A. IMPROVEMENTS B. INCIDENTALS C. FAIRWAY OAKS SOUTH AREA IMPROVEMENT COST 4. PAYOFF OF EX1STING ASSESSMENT DISTRICT NO. 01-2 ASSESSMENTS (SEVEN OAKS WEST 111 AREA ONLY) ESTIMATED ASSESSMENT DISTRICT PROCEEDING COST AND EXPENSE A. SEVEN OAKS WEST Ill AREA B. BRIGHTON PLACE Il AREA C. FAIRWAY OAKS SOUTH AREA D. TOTAL ESTIMATED ASSESSMENT DISTRICT PROCEEDING COST AND EXPENSE SUBTOTAL COST TO ASSESSMENT A. SEVEN OAKS WEST II1 AREA B. BRIGHTON PLACE Il AREA C. FAIRWAY OAKS SOUTH AREA D. SUBTOTAL COST TO ASSESSMENT UNDERWRITER'S DISCOUNT, CAPITALIZED INTEREST, AND RESERVE FUND A. SEVEN OAKS WEST Ill AREA B BRIGHTON PLACE Il AREA C. FAIRWAY OAKS SOUTH AREA D. TOTAU UNDERWRITER'S DISCOUNT, CAPITALIZED INTEREST, AND RESERVE FUND 8. TOTAL AMOUNT ASSESSED ALLOCATION OF TOTAL AMOUNT ASSESSED TO EACIt DEVELOPMENT AREA I. SEVEN OAKS WEST 111 AREA 2. BRIGHTON PLACE 11 AREA 3, FAIRWAY OAKS SOUTH AREA Source: Engineer's Report prepared by Wilson & Associates. CONFIRMED ASSESSMENT $3,326,312.00 655,171.00 $3,981,483.00 $581,049.00 26,906.00 $607,955.00 $550,957.25 30,000.00 $580,957.25 $324,283.16 $202,295.62 28,563.24 49,806.48 $280,665.34 $4.508,061.78 636.518.24 630~763.73 $5,775,343.75 $663,216.43 93,643.21 92,796.61 $849,656.25 $6,625,000.00 $5,171,278.21 $730,161.45 $723,560.34 Method of Assessment Spread Spread of the Assessment District Costs to Benefited Parcels Section 10204 of the 1913 Act requires that the assessments must be levied in proportion to the estimated benefit that the subject properties receive fi.om the works of improvement. The statute does not provide the specific method or formula that should be used in any particular special assessment district proceeding. That responsibility rests initially with the Assessment Engineer, who is retained by the City for the purpose of making an independent analysis of the facts and recommendations about the apportionment of the assessment obligation. For the proceedings with respect to the Assessment District, the City has retained Wilson & Associates, Fresno, California, to serve as the Assessment Engineer. The 1913 Act provides that the Assessment Engineer makes his recommendations as to the cost and method of apportionment of the assessments in the Engineer's Report, which is then considered at the public hearing on the Assessment District. Final authority and action with respect to the levy of the assessments rests with the City Council after hearing all testimony and evidence presented at the public hearing. Upon the conclusion of the public hearing, the City Council must take final action in determining the proportionality of the benefits received by the properties assessed. The financed costs will be spread to the assessed parcels in the Assessment District in the manner set forth in Municipal Code Section 13.08.070 - Benefit Spread, which was added to the City's Municipal Code on April 5, 1995, by City Council adoption of Ordinance No. 3643. The parcel assessment shares for City assessment districts are to be allocated or spread in accordance with the 1913 Act, which requires that the financed cost in a special assessment proceeding be allocated among the benefited parcels of land in proportion to the estimated benefit each parcel can be expected to receive from the work and improvement covered by the assessment. Municipal Code Section 13.08.070 authorizes the "reallocation" to alternate properties of assessments initially allocated to parcels in proportion to their estimated benefit (i.e., initial allocation made in accordance with the 1913 Act cost/benefit requirement), when such reallocation is so requested by the owner of all property to be assessed and upon the written consent of the owner of the property to which assessments are reallocated and approval thereof by the City Council. The Assessment District individual parcel assessment amounts shown on APPENDIX E have been calculated or spread among the assessed parcels pursuant to Municipal Code Section 13.08.070. The alternate method used by the Assessment Engineer to reallocate the benefit based assessment shares initially allocated by the Assessment Engineer to each assessed parcel has been provided by C&C California and Fairway Oaks South. The Assessment Engineer has determined that the spreading of the assessments in accordance with the alternate method conforms with the requirements of Municipal Code Section 13.08.070. To the extent that any assessments are reapportioned after the Bonds have been issued, the City will approve the same only if the security for the Bonds is not reduced or impaired. Reallocation Spread Method In accordance with Municipal Code Section 13.08.070, C&C California and Fairway Oaks South have submitted a proposed alternate method and rate of assessment. Further, C&C California and Fairway Oaks South have stated that, as of the date of the approval of the alternate method and rate of assessment, they are the owners of all the property proposed to be reallocated a share of the assessment and that they consent to the reallocation. The Assessment Engineer's estimates of the costs of the Improvements is presented above under the heading "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS Estimated Improvement Costs." The alternate method (the "Reallocation Spread Method") is described as follows: The total improvement acquisition cost within each of the three Community Areas is spread among the developed and undeveloped parcels within each area in direct proportion to parcel acreage and to each planned or existing R-1 lot within those developed and undeveloped parcels as an equal per R-1 lot cost share. There are no exceptions in any Community Area to the equal cost share per acre and equal cost per existing or planned R-I lot Reallocation Spread Method. 20 OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT Ownership of Property in the Assessment District C&C California owned 86.51% of the assessed property in the Assessment District prior to the recording of the notice of assessment and currently owns approximately __% of the assessed property in the Assessment District. As of ,2004, C&C California has sold lots in the Seven Oaks West Ill Area and lots in the Brighton Place 11 Area to merchant builders. Fairway Oaks South owned approximately 10.70% of the assessed property in the Assessment District prior to the recording of the notice of assessment. Fairway Oaks has not sold, and does not intend to sell, any lots in the Fairway Oaks South Area to merchant builders. The Community Areas will bear 100% of the total assessment lien. Neither C&C California nor Fairway Oaks South nor any other owner of property within the Assessment District (each, a "Proper~ Owner"), will be personally liable for payments of the assessments to be applied to pay the principal of and interest on the Bonds. In addition, there is no assurance that C&C California, Fairway Oaks South, or any other Property Owner will be able to pay the assessment installments or that C&C California, Fairway Oaks South, or any other Property Owner will pay such installments even if it is financially able to do so. Furthermore, except to the extent expressly set forth herein, no representation is made that C&C California, Fairway Oaks South, or any other Property Owner will have moneys available to complete or improve the development of the land within the Assessment District (other than the Improvements) in the manner described herein. Accordingly, no Property Owner's financial statements are included in this Official Statement. C&C California The information under this subheading has been provided by C&C California and has not been verified for accuracy or completeness by the City or the Underwriter, and the City and the Underwriter shall have no liability in respect thereof C&C California is a California corporation and wholly owned subsidiary of Castle & Cooke, Inc., a Hawaii corporation ("Castle"). Castle was formed on October 10, 1995, to be the successor to the mai estate, commercial real estate, and resort business of Dole Food Company, Inc., primarily in the states of Hawaii, California, and Arizona, but also in other states in the United States. C&C California was incorporated on November 16, 1995, and assumed some of Castle's real estate developments in the State of California. C&C California is currently engaged in the development of residential real estate properties in the United States, primarily in the State of California. C&C California develops finished lots for re-sale to homebuilders and is engaged in the construction of some homes. C&C California owns the following real estate developments in the City of Bakersfield: Seven Oafs. Seven Oaks, which includes the Seven Oaks West 111 Area, is a master-planned community on approximately 1,700 acres that is designed to be the premier residential development in Bakersfield. Seven Oaks surrounds the Seven Oaks Country Club and Golf Course, which was developed by C&C California, and which eventually will be contributed to a nonprofit mutual benefit corporation. C&C California has the exclusive right to sell memberships in the Seven Oaks Country Club. Development of the community is being completed in phases, based on market demand. C&C California has developed neighborhoods offering home sites fi.om "move-up" to luxury homes. Approximately 800 homes sites and homes remain to be developed on approximately 600 acres. Silver Creek. Silver Creek is a master-planned community encompassing approximately 600 acres in the City. C&C California is currently constructing and will sell homes only in the Silver Creek II Area of the Silver Creek development, which area is being marketed as "Liberty" and is planned to include 154 homes. Brimhall North. Brimhall North, a residential community in the City comprised of approximately 1,400 acres, is planned to attract first-time to custom home buyers. Approximately 153 home sites of the total 1,395 sites remain to be sold, located on approximately 106 acres. Brimhall (Brighton). Brimhall (Brighton), a new community that began construction in 2003, encompasses approximately 395 acres in the City, including the Brighton Place 11 Area. Upon completion, Brimhall (Brighton) will encompass approximately 1,038 homes. Forty-eight lots were sold during late 2003. Prices for lots in the first phase of the development have averaged between $75,000 and $110,000. Southern Oaks. Southern Oaks, a development encompassing approximately 67 acres in the City, is located just south of the Seven Oaks development. Them are 175 homes sites in Southern Oaks, of which 77 remain to be sold as of December 31, 2003. The average price of the remaining lots is $67,000. C&C California owns additional development property in the City, including Renfro, an 80-acre single family development currently being master planned, approximately 31 acres of property zoned R-2 (for multifamily use) at Ming Avenue and Gosford Road, and approximately 116 acres of freeway right-of-way in the Brimhall development, which is expected to be developed as an expressway through the southwest portion of the City. Other California properties owned by C&C California include the following: · Approximately 2,132 of open space in the City of San Jose, which is expected to be sold for an average purchase price of $25,000 per acre. · Coyote Creek Golf Course, located approximately 2.5 miles south of the City of San Jose (adjacent to the San Jose property described above). The Coyote Creek Golf Course, formerly known as Riverside Golf Course, consists of two 18-hole daily fee courses designed by Jack Nicklaus, as well as a 12,000 square foot clubhouse (constructed with the first of the two existing courses in 1999). · Mountaingate, a master-planned community located in Los Angeles County adjacent to the Mountaingate Country Club. A final map is expected to be recorded and construction is expected to be commenced for this development by December 2004. Mountaingate is planned to include 29 lots that are expected to sell at a price of approximately $1,600,000 each. C&C California, or an affiliate of C&C California, also owns and is developing land in Hawaii, Arizona, Georgia, North Carolina, and Florida. Fairway Oaks South The information under this subheading has been provided by Fairway Oaks South and has not been verified for accuracy or completeness by the City or the Underwriter, and the City and the Underwriter shall have no liability in respect thereof Fairway Oaks South, LP, is a California limited partnership formed in July 2, 2003. The sole general partner of Fairway Oaks South is McDivitl Development, Inc., a California corporation ("McDivitt"), the sole shareholders of which are Don Judkins and his wife, Maxine Judkins, each acting in the capacity as Co-Trustee Under Trust Agreement dated January 3, 1985. The shareholder of McDivitt have been developing single family residential subdivisions and building and selling single family residences in the Bakersfield area continuously for approximately 28 years, including 158 homes in 2003, and have never failed to successfully complete a project. McDivitt is also the sole general partner of Hampton Place LP, a California limited partnership ("Hampton Place LP"). In addition, the shareholders of McDivitt previously owned and operated All Kern Financial Corp., a mortgage banking company, from 1979 until its sale in 1988 and, in late 1998, started another mortgage banking company called Centennial Corp. Hampton Place LP's development, called Hampton Place, is located approximately 1.5 miles from the Fairway Oaks South Area and encompasses approximately 154 single-family residential lots to be built in four phases. Three of the four phases of Hampton Place are complete and homes are under construction in the fourth 22 phase. In addition, the shareholders of McDivigt, through another entity, recently completed the Fairway Oaks project, a 238-unit single-family residential development located proximate to the Fairway Oaks South Area. Fairway Oaks South was formed to develop the Fairway Oaks South Area only. All of the homes in the portion of the Fairway Oaks South Project currently being developed will be constructed by Biltmore Properties, a California corporation doing business as Burlington Homes. Burlington Homes, a licensed general contractor, is owned by Donavan Judkins, Don and Maxine Judkin's oldest son. Fairway Oaks South does not currently intend to sell lots in the Fairway Oaks South Area to merchant builders. As a condition to recordation of the final tract map for a project, the City requires that the proper~ owner deliver either bonds or letters of credit to secure the owner's obligation to complete and maintain the subdivision improvements. In connection with the recordation of the tract map for Tract 6079 Unit One, Fairway Oaks South obtained and delivered to the City letters of credit from TriCounties Bank. Accordingly, the Fairway Oaks South Area is currently encumbered by a deed of trust in favor of TriCounties Bank securing Fairway Oaks South's indemnity obligation related to such letters of credit. Since the letters of credit have not been drawn, there is currently no outstanding indebtedness secured by such deed of trust. Development and Financing Plans The current development plans of C&C California and Fairway Oaks South for the development of the property within the Assessment District are subject to change. Furthermore, the current development plans envisioned for the Assessment District are subject, in large part, to the financial resources and construction and marketing capabilities and efforts of C&C California, Fairway Oaks South, and the merchant builders and other persons to whom the parcels within the Assessment District may be sold. There can be no assurance that such development will occur as described herein, or that it will occur at all. The information under this section has been provided by C&C California or Fairway Oaks South, as applicable, and has not been verified for accuracy or completeness by the City and the City shall have no liability in respect thereof. The C& C California Development Plan C&C California is the developer of the Seven Oaks West III Area and the Brighton Place II Area. C&C California plans to develop these Community Areas as follows: [C&C CALIFORNIA TO CONFIRM/COMPLETE:] Seven Oaka West lllArea. The Seven Oaks West 111 Area encompasses approximately 225.5 acres and has been approved for subdivision into 503 R-1 lots as follows: 29 lots in Tract 6086, 95 lots in Tract 6087, 49 lots in Tract 6150, 47 lots in Tract 6151,42 in Tract 6199, and 241 lets in Tract 6223. C&C California plans to develop the property in the Seven Oaks West Ill Area into developable R-I lots for sale to merchant builders and/or individuals for construction of single-family residential units. Development in the Seven Oaks West 111 Area will also include one commercial use parcel, comprised of Lot 30 in Tract 6086 ("Tract 6086, Lot 30"). Tract 6086, Lot 30 of the Seven Oaks West 111 Area is zoned for commercial uses and is expected to be sold and/or subdivided for commercial purposes. No parcel map has been submitted to the County for recordation with respect to Tract 6086, Lot 30. Tract 6199, Phase B of Tract 6087, and a portion of Tract 6086 of the Seven Oaks West I11 Area, also collectively referred to as the "Lexingtx)n Development, are being developed in phases. The first phase will comprise R-I lots, the second phase will comprise __ R-I lots, [etc.]. The lots are expected to average __ square feet each. Construction in the [first] phase will also include certain required off-site improvements. Prices of the lots in the Lexington Development are expected to begin at $__. C&C California estimates that __ to lots will be sold each year. As of ., 2004, __ lots have been sold to merchant builders [and/or individuals]. 23 Tract 6150 (Unit 1 and Unit 2) and Phase A of Tract 6087 of the Seven Oaks West Ill Area, also collectively referred to as the "Regency Development," are being developed in __ phases. The first phase will comprise R-1 lots, the second phase will comprise __ R-1 lots, [etc.]. The lots are expected to average _ square feet e~ch. Construction in the [first] phase will also include certain required off-site improvements. Prices of the lots in the Regency Development are expected to begin at $ __. C&C California estimates that to lots will be sold each year. As of. , 2004, __ lots have been sold to merchant builders [and/or individuals]. Tract 6151 (Unit 1 and Unit 2) of the Seven Oaks West 111 Area, also referred to as the "Showcase Development," is being developed in __ phases. The first phase will comprise __ R-1 lots, the second phase will comprise __ R-1 lots, [etc.]. The lots are expected to average square feet each. Construction in the [first] phase will also include certain required off-site improvements. Prices of the lots in the Showcase Development are expected to begin at $ . C&C California estimates that to lots will be sold each year. As of ,2004, lots have been sold to merchant builders [and/or individuals]. Tract 6087 (Phase C and Phase D) of the Seven Oaks West 111 Area, also referred to as the "Wedgewood Development," is being developed in __ phases. The first phase will comprise __ R-1 lots, the second phase will comprise __ R-1 lots, [etc.]. The lots are expected to average __ square feet each. Construction in the [first] phase will also include certain required off-site improvements. Prices of the lots in the Wedgewood Development are expected to begin at $ _. C&C California estimates that to lots will be sold each year. As of ,2004, lots have been sold to merchant builders [and/or individuals]. Tract 6223 of the Seven Oaks West II1 Area, also referred to as the "Windemere Development," is being developed in __ phases. The first phase will comprise __ R-1 lots, the second phase will comprise __ R-1 lots, [etc.]. The lots are expected to average square feet each. Construction in the [first] phase will also include certain required off-site improvements. Prices of the lots in the Windemere Development are expected to begin at $__. C&C California estimates that to lots will be sold each year. As of ., 2004, __ lots have been sold to merchant builders [and/or individuals]. Brighton Place llArea. The Brighton Place 11 Area encompasses approximately 55.0 acres and has been approved for subdivision into 176 R-1 lots in Tract 6185. C&C California plans to develop the property in the Brighton Place 11 Area into developable R-1 lots for sale to merchant builders and/or individuals for construction of single-family residential units. Development in the Brighton Place 11 Area will also include one common area lot to be used for recreation, and one parcel that is to be split later into one water recharge basin and a future freeway right-of-way parcel. Tract 6185 of the Brighton Place 1I Area is being developed in phases. The first phase will comprise R-1 lots, the second phase will comprise R-1 lots, [etc.]. The lots are expected to average __ square fee~ each. Construction in the [first] phase will also include certain required off-site improvements. Prices of the lots in Tract 6185 are expected to begin at $ . C&C California estimates that to lots will be sold each year. As of 2004, __ lots have been sold to merchant builders [and/or individuals]. The Fairway Oaks South Development Plan Fairway Oaks South is the developer of the Fairway Oaks South Area. Fairway Oaks South plans to develop the Fairway Oaks South Area as follows: The Fairway Oaks South Area encompasses approximately 30.5 acres and has been approved for subdivision into 59 R-1 lots and one "super" lot (planned for future subdivision into 60 R-I lots). Fairway Oaks South plans to develop the property in the Fairway Oaks South Area into developable R-1 lots for sale to individual homeowners. The development in the Fairway Oaks South Area is herein referred to as the "Fairway Oaks South Project." The approved 59 R-1 lots in Tract 6079 Unit One are being developed in one phase. The lots are expected to average 7,000 square feet each. Construction in Tract 6079 Unit One will also include certain required off-site 24 improvements. Homes in the Fairway Oaks South Project are expected to range in size between 1,407 and 2,760 square feet and range in price between $190,000 and 300,000. Sales to Merchant Builders IC&C CALIFORNIA TO CONFIRM/COMPLETE:I Fairway Oaks South does not presently intend to sell any lots in the Fairway Oaks South Area to merchant builders. Since the recording of the notice of assessment for the Assessment District, lots in The Seven Oaks West Ill Area and the Brighton Place Ii Area have been sold to several merchant builders. As of ., 2004, __ (~) such merchant builders have each purchased lots that in the aggregate bear greater than five percent (5%) of the total assessment lien imposed within the Assessment District. Such merchant builders are described below: [Name of Merchant Builder]. As of ,2004, . ( .... ), owned __ lots within the [Seven Oaks West III Area] of the Assessment District, which lots are subject to approximately __% of the assessment lien therein, was incorporated in and since that time has developed __ single- family homes in the State of California. plans to develop its Assessment District property with single- family homes ranging in size from to __ square feet and ranging in price from $ to $ anticipates that its planned units will be completed by 20 . [Name of Merchant Builder]. As of ,2004, . ( .... ), owned __ lots within the [Brighton Place 11 Area] of the Assessment District, which lots are subject to approximately % of the assessment lien therein, was incorporated in and since that time has developed single- family homes in the State of California. plans to develop its Assessment District property with single- family homes ranging in size from to square feet and ranging in price from $ to $ anticipates that its planned units will be completed by 20 . The C&C California Financing Phm ICONFIRM:] In December 2003, C&C California entered into an amended and restated credit agreement (the "Credit Agreement") with a syndicate of banks (the "Credit Banks"). All Improvements in the Assessment District not financed with proceeds from the sale of the Bonds will be financed with moneys derived from the Credit Agreement. Pursuant to the Credit Agreement, the Credit Banks agreed to provide a three-year secured term loan of $125 million and a three-year secured revolving line of credit of up to $250 million, based on a percentage of the value of certain commercial properties, land holdings, and homebuilding inventory, and subject to certain limitations. Repayment obligations under the Credit Agreement are subject to interest at a variable rate based on the London interbank Offered Rate ("LIBOR"), or at an alternate rate based upon a designated Credit Bank's prime rate or the federal funds rate. The Credit Agreement contains customary covenants, including, but not limited to, limitations on investments, sale of assets, limitation on other debt, financial covenants related to tangible net worth, leverage, interest coverage, and inventory levels. As of December 31, 2003, the amount available under the Credit Agreement was $250 million, with an additional $70 million available for general corporate purposes. C&C California's estimated construction budgets for the Seven Oaks West I11 Area and the Brighton Place I1 Area are set forth below: 25 Seven Oaks West Ill Area Estimated Construction Budget Land Off'site Improvements (Net of Reimbursements from Bond Proceeds) Onsite Improvements Indirect Improvements Capitalized Home Costs Total Expenditures Incurred as of 5/~/04 Brighton Place 11 Area Estimated Construction Budget Land Offsite Improvements (Net of Reimbursements from Bond Proceeds) Onsite Improvements Indirect Improvements Capitalized Home Costs Total Expenditures Incurred as of 5/~/04 The Fairway Oaks South Financing Plan As its general partners have done with other development projects in the past, Fairway Oaks South intends to fund the construction of all non-Bond financed off-site improvements and all of the homes out of its existing cash and projected cash flow, and thereby avoid incurring any liens against the properties in the Fairway Oaks South Area. At the time of recordation of the final map for the Fairway Oaks South Project (except for the "super" lot), Fairway Oaks South entered into approximately $1,425,814 in aggregate amount of business loan agreements with TriCounties Bank, in order to provide the performance and maintenance bonds for the first phase of development, the non-Bond financed phase two improvements, and landscaping and maintenance improvements, all as required by the City in connection with the development of the Fairway Oaks South Area. Fairway Oaks South's estimated construction budget for the Fairway Oaks South Area is set forth below: Fairway Oaks South Area Estimated Construction Budget Land Planning lnfrastructure lmprovements (OnsitcandOfl~ite/ Home Construction (59Approved Lotsin Tract 60?9 Unit One Only) Total Expenditures Incurred as of 4/30/04 $ 408,000 180,000 1,161,726 7,670,000 $9,419,726 $1393,713 Assessment Roll Set forth in APPEND1X E is the assessment roll, including Bulk Value (as defined herein) to assessment lien ratio information, for the parcels of property within the Assessment District that are subject to the lien of the assessments. The assessment roil shows the amount of the total estimated cost of the proposed Improvement acquisition, construction and incidental cost that is assessed upon each of the lots and parcels within the Assessment District based upon the alternate method and rate of assessment permitted under Section 13.08.070 of the Municipal Code of the City. See "THE ASSESSMENT DISTR1CT AND THE IMPROVEMENTS - Method of Assessment Spread" above. The assessment numbers that appear on the assessment roll correspond to the assessment numbers shown on the assessment diagram, attached hereto as APPENDIX D. Utilities For the Seven Oaks West Ill Area, ail utilities, including gas, water, electricity, sewer, storm drains, and telephone service are or will be installed in the streets within the Community Area and will connect to existing facilities in the surrounding streets. Natural gas service is provided by Pacific Gas and Electric Company ("PG&E"); water, sewer, and storm sewers are provided by the City; electricity service is provided by PG&E; and telephone service is provided by Pacific Bell. For the Brighton Place 11 Area, all utilities, including gas, water, electricity, and telephone services, are in place. Natural gas service is provided by Southern California Gas Company; water, sewer, and storm sewers are provided by the City; electricity service is provided by PG&E; and telephone service is provided by Pacific Bell. For the Fairway Oaks South Area, electricity, water, and gas utility services are located north of the Burlington-Santa Fe Rail Line ("Burlington-Santa Fe") north of Pacheco Road. Fairway Oaks South has acquired an agreement from Burlington-Santa Fe to allow the routing of these utilities under the railroad tracks to connect to the parcels in the Fairway Oaks South Area. Sewer connections for the parcels in the Fairway Oaks South Area will tie in to the existing trunk line in Harris Road and Fairway Oaks South intends to extend such trunk line to Mountain Vista Drive and then to the parcels in the Fairway Oaks South Area. Fairway Oaks South has represented that access to all such utilities facilities will be available to each parcel within the Fairway Oaks South Area upon construction of the planned homes thereon. See "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS Description of the Community Areas and the Improvements" and "SPECIAL RISK FACTORS - Factors Which May Affect Land Development." Flood and Earthquake Zones According to maps prepared by the Federal Emergency Management Agency Federal Insurance Administration, the Community Areas are situated in Zone B (Brighton Place II Area) or Zone C (Seven Oaks West II1 Area and Fairway Oaks South) flood areas. "Zone B" denotes an area protected from the 1% chance of annual flooding by levee, dike, or other structures subject to possible failure or overtopping during larger floods, and "Zone C" denotes an area of minimal flooding. No flood insurance is required for property in Zone B or Zone C flood areas, and no flood insurance has been obtained for any property within the Assessment District. According to Special Publication g42 of the California Division of Mines and Geology, Revised Edition, 1994, entitled "Fault-Rupture Hazard Zones in Califomia," the Assessment District is not located within any Special Studies Zone, as defined in the Alquist-Priolo Special Studies Zone Act. Zoning According to the Planning Department of the City, approximately ten (10) acres of assessment number I is zoned C-2. The C-2 zoning designation allows development for commercial uses and precludes any uses typically allowed under any R (i.e., residential) designations. The remainder of the parcels in the Assessment District are zoned R-1. An R-I zoning designation allows single-family residential land uses, with a minimum lot size of 6,000 square feet for each dwelling unit (referred to herein as "R-1 lots"). Tax Delinquencies The City reports that, based upon the records of the office of the Kern County Tax Collector, there are no delinquent taxes or penalties owed against the parcels in the Assessment District. C&C California and Fairway Oaks South have each reported that it has never been late on making assessment payments in other assessment districts, defaulted on any bond issue, or lost any property to foreclosure as a result of not paying assessments. 27 Environmental Review Pursuant to the Charter and Municipal Code of the City, the formation of an assessment district is exempt from compliance with the California Environmental Quality Act ("CEQA"). Accordingly, a Notice of Exemption from CEQA was filed by the City with the Kern County Clerk for the Assessment District proceedings on February 3, 2004. The City reports that separate environmental review proceedings will be conducted for the improvement projects proposed to be financed by the District as part of the CEQA compliance associated with the land use entitlement and subdivision approval process within each Community Area. Bulk Value-to-Assessment Lien Ratio An Appraisal of the property within each of the three Community Areas in the Assessment District that is subject to the lien of the assessments has been prepared for the City by the Appraiser. The Appraisal, subject to the various limitations and assumptions set forth therein, provides an estimate of the as-is market value (designated in the Appraisal as the "Bulk Value of Recorded Lots or Land" and defined herein as the "Bulk Value") of each parcel of properly within the Assessment District. Because final maps have been recorded for all pamels in the Assessment District (other than the super lot in the Fairway Oaks South Area), the Appraiser determined Bulk Value by discounting the Aggregate Finished Lot Value When Complete (as defined below) of each parcel based on the portion of the Completion Costs (as defined below) not yet incurred by C&C California or Fairway Oaks South, as applicable. The "Aggregate Finished Lot Value When Complete" is described in the Appraisal as the value of each parcel assuming the completion of the Improvements and taking into account the value added by existing improvements, a recorded subdivision map, and the "Completion Costs," which are defined herein as the costs associated with the developer-funded improvements necessary to develop such parcel as a finished lot available for improving with new housing units. The Completion Costs were presumed by the Appraiser to include direct and indirect costs for each lot, taxes during construction, costs associated with school bonds and other applicable direct and overlapping debt, profits, commissions, administrative and miscellaneous expenses, and the time value of money. See "APPENDIX B Appraisal. For a discussion of liens encumbering the Assessment District property other than the assessments, see "Direct and Overlapping Debt" below and "THE BONDS - Priority of Lien" herein. Based on the Appraisal, the ratio of the aggregate Bulk Value of the Assessment District property to the aggregate assessment lien is 7.06:1'. The following table sets forth the Bulk Value of the Assessment District property and the applicable Bulk Value-to-assessment lien ratios. * Preliminary; subject to change 28 APPRAISED VALUES AND BULK VALUE-TO-ASSESSMENT LIEN RATIOS CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO. 03-3 (SEVEN OAKS WEST III/BRIGHTON PLACE II/FAIRWAY OAKS SOUTH) Fairway Oaks South Fairway Oaks South (I) Since the recording of the notice of assessment for the Assessment District, ceriain lots in each of the Community Areas have been sold to several merchant builders. See "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT - Development and Financing Plans Sales to Merchant Builders" herein, (2) "Net Acres" represent the acres within the Assessment District being assessed, and do not include off-site streets, storm drain sumps, water well sites, or park sites (3) For a discussion of liens encumbering the Assessment DistTict property other than the assessments, see "Direct and Overlapping Debt" below and "THE BONDS - Priority of Lien" herein Source: Appraisal (provided, however, that the Engineer's Report served as the source for Net Acres data). The assumptions and limitations regarding the appraised valuations are set forth in the Appraisal, a copy of which is attached hereto as APPENDIX B. See APPENDIX E for additional information regarding the appraised value of each assessed parcel and the ratio of such value to the amount of the assessment lien against such parcel. The City makes no representations as to the accuracy or completeness of the Appraisal. Certain considerations relating to the Appraisal are discussed under the heading "SPECIAL RISK FACTORS." 29 NO REPRESENTATIONS ARE MADE REGARDING THE APPRAISED VALUATIONS QUOTED IN APPENDIX E, AND PROSPECTIVE PURCHASERS ARE CAUTIONED NOT TO RELY ON THE VALUATIONS IN DETERMINING WHETHER OR NOT THE BONDS DESCRIBED HEREIN ARE A SUITABLE INVESTMENT. PROSPECTIVE PURCHASERS OF THE BONDS SHOULD NOT ASSUME THAT THE PROPERTY WITHIN THE ASSESSMENT DISTRICT COULD BE SOLD FOR THE VALUATION AMOUNT AT A FORECLOSURE SALE FOR DELINQUENT ASSESSMENTS. Direct and Overlapping Debt The folIowing table (the "Direct and Overlapping Debt Table") details the direct and overlapping debt currently encumbering property within the Assessment District. The Direct and Overlapping Debt Table has been derived from data assembled and reported to the City by California Municipal Statistics, lnc., as of May 1, 2004. Neither the City nor the Underwriter has independently verified the inforntation in the Direct and Overlapping Debt Table and neither the City nor the Underwriter guarantees its completeness or accuracy. The Direct and Overlapping Debt Table does not include the special tax liens described under the heading "THE BONDS - Priority of Lien" herein. Direct and Overlapping Debt City of Bakersfield Assessment District No. 03-3 (Seven Oaks West III/Brighton Place Il/Fairway Oaks South) 2003-04 Local Secured Assessed Valuation: $5,592,632 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 5/1/04 Kern Community College District School Facilities Improvement District No. I 0.013% $ 9,775 Kern County Union High School District 0.020 13,007 Rosedale Union School District 0.069 2,722 City of Bakersfield 0.045 1,373 Kern County Water Agency, I.D. No. 4 0.011 245 Kern Delta Water District 0.045 1,071 Kern Community College District Assessment District 0.015 1,482 City of Bakersfield Assessment District No. 03-3 100. - (1) TOTAL GROSS DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $29,675 tess: City of Bakersfiald water bonds 1,373 TOTAL NET DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $28~302 OVERLAPPING GENERAL FUND OBLIGATION DEBT: Kern County General Fund Obligations 0.013% $ 13,961 Kera County Pension Obligations 0.013 65,083 Kem County Board of Education Certificates of Participation 0.013 12,685 Kern Community College District Certificates of Participation 0.012 10,372 Kern County Union High School District General Fund Obligations 0.021 19,824 City of Bakersfield Certificates of participation 0.045 15,588 TOTAL OVERLAPPING GENERAL FUND OBLIGATION DEBT $137,513 GROSS COMBINED TOTAL DEBT $167,188 (2) NET COMBINED TOTAL DEBT $165,815 (1) Excludes 1915 Act bonds to be sold. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and t~x allocation bonds and non-bonded capital lease obligations. Ratios to 2003-04 Assessed Valuation: Direct Debt .................................................................................................... - % Total Gross Direct and Overlapping Tax and Assessment Debt ...................... 0.53% Total Net Direct and Overlapping Tax and Assessment Debt .......................... 0.51% Gross Combined Total Debt ............................................................................ 2.99% Net Combined Total Debt ................................................................................ 2.96% STAIE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/03:$0 Source: Califomia Municipal Statistics, Inc. 3O SPECIAL RISK FACTORS General Under the provisions of the 1915 Act, assessment installments, from which funds for the payment of annual installments of principal and interest with respect to the Bonds are derived, will be billed to properties against which there are unpaid assessments on the regular property tax bills sent to owners of such properties. Such assessment installments are due and payable, and bear the same penalties and interest for non-payment, as do regular proper~ tax installments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as evidenced by property tax delinquencies will likely indicate an unwillingness or inability to make regular property tax payments and assessment installment payments in the furore. In order to pay debt service on the Bonds, it is necessary that unpaid installments of assessments on land within the Assessment District are paid in a timely manner. Should the installments not be paid on time, the City has established a Special Reserve Fund in the initial amount of $ , which will thereafter be maintained, from assessment installment payments and from proceeds of redemption or sale of parcels with assessment delinquencies, in the amount of the Reserve Requirement, to cover delinquencies in the payment of assessments. The assessments are secured by a lien on the pamels of land and the City can institute foreclosure proceedings to sell land in the Assessment District with delinquent installments for the amount of such delinquent installments in order to obtain funds to pay debt service on the Bonds. Failure by owners of the parcels to pay installments of assessments when due, depletion of the Special Reserve Fund, or the inability of the City to sell parcels which have been subject to foreclosure proceedings for amounts sufficient to cover the delinquent installments of assessments levied against such parcels may result in the inability of the City to make full or punctual payments of debt service on the Bonds, and Bondowners would therefore be adversely affected. The Bonds are not secured by the general taxing power of the City, the County, the State, or any other political subdivision of the State, and neither the City, nor the County, nor the State, nor any other political subdivision of the State has pledged its full faith and credit for the payment thereof. Unpaid assessments do not constitute a personal indebtedness of the owners of the lots and parcels within the Assessment District. There is no assurance the owners will be able to pay the assessment installments or that they will pay such installments even though financially able to do so. Risks of Real Estate Secured Investments Generally Owners of the Bonds will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i) adveme changes in local market conditions, such as changes in the market value of real property in and in the vicinity of the Assessment District, the supply of or demand for competitive properties in such area, and the market value of residential property or buildings and/or sites in the event of sale or foreclosure; (ii) changes in real estate tax rate and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; and (iii) natural disasters (including, without limitation, earthquakes and floods), which may result in uninsured losses. Availability of Funds to Pay Delinquent Assessment Installments The City will establish a Special Reserve Fund out of Bond proceeds in the amount of $ , which wilI thereafter be maintained, from assessment installment payments and from proceeds of redemption or sale of parcels with assessment delinquencies, in the amount of the Reserve Requirement. As discussed herein under the heading "THE BONDS Special Reserve Fund," if a delinquency occurs in the payment of any assessment installment, the City has a duty to transfer to the Redemption Fund the amount of the delinquency out of the Special Reserve Fund. This duty of the City is continuing during the period of delinquency, until reinstatement, redemption, or sale of the delinquent property. There is no assurance that the balance in the Special Reserve Fund will always be adequate to pay all delinquent installments and if, during the period of delinquency, there are insufficient funds in the Special Reserve Fund to pay all delinquent installments, a delay may occur in payments to the owners of the Bonds. Hazardous Substances Although governmental taxes, assessments, and charges are a common claim against the value of an assessed parcel, other less common claims may be relevant. One of the most serious in terms of the potential reduction in the value that may be realized to pay the unpaid assessments is a claim with regard to hazardous substances. In general, the owners and operators of parcels within the Assessment District may be required by law to remedy conditions of the parcels related to the releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, sometimes referred to as "CERCLA" or the "Superfund Act," is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar. Under many of thase laws, the owner (or operator) is obligated to remedy a hazardous substances condition of a proper~ whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance. The effect, therefore, should any parcel within the Assessment District be affected by a hazardous substance, would be to reduce the marketability and value of the pamel by the costs of remedying the condition, because the owner (or operator) is obligated to remedy the condition. Further, such liabilities may arise not simply from the existence ora hazardous substance but from the method of handling or disposing of it. All of these possibilities could significantly affect the financial and legal ability of a property owner to develop the affected parcel or other parcels, as well as the value of the property that is realizable upon a delinquency and foreclosure. The appraised values set forth in the Appraisal do not, unless expressly noted, take into account the possible reduction in marketability and value of any of the parcels by reason of the possible liability of the owner (or operator) for the remedy ora hazardous substance condition of the parcel. C&C California and Fairway Oaks South have each represented to the City that it is not aware of any current liability with respect to any of its parcels within the Assessment District. Further, it is possible that Iiabilities may arise in the future with respect to any of the parcels within the Assessment District resulting from the existence, currently, on the parcel of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently, on the parcel of a substance not presently classified as hazardous but which may in the future be so classified. Such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling or disposing of it. All of these possibilities could significantly affect the value of an assessed parcel that is realizable upon a delinquency of an unpaid assessment. See "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT Environmental Review." Endangered and Threatened Species No threatened or endangered species (or their respective habitats) have been identified in any of the Community Areas. If, however, any threatened or endangered species (or their respective habitats) were to be discovered on a parcel within the Assessment District prior to or during development, the ability of the then-current landowner to develop the affected parcel could be severely limited. In such an event, the then-current landowner's willingness or ability to pay assessment installments could be adversely affected. The property within the Assessment District is subject to the Metropolitan Bakersfield Habitat Conservation Plan ("MBHC?"), a joint program of the City and the County that was undertaken to assist urban development applicants in complying with State and federal endangered species laws. Under the MI31qCP, each development applicant pays to the County a mitigation fee for grading or building permits that funds the purchase and maintenance of habitat land to compensate for the effects of urban development on endangered species habitat. The }ands acquired for the MBHCP program are generally located outside the metropolitan Bakersfield area. In exchange for the MBHCP mitigation fee, the applicant is relieved of the obligation of demonstrating compliance with the endangered species laws by preparing biological reports, securing compensation lands, and undertaking other measures to avoid impacts to the species. 32 Factors Which May Affect Land Development There is no assurance that the amount to be financed by the assessments will be sufficient to pay for the entire cost of the Improvements. C&C California and Fairway Oaks South will each be obligated to pay all of its costs in excess of the amount financed by the assessments. See "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS - Description of the Community Areas and the Improvements." Future development in the Assessment District may be affected by changes in the general economic conditions, fluctuations in the real estate market, and other factors. In addition, development may be subject to future federal, state, and local regulations. Approval may be required from various agencies from time to time in connection with the layout and design of any proposed development in the Assessment District, the nature and extent of public improvements, land use, zoning, and other matters. Although no such delays are anticipated, failure to meet any such future regulations or obtain any such approvals in a timely manner could delay or adversely affect any proposed development in the Assessment District. The development of property within the Assessment District could be adversely affected if lawsuits or other actions were commenced to restrict or prevent further development within the Assessment District. Private Improvements; Increased Debt The development of the property within the Assessment District depends upon both public and private improvement of land within the Assessment District. The cost of additional private improvements within the Assessment District, together with public improvements financed with any additional property secured financing, will increase the public and private debt for which the land within the Assessment District is the security. Any additional public improvements for which the property owners or their properties might be obligated could reduce the ability or willingness of the property owners within the Assessment District to pay the annual assessment installments levied against their property. See "SPECIAL RISK Priority of Lien." In addition to the assessments being levied to finance the construction and acquisition of the lmprnvements, the City intends to include as a part of such levy an annual assessment upon each parcel of land in the Assessment District to cover all administrative costs of the City with respect to the Assessment District. These additional administrative assessment amounts could reduce the ability or willingness of the property owners within the Assessment District to pay the annual assessment installments levied against their property. Subordinate Debt; Payments by FDIC and other Federal Agencies [CONFIRM:I C&C California has reported that all of the property owned by C&C California within the Assessment District currently serves as security for its obligations under the Credit Agreement, and Fairway Oaks South has reported that all of the property owned by Fairway Oaks South within the Assessment District currently serves as security for the lei~ers of credit from TriCounties Bank securing Fairway Oaks South's obligation to complete and maintain the subdivision improvements. All or portions of the Assessment District property may in the future secure additional loans of the owners thereof. Any such loans, including the Credit Agreement, are subordinate to the lien of the assessments. However, in the event that any of the financial institutions making any loan that is secured by real property within the Assessment District is taken over by the Federal Deposit Insurance Corporation ("FDIC") or if a lien is imposed on the property by the Drug Enfomement Agency, the Internal Revenue Service, or other similar federal governmentaI agency, and, prior thereto or thereaRer, the loan or loans go into default, the ability of the City to collect interest and penalties specified by state law and to foreclose the lien ora delinquent unpaid assessment may be limited. Specifically, with respect to the FDIC, on June 4, 1991, the FDIC issued a Statement of Policy Regarding the Payment of State and Local Property Taxes (the "1991 Policy Statement"). The 1991 Policy Statement was revised and superseded by new Policy Statement effective January 9, 1997 (the "Policy Statement"). The Policy Statement provides that real property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property's value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution's affairs, unless 33 CP~ .... abandonment of the FDIC's interest in the properly is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC's consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC's consent. The Policy Statement is unclear as to whether the FDIC considers assessments such as those levied by the City to be "real property taxes" which they intend to pay. However, the Policy Statement states that the FDIC generally will not pay non-ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. The City is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency on a parcel within the Assessment District in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed at a judicial foreclosure sale would reduce or eliminate the persons willing to purchase a parcel at a foreclosure sale. Owners of the Bonds should assume that the City will be unable to foreclose on any pamel owned by the FDIC. Such an outcome could cause a draw on the Special Reserve Fund and perhaps, ultimately, a default in payment on the Bonds. Based on the secured tax roll as of April 30, 2004, the FDIC does not presently own any property within the Assessment District. The City expresses no view concerning the likelihood that the risks described above will materialize while the Bonds are outstanding. Property Values Reference is made to APPENDIX B, which contains excerpts from the Appraisal summarizing the Appraiser's opinion with respect to the value of the property that is subject to the lien of the assessments and the assumptions made by the Appraiser in connection therewith. Reference is also made to "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT - Bulk Value-to- Assessment Lien Ratio" for a summary of the value of the proper~ within each of the three respective Community Areas in the Assessment District that is subject to the lien of the assessments and the ratio of the appraised value of such properly to the total amount of the assessment liens on such property that secure the Bonds. See also APPENDIX E for a listing of the ratio of the appraised value of each assessed pamel to the amount of the assessment lien against such parcel. No assurance can be given that this appraised value to lien ratio will not decline should subsequent liens be placed on property within the Assessment District. Further, there is no assurance that in the event ora foreclosure sale for a delinquent assessment installment, any bid will be received for any such proper~ within the Assessment District or that any bid received or resale price will be sufficient to pay such delinquent installments (plus costs and penalties). The 1915 Act provides that a parcel be sold for the delinquent installment(s) amount (plus costs and penalties) and not the entire outstanding assessment. The Appraiser has made various assumptions, which may vary from the assumptions made by other parties (including C&C California and Fairway Oaks South), in order to derive the aggregate valuation estimate of the proper~y within the Assessment District to be assessed. For example, the Appraiser has assumed a rate of absorption of the residential units being constructed in the Assessment District that is greater than the rate assumed by C&C California or Fairway Oaks South, as applicable, as described elsewhere in this Official Statement. See APPENDIX B for an explanation of methodology and a statement of contingent and limiting conditions and assumptions used by the Appraiser to derive the aggregate value of the property. Although these contingent and limiting conditions and assumptions were considered reasonable by the Appraiser based on information available to the Appraiser, neither the Appraiser nor the City can give any assurance that any parcel will be developed in accordance with the uses that the Appraiser has projected. 34 Concentration of Ownership C&C California owned approximately 86.51% of the assessed property in the Assessment District prior to the recording of the notice &assessment, which property was subject to approximately 86.41% of the assessment lien. Fairway Oaks South owned approximately 10.70% of the assessed property in the Assessment District prior to the recording of the notice of assessment, which property was subject to approximately 10.92% of the assessment lien. Although C&C California has sold approximately lots within the Assessment District and has indicated its intention to sell additional lots to merchant builders, there can be no assurance that it will be successful in so doing. Thus, there is no assurance of any degree of diversification of ownership of the assessed property. Also, unless and until such ownership is further diversified, the inability or refusal of C&C California or Fairway Oaks South to pay is respective assessment installments when due could result in the rapid total depletion of the Special Reserve Fund prior to reimbursement thereof from foreclosure proceedings. Under such circumstances, there would be insufficient moneys with which to pay principal of and/or interest on the Bonds. Failure of any future property owners to pay installments of assessments when due could also result in a default in payment of the principal of and interest on the Bonds prior to the resales of foreclosed property or delinquency redemptions. In that event, there could be a default in payments of the principal of and interest on the Bonds. Tax Delinquencies Assessment installments, from which funds necessary for the payment of annual installments of principal of and interest on the Bonds are to be derived, will be billed to each property against which there is an unpaid assessment on the regular property tax bills sent to the owner of such property. Such installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. Under certain circumstances, assessment installment payments on parcels of property in Kern County can be made separately fi.om regular property tax payments for such parcels. Property tax payments will not be accepted, however, unless the assessment installments for such parcels have also been paid. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills, as evidenced by property tax delinquencies, will likely indicate an unwillingness or inability to make regular property tax payments and assessment installment payments in the future. A failure of property owners to pay installments of assessments when due could result in a default in payments of the principal of and interest on the Bonds. The City reports that, based upon the records of the office of the Kern County Tax Collector, none of the parcels in the respective Community Areas within the Assessment District shows delinquencies in the payment of fiscal year 2000-01, 2001-02, 2002-03, or 2003-04 property tax installments. Limited Obligation of the City Upon Delinquency If a delinquency occurs in the payment of any assessment installment, the City has a duty only to transfer into the Redemption Fund the amount of the delinquency out of the Special Reserve Fund and to undertake, under certain circumstances, judicial foreclosure proceedings to recover such delinquencies. This duty of the City is continuing during the period of delinquency, until reinstatement, redemption, or sale of the delinquent property. There is no assurance that funds will be available for this purpose and if, during the period of delinquency, there are insufficient funds in the Special Reserve Fund, a delay may occur in payments to the owners of the Bonds. If there are additional delinquencies after exhaustion of funds in the Special Reserve Fund, the City is not obligated to transfer into the applicable Redemption Fund the amount of such delinquency out of any other available moneys of the City. THE CITY'S LEGAL RESPONSIBILITIES WITH RESPECT TO SUCH DELINQUENT INSTALLMENTS ARE LIMITED TO ADVANCING THE AMOUNT THEREOF SOLELY FROM ANY AVAILABLE MONEYS 1N THE SPECIAL RESERVE FUND AND TO UNDERTAKING, UNDER CERTAIN CIRCUMSTANCES, JUDICIAL FORECLOSURE PROCEEDINGS TO RECOVER SUCH DELINQUENCIES. THIS DUTY OF THE CITY TO ADVANCE FUNDS IS CONTINUING DURING THE PERIOD OF DELINQUENCY ONLY TO THE EXTENT OF FUNDS AVAILABLE FROM THE SPECIAL RESERVE FUND UNTIL REINSTATEMENT, REDEMPTION, OR SALE OF THE DELINQUENT PROPERTY. IN 35 ACCORDANCE WITH SECTION 8769(b) OF THE 1915 ACT, THE CITY HAS DETERMINED THAT IT WILL NOT ADVANCE FUNDS FROM ITS TREASURY TO CURE ANY DEFICIENCY IN THE REDEMPTION FUND. Bankruptcy and Foreclosure The payment of assessment installments and the ability of the City to foreclose on the lien of a delinquent unpaid assessment, as discussed below in the section entitled "SPECIAL RISK FACTORS Covenant to Commence Superior Court Foreclosure," may be limited by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the laws of the State of California relating to judicial foreclosure. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified, as to the enforceability of the various legal instruments, by reference to bankruptcy, insolvency, reorganization, arrangement, moratorium, and other similar laws affecting the rights of creditors generally, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies in the State. On July 30, 1992, the United States Court of Appeals for the Ninth Circuit issued its opinion in a bankruptcy case entitled In re Glasply Marine Industries. In that case, the court held that ad valorem property taxes levied by Snohomish County in the State of Washington after the date that the property owner filed a petition for bankruptcy were not entitled to priority over a secured creditor with a prior lien on the property. The court upheld the priority of unpaid taxes imposed after thc filing of the bankruptcy petition as "administrative expenses" of the bankruptcy estate, payable after all secured creditors. As a result, the secured creditor was able to foreclose on the property and retain all of the proceeds of the sale except the amount of the pre-petition taxes. According to the court's ruling, as administrative expenses, post-petition taxes would have to be paid, assuming that the debtor has sufficient assets to do so. In certain circumstances, payment of such administrative expenses may be allowed to be deferred. Once the property is transferred out of the bankruptcy estate (through foreclosure or otherwise) it would at that time become subject to currant ad valorem taxes. Glasply is controlling precedent on bankruptcy courts in the State of California. Pursuant to statute, the lien date for general ad valorem property taxes levied in the State of California is the January 1 preceding the fiscal year for which the taxes are levied. Therefore, under Glasply, a bankruptcy petition filing would prevent the lien for general ad valorem property taxes levied in subsequent fiscal years from attaching so long as the property was a part of the estate in bankruptcy. Under current law, the lien of an assessment, unlike the lien for general ad valorem property taxes, attaches upon recordation of the notice of assessment. The notice of assassment for the Assessment District assessments was recorded in the Official Records of the County on September 30, 2003. Thus, before applying Glasply to a bankruptcy situation involving assessments rather than general ad valorem property taxes, a court would need to consider the differences in the statutory provisions for creation of the applicable assessment lien. Ifa court were to apply Glasply to eliminate the priority as a secured claim of the assessment lien with respect to post petition levies of the assessments as against property owners within the Assessment District who file for bankruptcy, collections of the assessments from such property owners could be reduced. It should also be noted that on October 22, 1994, Congress enacted 11 U.S.C. Section 362(b)(18), which added a new exception to the automatic stay for ad valorem proper~ taxes imposed by a political subdivision after the filing ora bankruptcy petition. Pursuant to this new provision of law, in the event of a bankruptcy petition filed on or after October 22, 1994, the lien for ad valorem taxes in subsequent fiscal years will attach even if the property is part of the bankruptcy estate. Bondowners should be aware that the potential effect of I1 U.S.C. Section 362(b)(18) on the Assessment District assessments depends upon whether a court were to determine that the assessments should be treated like ad valorem taxes for this purpose. Whether or not bankruptcy proceedings were to cause the assessment liens to become extinguished, bankruptcy of a property owner in all likelihood would result in a delay in prosecuting superior court foreclosure proceedings. Such a delay would increase thc likelihood of a delay or default in payment of the principal of and interest on the Bonds, and the possibility that delinquent assessment installments might not be paid in full. 36 Economic, Political, Social and Environmental Conditions Prospective investors are encouraged to evaluate current and prospective economic, political, social, and environmental conditions as part of an informed investment decision. Changes in economic, political, social, or environmental conditions on a local, state, federal and/or international level may adversely affect investment risk generally. Such changes may also adversely affect the value of property within the Assessment District and/or the willingness or ability of the owners of land within the Assessment District to pay their assessments. Such conditional changes may include (but are not limited to) fluctuations in business production, consumer prices, or financial markets, unemployment rates, technological advancements, shortages or surpluses in natural resources or energy supplies, changes in law, social unrest, fluctuations in the crime rate, political conflict, acts of war or terrorism, environmental damage, and natural disasters. Articles XIIlA and XllIB of the California Constitution On June 6, 1978, California voters approved an amendment to the California Constitution, commonly known as Proposition 13 (the Jarvis/Gann Initiative) which added Article XIIIA to the California Constitution. The effect of Article XIIIA is to limit ad valorem taxes on real property. On November 7, 1978, California voters approved Proposition 8, which made certain clarifications to Article XIIIA. Article XII1A of the Califomia Constitution limits the amount of ad valorem taxes on real property to 1% of "full cash value" as determined by the county assessor. Article XIIIA defines "full cash value" to mean "the county assessor's valuation of mai property as shown on the 1975-76 tax bill under 'full cash value' or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment." The "full cash value" is subject to annual adjustment to reflect increases, not to exceed 2% per year, or decreases in the consumer price index or comparable local data, or to reflect reductions in properly value caused by damage, destruction or other factors. Article XIIIA exempts from the 1% tax limitation any taxes to repay indebtedness approved by the voters prior to July 1, 1978, and allows local governments to raise their property tax rates above the constitutionally mandated l% ceiling for the purpose of paying off certain new general obligation debt issued for the acquisition or improvement of real property and approved by two-thirds of the votes cast by the qualified electorate. Article XIIIA requires a vote of two-thirds of the qualified electorate to impose special taxes on real property, while otherwise generally precluding the imposition of any additional ad valorem, sales or transaction tax on real properly. In addition, Article XIIIA requires the approval of two-thirds of all members of the State Legislature to change any State laws resulting in increased tax revenues. Enactment of Article XIIIA has reduced the amount of general property tax revenues received by the City. This reduction in such revenues makes it less likely that the City will have surplus funds, other than the Special Reserve Fund, with which to advance funds to make any payments or to cure any deficiency in the Redemption Fund, should the City, in the exercise of its discretion, choose to do so. If there are additional delinquencies after exhaustion of funds in the Special Reserve Fund, the City has no obligation to transfer into the Redemption Fund the amount of any such delinquencies out of any surplus moneys of the City. On July 2, 1979, the Fifth District Court of Appeal rendered a 3-0 decision in the case of County of Fresno v. Malmstrom (94 Cal. App. 3d 1974) that determined that special assessments are not subject to the limitations of Article XIIIA (Proposition 13). The Court held the one percent tax limitation imposed by California Constitution Article XIIiA on ad valorem taxes does not apply to special assessments levied pursuant to the Improvement Act of 191 I (Streets and Highways Code, Section 5000 et seq., the relevant portions of which are incorporated in the 1915 Act) and the 1913 Act. The Court further held that because special assessments pursuant to such acts are not within the definition of"special taxes" in Article XIIIA, the Constitution does not require the levy of assessments and the issuance of bonds to be approved by a two-thirds vote of the qualified electors in an assessment district. On September 12, 1979, the California Supreme Court refused to hear an appeal of the lower court's decision. At the November 6, 1979, general election, Proposition 4 (the Gann Initiative) was approved by the voters of California. Such proposition added Article XIIIB to the California Constitution. 37 Article XII1B of the California Constitution limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by the governmental entity. The "base year" for establishing such appropriation limit is the fiscal year 1978-79 and the limit is to be adjusted annually to reflect changes in population, consumer prices and certain increases in the cost of services provided by these public agencies. Appropriations subject to Article XIIIB generally include the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions, refunds of taxes, benefit payments from retirement, unemployment insurance and disability insurance funds. "Proceeds oftaxas" include, but are not limited to, all tax revenues and the proceeds to an entity of government from (i) regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost of providing the service or regulation), and (ii) the investment of tax revenues. Article XIIIB includes a requirement that if an entity's revenues in any year exceed the amounts permitted to be spent, the excess would have to be allocated to fund schools or be returned by revising tax rates or fee schedules over the subsequent two years. On December 17, 1980, the Third District Court of Appeal rendered a 3-0 decision in the case County of Placer v. Corin (113 Cal. App. 3d 443) that determined that special assessments are not subject to the limitation of Article XIIIB (Proposition 4). The Court held that the definition of "proceeds of taxes" imposed by California Constitution Article XIIlB does not apply to special assessments and improvement bonds issued pursuant to the 1915 Act and the 1913 Act. The decision of the Court was not appealed. The enactment of Article XIIIA of the California Constitution (Proposition 13) and subsequent legislative enactments effectively repeal the otherwise mandatory duty on the part of the City, under the 1915 Act, to levy and collect a special tax (in an amount necessary to meet delinquencies, but not to exceed ten cents on each $100 of assessable property within the City in any one year) if other funds are not available to cover delinquencies. In early 1990, the U.S. Supreme Court struck down as a violation of equal protection certain property tax assessment practices in West Virginia, which had resulted in vastly different assessments of similar properties. Since Article XIIIA provides that property may only be reassessed up to 2%, per year, except upon change of ownership or new construction, recent pumhasers may pay substantially higher property taxes than long-time owners of comparable property in a community. The Supreme Court in the West Virginia case expressly declined to comment in any way on the constitutionality of Article XIIIA. Based on this decision, however, property owners in California brought three suits challenging the acquisition value assessment provisions of Article XIIIA. Two cases involve residential property and one case involves commercial property. In all three cases, State trial and appellate courts have upheld the constitutionality of Article XlllA's assessment rules and concluded that the West Virginia case did not apply to California's laws. On June 3, 1991, the U.S. Supreme Court agreed to hear the appeal in the challenge relating to commercial properly, but the plaintiff subsequently decided to drop the case. On October 7, 1991, the U.S. Supreme Court granted the plaintiff's petition for a writ of certiorari and agreed to hear the Nordlin~er v. Lynch case. On June 18, 1992, the U.S. Supreme Court affirmed the Nordlinger decision (I 12 U.S. 2326) of the California Court of Appeal, Second Appellate District, which previously held that Article XIIIA does not violate the U.S. Constitution. The City cannot predict whether any other pending or future challenges to the State's present system of property tax assessment will be successful, when the ultimate resolution of any challenge will occur, or the ultimate effect any decision regarding the State's present system of property tax assessment will have on the City's revenues or on the State's financial obligations to local governments. 38 Articles XII1C and XIlID of the California Constitution Proposition 218, a state ballot initiative known as the "Right to Vote on Taxes Act," was approved by California voters on November 5, 1996. Proposition 218 added Articles XII1C and XIIID to the State Constitution, and, with the exception of certain provisions, Articles XIIIC and XIIID became effective on November 6, 1996. Article XIIID, entitled "Assessment and Property Related Fee Reform," contains several new provisions making it generally more difficult for local agencies to levy and maintain "assessments" for municipal services and programs. Article XIIlD requires that, beginning July 1, 1997, the proceedings for the levy of any assessment by the City under the 1913 Act (including, if applicable, any increase in such assessment or any supplemental assessment under the 1913 Act) must be conducted in conformity with the provisions of Section 4 of Article XIlID. "Assessment" is defined to mean any levy or charge upon real proper~y for a special benefit conferred upon the real properS. Article XIIID additionally provides that in levying "assessments" a local government must separate the "general benefits" from the "special benefits" conferred on a parcel and may not impose on any parcel an assessment which exceeds the "reasonable cost of the proportional special benefit conferred on that parcel." Article XIIID also contains various notice requirements and a public hearing requirement and prohibits the imposition of an assessment if ballots submitted by property owners, weighted according to the proportional financial obligation of the affected propemy, in opposition to the assessment exceed the ballots submitted in favor of the assessment. The City believes that it has complied with all provisions of Article XIIID applicable to the Assessment District proceedings described herein. All ballots submitted by proper~ owners were in favor of the assessment. Article XIIIC, entitled "Voter Approval for Local Tax Levies," provides, in Section 3 thereof, that the initiative power shall "not be prohibited or otherwise limited in matters reducing or repealing any ... assessment" of the City. Thus, Article XIIIC removes limitations on the initiative power in matters of, among other things, assessments. Consequently, the voters of the City could, by future initiative, repeal, reduce, or prohibit the future imposition or increase of any assessment. "Assessment," is not defined in Article XIIlC and it is not clear whether the definition of that term in Article XIIID (which is generally properS-related as described above) would be applied to Article XIIIC. No assurance can be given that the voters of the City will not, in the future, approve initiatives that repeal, reduce, or prohibit the future imposition or increase of any assessments. In the case of the unpaid assessments that are pledged as security for payment of the Bonds, the 1915 Act provides a mandatory, statutory duty of the City and the Kern County Auditor to post installments on account of the unpaid assessments to the Kern County property tax roll each year while any of the Bonds are outstanding in aggregate amounts equal to the principal of and interest on the Bonds coming due in the succeeding calendar year. Although the provisions of Article XIIIC have not been interpreted by the courts, the City believes that the initiative power cannot be used to reduce or repeal the unpaid assessments that are pledged as security for payment of the Bonds or to otherwise interfere with the mandatory, statutory duty of the City and the Kern County Auditor with respect to the unpaid assessments that are pledged as security for payment of the Bonds. The interpretation and application of Proposition 218 will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination. Future Initiatives Articles XII1A, XII1B, XIIIC, and XIIID of the Constitution were each adopted as measures that qualified for the ballot pursuant to California's initiative process. From time to time other initiative measures could be adopted, which may affect the ability of the City to levy and maintain assessments. Covenant to Commence Superior Court Foreclosure The 1915 Act provides that in the event any assessment or installment thereof or any interest thereon is not paid when due, the City may order the institution of a court action to foreclose the lien of assessment. In such an action, the real property subject to the unpaid assessment may be sold at judicial foreclosure sale. This foreclosure sale procedure is not mandatory. However, in the Bond Resolution, the City has covenanted that, in the event any 39 assessment or installment thereof, including any interest thereon, is not paid when due, the Ciiy will, no later than October 1 in any year, file an action in the Superior Court of Kern County to foreclose the lien on each delinquent assessment if (i) the sum of uncured assessment delinquencies for the preceding fiscal year exceeds 5% of the assessment installments posted to the tax roll for that fiscal year and (ii) the amount in the Special Reserve Fund is less than the Reserve Requirement. In the event such Superior Court foreclosure or foreclosures are necessary, there may be a delay in payments to the owners of the Bonds, pending prosecution of the foreclosure proceedings and receipt by the City of the proceeds of the foreclosure sale. It is also possible that no bid for the purchase of the applicable property would be received at the foreclosure sale. Prior to July 1, 1983, the right of redemption from foreclosure sales was limited to a period of one year from the date of sale. Under legislation effective July 1, 1983, the statutory right of redemption from such foreclosure sales has been repealed. However, a period of 140 days must elapse after a court adjudges and decrees a lien against the lot or parcel of land covered by an assessment or reassessment before the sale of such parcel can be given. Furthermore, if the purchaser at the sale is the judgment creditor, i.e., the City, an action may be commenced by the delinquent property owner within ninety (90) days at,er the date of sale to set aside such sale. Price Realized Upon Foreclosure The 1915 Act provides that, under certain circumstances, property may be sold upon foreclosure at less than the Minimum Price or without a Minimum Price upon petition by the City. "Minimum Price" as used in this section is the amount equal to the delinquent installments of principal and interest on the assessment or reassessment, together with all interest, penalties, costs, fees, charges and other amounts more fully detailed in the 1915 Act. The court may authorize a sale at less than the Minimum Price if the court determines, based on the evidence introduced at the required hearing, any of the following: (A) Sale at the lesser Minimum Price or without a Minimum Price will not result in an ultimate loss to the owners of the Bonds. (B) Owners of 75% or more of the outstanding Bonds, by principal amount, have consented to such petition by the City and the sale will not result in an ultimate loss to the non-consenting Bondowners. (C) Owners of 75% or more of the outstanding Bonds, by principal amount, have consented to the petition and all of the following apply: (I) By reason of determination pursuant to the 1915 Act, the City is not obligated to advance funds to cure a deficiency (the City made such a determination not to be obligated with respect to the Bonds). sale. (2) No bids equal to or greater than the Minimum Price have been received at the foreclosure (3) No funds remain in the Special Reserve Fund. (4) The City has reasonably determined that a reassessment and refunding proceeding is not practicable, or has in good faith endeavored to accomplish a reassessment and refunding and has not been successful, or has completed a reassessment and refunding arrangement which will, to the maximum extent feasible, minimize the ultimate loss to the Bondowners. (5) No other remedy acceptable to owners of 75% or more of the outstanding Bonds, by principal amount, is reasonably available. The assessment or reassessment lien upon property sold pursuant to this procedure at a lesser price than the Minimum Price shall be reduced by the difference between the Minimum Price and the sale price. In addition, the court shall permit participation by the Bondowners in its consideration of the petition as necessary to its determinations. 4o Implementation of the above-described Minimum Price provision by the court upon foreclosure could result in nonpayment of amounts due to Bondowners who are not in agreement with the 75% of such Bondowners required to approve the sale at less than the Minimum Price. Reference should be made to the 1915 Act for a complete presentation of this provision. Priority of Lien Each assessment (and any reassessment) and each installment thereof, and any interest and penalties thereon, constitutes a lien against the parcel of land on which it was imposed until the same is paid. Such a lien is subordinate to all fixed special assessment liens previously imposed upon the same property, but has priority over all private liens and over all fixed special assessment liens which may thereafter be created against the property. Such a lien is co-equal to and independent of the lien for general property taxes and special taxes, including, without limitation, special taxes created pursuant to the Mello-Roos Act, whenever created against the property. Upon the issuance of the Bonds, none of the property in the Assessment District will be subject to any other special assessment lien created under the 1913 Act. The Seven Oaks West 111 Area is currently subject to an existing AD 01-2 assessment; however such assessment will be paid in full upon the issuance of the Bonds from a portion of the proceeds thereof. The property within the Brighton Place 11 Area is subject to an existing special tax lien created by RNR CFD No. 92-1 pursuant to the Mello-Roos Act. The amount of special taxes, if any, to which property within RNR CFD No. 92-1 is subject varies based upon the zoning, the entitlements, and the type and level of development of such property. See "THE BONDS-Priority of Lien.' Refunding Bonds Pursuant to the Refunding Act of 1984 for 1915 Improvement Act Bonds (Division 11.5 of the California Streets and Highways Code), the City may issue refunding bonds for the purpose of redeeming the Bonds. After the making of certain required findings by the City Council, the City may issue and sell refunding bonds without giving notice to and conducting a hearing for the owners of property in the assessment district, or giving notice to the owners of the Bonds. See "THE BONDS - Refunding Bonds." Upon issuing refunding bonds, the City Council could require that the Bonds be exchanged for refunding bonds on any basis which the City Council determines is for the City's benefit, if the Bondowners consent to the exchange. As an alternative to exchanging the refunding bonds for the Bonds, the City could sell the refunding bonds and use the proceeds to pay the principal of and interest and redemption premium, if any, on the Bonds as they become due, or advance the maturity of the Bonds and pay the principal of and interest and redemption premium thereon. Absence of Market for Bonds No application has been made for a rating for the Bonds, and it is not known whether a rating for the Bonds could be secured either now or in the future. There can be no assurance that there will ever be a secondary market for purchase or sale of the Bonds, and from time to time there may be no market for them, depending upon prevailing market conditions and the financial condition or market position of firms who may make the secondary market. Loss of Tax Exemption As discussed under the heading "TAX MATTERS," interest on the Bonds could cease to be excluded ~om gross income for purposes of federal income taxation, retroactive to the date the Bonds were issued, as a result of future acts or omissions of the City. ENFORCEABILITY OF REMEDIES The remedies available to the Paying Agent, the City, or the owners of the Bonds upon any nonpayment of assessment installments are in many respects dependent upon judicial actions, which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically Title 11 of the United States Code (the federal bankruptcy code) and relevant banking and insurance law, the remedies provided in the 1915 Act and the 1913 Act may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by bankruptcy, reorganization, insolvency, or other similar laws affecting the rights of creditors generally, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies in the State of Califomia. ABSENCE OF MATERIAL LITIGATION No litigation is pending concerning the validity of the Bonds or the Bond Resolution, and an opinion of the City Attorney to that effect will be furnished to the pumhaser at the time of the original delivery of the Bonds. The City is not aware of any litigation pending or threatened questioning the political existence of the City or contesting the City's ability to pay interest on the Bonds. There are a number of lawsuits and claims pending against the City. In the opinion of the City Attorney, the aggregate amount of liability that the City might incur as a result of adverse decisions in such cases would be covered under the City's insurance policies or self-insurance program. CERTAIN INFORMATION CONCERNING THE CITY Certain general information concerning the City is included in APPENDIX A hereto. THE GENERAL FUND OF THE CITY IS NOT LIABLE FOR THE PAYMENT OF THE BONDS OR THE INTEREST THEREON, AND THE TAXING POWER OF THE C1TY IS NOT PLEDGED FOR THE PAYMENT OF THE BONDS OR THE INTEREST THEREON. TAX MATTERS [SUBJECT TO REVIEW/APPROVAL BY BOND COUNSEL:] In the opinion of Orrick, Herrington & Sntcliffe LLP, Bond Counsel, based upon an analysis of existing laws, regulations, rulings, and court decisions, interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes. Bond Counsel is also of the opinion that interest on the Bonds is not a specific preference item for purposes of the federal individual and corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings in calculating federal corporate alternative minimum taxable income. A complete copy of the opinion of Bond counsel is set forth in APPENDIX C hereto. The Internal Revenue Code of 1986 (the "Code") imposes various restrictions, conditions, and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. The City has covenanted to comply with certain restrictions designed to assure that interest on the Bonds will not be included in federal gross income. Failure to comply with these covenants may result in interest on the Bonds being included in federal gross income, possibly from the date of issuance of the Bonds. The opinion of Bond Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) aP/er the date of issuance of the Bonds may adversely affect the tax status of the interest on the Bonds. Certain requirements and procedures contained or referred to in the Bond Resolution, the tax certificate to be executed by the City at closing, and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Bond Counsel expresses no opinion as to any Bonds or the interest thereon if any such change occurs or actions are taken or omitted upon the advice or approval of bond counsel other than Orrick, Herrington & Sutcliffe LLP. However, without limiting the generality of the foregoing, the City has covenanted in the Bond Resolution that, prior to making any change to or taking or omitting to take any action with respect to any of the agreements, requirements, or procedures contained or referred to in the Bond Resolution, the tax certificate, or other relevant documents pertaining to the Bonds, the City will do either of the following: (i) obtain a subsequent opinion of Orrick, Herrington & Sutcliffe LLP that such change, action, or omission will not adversely affect the exclusion from gross income for federal income lax purposes of interest on the Bonds; or (ii) obtain an opinion of alternative nationally recognized bond counsel to the effect originally delivered 42 by Bond Counsel that, notwithstanding such change, action, or omission, interest on the Bonds is excluded from gross income for federal income tax purposes. Although Bond Counsel will render an opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from California personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect a Bondholder's federal tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the Bondholder or the Bondholder's other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. APPROVAL OF LEGALITY The validity of the Bonds and certain other legal matters are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel. A complete copy of the proposed form of bond counsel opinion is contained in APPENDIX C hereto and is printed on the Bonds. Bond counsel undertakes no responsibility for the accuracy, completeness, or fairness of this Official Statement. Certain matters will be passed upon for the City by the City Attorney of the City of Bakersfield. Certain other matters will be passed upon by Pillsbury Winthrop LLP, Los Angeles, California, as disclosure counsel to the City, by Jones & Beardsley, as counsel to C&C California, and by , as counsel to Fairway Oaks South. UNDERWRITING Pursuant to a Bond Purchase Contract between the City and the Underwriter, the Bonds are being purchased by the Underwriter at a purchase price equal to the principal amount of Bonds being issued less an Underwriter's discount of $ . The Bond Pumhase Contract provides that the Underwriter will pumhase all of the Bonds if any are purchased, the obligation to make such purchase, if made, being subject to certain terms and conditions set forth in the Bond Purchase Contract, the approval of certain legal matters by counsel, and certain other conditions. The Underwriter may offer and sell Bonds to certain dealers and others at a price other than the offering price. The offering price may be changed from time to time by the Underwriter. NO RATING The City has not made and does not contemplate making application to any rating agency for the assignment ora rating to the Bonds. CONTINUING DISCLOSURE The City and C&C California have each covenanted for the benefit of Bondholders to provide an annual or semi-annual report, as applicable, containing certain financial information and operating data relating to the Assessment District and the property in the Assessment District by not later than nine months after the end of the City's fiscal year (i.e., currently not later than April 1 of each year), commencing with the report for the 2003-04 fiscal year, and to provide notices of the occurrence of certain enumerated events, if material. The specific nature of the information to be contained in each annual or semi-annual report, as applicable, or each notice of material events, if any, is set forth in the respective Continuing Disclosure Certificate, the forms of which are attached hereto as "APPENDIX F CONTINUING DISCLOSURE CERTIFICATES." These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5), as amended (the "Rule"). Each of the City and C&C California has represented that it has never failed to comply with any previous undertaking to provide annual or semi-annual reports, as applicable, and notices of material events. Fairway Oaks South, as owner of property in the Assessment District that, when aggregated with all other property in the Assessment District owned by Fairway Oaks South or its affiliates, is subject to a lien of less than twenty percent (20%) of the annual assessment securing payment of the Bonds, does not have an obligation to provide continuing disclosure information and has not entered into a continuing disclosure certificate. 43 MISCELLANEOUS The foregoing summaries or descriptions of provisions of the Bonds, the Bond Resolution, and all references to other materials not purporting to be quoted in full are only brief outlines of some of the provisions thereof and do not purport to summarize or describe all of the provisions thereof, and reference is made to said documents for full and complete statements of their provisions. The appendices hereto are a part of this Official Statement. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. The Official Statement is not to be construed as a contract or agreement between the City and the purchasers or owners of any of the Bonds. The execution and delivery of this Official Statement has been duly authorized by the City. CITY OF BAKERSFIELD By: Gregory J. Klimko Finance Director APPENDIX A CITY OF BAKERSFIELD ECONOMIC, FINANCIAL AND DEMOGRAPHIC INFORMATION The City is located at the southern end of the San Joaquin Valley, approximately I10 miles north of Los Angeles and 290 miles south of San Francisco. The City includes over 116 square miles of land and an additional 76 square miles of land area is located within the City's sphere of influence. The City is a regional center for industry, govemmant, transportation, retail trade, medical services, and oil field operations. Major manufacturing activities include iron and steel fabrication, plastic foam products, food products, petroleum refining, and textiles. Bakersfield is one of the leading convention centers of the state and is the commercial hub of Kern County (the "County"). As the County seat, it is the location of many county, state, and federal offices. The metropolitan area has expanded considerably beyond the City limits. As of January 1, 2004, the estimated population of the County was 724,883 and the estimated population of the City was 279,672, according to the California Department of Finance and the City's Finance Department, respectively. The Bakersfield Standard Metropolitan Statistical Area (SMSA) includes all of Kern County, as defined by the State Department of Employment Development. City Government The City was incorporated on January 11, 1898, under the general laws of the State of California (the "State"). The City is a charter city with a councilJmanager form of government. The City Council is comprised of seven council members, elected by ward on a staggered basis for a term of four years. The mayor is directly elected for a four-year term. The council appoints the City Attorney and the City Manager, who also serves as the Executive Director of the Bakersfield Redevelopment Agency (the "Agency"). There am approximately 1,245 permanent City employees, including 74 persons in management and 150 persons in supervisory positions. Fire protection is provided by 170 firemen and officers, manning 13 stations. The police department has 311 patrolmen and officers. Tax Levies and Delinquencies; Assessed Valuation of Taxable Property The Kern County Tax Collector collects ad valorem property tax levies representing taxes levied for each fiscal year on taxable real and personal property which is situated in the County as of the preceding March 1. Unsecured taxes are assessed and payable on March 1 and become delinquent August 31, in the next fiscal year. Accordingly, unsecured taxes are levied at the rate applicable to the fiscal year preceding the one in which they are paid. One half of the secured tax levy is due November 1 and becomes delinquent December 10; the second installment is due February 1 and becomes delinquent April 10. A ten percent penalty is added to any late installment. On June 30, delinquent properties are sold to the State. Property owners may redeem property upon payment of delinquent taxes and penalties. Tax-defaulted properties are subject to a redemption penalty of one and one-half percent (1-1/2%) of the tax due, charged from July 1 following the date on which the property became tax-defaulted to the date of redemption, plus a penalty for every subsequent tax year (i.e., July 1 through June 30) in which the property remains tax-defaulted, at a rate of one and one-half percent (I-1/2%) of the tax due for each such tax year. Properties may be redeemed under an installment plan by paying current taxes, plus 20% of delinquent taxes each year for five years, with interest accruing at one and one-half percent (1-1/2%) per month on the unpaid balance, lfno payments have been made on delinquent taxes at the end of five fiscal years, the property is deeded to the State. Such properties may thereafter be conveyed to the County Tax Collector as provided by law. The table below summarizes the City's property tax levies, the current amounts delinquent, and total collections for fiscal years 1993-94 through 2002-03. Table A-I City of Bakersfield Property Tax Levies and Delinquencies Fiscal Years 1993-94 through 2002-03 Total Total Tax Percent ofLevy Percent of Current Fiscal Tax Levy Collections Collected Taxes Collected Year 1993-94 $15,835,374 $15,796,355 97.1% 99.8% 1994-95 16,349,776 16,239,085 96.7 99.3 1995-96 16,856,805 16,975,278 96.4 100.7 1996-97 17,175,495 17,464,195 97.5 101.7 1997-98 17,289,200 17,430,365 97.4 100.8 1998-99 17,864,445 20,488,683 111.7 114.7 1999-00 18,554,717 19,123,448 99.5 103.1 2000-01 19,093,149 18,199,926 92.9 95.3 2001-02 20,121,528 20,675,415 99.4 102.8 2002-03 21,301,453 23,523,106 107.4 110.4 (I) Excludes redevelopment tax increment revenues. Source: City Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2003. The table below summarizes the assessed valuations in the City for fiscal years 1993-94 through 2002-03. Table A-2 City of Bakersfield Assessed Value of Taxable Property (Fiscal Years 1993-94 through 2002-03) Total Assessed Increase Fiscal Year Secured Unsecured Utility Value (Decrease) 1993-94 $7,243,647,529 $342,279,574 $13,306,584 $7,599,233,687 4.90% 1994-95 7,662,423,762 342,662,118 14,097,810 8,019,183,690 5.53 1995-96 8,068,506,294 356,616,991 13,232,785 8,438,356,070 5.23 1996-97 8,213,247,086 350,499,835 13,971,013 8,577,717,934 1.65 1997-98 8,407,516,746 374,446,012 15,497,196 8,797,459,954 2.56 1998-99 8,628,532,571 453,535,838 17,719,409 9,099,787,818 3.44 1999-00 9,268,459,616 423,862,659 19,424,138 9,711,746,413 6.72 2000-01 9,809,567,800 432,049,903 19,039,560 10,260,657,263 5.65 2001-02 10,111,103,449 462,192,054 18,851,231 10,592,146,734 3.23 2002-03 10,820,926,790 481,183,430 18,614,866 11,320,725,086 6.88 Source: City Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2003. A-2 The table below shows the assessed valuations of the principal taxpayers in the City as of June 30, 2003. Table A-3 City of Bakersfield Assessed Valuation of Principal Taxpayers (June 30, 2003) 2002-03 Assessed Percentage of Total Taxpayer (1) Type of Business Valuation Assessed Valuation Bakersfield Mall LLC Shopping Center $ 114,341,670 1.01% Castle & Cooke Comm. Inc. Real Estate Development 101,116,491 0.89 Ice Cream Partners, USA Manufacturing 63,866,689 0.56 State Farm Insurance 58,422,309 0.52 Bear Mountain Limited Cogeneration 55,727,020 0.49 Sun Easton Corporation Commercial 28,721,236 0.25 Wal Mart Stores, Inc. Retail Sales 24,958,174 0.22 Time Warner Entertainment Cable 24,680,726 0.22 Albertsons Inc. Groceries 24,655,249 0.22 United States Cold Storage of CA Industrial 24,180,076 0.21 Total taxable assessed value of ten (10) largest taxpayers $ 520,669,640 4.60 Total taxable assessed valne of other taxpayers 10~800~055~446 95.40 Total taxable assessed value of all taxpayers $11.320.725.08~6 100.00% (I) Related parties grouped together on the original source document (County's list of assessed valuations) are included in the total assessed valuation amount for each taxpayer cited. Unitary and operating nonunitary are excluded as valuation by parcel is no longer available. Source: City Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2003, citing HDL Coren & Cone and Kern County Assessor 2002/03 Combined Tax Rolls. Demographic Statistics The following table sets forth various demographic data regarding the City, including population, estimated median household income, elementary school enrollment, and estimated unemployment rate, from fiscal year 1993- 94 through 2002-03. Table A-4 City of Bakersfield Demographic Statistics (Fiscal Years 1993-94 through 2002-03) Estimated Median Elementary Estimated Household School Unemployment Fiscal Year Population Income Enrollment Rate 1993-94 197,469 $35,885 26,312 13.5% 1994-95 207,472 37,449 26,350 12.8 1995-96 212,715 31,852 26,903 12.4 1996-97 214,554 31,888 27,126 11.4 1997-98 221,689 33,339 27,370 10.9 1998-99 230,771 33,754 27,668 11.0 1999-00 237,222 34,343 27,783 12.5 2000-01 254,368 37,573 28,099 10.4 2001-02 257,914 35,153 28,267 11.2 2002-03 266,784 42,800 28,179 12.0 Sources: City Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2003. Employment The County's total labor force, the number of persons who work or are available for work, is estimated to be 305,400 for 2003, an increase of 2.11% over the preceding year. The number of employed workers in the labor force is estimated to be 267,900 for the same date. The following table sets forth information regarding the size of the labor force, employment and unemployment rates for the County, the State, and the United States for the calendar years 1998 through 2003. Table A-5 Employment - Averages Calendar Years 1998 - 2003 1998 1999 2000 2001 2002 2003 Kern County Labor Force (000s) 277.9 277.9 287.1 292.0 299.1 305.4 Employment (000s) 244.2 246.3 254.7 260.9 264.0 267.9 Unemployment Rate 12.1% 11.4% 11.3% 10.6% 11.7% 12.32% State of California Labor Force (000s) 16,138.1 16,375.6 16,884.2 17,182.9 17,404.6 17,629.3 Employment (000s) 15,180.9 15,522.3 16,048.9 16,260.1 16,241.8 16,455.4 Unemployment Rate 5.9% 5.2% 4.9% 5.4% 6.7% 6.7% United States Labor Force (000s) 137,673 (1) 139,368 (1) 142,583 (1) 143,734 144,863 146,510 (1) Employment (000s) 131,463 (1) 133,488 (1) 136,891 (1) 136,933 136,485 137,736 Unemployment Rate 4.5% 4.2% 4.0% 4.7% 5.8% 6.0% (1) Not strictly comparable with data for prior years. Source: California Employment Development Department and U.S. Department of Labor Bureau of Labor Statistics. A-4 The following table sets forth the top twenty employers in the City as of July 2003. Table A-6 CITY OF BAKERSFIELD Principal Employers (As of July 2003) FIRM PRODUCT/SERVICE EMPLOYEES County of Kern Government 9,400 Grimmway Enterprises Agriculture 5,000 Giumarra Farms Agriculture 4,000 Wm. Bolthouse Farms Agriculture 2,400 Bakersfield Memorial Hospital Hospital 1,350 City of Bakersfiaid Government 1.275 Aera Energy LLC Oil and Gas Production 1,150 Mercy Hospitals Hospital 1,100 State Fanta Insurance Insurance 1,003 Califomia State University Bakersfield Education 1,003 ChevronTexaco Oil and Gas Production 1,000 Pandol & Sons Agriculture 1,000 San Joaquin Community Hospital Hospital 955 ACS Call Center 800 Frito-Lay Inc. Food Production 800 Kaiser Permanente Health Care 729 Sears Logistics Logistics 650 B.A.R.C. Non-Profit 560 Paramount Citrus Association Agriculture 550 Bakersfield College Education 400 Source: City of Bakersfield. ^-5 Building Activity The following table summarizes the City's total annual building permit valuations since Fiscal Year 1993- 94. Table A-7 CITY OF BAKERSFIELD Property Value, Construction, and Bank Deposits (1) Fiscal Years i 993-94 through 2002-03 Commercial Residential Other Total Construction Construction Construction Construction Fiscal Number of Number of Number of Bank Year Units Value Units Value Value Units Value Deposits 1993-94 30 $70,472 1,581 $154,577 $28,533 1,611 $253,582 $1,646,679 1994-95 39 65,891 1,571 150,429 37,167 1,610 253,487 1,563,075 1995-96 50 26,287 1,909 179,127 41,962 1,959 247,376 1,678,075 1996-97 102 42,352 1,352 132,785 40,459 1,454 215,596 2,310,008 1997-98 147 49,241 1,983 197,773 67,281 2,130 314,295 2,438,004 1998-99 213 78,199 2,088 223,576 36,958 2,301 338,733 2,464,202 1999-00 140 51,251 1,890 218,656 34.438 2,030 304,245 2,454,280 2000-01 123 38,113 2,012 261,522 48,067 2,135 347,702 2,730,107 2001-02 143 70,874 2,445 311,639 57,983 2,588 440,496 2,865,985 2002-03 141 56,694 2,981 428,534 62,112 3,122 547,340 Not Available (I) Proporb' values and hank deposits are reported in thousands Sources: Cily Finance Department Commercial Activity Consumer spending in calendar year 2002 resulted in approximately $3,828,193 in taxable sales in the City, which is approximately 2.24% above calendar year 2001. The following table sets forth information regarding taxable sales in the City for calendar years 1998 through 2002. Table A-8 CITY OF BAKERSFIELD Taxable Retail Sales 1998 - 2002 (O00s) 1998 1999 2000 2001 2002 Apparelstores $ 93,522 $ 97,207 $ 109,847 $ 117,059 $ 126,267 General memhandise stores 522,425 564,971 598,519 633,892 667,344 Food stores 148,581 162,505 176,986 181,300 196,060 Eating and drinking places 250,628 266,476 287,815 309,643 330,061 Home furnishings and appliances 102,108 113,435 123,510 126,841 142,019 Building materials and farm implmts. 184,458 217,197 244,146 256,506 286,088 Automobile dealers and auto supplies 531,261 623,868 716,804 845,904 850,364 Service stations 157,046 179,011 209,649 187,497 178,716 Other retail stores 318,548 342,586 372,930 384,538 413,285 Total Retail Outlets 2,308,577 2,567,256 2,840,206 3,043,180 3,190,204 All Other Outlets 588,811 629,476 657,574 701,212 637,989 Total All Outlets $2,897,388 $3,196,732 $3,497,780 $3,744,392 $3,828,193 Source: California State Board of Equalization. A-6 OR t.. There are three major shopping centers in the City. Major department stores with local outlets include Robinsons-May, Macy's, Mervyns, J.C. Penney, and Sears. The retail base includes two Wai-Marts, two Targets, one K-Mart, two Home Depots, a Lowe's Home Improvement Store, and a Costco. The number of sales permits issued and the valuation of taxable transactions for the years 1998 through 2002 is presented in the following table. Table A-9 CITY OF BAKERSFIELD Number of Permits and Valuation of Taxable Transactions 1998-2002 Retail Stores Year No. of Permits Taxable Transactions Total All Outlets No. of Permits Taxable Transactions 1998 2,838 $2,308,577 5,864 $2,897,388 1999 2,955 2,567,256 5,887 3,196,732 2000 3,163 2,840,206 5,961 3,497,780 2001 3,422 3,043,180 6,213 3,744,392 2002 3,552 3,190,204 6,359 3,828,193 Source: State of California, Board of Equalization. Transportation Well-developed surface and air transportation facilities are available to City residents and business firms. Main lines of both the Union Pacific and the Burlington Northern Santa Fe railroads traverse the area. Amtrak service is available. State Highway 99, the main north-south artery serving the most populous communities along the east side of the Central Valley, runs through the center of the City. State Highway 58 provides east-west linkage between Interstate 5, 20 miles west, and Interstate 15 at Barstow, to the east, Highway 178, heading northeast, is the major route along the Kern River Valley. Highway 65, to the north, provides access to communities east of Highway 99 and to Sequoia National Park. Interurban motor transportation is made available by Orange Belt Stages, Greyhound, and Trailways. Golden Empire Transit provides local bus transportation. Meadows Field (Kern County Airport) adjoins the City to the north. Regularly scheduled passenger and air cargo service is available as well as charter service and general aviation services. The main runway is 11,000 feet in length. Utilities Electricity throughout the City is supplied by Pacific Gas and Electric Company. This company, along with Southern California Gas Company, also supplies natural gas. Telephone service is by Pacific Bell. Fifteen private water companies serve the City. Sewer service is provided by the City. Education Public education in the City through the secondary grades is provided by a number of elementary school districts, including the Bakersfield City School District and Kern High School District. There are also a number of private schools, nursery schools, and pre-schools within the City. A-7 The City lies within Kern Community College District, which administers Bakersfield College. This two year institution is located on a 150-acre site in northeast Bakersfield. Vocational and technical courses are offered as well as academic courses designed to equip the student for transfer to a four-year college or university in the third year. Bakersfield College attracts about half the local high school graduating class each year. California State University, Bakersfield opened in 1970. It is one of the newest campuses in the State University system, receiving its university status in 1988. It is on a 375-acre site located in the western portion of the City. Majors offered include anthropology, art, earth sciences, philosophy, mathematics, political science, business and teaching. A graduate program offers the master's degree in a number of fields. The newest campus in the University of California system, UC Merced, is scheduled to open in 2004. UC Merced will serve the entire San Joaquin Valley, with the main campus located in the City of Merced and satellite centers located in the City (which satellite center has already opened) and the Cities of Fresno and Modesto. Financial Services Statewide banking systems serving the City include Bank of America, Washington Mutual Bank, Sanwa Bank California, Union Bank, and Wells Fargo Bank. Their services are supplemented by local and regional banks, and various savings and loan associations. Community Facilities The City has six general hospitals with a total bed capacity of 1,075. The City is a primary medical center of a region larger than some states. Mercy Hospital and Greater Bakersfield Memorial Hospital are among the largest employers in the City. Kern Medical Center, administered by the County, is affiliated with UCLA Medical Center of Los Angeles. The daily "Bakersfield Californian" and two weekly newspapers provide regional news coverage. Bakersfield has twenty radio stations, four television stations and three cable TV companies. The City has 47 public parks, covering a total of 395 acres. The Bakersfield Centennial Garden and Convention Center contains a 3,250-seat concert hall, a 9,000-seat arena, four meeting halls, and six conference rooms. Memorial Stadium hosts more National AAU track meets than any other city in the country. County-owned golf courses and five private courses offer year-round golf, and tennis is played throughout the year at the Bakersfield Racquet Club. Cultural advantages of the City include a community theater, the Bakersfield Symphony orchestra, a community concert group, and Cunningham Art Gallery. Bakemfield College and California State University, Bakersfield, sponsor plays, concerts, lectures, and special events throughout the year. A-8 APPENDIX B APPRAISAL [TO BE PROVIDED BY APPRAISER] APPENDIX C FORM OF OPINION OF BOND COUNSEL Closing Date, 2004 City Council City of Bakersfield 1501 Truxtun Avenue Bakersfield, CA 93301 City of Bakersfield Assessment District No. 03-3 (Seven Oaks West Ill/Brighton Place Il/Fairway Oaks South) Limited Obligation Improvement Bonds (Final Opinion) Ladles and Gentlemen: We have acted as bond counsel in connection with the issuance by the City of Bakersfield (the "Issuer") of $ aggregate principal amount of the City of Bakersfield Assessment District No. 03-3 (Seven Oaks West Ill/Brighton Place Il/Fairway Oaks South) Limited Obligation Improvement Bonds (the "Bonds") pursuant to the provisions of the Municipal Improvement Act of 1913 and the Improvement Bond Act of 1915 and Resolution No. , adopted by the City Council on ., 2004 (the "Resolution"). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Resolution. In such connection, we have reviewed the Resolution, the Tax Certificate of the Issuer dated the date hereof (the "Tax Certificate") an opinion of counsel to the Issuer, certifications of the Issuer and others and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. Certain agreements, requirements and procedures contained or referred to in the Resolution, the Tax Certificate and other relevant documents may be changed and certain actions(including, without limitation, defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. No opinion is expressed herein as to any Bond or the interest thereon if any such change occurs or action is taken or omitted upon the advice or approval of counsel other than ourselves. The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur. Our engagement with respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update this opinion. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the Issuer. We have not undertaken to verify independently, and have assumed, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinion, referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Resolution and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Bonds to be included in gross income for federal income tax purposes. In addition, we call attention to the fact that the rights and obligations under the Bonds, the Resolution and the Tax Certificate may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other similar laws relating to or affecting creditors' rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against cities in the State of California. We express no opinion on the plans, specifications, maps and other engineering details of the proceedings, or upon the validity of the individual separate assessments securing the Bonds which validity depends, in addition to the legal steps required, upon the accuracy of certain of the engineering details. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds and express no opinion with respect thereto. Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: 1. The Bonds constitute valid and binding special assessment obligations of the Issuer, payable solely from and secured by the unpaid assessments and certain funds held under the Resolution. 2. The Resolution has been duly adopted and constitutes a valid and binding obligation of the Issuer. 3. Interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. Interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although we observe that it is included in adjusted current earnings in calculating corporate alternative minimum taxable income. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. Faithfully yours, ORRICK, HERRINGTON & SUTCLIFFE LLC per c-2 APPENDIX D ASSESSMENT DIAGRAM [TO BE PROVIDED BY ASSESSMENT ENGINEERI APPENDIX E ASSESSMENT ROLL AND VALUE-TO-LIEN DATA [TO BE PROVIDED BY ASSESSMENT ENGINEER] APPENDIX F CONTINUING DISCLOSURE CERTIFICATES CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO. 03-3 (SEVEN OAKS WEST III/BRIGHTON PLACE II/FAIRWAY OAKS SOUTH) LIMITED OBLIGATION IMPROVEMENT BONDS CITY CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by the City of Bakersfield (the "City") in connection with the issuance by the City of $ in aggregate principal amount of the above-referenced bonds (the "Bonds") for Assessment District No. 03-3 (Seven Oaks West Ill/Brighton Place Il/Fairway Oaks South) (the "Assessment District"). The Bonds are being issued pursuant to a resolution authorizing issuance of the Bonds, being Resolution No. __ (the "Resolution"), adopted by the City Council of the City on ,2004. The City covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5), as amended. Section 2. Definitions. In addition to the definitions set forth above and in the Resolution, which apply to any capitalized term used in this Disclosure Certificate, unless otherwise defined in this section, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. "Beneficial Owner" shall mean any person who has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories, or other intermediaries). "Dissemination Agent" shall mean the City, or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation. "Fiscal Year" shall mean the 12-month period beginning on July 1 and ending on the next following June 30, unless and until changed by the City. "Holder" shall mean either the registered owner of any Bond, or, if the Bonds are registered in the name of DTC or another recognized depository, any Beneficial Owner or applicable participant in its depository system. "Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The current National Repositories are listed on the Securities and Exchange Commission website at http://www.sec.gov/info/municipal/nrmsir.htm. "Official Statement" shall mean the final Official Statement, dated Bonds. ,2004, pertaining to the "Participating Underwriter" shall mean RBC Dain Rauscher Inc., and any other original undetwfiters of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Repository" shall mean each National Repository and each State Repository. "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "State Repository" shall mean any public or private repository or entity designated by the State of Califomia as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Disclosure Certificate, there is no State Repository. Section 3. Provision of Annual Reports. (a) The City shall, or shall cause the Dissemination Agent to, not later than nine (9) months after the end of the City's Fiscal Year (i.e., currently not later than April 1 of each year), commencing with the report for the 2003-04 Fiscal Year, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if not available by that date. If the City's Fiscal Year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). (b) Not later than fifteen (15) Business Days prior to the date required in subsection (a), the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If the City is unable to provide to each Repository an Annual Report by the date required in subsection (a), the City shall send to each Repository a notice in substantially the form attached hereto as Exhibit A. (c) The Dissemination Agent shall: (i) determine each year, prior to the date for providing the Annual Report, the name and address of each Repository, and file the Annual Report with each Repository, and (ii) if the Dissemination Agent is other than the City, file a report with the City certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided and listing all the Repositories to which it was provided. Section 4. Content of Annual Reports. The City's Annual Report shall contain or incorporate by reference the following: (a) The audited financial statements of the City for the prior Fiscal Year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the City's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. Notwithstanding the foregoing, each Annual Report or other filing containing the City's financial statements may include the following or other similar statement: THE FOLLOWING FINANCIAL STATEMENTS ARE PROVIDED SOLELY TO COMPLY WITH THE SECURITIES AND EXCHANGE COMMISSION STAFF'S INTERPRETATION OF RULE 15c2-12. NO FUNDS OR ASSETS OF THE CITY OF BAKERSFIELD (OTHER THAN THE ASSESSMENTS LEVIED IN THE ASSESSMENT DISTRICT) ARE REQUIRED TO BE USED TO PAY DEBT SERVICE ON THE BONDS, AND THE CITY IS NOT OBLIGATED TO ADVANCE AVAILABLE FUNDS FROM THE CITY TREASURY TO COVER ANY DELINQUENCIES. INVESTORS SHOULD NOT RELY ON THE FINANCIAL F-2 CONDITION OF THE C1TY 1N EVALUATING WHETHER TO BUY, HOLD, OR SELL THE BONDS. (b) The following information with respect to the City for the Fiscal Year to which the Annual Report relates, which information may be provided by its inclusion in the audited financial statements of the Ciiy for the prior Fiscal Year described in subsection (a) above: (i) The principal amount of Bonds outstanding, including principal amounts and years of maturity of Bonds, if any, called for redemption in advance of maturity. (ii) The balances as of the end of such Fiscal Year in each of the following funds established pursuant to the Resolution: (A) the Improvement Fund; (B) the Redemption Fund; and (C) the Reserve Fund. (iii) Identification of each parcel for which any installment of the unpaid assessment is delinquent, together with the following information respecting each such parcel: (A) the amount delinquent (exclusive of late charges and monthly penalties for reinstatement); (B) the date (December 10 or April 10) of the first delinquency; (C) in the event a foreclosure complaint has been filed respecting such delinquent parcel and such complaint has not yet been dismissed, the date on which the complaint was filed in the Kern County Superior Court; and (D) in the event a foreclosure sale has occurred respecting such delinquent parcel, a summary of the results of such foreclosure sale. (iv) A current statement of the status of completion or progress toward completion of the public improvements described in the Official Statement under the subheading "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS Description of the Community Areas and the Improvements." (v) A current statement of the land-secured public financing information summarized in the Official Statement under the subheading "THE BONDS - Priority of Lien.' (vi) A current statement of the parcel information set forth in Columns 5 through 9, inclusive, of APPENDIX E to the Official Statement, for both existing and future parcels. (c) In addition to any of the information expressly required to be provided under paragraphs (a) and (b) of this Section, the City shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement~ it must be available from the Municipal Securities Rulemaking Board. The City shall clearly identi~ each such other document so included by reference. Section 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the follow'rig events (each, a 'Listed Event") with respect to the Bonds, if material: (i) principal and interest payment delinquencies; (ii) non-payment related defaults; (iii) modifications to rights of Bond Holders; (iv) optional, contingent, or unscheduled Bond calls; (v) defeasances; F-3 (vi) rating changes; (vii) adverse tax opinions or events adversely affecting the tax-exempt status of the Bonds; (viii) unscheduled draws on the debt service reserves reflecting financial difficulties; (ix) unscheduled draws on credit enhancements reflecting financial difficulties; (x) substitution of credit or liquidity providers, or their failure to perform; or (xi) release, substitution, or sale of property securing repayment of the Bonds. (b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall as soon as possible determine if such event would be material under applicable Federal securities law. (c) If the City determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the City shall promptly file a notice of such occurrence with either (i) the Municipal Securities Rulemaking Board and the State Repository or (ii) the Repositories. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(iv) and (v) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Bonds pursuant to the Resolution. Section 6. Termination of Reporting Obligation. The City's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption, or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the same manner as ~br a Listed Event under Section 5(c). Section 7. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Section 3(a), 4, or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, a~er taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the proposed amendment or waiver either (i) is approved by Holders of the Bonds in the manner provided in the Resolution for amendments to the Resolution with the consent of Holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the Bonds. If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. F-4 In the event of any amendment or waiver of a provision of this Disclosure Agreement, the City shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case ora change of accounting principles, on the presentation) of financial information or operating data being presented by the City. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repositories in the same manner as for a Listed Event under Section 5(c). Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default. in the event of a failure of the City to comply with any provision of this Disclosure Certificate any Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Resolution, and the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance. Section 11. Duties, Immunities, and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees, and agents, harmless against any losses, expenses, and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriter, and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Date: [Closing Date] CITY OF BAKERSFIELD By: Finance Director Name of Issuer: Name of Bond Issue: EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT City of Bakersfield, California Assessment District No. 03-3 (Seven Oaks West III/Brighton Place II/Fairway Oaks South) Limited Obligation Improvement Bonds Date of Issuance: [Closing Date] NOTICE IS HEREBY GIVEN that the City of Bakersfield, California (the "City), has not provided an Annual Report with respect to the above-named Bonds as required Section 4(a) of the Continuing Disclosure Certificate executed by the City on [Closing Date]. The City anticipates that the Annual Report will be filed by Dated: CITY OF BAKERSFIELD By: Finance Director F-6 ORtGIN'~L CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO. 03-3 (SEVEN OAKS WEST Ill/BRIGHTON PLACE II/FAIRWAY OAKS SOUTH) LIM1TED OBLIGATION IMPROVEMENT BONDS DEVELOPER'S CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by Castle & Cooke California, Inc., a California corporation (the "Developer"), in connection with the issuance by the City of Bakersfield (the "City") of $ in aggregate principal amount of the above-referenced bonds (the "Bonds") for Assessment District No. 03-3 (Seven Oaks West III/Brighton Place II/Fairway Oaks South) (the "Assessment District"). The Bonds are being issued pursuant to a resolution authorizing issuance of the Bonds, being Resolution No. __ (the "Resolution"), adopted by the City Council of the City on ,2004. The Developer covenants and agrees as follows: SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Developer for the benefit of the City, RBC Dain Rauscher lnc., as the underwriter of the Bonds (the "Underwriter"), and the Holders and Beneficial Owners (each as defined below) of the Bonds in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5), as amended. SECTION 2. Definitions. In addition to the definitions set forth above and in the Resolution, which apply to any capitalized term used in this Disclosure Certificate, unless otherwise defined in this section, the following capitalized terms shall have the following meanings: "Affiliate" of another Person shall mean (a) a Person directly or indirectly owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of such other Person, (b) any Person 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by such other Person, or (c) any Person directly or indirectly controlling, controlled by, or under common control with, such other Person. For purposes hereof, "control" means the power to exercise a controlling influence over the management or policies of a Person, unless such power is solely the result of an official position with such Person. "Assumption Agreement" means an agreement or certificate by a Successor Developer, containing terms substantially similar to this Disclosure Certificate, whereby such Successor Developer shall agree to provide Semi- Annual Reports and notices of Listed Events with respect to the property in the Assessment District owned by such Successor Developer and its Affiliates, if any. "Beneficial Owner" shall mean any person who has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bond or Bonds, including persons holding Bonds through nominees, depositories, or other intermediaries. "Development Plan" shall mean the specific improvements the Developer intends to make, or cause to be made, in order for the Community Area to reach the Planned Development Stage, the time frame in which such improvements am intended to be made, and the estimated costs of such improvements. The Developer's Development Plan, as of the date hereof, is described in the Official Statement under the heading "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT." "Disclosure Period" shall mean the six-month period beginning on July 1 or January 1 and ending on the next following June 30 or December 31, as applicable. F-7 "Disclosure Representative" shall mean the president, the managing member, any vice-president, or the chief financial officer of the Developer or his or her designee, or such other officer, employee, or agent as the Developer shall designate in writing to the Dissemination Agent and the City from time to time. "Dissemination Agent" shall mean the City, or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation. "Event of Bankruptcy" shall mean, with respect to a Person, that such Person files a petition or institutes a proceeding under any act or acts, state or federal, dealing with or relating to the subject or subjects of bankruptcy or insolvency, or under any amendment of such act or acts, either as a bankrupt or as an insolvent, or as a debtor, or in any similar capacity, wherein or whereby such Person asks, seeks, or prays to be adjudicated a bankrupt, or is to be discharged from any or all of such Person's debts or obligations, or offers to such Person's creditors to effect a composition or extension of time to pay such Person's debts or obligations, or asks, seeks, or prays for reorganization or to effect a plan of reorganization, or for a readjustment of such Person's debts, or for any other similar relief, or if any such petition or any such proceedings of the same or similar kind or character is filed or instituted or taken against such Person, or if a receiver of the business, property, or assets of such Person is appointed by any court, or if such Person makes a general assignment for the benefit of such Person's creditors. "Financing Plan" shall mean the method by which Developer intends to finance its Development Plan, including specific sources of funding for such Development Plan. The Developer's Financing Plan, as of the date hereof, is described in the Official Statement under the heading "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT." "Financial Statements" shall mean the full financial statements, special purpose financial statements, project operating statements, or other repons reflecting the financial position of the Developer's parent company or, if such financial statements are prepared separately for the Developer, reflecting the financial position of the Developer; provided that, if such financial statements or reports are otherwise prepared as audited financial statements or reports, then "Financial Statements" means such audited financial statements or repons. The Financial Statements for the Developer or its parent company shall consist of a balance sheet, an income statement, and a statement of cash flows, all prepared in accordance with generally accepted accounting principles. "Holders" shall mean either the registered owners of the Bonds, or, if the Bonds are registered in the name of The Depository Trust Company or another recognized depository, any Beneficial Owner or applicable participant in its depository system. "Listed Event" shall have the meaning given to such term in Section 5 of this Disclosure Certificate. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The current National Repositories are listed on the Securities and Exchange Commission website at http://www.sec.gov/info/municipal/nrmsir.htm. "Official Statement" shall mean the final Official Statement dated ,2004, pertaining to the Bonds. "Person" means an individual, a corporation, a partnership, an association, a joint stock company, a limited liability company, a ~'ust, any unincorporated organization, or a government or a political subdivision thereof. "Planned Development Stage" shall mean, with respect to any property in the Assessment District owned by the Developer or its Affiliates, if any, the stage of development to which the Developer intends to develop such property, as described in the Official Statement, which is the stage at which backbone infrastructure is in place for the applicable Community Area, and the Developer has completed construction and~or development as described in the Official Statement under the heading "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT." "Repository" shall mean each National Repository and each State Repository. F-8 "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "Semi-Annual Report" shall mean any Semi-Annual Report provided by the Developer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. "State Repository" shall mean any public or private repository or entity designated by the State of California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Disclosure Certificate, there is no State Repository. "Successor Developer" shall mean any property owner, other than the Developer or its Affiliates, which purchases property in the Assessment District for the purpose of developing the proper~ and not merely as an end- user. SECTION 3. Provision of Semi-Annual Reports. (a) So long as the Developer is obligated hereunder and said obligation has not been terminated pursuant to Section 6 of this Disclosure Certificate, the Developer shall provide, or shall cause the Dissemination Agent to provide, not later than three (3) months after the end of each Disclosure Period (i.e., not later than September 30 or March 31 of each year, as applicable), commencing with the report for the Disclosure Period ending June 30, 2004, to each Repository a Semi-Annual Report relating to the immediately preceding Disclosure Period which is consistent with the requirements of Section 4 of this Disclosure Certificate. The Semi-Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross- reference other information as provided in Section 4 of this Disclosure Certificate; provided, however, that if audited Financial Statements are required to be provided, such audited Financial Statements may be submitted separately from the balance of the Semi-Annual Report, and later than the date required above for the filing of the Semi- Annual Report, if not available by that date. (b) So long as the Developer is obligated hereunder and said obligation has not been terminated pursuant to Section 6 of this Disclosure Certificate, not later than fifteen (15) business days prior to the date required in subsection (a) hereof, the Developer shall provide the Semi-Annual Report to the Dissemination Agent. If the Developer is unable to provide, or cause to be provided, to each Repository a Semi-Annual Report by the date required in subsection (a) hereof, the Dissemination Agent shall, first, confirm that the Developer's obligation hereunder has not been terminated pursuant to Section 6 of this Disclosure Certificate, and, if the Developer is still obligated hereunder, the Dissemination Agent shall send to each Repository a notice in substantially the form attached hereto as Exhibit A. (c) The Dissemination Agent shall: (i) determine each year, prior to the date for providing the Semi-Annual Report, the name and address of each Repository, and file the Semi-Annual Report with each Repository, and (ii) following the filing of the Semi-Annual Report with each Repository, file a certificate with the City and the Developer certifying that the Semi-Annual Report has been filed with each Repository pursuant to this Disclosure Certificate, stating the date on which the Semi-Annual Report was filed, and listing each Repository (by name and address) with which it was filed. SECTION 4. Content of Semi-Annual Reports. So Long as the Developer is obligated hereunder and said obligation has not been terminated pursuant to Section 6 of this Disclosure Certificate, the Developer shall provide a Semi-Annual Report for the preceding Disclosure Period with respect to property within the Assessment District owned by the Developer or its Affiliates, if any, which Semi-Annual Report shall contain or incorporate by reference the following: F-9 (a) The Developer shall provide a general description of progress made in the Development Plan, and any significant changes in the Development Plan, Financing Plan, or zoning during the prior Disclosure Period. The Developer shall track actual absorption relative to projected absorption according to the framework described in the Official Statement under the heading "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT." The Developer shall identify any material deviations in actual versus expected sale prices, and identify zoning changes, if any. The Developer shall also include infom~ation concerning the recordation of finaI maps, if applicable, and information concerning the sale or transfer of property to Persons that are not Affiliates of the Developer. The Developer shall describe any significant changes in the Financing Plan for its development project including, without limitation, changes in status of the Developer's credit line (or the credit line of any Affiliates of the Developer that own property within the Assessment District), if applicable. The Developer shall describe (i) any change in the legal structure of the Developer or of any of its Affiliates that own property within the Assessment District; (ii) any previously undisclosed amendments to the land use entitlements or environmental conditions or other governmental conditions that are necessary to complete its Development Plan; or (iii) any previously undisclosed legislative, administrative, or judicial challenges to the Development Plan, if known. (d) Each fiscal year, one Semi-Annual Report shall make reference to the quarterly and annual financial statements of the Developer, on file with the Securities and Exchange Commission (if applicable). All such references shall contain the following caveat: The quarterly and annual reports of the Developer are referred to for informational purposes only. In the event ora failure to pay any installment of assessments, and after depletion of the Reserve Fund, the real property in the Assessment Dis~'ict is the sole security for the Bonds. The obligation of the Developer to pay the unpaid assessment installments does not constitute a personal indebtedness of the Developer for which the funds or assets (other than the property in the Assessment District) of the Developer may be required, by operation of law or otherwise, to be used to pay debt service on the Bonds. It should not be inferred from the reference to the quarterly and annual reports of the Developer that the funds or assets (other than the property in the Assessment District) are available to cure any delinquencies in the payment of assessments. (e) To the extent that Financial Statements are prepared separately for the Developer, Financial Statements prepared in accordance with generally accepted accounting principles, as in effect from time to time, shall be provided. To the extent that audited Financial Statements are prepared separately for the Developer, if audited Financial Statements are required to be provided and such audited Financial Statements are not available by the time the applicable Semi-Annual Report is required to be provided pursuant to Section 2(a) of this Disclosure Certificate, the applicable Semi-Annual Report shall contain unaudited Financial Statements, and the audited Financial Statements shall be filed in the same manner as the applicable Semi-Annual Report when they become available. Such Financial Statements shall be for the most recently ended fiscal year for the entity covered thereby. To the extent that audited Financial Statements of the Developer are prepared, the Developer shall include such audited Financial Statements in the applicable Semi-Annual Report. To the extent that the provisions of this subsection (e) become applicable, the provisions of subsection (d) above shall cease to be applicable. All such audited Financial Statements of the Developer, if any, shall contain the following caveat: The audited financial statements of the Developer are included for informational purposes only. In the event of a failure to pay any installment of assessments, and ai~er depletion of the Reserve Fund, the real property in the Assessment District is the sole security for the Bonds. The obligation of the Developer to pay the unpaid assessment installments does not constitute a personal indebtedness of the Developer for which the funds or assets (other than the property in the Assessment District) of the Developer may be required, by operation of law or otherwise, to be used to pay debt service on the Bonds. It should not be inferred from audited financial statements of the Developer that the funds or assets (other than the property in the Assessment District) are available to cure any delinquencies in the payment of assessments. F-10 ORIGINAL In addition to any of the information expressly required to be provided under this Section, the Developer shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Any or all of the items listed above may be included by specific reference to other documents that have been submitted to each of the Repositories or the Securities and Exchange Commission. lfthe document included by reference is a final official statement, it must be available fi.om the Municipal Securities Rulemaking Board. The Developer shall clearly identify each such other document so included by reference. SECTION 5. Developer's Report of Listed Events. (a) So long as the Developer is obligated hereunder and said obligation has not been terminated pursuant to Section 6 of this Disclosure Certificate, pursuant to the provisions of this Section 5, the Developer shall promptly give, or cause to be given notice of the occurrence of any of the following events (each, a "Listed Event") with respect to Developer and any of its Affiliates that own property within the Assessment District: (i) Any conveyance by the Developer or any of its Affiliates to a Successor Developer or its Affiliates, if any, of property that, when aggregated with all other property in the Assessment District then-owned by such Successor Developer and its Affiliates, if any, is subject to the lien of greater than twenty percent (20%) of the annual assessment securing payment of the Bonds. (ii) Any failure of the Developer or any of its Affiliates to pay when due general property taxes, special taxes, or assessments with respect to its property within the Assessment District. (iii) Any termination of a line of credit or loan, any termination of, or uncured material default under, any line of credit or loan, or any other loss of a source of funds that could have a material adverse affect on the Developer's most recently disclosed Financing Plan or Development Plan, if any, or on the ability of the Developer or any of its Affiliates to pay assessment installments with respect to the Assessment District when due. (iv) The occurrence of an Event of Bankruptcy with respect to the Developer or any of its Affiliates that could have a material adverse affect on the Developer's most recently disclosed Financing Plan or Development Plan, if any, or on the ability of the Developer or any of its Affiliates to pay assessment installments with respect to the Assessment District when due. (v) Any significant amendments to land use entitlements for the Developer's or its Affiliates' proper~ in the Assessment District, if material. (vi) Any previously undisclosed govemmentally-imposed preconditions to commencement or continuation of development on the Developer's or its Affiliates' property in the Assessment District, if material. (vii) Any previously undisclosed legislative, administrative, or judicial challenges to development on the Developer's or its Affiliates' property in the Assessment District, if material. (viii) Any changes, if material, in the alignment, design, or likelihood of completion of significant public improvements, including major thoroughfares, sewers, water conveyance systems, and similar facilities. (ix) The assumption of any obligations by a Successor Developer pursuant to Section 6 of this Disclosure Certificate. (b) Whenever the Developer obtains knowledge of the occurrence of a Listed Event, the Developer shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (c) below. F-II (c) If the Dissemination Agent has been instructed by the Developer to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with either (i) the Municipal Securities Rulemaking Board and each State Repository or (ii) the Repositories, with a copy to the Participating Underwriter. SECTION 6. Termination of Developer's Reporting Obligation. The Developer's continuing obligation to provide a Semi-Annual Report and notices of material Listed Events will terminate upon the earlier of (1) the legal defeasance, prior redemption, or payment in full of all of the Bonds, or (2) the date upon which the Developer and its Affiliates, if any, cease to own proper~ in the Assessment District that, when aggregated with all other property in the Assessment District then-owned by the Developer and its Affiliates, if any, is subject to the lien of greater than twenty percent (20%) of the annual assessment securing payment of the Bonds, or (3) when the Developer's Community Area has reached the Planned Development Stage. If the Developer conveys to a Successor Developer property in the Assessment District prior to the time at which such property reaches the Planned Development Stage, and such property conveyed, when aggregated with all other property in the Assessment District then-owned by such Successor Developer and its Affiliates, if any, is subject to the lien of greater than twenty percent (20%) of the annual assessment securing payment of the Bonds, then the Developer shall require a Successor Developer to enter into an Assumption Agreement, but only to the extent and upon the terms, if any, required by the Rule. SECTION 7. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist the Developer in carrying out its obligations under this Disclosure Certificate, and the City may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. SECTION 8. Amendment: Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Developer may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the City agrees in writing and the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Section 3(a), 4, or 5, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the proposed amendment or waiver either (i) is approved by Holders of the Bonds in the manner provided in the Resolution for amendments to the Resolution with the consent of Holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the Bonds. If the annual financial information or operating data to be provided in the Semi-Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the Developer shall describe such amendment in the next Semi-Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Developer. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the Developer to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repositories in the same manner as for a Listed Event under Section 5. SECTION 9. Additional information. Nothing in this Disclosure Certificate shall be deemed to prevent the Developer from disseminating any other information using the means of dissemination set forth in this Disclosure Certificate or any other means of communication or including any other information in any Semi-Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Developer chooses to include any informmion in any Semi-Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Developer shall have no obligation under this Disclosure Certificate to update such information or include it in any future Semi-Annual Report or notice of occurrence of a Listed Event. SECTION 10. Default. In the event of a failure of the Developer to comply with any provision of this Disclosure Certificate, the Underwriter, the City, or any Holder or Beneficial Owner of outstanding Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Developer to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Agreement shall not be deemed to be an event of default under the Resolution, and the sole remedy under this Disclosure Certificate in the event of any failure of the Developer to comply with this Disclosure Certificate shall be an action to compel performance. SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Developer agrees to indemnify and save the City, the Dissemination Agent, and their respective officers, directors, employees, and agents, harmless against any losses, expenses, and liabilities which either or both of them may incur arising out of or in the exemise or performance of the Developer's powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the City's or the Dissemination Agent's negligence or willful misconduct. The obligations of the Developer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. SECTION 12. Beneficiaries. This Disclosure Certificate shall be binding upon the Developer and shall inure solely to the benefit of the Developer, the Dissemination Agent, the Underwriter, the City, and the Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Date: [Closing Date] CASTLE & COOKE CALIFORNIA, INC., a California corporation By: Title: ORIGiN~,L EXHIBIT A NOTICE TO REPOSITORIES OF FAILURE TO FILE SEMI-ANNUAL REPORT Name of Developer: Name of Bond Issue: CASTLE & COOKE CALIFORNIA, INC., a Califomia corporation CITY OF BAKERSFIELD, CALIFORNIA ASSESSMENT DISTRICT NO. 03-3 (SEVEN OAKS WEST III/BRIGHTON PLACE II/FAIRWAY OAKS SOUTH) LIM1TED OBLIGATION IMPROVEMENT BONDS Date of Issuance: [Closing Date] NOTICE IS HEREBY GIVEN that Castle & Cooke California, Inc., a California corporation (the "Developer"), has not provided a Semi-Annual Report with respect to the above-named Bonds as required by Section 3 of the Developer's Continuing Disclosure Certificate, dated [Closing Date]. The Developer anticipates that the Semi-Annual Report will be filed by Date: THE CITY OF BAKERSFIELD, as Dissemination Agent, on behalf of CASTLE & COOKE CALIFORNIA, INC., a California corporation By: Finance Director [$ PAR AMOUNTI CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO. 03-3 (SEVEN OAKS WEST Ill/BRIGHTON PLACE II/FAIRWAY OAKS SOUTH) L1MITED OBLIGATION IMPROVEMENT BONDS BOND PURCHASE CONTRACT 2004 City of Bakersfield Bakersfield, California Ladies and Gentlemen: The undersigned, RBC Dain Rauscher Inc. (the "Underwriter"), hereby offers to enter into this Bond Pumhase Contract (the "Purchase Contract") with you, the City of Bakersfield (the "City"), for the purchase by the Underwriter and execution and delivery to be caused by the City under Resolution No. __, adopted by the City Council of the City on ,2004 (the "Resolution of Issuance"), of the Bonds described heroin. This offer is made subject to acceptance by the City prior to midnight, California time, on the date hereofi If this offer is not so accepted, this offer will be subject to withdrawal by the Underwriter upon notice delivered to the City at any time prior to acceptance. Upon acceptance, this Pumhase Contract shall be in full force and effect in accordance with its terms and shall be binding upon the City and the Underwriter. 1. Purchase, Sale and Delivery of the Bonds. (a) Subject to the terms and conditions and in reliance upon the representations and agreements hereinafter set forth, the Underwriter hereby agrees to purchase and the City agrees to cause U.S. Bank National Association, appointed as paying agent, registrar, and transfer agent for the Bonds in the Resolution of Issuance (the "Paying Agent"), to authenticate and deliver to the Underwriter all (but not less than all) of [$ PAR AMOUNT] aggregate principal amount of the City of Bakersfield, Assessment District No. 03-3 (Seven Oaks West Ill/Brighton Place Il/Fairway Oaks South), Limited Obligation Improvement Bonds, dated the date of delivery thereof(the "Bonds"), issued for the purpose of financing (i) the acquisition or construction by the City of certain public improvements for each of the three development areas within Assessment District No. 03-3 (Seven Oaks West Ill/Brighton Place l I/Fairway Oaks South) (the "Assessment District") that will be owned, operated, and maintained by the City; (ii) the cost to pay off existing parcel assessments confirmed pursuant to City of Bakersfield Assessment District No. 01-2 (Seven Oaks West I1/River Walk/Southern Oaks) with respect to the Seven Oaks West Ill development area within the Assessment District, and (iii) the payment of certain improvement, assessment proceeding, and Bond issuance incidental costs and expenses, including the funding ora special reserve fund, as more fully described and defined in the Resolution of Issuance. The aggregate purchase price for the Bonds shall be $ ([$ PAR AMOUNT] principal amount less Underwriter's discount of $ ). The Bonds shall be substantially in the form described in, and shall be executed, delivered, and secured under and pursuant to, and shall be payable and subject to redemption, as provided -1- 20498357v2 in the Resolution of Issuance. The Bonds am more fully described in the Official Statement of the City, dated the date hereof, relating to the Bonds (including the cover page and all appendices, exhibits, and statements thereon or attached thereto being herein called the "Official Statement"). The Bonds will mature on the dates and in the amounts, and will bear interest at the rates shown in Schedule l attached hereto. A Preliminary Official Statement dated ,2004 (including the cover page and all appendices, exhibits, and statements thereon or attached thereto being herein called the "Preliminary Official Statement"), has been delivered to the Underwriter in connection with the Bonds. The City hereby consents to and ratifies the prior use by the Underwriter of the Preliminary Official Statement (in printed or electronic form), in connection with the public offering of the Bonds by the Underwriter and further confirms the authority of the Underwriter to use, and consents to the use of, a final Official Statement (in printed or electronic form) with respect to the Bonds, to be dated the date hereofi and any amendments or supplements thereto that shall be approved by the City in connection with the public offering and sale of the Bonds. The City has deemed the Preliminary Official Statement final as of its date within the meaning of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 ("Rule ! 5c2-12"), except for the omission of such information as is specified in Rule 15c2-12, by delivering a certificate to the Underwriter substantially in the form of Exhibit A attached hereto. The Resolution of Intention No. 1320, adopted by the City Council of the City on December 10, 2003, the Resolution of Issuance, and all other resolutions adopted by the City Council relating to the Bonds, this Purchase Contract, the Official Statement, the Preliminary Official Statement, the ~brmation of the Assessment District, and the levying of assessments shall be collectively referred to herein as the "Resolutions." The Bonds, the Resolutions, the Acquisition and Disclosure Agreement No. 04-055, effective March 10, 2004 (the "C&C California Acquisition Agreement"), between the City and Castle & Cooke California, Inc., a California corporation ("C&C California"), the Acquisition and Disclosure Agreement No. 04-056, effective March 10, 2004 (the "Fairway Oaks South Acquisition Agreement"), between the City and Fairway Oaks South, LP, a California limited partnership ("Fairway Oaks South"), the Continuing Disclosure Certificate to be signed by the City on or before the Closing Date (as defined below) (the "City Continuing Disclosure Certificate"), and the Continuing Disclosure Certificate to be signed by C&C California on or before the Closing Date (the "C&C California Continuing Disclosure Certificate"), shall be collectively referred to herein as the "Financing Documeuts?' (b) At 8:00 a.m., California time, on _ , 2004, or at such other time or on such other date as the City and the Underwriter mutually agree upon (the "Closing Date"), the City will cause the Paying Agent to deliver or cause to be delivered to the Underwriter or its representative, at a location or locations to be designated by the Underwriter in New York, New York, the Bonds in definitive form (all of the Bonds to be lithographed with steel engraved borders (except Bonds to be deposited with the Depository Trust Company and subject to its book-entry-only system) and to bear CUSIP numbers) duly executed, together with the other documents mentioned herein. The Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in subparagraph (a) above by wire transfer in federal funds (such delivery and payment being herein referred to as the "Closing"), to the order of the City in an amount equal to the purchase price. The Bonds will be made available to the Underwriter for inspection and packaging, at an office which the City and the Underwriter may mutually agree upon, not less than 48 hours prior to the Closing Date. The Bonds shall be delivered as fully registered Bonds in such denominations and registered in such names as the Underwriter shall request by written notice given to the Paying Agent not later than 72 hours prior to the Closing Date. The City shall provide, or cause to be provided within seven (7) business days after the date hereof or by the Closing Date, whichever comes first, conformed copies of the final Official Statement in sufficient quantity to 20498357v2 -2- ORI~ permit the Underwriter to comply with Rule 15c2-12 and other applicable rules of the Securities and Exchange Commission and the Municipal Securities Rulemaking Board. (c) The Underwriter agrees to make a bona fide public offering of the Bonds at the initial offering prices set forth in the Official Statement, which prices may be changed from time to time by the Underwriter after such offering. The Underwriter will deliver copies of the Official Statement to a nationally recognized municipal securities information repository as soon as practicable. 2. Representations, Warranties, and Agreements of the City. The City hereby represents and warrants to and agrees with the Underwriter as follows: (a) The descriptions in the Official Statement of the Bonds, the Resolution of Issuance, and the other applicable agreements, resolutions, and documents to which the City is a party are accurate; and the Bonds, when delivered to and paid for by the Underwriter on the Closing Date as provided herein, will be validly issued and outstanding and entitled to all the benefits and security of the Resolution of Issuance; (b) The Preliminary Official Statement is, and the Official Statement will be as of the Closing Date, true, correct, and complete in all material respects and the Official Statement will not as of the Closing Date contain any untrue statement ora material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (c) The City is a municipality duly organized and validly existing under and operating pursuant to the Constitution and laws of the State of California (the "State") and the City Charter of the City, with the full power and authority to execute and deliver the Official Statement, to issue, sell, and deliver the Bonds to the Underwriter as provided herein, and to enter into and to adopt, as applicable, the applicable Financing Documents to be executed by the City and this Purchase Contract; (d) By official action of the City prior to or concurrently with the acceptance hereof, the City has duly approved the distribution of the Preliminary Official Statement and the Official Statement, and has duly authorized and approved the execution and delivery of, and the performance by the City of the obligations on its part contained in, the applicable Financing Documents and this Purchase Contract and the consummation by it of all other transactions contemplated by the Official Statement and this Purchase Contract; (e) The execution and delivery of this Purchase Contract and the Official Statement, the adoption of the Resolutions, and compliance with the provisions on the City's part contained herein and therein, will not in any material respect conflict with or constitute a breach of or default under any law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement, or other instrument to which the City is a party or is otherwise subject, nor will any such execution, delivery, adoption, or compliance result in the creation or imposition of any lien, charge, or other security interest or encumbrance of any nature whatsoever upon any of the properties or assets of the City under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement, or other instrument, except as provided in the applicable Financing Documents; (f) Except as otherwise set forth in the Official Statement, the City is not in any material respect in breach of or default under any applicable law or administrative regulation of the State or the United States or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement, or other instrument to which the City is a financially-obligated party or is 20498357v2 ~ otherwise subject, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or an event of default on the part of the City under any such instrument; (g) There is no action, suit, proceeding, inquiry, or investigation, at law or in equity, before or by any court, governmental agency, public board or body, pending for which the City has been served or, to the best knowledge of the City, threatened against the City in any material respect affecting the existence of the City or the titles of its officers to their respective offices or seeking to prohibit, restrain, or enjoin the sale, execution, or delivery of the Bonds or the payment of Bond principal and interest or in any way contesting or affecting the validity or enforceability of the Bonds, the Financing Documents to which the City is a party, or this Purchase Contract or contesting the powers of the City or its authority to enter into, adopt, or perform its obligations under any of the foregoing, or contesting in any way the completeness or accuracy of the Preliminary Official Statement or the Official Statement, or any amendment or supplement thereto, wherein an unfavorable decision, ruling, or finding could materially adversely affect the validity or enforceability of the Financing Documents or this Purchase Contract; (h) The City will furnish such information, execute such instruments, and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order (i) to qualify the Bonds for offer and sale under the Blue Sky or other securities law and mgulafions of such states and other jurisdictions of the United States as the Underwriter may designate and (ii) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdicfions, and will use its best efforts to continue such qualification in effect so long as required for distribution of the Bonds; provided, however, that in no event shall the City be required to take any action which would subject it to general or unlimited service of process in any jurisdiction in which it is not now so subject; (i) If between the date hereof and the Closing Date an event occurs, of which the City has knowledge, which might or would cause the information contained in the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make such information therein, in light of the circumstances under which it was presented, not misleading, the City will notify the Underwriter, and, if, in the opinion of the City or the Underwriter or their respective counsel, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the City will cooperate in the preparation of, at the expense of C&C California and/or Fairway Oaks South, an amendment or supplement to the Official Statement in a form and manner approved by the Underwriter and deliver to the Underwriter the number of amended Official Statements that, in the reasonable judgment of the Underwriter, are necessary to satisfy its obligations; (j) If the information contained in the Official Statement is amended or supplemented pursuant to paragraph (i) hereof, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such paragraph), at all times subsequent thereto up to and including the Closing Date, the Official Statement so supplemented or amended (including any financial and statistical data contained therein), will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make such information therein, in light of the circumstances under which it was presented, not misleading; (k) The special assessments on properties in the Assessment District, together with other moneys in the funds and accounts established under the Resolution of Issuance, constitute the security for the Bonds, will be duly and lawfully levied under and pursuant to the Municipal Improvement Act of 1913 (Division 12 of the California Streets and Highways Code) and 20498357v2 -4- Section 13.08.070 of the Municipal Code of the City, and such assessments will constitute valid and legally binding liens on the properties on which they have been levied; (I) Other than as described in the Official Statement, there are no outstanding assessment liens against, or communities facilities districts affecting, any of the properties within the Assessment District; (m) The proceedings to create the Assessment District and to issue the Bonds will create a valid pledge of, lien upon, and security interest in the unpaid assessments in the Assessment District and the interest thereon and the moneys in the funds and accounts as provided in the Resolution of Issuance, including the investments thereof, subject in all cases to the provisions of the Resolution of Issuance permitting the application thereof for the purposes and on the terms and conditions set forth therein; (n) The City will notify the Underwriter prior to any reapportionment of assessments to the end that they will be approved only if the security for the Bonds is not reduced or impaired; (o) Until such time as moneys have been set aside in an amount sufficient to pay all then outstanding Bonds at maturity or to the date of redemption if redeemed prior to maturity, plus unpaid interest thereon and premium, if any, to maturity or to the date of redemption if redeemed prior to maturity, the City will faithfully perform and abide by all of the covenants, undertakings, and provisions contained in the Financing Documents applicable to it; (p) The City shall undertake, pursuant to the Resolution of Issuance and the City Continuing Disclosure Certificate, to provide certain annual financial information and assessment district property information, together with notices of the occurrence of certain events, if material. A copy of the City Continuing Disclosure Certificate is set forth in Appendix F of the Preliminary Official Statement and will also be set forth in the Official Statement; (q) The City has not failed during the previous five (5) years to comply in all material respects with any previous undertakings in a written continuing disclosure contract or agreement under Rule 15c2-12; and (r) The portion of the lien of City of Bakersfield Assessment District No. 01-2 (Seven Oaks West Il/River Walk/Southem Oaks) that has been levied against properties within the Assessment District shall be paid offwith a portion of the proceeds of the Bonds. 3. Conditions to the Obligations of the Underwriter. The Underwriter hereby enters into this Purchase Contract in reliance upon the representations, warranties, and agreements of the City contained herein, the representations, warranties, and agreements of each of C&C California and Fairway Oaks South contained in their respective certificates in form and substance as set forth in Exhibits B-1 and B-2 attached hereto, the representations, warranties, and agreements of the City, C&C California, and Fairway Oaks South to be contained in the documents and instruments to be delivered at the Closing, and the performance by the City, the Paying Agent, C&C Califomia, and Fairway Oaks South of their respective obligations both on and as of the date hereof and as of the Closing Date. Accordingly, the Underwriter's obligations under this Purchase Contract to purchase, to accept the delivery of, and to pay for the Bonds shall be subject, at the option of the Underwriter, (i) to the accuracy in all material respects of the representations, warranties, and agreements of the City contained herein as of the date hereof and as of the Closing Date, (ii) to the receipt by the City and the Underwriter of the certificates of C&C California and Fairway Oaks South, each dated the date hereof, in substantially the form set forth in Exhibits B-1 and B-2 attached hereto, (iii) to the accuracy in all material respects of the statements of the officers and other officials of the Paying Agent, the City, C&C California, and Fairway Oaks South made in any certificate or other document furnished pursuant to the provisions hereof, (iv) to the performance by the City, the Paying Agent, C&C California, and Fairway Oaks South of their respective obligations to be performed hereunder and under the Financing Documents at or prior to the Closing Date, and (v) to the following additional conditions: (a) The representations, warranties, and agreements of the City contained heroin shall be true, complete, and correct in all material respects on the date hereof and on the Closing Date, as if made on and at the Closing; (b) At the Closing, the Financing Documents shall have been duly authorized, executed, and delivered by the respective parties thereto, and the Official Statement shall have been duly authorized, executed, and delivered by the City, all in substantially the forms heretofore submitted to the Underwriter, with only such changes as shall have been agreed to in writing by the Underwriter, and shall be in full force and effect; and there shall be in full force and effect such resolution or resolutions of the City as, in the opinion of Orrick, Herrington & Sutcliffe LLP, San Francisco, California ("Bond Counsel"), shall be necessary or appropriate in connection with the transactions contemplated hereby and thereby; (c) Between the date hereof and the Closing Date, the market price or marketability, at the initial offering prices set forth in the Official Statement, of the Bonds or the market price generally of obligations of the general character of the Bonds shall not have been materially adversely affected, in the reasonable judgment of the Underwriter (evidenced by a written notice to the City terminating the obligation of the Underwriter to accept delivery of and make any payment for the Bonds), by reason of any of the following statements of fact, regardless of whether the statements of fact were in existence or known on the date of this Purchase Contract: (1) Legislation shall have been introduced in or enacted by the Congress of the United States or enacted by the State, or legislation pending in the Congress of the United States shall have been amended, or legislation shall have been recommended to the Congress of the United States or otherwise endorsed for passage (by press release, other form of notice, or otherwise), by the President of the United States, the Treasury Department of the United States, the Internal Revenue Service, or the Chairman or ranking minority member of the Committee on Finance of the United States Senate or the Committee on Ways and Means of the United States House of Representatives, or legislation shall have been proposed for consideration by either such Committee by any member thereof or presented as an option for consideration by either such Committee by the staff of such Committee or by the staff of the Joint Committee on Taxation of the Congress of the United States, or legislation shall have been favorably reported for passage to either House of Congress of the United States by a Committee of such House to which such legislation has been referred for consideration, or a decision shall have been rendered by a court of the United States or the State, including the Tax Court of the United States, or a ruling shall have been made or a regulation shall have been proposed or made or a press release or other form of notice shall have been issued by the Treasury Department of the United States, or the lntemal Revenue Service, or other authority of the United States or the State, with respect to Federal taxation or taxation by the State upon revenues or other income of the general character to be derived by the City or by any similar body, or upon interest on obligations of the general character of the Bonds, which may have the purpose or effect, directly or indirectly, of affecting the tax status of the City, its property or income, its securities (including the Bonds), or the interest thereon, or any tax exemption granted or authorized by legislation of the State; 20498357v2 -6- (2) The declaration of war or engagement in major military hostilities by the United States or the occurrences or any other national emergency or calamity relating to the effective operation of the government of or the financial community in the United States; (3) The declaration of a general banking moratorium by federal, New York, or California authorities, or the ganeml suspension of trading on any national securities exchange; (4) The imposition by the New York Stock Exchange or other national securities exchange, or any governmental authority, of any material restrictions not now in force with respect to the Bonds or obligations of the general character of the Bonds or securities generally, or the material increase of any such restrictions now in force, including those relating to the extension of credit by, or the charge to the net capital requirement of, the Underwriter; (5) Legislation enacted (or resolution passed), or introduced or pending legislation amended in the Congress or recommended for passage by the President of the United States, or an order, decree, or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed), or press release issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, or the Bonds, including any or all underlying arrangements, are not exempt from registration under the Securities Act of 1933, as amended, or that the Resolution of Issuance is not exempt from qualifications under the Trust Indenture Act of 1939, as amended, or that the issuance, offering, or sale of obligations of the general character of the Bonds, or the Bonds, including any or all underlying arrangements, as contemplated hereby or by the Official Statement, otherwise is or would be in violation of the federal securities laws as amended and then in effect; or (6) Any event occurring, or information becoming known which, in the judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Official Statement, or has the effect that the Official Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; (d) At or prior to the Closing Date, the Underwriter shall have received the following documents, in each case satisfactory in form and substance to the Underwriter: (I) Copies of the Financing Documents, each duly executed and delivered by the respective parties thereto; (2) The approving opinion, dated the Closing Date and addressed to the City, of Bond Counsel in substantially the form attached to the Official Statement as Appendix C; (3) The supplemental opinion, dated the Closing Date and addressed to the Underwriter, of Bond Counsel, substantially to the effect that (i) the assessments securing the Bonds have been validly levied by resolution of the City Council of the City adopted on April 28, 2004, after legal proceedings taken in conformity with the Municipal Improvement Act of 1913 and Section 13.08.070 of the Municipal Code of the City and have become liens upon the respective pamels by virtue of the recordation on May 4, 2004, of the assessment diagram and notice of assessment for the Assessment District in the official records of the Kern County Recorder, (ii) the statements contained in the Official Statement on the cover and under the captions "INTRODUCTORY STATEMENT," "THE BONDS," "SPECIAL RISK FACTORS," "ENFORCEABILITY OF REMEDIES," "TAX MATTERS," "APPROVAL OF LEGALITY," and "APPENDIX C -- FORM OF OPINION OF BOND COUNSEL," -7- OR~OINAL insofar as such statements purport to summarize certain provisions of the Financing Documents and Federal and State law, present an accurate summary of such provisions, (iii) the Bonds are exempt from registration under the Securities Act of 1933, as amended, and the Resolution of Issuance is exempt from qualification under the Trust Indenture Act of 1939, as amended, and (iv) the Purchase Contract and the Financing Documents to which the City is a party have been duly authorized, executed, and delivered, or adopted, as applicable, by the City and, assuming due authorization, execution, and delivery by the other parties thereto, constitute legal, valid, and binding agreements of the City enforceable in accordance with their respective terms, subject to laws relating to bankruptcy, insolvency, or other laws affecting the enforcement of creditors' rights generally and the application of equitable principles if equitable remedies are sought; (4) The opinion of the City Attorney, counsel for the City, dated the Closing Date and addressed to the Underwriter, to the effect that, with respect to the issuance of the Bonds, (i) the City was duly organized and is validly existing under the Constitution and laws of the State and the City Charter of the City as a municipality, (ii) the City has full legal right, power, and authority (1) to conduct its afl'airs and to own its properties, and (2) to execute and deliver this Purchase Contract and the Financing Documents to which it is a party, (iii) each of the Resolutions has been duly adopted by the City, is in full force and effect, and, except as expressly otherwise provided, has not been amended, modified, or supplemented, and continues to be a legal, valid, and binding resolution of the City, enforceable in accordance with its terms, (iv) the execution and delivery, or adoption, as applicable, and performance by the City of this Purchase Contract and the Financing Documents to which the City is a party on the terms and conditions thereof have been duly authorized by all necessary action, and, to the best of such counsel's knowledge, without conducting an independent investigation, will not violate or contravene any order or decree of any court, tribunal, governmental authority, bureau, or agency, or violate or cause a default under any mortgage, indenture, contract, or other agreement to which the City is a party or that is binding upon it or any of its property; (v) this Purchase Contract and the Financing Documents to which the City is a party have been duly authorized, executed, and delivered, or adopted, as applicable, by the City and, except as otherwise expressly provided therein, have not been amended, modified, or supplemented, and, assuming due authorization and execution by any other applicable parties thereto, each constitutes a valid and binding obligation of the City, enforceable in accordance with its terms, subject to laws relating to bankruptcy, insolvency, or other laws affecting the enforcement of creditors' rights generally and the application of equitable principles if equitable remedies are sought, (vi) to the best of such counsel's knowledge, after due inquiry, there are no actions, suits, proceedings, inquiries, or investigations, at law or in equity, before or by any court, governmental agency, public board, or body, pending or threatened against the City, for which the City has been served, to restrain or enjoin the issuance of the Bonds, the collection or application of the assessments, or the payment of principal of and interest on the Bonds, or in any way contesting the validity of the Bonds or the other Financing Documents to which the City is a party or this Purchase Contract, (vii) the City has duly authorized the formation of the Assessment District, which is validly existing as an assessment district under the laws of the State, and (viii) to the best of such counsel's knowledge, without conducting an independent investigation, the information contained in the Official Statement (except for the financial statements and other financial, statistical, or engineering data or forecasts, numbers, charts, estimates, projections, assumptions, or expressions of opinion, any information about valuation, appraisals, absorption or environmental matters, Appendices B, C, D, or E included in the Official Statement, or any information about the Depository Trust Company or the book-entry-only system, as to which no view need be expressed) is correct in all material respects and does not contain any untrue or misleading statement ora material fact or omit a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (5) The opinion of Pillsbury Winthrop LLP, Los Angeles, California, Disclosure Counsel ("Disclosure Counsel"), dated the Closing Date and addressed to the City and 20498357v2 ~, Underwriter, to the effect that, based upon their participation in the preparation of the Official Statement and without having undertaken to determine independently the accuracy or completeness of the statements in the Official Statement, such counsel does not believe that, as of the date thereof or the Closing Date, the Official Statement (except for the financial statements and other financial, statistical or engineering data or forecasts, numbers, charts, estimates, projections, assumptions, or expressions of opinion, any information about valuation, appraisals, absorption or environmental matters, Appendices A, B, C, D, or E included in the Official Statement, or any information about the Depository Trust Company or the book-entry-only system, as to which no view need be expressed) contains any untrue statement of material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (6) The opinion of Jones & Beardsley, Bakersfield, California, counsel to C&C California, dated the Closing Date and addressed to the City and the Underwriter, to the effect that, (i) C&C Califomia has been duly incorporated and organized and is validly existing as a corporation, in good standing under the laws of the State, and is authorized by the laws of the State to enter into and perform its obligations under State law, and has full corporate power and authority to own its properties and to conduct its business as presently conducted and to consummate all transactions contemplated by the C&C California Acquisition Agreement and the C&C California Continuing Disclosure Certificate and all other agreements relating thereto to which C&C California is a party; (ii) C&C California has duly authorized all action necessary to be taken by it or on its behalf for (1) the execution and delivery of the C&C California Acquisition Agreement and the C&C California Continuing Disclosure Certificate and (2) the carrying out, giving effect to, and consummation of the transactions contemplated by the C&C California Acquisition Agreement and the C&C California Continuing Disclosure Certificate; (iii) the C&C California Acquisition Agreement and the C&C California Continuing Disclosure Certificate have each been duly and validly authorized, executed, and delivered by C&C Califomia and, except as otherwise expressly provided therein, have not been amended, modified, or supplemented, and, assuming due authorization and execution by any other applicable parties thereto, each of the C&C California Acquisition Agreement and the C&C California Continuing Disclosure Certificate constitutes a valid and binding obligation of C&C California, enforceable in accordance with its terms, subject to laws relating to bankruptcy, insolvency, or other laws affecting the enfomement of creditors' rights generally and the application of equitable principles if equitable remedies are sought; (iv) the execution and delivery by C&C California of the C&C California Acquisition Agreement and the C&C California Continuing Disclosure Certificate and the performance of its obligations thereunder do not and will not result in violation of any provision of, or in default under, C&C California articles of incorporation, bylaws, or any of its other organizational documents; (v) except as described in the Official Statement and except for governmental approvals and permits that are required to be obtained in the ordinary course of development, all actions necessary to be taken by C&C California have been taken, and no additional approval, authorization, consent, or other order of C&C California or any other public board or body is legally required to allow C&C California to enter into the C&C California Acquisition Agreement and the C&C California Continuing Disclosure Certificate and to consummate the transactions contemplated thereby or to complete the construction of the applicable Improvements (as defined and described in the Official Statement) to be constructed by C&C California; (vi) to the best of such counsel's knowledge, based solely upon a litigation search performed by or at the request of such counsel in State and federal courts deemed appropriate by such counsel, there are no legal or governmental actions, proceedings, inquiries, or investigations pending or threatened by governmental authorities or to which C&C California is a party or of which any property of C&C California is subject, which, if determined adversely to C&C California, would individually or in the aggregate (1) have a material adverse effect on the financial position or results of operations of C&C California, (2) otherwise materially or adversely affect the ability of C&C California to comply with its obligations under the C&C California Acquisition Agreement or the C&C California Continuing Disclosure Certificate, or materially and adversely affect the transactions contemplated by the Official Statement to be engaged in by C&C Califomia, or 20498357v2 (3) otherwise materially or adversely affect the ability of C&C California to complete the construction of the applicable Improvements; and (vii) based upon such counsel's experience as counsel for C&C California and on such counsel's review of and participation in the drafting of the Official Statement, the statements relating to C&C California, the property owned by C&C California, and the development of the land by C&C California within the Assessment District contained in the Official Statement under the captions "INTRODUCTORY STATEMENT," "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS," "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT," "SPECIAL RISK FACTORS," and "CONTINUING DISCLOSURE" (excluding therefrom any financial and statistical data included therein) do not contain any untrue statement ora material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the cimumstances under which they were made, not misleading; (7) The opinion ofGreg D. Judkins Esq., San Diego, California, counsel to Fairway Oaks South, dated the Closing Date and addressed to the City and the Underwriter, to the effect that, (i) Fairway Oaks South is a duly formed limited partnership and is existing in good standing under the laws of the State, and is authorized by the laws of the State to enter into and perform its obligations under State law, and has full limited partnership power and authority to own its properties and to conduct its business as presently conducted and to consummate all transactions contemplated by the Fairway Oaks South Acquisition Agreement and all other agreements relating thereto to which Fairway Oaks South is a party; (ii) Fairway Oaks South has duly authorized all action necessary to be taken by it or on its behalf for (1) the execution and delivery of the Fairway Oaks South Acquisition Agreement and (2) the carrying out, giving effect to, and consummation of the transactions contemplated by the Fairway Oaks South Acquisition Agreement; (iii) the Fairway Oaks South Acquisition Agreement have each been duly and validly authorized, executed, and delivered by Fairway Oaks South and, except as otherwise expressly provided therein, have not been amended, modified, or supplemented, and, assuming due authorization and execution by any other applicable parties thereto, each of the Fairway Oaks South Acquisition Agreement constitutes a valid and binding obligation of Fairway Oaks South, enforceable in accordance with its terms, subject to laws relating to bankruptcy, insolvency, or other laws affecting the enforcement of creditors' rights generally and the application of equitable principles if equitable remedies are sought; (iv) the execution and delivery by Fairway Oaks South of the Fairway Oaks South Acquisition Agreement and the performance of its obligations thereunder do not and will not result in violation of any provision of, or in default under, Fairway Oaks South limited partnership agreement, certificate of limited partnership, or any of its other organizational documents; (v) except as described in the Official Statement and except for governmental approvals and permits that are required to be obtained in the ordinary course of development, all actions necessary to be taken by Fairway Oaks South have been taken, and no additional approval, authorization, consent, or other order of Fairway Oaks South or any other public board or body is legally required to allow Fairway Oaks South to enter into the Fairway Oaks South Acquisition Agreement and to consummate the transactions contemplated thereby or to complete the construction of the applicable Improvements (as defined and described in the Official Statement) to be constructed by Fairway Oaks South; (vi) to the best of such counsel's knowledge, based solely upon a litigation search performed by or at the request of such counsel in State and federal courts deemed appropriate by such counsel, there are no legal or governmental actions, proceedings, inquiries, or investigations pending or threatened by governmental authorities or to which Fairway Oaks South is a party or of which any property of Fairway Oaks South is subject, which, if determined adversely to Fairway Oaks South, would individually or in the aggregate (1) have a material adverse effect on the financial position or results of operations of Fairway Oaks South, (2) otherwise materially or adversely affect the ability of Fairway Oaks South to comply with its obligations under the Fairway Oaks South Acquisition Agreement, or materially and adversely affect the transactions contemplated by the Official Statement to be engaged in by Fairway Oaks South, or (3) otherwise materially or adversely affect the ability of Fairway Oaks South to complete the construction of the applicable Improvements; and (vii) based upon such counsel's experience as counsel for Fairway Oaks South and on such counsel's -10- ~ ~Jc~ review of and participation in the drafting of the Official Statement, the statements relating to Fairway Oaks South, the property owned by Fairway Oaks South, and the development of the land by Fairway Oaks South within the Assessment District contained in the Official Statement under the captions "INTRODUCTORY STATEMENT," "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS," "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT," "SPECIAL RISK FACTORS," and "CONTINUING DISCLOSURE" (excluding therefrom any financial and statistical data included therein) do not contain any untrue statement ora material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (8) A certificate, dated the Closing Date, addressed to the City and the Underwriter and signed by an authorized representative of Wilson & Associates (the "Assessment Engineer") in substantially the form attached hereto as Exhibit C; (9) A certificate or certificates, dated the Closing Date, signed by a duly authorized official of the City satisfactory to the Underwriter, in form and substance satisfactory to the Underwriter, to the effect that (i) the representations, warranties, and agreements of the City contained in the Purchase Contract are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date, (ii) no litigation is pending or threatened (1) to restrain or enjoin the execution, sale, or delivery of any of the Bonds, (2) in any way contesting or affecting the validity of the Bonds, the Purchase Contract, or the Financing Documents to which the City is a party, or (3) in any way contesting the existence of powers of the City, and (iii) the information in the Preliminary Official Statement is deemed final by the City as of the date thereof within the meaning of Rule 15c2-12, and no event affecting the City has occurred since the date of the Official Statement which either makes untrue or incorrect in any material respect as of the Closing Date any statement or information contained in the Official Statement or is not reflected in the Official Statement but should be reflected therein in order to make the statements and information therein not misleading in any material respect; (10) A certificate, dated as of the Closing Date, signed by a duly authorized official of the Paying Agent, satisfactory in form and substance to the Underwriter, to the effect that (i) such official is an authorized officer of the Paying Agent, (ii) the Paying Agent has been appointed to serve as Paying Agent for the Bonds under the Resolution of Issuance, (iii) the Paying Agent has full power and authority required to carry out the trust intended under the Resolution of Issuance, (iv) to the best of such officer's knowledge, no litigation is pending or threatened in any way contesting or affecting the existence of powers (including trust powers) of the Paying Agent or the Paying Agent's ability to fulfill its duties created by the Resolution of Issuance, and (v) to the best of such officer's knowledge, the acceptance by the Paying Agent of the duties and obligations of the Paying Agent under the Resolution of Issuance and compliance with the provisions thereof will not conflict with or constitute a breach of or default under any law or administrative regulation to which the Paying Agent is subject; (11 ) A certificate, dated the Closing Date and signed by an authorized officer of the Paying Agent, with respect to the sources and uses of funds deposited under the Resolution of Issuance; (12) A certified copy of the general resolution of the Paying Agent authorizing the execution and delivery of any Financing Documents to which the Paying Agent is a party; (13) A copy of the Official Statement, executed on behalf of the City by an authorized representative of the City; (14) Certified copies of the Resolutions; -11- 20498357v2 (15) A tax certificate, dated the Closing Date, signed by a duly authorized official of the City concerning "no-arbitrage" in form satisfactory to Bond Counsel; (16) A copy of Internal Revenue Service Form 8038-G, executed by an authorized officer of the City; (17) A copy of the Appraisal, and any supplements and amendments thereto (collect'vely, the' Appraisal"), prepared by Launer & Assoc'ates, lnc. (the 'Appraiser"), which Appraisal shall demonstrate, among other things, that the Bonds shall be secured by property having a minimum value-to-lian ratio of 3:1 on each parcel and a minimum value-to-lien ratio of 4:1 for the entire Assessment District, including prior liens and special taxes, if any, and based on the value of the land, the existing improvements, and the improvements to be financed by the Bonds; (18) A certificate, dated the Closing Date, addressed to the City and the Underwriter and signed by an authorized representative of the Appraiser to the effect that (i) the Appraisal attached to the Official Statement as Appendix B fairly and accurately described the market values of the properties in the Assessment District which am subject to the assessment, (ii) the Appraisal is reproduced as part of the Official Statement with the consent of such firm, and (iii) in connection with such firm's participation in the preparation of the Official Statement, such authorized representative has no reason to believe that the material in the Official Statement under the headings "INTRODUCTORY STATEMENT," "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS," "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT," "SPECIAL RISK FACTORS," and "APPENDIX B - APPRAISAL," insofar as such material contained under such captions purports to summarize certain provisions of the Appraisal, as of the Closing Date, contains any untrue statement of material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (19) The respective certificates, each dated the date of this Purchase Contract, addressed to the City and the Underwriter and signed by an authorized representative of each of C&C California and Fairway Oaks South in substantially the form attached hereto as Exhibit B-I and B-~2, as applicable, and the respective bring-down certificates of each of C&C California and Fairway Oaks South, each dated the Closing Date, as to the matters in such certificates; and (20) Such additional legal opinions, certificates, proceedings, instruments, title insurance, other insurance policies or evidences thereof, and other documents as the Underwriter or Bond Counsel may reasonably request to evidence the troth and accuracy, as of the date hereof and as of the Closing Date, of the representations, warranties, and agreements of the City herein and of the statements and information contained in the Official Statement, and the due performance or satisfaction by the Paying Agent and the City at or prior to the Closing of all agreements then to be performed and all conditions then to be satisfied by any of them in connection with the transactions contemplated hereby and by the Financing Documents. If the conditions to the Underwriter's obligations contained in this Purchase Contract are not satisfied or ffthe Underwriter's obl'gations shall be terminated for any reason permitted herein, all obligations of the Underwriter hereunder may be terminated at, or at any time prior to, the Closing Date by written notice to the City. 4. Expenses. All expenses and costs incident to the authorization, execution, delivery, and sale of the Bonds to the Underwriter, including the costs of printing and preparation of the Bonds, the Preliminary 20498357v2 2~ L3 Official Statement, and the Official Statement, the cost of duplicating the Financing Documents, the fees of accountants, consultants, engineers, appraisers, and rating agencies, if any, the initial fee of the Paying Agent and its counsel in connection with the sale of the Bonds, the fees and expenses of Bond Counsel, Disclosure Counsel, and of counsel for the City, and insurance premiums associated with the procurement of title insurance and any other insurance required in the financing shall be paid by the City from moneys deposited with the City by C&C Califomia and Fairway Oaks South and from Bond proceeds specifically authorized for such purpose. The Underwriter shall pay its own out-of-pocket expenses, including travel expenses and expenses to qualify the Bonds for sale under any "blue sky" laws, if such qualification is sought, underwriter's counsel, if any, and federal funds interest expense, if any. The Underwriter shall also pay all fees and expenses incurred from the California Debt and Investment Advisory Commission, the Municipal Securities Rulemaking Board, the National Public Securities Association, the California Public Securities Association, the Depository Trust Company, and CUStP. 5. Notices. Any notice or other communication to be given to the City or the Underwriter under this Purchase Contract may be given by delivering the same in writing to the respective party at the following address: Underwriter: RBC Dain Rauscher lnc. 345 California Street, Suite 2800 San Francisco, CA 94104 Attention: Robert L. Williams, Jr. City: City of Bakersfield 1501 Truxtun Avenue Bakersfield, California 93301 Attention: Finance Director 6. Survival of Representations. The representations of the City set forth in or made pursuant to this Purchase Contract shall not be deemed to have been discharged, satisfied, or otherwise rendered void by reason of the Closing or termination of this Purchase Contract and regardless of any investigations or statements as to the results thereof made by or on behalf of the Underwriter and regardless of delivery of and payment for the Bonds. 7. EffEctiveness; Applicable Law. This Purchase Contract shall become effective and binding upon the respective parties hereto as of the date first above written upon the execution of the acceptance by a duly authorized officer of the City and shall be valid and enforceable as of the time of such acceptance. This Pumhase Contract shall be governed by the laws of the State of California. 8. Counterparts. This Purchase Contract may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Very truly yours, 20498357v2 -13- RBC DAIN RAUSCHER INC. By: Robert L. Williams, Jr. Managing Director .ACCEPTED: CITY OF BAKERSFIELD By: Finance Director APPROVED AS TO FORM: PILLSBURY WINTHROP LLP By: Attorney 20498357v2 -14- SCHEDULEI MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, AND INITIAL OFFERING PRICES $ Serial Bonds Maturity Interest Initial (September 2) Amount Rate Offering Price $ ,000 % Term Bonds Due September 2, 20 , Price 100.00% The Term Bonds maturing on September 2, 20__, are subject to mandatory advance redemption in part prior to their stated maturity, as authorized under the Resolution of Issuance. The redemption shall occur on September 2 in the following years and in the following principal amounts, together with interest accrued on such amounts to the date fixed for redemption, and shall be without premium: Year Principal Amount 20 $ ,000 20 ,000 20 __,000 20 ___,000 20__(m~urity) __,000 lfthe Bonds are redeemed in part, as described in the Official Statement under the heading "THE BONDS - Redemption - Optional Redemption and Prepayment of Bonds," the principal of the Bonds to be redeemed on each of the payment dates set forth above shall be modified by deducting the principal amount of the Bonds redeemed in $5,000 increments as proportionately as practicable from the principal amounts set forth above. 20498357v2 1-1 Any Bond or portion thereof in the amount of $5,000 or any integral thereof outstanding may be called for redemption prior to maturity on any March 2 or September 2 upon payment of the principal, plus accrued interest to the date of redemption, together with a redemption premium (calculated as a percentage of the par value of Bonds being redeemed) as set forth in the following table: [REVISE TABLE BELOW PER RESOLUTION OF ISSUANCE] Redemption Redemption Dates (March 2 and September 2) Premium September 2, 2004 through September 2, 2014 3.0% March 2, 2015 and September 2, 2015 2.0% March 2, 2016 and September 2, 2016 1.0% March 2, 2017 and thereafter 0.0% 20498357v2 1-2 EXHIBIT A "DEEMED FINAL LETTER" FOR PRELIMINARY OFFICIAL STATEMENT ,2004 RBC Dain Rauscher Inc. 345 California Street, Suite 2800 San Francisco~ CA 94104 Ladies and Gentlemen: With respect to the proposed sale by the City of Bakersfield (the "City") of its Assessment District No. 03-3 (Seven Oaks West III/Brighton Place Il/Fairway Oaks South), Limited Obligation Improvement Bonds (the "Bonds"), the City has delivered to you a Preliminary Official Statement, dated the date hereof(the "Preliminary Official Statement"). The City, for purposes of compliance with Rule 15c2-12 of the Securities Exchange Commission, deems the Preliminary Official Statement to be final as of its date, except for the omission of no more than the following information; the offering prices, interest rates, selling compensation, aggregate principal amount, principal amount per maturity, dates and amounts of mandatory sinking fund payments, delivery dates, ratings, and identity of the purchasers and any other terms of the Bonds relating to such matters and any other information permitted to be omitted by said Rule 15c2-12. CITY OF BAKERSFIELD By: Finance Director 20498357v2 A-1 EXHIBIT B-1 CERTIFICATE OF C&C CALIFORNIA City of Bakersfield 1501 Truxtun Avenue Bakersfield, California 93301 RBC Dain Rauscher Inc. 345 California Street, Suite 2800 San Francisco, CA 94104 Ladies and Gentlemen: Pursuant to Section 3(d)(19) of the Bond Purchase Contract dated ,2004 (the "Purchase Contract"), by and between RBC Dain Rauscher Inc, as Underwriter (the "Underwriter"), and the City of Bakersfield (the "City"), the undersigned hereby certifies as of the date hereof as follows (all capitalized terms used but not otherwise defined herein shall have the respective meanings given to such terms in the Purchase Contract): 1. The undersigned is, and at all pertinent times mentioned herein has been, the authorized representative of Castle & Cooke California, Inc., a California corporation ("C&C California"), and is authorized to make this certification on behalf of C&C California. 2. C&C California is a duly incorporated, organized, and validly existing corporation in good standing under the laws of the State of California. 3. C&C California has full corporate power and authority to execute, deliver, and perform its obligations under the C&C California Acquisition Agreement and the C&C California Continuing Disclosure Certificate, and each of the C&C California Acquisition Agreement and the C&C California Continuing Disclosure Certificate has been, or, on or before the Closing Date, will have been, duly authorized, executed, and delivered by C&C California and, assuming due authorization, execution, and delivery by the other parties thereto, as applicable, each constitutes a legal, valid, and binding agreement of C&C California, enforceable in accordance with its respective terms, subject to laws relating to bankruptcy, insolvency, or other laws affecting the enforcement of creditors' rights generally and the application of equitable principles if equitable remedies are sought. 4. The undersigned has reviewed the contents of the Preliminary Official Statement and will review the contents of the Official Statement. The undersigned has reviewed the contents of this Certificate and has conferred with our counsel, for the purpose of discussing the meaning of its contents. 5. All information concerning C&C California, the property owned by C&C California, and the development of the land by C&C California within the Assessment District submitted by, or on behalf of, C&C California to the Underwriter, the City, or Disclosure Counsel in connection with the preparation of the Preliminary Official Statement and the Official Statement, to the Appraiser in 20498357v2 B-1-1 connection with preparation of the Appraisal, and to the Assessment Engineer in connection with the Engineer's Report (as defined in the Official Statement), was, to the best of my knowledge, true, complete, and correct. 6. The statements relating to C&C California, the property owned by C&C California, and the development of the land by C&C California within the Assessment District contained in the Official Statement under the captions "INTRODUCTORY STATEMENT," "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS," "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT," "SPECIAL RISK FACTORS," and "CONTINUING DISCLOSURE" do not contain any untrue statement ora material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 7. No proceedings are pending or, to the best knowledge of the undersigned, after due inquiry, threatened in which C&C California may be adjudicated as bankrupt or discharged from any and all of its debts or obligations or granted an extension of time to pay its debts or a reorganization or readjustment o f the debts. 8. No action, suit, proceeding, inquiry, or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, is pending or, to the best knowledge of C&C California, threatened in any way seeking to restrain or to enjoin the development of the property within the Assessment District. 9. Except as disclosed in the Official Statement, to the best knowledge of C&C California, no other public debt secured by a tax or assessment on the land in the Assessment District is in the process of being authorized and no assessment districts or community facilities districts have been or are in the process of being formed which include any portion of the land in the Assessment District. 10. Except as disclosed in writing to the Underwriter and the City, to the best knowledge of C&C California, based upon due inquiry, there are no events of monetary default or events which with the passage of time would constitute a monetary default under any loan or similar credit arrangement to which C&C California or any of its affiliates is a party or to which any of its properties is subject. I 1. None of the property owned by C&C California within the Assessment District or elsewhere is delinquent in the payment of any taxes or assessments. C&C California has never been late on making assessment payments in other assessment districts, defaulted on any bond issue, or lost any property to foreclosure as a result of not paying assessments. 12. C&C California agrees to indemnify and hold harmless, to the extent permitted by law, the City and its officials, employees, and agents (each such entity and person being hereinafter called an "Indemnified Party"), against any and all losses, claims, damages, or liabilities, joint or several, to which such Indemnified Party may become subject under any statute or at law or in equity or otherwise, and shall reimburse any such Indemnified Party for any legal or other expenses incurred by it in connection with investigating any claims against it and defending any actions, insofar as such losses, claims, damages, liabilities, or actions arise out of or are based upon any untrue statement or alleged untrue statement ora material fact or the omission or alleged omission to state a material fact necessary to make the statements in the Official Statement or in any amendment or supplement to such information not misleading, but only to the extent that such material fact relates to C&C California, the property owned by C&C California, or the development of the land owned by C&C California within the Assessment B- -2 District, under the captions "INTRODUCTORY STATEMENT," "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS," "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT," "SPECIAL R1SK FACTORS," and "CONTINUING DISCLOSURE" in the Official Statement or in any amendment or supplement to such information. This indemnity provision shall not be construed as a limitation on any other liability which C&C California may otherwise have to any Indemnified Party, provided that in no event shall C&C California be obligated for double indemnification. Promptly after receipt by any Indemnified Party of notice of any complaint or the commencement of any action or proceeding in connection with any matter for which C&C California is obligated to indemnify an Indemnified Party as set forth in the preceding paragraph, the Indemnified Party shall notify C&C California in writing of such complaint or of the commencement of such action or proceeding and, ifC&C California so elects or is requested by the Indemnified Party, C&C California shall assume the defense of such action or proceeding, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of the fees and disbursements of such counsel, in which event C&C California shall not be obligated to pay the reasonable fees and disbursements of separate counsel for the Indemnified Party in such action. In the event, however, that an Indemnified Party's legal counsel has determined that defenses may be available to an Indemnified Party that are different from or in addition to those available to C&C California or that there is or could reasonably be expected to be a conflict of interest by reason of C&C California and an Indemnified Party having common counsel in any action or proceeding, then the Indemnified Party may employ separate counsel to represent or defend it in any such action or proceeding in which such Indemnified Party may become involved or is named as defendant and C&C California shall pay the reasonable fees and disbursements of such separate counsel. 13. C&C California is fully qualified by all necessary permits, licenses, and certifications to conduct its business as it is presently being conducted and, except as may be required under blue sky or other securities laws of any state, and except for such licenses, certificates, approvals, variances, and permits which may be necessary for the construction and operation of the Improvements, there is no consent, approval, authorization, or other order of, or filing with, or certification by, any regulatory authority having jurisdiction over C&C California except as such have been obtained and are in full force and effect, for the consummation by C&C California of the actions contemplated to be consummated by C&C California under the Official Statement. 14. To the best knowledge of the undersigned, after due inquiry, C&C California is not in violation of any provision of, or in default under, its articles of incorporation, bylaws, or any material agreement, lease, or other contract, the violation of or default under which would materially and adversely affect the business, properties, assets, liabilities, or conditions (financial or other) of C&C California. 15. C&C California has never failed to timely file any annual disclosure report with the appropriate information repositories as required under Securities and Exchange Commission Rule 15c2-12 or any related continuing disclosure obligation. 16. The loans, lines of credit and/or other funding sources described in the Official Statement under the heading "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT Development and Financing Plans The C&C California Financing Plan," when added to the Bond proceeds expected to be made available to C&C California following the issuance of Bonds and its anticipated equity contributions, will be sufficient to pay the total 20498357v2 B-I-3 estimated cost of its planned developments in the Seven Oaks West II1 Area and the Brighton Place 11 Area of the Assessment District. 17. The execution and delivery by C&C California of the C&C California Acquisition Agreement and the C&C California Continuing Disclosure Certificate and the performance of its respective obligations thereunder do not and will not result in violation of any provision of, or in default under, C&C California's articles of incorporation, bylaws, or any material agreement, lease, or other contract to which C&C California is a party or by which it or its properties are bound. Dated: ,2004 CASTLE & COOKE CALIFORNIA, INC., a California corporation By: Name: Title: 20498357v2 B-I-4 EXHIBIT B-2 CERTIFICATE OF FAIRWAY OAKS SOUTH City of Bakersfield 1501 Truxtun Avenue Bakersfield, California 93301 RBC Dain Rauscher lnc. 345 California Street, Suite 2800 San Francisco, CA 94104 Ladies and Gentlemen: Pursuant to Section 3(d)(19) of the Bond Purchase Contract dated ,2004 (the "Purchase Contract"), by and between RBC Dain Rauscher lnc., as Underwriter (the "Underwriter"), and the City of Bakersfield (the "City"), the undersigned hereby certifies as of the date hereof as follows (all capitalized terms used but not otherwise defined herein shall have the respective meanings given to such terms in the Purchase Contract): I. The undersigned is, and at all pertinent times mentioned herein has been, the authorized representative of Fairway Oaks South, LP, a California limited partnership ("Fairway Oaks South"), and is authorized to make this certification on behalf of Fairway Oaks South. 2. Fairway Oaks South is a duly formed limited partnership and is existing in good standing under the laws of the State of Califomia. 3. Fairway Oaks South has full limited partnership power and authority to execute, deliver, and perform its obligations under the Fairway Oaks South Acquisition Agreement, and the Fairway Oaks South Acquisition Agreement has been, or, on or before the Closing Date, will have been, duly authorized, executed, and delivered by Fairway Oaks South and, assuming due authorization, execution, and delivery by the other parties thereto, as applicable, each constitutes a legal, valid, and binding agreement of Fairway Oaks South, enforceable in accordance with its respective terms, subject to laws relating to bankruptcy, insolvency, or other laws affecting the enforcement of creditors' rights generally and the application of equitable principles if equitable remedies are sought. 4. The undersigned has reviewed the contents of the Preliminary Official Statement and will review the contents of the Official Statement. The undersigned has reviewed the contents of this Certificate and has conferred with our counsel, for the purpose of discussing the meaning of its contents. 5. All information concerning Fairway Oaks South, the property owned by Fairway Oaks South, and the development of the land by Fairway Oaks South within the Assessment District submWted by, or on behalf of, Fairway Oaks South to the Underwriter, the City, or Disclosure Counsel in connection with the preparation of the Preliminary Official Statement and the Official Statement, to the Appraiser in connection with preparation of the Appraisal, and to the Assessment Engineer in connection B-2-1 .2~' ?' 'r~'c%9o~'~ 20498357v2 t~ with the Engineer's Report (as defined in the Official Statement), was, to the best of my knowledge, true, complete, and correct. 6. The statements relating to Fairway Oaks South, the property owned by Fairway Oaks South, and the development of the land by Fairway Oaks South within the Assessment District contained in the Official Statement under the captions "INTRODUCTORY STATEMENT," "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS," "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT,' "SPECIAL RISK FACTORS," and "CONTINUING DISCLOSURE" do not contain any untrue statement ora material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 7. No proceedings are pending or, to the best knowledge of the undersigned, after due inquiry, threatened in which Fairway Oaks South may be adjudicated as bankrupt or discharged from any and all of its debts or obligations or granted an extension of time to pay its debts or a reorganization or readjustment of the debts. 8. No action, suit, proceeding, inquiry, or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, is pending or, to the best knowledge of Fairway Oaks South, threatened in any way seeking to restrain or to enjoin the development of the property within the Assessment District. 9. Except as disclosed in the Official Statement, to the best knowledge of Fairway Oaks South, no other public debt secured by a tax or assessment on the land in the Assessment District is in the process of being authorized and no assessment districts or community facilities districts have been or are in the process of being formed which include any portion of the land in the Assessment District. 10. Except as disclosed in writing to the Underwriter and the City, to the best knowledge of Fairway Oaks South, based upon due inquiry, there are no events of monetary default or events which with the passage of time would constitute a monetary default under any loan or similar credit arrangement to which Fairway Oaks South or any of its affiliates is a party or to which any of its properties is subject. I I. None of the property owned by Fairway Oaks South within the Assessment District or elsewhere is delinquent in the payment of any taxes or assessments. Fairway Oaks South has never been late on making assessment payments in other assessment districts, defaulted on any bond issue, or lost any property to foreclosure as a result of not paying assessments. 12. Fairway Oaks South agrees to indemnify and hold harmless, to the extent permitted by law, the City and its officials, employees, and agents (each such entity and person being hereinafter called an "Indemnified Party"), against any and all losses, claims, damages, or liabilities, joint or several, to which such Indemnified Party may become subject under any statute or at law or in equity or otherwise, and shall reimburse any such Indemnified Party for any legal or other expenses incurred by it in connection with investigating any claims against it and defending any actions, insofar as such losses, claims, damages, liabilities, or actions arise out of or are based upon any untrue statement or alleged untrue statement ora material fact or the omission or alleged omission to state a material fact necessary to make the statements in the Official Statement or in any amendment or supplement to such information not misleading, but only to the extent that such material fact relates to Fairway Oaks South, the property owned by Fairway Oaks South, or the development of the land owned by Fairway Oaks South within the Assessment District, under the captions "INTRODUCTORY STATEMENT," "THE 20498357v2 B-2-2 ASSESSMENT DISTRICT AND THE IMPROVEMENTS," "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT," "SPECIAL RISK FACTORS," and "CONTINUING DISCLOSURE" in the Official Statement or in any amendment or supplement to such information. This indemnity provision shall not be construed as a limitation on any other liability which Fairway Oaks South may otherwise have to any Indemnified Party, provided that in no event shall Fairway Oaks South be obligated for double indemnification. Promptly after receipt by any Indemnified Party of notice of any complaint or the commencement of any action or proceeding in connection with any matter for which Fairway Oaks South is obligated to indemnify an Indemnified Party as set forth in the preceding paragraph, the Indemnified Party shall notify Fairway Oaks South in writing of such complaint or of the commencement of such action or proceeding and, if Fairway Oaks South so elects or is requested by the Indemnified Party, Fairway Oaks South shall assume the defense of such action or proceeding, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of the fees and disbursements of such counsel, in which event Fairway Oaks South shall not be obligated to pay the reasonable fees and disbursements of separate counsel for the Indemnified Party in such action. In the event, however, that an Indemnified Party's legal counsel has determined that defenses may be available to an Indemnified Party that are different from or in addition to those available to Fairway Oaks South or that there is or could reasonably be expected to be a conflict of interest by reason of Fairway Oaks South and an Indemnified Party having common counsel in any action or proceeding, then the Indemnified Party may employ separate counsel to represent or defend it in any such action or proceeding in which such Indemnified Party may become involved or is named as defendant and Fairway Oaks South shall pay the reasonable fees and disbursements of such separate counsel. 13. Fairway Oaks South is fully qualified by all necessary permits, licenses, and certifications to conduct its business as it is presently being conducted and, except as may be required under blue sky or other securities laws of any state, and except for such licenses, certificates, approvals, variances, and permits which may be necessary for the construction and operation of the Improvements, them is no consent, approval, authorization, or other order of, or filing with, or certification by, any regulatory authority having jurisdiction over Fairway Oaks South except as such have been obtained and are in full fome and effect, for the consummation by Fairway Oaks South of the actions contemplated to be consummated by Fairway Oaks South under the Official Statement. 14. To the best knowledge of the undersigned, after due inquiry, Fairway Oaks South is not in violation of any provision of, or in default under, its articles of incorporation, bylaws, or any material agreement, lease, or other contract, the violation of or default under which would materially and adversely affect the business, properties, assets, liabilities, or conditions (financial or other) of Fairway Oaks South. 15. Fairway Oaks South has never failed to timely file any annual disclosure report with the appropriate information repositories as required under Securities and Exchange Commission Rule 15c2-12 or any related continuing disclosure obligation. 16. The loans, lines of credit and/or other funding sources described in the Official Statement under the heading "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT- Development and Financing Plans The Fairway Oaks South Financing Plan," when added to the Bond proceeds expected to be made available to Fairway Oaks South following the issuance of Bonds and its anticipated equity contributions, will be sufficient to pay the total estimated cost of its planned developments in the Fairway Oaks South Area of the Assessment District. 20498357v2 B-2-3 17. The execution and delivery by Fairway Oaks South of the Fairway Oaks South Acquisition Agreement and the performance of its respective obligations thereunder do not and will not result in violation of any provision of, or in default under, Fairway Oaks South's limited partnership agreement, certificate of limited partnership, or any material agreement, lease, or other contract to which Fairway Oaks South is a party or by which it or its properties are bound. Dated: ,2004 FAIRWAY OAKS SOUTH, LP, a Califomia limited partnership By: Name: Title: 20498357v2 B-2-4 OR!QINAL EXHIBIT C CERTIFICATE OF WILSON & ASSOCIATES [Closing Date] City of Bakersfield 1501 Truxtun Avenue Bakersfield, California 93301 RBC Dain Rauscher Inc. 345 California Street, Suite 2800 San Francisco, CA 94104 Re: City of Bakersfield Assessment District No. 03-3 (Seven Oaks West Ill/Brighton Place Il/Fairway Oaks South) Ladies and Gentlemen: We have acted as the Assessment Engineer in connection with the [$ PAR AMOUNT] aggregate principal amount of City of Bakersfield, Assessment District No. 03 -3 (Seven Oaks West Ill/Brighton Place Il/Fairway Oaks South), Limited Obligation Improvement Bonds (the "Bonds"). In connection with the purchase and sale of the Bonds, pursuant to a Bond Purchase Contract dated ,2004 (the "Purchase Contract"), by and between RBC Dain Rauscher Inc., as Underwriter, and the City of Bakersfield, California, we hereby certify that as of this date the statements and information contained in the Official Statement dated ,2004, under the captions "INTRODUCTORY STATEMENT," "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS," and "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT" and in "APPENDIX D - ASSESSMENT DIAGRAM" and "APPENDIX E - ASSESSMENT ROLL AND VALUE-TO-LIEN DATA" to the Official Statement, insofar as such statements and information purport to summarize certain provisions of the Engineer's Report prepared by our firm with respect to Assessment District No. 03-3 (Seven Oaks West Ill/Brighton Place Il/Fairway Oaks South), do not contain any untrue statement ora material fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading. Further, in the opinion of the undersigned, the assessment, as set forth in such Engineer's Report, has been spread in conformance with the requirements of the Municipal Improvement Act of 1913 (Division 12 of the California Streets and Highways Code) and City of Bakersfield Municipal Code Section 13.08.070 to each separate lot, piece, parcel, or subdivision of lands within Assessment District No. 03-3 (Seven Oaks West Ill/Brighton Place Il/Fairway Oaks South) and, accordingly, the assessment is fair and equitable. Sincerely, WILSON & ASSOCIATES By: Name: Title: 2(,~98357v2 C-1