OFFICIAL STATEMENT DATED MAY 21, 2008

Transcription

1 OFFICIAL STATEMENT DATED MAY 21, 2008 NEW ISSUE - BOOK-ENTRY ONLY BANK QUALIFIED NOT RATED In the opinion of Jack Nelson Jones Fink Jiles & Gregory, P.A., special tax counsel to Depositor, under existing statutes, regulations, rulings and court decisions, and assuming, among other matters, compliance with certain covenants, the amount of each Rental Payment designated as and comprising interest as set forth on Exhibit 1 to Leasing Schedule No. 001 of the Master Lease Purchase Agreement (as shown in Appendix D, hereto) received by the registered Owners of the Certificates of Participation: (a) is not includable in gross income of such recipients for federal income tax purposes; (b) is not an item of tax preference includable in alternative minimum taxable income for purposes of the federal alternative minimum tax applicable to all tax payers; and (c) is includable in adjusted current earnings of corporations in determining alternative minimum taxable income for purposes of the federal alternative minimum tax imposed on corporations. (See, FEDERAL INCOME TAX CONSIDERATIONS, herein). Fuller & Willingham, counsel to Lessee, has issued an opinion stating that the Master Lease Purchase Agreement and Leasing Schedule No. 001 thereunder were lawfully authorized, executed and delivered. Lessee has designated Leasing Schedule No. 001 of the Master Lease Purchase Agreement as a qualified tax exempt obligation within the meaning of Section 265(b) of the Internal Revenue Code of 1986, as amended, and has certified that the reasonably anticipated amount of qualified tax exempt obligations to be issued by the Lessee and its subordinate entities for the current calendar year will not exceed $10,000,000. CERTIFICATES OF PARTICIPATION Totaling $9,655,000 in Principal Amount SERIES 2008 Representing Fractional, Undivided Interests In CULLMAN COUNTY BOARD OF EDUCATION (Leasing Schedule No. 001 of Master Lease Purchase Agreement dated as of May 15, 2008) DATED: May 15, 2008 Due: As shown on inside cover page The Certificates of Participation ( Certificates of Participation ), dated May 15, 2008, evidence the right to receive specific future payments of interest and principal derived from principal and interest payments (the Rental Payments ) to be made by the Cullman County Board of Education (the Lessee ) pursuant to Leasing Schedule No. 001 entered under that certain Master Lease Purchase Agreement (the Master Lease Purchase Agreement ) which was executed between Lessee and First Security Leasing, Inc. (the Lessor ) as of May 15, 2008 (Leasing Schedule No. 001 and the Master Lease Purchase Agreement as incorporated therein are herein referred to collectively as Leasing Schedule No. 001 ). Simultaneously with the delivery of the Certificates of Participation, Leasing Schedule No. 001 will be irrevocably deposited by Crews & Associates, Inc. (the Depositor ) with First Security Bank, Searcy, Arkansas, as the custodian (the Custodian ) pursuant to the Custodial Agreement dated as of May 15, 2008, to be held on behalf of the Owners (defined below) of the Certificates of Participation. The Certificates of Participation are NOT a general obligation of the Lessee, but payable solely from the Rental Payments made under Leasing Schedule No. 001 and from other funds held by Custodian under the Custodial Agreement. The Certificates of Participation will be book-entry-only and will be registered in the name of Cede & Co. as registered owner and nominee of The Depository Trust Company, New York, New York, and are issuable in minimum denominations of $5,000, or such other denominations reflected on the Maturity Schedule. The Certificates of Participation are being offered in the face amounts, at the prices and are payable on the dates set forth below: SEE MATURITY SCHEDULE ON INSIDE FRONT COVER Rental Payments will be made to Custodian as the nominal holder of Leasing Schedule No. 001 beginning on November 15, 2008, and semi-annually thereafter on each May 15 and November 15 until the final payment date which will occur on May 15, 2029 (the Rental Payment Dates ). Persons in whose name the Certificates of Participation are registered (the Owners ) on the register maintained by Custodian (the Certificate of Participation Register ) will be sent payments attributable to the Rental Payments on Leasing Schedule No. 001 semi-annually on each June 1 and December 1, commencing December 1, 2008 (the Certificates of Participation Payment Dates ). (See, CERTIFICATES OF PARTICIPATION, Payments on Certificates of Participation, herein). Annual Appropriation Risk: Pursuant to the express terms of Leasing Schedule No. 001, Lessee reserves the right to terminate Leasing Schedule No. 001 and its ongoing obligation to make further Rental Payments thereunder, without penalty, at the end of any fiscal year period by giving notice to Lessor. If Lessee fails to receive or make an appropriation prior to a fiscal period of Lessee for the Rental Payments scheduled in such fiscal period, Lessor may terminate Leasing Schedule No (See, RISK FACTORS, Renewal and Non-Appropriation, herein). The Certificates of Participation are expected to be issued and delivered on or about May 28, 2008, in New York, New York.

2 MATURITY SCHEDULE CERTIFICATES OF PARTICIPATION Totaling $9,655,000 in Principal Amount SERIES 2008 Representing Fractional, Undivided Interests In CULLMAN COUNTY BOARD OF EDUCATION (Leasing Schedule No. 001 of Master Lease Purchase Agreement dated as of May 15, 2008) PRICE YIELD $2,140, % Term Certificate of Participation due June 1, % 3.750% $400, % Term Certificate of Participation due June 1, % 4.100% $420, % Term Certificate of Participation due June 1, % 4.150% $435, % Term Certificate of Participation due June 1, % 4.200% $455, % Term Certificate of Participation due June 1, % 4.250% $470, % Term Certificate of Participation due June 1, % 4.300% $490, % Term Certificate of Participation due June 1, % 4.400% $510, % Term Certificate of Participation due June 1, % 4.550% $535, % Term Certificate of Participation due June 1, % 4.700% $560, % Term Certificate of Participation due June 1, % 4.800% $590, % Term Certificate of Participation due June 1, % 4.900% $2,650, % Term Certificate of Participation due June 1, % 5.100% Plus accrued Interest from May 15, 2008 to May 28, 2008

3 In accordance with the provisions of Section 265(b)(3) of the Internal Revenue Code, Lessee has designated the obligations payable under Leasing Schedule No. 001 as qualified tax exempt obligations in that the obligations do not constitute private activity bonds under the Internal Revenue Code and the reasonably anticipated amount of qualified tax exempt obligations to be issued by Lessee and its subordinate entities for the current calendar year will not exceed $10,000,000. The Certificates of Participation are being offered subject to, among other things, the deposit of Leasing Schedule No. 001 under the Custodial Agreement that is expected to occur simultaneously with the delivery of the Certificates of Participation. The Certificates of Participation are offered when, as and if delivered at The Depository Trust Company, New York, New York, on or about May 28, THE CERTIFICATES OF PARTICIPATION OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT ), IN RELIANCE ON CERTAIN EXEMPTIONS AVAILABLE UNDER THE ACT. THIS OFFICIAL STATEMENT AND THE CERTIFICATES OF PARTICIPATION OFFERED HEREBY HAVE NOT BEEN REVIEWED, APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE ACCURACY OR ADEQUACY OF THE INFORMATION SET FORTH HEREIN BEEN REVIEWED, APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE S SECURITIES ADMINISTRATOR. INVESTORS SHOULD FAMILIARIZE THEMSELVES WITH THE RISKS OF AN INVESTMENT IN THE CERTIFICATES OF PARTICIPATION. SEE, RISK FACTORS. iii

4 INDEX OF PARTIES LESSEE/OBLIGOR: CULLMAN COUNTY BOARD OF EDUCATION, CULLMAN, ALABAMA LESSOR: FIRST SECURITY LEASING, INC., LITTLE ROCK, ARKANSAS CONTRACTOR/VENDOR: CHEVRON ENERGY SOLUTIONS COMPANY, A Division of Chevron U.S.A., Inc. TYPE OF CONTRACT: MASTER LEASE PURCHASE AGREEMENT AND LEASING SCHEDULE NO. 001 to finance Equipment and Services provided by Contractor/Vendor to Lessee/Obligor under an Energy Services Contract dated April 7, CUSTODIAN: FIRST SECURITY BANK, SEARCY, ARKANSAS ESCROW AGENT: PREMIER BANK OF THE SOUTH CULLMAN, ALABAMA DEPOSITOR: CREWS & ASSOCIATES, INC., LITTLE ROCK, ARKANSAS DEPOSITOR S COUNSEL: JACK NELSON JONES FINK JILES & GREGORY, P.A., LITTLE ROCK, ARKANSAS THE CERTIFICATES OF PARTICIPATION ARE NOT GENERAL OBLIGATIONS OF LESSEE, BUT ARE PAYABLE SOLELY FROM THE RENTAL PAYMENTS DERIVED FROM LEASING SCHEDULE NO iv

5 TABLE OF CONTENTS INTRODUCTION & SUMMARY OF THE OFFERING... 1 SUMMARY OF LEASING SCHEDULE NO THE CERTIFICATES OF PARTICIPATION SUMMARY OF THE CUSTODIAL AGREEMENT ESCROW AGREEMENT NO RATING RISK FACTORS THE CONTRACTOR BOOK-ENTRY ONLY SYSTEM CONTINUING DISCLOSURE AGREEMENT FEDERAL INCOME TAX CONSIDERATIONS LEGAL MATTERS MISCELLANEOUS APPENDIX A: DESCRIPTION OF THE LESSEE AND THE COUNTY... A-1 APPENDIX B: SOURCES AND USES OF FUNDS... B-1 APPENDIX C: CERTIFICATES OF PARTICIPATION PAYMENT SCHEDULE... C-1 APPENDIX D: RENTAL PAYMENT SCHEDULE... D-1 APPENDIX E: AUDITED FINANCIAL STATEMENTS OF LESSEE FOR YEAR ENDING SEPTEMBER 30, E-1 v

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7 CERTIFICATES OF PARTICIPATION Totaling $9,655,000 in Principal Amount SERIES 2008 Representing Fractional, Undivided Interests In CULLMAN COUNTY BOARD OF EDUCATION (Leasing Schedule No. 001 of Master Lease Purchase Agreement dated as of May 15, 2008) INTRODUCTION & SUMMARY OF THE OFFERING The information set forth in this Introduction & Summary of the Offering is qualified in its entirety by the more detailed information provided in this entire Official Statement. Included in this Official Statement are summaries of certain provisions of the Master Lease Purchase Agreement, Leasing Schedule No. 001, the Custodial Agreement and the other documents and instruments attached hereto or incorporated herein by reference. Such summaries do not purport to be complete and reference is hereby made to these documents in their entirety for a complete description of all of the terms and provisions thereof. Copies of such documents are available at the offices of the Custodian. Introduction: This is an offering of Certificates of Participation totaling $9,655,000 in principal amount representing a fractional, undivided interest in the Rental Payments, defined herein, derived from the Cullman County Board of Education Leasing Schedule No. 001 of the Master Lease Purchase Agreement dated as of May 15, 2008 (the Master Lease Purchase Agreement ; Leasing Schedule No. 001 and the Master Lease Purchase Agreement as incorporated therein are herein referred to collectively as Leasing Schedule No. 001 ). Leasing Schedule No. 001 is being executed and delivered to finance a portion of the cost of acquisition and installation of certain energy efficiency improvements at several of the Lessee s campuses. Leasing Schedule No. 001 will finance a portion of this project. It is anticipated that Lessee will issue a Leasing Schedule No. 002 under the Master Lease Purchase Agreement ( Leasing Schedule No. 002 ) in 2009 to finance the balance of the cost of the project. Leasing Schedule No. 001, and thus the Certificates of Participation, will be secured on a pro-rata parity basis with Leasing Schedule No. 002, when and if issued. Lessee. Lessee is the Cullman County Board of Education, Cullman, Alabama. Lessee is a public school district in the State of Alabama with an enrollment of approximately 10,041 students in grades K 12. For a more detailed description of Lessee, see, Description of Lessee and the County attached hereto as Appendix A. Lessor. First Security Leasing, Inc., 521 President Clinton Avenue, Suite 800, Little Rock, Arkansas Lessor has assigned its interest in Leasing Schedule No. 001 to the Depositor. Contractor (Vendor): Chevron Energy Solutions Company, a Division of Chevron, U.S.A., Inc. Depositor: Crews & Associates, Inc., 521 President Clinton Avenue, Suite 800, Little Rock, Arkansas Depositor has been assigned Leasing Schedule No. 001 by the original Lessor, First Security Leasing, Inc. 1

8 The Certificates of Participation. The Certificates of Participation are delivered pursuant to the Custodial Agreement dated as of May 15, 2008 (the Custodial Agreement ), between First Security Bank, Searcy, Arkansas, as the custodian ( Custodian ), and Crews & Associates, Inc., as the depositor ( Depositor ). The Certificates of Participation evidence the right of the holders thereof to receive a specified, fractional, undivided interest in and to Leasing Schedule No Leasing Schedule No. 001 will be irrevocably deposited with and transferred to Custodian at or prior to the closing. Rental Payments under Leasing Schedule No. 001 will be made to Custodian, as the beneficial holder of Leasing Schedule No. 001, on November 15, 2008 and continuing on or about the 15 th day of each May and November thereafter, with a final payment due May 15, 2029 (the Rental Payment Dates ). Pursuant to the Custodial Agreement, persons in whose name the Certificates of Participation are registered (the Owners ) on the register maintained by Custodian (the Certificate of Participation Register ) will be sent payments that have been received by Custodian and that are attributable to the Rental Payments due under Leasing Schedule No. 001 on December 1, 2008 and on each June 1 and December 1 thereafter, until final maturity. (See, CERTIFICATES OF PARTICIPATION, Payments on Certificates of Participation, herein). Owners of the Certificates of Participation will have all the rights and privileges of owners of the underlying Leasing Schedule No. 001 and each Owner, as a real party in interest, will have the right, upon default of Leasing Schedule No. 001, to proceed directly and individually against the Lessee. The Owner will not be required to act in concert with other Owners or the Custodian when pursuing a default of Leasing Schedule No. 001, but may, upon proper indemnification of and agreement with the Custodian. The Depositor will, at or before delivery of the Certificates of Participation, provide an opinion of counsel to this effect, as well as the following factors: (1) each Certificate of Participation represents the entire interest in a discrete, identified interest payment or principal payment on Leasing Schedule No. 001; (2) the Custodian performs only clerical or ministerial services on behalf of the Owners; (3) neither the custodian nor Depositor additionally will guarantee or otherwise enhance the creditworthiness of the underlying Lease or the Certificates of Participation; (4) the Custodian undertakes to notify Owners in the event of a default, and to forward copies of all communications from the Lessee to the Owners; (5) an opinion of counsel is provided indicating that the underlying Lease will not be considered assets of either the Depositor or the Custodian; and (6) other factors are not present, such as remarketing agreements, that would require the investors in the Certificates of Participation to rely upon the Depositor to obtain the benefit of their investment. The Certificates of Participation are NOT a general obligation of the Depositor, but are payable solely from the Rental Payments made under Leasing Schedule No Neither Custodian nor Depositor will be responsible for the payments due on the Certificates of Participation, except that Custodian is obligated to apply all payments received from Lessee in respect of Leasing Schedule No. 001 to the Certificates of Participation without making any deductions. (See, CERTIFICATES OF PARTICIPATION - Payments on Certificates of Participation.) Custodian: First Security Bank, Searcy, Arkansas, is the assignee of Depositor, Crews & Associates, Inc., of Leasing Schedule No. 001, and Custodian to the Owners of the Certificates of Participation subject to the terms of the Custodial Agreement. Depositor acquired Leasing 2

9 Schedule No. 001 from Lessor, First Security Leasing, Inc., before depositing it with Custodian. The street address for delivery to Custodian is First Security Bank, Trust Department, 314 North Spring Street, Searcy, Arkansas Custodial Agreement: The Certificates of Participation are subject to the terms and conditions of the Custodial Agreement dated as of May 15, 2008 (the Custodial Agreement ). Under the Custodial Agreement, Custodian will distribute to each owner its proportionate interest in the Rental Payments as reflected on the Certificate of Participation, respectively. Custodian is under no duty to pursue Lessee upon default or termination. Maturity Date: See inside front cover. Leasing Schedule No Lessee authorized the Master Lease Purchase Agreement and Leasing Schedule No. 001, thereunder, by a resolution of its School Board on May 1, 2008, and designated the obligations payable under Leasing Schedule No. 001 as qualified tax exempt obligations under the Internal Revenue Code. The obligations of Lessee to make Rental Payments and to make any other payments to Lessor (or to any other person) pursuant to the Master Lease Purchase Agreement, Leasing Schedule No. 001 and Leasing Schedule No. 002 (when and if issued) are subject to appropriation of funds that are lawfully available to be applied for such purpose. If sufficient funds have not been appropriated or otherwise lawfully set aside to permit Lessee to satisfy its payment obligations for the Rental Payments scheduled in such fiscal period, the Master Lease Purchase Agreement, Leasing Schedule No. 001, and Leasing Schedule No. 002 (when and if issued) may be terminated without further monetary obligation on the part of the Lessee. Upon any such termination, all of Lessee's rights, title and interest in and its obligation under the Master Lease Purchase Agreement, Leasing Schedule No. 001 and Leasing Schedule No. 002 (when and if issued), and to the Equipment shall terminate effective on the last day of the last fiscal period of Lessee for which such an appropriation was made. Lessee has agreed, to the extent permitted by the law of the State of Alabama, to include in its budget for each fiscal period of the Lessee during the term of the Master Lease Purchase Agreement and Leasing Schedule No. 001 and Leasing Schedule No. 002 (when and if issued) amounts sufficient to permit Lessee to discharge all of its obligations thereunder. In addition, as provided for in Code of Alabama 41-16A-5(a)(8), Lessee has covenanted that in the event Leasing Schedule No. 001 is cancelled or terminated prior to the payment in full of all Rental Payments due under Leasing Schedule No. 001, Lessee shall not acquire property comparable to the Equipment for a period of five (5) years from the date of such early cancellation or termination. If the Lessee terminates Leasing Schedule No. 001 or Leasing Schedule No. 002 under its nonappropriation rights described above, the Master Lease Purchase Agreement, Leasing Schedule No. 001 and Leasing Schedule No. 002 (when and if issued) shall all be deemed to have been nonappropriated and terminated. On or after May 15, 2018, Lessee shall have the option to prepay the Rental Payments owed on Leasing Schedule No. 001 (in whole but not in part) on any Rental Payment Date; provided, Lessee gives proper notice, is not in default, and pays the applicable prepayment option price, which has been calculated so as to redeem the Certificates of Participation at par, plus accrued interest to the date of acceleration and redemption. 3

10 Escrow Agreement: The proceeds of Leasing Schedule No. 001 will be placed in escrow and held pursuant to a Master Escrow Agreement and Escrow Supplement No. 001 thereunder (collectively the Escrow Agreement ) by the Escrow Agent named therein. The Escrow Agreement will extend through the installation period of the ECMs (defined under the following heading) by Contractor. Contractor may request draws from the Escrow Agreement upon installation of specific ECMs, acceptance thereof by Lessee, and approval by Lessor. The Master Escrow Agreement shall govern the financing of the entire project, and Leasing Schedule No. 002 which is anticipated to be executed and delivered in 2009, will be governed by the terms of supplements to the Master Escrow Agreement. The Project. The purpose of Leasing Schedule No. 001 is to provide Lessee with a portion of the financing necessary to facilitate the installation of certain energy cost savings measures ( ECMs ) and the subsequent monitoring and provision of technical support services following installation under that certain Energy Services Contract ( the Contract ) between Lessee and Chevron Energy Solutions Company, a Division of Chevron U.S.A., Inc. (the Contractor ), which consists of a plan to save energy and upgrade Lessee s campus infrastructure. In addition, a portion of the proceeds of Leasing Schedule No. 001 will be deposited into a capitalized interest account established under the terms of the Escrow Agreement and will be used to pay the interest-only Rental Payments due on November 15, 2008 and May 15, The total anticipated cost of the project is approximately $13,855, The proceeds of Leasing Schedule No. 001 are funding the portion of the project which will be completed during calendar year It is anticipated that the Lessee will issue a Leasing Schedule No. 002 under the terms of the Master Lease Purchase Agreement in 2009 to finance the remaining balance of the project. Leasing Schedule No. 001 will be secured on a pro-rata parity basis with Leasing Schedule No In general, an energy services performance contract is an agreement in which an energy company performs a comprehensive energy audit to ascertain where an institution is inefficiently using energy dollars. Contractor was awarded the Contract by Lessee and performed such an energy audit. Following that audit, Contractor made a proposal to Lessee in which it guaranteed certain energy savings, which are spent on improvements to the institution s buildings. [Remainder of page intentionally blank] 4

11 Below is a table detailing the estimated total energy savings and the total Rental Payment amounts (including the anticipated issuance of Leasing Schedule No. 002 in January 2009). The Contractor has projected that by completing the project, the Lessee will experience energy savings over the next twenty (20) years of approximately $23,016,190, operational savings of approximately $1,237,380 and total savings of approximately $24,253,570. Year Energy Savings(1) Operational Savings Total Savings Lease Payments(2) Net Savings ,924 61, ,793 1,156,428 (321,635) 2 803,841 61, ,710 1,156,428 (290,718) 3 835,995 61, ,864 1,156,428 (258,564) 4 869,435 61, ,304 1,156,428 (225,124) 5 904,212 61, ,081 1,156,428 (190,347) 6 940,380 61,869 1,002,249 1,156,428 (154,179) 7 977,995 61,869 1,039,864 1,156,428 (116,564) 8 1,017,115 61,869 1,078,984 1,156,428 (77,444) 9 1,057,800 61,869 1,119,669 1,156,428 (36,759) 10 1,100,112 61,869 1,161,981 1,156,428 5, ,144,116 61,869 1,205,985 1,156,428 49, ,189,881 61,869 1,251,750 1,156,428 95, ,237,476 61,869 1,299,345 1,156, , ,286,975 61,869 1,348,844 1,156, , ,338,454 61,869 1,400,323 1,156, , ,391,992 61,869 1,453,861 1,156, , ,447,672 61,869 1,509,541 1,156, , ,505,579 61,869 1,567,448 1,156, , ,565,802 61,869 1,627,671 1,156, , ,628,434 61,869 1,690,303 1,156, ,875 (1) Does not include estimated savings during construction of $354,257. (2) Estimated Rental Payments for Leasing Schedule No. 001 and Leasing Schedule No Assumes Leasing Schedule No. 002 is issued in January [Remainder of page intentionally blank] 5

12 It is anticipated that the project will take approximately twelve (12) months to complete. The project consists of upgrades to twenty-six (26) campuses served by the Lessee. The Contractor will provide all engineering services, acquisition, labor, management, materials installation and monitoring of all ECMs for the upgrades. The upgrades include lighting conservation measures, energy management systems/programmable thermostats, water conservation measures, window units and heating units to various facilities. The improvements will be made at the following campuses: School Name Square Feet Built Addition/Renovation Cullman Area Career Center 63, Child Development Center 22, Cold Springs Elementary School 46, Cold Springs High School 76, Fairview Elementary School 64,662 Various ( ) Fairview Middle School 2,380 Various ( ) Fairview High School 151,564 Various ( ) Garden City Elementary 14,400 N/A Good Hope Primary School 73, Good Hope Elementary School 55,220 N/A Gym (1995) Good Hope Middle School 28, Good Hope High School 64,895 N/A 2005 Hanceville Elementary School 48, and 2001 Hanceville Middle School 34, Hanceville High School 44,190 N/A Harmony School 58, Holly Pond Elementary School 80,673 N/A Holly Pond High School 68, Parkside School 63,303 N/A Vinemont Elementary School 54, and 2003 Vinemont Middle School 51, Vinemont High School 87, Welti Elementary School 21, , 2000, and 2003 West Point Elementary 72,431 N/A West Point Middle School 73, West Point High School 101,425 N/A Summary of Transaction: By acquiring a Certificate of Participation, the Owner is acquiring a fractional, undivided interest in those Rental Payment revenues related to the equipment installed under the Contract and financed under Leasing Schedule No. 001 that has been assigned to Custodian. The Rental Payments assigned to Custodian represent the total Rental Payments to be made by Lessee under Leasing Schedule No Custodian will pay over to each Certificate of Participation Owner the proportionate interest in the Rental Payments represented by each Certificate of Participation as set forth in the Custodial Agreement. 6

13 Dollar Amount of Rental Payments: See, THE RENTAL PAYMENT SCHEDULE ATTACHED AS APPENDIX D. Denominations of Certificates of Participation: The Certificates of Participation will be book-entry-only and will be registered in the name of Cede & Co. as registered owner and nominee of The Depository Trust Company, New York, New York, and initially be issued in authorized denominations of $5,000, or such other denominations reflected on the Maturity Schedule. Certificates of Participation Payment Dates: The payment date of the Certificates of Participation (the Certificates of Participation Payment Date(s) ) shall begin December 1, 2008, and shall continue on each June 1 and December 1 thereafter until maturity, subject in all respects to Custodian s actual receipt of Rental Payments. See, THE CERTIFICATES OF PARTICIPATION. SUMMARY OF LEASING SCHEDULE NO. 001 The Cullman County Board of Education, Cullman, Alabama, entered into a Master Lease Purchase Agreement with First Security Leasing, Inc., as of May 15, Under the terms of the Master Lease Purchase Agreement, the Lessee has approved and executed its Leasing Schedule No. 001, which provides for the financing of a portion of the ECMs and other deliverables under the Contract between Lessee and Contractor. It is anticipated that Lessee will execute and deliver its Leasing Schedule No. 002 to finance the balance of the project in the year Leasing Schedule No. 001 is secured on a parity basis with Leasing Schedule No. 002, when and if issued. The following is a summary of certain provisions of the Master Lease Purchase Agreement, as incorporated into the terms of Leasing Schedule No The following summary does not purport to be complete. Reference should be made to the complete terms of the Master Lease Purchase Agreement and Leasing Schedule No. 001, copies of which are available from the Custodian or the Depositor. Definition of Certain Terms. The definitions of certain capitalized terms which are used in this section SUMMARY OF LEASING SCHEDULE NO. 001 and not otherwise defined herein, are as follows: Additional Payments means any amounts (other than Rental Payments) required to be paid by Lessee pursuant to the terms of the Master Lease Purchase Agreement. "Costs and Expenses" shall mean, to the extent allowed by law: (i) reasonable attorneys' fees if a Lease is referred for collection to an attorney other than a salaried employee of Lessor or the holder of the Lease; (ii) court costs and disbursements, including such costs in the event of any action necessary to secure possession of the Equipment; and (iii) actual and reasonable out-of-pocket expenses incurred in connection with any repossession or foreclosure. Energy Services Contract means the Energy Services Contract No. CU0896 between Lessee and Vendor, dated effective April 7,

14 "Equipment" means (a) all items of property described in each Equipment Schedule, which constitutes the energy cost savings measures to be acquired pursuant to the Energy Services Contract, (b) any property acquired in substitution, renewal, repair or replacement for or as additions, improvements, accessions and accumulations to any of such equipment, and (c) any accessories, equipment, parts and appurtenances appertaining or attached to any of such equipment or from time to time incorporated therein or installed thereon. Equipment Group means each group of Equipment listed in a single Equipment Schedule. Equipment Schedule means the description of each Equipment Group financed pursuant to a particular Lease, in substantially the form of Exhibit B-1 to the Master Lease Purchase Agreement, which shall be an exhibit to each Leasing Schedule. Lease means, with respect to each Equipment Group, the Master Lease Purchase Agreement and the Leasing Schedule relating thereto, which together shall constitute a separate contract between Lessor and Lessee relating to the lease of such Equipment Group. Lease Term means, with respect to each Leasing Schedule, the period during which the related Lease is in effect as specified in Paragraph 2 of the Master Lease Purchase Agreement. Leasing Schedule means each sequentially numbered schedule executed by Lessor and Lessee with respect to an Equipment Group, in substantially the form attached as Exhibit B to the Master Lease Purchase Agreement Nonappropriation means the failure or refusal of Lessee to Obligate funds to pay the Payments in any fiscal period of Lessee. "Obligate" means that Lessee commits its general funds to a specific purpose. Payments means the Rental Payments and the Additional Payments, collectively. "Prepayment Option Price" means the amount so designated and set forth opposite a Rental Payment Date in a Rental Payment Schedule indicating the amount for which Lessee may prepay the amount owed under a Lease as of such Rental Payment Date after making the Rental Payment due on such Rental Payment Date. "Rental Payment Date" means the date upon which a Rental Payment is due and payable as provided in a Rental Payment Schedule. Rental Payment Schedule means the schedule of Rental Payments, in substantially the form of Exhibit B-2 to the Master Lease Purchase Agreement, which shall be an exhibit to each Leasing Schedule. "Rental Payments" means the amounts (allocable to a principal component and an interest component) payable by Lessee pursuant to the provisions of the Master Lease Purchase Agreement, as set forth in a Rental Payment Schedule. 8

15 Vendor means Chevron Energy Solutions Company, a Division of Chevron U.S.A., Inc., a Pennsylvania corporation. Nonappropriation and Right of Termination. The obligations of Lessee to make Rental Payments and to make any other payments to Lessor (or to any other person) pursuant to the Master Lease Purchase Agreement are subject to appropriation of funds that are lawfully available to be applied for such purpose. The Master Lease Purchase Agreement, and each Lease entered thereunder, shall terminate without further monetary obligation on the part of the Lessee at the close of any fiscal period of Lessee in the event sufficient funds have not been appropriated or otherwise lawfully set aside to permit Lessee to satisfy its payment obligations thereunder during the next succeeding fiscal period of Lessee. Lessee may terminate the Master Lease Purchase Agreement and each Lease entered thereunder under the provisions of this Section, without penalty, by providing written notice of such Nonappropriation to Lessor as soon as the decision to nonappropriate is made. Upon any such termination of the Master Lease Purchase Agreement and each Lease entered thereunder, all of Lessee's rights, title and interest in and its obligation under the Master Lease Purchase Agreement and each Lease entered thereunder and to the Equipment shall terminate effective on the last day of the last fiscal period of Lessee for which such an appropriation was made. It is understood and agreed that the Nonappropriation of any Lease entered under the Master Lease Purchase Agreement shall constitute a Nonappropriation of the Master Lease Purchase Agreement and each Lease entered thereunder. Covenant Against Replacement of Equipment. As provided for in Code of Ala A- 5(a)(8), Lessee covenants that in the event a Lease is cancelled or terminated prior to the payment in full of all Rental Payments due under a Rental Payment Schedule, Lessee shall not acquire property comparable to the Equipment for a period of five (5) years from the date of such early cancellation or termination Repairs, Alterations and Improvements. Lessee agrees that Lessor shall not be obligated to rebuild, replace, maintain or make any repairs to the Equipment or to any improvements located thereon during the applicable Lease Term or any renewal thereof. Lessee may, at its own expense, install or place in or on, or attach or affix to, the Equipment such other equipment or accessories as may be necessary or convenient to use the Equipment for its intended purposes, provided that such other equipment or accessories do not impair or diminish the value or utility of the Equipment. All such other equipment and accessories shall remain the property of the Lessee. At the expiration or termination of a Lease, or any extension or renewal thereof, for any reason except Lessee's exercise of its prepayment option, or the payment in full of all Payments required by a Lease, Lessee shall surrender the Equipment in good condition, allowance being made for ordinary wear and tear from proper use. Without the written consent of Lessor, Lessee shall not make any other alterations, modifications or improvements to the Equipment except as required or permitted under the Master Lease Purchase Agreement. Any other alterations, modifications or improvements to the Equipment shall immediately become part of the Equipment, subject to the provisions of the Master Lease Purchase Agreement. Option to Accelerate. Lessee shall have the option to prepay the Rental Payments owed under any Lease (referred to herein as a Prepaid Lease ) (in whole but not in part) on any applicable Rental Payment Date on or after May 15, 2018; provided: (i) Lessee gives written notice to Lessor of its intention to exercise this option at least thirty (30) calendar days prior to the Rental Payment Date on which the option is to be exercised; (ii) Lessee has complied with 9

16 all applicable laws concerning acquisition of Equipment; (iii) there is a specific Prepayment Option Price shown on the applicable Rental Payment Schedule on that Rental Payment Date; and (iv) on the applicable Rental Payment Date, Lessee shall deposit with Lessor an amount equal to all Rental Payments together with any Additional Payments and any other amounts then due or past due (including, but not limited to, the Rental Payment due on the applicable Rental Payment Date and all accrued interest) together with the applicable Prepayment Option Price, all as shown on the applicable Rental Payment Schedule. The closing shall be on the Rental Payment Date or the first business day preceding the Rental Payment Date at the office of Lessor or such other place as Lessor may direct in writing. Default and Lessor's Remedies. (a) The occurrence of one or more of the following events shall constitute an Event of Default, whether occurring voluntarily or involuntarily, by operation of law or pursuant to any order of any court or governmental agency: (1) Lessee fails to make any payment under the Master Lease Purchase Agreement or under any Lease when due or within ten (10) calendar days thereafter; (2) Lessee fails to comply with any other covenant, condition or agreement of Lessee under the Master Lease Purchase Agreement or under any Lease for a period of thirty (30) calendar days after notice thereof; provided, that, if Lessee makes a commercially reasonable effort to cure such default during such thirty (30) calendar day period, but will, in good faith, require additional time to complete such cure, no default will be declared so long as Lessee continues to make good faith, commercially reasonable efforts to cure such default, and such default is in any event cured within sixty (60) calendar days; (3) Any representation or warranty made by Lessee under the Master Lease Purchase Agreement shall be untrue in any material respect as of the date made; (4) Lessee makes, permits or suffers any unauthorized assignment, transfer or other disposition of any Lease or any interest herein, or any part of the Equipment or any interest therein; (5) Lessee becomes insolvent; or admits in writing its inability to pay its debts as they mature; or applies for, consents to or acquiesces in the appointment of a trustee, receiver or custodian for Lessee or a substantial part of its assets, including, but not limited to, the Equipment; or, in the absence of such application, consent or acquiescence, a trustee, receiver or custodian is appointed for Lessee or a substantial part of its property, and is not discharged within sixty (60) calendar days; or any bankruptcy, reorganization, debt arrangement, moratorium, or any proceeding under any bankruptcy or insolvency law; or any dissolution or liquidation proceeding is instituted by or against Lessee and, if instituted against Lessee, is consented to or acquiesced in by Lessee or is not dismissed within sixty (60) calendar days. It is agreed and understood that a default under any Lease entered pursuant to the Master Lease Purchase Agreement shall constitute a cross-default on all Leases entered under the Master Lease Purchase Agreement. 10

17 (b) Upon the occurrence of any Event of Default specified above, and subject to subsection (c) below, Lessor may, at its sole discretion, exercise any or all of the following remedies: (1) Enforce any Lease by appropriate action to collect amounts due or to become due under the Master Lease Purchase Agreement, by acceleration or otherwise, or to cause Lessee to perform its other obligations under the Master Lease Purchase Agreement in which event Lessee shall be liable for all costs and expenses incurred by Lessor; (2) Enter upon Lessee s premises and take possession of the Equipment, without court order or any process of law, and remove the same and re-lease or otherwise dispose of the Equipment for Lessee's account, in which event Lessee waives any and all damages resulting therefrom and shall be liable for all costs and expenses incurred by Lessor in connection therewith and the difference, if any, between the amounts to be paid pursuant to Paragraph 2 of the Master Lease Purchase Agreement and the amounts received and to be received by Lessor in connection with any such re-letting. Not withstanding the foregoing, Lessor must act in a commercially reasonable manner and mitigate any damages resulting from its actions under this provision; (3) Terminate the Master Lease Purchase Agreement, or each Lease entered thereunder, and repossess the Equipment, in which event Lessee shall be liable for any amounts payable hereunder through the date of such termination and all costs and expenses incurred by Lessor in connection therewith; or (4) Pursue and exercise any other remedy available at law or in equity, in which event Lessee shall be liable for any and all Costs and Expenses incurred by Lessor in connection therewith. As provided in Paragraph 3 of the Master Lease Purchase Agreement, under no circumstances shall Lessee be liable under this subsection (b) for any amount in excess of the sum appropriated for the previous and current fiscal periods, less all amounts previously due and paid during such previous and current fiscal periods from amounts so appropriated. (c) It is understood and agreed that the Lessee is granting to Lessor a first priority security interest in the Equipment and that each Lease entered under the Master Lease Purchase Agreement shall be secured on a pro-rata parity basis with respect to the Equipment. Any recovery upon exercise of the remedies provided for in subparagraph (b) shall be apportioned among each outstanding Lease in a ratio of the total outstanding principal and interest amount of each respective Lease to the total outstanding principal and interest amount of all outstanding Leases under the Master Lease Purchase Agreement. Assignment and Issuance of the Certificates of Participation. Under the Master Lease Purchase Agreement, Lessee may not assign any of its interests in the Master Lease Purchase Agreement, any Lease or the Equipment or any interest therein. However, Lessor, or one or more of its assigns, may assign or otherwise transfer its interest in the Master Lease Purchase Agreement and any Lease and serialize the payments and create Certificates of Participation. Lessee has acknowledged and agreed in the Master Lease Purchase Agreement that Lessor, or one or more of its assigns, may also engage and utilize an underwriter or placement agent for 11

18 the purpose of assisting with the sale of the Certificates of Participation. The Custodian shall authenticate and deliver the Certificates of Participation. THE CERTIFICATES OF PARTICIPATION Sale and Delivery of Certificates of Participation The Certificates of Participation are offered pursuant to this Official Statement. Depositor has caused the payments owing under Leasing Schedule No. 001 to be reconfigured for purposes of the Certificates of Participation in order to represent the $9,655,000 stated principal amount outstanding hereunder, the interest payable hereunder, and in order to cover the cost of issuance. The Certificates of Participation will be book-entry-only and will be registered in the name of Cede & Co. as registered owner and nominee of The Depository Trust Company, New York, New York. The Certificates of Participation shall be issued in authorized denominations of $5,000. Interest on the Certificates of Participation shall be computed on the basis of a 360-day year of twelve 30-day months. The Certificates of Participation shall mature in accordance with the Maturity Schedule on the cover of this Official Statement. The manual signature of an authorized officer of Custodian and a facsimile of the corporate seal of Custodian shall appear on each Certificate of Participation. No Certificate of Participation shall be valid or obligatory for any purpose or entitled to any security or benefit under the Custodial Agreement unless authenticated in the manner provided therein, and such execution and authentication of any such Certificate of Participation shall be conclusive evidence that such Certificate of Participation has been authenticated and delivered under the Custodial Agreement. Custodian's certificate of authentication on any Certificate of Participation shall be deemed to have been executed by it if signed by an authorized officer or signatory of Custodian, but it shall not be necessary that the same officer or signatory sign the certificate of authentication on all of the Certificates of Participation issued hereunder. Security for the Certificates of Participation The Certificates of Participation are limited obligations. Principal and interest payments on the Certificates of Participation shall be made solely from the payments received from Lessee under Leasing Schedule No. 001 and from other funds held by Custodian under the Custodial Agreement. In addition, the Certificates of Participation will be secured by a first priority security interest in the Equipment, as described in Leasing Schedule No The security interest in the Equipment will be on a parity basis with respect to Leasing Schedule No. 002, when and if issued. Subject to the Lessee s right not to appropriate funds, the payments made by Lessee under Leasing Schedule No. 001 will be made from general revenues. The obligations of Lessee to make Rental Payments and to make any other payments to Lessor (or to any other person) pursuant to Leasing Schedule No. 001 are subject to appropriation of funds that are lawfully available to be applied for such purpose. See SUMMARY OF LEASING SCHEDULE NO. 001 Nonappropriation and Right of Termination. 12

19 Lessee has agreed, to the extent permitted by the law of the State of Alabama, to include in its budget for each fiscal period of the Lessee during the term of Leasing Schedule No. 001, amounts sufficient to permit Lessee to discharge all of its obligations under Leasing Schedule No In addition, as provided for in Code of Alabama 41-16A-5(a)(8), Lessee has covenanted that in the event Leasing Schedule No. 001 is cancelled or terminated prior to the payment in full of all Rental Payments due under Leasing Schedule No. 001, Lessee shall not acquire property comparable to the Equipment for a period of five (5) years from the date of such early cancellation or termination. Payment on Certificates of Participation The Certificates of Participation are limited obligations payable solely from the Rental Payments and any other amounts derived or to be derived from Leasing Schedule No. 001, other accounts established under and all moneys and securities held under the terms of the Custodial Agreement. Each Certificate of Participation initially issued shall be dated May 15, Each Certificate of Participation authenticated after the date of the initial issuance shall be dated as of its date of authentication and shall bear interest from the Certificates of Participation Payment Date immediately preceding the date thereof to which interest has been paid. The principal of each Certificate of Participation shall be payable in installments ending no later than the Stated Maturity thereof, unless the unpaid principal of such Certificate of Participation becomes due and payable at an earlier date by call for redemption upon early termination of Leasing Schedule No. 001-Purchase Agreement or otherwise. The Certificates of Participation Payment Date of the Certificates of Participation shall begin December 1, 2008, and shall continue semi-annually thereafter on each June 1 and December 1 until maturity. Custodian will make payments pursuant to the Maturity Schedule set forth on the inside cover page hereof. Payments shall be deemed made when placed by Custodian into the mail, or otherwise transmitted in accordance with the terms of the Custodial Agreement. All payments received by Custodian from Leasing Schedule No. 001 shall be recomputed and converted into applicable payments of principal and interest on the Certificates of Participation. Each payment made with respect to any Certificate of Participation shall be applied first to the interest, if any, then due and payable on such Certificate of Participation, and then to the principal thereof. Interest on the unpaid principal amount of each Certificate of Participation outstanding shall be payable on each Certificates of Participation Payment Date at the interest rate applicable to such Certificate of Participation for the period from the Accrual Date, or such later date to which interest has been paid, to such Certificates of Participation Payment Date. Any installment of interest or principal payable on the Certificates of Participation on the applicable Certificates of Participation Payment Date or redemption date shall be paid to DTC, or its nominee, Cede & Co., as described below, for the Holder in whose name such Certificate of Participation is registered on the Record Date for such Certificates of Participation Payment Date from funds available to Custodian by check or draft mailed to such Person's address as it appears in the Certificate of Participation Register on such Record Date. 13

20 Events of Default; Rights of Owners of Certificates of Participation The occurrence of one or more of the Events of Default described above under the caption, The Lease; Default and Lessor s Remedies, that result in any failure by Lessee to make a Rental Payment to Custodian, shall be deemed an event of default of the Certificates of Participation. The Certificates of Participation are limited obligations payable solely from the Rental Payments and any other amounts derived or to be derived from Leasing Schedule No. 001, other accounts established under the Custodial Agreement and all monies and securities held under the terms of the Custodial Agreement. The sole obligor with respect to any Rental Payment is Lessee. Neither Custodian nor Depositor shall have any obligation with respect to any payment due under Leasing Schedule No. 001 except as provided in Section 5.01 of the Custodial Agreement with respect to Custodian, and its respective obligations with respect to the Certificates of Participation shall be solely set forth in the Custodial Agreement. The Owners, as the real parties in interest, will have the right upon a Lease Default to proceed against Lessee. In any such case, the Owners are not required to act in concert with, or join as third parties, Depositor or Custodian in order to proceed against Lessee. Neither Custodian nor Depositor is authorized or required to proceed against Lessee in the event of a Lease Default or to assert the rights and privileges of the Owners and said parties have no duty to do so, except that at the written request and at the risk and expense (including reasonable compensation of Custodian) of the Owners of a majority of the stated amount of the Certificates of Participation then unpaid, and if such Owners provide appropriate indemnification of Custodian, then Custodian, in its capacity as the nominal holder or registered owner of Leasing Schedule No. 001, may elect in Custodian's sole discretion, to cooperate with the Owners to enable them to proceed against Lessee or otherwise serve as the coordinator of all default or work-out proceedings involving Lessee. Unless Custodian so elects, Custodian shall have no duty or obligation to become involved in any default, work-out or similar proceeding against or otherwise involving Lessee. Optional Redemption The Certificates of Participation are subject to optional redemption at the option of the Depositor on or after June 1, 2018 from proceeds available to the Depositor from any source at par plus accrued interest thereon to the date of redemption. See, SUMMARY OF LEASING SCHEDULE NO Option to Accelerate. Mandatory Sinking Fund Redemption The Certificates of Participation are subject to mandatory redemption, in Authorized Denominations, in accordance with the mandatory sinking fund schedule set forth below. The sole source of proceeds to effect mandatory redemption shall be those Rental Payments received by the Custodian with respect to Leasing Schedule No The Certificate of Participation shall be redeemed in the following amounts at the following times: 14