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Item 10 - 1995 Refunding Certificates of Participation Royal Mobilhome Park _ AGENDA REPORT ~lSttRl B~UTED , -TO: Honorable Mayor and Members of the City Council Chairman and Members of the Redevelopment Agency FROM: James L. Bowersox, City Man~ INITIATED BY: John D. Fitch, Assistant City Manager Peggy A. Stewart, Director of Administrative servic~~ DATE: June 20, 1995 SUBJECT: 1995 Refunding Certificates of Participation-- (City of Poway 1991 Capital Improvement Project _ Powav Royal Mobilehome Park) ABSTRACT In order to proceed with the 1995 Refunding of Certificates of Participation (City of Poway 1991 Capital Improvement Project - Poway Royal Mobilehome Park), it is recommended that the City Council adopt the attached Bond Resolution and that the Poway Redevelopment Agency adopt its attached Bond Resolution and both approve the Trust Agreement, the Escrow Agreement, the Lease Agreement, the Site Lease, the Preliminary Official Statement, the Bond Purchase Agreement, the Assignment Agreement, and the Special Counsel Agreement. - ENVIRONMENTAL REVIEW This agenda item is not subject to environmental review according to CEQA guidelines. FISCAL IMPACT A net present value savings of $934,000 to the Redevelopment Agency and the City in debt service costs. ADDITIONAL PUBLIC NOTIFICATION AND CORRESPONDENCE Poway Royal Homeowners Association RECOMMENDATION It is recommended (1) that the City Council adopt the attached Bond Resolution and approve all the attachments for the City of Poway; (2) that the Poway Redeveloment Agency adopt the attached Bond Resolution and approve all the attachments for the Agency; and (3) that staff be directed to proceed with the refunding of the 1991 Certificates of Participation. ACTION - ~ 1 of 5 JUN 2 0 1995 ITEM 10 - ~ AGENDA REPOR CITY OF POW A Y TO: Honorable Mayor and Members of the City Council Chairman and Members of the Redevelopment Agency FROM: James L. Bowersox, City Ma~~ INITIATED BY: John D. Fitch, Assistant City anager Peggy A. Stewart, Director of Administrative Services DATE: June 20, 1 995 SUBJECT: 1995 Refunding Certificates of Participation-- (City of Poway 1991 Capital Improvement Project - Poway Royal Mobilehome Park) BACKGROUND The City of Poway is'sued Certificates of Participation (COPs) in the amount of $28,300,000 in January 1991 to fund the acquisition of and improvements to the Poway Royal Mobilehome Par<. The Poway Redevelopment Agency acquired the Mobilehome Park and leases it to the City. The City of Poway makes Lease Payments to the Agency equivalent to annual debt service on the COPs. The City operates the Mobilehome Park, collects rents, and pays all operating costs and the lease payment from rent proceeds. Financial Security Assurance will insure the refunding certificates of participation which will enable them to receive a AAA rating. The 1991 COPs were issued at an average interest rate of 7.09%. Under current market conditions, the 1995 Refunding COPs could be issued between 6.0% and 6.25% average interest rate. In addition the repayment of the bonds is being extended by five years, and the debt service payments have been restructured to take advantage of $3.2 million in savings between January 1, 1996 and January I, 2005. Debt service between January 1, 2005 and December 31, 2023 increases between $1,000 and $9,000 annually; and an additional $10 million in debt service is paid between July I, 2024 and July 1, 2028. The net present value of the overall savings from cash flow is approximately $954,000. The size of the refunding COPs issue will be approximately $2,700,000 greater than the current outstanding principal of the original COPs issue in 1991. The original issue was structured so that the COPs could not be called until January 1, 2001. In the meantime, the Agency must establish an escrow account with the proceeds of the refunding COPs. The interest generated by that escrow account will make the debt service payments on the original 1991 COPs. Between now and 2001, the Agency will ACTION: l 2 of 5 )) JUN 2 0 1995 ITEM 10 - Agenda Report June 20, 1995 Page 2 be earning between 6.0% and 6.25% on funds in the escrow account and paying 7.09% on the outstanding 1991 COPs. It is therefore necessary to place an additional $1.7 million in the escrow account to cover the difference. The remaining $1 million covers issuance costs and bond insurance premium. The savings highlighted above include the costs on the increased size of the refunding. FINDINGS An insured refunding of 1991 Certificates of Participation can be sold without any direct costs to the Redevelopment Agency. A primary benefit of this refunding mechanism is approximately $3.2 million savings in debt service payments over the first ten years of the bonds and the restructuring of the debt. A refunding transaction of this kind is highly sensitive to interest rates. If interest rates move down, the benefit of refunding will increase and, if interest rates increase, it may not be advantageous to proceed. This bond transaction will be completed only if there is positive benefit to the Agency and the City. In order to proceed with the issuance of the bonds and to provide instructions to the Trustee, Registrar and Paying Agent, it is necessary for the City Council to adopt the following: Bond Resolution of the City of Poway: The resolution approves the refunding and authorizes staff to proceed with the documentation and execution of the transaction. The Poway Redevelopment Agency needs to adopt its attached bond resolution and approve the following documents: Bond Resolution of the Poway Redevelop- ment Agency: The resolution approves refunding and authorizes staff to proceed with the documentation and execution of the transaction. Both the City of Poway and the Poway Redevelopment Agency need to approve the following documents: Trust Agreement: The Trust Agreement is the contract between Bank of America National Trust & Savings Association as Trustee for the bondowners and the Agency describing the terms of the transaction and the sources of funds for repayment. Escrow Agreement: The agreement basically describes that Bank of America will hold the proceeds of the new issue and how and ----, when those proceeds will be used to retire the previous bond issues. ITEM 10 I 3 of 5 JUri 2 0 1995 -,- Agenda Report June 20, 1995 Page 3 Preliminary Official Statement: The POS is the sales document that is distributed to all interested buyers at the time of sale of the bonds. Bond Purchase Agreement: The BPA is the contract between PaineWebber and the Agency describing how and when the money is paid in exchange for the specified bonds. Lease Agreement: The lease agreement describes the terms and conditions of the lease of the mobilehome park by the Agency to the City. Site Lease: The site lease describes the terms and conditions of the City leasing the site back to the Agency in order to obtain the funds for the advance refunding. Assignment Agreement: The Agency agrees to assign its interest in the Lease Agreement and the Site Agreement to the Trustee, including the right to receive lease payments. Special Counsel Agreement: Retains Stradling, Yocca, Carlson & Rauth as special counsel for the Agency. ENVIRONMENTAL REVIEW This agenda item is not subject to environmental review according to CEQA guidelines. FISCAL IMPACT A net present value savings of $934,000 to the Redevelopment Agency and the City in debt service costs. ADDITIONAL PUBLIC NOTIFICATION AND CORRESPONDENCE Poway Royal Homeowners Association 4 of 5 JUN 2 0 1995 ITEM 10 -... Agenda Report June 20, 1995 Page 4 RECOMMENDATION It is recommended that: 1. The City Council adopt the attached Bond Resolution for the City of Poway and approve the Escrow Agreement, the Preliminary Official Statement, the Bond Purchase Agreement, the Lease Agreement, the Site Lease, the Trust Agreement, the Assignment Agreement, and the Special Counsel Agreement. 2. The Poway Redevelopment Agency adopt the attached Bond Resolution for the Agency and approve the Trust Agreement, the Escrow Agreement, the Preliminary Official Statement, the Bond Purchase Agreement, the Lease Agreement, the Site Lease, the Assignment Agreement, and the Special Counsel Agreement. 3. Staff be directed to proceed with the refunding of the 1991 Certificates of Participation, completing the transaction only if interest rates remain low and there continues to be a financial gain to the Agency and the City. JLB:JDF:PAS:eg Attachments (limited distribution): A. Bond Resolution, City of Poway B. Bond Resolution, Poway Redevelopment Agency C. Trust Agreement D. Escrow Agreement E. Preliminary Official Statement F. Bond Purchase Agreement G. Lease Agreement H. Site Lease 1. Assignment Agreement J. Special Counsel Agreement c: BONDAGR 1. AGN 5 of 5 JUN 2 0 1995 ITEM 10 RESOLUTION NO. _ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF POWAY AUTHORIZING THE PREPARATION, SALE AND DELIVERY OF NOT TO EXCEED $32,000,000 PRINCIPAL AMOUNT OF 1995 REFUNDING CERTIFICATES OF PARTICIPATION (CITY OF POWAY CAPITAL IMPROVEMENT PROJECTS-POW A Y ROYAL MOBILEHOME PARK) AND APPROVING CERTAIN DOCUMENTS AND AUTHORIZING CERTAIN ACTIONS IN CONNECTION THEREWITH WHEREAS, the Poway Redevelopment Agency is a political subdivision of the State organized and existing under the laws of the State of California (the "Agency") with the authority to assist in the financing of capital facilities on behalf of the City of Poway, a municipal corporation (the "City"); and WHEREAS, the Agency has assisted the City in fmancing various capital facilities through the execution and delivery of the $28,300,000 1991 Certificates of Participation (Capital Improvement Project-Poway Royal Mobilehome Park); and WHEREAS, the City now desires to advance refund the 1991 Certificates, which Certificates were executed and delivered to fmance the acquisition and construction of certain public facilities (the "Prior Certificates") through the execution and delivery of the Certificates (as defined below) and the entering into by the City of that certain Escrow Agreement, to be dated as of the first day of the month in which the Purchase Agreement (as defined herein) is executed, by and among the Agency, the City and Bank of America National Trust and Savings Association (the "Escrow Agent"), the form of which has been presented to this City Council at the meeting at which this Resolution has been adopted (the "Escrow Agreement"). WHEREAS, in order to accomplish the refunding of the Prior Certificates, the City and the Agency further desire to enter into that certain Site Lease, by and between the City and the Agency (the "Site Lease"), and that certain Lease Agreement, by and between the City and the Agency (the "Lease Agreement"), each to be dated as of the first day of the month in which the Purchase Agreement is executed, the forms of which have been presented to this City Council at the meeting at wh~h this Resolution has been adopted, pursuant to which Site Lease the Agency will agree to lease certain real property and improvements from the City and pursuant to which Lease Agreement the City will agree to lease back such real property and improvements from the Agency and to pay certain lease payments in connection therewith which will be pledged by the Agency to the owners of the 1995 Refunding Certificates of Participation (City of Poway Capital Improvement Proj~t-Poway Royal Mobilehome Park) (the "Certificates") to be executed and delivered pursuant to a Trust Agreement, to be dated as of the first day of the month in which the Purchase Agreement is executed, by and among Bank of America National Trust and Savings Association, as trustee (the "Trustee"), the City and the Agency (the "Trust Agreement"), the form of which has been presented to this City Council at the meeting at which this Resolution has been adopted; and ATTACHMENT A JUN 2 0 1995 ITEM 10 WHEREAS, the Agency and the City have determined that it would be in the best interests of the Agency, the City and the residents of the City to authorize the preparation, sale and delivery of the Certificates in an aggregate principal amount not to exceed $32,000,000, which Certificates evidence proportionate interests in certain rights under the Lease Agreement, including the right to receive certain lease payments to be made by the City thereunder; and WHEREAS, the City Council desires to consent to the assignment of certain of the Agency's rights, title and interest in and to the Site Lease and the Lease Agreement, including the right to receive such lease payments from the City, to the Trustee pursuant to an Assignment Agreement, between the Agency and the Trustee, to be dated as of the first day of the month in which the Purchase Agreement is executed (the" Assignment Agreement"), the form of which has been presented to this City Council at the meeting at which this Resolution has been adopted; and WHEREAS, the City Council desires to approve the form of a Purchase Agreement (the "Purchase Agreement"), by and between the City and PaineWebber Incorporated (the "Purchaser"), pursuant to which the Purchaser will agree to buy the Certificates on the terms and conditions set forth therein, the form of which has been presented to this City Council at the meeting at which this Resolution has been adopted and to approve the form of Special Counsel Agreement by and between the City and Stradling, Yocca, Carlson & Rauth, a Professional Corporation presented to this City Council at such meeting (the "Special Counsel Agreement"); and WHEREAS, the City Council desires to approve the form of a Preliminary Official Statement relating to the Certificates (the "Preliminary Official Statement') to be distributed to potential investors, for the purposes of facilitating the sale of the Certificates at the lowest feasible interest rate, the form of which has been presented to this City Council at the meeting at which this Resolution has been adopted; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Poway that: Section 1. Each of the foregoing recitals is true and correct. Section 2. This City Council hereby consents to the preparation, sale and delivery of the Certificates in an aggregate amount of not to exceed $32,000,000 in accordance with the terms and provisions of the Trust Agreement, with the exact principal amount to be that determined necessary by the City Manager to advance refund and defease the Prior Certificates, The purposes for which the proceeds of the Certificates shall be expended are to advance refund and defease the Prior Certificates and to provide for a reserve fund, if any, and the costs of the preparation, sale and delivery of the Certificates. Section 3. Bank of America National Trust and Savings Association is hereby appointed as Trustee on behalf of the owners of the Certificates, with the duties and powers of such Trustee as set forth in the Trust Agreement, and as the Escrow Agent with the duties and powers of the Escrow Agent as set forth in the Escrow Agreement. Section 4. The forms of the Escrow Agreement, the Site Lease, the Lease Agreement, the Trust Agreement and the Assignment Agreement presented at this meeting are hereby approved, Each of the Mayor of the City of Poway, the City Manager or his designee PU8L,27345 _111381 B2345,52 2 (the "City Manager")and the City Clerk is hereby authorized for and in the name of the City to execute the Escrow Agreement, the Site Lease, the Lease Agreement and the Trust Agreement in substantially the forms hereby approved, with such additions thereto and changes therein as are recommended or approved by Stradling, Yocca, Carlson & Rauth, as Special Counsel to the City ("Special Counsel'), or City Manager and the officers executing the same, including all changes necessary to reflect the purchase of bond insurance as described in Section 5 below. Approval of such changes and the designation of the Site shall be conclusively evidenced by the execution and delivery of the foregoing documents by such officers. The Mayor of the City, the City Manager and the City Clerk are hereby authorized to execute, acknowledge and deliver any and all documents required to consummate the transactions contemplated by the Site Lease, the Lease Agreement and the Trust Agreement, including, but not limited to, any termination agreements with respect to the financing documents heretofore entered into in connection with the Prior Certificates which the City Manager determines are required to be executed in order to accomplish the defeasance of the Prior Certificates. Section 5. The form of the Purchase Agreement presented at this meeting and the sale of the Certificates pursuant thereto are hereby approved, and each of the Mayor of the City and the City Manager is hereby authorized to evidence the City's acceptance of the terms and provisions of the Purchase Agreement by executing and delivering the Purchase Agreement in the form presented to the City at this meeting, with such additions thereto and changes therein as are recommended or approved by Special Counsel and the officers executin~ the same. Approval of such additions and changes shall be conclusively evidenced by the execu on and delivery of the Purchase Agreement; provided, however, that the Purchase Agreement shall be signed only if the aggregate principal amount of the Certificates does not exceed $32,000,000, the present value of the debt service payments due with respect to the Certificates is less than the present value of the debt service due with respect to the Prior Certificates (as set forth in writing by the City's Financial Advisor) and the Purchaser's discount (exclusive of original issue discount and any bond insurance premium) with respect to the Certificates does not exceed 1.5% of the aggregate principal amount of the Certificates. The City Manager is authorized to determine the day on which the Certificates are to be priced in order to produce the lowest financing cost for the Certificates, which determination shall be conclusively evidenced by the execution and delivery of the Purchase Agreement by one of the aforesaid officers, provided, however, that the net interest cost thereof shall not exceed 6.5%. The City Manager, or his designee, is authorized to reject any terms presented by the Purchaser if determined not to be in the best interest of the City and is further authorized to evaluate whether the purchase of municipal bond insurance for the Certificates will result in a net savings to the City and if so to purchase such municipal bond insurance. Section 6. The form of the Certi ficates as set forth in the Trust Agreement (as the Trust Agreement may be modified pursuant to Section 4 hereof) is hereby approved. Section 7. The form of the Preliminary Official Statement presented at this meeting is hereby approved, and the Preliminary Official Statement may be distributed to prospective purchasers in the form so approved, together with such additions thereto and changes therein as are determined necessary by the City Manager, or his designee, to make such Preliminary Official Statement final as of its date for purposes of Rule l5c2-12 of the Securities and Exchange Commission. Each of the Mayor of the City and the City Manager is hereby authorized to execute a final Official Statement in the form of the Preliminary Official Statement, PU8L,27345 _11138182345,52 3 -- together with such changes as are determined necessary by the City Manager, or his designee, to make such Official Statement complete and accurate as of its date. The Purchaser is further authorized to distribute the final Official Statement for the Certificates to the purchasers thereof upon its execution by an officer of the City as described above. The City Manager and his written designees are hereby authorized and directed to take whatever steps are necessary to comply with the requirements of Rule 15c(2)-12 applicable to the Certificates following their execution and delivery. Section 8. The form of Special Counsel Agreement presented at this meeting is hereby approved and the City Manager is authorized to execute such Agreement and deliver such to Special Counsel. Section 9. The Mayor of the City, the City Manager, or his written designee, and the City Clerk are hereby authorized, jointly and severally, to do any and all things and to execute and deliver any and all documents which they may deem necessary and advisable in order to consummate the sale and delivery of the Certificates and otherwise effectuate the purposes of this Resolution, including the advance refunding and defeasance of the Prior Certificates, and such actions previously taken by such officers are hereby ratified and confirmed. In the event the Mayor of the City is unavailable or unable to execute and deliver any of the above-referenced documents, any other member of the City Council may validly execute and deliver such document, and, in the event the City Clerk is unavailable or unable to execute and deliver any of the above-referenced d~uments, any deputy clerk may validly execute and deliver such document in her place. Section 10. This Resolution shall take effect from and after its date of adoption. ADOPTED, SIGNED AND APPROVED this _ day of , 1995. Mayor of the City ATTEST: City Clerk City of Poway, California pU8L27345_11138182345,52 4 STATE OF CALIFORNIA ) ) ss. County of San Diego ) I, , City Clerk of the City of Poway, California, hereby certify that the above and foregoing Resolution was duly and regularly adopted by the City Council of said City at a regular meeting thereof held on the _ day of _, 1995, and that it was so adopted by the following vote of said Council: AYES: Councilmembers NOES: Councilmembers ABSENT: Councilmembers IN WITNESS WHEREOF, I have hereunto set my hand and seal this _ day of , 1995. City Clerk of the City of Poway, California PU8L:27345_11 1381B2345,52 5 -- .- RESOLUTION NO. - A RESOLUTION OF THE BOARD OF DIRECTORS OF THE POWAY REDEVELOPMENT AGENCY AUTHORIZING THE PREPARATION, SALE AND DELIVERY OF NOT TO EXCEED $32,000,000 PRINCIPAL AMOUNT OF 1995 REFUNDING CERTIFICATES OF PARTICIPATION (CITY OF POWAY CAPITAL IMPROVEMENT PROJECTS-POWAY ROYAL MOBILEHOME PARK) AND APPROVING CERTAIN DOCUMENTS AND AUTHORIZING CERTAIN ACTIONS IN CONNECTION THEREWITH WHEREAS, the Poway Redevelopment Agency is a political subdivision of the State organized and existing under the laws of the State of California (the" Agency") with the authority to assist in the financing of capital facilities on behalf of the City of Poway, a municipal corporation (the "City"); and WHEREAS, the Agency has assisted the City in financing various capital facilities through the execution and delivery of the $28,300,000 1991 Certificates of Participation (Capital Improvement Project-Poway Royal Mobilehome Park); and WHEREAS, the City now desires to advance refund the 1991 Certificates, which Certificates were executed and delivered to finance the acquisition and construction of certain public facilities (the "Prior Certificates") through the execution and delivery of the Certificates (as defined below) and the entering into by the City and the Agency of that certain Escrow Agreement, to be dated as of the first day of the month in which the Purchase Agreement (as defined herein) is executed, by and among the Agency, the City and Bank of America National Trust and Savings Association (the "Escrow Agent"), the form of which has been presented to this Board of Directors at the meeting at which this Resolution has been adopted (the "Escrow Agreement"). WHEREAS, in order to accomplish the refunding of the Prior Certificates, the City and the Agency further desire to enter into that certain Site Lease, by and between the City and the Agency (the "Site Lease"), and that certain Lease Agreement, by and between the City and the Agency (the "Lease Agreement"), each to be dated as of the first day of the month in which the Purchase Agreement is executed, the forms of which have been presented to this Board of Directors at the meeting at which this Resolution has been adopted, pursuant to which Site Lease the Agency will agree to lease certain real property and improvements from the City and pursuant to which Lease Agreement the City will agree to lease back such real property and improvements from the Agency and to pay certain lease payments in connection therewith which will be pledged by the Agency to the owners of the 1995 Refunding Certificates of Participation (City of Poway Capital Improvement Project-poway Royal Mobilehome Park) (the "Certificates") to be executed and delivered pursuant to a Trust Agreement, to be dated as of the first day of the month in which the Purchase Agreement is executed, by and among Bank of America National Trust and Savings Association, as trustee (the "Trustee"), the City and the Agency (the "Trust ATTACHMENT B JUN 2 0 1995 ITEM 10 :,,! Agreement"), the form of which has been presented to this Board of Directors at the meeting at which this Resolution has been adopted; and WHEREAS, the Agency and the City have determined that it would be in the best interests of the Agency, the City and the residents of the City to authorize the preparation, sale and delivery of the Certificates in an aggregate principal amount not to exceed $32,000,000, which Certificates evidence proportionate interests in certain rights under the Lease Agreement, including the right to receive certain lease payments to be made by the City thereunder; and WHEREAS, the Board of Directors desires to consent to the assignment of certain of the Agency's rights, title and interest in and to the Site Lease and the Lease Agreement, including the right to receive such lease payments from the City, to the Trustee pursuant to an Assignment Agreement, between the Agency and the Trustee, to be dated as of the first day of the month in which the Purchase Agreement is executed (the" Assignment Agreement"), the form of which has been presented to this Board of Directors at the meeting at which this Resolution has been adopted; and WHEREAS, the Board of Directors desires to approve the form of a Purchase Agreement (the "Purchase Agreement"), by and between the City and PaineWebber Incorporated (the "Purchaser"), pursuant to which the Purchaser will agree to buy the Certificates on the terms and conditions set forth therein, the form of which has been presented to this Board of Directors at the meeting at which this Resolution has been adopted, and to approve the form of Special Counsel Agreement by and between the City and Stradling, Yocca, Carlson & Rauth, a Professional Corporation presented to this Board of Directors at such meeting (the "Special Counsel Agreement"); and WHEREAS, the Board of Directors desires to approve the form of a Preliminary Official Statement relating to the Certificates (the "Preliminary Official Statement") to be distributed to potential investors, for the purposes of facilitating the sale of the Certificates at the lowest feasible interest rate, the form of which has been presented to this Board of Directors at the meeting at which this Resolution has been adopted; NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Poway Redevelopment Agency that: Section 1. Each of the foregoing recitals is true and correct. Section 2. This Board of Directors hereby consents to the preparation, sale and delivery of the Certificates in an aggregate amount of not to exceed $32,000,000 in accordance with the terms and provisions of the Trust Agreement, with the exact principal amount to be that determined necessary by the City Manager to advance refund and defease the Prior Certificates. The purposes for which the proceeds of the Certificates shall be expended are to advance refund and defease the Prior Certificates and to provide for a reserve fund, if any, and the costs of the preparation, sale and delivery of the Certificates. Section 3. Bank of America National Trust and Savings Association is hereby appointed as Trustee on behalf of the owners of the Certificates, with the duties and powers of PUBL,27354_11138182345,52 2 such Trustee as set forth in the Trust Agreement, and as the Escrow Agent with the duties and powers of the Escrow Agent as set forth in the Escrow Agreement. Section 4. The forms of the Escrow Agreement, the Site Lease, the Lease Agreement, the Trust Agreement and the Assignment Agreement presented at this meeting are hereby approved. Each of the Chairman of the poway Redevelopment Agency, the Executive Director of the Agency or his designee (the "Executive Director")and the Secretary of the Agency is hereby authorized for and in the name of the Agency to execute the Escrow Agreement, the Site Lease, the Lease Agreement, the Assignment Agreement and the Trust Agreement in substantially the forms hereby approved, with such additions thereto and changes therein as are recommended or approved by Stradling, Yocca, Carlson & Rauth, as Special Counsel to the City ("Special Counsel"), or Executive Director and the officers executing the same, including all changes necessary to reflect the purchase of bond insurance as described in Section 5 below. Approval of such changes and the designation of the Site shall be conclusively evidenced by the execution and delivery of the foregoing documents by such officers. The Chairman of the Agency, the Executive Director, and the Secretary of the Agency are hereby authorized to execute, acknowledge and deliver any and all documents required to consummate the transactions contemplated by the Site Lease, the Lease Agreement, the Assignment Agreement and the Trust Agreement, including, but not limited to, any termination agreements with respect to the financing documents heretofore entered into in connection with the Prior Certificates which the Executive Director determines are required to be executed in order to accomplish the defeasance of the Prior Certificates. Section 5. The form of the Purchase Agreement presented at this meeting and the sale of the Certificates pursuant thereto are hereby approved, and each of the Chairman of the Agency and the Executive Director is hereby authorized to evidence the Agency's acceptance of the terms and provisions of the Purchase Agreement by executing and delivering the Purchase Agreement in the form presented to the Agency at this meeting, with such additions thereto and changes therein as are recommended or approved by Special Counsel and the officers executing the same. Approval of such additions and changes shall be conclusively evidenced by the execution and delivery of the Purchase Agreement; provided, however, that the Purchase Agreement shall be signed only if the aggregate principal amount of the Certificates does not exceed $32,000,000, the present value of the debt service payments due with respect to the Certificates is less than the present value of the debt service due with respect to the Prior Certificates (as set forth in writing by the City's Financial Advisor) and the Purchaser's discount (exclusive of original issue discount and any bond insurance premium) with respect to the Certificates does not exceed 1.5 % of the aggregate principal amount of the Certificates. The Executive Director is authorized to determine the day on which the Certificates are to be priced in order to produce the lowest financing cost for the Certificates, which determination shall be conclusively evidenced by the execution and delivery of the Purchase Agreement by one of the aforesaid officers, provided, however, that the net interest cost thereof shall not exceed 6.5 %. The Executive Director, or his designee, is authorized to reject any terms presented by the Purchaser if determined not to be in the best interest of the Agency and is further authorized to evaluate whether the purchase of municipal bond insurance for the Certificates will result in a net savings to the City and if so to purchase such municipal bond insurance. Section 6. The form of the Certificates as set forth in the Trust Agreement (as the Trust Agreement may be modified pursuant to Section 4 hereof) is hereby approved. PU8L'27354_11138182345,52 3 -'-,.- -- Section 7. The form of the Preliminary Official Statement presented at this meeting is hereby approved, and the Preliminary Official Statement may be distributed to prospective purchasers in the form so approved, together with such additions thereto and changes therein as are determined necessary by the Executive Director, or his designee, to make such Preliminary Official Statement ftnal as of its date for purposes of Rule 15c2-12 of the Securities and Exchange Commission. Each of the Chairman of the Agency and the Executive Director is hereby authorized to execute a ftnal Official Statement in the form of the Preliminary Official Statement, together with such changes as are determined necessary by the Executive Director, or his designee, to make such Offtcial Statement complete and accurate as of its date. The Purchaser is further authorized to distribute the ftnal Official Statement for the Certiftcates to the purchasers thereof upon its execution by an officer of the Agency as described above. The Executive Director and his written designees are hereby authorized and directed to take whatever steps are necessary to comply with the requirements of Rule 15c(2)-12 applicable to the Certiftcates following their execution and delivery. Section 8. The form of Special Counsel Agreement presented at this meeting is hereby approved and the City Manager is authorized to execute such Agreement and deliver such to Special Counsel. Section 9. The Chairman of the Agency, the Executive Director, or his written designee, and the Secretary of the Agency are hereby authorized, jointly and severally, to do any and all things and to execute and deliver any and all documents which they may deem necessary and advisable in order to consummate the sale and delivery of the Certiftcates and otherwise effectuate the purposes of this Resolution, including the advance refunding and defeasance of the Prior Certiftcates, and such actions previously taken by such officers are hereby ratifted and conftrmed. In the event the Chairman of the Agency is unavailable or unable to execute and deliver any of the above-referenced documents, any other member of the Board of Directors may validly execute and deliver such document, and, in the event the Secretary of the Agency is unavailable or unable to execute and deliver any of the above-referenced documents, any deputy secretary may validly execute and deliver such document in her place. PUBL:27354_11138182345,52 4 - - Section 10. This Resolution shall take effect from and after its date of adoption. ADOPTED, SIGNED AND APPROVED this _ day of , 1995, Chairman of the Board of Directors of the Poway Redevelopment Agency ATTEST: Secretary Poway Redevelopment Agency, California PUBL'27354_11138182345,52 5 -, ---- STATE OF CALIFORNIA ) ) ss. County of San Diego ) I, , Secretary of the Poway Redevelopment Agency, California, hereby certify that the above and foregoing Resolution was duly and regularly adopted by the Board of Directors of said Agency at a regular meeting thereof held on the _ day of , 1995, and that it was so adopted by the following vote of said Board: AYES: Directors NOES: Directors ABSENT: Directors IN WITNESS WHEREOF, I have hereunto set my hand and seal this _ day of , 1995. Secretary of the Board of Directors of the Poway Redevelopment Agency, California PUBL'27354_1113818234552 6 .-- - TRUST AGREEMENT among CITY OF POW A Y and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Trustee and POWAY REDEVELOPMENT AGENCY Dated as of July 1, 1995 RELATING TO $ 1995 REFUNDING CERTIFICATES OF PARTICIPATION (CITY OF POWAY 1991 CAPITAL IMPROVEMENT PROJECT- POWAY ROYAL MOBILEHOME PARK) ATTACHMENT C JUN 2 0 1995 ITEM 10 :lloI ^_..-- TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION Section 10 l. Definitions .................................... . 3 Section 102. Rules of Construction ............................ . 12 Section 103. Exhibits . . . . . . . . . . . , . . . . . . . . , . . , . , , . , . . . . . . . . . 12 ARTICLE II ASSIGNMENT; DECLARATION OF TRUST; REPRESENTATIONS AND RECITALS Section 20l. Declaration of Trust by Trustee ...................... . 12 Section 202. Deposit of Moneys .............................. . 13 Section 203. Conditions Precedent Satisfied ....................... . 13 Section 204. Due Authorization and Execution ..................... . 13 ARTICLE III TERMS AND PROVISIONS OF THE CERTIFICATES AND ADDITIONAL CERTIFICATES Section 30l. Preparation of Certificates and Additional Certificates . . . . , . . , , . 13 Section 302. Payments from Trust Estate Only; Distribution of Trust Estate ... . 14 Section 303. Description of the Certificates and Additional Certificates ...... . 14 Section 304. Medium of Payment ............................. . 16 Section 305. Execution and Exchange . . . . . . . . . . . . . . , . . , . . , . , , . , , . 16 Section 306. Negotiability, Transfer and Registry. . . . . . . . . . . . . . . . . . , . , 16 Section 307. Regulations with Respect to Exchanges and Transfers . . . . . . , . . , 17 Section 308. Certificates and Additional Certificates Mutilated, Destroyed, Stolen or Lost .............,..........,......... 17 Section 309. Temporary Certificates and Additional Certificates; Form of Certificates .. . . . . . . . . . . . . . . . . . . . . . . . . . . , . . , . . . . 17 Section 310. Redemption of Certificates and Additional Certificates . . . . , , . , , . 18 Section 31l. Selection of Certificates and Additional Certificates to be Redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . , . , . . , 19 Section 312. Notice of Redemption ............................ . 20 Section 313, Payment of Redeemed Certificates and Additional Certificates . , . . . 22 Section 314. Cancellation of Certificates and Additional Certificates ........ . 22 Section 315. Nonpresentment of Certificates and Additional Certificates . . . . . . . 23 Section 316. Unclaimed Money . . . . . , . . , . . , . . , . . , " , , . . . . . . . . . . . 23 Section 317. Additional Certificates ,.,..",.............,.,..... 23 PUBL27208_' I 138 I B2345,52 i ~~ ARTICLE IV ESTABLISHMENT AND ADMINISTRATION OF FUNDS AND ACCOUNTS Section 401. Establishment of Funds; Disposition of Proceeds of Certificates and Additional Certificates ..,.........,....,.........,. 25 Section 402. Project Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 403. Lease Payment Fund ..............,.....,......,., 28 Section 404. Certificate Fund . . . . . , . . . . . . , . . , . . . . . . . . . , . . . . . . . 28 Section 405. Insurance and Condemnation Fund .................... . 31 Section 406. Rebate Fund .................................. . 32 Section 407. Deposits of Money .....,..,.........,............ 34 Section 408. Investment of Certain Accounts ...................... . 34 Section 409. Valuation and Sale of Investments . . , . , . . . . , . . , . . , . . . . . . 35 ARTICLE V COVENANTS, EVENTS OF DEFAULT, REMEDIES OF OWNERS AND LIMITATIONS OF LIABILITY Section 501. Trustee to Enforce Lease Agreement; Notice of Nonpayment .... . 36 Section 502. Assignment of Rights . . . . . . . . . . . , . . . . . . . . . . . . . . , . . . 36 Section 503. Events of Default ................................ 36 Section 504. Application of Funds .. . . . . . . . . . . . . . . . . . . . . . . . . . . . , 36 Section 505. Institution of Legal Proceedings ...................... . 37 Section 506. Non-Waiver .................................. . 37 Section 507. Remedies Not Exclusive . . . . . . . . . . . , . . . . . . , . . , . . . . . . 37 Section 508. Power of Trustee to Control Proceedings ................ . 38 Section 509. Limitation on Owners' Right to Sue. , . . , . . . . , . . , . . , . . , . " 38 Section 510. Reconstruction; Application of Net Proceeds .............. . 38 Section 511. Accounts and Reports ............................ . 39 Section 512. No Obligation by the City to Owners . . . . . . . . . . . . . . . . . . . . 39 Section 513. No Obligation with Respect to Performance by Trustee . . , . . , . , . 39 Section 514. No Liability to Owners for Payment ................... . 39 Section 515. Possession and Enjoyment . . . . . . . . . . . . . . . . , . . . . . . . . . . 40 Section 516. Federal Tax Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . , . . 40 ARTICLE VI CONCERNING THE TRUSTEE AND PAYING AGENT Section 601. Employment of Trustee ........................... . 41 Section 602. Trustee Acceptance of Duties . . . . . . . . . . , . . . . . . . . . . . . . . 41 Section 603. Evidence on Which Trustee May Act . . . . . . . . . , . . , . . . . . . . 41 Section 604. Obligations of Trustee ..,.......,..,..,........,... 42 Section 605. Compensation ................................. . 42 OU8",27208_1 1 138182345,52 ii -- Section 606. Resignation of Trustee . . . . . , . . , . , . . . . , , . , . . , . . . , , . . 42 Section 607. Removal of Trustee . , . . , . . , . . , . . . . , . , . . , . . , . , . . , . . 43 Section 608. Appointment of Successor Trustee . . . . . . . . . . . . . . . . . . . , , . 43 Section 609. Transfer of Rights and Property to Successor Trustee . . . , . . , , . . 43 Section 610. Merger or Consolidation . . . . . . . . . . . . . , . . . . . . . , . . , . . . 44 Section 611. Adoption of Authorized Signature . . . . , . . . . . . . . . . . . . . . . . 44 Section 612. Trustee Liability . . . . . . . . . . . . , . . . . . . . . . . . . . . . , . . , , 44 Section 613, Indemnification ................................ . 45 ARTICLE VB AMENDMENTS Section 701. Mailing ..................................... . 45 Section 702. Powers of Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 703. Consent of Owners ............................... 46 Section 704. Modifications by Unanimous Consent . . . . . . . . . . . . . . . . . . , . 48 Section 705. Exclusion of Certificates and Additional Certificates . . . . . . , . . . . 48 Section 706. Notation on Certificates and Additional Certificates .......... . 48 ARTICLE VIII BOOK-ENTRY SYSTEM Section 801. Book-Entry System; Limited Obligation of Agency .......... . 49 Section 802. Representation Letter . . . . . . . . . . . . . . . . . . . . . . . . , . . . . , 50 Section 803. Transfers Outside Book-Entry System. . . . , . . . . . . , , . . . . . . , 50 Section 804. Payments to the Nominee ............,.............. 50 Section 805. Initial Depository and Nominee . . . . . . . . . . . . . . . . . . . . . . . . 50 ARTICLE IX MISCELLANEOUS Section 901. Defeasance .................................... 51 Section 902. Evidence of Signatures of Certificate Owners and Ownership of Certificates . . . . . . . . . . . . . . . . . . . . . . . , . . . . . . . . . , , . 52 Section 903. Moneys Held for Particular Certificates and Additional Certificates 52 Section 904. Preservation and Inspection of Documents . . . . . . . . . . . . . , . . , 52 Section 905. Parties Interested Herein. . . . . , . . . . . . . , . . . . . . . . . , , . . . 53 Section 906. Severability of Invalid Provisions ..................... . 53 Section 907. Recording and Filing , . . . . . . . , . . . . . . . . . . , , . . . . . , , , . 53 Section 908. Notices ..................................... . 53 Section 909. California Law . . . . . , . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 910. Binding on Successors ..................,.......... 54 Section 911. Headings .................................... . 54 Section 912. Execution in Counterparts . , . . . . . . . . . . , . . . . . . . , . , , . , . 54 PUBL:27208_111381 B2345 ,52 ijj ARTICLE X PROVISIONS RELATING TO MUNICIPAL BOND INSURANCE POLICY Section 1001. Consent of Insurer .............................. . 54 Section 1002. Notices to be Given to Insurer ....................,.., 55 Section 1003. Payment Procedure Pursuant to the Municipal Bond Insurance Policy. . . . . . . . . . . . . . . . . . . . . . . . . , . . . . . , . . . . , , . 56 Section 1004. Trustee-Related Provisions ......................... . 57 Section 1005. Parties Interested Herein . . . . . . . . . . . . . . . . . . . . . . . . . . . , 58 Section 1006. Termination of Insurance Provisions ................... . 58 Exhibit A Form of Certificate, . . . . . . . . . . . . . . . . . , . . , . . , . . , . . . . , , " A-I Exhibit B Form of Requisition ....,..............,..,..,..,..,.., B-1 PUBL:2no8_11138182345.52 iv - ,- ------- TRUST AGREEMENT RELATING TO THE 1995 REFUNDING CERTIFICATES OF PARTICIPATION (CITY OF POWAY 1991 CAPITAL IMPROVEMENT PROJECT, POWAY ROYAL MOBILEHOME PARK) THIS TRUST AGREEMENT, dated as of July 1, 1995 (the "Trust Agreement"), is entered into by and among the City of Poway, a municipal corporation (the "City"), Bank of America National Trust and Savings Association, a national banking association organized and existing under the laws of the United States, as trustee (the "Trustee"), and the Poway Redevelopment Agency, a political subdivision of the State of California duly organized and existing under the laws of the State of California (the "Agency"); WIIN)HS,,!HH: In consideration of the mutual agreements and covenants herein contained and for other valuable consideration, the parties hereto agree as follows: WHEREAS, the Agency and the City have entered into a Site Lease dated as of the date hereof (the "Site Lease"), pursuant to which the City has agreed to lease certain real property and improvements described therein (the "Site") to the Agency; and WHEREAS, the Agency and the City have entered into a Lease Agreement dated as of the date hereof (the "Lease Agreement"), pursuant to which the City has agreed to lease back from the Agency the Site for the purpose of facilitating the sale of the Certificates (as defined herein) and any Additional Certificates (as defined herein) to be executed and delivered under this Trust Agreement, the proceeds of which will be used to advance refund those certain $28,300,000 1991 Certificates of Participation (City of Poway Capital Improvement Project - Poway Royal Mobilehome Park) the proceeds of which were used to acquire and construct certain public improvements (the "Prior Certificates"); and WHEREAS, pursuant to an Assignment Agreement dated as of the date hereof (the "Assignment Agreement"), the Agency has transferred all of its rights, title and interest (excluding its rights to indemnification and payment or reimbursement of its costs and expenses) in and to the Site Lease and the Lease Agreement, including the right to receive certain rental payments due thereunder (the "Lease Payments "), to the Trustee for the benefit of the Owners of the Certificates and any Additional Certificates; and WHEREAS, the Trustee shall execute and deliver the Certificates and any Additional Certificates on the respective Delivery Dates therefor evidencing proportionate interests in certain rights under the Lease Agreement, including the right to receive Lease Payments payable thereunder, and shall undertake such other responsibilities as are assigned to the Trustee pursuant to this Trust Agreement; and WHEREAS, the Agency will deposit with the Trustee certain of the proceeds of the Certificates in order to advance refund the Prior Certificates and the proceeds of any Additional pU8L27208_11138182345,52 Certificates in order to finance the costs of the Project and to accomplish any other purposes described for such Additional Certificates; and WHEREAS, the City and the Agency represent that all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and entering into of this Trust Agreement do exist, have happened and have been performed in due time, form and manner as required by law, and the parties hereto are duly authorized to execute and enter into this Trust Agreement; and NOW, THEREFORE, in consideration of the premises, of the acceptance by the Trustee of its duties hereby imposed, and of the purchase and acceptance of the Certificates and any Additional Certificates by the Owners thereof, and to fix and declare the terms and conditions upon which the Certificates and any Additional Certificates are to be executed, delivered, secured and accepted by all persons who shall from time to time be or become Owners thereof, and to secure the payment of the Certificates and any Additional Certificates and the interest with respect thereto according to their tenor, purpose and effect, and to secure the performance and observance of all of the covenants, agreements and conditions contained therein, herein and in the Lease Agreement, the City and the Agency by these presents do hereby grant, bargain, sell, warrant, convey, confrrm, assign, transfer in trust, grant a security interest in and pledge unto the Trustee for the benefit of the Owners of Certificates and any Additional Certificates all their right, title and interest in and to the property, real and personal, hereinafter described, subject only to the provisions hereof permitting the application thereof for or to the purposes and on the terms and conditions set forth herein (said property being herein sometimes referred to as the . Trust Estate'): GRANTING CLAUSES All right, title and interest of the City and the Agency, if any, in the Lease and the Site Lease and all other security therefor or certificates or instruments evidencing the same, and all amendments, modifications and renewals thereof, and all casualty insurance proceeds or condemnation awards payable with respect thereto, and any interest earnings thereon, other than such parties' rights to indemnification and payment or reimbursement of costs and expenses thereunder. All right, title and interest of the City and the Agency in and to any moneys held under this Trust Agreement by the Trustee (other than amounts held in the Rebate Fund), including the proceeds of the Certificates and the interest, profits and other income derived from the investment thereof, all certificates or other instruments representing the same, and all renewals thereof, additions thereto and replacements or substitutions therefor. All funds, moneys and securities and any and all other rights and interests in property whether tangible or intangible from time to time hereafter by delivery or by writing of any kind, conveyed, mortgaged, pledged, assigned or transferred as and for additional security hereunder for the Certificates by the City or by anyone on its behalf or with its written consent to the Trustee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof. 'U8L,27208_11138182345.52 2 -'----.---.-- _n TO HA VB AND TO HOLD all and singular with all privileges and appurtenances hereby given, granted, bargained, sold, conveyed, assigned, pledged, mortgaged and transferred or agreed or intended so to be, whether now owned or hereafter acquired, including any and all additional property that by virtue of any provision hereof or of any indenture supplemental hereto shall hereafter become subject to this Trust Agreement and to the trusts hereby created, unto the Trustee and its successors in trust and assigns forever; IN TRUST, NEVERTHELESS, upon the terms and trusts herein set forth for the equal and proportionate benefit, security and protection of the registered owners from time to time of any of the Certificates authenticated and delivered under this Trust Agreement and issued by the City and Outstanding, without preference, priority or distinction as to lien, or otherwise of any one Certificate over any other Certificate by reason of priority in the issue, sale or negotiation thereof, or of any other cause; PROVIDED, HOWEVER, that if the City, its successors or assigns, shall well and truly pay, or cause to be paid, the principal of, premium, if any, and interest due with respect to the Certificates, at the times and in the manner mentioned in the Certificates according to the true intent and meaning thereof, or shall provide, as permitted hereby, for the payment thereof by depositing with the Trustee the entire amount due or to become due thereon, and shall well and truly keep, perform and observe all the covenants and conditions pursuant to the terms of this Trust Agreement to be kept, performed and observed by it, and shall pay, cause to be paid or make provision for payment to the Trustee of all sums of money due or to become due in accordance with the terms and provisions hereof, then upon such fmal payment this Trust Agreement and the rights hereby granted shall cease, determine and be void; otherwise this Trust Agreement shall remain in full force and effect; AND IT IS HEREBY COVENANTED that all of the Certificates shall be issued, authenticated and delivered, and that the Trust Estate shall be held by the Trustee, subject to the further covenants, conditions, uses and trusts hereinafter set forth, and the City and the Agency agree and covenant with the Trustee and with the registered owners from time to time of the Certificates, as follows: ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION Section 101. Definitions. The terms set forth in this section shall have the meanings ascribed to them for all purposes of this Trust Agreement unless the context clearly indicates some other meaning. Additional Certificates shall mean any certificates of participation executed and delivered by the Trustee in accordance with the provisions of Section 317 of this Trust Agreement subsequent to the Delivery Date for the Certificates which are secured on a parity with the Certificates. PUBL,27208_11138182345.52 3 Additional Payments shall mean any amount payable by City under the terms of the Lease Agreement, other than the Lease Payments. Assi2nment A2reement shall mean that certain Assignment Agreement, dated as of July 1, 1995, by and between the Agency and the Trustee, pursuant to which the Agency assigns certain of its rights, title and interest in and to the Lease Agreement and the Site Lease to the Trustee on behalf of the Owners of the Certificates and any Additional Certificates, as amended and supplemented from time to time. Authorized ReDresentative of the A2ency shall mean the Executive Director of the Agency and any other person or persons designated by the governing board of the Agency and authorized to act on behalf of the Agency as certified by a written certificate signed on behalf of the Agency by the Executive Director of the Agency and containing the specimen signature of each such person. Authorized ReDresentative of the Citr shall mean the City Manager, his or her written designee, and any other person or persons designated by the City Council of the City and authorized to act on behalf of the City by a written certificate signed on behalf of the City by the Mayor of the City and containing the specimen signature of each such person. Bond Counsel shall mean an attorney or firm of attorneys of nationally recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Code and acceptable to the City. Business Day shall mean any day other than (i) a Saturday or Sunday or legal holiday or a day on which banking institutions in the city in which the principal corporate trust office of the Trustee is located are authorized to close, (ii) a day on which the New York Stock Exchange is closed, (iii) if a Credit Facility is then in effect, a day on which the issuer of the Credit Facility is authorized or required by law or executive order to close, or (iv) if a Reserve Account Policy is then in effect, a day on which the issuer of any Reserve Account Policy is authorized or required by law or executive order to close. Certificate or Certificates shall mean the $ 1995 Refunding Certificates of Participation (City of Poway 1991 Capital Improvement Project - Poway Royal Mobilehome Park) executed and delivered by the Trustee pursuant to this Trust Agreement. Certificate Fund shall mean the fund by that name established in Section 401 hereof. Certificate Year shall mean, with respect to the Certificates and any Additional Certificates, (i) the period beginning on the Delivery Date of the Certificates or the Additional Certificates, as applicable, and ending on the Interest Payment Date next preceding the date that is twelve months subsequent to such Delivery Date, and (ii) each successive twelve month (or shorter) period thereafter until there are no longer any Certificates or Additional Certificates Outstanding. PUBL,27208_11138182345.52 4 - ~ shall mean the Internal Revenue Code of 1986, as amended, and any regulations, rulings, judicial decisions, and notices, announcements, and other releases of the United States Treasury Departtnent or Internal Revenue Service interpreting and construing it. Comuletion Certificate shall mean a certificate of an Authorized Representative of the City delivered pursuant to Section 3.5 of the Lease Agreement and in the form required by Section 402( c) hereof to the effect that the Project, or the portion thereof to which such certificate relates, has been completed substantially in conformity with the plans and specifications for the Project or such portion thereof. Cost shall mean and be deemed to include, with respect to the Project, together with any other proper item of cost not specifically mentioned herein, (a) costs of payment of, or reimbursement for, acquisition, design, construction, rehabilitation, installation, delivery and financing of the Project, including, but not limited to, the payment of real property rental, administrative costs and capital expenditures relating to acquisition, construction and installation, inspection costs, filing and recording costs, printing costs, reproduction and binding costs, fees and charges of the Trustee pursuant to the Trust Agreement and other financing documents, legal fees and charges, financial, accounting and other professional consultant fees, costs of rating agencies or credit ratings, fees for the printing, execution, transportation and safekeeping of the Certificates or any Additional Certificates; (b) all other costs which the City shall be required to pay under the terms of any contract or contracts for the acquisition, construction, delivery and installation of the Project, including, but not limited to, the cost of insurance; (c) any sums required to reimburse the City for advances made for any of the above items, or for any other costs incurred and for work done, which is properly chargeable to the Project; (d) any costs paid from the Net Proceeds to repair, restore or replace the Project; and (e) such other expenses not specified herein as may be necessary or incidental to the acquisition, construction, delivery and installation of the Project, the financing thereof and the placing of the same in use and operation. Cost as defined herein shall be deemed to include the cost and expenses incurred by any agent of the City for any of the above mentioned items. Costs of Issuance shall mean all the costs of executing and delivering the Certificates or any Additional Certificates, including, but not limited to, City administrative costs and expenses directly attributable to the execution and delivery of the Certificates, or any Additional Certificates, all printing and document preparation expenses in connection with this Trust Agreement, the Lease Agreement, the Assignment Agreement, the Site Lease, the Escrow Agreement, the Certificates, any Additional Certificates and the Official Statement pertaining to the Certificates or any Additional Certificates; rating agency fees; appraisal fees; market study fees; legal fees and expenses of counsel with respect to the financing of the Project; fees and costs associated with obtaining any Municipal Bond Insurance Policy, Credit Facility or Reserve Account Policy obtained in connection with an issue of Additional Certificates; any accounting, computer and other expenses incurred in connection with the Certificates or any Additional Certificates; the initial fees and expenses of the Trustee and its counsel and any paying agent (including, without limitation, origination fees and first annual fees payable in advance); the fees and expenses of the City's financial advisor; the fees and expenses of disclosure counsel; and other fees and expenses incurred in connection with the execution and delivery of the Certificates or any Additional Certificates or the implementation of the financing for the Project, including amounts to reimburse the City for advances made for any of the foregoing, to the extent such fees and expenses are approved by the City. PUBL,27208_1I 1381B2345.52 5 - Credit Facilitr shall mean an irrevocable and unconditional letter of credit, a standby purchase agreement, a line of credit or other similar credit arrangement issued by a Qualified Bank to satisfy all or a portion of the Reserve Requirement. Deliverv Date shall mean, as applicable, the date on which the Certificates and any Additional Certificates are initially delivered. DeDository shall mean The Depository Trust Company, New York, New York, and its successors and assigns as securities depository for the Certificates, or any other securities depository acting as Depository under Article VIII. Escrow Al!:reement shall mean the Escrow Agreement, dated as of July I, 1995, by and between the City and the Escrow Bank relating to the Prior Certificates, and any duly authorized and executed amendments thereto. Escrow Bank shall mean Bank of America National Trust and Savings Association, acting in its capacity as such under the Escrow Agreement, and any successor thereto. Escrow Fund shall mean the fund by that name which is established in the Escrow Agreement. Fiscal Year shall mean the twelve month fiscal period of the City which commences on July 1 in every year and ends on June 30 of the succeeding year. Insurance and Condemnation Fund shall mean the fund by that name established in Section 401 hereof. Insurer shall mean Financial Security Assurance, Inc., a -domiciled stock insurance company, or any successor thereto. Interest ComDonent shall mean any Lease Payment, or portion thereof, which is designated and paid as interest pursuant to the terms of the Lease Agreement; the Interest Component of a Certificate or an Additional Certificate is the proportionate interest in the Interest Component of the Lease Payments which is evidenced by such Certificate or Additional Certificate, as applicable. Interest Payment Date shall mean February 1 and August 1 of each year, commencing February 1, 1996, until the earlier of the maturity date or Redemption Date of the last Outstanding Certificates or Additional Certificates. Lease Al!:reement shall mean the Lease Agreement, dated as of July 1, 1995, by and between the Agency and the City, and any and all modifications, alterations, amendments and supplements thereto made in accordance with the provisions of the Lease Agreement and this Trust Agreement. PUBL,27208_11138182345.52 6 Lease Payment shall mean the amount to be paid by the City for the use and occupancy of the Site pursuant to Section 4.4 of the Lease Agreement, but does not include any Additional Payments. Lease Payment Date shall mean the fifth Business Day prior to each Interest Payment Date. Lease Pavment Fund shall mean the fund by that name established in Section 401 hereof. Lease Term shall mean the period during which the Lease Agreement is in effect as specified in the Lease Agreement. Moody's shall mean Moody's Investors Service, Inc., a municipal bond rating service with offices in New York, New York, or any successor thereto. Municioal Bond Insurance Policy shall mean the municipal bond insurance policy issued by the Insurer insuring the payment when due of the Interest Components and Principal Components represented by the Certificates and any municipal bond insurance policy issued in connection with an issue of Additional Certificates insuring the payment of the Interest Components and Principal Components represented by such issue of Additional Certificates. Net Proceeds shall mean the proceeds of any insurance required to be maintained pursuant to Sections 5.3 and 5.5 of the Lease Agreement or condemnation proceeds paid with respect to the Site and remaining after payment therefrom of all expenses incurred in the collection thereof. Nominee shall mean the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 801. Outstandinl!:, when used with reference to any Certificates or Additional Certificates, shall mean, as of any date, the Certificates or Additional Certificates theretofore or thereupon being executed and delivered under this Trust Agreement except: (i) Certificates or Additional Certificates cancelled or delivered for cancellation by the Trustee on or prior to such date; (ii) Certificates (or portions of Certificates) or Additional Certificates (or portions of Additional Certificates) defeased as provided in Section 901 of this Trust Agreement; (iii) Certificates or Additional Certificates in lieu of or in substitution for which other Certificates or Additional Certificates, as applicable, shall have been executed and delivered pursuant to Article III of this Trust Agreement; and (iv) Certificates or Additional Certificates of the type described in Section 315 hereof. PUBL,27208_11138182345.52 7 - Owner shall mean the registered Owner of any Certificate or Additional Certificate, as applicable. Particioants shall mean those broker-dealers, banks and other financial institutions from time to time for which the Depository holds Certificates as securities depository. Pavinl!: Al!:ent shall mean the Trustee or such other entity as is appointed by the City to make principal and interest payments with respect to the Certificates and any Additional Certificates. Permitted Investments shall mean: (a) Cash (insured at all times by the Federal Deposit Insurance Agency or otherwise collateralized with obligations described in paragraph (b) below); or (b) Direct obligations of (including obligations issued or held in book entry form on the books of) the Department of Treasury of the United States of America; (c) obligations of any of the following federal agencies which obligations represent full faith and credit of the United States of America, including: - Export - Import Bank _. Farmers Home Administration - General Services Administration - U.S. Maritime Administration - Small Business Administration - Government National Mortgage Association (GNMA) - U.S. Department of Housing & Urban Development (PHA's) - Federal Housing Administration; (d) bonds, notes or other evidences of indebtedness rated" AAA" by Standard & Poor's and "Aaa" by Moody's issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation with remaining maturities not exceeding three years; (e) U.S. dollar denominated deposit accounts, federal funds, certificates of deposit and banker's acceptances with domestic commercial banks (including the Trustee) which have the highest short-term rating of each Rating Agency and are payable on demand or mature no more than 360 days after the date of purchase. (Ratings on holding companies are not considered as the rating of the bank); (f) commercial paper which is rated in the single highest classification of each Rating Agency and which matures not more than 270 days after the date of purchase; PUBL,27208 _11138182345.52 8 ~-_.- (g) investments in a money market fund rated in the highest rating category of the Rating Agency; (h) Pre-refunded Municipal Obligations defined as follows: Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and which are rated, based on the escrow, in the highest rating category of the Rating Agency; (i) other forms of investments approved in writing by the Insurer with notice to each Rating Agency; (j) deposits in the Local Agency Investment Fund as administered by the Treasurer of the State; and (k) shares of beneficial interest issued by diversified management companies, as defined in Section 23701m of the California Revenue and Taxation Code, investing in the securities and obligations as authorized by clauses (1) to (10), inclusive, of this definition. To be eligible for investment pursuant to this subdivision, these companies shall be rated in the highest rating category of the Rating Agency. Person shall mean natural persons, firms, corporations, partnerships, associations, trusts, public bodies and other entities. Preoavment shall mean any payment made by the City pursuant to Article X of the Lease Agreement as a prepayment of Lease Payments. Princioal Comoonent shall mean, with respect to a Lease Payment, the portion thereof which is designated and paid as principal pursuant to the terms of the Lease Agreement; the Principal Component of a Certificate or an Additional Certificate is the proportionate interest in the Principal Component of the Lease Payments which is evidenced by such Certificate or an Additional Certificate, as applicable. Princioal Comoonent Pavment Date shall mean August 1 of each year in which a Principal Component of a Certificate or an Additional Certificate is due. Prior Certificates shall mean the $28,300,000 1991 Certificates of Participation (City of Poway Capital Improvement Project - Poway Royal Mobilehome Park) the proceeds of which were used to acquire and construct certain public improvements and which are being advance refunded with the proceeds of the Certificates. Proiect shall mean any capital improvements specified by the City from time to time to be acquired or constructed with the proceeds of any Additional Certificates. PUBL,27208_11138182345.52 9 - Proiect Fund shall mean the fund by that name which is established in Section 401 hereof. Qualified Bank shall mean a fmancial institution whose long-term obligations is rated not less than AA by Standard & Poor's and As by Moody's. Ratinl!: Al!:ency shall mean Moody's if Moody's then rates the Certificates and Standard & Poor's if Standard & Poor's then rates the Certificates and any of their respective successors and assigns that then rate the Certificates. Rebate Fund shall mean the fund by that name established in Section 401 hereof. Rebate Rel!:ulations shall mean any fmal, temporary or proposed Treasury Regulations promulgated under Section 148(f) of the Code. Record Date shall mean the fifteenth calendar day of the month preceding each Interest Payment Date, whether or not such fifteenth day is a Business Day. Redemotion Date means the date fixed for an optional or mandatory redemption, as the case may be, prior to maturity, of the Certificates and any Additional Certificates. Redemotion Price shall mean with respect to each Certificate and Additional Certificate called for redemption an amount equal to the Principal Component to be prepaid, and the premium, if any, due thereon, together with the Interest Components due to the date fixed for redemption. Rental Interruotion Insurance shall mean the policy of insurance required to be maintained pursuant to Section 5.4 of the Lease Agreement. Reoresentation Letter shall mean a representation letter from the City and the Trustee to the Depository, as described in Section 802 hereof. Reserve Account Policy shall mean a policy of insurance or surety bond issued by a municipal bond insurer, obligations insured by which have a rating by the Rating Agency which at the time of issuance is the highest rating then issued by said Rating Agency, to satisfy all or a portion of the Reserve Requirement. Reserve Reouirement shall mean, as of the date of calculation, the least of (i) an amount equal to the maximum amount of Lease Payments due on the fifth Business Day preceding any August 1 and the next preceding February 1 with respect to Outstanding Certificates and Additional Certificates, (H) an amount equal to 10% of the proceeds (within the meaning of Section 148 of the Code) of all Certificates and Additional Certificates, or (Hi) an amount equal to 125% of the average annual Lease Payments due with respect to Outstanding Certificates and Additional Certificates; provided, however, that with the prior approval of the Insurer such Reserve Requirement or a portion thereof may be provided by one or more Reserve Account Policies or Credit Facilities upon the filing by the City with the Trustee of (x) written evidence that the use of such Reserve Account Policies or Credit Facilities to satisfy the Reserve Requirement or any portion thereof will not by itself result in the downgrading or withdrawal of PUBL,27208_1 I 138182345.52 10 ."--....------- any credit rating then in effect with respect to the Certificates or Additional Certificates Outstanding, and (y) an opinion of Bond Counsel to the effect that such event will not impair the exclusion from gross income for federal income tax purposes or from State personal income taxes of the Interest Component of each Lease Payment. Serial Certificates shall mean, with respect to the Certificates, the Certificates maturing on August 1 in each of the years 19_ through 20_ and with respect to any Additional Certificates, the Additional Certificates so designated in the Supplemental Trust Agreement relating to such Additional Certificates. Sinkinl!: Account Installment shall mean the Principal Component of Certificates required to be paid on any Sinking Account Installment Date pursuant to Section 310(b) hereof or the Principal Component of any Additional Certificates required to be paid on a Sinking Account Installment Date pursuant to the Supplemental Trust Agreement relating thereto. Sinkinl!: Account Installment Date shall mean, with respect to the Term Certificates, August 1 of each year, commencing August 1,20_ and terminating August 1,20_ and, with respect to any Additional Certificates, the date or dates so specified with respect to such Additional Certificates in the Supplemental Trust Agreement relating thereto. Site shall mean the real property, including all improvements thereto, described from time to time in Exhibit A to the Site Lease and Exhibit A to the Lease Agreement, as such Exhibit A may be amended and supplemented from time to time in accordance with the provisions of the Lease. Site Lease shall mean the Site Lease, dated as of July 1, 1995, by and between the Agency and the City pursuant to which the City has leased the Site to the Agency, and any and all modifications, alterations, amendments and supplements thereto made in accordance with the Lease Agreement and this Trust Agreement. Six-Month Period shall mean the period of time beginning on the Delivery Date of the Certificates or Additional Certificates, as applicable, and ending six consecutive months thereafter, and each six-month period thereafter until the latest maturity date of the Certificates and the Additional Certificates (and any obligations that refund the Certificates and the Additional Certificates). Standard & Poor's or ~ shall mean Standard & Poor's Rating Group, a municipal bond rating service with offices in New York, New York, or any successor thereto. ~ shall mean the State of California. Suoo!emental Trust Al!:reement shall mean any agreement supplemental to or amendatory of this Trust Agreement. Tax Certificate shall mean the certificate by that name to be executed by the City on a Delivery Date to establish certain facts and expectations and which contains certain covenants relevant to compliance with the Code. PUBL,27208_11138182345.52 11 Term Certificates shall mean the Certificates maturing on August 1, 20_ and, with respect to any Additional Certificates, the Additional Certificates so designated in the Supplemental Trust Agreement relating to such Additional Certificates. Title Insurance shall mean the policy or policies of insurance required to be maintained pursuant to Section 5.5 of the Lease Agreement. Treasury Rel!:ulations shall mean the regulations adopted or proposed by the Department of Treasury from time to time with respect to obligations issued pursuant to Section 103 of the Code. Trust Al!:reement shall mean this Trust Agreement and any and all amendments hereof and supplements hereto made in accordance with the provisions hereof. Trust Estate shall mean as set forth in the Granting Clause hereof all right, title and interest of the Trustee in and to the Lease Payments and the Lease Agreement including, without limitation, all amounts from time to time deposited in the funds, accounts and subaccounts created pursuant to this Trust Agreement (other than the Rebate Fund), including to the extent set forth herein investment earnings thereon, and any additional property that may from time to time, by delivery or by writing of any kind, be subjected to the lien hereof by the City, the Agency, or by anyone on their behalf. Trustee shall mean Bank of America National Trust and Savings Association, and its successor or assigns which may at any time be substituted in its place pursuant to the provisions of this Trust Agreement. Section 102. Rules of Construction. Except where the context otherwise requires, words importing the singular number shall include the plural number and vice versa, and words importing persons shall include firms, associations and corporations. Section 103. Exhibits. The following exhibits are attached to and by this reference made a part of this Trust Agreement: Exhibit A: Form of Certificate Exhibit B: Form of Requisition ARTICLE II ASSIGNMENT; DECLARATION OF TRUST; REPRESENTATIONS AND RECITALS Section 201. Declaration of Trust by Trustee. The Trustee hereby declares that it holds and will hold the Trust Estate upon the trusts hereinafter set forth for the use and benefit of the Certificate Owners and the Owners of any Additional Certificates. PUBL,27208_1 I 138182345.52 12 Section 202. Deposit of Moneys. In order to induce the City to proceed with the lease of the Site to the Agency and to provide the funds necessary to advance refund the Prior Certificates, the Agency has executed the Site Lease and the Lease Agreement and has consented to the Trustee's execution and delivery of the Certificates and has deposited the net proceeds of the sale of the Certificates with the Trustee. Upon receipt of such initial deposit, the Trustee shall transfer the amounts received from the Agency as specified in Section 40 1 hereof. Section 203. Conditions Precedent Satisfied. All acts, conditions and things required by law to exist, happen and be performed precedent to and in connection with the execution and entering into of this Trust Agreement have happened and have been performed in regular and due time, form and manner as required by law. Section 204. Due Authorization and Execution. Each of the parties hereby represents and warrants that it has full legal authority and is duly empowered to enter into this Trust Agreement, and has taken all actions necessary to authorize the execution and delivery of this Trust Agreement. ARTICLE III TERMS AND PROVISIONS OF THE CERTIFICATES AND ADDmONAL CERTIFICATES Section 301. Preparation of Certificates and Additional Certificates. (a) The Agency hereby directs the Trustee to execute and deliver to the original purchaser or purchasers thereof Certificates in an aggregate principal amount of $ evidencing undivided proportionate interests in certain rights under the Lease Agreement, including the right to receive the Lease Payments to be paid by the City under the Lease Agreement. The Certificates shall originally be registered in the name of the Nominee. Additional Certificates may either be in book-entry form subject to the provisions of Article VIII or in physical form subject to the provisions of this Article III. Each Certificate and Additional Certificate shall represent an undivided proportionate interest in the Principal Component of the Lease Payments due and payable on certain Lease Payment Dates and in the Interest Component of the Lease Payments due and payable on each Lease Payment Date to and including each maturity date or Redemption Date. The Certificates shall be designated "City of Poway 1995 Refunding Certificates of Participation (City of Poway 1991 Capital Improvement Project - Poway Royal Mobilehome Park)". Additional Certificates shall be designated as set forth in a written certificate of an Authorized Representative of the City to the Trustee. (b) If at any time after the Delivery Date of the Certificates the City determines it necessary, the City may provide for the execution and delivery of and sell Additional Certificates secured on a parity with the Certificates provided that the conditions set forth in Section 317 hereof are satisfied. The Trustee shall not at any time while any Certificate or Additional Certificate is Outstanding execute and deliver certificates of participation payable from the Lease Payments except as provided in Sections 305, 306, 307, 308, 309, 313 and 317 hereof. pUBL,27208_11138182345.52 13 Section 302. Payments from Trust Estate Only; Distribution of Trust Estate. (a) All amounts payable with respect to the Certificates and the Additional Certificates pursuant to this Trust Agreement shall be paid only from the income of and proceeds from the Trust Estate and only to the extent that the Trustee shall have actually received sufficient income or proceeds from the Trust Estate to make such payments in accordance with the terms of Article V hereof. Each Owner of a Certificate or Additional Certificate agrees to look solely to the income of and the proceeds from the Trust Estate to the extent available for distribution to such Owner as herein provided, and each Certificate Owner and each Owner of any Additional Certificate agrees that the Trustee is not personally liable to any Owner for any amounts payable under this Trust Agreement or subject to any liability under this Trust Agreement except liability under this Trust Agreement as a result of negligence or willful misconduct by the Trustee. (b) So long as the Lease Agreement shall be in effect, all Lease Payments, insurance proceeds and other payments of any kind constituting a part of the Trust Estate payable to the Trustee with respect to the Site, shall be paid directly to the Trustee for distribution, in accordance with Article IV of this Trust Agreement. Section 303. Description of the Certificates and Additional Certificates. (a) The Certificates shall be dated as of July 1, 1995 and the Principal Components evidenced thereby shall become due as set forth in Section 303(b) and (c) below. The Certificates shall be executed and delivered in the aggregate Principal Component of Dollars ($ ) with Interest Components accruing from July 1, 1995. (b) The Serial Certificates shall mature on August 1 in the years and amounts and interest with respect thereto shall be payable at the rates as shown below: Maturity Date Principal Interest (Augusr I) Component Rate $ ,000.00 % ,000.00 ,000.00 ,000.00 ,000.00 ,000.00 ,000.00 ,000.00 ,000.00 ,000.00 ,000.00 ,000.00 ,000.00 PUBU7208_1 1 138182345.52 14 ---------- (c) The Term Certificates maturing August 1, 20_ shall be executed and delivered in the aggregate principal amount of $ , and the Principal Components evidenced thereby shall be subject to prior payment pursuant to mandatory Sinking Account Installments pursuant to Section 31O(b) hereof and interest with respect thereto shall be payable at the rate of % per annum. (d) Interest with respect to each Certificate and Additional Certificate shall accrue from the Interest Payment Date next preceding the date of execution thereof, unless (i) it is executed on an Interest Payment Date, in which event interest shall accrue from the date of execution thereof, (ii) it is executed after a Record Date and before the close of business on the immediately following Interest Payment Date, in which event interest with respect thereto shall be payable from such Interest Payment Date, or (iii) it is executed prior to the close of business on the first Record Date, in which event interest with respect thereto shall be payable from the dated date of such Certificate or Additional Certificate, as applicable; orovided, however, that, if at the time of registration of any Certificate or Additional Certificate interest with respect thereto is in default, interest with respect thereto shall be payable from the Interest Payment Date to which interest has previously been paid or made available for payment or from the dated date of such Certificate or Additional Certificate, as applicable, if no interest has been paid or made available for payment. Interest with respect to the Certificates and Additional Certificates shall accrue on overdue Principal Components at the same rate as borne by the particular Certificates or Additional Certificates. Interest with respect to any Certificate or Additional Certificate shall be payable on each Interest Payment Date following the Delivery Date therefor to the Owner thereof as of the close of business on the Record Date, such interest to be paid by check, mailed by the Trustee to the Owner first class mail, postage prepaid, on such Interest Payment Date, at his address as it appears on the registration books maintained by the Trustee pursuant to Section 306 hereof or, in the case of an Owner of Certificates representing at least $1,000,000 in aggregate Principal Components or an Owner of Additional Certificates representing at least $1,000,000 in aggregate Principal Components, by wire transfer in immediately available funds to an account in the United States designated in writing by such Owner to the Trustee prior to the applicable Record Date. Interest Components with respect to the Certificates and any Additional Certificates shall be computed on the basis of a 36O-day year comprised of 12 months of 30 days each. Payments of defaulted Interest Components shall be paid in the same manner as payment is made on a regular Interest Payment Date on the payment date fixed therefor by the Trustee to the Owners of the Certificates and Owners of any Additional Certificates as of a special record date to be fixed by the Trustee, notice of which payment date and special record date shall be given to the Owners of the Certificates and the Owners of any Additional Certificates not less than ten days prior thereto. Principal Components and premium, if any, due with respect to any Certificate and Additional Certificate are payable at the location designated by the Nominee, or, at any time the Certificates and Additional Certificates are not in book-entry form pursuant to Article VIII, upon surrender thereof at the corporate trust office of the Trustee in Los Angeles, California. (e) The Certificates and any Additional Certificates shall be delivered in fully registered form and, except as otherwise provided in Section 801 hereof, in the denominations of $5,000 or any integral multiple thereof. Unless the Agency shall otherwise direct in writing, the Certificates and any Additional Certificates shall be lettered and numbered in such manner as the PUBL,27208_11138182345.52 15 -'- - Trustee shall deem adequate and appropriate for recordkeeping purposes. Subject to the provisions of this Trust Agreement, the Certificates shall be substantially in the form set forth in Exhibit A hereto and any Additional Certificates shall be substantially in the form set forth in the Supplemental Trust Agreement executed with respect to such Additional Certificates. (f) The Trustee shall maintain, or cause to be maintained at its principal corporate trust office a system by which a record of the names and addresses of the Owners of any Certificates and Additional Certificates as of any particular time can be kept; and the Trustee shall, upon written request of the City, furnish such information to the City. Section 304. Medium of Payment. The Certificates and any Additional Certificates shall be payable, with respect to Interest Components, Principal Components and premium, if any, in lawful money of the United States of America. Section 305. Execution and Exchange. (a) Subject to the provisions of Section 801 hereof, the Certificates and any Additional Certificates shall be executed in the name of, and by, the Trustee, as trustee under this Trust Agreement, by the manual signature of an authorized signatory of the Trustee. (b) Subject to the provisions of Section 801 hereof, upon surrender of a Certificate or an Additional Certificate at the corporate trust office of the Trustee in Los Angeles, California with a written instrument of transfer satisfactory to the Trustee, duly executed by such Owner or his duly authorized attorney, the Trustee shall, at the option of such Owner and upon payment by such Owner of any charges which the Trustee may make as provided in Section 307, exchange such Certificates or Additional Certificates, as applicable, for Certificates or Additional Certificates of the same issue representing the same aggregate amount of Principal Components and the same maturity and interest rate. Section 306. Negotiability, Transfer and Registry. (a) Each Certificate and Additional Certificate shall be transferable only upon the books of the Trustee which shall be kept for that purpose at the principal corporate trust office of the Trustee, by the Certificate Owner or Owner of any Additional Certificates in person or by his attorney duly authorized in writing, upon surrender thereof together with a written instrument of transfer satisfactory to the Trustee duly executed by such Owner or his duly authorized attorney. Upon the transfer of any such Certificate or Additional Certificate, the Trustee shall deliver in the name of the transferee a new Certificate or Additional Certificate of like maturity and representing the same issue and aggregate amount of Principal Components as the surrendered Certificate or Additional Certificate, as applicable. (b) The Trustee and the City may deem and treat the person in whose name any Certificate or Additional Certificate shall be registered upon the books of the Trustee as the absolute Owner of such Certificate or Additional Certificate, whether such Certificate or Additional Certificate shall be overdue or not, for the purpose of receiving payment of, or on account of, the Principal Components, premium, if any, and Interest Components due with PUBL,27208_1 1 138182345.52 16 respect to such Certificate or Additional Certificate and for all other purposes; and all such payments so made to any such Owner or upon his order shall be valid and effectual to satisfy and discharge the liability upon such Certificate or Additional Certificate to the extent of the sum or sums so paid; and neither the City nor the Trustee shall be affected by any notice to the contrary. Section 307. Regulations with Respect to Exchanges and Transfers. In all cases in which the privilege of exchanging Certificates and Additional Certificates or transferring Certificates and Additional Certificates is exercised, the Trustee shall execute and deliver Certificates and Additional Certificates in accordance with the provisions of this Trust Agreement. All Certificates surrendered in any such exchanges or transfers shall forthwith be cancelled by the Trustee. For every such exchange or transfer of Certificates and Additional Certificates, whether temporary or definitive, the Trustee may make a charge sufficient to reimburse it for any tax, fee or other governmental charge required to be paid with respect to such exchange or transfer. The Trustee shall not be required to transfer or exchange any Certificates or Additional Certificates called for redemption (except for any unredeemed portion thereof) or any Certificates or Additional Certificates during the period of 15 days before the selection of Certificates or Additional Certificates for redemption. Section 308. Certificates and Additional Certificates Mutilated, Destroyed, Stolen or Lost. In case any Certificate or Additional Certificate shall become mutilated or be destroyed, stolen or lost, the Trustee shall execute and deliver, a new Certificate or Additional Certificate of the same issue and of like maturity and Principal Component as the Certificate or Additional Certificate so mutilated, destroyed, stolen or lost, in exchange and substitution for such mutilated Certificate or Additional Certificate, upon surrender and cancellation of such mutilated Certificate or Additional Certificate, or in lieu of and substitution for the Certificate or Additional Certificate, destroyed, stolen or lost, upon receipt by the Trustee of evidence satisfactory to the Trustee that such Certificate or Additional Certificate has been destroyed, stolen or lost and proof of ownership thereof, and upon furnishing the Trustee with indemnity satisfactory to the Trustee and complying with such other regulations as the Trustee may prescribe and paying such expenses as the Trustee may incur. All Certificates or Additional Certificates so surrendered to the Trustee shall be cancelled by it. Any such new Certificates or Additional Certificates issued pursuant to this Section in substitution for Certificates or Additional Certificates alleged to be destroyed, stolen or lost shall be equally secured by and entitled to equal and proportionate benefits, with all other Certificates and Additional Certificates delivered under this Trust Agreement, in any moneys or securities held by the Trustee for the benefit of the Certificate Owners and Owners of Additional Certificates. Notwithstanding any other provision of this Section 308, in lieu of delivering a new Certificate or Additional Certificate in exchange and substitution for a Certificate or Additional Certificate which has been mutilated, lost, destroyed or stolen, and which has matured or been redeemed, or has been selected for redemption, the Trustee may make payment of the principal of or interest with respect to such Certificate or Additional Certificate. Section 309. Temporary Certificates and Additional Certificates; Form of Certificates . So long as the Certificates and any Additional Certificates are in book-entry form, they may be typewritten or in any other form acceptable to the City and the Depository. At any time during which the Certificates and any Additional Certificates are not in book-entry form, the definitive Certificates and Additional Certificates shall be lithographed or printed with steel engraved borders. Until the definitive Certificates and Additional Certificates are prepared, the pUBL27208_11138182345.52 17 Trustee may execute and deliver, in the same manner as is provided in Section 305, in lieu of definitive Certificates and Additional Certificates, one or more temporary certificates substantially of the tenor of the defmitive Certificates and Additional Certificates, as applicable, in any authorized denomination, and with such omissions, insertions and variations as may be appropriate to temporary certificates. The Trustee at the expense of the City shall execute and, upon the surrender of such temporary Certificates and Additional Certificates and the cancellation of such surrendered temporary Certificates and Additional Certificates, shall, without charge to the Owners thereof, in exchange therefor, deliver definitive Certificates and Additional Certificates, representing the same aggregate amount of Principal Components and of like maturity as the temporary Certificates and Additional Certificates. All temporary Certificates and Additional Certificates surrendered either in exchange for another temporary Certificate or Additional Certificate, as applicable, or for a definitive Certificate or Additional Certificate, as applicable, shall be forthwith cancelled by the Trustee and destroyed. Section 310. Redemption of Certificates and Additional Certificates. The Certificates and Additional Certificates shall be redeemable at such times, in such amount, upon such terms and upon such notice as are provided in this Article III. (a) The Certificates and the Additional Certificates, if any, are subject to extraordinary redemption on a pro rata basis among maturities (treating each Sinking Account Installment due with respect to the Certificates and the Additional Certificates as a separate maturity for such purpose) and by lot within a maturity, in whole or in part, as the case may be, without premium, in an amount equal to the Principal Component thereof, together with the Interest Components due with respect thereto to the date fixed for redemption on the first date for which notice of redemption can be given by the Trustee following the transfer of Net Proceeds to the Redemption Account of the Certificate Fund pursuant to Section 405(a) or (b) hereof; (b) The Term Certificates maturing on August 1, 20_ shall be subject to mandatory redemption, in part, by lot, without premium, in an amount equal to the Principal Component thereof, together with the Interest Component due with respect thereto to the date fixed for redemption on August 1, 20_ and on each August 1 thereafter to and including August 1, 20_ from Sinking Account Installments transferred from the Lease Payment Fund to the Principal Account of the Certificate Fund according to the following schedule: PUBL,27208_11138182345.52 18 - TERM CERTIFICATES MATURING AUGUST 1, 20_ August 1 Principal of the Year Amount $ (maturity) To the extent that a partial redemption of the Term Certificates occurs under Section 310(a) or (c), each of the remaining Sinking Account Installments relating to such maturity of Term Certificates shall be reduced pro rata, as directed in writing by an Authorized Representative of the City, in multiples of $5,000. If during the twelve-month period immediately preceding one of the redemption dates specified in this Section 31 O(b) the City, or the Trustee at the written direction of an Authorized Representative of the City, has purchased one or more of the applicable Term Certificates subject to redemption, at least 30 days prior to the Redemption Date the City shall confirm in writing with the Trustee as to the Principal Component purchased and the amount of Term Certificates so purchased shall be credited, to the extent of the full Principal Component thereof, to reduce the upcoming Sinking Account Installment for such Term Certificates. All Term Certificates purchased pursuant to this subsection shall be surrendered to the Trustee and cancelled. (c) The Certificates maturing on or before August 1, 20_ are not subject to optional redemption prior to maturity. The Certificates maturing on or after August 1, 20_ are subject to optional redemption prior to maturity on or after August 1, 20_, at the option of the City, in whole or in part on any Interest Payment Date, from amounts deposited to the Lease Payment Fund by the City in furtherance of the exercise of the City's option to prepay Lease Payments in accordance with Section 7.3 of the Lease Agreement and transferred by the Trustee to the Redemption Account of the Certificate Fund, at the following prices expressed as percentages of the Principal Components to be redeemed, together with the Interest Components due thereon to the date fixed for redemption: Redemotion Dates Redemotion Price August 1, 20_ and February 1, 20_ % August 1, 20_ and February 1,20_ % August 1, 20_ and thereafter % Section 311. Selection of Certificates and Additional Certificates to be Redeemed. For purposes of selecting Certificates and Additional Certificates for redemption, the Certificates PUBL,27208_11138182345.52 19 and Additional Certificates shall be deemed to be comprised of $5,000 portions. If less than all of the Certificates and Additional Certificates shall be called for extraordinary redemption under Section 310(a), the particular Certificates or Additional Certificates, or portions thereof, to be redeemed shall be selected by the Trustee on a pro rata basis among maturities (treating each Sinking Account Installment due with respect to the Certificates and Additional Certificates as a separate maturity for such purpose) such that the Lease Payments to become due in each remaining year of the Lease Term shall be as nearly as practicable equal to the Lease Payments to become due in every other year. Within a maturity, the Trustee shall select Certificates and Additional Certificates for redemption by lot in any manner determined to be appropriate by the Trustee. If less than all of the Certificates shall be called for optional redemption under Section 310(c), the particular Certificates or portions thereof to be redeemed shall be selected by the Trustee by lot from one or more maturities as specified, in writing, by an Authorized Representative of the City. Any Certificate or Additional Certificate of a denomination of more than $5,000 to be redeemed shall be redeemed in the principal amount of $5,000 or an integral multiple thereof. In selecting portions of the Certificates and Additional Certificates for redemption, the Trustee shall treat each such Certificate and Additional Certificate as representing that number of Certificates or Additional Certificates of $5,000 denomination which is obtained by dividing the principal amount of the Certificate or Additional Certificate to be redeemed in part by $5,000. The Trustee shall promptly notify the City and the Agency in writing of the Certificates and any Additional Certificates so selected for redemption. Section 312. Notice of Redemption. When redemption of Certificates and/or Additional Certificates is required, the City shall notify the Trustee in writing and the Trustee shall, at the expense of the City, give notice of the redemption of such Certificates and/or Additional Certificates, and such notice shall include (i) the date of the Certificates as set forth in Section 303(a) hereof or of the Additional Certificates as set forth in the Supplemental Trust Agreement relating to such Additional Certificates; (ii) the rate of interest borne by each Certificate or Additional Certificate being redeemed; (iii) the Redemption Date and the place or places where amounts due upon such redemption will be payable; (iv) if less than all of the Certificates or Additional Certificates of a maturity are to be redeemed, the letters, numbers, CUSIP numbers or other distinguishing marks of such Certificates or Additional Certificates so to be redeemed; and (v) in the case of Certificates or Additional Certificates to be redeemed in part only, such notice shall also specify the respective portions of the principal amount thereof to be redeemed. Such notice shall further state that on such date there shall become due and payable upon each Certificate or Additional Certificate to be redeemed the Principal Component to be redeemed, together with the Interest Components accrued to the Redemption Date, and premium, if any, and that from and after such date interest on the Principal Components redeemed shall cease to accrue and be payable. The Trustee shall mail a copy of such notice, postage prepaid, first class United States mail, not less than 30 days and not more than 45 days before the Redemption Date, to the Owners of any Certificates or Additional Certificates or portions thereof which are to be redeemed, at their last addresses, appearing upon the registry books. Neither the failure of an Owner to receive a notice of redemption mailed by the Trustee nor any defect therein shall affect the sufficiency of the proceedings for the redemption of Certificates or Additional Certificates, as applicable. PUBL,27208_11138182345.52 20 .--- A copy of such notice of redemption shall be sent at least 30 days before the Redemption Date by registered or certified mail or overnight delivery service to the three registered securities depositories listed below and to any other registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Certificates specified by the City to the Trustee in writing and, on the date notice is mailed to the Certificate Owners or Owners of Additional Certificates, to the national information services listed below that disseminate notice of redemption of obligations as the Certificates and Additional Certificates; provided, however, that neither a defect in any notice sent pursuant to this paragraph nor any failure to mail notice as required by this paragraph shall in any manner defeat the effectiveness of a call for redemption if notice of such redemption is mailed to Certificate Owners and Owners of Additional Certificates as prescribed above. Rel!:istered Securities Deoositories The Depository Trust Company 711 Stewart Avenue Garden City, New York 11530 Telecopy: (516) 227-4039 or 4190 Midwest Securities Trust Company Capital Structures-Call Notification 440 South LaSalle Street Chicago, Illinois 60605 Telecopy: (312) 663-2343 Philadelphia Depository Trust Company Reorganization Division 1900 Market Street Philadelphia, Pennsylvania 19103 Attention: Bond Department Telecopy: (215) 496-5058 National Information Services Financial Information, Inc. 's Financial Daily Called Bond Service 30 Montgomery Street, 10th Floor Jersey City, New Jersey 07302 Attention: Editor Kenny Information Service's Called Bond Service 65 Broadway New York, New York 10006 Standard and Poor's Called Bond Record 25 Broadway New York, New York 10004 PUBL,27208_11138182345.52 21 - Upon the payment of the Redemption Price of Certificates and/or Additional Certificates being redeemed, each check or other transfer of funds issued for such purpose shall bear the CUSIP number identifying, by issue and maturity, the Certificates and/or Additional Certificates being redeemed with the proceeds of such check or other transfer. The Trustee shall have no responsibility for a defect in the CUSIP number that appears on any Certificate or in the notice of redemption. The redemption notice may provide that the CUSIP numbers have been assigned by an independent service and are included in the notice solely for the convenience of the Owners and that the Trustee and the City shall not be liable in any way for inaccuracies of said numbers. Section 313. Payment of Redeemed Certificates and Additional Certificates. Notice having been given in the manner provided in Section 312 hereof, the Certificates or portions thereof and/or the Additional Certificates or portions thereof so called for redemption shall become due and payable on the Redemption Date so designated at the Redemption Price for such Certificate and/or Additional Certificate, and, upon presentation and surrender thereof at the office specified in such notice, the Redemption Price of such Certificate and/or Additional Certificate to be redeemed shall be paid as provided in Section 303. If there shall be called for redemption less than all of a Certificate or Additional Certificate, the Trustee shall execute and deliver, upon the surrender of such Certificate or Additional Certificate, without charge to the Owner thereof, for the unredeemed balance of the Principal Component of any Certificate or Additional Certificate so surrendered, Certificates or Additional Certificates of the same issue and of like maturity and interest rate in any of the authorized denominations. If, on the Redemption Date, moneys for the redemption of all the Certificates or portions thereof and/or the Additional Certificates or portions thereof to be redeemed together with interest to the Redemption Date shall be held by the Trustee so as to be available therefor on said date and if notice of redemption shall have been given as aforesaid, then from and after the Redemption Date the Interest Components due with respect to such Certificates or portions thereof and/or the Additional Certificates or portions thereof so called for redemption shall cease to accrue and become payable. On each such Redemption Date other than a Sinking Account Installment Date, the Trustee shall give written notice to the City and the Agency of the Certificates and Additional Certificates selected for redemption in accordance with Section 311 hereof, and the City shall recompute the amount of Lease Payments to become due in each remaining year of the Lease Agreement following a redemption of the Certificates and Additional Certificates and shall notify the Agency and the Trustee in writing of the amount of such Lease Payments. Section 314. CanceUation of Certificates and Additional Certificates. All Certificates and Additional Certificates paid or redeemed, either at or before maturity, shall be delivered to the Trustee when such payment or redemption is made, and such Certificates and Additional Certificates shall thereupon be promptly cancelled and destroyed. Upon the cancellation of any Certificates or Additional Certificates by the Trustee, upon the written request of an Authorized Representative of the City, the Trustee shall execute a certificate of cancellation and destruction in duplicate by the signature of one of its authorized officers describing the Certificates or Additional Certificates so cancelled. One executed certificate shall be filed with the City, and the other executed certificate shall be retained by the Trustee. The Trustee may charge the City for its reasonable costs of permanent recordkeeping, including microfilming. PUBL,27208_11138182345.52 22 -- Section 315. Nonpresentment of Certificates and Additional Certificates. Except as otherwise provided in Section 316 hereof, in the event any Certificate or Additional Certificate shall not be presented for payment when the Principal Component thereof becomes due, if funds sufficient to pay such Certificate or Additional Certificate shall be held by the Trustee for the benefit of the Owner thereof, all liability of the City to the Owner thereof for the payment of the Principal Component of and Interest Component due with respect to such Certificate or Additional Certificate, as applicable, shall forthwith cease and be completely discharged and thereupon it shall be the duty of the Trustee to hold such funds (subject to Section 316 hereof), without liability for interest thereon, for the benefit of the Owner of such Certificate or Additional Certificate, as applicable, who shall thereafter be restricted exclusively to such funds for any claim of whatever nature on, or with respect to, such Certificate or Additional Certificate. Section 316. Unclaimed Money. All money which the Trustee shall have received from any source and set aside for the purpose of paying any of the Certificates and any Additional Certificates shall be held in trust for the respective Owners of such Certificates and Additional Certificates, but any money and earnings thereon which shall be so set aside or deposited by the Trustee and which shall remain unclaimed by the Owners of such Certificates and Additional Certificates for a period of two years after the date on which the payment with respect to which such money is set aside became due and payable shall be paid to the City. Thereafter, the Owners of such Certificates and any Additional Certificates shall look only to the City for payment and then only to the extent of the amount so received by the City from the Trustee without any interest thereon, and the Trustee shall have no responsibility with respect to such money. Section 317. Additional Certifieates. At any time after the Delivery Date of the Certificates, the City may provide for the execution and delivery of and sell Additional Certificates secured on a parity with the Certificates, in such Principal Components as it deems necessary for its public purposes (evidenced by a resolution to that effect passed by the City's City Council), subject to the following conditions precedent to such execution, delivery and sale: (a) The City shall be in compliance with all covenants set forth in the Lease Agreement and this Trust Agreement and a certificate to that effect shall have been filed with the Trustee upon which Trustee may absolutely rely; (b) The City shall have obtained and provided to the Trustee the written consent of the Insurer; (c) The City shall have obtained and provided to the Trustee written confirmation from each Rating Agency that its then existing rating with respect to the Certificates and any Additional Certificates will not be reduced or withdrawn as a result of such execution and delivery of Additional Certificates; (d) The City shall have delivered to the Trustee a certificate from an independent and qualified MAl real estate appraiser selected by the City setting forth his or her findings that the Site based upon the then existing improvements on the Site (i) has an annual fair rental value during the remainder of the term of the Lease, as supplemented, which is equal to or greater than the total annual Lease Payments and PUBL,27208_11138182345.52 23 - Additional Payments (assuming that the annual Additional Payments due in the future will equal the average annual Additional Payments prior to the date of execution and delivery of such Additional Certificates ) required to be paid under the Lease during any year of the remainder of the term following the execution and delivery of the Additional Certificates, and (H) has a useful life at least equal to the remaining term of the Lease, as supplemented; provided, if the Additional Certificates are being executed and delivered solely for the purpose of making repairs, replacements, additions or improvements to the Site, an appraisal shall not be required if the City shall have certified in writing to the Trustee that it has entered into a fixed price construction contract for the repairs, replacements, additions or improvements to the Site, which contract includes a scheduled completion date and provides for liquidated damages sufficient to pay the portion of Lease Payments attributable thereto for each day from the scheduled completion date to the date on which such repairs, replacements, additions or improvements are accepted by the City, and deposited with the Trustee a sufficient amount of capitalized interest to pay the interest due with respect to the Additional Certificates until such scheduled completion date; (e) The City shall have obtained and provided to the Trustee a certificate stating that the City holds certificates of insurance relating to the Site (as it will be comprised at and after the execution and delivery of such Additional Certificates) which comply with the requirements of the Lease Agreement; (f) Provision shall have been made for the deposit into the Reserve Account of an amount equal to the amount necessary to increase the balance therein to the combined Reserve Requirement for the Certificates and any Additional Certificates, as calculated at the time such Additional Certificates are to be executed and delivered; (g) Provision shall have been made for the execution and delivery of a supplement to the Lease Agreement setting forth the total Lease Payments to be paid by the City following the execution and delivery of the Additional Certificates; (h) Provision shall have been made for the execution and delivery of a Supplemental Trust Agreement setting forth the terms of the Additional Certificates, including but not limited to (i) the purpose for which such Additional Certificates are to be executed and delivered and the funds into which the proceeds thereof are to be deposited on the Delivery Date of the Additional Certificates (including provision for any deposit required to be made to the Reserve Account as required by paragraph (e) above), (H) the aggregate principal amount of Additional Certificates to be executed and delivered, (iH) redemption premiums, if any, and the redemption terms, if any, for such Additional Certificates, and (iv) such other provisions as are necessary or appropriate and not inconsistent with this Trust Agreement; (i) The City shall have obtained and provided to the Trustee an opinion of Bond Counsel to the effect that (i) the execution and delivery of such Additional Certificates will not adversely affect the exclusion from gross income for federal income tax purposes or the exemption from State of California personal income taxation of the Interest Component of the Certificates and any Additional Certificates previously issued on a tax-exempt basis, and (H) following the execution and delivery of such Additional PUBL,27208_11138182345.52 24 Certificates, the Lease Agreement and this Trust Agreement, including any supplements to such agreements, will constitute the valid and legally binding agreements of the City enforceable in accordance with their terms; and (j) The execution and delivery of such Additional Certificates shall have been duly authorized by the City and the Agency and certified copies of the resolutions authorizing such execution and delivery shall have been delivered to the Trustee. So long as the City complies with the foregoing provisions, nothing in this Trust Agreement or the Lease Agreement shall be construed to prohibit the execution and delivery of Additional Certificates for the purpose of effecting a refunding of any Outstanding Certificate or Additional Certificate; provided, however, that the City need not obtain the appraisal required under (d) above if the effect of such refunding is to reduce the total Lease Payments owed by the City in each Fiscal Year during the remaining Term of the Lease Agreement. ARTICLE IV ESTABLISHMENT AND ADMINISTRATION OF FUNDS AND ACCOUNTS Section 401. Establishment of Funds; Disposition of Proceeds of Certificates and Additional Certificates. There are hereby established with the Trustee the following special trust funds and accounts to be designated as follows and each such fund and account shall be kept by the Trustee separate and apart from all other funds and accounts: (a) The Project Fund, in which there is hereby established an Agency Rental Payment Account, a Costs of Issuance Account and an Acquisition and Construction Account; (b) The Certificate Fund, in which there is hereby established an Interest Account, a Principal Account, a Redemption Account and a Reserve Account; (c) The Lease Payment Fund; (d) The Insurance and Condemnation Fund; and (e) The Rebate Fund, in which there shall be established an Earnings Account, a Rebate Account and an Alternative Penalty Account. At the written direction of the City, the Trustee shall establish subaccounts or additional Accounts in the foregoing Funds and Accounts in connection with the execution and delivery of any Additional Certificates in order that a separate accounting of the proceeds of such Additional Certificates may be maintained. The Trustee may establish such funds and accounts as it deems necessary to perform its obligations under this Trust Agreement. PUBL,27208_1 1 138182345.52 25 .- On the Delivery Date of the Certificates, the Trustee agrees to receive from the Agency and deposit in the Agency Rental Payment Account the net proceeds of the Certificates, representing the payment by the Agency of the rental due to the City under the Site Lease on the Delivery Date for the Certificates. The Trustee agrees that on the Delivery Date it will transfer $ to the Escrow Bank for deposit in the Escrow Fund in order to defease the Prior Certificates and that it will thereafter hold the remainder of such proceeds pursuant to the terms of this Trust Agreement for the benefit of the City and will transfer such amounts to the following funds and accounts in the following amounts: Interest Account: $ Costs of Issuance Account: $ Reserve Account: $ The Trustee agrees that it will immediately transfer $ from the Costs of Issuance Account to the Insurer as payment of the insurance premium for the Certificates. The Trustee shall deposit in the Acquisition and Construction Account from time to time any amounts deposited with it by the City from time to time which the City directs, in writing, to be deposited into the Acquisition and Construction Account. The net proceeds of any Additional Certificates shall be deposited in the Agency Rental Payment Account of the Project Fund and thereafter transferred in accordance with the provisions of the Supplemental Trust Agreement executed with respect to such Additional Certificates. Section 402. Project Fund. (a) Costs of Issuance Account. There shall be paid into the Costs of Issuance Account the amount required to be so paid by the provisions of Section 401 hereof and Costs of Issuance shall be paid from amounts on deposit therein by the Trustee in accordance with written instructions to be given to the Trustee by an Authorized Representative of the City substantially in the form set forth in Exhibit B hereto. Any unexpended proceeds of the Certificates or any issue of Additional Certificates, as applicable, remaining in the Costs of Issuance Account on the date which is 180 days after the Delivery Date for the Certificates or such Additional Certificates, respectively, or such earlier date as is specified in writing by an Authorized Representative of the City, shall be transferred by the Trustee in the case of any proceeds of the Certificates to the Interest Account of the Certificate Fund and in the case of any proceeds of Additional Certificates to the Acquisition and Construction Account. (b) Acauisition and Construction Account. In connection with the execution and delivery of any Additional Certificates, there shall be paid into the Acquisition and Construction Account the amount so required to be paid by the provisions of Section 40 1 and the Cost of the Project shall be paid from the amounts on deposit in such account. The Trustee shall make payments of the Cost of the Project from the Acquisition and Construction Account in the -" amounts, at the times, in the manner, and on the other terms and conditions set forth in this subsection. No such payment shall be made until the Trustee shall have received a requisition PUBL,27208_11138182345.52 26 signed by an Authorized Representative of the City substantially in the form set forth in Exhibit B hereto. Upon receipt of a requisition in the form of Exhibit B hereto, the Trustee is authorized to act thereon without further inquiry and shall not be responsible for the contents of such requisition or the application of such funds except for ascertaining that it has been signed by an Authorized Representative of the City. The Trustee shall issue its check or, upon request, a wire transfer, for each payment required by a requisition to the extent funds are available in the Acquisition and Construction Account. (c) Comoletion of Proiect. The completion of the acquisition, construction, delivery and installation of the Project, or the portion thereof to be completed with the proceeds of an issue of Additional Certificates, shall be evidenced by the filing of a Completion Certificate of an Authorized Representative of the City, which shall be filed with the Trustee, stating (1) that the acquisition, construction, delivery and installation of the Project, or the applicable portion thereof, has been completed substantially in accordance with the plans and specifications applicable thereto and that the Project, or the applicable portion thereof, is ready for use, (2) the date of such completion, and (3) the amount, if any, required, in the opinion of the signer or signers, for the payment of any remaining part of the Cost of the Project, which amount shall be retained in the Acquisition and Construction Account of the Project Fund. A separate Completion Certificate may be filed with respect to the portion of the Project to be financed from the proceeds of the Certificates and each issue of Additional Certificates. (d) Yield Restriction. If any moneys which are proceeds of an issue of Additional Certificates remain in the Project Fund on the date which is three years after the Delivery Date for such issue of Additional Certificates, all such amounts shall immediately be invested at the written direction of the City in Permitted Investments which are tax-exempt obligations the interest on which is not a specific preference item for purposes of the alternative minimum tax or in Permitted Investments the yield (as defined in Section III of the Tax Certificate) on which does not exceed the yield on the issue of Additional Certificates from which such proceeds were derived, unless the Trustee is provided with an opinion of Bond Counsel stating that another investment of such amounts will not cause the Interest Component of any Lease Payment to be included in gross income for federal income tax purposes. (e) Transfer of Suro1us. Upon the filing of a Completion Certificate with respect to an issue of Additional Certificates, the Trustee shall transfer from the Acquisition and Construction Account and deposit in the Reserve Account any amount necessary to increase the amount on deposit therein to the Reserve Requirement. Thereafter, and at the written direction of an Authorized Representative of the City, the Trustee shall (i) transfer any balance in the Acquisition and Construction Account to the Interest Account or the Principal Account of the Certificate Fund to pay the Principal Components and Interest Components due with respect to the Certificates and any Additional Certificates on the next Interest Payment Date, or (ii) retain any balance in the Acquisition and Construction Account to be used for any capital requirements of the City, whether or not related to the Project, upon such terms and conditions as shall not in the opinion of Bond Counsel impair the exclusion from gross income for federal income tax purposes of the Interest Component of any Lease Payment. PUBL,z7208_11138182345.52 27 Section 403. Lease Payment Fund. There shall be paid into the Lease Payment Fund the amount required to be so paid by the provisions of Section 404(d)(iv) hereof, all Lease Payments, other than Prepayments, and any proceeds of Rental Interruption Insurance received by the Trustee with respect to the Lease Agreement immediately upon their receipt. The Trustee shall apply amounts deposited to the Lease Payment Fund as follows: (a) on the Business Day next preceding each Interest Payment Date, the Trustee shall transfer to the Interest Account of the Certificate Fund the amount necessary to increase the balance therein to an amount equal to the Interest Component due with respect to the Certificates and any Additional Certificates on such Interest Payment Date; (b) on the Business Day next preceding each Principal Component Payment Date on which a portion of the Principal Components is due at maturity or upon a Sinking Account Installment Date, the Trustee shall transfer to the Principal Account of the Certificate Fund the amount necessary to increase the balance therein to an amount equal to the Principal Components, including Sinking Account Installments, due with respect to the Certificates and any Additional Certificates on such Principal Component Payment Date; (c) on the date of receipt of any delinquent Lease Payments, the Trustee shall transfer to the Reserve Account of the Certificate Fund the amount needed to increase the amount therein to the Reserve Requirement; and (d) any amounts remaining in the Lease Payment Fund after the transfers referred to in (a), (b) and (c) above shall remain in the Lease Payment Fund until all Certificates and Additional Certificates are paid, redeemed or defeased, in which case all such amounts shall be paid to the City. Section 404. Certificate Fund. (a) Interest Account. Moneys transferred to the Interest Account from the Lease Payment Fund and the Reserve Account shall be applied to pay the Interest Components due on each Interest Payment Date. (b) Princioal Account. Moneys transferred to the Principal Account from the Lease Payment Fund and the Reserve Account shall be applied to pay the Principal Components at maturity or upon a Sinking Account Installment Date. To the extent that the Trustee has insufficient funds on deposit in the Interest Account, the Principal Account and the Redemption Account of the Certificate Fund (including amounts transferred from the Reserve Account) to pay the Principal Components and Interest Components due with respect to the Certificates and any Additional Certificates as a result of an abatement of Lease Payments pursuant to Section 4.10 of the Lease Agreement, each Owner of a Certificate and each Owner of an Additional Certificate remaining Outstanding will be paid a pro rata portion of the Interest Components and Principal Components of the Lease Payments actually received that corresponds to his proportionate interest in the Lease Payments. PUBL,27208_11138182345.52 28 (c) Redemotion Account. The Trustee shall apply moneys in the Redemption Account as provided in this Section 404(c). Amounts in the Redemption Account shall be applied to pay the Redemption Price of Certificates and Additional Certificates pursuant to Sections 310(a) and (c) hereof and of any Additional Certificates as specified in the Supplemental Trust Agreement for such Additional Certificates. All expenses in connection with any redemption shall be paid by the City. The Trustee shall deposit in the Redemption Account as received, all Prepayments and any amounts to be transferred to the Redemption Account in accordance with Section 405. All of said moneys shall be set aside in the Redemption Account for the purpose of redeeming the Certificates and any Additional Certificates in advance of their maturity and shall be applied on or after the Redemption Date for such Certificates and Additional Certificates to the payment of the Redemption Price due with respect to the Certificates and Additional Certificates to be redeemed upon presentation and surrender of such Certificates and Additional Certificates. Any excess amounts remaining in the Redemption Account following the redemption or redemptions to be made with such amounts shall be transferred to the Lease Payment Fund. (d) Reserve Account. (i) The Reserve Requirement shall be maintained by the Trustee in the Reserve Account, which shall be kept separate and apart from all other funds and money held by the Trustee, until the Lease Payments are paid in full pursuant to the terms of the Lease Agreement or until this Trust Agreement is terminated. The Trustee shall apply moneys in the Reserve Account as provided in this Section 404(d). (ii) If on the Business Day prior to any Interest Payment Date the amount in the Interest Account of the Certificate Fund shall be less than the amount required for the Interest Components due with respect to the Certificates and any Additional Certificates on said Interest Payment Date, the Trustee shall withdraw from the Reserve Account and deposit in the Interest Account the amount necessary to make up the deficiency on such Business Day. In the event of any such transfer, the Trustee shall, within five days thereafter, provide written notice to the City of the amount and date of such transfer. (iii) If on the Business Day prior to any Principal Component Payment Date the amount in the Principal Account of the Certificate Fund shall be less than the amount required to pay the Principal Components payable on the Certificates and any Additional Certificates on such Principal Component Payment Date, the Trustee shall, after making any transfers required by the preceding paragraph, withdraw from the Reserve Account and deposit in the Principal Account the amount necessary to make up the deficiency on such Business Day. In the event of any such transfer, the Trustee shall, within five days thereafter, provide written notice to the City of the amount and date of such transfer. (iv) Except as permitted by the following sentence, in the event the amount on deposit in the Reserve Account exceeds the Reserve Requirement, the Trustee shall, upon written direction of the City, not less frequently than semiannually, transfer PUBL,27208_11138182345.52 29 such amounts (a) to the Rebate Fund, if any deposit is then required to be made pursuant to Section 406 hereof, and (b) to the Lease Payment Fund for application in accordance with Section 403 hereof. In the event that a Reserve Account Policy or Credit Facility is provided to satisfy all or a portion of the Reserve Requirement, any cash on deposit in the Reserve Account which is no longer needed to satisfy the Reserve Requirement will be transferred by the Trustee, at the written direction of an Authorized Representative of the City, to the Project Fund for application in accordance with Section 401 hereof, to a special account to be established for the payment of the fees related to the Reserve Account Policy or Credit Facility, or to the City's General Fund provided that there shall have been delivered to the Trustee, the City and the Agency an opinion of Bond Counsel to the effect that such transfer to the City's General Fund will not impair the exclusion from gross income for federal income tax purposes of the Interest Component of any Lease Payment. For purposes of determining the amount on deposit at any time, the Trustee shall value all Permitted Investments in the Reserve Account in accordance with Section 409 hereof. A Reserve Account Policy must have a maturity date which is equal to the last maturity of any Outstanding Certificate or Additional Certificate. A Credit Facility must either have a maturity date which is equal to the last maturity of any Outstanding Certificate or Additional Certificate or provide that it may be drawn upon in its full stated amount unless prior to the expiration date of the Credit Facility a substitute Credit Facility, which when combined with the other amounts in the Reserve Account will equal the Reserve Requirement, has been delivered to the Trustee. Any Credit Facility must permit the Trustee to draw on such instrument in the full stated amount thereof in the event that the long-term obligations of the issuer thereof is rated less than AA by Standard & Poor's or As by Moody's. (v) Moneys in the Reserve Account shall be used solely for the purpose of: (A) making up deficiencies in the Interest Account as provided in Section 404(d)(ii) hereof; (B) making up deficiencies in the Principal Account as provided in Section 404(d)(iii) hereof; (C) making the transfers as provided in Section 404(d)(iv) hereof; (0) with respect to the amounts in any subaccount therein established for the Certificates or any Additional Certificates, providing for the payment of the final Lease Payments represented by the issue of Certificates or Additional Certificates for which such subaccount was created, in which event the Trustee shall transfer such amounts on deposit in the Reserve Account to the Lease Payment Fund to be app lied as a credit against such final Lease Payments; or PUBL,27208 _111381 82345.52 30 .------.---. (E) providing for the defeasance pursuant to Section 901 hereof or the Prepayment of all Lease Payments attributable to the Certificates or an issue of Additional Certificates, in which case the amounts in the subaccount of the Reserve Account established for such issue, or in the case of a partial defeasance the amount in the subaccount that will no longer be required as a part of the Reserve Requirement following the defeasance, shall be transferred to the Redemption Account to be applied to the defeasance or redemption of the applicable issue of Certificates or Additional Certificates or portion thereof. Section 405. Insurance and Condemnation Fund. (a) Aoolication of Net Proceeds. There shall be paid into the Insurance and Condemnation Fund the Net Proceeds of the hazard insurance maintained pursuant to Section 5.3 of the Lease Agreement and any condemnation awards constituting Net Proceeds. In the event that the City elects to restore the Site as provided in Section 6.1(b) of the Lease Agreement, then such Net Proceeds shall be disbursed in accordance with requisitions submitted to the Trustee by an Authorized Representative of the City. Promptly upon determining that the restoration of the Site is complete, the Authorized Representative of the City shall so notify the Trustee in writing that the restoration is complete. Any balance of Net Proceeds remaining after the final disbursement to restore the Site, and, in the event the City elects not to restore the Site as provided in Section 6.1(c) of the Lease Agreement, all Net Proceeds shall be transferred by the Trustee to the Redemption Account and applied to the redemption of Certificates and any Additional Certificates on a pro rata basis pursuant to Section 310(a)(i) hereof. (b) Aoolication of Title Insurance Proceeds. The Net Proceeds of any Title Insurance obtained in accordance with Section 5.5 of the Lease Agreement and received by the Trustee in respect of the Site upon receipt shall be deposited in the Insurance and Condemnation Fund and shall be applied and disbursed by the Trustee as follows: (i) If the City determines that the title defect giving rise to such proceeds has not materially affected the operation of the Site and will not result in an abatement of Lease Payments payable by the City under the Lease Agreement, at the written direction of an Authorized Representative of the City, such proceeds shall be transferred into the Reserve Account of the Certificate Fund to the extent that the amount therein is less than the Reserve Requirement. Amounts not required to be so deposited shall be remitted to the City and used for any lawful purpose. (ii) If any portion of the Site has been affected by such title defect, and if the City determines that such title defect will result in an abatement of Lease Payments payable by the City under the Lease Agreement, then the Trustee, at the written direction of an Authorized Representative of the City, shall immediately transfer such proceeds to the Redemption Account of the Certificate Fund and such proceeds shall be applied to the redemption of Certificates and any Additional Certificates on a pro rata basis pursuant to Section 310(a)(ii) hereof. PUBL,27208_1 1 138182345.52 31 Section 406. Rebate Fund. (a) Establishment of Rebate Fund. All money at any time deposited in the Rebate Account or the Alternative Penalty Account of the Rebate Fund shall be held by the Trustee in trust, for payment to the United States Treasury. A separate subaccount of the Rebate Account, the Alternate Penalty Account and the Earnings Account shall be established for the Certificates and each issue of Additional Certificates. All amounts on deposit in the Rebate Fund shall be governed by this Section 406 and the Tax Certificate, unless the City obtains an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of the Interest Component of each Lease Payment will not be adversely affected for federal income tax purposes if such requirements are not satisfied. (1) There shall be transferred to the Earnings Account for disposition as described in this Section the amounts described in Section 408(b) hereof. (2) Rebate Account. The following requirements shall be satisfied with respect to each subaccount of a Rebate Account: (i) Annual Comoutation. Within 55 days of the end of each Certificate Year, the City shall calculate or cause to be calculated the amount of rebatable arbitrage for the Certificates and each issue of Additional Certificates, in accordance with Section 148(f)(2) of the Code and Section 1.148-3 of the Rebate Regulations (taking into account any applicable exceptions with respect to the computation of the rebatable arbitrage described in the Tax Certificate ~, the temporary investments exceptions of Section 148(f)(4)(B) and (C) of the Code), and taking into account whether the election pursuant to Section 148(f)(4)(C)(vii) of the Code (the "1'12 % Penalty") has been made), for this purpose treating the last day of the applicable Certificate Year as a computation date, within the meaning of Section 1.148-1(b) of the Rebate Regulations (the "Rebatable Arbitrage"). The City shall obtain expert advice as to the amount of the Rebatable Arbitrage to comply with this Section. (ii) Annual Transfer. Within 55 days of the end of each Certificate Year for which Rebatable Arbitrage must be calculated as required by the Tax Certificate, upon the written direction of an Authorized Representative of the City, an amount shall be deposited to each subaccount of the Rebate Account by the Trustee from any funds, including the Earnings Account, so designated by the City if and to the extent required, so that the balance in the Rebate Account shall equal the amount of Rebatable Arbitrage so calculated by or on behalf of the City in accordance with (i) of this Subsection (a)(I) with respect to the Certificates and each issue of Additional Certificates. In the event that immediately following any transfer required by the previous sentence, or the date on which the City determines that no transfer is required for such Certificate Year, the amount then on deposit to the credit of the applicable subaccount of the Rebate Account exceeds the amount required to be on deposit therein, upon written instructions from an Authorized Representative of the City, the Trustee shall withdraw the excess from the appropriate subaccount of the Rebate Account and then credit the excess to the Lease Payment Fund. PUBL,27208_11138182345.52 32 .-- -- (iii) Pavment to the Treasury. The Trustee shall pay, as directed in writing by an Authorized Representative of the City, to the United States Treasury, out of amounts in each subaccount of the Rebate Account, (X) Not later than 60 days after the end of (A) the fifth Certificate Year for the Certificates and each issue of Additional Certificates, and (B) each applicable fifth Certificate Year thereafter, an amount equal to at least 90% of the Rebatable Arbitrage calculated as of the end of such Certificate Year for the Certificates and each issue of Additional Certificates, as applicable; and (Y) Not later than 60 days after the payment or redemption of all the Certificates or all Additional Certificates, as applicable, an amount equal to 100% of the Rebatable Arbitrage calculated as of the end of such applicable Certificate Year, and any income attributable to the Rebatable Arbitrage, computed in accordance with Section 148(f) of the Code. In the event that, prior to the time of any payment required to be made from the Rebate Account, the amount in the Rebate Account is not sufficient to make such payment when such payment is due, the City shall calculate or cause to be calculated the amount of such deficiency and deposit an amount received from any legally available source equal to such deficiency prior to the time such payment is due. Each payment required to be made pursuant to this Subsection (a)( 1) shall be made to the Internal Revenue Service Center, Philadelphia, Pennsylvania 19255 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038-T, or shall be made in such other manner as provided under the Code. (3) Alternative Penalty Account. (i) Six-Month Comoutation. If the l'h % Penalty has been elected, within 85 days of each particular Six-Month Period, the City shall determine or cause to be determined whether the Ph % Penalty is payable (and the amount of such penalty) as of the close of the applicable Six-Month Period. The City shall obtain expert advice in making such determinations. (ii) Six-Month Transfer. Within 85 days of the close of each Six-Month Period, the Trustee, at the written direction of an Authorized Representative of the City, shall deposit an amount in the Alternative Penalty Account from any source of funds held by the Trustee pursuant to this Trust Agreement and designated by the City in such written directions or provided to it by the City, if and to the extent required, so that the balance in the Alternative Penalty Account equals the amount of l'h % of the Penalty due and payable to the United States Treasury determined as provided in Subsection (a)(2)(i) above. In the event that immediately following any transfer provided for in the previous sentence, or the date on which the City determines that no transfer is required for such Certificate Year, the amount then on deposit to the credit of the Alternative Penalty Account exceeds the amount required to be on deposit therein to make the payments required by Subsection (iii) below, the Trustee, at the written direction of an Authorized Representative of the City, may withdraw the excess from the Alternative Penalty Account and credit the excess to the Lease Payment Fund. PUBL,27208_1 1 138182345.52 33 (iii) Pavment to the Treasury. The Trustee shall pay, as directed in writing by an Authorized Representative of the City, to the United States Treasury, out of amounts in an Alternative Penalty Account, not later than 90 days after the close of each Six-Month Period the 11h % Penalty, if applicable and payable, computed with respect to the Certificates or any issue of Additional Certificates in accordance with Section 148(f)(4) of the Code. In the event that, prior to the time of any payment required to be made from the Alternative Penalty Account, the amount in such Account is not sufficient to make such payment when such payment is due, the City shall calculate the amount of such deficiency and direct the Trustee, in writing, to deposit an amount equal to such deficiency into the Alternative Penalty Account from the applicable Earnings Account or any other funds held by the Trustee pursuant to this Trust Agreement and designated by the City in such written directions prior to the time such payment is due. Each payment required to be made pursuant to this Subsection (a)(2) shall be made to the Internal Revenue Service, Philadelphia, Pennsylvania 19255 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038- T or shall be made in such other manner as provided under the Code. (b) Disoosition of Unexoended Funds. Any funds remaining in the Rebate Fund with respect to the Certificates or an issue of Additional Certificates after redemption and payment of the Certificates or such related issue of Additional Certificates and the payments described in Subsection (a)(I)(iii) or (a)(2)(iii) (whichever is applicable), may be withdrawn by the Trustee at the written direction of the City and utilized in any manner by the City. (c) Survival of Defeasance and Final Pavment. Notwithstanding anything in this Section or this Trust Agreement to the contrary, the obligation of the City to comply with the requirements of this Section shall survive the defeasance and final payment of the Certificates and any Additional Certificates. Section 407. Deposits of Money. All moneys required to be held by the Trustee under the provisions of this Trust Agreement shall be deposited with the Trustee. All moneys deposited under the provisions of this Trust Agreement with the Trustee constituting a part of the Trust Estate shall be held in trust for the Owners of Certificates and the Owners of any Additional Certificates and applied only in accordance with the provisions of this Trust Agreement. All moneys deposited with the Trustee shall be credited to the particular fund, account or subaccount to which such moneys belong. Section 408. Investment of Certain Accounts. (a) Moneys held in all Funds, Accounts and subaccounts shall be invested and reinvested by the Trustee in Permitted Investments held in the name of the Trustee which mature not later than such times as shall be necessary to provide moneys when needed for payments to be made from such Funds, Accounts and subaccounts and in any event in the case of each subaccount of the Reserve Account not later than the final maturity of the Certificates or issue of Additional Certificates with respect to which subaccount was created; provided that funds in the PUBL,27208_11138182345.52 34 Reserve Account shall not be invested in Permitted Investments described in clause (j) of the definition thereof. Moneys in the Rebate Fund shall be invested only in obligations of, or obligations the payment of the principal of and interest on which is unconditionally guaranteed by, the United States of America and which have a maturity no longer than the date on which such amounts will be required to make any payments to the United States required by Section 406 hereof. The Trustee shall make all such investments of moneys held by it in accordance with written instructions received from an Authorized Representative of the City two days in advance of the investment. In the absence of such written instructions from the City, the Trustee shall invest in investments described in subparagraph (g) of the definition of "Permitted Investments." (b) Any income or interest earned on any moneys or investments in the Project Fund or the Certificate Fund shall be deposited in the Acquisition and Construction Account of the Project Fund, if any, until all amounts in the Project Fund have been expended. After such date, all earnings on amounts in the Certificate Fund shall be deposited in the Lease Payment Fund except for income or interest earned on amounts in each subaccount of the Reserve Account in excess of the yield on the Certificates or Additional Certificates for which such subaccount was created which shall be deposited in the appropriate subaccount of the Earnings Account of the Rebate Fund. For purposes of this Section 408(b), the Trustee shall assume the yield on the Certificates to be _ % per annum and the yield on each issue of Additional Certificates to be as specified in a certificate of an Authorized Representative of the City and shall estimate the amount of the earnings on the Reserve Account which are in excess of such yields which are to be deposited in the Earnings Account. The Trustee shall have no responsibility for the accuracy of any such estimate. Additionally, any income or interest earned on any moneys or investments in any Fund, Account or subaccount other than the Project Fund and the Certificate Fund shall remain in the respective Funds, Accounts and subaccounts. In crediting interest earnings, the Trustee shall post earnings to the appropriate subaccount of each of the foregoing Funds, Accounts and subaccounts so that earnings on the proceeds of the Certificates and each issue of Additional Certificates are separately maintained and not commingled. (c) Nothing herein shall prevent any Permitted Investments acquired as investments of funds held hereunder from being issued or held in book -entry form on the books of the Department of the Treasury of the United States of America. (d) The Trustee may act as principal or agent in the acquisition or disposition of an investment. (e) To the extent that Permitted Investments are registerable securities, they shall be registered in the name of the Trustee. Section 409. Valuation and Sale of Investments. Obligations purchased as an investment of moneys in any Fund, Account or subaccount created under the provisions hereof shall be deemed at all times to be a part of such Fund, Account or subaccount and any profit realized from the liquidation of such investment shall be credited to, and any loss resulting from the liquidation of such investment shall be charged to, the computation of net interest earned on the moneys and investments of such Fund, Account or subaccount. PUBL,27208_11138182345.52 35 - In computing the amount in any Fund or Account created under the provisions hereof for any purpose provided herein, obligations purchased as an investment of moneys therein shall be valued at the market value thereof and amounts in the Reserve Account shall be so valued on or about the thirty-fifth calendar day preceding each Interest Payment Date. Except as otherwise provided herein, the Trustee shall sell at the best price obtainable or present for redemption or transfer as provided in the next sentence any obligation so purchased as an investment whenever it shall be requested in writing by an Authorized Representative of the City so to do or whenever it shall be necessary in order to provide moneys to meet any payment or transfer from any Fund, Account or subaccount held by it. In lieu of such sale or presentment for redemption, the Trustee may, in making the payment or transfer from any Fund, Account or subaccount mentioned in the preceding sentence, transfer such investment obligations or interest appertaining thereto if such investment obligations shall mature or be collectable at or prior to the time the proceeds thereof shall be needed and such transfer of investment obligations may be made in book-entry form. Except for its own negligence or willful misconduct, the Trustee shall not be liable or responsible for making any such investment in the manner provided in this Trust Agreement or for any loss resulting from any such investment or the sale or liquidation thereof. ARTICLE V COVENANTS, EVENTS OF DEFAULT, REMEDIES OF OWNERS AND LIMITATIONS OF LIABILITY Section 501. Trustee to Enforce Lease Agreement; Notice of Nonpayment. Subject to the provisions of this Trust Agreement, the Trustee covenants and agrees with the Certificate Owners and the Owners of any Additional Certificates to enforce the Lease Agreement against the City. In the event of delinquency in the payment of Lease Payments due by the City pursuant to the Lease Agreement, the Trustee shall on the Business Day following such delinquency give written notice of the delinquency and the amount thereof to the City. Section 502. Assignment of Rights. Pursuant to the Assignment Agreement, the Agency has transferred, assigned and set over to the Trustee all of the Agency's rights, title and interest in and to the Site Lease and the Lease Agreement (other than its rights to indemnification and the payment of certain of its costs and expenses), including without limitation all of the Agency's right to receive Lease Payments from the City under the Lease Agreement, its right to receive the Net Proceeds relating to the Site, its right to enforce payment of such Lease Payments when due, or otherwise protect its interests and enforce its rights under the Lease Agreement. Section 503. Events of Default. Any event of default under the Lease Agreement, as defined in Section 9.1 thereof, shall be an "Event of Default" under this Trust Agreement and the term "Events of Default" shall mean, whenever it is used in this Trust Agreement, anyone or more of such events. Section 504. Application of Funds. All moneys received by the Trustee pursuant to any right given or action taken under the provisions of this Article V or Article IX of the Lease Agreement shall be applied by the Trustee in the order following upon presentation of the PUBL,27208 _11138182345.52 36 Certificates and any Additional Certificates, and the stamping thereon of the payment if only partially paid, or upon the surrender thereof if fully paid -- Em. to the payment of the costs and expenses of the Trustee and thereafter, to the Certificate Owners and the Owners of any Additional Certificates in declaring such Event of Default, including reasonable compensation to its or their agents, attorneys and counsel; Second, to the payment to the Persons entitled thereto of all Interest Components then due in the order of the due date thereof and, if the amount available shall not be sufficient to pay in full any Interest Component maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the Persons entitled thereto without discrimination or preference; Third, to the payment to the Persons entitled thereto of the unpaid Principal Components which shall have become due, whether at maturity or by call for redemption, in the order of their due dates, with interest on each overdue Principal Component at the rate represented by the respective Certificate or Additional Certificate to which such Principal Component relates, and, if the amount available shall not be sufficient to pay in full all the Certificates and Additional Certificates due on any date, then to the payment thereof ratably, according to the amounts of Principal Component due on such date to the Persons entitled thereto, without any discrimination or preference; and Fourth, if there shall exist any remainder after the foregoing payments, such remainder shall be paid to the City. Section 505. Institution of Legal Proceedings. If one or more Events of Default shall happen and be continuing, the Trustee in its discretion may, and upon the written request of the Owners of not less than a majority of the aggregate of the Certificates and Additional Certificates then Outstanding, and upon being indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of the Owners of Certificates and Additional Certificates by enforcing any of the remedies provided in Article IX of the Lease Agreement. Section 506. Non-Waiver. Nothing in this Article V or in any other provision of this Trust Agreement or in the Certificates or Additional Certificates, shall affect or impair the obligation of City to payor prepay the Lease Payments in accordance with and subject to the terms and provisions of the Lease Agreement. No delay or omission of the' Trustee or any Certificate Owner or Owner of Additional Certificates to exercise any right or power arising upon the happening of any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein, and every power and remedy given by this Article V to the Trustee or to the Certificate Owners or Owners of Additional Certificates may be exercised from time to time and as often as shall be deemed expedient by the Trustee, the Certificate Owners or Owners of Additional Certificates. Section 507. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee or the Certificate Owners or Owners of Additional Certificates is intended to be exclusive of any other remedy, and every such remedy shall be cumulative and shall be in PUBL27208_1 1 138182345.52 37 - addition to every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise. Section 508. Power of Trustee to Control Proceedings. In the event that the Trustee, upon the happening of an Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its duties hereunder, whether upon its own discretion or upon the request of the Owners of the required percentages of Certificates and Additional Certificates as set forth in Section 505 hereof, it shall have full power, in the exercise of its discretion for the best interests of the Certificate Owners and Owners of any Additional Certificates, with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, however, that the Trustee shall not discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, without the consent of the Owners of a m~ority in aggregate Principal Components of the Certificates and Additional Certificates Outstanding. Section 509. Limitation on Owners' Right to Sue. No Certificate Owner or Owner of any Additional Certificate shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon this Trust Agreement, unless (a) such Certificate Owner or Owner of any Additional Certificate shall have previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of the required percentages of Certificates and Additional Certificates as set forth in Section 505 hereof shall have made written request upon the Trustee to exercise the powers granted to the Trustee as assignee of the Agency or to institute such action, suit or proceeding in its own name; (c) said Certificate Owner or Owner of any Additional Certificate shall have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of 60 days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee. Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Certificate Owner or Owner of any Additional Certificate of any remedy hereunder; it being understood and intended that no one or more Certificate Owner or Owner of any Additional Certificate shall have any right in any manner whatever by his or their action to enforce any right under this Trust Agreement, except in the manner herein provided, and that all proceedings at law or in equity with respect to an Event of Default shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Owners of the Outstanding Certificates and Additional Certificates. Notwithstanding the foregoing provisions of this Section or any other provision of this Trust Agreement, the right of any Certificate Owner or Owner of any Additional Certificate to receive payment of said Owner's proportionate interest in the Lease Payments as the same become due shall not be impaired or affected without the consent of such Owner. Section 510. Reconstruction; Application of Net Proceeds. If any useful portion of the Site shall be destroyed or is damaged by fire or other casualty, or title to, or the temporary use of, such portion shall be taken under the exercise of the power of eminent domain, the City shall, as expeditiously as possible, continuously and diligently prosecute or cause to be PUBL,27208_1 1 138182345.52 38 prosecuted the repair, reconstruction, restoration or replacement thereof, unless it is determined under the provisions of Section 6.1(c) of the Lease Agreement that such repair, reconstruction, restoration or replacement is not to be undertaken. If such repair, reconstruction, restoration or replacement is to be undertaken, Net Proceeds of any hazard insurance paid on account of such damage or destruction shall be held by the Trustee in the Insurance and Condemnation Fund, and made available for, and to the extent necessary be applied to, the cost of the repair, reconstruction, restoration or replacement of the Site or portion thereof damaged, destroyed or taken. Pending such application, such proceeds may be invested by the Trustee, upon written direction of an Authorized Representative of the City received two days prior to the date of making such investment, in Permitted Investments which mature not later than such times as shall be necessary to provide moneys when needed to pay such cost of repair, reconstruction, restoration or replacement. Section 511. Accounts and Reports. (a) The Trustee shall keep proper books of record and account in which complete and correct entries shall be made of its transactions relating to the Site, the Project and each Fund, Account and subaccount established under this Trust Agreement and the Principal Components of the Certificates and Additional Certificates and which shall at all reasonable times during business hours and upon reasonable prior notice be subject to the inspection of the City and Owners of at least 25 % of the aggregate Principal Components of Certificates and Additional Certificates Outstanding. (b) The Trustee shall provide the City on or before the twentieth day after the end of each month with a copy of its customary cash and asset statements relating to each Fund, Account or subaccount held by it under the Trust Agreement; provided that the Trustee shall not be obligated to provide an accounting for any accounts that have had no activity since the last reporting date and that have a balance of zero. Section 512. No Obligation by the City to Owners. Except for the payment of Lease Payments when due in accordance with the Lease Agreement and any other payment due and owing by the City under the Lease Agreement and the performance of the other covenants and agreements of the City contained in the Lease Agreement or hereunder, the City shall have no obligation or liability to any of the other parties or to the Certificate Owners or Owners of any Additional Certificates with respect to this Trust Agreement or the terms, execution, delivery or transfer of the Certificates or any Additional Certificates, or the distribution of Lease Payments to the Certificate Owners and the Owners of any Additional Certificates by the Trustee. Section 513. No Obligation with Respect to Performance by Trustee. The Trustee acknowledges that neither the City nor the Agency shall have any obligation or liability to any of the other parties or to the Certificate Owners or Owners of any Additional Certificates with respect to the performance by the Trustee of any duty imposed upon it under this Trust Agreement. Section 514. No Liability to Owners for Payment. Except as provided in this Trust Agreement, neither the Trustee nor the Agency shall have any obligation or liability to the Certificate Owners or Owners of any Additional Certificates with respect to the payment of the PUBL,27208_1 1 138182345.52 39 - Lease Payments by the City when due, or with respect to the performance by the City of any other covenant by it in the Lease Agreement. Section 515. Possession and Enjoyment. From and after the execution of the Lease Agreement, the City shall during the term of the Lease Agreement peaceably and quietly have and hold and enjoy the Site, without suit, trouble or hindrance from the Trustee, except as expressly set forth in the Lease Agreement and this Trust Agreement. The Trustee will, at the written request of the City and at the City's cost, join in any legal action in which the City asserts its right to such possession and el\ioyment, to the extent Trustee lawfully may do so in accordance with the provisions of this Trust Agreement and the Lease Agreement. Section 516. Federal Tax Covenants. Notwithstanding any other provision of this Trust Agreement, absent an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of the Interest Components with respect to the Certi ficates and any Additional Certificates executed and delivered on a tax-exempt basis will not be adversely affected, the City covenants to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income and specifically covenants, without limiting the generality of the foregoing, as follows: (i) Private Activitr. The City will not take or omit to take action or refrain from any action or make any use of the proceeds of the Certificates or of any Additional Certificates executed and delivered on a tax-exempt basis or of any other monies or property which would cause the Certificates or any Additional Certificates executed and delivered on a tax-exempt basis to be "private activity bonds" within the meaning of Section 141 of the Code; (ii) Arbitral!:e. The City will make no use of the proceeds of the Certificates or of any Additional Certificates executed and delivered on a tax-exempt basis or of any other amounts or property, regardless of the source, or take or omit to take any action which will cause the Certificates or any Additional Certificates executed and delivered on a tax-exempt basis to be "arbitrage bonds" within the meaning of Section 148 of the Code; (iii) Federal Guarantee. The City will make no use of the proceeds of the Certificates or of any Additional Certificates executed and delivered on a tax-exempt basis or take or omit to take any action that would cause the Certificates or any Additional Certificates executed and delivered on a tax-exempt basis to be "federally guaranteed" within the meaning of Section 149(b) of the Code; (iv) Information ReoortinL!. The City will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149(e) of the Code; (v) Hedl!:e Bonds. The City will make no use of the proceeds of the Certificates or of any Additional Certificates executed and delivered on a tax-exempt basis or any other amounts or property, regardless of the source, or take or omit to take any action that would cause the Certificates or any Additional Certificates executed and delivered on a tax-exempt basis to be considered "hedge bonds" within the meaning of PUBL,27208_11138182345.52 40 Section 149(g) of the Code unless the City takes all necessary action to assure compliance with the requirements of Section 149(g) of the Code to maintain the exclusion from gross income of the Interest Components due with respect to the Certificates and any Additional Certificates executed and delivered on a tax-exempt basis for federal income tax purposes; and (vi) Miscellaneous. The City will take no action inconsistent with its expectations stated in the Tax Certificate and will comply with the covenants and requirements stated therein and incorporated by reference herein. ARTICLE VI CONCERNING THE TRUSTEE AND PAYING AGENT Section 601. Employment of Trustee. In consideration of the recitals hereinabove set forth and for other valuable consideration, the Trustee hereby agrees to receive, hold, invest and disburse the moneys to be paid to it pursuant to the Lease Agreement for credit to the various funds, accounts and subaccounts established by this Trust Agreement; to execute and deliver the Certificates and each issue of Additional Certificates; and to apply and disburse the Trust Estate and other moneys received pursuant to the Lease Agreement to the Certificate Owners and Owners of any Additional Certificates; and to perform certain other functions, all as herein provided and subject to the terms and conditions of this Trust Agreement. Section 602. Trustee Acceptance of Duties. The Trustee shall signify its acceptance of the duties and obligations imposed upon it hereby by executing and delivering this Trust Agreement; and by executing such acceptance the Trustee shall be deemed to have accepted such duties and obligations with respect to all the Certificates and Additional Certificates thereafter delivered, but only, however, upon the terms and conditions set forth herein. No duties or obligations, fiduciary or otherwise, other than those described herein shall be implied against the Trustee. In case an Event of Default has occurred (which has not been cured or waived), the Trustee may exercise such of the rights and powers vested in it by this Trust Agreement, and shall use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. Section 603. Evidence on Which Trustee May Act. (a) The Trustee, upon receipt of any notice, resolution, request, consent, order, certificate, report, opinion, bond, or other paper or document (including facsimile copies thereof) furnished to it pursuant to any provision hereof, shall examine such instrument to determine whether it conforms to the requirements hereof and shall be protected in acting upon any such instrument believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who mayor may not be of counsel to the City, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. Any action taken or omitted to be taken by the Trustee in good faith pursuant to this Trust Agreement upon the request or authority or consent of any person who at the time of making such request or giving such authority or consent is the Owner of any PUBL,27208_1 I 138182345.52 41 - Certificate or Additional Certificate shall be conclusive and binding upon all future Owners of the same Certificate or Additional Certificate 'and upon Certificates or Additional Certificates, as applicable, executed and delivered in exchange therefor or in place thereof. The Trustee shall not be bound to recognize any person as an Owner of any Certificate or to take any action at his request unless such person is the registered owner of a Certificate or Additional Certificate as shown on the registration books. (b) Whenever the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be therein specifically prescribed) may be deemed to be conclusively proved and established by a certificate of an Authorized Representative of the City, and such certificate shall be full warrant for any action taken or suffered in good faith under the provisions hereof upon the terms hereof; but in its discretion the Trustee may in lieu thereof accept other evidence of such fact or matter or may require such further or additional evidence as to it may seem reasonable, but shall in no case be bound to secure the same. The Trustee may accept a certificate of an Authorized Representative of the City or an Authorized Representative of the Agency to the effect that an authorization in the form therein set forth has been adopted by the City or the Agency, as the case may be, as conclusive evidence that such authorization has been duly adopted, and is in full force and effect. (c) Except as otherwise expressly provided herein, any request, order, notice or other direction required or permitted to be furnished pursuant to any provision hereof by the City to the Trustee shall be sufficiently executed in the name of the City by an Authorized Representative of the City. Section 604. Obligations of Trustee. Upon the termination of the Lease Term for the reasons stated in Section 4.2 of the Lease Agreement, upon the payment of all amounts due with respect to the Certificates and any Additional Certificates from whatever source following a termination of the Lease Agreement pursuant to Section 4.2 thereof, or upon a defeasance of all Certificates and any Additional Certificates Outstanding pursuant to Section 901 hereof and after the payment by the City of all reasonable expenses, charges, counsel fees and other disbursements of the Trustee as set forth in Section 605 herein and in the Lease Agreement, the Trustee shall conveyor relinquish all of its interests in the Site to the City free and clear of all liens thereon which Trustee may have. Section 605. Compensation. The City has agreed in the Lease Agreement to pay to the Trustee from time to time reasonable compensation for all services rendered hereunder and also all reasonable expenses, charges, counsel fees and other disbursements, including those of its attorneys, agents, and employees, incurred in and about the performance of its powers and duties hereunder. Upon an Event of Default, but only upon an Event of Default, the Trustee shall have a first lien with right to payment prior to payment on account of principal of, premium, if any, and interest due with respect to any Certificate and Additional Certificate, upon the amounts held hereunder for the foregoing fees, charges and expenses incurred by it. Section 606. Resignation of Trustee. The Trustee may at any time resign and be discharged of the duties and obligations created hereby by giving not less than 30 days' written notice to the City, the Insurer and the Owners of the Certificates and Additional Certificates Outstanding, specifying the date when such resignation shall take effect, and such resignation PUBL,27208_11138182345.52 42 shall take effect upon the later of the day specified in such notice or the day on which a successor appointed by the City or the Owners as provided in Section 608 shall have accepted its appointment as successor trustee. Section 607. Removal of Trustee. So long as no Event of Default shall have occurred and then be continuing, the Trustee may be removed upon 30 days' written notice by the City or by an instrument or concurrent instruments in writing, filed with the Trustee, and signed by the Owners of a majority in aggregate principal amount of the Certificates and any Additional Certificates then Outstanding or their attorneys-in-fact duly authorized. Section 608. Appointment of Successor Trustee. (a) In case at any time the Trustee shall resign or shall be removed pursuant to this Trust Agreement or shall become incapable of acting, or shall be adjudged as bankrupt or insolvent, or if a receiver, liquidator or conservator of the Trustee, or of its property, shall be appointed, or if any public officer shall take charge or control of the Trustee or of its property or affairs, a successor will be appointed by the City; provided, nevertheless, that unless a successor Trustee shall have been appointed as aforesaid, the Trustee shall forthwith appoint or petition a court of competent jurisdiction to appoint a Trustee to fill such vacancy until a successor Trustee shall be appointed by the City as authorized in this Section. (b) Any Trustee appointed under the provisions of this Section in succession to the Trustee shall be a commercial bank or trust company or national banking association subject to supervision and examination by federal or state banking authorities doing business and having its principal office in a city in which a Federal Reserve Bank is located or in the State and having the power of a trust company in the State and having (or if such trustee is a member of a bank holding company its parent bank holding company has) capital stock and surplus aggregating at least $50,000,000. (c) Immediately upon appointment, a successor Trustee shall mail notice to the Owners of the Certificates and any Additional Certificates Outstanding of its appointment. Section 609. Transfer of Rights and Property to Successor Trustee. Any successor Trustee appointed under this Trust Agreement shall execute, acknowledge and deliver to its predecessor Trustee an instrument accepting such appointment, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become fully vested with all moneys, estates, properties, rights, powers, duties and obligations of such predecessor Trustee, with like effect as if originally named as Trustee; but the Trustee ceasing to act shall nevertheless, on the written request of the successor Trustee, execute, acknowledge and deliver such instrument of conveyance and further assurance and do such other things as may reasonably be required for more fully and certainly vesting and confirming in such successor Trustee all the right, title and interest of the predecessor Trustee in and to any property held by it under this Trust Agreement, and shall pay over, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set forth. Should any deed, conveyance or instrument in writing from the City or the Agency be required by such successor Trustee for more fully and certainly vesting in and confirming to such successor Trustee any such estates, rights, power and duties, any and all such deeds, conveyances and instruments in writing shall, on request, and so PUBL,27208_1 1 138182345.52 43 - far as may be authorized by law, be executed, acknowledged and delivered by the City or the Agency. Section 610. Merger or Consolidation. Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such company satisfies the requirements of Section 608 above and is a bank or trust company organized under the laws of any state of the United States or a national banking association and shall be authorized by law to perform all the duties imposed upon it hereby, shall be the successor to the Trustee without the execution or filing of any paper or the performance of any further act. Section 611. Adoption of Authorized Signature. In case any of the Certificates or Additional Certificates contemplated to be delivered hereunder shall have been executed but not delivered, any successor Trustee may, but shall not be required to, adopt the authorized signature of any predecessor Trustee so executing such Certificates or Additional Certificates and deliver such Certificates or Additional Certificates so executed; and in case any of the said Certificates or Additional Certificates shall not have been executed, any successor Trustee may, but shall not be required to, execute such Certificates or Additional Certificates in the name of the successor Trustee, and in all such cases such certificate shall have the full force which it is anywhere in said Certificates or Additional Certificates or herein provided that the certificate of the Trustee shall have. Section 612. Trustee Liability. (a) No provision in this Trust Agreement shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (b) The Trustee shall not be responsible for the sufficiency of the security for the Certificates or any Additional Certificates executed and delivered hereunder or intended to be secured hereby and the Trustee shall not be bound to ascertain or inquire as to the observance or performance of any covenants, conditions or agreements on the part of the City under the Lease Agreement. (c) The Trustee, in its individual or any other capacity, may become the Owner or pledgee of Certificates or Additional Certificates secured hereby with the same rights which it would have if not the Trustee; may acquire and dispose of other bonds or evidence of indebtedness of the City with the same rights it would have if it were not the Trustee; and may act as a depository for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Owners, whether or not such committee shall represent the Owners of the majority in aggregate principal amount of the Certificates and Additional Certificates then Outstanding. PUBL,27208_1 1 138182345.52 44 (d) The permissive right of the Trustee to do things enumerated in this Trust Agreement shall not be construed as a duty and it shall not be answerable for other than its negligence or willful misconduct. (e) The Trustee shall not be required to take notice or be deemed to have notice of any Event of Default hereunder except failure by the City to make any of the Lease Payments to the Trustee required to be made by the City pursuant to the Lease Agreement or failure by the City or the Agency to file with the Trustee any document required by this Trust Agreement or the Lease Agreement to be so filed subsequent to the delivery of the Certificates, unless the Trustee shall be specifically notified in writing of such default by the City, the Agency or by the Owners of at least 25 % in aggregate principal amount of Certificates and Additional Certificates then Outstanding and all notices or other instruments required by this Trust Agreement to be delivered to the Trustee must, in order to be effective, be delivered in accordance with the provisions of Section 908 hereof, and in the absence of such notice so delivered, the Trustee may conclusively assume there is no Event of Default except as aforesaid. (f) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Owners of a majority in aggregate principal amount of the Outstanding Certificates and Additional Certificates, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Trust Agreement. (g) The recitals, statements and representations in this Trust Agreement or in the Certificates and any Additional Certificates have not been made by the Trustee; and the Trustee shall be under no responsibility for the correctness thereof, except such recitals of the Trustee as are contained in Sections 201 and 204 hereof. Section 613. Indemnification. The City agrees to indemnify and save the Trustee harmless in accordance with the provisions of Section 2.1(e) of the Lease Agreement and against any loss, liability or expense which it may incur in the performance of its duties and powers under this Trust Agreement or the Lease Agreement which are not due to its negligence or willful misconduct. ARTICLE VII AMENDMENTS Section 701. Mailing. Except as provided in Sections 312 and 703 hereof, any provision in this Article for the mailing for a notice or other paper to Certificate Owners and any Owners of Additional Certificates shall be fully complied with only if it is mailed first class United States mail, postage prepaid to each Owner of Certificates and any Additional Certificates then Outstanding at his address, if any, appearing upon the registry books of the Trustee. pUBL,27208_11138182345.52 45 - Section 702. Powers of Amendment. This Trust Agreement and the rights and obligations provided herein may be modified or amended at any time by a Supplemental Trust Agreement, entered into among the Trustee, the Agency and the City but without the consent of any Certificate Owners or the Owners of any Additional Certificates, and the Assignment Agreement, the Lease Agreement and the Site Lease may be amended with the consent of the parties thereto and in the case of the Assignment Agreement, the City and in the case of the Lease Agreement and the Site Lease the Trustee but without the consent of the Certificate Owners or the Owners of any Additional Certificates, but only (1) to cure any ambiguity, supply any omission, or cure or correct any defect or inconsistent provision in this Trust Agreement, the Site Lease, the Assignment Agreement or the Lease Agreement, or (2) in regard to questions arising under this Trust Agreement, the Lease Agreement, the Assignment Agreement or the Site Lease which the City and the Trustee may deem necessary or desirable and not inconsistent with this Trust Agreement, the Lease Agreement, the Assignment Agreement or the Site Lease, and which shall not adversely affect the interests of the Owners of the Certificates or any Additional Certificates, or (3) to provide for the substitution of property in accordance with Section 3.6 of the Lease Agreement, or (4) to provide for the execution and delivery of Additional Certificates in accordance with the provisions of Section 317 hereof, or (5) for any other reason, provided such modification or amendment does not adversely affect the interests of the Owners of the Certificates or any Additional Certificates. Any other modification or amendment hereof and of the rights and obligations of the Trustee and of the Owners of the Certificates or any Additional Certificates hereunder, in any particular, may be made only by a Supplemental Trust Agreement, entered into among the Trustee, the Agency and the City and the written consent, given as provided in Section 703, of the Owners of at least a majority in aggregate principal amount of the Certificates and Additional Certificates Outstanding at the time such consent is given. Any other modification or amendment to the Assignment Agreement, the Lease Agreement or the Site Lease may be made only with the written consent, given as provided in Section 703, of the Owners of at least a majority in aggregate principal amount of the Certificates or Additional Certificates Outstanding at the time such consent is given. No such modification or amendment shall permit a change in the terms of redemption or maturity of the Principal Components of any Outstanding Certificates or Additional Certificates or payment of any Interest Component or a reduction in the Principal Component or the Redemption Price thereof, or in the rate of interest thereon or which will have a materially ad verse effect on the security interest of the Owner without the consent of the Owner of such Certificate or Additional Certificate, or shall reduce the percentages or otherwise affect the classes of Certificates or Additional Certificates the consent of the Owners of which is required to effect any such modification or amendment, or shall change or modify any of the rights or obligations of the Trustee without the written consent of the Trustee. Section 703. Consent of Owners. The Trustee, the Agency and the City may at any time enter into a Supplemental Trust Agreement or amendment to the Lease Agreement, the Assignment Agreement or the Site Lease making a modification or amendment requiring the consent of Owners of Certificates or Additional Certificates under the provisions of Section 702 to take effect when and as provided in this Section. A copy of such Supplemental Trust Agreement or amendment to the Lease Agreement, the Assignment Agreement or the Site Lease (or brief summary thereof or reference thereto in form approved by Bond Counsel), together with a request to Owners of Certificates or Additional Certificates to approve the same shall be mailed to each Certificate Owner or Owner of any Additional Certificates (but failure to mail such copy PUBL,27208_11138182345.52 46 --- and request shall not affect the validity of the Supplemental Trust Agreement or amendment to the Lease Agreement, the Assignment Agreement or the Site Lease when consented to as in this Section provided). Such Supplemental Trust Agreement or amendment to the Lease Agreement, the Assignment Agreement or the Site Lease shall not be effective unless and until (i) there shall have been filed with the Trustee (a) the written consents of the Owners of the percentages of Outstanding Certificates and Additional Certificates specified in Section 702 hereof, and (b) an opinion of Bond Counsel, stating that such Supplemental Trust Agreement or amendment to the Lease Agreement, the Assignment Agreement or the Site Lease has been duly and lawfully entered into by the City or the Agency, as applicable, and filed with the City and the Trustee in accordance with the provisions hereof, is authorized or permitted hereby, and is valid and binding upon the parties thereto in accordance with its terms. Each such consent shall be effective only if accompanied by proof of the Owner, at the date of such consent, of the Certificates or Additional Certificates with respect to which such consent is given, which proof shall be such as is permitted by Section 902. A certificate or certificates executed by the Trustee and filed with the City stating that it has examined such proof and that such proof is sufficient in accordance with Section 902 shall be conclusive that the consents have been given by the Owners of the Certificates and any Additional Certificates described in such certificate or certificates of the Trustee. Any such consent shall be binding upon the Owner of the Certificates and any Additional Certificates giving such consent and, anything in Section 902 to the contrary notwithstanding, upon any subsequent Owner of such Certificates or Additional Certificates and of any Certificates or Additional Certificates issued in exchange therefor (whether or not such subsequent Owner thereof has notice thereof) unless such consent is revoked in writing by the Owner of such Certificates or Additional Certificates giving such consent or a subsequent Owner thereof by filing with the Trustee, prior to the time when the written statement of the Trustee hereinafter in this Section provided for is filed, such revocation and, if such Certificates or Additional Certificates are held by the signer of such revocation in the manner permitted by Section 902. The fact that a consent has not been revoked may likewise be proved by a certificate of the Trustee filed with the City to the effect that no revocation thereof is on file with the Trustee. At any time after the Owners of the required percentages of Certificates or Additional Certificates shall have filed their consents to the Supplemental Trust Agreement or amendment to the Lease Agreement, the Assignment Agreement or the Site Lease, the Trustee shall make and file with the City a written statement that the Owners of such required percentages of Certificates and Additional Certificates have filed such consents. Such written statements shall be conclusive that such consents have been so filed. At any time after the filing of the required consents, notice shall be given by the City to the Owners of Certificates and any Additional Certificates stating in substance that the Supplemental Trust Agreement or amendment to the Lease Agreement, the Assignment Agreement or the Site Lease has been consented to by the Owners of the required percentages of Certificates and Additional Certificates by mailing such notice to the Owners of Certificates and any Additional Certificates (but failure to receive such notice shall not prevent such Supplemental Trust Agreement or amendment to the Lease Agreement, the Assignment Agreement or the Site Lease from becoming effective and binding as in this Section provided). The City shall file with the Trustee proof of the mailing of such notice. A record, consisting of the Certificates or statements required or permitted by this Section to be made by the Trustee, shall be proof of the matters therein stated. Such Supplemental Trust Agreement or amendment to the Lease Agreement, the Assignment Agreement or the Site Lease making such amendment or pUBL,27208_11138182345.52 47 .-- modification shall be deemed conclusively binding upon the City, the Trustee, the Agency and the Owners of all Certificates and Additional Certificates at the expiration of 20 days after the filing with the Trustee of the proof of the mailing of such last mentioned notice, except in the event of a final decree of a court of competent jurisdiction setting aside such Supplemental Trust Agreement or amendment to the Lease Agreement, the Assignment Agreement or the Site Lease in a legal action or equitable proceeding for such purpose commenced within such 20 day period; provided, however, that the Trustee and the City during such 20 day period and any such further period during which any such action or proceeding may be pending shall be entitled in their absolute discretion to take such action, or to refrain from taking such action, with respect to such Supplemental Trust Agreement or amendment to the Lease Agreement, the Assignment Agreement or the Site Lease as they may deem expedient. Section 704. Modifications by Unanimous Consent. Subject to the provisions of Section 703 hereof, the terms and provisions hereof and the rights and obligations of the Trustee and of the Owners of the Certificates and Additional Certificates hereunder may be modified or amended in any respect upon entering into by the parties thereto of a Supplemental Trust Agreement with the consent of the Owners of all the Certificates and any Additional Certificates then Outstanding, such consent to be given as provided in Section 703 except that no notice to such Owners by mailing shall be provided. Section 705. Exclusion of Certificates and Additional Certificates. Certificates or Additional Certificates owned or held by or for the account of the City or the Agency shall not be deemed Outstanding for the purpose of consent or other action or any calculation of Outstanding Certificates and Additional Certificates provided for in this Article, and neither the City nor the Agency shall be entitled with respect to such Certificates and Additional Certificates to give any consent or take any other action provided for in this Article. At the time of any consent or other action taken under this Article, the City shall furnish the Trustee a certificate of an Authorized Representative of the City, upon which the Trustee may rely, describing all Certificates and Additional Certificates so to be excluded. Section 706. Notation on Certificates and Additional Certificates. Certificates and Additional Certificates executed and delivered after the effective date of any action taken as provided in Article V or this Article provided may, and if the City so determines shall, bear a notation by endorsement or otherwise in form approved by the City as to such action, and in that case upon demand of the Owner of any Certificate or Additional Certificate Outstanding at such effective date and presentation of his Certificate or Additional Certificate, as applicable, for the purpose at the principal corporate trust office of the Trustee or upon any transfer or exchange of any Certificate or Additional Certificate Outstanding at such effective date, suitable notation shall be made on such Certificate or Additional Certificate or upon any Certificates or Additional Certificate issued upon any such transfer or exchange by the Trustee as to any such action. If the City shall so determine, new Certificates or Additional Certificates so modified as in the opinion of Bond Counsel and the City to conform to such action shall be prepared, executed and delivered, and upon demand of the Owner of any Certificate or Additional Certificate then Outstanding shall be exchanged, without cost to such Owner, for Certificates or Additional Certificate, as the case may be, of the same issue and maturity then Outstanding, upon surrender of such Certificates or Additional Certificates, as the case may be. PUBL,27208_11138182345.52 48 -,.- ARTICLE VIII BOOK-ENTRY SYSTEM Section 801. Book-Entry System; Limited Obligation of Agency. The Certificates shall and any issue of Additional Certificates so designated by an Authorized Representative of the City shall be initially delivered in the form of a separate single fully registered Certificate or Additional Certificate (which may be typewritten) for each of the maturities of the Certificates and applicable Additional Certificates. Upon initial delivery, the ownership of each such Certificate and Additional Certificate shall be registered in the registration books kept by the Trustee in the name of the Nominee as nominee of the Depository. Except as provided in Section 803 hereof, all of the Outstanding Certificates and applicable Additional Certificates shall be registered in the registration books kept by the Trustee in the name of the Nominee. With respect to Certificates and Additional Certificates registered in the registration books kept by the Trustee in the name of the Nominee, the City, the Agency and the Trustee shall have no responsibility or obligation to any such Participant or to any Person on behalf of which such a Participant holds an interest in the Certificates or Additional Certificates. Without limiting the immediately preceding sentence, the City, the Agency and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the records of the Depository, the Nominee, or any Participant with respect to any ownership interest in the Certificates or Additional Certificates, (ii) the delivery to any Participant or any other Person, other than an Owner as shown in the registration books kept by the Trustee, of any notice with respect to the Certificates or Additional Certificates, including any notice of redemption, (iii) the selection by the Depository and its Participants of the beneficial interests in the Certificates or Additional Certificates to be redeemed in the event the Certificates or Additional Certificates are redeemed in part, or (iv) the payment to any Participant or any other Person, other than an Owner as shown in the registration books kept by the Trustee, of any amount with respect to principal of, premium, if any, or interest due with respect to the Certificates or Additional Certificates. The City, the Agency and the Trustee may treat and consider the Person in whose name each Certificate and Additional Certificate is registered in the registration books kept by the Trustee as the holder and absolute owner of such Certificate and Additional Certificate for the purpose of payment of Principal Components, premium, if any, and Interest Components with respect to such Certificate, for the purpose of giving notices of redemption and other matters with respect to such Certificate and Additional Certificate, for the purpose of registering transfers with respect to such Certificate and Additional Certificate, and for all other purposes whatsoever. The Trustee shall pay all principal of, premium, if any, and interest due with respect to the Certificates and Additional Certificates only to or upon the order of the respective Owner, as shown in the registration books kept by the Trustee, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to satisfy and discharge fully the City's obligations with respect to payment of the Principal Components, premium, if any, and Interest Components due with respect to the Certificates and Additional Certificates to the extent of the sum or sums so paid. No Person other than an Owner, as shown in the registration books kept by the Trustee, shall receive a Certificate or Additional Certificates evidencing the obligation of the City to make payments of principal, premium, if any, and interest pursuant to this Trust Agreement. Upon delivery by the Depository to the Trustee, the City and the Agency of written notice to the effect that the Depository has determined to substitute a new nominee in place of the PUBL,27208_1 1 138182345.52 49 Nominee, and subject to the provisions herein with respect to Record Dates, the word Nominee in this Trust Agreement shall refer to such new nominee of the Depository. Section 802. Representation Letter. In order to qualify the Certificates or Additional Certificates for the Depository's book-entry system, an authorized representative of the Trustee is hereby authorized by the City to execute from time to time and deliver to such Depository the Representation Letter. The execution and delivery of the Representation Letter shall not in any way limit the provisions of Section 801 or in any other way impose upon the City, the Agency or the Trustee any obligation whatsoever with respect to persons having interests in the Certificates or Additional Certificates other than the Owners, as shown on the registration books kept by the Trustee. The Trustee agrees to take all action necessary to continuously comply with all representations made by it in the Representation Letter. In addition to the execution and delivery of the Representation Letter, the Chair, the Secretary and all other officers of the Agency, and the Authorized Representative of the City, are hereby authorized to take any other actions, not inconsistent with this Trust Agreement, to qualify the Certificates or any Additional Certificates for the Depository's book-entry program. Section 803. Transfers Outside Book-Entry System. In the event (i) the Depository determines not to continue to act as securities depository for the Certificates or an issue of Additional Certificates, or (ii) the City determines that the Depository shall no longer so act, then the City following delivery of a written notice of removal to the Depository will discontinue the book-entry system with the Depository. If the City fails to identify another qualified securities depository to replace the Depository then the Certificates or Additional Certificates so designated shall no longer be restricted to being registered in the registration books kept by the Trustee in the name of the Nominee, but shall be registered in whatever name or names Persons transferring or exchanging Certificates shall designate, in accordance with the provisions of Section 306. Section 804. Payments to the Nominee. Notwithstanding any other provisions of this Trust Agreement to the contrary, so long as any Certificate or Additional Certificate is registered in the name of the Nominee, all payments with respect to Principal Components, premium, if any, and Interest Components due with respect to such Certificate or Additional Certificate and all notices with respect to such Certificate or Additional Certificate shall be made and given, respectively, as provided in the Representation Letter or as otherwise instructed by the Depository. Section 805. Initial Depository and Nominee. The initial Depository under this Article shall be The Depository Trust Company, New York, New York. The initial Nominee shall be Cede & Co., as Nominee of The Depository Trust Company, New York, New York. PUBL,27208_11138182345.52 50 _. ARTICLE IX MISCELLANEOUS Section 901. Defeasance. One or more of the Certificates and/or Additional Certificates may be paid and discharged in anyone or more of the following ways: (a) by paying or causing to be paid the Principal Component and the Interest Components with respect to said Certificate(s) and Additional Certificate(s), as and when the same become due and payable; (b) by depositing with the Trustee, in trust, at or before maturity, money which, together with the amounts then on deposit in the Lease Payment Fund and the Certificate Fund applicable to the Outstanding Certificate(s) or Additional Certificate(s) to be paid and discharged, is fully sufficient to pay the Outstanding Certificate(s) or Additional Certificate(s), as applicable, to be paid and discharged, including the Principal Component and the Interest Component thereof; or (c) by depositing with the Trustee, in trust, Permitted Investments of the type described in paragraphs (a) or (b) of the definition thereof in such amount as certified by an independent certified public accountant will be sufficient, together with the interest to accrue thereon, moneys then on deposit in the Lease Payment Fund and the Certificate Fund applicable to the Outstanding Certificate(s) and Additional Certificate(s) to be paid and other available moneys dedicated to such purpose, together with the interest to accrue thereon, to pay and discharge the Outstanding Certificate(s) and Additional Certificate(s) to be paid and discharged (including the Principal Component, any applicable premium, and the Interest Component thereof) at or before their respective maturity or Redemption Dates. Notwithstanding that any Certificates or Additional Certificates shall not have been surrendered for payment, all obligations of the Agency, the Trustee and the City under this Trust Agreement with respect to those Certificates or Additional Certificates paid, as provided in the above subsections (a) (b) or (c), shall cease and terminate and shall no longer be Outstanding hereunder, except only the obligation of the Trustee to payor cause to be paid from funds deposited therefor to the Owners of the Certificates and Additional Certificates not so surrendered and paid all sums due thereon and to transfer title to the Site to City as provided in Section 604 hereof and except the obligation of the City to comply with the covenants set forth in Section 516 hereof. Any funds held by the Trustee, at the time of one of the events described above in subsections (a) (b) or (c) shall have occurred as to all Outstanding Certificates and Additional Certificates, which are not required for the payment to be made to Owners, or for payments to be owed to the Trustee by the City under Sections 406 and 605 hereof or otherwise, shall be paid over to the City. Notwithstanding anything herein to the contrary, in the event that a Principal Component and/or Interest Component due with respect to a Certificate shall be paid by Insurer PUBL,27208_11138182345.52 51 -. pursuant to the Municipal Bond Insurance Policy, such Certificate shall remain Outstanding for - all purposes, not be defeased or otherwise satisfied and not be considered paid by the City, and the assignment and pledge of the Trust Estate and all covenants, agreements and other obligations of the City to the registered Certificate Owner shall continue to exist and shall run to the benefit of Insurer, and Insurer shall be subrogated to the rights of such registered Certificate Owner. Section 902. Evidence of Signatures of Certificate Owners and Ownership of Certificates . (a) Any request, consent, revocation of consent or other instrument which this Trust Agreement may require or permit to be signed and executed by the Owners of Certificates or any Additional Certificates may be in one or more instruments of similar tenor, and shall be signed or executed by such Owners of Certificates or any Additional Certificates in person or by their attorneys appointed in writing. Proof of (i) the execution of any such instrument, or of an instrument appointing any such attorney, or (ii) the holding by any person of the Certificates or any Additional Certificates, shall be sufficient for any purpose hereof (except as otherwise therein expressly provided) if made in the following manner, or in any other manner satisfactory to the Trustee, which may nevertheless in its discretion require further or other proof in cases where it deems the same desirable: the fact and date of the execution by any Owner of Certificates or any Additional Certificates or his attorney of such instruments may be proved by a guarantee of the signature thereon by a bank or trust company or by the certificate of any notary public or other officer authorized to take acknowledgments of deeds, that the person signing such request or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such notary public or other officer. Where such execution is by an officer of a corporation or association or a member of a partnership, on behalf of such corporation, association or partnership, such signature guarantee, certificate or affidavit shall also constitute sufficient proof of his authority. (b) The ownership of Certificates and any Additional Certificates and the amount, numbers and other identification, and date of holding the same shall be proved by the registry books. (c) Any request or consent by an Owner of Certificates and Additional Certificates shall bind all future Owners of Certificates and Additional Certificates in respect of anything done or suffered to be done by the Agency, the City or the Trustee in accordance therewith. Section 903. Moneys Held for Particular Certificates and Additional Certificates. The amounts held by the Trustee for the payment of the Interest Components, Principal Components or premium due on any date with respect to particular Certificates or Additional Certificates shall, on and after such date and pending such payment, be set aside on its books and held in trust, without responsibility for investment thereof, by it for the Owners of the Certificates or Additional Certificates entitled thereto, subject to Section 316 herein. Section 904. Preservation and Inspection of Documents. All documents received by the Trustee under the provisions of this Trust Agreement shall be retained in its possession and shall be subject at all reasonable times during business hours on any Business Day and upon reasonable prior notice to the inspection of the City, any Owner of 25 % of the Certificates and PUBL,27208_11138182345.52 52 -.- Additional Certificates and their agents and representatives, any of whom may make copies thereof. Section 90S. Parties Interested Herein. Nothing in this Trust Agreement expressed or implied is intended or shall be construed to confer upon, or to give to, any person or corporation, other than the City, the Agency, the Trustee and the Owners of the Certificates and any Additional Certificates, any right, remedy or claim under or by reason of this Trust Agreement or any covenant, condition or stipulation thereof; and all the covenants, stipulations, promises and agreements herein contained by and on behalf of the Trustee shall be for the sole and exclusive benefit of the Trustee and the Owners of the Certificates and any Additional Certificates. Section 906. Severability of Invalid Provisions. If anyone or more of the covenants or agreements provided herein should be contrary to law, then such covenant or covenants or agreement or agreements shall be deemed severable from the remaining covenants and agreements, and shall in no way affect the validity of the other provisions hereof. Section 907. Recording and Filing. The City shall be responsible for the recording and filing of the Lease Agreement and financing statements (or continuation statements in connection therewith) or of any supplemental instruments or documents of further assurance as may be required by law in order to perfect the security interests created by the Lease Agreement. Section 908. Notices. All notices, certificates, requests or other communications hereunder shall be in writing and shall be sufficiently given and shall be deemed given when delivered or mailed by certified mail, postage prepaid, to the parties at their respective places of business as follows: If to the City: City of Poway 13325 Civic Center Drive Poway, California 92064 Attention: City Manager If to the Agency: Poway Redevelopment Agency 13325 Civic Center Drive Poway, California 92064 Attention: Executive Director PUBL,27208_1 1 138182345.52 53 - If to the Trustee: Bank of America National Trust and Savings Association 333 South Beaudry, 25th Floor Los Angeles, California 90071 Attention: Corporate Trust Department #8510 If to Insurer: Attn: Telecopier: The parties hereto by written notice hereunder may designate different addresses for the purposes of this Section. Section 909. California Law. This Trust Agreement shall be construed and governed in accordance with the laws of the State of California. Section 910. Binding on Successors. This Trust Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. Section 911. Headings. Headings preceding the text of the several Articles and Sections hereof, and the table of contents, are solely for convenience of reference and shall not constitute a part of this Trust Agreement or affect its meaning, construction or effect. Section 912. Execution in Counterparts. This Trust Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. ARTICLE X PROVISIONS RELATING TO MUNICIPAL BOND INSURANCE POLICY Section 1001. Consent of Insurer. (a) Any provision of this Trust Agreement expressly recognizing or granting rights in or to Insurer may not be amended in any manner which affects the rights of Insurer hereunder without the prior written consent of Insurer. (b) Insurer's consent shall be required in addition to Certificate owner's consent, when required, for the following purposes: (i) execution and delivery of any Supplemental Trust Agreement or any amendment, supplement or change to or modification of the Lease Agreement, the Site Lease or the Assignment Agreement; (ii) removal of the Trustee or Paying Agent and selection and appointment of any successor trustee or paying agent; and PUBL,27208_1 1 138182345.52 54 (iii) initiation or approval of any action not described in (i) or (ii) above which requires Certificate owner consent. (c) Anything in this Trust Agreement to the contrary notwithstanding, upon the occurrence and continuance of an Event of Default as de.fined herein, Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the Certificate owners or the Trustee for the benefit of the Certificate owners under this Trust Agreement. Section 1002. Notices to be Given to Insurer. (a) While the Municipal Bond Insurance Policy is in effect, the City shall furnish to Insurer: (i) as soon as practicable after the filing thereof, a copy of the adopted budget of the City and a copy of any audit and annual report of the City; (ii) a copy of any notice to be given to the registered owners of the Certificates, including, without limitation, notice of any redemption of or defeasance of Certificates, and any certificate rendered pursuant to this Trust Agreement relating to the security for the Certi ficates; and (iii) such additional information it may reasonably request. (b) The Trustee shall notify Insurer of any failure of the City to provide relevant notices or certificates to the Trustee required under the Trust Agreement or the Lease Agreement. The Trustee shall furnish to Insurer a copy of all notices given to it by the City pursuant to the Site Lease and the Lease Agreement. (c) The City will permit Insurer to discuss the affairs, finances and accounts of the City or any information Insurer may reasonably request regarding the security for the Certificates with appropriate officers of the City. The City will permit Insurer to have access to the Project and have access to and to make copies of all books and records relating to the Certificates at any reasonable time. (d) Insurer shall have the right to direct an accounting at the City's expense, and the City's failure to comply with such direction within thirty (30) days after receipt of written notice of the direction from Insurer shall be deemed a default hereunder; provided, however, that if compliance cannot occur within such period, then such period will be extended so long as compliance is begun within such period and diligently pursued, but only if such extension would not materially adversely affect the interests of any registered owner of the Certificates. (e) Notwithstanding any other provision of this Trust Agreement, the Trustee shall immediately notify Insurer if at any time there are insufficient moneys to make any payments of the Principal Components and/or Interest Components as required and immediately upon the occurrence of any Event of Default hereunder. PUBL,27208_11138182345.52 55 - Section 1003. Payment Procedure Pursuant to the Municipal Bond Insurance Policy. As long as the Municipal Bond Insurance Policy is in full force and effect, the City, the Trustee and any Paying Agent agree to comply with the following provisions: (a) At least one (1) day prior to all Interest Payment Dates the Trustee or Paying Agent, if any, will determine whether there will be sufficient funds in the Funds and Accounts to pay the Principal Components or Interest Components due with respect to the Certificates on such Interest Payment Date. If the Trustee or Paying Agent, if any, determines that there will be insufficient funds in such Funds or Accounts the Trustee or Paying Agent, if any, shall so notify Insurer. Such notice shall specify the amount of the anticipated deficiency, the Certificates to which such deficiency is applicable and whether such Certificates will be deficient as to the Principal Components or Interest Components, or both. If the Trustee or Paying Agent, if any, has not so notified Insurer one (I) Business Day prior to an Interest Payment Date, Insurer will make payments of the Principal Components or Interest Components due with respect to the Certificates on or before the first (1st) Business Day next following the date on which Insurer shall have received notice of nonpayment from the Trustee or Paying Agent, if any. (b) The Trustee or Paying Agent, if any, shall, after giving notice to Insurer as provided in (a) above, make available to Insurer and, at Insurer's direction, to the United States Trust Company of New York, as insurance trustee for Insurer or any successor insurance trustee (the "Insurance Trustee"), the registration books of the City maintained by the Trustee or Paying Agent, if any, and all records relating to the Funds and Accounts maintained under this Trust Agreement. (c) The Trustee or Paying Agent, if any, shall provide Insurer and the Insurance Trustee with a list of registered owners of Certificates entitled to receive payment of the Principal Components or Interest Components from Insurer under the terms of the Municipal Bond Insurance Policy, and shall make arrangements with the Insurance Trustee (i) to mail checks or drafts to the registered owners of Certificates entitled to receive full or partial Interest Components from Insurer and (ii) to pay Principal Components due with respect to the Certificates surrendered to the Insurance Trustee by the registered owners of Certificates entitled to receive full or partial Principal Components from Insurer. (d) The Trustee or Paying Agent, if any, shall, at the time it provides notice to Insurer pursuant to (a) above, notify registered owners of Certificates entitled to receive the payment of Principal Components or Interest Components thereon from Insurer (i) as to the fact of such entitlement, (ii) that Insurer will remit to them all or a part of the Interest Components next coming due upon proof of Certificate owner's entitlement to Interest Components and delivery to the Insurance Trustee, in form satisfactory to the Insurance Trustee, of an appropriate assignment of the registered owner's right to payment, (iii) that should they be entitled to receive full payment of Principal Components from Insurer, they must surrender their Certificates (along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee to permit ownership of such Certificates to be registered in the name of Insurer) for payment to the Insurance Trustee, and not the Trustee or Paying Agent, if any, and (iv) that should they be entitled to receive partial payment of Principal Components from Insurer, they must surrender their Certificates for payment thereon first to the Trustee or Paying Agent, if any, who shall note on such Certificates the portion of the Principal Components paid by the Trustee or Paying PUBL'27208_1 I 138182345.52 56 Agent, if any, and then, along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee, to the Insurance Trustee, which will then pay the unpaid portion of Principal Components. (e) In the event that the Trustee or Paying Agent, if any, has notice that any payment of the Principal Components or Interest Components due with respect to a Certificate which has become Due for Payment (as defined in the Municipal Bond Insurance Policy) and which is made to a Certificate owner by or on behalf of the City has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealab Ie order of a court having competent jurisdiction, the Trustee or Paying Agent, if any, shall, at the time Insurer is notified pursuant to (a) above, notify all registered owners that in the event that any registered owner's payment is so recovered, such registered owner will be entitled to payment from Insurer to the extent of such recovery if sufficient funds are not otherwise available, and the Trustee or Paying Agent, if any, shall furnish to Insurer its records evidencing the payments of the Principal Components and Interest Components due with respect to the Certificates which have been made by the Trustee or Paying Agent, if any, and subsequently recovered from registered owners and the dates on which such payments were made. (f) In addition to those rights granted Insurer under this Trust Agreement, Insurer shall, to the extent it makes payment of the Principal Components or Interest Components due with respect to Certificates, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Municipal Bond Insurance Policy, and to evidence such subrogation (i) in the case of subrogation as to claims for past due Interest Components, the Trustee or Paying Agent, if any, shall note Insurer's rights as subrogee on the registration books of the City maintained by the Trustee or Paying Agent, if any, upon receipt from Insurer of proof of the payment of the Interest Components thereon to the registered owners of the Certificates, and (ii) in the case of subrogation as to claims for past due Principal Components, the Trustee or Paying Agent, if any, shall note Insurer's rights as subrogee on the registration books of the City maintained by the Trustee or Paying Agent, if any, upon surrender of the Certificates by the registered owners thereof together with proof of the payment of the Principal Components thereof. Section 1004. Trustee-Related Provisions. (a) The Trustee or Paying Agent, if any, may be removed at any time, at the request of Insurer, for any breach of this Trust Agreement set forth herein. (b) Insurer shall receive prior written notice of any Trustee or Paying Agent resignation. (c) Every successor Trustee appointed pursuant to Section 608 shall be a trust company or bank in good standing located in or incorporated under the laws of the State, duly authorized to exercise trust powers and subject to examination by federal or state authority, having (or if such successor Trustee is a member of a bank holding company system, its parent bank holding company has) a reported capital and surplus of not less than $75,000,000 and acceptable to Insurer. Any successor Paying Agent, if applicable, shall not be appointed unless Insurer approves such successor in writing. PUBL,27208_11138182345.52 57 - - (d) Notwithstanding any other provision of this Trust Agreement, in determining whether the rights of the Certificate owners will be adversely affected by any action taken pursuant to the terms and provisions of this Trust Agreement, the Trustee shall consider the effect on the Certificate owners as if there were no Municipal Bond Insurance Policy. (e) Notwithstanding any other provision of this Trust Agreement, no removal, resignation or termination of the Trustee or Paying Agent, if any, shall take effect until a successor, acceptable to Insurer, shall be appointed. Section 1005. Parties Interested Herein. Nothing in this Trust Agreement expressed or implied is intended or shall be construed to confer upon, or to give to, any person or entity, other than the City, the Trustee, Insurer, the Paying Agent, if any, and the registered owners of the Certificates, any right, remedy or claim under or by reason of this Trust Agreement or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in this Trust Agreement contained by and on behalf of the City shall be for the sole and exclusive benefit of the City, the Trustee, Insurer, the Paying Agent, if any, and the registered owners of the Certificates. To the extent that this Trust Agreement confers upon or gives or grants to Insurer any right, remedy or claim under or by reason of this Trust Agreement, Insurer is hereby explicitly recognized as being a third-party beneficiary hereunder and may enforce any such right, remedy or claim conferred, given or granted hereunder. Section 1006. Termination of Insurance Provisions. The provisions of this Article X shall apply only so long as the Municipal Bond Insurance Policy remains in effect and no default in payment has occurred thereunder. PUBL,27208 _11138182345.52 58 -.- -~._~ IN WITNESS WHEREOF, the parties have executed and attested this Trust Agreement by their officers thereunto duly authorized as of the date and year first written above. CITY OF POW A Y By: Its: Mayor ATTEST: City Clerk POWAY REDEVELOPMENT AGENCY By: Its: Chairperson ATTEST: Secretary BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Trustee By: Its: Authorized Officer PUBL,27208_1 1 138182345.52 59 EXHIBIT A ._. FORM OF CERTIFICATE No._ $ 1995 REFUNDING CERTIFICATE OF PARTICIPATION (CITY OF POWAY 1991 CAPITAL IMPROVEMENT PROJECT- POWAY ROYAL MOBILEHOME PARK) Evidencing a Proportionate Interest of the Owner Hereof in Lease Payments to be Made by the CITY OF POWAY, as Lessee As the Rental for a Certain Site Pursuant to a Lease Agreement with the Poway Redevelopment Agency, as Lessor INTEREST CERTIFICATE RATE PAYMENT DATE DATED DATE CUSIP July 1, 1995 REGISTERED OWNER: Cede & Co. PRINCIPAL COMPONENT: DOLLARS THIS IS TO CERTIFY THAT the person or entity named above is the registered owner of this Certificate of Participation (the "Certificate"), evidencing a proportionate interest in that certain Lease Agreement, dated as of July 1, 1995 (the "Lease Agreement"), by and between the City of Poway as Lessee (the "City") and the Poway Redevelopment Agency, a nonprofit public benefit corporation, as Lessor (the" Agency"). The Agency's rights, title and interest as lessor under the Lease Agreement, including the right to receive Lease Payments and the right to enforce the payment thereof, have been assigned to Bank of America National Trust and Savings Association, as trustee (the "Trustee") pursuant to an Assignment Agreement, dated as of July 1, 1995 (the "Assignment Agreement"), between the Agency and the Trustee. PUBL,27208_11138182345.52 A-I M____._ The registered owner of this Certificate is entitled to receive, subject to the terms of the Lease Agreement and the Trust Agreement, dated as of July 1, 1995 (the "Trust Agreement"), by and among the City, the Agency and the Trustee, on the Certificate Payment Date specified above, unless redeemed prior thereto as provided herein, the Principal Component specified above, representing a portion of the Lease Payments designated as principal coming due on the Certificate Payment Date, and to receive on February 1, 1996 and on each August 1 and February 1 thereafter (each, an "Interest Payment Date"), to and including the Certificate Payment Date or the date of redemption, whichever is earlier, the registered owner's proportionate share of the Lease Payments designated as interest coming due on such Interest Payment Dates. Said proportionate share of the Lease Payments designated as interest is the product of the aforesaid portion of Lease Payments designated as principal multiplied by the Interest Rate set forth above and divided into semiannual payments (the "Interest Components "). Such proportionate share of the portion of the Lease Payments designated as interest shall be computed on the basis of a 36O-day year composed of 12 months of 30 days each. Interest with respect to this Certificate shall be payable from the Interest Payment Date next preceding the date of execution hereof, unless this Certificate is executed after the fifteenth day of the month immediately preceding an Interest Payment Date in which event interest shall be payable from such Interest Payment Date, or unless this Certificate is executed prior to the close of business on January 15, 1996, in which event interest with respect hereto shall be payable from July 1, 1995; provided, however, that, if at the time of registration of this Certificate interest with respect hereto is in default, interest with respect hereto shall be payable from the Interest Payment Date to which interest has previously been paid or made available for payment or from July 1, 1995 if no interest has been paid or made available for payment. Amounts due hereunder in respect of principal and premium, if any, are payable in lawful money of the United States of America upon the surrender hereof at maturity or the earlier redemption hereof at the corporate trust office of Bank of America National Trust and Savings Association, the Trustee, in the City of Los Angeles, California (or any successors thereto), or any paying agent appointed by the Trustee. Amounts representing interest are payable by check mailed by first class mail, postage prepaid, on the Interest Payment Date to the owner of this Certificate at such owner's address as it appears on the Certificate register as of the fifteenth day of the month next preceding the Interest Payment Date, or in the case of an Owner of $1,000,000 or more of Principal Components by wire transfer to an account within the United States upon compliance with the requirements set forth in the Trust Agreement. Payments of defaulted interest, if any, with respect to this Certificate shall be paid by check to the registered owner of . this Certificate as of a special record date to be fixed by the Trustee, notice of which special record date shall be given to the owner of this Certificate not less than ten days prior thereto. All amounts payable by the Trustee with respect to this Certificate shall be paid only from Lease Payments received by the Trustee from the City and amounts frorn time to time deposited in accounts designated therefor under the Trust Agreement, including certain investments and investment earnings thereon, and only to the extent that the Trustee shall have actually received sufficient income or proceeds from such sources to make such payments. The payment of the principal of, premium, if any, and interest due with respect to the Certificates is not a liability or charge upon the credit of the Trustee, and the Trustee has no obligation to make such payments, other than the Trustee's obligation to make such payments from the sources described above, to the extent the source is actually received. PUBL27208_1 I 138182345.52 A-2 - This Certificate has been executed by the Trustee pursuant to the Trust Agreement. Copies of the Trust Agreement, the Assignment Agreement and the Lease Agreement are on file at the office of the City and at the corporate trust office of the Trustee in the City of Los Angeles, California, and reference to the Trust Agreement, the Assignment Agreement and the Lease Agreement and any and all supplements or amendments thereto is made for a description of the funds and accounts established under the Trust Agreement for the purpose of securing the Certificates, the agreements and covenants of the City in the Lease Agreement with respect to the Site, as defined in the Lease Agreement, and Lease Payments to be made by the City, the nature, extent and manner of enforcement of such agreements and covenants, the rights and remedies of the Owners of the Certificates with respect thereto, and the other terms and conditions upon which the Certificates are delivered thereunder. To the extent and in the manner permitted by the terms of the Trust Agreement, the provisions of the Trust Agreement, the Lease Agreement, the Site Lease and the Assignment Agreement may be amended by the parties thereto, in some cases without the consent of Owners of the Certificates. No such amendment shall permit a change in the terms of redemption or maturity of the principal of any outstanding Certificate or of the right of any Owner to receive his proportionate share of any Lease Payment in accordance with his Certificate without the consent of such Owner. Additional Certificates may be executed and delivered pursuant to the Trust Agreement from time to time without the consent of the Owners of the Certificates provided the City complies with the provisions in the Trust Agreement for delivering such Additional Certificates. Any such Additional Certificates will be secured on a parity with the Certificates. This Certificate shall be transferable only upon the books of the Trustee, which shall be kept for that purpose at the corporate trust office of the Trustee, in the City of Los Angeles, California, upon surrender hereof together with a written instrument of transfer satisfactory to the Trustee duly executed by the registered owner or his duly authorized attorney. Upon the transfer of this Certificate, the Trustee shall deliver in the name of the transferee a new Certificate or Certificates, of the same aggregate Principal Component and maturity as the surrendered Certificate. The Trustee may deem and treat the person in whose name this Certificate is registered as the absolute owner hereof for all purposes, and the Trustee shall not be affected by any notice to the contrary. The Certificates shall be delivered in registered form in the denomination of $5,000 or any integral multiple of $5,000. This Certificate, upon surrender hereof at the corporate trust office of the Trustee in the City of Los Angeles, California with a written instrument of transfer satisfactory to the Trustee, duly executed by the registered owner hereof or his duly authorized attorney, may, at the option of the registered owner and upon payment by the registered owner of any charges which the Trustee may make as provided in the Trust Agreement, be exchanged for an equal aggregate Principal Component of registered Certificates of the same Certificate Payment Date and any authorized denominations. The Certificates and any Additional Certificates are subject to extraordinary redemption on a pro rata basis among maturities (treating each Sinking Account Installment (as defined in the Trust Agreement) due with respect to the Certificates and the Additional Certificates as a separate maturity for such purpose) and by lot within a maturity, in whole or in part, on any date, without PUBL,27208_11138182345.52 A-3 --..---- premium, in an amount equal to the Principal Component thereof, together with accrued interest due with respect to such Principal Components to the date fixed for redemption upon the occurrence of any of the following events: the election by the City to apply the net proceeds of any insurance claim or condemnation award to the prepayment of all or a portion of the Lease Payments when all or a portion of the Site is destroyed or damaged by fire or other casualty, or title to, or the temporary use of all or a portion of the Site, shall be taken under the exercise of the power of eminent domain, or a title defect relating to the Site impairs the City's use of the Site. The Certificates maturing on or before August 1, 20_ are not subject to optional redemption prior to maturity. The Certificates maturing on or after August 1, 20_ are subject to optional redemption prior to maturity on or after August 1, 20_, at the option of the City, in whole or in part on any Interest Payment Date, from amounts deposited with the Trustee by the City in furtherance of the exercise of the City's option to prepay Lease Payments in accordance with the Lease Agreement at the following prices expressed as percentages of the principal amount to be redeemed plus accrued interest to the Redemption Date: Redemotion Dates Redemotion Price August 1, 20_ and February 1, 20_ % August 1,20_ and February 1,20_ % August 1, 20_ and thereafter % The Certificates maturing on August 1, 20_ are subject to mandatory redemption, in part, by lot, on August 1,20_ and on each August 1 thereafter to and including May 1,20_ from Sinking Account Installments made pursuant to the Trust Agreement, at the principal amount of such Certificates to be redeemed, without premium, plus accrued but unpaid interest to the redemption date. The principal amount of such Certificates to be so redeemed (subject to credits for such Certificates purchased by the City or the Trustee during the preceding 12 months) and the dates therefor are as follows: TERM CERTIFICATES MATURING AUGUST 1,20_ August 1 Principal of the Year Amount $ ,000 ,000 .000 ,000 (maturity) ,000 If less than all of the Certificates shall be called for redemption from the net proceeds of any insurance or condemnation award, the particular Certificates or portions of Certificates to be redeemed shall be selected by the Trustee pro rata as approved in writing by an Authorized Representative of the City among various maturities such that the Lease Payments to become due in each remaining year of the Lease Term shall be as nearly as practicable equal to the Lease PUBL,27208_1 1 138182345.52 A-4 -" Payments to become due in every other year and by lot within a maturity. If less than all of the Certificates shall be called for optional redemption, the particular Certificates or portions thereof to be redeemed shall be selected by the Trustee by lot from one or more maturities as specified, in writing, by an Authorized Representative of the City. The portion of any Certificate of a denomination of more than $5,000 to be redeemed shall be in a Principal Component of $5,000 or an integral multiple thereof, and, in selecting portions of such Certificates for redemption, the Trustee shall treat each such Certificate as representing that number of Certificates of $5,000 denomination which is obtained by dividing the Principal Component of such Certificate to be redeemed in part by $5,000. Notice of redemption shall be given by mailing copies thereof to the Owners of any Certificates or portion of Certificate to be redeemed, postage prepaid, not less than 30 days nor more than 45 days prior to said Redemption Date at their last addresses, appearing on the registration books of the Trustee. Neither a failure of a Certificate Owner to receive such notice nor any defect in any notice so given shall affect the validity of the proceedings for the redemption of Certificates. If this Certificate is called for redemption and the Principal Component of this Certificate plus premium (if any) and Interest Components due with respect hereto are duly provided therefor as specified in the Trust Agreement, then interest shall cease to accrue with respect hereto from and after the date fixed for redemption. The City's obligation to make Lease Payments does not constitute a debt or liability of the City or the State of California or any political subdivision thereof within the meaning of any constitutional or statutory limitation and neither the faith and credit nor taxing power of the City or the State of California or any political subdivision thereof is pledged to make such payments. The City's obligation to pay Lease Payments is abated under certain circumstances described in the Lease Agreement during any period in which there is substantial interference with the use and right of possession by the City of the Site and funds are not otherwise available to the Trustee under the Trust Agreement to make such Lease Payments. Failure of the City to pay Lease Payments during any such period shall not constitute a default under the Lease Agreement, the Assignment Agreement, the Trust Agreement or this Certificate. To the extent that the Trustee lacks sufficient funds to pay the Interest Components or Principal Components due with respect to the Certificates as a result of an abatement in Lease Payments, each Certificate owner will be paid a pro rata portion of any Interest Components and Principal Components due with respect to a Certificate. The Trustee has no obligation or liability to the Owners of the Certificates with respect to the payment of Lease Payments by the City. The Trustee is not responsible for the accuracy of the recitals of fact herein. This Certificate shall not be entitled to any benefit under the Trust Agreement or become valid for any purpose until it has been duly manually executed and delivered by the Trustee. .- PUBL,27208_11138182345.52 A-5 IN WITNESS WHEREOF, this Certificate has been executed by the manual signature of an Authorized Signatory of the Trustee, all as of the date specified below. Dated: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS TRUSTEE By Authorized Signatory PUBL,z7208_11138182345.52 A-6 (Form of Assignment) ASSIGNMENT For value received the undersigned do(es) hereby sell, assign and transfer unto the within mentioned registered Certificate of Participation, and hereby irrevocably constitute(s) and appoint(s) attorney, to transfer the same on the books of the Trustee with full power of substitution in the premises. Dated: Note: The signature(s) of this Assignment must correspond with the name(s) as written on the face of the within registered Certificate in every particular without alteration or enlargement or any change whatsoever. Tax I.D. #: Signature Guaranteed: Note: Signature must be guaranteed by a qualified guarantor institution. - PUBL,27208_1 I 138182345.52 A-7 STATEMENT OF INSURANCE Municipal Bond Insurance Policy No. _ (the "Policy") with respect to payments due for principal of and interest on this certificate has been issued by ("-"). The Policy has been delivered to the United States Trust Company of New York, New York, New York, as the Insurance Trustee under said Policy and will be held by such Insurance Trustee or any successor insurance trustee. The Policy is on file and available for inspection at the principal office of the Insurance Trustee and a copy thereof may be secured from _ or the Insurance Trustee. All payments required to be made under the Policy shall be made in accordance with the provisions thereof. The Owner of this certificate acknowledges and consents to the subrogation rights of _ as more fully set forth in the Policy. ,- EXlUBIT B FORM OF REQUISITION Requisition No. _ The undersigned states as follows: (1) The obligation or obligations in the stated amount or amounts described in Attachment 1 hereto have been incurred with respect to the Project and each item thereof is a proper charge against moneys in the Account of the Project Fund, and has not been the subject of a previous requisition; (2) There has not been filed with or served upon the City, or to the best knowledge of the undersigned served upon the Agency, notice of any lien, right to lien, attachment upon, or claim affecting the right to receive payment of any of the moneys payable to any of the persons named in Attachment 1 hereto, which has not been released or will not be released simultaneously with such payment, other than materialmen's liens accruing by mere operation of law which will not be released until final payment is made; and (3) For any payment listed above that is made under a construction contract, the City Manager of the City of Poway, or his designee, certifies approval thereof and further certifies that, insofar as such obligation was incurred for work, materials, equipment and supplies, such work was actually performed, or such materials, equipment or supplies were actually installed, in furtherance of the construction of the Project or delivered at the site of the work for the purpose of completing the Project, or delivered for storage or fabrication at a place or places approved by the City of Poway. Dated: Authorized Representative PUBL,27208_11138182345.52 B-1 1991 CERTIFICATES ESCROW AGREEMENT THIS 1991 CERTIFICATES ESCROW AGREEMENT, dated as of , 1995, by and among the City of Poway (the "City"), the Poway Redevelopment Agency (the" Agency"), and Bank of America National Trust & Savings Association, acting in its capacity as successor to Security Pacific National Bank, trustee (the "1991 Trustee") under the 1991 Trust Agreement (as hereinafter defined) and acting in its capacity as escrow bank (the "Escrow Bank") pursuant to this 1991 Certificates Escrow Agreement (the" Agreement"). WIT N E SSE T H: WHEREAS, the Agency and the City heretofore entered into a Lease Agreement, dated as of January 1, 1991 (the "1991 Lease"), whereby the Agency leased to the City certain property described therein in exchange for payments required thereunder at the times and in the amounts set forth in the 1991 Lease (the "1991 Lease Payment Obligation"); and WHEREAS, the Agency and the City authorized the preparation, execution and delivery of certificates of participation, dated as of January 1, 1991, in the aggregate principal amount of $28,300,000, evidencing and representing interests of the owners thereof in the 1991 Lease Payment Obligation (the "1991 Certificates"), pursuant to a trust agreement, dated as ofJanuary 1, 1991, (the "1991 Trust Agreement"), by and among the Agency, the City and the 1991 Trustee; and WHEREAS, the Agency has detertnined that it is in its best interests and desirable that the 1991 Lease Payment Obligation be refmanced and the 1991 Lease be defeased (provided that the City shall remain liable under the 1991 Lease, but only to the extent of amounts on deposit in the Escrow Fund hereinafter established); and WHEREAS, in order to accomplish such refinancing it is necessary and desirable for the Agency to secure payment of the 1991 Lease Payment Obligation in accordance with the terms of the 1991 Lease and to thereby prepay the 1991 Certificates in accordance with the terms of the 1991 Trust Agreement on January 1, 2001; and WHEREAS, the City has agreed to provide funds necessary to secure payment of the 1991 Lease Payment Obligation and defease the 1991 Certificates by authorizing the preparation, execution and delivery of $ aggregate principal amount of certificates of participation, dated as of , 1995 (the "1995 Certificates"), evidencing and representing interests in the owners thereof in lease payments to be made by the City to the Agency pursuant to a Lease Agreement, dated as of October ,1995 (the "1995 Lease Agreement"); and WHEREAS, the City has determined that it is in the best interests and desirable for the 1995 Certificates to be executed and delivered and for a portion of the proceeds of the 1995 Certificates to be applied to the advance refunding of the 1991 Lease Payment Obligation and the outstanding 1991 Certificates in accordance with the terms of this Agreement; NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the Agency, the City, the 1991 Trustee and the Escrow Bank agree as follows: ATTACHMENT D JUN 2 0 1995 ITEM 10 ~ 1 --_...,---~_._-- -"_..._-~_.._- ------- SECTION 1. Deoosit of Moneys. (a) As used herein, the term "Investment Securities" means the Investment Securities set forth in Exhibit A hereto. The Agency and the City hereby deposit, and the 1991 Trustee hereby consents to such deposit, with the Escrow Bank, acting in its capacity as Escrow Bank and as an agent for the 1991 Trustee for the sole purpose of receiving such deposit, the sum of $ , representing a portion of the net proceeds of the 1995 Certificates and a portion of the funds released under the terms of the 1991 Trust Agreement upon the defeasance of the 1991 Certificates, to be held in an irrevocable escrow by the Escrow Bank separate and apart from other funds of the City, the Agency, the Escrow Bank and the 1991 Trustee in a fund hereby created and established and to be known as the "Escrow Fund" and to be applied solely as provided in this Agreement. Such moneys are at least equal to an amount sufficient to purchase the principal amount of Investment Securities set forth in Exhibit A hereto; the aggregate principal amount of Investment Securities described in Exhibit A hereto, together with all interest due or to become due on such Investment Securities, will be sufficient to pay when due the principal and interest with respect to the 1991 Certificates prior to and on January 1, 2001, and the prepayment price of the 1991 Certificates in accordance with the 1991 Trust Agreement on January 1, 2001 as determined by an independent CPA and as set forth in Exhibit D hereto. (b) The 1991 Trustee hereby acknowledges receipt of the written opinion of Ernst & Young, certified public accountants, dated , 1995 relating to the Investment Securities, and the opinion of Stradling, Yocca, Carlson & Rauth, dated , 1995, relating to this Agreement with respect to the satisfaction of the requirements of Section 801 of the 1991 Trust Agreement, and that the City's obligations under the 1991 Lease and all obligations of the 1991 Trustee, the City, and the Agency under the 1991 Trust Agreement have been discharged in the manner and to the extent provided in Section 801 of the 1991 Trust Agreement. SECTION 2. Use and Investment of Moneys. The Escrow Bank acknowledges receipt of the moneys described in Section l(a) and agrees: (i) immediately to invest $ of the net proceeds described in Section l(a) hereof in the Investment Securities set forth in Exhibit A hereto and to deposit such Investment Securities in the Escrow Fund; and (ii) to make the payments required under Section 3(a) hereof at the times set forth in Section 3(a) hereof and in Exhibit D hereto. SECTION 3. Payment of Refunded 1991 Certificates. (a) Payment. As the principal of the Investment Securities set forth in Exhibit A hereof and the investment income and earnings thereon are paid, the Escrow Bank shall, no later than 11:00 A.M. (Pacific Daylight Time) on the respective Interest Payment Dates (as defined in the 1991 Trust Agreement), transfer from the Escrow Fund to the paying agents for the 1991 Certificates amounts sufficient to pay (i) prior to and on January 1,2001, the principal and interest evidenced by the 1991 Certificates, and (ii) on January 1,2001, the prepayment price of such Certificates, including a 2 % premium, (as described in Exhibit B attached hereto). Such transfers shall constitute the payments of the principal and interest with respect to the 1991 Certificates and prepayment price due from the City. PUBL07259 _11138182345.52 2 - (b) Priority of Payments. The holders of the 1991 Certificates shall have a first lien on the moneys and Investment Securities in the Escrow Fund which are allocable and sufficient to pay the 1991 Certificates until such moneys and Investment Securities are used and applied as provided in this Agreement. (c) Termination of Obligation. Upon deposit of the moneys set further in Section 1 hereof with the Escrow Bank pursuant to the provisions of Section 1 hereof and the simultaneous purchase of the Investment Securities as provided in Section 2 hereof, the holders of the 1991 Certificates shall cease to be entitled to any lien, benefit or security under the 1991 Trust Agreement. SECTION 4. Performance of Duties. The Escrow Bank agrees to perform the duties set forth herein. SECTION 5. Reinvestment. Upon written direction of the City, the Escrow Bank may reinvest any uninvested amounts held as cash under this Agreement in direct obligations issued by the United States Treasury or obligations which are unconditionally guaranteed by the United States of America provided (i) the amounts of and dates on which the anticipated transfers from the Escrow Fund to the paying agents for the payment of the principal of, redemption price of, and interest on the 1991 Certificates will not be diminished or postponed thereby, (ii) the Escrow Bank shall receive the unqualified opinion of nationally recognized municipal bond attorneys to the effect that such reinvestment will not adversely affect the exclusion from gross income of interest with respect to the 1995 Certificates or the 1991 Certificates, and (iii) the Escrow Bank shall receive from an independent certified public accountant a certification that, immediately after such reinvestment, the principal of and interest on obligations in the Escrow Fund will, together with other cash on deposit in the Escrow Fund available for such purpose, be sufficient to pay, when due, the principal or redemption price of and interest evidenced by the 1991 Certificates. Except as provided in this section and Section 8 hereof and this Section, the Escrow Bank shall have no power or duty to invest any funds held under this Agreement or to sell, transfer or otherwise dispose of the moneys or Investment Securities held hereunder. SECTION 6. Indemnity . The City hereby assumes liability for, and hereby agrees (whether or not any of the transactions contemplated hereby are consummated) to indemnify, protect, save and keep harmless the Escrow Bank and its respective successors, assigns, agents, employees and servants, from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including reasonable legal fees and disbursements) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, the Escrow Bank at any time (whether or not also indemnified against the same by the City or any other person under any other agreement or instrument, but without double indemnity) in any way relating to or arising out of the execution, delivery and performance of this Agreement, the establishment hereunder of the Escrow Fund, the acceptance of the funds and securities deposited therein, the purchase of the Investment Securities, the retention of the Investment Securities or the proceeds thereof and any payment, transfer or other application of moneys or securities by the Escrow Bank in accordance with the provisions of this Agreement; provided, however, that the City shall not be required to indemnify the Escrow Bank against the Escrow Bank's own negligence or willful misconduct or the negligent or willful misconduct of the Escrow Bank's respective successors, assigns, agents and employees or the breach by the Escrow Bank of the terms of this Agreement. In no event shall the City or the Escrow Bank be liable to any person by reason of the transactions PUBL,7259_11 138 1 B2345.52 3 contemplated hereby other than to each other as set further in this section. The indemnities contained in this section shall survive the termination of this Agreement. SECTION 7. Resoonsibilities of the Escrow Bank. The Escrow Bank and its respective successors, assigns, agents and servants shall not be held to any personal liability whatsoever, in tort, contract, or otherwise, in connection with the execution and delivery of this Agreement, the establishment of the Escrow Fund, the acceptance of the moneys or securities deposited therein, the purchase of the Investment Securities, the retention of the Investment Securities or the proceeds thereof, the sufficiency of the Investment Securities to accomplish the defeasance of the 1991 Certificates or any payment, transfer or other application of the 1991 Certificates or any payment, transfer or other application of moneys or obligations by the Escrow Bank in accordance with the provisions of this Agreement or by reason of any non-negligent act, non-negligent omission or non-negligent error of the Escrow Bank made in good faith in the conduct of its duties. The recitals of fact contained in the "Whereas" clauses herein shall be taken as the statements of the Agency and the City and the Escrow Bank assumes no responsibility for the correctness thereof. The Escrow Bank makes no representation as to the sufficiency of the Investment Securities to accomplish the defeasance of the 1991 Certificates, to the validity of this Agreement as to the City and, except as otherwise provided herein, the Escrow Bank shall incur no liability with respect thereto. The Escrow Bank shall not be liable in connection with the performance of its duties under this Agreement except for its own negligence, willful misconduct or default, and the duties and obligations of the Escrow Bank shall be determined by the express provisions of this Agreement. The Escrow Bank may consult with counsel, who mayor may not be counsel to the City, and in reliance upon the written opinion of such counsel shall have full and complete authorization and protection with respect to any action taken, suffered or omitted by it in good faith in accordance therewith. Whenever the Escrow Bank shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering, or omitting any action under this Agreement, such matter may be deemed to be conclusively established by a certificate signed by an authorized officer of the City. SECTION 8. Substitution of Investment Securities. At the written request of the City and upon compliance with the conditions hereinafter set forth, the Escrow Bank shall have the power to sell, transfer, request the redemption or otherwise dispose of some or all of the Investment Securities in the Escrow Fund and to substitute non-ca1lable Investment Securities constituting direct obligations issued by the United States Treasury or obligations which are unconditionally guaranteed by the United States of America, as contemplated by Section 801 of the 1991 Trust Agreement. The foregoing may be effected only if: (i) the substitution of Investment Securities for the Investment Securities occurs simultaneously; (ii) the amounts of and dates on which the anticipated transfers from the Escrow Fund to the paying agents for the payment of the principal of and/or redemption price of and/or interest on the 1991 Certificates will not be diminished or postponed thereby; (iii) the Escrow Bank shall receive the unqualified opinion of nationally recognized municipal bond attorneys to the effect that such disposition and substitution would not adversely affect the exclusion from gross income of interest with respect to the 1991 Certificates and the 1995 Certificates and that the conditions of this Section 8 as to the disposition and substitution have been satisfied; and (iv) the Escrow Bank shall receive from an independent certified public accountant a certification that, immediately after such transaction, the principal of and interest on the Investment Securities in the Escrow Fund will, together with other cash on deposit in the Escrow Fund available for such purpose, be sufficient to pay, when due, the principal or prepayment price of and interest evidenced by the 1991 Certificates. Any cash from the sale of Investment Securities (including U.S. Treasury Securities) received from the disposition and substitution of Investment Securities pursuant to this PUBL,n59_1 1 138182345.52 4 - Section 8 to the extent such cash will not be required, in accordance with the 1991 Trust Agreement and this Agreement, and as demonstrated in the certification described in (iv) above, at any time for the payment when due of the principal or prepayment price of or interest evidenced by the 1991 Certificates shall be paid to the City as received by the Escrow Bank free and clear of any trust, lien, pledge or assignment securing such certificates or otherwise existing under this Agreement. SECTION 9. Irrevocable Instructions as to Notice. The 1991 Trustee hereby acknowledges that upon the funding of the Escrow Fund as provided in this Agreement, the receipt of the opinions described in Section 1(b) of this Agreement and the giving of irrevocable instructions to mail as provided in the Irrevocable Instructions and Request to 1991 Trustee attached hereto as Exhibit C (constituting all of the conditions precedent to the defeasance of the 1991 Certificates), the 1991 Certificates shall be paid in accordance with the 1991 Trust Agreement and the 1991 Certificates shall cease to be entitled to any lien, benefit or security under the 1991 Trust Agreement. SECTION 10. Amendments. This Agreement is made for the benefit of the City and the holders from time to time of the 1991 Certificates and it shall not be repealed, revoked, altered or amended without the written consent of all such holders, the Escrow Bank, the 1991 Trustee, the City and the Agency; provided, however, but only after the receipt, by the Escrow Bank, of an opinion of nationally recognized bond counsel that the exclusion from gross income of interest with respect to the 1995 Certificates, the 1991 Certificates will not be adversely affected for federal income tax purposes, that the Agency, the City, the 1991 Trustee and the Escrow Bank may, without the consent of, or notice to, such holders, amend this Agreement or enter into such agreements supplemental to this Agreement as shall not adversely affect the rights of such holders and as shall not be inconsistent with the terms and provisions of this Agreement, for anyone or more of the following purposes: (i) to cure any ambiguity or forntal defect or omission in this Agreement; (ii) to grant to, or confer upon, the Escrow Bank for the benefit of the holders of the 1991 Certificates any additional rights, remedies, powers or authority that may lawfully be granted to, or conferred upon, such holders or the Escrow Bank; and (iii) to include under this Agreement additional funds, securities or properties. The Escrow Bank shall be entitled to rely conclusively upon an unqualified opinion of nationally recognized municipal bond attorneys with respect to compliance with this Section 10, including the extent, if any, to which any change, modification, addition or elimination affects the rights of the holders of the 1991 Certificates or that any instrument executed hereunder complies with the conditions and provisions of this Section 10. SECTION 11. Term. This Agreement shall commence upon its execution and delivery and shall terminate on the later to occur of either (i) the date upon which the 1991 Certificates have been paid in accordance with this Agreement or (ii) the date upon which no unclaimed moneys remain on deposit with the Escrow Bank pursuant to Section 3(b) of this Agreement. SECTION 12. Comoensation. The Escrow Bank shall receive its reasonable fees and expenses as previously agreed to by the Escrow Bank and the City; provided, however, that under no circumstances shall the Escrow Bank be entitled to any lien whatsoever on any moneys or obligations in the Escrow Fund for the payment of fees and expenses for services rendered by the Escrow Bank under this Agreement. SECTION 13. Resil!:nation or Removal of Escrow Bank. (a) The Escrow Bank may resign by giving notice in writing to the Agency and the City, which notice shall be published once in a .-.. newspaper of general circulation published at least once each calendar week in the County of San PUBL07259_11 138 1 B2345.52 5 Diego, and in a daily newspaper of general circulation in the Borough of Manhattan, and State of New York. The Escrow Bank may be removed (1) by (i) filing with the Agency, the City and the 1991 Trustee of an instrument or instruments executed by the holders of at least 51 % in aggregate principal amount of the 1991 Certificates then remaining unpaid, (ii) the publishing of such notice at least 60 days prior to the effective date of said removal in a newspaper of general circulation in the County of San Diego, and in a daily newspaper of general circulation in the Borough of Manhattan, and State of New York, and (iii) the delivery of a copy of the instruments filed with the City, the Agency and the 1991 Trustee to the Escrow Bank or (2) by a court of competent jurisdiction for failure to act in accordance with the provisions of this Agreement upon application by the City or the Agency or the 1991 Trustee or the holders of 5% in aggregate principal amount of the 1991 Certificates then remaining unpaid. (b) If the position of Escrow Bank becomes vacant due to resignation or removal of the Escrow Bank or any other reason, a successor Escrow Bank may be appointed by the City and the Agency. Notice of such appointment shall be published in accordance with the requirements more specifically set forth in clause (l)(ii) of subsection (a) of this Section. Within one year after a vacancy, the holders of a majority in principal amount of the 1991 Certificates then remaining unpaid may, by an instrument or instruments filed with the City, the Agency and the 1991 Trustee, appoint a successor Escrow Bank who shall supersede any Escrow Bank theretofore appointed by the Agency, the City and the 1991 Trustee. If no successor Escrow Bank is appointed by the City and the Agency or the holders of such 1991 Certificates or any retiring Escrow Bank may apply to a court of competent jurisdiction for the appointment of a successor Escrow Bank. The responsibilities of the Escrow Bank under this Escrow Agreement will not be discharged until a new Escrow Bank is appointed and until the cash and investments held under this Escrow Agreement are transferred to a new Escrow Bank. SECTION 14. Severabilitv. If anyone or more of the covenants or agreements provided in this Agreement on the part of the City, Agency or the Escrow Bank to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenants or agreements shall be null and void and shall be deemed separate from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Agreement. SECTION 15. Countemarts. This Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as one original and shall constitute and be but one and the same instrument. SECTION 16. Governinl!: Law. This Agreement shall be construed under the laws of the State of California. SECTION 17. Holidays. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in this Agreement, shall be a legal holiday or a day on which banking institutions in the city in which is located the principal office of the Escrow Bank are authorized by law to remain closed, such payment may be made or act performed or right exercised on the next succeeding day not a legal holiday or a day on which such banking institutions are authorized by law to remain closed, with the same force and effect as if done on the nominal date provided in this Agreement, and no interest shall accrue for the period after such nominal date. PUBL,?259 _11138182345.52 6 - - SECTION 18. Assil!:nment. This Agreement shall not be assigned by the Escrow Bank or any successor thereto without the prior written consent of the City and Agency. SECTION 19. Moodv's. The City agrees to forward to Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007, Attention: Public Finance Rating DesklRefunded Bonds, a copy of each proposed amendment hereto to be entered into pursuant to Section 10 hereof at least ten (10) days prior to the effective date of such amendment, and a copy of an action relating to severability as contemplated by Section 14 hereof. PUBL,7259_1 1 138182345.52 7 ---..-- IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed by their duly authorized officers and attested as of the date hereinabove set forth. POW A Y REDEVELOPMENT AGENCY By: Its: Chairperson ATTEST: Secretary CITY OF POW A Y By: Its: Mayor ATTEST: City Clerk BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Escrow Bank By: Its: Authorized Officer PUBL,7259 _11138182345.52 - -- - - EXHIBIT A INVESTMENT SECURITIES Settlement Interest Principal Purchase Maturity Date Tvoe Rate Amount Price Date - PUBL,7259 _11138182345.52 EXHffiIT B PREPAYMENT SCHEDULE Prepayment Date Amount PUBL,7259 _11138182345.52 - IRREVOCABLE INSTRUCTIONS AND REQUEST TO TRUSTEE , 1995 Bank of America National Trust and Savings Association $28,300,000 Certificates of Participation (City of Poway 1991 Capital Improvement Project _ Poway Royal Mobilehome Park) (the "1991 Certificates") Gentlemen: As Trustee under that certain Trust Agreement dated as of January 1, 1991, (the "Trust Agreement"), and as a party under that certain 1991 Escrow Agreement dated as of -' 1995, (the "Escrow Agreement"), you are hereby notified of the irrevocable election of the Poway Redevelopment Agency to cause to be paid (i) on January 1, 2001, the prepayment price of all 1991 Certificates maturing after January 1, 2001, and (ii) interest and principal evidenced by all such 1991 Certificates on and prior to the prepayment date thereof. You are hereby irrevocably instructed to mail, as provided in the Trust Agreement, notice of prepayment of such principal amounts of said 1991 Certificates as are scheduled to be prepaid prior to maturity to the extent such 1991 Certificates have not been otherwise prepaid or purchased prior to said dates. Such notice shall be in the form annexed hereto as Exhibit X. You are hereby further irrevocably instructed to mail, as soon as practicable, a notice to the Holders of such Certificates (in the form annexed hereto as Exhibit Y) that the deposit of investment securities and moneys has been made with the Escrow Bank (as defined in the Escrow Agreement) and that the projected withdrawals from such escrow have been calculated by an independent CPA to be adequate to pay the principal or prepayment price of and the interest evidenced by said 1991 Certificates outstanding as such become due or are subject to redemption. POW A Y REDEVELOPMENT AGENCY By -, PUBL,7259_1 1 138[82345.52 EXHIBIT X NOTICE OF REDEMPTION OF POW A Y REDEVELOPMENT AGENCY CERTIFICATES OF PARTICIPATION (CITY OF POWAY 1991 CAPITAL IMPROVEMENT PROJECT- POWAY ROYAL MOBILEHOME PARK) Notice is hereby given to the holders of the outstanding Poway Redevelopment Agency Certificates of Participation (City of Poway 1991 Capital Improvement Project - Poway Royal Mobilehome Park) maturing after January 1,2001, that such 1991 Certificates have been called for prepayment prior to maturity in accordance with their terms at a prepayment price of 102 % of the principal amount thereof, together with accrued interest evidenced thereby to January 1,2001. The source of the funds to be used for such prepayment is the principal of and interest on investment securities heretofore deposited with Bank of America National Trust and Savings Association as Escrow Bank and as agent for the below-mentioned Trustee, together with moneys, if any, heretofore deposited with the Escrow Bank. The prepayment price of and accrued interest evidenced thereby on the 1991 Certificates maturing after January 1, 2001 shall become due and payable on January 1, 2001, and from and after January 1,2001, interest evidenced thereby on the 1991 Certificates maturing after January 1,2001 shall cease to accrue and be payable. Holders of the 1991 Certificates maturing after January 1,2001, will receive payment of the redemption price and accrued interest to which they are entitled upon presentation and surrender thereof at the principal corporate trust office of [specify names of current Paying Agent]. Dated this day of ,- POW A Y REDEVELOPMENT AGENCY By PUBLm59_1 I 138182345.52 EXHffiIT Y - NOTICE OF REFUNDING OF POW A Y REDEVELOPMENT AGENCY CERTIFICATES OF PARTICIPATION (CITY OF POWAY 1991 CAPITAL IMPROVEMENT PROJECT- POWAY ROYAL MOBILEHOME PARK) Notice is hereby given to the holders of the outstanding certificates of participation designated Poway Redevelopment Agency Certificates of Participation (City of Poway 1991 Capital Improvement Project - Poway Royal Mobilehome Park) (collectively, the "Refunded Certificates") (i) that there has been deposited with Bank of America National Trust and Savings Association, as Escrow Bank (the "Escrow Bank"), moneys and investment securities as permitted by the Trust Agreement, dated as of January I, 1991, among the City of Po way, Poway Redevelopment Agency and Security Pacific National Bank as Trustee, (the" Agreement"), the principal of and the interest on which when due will provide moneys which, together with such other moneys deposited with the Escrow Bank, shall be sufficient and available (a) to pay on and prior to January 1, 2001 the principal and interest evidenced by the Refunded Certificates and scheduled to be paid on and prior to January 1,2001, and (b) to prepay on January 1,2001 the Refunded Certificates maturing after January 1, 2001 at a prepayment price (expressed as a percentage of the principal amount of the Refunded Certificates to be prepaid) equal to 102 %, and to pay interest evidenced by such Refunded Certificates when due on and prior to January 1, 2001 (ii) that the Trustee has been irrevocably instructed to prepay on January 1, 2001 the Refunded Certificates maturing after January 1, 2001; and (iii) that the Refunded Certificates are deemed to be paid in accordance with Section 801 of the Agreement. Dated this _ day of , 1995. POW A Y REDEVELOPMENT AGENCY By PUBL07259 _11138182345.52 EXHIBIT D ESCROW FUND CASH FLOW Beginning Total Total Ending Date Cash Receiots Reauirements Cash PUBL,n59 _11138182345.52 In tM opinion of Stradling. Yocca, Carlson d- Rawh, a ProftssiONJi Corporation, N~wpon B~tlCh, CahfonUa, (.Special COlllls~I.), unckr aisnng sranu~s, r~gwkuions. rulings and j~v decision.r tJNi assuming c~FTlJin represnuatioru ~Uance with cenain covenanrs and requirtmntll do"rib,d h4rnn, I.. . .onion of IIu LeQJ' PayrrIt7IU (QJ dojiMd h4rtiJo) do, A~d tU and Comprising inuresr .s excluded from gross inconw for f<<kral incoww ~ pIIrpos~.r aItd is nor art item of tta prfffernICff for PurpoSffS of caicukuing tM federal ahef7lDlive minimMm Au Unpoled on indivitblDls and corporanoru. In 1M furrher opinion of SfMcial COUTU,I, Iht porrion of Iht LeQJ' PayrrIt7IU dorignaud QJ and compriring WtrW - iI amrplfrom California fMTlONJ! income lQ. Ik, "TAX EXEMP110N" h4rtin. Global: Project to Site NEW ISSUE - FULL BOOK-ENI'IlY ONLY RATINGS: Moody'.: Standard A Poor'.: 6/12/95 (See "Bal!Ba" herela) BB&K CHANGES $ MARi~ED CITY OF POW AY 1995 REFUNDING CERTIFICATES OF PARTICIPATION (City of Poway 1991 Capital Improvement Project-Poway Royal Mobilehome Park) Evidencing Fractional Undivided Interests of the Owners Thereof in Lease Payments to Be Made by the CITY OF POW AY As Rental for Certain Property Pursuant to a Lease Agreement with the POW AY REDEVELOPMENT AGENCY Datedi\luly I, 1995 Due: As shown below The Certificates are being sold, executed and delivered to advance refund the leue obligation. of the City of Poway, California (the" City") relating to certain land encompassing a mobilebome patk: and existing improvemenc. thereon and the conltrUCtion aDd inltallation of certain additional improvements for the purpose of rehabilitation of the park (the "Site"). The Site i.located within the boundari_ of the City and will be leued to the City by the Poway RedevelopmentAgency pursuant to the Leue Agreement (u defmed herein). The proceedl of the Certificatel, together with other moneYlavailable therefor, will b. used to d.f.... the City's $2S,3OO.000 C.ttifi_ of Psrticipation (City of Po....y 1991 l:.pitailmprovement Project. Po....y Royal Mobil.hom. Park). Interest with respect to the Certificates will be payable on January 1 and July I of esch year commencing January 1, 1996. The Certificates will be delivered in fully registered form, registered in the name of Cede" Co. .. nominee of the Depo.itory TrUll Company, New York, New York: ("OTC"), and will be available to actual purcbuers of the Certificates (the "Beneficial Ownera") in the denomination of SS,OOO or any whole multiple thereof, under the book-entry system maintained by OTC, only through broker and dealers who are or act through DTC Participanc... described herein. Beneficial Owners will not be entitled to receive phYlif* delivery of the CertifiClUel. Principal of and interest on the Certific:aues i. payable by Bank of America National Trust and Savings Association. Lo, Anpl.., California... Truat:ee. to DTC and, 10 long.. OlC or its nominee remain. the registered bond bolder, disbursement of such payments to OlC Participulta is the teIpOD.ibility of DlC, and disbursement of such payments to the Beneficial Owners is the responsibility of OTC Participants. In the event that the book.entry syltem is no longer uaed with respect to the Certificates, the Beneficial Owners will become the registered owners of the Certificates and will be paid principal and interest by the Trustee, all as described herein. Th. Certlllcat.. ... subject to opd........ atranrdinary md mandatnl'y .....payDJellt u described berela. The scheduled payment of principal and internt in respect of tbe Certificates when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Certificates by FINANCIAL SECURITY ASSURANCE INC. [FSA LOGO] The City is legally requited under the Leue Agreement to make Leue Payments (as defined herein), the interest.and principal components of which comprise the interest and principal d.ue with respect to the Certificates, which are subject to abatement in the event that there is substantial interference with the City's use and possession of all or a portion of the Site. The City has agreed in the Leue Agreement to include the Leue Paymenc. due in each fiscal year in its budget for that fiscal year and to make the neceuary appropriation. for the Leue Payments. KAS1B7S67 ATTACHMENT E JUN 2 0 1995 ITEM 10 i~ ------ THE OBLIGATION OF THE CITY TO MAKE THE LEASE PAYMENTS cONSTITUTEijlCUllRENT EXPENSE OF THE CITY. PAYABLE FROM ANNUAL APPROPP: TJONS OF THE GENERAL REVENUES OF TY "ITY LAWFULLY AVAILABLE THEREFOR. NEITHER THE CERTIFICATES NOR 1. OBLIGATION OF THE CITY TO MAKE LEASE. .. iMENTS CONSTITIJTES AN INDEBTEDNESS OF THE CITY OF POW A Y, THE POW A Y REDEVELOPMENT AGENCY, THE STATE OF CALIFORNIA OR ANY POLmCAL SUBDMSION THEREOF, WITHIN THE MEANING OF THE CONSTlTUfION OF THE STATE OF CALIFORNIA OR <7I'IIERWlSE, OR AN OBLIGATION FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVlEO OR PLEDGED ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS PLEDGED ITS GENERAL REVENUES, FUNDS OR MONEYS. MATURITY SCHEDULE Serial Certllleat... Price -.. Maturity PriIIcipol - Mamrity PriIIcipol - ~ AmOUDt ...!YIL. ~ Amoaat ...!YIL. January 1 $ " July 1 $ " July 1 January 1 January 1 luly 1 July 1 January 1 January 1 July 1 July 1 January I January I July 1 $ _lI Term Certificate Due lanuary I, _, Price_ " $ "Term Certificate nu.lu1y 1. _, Price_ " (PIu. ...rued i_ ~ 1. 1995) This cover e contains information for uick reference onl . It i. not alum of thil illue. Potential purchuera mult reed the entire Official Swement to obtain information essential to making an lD orm lDvestment OeclS1on. The CertificateS are offered wben. u and if IOld, executed and delivered. .ubject to the approval.. to their legality by Stradling. Yacca., Carlson & Rauth. a Profeuional Corporation. Newport Beach. California. Special CouDlel. Certain legal maners will be paued. upon for the Underwriter by its counsel. Best. Best &t Krieger. Riverside. California. It i. anticipated that the Certificatel in book..entry form. will be available for delivery in New York.. New York.. on or about .199~. PAlNEWEBBER INCORPORATED Dated , .199~ KAB187567 [RED HERRING]: - - This Prel iminary Official SwemeDt &h~ ~n. information cODtained herein i. deemed by the City ...e final III of the date hereof within the meaning of Rule 15<:2-12 promulgated under the SecuritieelUld Exchan.. Act of 1934, III amended; however. prictn'llDd underwriting infOrmation is subject to completion or amendment. These lOCuritiea may not be told, nor may otTen to buy them be ~ted prior to the time the OfficiaJ Statement i. delivered in final form. Under DO circUlIlIf&DceI aball thi. Preliminary Official Statement constitute 811 offer to _I or the IOlicita1ioa. of an offer to buy. nor shall there - be any we of these lOCuritiel in -y jun.dictioa ill whieh such offer. solicitation or sale would be unlawful prior to regiRration. qualification or filing under :he securities law. of any such juriMietioa. -- KAB187567 No dealer, salesperson or other person has been authorized by the City of poway or the Poway Redevelopment Agency to give any information or to make any representation other than as contained in this Official Statement in connection with the offering described in it and, if given or made, such other information or representation must not r relied upon as having been authorized by the City of Poway or the Poway Redevelopment Agency. This Offick Statement does not constitute an offer to sell or the solicitation of an offer to buy any securities other than those described on the cover page, nor shall there be any offer to sell, solicitation of an offer to buy or sale of such securities by a 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 as a contract with the purchasers of the Certificates. The information contained in this Official Statement has been obtained from official sources deemed reliable. No representation is made, however, as to the accuracy or completeness of such information, and nothing contained in this Official Statement is, or shall be relied upon as, a promise or representation by the Underwriter. The Official Statement is submitted in connection with the sale of the securities described in it and may not be reproduced or used, in whole or in part, for any other purposes. The information and expression of opinions contained in this Official Statement are subject to change without notice and neither delivery of this Official Statement nor any sale made by means of it shall, under any circumstances, create any implication that there have not been changes in the affairs of the City or Agency since the date of this Official Statement. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET SUCH STABILIZING. IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. KAB187S67 -i- TABLE OF CONTENTS INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 CONSTrrUTIONAL AND STATUTORY LIMITATIONS ON THEREFUNDINOPLAN ......................3 TAXES AND APPROPRIATIONS ................22 Adva~ RefuDdiDa of Prior Certifictltel . . . , . . . . . , . 3 ArticleXIIIA ........................ 22 E.atimlted Soureel and U... of Fund. ..........., 4 AtticleXIIIB ......................., 23 THESrrE ................................4 Liti,ation Rea.rdinl Property THE CERTlFlCATES . . . . . . . . . . . . . . . . . . . . . . . . . 4 TaxAlJocatioDl .....................23 OenenJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 StlbltoryLimitatiODl..............,...,...23 Boot-Emry Only ~ ... . . .. . .. . . . . . . . . . . 5 CITY OF POWAY . . . . . . . . . . . . . . . . . . . . . . . . . . 24 DillCOminuatiOR of Boot.-Edtry HiatoryandLocatioD .,...................24 Syatem; Payrnem. 10 City OrJanizatiOD. .......................24 BeneticialOwnen.....................6 Momben . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 OptionelProp.yment.......................7 Staff.. .. . .. .. ... .. .. ... .. . .. .. .. .... 25 Mandatory Sintina Fund Prepayment ............ 7 PopUlatiOD ............................ 25 ExuaordinaryPrepaymem. ...................8 Clinute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Parti.1 Prepayment. . . . . . . . . . . . . . . . . . . . . . . . 8 CityServicu ..........................26 SECURrrY AND SOURCES OF PAYMENT TtaDIpOrtation . . . . . . . . . . . . . . . . . . . . . . . . . . 27 FOR THE CERTlFlCATES ..................... 9 Servi~andFaciliti.. .....................27 Oeneral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 HOulilllandIncome......................27 Lea.. PaymeDll . . . . . . . . . . . . . . . . . . . . . . . .. 10 Retail and Total Taxable Sal.. . . . . . . . . . . . . . . . . 27 Insurance. . . . . . , . . . . . . . . . . . . . . . . . . . . .. 12 A.....-l Valuation aDd Tax Ratea ............. 30 Covenant to Budg. ...................... 13 ConItrUctionAetivity ..................... 31 ReaerveAccoum ........................13 EmploymentlJldlncluouy...................32 SubltitutionandR.l....ofSite...............14 CITY FINANCIAL INFORMATION . . . . . . . . . . . . . . 35 Additional Certificat.ea . . . . . . . . . . . . . . . . . . . .. 14 Oenenl Fuod .......................... 35 Insurance Policy ........................ IS Bud_ry _ ....................... 35 Action on Default . '" .. . ... .. ... .. ... ... 16 Summary of Rev~ and Flow of Fund. . C.rtificate Expenditure. . . . . . . . . . . . . . . . . . . . . . . . 36 Proceed. . . . . . . . . . . . . . . . . . . . . . . . . .. 16 1994/95 Bud.. . . . . . . . . . . . . . . . . . . . . . . . . . 37 CERTlFlCATEINSURANCE...................16 AuditJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 The Policy . . . . . . . . . . . . . . . . . . . . . . . . . . .. 16 OUtatandinaDebt........................38 FinanciaIAdvilOr........................17 Direct.odOverlappiaaDebt.................39 SPECIAL RISK FACTORS. . . . . . . . . . . . . . . . . . . .. 18 THE POWAY REDEVELOPMENT AOENCY ........ 40 l.eeoePayme...NotCityDebt ...............18 TheApncy ........................... 40 Additional Obligltiona . . . . . . . . . . . . . . . . . . . .. 18 ApocyPowenandDuti....................4O County Financial Problema - ExamiDation of Yie1d1 aDd &crow City Inveatment in County Pool .............. 19 Sufficiency...........................4O Limited Recouneon Default ................. 19 TAX EXEMPI10N . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Lou ofTu Exemption. . . . . . . . . . . . . . . . . . . . 20 CERTAIN LEGAL MAlTERS .................. 41 Abatement of Lelle PaymeDll . . " . ... .. ... ... 20 LmOATION ............................. 42 Ri,t of Uninaured Lou . . . . . . . . . . . . . . . . . . . . 20 UNDER~O .......................... 42 Failure of InJurer to Pay Under AVAlLABD.lT'Y OF DOCUMENTS . . . . . . . . . . . . . . . 43 InIurancePolicy .....................22 RATINOS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Rental Paymenu of Project TenaatI MISCELLANEOUS .........................43 Not Pledged to Payment of Certificlt.ea ........................2:2 APPENDIX A: City of Poway Audited Financial Statementl for FiICal Y..r Ended IUM 30. 1994 APPENDIX B: Form of Leaal Opinion of Special Cou.nJeJ APPENDIX C, Summary of Principal Leaal Docu...... APPENDIX D: Form of Municipal Bond InIurance Policy OTHER THAN WI11I RESPECT TO INFORMATION CONCERNING FINANCIAL SECURITY ASSURANCE INC. ("FINANCIAL SECURITY") CONTAINED UNDER THE CAPTION .CERTIFICATE INSURANCE" HEREIN, NONE OF THE INFORMATION IN TInS OFFICIAL STATEMENT HAS BEEN SUPPLIED OR VERIFIED BY FINANCIAL SECURITY AND FINANCIAL SECURITY MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO (I) THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION; (U) THE VALIDITY OF THE CERTIFICATES; OR (III) THE TAX EXEMPT STATUS OF THE INTEREST IN RESPECT OF THE CERTIFICATES. KAB187567 -ii- -- - ~-_._--- CITY OF POWAY SAN DIEGO COUNTY, CALIFORNIA City Coundl Don Higginson, Mayor Susan Callery, Deputy Mayor Robert C. Emery, Councilmember Michael P. Cafagna, Council member Betty Rexford, Councilmember City Stair James L. Bowersox, Executive Director/City Manager John D. Fitch, Assistant Executive Director/ Assistant City Manager Stephen M. Bekis, Esq., City Attorney Marjorie K. Wahlsten, Secretary/City Clerk Peggy A. Stewart, Director of Administrative Services David Narevsky, Redevelopment Manager Warren Shafer, Director of Redevelopment Services Reba Wright-Quastler. Director of Planning Services POWAY REDEVELOPMENT AGENCY Don Higginson, Chairperson Susan Callery, Vice Chairperson Robert C. Emery, Member Michael P. Cafagoa, Member Betty Rexford, Member Special Counsel Stradling, Vacca, Carlson & Rauth, a Professional Corporation Newport Beach, California TnIstee Bank of America National Trust and Savings Association Los Angeles, California Escrow Verification Agent Ernest & Young Memphis, Tennessee KAB187567 -iii- .- $ CITY OF POWAY 1995 REFUNDING CERTIFICATES OF PARTICIPATION (City of Poway 1991 Capital Improvement Project-Poway Royal MobiIehome Park) Evidencing Fractional Undivided Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF POWAY As Rental For Certain Property Pursuant to a Lease Agreement with the POWAY REDEVELOPMENT AGENCY INTRODUCTION This introduction contains only a brief summary of certain of tM terms of tM Certificates being offered, ond a brief description of tM OjJicial Statement. AU statements contained in this introduction are qualified in tMir entirety by reference to tM entire OjJicial Statement. References to. ond summaries of, provisions of tM Constitution ond laws oftM State ofColifomia ond any documents refemd to Mrein do not purport to be complete ond such references are qualified in tMir entirety by reference to tM complete provisions. Capitalized terms used in this OjJicial Statement ond not defined elsewhere Mrein have tM meanings given such terms in .Appendix C - .Summary of Principal Legal Documents. . The purpose of this Official Statement, which includes the cover, the table of contents and the appendices, is to provide certain information concerning the sale and delivery of 1995 Refunding Certificates of Participation (City of Poway 1991 Capital Improvement Project - Poway Royal Mobilehome Park) (the "Certificates"), in the aggregate principal amount of $ The Certificates represent the direct and fractional undivided interests of registered owners (collectively, the "Owners") thereof in payments (the "Lease Payments") to be made by the City of Po way, California (the "City") as rental for the use of certain parcels of land as improved by certain improvements (collectively, the "Site") which Site was acquired, constructed and installed with proceeds of the Prior Certificates and which Site is leased bv the City to the Powav RedeveloPment Agency (the" Agency") pursuant to that certain Site Lease dated as of Jul 1 1995 b and between the Ci and the A en (the "Site Lease") and which Site is pursuant to a Lease Agreement, dated as o~ 1, 1995 (the "Lease Agreement , between the City and th~genC)l\ The Certificates are being prepared pursuant to a Trust Agreement, dated as of~ 1, 1995 (the "Trust Agreement") by and between the City, the Agency and Bank of America National Trust and Savings Association (the "Trustee"). Each Certificate evidences the fractional undivided interest of the Owner thereof in Lease Payments payable by the City, as lessee, to the Agency, as lessor for the use and occupancy of the Site. Payment of principal, interest and any premium with respect to the Certificates will be made through the Trust Agreement. The Agency has assigned to the Trustee for the benefit of the Owners of the Certificates (i) its rights under the Lease Agreement, including its rights to receive Lease Payments from the City and (ii) its rights to enforce payments of Lease Payments when due and otherwise to protect its interests under the Lease Agreement. The proceeds of the Certificates will be used to advance refund, and the City will enter into the Lease Agreement for the purpose of advance refunding, certain lease obligations of the City represented by the KAB187567 -1- ---_.~-- City's $28,300,000 Certificates of Participation (City of Poway 1991 Capital Improvement Project _ Poway Royal Mobilehome Park) (the "Prior Certificates"). See "THE REFUNDING PLAN" herein. In accordance with the Lease Agreement, the Agency has agreed to sublease the Site to the City. The City is required under the Lease Agreement to pay to th~ltencv specified Lease Payments for the Site which are designed to be sufficient, in both time and amount, to pay, when due, the interest with respect to the Certificates due on January I and July 1 of each year commencing January 1, 1996, and principal with respect to the Certificates due on January 1 and July 1 of each year in amounts shown on the cover page hereof, and to pay as Additional Lease Payments each year, any taxes, assessment charges, utility charges, and maintenance and repair costs of the Site, among other charges. Pursuant to an Assignment Agreement dated as of July I, 1995 by and between the Agency and the Trustee e "Assignment Agreement"), the Agency will assign to the Trustee, for the benefit of the Owners of the Certificates and Owners of any Additional Certificates, all of its right, title and interest in and to the Site Lease and the Lease Agreement (other than its rights to indemnification and payment or reimbursement of its costs thereunder), including the right to receive Lease Payments under the Lease Agreement. The City has covenanted in the Lease Agreement to pay the Lease Payments pursuant to the Lease Agreement and to take such action as may be necessary to include the Lease Payments in its annual budgets and has further covenanted to make the necessary annual appropriations for such Lease Payments. Said covenants on the part of the City are deemed to be and will be construed to be duties imposed by law. The Lease Agreement is deemed by Special Counsel to be a valid and legally binding instrument enforceable against the City in accordance with its terms, subject to the limitations on legal remed.ies against cities in California, which include the limitation that judgments may not be enforced against funds held by a city which serve the public welfare and interest, and subject to the limitation that the enforceability thereof may be limited by bankruptcy or insolvency or other laws affecting creditors' rights. The amount of Lease Payments that the City is obligated to pay under the Lease Agreement is subject to abatement in the event that there is substantial interference with the City's use and possession of all or a portion of the Site. See "SPECIAL RISK FACTORS - Abatement of Lease Payments" herein. THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS DOES NOT CONSTITUTE A "DEBT" OF THE CITY, THE AGENCY OR THE STATE OF CALIFORNIA OR ANY POLmCAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY STATUTORY OR CONSTITUTIONAL DEBT LIMITATIONS, OR AN OBLIGATION OF THE CITY FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS PLEDGED ITS GENERAL REVENUES, FUNDS OR MONEYS. Simultaneous with the delivery of the Certificates, a municipal bond insurance policy (the "Policy") will be issued by Financial Security Assurance, Inc. ("Financial Security") which provides for payments of the principal and interest with respect to the Certificates when due to the extent that the Trustee has not received sufficient funds from the City. For a discussion of the Policy and Financial Security, see "CERTIFICATE INSURANCE" herein. For certain financial information with respect to the City, see "CITY FINANCIAL INFORMATION" herein. The City's audited financial statements for the year ended June 30, 1994 are attached hereto as Appendix A. There are certain risks associated with the investtoent in and ownership of the Certificates. See "SPECIAL RISK FACTORS" herein. The description herein of the Trust Agreement, the Lease Agreement, the Site Lease, the Assignment Agreement and any other agreements relating to the Certificates are qual ified in their entirety by reference to such documents, and the descriptions herein of the Certificates are qualified in their entirety by the form thereof and the information with respect thereto included in the aforementioned documents. See KA8187567 -2- . - Appendix C - "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS". Copies of the documents are on file and available for inspection at the offices of the Trustee at State Street Bank and Trust Company of California, N.A., 725 South Figueroa Street, Suite 310, Los Angeles, California 90017, Attention: Stephen Rivero. All capitalized temlS used in this Official Statement and not otherwise defined herein have the meanings given such temlS in Appendix C - "Summary of Principall.egal Documents." The information and expressions of opinion herein speak only as of their date and are subject to change without notice. Neither the delivery of this Official Statement nor any sale made hereunder nor any future use of this Official Statement shall, under any circumstances, create any implication that there has been no change in the affairs of the County since the date hereof. The presentation of information, including tables of receipt of revenues, is intended to show recent historical information and is not intended to indicate future or continuing trends in the financial position or other affairs of the City. No representation is made that past experience, as it might be shown by such financial and other information, will necessarily continue or be repeated in the future. The City has not made any covenants with respect to providing continuing disclosure with respect to the Certificates, the City's financial condition, the status of the Site or otherwise. THE REFUNDING PLAN The City is authorizing the execution of the Certificates in order to refinance the City's lease obligations with respect to the Poway Royal Mobilehome Park. As described more completely in succeeding sections of this Official Statement, the Certificates are special obligations of the City payable from lease payments due under the Lease Agreement. Proceeds of the Certificates will be used to provide for the advance refunding of the City's lease obligations relating to the Prior Certificates, to fund a reserve account and to pay the costs of issuing the Certificates. Advance Refunding of Prior Certificates A portion of the proceeds of the Certificates will be used, together with certain existing funds related to the Prior Certificates to provide for the advance refunding and legal defeasance of the City's outstanding $28,300,000 Certificates of Participation (City of Poway 1991 Capital Improvement Project- Poway Royal Mobilehome Park) (the "Prior Certificates"). Concurrent with the issuance of the Certificates, the City will enter into an Escrow Agreement (the "Escrow Agreement") with Bank of America National Trust and Savings Association, as successor to Security Pacific National Bank, as trustee for the Prior Certificates, as Trustee under the Trust Agreement and as Escrow Bank. Amounts deposited under the Escrow Agreement will be invested solely in direct non-callable general obligations of the United States Department of the Treasury, the principal of and interest on which, together with any available cash to be held uninvested, will be verified by Ernst & Young (the "Verification Agent") to be sufficient to pay the principal of and interest and premium, if any, on the Prior Certificates to and including the final retirement thereof on January 1, 200 1. As a result of the deposit and application of funds as provided in the Escrow Agreement, the Prior Certificates, assuming the accuracy of the Verification Agent's computations, will be defeased and the obligation of the City to make lease payments under the lease agreement relating to the Prior Certificates will also be defeased . KA8187567 -3- EPilllllted SourteS and Uses of Funds The anticipated sources and uses of funds relating to the Certificates are as follows: Sources of Pnntbt Principal Amount $ Less: Underwriter's Discount Less: Original Issue Discount Plus: Accrued Interest(l) Plus: Prior Certificate Funds(2) . Total Sources: $ ~ Escrow Fund $ Lease Payment Account Cost of Issuance Account Reserve Account . Total Uses: $ (1) Representing accrued interest on the Certificates fro~ 1, 1995 to the date of delivery. (2) Amount represents moneys on hand in Reserve Account and Lease Payment Account held by the Trustee for the Prior Certificates. ^ THE SITE I The Site consists of the Poway Royal Mobilehome Park. The Site includes the land and existing improvements encompassed by the Park. Improvements do not include mobilehome coaches. The City currently maintains title to the Site and will lease the Site to the Agency and the Agency will sublease the Site to the City. Mobilehome spaces in the Site will be rented to tenants, and pursuant to income eligibility criteria, in some cases rents will be assisted using public funds pursuant to that certain Memorandum of Affordable Housing Covenants recorded in the Offices of the San Diego County Recorder prior to the date hereof. The City operates and manages the Site. THE CERTIFICATES General The Certificates are issuable only in fully registered form in denominations of $5,000 or integral multiples thereof. Interest represented by the Certificates will be payable semiannually on January 1 and July 1 of each year, commencing January I, 1996. Principal represented by the Certificates will be payable on January 1 and July 1 of the years and in the amounts set forth on the cover page of this Official Statement. The Certificates will be subject to the prepayment provisions described below. The Certificates when issued will be registered in the name of Cede & Co., as registered owner and nominee of the Depository Trust Company, New York, New York ("DTC"). So long as DTC, or Cede & Co. as its nominee, is the registered owner of the Certificates, all payments on the Certificates will be made directly to DTC, and disbursement of such payments to the DTC Participants (defined below) will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners (defined below) will KAB187567 -4- - be the responsibility of the DTC Participants, as more fully described hereinafter."See "Book-Entry Only System" below-. Interest with respect to the Certificates shall be payable from the preceding Interest Payment Date, provided, Certificates registered on or prior to December 15, 1995 shall have interest payable with respect thereto ~ I, 1995 and Certificates registered after a Record Date, which is the fifteenth day of the calendar month preceding an Interest Payment Date, and on or prior to an Interest Payment Date shall have interest payable with respect thereto from such Interest Payment Date. Interest shall be calculated on the basis of a 36O-day year of twelve 3O-day months. Book-Entry Only System The Depository Trust Company, New York, New York, will act as securities depository for the Certificates. Upon the issuance of the Certificates, one fully registered Certificate will be registered in the name of Cede & Co., as nominee for DTC, for each maturity of the Certificates as set forth on the cover page hereof, each in the aggregate principal amount of such maturity. So long as Cede & Co. is the registered owner of the Certificates, as nominee of DTC, references herein to the owners of the Certificates or registered owners of the Certificates shall mean Cede & Co. and shall not mean the actual purchasers of the Certificates (the "Beneficial Owners"). DTC is a limited-purpose trust company organized under the laws of 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, as amended. DTC was created to hold securities of its participating organizations (the "DTC Participants") and to facilitate the clearance and settlement of securities transactions among DTC Participants in such securities through electronic book~ changes in accounts of DTC Participants, thereby eliminating the need for physical movement of securities certificates. DTC Participants include securities brokers and dealers (including the Underwriter), banks, trust companies, clearing corporations, and certain other organizations, some of which (and/or their representatives) own DTC. Indirect access to the DTC system is also available to others as banks, brokers, dealers and trust companies that clear through, or maintain a custodial relationship with, a DTC Participant, either directly or indirectly ("DTC Indirect Participants"). Purchases of Certificates under the DTC system must be made by or through DTC Participants, which will receive a credit balance in the records of DTC. The ownership interest of each of the Beneficial Owners in the Certificates will be recorded through the records of the DTC Participant. Each Beneficial Owner will receive a written confirmation of purchase providing details of the Certificate acquired. Transfers of ownership interests in the Certificates will be accomplished by book entries made by DTC and, in turn, DTC Participants who act on behalf of the Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Certificates, except in the event that use of the book -entry system is discontinued. For every transfer and exchange of beneficial ownership in the Certificates, the Beneficial Owner may be charged a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto. The City and the Trustee will recognize DTC or its nominee as Certificate Owner for all purposes, including notices and voting. Conveyance of notices and other communications by DTC to DTC Participants, by DTC Participants to DTC Indirect Participants and by DTC Participants and DTC Indirect Participants to the Beneficial Owners will be governed by arrangements among DTC, DTC Participants and DTC Indirect Participants, subject to any statutory and regulatory requirements as may be in effect from to time. Neither the City nor the Trustee will assume any responsibility or obligation with respect to the payments to or the providing of notice for DTC Participants or the Beneficial Owners. KAB187567 -5- -------- Neither the City nor the Trustee is responsible or liable for sending transaction statements to the Beneficial Owners or for maintaining, supervising or reviewing such records. Principal and interest payments with respect to the Certificates will be made to DTC or its nominee, Cede & Co., as the registered owner of the Certificates. Upon receipt of any such payments, DTC's current practice is to immediately credit the accounts of the DTC Participants in accordance with their respective holdings shown on the records of DTC. However, Beneficial Owners may experience some delay in their receipt of payments since such payment will be forwarded by the Trustee to Cede & Co., as nominee for DTC. DTC will then forward such payments to the DTC Participants, which thereafter will forward them to indirect participants or Beneficial Owners. See "SPECIAL RISK FACTORS - Book-Entry System." Payments by DTC Participants and DTC Indirect Participants to Beneficial Owners will be governed by standing instructions and customary practices (which is now the case with municipal securities held by the accounts of customers in bearer form or registered in "street name") and will be the responsibility of such DTC Participant or DTC Indirect Participant and not of DTC, the Agency or the Trustee, subject to any statutory and regulatory requirements as may be in effect from time to time. The City and the Trustee cannot and do not give any assurances that DTC Participants or DTC Indirect Participants will distribute to the Beneficial Owners (i) payments of interest, principal or premium, if any, with respect to the Certificates, (ii) certificates representing ownership interests in or other confirmation of ownership interests in the Certificates, or (iii) prepayment or other notices set to DTC or Cede & Co., its nominee, as the registered owner of the Certificates, or that they will act in the manner described in this Official Statement. The current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current "Procedures. of DTC to be followed in dealing with DTC Participants are on file with DTC. The Trustee, the City and any paying agent may treat DTC (or its nominee) as the sole and exclusive owner of the Certificates registered in its name for the purpose of payment of the principal or prepayment price of and interest on such Certificates, selecting the Certificates or portions thereof to be redeemed, giving any notice permitted or required to be given to Beneficial Owners under the Trust Agreement, registering the transfer of Certificates, obtaining any consent or other action to be taken by Beneficial Owners and for all other purposes whatsoever; and neither the Trustee nor the City or any paying agent shall be affected by any notice to the contrary. Neither the Trustee nor the City or any paying agent shall have any responsibility or obligation to any Participant (which shall mean, for purposes of the Trust Agreement, securities brokers and dealers, banks, trust companies, clearing corporations and other entities, some of whom directly or indirectly own DTC), any person claiming a beneficial ownership interest in the Certificates under or through DTC or any Participant, or any other person which is not shown on the registration records as being a Beneficial Owner, with respect to (i) the accuracy of any records maintained by DTC or any Participant, (ii) the payment by DTC or any Participant of any amount in respect of the principal or prepayment price of or interest on the Certificates, (iii) any notice which is permitted or required to be given to owners of Certificates under the Trust Agreement, (iv) the selection by DTC or any Participant of any person to receive payment in the event of a partial prepayment of the Certificates, or (v) any consent given or other action taken by DTC as owner of Certificates. Discontinuation of Book-Entry System; Payments to Beneficial Owners In the event that the City determines that it is in the best interests of the Beneficial Owners of the Certificates that they may be able to obtain certificates, the Trustee shall, upon the written instruction of the Agency, so notify DTC, whereupon DTC shall notify the DTC Participants of the availability through DTC of certificates. In such event the Certificates will be transferable in accordance with the Trust Agreement. DTC may determine to discontinue providing its services with respect to the Certificates at KAB187567 -6- - any time by giving written notice of such discontinU8JKle to the Agency and the Trustee and discharging its responsibilities with respect thereto under applicable law. In sucl1 event, Certificates will be transferable in accordance with the Trust Agreement. Whenever DTC requests the City and the Trustee to do so, the Trustee and the City will cooperate with DTC in taking appropriate action after reasonable notice to arrange for another securities depository to maintain custody of all certificates evidencing the Certificates then outstanding. In such event, the Certificates will be transferable to such securities depository in accordance with the Trust Agreement, and thereafter, all references in the Trust Agreement to DTC or its nominee will be deemed to refer to such successor securities depository and its nominee, as appropriate. The Beneficial Owners, upon registration of certificates held in the Beneficial Owners' names, will become the registered owners of the Certificates. In the event that the book -entry system described above is no longer used with respect to the Certificates, the principal of the Certificates and any premium upon the prepayment thereof prior to the maturity will be payable in lawful money of the United States of America upon presentation and surrender of the Certificates at the corporate trust office of the Trustee in Los Angeles, California. Interest on the Certificates will be paid by the Trustee by check or draft mailed by first class mail to the registered owner as his or her name and address appear on the registration books kept by the Trustee at the close of business on the Record Date or, upon written request of an owner of Certificates in an aggregate principal amount of at least $1,000,000, submitted to the Trustee before the applicable Record Date, by wire transfer to an account designated by the owner. Optional Prepayment The Certificates maturing on or after January 1, 2006 are subject to optional prepayment prior to maturity, in whole or in part on any January 1 or July I on or after July 1,2005, at the option of the City, from amounts deposited to the Lease Payment Fund by the City in furtherance of the exercise of the City's option to prepay Lease Payments at the following prepayment prices expressed as percentages of the Principal Components to be prepaid plus Interest Components due with respect thereto to the date fixed for redemption: Prepayment Prices (expressed as a Dates of Preoavment oercental!e of oar) July 1, 2005 and January 1, 2006 102% July 1, 2006 and January 1,2007 101 % July 1, 2007 and thereafter 100% Mandatory Sinking Fund Prepayment The Term Certificates maturing on January 1, _ and July 1, _ are subject to mandatory prepayment by lot prior to their swell maturity date, without premium, in an amount equal to the Principal Component thereof, together with the Interest Component due with respect thereto to the date fixed for redemption, on the dates and in the principal amounts set forth as follows: KAB187567 -7- ..-.- --,. Certificates MatnriQ2 Januarv 1. Date Amnnnt ~ Amnll"t January 1 $ July 1 $ July 1 January 1 January 1 July 1 July 1 January 1 January 1 July 1 July 1 January 1 January 1 July 1 July 1 January 1 January 1 July 1 (maturity) Certifil'".Atlfli!.Cl Maturinil lu1v 1. Date Amount ~ Amount January 1 $ July 1 $ July 1 January 1 January 1 July July 1 January 1 January 1 July 1 July 1 January 1 January 1 July 1 July 1 January 1 January 1 July 1 (Maturity) Extraordinary Prepayment The Certificates are further subject to extraordinary prepayment on any date on a pro rata basis among maturities (treating each Sinking Account Installment due with respect to the Certificates and the Additional Certificates as a separate maturity for such purpose) and by lot within a maturity, in whole or in part, without premium, in an amount equal to the Principal Component thereof, together with the Interest Components due with respect thereto to the date fixed for redemption on the first date for which notice of redemption can be given by the Trustee in the event that proceeds of hazard or title insurance and/or condemnation awards are deposited into the Redemption Account, as provided in the Trust Agreement. In the event that Additional Certificates have been executed and delivered under the Trust Agreement, such insurance and condemnation proceeds will be allocated between the Certificates and the Additional Certificates on a pro rata basis in order to effect a proportionate redemption of the Certificates and the Additional Certificates. Partial Prepayment Selection of Certificates for Redemotion. For purposes of selecting Certificates for redemption, the Certificates will be deemed to be comprised of $5,000 portions. If less than all of the Certificates are to be called for extraordinary redemption under the terms of the Trust Agreement, the particular ^ Certificates, or portions thereof, to be redeemed will be selected by the trustee on a pro rata basis among maturities (treating each Sinking Account Installment due with respect to the Certificates as a separate maturity for such purpose) such that the Lease Payments to become due in each remaining year of the Lease Term will be as nearly as practicable equal to the Lease Payments to become due in every other year. Within a maturity, the Trustee will select Certificates for redemption by lot in any manner determined to be appropriate by the Trustee. If less than all of the Certificates will be called for optional KAS187567 -8- ~ redemption, the particular Certificates or portions thereof to be redeemed will be selected by the Trustee by lot from one or more maturities as specified, in writing, by an Authorized Representative of the City. - So long as DTC (or its nominee) is the registered owner of the Certificates, all notices of prepayment will be mailed to DTC (or its nominee.) SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES GeueraI Each Certificate represents a fractional undivided interest in the Lease Payments to be made by the City to the Agency under the Lease Agreement. The Agency, pursuant to th~greement, has assigned its rights to receive Lease Payments to the Trustee for the benefit 0 e ners. The obligation of the City to make such Lease Payments is payable by the City from annual appropriations of the City of funds lawfully available therefor during each fiscal year. Neither the full faith and credit nor the taxing power of the City, the Agency. the State of California or any political subdivision thereof is pledged to make payments under the Lease Agreement. The Lease Agreement provides that the City will take proceedings for each fiscal year as may be necessary to include all Lease Payments for that fiscal year in its annual budget and to make annual appropriations for all such Lease Payments. The Lease Payments payable to the Trustee are calculated to be sufficient to pay, when due, amounts designated as principal and interest with respect to the Certificates. Additiooai Lease Payments due from the City to the Trustee include in each year amounts sufficient to pay certain taxes and assessments, insurance premiums and administrative expenses. Should the City default, the Trustee, as assignee of the Agency, may, subject to the rights of the Bond Insurer, exercise any and all remedies authorized by law or granted pursuant to the Lease Agreement. See "SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES - Insurance" and Appendix C - "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - THE LEASE- - Remedies on Default". The City may not mortgage, pledge, assign or transfer its interest in the Lease Agreement except as specifically provided in the Lease Agreement. The City has the right to sublet all or any portion of the Site from time to time but such subletting will not relieve the City of its obligations under the Lease Agreement. The Site is insured to the extent as set forth in the Lease Agreement. See "SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES - Insurance" and Appendix C - "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - THE LEASE - Insurance". Insurance and condemnation proceeds are required to be applied either to the repair, restoration or replacement of the Site or to the prepayment of Certificates, at the City's option. If the proceeds are insufficient to repair, restore or replace the Site, the City may pay any additional amounts required, but will not be entitled to any reimbursement therefor or reduction in Lease Payments. If there are excess insurance or condemnation proceeds after repair, restoration or replacement, the excess will be applied to the prepayment of Certificates. Subject to the provisions of the Lease Agreement relating to abatement more particularly described herein, the Lease Agreement provides that the obligation of the City to pay Lease Payments and Additional Payments shall be absolute and unconditional and such Lease Payments and Additional Payments will not be subject to set-off or counterclaim. The Lease Agreement provides that the City KAB187567 -9- - -----~--- CONSTITUTES A CURRENT EXPENSE OF THE CITY AND SHOULD NOT IN ANY WAY BE I CONSTRUED TO BE A DEBT OF THE CITY, OR THE STATE, OR ANY POLmCAL SUBDMSION THEREOF, IN CONTRAVENTION OF ANY APPLICABLE CONSTITUTIONAL OR STATUTORY LIMITATION OR REQUIREMENTS CONCERNING THE CREATION OF INDEBTEDNESS BY THE CITY, THE STATE, OR ANY POLmCAL SUBDMSION THEREOF. NEITHER THE CERTIFICATES NOR THE OBLIGATION OF THE CITY TO MAKE PAYMENTS UNDER THE LEASE AGREEMENT CONSTITUTES A PLEDGE OF GENERAL REVENUES, FUNDS OR MONEYS OF THE CITY OR AN OBLIGATION OF THE CITY FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. Lease Payments " Five business days prior to each July 1 and January 1, commencin~anuary 1, 1996, the City will pay to the Trustee for deposit into the Lease Paymen\oJ'lJI'd, the Lease Payment whtch is in an amount equal to the interest and principal payments due with respect to the Certificates then outstanding on the succeeding January 1 and July 1, respectively A The Trust Agreement requires that the Lease Payments received by Trustee be deposited in the Lease Paymen~ upon receipt. The Lease Agreement requires Lease Payment to be made by the City in accordance with the following payment schedule: SCHEDULE OF LEASE PAYMENTS Lease Payment Dates (five Business Days *,rior Principal Interest Total to each of the followi l! dates) Comnonent Comoonent Payments January 1 July I January 1 July 1 January 1 July 1 January I July 1 January 1 July 1 January 1 July 1 January 1 July 1 January 1 July 1 January 1 July 1 January 1 July 1 January 1 KAB187567 -10- .- July 1 January 1 July 1 - January 1 July 1 January 1 July I January 1 July 1 January 1 July 1 January 1 July 1 January 1 July 1 J lDUary 1 July 1 January 1 July 1 January 1 July 1 January 1 July 1 January 1 July 1 January 1 July I - January 1 July 1 January 1 July 1 January 1 July 1 January 1 July 1 January 1 July 1 January 1 July 1 The amount of Lease Payments for the Site shall be abated during any period in which by reason o\\damage, destruction, title defect or condemnation there is substantial interference with the use and occupancy of the Site by the City, and no other amounts are on deposit in the Lease Paymen~ or the Reserve Account from which Lease Payments can be made. The amount of the abatement will be such that the resulting Lease Paymenq.do not exceed fair rental value for that portion of the Site not damaged or destroyed. The abatement will continue until the Site ~epaired. Any resulting reduction in Lease Payments would not constitute a default under either e Trust Agreement or the Lease Agreement. See "SPECIAL RISK FACTORS - Abatement of Lease Payments" herein and" APPENDIX C-SUMMARY OF PRINCIPAL LEGAL DOCUMENTS-THE LEASE - Abatement of Lease Payments and Additional Payments." KAB187567 -11- Insurance , The Lease Agreement requires the City to secure and maintain or cause to be secured and maintained at all times certain types of insurance either with independent carriers or through a program of self-insurance. The Lease Agreement requires the City to maintain insurance on the improvements to the Site against loss or damage resulting from fire or lightning, with an extended coverage endorsement and vandalism and malicious mischief insurance and standard comprehensive general public liability and property damage coverage. Flood and earthquake insurance is not required unless the City, in its reasonable decision, determines that such coverage is available from reputable insurers at a reasonable cost. The Lease Agreement also requires the City to maintain worker's compensation insurance to insure its employees against liability for compensation under the Worker's Compensation Insurance and Safety Act now in force in the State; or any act hereafter enacted as an amendment or supplement thereto, or in lieu thereof such insurance, or a part thereof, may be maiotaioed by the City in the form of self- insurance which complies with the terms of the Lease Agreement. The Lease Agreement also requires the City to maintain rental interruption insurance in an amount not less than the scheduled Lease Payments in the next succeeding twenty-four month period during the term of the Lease Agreement, to insure against loss of rental income from the Site caused by perils covered by the insurance required to be maintained as provided in the Lease Agreement. Such insurance is to be obtained not later than the Delivery Date for the Certificates and will be increased as required in connection with each issue of Additional Certificates. Such insurance may be maintained as part of or in conjunction with any other rental interruption insurance carried by the City. The City may not maintain rental interruption insurance in the form of self-insurance. The proceeds of such rental interruption insurance will be paid to the Trustee and deposited (1) first, in the Reserve Account to make up any deficiencies therein, and (2) second, in the Lease Payment Fund, to be held therein and credited towards the payment of the Lease Payments in the order in which such Lease Payments come due and payable. The City is required to obtain title insurance on the Site, in the form of CL T A leasehold title policy or an ALTA Owner'slLeasehold Policy with Western Regional Exceptions, in an amount at least equal to the aggregate Principal Component of unpaid Lease Payments, issued by a company of recognized standing duly authorized to issue the same. The title policy or policies will insure the City's leasehold estate in the Site, subject ooIy to Permitted Encumbrances. The proceeds of such insurance will be applied as provided in the Trust Agreement. The City may not maintain title insurance in the form of self-insurance. All policies of insurance required to be procured and maintained pursuant to the Lease Agreement, other than the worker's compensation insurance and the title insurance specified in the Lease Agreement, and any statements of self-insurance must provide that the City and the Trustee will receive 30 days' notice of each expiration, or any intended cancellation thereof or reduction of the coverage provided thereby. Insurance required to be procured and maintained pursuant to the Lease Agreement (regarding hazard insurance, rental interruption insurance and title insurance) must provide that all proceed thereunder will be payable to the Trustee as the insured or loss payee. The City will payor cause to be paid when due the premiums for all insurance policies required by the Lease, and will promptly furnish or cause to be furnished after such payment to the Trustee a certificate to such effect accompanied by evidence of such payments. The Trustee is not responsible for the sufficiency or adequacy of any insurance required under the Lease Agreement and is fully protected KAB187567 -12- - in accepting payment on account of such insurance or lIII}' adjustment, compromise or settlement or any loss agreed to by the City. The City must deliver certificates to the Trustee within the 30 days prior to May I of each year during the term of the Lease Agreement to the effect that the insurance policies required by the Lease Agreement are in full force and effect. Any self-insurance maintained by the City pursuant to the Lease Agreement must afford reasonable protection to the Agency, the City and the Trustee. Before the City elects to provide self-insurance thereunder, and on each May I thereafter, there must be filed with the Trustee a certificate of an actuary, independent insurance consultant selected by the City, or other qualified person selected by the City, who may be the City's Risk Manager, stating that, in the opinion of the signer, the method or plan of protection is in accordance with the requirements of the Trust Agreement, and affords adequate protection to the Agency, the City and the Trustee against loss and damage from the hazards and risks covered thereby, and there must also be filed with the Trustee a certificate of the City setting forth the details of such substitute method or plan. The Trustee is fully protected in relying on the certificate regarding self-insurance and is not responsible for the review or verification of the certificate describing such method or plan. See Appendix C - "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - LEASE AGREEMENT - Insurance." Covenant to Budget The City has covenanted in the Lease Agreement that so long as the Site is available for the City's use it will include all Lease Payments in its annual budgets and make the necessary annual appropriations therefor. Should the City default under the Lease Agreement, the Agency may either terminate the Lease Agreement and re-Iet or sell the Site, or retain the Lease Agreement and hold the City liable for all Lease Payments to be paid pursuant to the Lease Agreement on an annual basis. In such a case, it may prove impossible for the Agency to re-Iet the Site to another lessee or sell the Site. See "SPECIAL RISK FACTORS - Limited Recourse on Default" herein. Reserve Account Under the terms of the Trust Agreement, the balance in the Reserve Account is to be maintained at the Reserve Requirement until the Lease Payments are paid in full pursuant to the terms of the Lease Agreement or until the Trust Agreement is terminated. The Reserve Account initially will be funded with ^ proceeds of the Certificates; however, at the option of the City, upon compliance with the conditions specified in the Trust Agreement, amounts required to be held in the Reserve Account may be satisfied, in whole or in part, by the deposit of a Reserve Account Policy or Credit Facility with the Trustee. The Trustee must apply moneys in the Reserve Account as provided in the Trust Agreement. See Appendix C - "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - TRUST AGREEMENT - Definitions" and - Reserve Account. " Moneys in the Reserve Account may be used solely for the purpose of: (a) making up deficien- cies in the Interest Account as provided in the Trust Agreement; (b) making up deficiencies in the Principal Account as provided in the Trust Agreement; (c) making the transfers to the Rebate Fund and the Lease Payment Fund as provided in the Trust Agreement; (d) with respect to the amounts in any subaccount therein established for the Certificates or any Additional Certificates, providing for the payment of the final Lease Payments represented by the issue of Certificates or Additional Certificates for which such subaccount was created, in which event the Trustee will transfer such amounts on deposit in the Reserve Account to the Lease Payment Fund to be applied as a credit against such final Lease Payments; or (e) providing for the defeasance pursuant to the Trust Agreement or the Prepayment of all Lease Payments attributable to the Certificates or an issue of Additional Certificates, in which case the amount in the subaccount of the Reserve Account established for such issue, or in the case of a partial defeasance the amount in the subaccount that will no longer be required as a part of the Reserve KAB187567 -13- ... Requirement following the defeasance, shall be transferred to the Redemption Accqunt to be applied to the defeasance or redemption of the applicable issue of Certificates or Additional Certificates or portion thereof. See Appendix C - 'SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - TRUST AGREEMENT - Reserve Account. . Substitution and ReI~ of Site The City has the right from time to time to add other real property and improvements (subject only to Permitted Encumbrances) or to substitute other real property or improvements (subject only to Permitted Encumbrances) for all or a portion of the Site or to release a portion of the real property or improvements constituting the Site, if it has provided the Trustee with a written Lease Supplement and has obtained and provided to the Trustee each of the following: (1) written consent of each municipal bond insurance company that has insured the Certificates or an issue of Additional Certificates, if any; I (2) written confirmation from each Rating Agency (as defined in the Trust Agreement) that has rated the Certificates or an issue of Additional Certificates that its then existing rating with respect to the I Certificates or any Additional Certificates will not be reduced or withdrawn as a result of such addition, I substitution or release; (3) a certificate from an independent and qualified MAl real estate appraiser selected by the City setting forth his or her findings that the Site as constituted following such addition, i substitution or release (a) has an annual fair rental value during the remainder of the term which is equal , to or greater than the total annual Lease Payments and Additional Payments (assuming that the annual I Additional Payments due in the future will equal the average annual Additional Payments prior to such addition, substitution or release) required to be paid under the Lease Agreement during any year of the remainder of the term and (b) has a useful life at least equal to the remaining term thereof; (4) certificates of insurance applicable to the Site (at and after the addition, substitution or release) which comply with the requirements of the Lease Agreement; and (5) an opinion of bond counsel to the effect that such addition, substitution or release will not adversely affect the exclusion from gross income for federal income tax purposes and the exemption from State personal income taxation of the Interest Component of the Lease Payments and that the Lease and the Site Lease, as amended, remain valid and binding obligations of the City. In connection with a substitution or release, all interests of the Agency, and its assignee, in the portion of the Site released shall terminate and the Agency and its assignee shall execute and record with the County Recorder of the County of San Diego all documents deemed necessary by the City to evidence such termination of interest. Upon receipt of the items described in subsections (1), (2), (3), (4) and (5) above, the Trustee also will execute a Lease Supplement and, if necessary, a Supplemental Trust Agreement, and will not impose on the City any further conditions or prerequisites to the requested addition, substitution or release. The City will cause the Lease Supplement to be recorded in the real property records of the City. All costs and expenses incurred in connection with such addition, substitution or release will be borne by the City. No addition, substitution or release under the Lease Agreement will be, by itself, the basis for any reduction in or abatement of the Lease Payments due from the City thereunder. See Appendix C -- 'SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - LEASE AGREEMENT _ Substitution and Release.' Additional Certificates If at any time after the Delivery Date of the Certificates the City determines it necessary, the City may provide for the execution and delivery of and sell Additional Certificates secured on a parity with the Certificates provided that the following conditions, among others, as set forth in the Trust Agreement are satisfied: (i) the City is in compliance with all covenants set forth in the Lease Agreement and the Trust Agreement, (ii) the Insurer shall have consented to the issuance of such Additional Certificates, KAB187567 -14- - - (iii) each Rating Agency shall have confirmed that the then existing ratings with respect to the Certificates and any Additional Certificates will not be reduced or withdrawn as a result of such execution and delivery of Additional Certificates, (iv) an independent and qualified MAl real estate appraiser selected by the City shall certify that the Site based upon the then existing improvements on the Site (a) has an annual fair rentaI value during the remainder of the term of the Lease, as supplemented, which is equal to or greater than the total annual Lease Payments and Additional Payments (assuming that the annual Additional Payments due in the future will equal the average annual Additional Payments prior to the date of execution and delivery of such Additional Certificates) required to be paid under the Lease during any year of the remainder of the term following the execution and delivery of the Additional Certificates, and (b) has a useful life at least equal to the remaining term of the Lease, as supplemented; provided, if the Additional Certificates are being executed and delivered solely for the purpose of making repairs, replacements, additions or improvements to the Site, an appraisal shall not be required if the City shall have certified in writing to the Trustee that it has entered into a fixed price construction contract for such repairs, replacements, additions or improvements to the Site, which contract includes a scheduled completion date and provides for liquidated damages sufficient to pay the portion of the Lease Payments attributable thereto for each day from the scheduled completion date to the date on which such repairs, replacements, additions or improvements are accepted by the City, and deposited with the Trustee a sufficient amount of capitalized interest to pay the interest due with respect to the Additional Certificates until such scheduled completion date, (v) the City shall have obtained and provided to the Trustee a certificate stating that the city is in compliance with the insurance provisions of the Lease Agreement with respect to the Site (as it will be comprised at and after the execution and delivery of such Additional Certificates), (vi) the Reserve Account shall contain an amount equal to the Reserve Requirement for the Certificates and such Additional Certificates, (vii) a supplement to the Lease Agreement shall have been executed and delivered setting forth the total Lease Payments to be paid by the City following the execution and delivery of the Additional Certificates, (viii) a supplenteDt to the Trust Agreement shall have been executed and delivered setting forth the terms of the Additional Certificates, and (ix) the City shall have obtained and provided to the Trustee an opinion of Bond Counsel to the effect that (a) the execution and delivery of such Additional Certificates will not adversely affect the exclusion from gross income for federal income tax purposes or the exemption from the State of California personal income taxation of the Interest Component of the Certificates and any Additional Certificates previously issued on a tax-exempt basis, and (b) following the execution and delivery of such Additional Certificates, the Lease Agreement and the Trust Agreement, including any supplements to such agreements, will constitute the valid and legally binding agreements of the City enforceable in accordance with their terms. Provided that the City complies with the foregoing provisions, nothing in the Trust Agreement or the Lease Agreement shall be construed to prohibit the execution and delivery of Additional Certificates for the purpose of effecting a refunding of any Outstanding Certificate or Additional Certificate; provided, however, that the City need not obtain the appraisal required under clause (iv) above if the effect of such refunding is to reduce the total Lease Payments owed by the City in each Fiscal Year during the remaining term of the Lease Agreement. The Trustee may not at any time while any Certificate or Additional Certificate is Outstanding execute and deliver certificates of participation payable from the Lease Payments except as provided in the Trust Agreement. Insurance Policy Simultaneous with the delivery of the Certificates, the Policy will be issued by Financial Security which provides for payment of the principal of and interest with respect to the Certificates when due to the extent the Trustee has not received sufficient funds from the City. S~'CERTIFICATE INSURANCE" herein. ^ KAB187567 -15- -- -- Action on Default Should the City default, the Trustee, as assignee of the Agency, may, subject to the rights of the Bond Insurer, exercise any and all remedies available to the Agency pursuant to law in order to enforce and collect Lease Payments when due. The Trustee is expressly authorized to exercise any and all of the rights set forti}. in the Lease Agreement. See" APPENDIX C-SUMMARY OF PRINCIPAL LEGAL DOCUMENTS-TIlE LEASE - Remedies on Default" and "SPECIAL RISK FACTORS - Limited Recourse on Default" herem. Flow of Funds - Cer1ificate Proceeds From the proceeds of the sale of the Certificates, the Trustee will deposit $ in the Lease Payment#und, representing accrued interest due with respect to the Certificates fro~ 1, 1995 to date of delivery. The Trustee will also deposit $ in the Reserve Account and will transfer $ to the Escrow Fund. Pursuant to the terms of the Trust Agreement, all Lease Payments received by the Trustee from the City, and any other moneys required to be deposited pursuant to the Lease Agreement or Trust Agreement will be deposited in the Lease Payment#un~, except to the extent required to be deposited in the Reserve Account to remedy a deficiency therem resulting from a prior withdrawal to make payments of principal of or interest with respect to the Certificates, or in the Excess Investment Earnings Account to pay amounts required to be rebated to the United States. On January 1, 1996, and each January 1 and July I thereafter, the Trustee will promptly use the funds on deposit in the Lease Payment Account to pay to the Owners th~cipal Components and Interest Components with respect to the Certificates then due. Upon prepayment and payment of all Certificates, including any premium and interest to accrue with respect thereto, and payment of any applicable fees to the Trustee, or after provision for such prepayment or payment has been made to the satisfaction of the Trustee, any funds held by the Trustee not required for such payment or prepayment or for rebate of amounts to the United States will be remitted to the City. CERTIFICATE INSURANCE The full text of a specimen municipal bond insurance policy is set jonh in Appendix D hereto. The Policy ConcurrentIy with the issuance of the Certificates, Financial Security Assurance Inc. ("Financial Security") will issue its Municipal Bond Insurance Policy for the Certificates (the "Policy"). The Policy unconditionally guarantees the payment of that portion of the principal and interest in respect of the Certificates that has become due for payment, but shall be unpaid by reason of nonpayment by the City. On the later of the day on which such principal and interest is due or on the business day next following the business day on which Financial Security shall have received notice by telephone or telecopy, subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an Owner of Certificates, the Trustee or the Paying Agent, of the nonpayment of such amount by the City, Financial Security will disburse such amount due in respect of any Certificates to the Trustee or the Paying Agent, for the benefit of the Owners or, at the election of Financial Security, directly to each Owner, in either case upon receipt by Financial Security in form reasonably satisfactory to it of (a) evidence of the Owner's right to receive payment of the principal and interest that is due for payment, KA8187567 -16- - and (b) evidence, including any appropriate instruments of assignment, that all of such Owner's rights to payment of such principal and interest shall be vested in Financial Security. The term "nonpayment" in respect of a Certificate includes any payment of principal or interest that is insured by Financial Security made to an Owner of a Certificate that has been recovered from such Owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order of a court having competent jurisdiction. The Policy is non-cancellable and the premium will be fully paid at the time of delivery of the Certificates. The Policy covers failure to pay principal in respect of the Certificates on their respective . stated maturity dates, or dates on which the same shall have been duly called for mandatory sinking fund prepayment, and not on any other date on which the Certificates may have been called for prepayment or other advancement of maturity unless Financial Security shall elect, in its sole discretion, to pay such principal due together with any interest accrued to the date of prepayment, and covers the failure to pay an installment of interest on the stated date for its payment. Financial Security may appoint a fiscal agent (the "Insurer's Fiscal Agent") for purposes of the Policy by giving written notice to the Trustee and the Paying Agent specifying the name and notice address of the Insurer's Fiscal Agent. From and after the date of receipt of such notice by the Trustee and the Paying Agent, (i) copies of all notices required to be delivered to Financial Security pursuant to the Policy shall be simultaneously delivered to the Insurer's Fiscal Agent and to Financial Security and shall not be deemed received until received by both and (ii) all payments required to be made by Financial Security under the Policy may be made directly by Financial Security or by the Insurer's Fiscal Agent on behalf of Financial Security. The Insurer's Fiscal Agent is the agent of Financial Security only and the Insurer's Fiscal Agent shall in no event be liable to Owners of the Certificates for any acts of the Insurer's Fiscal Agent or any failure of Financial Security to deposit or cause to be deposited sufficient funds to make payments due under the Policy. Under the Policy, Financial Security will, to the extent permitted by applicable law, waive, only for the benefit of the Owners of Certificates, all rights and defenses that might otherwise have been available to Financial Security to avoid payment of its obligations under the Policy in accordance with its terms. TIlE POLICY IS NOT COVERED BY TIlE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF TIlE NEW YORK INSURANCE LAW. Financial Security Financial Security is a wholly owned subsidiary of Financial Security Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company. Holdings is owned approximately 61.2% by US WEST Capital Corporation ("U S WEST"), 9.5% by Fund American Enterprises Holdings, Inc. ("Fund American"), and 7.5% by The Tokio Marine and Fire Insurance Co., Ltd. ("Tokio Marine"). U S WEST is a subsidiary of U S WEST, Inc., which operates businesses involved in communications, data solutions, marketing services and capital assets, including the provision of telephone services in 14 states in the Western and mid-Western United States. Fund American is a financial services holding company whose principal operating subsidiary is one of the nation's largest mortgage servicers. Tokio Marine is a major Japanese property and casualty insurance company. U S WEST has announced its intention to dispose of its remaining interest in Holdings as part of its strategic plan to withdraw from businesses not directly involved in telecommunications. Fund American has certain rights to acquire additional shares of Holdings from U S WEST and Holdings. No shareholder of Holdings is obligated to pay any debt of the Insurer or any claim under any insurance policy issued by the Insurer or to make any additional contribution to the capital of the Insurer. KA8187567 -17- --------. Financial Security is domiciled in the State of New York and is subject to regulation by the state of New York Insurance Department. At March 31, 1995, the Insurer's total policyholders' surplus and contingency reserves were approximateIy $469,190,000 and its totaI unearned premium reserve was approximately S248,929,OOO, in accordance with statutory accounting principles. At March 31, 1995, Financial Security's totaI shareholders' equity was approximateIy S557,421,000 and its total net unearned premium reserve was approximately S217,048,OOO in accordance with generally accepted accounting principles. Copies of Financial Security's financial statements may be obtained by writing to Financial Security Assurance Inc., 350 Park Avenue, New York, New York 10022, Attention: Communications Department. Financial Security's telephone number is (212) 826-0100. Financial Security's claims-paying ability is rated "Au" by Moody's Investors Service and "AAA" by Standard & Poor's Ratings Group. Such ratings reflect only the views of the respective ratings agencies, are not recommendations to buy, sell or hold securities and are subject to revision or withdrawal at any time by such rating agencies. The Policy does not protect investors against changes in market value of the Certificates. The market value of the Certificates may be impaired as a result of changes in prevailing interest rates, changes in applicable ratings or other causes. Financial Security makes no representation regarding the Certificates or the advisability of investing in the Certificates. Financial Security makes no representation regarding this Official Statement, nor has it participated in the preparation hereof, except that Financial Security has provided to the District the information presented under this caption for inclusion in this Official Statement. SPECIAL RISK FACTORS The following factors, along with all other information in this Official Statement, should be considered by potential investors in evaluating the investment quality of the Certificates. Lease Payments Not City Debt The obligation of the City to pay the Lease Payments does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The obligation of the City to pay Lease Payments does not constitute a debt or indebtedness of the City, the County of San Diego, the State of California or any of its political subdivisions, within the meaning of any constitutional or statutory debt limitation or restriction. Although the Lease Agreement does not create a pledge, lien or encumbrance upon the funds of the City, the City is obligated under the Lease Agreement to pay Lease Payments from any source of legally available funds (subject to certain exceptions) and the City has covenanted in the Lease Agreement that, for so long as the Site is available for its use and possession. it will include all Lease Payments in its annual budgets and make the necessary annual appropriations therefor. The Ci~ currently liable on other obligations payable from general revenues. See "CITY FINANCIAL INFORMA nON" herein. Additional Obligations The City has the right and authority to enter into other obligations which constitute additional charges against its general fund without obtaining the prior consent of the Owners or Beneficial Owners. KAB187567 -18- - To the extent that additional obligations are incurred by the City, the funds available to make Lease Payments may be decreased. The Leae Payments and other payments due under the Lease Agreentent (including payment of costs of repair and maintP.nance of the Site, taxes and other governmentaI charges levied against the Site) are payable from funds lawfully available to the City. In the event that the amounts which the City is obligated to pay in a fisca1 year exceed the City's revenues for such year, the City may choose to make some payments rather than making other payments, including Lease Payments and Additional Payments, based on the perceived needs of the City. The same result could occur if, because of California Constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available revenues or is required to expend available revenues to preserve the public health, safety and welfare. County Financial Problems-City Investment in County In..""aw-t Pool As of May 31, 1995, the City had invested approximately $23 million of its $73 million general operating reserve investment portfolio in the San Diego County Investment Pool (the "Pool"). In addition, the City had invested approximately $39.5 million of its $43.5 million in tax allocation bond proceeds in the Pool. As of May 31, 1995, the total deposits in the Pool was approximately $2.82 billion; the market value of the Pool was approximately $2,65 for an unrealized loss of approximately $174.4 million or 6.3 %. As a result of the market value loss of the investments within the Pool, the City estimates that its total investment portfolio of $116.5 million would now have a market value of $112.9 million representing an unrealized loss of 3 %. Under State law, depositors in the Pool are permitted to withdraw funds which they have deposited on 30 days' notice. Due to the market value loss of the various investments within the Pool, if a significant number of depositors requested withdrawal of their moneys at the same time, the County Treasurer would currently be unable to honor all withdrawal requests without liquidating investments in the Pool at a significant loss. In order to prevent this type of liquidating problem, the County, together with an Oversight Committee and a Pool Participant Committee, approved a Phased Withdrawal Plan (the "Withdrawal Plan"). The City of Poway has elected to participate in the Withdrawal Plan under an option which provides for the scheduled withdrawal of all of its funds over a three-year period. The City does not anticipate that it will lose any of the money it has invested in the Pool by withdrawing its moneys under the Withdrawal Plan. In addition, City staffhas reviewed the City's financial condition through February 2, 1998, the last date upon which City moneys will be withdrawn from the Pool, and believes that there will be adequate cash flow from all available sources to meet both the operating and capital needs of the City, including the ability to make Lease Payments on the Certificates. Limited Recourse on Default In the event of a default under the Lease Agreement, there is no remedy of acceleration of the total Lease Payments over the term of the Lease Agreement. Rather, the Trustee, as assignee of the Agency, may proceed with certain specified remedies and also take whatever action at law or in equity may appear necessary or desirable to enforce the rights of the Owners of the Certificates. All amounts received from such proceedings after subtracting therefrom all costs of collection will be credited against Lease Payments due from the City. The City is only liable for Lease Payments on an annual basis, and, in the event of a failure of the City to make Lease Payments in accordance with the terms of the Lease Agreement, the Trustee KAB187567 -19- _._--_.._----~-- would be required to seek a separate judgment each year for that year's defaulted Lease Payments. Any such suit for money damages would be subject to limitations on legal remedies against municipalities in California, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest. Additionally, enforceability of the rights and remedies of the Owners of the Certificates, and the obligations incurred by the City, may become subject to the following: The Federal Bankruptcy Code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual equity principles which may limit the specific enforcement under State law of certain remedies; the exercise by the United States of America of the powers delegated to it by the Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police powers inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or state government, if initiated, could subject the Owners of the Certificates to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitation or modification of their rights. The Lease Agreement provides that the Trustee may take possession of the Site. Upon doing so, the Trustee may re-let the Site to another lessee for the account of the City, in which event the City's obligations will continue to accrue from year to year in accordance with the Lease Agreement and the City will continue to receive the value of the use of the Site from year to year in the form of credits against its obligation to pay Lease Payments. There can be no assurances given, however, that rents accruing from the Site will be adequate, at any time, to pay the Lease Payments as they become due. Additionally, Interest Components due with respect to the Certificates could become includable in gross income for federal income tax purposes as a result of re-Ietting the Site under certain circumstances. Alternatively, the Lease Agreement provides that the Trustee may sell the Site. There is no assurance that the Trustee could re-let the Site at rental rates that would be sufficient to pay the principal and interest with respect to the Certificates when due or sell the Site for an amount that would be sufficient to redeem all Certificates. The Trustee's ability to re-let the Site may be further impaired by the continuing encumbrance on the Site created by that certain Memorandum of Affordable Housing Covenants recorded against the Site in the Office of the San Diego County Recorder (the "Affordability Memorandum"). The Affordability Memorandum requires the City to restrict the rent of no less than 50 units of the 399 units located in the Site to rates affordable for moderate income households (within the meaning set forth in California Health and Safety Code Section 50052.5) for a period through and including August 1,2015. Moreover, under the public welfare and equitable provisions described above, a court might prevent the Trustee from exercising its right of reentry if that was determined to be detrimental to the public interests. Additionally, the Trustee may terminate the Lease Agreement at its option. Loss of Tax Exemption As discussed under the caption "TAX EXEMPTION" herein, the interest due with respect to the Certificates could become includable in gross income for purposes of federal income taxation retroactive to the date such Certificates were issued, as a result of acts or omissions of the City in violation of its covenants in the Trust Agreement and the Lease Agreement to comply with certain provisions of the Internal Revenue Code of 1986, as amended, subsequent to the execution and delivery of the Certificates. Should such an event of taxability occur, the Certificates are not subject to early prepayment and will remain outstanding until maturity or until redeemed under one of the prepayment provisions contained in the Trust Agreement. KAB187567 -20- . .- Abatement or Lease Payments The amount of Lease Payments payable under the Lease Agreement shall be abated during any period in which by reason of damage, destruction, tide defect or condemnation there is substantial interference with the use and occupancy of the Site by the City. The amount of such abatement shall be such that the resulting Lease Payments do not exceed fair rental value for that portion of the Site not damaged or destroyed; provided, however, that such abatement shall not result so long as there are proceeds of the type described in the following paragraph legally available to the Trustee to make Lease Payments when and as due. Abatement caused by damage or destruction shall continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any partial non-completion, damage or destruction, the Lease Agreement shall continue in full force and effect and the City waives any right to terminate the Lease Agreement by virtue of any such non-completion, damage or destruction. See "APPENDIX C - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - THE LEASE AGREEMENT - Abatement of Lease Payments and Additional Payments." During any period of substantial interference with the use and occupancy of the Site, the Lease Payments are payable only from (i) amounts on deposit in the Lease Payment Fund and the Reserve Account, (ii) in an amount not to exceed the fair rental value during each Fiscal Year for the portion of the Site not damaged, destroyed, interfered with or taken, as determined by an independent real estate appraiser selected by the City how is not an employee of the City, and (iii) to the extent that moneys derived from any person as a result of any delay in the construction, reconstruction, replacement or report of the Site, or any portion thereof, are available to pay the amount which would otherwise be abated. If the resulting Lease Payments after an abatement, together with the other moneys available to the Trustee as described above, are insufficient to pay the principal of and interest due with respect to the Certificates during the period that the abatement remains in effect, the City will have no obligation to pay to the Trustee the amount necessary to cover such deficiency. The failure to make such payment of principal and interest under such circumstances would not constitute a default by the city under the Trust Agreement, the Lease Agreement or the Certificates. Under such circumstances, no remedy for nonpayment is available to the trustee or the Owners of the Certificates against the City under the Lease Agreement or the Trust Agreement. In the event the amounts legally available to the Trustee after an abatement are insufficient to pay the principal of and interest due with respect to the Certificates, all Owners of the Certificates would forfeit a pro rata portion of interest attributable to abated Lease Payments in any year of abatement and, to the extent Certificates mature during a period of abatement, such Owners would forfeit a pro rata portion of principal attributable to such abated Lease Payments. Risk or UninsUl'ed Loss The City is not obligated under the Lease Agreement to procure and maintain, or cause to be procured and maintained, earthquake insurance on the Site. The Site could be damaged or destroyed due to earthquake for which the Site is uninsured. Additionally, the Site could be the subject of an eminent domain proceeding. Under these circumstances an abatement of Lease Payments could occur and could continue indefinitel>j\ There can be no assurance that the providers of the City's liability and rental interruption insurance will in all events be able or willing to make payments under the respective policies for such loss should a claim be made under such policies. Further, there can be no assurances that amounts received as proceeds from insurance or from insurance or from condemnation of the Site will be sufficient to prepay Certificates. See "SPECIAL RI~batement of Lease Payments" above. KAB187567 -21- Failure of IDsurer to Pay Under Insurance Policy While Financial Security currently has the highest rating given by Moody's Investors Service and Standard & Poor's Corporation, there can be no assurance that the Insurer will in all events be able to make payments under the Policy should a claim be made under it. See "CERTIFICATE INSURANCE" herein. A Rental Payments of Site Tenants Not Pledged to Payment of Certific:ates Certificate Owners should not look to the payment of rental payments from tenants of the Site as security for the payment of principal, premium, if any, and interest on the Certificates. As discussed above, Lease Payments are an obligation of the City's General Fund for which the City has covenanted under the Lease Agreement to budget annually so long as any Certificates remain Outstanding. The Lease provides that, upon satisfaction of the conditions specified therein, the City may release from the Lease and Site Lease any portion of the Site or substitute other property and improvements for all or a portion of the Site. Although the Lease requires that the property which will comprise the Site after such release or substitution must have an annual fair rental value equal to or greater than the maximum annual amount of Lease Payments and Additional Payments required to be paid under the Lease during any year of the remainder of the term of the Lease, it does not require that such property have an annual fair rental value equal to 100% of the annual fair rental value of the property comprising the Site at the time of substitution or release. Thus, a portion of the property comprising the Site could be. replaced with less valuable property, or could be released altogether. Such a replacement or release could have an adverse impact on the security for the Certificates, particularly if an event requiring abatement of Lease Payments were to occur subsequent to such substitution or release. CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS Article XIllA Article XIIIA of the California Constitution limits the amount of ad valorem taxes on real property to I % of "full cash value" as determined by the County Assessor. Article XIIIA defines "full cash value" to mean the County Assessor's valuation of real 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. "Changes in ownership" do not include purchases or transfers when the person acquiring the property was displaced by eminent domain, inverse condemnation, or acquisition of property by a government entity, or certain transfers between spouses or parents and children. "Newly constructed" does not include real property constructed after a disaster as declared by the Governor of the State where the property reconstructed is comparable in value to that destroyed. Furthermore, all real property valuation may be increased to reflect the inflationary rate, as shown by the consumer price index or comparable data, not to exceed 2 % per year, or may be reduced. Article XIIIA also permits the reduction of the "full cash value" base in the event of declining property values caused by damage, destruction or other factors. Article XIIIA exempts from the 1 % tax limitation any general or special taxes to repay indebtedness approved by the voters prior to July I, 1978, and requires approval by two-thirds of the qualified electorate to impose special taxes, while totally precluding the imposition of any additional ad valorem, sales, or transaction tax on real property. In addition, Article XIlIA requires the approval of two-thirds of all members of both houses of the State legislature to change any State tax laws resulting in increased tax revenues. KAB187567 -22- - - On June 3, 1986, California voters approved Proposition 46, which added an additional exemption to the I % tax limitation imposed by Article XIDA. Under this a1llP.Nltneut to Article XIDA, local governments and school districts may increase the property tax rate above 1 % for the period necessary to retire new geueral obligation bonds, if two-thirds of those voting in a local election approve the issuance of such bonds and the money raised through the sale of the bonds is used exclusively to acquire or improve real property. Article XIllB Article XIllB of the California Constitution limits the annual appropriations of the State and any city, county, school district, authority, or other political subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted annually primarily for changes in the consumer price index and population. The "base year" for establishing such appropriations limits is the 1978n9 Fiscal Year. Increases in appropriations by a governmental entity are also permitted (i) if financial responsibility for providing services is transferred to the governmental entity, or (ii) for emergencies so long as the appropriations limits for the three years following the emergency are reduced to prevent any aggregate increase above the Constitutional limit. Decreases are required where responsibility for providing services is transferred from the governmental entity. Appropriations by an entity of local government subject to Article XIllB include generally any authorized to expend during the fiscal year the proceeds of taxes levied by or for the entity of local government, and the proceeds of certain State subventions exclusive of refunds of taxes. Appropriations subject to limitation pursuant to Article XIllB do not include local agency loan funds, debt service on indebtedness existing or legally authorized as of January 1, 1979, and on bonded indebtedness thereafter approved according to law by a vote of the electors of the issuing entity voting in an election for such purpose or certain investment funds of the governmental entity. For local governments, "proceeds of taxes" include, but are not I imited to, all tax revenues and the proceeds to any entity of government from (I) regulatory licenses, user charges, and user fees to the extent such proceeds exceed the cost of providing the service or regulation, (2) the investment of tax revenues, and (3) certain State subventions received by local governments. Article XIllB 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 returned by revising tax rates or fee schedules over the subsequent two fiscal years. For Fiscal Year 1993/94, the City's appropriations limit was $ . The City's actual appropriations in Fiscal Year 1993/94 were $ , including debt service on the Prior Cenificates. The City is subject to and operating in conformity with Article XIllB. Litigation Regarding Property Tax Allocations The Supreme Court determined in Nordlinger v. Hahn, that California's present system of assessing property did not violate the equal protection clause of the federal Constitution. The City and the Agency cannot predict whether there will be future challenges to California's present system of assessing property for taxation or if such challenges will be successful. Statutory Limitations On November 4, 1986, California voters approved Proposition 62, which added Sections 53720 et seq. to the California Government Code, and which (i) requires that any tax for general governmental purposes imposed by local governmental entities be approved by resolution or ordinance adopted by a two-thirds vote of the governmental entity voting in an election on the issue, (ii) requires that any special KA8187567 -23- tax (defined as taxes levied for specific purposes) imposed by a local governmental entity be approved by a two-thirds vote of the voters within that jurisdiction, (iii) restricts the use of revenues from a special tax to the purposes or for the service for which the special tax was imposed, (iv) prohibits the imposition of ad valorem taxes on real property by local governmental entities except as permitted by Article XIllA, (v) prohibits the imposition of transaction taxes or sales taxes on the sale of real property by local governmental entities, and (vi) requires that any tax imposed by a local governmental entity on or after August 1, 1985 and prior to the effective date of Article XIllA be ratified by a majority vote of the electorate within two years of the effective date of Proposition 62 or be terminated by November 15, 1988. The California Legislative Analyst and Director of Finance, in assessing the fiscal impact of this initiative on State and local governments, had indicated prior to voter approval that adoption of this initiative . would make it more difficult for city governments to impose new taxes in the future since under current law city general purpose taxes may be imposed or increased by a vote" of the city council. The City is unable to predict the potential adverse financial impact, if any, of the initiative on the City. ! On March 6, 1995, in the case of Rossi v. Brown, the State Supreme Court held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption from the referendum requirements does not apply to initiatives. THE CITY OF POWAY History and Location Poway developed as an unincorporated community until November 1980 when, its 33,500 residents voted to incorporate an area of about 38 square miles. It began its formal existence as a City on December 1, 1980. In November 1986 the City annexed an additional 1,325 acres for a total area of about 40 square miles. Poway is located inland about three miles east of Interstate Highway 15, and surrounded on three sides by the City of San Diego. Driving distance southerly to downtown San Diego or the San Diego International Airport is about 25 miles. The terrain is hilly and steep in some areas with gentle slopes in the center of the City. Poway is relatively new in that over 70')1; of the housing stock postdates 1970. City Organization The City has, since incorporation, been governed and operated under the Council-Manager form of government. The City Manager directs a work force of [216] full-time employees and appoints department heads on the basis of specialized knowledge, experience and education in their area of responsibility. The City employees are members of the State Public Employees Retirement System. City contributions to the System are current and no unfunded contractualliabiIity exists for past services. Members Mayor Don Higginson graduated from Brigham Young University in 1979 with a B.A. in Political Science. He received his J.D. from Western State Law School in 1982, and served for two years as legal liaison with the San Diego County Sheriffs Department. For the past five years Mr. Higginson has served as Corporate Counsel for Mail Boxes Etc. and is currently Vice President of FranX, Ltd. He is an active member of the San Diego Bar Association and is a current member of the Antitrust and Trade Regulation Section of the State Bar of California. Mr. Higginson sits on the Franchise Tax Force of the Senate Select Committee on Small Business. He currently serves as Vice Chairman of the Hospice Foundation. KAB187567 -24- - Dqluty Mayor Susan CDlluy was elected to the City Council and appointed to the Board of the Agency in November, 1992. After graduating from U.C.L.A., Ms. Callery spent nine years in medical administration and research. Ms. Callery has been involved in numerous volunteer organizations in Poway, and served as Community Protection Chairman for Green Valley Community Association. Prior to her election, Ms. Callery served on the City's Migrant Worker Housing Committee from March to August, 1991, and the Redevelopment Committee from January, 1991, until her election to Council in Novembet, 1992. Councilmember Robert C. Emery is employed as a middle school teacher. He holds a B.A. in Political Science from San Diego State University and a M.A. in psychology from the University of San Diego. He was first elected to the City Council at the time of incorporation of the City in 1980. He has previously served as Mayor in 1982, 1985 and 1988. Mr. Emery has also served as an elected member to the Poway Planning and Development Program, an advisory group to the San Diego Planning Commission. Councilmember MicluJel P. CtifagJUI was appointed to a two-year term to the City Council and Agency Board of Directors in December, l~ In addition to these duties, Mr. Cafagna also serves on the Mid-County Transportation Committee 0 e San Diego Association of Governments (" SANDAG") and is an alternate member of the San Diego Wastewater ManagenteDt District, the SANDAG board of directors and the Metropolitan Transit Development Board. Mr. Cafagna has owned and operated Square One, Inc., a diversified real estate firm, since 1974 and is a founding director and Vice President of the Poway Taxpayers' Association. Councilmember Betty Ruford [to come]. Staff James L. Bowersox has served as the first and only City Manager since his selection and appointment in 1981 shortly after incorporation. He previously served in the City of Cerritos as Assistant City Manager and in administrative posts in La Mesa and Tulare since 1970. He holds a B.A. from San Diego State University. The City staff under the leadership of the City Manager provides ongoing resources to the elected officials, including policy papers and background information to assist the elected officials in the development of City and municipal policies. The policies developed through this process are implemented by the staff under the direction of the City Manager. Population At incorporation in 1980, there were about 33,500 in the City limits. Poway has grown to a population of 46,579 and expects to be built out according to general plan estimates at 52,000. Poway is a low density community predominately of single family homes. The following table illustrates comparative population figures. KA8187567 -25- CITY OF POWAY, NINETEEN CITIES, SAN DIEGO COUNTY, CALIFORNIA Comparative Populations Change from 1980 to 1994 % Change .illQ l222 1221 1m 1m 1m 1980-94 1. Carlsbad 35,490 63,451 64,300 65,700 67,200 67,923 91.39 2. Chula Vista 83,927 131,603 138,700 142,200 146,400 149,347 77.95 3. Coronado 18,790 26,934 26,600 26,700 23,350 26,312 40.03 4. Del Mar 5,017 5,215 4,880 4,980 5,050 5,073 1.12 5. El Cajon 73,892 86,494 89,300 90,300 91,200 92,262 24.86 6. Encinitas 55,017 56,000 56,600 57,600 58,011 7. Escondido 64,355 104,213 110,800 112,900 115,300 116,938 81.71 8. Imperial Beach 22,689 26,573 26,650 27,150 27,800 28,002 23.42 9. La Mesa 50,308 53,976 53,300 54,100 55,800 56,569 16.42 10. Lemon Grove 20,780 23,379 24,300 24,650 24,950 25,086 20.72 11. National City 48,772 56,649 55,700 58,700 56,600 55,625 14.05 12. Oceanside 76,698 125,823 33,700 138,300 141,900 145,404 89.58 13. Poway 33,178 44,368 44,450 45,400 46,350 46,689 40.72 14. San Diego 875,538 1,118,282 1,130,000 1,150,600 1,171,600 1,184,814 35.32 15. San Marcos 17,479 37,020 40,250 42,800 44,550 45,991 163.12 16. Santee 40,182 53,737 53,200 53,900 54,600 54,994 36.86 17. Solana Beach 14,761 13,000 13,200 13,400 13,434 18. Vista 35,834 67,832 74,200 75,800 78,100 79,511 121.89 19. Unincorporated 358.917 414.587 409.300 420.700 426.700 436.002 ~ TOTAL: 1,861,846 2,509,914 2,548,6302,604,500 2,648,600 2,687,887 44.37 SOURCE: California State Department of Finance. 1980 Census figures represent data as of April 1, 1980; all other data points are January 1st estimates. Climate Poway as part of San Diego County has a relatively dry climate and its inland location spares it much of the fog experienced along the coast. Temperatures are frostfree over 300 days per year and rainfall of about II inches falls principally between October and April. City Services The City provides all services except sewage waste treatment and police protection. Poway's sewage waste is pumped to the San Diego Metro system for treatment and disposition; police protection is provided by the County Sheriff's office under contract with the City. City services are organized into functional departments containing 197 full-time and part-time employees under the direction of the City Manager: (I) Administrative Services, which includes Personnel, Customer Services, Finance, Data Processing, Purchasing, Support Services, Risk Management and Capital Management; (2) Community Services, which includes Leisure Services, Aquatics, Performing Arts and Lake Operations; (3) Planning Services, which includes Current Planning, Advanced Planning and Building Inspection; (4) Public Services, which includes Operations and Maintenance Administration, Water Supply, Treatment, Pumping and Storage, Street Maintenance, KAB187567 -26- Vehicle and Equipment Mainteuance, Park and Landscaping MalDtP.11ance, !lewer Pumping and Treatment, Special Landscape District, Trails, Construction and Maintenan...e and Drainage Maintenance; (5) Engineering Services, which includes Subdivision Engineering, Capital Improvement Program, Special Projects, Engineering Inspection and Traffic Engineering; and (6) Safety Services, which includes Fire Suppression, Fire Prevention, Paramedics and Law Enforcement. Transportation Poway is served by a variety of transportation modes. Commercial air travel is supplied at Lindbergh Field, approximately 25 miles south in San Diego, and is supplemented by private and charter plane service from the Palomar Airport, about 20 minutes to the west. Automobile travel is facilitated by Interstate 15 which runs north/south one to three miles to the west of Poway. Bus travel is supplied by San Diego County Regional Transit District and is supplemented by commuter service from Poway to downtown San Diego. Service and Facilities The City of Poway supplies its residents with water and sewer service. Power is supplied by San Diego Electric and Gas, and telephone service by Pacific Bell. The City has its own parks and community services departments and provides fire protection service, but contracts for police service from the County. Health care facilities are provided by Pomerado Hospital, a 13o-bed, full-service facility. Educational facilities in the Poway Unified School District include 17 e1enteDtary schools (12 public and 5 private), 3 middle schools, and 3 high schools, one of which is a continuation school. These educational. facilities serve the populace of Poway as well as the neighboring communities of Rancho Bernardo, Rancho Penasquitos, Sabre Springs and Carmel Mountain Ranch. Several schools within the Authority have recently been awarded national honors for excellence. Recreational facilities in the City of Poway include two community parks, one at the Community Center and one surrounding Lake Poway, a man-made lake. The Community Center also includes lighted softball/baseball fields and a swimming pool. Golfing is available at local non-membership country clubs. Residents of Poway have excellent access to cultural and recreational facilities in the metropolitan San Diego area as well. In May 1990, the Poway Center for the Performing Arts opened. The 815-seat theater located at the corner of Espola Road and Titan Way is a joint project of the City of Poway Department of Community Services and the Poway Unified School District. The $8.4 million complex houses an array of national and local performances, serving the entire mid-San Diego County area. Housing and Income ^ The average selling price for new and existing single family homes is about $261,000. 1988 median income for Poway was $45,837, the highest of incorporated cities in the County. The median age of Poway residents is 30.6 years and the family/household size was 3.21 in 1988. Owner occupancy is high; Poway is predominantly a single family community. Retail and Total Taxable Sales Retail sales have increased during the period of 1985 to 1994 over _ %. Sales tax revenue is the second largest revenue source for the City and for Fiscal Year 1994/95, the City expects to receive approximately $_ million in sales tax revenue. The following table sets forth comparative taxable retail sales for the City. KAB187567 -27- -- CITY OF POWAY, EIGHT CITIES, SAN DIEGO COUNTY, CALIFORNIA Comparative Taxable Retail Sales Annual 1986-1994 (thousands of dollars) ~ 1987 !2D 1989 1990 .1.22l 1992 1993 1994' EI c..jon $821,193 $833,868 $884.8<59 $934,8<59 $938,740 $9S4,362 $1.139,023 $1,116.650 $798,903 &coodido 897,103 1.034,021 1,149.313 1,332,781 1.294,600 1.192.m 1.432.397 1,433,242 941.681 LaM_ 308.898 337.212 373,147 391,390 373,243 S48.917 618,794 618..s67 441,370 POWAY 173.737 180.297 202.88.S 222,S49 208,483 198.701 271,986 310.603 236,804 San Di. 3.282,202 5,736.010 6,032,631 6,301,643 6.700,138 6,378,838 9,654.105 9.8n,362 6,966,386 San MafCOl 269,112 323,208 337.843 380.032 388,.527 337.124 333.328 303,n3 373.801 Santee 178,123 197,917 213,233 228,343 239,373 241,118 317,286 333.903 269.870 Vilta 163.820 188.171 214.S43 249.894 266.118 240 310 326.184 339.036 299.886 Eight Citiu $8,296.814 $9,032, n4 $9,630,686 $10,441,303 $ 9,766,144 $10,312,367 14,333.203 14,333,380 1,031.403 Other em.. 3.344.06.5 3.678.886 9.731.196 3.129.733 3.300.094 4.286 999 7 .002.6.54 7.020.947 3.986.783 San Diego County $11,640,879 $12.731,660 $19,381.882 $13,371,2.58 $13.066,238 $14,m,366 $21.337,837 $21,376,327 $16.298.188 Colifomia $141,881,161 $130,232,360 $162.316.803 $173,766,403 $173.878,939 $176,373,184 $272,368.291 $272,123,743 $208,407.331 -Firat thrw ql1lrterl. SOURCES: Colifomia S.... Boanl of Equalization. S..tillieaJ RMardl &Dd C~ DivUion, _; Annual Roporta, for y_n obowu. KA8187567 -28- - The following table sets forth taxable sales by type of business. CITY OF POWAY Total Taxable Sales by Type of Business 1986 through 1994 (thousands of dollars) 1986 1987 1988 1212 122Il 1991 ~ 1993 1994. Apparel $ 2,537 $ 3,784 $ 4,371 $ 4,702 $ 4,939 $4,765 $4,988 $5,154 $3.142 Omend Merchandi.. 11,380 12,OSl5 25,158 27,689 29,105 28,558 44.394 49,912 34,931 DNI 6,360 6,877 6.943 7,459 7,449 6,373 4,669 4,030 1,802 Food 14,_ 16,415 17,504 19,764 21.872 23,674 25.863 20,545 16,558 Pacbged Liquor 1,981 2.742 1,641 1,462 1,437 1.625 1.771 1,629 1,096 Eatins aDd DriaItiDs 14.893 16,350 16,315 17,997 19,434 20,901 21,963 23.196 19,611 Home Fumilhiap 2,158 2.686 2,957 3,104 2.614 1,707 1,502 1.783 1.248 Buildina Material. 16,894 18,301 18.961 20.604 8,655 5,255 5,428 5.291 1.242 Auto De&len 81,838 75,251 78,310 84,5U 74,826 68,451 72.438 108.778 82,022 Service S..tiODl 10,211 12,083 15.410 15,454 15,403 14,477 21.793 22,333 16,275 Other Retail ~ ...ll.m ~ ...l2.:m ~ .AID ..Alli ...A.2U -1!.ill Retail TouJ $175.757 $180,297 $202,885 $222,549 $208,483 $198,701 $227,383 $266,616 $197,241 Other Total Dud... $15,478 $16,491 $18,910 $ 23,573 $ 26,873 $ 34,382 $ 44,603 $ 43,987 $ 39,663 TouJ All Dud... $191,235 $196,7U $221,795 $246,122 $235,356 $233,013 $271,_ $310,603 $236.904 -Fint three quartan. SOURCE, California State Boan! of Equalizotioo, Statiltica1 _td1 aDd C~ Divmoo, Saenl_; AIuwaI Repo..., for y.... mowo. KAB187567 -29- -- -- Assessed Valuation and Tax Rates The following table sets forth assessed valuation growth in Poway. Tax rates are dropping as assessed valuation increases. The average tax rate in Poway is below $1.10 per $100 assessed valuation. CITY OF POWAY Assessed Valuation 1981/82 through 1994 Fiscal Year Total Percent Ending Total Total Assessed Change From June 30 Secured Unsecured Value Previous Year 1982(1) $ 883,493,134 $ 0 $883,493,134 1983 966,571,050 14,845,839 981,416,889 11.08% 1984 1,019,953,883 16,685,712 1,036,639,595 5.63 1985 1,109,674,392 18,010,665 1,127,685,057 8.78 1986 1,224,261,949 19,624,399 1,243,886,348 10.30 1987 1,371,840,241 18,2n,448 1,390,117,689 11. 76 1988 1,546,330,363 24,897,449 1,571,227,812 13.03 1989 1,744,013,209 27,045,506 l,nl,058,715 12.72 1990 2,052,405,447 30,240,937 2,082,646,384 17.59 1991 2,413,n3,613 37,219,612 2,450,993,225 17.69 1992 2,684,903,547 44,186,797 2,729,090,344 11.35 1993 2,585,029,834 54,214,861 2,912,244,695 6.71 1994 2,964,014,503 69,962,694 3,033,967,197 4.18 (I) The first year that general property tax assessments were first applied to the City was in 1982. Assessed values are stated at full value and are increased by up to 2 % annually with the exception of newly acquired property, which is reassessed based on purchase price. SOURCE: County of San Diego Assessor's Office. The following table sets forth tax levies and collections including delinquency rates for Fiscal Year 1981/82 through 1993/94. The City receives only a ponion of the total tax collections shown on the table. A portion of the basic 1 % property tax rate established by Article XllIA is received by other taxing entities. Additionally, the Agency receives amounts which are attributable to increases in assessed valuation over the assessed value of $203,331,000 in the Fiscal Year 1983/84, which is the base year for the Agency's project area. After deducting such amounts, the City's share equals approximately _ % of the 1 % general tax levy, or, for Fiscal Year 1993/94, approximately $_ million. This amount may fluctuate from year to year due to growth in the Agency's redevelopment project area. Approximately 33 % of the City is within the Agency's project area. Assessed valuation attributable to the Agency is approximately 42 % of the total assessed valuation of the City. The ponion of the City within the Agency's redevelopment project experiences more rapid increases in assessed valuation on a percentage basis than the remaining areas of the City due to growth in the redevelopment project. KA8187567 -30- - CITY OF POW AY Property Tax Levies and Collections Fiscal Years Ending 1982 through 1994 FII<a! _of _of Yea, DeliDqueat Toul Tax OulllalllliDi DeIiDq..... Eodm, Curnm Cunoal Co11ac:tion Tax Toul Tax Collectiou DaIiDq.... TUelto ~ ~ Collectiooa RaIa" Collectiona COUectiODl To Tax Levv Tax.. Tu Levv 1982(1) $3,488.185 $3,272,692 93.82 S 58,161 S 3,33O,8S3 95.49" S 256,127 7.34" 1983 3,863,017 3,530,540 91.39 lSO,631 3,611.179 95.29 438,163 11.34 1984 3,933,203 3,633,395 92.38 251,855 3,88S,2S0 98.78 486,136 12.36 1985 4,126,697 3,1146,429 93.21 216,385 4.062.114 98.45 550.019 13.33 1986 4,873.378 4,635,446 95.12 275,516 4,910,962 100.77 471.691 9.68 1987 5,261.453 4,968,778 94.44 233,983 5,202,761 98.88 546.011 10.38 1988 5,892.828 5,617,5-41 95.33 242,144 S,1S9,692 99.44 561,383 9.35 1989 6,622.830 6,169,589 94.67 107,529 6.277,118 94.78 834,392 12.60 1990 8,009,185 7,812,459 97.54 115,233 7,927,fR2 98.98 600,469 7.50 1991 9.136,715 8,689,581 95.11 230,400 8,919.981 97.63 413,351 4.52 1992 12.639,697 12.284,495 97.19 424,816 12,709,311 100.55 307,971 2.44 1993 9.604.741 9.156,139 95.33 400,191 9,556,330 99.50 533,344 5.55 1994 12.8S5.2IO 9,585,698 74.57 386,361 9,972,055 n57 3,431,515 26.69 (1) The tint Yelt that property tax ... Wlata were applied to the City ViU 1982. SOURCE: County of San Dieao. Auditor CoIaoU..... Office. Construction Activity Residential and commercial construction values for Fiscal Years 1983/84 through 1993/94 are shown in below. CITY OF POWAY Construction Activity 1985/86 to 1993/94 Residential and Commercial Construction Value of Value of Fiscal Number Dwelling Residential Commercial ...Ym... of Permits Units Construction Construction 1985/86 1,303 579 $ 68,636,940 $ 2,544,400 1986/87 1,287 607 107,298,476 2,128,201 1987/88 1,948 626 91,244,133 20,778,035 1988/89 1,716 391 89,449,956 8,960,829 1989/90 1,619 524 70,107,550 1,343,125 1989/90 1,619 325 70,107,550 1,343,125 1990/91 1,286 218 53,810,212 1,082,843 1991/92 1,273 50 17,152,028 16,157,812 1992/93 1,183 40 12,870,944 13,887,733 1993/94 1,216 81 18,829,254 915,093 _. SOURCE: City of Poway Planning Department KAB187567 -31- Employment and Indl6try A Poway is part of the Metropolitan Statistical Area (MSA) comprised of San Diego County. Non- agricultural employment figures are compiled at the MSA level. The trade and service sectors have been the largest employers in the County, accounting for almost half of all jobs since 1980. The service sector has been growm, at the rate of 6% per year since 1980, followed by growth in the retail trade sector at 6.5% per year. Projected employment figures for 1989 indicated that the trade, service, manufacturing and government sectors will retain their prominence; growth in the construction sector would continue and employment in agriculture would continue to decline. The City of Poway is primarily a residential community, thus, there are few major employers in the community. The City itself, the Pomerado Hospital District, and the Poway Unified School District are the largest employers in the area. Numerous small businesses make up the rest of the employment base in the community. In addition, there are plans in place to add to the employment base by developing the South Poway Industrial Park. The two tables which follow set forth information with respect to employment by industry groups and the labor force in general in the County of San Diego. COUNTY OF SAN DIEGO Civilian Labor Force, Employment and Unemployment Unemployment Y!lm: Labor Force Emnloved UlleIQnloved Ratio (J) 1979 744,800 698,700 46,100 6.2% 1980 754,900 705,300 49,600 6.6 1981 802,200 746,800 55,400 6.9 1982 837,100 759,500 77,600 9.3 1983 877,100 805,100 72,000 8.2 1984 915,300 860,800 54,500 6.0 1985 967,200 915,900 51,300 5.3 1986 1,010,900 960,500 50,400 5.0 1987 1,059,100 1,011,400 47,700 4.5 1988 1,126,500 1,078,300 48,200 4.3 1989 1,173,400 1,127,200 46,200 3.9 1990 1,174,400 1,121,600 52,800 4.5 1991 1,176,200 1,104,100 72,100 6.1 1992 1,213,300 1,124,600 88,700 7.3 1993 1,218,400 1,123,700 94,700 7.8 1994 1,234,500 1,146,000 88,500 7.2 1995 1,203,800 1,123,800 80,000 6.6 (I) Unadjusted for season. SOURCE: State of California Employment Development Department. KA8187567 -32- - COUNTY OF SAN DIEGO Employment by MJUor Industry Group ..-, 1985-1994 1985 12H 1987 1988 Am 1990 122l 1992 1993 1m ~ Govemmem 145,700 149,900 156,600 162,800 169.300 176,800 178.700 179,300 179,100 180,600 186.900 Servicoa 197,900 211,100 229,000 242._ 259,500 275,700 281,200 283.600 287.300 294._ 299,700 R.etail Trade 153.300 160,900 169,100 181.900 190.800 193,800 191,100 179,100 185.800 184,100 180,100 Manufacturina 121.600 121,800 124,300 130,100 135,400 136,SOO 131,700 124,100 117.SOO 112,300 107,600 Finance, Inmrance, Real Eaa.. 52.000 56,000 61,400 65.000 66._ 67,900 66,000 61,100 62,200 60,900 89.300 TranspOrtlitioD and Public Utiliti.. 31.600 32.300 33,700 35,100 35.800 37.100 36,SOO 34,800 35,700 35,800 36.000 Conmuction 47,SOO SO.9OO 54,600 57.400 63 ,800 62,300 58,100 43,100 39.SOO 40,000 41,200 Wholeaale Trade 33,600 35,200 37,900 41.000 42.800 44,300 43,900 42.300 39,700 41,300 42.000 A,ncultul'll 11,800 11,800 12,400 12.100 N/A N/A 10,5SO 10.600 10.700 10._ 11,200 Mineral Extraction 800 800 800 800 800 700 700 SOO 400 400 400 - - - - - - - - - Total 795.800 831.300 879,800 926,700 _.700 995,100 998,4SO 958,_ 957,900 960.400 961,600 SOURCE: s.... of CalifOrnia EmploymeDl Develop_ Dop_ u eompilod by 1M E<oaomio _ Bu..... of SaIl 0ieI<>. - .... of April 1, 1995 The following table lists the ten largest employers in the City. [To be updated.] CITY OF POW AY Ten Principal Employers As of AprU, 1993 Type of Number of Emolover Business Emolovees(l) I. Poway Unified School District School 3,500 2. Anacomp Inc. Micrographic Equipment Manufacturer 671 3. Pomerado Hospital Hospital 700 4. WaI *Mart Retail Department Store 300 5. City of Poway Government 230 6. Executone Information Systems Business Telephone Systems 200 7. Lucky's Grocery Store 134 7. Target Retail Department Store 125 8. New Poway Ford Automobile Dealer 80 9. Vons Grocery Store 74 (I) Includes part-time employees. SOURCE: City of Poway - KAB187567 -33- CITY OF POWAY Ten Largest Taxpayers June 30,1994 Assessed Percentage Name V a1uation of Total Burnham Pacific Properties Inc. $30,352,000* 16.4% IMP Advisors Inc. 30,094,858* 16.2 Stoneridge County Club Corp. 26,954,274 14.5 C.F. Poway Ltd. 25,351,104* 13.7 Tech Business Center 17,147,015 9.2 R & R Partners - Poway 15,779,609 8.5 Beecroft, Ioseph N. & Lois M. 11,923,832 6.4 Gateway Medical Building - Ioint Venture 10,710,964 5.8 Poway Creekside Partners 9,136,744 4.9 Standard Pacific LP 8.251.770 ~ ,$185.702.170 IOO.O~ SOURCE: San Diego County Assessor's Office and City Finance Division. *Currently delinquent $ KAB187567 -34- - -, CITY FINANCIAL INFORMATION - General Fund The City General Fund finances the legally authorized activities of the City not provided for in other restricted funds. General Fund revenues are derived from such sources as taxes; licenses and permits; fines, forfeits and penalties; use of money and property; aid from other governmental agencies; charges for current services; and other revenue. General Fund expenditures and encumbrances are classified by the functions of administrative services, public safety, public works, community development, and general government. Budgetary Process The fiscal year of the City begins on the first day of July each year and ends on the thirtieth day of June of the following year. At such date as the City Manager determines, such department head must furnish to the City Manager an estimate of revenues and expenditures for such department for the ensuing fiscal year, detailed in such manner as may be prescribed by the City Manager. In preparing the proposed budget, the City Manager reviews the estimates, holds conferences thereon with the respective department heads, and revises the estimates as he deems advisable. At least thirty days prior to the beginning of each fiscal year, the City Manager submits to the City Council the proposed budget. After reviewing and making such revisions as it deems advisable, the City Council determines the time for the holding of a public hearing thereon and causes to be published a notice thereof not less than ten days prior to the hearing date. Copies of the proposed budget are available for inspection by the public in the office of the City Clerk at least ten days prior to the hearing. At the conclusion of the public hearing, the City Council further considers the proposed budget and makes any revision thereof that it deems advisable. On or before June 30 it adopts the budget with revisions, if any, by the affirmative vote of at least a majority of the total members of the City Council. From the effective date of the budget, the several amounts stated as proposed expenditures become appropriated to the several departments, offices and agencies for the objects and purposes named, provided that the City Manager may transfer the appropriations of a fund from one object or purpose to another within the same department, office or agency. All appropriations lapse at the end of the fiscal year to the extent that they have not been amended or lawfully encumbered. At the public meeting after the adoption of the budget, the City Council may amend or supplement the budget by motion adopted by the affirmative vote of at least three members of the five member City Council. The City Council employs, at the beginning of each fiscal year, an independent public accountant who, at such time or times as specified by the City Council, at least annually, and at such other times as he shall determine, examines the books, records, inventories and reports of all officers and employees who receive, control, handle or disburse public funds and of all such other officers, employees or departments as the City Council may direct. As soon as practicable after the end of the fiscal year, a final audit and report is submitted by such accountant to the City Council and a copy of the financial statements as of the close of the fiscal year is published. ~..-. KA8187567 -35- Summary of Revenl1t'S and Expenditures The following table summarizes General Fund revenues, expenditures, transfers, and ending fund balances for the City for Fiscal Years 1988/89 through 1993/94. See Appendix A herein for the complete audit report of the City for the year ended June 30, 1994. CITY OF POW AY Statement of General Fund Revenues, Expenditures and Balances Fiscal Year 1988/89 through 1993/94. The information below in each case relates to the Fiscal Year Ended June 30. 1989 .122Q 1m .!22Z 1993 I 1994 REVENUES Taxes $6,261,730 $6,707,247 $6,784,227 $6,956,653 7,425,204 $7,889,870 Licenses and Permits 334,150 398,748 394,812 352,341 340,884 335,037 Intergovernmental 1,788,560 1,876,714 1,907,774 1,737,463 1,636,092 1,566.910 Charges for Services 4,205,250 5,696,519 5,294,671 3,963,179 4,098,276 4,453,428 Fines and Forfeitures 150,000 139,312 146,838 95,080 71,747 91,593 Interest and Rentals 463,070 1,033,822 1,306,988 1,033,443 1,070,136 869,443 Other 504.200 315.391 1.000.430 1.316.961 1.102.932 551.830 Total Revenues $13.706.960 $16.167.753 $16.935.740 $15.455.120 . $15.745.271 $15.758.111 EXPENDITURES Current: General Government $4,027,247 $4,561,589 $3,909,534 3,011,399 3,738,172 2,531,457 Public Safety 4,975,587 5,563,163 8,212,765 8,019,225 8,322,611 8,371 ,953 Public Works 2,548,464 2,988,005 1,166,729 1,121,208 1,211,792 1,404,125 Community Services 2,312,274 3,080,322 2,656,274 2,519,556 2,666,515 2,496,504 Capital Expenditures 398,575 569,140 776,145 222,302 788,767 755,107 Debt Service Total Expenditures $14,262,147 $16,789,219 $16,721,447 $14,893,690 ,$16,727,857 $15,594,951 i , Excess (Deficiency) of Revenue Over Expenses 1555.187) 1621.466) $214.293 $561.430 , $982.586 $163.160 Other Financing Sources (Uses) $1.380.805 $1. 776.237 1$670.459) $818.614 1$168.697) Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses $759,339 $1,990,530 ($109,029) $163,972 ($5,537) Fund Balance, Beginning $23.773.305 $24.360.708 $26.511.895 $26.402.866 $26.238.894 Fund Balance, Ending $15.639.122 $24.532.644 $26.351.238 $26.402.866 $26,238,894 $26.233.357 SOURCE: Annual City Audits '" KAB187567 -36- - 1994/95 Budget The following table summarizes the approved Fiscal Year 1994/1995 General Fund Budget of the City. CITY OF POWAY Adopted Budget - General Fund Fiscal Year 1994195 BUDGET IrnM 1994/1995 Revenues: Taxes $8,015,620 Licenses and Permits 343,520 Intergovernmental 1,635,360 Charges for services 4,152,070 Fines and forfeitures 97,000 Interest and rentals 857,400 Other 258230 Total Revenues $15,460,200 Expenditures: Current: - General government $2,024,557 Public safety 8,379,957 Public works 2,445,359 Community services 2,725,380 Capital expenditures (20,000) Debt Service* 0 Total Expenditures $15,167,253 Excess (Deficiency) $ 292,947 of Revenue Over Expenses SOURCE: City of Poway. *See "CITY FINANCIAL INFORMATION - Oustanding Debt" herein. Audits The City, all its funds and the Poway Redevelopment Agency are audited annually by the certified public accounting firm of Moreland & Associates, Inc. of 610 Newport Center Drive, Suite 500, Newport Beach, California 92660. A copy of the audited financial statements of the City for Fiscal Year 1993/94 is attached hereto as Appendix A. KAB187567 -37- Outstanding Debt The following table shows the City's debt service requirenteDts to maturity for general obligation bonds and prior certificates of participation. CURRENT OUTSTANDING DEBT DEBT SERVICE REQUIREMENTS TO MATURITY CITY OF POW A Y Fiscal Year General Certificates of Endinl! June 30 Oblil!ation Bonds Particioation 1995 $1,077,603 $4,155,997 1996 1,085,478 4,155,007 1997 930,828 4,155,268 1998 763,290 4,249,994 1999 768,976 4,250,823 2000 768,123 4,250,866 2001 2,614,203 4,250,334 2002 1,517,594 4,247,654 2003 860,975 4,241,367 2004 958,775 4,247,725 2005 958,600 4,244,141 2006 963,713 4,242,103 2007 & Beyond ..0- . 52.304.487 Total $13,258,156 $102,995,766 SOURCE: City Administrative Services Department KAB187567 -38- - Direct and Overlapping Debt The direct and overlapping bonded debt of the City as of June 30, 1994, is shown below. CITY OF POW A Y Statement of Direct and Overlapping Bonded Debt 1993/94 Assessed V aluation: $1,959,261,620 (after deducting$I,074, 705,577 redevelopment incremental valuation) POPULATION: 46,579 DIRECT AND OVERLAPPING BONDED DEBT: % ADDlicable Debt 6/30/94 San Diego County Building Authorities 1.486% $12,567,444 San Diego County Superintendent of Schools Certificates of Participation 1.486 23,751 San Diego County Water Authority 1.541 209,576 Metropolitan W ater Di~trict 0.243 1,574,033 Poway United School District Certificates of Participation 20.235 1,408,331 Escondido Union High School District 0.082 60 San Pasqual Union School District .769 5,532 Poway Municipal Water District 100. 7,890,000 Poway Sewer Improvement District #1 99.995 299,865 Palomar Pomerado Hospital District 9.479 153,086 Palomar Pomerado Hospital District Authority 9.479 770,643 'outh Poway Community Facilities District #1 100. 30,440,000 ":ity of Poway Community Facilities District #88-1 100. 36,385,000 City of Poway Certificates of Participation 100. 49.445.000 TOTAL DIRECT AND OVERLAPPING BONDED DEBT $141.172.321 (1) Ratios to Assessed V a1uation: Direct Debt ($49.445.000) 2.52% T otal Debt 7.28% SHARE OF AUTHORIZED AND UNSOLD BONDS: Metropolitan Water District. . . . . . . . . . . . . . . . $ 121,000 Poway Municipal Water District . . . . . . . . . . . . . $1,900,000 Poway Municipal Water District, J.D. #2 ....... $1,620,000 Poway Municipal Water District, I.D. #3 ....... $ 140,000 STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/94: $0 (I) Excludes tax and revenue anticipation notes, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. SOURCE: California Municipal Statistics, Inc. KAB187567 -39- - ----- --~,- TIlE POW AY REDEVELOPMENT AGENCY The Agency The Poway Redevelopment Agency was activated by the adoption of City Ordinance No. 96 on April 26, 1983. The City Council declared itself to be the Agency and acted upon redevelopment matters by the adoption of a Survey Area as required by the Community Redevelopment Law. Agency Powers and Duties The Agency is charged with the responsibility for elimination of blight through the process of redevelopment. All powers of the Agency are vested in its five members. The Agency exercises all of the governmental functions authorized under the Community Redevelopment Law and has, among other powers, the authority to acquire, administer, develop and sell or lease property, including the right of eminent domain, and the right to issue bonds and expend the proceeds. The Agency may sell or lease property within a redevelopment area in conformity with the redevelopment plan for such project area, may specify the period within which such redevelopment must begin, may establish certain restraints and controls over the development, and may set the period in which such development must be completed. Further, the Agency may, out of funds available to it for such purposes, pay all or part of the value of land, cost of buildings, facilities, structures or other improvements to be publicly owned and operated, to the extent that such improvements are of benefit to such project area and are in strict conformity with such redevelopment plan. Redevelopment in the State of California is carried out pursuant to the Community Redevelopment Law (Section 33000 et seq. of the Health and Safety Code). Section 33020 of the Law defines redevelopment as the planning, development, replanning, redesign, clearance, reconstruction or rehabilitation, or any combination of these, of all or part of a survey area and the provision of such residential, commercial, industrial, public or other structures or spaces as may be appropriate or necessary in the interest of the general welfare, including recreational and other facilities incidental or appurtenant to them. It EXAMINATION OF YIELDS AND ESCROW SUFFICIENCY Ernst & Young, LLP, a firm of independent public accountants will deliver to the Agency its attestation report indicating that it has examined, in accordance with standards established by the American Institute of Certified Public Accountants, the information and sections provided by the City and its representatives. Included in the scope of its examination will be a verification of the mathematical accuracy of (a) the mathematical computations of the adequacy of the initial cash deposit together with the maturing principal of and interest on the Escrow Securities, to pay, when due, the maturing principal of, interest on and call premium requirements of the Prior Certificates; and (b) the mathematical computations supporting the conclusion of Bond Counsel that the Prior Certificates are not "arbitrage bonds" under the Code and the regulations promulgated thereunder. TAX EXEMPTION In the opinion of Stradling, Y occa, Carlson & Rauth, a Professional Corporation, Newport Beach, California, Special Counsel, under existing statutes, regulations, rulings and judicial decisions, the portion of the Lease Payments designated as and comprising interest is excluded from gross income for federal income tax purposes, and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations; however, Special Counsel notes that, KAB187567 -40- - - with respect to corporations, the portion of the Lease Payments designated as and comprising interest may be included as an adjustment in the calculatinn of alternative minimum taxable income which may affect - the alternative minimum tax liability of such corporations. In the further opinion of Special Counsel, the portion of the Lease Payments designated as and comprising interest is exempt from State of California personal income tax. Special Counsel's opinion as to the exclusion from gross income for federal income tax purposes of the portion of the Lease Payments designated as and comprising interest is based upon certain representations of fact and certifications made by the City, the Agency, the Underwriter and others and is subject to the condition that the City and the Agency comply with all requirenteDts of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the execution and delivery of the Certificates to assure that the portion of Lease Payments designated as and comprising interest will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the portion of Lease Payments designated as and comprising interest to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Certificates. The City and the Agency each have COVfmante(j to comply with all such I requirements . Should the portion of the Lease Payments designated as and comprising interest become includable in gross income for federal income tax purposes, the Certificates are not subject to early redemption and will remain Outstanding until maturity or until redeemed in accordance with the Trust . Agreement. Special Counsel's opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date thereof. Special Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring after the date of issuance of the I -- Certificates may affect the tax status of interest with respect to the Certificates. I Although Special Counsel has rendered an opinion that the portion of Lease Payments designated , as and comprising interest is not excluded from gross income for federal income tax purposes provided that the City and the Agency continue to comply with certain requirements of the Code, the ownership of the Certificates and the accrual or receipt of interest with respect to the Certificates may otherwise affect the tax liability of certain persons. Special Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Certificates, all potential purchasers should consult their tax advisors with respect to collateral tax consequences with respect to the Certificates. A form of the opinion of Special Counsel is set forth as Appendix B hereto. CERTAIN LEGAL MATI'ERS Stradling, Yocca, Carlson & Rauth, a Professional Corporation, Newport Beach, California, Special Counsel, will render an opinion with respect to the validity and enforceability of the Lease Agreement and the Trust Agreement and as to the execution and delivery of the Certificates and that the Certificates are entitled to the benefits of the Trust Agreement. The form of such approving opinion is attached hereto as Appendix B. Certain legal matters will be passed upon for the Underwriter by Best, Best & Krieger, Riverside, California, for the City by the City Attorney and for the Agency by the City Attorney. KA8187567 -41- --------- LmGATION In January 1995 the Poway Royal Mobile Homeowners Association and certain individual tenants within the Site (together, the .Plaintiffs") commenced a lawsuit in the Superior Court for the County of San Diego against the City, the City Council, the Agency and the City Manager seeking recovery of monetary damages approximating $20,000,000 in connection with the acquisition and operation of the Site by the City and the Agency. Generally, the Association's complaint alleges that (i) the Agency paid too much for the Site resulting in excessive rental payments charged to the Plaintiffs, (ii) the City violated various technical provisions of the Mobilehome Park Act with respect to the landlord tenant relationship between the Plaintiffs and the City, and (iii) the City failed to adequately maintain the Site. ^ The City and the Agency are vigorously defending the lawsuit. The City Attorney believes that the complaint lacks merit and that all causes of actions resulting from the alleged excessive purchase price for the Site will be dismissed upon motion prior to trial. Motions to dismiss the excessive purchase price causes of action will likely to be heard in late 1995. Due to the factual nature of the causes of action arising from claims of Mobilehome Park Act violations and inadequate maintenance of the Park, the City attorney believes that a trial on these issues may be necessary. However, the City Attorney further believes that the City is in compliance with the Mobilehome Park act and, given the substantial investment of funds by the City and the Agency in the Site to upgrade facilities and utilities, it is unlikely that the Association will recover on these grounds. Although the City, the Agency and the City Attorney do not anticipate that the law suit will have a significant effect upon the City's ability to make Lease Payments or otherwise negatively impact the City's financial condition, there can be no guarantee that the outcome of the litigation will be favorable to the City and the Agency. Other than as set forth above, there is no action, suit or proceeding known to be pending or threatened, restraining or enjoining the execution or delivery of the Cenificates, the Lease Agreement, the Trust Agreement or the Escrow Agreement or in any. way contesting or affecting the validity of the I foregoing or any proceedings of the City taken with respect to any of the foregoing. UNDERWRITING The Certificates are to be purchased by PaineWehber Incorporated (the "Underwriter") at a price of$ , plus accrued interest. The purchase agreement relating to the Certificates provides that the Underwriter will purchase all of the Certificates if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in the purchase agreement, the approval of certain legal matters by counsel and certain other conditions. The Underwriter may offer and sell Certificates to certain dealers and others at a price lower than the offering price stated on the Cover Page hereof. The offering price may be changed from time to time by the Underwriter. FlNANCIAL ADVISOR The City has retained Public Financial Management, Inc., Newport Beach, California, as financial advisor (the "Financial Advisor") for the sale of the Certificates. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification, or to assume responsibility for the accuracy, completeness, or fairness of the information contained in the Official Statement. Public Financial Management, Inc. is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities. Public Financial Management, Inc. is a wholly-owned subsidiary of Marine Midland Bank, N.A., Buffalo, New York. KAB 187567 -42- - AVAILABILITY OF DOCUMENTS Copies of the Lease Agreement, the Trust Agreement and the Escrow Agreement will be available, upon written request, from the Agency or the City. The City's address is 13325 Civic Center Drive, Poway, California 92064, Attention: City Manager. RATINGS Based upon Financial Security's commitment to deliver the Policy, Standard & Poor's Corporation and Moody's Investors Service have assigned the Certificates the ratings of . _" and "_", respectively. The ratings reflect only the view of such organizations and an explanation of the significance of such ratings may be obtained from Standard & Poor's Corporation, 25 Broadway, New York, New York 10004, (212) 208-8000 and Moody's Investors Service, 99 Church Street, New York, New York 10004, (212) 553..()470. There is no assurance that the ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by either rating agency, if, in the judgment of such rating agency, circumstances so warrant. The City undertakes no responsibility either to bring to the attention of the Owners the downward revision or withdrawal of the ratings obtained or to oppose any such revision or withdrawal. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Certificates. MISCELLANEOUS References are made herein to certain documents and reports which are brief summaries thereof - which do not purport to be complete or definitive and reference is made to such documents and reports for fun and complete statements of the contents thereof. 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. This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or Owners of any of the Certificates. The execution and delivery of this Official Statement by the Mayor have been duly authorized by the Mayor and City Council of the City. THE CITY OF POWAY, CALIFORNIA Mayor POW A Y REDEVELOPMENT AGENCY Chairperson KAB187567 -43- -----~- APPENDIX A CITY OF POWAY AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 1994 - APPENDIXB FORM OF LEGAL OPINION OF SPECIAL COUNSEL - - -.---- --- APPENDIX B FORM OF LEGAL OPINION OF SPECIAL COUNSEL [CLOSING DATE] City Council of the City of Poway Poway, California Board of Directors of the Poway Redevelopment Agency Poway, California Re: $ 1995 Refunding Certificates ofPanicipation. (City of Po way 1991 Capitill1mprovement Project-Poway Royal Mobilehome Park) Ladies and Gentlemen: We have reviewed the Constitution and the laws of the State of California and certain proceedings taken by the City of Poway, California (the "City") in connection with the authorization, execution and delivery by the City of the Lease Agreement, dated as of July 1, 1995 (the "Lease"), by and between the Poway Redevelopment Agency (the "Agency") and the City. We have also reviewed the Trust Agreement, dated as of July 1, 1995 (the "Trust Agreement"), by and among Bank of America National Trust and Savings Association, as trustee (the "Trustee"), the Agency and the City. All capitalized terms used herein shall have the meaning given them in the Trust Agreement unless otherwise defmed. Pursuant to the Trust Agreement, the Trustee has agreed to execute and deliver the refunding certificates of participation (the "Certificates") evidencing proportionate interests of the Owners of the Certificates in lease payments (the "Lease Payments") to be made by the City pursuant to the Lease. Pursuant to an Assignment Agreement dated as of July 1, 1995, by and between the Agency and the Trustee, the Agency has assigned to the Trustee the Agency's right to receive Lease Payments from the City under the Lease. .- City Council of the City of Poway Board of Directors of the Poway Redevelopment Agency [Closing Date] Page 2 The Certificates are dated July 1, 1995. The Certificates mature on the dates and in the amounts set forth in the Trust Agreement. Interest due with respect to the Certificates is payable on the dates and at the rates per annum set forth in the Trust Agreement. The Certificates are registered Certificates in the form set forth in the Trust Agreement and are subject to optional, extraordinary and mandatory redemption prior to maturity in the manner and upon the terms set forth in the Trust Agreement. Based upon our examination of the foregoing, and in reliance thereon and on all matters of fact as we deem relevant under the circumstances, and upon consideration of applicable laws, we are of the opinion that: 1. .Th~ obligation of the City to pay Lease Payments in accordance with the terms ,,_._c_' .""'....~.. .. of the Lease is a valid and binding obligation payable from the funds of the City lawfully available therefor, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights, by equitable principles, by the exercise of judicial discretion in appropriate cases and by the limitations on legal remedies against cities in the State of California. The obligation of the City to make Lease Payments under the Lease does not constitute a debt of the City, the State of California or any political subdivision thereof within the meaning of any statutory or constitutional debt limitation or restriction and does not constitute a pledge of the faith and credit or taxing power of the City, the State of California or any political subdivision thereof. 2. . The Lease and the Trust Agreement have been duly authorized, executed and delivered by the City and constitute valid and legally binding agreements of the City enforceable against the City in accordance with their terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights, by equitable principles, by the exercise of judicial discretion in appropriate cases and by the limitations on legal remedies against cities in the State of California, except that we express no opinion as to any provisions in the Lease or the Trust Agreement with respect to indemnification. 3. Under existing statutes, regulations, rulings and judicial decisions, the portion of the Lease Payments designated as and comprising interest is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, it should be noted that, with respect to corporations, such interest will be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations . The foregoing opinion is subject to the condition that the City comply with all requirements of .the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the execution and delivery of the Certificates to assure that the portion of the Lease Payments designated as and comprising interest will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements may cause the portion of the Lease Payments designated as and comprising interest to be included in gross income for federal income -------------- ---~ City Council of the City of Poway Board of Directors of the Poway Redevelopment Agency [Closing Date] Page 3 tax purposes retroactive to the date of execution and delivery of the Certificates. The City has covenanted to comply with all such requirements. 4. The portion of the Lease Payments designated as and comprising interest described in paragraph (3) above is exempt from State of California personal income tax. Except as expressly set forth in paragraphs (3) and (4), we express no opinion regarding any tax consequences with respect to the Certificates. We have not made or undertaken to make an investigation of the state of title to any of the real property described in the Lease or the Site Leas", or of the accuracy or sufficiency of the description of such property contained therein, and we 'press no opinion with respect to such matters. We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Certificates, and purchasers of the Certificates should not assume that we have reviewed the Official Statement. The opinions expressed herein are based upon our analysis and interpretation of existing statutes, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. The opinions expressed herein may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. In rendering this opinion, we have relied upon certain representations of fact and certifications made by the City, the Agency, the initial purchasers of the Certificates and others. We have not undertaken to verify through independent investigation the accuracy of the representations and certifications relied upon by us. Respectfully submitted, . APPENDIXC SUMMARY OF PRINCIPAL LEGAL DOCUMENTS -"-'-'-~--'-- --,.~.._- APPENDIXC SUMMARY OF PRINCIPAL LEGAL DOCUMENTS The following is a summary of certain provisions of the legal documents which are not described elsewhere in this Official Statement. These summaries do not purport to be comprehensive and reference should be made to the Trust Agreement, the Site Lease, the Lease and the Assignment Agreemem for a full and complete statement of their provisions. All capitalized terms not defined in this Official Statement have the meanings set forth in the Trust Agreement. Definitions of Certain Terms Additional Certificates shall mean any certificates of participation executed and delivered by the Trustee in accordance with the provisions of the Trust Agreement subsequent to the Delivery Date for the Certificates. Additional Pavments shall mean any amount payable by the City under the terms of the Lease, other than the Lease Payments. Bond Counsel shall mean an attorney or firm of attorneys of nationally recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Code and acceptable to the City. Business DlIY shall mean any day other than (i) a Saturday or Sunday or legal holiday or a day on which banking institutions in the city in which the principal corporate trust office of the Trustee is located are authorized or required bylaw or executive order to close, (ii) a day on which the New York Stock Exchange is closed, (iii) if a Credit Facility is then in effect, a day on which the issuer of the Credit Facility is authorized or required by law or executive order to close, or (iv) if a Reserve Account Policy is then in effect, a day on which the issuer of any Reserve Account Policy is authorized or required by law or executive order to close. Certificate Fund shall mean the fund by that name established pursuant to the Trust Agreement. ~ shall mean the Internal Revenue Code of 1986, as amended, and any regulations, rulings, judicial decisions, and notices, announcements, and other releases of the United States Treasury Department or Internal Revenue Service interpreting and construing it. ComDletion Certifkat.. shall mean a certificate of an Authorized Representative of the City delivered pursuant to the Lease and in the form required by the Trust Agreement to the effect that the Project, or a portion thereof to which such certificate relates, has been completed substantially in conformity with the plans and specifications for the Project or such portion thereof. ~ shall mean and be deemed to include, with respect to the Project, together with any other proper item of cost not specifically mentioned in the Trust Agreement, (a) costs of payment of, or reimbursement for, acquisition, design, construction, rehabilitation, installation, delivery and financing of the Project, including, but not limited to, the payment of real property rental, administrative costs and capital expenditures relating to acquisition, construction and installation, inspection costs, filing and recording costs, printing costs, reproduction and binding costs, fees and charges of the Trustee pursuant to the Trust Agreement and other financing documents, legal fees and charges, financial, accounting and other professional consultant fees, costs of rating agencies or credit ratings, fees for the printing, PUBL,27204_1 1 138182345.52 C-l - execution, transportation and safekeeping of the Certificates or any Additional Certificates; (b) all other costs which the City shall be required to pay under the terms of any contract or contracts for the acquisition, coDStrUCtion, delivery and instaIlation of the Project, including, but not limited to, the cost of insurance; (c) any sums required to reimbune the City for advances made for any of the above items, or for any other costs incurred and for worlc done, which is properly chargeable to the Project; (d) any costs paid from the Net Proceeds to repair, restore or replace the Project; and (e) such other expenses not specified in the Trust Agreentent as may be necessary or incidental to the acquisition, construction, delivery and installation of the Project, the financing thereof and the placing of the same in use and operation. Cost as defined in the Trust Agreement shall be deemed to include the cost and expenses incurred by any agent of the City for any of the above mentioned items. Costs of Issuance shall mean all the costs of executing and delivering the Certificates or any Additional Certificates, including, but not limited to, City administrative costs and expenses directly attributable to the execution and delivery of the Certificates, or any Additional Certificates, all printing and document preparation expenses in connection with the Trust Agreement, the Lease, the Assignment Agreement, the Site Lease, the Escrow Agreement, the Certificates, any Additional Certificates and the Official Statement pertaining to the Certificates or any Additional Certificates; rating agency fees; appraisal fees; market study fees; legal fees and expenses of counsel with respect to the financing of the Project; fees and costs associated with obtaining any Municipal Bond Insurance Policy, Credit Facility or Reserve Account Policy obtained in connection with an issue of Additional Certificates; any accounting, computer and other expenses incurred in connection with the Certificates or any Additional Certificates; the initial fees and expenses of the Trustee and its counsel and any paying agent (including, without limitation, origination fees and first annual fees payable in advance); the fees and expenses of the City's financial advisor; the fees and expenses of disclosure counsel; and other fees and expenses incurred in connection with the execution and delivery of the Certificates or any Additional Certificates or the implementation of the financing for the Project, including amounts to reimburse the City for advances made for any of the foregoing, to the extent such fees and expenses are approved by the City. Credit Facility shall mean an irrevocable and unconditional letter of credit, a standby purchase agreement, a line of credit or other similar credit arrangement issued by a Qualified Bank to satisfy all or a portion of the Reserve Requirement. Deliverv Date shall mean, as applicable, the date on which the Certificates or any Additional Certificates are initially delivered. Fiscal Year shall mean the twelve month fiscal period of the City which commences on July I in every year and ends on June 30 of the succeeding year. Insur.~ and Condemnation Proceeds Fund shall mean the fund by that name established under the Trust Agreement. Insurer shall mean Financial Security Assurance, Inc., a -domiciled stock insurance company. Interest Comoonent shall mean any Lease Payment, or portion thereof, which is designated and paid as interest pursuant to the terms of the Lease; the Interest Component of a Certificate or an Additional Certificate is the proportionate interest in the Interest Component of the Lease Payments which is evidenced by such Certificate or Additional Certificate, as applicable. C-2 Interest Pavment Date shall mean August I and February I of each year, commencing February I, 1995, until the earlier of the maturity date or redemption date of the last Outstanding Certificates or Additional Certificates. , ..aoe Pa- shall mean the amount to be paid by the City for the use and occupancy of the Site pursuant to the Lease, but does DOt include any Additional Payments. Lease Pavment Date shall mean the fifth Business Day prior to each Interest Payment Date. Lease Pavment Fund shall mean the fund by that name established in the Trust Agreement. Municical Bond Insurance Policy shall mean the municipal bond insurance policy issued by the Insurer insuring the payment when due of the Interest Components and Principal Components represented by the Cenificates and any municipal bond insurance policy issued in connection with an issue of Additional Certificates insuring the payment of the Interest Components and Principal Components represented by such issue of Additional Certificates. Net Proceeds shall mean the proceeds of any insurance required to be maintained pursuant to the Lease or condemnation proceeds paid with respect to the Site and I"""ainillg after payment therefrom of all expenses incurred in the collection thereof. Outstandin2, when used with reference to any Certificates or Additional Certificates, shall mean, as of any date, the Cenificates or Additional Certificates theretofore or thereupon being executed and delivered under the Trust Agreement except: (a) Certificates or Additional Certificates cancelled or delivered to the Trustee for cancellation on or prior to such date; (b) Cenificates (or portions of Certificates) or Additional Certificates (or portions of Additional Certificates) defeased as provided in the Trust Agreement; (c) Cen!ficates or Additional Cenificates in lieu of or in substitution for which other Cenificates or Additional Certificates, as applicable, shall have been executed and delivered pursuant to the Trust Agreemem; and (d) Certificates or Additional Cenificates of the type described in the Trust Agreement. Perm;.....! Investments shall mean: (a) cash (insured at all times by the Federal Deposit Insurance Corporation or otherwise collateralized with obligations described in paragraph (b) below); or (b) direct obligations of (including obligations issued or held in book entry form on the books of) the Department of Treasury of the United States of America; (c) obligations of any of the following federal agencies which obligations represent full faith and credit of the United States of America, including: C-3 - Export - Import Bmk. - Farm Credit System Financial Assistance Corporation - Farmers Home Administration - General Services Administration - U .S. Maritime Administration - Small Business Administration - Government National Mortgage Association (GNMA) - U.S. Department of Housing and Urban Development (PHAs) - Federal Housing Administration; (d) senior debt obligations rated in the highest rating category by each Rating Agency issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation and other government sponsored agencies approved by the Insurer; (e) U.S. dollar denom;natP1l deposit accounts, federal funds and banker's acceptances with domestic commercial banks (including the Trustee) which bave the highest short-term rating of eacb Rating Agency on the date of purchase and maturing no more than 360 days after the date of purchase. (Ratings on holding companies are not considered as the rating of the bmk); (f) commercial paper which is rated in the single highest classification of each Rating Agency at the time of purchase, and which matures not more than 270 days after the date of purchase; (g) investments in a money market fund rated . AAAm" or . AAAm-G" or better by Standard & Poor's; (b) pre-refunded municipal obligations defined as follows: Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and which are rated, based on an irrevocable escrow account or fund (the "escrow"), in the highest rating category of each Rating Agency; (i) other forms of investments approved in writing by the Insurer with notice to each Rating Agency; G) deposits in the Local Agency Investment Fund as administered by the Treasurer of the State; and (It) shares of beneficial interest issued by diversified management companies, as defined in Section 2370lm of the California Revenue and Taxation Code, investing in the securities and obligations as authorized by clauses (a) to (i), inclusive, of this definition. To be eligible for investment pursuant to this subdivision, these companies shall be rated in the highest rating category of the Rating Agency. "Value" of the above investments shall be determined as of the end of each month, and the value of any investments shall be calculated as follows: C-4 (a) as to investments the bid and asked prices of which are published on a regular basis in 1he Wall Street Jounuzl (or, if DOt there, then in 1he New York nmes): the average of the bid and asked prices for such investments so published on or most recently prior to such time of determination; (b) as to investments the bid and asked prices of which are not published on a regular basis in 1he Wall Street Jounuzl or 1he New York Tzmes; the average bid price at such time of determination for such investments by any two nationally recognized government securities dealers (selected by the Trustee in its absolute discretion) at the time making a market in such investments or the bid price published by a nationally recognized pricing service; (c) as to certificates of deposit and bankers acceptances: the face amount thereof, plus accrued interest; and (d) as to any investment not specified above: the value thereof established by prior agreement between the City, the Trustee and the Bond Insurer. Preoavment shall mean any payment made by the City pursuant to the Lease as a prepayment of Lease Payments. Princioal Comoonent shall mean, with respect to a Lease Payment, the portion thereof which is designated and paid as principal pursuant to the terms of the Lease; the Principal Component of a Certificate or an Additional Certificate is the proportionate interest in the Principal Component of the Lease Payments which is evidenced by such Certificate or an Additional Certificate, as applicable. Princioal Comoonent PaYment Date shall mean November I of each year in which a Principal Component of a Certificate or Additional Certificate is due. Proiect shall mean the improvements financed with the proceeds of any Additional Certificates as described in a supplement to the Lease Agreement. Proiect Fund shall mean the fund by that name which is established under the Trust Agreement. Oualified Bank shall mean a financial institution whose long-term obligations are rated in one of the two highest rating categories by each Rating Agency. Ratinl! Al!ency shall mean Moody's Investors Service, if it then rates the Certificates, Standard & Poor's Ratings Group, if it then rates the Certificates, and any of their respective successors and assigns that then rate the Certificates or any Additional Certificates. All rating categories of the Rating Agency referred to in the Trust Agreement shall be without regard to modifiers. Rebate Fund shall mean the fund by that name established in the Trust Agreement. Record Date shall mean the fifteenth calendar day of the month preceding each Interest Payment Date. whether or not such fifteenth day is a Business Day. Reserve Account Policv shall mean a policy of insurance or surety bond issued by a municipal bond insurer, obligations insured by which have a rating by the Rating Agency in the highest rating category then issued by said Rating Agency, to satisfy all or a portion of the Reserve Requirement. C-5 - Reserve Reauirement shall mean, as of the date of calculation, the least of (i) an amount equal to the maximum amount of Lease Payments due on the fifth Business Day preceding any August I and the next precediD& February 1 with respect to OutstandiD& Certificates and Additional Certificates, (ii) an amount equal to IO'J of the proceeds (within the IDtJlning of Section 148 of the Code) of all Certificates and Additional Certificates, or (iii) an amount equal to 125 I of the average annual Lease Payments due with respect to Outstanding Certificates and Additional Certificates; provided, however, that with the prior approval of the Insurer such Reserve Requirement or a portion thereof may be provided by one or more Reserve Account Policies or Credit Facilities upon the filing by the City with the Trustee of (x) written evidence that the use of such Reserve Account Policies or Credit Facilities to satisfy the Reserve Requirement or any portion thereof will not by itself result in the downgrading or withdrawal of any credit rating then in effect with respect to the Certificates or Additional Certificates Outstanding, and (y) an opinion of Bond Counsel to the effect that such event will not impair the exclusion from gross income for federal income tax purposes or from State personal income taxes of the IntereSt Component of each Lease Payment. Sinkinl! Account Installment Date shall mean, with respect to the Term Certificates, August I of each year, commencing August 1, 20_ and term;nm'lg August 1, 20_ and, with respect to any Additional Certificates, the date or dates so specified with respect to such Additional Certificates in the Supplemental Trust Agreement relating thereto. ~ shall mean the real property described from time to time in Exhibit A to the Site Lease and Exhibit A to the Lease, as such Exhibit A may be amended and supplemented from time to time in accordance with the provisions of the Site Lease and the Lease. SUDDlemental Trust Al!reement shall mean any agreement supplemental to or amendatory of the Trust Agreement, executed and delivered in accordance with the terms of the Trust Agreement. THE TRU!rr AGREEMENT The Trust Agreement provides for the appoimment of the Trustee by the Agency and the City and acceptance of such appointment by the Trustee. The Trust Agreement also provides for the establishment and administration of funds and for the preparation and delivery of the Certificates. Fstablishment of Funds There are established with the Trustee the following special trust funds and accounts to be designated as follows and each such fund and account shall be kept by the Trustee separate and apart from all other funds and accounts: (a) The Project Fund, in which there is established an Agency Rental Payment Account and a Costs of Issuance Account and an Acquisition and Construction Account; (b) The Certificate Fund, in which there is hereby established an Interest Account, a Principal Account, a Redemption Account and a Reserve Account; (c) The Lease Payment Fund; (d) The Insurance and Condemnation Proceeds Fund, to be established and maintained when required; and C-6 -_.~-~-- (e) The Rebate Fund, in which there shall be established an Earnings Account, a Rebate Account and an Alternative Penalty Account. Project Fund Costs of Issuance Account. There shall be paid into the Costs of Issuance Account of the Project Fund the amount required to be so paid by the provisions of the Trust Agreement and Costs of Issuance shall be paid from amounts on deposit therein by the Trustee in accordance with written instructions to be given to the Trustee by an Authorized Representative of the City. Any unexpended proceeds of the Certificates or any issue of Additional Certificates, as applicable, rmnaining in the Costs of Issuance Account on the date which is 180 days after the Delivery Date for the Certificates or such Additional CertificateS, respectively, or such earlier date as is specified in writing by an Authorized Representative of the City, shall be transferred by the Trustee in the case of any proceeds of the Certificates to the Interest Account of the Certificate Fund and in the case of any proceeds of Additional Certificates to the Acquisition and Construction Account or, if the balance therein is zero, then to the Interest Account. Acauisition and Construction Account, In connection with the execution and delivery of any Additional Certificates, there shall be paid into the Acquisition and Construction Account the amount so required to be paid by the provisions of the Trust Agreement and the Cost of the Project shall be paid from the amounts on deposit in such account. The Trustee shall make payments of the Cost of the Project from the Acquisition and Construction Account in the amounts, at the times, in the manner, and on the other terms and conditions set forth in this subsection. No such payment shall be made until the Trustee shall have received a requisition signed by an Authorized Representative of the City substantially in the form set forth in the Trust Agreement. Upon receipt of a requisition in the form required by the Trust Agreement, the Trustee is authorized to act thereon without further inquiry and shall not be responsible for the contents of such requisition or the application of such funds except for ascertaining that it has been signed by an Authorized Representative of the City. The Trustee shall issue its check or. upon request, a wire transfer, for each payment required by a requisition to the extent funds are available in the Acquisition and Construction Account. Comoletion of Proiect. The completion of the acquisition, construction, delivery and installation of the Project, or portion thereof, to be completed with the proceeds of an issue of Additional Certificates, shall be evidenced by the filing of a Completion Certificate of an Authorized Representative of the City, which shall be filed with the Trustee, stating (I) that the acquisition, construction, delivery and installation of the Project, or the applicable portion thereof, has been completed substantially in accordance with the plans and specifications applicable thereto and that the Project, or the applicable portion thereof, is ready for use, (2) the date of such completion, and (3) the amount, if any, required, in the opinion of the signer or signers, for the payment of any remaining part of the Cost of the Project, which amount shall be retained in the Acquisition and Construction Account of the Project Fund. A separate Completion Certificate may be filed with respect to the portion of the Project to be financed from the proceeds of each issue of Additional Certificates. Transfer of Sumlus. Upon the filing of a Completion Certificate with respect to an issue of Additional Certificates, the Trustee shall transfer from the Acquisition and Construction Account and deposit in the Reserve Account any amount necessary to increase the amount on deposit therein to the Reserve Requirement. Thereafter, and at the written direction of an Authorized Representative of the City, the Trustee shall (i) transfer any balance in the Acquisition and Construction Account to the Interest Account or the Principal Account of the Certificate Fund to pay the Principal Components and Interest Components due with respect to the Certificates and any Additional Certificates as they become due, or (ii) retain any balance in the Acquisition and Construction Account to be used for any capital C-7 : requirements of the City, whether or not related to the Project, upon such terms and conditions as shall not in the opinion of Bond Counsel impair the exclusion from gross income for federal income tax purposes of the Interest Component of any Lease Paymeut. Lease Payment Fund There shall be paid into the Lease Payment Fund the amount required to be so paid by the provisions of the Trust Agreement, all Lease Payments, other than Prepayments, and any proceeds of rental interruption insurance received by the Trustee with respect to the Lease immediately upon their receipt. The Trustee shall apply amounts deposited to the Lease Paymeut Fund as follows: (a) on the Business Day next preceding each Interest Payment Date, the Trustee shall transfer to the Interest Account of the Certificate Fund the amount necessary to increase the balance therein to an amount equal to the Interest Component due with respect to the Certificates and any Additional Certificates on such Interest Payment Date; (b) on the Business Day next preceding each Principal Component Payment Date on which a portion of the Principal Components is due at matUrity or upon a Sinking Account Installment Date, the Trustee shall transfer to the Principal Account of the Certificate Fund the amount necessary to increase the balance therein to an amount equaJ to the Principal Components,. including Sinking Account Installments, due with respect to the Certificates and any Additional Certificates on such Principal Component Payment Date; (c) on the date of receipt ofany delinquent Lease Payments, the Trustee shall transfer to the Reserve Account of the Certificate Fund the amount needed to increase the amount therein to the Reserve Requirement; and (d) any amounts remaining in the Lease Payment Fund after the transfers referred to in (a), (b) and (c) above shall remain in the Lease Payment Fund until all Certificates and Additional Certificates are paid, redeemed or defeased, in which case all such amounts shall be paid to the City. Certificate Fund Interest Account. Moneys transferred to the Interest Account from the Lease Payment Fund and the Reserve Account shall be applied to pay the Interest Components due on each Interest Payment Date. Princioal Account. Moneys transferred to the Principal Account from the Lease Payment Fund and the Reserve Account shall be applied to pay the Principal Components at maturity or upon a Sinking Account Installment Date. To the extent that the Trustee has insufficient funds on deposit in the Interest Account, the Principal Account and the Redemption Account of the Certificate Fund (including amounts transferred from the Reserve Account) to pay the Principal Components and Interest Components due with respect to the Certificates and any Additional Certificates as a result of an abatement of Lease Payments pursuant to the Lease, each Owner of a Certificate and each Owner of an Additional Certificate remaining Outstanding will be paid a pro rata portion of the Interest Components and Principal Components of the Lease Payments actually received that corresponds to his proportionate interest in the Lease Payments. C-8 ~~.- -,~._--~--~ RedemDtion Account. The Trustee shall apply moneys in the Redemption Account as provided in the Trust Agreement. Amounts in the Redemption Account shall be applied to pay the redemption price of Certificates and Additional Certificates pursuant to the Trust Agreem..ut and of any Additional Certificates as specified in the Supplemental Trust Agreement for such Additional Certificates. All expenses in connection with any redemption shall be paid by the City. The Trustee shall deposit in the Redemption Account as received, all Prepayments and any amounts to be transferred to the Redemption Account in accordance with the Trust Agreement. All of said moneys shall be set aside in the Redemption Account for the purpose of redeeming the Certificates and any Additional Certificates in advance of their maturity and shall be applied on or after the redemption date for such Certificates and Additional Certificates to the payment of the redemption price due with respect to the Certificates and Additional Certificates to be redeemed upon presentation and surrender of such Certificates and Additional Certificates. Any excess amounts remaining in the Redemption Account following the redemption or redemptions to be made with such amounts shall be transferred to the Lease Payment Fund. Reserve Account. (a) The Reserve Requirement shall be maintained by the Trustee in the Reserve Account until the Lease Payments are paid in full pursuant to the terms of the Lease or until the Trust Agreement is terminated. The Trustee shall apply moneys in the Reserve Account as provided in the Trust Agreement. (b) If on the Business Day prior to any Interest Payment Date the amount in the Interest Account of the Certificate Fund shall be less than the amount required for the Interest Components due with respect to the Certificates. and any Additional Certificates on said Interest Payment Date, the Trustee shall withdraw from the Reserve Account and deposit in the Interest Account the amount necessary to make up the deficiency on such Business Day. In the event of any such transfer, the Trustee shall, within five days thereafter, provide written notice to the City of the amount and date of such transfer. (c) If on the Business Day prior to any Principal Component Payment Date the amount in the Principal Account of the Certificate Fund shall be less than the amount required to pay the Principal Components payable on the Certificates and any Additional Certificates on such Principal Component Payment Date, the Trustee shall, after making any transfers required by the preceding paragraph, withdraw from the Reserve Account and deposit in the Principal Account the amount necessary to make up the deficiency on such Business Day. In the event of any such transfer, the Trustee shall, within five days thereafter, provide written notice to the City of the amount and date of such transfer. (d) Except as permitted by the following sentence, in the event the amount on deposit in the Reserve Account exceeds the Reserve Requirement, the Trustee shall, upon written direction of the City, not less frequently than semiannually, transfer such amounts (a) to the Rebate Fund, if any deposit is then required to be made pursuant to the Trust Agreement, and (b) to the Lease Payment Fund for application in accordance with the Trust Agreement. In the event that a Reserve Account Policy or Credit Facility is provided to satisfy all or a portion of the Reserve Requirement, any cash on deposit in the Reserve Account which is no longer needed to satisfy the Reserve Requirement will be transferred by the Trustee, at the written direction of an Authorized Representative of the City, to the Project Fund for application in accordance with the Trust Agreement, to a special account to be established for the payment of the fees related C-9 to the Reserve Account Policy or Credit Facility, or, with an approving opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes and the exemption from State of CIIifornia personal income taxation of tile Interest Component of tile Cenific:ates will not be advcnely affected, to the City's General Fund. For purposes of determining the amoum on deposit at any time, the Trustee sball value all Permitted Investments in the Reserve Account in accordance with the provisions of the Trust Agreement. A Reserve Account Policy must have a maturity date which is equal to the last maturity of any Outstanding Cenificate or Additional Cenificate. A Credit Facility must either have a maturity date which is equal to the last maturity of any Outstanding Certificate or Additional Certificate or provide that it may be drawn upon in its full stated amount unless prior to the expiration date of the Credit Facility a substitute Credit Facility, which when combined with the other amounts in the Reserve Account will equal the Reserve Requirement, has been delivered to the Trustee. Any Credit Facility must permit the Trustee to draw on such instrument in the full stated amount thereof in the event that the long-term obligations of the issuer thereof are rated less than the two highest rating categories of the Rating Agency. (e) Moneys in the Reserve Account shall be used solely for the purpose of: (I) making up deficiencies in the Interest Account as provided in the Trust Agreement; (2) making up deficiencies in the Principal Account as provided in the Trust Agreement; (3) making the transfers as provided in (d) above; (4) with respect to the amounts in any subaccount therein established for the Certificates or any Additional Certificates, providing for the payment of the final Lease Payments represented by the issue of Cenificates or Additional Certificates for which such subaccount was created, in which event the Trustee shall transfer such amounts on deposit in the Reserve Account to the Lease Payment Fund to be applied as a credit against such final Lease Payments; or (5) providing for the defeasance pursuant to the Trust Agreement or the Prepayment of all Lease Payments attributable to the Certificates or an issue of Additional Certificates, in which case the amounts in the subaccount of the Reserve Account established for such issue, or in the case of a partial defeasance the amount in the subaccount that will no longer be required as a part of the Reserve Requirement following the defeasance, shall be transferred to the Redemption Account to be applied to the defeasance or redemption of the applicable issue of Certificates or Additional Cenificates or portion thereof. Insurance and Condemnation Fund Aoolication of Net Proceeds. There shall be paid into the Insurance and Condemnation Fund the Net Proceeds of the hazard insurance maintained pursuant to the Lease and any condemnation awards constituting Net Proceeds. In the event that the City elects to restore the Site as provided in the Lease, then such Net Proceeds shall be disbursed in accordance with requisitions submitted to the Trustee by an Authorized Representative of the City. Promptly upon determining that the restoration of the Site is C-IO - complete, the Authorized Representative of the City shall so notify the Trustee in writing that the restoration is complete. Any balance of Net Proceeds remaining after the final disbursement to restore the Site, and, in the event the City elects not to restore the Site as provided in the Lease, all Net Proceeds shall be transferred by the Trustee to the Redemption Account and applied to the redemption of Certificates and any Additional Certificates on a pro rata basis pursuant to the Trust Agreement. ADDlication of Title Insurance J>rnt"~!. The Net Proceeds of any title insurance obtained in accordance with the Lease and received by the Trustee in respect of the Site upon receipt shall be deposited in the Insurance and Condemnation Fund and shall be applied and disbursed by the Trustee as follows: (a) If the City determines that the title defect giving rise to such proceeds has not materially affected the operation of the Site and will not result in an abatement of Lease Payments payable by the City under the Lease, at the written direction of an Authorized Represenwive of the City, such proceeds shall be transferred into the Reserve Account of the Certificate Fund to the extent that the amount therein is less than the Reserve Requirement. Amounts not required to be so deposited shall be remitted to the City and used for any lawful purpose. (b) If any portion of the Site has been affected by such title defect, and if the City determines that such title defect will result in an abatentent of Lease Payments payable by the City under the Lease, then the Trustee, at the written direction of an Authorized Representative of the City, shall immediately transfer such proceeds to the Redemption Account of the Certificate Fund and such proceeds shall be applied to the redemption of Certificates and any Additional Certificates on a pro rata basis pursuant to the Trust Agreement. Rebate Fund There shall be paid into the Rebate Fund the amounts required to be rebated to the United States in accordance with certain provisions of the Code. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust, for payment to the United States Treasury. In the event that immediately following the transfer required by the previous sentence, the amount then on deposit in the Rebate Fund exceeds the amount required to be on deposit therein, upon written instructions from an Authorized Representative of the City, the Trustee shall withdraw the excess from the Rebate Fund and then credit the excess to the Lease Payment Fund. Investment of Certain Accounts (i) Moneys held in all Funds, Accounts and subaccounts shall be invested and reinvested by the Trustee in Permitted Investments which mature not later than such times as shall be necessary to provide moneys when needed for payments to be made from such Funds, Accounts and subaccounts. Moneys in each subaccount of the Reserve Account shall be invested and reinvested by the Trustee in Permitted Investments which mature not later than five years following the date of purchase, and in no event later than the final maturity of the Certificates or issue of Additional Certificates with respect to which such subaccount was created; provided, however, that amounts in the Reserve Account may be invested in Permitted Investments of longer maturities so long as such Permitted Investments may be liquidated at par if needed to make timely payment of scheduled Interest Components and Principal Components. Moneys in the Rebate Fund shall be invested only in obligations of, or obligations the payment of the principal of and interest on which is unconditionally guaranteed by, the United States of America and which have a maturity no longer than the date on which such amounts will be required to make any payments to the United States required by the Trust Agreement. The Trustee shall make all C-ll "- - . such investments of moneys held by it in accordance with written instructions received from an Authorized Representative of the City two days in advance of the investment. In the absence of such written instructions from the City, the Trustee shall invest in investments described in subparagraph (e) or (g) of the definition of "Permitted Investments.. (ii) All earnings on amounts in the Certificate Fund shall be deposited in the Lease Payment Fund except for income or interest earned on amounts in each subaccount of the Reserve Account in excess of the yield on the Certificates or Additional Certificates for which such subaccount was created which shall be deposited in the appropriate subaccount of the Earnings Account of the Rebate Fund. Additionally, any income or interest earned on any moneys or investments in any Fund, Account or subaccount other than the Project Fund and the Certificate Fund shall remain in the respective Funds, Accounts and subaccounts. In crediting interest earnings, the Trustee shall post earnings to the appropriate subaccount of each of the foregoing Funds, Accounts and subaccounts so that earnings on the proceeds of the Certificates and each issue of Additional Certificates are separately maintained and not commingled. (iii) Nothing in the Trust Agreement shall prevent any Permitted Investments acquired as investments of funds held thereunder from being issued or held in book-entry form on the books of the Department of the Treasury of the U oited States of America. (iv) The Trustee may act as principal or agent in the acquisition or disposition of an investment. Additional Certificates At any time after the Delivery Date of the Certificates, the City may provide for the execution and delivery of and sell Additional Certificates to be executed and delivered pursuant to the Trust Agreement, in such Principal Components as it deems necessary for its public purposes (evidenced by a resolution to that effect passed by the City's City Council), subject to the following conditions precedent to such execution, delivery and sale: (a) The City shall be in compliance with all covenants set forth in the Lease and the Trust Agreement and a certificate to that effect shall have been filed with the Trustee upon which Trustee may absolutely rely; (b) The City shall have obtained and provided to the Trustee the written consent of the Insurer; (c) The City shall have obtained and provided to the Trustee written confirmation from each Rating Agency that its then existing rating with respect to the Certificates and any Additional Certificates will not be reduced or withdrawn as a result of such execution and delivery of Additional Certificates; (d) The City shall have delivered to the Trustee a certificate from an independent and qualified MAl real estate appraiser selected by the City setting forth his or her findings that the Site based upon the then existing improvements on the Site (i) has an annual fair rental value during the remainder of the term of the Lease. as supplemented, which is equal to or greater than the total annual Lease Payments and Additional Payments (assuming that the annual Additional Payments due in the future will equal the average annual Additional Payments prior to the date of execution and delivery of such Additional Certificates ) required to be paid under the Lease C-12 -.-- during any year of the r"mainder of the term following the execution and delivery of the Additional Certificates, and (ii) has a usefgllife at least equal to the remaining term of the Lease, as supplemented; provided, however, if the Additional Certificates are being executed and delivered solely for the purpose of making repairs, replacements, additions or improvements to the Site, an appraisal shall not be required if the City shall have certified in writing to the Trustee that it has entered into a fixed price construction contract for the repairs, replacements, additions or improvements to the Site, which contract includes a scheduled completion date and provides for I iquidated damages sufficient to pay the portion of Lease Payments attributable thereto for each day from the scheduled completion date to the date on which such repairs, replacements. additions or improvements are accepted by the City, and deposited with the Trustee a sufficient amount of capitalized interest to pay the interest due with respect to the Additional Certificates until such scheduled completion date, as evidenced by a certificate of an Authorized Representative of the City to the Trustee as to the sufficiency of such deposit for such purpose; (e) The City shall have obtained and provided to the Trustee a certificate stating that the City holds certificates of insurance relating to the Site (as it will be comprised at and after the execution and delivery of such Additional Certificates) which comply with the requirements of the Lease; (f) Provision shall have been made for the deposit into the Reserve Account of an amount equal to the amount necessary to increase the balance therein to the combined Reserve Requirement for the Certificates and any Additional Certificates, as calculated at the time such Additional Certificates are to be executed and delivered; . (g) Provision shall have been made for the execution and delivery of a supplement to the Lease setting forth the total Lease Payments to be paid by the City following the execution and delivery of the Additional Certificates; (h) Provision shall have been made for the execution and delivery of a Supplemental Trust Agreement setting forth the terms of the Additional Certificates, including but not limited to (i) the purpose for which such Additional Certificates are to be executed and delivered and the funds into which the proceeds thereof are to be deposited on the Delivery Date of the Additional Certificates (including provision for any deposit required to be made to the Reserve Account as required by paragraph (e) above), (ii) the aggregate principal amount of Additional Certificates to be executed and delivered, (iii) redemption premiums, if any, and the redemption terms. if any, for such Additional Certificates, and (iv) such other provisions as are necessary or appropriate and not inconsistent with the Trust Agreement; (i) The City shall have obtained and provided to the Trustee an opinion of Bond Counsel to the effect that (i) the execution and delivery of such Additional Certificates will not adversely affect the exclusion from gross income for federal income tax purposes or the exemption from State of California personal income taxation of the Interest Component of the Certificates and any Additional Certificates previously issued on a tax-exempt basis, and (ii) following the execution and delivery of such Additional Certificates, the Lease and the Trust Agreement, including any supplements to such agreements, will constitute the valid and legally binding agreements of the City enforceable in accordance with their terms; and (j) The execution and delivery of such Additional Certificates shall have been duly authorized by the City and the Agency and certified copies of the resolutions authorizing such execution and delivery shall have been delivered to the Trustee. C-13 - So long as the City complies with the foregoing provisions, nothm, in the Trust Agreement or the Lease shall be construed to prohibit the execution and delivery of Additional Certificates for the purpose of effectiD& a refunding of any Outstanding Certificate or Additional Certificate; provided, however, that the City need not obtain the appraisal required under (d) above if the effect of such refunding is to reduce the total Lease Payments owed by the City in each Fiscal Year during the remaining term of the Lease. Events of Default Any event of default under the Lease constitutes an "Event of Default" under the Trust Agreement. Application of Funds All moneys received by the Trustee pursuant to any right given or action taken under the provisions of the Trust Agreement or the Lease relating to an Event of Default sbaIl be applied by the Trustee in the order following upon presentation of the Certificates and any Additional Certificates, and the stamping thereon of the payment if only partially paid, or upon the surrender thereof if fully paid - fiIa, to the payment of the costs and expenses of the Trustee for performance of its duties under the Trust Agreement and thereafter, to the Certificate Owners and the Owners of any Additional Certificates in declaring such Event of Default, effecting collection of moneys due and owing as a result of such Event of Default, and exercising remedies with respect thereto, including reasonable compensation to its or their agents, attorneys and counsel; Second, to the payment to the persons entitled thereto of all Interest Components then due in the order of the due date thereof and, if the amount available shall not be sufficient to pay in full any Interest Component maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto without discrimination or preference; Third, to the payment to the persons entitled thereto of the unpaid Principal Components which shall have become due, whether at maturity or by call for redemption, in the order of their due dates, with interest on each overdue Principal Component at the rate represented by the respective Certificate or Additional Certificate to which sucb Principal Component relates, and, if the amount available shall not be sufficient to pay in full all the Certificates and Additional Cenificates due on any date, then to the payment thereof ratably, according to the amounts of Principal Component due on such date to the persons entitled thereto, without any discrimination or preference; and Esl!inIl, if there shall exist any remainder after the foregoing payments, such remainder shall be paid to the City. Consent of the Insurer Anything in the Trust Agreement to the contrary notwithstanding, upon the occurrence and continuance of an event of default under the Trust Agreement, the Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the Certificate Owners under the Trust Agreement. In addition, the initiation or approval of any action which requires the consent of the Cenificate Owners shall also require the consent of the Insurer. C-14 -- -- Any reorganization or liquidation plan with respect to the City must be acceptable to the Insurer. In the event of any reorganization or liquidation, the Insurer shall bave the right to vote on behalf of all Owners who hold Certificates absent a default by the Insurer under the Municipal Bond Insurance Policy. In determining whether the rights of the Owners will be adversely affected by any action taken pursuant to the terms and provisions of the Trust Agreement, the Trustee shall consider the effect on the Owners as if there were no Municipal Bond Insurance Policy. Institution of Legal Proceediags If one or more Events of Default shall happen and be continuing, the Trustee in its discretion may, and upon the written request of the Owners of not leas than a majority of the aggregate of the Certificates and Additional Certificates then Outstanding, and upon being indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of the Owners of Cenificates and Additional Cenificates by enforcing any of the remedies provided in the Lease. Limitation on Owners' Ri&bt to Sue No Cenificate Owner or Owner of any Additional Certificate shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon the Trust Agreement, unleas (a) such Cenificate Owner or Owner of any Additional Certificate shall have previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of the required percentages of Certificates and Additional Certificates as set forth in the Trust Agreement shall have made written request upon the Trustee to exercise the powers granted to the Trustee as assignee of the Agency or to institute such action, suit or proceeding in its own name; (c) said Certificate Owner or Owner of any Additional Cenificate shall have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of 60 days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee. Such notification, request, tender of indemnity and refusal or omission are declared, in every case, to be conditions precedent to the exercise by any Certificate Owner or Owner of any Additional Cenificate of any remedy under the Trust Agreement; it being understood and intended that no one or more Cenificate Owner or Owner of any Additional Certificate shall have any right in any manner whatever by his or their action to enforce any right under the Trust Agreement, except in the manner provided in the Trust Agreement, and that all proceedings at law or in equity with respect to an Event of Default shall be instituted, had and maintained in the manner provided in the Trust Agreement and for the equal benefit of all Owners of the Outstanding Certificates and Additional Certificates. Provisions ReJatiog to the Trustee In consideration of the recitals set forth in the Trust Agreement and for other valuable consideration, the Trustee agrees to receive, hold, invest and disburse the moneys to be paid to it pursuant to the Lease for credit to the various funds, accounts and subaccounts established by the Trust Agreement; to execute and deliver the Certificates and each issue of Additional Certificates; and to apply and disburse amounts held under the Trust Agreement and other moneys received pursuant to the Lease to the Cenificate Owners and Owners of any Additional Cenificates; and to perform certain other functions, all as provided in the Trust Agreement, subject to the terms and conditions of the Trust Agreement. C-15 - -- The Trustee may at any time resign and be discharged of the duties and obligations created by the Trust Agreem- by giving not less than 30 days' written notice to the Insurer, die City, the Owners of the CertificateS and Additional Certificates Outstanding, specifying the date when such resignation shall take effect, and such resignation shall take effect upon the later of the day specified in such notice or the day on which a successor appointed by the City or the Owners as provided in the Trust Agreement shall have accepted its appointment as successor trustee. So long as no Event of Default or event which with die passage of time could become an Event of Default shall have occurred and then be continuing, the Trustee may be removed at any time upon the request of the Insurer for a breach of the terms of the Truat Agreement and upon 30 days' written notice by the City or by an instrument or concurrent instruments in writing, filed with the Trustee, and signed by the Owners of a majority in aggregate principal amount of the Certificates and any Additional CertificateS then Outstanding or their attorneys-in-fact duly authorized. In addition, the Trustee may be removed at any time, at the request of the Insurer, for any breach of the trust set forth in the Trust Agreement. In case at any time the Trustee shall resign or shall be removed pursuant to the Trust Agreement or shall become incapable of acting, or shall be adjudged as bankrupt or insolvent, or if a receiver, liquidator or conservator of the Trustee. or of its property, sbaIl be appointed, or if any public officer shall take charge or control of the Trustee or of its property or affairs, a successor will be appointed by the City; provided, nevertheless, that unless a successor Trustee shall have been appointed as aforesaid, the Trustee shall petition a court of competent jurisdiction to order the City to appoint the successl)r or to appoint a Trustee to fill such vacancy until a successor Trustee shall be appointed by the City as authorized in the Trust Agreement. Any Trustee appointed under the provisions of the Truat Agreement as a successor to the Trustee shall be a commercial bank or trust company or national banking association subject to supervision and examination by federal or state banking authorities doing business and having its principal office in a city in which a Federal Reserve Bank is located or in the State and having the power of a trust company in the State and having (or if such trustee is a member of a bank holding company its parent bank holding company has) capital stock and surplus aggregating at least $75,000,000. Powers of Amendment The Trust Agreement and the rights and obligations provided in the Trust Agreement may be modified or amended at any time by a SupplementaI Trust Agreement, entered into among the Trustee, the Agency and the City but without the consent of any Certificate Owners or the Owners of any Additional Certificates, and the Assignment Agreement, the Lease and the Site Lease may be amended with the consent of the parties thereto and in the case of the Assignment Agreement, the City, and in the case of the Lease and the Site Lease, the Trustee, but without the consent of the Certificate Owners or the Owners of any Additional Certificates, but only (I) to cure any ambiguity, supply any omission, or cure or correct any defect or inconsistent provision in the Trust Agreement, the Site Lease, the Assignment Agreement or the Lease, or (2) in regard to questions arising under the Trust Agreement, the Lease, the Assignment Agreement or the Site Lease which the City and the Trustee may deem necessary or desirable and not inconsistent with the Trust Agreement, the Lease, the Assignment Agreement or the Site Lease, and which shall not adversely affect the interests of the Owners of the Certificates or any Additional Certificates, or (3) to provide for the substitution or release of property in accordance with the Lease, or (4) to provide for the execution and delivery of Additional Certificates in accordance with the provisions of the Trust Agreement, or (5) for any other reason, provided such C-16 -,---- modification or 'endment does not adversely affect the interests of the Owners of the Cenificates or any Additional urtificates. Any other modification or amendment of the Trust Agreement and of the rights and obligations of the Trustee and of the Owners of the Certificates or any Additional Certificates under the Trust Agreement, in any particular, may be made only by a SupplementaI Trust Agreement, entered into among the Trustee, the Agency and the City and the written consent, given as provided in the Trust Agreement, of the Owners of at least a ~ority in aggregate principal amount of the Certificates and Additional Cenificates Outstanding at the time such consent is given. Any other modification or amendment to the Assignment Agreement, the Lease or the Site Lease may be made only with the written consent, given as provided in the Trust Agreement, of the Owners of at least a majority in aggregate principal amount of the Cenificates or Additional CertificateS Outstanding at the time such consent is given. No such modification or amendment shall permit a change in the terms of redemption or maturity of the Principal Components of any Outstanding Certificates or Additional Certificates or payment of any Interest Component or a reduction in the Principal Component or the redemption price thereof, or in the rate of interest thereon or which will have a materially adverse effect on the security interest of the Owner without the consent of the Owner of such Certificate or Additional Certificate, or shall reduce the percentages or otherwise affect the classes of Certificates or Additional Certificates the consent of the Owners of which is required to effect any such modification or llm""'<lment, or shall change or modify any of the rights or obligations of the Trustee without the written consent of the Trustee. Consent of Owners The Trustee, the Agency and the City may at any time enter into a Supplemental Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease making a modification or amendment requiring the consent of Owners of Certificates or Additional Certificates under the provisions of the Trust Agreement to take effect when and as provided in the Trust Agreement. A copy of such Supplemental Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease (or brief summary thereof or reference thereto in form approved by Bond Counsel), together with a request to Owners of Certificates or Additional Certificates to approve the same shall be mailed to each Cenificate Owner or Owner of any Additional Certificates (but failure to mail such copy and request shall not affect the validity of the Supplemental Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease when consented to as provided in the Trust Agreement). Such Supplemental Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease shall not be effective unless and until (i) there shall have been filed with the Trustee (a) the written consents of the Owners of the percentages of Outstanding Certificates and Additional Certificates specified in the Trust Agreement, and (b) an opinion of Bond Counsel, stating that such Supplemental Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease has been duly and lawfully entered into by the City or the Agency, as applicable, and filed with the City and the Trustee in accordance with the provisions of the Trust Agreement, is authorized or permitted by the Trust Agreement, and is valid and binding upon the parties thereto in accordance with its terms. Each such consent shall be effective only if accompanied by proof of the Owner, at the date of such consent, of the Certificates or Additional Certificates with respect to which such consent is given, which proof shall be such as is permitted by the Trust Agreement. A certificate or certificates executed by the Trustee and filed with the City stating that it has examined such proof and that such proof is sufficient in accordance with the Trust Agreement shall be conclusive that the consents have been given by the Owners of the Cenificates and any Additional Cenificates described in such cenificate or cenificates of the Trustee. Any such consent shall be binding upon the Owner of the Certificates and any Additional Cenificates giving such consent and, anything in the Trust Agreement to the contrary C-17 7 - notwithstanding, upon any subsequent Owner of such Certificates or Additional Certificates and of any Certificates or Additional Certificates issued in exchange therefor (whether or not such subsequent Owner thereof has notice lhereof) unless such consent is revoked in writing by the Owner of such Certificates or Additional Certificates giving such consent or a subsequent Owner thereof by filing with the Trustee, prior to the time when the written statement of the Trustee hereinafter provided for is filed, such revocation and, if such Certificates or Additional Certificates are held by the signer of such revocation in the manner permitted by the Trust Agreement. The fact that a consent has not been revoked may likewise be proved by a certificate of the Trustee filed wilh the City to the effect that no revoCation thereof is on file with the Trustee. At any time after the Owners of the required percentages of Certificates or Additional Certificates shall have filed their consents to the Supplemental Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease, the Trustee shall make and file with the City a written statement that the Owners of such required percentages of Certificates and Additional Certificates have filed such consents. Such written s......""'nts shall be conclusive that such consents have been so filed. At any time after the filing of the required consents, notice shall be given by the City to the Owners of Certificates and any Additional Certificates suting in substance that lhe SupplementaI Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease has been consented to by the Owners of the required percentages of Certificates and Additional Certificates by mailing such notice to the Owners of Certificates and any Additional Certificates (but failure to receive such notice shall not prevent such SupplementaI Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease from becoming effective and binding as provided in the Trust Agreement). The City shall file with the Trustee proof of the mailing of such. notice. A record, consisting of the CertificateS or statements required or permitted by the Trust Agreement to be made by the Trustee, shall be proof of the matters therein stated. Such SupplenteDtaI Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease making such amendment or modification shall be deemed conclusively binding upon the City, the Trustee, the Agency and the Owners of all Certificates and Additional Certificates at the expiration of 20 days after the filing with the Trustee of the proof of the mailing of such last mentioned notice, except in the event of a final decree of a court of competent jurisdiction setting aside such SupplementaI Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease in a legal action or equitable proceeding for such purpose commenced within such 20 day period; provided, however, that the Trustee and the City during such 20 day period and any such further period during which any such action or proceeding may be pending shall be entitled in their absolute discretion to take such action, or to refrain from taking such action, with respect to such Supplemental Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease as they may deem expedient. Exclusion of Certificates and Additional Cer1ificates Certificates or Additional Certificates owned or held by or for the account of the City or the Agency shall not be deemed Outstanding for the purpose of consent or other action or any calculation of Outstanding Certificates and Additional Certificates provided for in the Trust Agreement, and neither the City nor the Agency shall be entitled with respect to such Certificates and Additional Certificates to give any consent or take any other action provided for in the Trust Agreement. At the time of any consent or other action taken under the Trust Agreement, the City shall furnish the Trustee a certificate of an Authorized Representative of the City, upon which the Trustee may rely, describing all Certificates and Additional Certificates so to be excluded. C-18 -~-,--- Defe858llCe One or more of the Certificates and/or Additional Certificates may be paid and discharged in any one or more of the following ways: (a) by paying or causing to be paid the Principal Component and the Interest Components with respect to said Certificate(s) and Additional Certificate(s), as and when the same become due and payable; (b) by depositing with the Trustee, in trust, at or before maturity, money which is fully sufficient to pay the Outstanding Certificate(s) or Additional Certificate(s), as applicable, to be paid and discharged, including the Principal Component and the Interest Component thereof; or (c) by depositing with the Trustee, in trust, Permitted Investments of the type described in paragraphs (a) or (b) of the definition thereof in such amount as certified by an independent certified public accountant will be sufficient, together with the interest to accrue thereon to pay and discharge the Outstanding Certificate(s) and Additional Certificate(s) to be paid and discharged (including the Principal Component, any applicable premium, and the Interest Component thereof) at or before their respective maturity or redemption dares. Notwithstanding that any Certificates or Additional Certificates shall not have been surrendered for payment, all obligations of the Agency, the Trustee and the City under the Trust Agreement with respect to those Certificates or Additional Certificates paid, as provided in the above subsections (a) (b) or (c), shall cease and terminate and shall no longer be Outstanding under the Trust Agreement, except only the obligation (i) of the Trustee to payor cause to be paid from funds deposited therefor to the Owners of the Certificates and Additional Certificates not so surrendered and paid all sums due thereon and (ii) to transfer title to the Site to the City as provided in the Trust Agreement and (iii) of the City to comply with the covenants set forth in the Trust Agreement relating to compliance with the Code; provided, however, notwithstanding anything in the Trust Agreement to the contrary, in the event that the principal and/or interest represented by the Certificates shall be paid by the Insurer pursuant to the Municipal Bond Insurance Policy, the Certificates shall remain Outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid by the City, and the assignment and pledge of the Trust Estate and all covenants, agreements and other obligations of the City to the registered owners shall continue to exist and shall run to the benefit of the Insurer, and the Insurer shall be subrogated to the rights of such registered owners. Any funds held by the Trustee, at the time of one of the events described above in subsections (a) (b) or (c) shall have occurred as to all Outstanding Certificates and Additional Certificates, which are not required for the payment to be made to Owners, or for payments to be made to the Trustee by the City under the Trust Agreement or otherwise, shall be paid over to the City. Payment Procedure Pursuant to the Bond Insurance Policy As long as the Bond Insurance Policy shall be in full force and effect, the City, the Agency and the Trustee agree to comply with the following provisions: (a) At least one (I) day prior to all Interest Payment Dates the Trustee will determine whether there will be sufficient funds in the funds and account established under the Trust Agreement ("Funds and Accounts") to pay the C-19 - principal of or interest with respect to the CertifiCItes on such Interest Payment Date. If the Trustee determines that there will be insufficient funds in such Funds or Accounts, the Trustee shall so notify the lDsurer. Such notice shall specify the amount of the anticipated deficiency, the Certificates to which such deficiency is applicable and whether such Certificates will be deficient as to principal or interest, or both. If the Trustee has not so notified the Insurer at least one (I) day prior to an Interest Payment Date, the Insurer will make payments of principal or interest with respect to the Certificates on or before the first (1st) day next following the date on which the Insurer shall have received notice of nonpayment from the Trustee. (b) The Trustee shall, after giving notice to the Insurer as provided in (a) above, make available to the Insurer and, at the Insurer's direction, to the United States Trust Company of New Y orlr., as insurance trustee for the Insurer or any successor insurance trustee (the "Insurance Trustee"), the registration books of the Issuer maintained by the Trustee and all records relating to the Funds and Accounts maintained under this Trust Agreement. (c) The Trustee shall provide the Insurer and the lDsurance Trustee with a list of registered owners of the Certificates entitled to receive principal or interest payments from the Insurer under the terms of the Bond Insurance Policy, and shall make arrangements with the Insurance Trustee (i) to mail checks or drafts to the registered owners of the Certificates entitled to receive full or partial interest payments from the Insurer and (ii) to pay principal upon the Certificates surrendered to the Insurance Trustee by the registered owners of the Certificates entitled to receive full or partial principal payments from the Insurer. (d) The Trustee shall, at the time it provides notice to the Insurer pursuant to (a) above, notify registered owners of the Certificates entitled to receive the paymem of principal or interest thereon from the Insurer (i) as to the fact of such entitlement, (ii) that the Insurer will remit to them all or a part of the interest payments next coming due upon proof of Certificateholder entitlement to interest payments and delivery to the Insurance Trustee, in form satisfactory to the Insurance Trustee, of an appropriate assignment of the registered owner's right to payment, (iii) that should they be entitled to receive full payment of principal from the Insurer, they must surrender their Certificates (along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee to permit ownership of such Certificates to be registered in the name of the Insurer for payment to the Insurance Trustee, and not the Trustee and (iv) that should they be entitled to receive partial payment of principal from the Insurer, they must surrender their Certificates for payment thereon first to the Trustee who shall note on such Certificates the portion of the principal paid by the Trustee, and then, along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee, to the Insurance Trustee, which will then pay the unpaid portion of principal. (e) In the event that the Trustee has notice that any payment of principal of or interest on a Certificate which has become Due for Payment and which is made to a Certificateholder by or on behalf of the City has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the C-20 -----...---."- . United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court having competent jurisdiction, the Trustee shall, at the time the Insurer is notified pursuant to (a) above, notify all registered owners that in the event that any registered owner's payment is so recovered, such registered owner will be entitled to payment from the Insurer to the extent of such recovery if sufficient funds are not otherwise available, and the Trustee shall furnish to the Insurer its records evidencing the payments of principal and interest represented by the Certificates which have been made by the Trustee and subsequently recovered from registered owners and the dates on which such payments were made. (f) In addition to those rights granted the Insurer under the Trust Agreement, the Insurer shall, to the extent it makes payment of principal or interest represented by the Certificates, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Bond Insurance Policy, and to evidence such subrogation (i) in the case of subrogation as to claims for past due interest, the Trustee shall note the Insurer's rights as subrogee on the registration books of the City maintained by the Trustee upon receipt from the Insurer of proof of the payment of interest thereon to the registered owners of the Certificates, and (ii) in the case of subrogation as to claims for past due principal, the Trustee shall note the Insurer's rights as subrogee on the registration books of the City mai.....inM by the Trustee upon surrender of the Certificates by the registered owners thereof together with proof of the payment of principal thereof. THE LEASE The Lease is entered into by and between the Agency and the City and, pursuant to its terms, the Agency agrees to lease the Site to the City and the City agrees to lease the Site from the Agency. Term The Term of the Lease shall commence on the Delivery Date for the Certificates and shall end May I, 20_, unless extended pursuant to the Lease, or unless terrninllted prior thereto upon the earliest of any of the following events: (a) Pavment of All Lease Pl\Yments. The payment by the City of all Lease Payments required under the Lease and any Additional Payments required under the Lease; or (b) Prenavment. The optional prepayment of all Lease Payments in accordance with the Lease and the payment of all Additional Payments due through such prepayment date and the defeasance of all the outstanding Certificates or Additional Certificates as provided in the Trust Agreement. Extension of Lease Term The Term of the Lease may be extended up to May 1,2035 in connection with the execution and delivery of any Additional Certificates. If on the final maturity date of tile Certificates or any Additional Certificates all Interest Components and Principal Components represented thereby shall not be fully paid C-2l - by the City, or if the Lease Payments or Additional Payments under the Lease shall have been abated at any time as permitted by the terms of the Lease, theD the Term shall be exteIIded until all Certificates and Additional Certificates shall be fully paid, except that the Term shall in no event be extended beyond May 1,2035. Lease Paymmts Subject to the provisions of the Lease regardinl abatement in event of noncompletion of certain improvements to the Site and loss of use of any portion of the Site and regarding prepayment of Lease Payments, the City agrees to pay to the Agency, its succeasors and assigns, as annual rental for the use and possession of the Site, the Lease Payments (denominatl!!d into Interest Components and Principal Components) to be due and payable in arrears on the fifth Business Day prior to each May I and November I, commencing November I, 1995 (the "Lease Payment Date"), which are sufficient in both time and amount to pay when due the Principal Components and Interest Components represented by the CertificateS and any Additional Certificates, as set forth in the Lease. In the event that any Additional Certificates are executed and delivered pursuant to the Trust Agreement, the City and the Trustee shall execute an amendment to the Lease Payment schedule to state the Lease Payments due under the Lease as a result of the execution and delivery of such Additional Certificates. Any amount held in the Lease Payment Fund or the Interest Account of the Certificate Fund on the date any Lease Payment is made by the City (other than amounts required for payment of past due Principal Components or Interest Components with respect to any Certificates or Additional Certificates that have matured or been called for redemption and have not been presented for payment or amounts which have been paid with respect to a prior Lease Payment Date but not yet distributed to Owners) shall be credited towards the Lease Payment then due and payable. No payment need be made by the City on any Lease Payment Date if the amounts then beld in the Lease Payment Fund and the Interest Account of the Certificate Fund (other than those amounts excluded under the prior sentence and amounts transferred from the Reserve Account which causes the balance therein to be less than the Reserve Requirement) are at least equal to the Lease Payment then required to be paid. In the event the City should fail to make any Lease Payments, or any portion of any such Lease Payment. the Lease Payment or portion thereof in default sball continue as an obligation of the City until the amount in default shall have been fully paid, and the City agrees to pay the same with interest thereon, to the extent permitted by law, from the date such amount was originally payable at the rate equal to the original interest rate payable with respect to each Certificate or Additional Certificate, as applicable, represented by such delinquent Lease Payment. Notwithstanding any dispute between the Agency and the City, other than a dispute arising under the Lease as a result of which the City has concluded that it may not legally pay the Lease Payments in dispute, the City shall make all Lease Payments when due and shall not withhold any Lease Payments pending the final resolution of such dispute. Budget and AppropriatiOD The City covenants to taIce such action as may be necessary to include all Lease Payments and Additional Payments due under the Lease in each of its proposed annual budgets and to make the necessary appropriations for such Lease Payments and Additional Payments. The City shall furnish to the Trustee following adoption of the final budget a certificate stating that Lease Payments were included in the final budget as adopted. C-22 To the extent that the amount of such payment becomes known after the adoption of the annual budget, such amounts shall be included and maintained in such budget as amended. The City covenants to take such action as is necessary to include such amounts in a supplemental budget of the City. The covenants on the part of the City contained in the Lease shall be deemed to be and shall be construed to be ministerial duties imposed by law and it shall be the ministerial duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in the Lease agreed to be carried out and performed by the City. Abatement of Lease Payments and Additional Payments Except to the extent that proceeds of the type described in the following paragraph are available, the amount of Lease Payments and Additional Payments shall be abated during any period in which there is substantial interference with the use and possession of all or a portion of the Site by the City by condemnation, damage, destruction, or title defect. The amount of such abatement shall be such that the resulting Lease Payments, exclusive of the amounts described in the following paragraph, do not exceed the fair rental value (as determined by an independent real estate appraiser selected by the City, who is not an employee of the City) for the use and possession of the portion of the Site which has been made available for the City's use and for which no substantial interference has occurred. Such abatement shall continue for the period of the substantial interference with the use and possession of the Site. Except as provided in the Lease, in the event of such interference with use and possession, the Lease shall continue in full force and effect and the City waives any right to terminate the Lease by virtue of such events. Notwithstanding a substantial interference with the use and possession of all or a portion of the Site, the City shall remain obligated to make Lease Payments (i) to the extent that moneys derived from any person as a result of any delay in the reconstruction, replacement or repair of the Site, or any portion thereof, are available to pay the amount which would otherwise be abated; or (ii) to the extent that moneys are available in the Certificate Fund or the Lease Payment Fund to pay the amount which would otherwise be abated. in which event the Lease Payments shall be payable from such amounts as a special obligation of the City. Additional Payments In addition to the Lease Payments, the City shall also pay such amounts ("Additional Payments ") as shall be required for the payment of all administrative costs of the Agency and the City relating to the Site, the Certificates and any Additional Certificates, including without limitation all expenses. assessments, compensation and indemnification of the Trustee payable by the City under the Trust Agreement, any amounts required to be rebated to the federal government in order to comply with the provisions of Section 148 of the Code, taxes of any sort whatsoever payable by the Agency as a result of its lease of the Site or undertaking of the transactions contemplated in the Lease or in the Trust Agreement. fees of auditors, accountants, attorneys or engineers. insurance premiums required by the Lease and all other necessary administrative costs of the Agency and the City or charges required to be paid by it in order to maintain its existence or to comply with the terms of the Certificates and any Additional Certificates or of the Trust Agreement, or to indemnify the Agency and its officers and directors. All such Additional Payments to be paid under the Lease shall be paid when due directly by the City to the respective parties to whom such Additional Payments are owing. C-23 Net-Net-Net Lease The Lease shall be deemed and construed to be a "net-net-net lease" and the City agrees that the Lease Payments shall be an absolute net retunI to the Agency. free and clear of any expenses, charges, counterclaims or set-offs whatsoeVer, except as expressly provided therein. Insunmce Public Liability and Pronertv DamlIlM. The City shall maintain or cause to be maintained, throughout the Term of the Lease, a standard comprehensive general public liability and property damage insurance policy or policies in protection of the City and the Agency and their respective officers, agents, assigns and employees as additional insureds under the policy or policies. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the use or operation of the Site. Said policy or policies shall provide coverage in the minimum liability limits of $1,000,000 for personal injury or death of each person in each accident or event and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of $500,000 for damage to property resulting from each accident or event (subject to a deductible clause of not to exceed S250,OOO). Such public liability and property damage insurance may, however, be in the form of a single limit policy covering all such risks in an amount equal to the aggregate minimum liability limits set forth in the Lease. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance coverage carried by the 'City. Such liability insurance may be maintained by the City in the form of self-insurance which complies with the provisions of the Lease. Worker's Comoensation. The City shall also maintain worker's compensation insurance issued by a responsible carrier authorized under the laws of the State to insure its employees against liability for compensation under the Worker's Compensation Insurance and Safety Act now in force in the State; or any act hereafter enacted as an amendment or supplement thereto, or in lieu thereof such insurance, or a part thereof, may be maintained by the City in the form of self-insurance which complies with the requirements of the Lease. H.7arrl Insurance. The City shall maintain or cause to be maintained, throughout the Term of the Lease, a policy or policies of insurance against loss or damage to the Site resulting from fire, lighming, vandalism, malicious mischief and such perils ordinarily defined as "extended coverage,' excluding flood and earthquake; provided, however, that a flood and earthquake rider shall be purchased if the City, in its reasonable discretion, determines that such coverage is available from reputable insurers at commercially reasonable rates. Said policy or policies shall be maintained in an amount not less than the full replacement value of the Site, subject to a "deductible clause" not to exceed one hundred thousand dollars (SIOO,OOO) for any one loss or, in the case of a flood and earthquake rider, ten percent (10%) of the coverage obtained and shall name the Agency and the Trustee as additional insured under the policy or policies. The term "full replacement value" shall mean the actual replacement cost of the improvements located on the Site (including the cost of restoring the surface of the Site, but excluding the cost of restoring trees, plants and shrubs). The City may maintain such insurance as part of or in conjunction with any other insurance carried by the City. The City shall not maintain such insurance in the form of self-insurance. C-24 Rental InterruDtion Insurance. The City shall maintain or cause to be maintained rental interruption or use and occupancy insurance in an amount not less than the scheduled Lease Payments in the next succeeding twelve month period during the Term of the Lease, to insure against loss of rental income or use and occupancy of the Site caused by perils covered by the insurance required to be maintained as provided in the Lease. Such insurance shall be obtained not later than the Del ivery Date for the Certificates and shall be increased as required in connection with each issue of Additional Certificates . The City may maintain such insurance as part of or in conjunction with any other rental interruption or use and occupancy insurance carried by the City. The City shall not maintain rental interruption or use and occupancy insurance in the form of self-insurance. Title Insurance. The City shall obtain on the Delivery Date for the Certificates and in connection with any substitution of real property pursuant to the Lease title insurance on the Site, in the form of a CLTA leasehold title policy or an ALTA Owner'slLeasehold Policy with Western Regional Exceptions, in an amount at least equal to the aggregate Principal Component of unpaid Lease Payments, issued by a company of recognized standing duly authorized to issue the same. The title policy or policies shall insure the City's leasehold estate under the Lease in the Site, and the Agency's leasehold estate under the Site Lease, subject only to Permitted Encumbrances. The City sbaIl not maintain title insurance in the form of self-insurance. Self-Insurance. Any self-insurance maintained by the City pursuant to the Lease shall afford reasonable protection to the Agency, the City and the Trustee. Before the City elects to provide self-insurance thereunder, and on each May I thereafter, there shall be filed with the Trustee a certificate of an actuary, independent insurance consultant selected by the City, or other qualified person selected by the City, who may be the City's Risk Manager, stating that, in the opinion of the signer, the method or plan of protection is sound and affords adequate protection to the Agency, the City and the Trustee against loss and damage from the hazards and risks covered thereby, and there shall also be filed with the Trustee a certificate of the City setting forth the details of such substitute method or plan. The Trustee shall be fully protected in relying on the certificate of the actuary, independent insurance consultant selected by the City, or other qualified person selected by the City, who may be the City's Risk Manager. and shall not be responsible for the review or verification of the certificate of the City describing such method or plan. The City shall provide adequate reserves to cover the amount of any deductible provisions of the insurance required to be maintained under the Lease. Deposit in Insurance and Condenmation Fund Pursuant to the provisions of the Trust Agreement, the Trustee shall deposit the Net Proceeds of hazard insurance and the title insurance required by the Lease in the Insurance and Condemnation Fund promptly upon receipt thereof. The City and/or the Agency shall transfer to the Trustee any other Net Proceeds received by the City and/or Agency in the event of any taking by eminent domain or condemnation with respect to the Site, for deposit in the Insurance and Condemnation Fund. Upon receipt of the certification and the requisition described below, the Trustee shall disburse moneys in the Insurance and Condemnation Fund to the person, firm or corporation named in the requisition as provided in the Trust Agreement. C-25 - - An Authorized Representative of the City must provide to the Agerry and the Trustee a certificate stating that: (a) The Net Proceeds available for such purpose, together with any other funds supplied by the City for such purpose, are sufficient to repair or replace the Site to a use which will have an annual fair rentaI value oot less than the annual Lease Payments and Additional Payments (assuming that the annual Additional Payments due in the future will equal the average annual Additional Payments prior to such date) due under the Lease, and (b) In the event that damage, destruction, taking or title defect results in an abatement of Lease Payments, such replacement or repair can be fully completed within a period not in excess of the period in which rental interruption insurance proceeds as described in the Lease, together with other legally available funds, will be available to pay in full all Lease Payments coming due during such period. If an Authorized Representative of the City ootifies the Trustee in writing of the City' s determination that the foregoing certifications cannot be made or replacoemem or repair of any portion of the Site is not ecooomicaIly feasible or in the best interest of the City, then the City shall deposit with the Trustee an amount which when combined with the Net Proceeds will prepay enough Lease Payments and result in a corresponding redemption of Certificates and Additional Certificates such that the fair rental value of the remaining portion of the Site is sufficiem to pay the Principal Components and Interest Components due with respect to the Certificates and Additional Certificates to remain Outstanding under the Trust Agreement after such Net Proceeds and such deposit by the City are applied to redeem Certificates and Additional Certificates under the Trust Agreement. The Trustee shall promptly transfer the Net Proceeds in respect of such portion to the Redemption Account of the Certificate Fund as provided in the Trust Agreement and apply them to the redemption of the Certificates and Additional Certificates as provided in the Trust Agreement and prepayment of Lease Payments as provided in the Lease. Substitution and Release The City shall have the right from time to time to add other real property and improvements (subject only to Permitted Encumbrances) or to substitute other real property or improvements (subject only to Permitted Encumbrances) for all or a portion of the Site or to release a portion of the real property or improvements constituting the Site, if it has provided the Trustee with a written Lease Supplement and has obtained and provided to the Trustee each of the following: (a) Written consent of each municipal bond insurance company that has insured the Certificates or a series of Additional Certificates, if any; (b) Written confirmation from each Rating Agency that has rated the Certificates or an issue of Additional Certificates that its then existing rating with respect to the Certificates or any Additional Certificates will not be reduced or withdrawn as a result of such addition, substitution or release; (c) A certificate from an independent and qualified real estate appraiser selected by the City setting forth his or her findings that the Site as constituted following such addition, substitution or release (i) has an annual fair rental value during the remainder of the Term which is equal to or greater than the total annual Lease Payments and Additional Payments (assuming that the annual Additional Payments due in the future will equal the average annual Additional C-26 Payments prior to such addition, substitution or release) required to be paid under the Lease during any year of the remainder of the Term and (ii) has a useful life at least equal to the remainiJ1' Term of the Lease; (d) Certificates of insurance applicable to the Site (at and after the addition, substitution or release) which comply with the requirements of the Lease; (e) An opinion of Bond Counsel to the effect that such addition, substitution or release will not adversely affect the exclusion from gross income for federal income tax purposes and the exemption from State personal income taxation of the Interest Component of the Lease Payments and that the Lease and the Site Lease, as amended, remain valid and binding obi igations of the City. Certain Covenants With Respect to the Site Ouiet Eniovment. Subject only to the Permitted Encumbrances, during the Term of the Lease the Agency shall provide the City with quiet use and enjoyment of the Site, and the City shall during such Term peaceably and quietly have and hold and enjoy the Site, without suit, trouble or hindrance from the Agency, or any person or entity claiming under or through the Agency except as expressly set forth in the Lease or the Trust Agreement. The Agency will, at the request of the City, join in any legal action in which the City asserts its right to such possession and enjoyment to the extent the Agency may lawfully do so. Notwithstanding the foregoing, the Agency shall have the right of access to the Site as provided in the Lease. Access to the Site. The City agrees that the Agency, and the Agency's successors and assigns, shall have (I) the right at all reasonable times to enter upon the Site or any portion thereof to examine and inspect the Site, and (2) such rights of access to the Site as may be reasonably necessary to cause the proper maintenance of the Site in the event of failure by the City to perform its obligations under the Lease. Maintenance. Utilities. Taxes and Assessments. Throughout the Term of the Lease, as part of the consideration for the rental of the Site, all repair and maintenance of the Site shall be the responsibility of the City, and the City shall pay for or otherwise arrange for the payment of the cost of the repair and replacement of the Site resulting from ordinary wear and tear or want of care on the part of the City or any sublessee thereof. The City shall also payor cause to be paid all taxes and assessments, including but not limited to utility charges of any type or nature charged to the Agency or the City or levied, assessed or charged against any portion of the Site or the respective interests or estates therein; provided that, with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are required to be paid during the Term of the Lease as and when the same become due. The City may, at its expense and in its name, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom; Drovided that prior to such nonpayment it shall furnish the Agency and the-Trustee with the opinion of an Independent Counsel to the effect that, by nonpayment of any such items, the interest of the Agency in such portion of the Site will not be materially endangered and that the Site will not be subject to loss or forfeiture. Otherwise, the City shall promptly pay such taxes, assessments or charges or make C-27 -." - - - provisions for the payment thereof in form satisfactory to the Agency. The Agency will cooperate fully in such conteSt, upon the request and at the expense of the City. Additions. Modifications and Im[lmvMlellb. The City shall, at its own expense, have the right to make additions, modifications and improvements to any portion of the Site if such additions, modifications or improvements are necessary or beneficial for the use of such portion of the Site. Such additions, modifications or improVenteDts shall not in any way damage any portion of the Site or cause it to be used for purposes other than those authorized under the provisions of state and federal law or in any way which would impair the exclusion from gross income for federal income tax purposes of the Interest Components of the Lease Payments or dimini.h the fair rental value of the Site; and the Site. upon completion of any additions, modifications or improvements made pursuant to the Lease, shall be of a value which is not less than the value of the Site immediately prior to the making of such additions, modifications or improvements. ~. Except as permitted by the Lease, the City shall not, directly or indirectly, create, incur, assume or suffer to exist any mortgage, pledge, liens, charges, encumbrances or claims, as applicable, on or with respect to the Site, other than Permitted Encumbrances and other than the respective rights of the Agency and the City as provided in the Lease. Except as expressly provided in the Lease, the City shall promptly, at its own expense, take such action as may be necessary to duly discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim, for which it is responsible, if. the same shall arise at any time; provided that the City may contest such lien or claim if it desires to do so, so long as such contest will not materially, adversely affect the rights of the City to the Site or the payment of Lease Payments under the Lease. The City shall reimburse the Agency and its assigns for any expense incurred by it in order to discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim. Assignment and Subleasing The Lease may not be assigned by the City unless the City receives an opinion of Bond Counsel stating that such assignment does not adversely affect the exclusion from gross income for federal income tax purposes or the exemption from State personal income taxation of the Interest Components of the Lease Payments. In the event that the Lease is assigned by the City, the obligation to make Lease Payments and Additional Payments and perform the other covenants of the City therein shall remain the obligation of the City. The City may sublease any portion of the Site, with the prior written consent of the Trustee as assignee of the Agency, subject to all of the following conditions: (a) the Lease and the obligation of the City to make Lease Payments and Additional Payments and perform the other covenants of the City thereunder shall remain obligations of the City; (b) the City shall, within 30 days after the delivery thereof, furnish or cause to be furnished to the Agency and the Trustee a true and complete copy of such sublease; and (c) no sublease shall cause the Interest Components of the Lease Payments due with respect to the Site to become subject to federal income taxes or State personal income taxes. C-28 No consent of the Trustee may be given with respect to the subleasing of the Site unless the Trustee shall have first received opinions of Independent Counsel with respect to the matters set forth in clause (a) above and the opinion of Bond Counsel with respect to the matters set forth in clause (c) above. Amendments and ModiIIc:atiOIlS The Lease may be amended or any of its terms modified in accordance with the Trust Agreement, with the written consent of the Trustee, the City and the Agency. Events of Default The following shall be "events of default" under the Lease and the terms "events of default" and "default" shall mean, whenever they are used in the Lease, any one or more of the following events: (a) Failure by the City to pay any Lease Payment or Additional Payments required to be paid under the Lease on the date such payments are due under the Lease. (b) Failure by the City to observe and perform any warranty, covenant, condition or agreement on its part to be observed or performed under the Lease or otherwise with respect to the Lease or in the Trust Agreement or in the Site Lease, other than as referred to in clause (a) above, for a period of 30 days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Agency, the Trustee or, subject to the provisions of the Trust Agreement, the Owners of not less than twenty-five percent (25") in aggregate principal amount of Certificates and Additional Certificates then Outstanding; nrovided. however, if the failure stated in the notice cannot be corrected within the applicable period, then no event of default shall have occurred so long as corrective action is instituted by the City within the applicable period and diligently pursued until the default is corrected. (c) The filing by the City of a case in bankruptcy, or the subjection of any right or interest of the City under the Lease to any execution, garnishment or attachment, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted under the provisions of the federal bankruptcy code, as amended, or under any similar act which may hereafter be enacted. Remedies on Default Whenever any event of default ref.,ued to in the Lease shall have happened and be continuing, it shall be lawful for the Agency, or its assignee, subject to the Lease, to exercise any and all remedies available pursuant to law or granted pursuant to the Lease; nrovided, however, that notwithstanding anything in the Lease or in the Trust Agreement to the contrary, THERE SHALL BE NO RIGHT UNDER ANY CIRCUMSTANCES TO ACCELERATE THE LEASE PAYMENTS OR OTHERWISE DECLARE ANY LEASE PAYMENTS NOT THEN DUE OR PAST DUE TO BE IMMEDIATELY DUE AND PAYABLE NOR SHALL THE Agency OR ITS ASSIGNEE HAVE ANY RIGHT TO REENTER OR RELET THE SITE, EXCEPT AS DESCRIBED IN THE LEASE. So long as any event of default exists under the Lease, the Agency, or its assignee, is expressly authorized to enter and re-enter the Site for the purpose of taking possession of any ponion of the Site and to re-let the Site and, in addition, at its option, with or without such entry to terminate the Lease as C-29 . - ._. - described below. The City irrevocably appoints the Agency, or its assignee, as the agent and attorney-in-fact of the City either to enter upon the Site for purposes of terminatillg the Lease or to enter upon and re-let the Site in the event of default under the Lease by the City. The City exempts and agrees to save harmless the Agew.;y and its assignee from any costs, loss or damage whatsoever arising or occasioned by any lawful entry upon or re-Ietting of the Site. The City waives any and all claims for damages caused, or which may be caused, by the Agency, or its assignee, lawfully entering and taking possession of the Site, other than damages caused by the negligence of the Agency, or its assignee. The City agrees that the terms of Lease constitute full and sufficient notice of the right of the Agency, or its assignee, to re-enter the Site for purposes of terminating the Lease and, alternatively, to enter upon and re-Iet the Site in the event of such re-entry without effecting a surrender of the Lease. In the event the Agency, or its assignee, elects to terminate the Lease, the City agrees to surrender immediately possession of the Site and to pay the Agency, or its assignee, all damages recoverable at law that the Agency, or its assignee, may incur by reason of default by the City, including, without limitation, any costs, loss or damage whatsoever arising out of, in connection with, or incident to any re-entry upon the Site by the Agency, or its duly authorized agents in accordance with such termination. Neither notice to pay rent or to deliver up possession of the Site given pursuant to law nor any entry or re-entry by the Agency, or its assignee, nor any proceeding in unlawful detainer, or otherwise, brought by the Agency, or its assignee, for the purpose of effecting such re-entry or obtaining possession of the Site nor the appointment of a receiver upon initiative of the Agency, or its assignee, to protect the interest of the Agency or its assignee under the Lease shall of itself operate to terminate the Lease, and no termination of the Lease on account of default by the City shall be or become effective by operation of law or acts of the parties to the Lease, or otherwise, unless and until the Agency, or its assignee, shall have given written notice to the City of its election to terminate the Lease. The City covenants and agrees that no surrender of the Site or any termination of this Lease shall be valid in any manner or for any purpose whatsoever unless stated or accepted by the Agency, or its assignee, by written notice. In the event that the Agency, or its assignee, does not elect to terminate the Lease, the City agrees to and shall remain liable for the payment of Lease Payments and Additional Payments and the performance of all conditions contained in the Lease and shall reimburse the Agency, or its assignee, for any deficiency arising out of the re-Ietting of the Site, or, in the event that the Agency, or its assignee, does not re-let the Site, then for the full amount of the Lease Payments and Additional Payments to the end of the Term of the Lease, but said Lease Payments, Additional Payments and/or deficiency shall be payable only at the same time and in the same manner as provided in the Lease, notwithstanding such entry or re-entry by the Agency, or its assignee, or any suit in unlawful detainer, or otherwise, brought by the Agency, or its assignee, for the purpose of effecting such entry or re-entry or obtaining possession of the Site or the exercise of any other remedy by the Agency or its assignee. In the event of a default, the City further agrees to reimburse the Agency, and its assignee, for any cost or expense, including attorneys' fees, incurred by the Agency or its assignee in connection with the exercise by the Agency, or its assignee, of the remedies under the Lease. THE SITE LEASE The Site Lease is entered into betWeen the Agency and the City and, pursuant to its terms, the City agrees to lease the Site to the Agency and the Agency agrees to lease the Site from the City. C-30 The Site Lease provides that its term shall commence as of the Delivery Date of the Cenificates and shall remain in effect until the earlier of August I, 20_ or the date of expiration of the Lease, unless such term is sooner terminated as provided in the Site Lease. The Term of the Site Lease may be extended if the term of the Lease is extended pursuant thereto, except that the term of the Site Lease shall in no event extend beyond August I, 2035. In the Site Lease, the City reserves the right at any time to substitute other real property and improvements for the real property described in the Site Lease upon compliance with the provisions of the Lease. THE ASSIGNMENT AGREEMENT The Assignment Agreement is entered into between the Agency and the Trustee and in it the Agency assigns and transfers to the Trustee, for the benefit of the Owners of the Cenificates. all of its right, title and interest under the Lease (other than its rights to indemnification and payment or reimbursement for its cost or expenses thereunder), including its right to receive Lease Payments; its right to receive proceeds of condemnation of, and insurance on, the Site; and its right to enforce payment of the Lease Payments when due and otherwise to protect its interests in the event of a default by the City. The Trustee accepts such assignment for the benefit of the Owners of the Certificates and subject to the provisions of the Trust Agreement. C-31 - - - APPENDIXD FORM OF MUNICIPAL BOND INSURANCE POUCY - BRK ...CHANGES...I'AAftKED ",;:::;;'-,;::,:::::,:,::;:;::-,',:::,:::, ::::;:.:-;-:.:::.-.:-:.:.:-::.:-:-:.:.:::-:::-:::;.:-::::::::::'::,:::::::;::'. ""-""-"',-,'" .............i......II~~;~IJ~ $ CITY OF POW A Y REFUNDING CERTIFICATES OF PARTICIPATION ryOWAY ROYAL MOBILEHOME PARK) Evidencing the Undivided Proportionate Interests of the Owners Thereof in Lease Payments to be made by THE CITY OF POW A Y to the POW A Y REDEVELOPMENT AGENCY between PAINEWEBBER INCORPORATED and THE CITY OF POW A Y - PURCHASE AGREEMENT /l June , 1995 City of Ppway 13325 Civic Center Drive Poway, California 92064 Ann: City Clerk Ladies and Gentlemen: The undersigned (the "Underwriter") offers to enter into this purchase agreement (the "Purchase Agreement") with the City of Poway (the "City") and the Poway Redevelopment Agency (the "Agency:'), which will be binding upon the City and the Agency and the Underwriter upon the acceptance hereof by the City and the Agency. This offer is made subject to its acceptance by the City and the Agency by execution of this Purchase Agreement and its delivery to the Underwriter on or before 8:00 p.m., California time, on the date hereof. All terms used herein and not otherwise defined shall have the respective meanings given to such terms in the Trust Agreement and the Lease Agreement (as those terms are hereafter defined). Section 1. Purchase and Sale. Upon the terms and conditions and in reliance upon the representations, warranties and Agreements herein set forth, the Underwriter hereby agrees to purchase KAB187793 ATTACHMENT F JUN 2 0 1995 ITEM 10 f.j from the City, and the City hereby agrees to sell to the Underwriter, all (but not less than all) of the City of Poway Refunding Cenificates of Participation (poway Royal MobiIehome Park) (the "Cenificates"), dated as of ..June 1, 1995 in the aggregate principal amount of $ , bearing interest (payable commencinlrjlJanuary 1, 1996, and semiannually thereafter on January 1 and July I in each year) at the rates of interest, and maturing on the dates, and in the amounts, as set forth in Exhibit A attached hereto and incorporated herein by this reference. The Certificates shall be as described in, and shall be executed and delivered pursuant to, the Trust Agreement. The Underwriter shall not be under any obligation under this Purchase Agreement to purchase less than all of the aggregate principal amount of the Cenificates. The Underwriter agrees to make a public offering of the Certificates at the initial price as set forth in Exhibit A, which may be changed from time to time by the Underwriter after the initial public offering. The City and the Agency will enter into a Lease Agreement dated as of.June 1 , 1995 (the "Lease Agreement"), a ponion of the proceeds of which will be applied to the defeasance of cenain cenificates of participation of the City described as $28,300,000 Cenificates of Participation (City of Poway 1991 Capital Improvement Project Poway Royal Mobilehome Park) (the "Prior Certificates "), such defeasance to be accomplished by the deposit of such proceeds (together with other moneys available therefor) under an Escrow Agreement, dated as of..June 1, 1995 (the "Escrow Agreement"). The City is obligated under the Lease Agreement to pay Lease Payments from the general revenues of the City. The obligation of the City to pay the Lease Payments does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The obligation to pay Lease Payments does not constitute a debt of the City, the State of California or any of its political subdivisions, and does not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. Section 2. Purchase Price. The purchase price of the Cenificates shall be $ (which represents the aggregate principal amount of the Certificates originally sold and delivered less Underwriter's discount of $ and less an original issue discount of $ , plus accrued interest from,June 1, 1995 to the date of delivery thereof). If the Underwriter fails to accept and pay for Cenificates upon tender thereof as herein provided (other than for a reason permitted by this Purchase Agreement), it is hereby agreed among the parties that the amount of actual damages would be impossible to determine and therefore an amount of one percent of the principal amount of the Certificates, payable by the Underwriter within five (5) business days of such tender, shall constitute full liquidated damages for such failure and for any and all defaults hereunder on the Underwriter's part, and such amount shall constitute a full release and discharge by the City and the Agency of all claims and damages for such failure and for any and all such defaults. Section 3. j!4 OmciaI Statement. The Preliminary Official Statement, datecwune , 19~ relating to the Cenificates, together with the cover page and all appendices thereto, is herein called the "Preliminary Official Statement." The City considers the Preliminary Official Statement to be "near final" within the meaning of Securities and Exchange Commission Rule 15c2-l2; hereby agrees to cooperate with the Underwriter in the "due diligence" proceedings necessary to transform the Preliminary Official Statement into the Official Statement (final form) and will deliver the Official Statement in final form to the Underwriter within seven (7) business days of the City's acceptance hereof, and hereby authorizes the Underwriter to use and distribute the Preliminary Official Statement, and the Official State- ment, in connection with the transactions contemplated by this Purchase Agreement, in connection with the offer and sale of the Certificates by the Underwriter. The term "Official Statement" shall mean the Preliminary Official Statement, as modified with the prior approval of the Underwriter, the Mayor of the City Council of the City of Poway, and Stradling, Yocca, Carlson & Rauth (the "Special Counsel") for use by the Underwriter incident to the sale of the Cenificates. The City shall deliver or cause to be delivered to the Underwriter promptly (but in no event later than seven business days) after the City's KAB18n93 -2- - acceptance hereof copies of the Official Statement with only such changes as shall have been approved by Special Counsel, signed on behalf of the City by the Mayor of the City of Poway. The City and the Agency shall have executed and delivered to the Underwriter a certification to such effect in the form attached hereto as Appendix B. (b) Continuing Disclosure. The City will undertake, pursuant to the Trust Agree- ment and a continuing disclosure agreement between the City and the Trustee (the "Continuing Disclosure Agreement"), to provide annual reports and notices of certain events. A description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the final Official Statement. Section 4. Closing. (a) At 8:00 a.m., California time, on , 1995, or at such other time or date as shall be agreed upon by the Underwriter and the City (such time andaate being herein referred to as the "Closing Date"), the City will deliver or cause to be delivered the Certificates to The Depository Trust Company in accordance with the requirements in paragraph (b) below and the Underwriter will accept such delivery and pay the purchase price thereof in immediately available funds (by check, wire transfer or such other manner of payment as the underwriter and the Trustee shall reasonably agree upon) to the order of the Trustee. (b) The Certificates shall be delivered in definitive form, having CUSIP numbers assigned to them printed thereon, and shall be in fully registered form registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York, with one Certificate for each maturity of Certificates set forth in Appendix A hereto in the aggregate principal amount of such maturity. The Certificates shall be made available to the Underwriter, or its designee, not later than two business days before the Closing Date for purposes of inspection and packaging. Pending the preparation of definitive Certificates, at the request of the Underwriter, the City and the Agency shall deliver, or cause to be delivered, Certificates in temporary form, in lieu of definitive Certificates and subject to the same limitations and conditions, exchangeable for definitive Certificates when ready for delivery. The temporary Certificates may be printed, lithographed, photocopied or typewritten, shall be of such authorized denominations as may be determined by the City, and shall be in registered form. The temporary Certificates may be in the form of a single Certificate for each maturity payable on the date, in the amount and at the rate of interest established for the Certificates maturing on such date. Every temporary Certificate shall be executed by the Trustee upon the conditions and in substantially the same manner as the definitive Certificates. If temporary Certificates are executed and delivered hereunder, definitive Certificates will be furnished as soon as practicable, and thereupon the temporary Certificates may be surrendered, for cancellation, in exchange therefor at the location designated by the Trustee for such purpose, and the Trustee shall execute and deliver in exchange for such temporary Certificates an equal aggregate principal amount of definitive Certificates of the same maturity or maturities. Until so exchanged, the temporary Certificates shall be entitled to the same benefits as definitive Certificates executed and delivered hereunder. Section 5. Representations, Warranties and Agreements or the City. The City hereby represents and warrants to and agrees with the Underwriter that: (a) Due Orl!anization. The City is a municipal corporation, duly organized and validly existing under the laws of the State of California; (b) Authoritv . The City has, and at the Closing Date will have, full legal right, power and authority (i) to execute, deliver and perform its obligations under this Purchase Agreement, the Lease Agreement, [the Continuin Disclosure A reement,] the Escrow Agreement and the Trust Agreement and to carry out transactions contemp a ere y and thereby; (ii) to enter into the other authorizing documents; (iii) to issue, sell and deliver the Certificates to the Underwriter pursuant to the Trust Agreement, as provided herein; and (iv) to carry out, give effect to and consummate the trans- KAB187793 -3- actions contemplated by the Trust Agreement, the Lease Agreement. [the Continuing Disclosure Altreement,l the Escrow Agreement, the Official Statement, and the Purchase Agreement (collectively, the Trust Agreement, the Lease Agreement, the Escrow Agreement, Jthe Continuing Disclosure Agreement'k.the Official Statement and the Purchase Agreement are referred to herein as the "City Documents' ). (c) Comoliance. The City will at the Closing Date be in compliance, in all respects, with this Purchase Agreement, the Trust Agreement and the Lease Agreement; (d) Due Authorization and ADoroval. The City Council has duly and validly authorized and approved the delivery and use of the Preliminary Official Statement and the execution, delivery and use of the Official Statement, the execution and delivery of the Certificates, the City Documents and any other applicable agreements and the performance by the City of its obligations contained therein, and the taking of any and all action as may be necessary to carry out, give effect to and consummate the transactions contemplated by each of said documents, and at the Closing Date, the City Documents and any other applicable agreements (assuming due authorization, execution and delivery by the other parties thereto, where necessary) will constitute and/or create valid, legal and binding obligations of the City, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought; (e) No Liti2ation. To the best knowledge of the City, no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, or public board or body is pending, threatened in any way affecting the existence of the City or the titles of its officers to their respective offices or seeking to restrain or enjoin the execution, sale or delivery of the Certificates, the application of the proceeds thereof in accordance with the Trust Agreement and the Lease Agreement, or by any way contesting or affecting the validity or enforceability of the Certificates, the Trust Agreement, the Lease Agreement, the Escrow Agreement or any other applicable agreements, or any action of the City contemplated by any of said documents or in any way contesting the completeness or accuracy of the Official Statement or the powers of the City or its authority with respect to the Certificates, the Trust Agreement, the Lease Agreement, the Escrow Agreement or any other applicable agreements, or any action of the City contemplated by any of said documents or which would adversely affect the exclusion of interest paid on the Certificates from gross income for purposes of federal income taxation; nor to the knowledge of the City, is there any basis therefor. (t) No Breach or Default. The City is not, and at the Closing Date will not be, in breach of or in default under any law or administrative rule or regulation of the State of California. the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the performance of the City under this Purchase Agreement, the Trust Agreement, the Lease Agreement, the Escrow Agreement or any other applicable agreements and other instruments by any such documents to which the City is a party, and compliance with the provisions of each thereof, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State of California, the United States of America, or of any department, division, agency or instrumentality of either thereof, or any applicable court or administrative decree or order or any loan, agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is a party or is otherwise subject to or bound; (g) Filin2s. All approvals, consents, authorizations, elections and orders of or filing or registrations with any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the KAB 18m3 -4- - performance by the City of its obligations hereunder. or under the Trust Agreement, the Lease Agreement, the Certificates or any other applicable agreements, have been obtained and are in full force and effect; (b) Documents Conform to Official Statement. The Certificates, the Trust Agreement, the Lease Agreement, the Escrow Agreement and other applicable agreements conform as to form and tenor to the descriptions thereof contained in the Official Statement, and will conform as to form and tenor to the descriptions thereof which will be contained in the Official Statement as of the Closing Date, and when delivered to and paid for by the Underwriter on the Closing Date as provided herein, the Certificates will be validly issued and outstanding and entitled to all the benefits of the Trust Agreement; (i) Official Statement. The information contained in the Official Statement, as such information relates to the Certificates, the City or the Agency is, and such information in the Official Statement is as of the date hereof, and will be as of the Closing Date and as of the date of any supplement or amendment thereto pursuant to paragraph (I) below, true, correct and complete in all material respects and does not, as of the date hereof, and will not, as of the Closing Date or as of the date of any supplement or amendment thereto pursuant to paragraph (1) below, contain any untrue statement of a 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; (j) Suoolement to Official Statement. If between the date of this Purchase Agreement and the Closing Date an event occurs, of which the City has knowledge, which might or would cause the information relating to the City or the Agency, their functions, duties and responsibilities 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 reasonable opinion of the Underwriter such event requires the preparation and publication of a supplement or amendment to the Official Statement, the City will amend or supplement the Official Statement in a form and in a manner approved by the Underwriter and all expenses thereby incurred will be paid by the City; (Ie) Underwritinll Period. For a period of ninety (90) calendar days from the Closing Date or until the date which is twenty-five (25) calendar days following the end of the underwriting period for the Certificates, if any event shall occur of which the City is aware, as a result of which it may be necessary to supplement the Official Statement in order to make the statements contained in the Official Statement, in light of the circumstances existing at such time, not misleading, the City shall forthwith notify the Underwriter of any such event of which it has knowledge and shall cooperate fully in furnishing any information available to it for any supplement to the Official Statement necessary, in the Underwriter's reasonable opinion, so that the statements therein as so supplemented will not be misleading in light of the circumstances existing at such time. The term "end of the underwriting period" means the later of such time as (i) the City delivers the Certificates to the Underwriter or (ii) the Underwriter does not retain directly or as a member or an underwriting syndicate, an unsold balance of the Certificates for sale to the public. Unless the Underwriter gives notice to the contrary, the "end of the underwriting period" shall be deemed the date of the Closing (or such other date as specified by notice). Any notice delivered pursuant to this paragraph shall be written notice, delivered to the City and shall specify a date, other than the date of the Closing (or other date specified by notice delivered pursuant to this paragraph), to be deemed the "end of the underwriting period." (I) Blue Skv. 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 for the Underwriter to qualify the Certificates for offer and sale under the "blue sky" or other securities laws and regulations of such states and other jurisdictions of the United States as the KA8187793 -5- Underwriter may designate; provided, however, the City shall not be required to register as a dealer or a broker of securities or consent to the jurisdiction of any state of the United States, other than the State of California; (m) Federal Taxation. The City will take no action and will cause no action to be taken that would cause the interest with respect to the Certificates to be includable in gross income for federal income tax purposes; (n) Debt Limitation. The City has not been and is not presently in violation of any debt limitation imposed by the California Constitution appropriations limitation imposed by the California Constitution, or any other provision of the California Constitution. The sale and delivery of the Certificates and the City's annual budgeting of Lease Payments for the payment of the Certificates will not violate any debt limitation, appropriation limitation or any other provision of the California Constitution; (0) No Other Bonds. Between the date hereof and the Closing Date, without the prior written consent of the Underwriter, the City will not have issued any bonds, notes or other obligations for borrowed money on behalf of the City except for such borrowings as may be described in or contemplated by the Official Statement; (P) Reoresentation. Any certificate signed by any official of the City authorized to do so shall be deemed a representation and warranty by the City to the Underwriter as to the statements made therein; (q) Arbitral!e Certificate. The City has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that the City is an issuer whose arbitrage certifications may not be relied upon; and (r) Aoolication of Proceeds. The City shall apply the proceeds of the Certificates, including the investment thereof, in accordance with the Trust Agreement and the Lease Agreement and as described in the Official Statement. Section 6. Representations and Warranties of the Agency. The Agency represents and warrants to the Underwriter that: (a) Due Orl!anization. Existence and Authority. The Agency is a public body, corporate and politic, duly organized and existing under the laws of the State of California and has, and at the Closing Date will have, all necessary power and authority to enter into and perform its duties under the Lease Agreement, the Trust Agreement, the Official Statement, the Escrow Agreement and this Purchase Agreement (collectively, the Lease Agreement, the Trust Agreement, the Official Statement, the Escrow Agreement and this Purchase Agreement are referred to herein as the "Agency Documents"), and when executed and delivered by the respective parties thereto, the Agency Documents will constitute legally valid and binding obligations of the Agency, enforceable in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally. (b) Due Authorization and Aooroval. The execution and delivery of the Agency Documents and compliance with the provisions hereof and thereof have been, or by the Closing Date will KAB187793 -6- - be, duly authorized by all necessary Agency action on the part of the Agency and will not conflict with - or constitute a breach of or default under any law, administrative regulation, court decree, resolution, charter, bylaw or any agreement to which the Agency is subject or by which it is bound or by which its properties may be affected. (c) Filinl!s. Except as may be required under blue sky or other securities law of any state, there is no consent, approval, authorization or other order of, filing with, or certification by, any regulatory authority having jurisdiction over the Agency required for the execution and delivery of the Certificates or the entering into of the Agency Documents or the consummation by the Agency of the other transactions contemplated thereby, except as may have already been obtained. (d) No Litil!ation. To the best knowledge of the Agency, no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, or public board or body is pending, threatened, in any way affecting the existence of the Agency or the titles of its officers to their respective offices or seeking to restrain or enjoin the execution, sale or delivery of the Certificates, the application of the proceeds thereof in accordance with the Trust Agreement, or by any way contesting or affecting the validity or enforceability of the Certificates, the Trust Agreement, the Lease Agreement, the Escrow Agreement or any other applicable agreements, or any action of the Agency contemplated by any of said documents, or in any way contesting the completeness or accuracy of the Official Statement or the powers of the Agency or its authority with respect to the Certificates, the Trust Agreement, the Lease Agreement, the Escrow Agreement or any other applicable agreements, or any action of the Agency contemplated by any of said documents or which would adversely affect the exclusion of interest paid on the Certificates from gross income for purposes of federal income taxation; nor to the knowledge of the Agency, is there any basis therefor. (e) No Breach or Default. The Agency is not, and at the Closing Date will not be, in breach of or default under, any law or administrative rule or regulation of the State of California, the United States of America or of any department, division, agency or instrumentality of either thereof, or any applicable court or administrative decree or order or any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Agency is a party or is otherwise subject or bound and which would materially impair the ability of the Agency to perform its obligation under the Trust Agreement, the Lease Agreement and the execution and delivery of the Lease Agreement, the Escrow Agreement any other applicable agreements and other instruments contemplated by any of such documents to which the Agency is a party, and compliance with the provisions of each thereof, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State of California, the United States of America, or of any department, division, agency or instrumentality of either thereof, or any applicable court or administrative decree or order or any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Agency is a party or is otherwise subject or bound. (f) Documents Conform to Official Statement. The Certificates, the Agency Documents and any other applicable agreements conform as to form and tenor of the descriptions thereof contained in the Official Statement. (h) Official Statement. The statements and the information contained in the Official Statement, as such information relates to the Agency or the agreements to which it is a party, are true, correct and complete in all material respects and do not omit any statement or information which is necessary to make such statements and information therein, in light of the circumstances under which they were made, not misleading in any material respect. ",,8187793 -7- --.-.--- (i) Suoolement to Official Statement. During the period commencing on the date hereof and ending on the Closing Date, if any event shall occur as a result of which it may be necessary to supplement the material contained in the Official Statement relating to the Agency in order to make statements therein, in light of the circumstances existing at such time, not misleading, the Agency shall forthwith notify the Underwriter of any such event of which it has knowledge and, if in the opinion of the Underwriter such event requires an amendment or supplement to the Official Statement, the Agency will at the expense of the City amend or supplement the Official Statement in a form and manner jointly approved by the Agency and the Underwriter. Ul Reoresentation. Any certificate signed by any official of the Agency authorized to do so shall be deemed a representation and warranty by the Agency to the Underwriter as to the statements made therein. Section 7. Conditions to the Obligations of the Underwriter. The obligations of the Underwriter to accept delivery of and pay for the Certificates on the Closing Date shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the representations and warranties on the part of the City contained herein, as of the date hereof and as of the Closing Date, to the accuracy in all material respects of the statements of the officers and other officials of the City and other persons and entities made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the City of its obligations to be performed hereunder at or prior to the Closing Date and to the following additional conditions: (a) Certificates. At the Closing Date, the Certificates, the Trust Agreement and the Lease Agreement shall be in full force and effect, and shall not have been amended, modified or supple- mented, except as may have been agreed to in writing by the Underwriter, and there shall have been taken in connection therewith, with the issuance of the Certificates and with the transactions contemplated thereby and by this Purchase Agreement, all such actions as, in the opinion of Best, Best & Krieger, Counsel to the Underwriter, and Special Counsel, shall be necessary and appropriate to consummate the transactions contemplated thereby; (b) Official Statement. At the Closing Date, the Official Statement shall not have been amended, modified or supplemented, except as may have been agreed to in writing by the U nder- writer; (c) Termination Events. Between the date hereof and the Closing Date, the market price or marketability of the Certificates at the initial offering prices set forth in the Official Statement 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 pay for the Certificates), by reason of any of the following: (I) Legislation enacted (or resolution passed) by the Congress of the United States of America or recommended to the Congress by the President of the United States, the Department of the Treasury, the Internal Revenue Service, or any member of Congress, or favorably reported for passage to either House of Congress by any committee of such House to which such legislation had been referred for consideration, or a decision rendered by a court established under Article III of the Constitution of the United States of America or by the Tax Court of the United States of America, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Treasury Department or the Internal Revenue Service of the United States KAB187793 -8- . - - of America, with the purpose or effect, directly or indirectly, of causing interest on the Certificates to be included in gross income for purposes of federal income taxation; (2) Legislation enacted (or resolution passed) by the Congress of the United States of America, or an order, decree or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice 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 Certificates, including any or all underlying arrangements, are not exempt from registration under, or other requirements of, the Securities Act of 1933, as amended, or that the Trust Agreement is not exempt from qualification under, or other requirements of, the Trust Agreement Act of 1939, as amended, or that the issuance, offering or sale of obligations of the general character of the Certificates, or of the Certificates, including any or all underwriting arrangements, as contemplated hereby or by the Official Statement or otherwise, is or would be in violation of the federal securities laws as amended and then in effect; (3) Any amendment to the federal or California Constitution or action by any federal or California court, legislative body, regulatory body or other authority having jurisdiction of the subject matter materially adversely affecting the tax status of the City, its property, income or securities (or interest thereon), the ability of the City to issue the Certificates as contemplated by the Trust Agreement and the Official Statement; (4) Any event occurring, or information becoming known which, in the reasonable judgment of the Underwriter, makes untrue in any material respect any statement or in- formation contained in the Preliminary Official Statement or the Official Statement or results in the Preliminary Official Statement or the Official Statement containing any untrue statement of a material fact or omitting to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (5) The declaration of war or engagement in major military hostilities by the United States or the occurrence of any other national emergency or calamity relating to the effective operation of the government of or the financial community in the United States, which, in the reasonable judgment of the Underwriter, would have a material and adverse effect on the market price or marketability, at the initial offering prices set forth in the Official Statement, of the Certificates; (6) The declaration of a general banking moratorium by federal, New York or California authorities, or the general suspension of trading on any national securities exchange; (7) 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 Certificates or obligations of the general character of the Certificates 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 requirements of, underwriters; (8) Any adverse event occurs with respect to the affairs of the City, the Agency or the Trustee which, in the judgment of the Underwriter, would have a material and adverse effect on the market price or marketability, at the initial offering prices set forth in the Official Statement, of the Certificates; ...187793 -9- ----- (d) Closinl! Documents. On or prior to the Closing Date, the Underwriter shall have received counterpart originals or certified copies of the following documents, in each case satisfactory in form and substance to the Underwriter; (I) Legal Documents. Two copies of this Purchase Agreement, the Trust Agreement, [the Continuing Disclosure Agreement, I. the Lease Agreement and the Escrow Agreement duly executed and delivered by the respective parties thereto, with such amendments, qualifications or supplements as may have been agreed to in writing by the Underwriter. (2) Special Counsel Opinion. An approving opinion of Special Counsel, Stradling, Y occa, Carlson & Rauth, dated the Closing Date and addressed to the City, in form and substance satisfactory to the Underwriter and its counsel, to the effect that (i) the Certificates will be, upon their sale and delivery, legal, valid and binding obligations of the City payable from its general fund; and (ii) interest on the Certificates is excluded from gross income for federal income tax purposes, is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes and is exempt from State of California personal income taxes; together with a letter of Special Counsel, dated the Closing Date and addressed to the Underwriter, to the effect that such opinion addressed to the City may be relied upon by the Underwriter to the same extent as if such opinion were addressed to it; (3) Supplemental Opinion of Special Counsel. A supplemental opinion of Special Counsel, dated the Closing Date and addressed to the City and the Underwriter, in form and substance satisfactory to the Underwriter and its counsel, to the effect that: (i) the City Documents have been duly authorized, executed and delivered by the City and constitute the legal, valid and binding agreements of the City enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorgani- zation, moratorium and other laws affecting the enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought; (ii) the Agency Documents have been duly authorized, executed and delivered by the Agency and constitute the legal, valid and binding agreements of the Agency, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium, and other laws affecting the enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought; (iii) as of the Closing Date, the information contained in the Official Statement under the captions "INTRODUCTION, " "THE CERTIFICATES," "SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES," "THE LEASE AGREEMENT," "THE TRUST AGREEMENT," "THE ESCROW AGREEMENT" and "TAX EXEMPTION," insofar as such statements purport to summarize certain provisions of the Certificates, the Trust Agreement, or our opinions are accurate in all material respects; (iv) the Certificates are exempt from registration pursuant to the Securities Act of 1933, as amended and the Trust Agreement is exempt from qualification pursuant to the Trust Indenture Act of 1939, as amended; and KAB18n93 -10- - (v) as a result of the deposit and application of the proceeds of the Certificates as of the Closing Date, and assuming the sufficiency of the amount so deposited for such purposes, the Prior Certificates have been deemed paid in full and are no longer outstanding under and within the meaning of the resolutions authorizing the issuance thereof, and the lien of the Prior Certificates has been defeased and discharged. (4) Underwriter's Counsel Opinion. An opinion of Best, Best & Krieger, counsel for the Underwriter, dated of the Closing Date and addressed to the Underwriter, to the effect that based upon the information made available to them in the course of their participation in the preparation of the Official Statement as counsel to the Underwriter and without having undertaken to determine independently or assuming any responsibility for the accuracy, completeness or fairness of statements contained in the Official Statement, such counsel does not believe that the Official Statement (excluding the appendices and any other financial or statistical data contained in the Official Statement of which no opinion need be expressed) as of its date and as of the Closing Date, contains any untrue statement of a material fact or omits 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. (5) Opinion of City Attorney. An opinion of the City Attorney, dated as of the Closing Date, addressed to the City, The Agency and the Underwriter to the effect that: (i) the Resolution authorizing the Lease Agreement, the Trust Agreement, the Escrow Agreement and this Purchase Agreement has been duly adopted by the City , is in full force and effect, and has not been rescinded or modified in any manner; (ii) the City Documents have been duly authorized, executed and delivered by the City and constitute legal, valid and binding obligations of the City enforceable in accordance with their terms, except as such enforceability may be limited by bankruptcy, reorganization, insolvency, moratorium or other laws affecting the enforcement of creditors' rights generally; (iii) to the best of his knowledge after reasonable investigation and due inquiry, the execution and delivery of the City Documents by the City and compliance by the City with the provisions thereof, will not conflict with the City's duties under, or constitute a breach or default under, said documents or any law, administrative regulation, court decree, resolution, charter, by-laws or other agreement to which the City is subject or by which it is bound; (iv) the City is duly created and legally exists under California law; (v) to the best of his knowledge after reasonable investigation and due inquiry, there is no action, suit, proceeding or investigation at law or in equity before or by any court or governmental agency or body pending or threatened against the City to restrain or enjoin the collection of the payments to be made pursuant to the Lease Agreement, or in any way contesting or affecting the validity of the City Documents or contesting the powers of the City to enter into or perform its obligations under any of the foregoing; - 187793 -11- (vi) nothing has come to his attention to lead him to believe that the material contained in the Official Statement relating to the City contains any untrue statement of a 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; and (vii) the information under the captions "INTRODUCTION, " "THE PROJECT," "THE CERTIFICATES," "SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES," "THE CITY OF POWAY," "TRUST AGREEMENT," "LEASE AGREEMENT, " "ESCROW AGREEMENT" and "ABSENCE OF LITIGATION" in the Official Statement is true and correct in all respects and such information does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, that no opinion need be expressed with respect to any statistical or financial information found in the Official Statement, and otherwise being in form and substance acceptable to Special Counsel and Underwriter's Counsel. (6) Opinion of Agency Attorney. An opinion of the Agency Attorney, dated as of the Closing Date, addressed to the City, The Agency and the Underwriter to the effect that: (i) the Agency is duly organized and validly existing under the laws of the State of California and is possessed of full power to own and hold real and personal property and to lease and sell the same; (ii) the Resolution of the Agency authorizing the Agency Documents has been duly adopted by the Agency, is in full force and effect, and has not been rescinded or modified in any manner; (iii) the Agency Documents have been duly authorized, executed and delivered by the Agency and constitute legal, valid and binding obligations of the Agency enforceable in accordance with their terms, except as such enforceability may be limited by bankruptcy, reorganization, insolvency, moratorium or other laws affecting the enforcement of creditors' rights generally; (iv) to the best of his knowledge after reasonable investigation and due inquiry, the execution and delivery of the Agency Documents by the Agency and compliance by the Agency with the provisions thereof, will not conflict with the Agency's duties under, or constitute a breach or default under, said documents or any law, administrative regulation, court decree, resolution, charter, by-laws or other agreement to which the Agency is subject or by which it is bound; (v) to the best of his knowledge after reasonable investigation and due inquiry, there is no action, suit, proceeding or investigation at law or in equity before or by any court or governmental agency or body pending or threatened against the Agency to restrain or enjoin the collection of the payments to be made pursuant to the Lease Agreement, or in any way contesting or affecting the validity of the Lease Agreement, KAB187793 -12- - the Trust Agreement or this Purchase Agreement or contesting the powers of the Agency to enter into or perform its obligations under any of the foregoing; and (vi) the information under the caption "THE POW A Y REDEVELOPMENT AGENCY" in the Official Statement is true and correct in all respects and such information does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, that no opinion need be expressed with respect to any statistical or financial information found in the Official Statement, and otherwise being in form and substance acceptable to Special Counsel and Underwriter's Counsel. (7) City Certificate. A Certificate, dated the Closing Date and signed by the authorized officer of the City, ratifying the use and distribution by the Underwriter of the Official Statement in connection with the offering and sale of the Certificates; and certifying that: (i) the representations and warranties of the City and the Agency contained in the City Documents 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 event has occurred since the date of the Official Statement affecting the City or the Agency which should be disclosed in the Official Statement; (iii) the City and the Agency have complied with all the Agreements and have satisfied all the conditions on their part to be performed or satisfied under the City Documents or any other agreement at and prior to the Closing; (iv) no litigation is pending or, to the best of such officer's knowledge, threatened (either in State or Federal courts), except as disclosed in the Official Statement (A) to restrain or enjoin the execution, sale or delivery of any of the Certificates; (B) in any way contesting or affecting the authority for the execution, sale or delivery of the Certificates or the City Documents; or (C) in any way contesting the existence or the powers of the City; and (v) the information contained in the Official Statement is true and correct and does 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 the statements therein, in light of the circumstances under which they were made, not misleading in any material respect. (8) Qty Finandal Officer Certificate. Certificate of the Chief Financial Officer of the City, dated the date of closing, substantially to the effect that: (i) as to the financial information and statistical data included therein, the material contained in the Official Statement relating to the City does not contain any untrue statement of a material fact or omit 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; ,.^d 1 87793 -13- (ii) since June 30, 19~ there has been no material adverse change in the financial condition of the City; (iii) the information in the Official Statement under the captions "THE PROJECT," "SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES," "CITY FINANCIAL INFORMATION," and "APPENDIX A - Audited Financial Statements of the City for Fiscal Year Ended June 30, 19~ is true and correct, and otherwise being in form and substance acceptable to Special Counsel and Underwriter's Counsel; and (iv) the City is currently in compliance with all insurance covenants set forth in the Lease Agreement. (9) Resolution of the Trustee. Certified copies of the general resolution of the Trustee under the Trust Agreement, authorizing the execution and delivery of the Trust Agreement and certain other documents by certain officers of the Trustee, which resolution authorizes the authentication of the Certificates; (10) Trustee's Certificate. The Certificate of the Trustee, dated the Closing Date, to the effect that: (i) the Trustee is duly organized and existing as a national banking association under the laws of the United States of America, having the full power and authority to perform its duties under the Trust Agreement; (ii) the Trustee is duly authorized to accept the trusts created by the Trust Agreement and to execute the Certificates pursuant to the terms of the Trust Agreement; (iii) no consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Trustee that has not been obtained is or will be required for the authentication of the Certificates or the consummation by the Trustee of the other transactions contemplated to be performed by the Trustee in connection with the authentication of the Certificates and the acceptance and performance of the trusts created by the Trust Agreement; (iv) the acceptance of the trusts created under the Trust Agreement and compliance with the terms thereof will not conflict with, or result in a violation or breach of, or constitute a default under, any loan Agreement, indenture, Certificates, note, resolution or any other Agreement or instrument to which the Trustee is a party or by which it is bound, to the best knowledge of the Trustee, or any law or any rule, regulation, order or decree of any court or governmental agency or body having jurisdiction over the Trustee or any of its activities or properties, or (except with respect to the lien of the Trust Agreement) result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Trustee; and (v) there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court or governmental agency, public board or body pending or, to the best knowledge of the Trustee, threatened against or affecting the existence of the Trustee or seeking to prohibit, restrain or enjoin the execution, sale and delivery of the Certificates or the KAB187793 -14- . -- collection of the Special Taxes to pay the principal of, and interest on, the Certificates, or the pledge thereof, or in any way contesting or affecting the validity or enforceability of the Certificates or the Trust Agreement or contesting the powers of the Trustee or its authority to enter into and perform its obligations under any of the foregoing, wherein an unfavorable decision, ruling or finding would adversely affect the transactions contemplated in connection with the execution and delivery of the Certificates, or which in any way, would adversely affect the validity of the Certificates, the Trust Agreement or any Agreement or instrument to which the Trustee is a party and which is used or contemplated for use in the cons~mmation of the transactions contemplated in connection with the execution, sale and delivery of the Certificates; (11) Trustee's Counsel Opinion. An opinion, satisfactory in form and substance to the Underwriter and Special Counsel, of counsel to the Trustee, dated the Closing Date and addressed to the Underwriter, the City and the Agency, to the effect that: (i) the Trustee is a duly organized and validly existing national banking association in good standing under the laws of the United States and has full power and authority to undertake the trust of the Trust Agreement; (ii) the Trustee has duly authorized, executed and delivered the Trust Agreement and by all proper corporate action has authorized acceptance of the trust of the Trust Agreement; (iii) assuming the corporate power and legal authority of, and the due authorization, execution and delivery by the Agency and the City of the Trust Agreement, the Trust Agreement constitutes a valid and binding obligation of the Trustee, enforceable against the Trustee in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws or equitable principles relating to or limiting creditors' rights generally; (iv) the Certificates have been validly authorized, executed and delivered by the Trustee to the Underwriter pursuant to direction from the City and are entitled to the benefits of the Trust Agreement; (v) exclusive of federal or state securities laws' requirements, no authorization, approval, consent or other order of any governmental agency or, to such counsel's knowledge, any other person or corporation is required for the valid authorization, execution and delivery of the Trust Agreement by the Trustee or the execution and delivery of the Certificates; (vi) 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 threatened in any way affecting the existence of the Trustee or the titles of its directors or officers to their respective offices, or seeking to restrain or enjoin the execution, sale or delivery of the Certificates, the application of the proceeds thereof in accordance with the Trust Agreement, or in any way contesting or affecting the validity or enforceability of the Certificates; and (vii) the execution and delivery of the Trust Agreement and the Certificates will not conflict with or constitute a breach of or default under the Trustee's duties under such , , 87793 -15- documents, or any law, administrative regulation, court decree, resolution, charter, bylaws or other agreement to which the Trustee is subject or by which it is bound. (12) Nonarbitrage Certificate. A nonarbitrage certificate of the City in form and substance acceptable to Special Counsel and the Underwriter; (13) Official Statement. Two copies of the Official Statement executed by the Mayor of the City; (14) Audited Financial Statements. A copy of the audited financial statements of the City for the fiscal year ending June 30, 19~ certified by an independent accounting firm, together with a letter, dated as of the Closing Date, from an authorized officer of said accounting firm consenting to the inclusion in the Official Statement of its report accompanying the audited financial statements of the City for the fiscal year ending June 30, 19~ (15) Escrow Bank's Certificate. A certificate of the Escrow Bank, dated the date of Closing, addressed to the City, the Agency and the Underwriter, in form and substance to the Underwriter, to the following effect: (i) The Escrow Bank is duly organized and existing as a national banking association in good standing under the laws of the United States of America, having the full power and authority to enter into and perform its duties under the Escrow and Deposit Agreement; (ii) The Escrow Bank is duly authorized to enter into the Escrow and Deposit Agreement and such Escrow and Deposit Agreement constitutes the legal, valid and binding obligation of the Escrow Bank in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights, to the application of equitable principles where equitable remedies are sought and to the exercise of judicial discretion in appropriate cases; and (iii) To the best knowledge of the Escrow Bank after due inquiry, there is no action, suit, proceeding or investigation, at law or in equity, before or by any court or governmental agency, public board or body pending against the Escrow Bank or threatened against the Escrow Bank which in the reasonable judgment of the Escrow Bank would affect the validity or enforceability of the Escrow and Deposit Agreement or contesting the powers of the Escrow Bank or its authority to enter into and perform its obligations under the Escrow and Deposit Agreement. (16) Insurance Policy. An insurance policy issued by Financial Security Assurance Inc. insuring the principal of and interest on the Certificates is delivered to the Trustee at the closing together with an opinion of counsel to Financial Security Assurance Inc., dated the date of the closing and addressed to the City, the Trustee and the Underwriter, as to the validity of the bond insurance policy, and that the description of Financial Security Assurance Inc. and the bond insurance in the Official Statement is true and correct and otherwise being in form and substance acceptable to Special Counsel and Underwriter's Counsel. KA8187793 -16- - (17) Ratings. Satisfactory evidence that the Certificates have received ratings of "Aaa" from Moody's Investors Service and "AAA" from Standard & Poor's Corporation, and that such ratings shall not have been lowered or withdrawn prior to closing. (18) Verification. A letter of verification from Ernst & Young to the effect that the available cash and federal securities to be held under the Escrow Agreement will be sufficient to pay the principal of, premium, if any, and interest on the Prior Certificates to and including the dates of optional redemption thereof. (19) Additional Documents. Such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the Closing Date, of the statements and information contained in the Official Statement, of the City's and Agency's representations and warranties contained herein and the due performance or satisfaction by the City and the Agency at or prior to the Closing of all Agreements then to be performed and all conditions then to be satisfied by the City and the Agency in connection with the transactions contemplated hereby and by the Trust Agreement and the Official Statement. If the City or the Agency shall be unable to satisfy the conditions to the Underwriter's obligations contained in this Purchase Agreement or if the Underwriter's obligations shall be terminated for any reason permitted herein, this Purchase Agreement may be terminated by the Underwriter at, or at any time prior to, the Closing Date by written notice to the City and neither the Underwriter, the City nor the Agency shall have any further obligation hereunder. Section 8. Expenses. _. (a) The Underwriter shall be under no obligation to pay, and the City shall payor cause to be paid out of the proceeds of the Certificates, all expenses incident to the performance of the City's obligations hereunder, including but not limited to: the cost of printing, engraving and delivering the Certificates to the Underwriter; the cost of preparation, printing (and/or reproduction), distribution and delivery of the Trust Agreement, and the cost of printing (and/or reproduction), distribution and delivery of the Preliminary Official Statement and the Official Statement and all other Agreements and documents contemplated hereby (and drafts of any thereof) in such reasonable quantities as requested by the Underwriter; the cost of appraisals; and the fees and disbursement of the Trustee, Special Counsel, and any accountants, financial advisors or other engineers or experts or consultants the City or the Agency have retained in connection with the Certificates. (b) Whether or not the Certificates are delivered to the Underwriter as set forth herein, provided that the City shall not have defaulted in the performance of its obligations under this Purchase Agreement, the City shall be under no obligation to pay, and the Underwriter shall pay, the cost of preparation of this Purchase Agreement and all other expenses incurred by the Underwriter in con- nection with its public offering and distribution of the Certificates (except those specifically enumerated in paragraph (a) of this section), including the fees and disbursements of its counsel and any advertising expenses. Section 9. Notices. Any notices, requests, directions, instruments or other communications required or permitted to be given hereunder shall be in writing and shall be given when - 1V'I~18n93 -17- delivered, against a receipt, or mailed certified or registered, postage prepaid, to the City, the Agency and the Underwriter at their respective address below: If to the City: City of Poway 13325 Civic Center Drive Poway, CA 92064 Attention: City Manager If to the Agency: Poway Redevelopment Agency 13325 Civic Center Drive Poway, CA 92064 Attention: Executive Director If to the Underwriter: Paine Webber Incorporated 725 South Figueroa Street, Suite 4100 Los Angeles, CA 90071 Attention: Municipal Finance Department provided, however, that all such notices, requests or other communications may be made by telephone and promptly confirmed by writing. The City, the Agency and the Underwriter may, by notice given as aforesaid, specify a different address for any such notices, requests or other communications. Section 10. Parties in Interest. This Purchase Agreement is made solely for the benefit of the City, the Agency and the Underwriter and no other person shall acquire or have any right or have any right hereunder or by virtue hereof. Section 11. Survival or Representations and Warranties. The representations and warranties of the City and the Agency set forth in or made pursuant to this Purchase Agreement shall not be deemed to have been discharged satisfied or otherwise rendered void by reason of the Closing or termination of this Purchase Agreement and regardless of any investigations made by or on behalf of the Underwriter (or statements as to the results of such investigations) concerning such representations and statements of the City and the Agency and regardless of delivery of and payment for the Certificates. Section 12. Effective. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the City and shall be valid and enforceable as of the time of such acceptance. Section 13. Applicable Law; Nonassignability. This Purchase Agreement shall be governed by the laws of the State of California. This Purchase Agreement shall not be assigned by the City or the Underwriter. Section 14. Execution of Counterparts. This Purchase Agreement may be executed in several counterparts, each of which shall be regarded as an original and all of which constitute one and the same. Section 15. No Prior Agreements. This Purchase Agreement supersedes and replaces all prior negotiations, Agreements and understandings between the parties hereto in relation to the sale KAS 187793 -18- - - of Certificates for the City and represents the entire Agreement of the parties as to the subject matter herein. Section 16. Partial Unenforceability. Any provision of this Purchase Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Purchase Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Section 17. Capitalized Tenns. Terms with initial capital letters not otherwise defined herein shall have the meanings assigned to them in the Trust Agreement. Dated: PAINEWEBBER INCORPORATED By: Dated: THE CITY OF POW A Y By: Title: City Manager Dated: POW A Y REDEVELOPMENT AGENCY - By: Title: Executive Director - 37793 -19- EXHIBIT A DESCRIPTION OF CERTIFICATES TO BE PURCHASED Maturity Interest Price Date Amount Rate or Yield KAB18n93 A-I - EXHIBIT B CITY OF POW A Y RULE 15c2-12 CERTIFICATE The undersigned hereby certifies and represents to PaineWebber Incorporated (the "Underwriter") that he or she is a duly appointed and acting officer of the City of Poway (the "City") and as such is authorized to execute and deliver this Cenificate and further hereby cenifies and reconfirms on behalf of the City to the Underwriter as follows: (1) This Cenificate is delivered to enable the Underwriter to comply with Securities and Exchange Commission Rule 15c2-12 under the Securities Exchange Act of 1934 (the "Rule") in connection with the offering and sale of the City of Poway Refunding Certificates of Participation (poway Royal Mobilehome Park) (the "Cenificates"). (2) In connection with the offering and sale of the Cenificates, there has been prepared a Preliminary Official Statement, setting forth information concerning the Cenificates and the issuer of the Certificates (the "Preliminary Official Statement"). (3) As used herein, "Permitted Omissions" shall mean the offering price(s), interest rate(s), selling compensation, aggregate principal amount, principal amount per maturity, delivery dates. ratings and other terms of the Certificates depending on such matters and the identity of the underwriter(s), all with respect to the Cenificates. (4) The Preliminary Official Statement is, except for the Permitted Omissions, -." deemed final within the meaning of the Rule and has been, and the information therein is, accurate and complete except for the Permitted Omissions, provided that no representation is made as to the information contained in the Preliminary Official Statement describing the Agency, or which was provided by the Underwriter. (5) If, at any time prior to the execution of the final contract of purchase, any event occurs as a result of which the Preliminary Official Statement might include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the City shall promptly notify the underwriter thereof; provided, however, that the City shall have such obligations with respect to information in the Preliminary Official Statement concerning the Agency, or supplied by the Underwriter, only to the extent the City has actual knowledge or notice of any such event. IN WITNESS WHEREOF, I have hereunto set my hand this _ day of ,19~ CITY OF POW A Y By: City Manager KAB187793 B-1 -- - --- POW A Y REDEVELOPMENT AGENCY RULE 15c2-12 CERTIFICATE The undersigned hereby certifies and represents to PaineWebber Incorporated (the "Underwriter") that he or she is a duly appointed and acting officer of the Poway Redevelopment Agency (the" Agency") and as such is authorized to execute and deliver this Certificate and further hereby certify and reconfirm on behalf of the Agency to the Underwriter as follows: (1) This Certificate is delivered to enable the Underwriter to comply with Securities and Exchange Commission Rule 15c2-l2 under the Securities Exchange Act of 1934 (the "Rule") in connection with the offering and sale of the City of Poway Refunding Certificates of Participation (poway Royal MobiIehome Park) (the "Certificates"). (2) In connection with the offering and sale of the Certificates, there has been prepared a Preliminary Official Statement, setting forth information concerning the Certificates and the issuer of the Certificates (the "Preliminary Official Statement"). (3) As used herein, "Permitted Omissions" shall mean the offering price(s), interest rate(s), selling compensation, aggregate principal amount, principal amount per maturity, delivery dates, ratings and other terms of the Certificates depending on such matters and the identity of the underwriter(s), all with respect to the Certificates. (4) The Preliminary Official Statement is, except for the Permitted Omissions, deemed final within the meaning of the Rule and has been, and the information therein is, accurate and complete except for the Permitted Omissions, provided that no representation is made as to the information contained in the Preliminary Official Statement describing the City, or which was provided by the Underwriter. (5) If, at any time prior to the execution of the final contract of purchase, any event occurs as a result of which the Preliminary Official Statement might include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the Agency shall promptly notify the underwriter thereof; provided, however, that the Agency shall have such obligations with respect to information in the Preliminary Official Statement concerning the City, or supplied by the Underwriter, only to the extent the Agency has actual knowledge or notice of any such event. IN WITNESS WHEREOF, I have hereunto set my hand this _ day of ,19~ POW A Y REDEVELOPMENT AGENCY By: Executive Director KAB18n93 B-2 - - RECORDING REQUESTED BY ) AND WHEN RECORDED MAIL TO: ) ) STRADLING, YOCCA, CARLSON & RAUTH ) 660 Newport Center Drive ) Suite 1600 ) Newport Beach, California 92660 ) Attn: Denise E. Hering, Esq. ) ) [Space above for recorder.] This document is recorded for the benefit of the City of Poway, and the recording is fee-exempt under Section 27383 of the Government Code. LEASE AGREEMENT between CITY OF POWAY, as Lessee and POWAY REDEVELOPMENT AGENCY, as Lessor Dated as of July 1, 1995 Relating to $ 1995 Refunding Certificates of Participation (City of Poway 1991 Capital Improvement Project - Poway Royal Mobilehome Park) ATTACHMENT G JUN 2 0 1995 ITEM 10..., i1 ----_.__.~ - TABLE OF CONTENTS Pal!e ARTICLE I DEFINITIONS AND EXHffiITS SECTION 1.1 Definitions and Rules of Construction . . . . . . . . . . . . . . . . 2 SECTION 1.2 Exhibits ................................. . 3 ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES SECTION 2.1 Representations, Covenants and Warranties of the City .... . 3 SECTION 2.2 Representations, Covenants and Warranties of the Agency .. . 5 ARTICLE III ACQUISITION, CONSTRUCTION AND IMPROVEMENT OF THE PROJECT SECTION 3.1 Deposit of Certificate Proceeds .. . . . . . . . . . . . . . . . . . . 7 SECTION 3.2 Acquisition, Construction and Improvement of the Project .. . 7 SECTION 3.3 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 3.4 Payment of Project Costs . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 3.5 Completion Date; Certification ................... . 7 SECTION 3.6 Substitution and Release ....................... . 7 SECTION 3.7 Further Assurances and Corrective Instruments .......... 8 ARTICLE IV AGREEMENT TO LEASE; TERM OF LEASE; LEASE PAYMENTS SECTION 4.1 Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 4.2 Term................................... . 9 SECTION 4.3 Extension of Lease Term . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 4.4 Lease Payments ............................ . 9 SECTION 4.5 No Withholding ........................... . 10 SECTION 4.6 Fair Rental Value .......................... . 10 SECTION 4.7 Budget and Appropriation ..................... . 10 SECTION 4.8 Assignment of Lease Payments ............ . . . . . . . II SECTION 4.9 Use and Possession ......................... . 11 SECTION 4.10 Abatement of Lease Payments and Additional Payments . . . . 11 SECTION 4.11 Additional Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 4.12 Net-Net-Net Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 PUBL,27201_1 1 138182345.52 i - - ARTICLE V INSURANCE SECTION 5.1 Public Liability and Property Damage . . . . . . . . . . . . . . . 12 SECTION 5.2 Worker's Compensation ...................... . 13 SECTION 5.3 Hazard Insurance .......................... . 13 SECTION 5.4 Rental Interruption Insurance ................... . 14 SECTION 5.5 Title Insurance ............................. 14 SECTION 5.6 General Insurance Provisions .................... 14 SECTION 5.7 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE VI DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS SECTION 6.1 Application of Net Proceeds . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE VII COVENANTS WITH RESPECT TO THE SITE SECTION 7.1 Use of the Site ... . . . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 7.2 Leasehold Interest in the Site ................... . 17 SECTION 7.3 Option to Prepay Lease Payments ................ . 17 SECTION 7.4 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 7.5 Installation of City's Personal Property .............. 17 SECTION 7.6 Access to the Site ........................... 18 SECTION 7.7 Maintenance, Utilities, Taxes and Assessments ........ . 18 SECTION 7.8 Modification of the Site . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 7.9 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 7.10 Agency's Disclaimer of Warranties ............... . 19 SECTION 7.11 City's Right to Enforce Warranties of Manufacturers, Vendors or Contractors . . . . . . . . . . . . . . . . . . . . . . . . 20 ARTICLE VIII ASSIGNMENT, SUBLEASING AND AMENDMENT SECTION 8.1 Assigrunent by the Agency . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 8.2 Assigrunent and Subleasing by the City .............. 20 SECTION 8.3 Amendments and Modifications . . . . . . . . . . . . . . . . . . . 21 ,u8L'27201_11138182345.52 ii ARTICLE IX EVENTS OF DEFAULT AND REMEDIES SECTION 9.1 Events of Default Defined ...................... 21 SECTION 9.2 Remedies on Default ........................ . 22 SECTION 9.3 No Remedy Exclusive. . . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 9.4 Agreement to Pay Attorneys Fees and Expenses . . . . . . . . . 23 SECTION 9.5 No Additional Waiver Implied by One Waiver. . . . . . . . . . 23 SECTION 9.6 Application of the Proceeds Following Default ........ . 24 SECTION 9.7 Trustee and Certificate Owners to Exercise Rights ...... . 24 ARTICLE X PREPAYMENT OF LEASE PAYMENTS SECTION 10.1 Security Deposit ............................ 24 SECTION 10.2 Extraordinary Prepayment From Net Proceeds . . . . . . . . . . 24 SECTION 10.3 Optional Prepayment ........................ . 24 SECTION 10.4 Sinking Fund Redemption ...................... 25 SECTION 10.5 Credit for Amounts on Deposit . . . . . . . . . . . . . . . . . . . 25 SECTION 10.6 Effect of Prepayment ......................... 25 ARTICLE XI MISCELLANEOUS SECTION 11.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 11.2 Binding Effect ............................ . 26 SECTION 11.3 Severability ............................... 26 SECTION 11.4 Execution in Counterparts ...................... 26 SECTION 11.5 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 11.6 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Exhibit A - Description of the Site . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-I Exhibit B - Schedule of Lease Payments ........................ . B-1 Exhibit C - Lease Supplement .............................. . C-l pU8L,27201_11138182345.52 iii - - LEASE AGREEMENT - THIS LEASE AGREEMENT, dated as of July 1, 1995, is entered into by and between the POW A Y REDEVELOPMENT AGENCY, a political subdivision of the State of California (the" State") duly organized and existing under the laws of the State of California, as lessor (the "Agency"), and the CITY OF POW A Y, a municipal corporation of the State duly organized and existing under and by virtue of the Constitution and laws of the State of California, as lessee (the "City"); WITNESSETH: WHEREAS, pursuant to the Government Code of the State of California, the City may enter into leases and agreements relating to real property to be used by the City; WHEREAS, the Agency and City desire to enter into this Lease Agreement (the "Lease") and authorize the execution and delivery of certificates of participation, described below, evidencing proportionate interests in certain rights of the Agency under this Lease, including the right to receive lease payments to be made by the City hereunder, in order to advance refund the outstanding portion of those certain outstanding $28,300,000 1991 Certificates of Participation, the proceeds of which were used to finance the acquisition and construction of certain public improvements (the "Prior Certificates"); and WHEREAS, the City has entered into a Site Lease of even date herewith (the "Site Lease") with the Agency under which the Agency has agreed to lease from the City the Site, which is described in Exhibit A hereto, and which Site Lease contains other terms and conditions as the governing board of the City deems to be in the best interest of the City; and WHEREAS, in consideration of the lease payments to be paid by the City to the Agency hereunder, the Agency will lease back the Site to the City pursuant to Section 4.1 hereof; and WHEREAS, the Agency is authorized pursuant to the laws of the State of California and its articles of incorporation and bylaws to provide financial assistance to the City by acquiring, constructing and ftnancing various public facilities, land and equipment and the leasing of facilities, land and equipment for the use, benefit and enjoyment of the public; NOW, THEREFORE, in consideration of the above premises and of the mutual covenants hereinafter contained and for other good and valuable consideration, the parties hereto agree as follows: pU8L,27201_11138182345.52 ARTICLE I DEFINITIONS AND EXlDBITS SECTION 1.1 Definitions and Rules of Construction. Unless the context otherwise requires, the capitalized terms used herein shall, for all purposes of this Lease, have the meanings specified in the Trust Agreement; and the additional terms defined in this Section shall, for all purposes of this Lease, have the meanings herein specified. Unless the context otherwise indicates, words importing the singular number shall include the plural number and vice versa. The terms "hereby," "hereof," "hereto," "herein," "hereunder" and any similar terms, as used in this Lease, refer to this Lease as a whole. "Additional Certificates" means any certificates of participation executed and delivered by the Trustee pursuant to Section 317 of the Trust Agreement subsequent to the Delivery Date for the Certificates, which are secured on a parity with the Certificates. "Certi ficates" means the $ 1995 Refunding Certificates of Participation (City of Poway 1991 Capital Improvement Project - Poway Royal Mobilehome Park), executed and delivered by the Trustee pursuant to the Trust Agreement. "Comoletion Certificate" means a certificate of the City filed with the Trustee and signed by the City Representative, as prescribed by Section 3.5 hereof. "Comoonent" means any portion of the Site designated in Exhibit A hereto as a Component, as such Exhibit A may be amended from time to time in accordance herewith. "Hazardous Substances" means any substance, waste, pollutants, or contaminants now or hereafter included in such (or any similar) term under any federal, state or local code, statute, regulation or ordinance now in effect or hereafter enacted or amended. "Indeoendent Counsel" means an attorney duly admitted to the practice of law before the highest court of the State and who is not an employee or officer of the Agency, the Trustee or the City. "~" means this Lease Agreement, by and between the City and the Agency, as amended and supplemented from time to time. "Lease Suonlement" means one or more amendments to this Lease executed substantially in the form attached as Exhibit C hereto. "Permitted Encumbrances" means as of any particular time: (1) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the City may, pursuant to Section 7.7 hereof, permit to remain unpaid; (2) the Assignment Agreement, as it may be amended from time to time; (3) this Lease, as it may be amended from time to time; (4) the Site Lease, as it may be amended from time to time; (5) any right or claim of any mechanic, laborer, materialman, supplier or vendor filed or perfected in the manner prescribed by law after the Delivery Date for the Certificates which is being contested by the City in accordance with Section 7.8(b) hereof; (6) that certain Memorandum of Affordable Housing Covenants recorded in the PUBL,2nOI_l 1 138182345.52 2 - - Offices of the Recorder of San Diego County on or before the date hereof; (7) easements, rights .-. of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record as of the Delivery Date for the Certificates and which the City certifies in writing on the Delivery Date for the Certificates will not materially impair the use of the Site; and (8) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions established following the Delivery Date for the Certificates, or existing on any real property substituted for the Site, to which the Agency, the Insurer and the City consent in writing and which the City certifies will not materially impair the use of the Site or real property substituted for the Site, as the case may be. "Project" means any capital improvements specified by the City from time to time to be constructed with the proceeds of any Additional Certificates. "Site" means the real property, including all improvements thereto, described from time to time in Exhibit A hereto, as such Exhibit A may be amended and supplemented from time to time in accordance with the provisions of this Lease. "Site Lease" means the Site Lease, dated as of the date hereof, by and between the City, as lessor, and the Agency, as lessee, as amended and supplemented from time to time, and any duly authorized and executed amendments thereto. "Term" means the term of this Lease as established by Section 4.2 hereof. "Trust Al!reement" means the Trust Agreement, dated as of the date hereof, by and among Bank of America National Trust and Savings Association, as trustee, the City and the Agency, as amended and supplemented from time to time. SECTION 1.2 Exhibits. The following Exhibits are attached to, and by reference made a part of, this Lease: Exhibit A: Description of the Site. Exhibit B: Schedule of Lease Payments. Exhibit C: Lease Supplement. ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES SECTION 2.1 Representations, Covenants and Warranties of the City. The City represents, covenants and warrants to the Agency as follows: (a) Due Orl!anization and Existence. The City is a municipal corporation, duly organized and existing under and by virtue of the Constitution and laws of the State, with the power and authority to own, lease and acquire real and personal property and equipment. pU8L,27201_11138182345.52 3 ------ (b) Authorization: Enforceability. The Constitution and laws of the State authorize the City to enter into this Lease, the Site Lease, the Escrow Agreement and the Trust Agreement and to enter into the transactions contemp lated by and to carry out its obligations under all of the aforesaid agreements, and the City has duly authorized and executed all of the aforesaid agreements. This Lease, the Site Lease, the Escrow Agreement and the Trust Agreement constitute the legal, valid and binding obligations of the City, enforceable in accordance with their respective terms, except to the extent limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the rights of creditors generally. (c) No Conflicts or Default: No Liens or Encumbrances. Neither the execution and delivery of this Lease, the Site Lease, the Escrow Agreement or the Trust Agreement, nor the fulfillment of or compliance with the terms and conditions hereof or thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any agreement or instrument to which the City is now a party or by which the City is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the City or upon the Site, except for Permitted Encumbrances and the pledges contained in the Trust Agreement. (d) Execution and Delivery. The City has duly authorized and executed this Lease, the Site Lease, the Escrow Agreement and the Trust Agreement in accordance with the Constitution and laws of the State. (e) Indemnification of the AlZencv and the Trustee. To the extent permitted by law, the City covenants to defend, indemnify and hold harmless the Agency, the Trustee and their respective assigns, board members and employees (collectively, the "Indemnified Party") against any and all losses, claims, damages or liabilities, joint or several, including fees and expenses incurred in connection therewith, to which such Indemnified Party may become subject under any statute or at law or in equity or otherwise in connection with the transactions contemplated by this Lease, 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 the transactions contemplated by this Lease or the Site Lease. In particular, without limitation, to the extent permitted by law, the City shall and hereby agrees to indemnify and save the Indemnified Party harmless from and against all claims, losses and damages, including legal fees and expenses, arising out of (i) the use, maintenance, condition or management of, or from any work or thing done on, the Site or the Project by the City including, without limitation, as a result of the use, storage, presence, disposal or release of any Hazardous Substances on or about the Site, (ii) any breach or default on the part of the City in the performance of any of its obligations under this Lease, (iii) any act of negligence of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Site, (iv) any act of negligence of any assignee or sublessee of the City with respect to the Project, or (v) the completion of the Project or the authorization of payment of the Project Costs by the City. No indemnification is made under this Section or elsewhere in this Lease for claims, losses or damages, including PUBL,2no,_, i 138182345.52 4 - .- legal fees and expenses arising out of the willful misconduct, negligence, or breach of duty under this Lease by the Agency, its officers, board members, agents, employees, successors or assigns. (f) General Tax and Arbitral!e Covenant. The City hereby covenants that, notwithstanding any other provision of this Lease, it will make no use of the proceeds of the Certificates or any Additional Certificates or of any other amounts, regardless of the source, or of any property or take any action, or refrain from taking any action that may cause the obligations of the City under this Lease to be "arbitrage bonds" within the meaning of Section 148 of the Code, or under applicable Treasury Regulations promulgated thereunder or to cause the Interest Component of the Lease Payments to become subject to State of California personal income taxation. In addition, the City covenants that it will not make any use of the proceeds of the obligations provided herein or in the Trust Agreement or of any other funds of the City, or take or omit to take any other action that would cause the obligations of the City under this Lease to be "private activity bonds. within the meaning of Se"ction 141 of the Code, or "federally guaranteed" within the meaning of Section 149(b) of the Code. To that end, so long as necessary to maintain the exclusion from gross income for federal income tax purposes of the Interest Component of the Lease Payments, the City will comply with all requirements of such Sections and all regulations thereunder and under Section 103 of the Code, to the extent that such requirements are, at the time, applicable and in effect. SECTION 2.2 Representations, Covenants and Warranties of the Agency. The Agency represents, covenants and warrants to the City as follows: (a) Due Orl!ani7J1tion and Existence: Enforceability. The Agency is a political subdivision of the State, duly organized, existing and in good standing under and by virtue of the laws of the State, has the power to enter into this Lease, the Site Lease, the Assignment Agreement and the Trust Agreement; is possessed of full power to own and hold real and personal property, and to lease and sell the same; and has duly authorized the execution and delivery of this Lease, the Site Lease, the Assignment Agreement and the Trust Agreement. This Lease, the Site Lease, the Assignment Agreement and the Trust Agreement constitute the legal, valid and binding obligations of the Agency, enforceable in accordance with their respective terms, except to the extent limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the rights of creditors generally. (b) No Encumbrances. The Agency will not pledge or encumber the Lease Payments or Additional Payments or other amounts derived from the Site or from its other rights under this Lease or the Site Lease, except for Permitted Encumbrances and except as provided under the terms of this Lease, the Site Lease, the Assignment Agreement and the Trust Agreement. (c) No Conflicts or Defaults: No Liens or Encumbrances. Neither the execution and delivery of this Lease, the Site Lease, the Assignment Agreement or the Trust Agreement, nor the fulfillment of or compliance with the terms and conditions hereof or thereof, nor the consummation of the transactions contemplated hereby or pU8L,27201_11138182345.52 5 thereby, conflicts with or results in a breach of the terms, conditions or provisions of the formation documents of the Agency or any restriction or any agreement or instrument to which the Agency is now a party or by which the Agency is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the Agency or upon the Site, except for Permitted Encumbrances and except by the pledges contained in the Trust Agreement. (d) Execution and Delivery. The Agency has duly authorized and executed this Lease, the Site Lease, the Assignment Agreement and the Trust Agreement in accordance with the Constitution and laws of the State. (e) General Tax and Arbitral!e Covenant. The Agency covenants that, notwithstanding any other provision of this Lease, it will make no use of the proceeds of the Certificates or any Additional Certificates or of any other amounts or property, regardless of the source, or take any action or refrain from taking any action that may cause the obligations of the City under this Lease to be "arbitrage bonds" subject to federal income taxation by reason of Section 148 of the Code or to cause the Interest Component of the Lease Payments to become subject to State of California personal income taxation. In addition, the Agency covenants that it will not make any use of the proceeds of the obligations provided herein or in the Trust Agreement or of any other funds of the City or take or omit to take any other action that would cause such obligations to be "private activity bonds" within the meaning of Section 141 of the Code, or "federally guaranteed" within the meaning of Section 149(b) of the Code. To that end, so long as necessary to maintain the exclusion from gross income for federal income tax purposes of the Interest Component of the Lease Payments, the Agency will comply with all requirements of such Sections and all regulations of the United States Department of the Treasury issued thereunder and under Section 103 of the Code, to the extent that such requirements are, at the time, applicable and in effect. (f) Maintenance of Existence. To the extent permitted by law, the Agency agrees that during the term hereof it will maintain its existence as a joint powers authority, will not dissolve or otherwise dispose of all or substantially all of its assets, if any, will not become a general or limited partner in any partnership or a joint venturer in any joint venture and will not combine or consolidate with or merge into any other entity or permit one or more other entities to consolidate with or merge into it, unless such action will not cause a merger of the City's leasehold estate in the Site and the successor thereto is a public agency which expressly agrees to assume all rights and responsibilities of the Agency under the Site Lease, the Assignment Agreement, the Trust Agreement and this Lease. PUBL,27201_1I 1381B2345.52 6 - ARTICLE III ACQUISmON, CONSTRUCTION AND IMPROVEMENT OF THE PROJECT SECTION 3.1 Deposit of Certificate Proceeds. On the Delivery Date for the Certificates and on the Delivery Date for any Additional Certificates, the Agency agrees to pay or cause to be paid to the Trustee as the rental due under the Site Lease the amount specified in Section 4 thereof, which moneys shall be deposited with the Trustee as provided in Section 401 of the Trust Agreement, or in the case of Additional Certificates as provided in any Supplemental Trust Agreement which relates to such Additional Certificates. SECTION 3.2 Acquisition, Construction and Improvement of the Project. The City agrees to acquire, construct, deliver and install the Project, or to cause it to be acquired, constructed, delivered and installed, with the proceeds of any Additional Certificates paid to the City by the Agency pursuant to Section 3.1 above and the Agency shall have no responsibility with respect thereto. SECTION 3.3 Compliance with Law. The City shall comply with all applicable provisions for bids and contracts prescribed by law with respect to the Project, including, without limitation, Sections 20110 ~ ~ of the Public Contracts Code and Article 42 (commencing with Section 20670) of Part 3 of Division 2 of the Public Contracts Code. SECTION 3.4 Payment of Project Costs. Payment of the Project Costs shall be made from the moneys deposited with the Trustee in the Project Fund as provided in Section 3.1 hereof and Section 402 of the Trust Agreement, which shall be disbursed from the Project Fund in accordance and upon compliance with Section 402 of the Trust Agreement and the provisions of any Supplemental Trust Agreement pursuant to which any Additional Certificates are executed and delivered. SECTION 3.5 Completion Date; Certification. Upon the completion of acquisition, construction, delivery and installation of the portion of the Project to be financed with each issue of Additional Certificates, the City shall deliver to the Trustee a Completion Certificate with respect thereto. A separate Completion Certificate will be filed with respect to the portion of the Project to be financed from each issue of Additional Certificates. On the date of filing a Completion Certificate, all excess moneys remaining in the Acquisition and Construction Account of the Project Fund for the issue of Additional Certificates for which such Completion Certificate is delivered shall be applied in accordance with the provisions of Section 402(e) of the Trust Agreement. SECTION 3.6 Substitution and Release. The City shall have the right from time to time to add other real property and improvements (subject only to Permitted Encumbrances) or to substitute other real property or improvements (subject only to Permitted Encumbrances) for all or a portion of the Site or to release a portion of the real property or improvements constituting the Site, if it has provided the Trustee with a written Lease Supplement and has obtained and provided to the Trustee each of the following: (a) Written consent of each municipal bond insurance company that has insured the Certificates or an issue of Additional Certificates, if any; PUBL,2720U 11381 82345.52 7 - -------- (b) Written confirmation from each Rating Agency that has rated the Certificates or an issue of Additional Certificates that its then existing rating with respect to the Certificates or any Additional Certificates will not be reduced or withdrawn as a result of such addition, substitution or release; (c) A certificate from an independent and qualified MAl real estate appraiser selected by the City setting forth his or her findings that the Site as constituted following such addition, substitution or release (i) has an annual fair rental value during the remainder of the Term which is equal to or greater than the total annual Lease Payments and Additional Payments (assuming that the annual Additional Payments due in the future will equal the average annual Additional Payments prior to such addition, substitution or release) required to be paid hereunder during any year of the remainder of the Term, and (ii) has a useful life at least equal to the remaining Term hereof; (d) Certificates of insurance applicable to the Site (at and after the addition, substitution or release) which comply with the requirements of Sections 5.1,5.3,5.4 and 5.5 hereof; and (e) An opinion of Bond Counsel to the effect that such addition, substitution or release will not adversely affect the exclusion from gross income for federal income tax purposes and the exemption from State personal income taxation of the Interest Component of the Lease Payments and that this Lease and the Site Lease, as amended, remain valid and binding obligations of the City. In connection with a substitution or release, all interests of the Agency, and its assignee, in the portion of the Site released shall terminate and the Agency and its assignee shall execute and record with the County Recorder of the County of San Diego all documents deemed necessary by the City to evidence such termination of interest. Upon receipt of the items described in subparagraphs (a), (b), (c), (d) and (e) above, the Trustee also shall execute a Lease Supplement and, if necessary, a Supplemental Trust Agreement, and shall not impose on the City any further conditions or prerequisites to the requested addition, substitution or release. The City shall cause the Lease Supplement to be recorded in the real property records of the City. All costs and expenses incurred in connection with such addition, substitution or release shall be borne by the City. No addition, substitution or release under this Section 3.6 shall be, by itself, the basis for any reduction in or abatement of the Lease Payments due from the City hereunder. SECTION 3.7 Further Assurances and Corrective Instruments. The Agency and the City agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Site hereby leased or intended so to be or for carrying out the expressed intention of this Lease. . PUBL,27201_111381 B2345.52 8 - ARTICLE IV AGREEMENT TO LEASE; TERM OF LEASE; LEASE PAYMENTS SECTION 4.1 Lease. The Agency hereby subleases the Site to the City upon the terms and conditions set forth herein. The subleasing by the Agency to the City of the Site described in Exhibit A hereto shall not effect or result in a merger of the City's leasehold estate pursuant to this Lease and its fee estate as lessor under the Site Lease, and the Agency shall continue to have and hold a leasehold estate in said Site pursuant to the Site Lease throughout the term of the Site Lease and the Term of this Lease. As to the Site, this Lease shall be deemed and constitute a sublease. SECTION 4.2 Term. The Term of this Lease shall commence on the Delivery Date for the Certificates and shall end on August 1. 20_, unless extended pursuant to Section 4.3 hereof, or unless terminated prior thereto upon the earliest of any of the following events: (a) Pavment of All Lease Pavments. The payment by the City of all Lease Payments required under Section 4.4 hereof and any Additional Payments required under Section 4.11 hereof; or (b) PreD~ment. The optional prepayment of all Lease Payments in accordance with Section 10.3 hereof and the payment of all Additional Payments due through such prepayment date. SECTION 4.3 Extension of Lease Term. The Term of this Lease may be extended up to August 1, 2035 in connection with the execution and delivery of any Additional Certificates. If on the final maturity date of the Certificates or any Additional Certificates all Interest Components and Principal Components represented thereby shall not be fully paid by the City, or if the Lease Payments or Additional Payments hereunder shall have been abated at any time as permitted by the terms hereof, then the Term shall be extended until all Certificates and Additional Certificates shall be fully paid, except that the Term shall in no event be extended beyond August 1, 2035. SECTION 4.4 Lease Payments. (a) Time and Amount. Subject to the provisions of Section 4.10 (regarding abatement in event of loss of use of any portion of the Site) and Article 10 hereof (regarding prepayment of Lease Payments), the City agrees to pay to the Agency, its successors and assigns, as annual rental for the use and possession of the Site, the Lease Payments (denominated into Interest Components and Principal Components). The Lease Payments are intended to be sufficient in both time and amount to pay when due the Principal Components and Interest Components represented by the Certificates and any Additional Certificates, and are due and payable in arrears and in immediately available funds on the fifth Business Day prior to each August 1 and February 1, commencing February 1, 1996 (the "Lease Payment Date") as set forth in Exhibit B hereto. In the event that any Additional Certificates are executed and delivered pursuant to the Trust PUBL,27201_11 13BIB2345.52 9 Agreement, the City and the Trustee shall execute an amendment to Exhibit B to state the Lease Payments due hereunder as a result of the execution and delivery of such Additional Certificates. (b) Credits. Any amount held in the Lease Payment Fund or the Interest Account of the Certificate Fund on the date any Lease Payment is made by the City (other than amounts required for payment of past due Principal Components or Interest Components with respect to any Certificates or Additional Certificates that have matured or been called for redemption and have not been presented for payment or amounts which have been paid with respect to a prior Lease Payment Date but not yet distributed to Owners) shall be credited towards the Lease Payment then due and payable. No payment need be made by the City on any Lease Payment Date if the amounts then held in the Lease Payment Fund and the Interest Account of the Certificate Fund (other than those amounts excluded under the prior sentence) are at least equal to the Lease Payment then required to be paid. (c) Rate on Overdue Pavments. In the event the City should fail to make any Lease Payments required by this Section 4.4, or any portion of any such Lease Payment, the Lease Payment or portion thereof in default shall continue as an obligation of the City until the amount in default shall have been fully paid, and the City agrees to pay the same with interest thereon, to the extent permitted by law, from the date such amount was originally payable at the rate equal to the original interest rate payable with respect to each Certificate or Additional Certificate, as applicable, represented by such delinquent Lease Payment. SECTION 4.5 No Withholding. Notwithstanding any dispute between the Agency and the City, other than a dispute arising under Section 4.10 hereof as a result of which the City has concluded that it may not legally pay the Lease Payments in dispute, the City shall make all Lease Payments when due and shall not withhold any Lease Payments pending the final resolution of such dispute. SECTION 4.6 Fair Rental Value. The Lease Payments and the Additional Payments (as defined in Section 4.11 hereof) shall be paid by the City in consideration of the right of possession of, and the continued quiet use and enjoyment of, the Site during each such period for which said rental is to be paid. The parties hereto have agreed and determined that such total rental to be paid hereunder does not exceed the fair rental value of the Site during the Term of this Lease. In making such determination, consideration has been given to the fair rental value of the Site (including but not limited to costs of maintenance, taxes and insurance), the uses and purposes which may be served by the Site and the essential public benefits therefrom which will accrue to the City and the general public. SECTION 4.7 Budget and Appropriation. The City covenants to take such action as may be necessary to include all Lease Payments and Additional Payments due hereunder in each of its proposed annual budgets and its final adopted annual budgets beginning with Fiscal Year 1995-96 through the Term of this Lease and to make the necessary appropriations for such Lease Payments and Additional Payments. The City shall furnish to the Trustee within 15 days following adoption of the final budget in each Fiscal Year a certificate stating that the Lease Payments were included in the final budget as adopted. PUBL27201_111381 B2345.52 10 . - To the extent that the amount of such payment becomes known after the adoption of the annual budget, such amounts shall be included and maintained in such budget as amended. The City covenants to take such action as is necessary to include such amounts in a supplemental budget of the City. The covenants on the part of the City herein contained shall be deemed to be and shall be construed to be ministerial duties imposed by law and it shall be the ministerial duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in this Lease agreed to be carried out and performed by the City. The obligation of the City to pay Lease Payments and Additional Payments hereunder shall constitute a current expense of the City and shall not in any way be construed to be a debt of the City, or the State, or any political subdivision thereof, in contravention of any applicable constitutional or statutory limitation or requirements concerning the creation of indebtedness by the City, the State, or any political subdivision thereof, nor shall anything contained herein constitute a pledge of general revenues, funds or moneys of the City or an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. SECTION 4.8 Assignment of Lease Payments. Certain of the Agency's rights under this Lease, including the right to receive and enforce payment of the Lease Payments to be made by the City hereunder, have been assigned to the Trustee, subject to certain exceptions, pursuant to the Assignment Agreement, to which assignment the City hereby consents. The Agency hereby directs the City, and the City hereby agrees, to pay to the Trustee at the Trustee's corporate trust office, or to the Trustee at such other place as the Trustee shall direct in writing, all Lease Payments or Prepayments thereof payable by the City hereunder. The Agency will not assign or pledge the Lease Payments or other amounts derived from the Site or from its other rights under this Lease except as provided under the terms of this Lease, or its duties and obligations except as provided under the Assignment Agreement and the Trust Agreement. SECTION 4.9 Use and Possession. The total Lease Payments and Additional Payments due in any Fiscal Year shall be for the use and possession of the Site for such Fiscal Year. During the Term of this Lease, the City shall be entitled to the exclusive use and possession of the Site, subject only to the Permitted Encumbrances. SECTION 4.10 Abatement of Lease Payments and Additional Payments. Except to the extent that proceeds of the type described in the following paragraph are available, the amount of Lease Payments and Additional Payments shall be abated during any period in which there is substantial interference with the use or possession of all or a portion of the Site by the City by condemnation, damage, destruction or title defect. The amount of such abatement shall be such that the resulting Lease Payments, exclusive of the amounts described in the following paragraph, do not exceed the fair rental value (as determined by an independent real estate appraiser selected by the City, who is not an employee of the City) for the use and possession of the portion of the Site for which no substantial interference has occurred. Such abatement shall continue for the period of the substantial interference with the use or possession of the Site. Except as provided herein, in the event of any such interference with use or possession, this Lease shall continue in full force and effect and the City waives any right to terminate this Lease by virtue of any such interference. PUBL,27201_1113B 1 82345.52 11 Notwithstanding a substantial interference with the use or possession of all or a portion of the Site, the City shall remain obligated to make Lease Payments (i) in an amount not to exceed the fair rental value during each Fiscal Year for the portion of the Site not damaged, destroyed, interfered with or taken, as determined by an independent real estate appraiser selected by the City (who is not an employee of the City); (ii) to the extent that moneys derived from any person as a result of any delay in the reconstruction, replacement or repair of the Site, or any portion thereof, are available to pay the amount which would otherwise be abated; or (iii) to the extent that moneys are available in the Certificate Fund or the Lease Payment Fund to pay the amount which would otherwise be abated, in which event the Lease Payments shall be payable from such amounts as an obligation of the City payable from a special fund. SECTION 4.11 Additional Payments. In addition to the Lease Payments, the City shall also pay such amounts ("Additional Payments") as shall be required for the payment of all administrative costs of the Agency and the City relating to the Site, the Certificates and any Additional Certificates, including without limitation all expenses, assessments, compensation and indemnification of the Trustee payable by the City under the Trust Agreement, any amounts required to be rebated to the federal government in order to comply with the provisions of Section 148 of the Code, taxes of any sort whatsoever payable by the Agency as a result of its lease of the Site or undertaking of the transactions contemplated herein or in the Trust Agreement, fees of auditors, accountants, attorneys or engineers, insurance premiums required by Article 5 hereof, items required by Section 7.7 hereof and all other necessary administrative costs of the Agency and the City or charges required to be paid by it in order to maintain its existence or to comply with the terms of the Certificates and any Additional Certificates or of the Trust Agreement, or to indemnify the Agency and its officers and directors. All such Additional Payments to be paid hereunder shall be paid when due directly by the City to the respective parties to whom such Additional Payments are owing. SECTION 4.12 Net-Net-Net Lease. This Lease shall be deemed and construed to be a "net-net-net lease" and the City hereby agrees that the Lease Payments shall be an absolute net return to the Agency, free and clear of any expenses, charges, counterclaims or set -offs whatsoever, except as expressly provided herein. ARTICLE V INSURANCE SECTION 5.1 Public Liability and Property Damage. (a) Coveral!e. The City shall maintain or cause to be maintained, throughout the Term hereof, a standard comprehensive general public liability and property damage insurance policy or policies in protection of the City and the Agency and their respective officers, agents and employees as additional insureds under the policy or policies. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the use or operation of the Site. PUBL,27201_1113B I 82345.52 12 - (b) Limits. Said policy or policies shall provide coverage in the minimum liability limits of $1,000,000 for personal injury or death of each person in each accident or event and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of $500,000 for damage to property resulting from each accident or event (subject to a deductible clause of not to exceed $250,000). Such public liability and property damage insurance may, however, be in the form of a single limit policy covering all such risks in an amount equal to the aggregate minimum liability limits set forth herein. (c) Joint or Self-Insurance. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance coverage carried by the City. Such liability insurance may be maintained by the City in the form of self-insurance which complies with Section 5. 6( e) hereof. (d) Pavment of Proceeds. The proceeds of such liability insurance shall be applied toward extinguishment or satisfaction of the liability with respect to which the insurance proceeds shall have been paid. SECTION 5.2 Worker's Compensation. The City shall also maintain worker's compensation insurance issued by a responsible carrier authorized under the laws of the State to insure its employees against liability for compensation under the Worker's Compensation Insurance and Safety Act now in force in the State; or any act hereafter enacted as an amendment or supplement thereto, or in lieu thereof such insurance, or a part thereof, may be maintained by the City in the form of self-insurance which complies with Section 5.6(e) hereof. SECTION 5.3 Hazard Insurance. (a) Coveralle. The City shall maintain or cause to be maintained, throughout the Term hereof, a policy or policies of insurance against loss or damage to the Site resulting from fire, lightning, vandalism, malicious mischief and such perils ordinarily defined as "extended coverage", excluding flood and earthquake; provided, however, that a flood and earthquake rider shall be purchased if the City, in its reasonable discretion, determines that such coverage is available from reputable insurers at commercially reasonable rates. Said policy or policies shall be maintained in an amount not less than the full replacement value of the Site, subject to a "deductible clause" not to exceed one hundred thousand dollars ($100,000) for anyone loss or, in the case of a flood and earthquake rider, ten percent (10%) of the coverage obtained and shall name the Agency as an additional insured under the policy or policies. The term "full replacement value" as used in this Section 5.3 shall mean the actual replacement cost of the improvements located on the Site (including the cost of restoring the surface of the Site, but excluding the cost of restoring trees, plants and shrubs). (b) Joint or Self-Insurance. Such insurance may be maintained as part of or in conjunction with any other insurance carried by the City. The City shall not maintain such insurance in the form of self-insurance. (c) Pavment of Net Proceeds. The Net Proceeds of such insurance shall be applied as provided in Section 6.1(a) hereof. PUBL,27201_1113BI B2345.52 13 SECTION 5.4 Rental Interruption Insurance. (a) Coveral!e and Amount. The City shall maintain or cause to be maintained rental interruption insurance in an amount not less than the scheduled Lease Payments in the next succeeding twelve month period during the Term hereof, to insure against loss of rental income from the Site caused by perils covered by the insurance required to be maintained as provided in Section 5.3 hereof. Such insurance shall be obtained not later than the Delivery Date for the Certificates and shall be increased as required in connection with each issue of Additional Certificates. (b) Joint Insurance. Such insurance may be maintained as part of or in conjunction with any other rental interruption insurance carried by the City. The City shall not maintain rental interruption insurance in the form of self-insurance. (c) Pavment of Proceeds. The proceeds of such rental interruption insurance shall be paid to the Trustee and deposited (1) first in the Reserve Account to make up any deficiencies therein, and (2) then deposited in the Lease Payment Fund, to be held therein and credited towards the payment of the Lease Payments in the order in which such Lease Payments come due and payable. SECTION 5.5 Title Insurance. The City shall obtain on the Delivery Date for the Certificates and in connection with any substitution of real property pursuant to Section 3.6 hereof, title insurance on the Site, in the form of a CLTA leasehold title policy or an ALTA Owner's/Leasehold Policy with Western Regional Exceptions, the title policy or policies in effect at any time with respect to the Site shall be in an amount at least equal to the aggregate Principal Component of unpaid Lease Payments, could be issued by a company of recognized standing duly authorized to issue the same. The title policy or policies shall insure the City's leasehold estate hereunder in the Site, subject only to Permitted Encumbrances. The proceeds of such insurance shall be applied as provided in Section 6. 1 (a) hereof. The City shall not maintain title insurance in the form of self-insurance. SECTION 5.6 General Insurance Provisions. (a) Form of Policies. All policies of insurance required to be procured and maintained pursuant to this Lease, other than the worker's compensation insurance and the title insurance specified in Sections 5.2 and 5.5 hereof, respectively, and any statements of self-insurance shall provide that the City and the Trustee shall receive 30 days' notice of each expiration, or any intended cancellation thereof or reduction of the coverage provided thereby. Insurance required to be procured and maintained pursuant to Section 5.3 hereof (regarding hazard insurance); Section 5.4 hereof (regarding rental interruption insurance) and Section 5.5 hereof (regarding title insurance) shall provide that all proceeds thereunder shall be payable to the Trustee as the insured or loss payee. (b) Pavment of Premiums. The City shall payor cause to be paid when due the premiums for all insurance policies required by this Lease. (c) Protection of the Trustee. The Trustee shall not be responsible for the sufficiency or adequacy of any insurance herein required and shall be fully protected in PUBL27201_111381 B2345.52 14 - accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by the City. (d) Evidence of Insurance. The City shall deliver certificates to the Trustee within the 30 days prior to July 1 of each year during the Term of this Lease to the effect that the insurance policies required by this Lease are in full force and effect. (e) Self-Insurance. Any self-insurance maintained by the City pursuant to Section 5.1(c) or 5.2 hereof shall afford reasonable protection to the Agency, the City and the Trustee. Before the City elects to provide self-insurance hereunder, and on each July 1 thereafter, there shall be filed with the Trustee a certificate of an actuary, independent insurance consultant selected by the City, or other qualified person selected by the City, who may be the City's Risk Manager, stating that, in the opinion of the signer, the method or plan of protection is sound and affords adequate protection to the Agency, the City and the Trustee against loss and damage from the hazards and risks covered thereby, and there shall also be filed with the Trustee a certificate of the City setting forth the details of such substitute method or plan. The Trustee shall be fully protected in relying on the certificate provided in accordance with this Section 5.6(e) and shall not be responsible for the review or verification of the certificate describing such method or plan. The City shall provide adequate reserves to cover the amount of any deductible provisions of the insurance required to be maintained pursuant to Sections 5.1, 5.2, 5.3 and 5.4 hereof. SECTION 5.7 Cooperation. The Agency shall cooperate fully with the City at the expense of the City in filing any proof of loss with respect to any insurance policy maintained pursuant to this Article and in the prosecution or defense of any prospective or pending condemnation proceeding with respect to the Site or any portion thereof. ARTICLE VI DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS SECTION 6.1 Application of Net Proceeds. (a) Deoosit in Insurance and Condemnation Fund. Pursuant to Section 405 of the Trust Agreement, the Trustee shall deposit the Net Proceeds of any insurance required by Section 5.3 hereof and the proceeds of the title insurance required by Section 5.5 hereof in the Insurance and Condemnation Fund promptly upon receipt thereof. The City and/or the Agency shall transfer to the Trustee any other Net Proceeds received by the City and/or Agency in the event of any taking by eminent domain or condemnation with respect to the Site, for deposit in the Insurance and Condemnation Fund. (b) Disbursement for ReDlacement or Repair of the Site. Upon receipt of the certification described in paragraph (1) below and the requisition described in paragraph (2) below, the Trustee shall disburse moneys in the Insurance and PUBL,2720U 11381 82345.52 15 Condemnation Fund to the person, firm or corporation named in the requisition as provided in Section 405 of the Trust Agreement. (1) Certification. An Authorized Representative of the City must provide to the Agency and the Trustee a certificate stating that: (i) Sufficiency of Net Proceeds. The Net Proceeds available for such purpose, together with any other funds supplied by the City for such purpose, are sufficient to repair or replace the Site to a use which will have an annual fair rental value not less than the annual Lease Payments and Additional Payments (assuming that the annual Additional Payments due in the future will equal the average annual Additional Payments prior to such date) due hereunder, and (ii) Timelv ComDletion. In the event that damage, destruction, title defect or taking results in an abatement of Lease Payments, such replacement or repair can be fully completed within a period not in excess of the period in which rental interruption insurance proceeds as described in Section 5.4 hereof, together with other legally available funds, will be available to pay in full all Lease Payments coming due during such period. (2) Reauisition. An Authorized Representative of the City must state with respect to each payment to be made (i) the requisition number, (ii) the name and address of the person, firm or corporation to whom payment is due, (iii) the amount to be paid, and (iv) that each obligation mentioned therein has been properly incurred, is a proper charge against the Insurance and Condemnation Fund, has not been the basis of any previous withdrawal, and specifying in reasonable detail the nature of the obligation. Any balance of the Net Proceeds remaining after such replacement or repair has been completed shall be disbursed as provided in Section 405 of the Trust Agreement. (c) Disbursement for PreDavment. If an Authorized Representative of the City notifies the Trustee in writing of the City's determination that the certification provided in Section 6.1(b)(1) hereof cannot be made or replacement or repair of any portion of the Site is not economically feasible or in the best interest of the City, then the City shall deposit with the Trustee an amount which when combined with the Net Proceeds will prepay enough Lease Payments and result in a corresponding redemption of Certificates and Additional Certificates such that the fair rental value of the remaining portion of the Site is sufficient to provide for payment of the Principal Components and Interest Components due with respect to the Certificates and Additional Certificates to remain Outstanding under the Trust Agreement after such Net Proceeds and such deposit by the City are applied to redeem Certificates and Additional Certificates under the Trust Agreement. The Trustee shall promptly transfer the Net Proceeds in respect of such portion to the Redemption Account of the Certificate Fund as provided in Section 405 of the Trust Agreement and apply them to the redemption of the Certificates and Additional Certificates as provided in Section 310(a) of the Trust Agreement and prepayment of Lease Payments as provided in Section 10.2 hereof. pUBL,27201_1113BI B2345.52 16 - - -. ARTICLE VII COVENANTS WITII RESPECT TO THE SITE SECTION 7.1 Use of the Site. The City represents and warrants that it has an immediate essential need for all of the Site, which need is not expected to be temporary or to diminish in the foreseeable future. SECTION 7.2 Leasehold Interest in the Site. (a) Al!ency Holds Leasehold Interest Durinl! Term. During the term of the Site Lease, the Agency shall hold a leasehold interest in the Site pursuant to the Site Lease. The City shall take any and all actions reasonably required, including but not limited to executing and filing any and all documents, reasonably required to maintain and evidence the Agency's leasehold interest in the Site at all times during the term of the Site Lease. The execution of this Lease shall not cause a merger of the interests created by the Site Lease and this Lease. (b) l.p"'<ehold Interest Transferred to City at End of Term. On the day of the expiration of the Term as provided in Section 4.2 hereof, the Agency's leasehold interest in the Site pursuant to the Site Lease and all right, title and interest of the Agency in the Site shall be transferred to and vest in the City, free and clear of any interest of the Agency or its assigns, without the necessity of any additional document of transfer. SECTION 7.3 Option to Prepay Lease Payments. The City may exercise an option to prepay all or a portion of the Lease Payments in accordance with Article 10 hereof and, by prepaying Lease Payments in the amounts necessary to cause the termination of the Term as provided in Section 4.2(b) hereof, terminate the Agency's leasehold interest in the Site under the Site Lease and all right, title and interest of the Agency in the Site. If the City elects to prepay a portion of the Lease Payments, and if the Lease Payments have been allocated to Components of the Site in Exhibit B hereto, then it may specify to which Component of the Site such prepayment is applicable. SECTION 7.4 Quiet Enjoyment. Subject only to the Permitted Encumbrances, during the Term of this Lease the Agency shall provide the City with quiet use and enjoyment of the Site, and the City shall during such Term peaceably and quietly have and hold and enjoy the Site, without suit, trouble or hindrance from the Agency, or any person or entity claiming under or through the Agency except as expressly set forth in this Lease or the Trust Agreement. The Agency will, at the request of the City, join in any legal action in which the City asserts its right to such possession and enjoyment to the extent the Agency may lawfully do so. Notwithstanding the foregoing, the Agency shall have the right of access to the Site as provided in Section 7.6 hereof. SECTION 7.5 Installation of City's Personal Property. The City may at any time and from time to time, in its sole discretion and at its own expense, install or permit to be installed items of equipment or other personal property in or upon any portion of the Site. All such items shall remain the sole personal property of the City, regardless of the manner in which PUBL,27201_1113B I B2345.52 17 the same may be affixed to such portion of the Site, in which neither the Agency nor the Trustee shall have any interest, and may be modified or removed by the City at any time; orovided that the City shall repair and restore any and all damage to such portion of the Site resulting from the installation, modification or removal of any such items of equipment. Nothing in this Lease shall prevent the City from purchasing items to be installed pursuant to this Section, provided that no lien or security interest attaching to such items shall attach to any part of the Site. SECTION 7.6 Access to the Site. The City agrees that the Agency, and the Agency's successors and assigns, shall have (1) the right at all reasonable times to enter upon the Site or any portion thereof to examine and inspect the Site, and (2) such rights of access to the Site as may be reasonably necessary to cause the proper maintenance of the Site in the event of failure by the City to perform its obligations hereunder. SECTION 7.7 Maintenance, Utilities, Taxes and Assessments. (a) Maintenance: ReDair and Reolacement. Throughout the Term of this Lease, as part of the consideration for the rental of the Site, all repair and maintenance of the Site shall be the responsibility of the City, and the City shall pay for or otherwise arrange for the payment of the cost of the repair and replacement of the Site resulting from ordinary wear and tear or want of care on the part of the City or any sublessee thereof. The City shall provide or cause to be provided all security service, custodial service, power, gas, telephone, light, heating and water, and all other public utility services for the Site. In exchange for the Lease Payments herein provided, the Agency agrees to provide only the Site. (b) Tax and Assessments: Utility Charl!es. The City shall also payor cause to be paid all taxes and assessments, including but not limited to utility charges of any type or nature charged to the Agency or the City or levied, assessed or charged against any portion of the Site or the respective interests or estates therein; provided that, with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are required to be paid during the Term of this Lease as and when the same become due. (c) Contests. The City may, at its expense and in its name, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom; Drovided that prior to such nonpayment it shall furnish the Agency and the Trustee with the opinion of an Independent Counsel to the effect that, by nonpayment of any such items, the interest of the Agency in such portion of the Site will not be materially endangered and that the Site will not be subject to loss or forfeiture. Otherwise, the City shall promptly pay such taxes, assessments or charges or make provisions for the payment thereof in form satisfactory to the Agency. The Agency will cooperate fully in such contest, upon the request and at the expense of the City. pUBL,27201_111381 B2345.52 18 - - SECTION 7.8 Modification of the Site. .... (a) Additions. Modifications and ImDrovements. The City shall, at its own expense, have the right to make additions, modifications and improvements to any portion of the Site if such additions, modifications or improvements are necessary or beneficial for the use of such portion of the Site. Such additions, modifications or improvements shall not in any way damage any portion of the Site or cause it to be used for purposes other than those authorized under the provisions of state and federal law or in any way which would impair the exclusion from gross income for federal income tax purposes of the Interest Components of the Lease Payments or diminish the fair rental value of the Site; and the Site, upon completion of any additions, modifications or improvements made pursuant to this Section, shall be of a value which is not less than the value of the Site immediately prior to the making of such additions, modifications or improvements. (b) No Liens. Except for Permitted Encumbrances, the City will not permit any mechanic's or other lien to be established or remain against the Site for labor or materials furnished in connection with any additions, modifications or improvements made by the City pursuant to this Section; Drovided that if any such lien is established and the City shall first notify or cause to be notified the Agency of the City's intention to do so, the City may in good faith contest any lien filed or established against the Site, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom and shall provide the Agency and its assigns with full security against any loss or forfeiture which might arise from the nonpayment of any such lien, in form satisfactory to the Trustee as assignee of the Agency. The Agency will cooperate fully in any such contest, upon the request and at the expense of the City. SECTION 7.9 Liens. Except as permitted by this Lease (including without limitation Section 7.8, Section 8.1 or Section 8.2 hereof), the City shall not, directly or indirectly, create, incur, assume or suffer to exist any mortgage, pledge, liens, charges, encumbrances or claims, as applicable, on or with respect to the Site, other than Permitted Encumbrances and other than the respective rights of the Agency and the City as herein provided. Except as expressly provided in this Article, the City shall promptly, at its own expense, take such action as may be necessary to duly discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim, for which it is responsible, if the same shall arise at any time; Drovided that the City may contest such lien or claim if it desires to do so, so long as such contest will not materially, adversely affect the rights of the City to the Site or the payment of Lease Payments hereunder. The City shall reimburse the Agency and its assigns for any expense incurred by it in order to discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim. SECTION 7.10 Agency's Disclaimer of Warranties. THE AGENCY MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR FITNESS FOR THE USE CONTEMPLATED BY THE CITY OF THE SITE OR ANY PORTION THEREOF. THE CITY ACKNOWLEDGES THAT THE AGENCY IS NOT A MANUFACTURER OF THE SITE OR OF ANY PORTION THEREOF, AND IS NOT A DEALER THEREIN, AND THAT THE CITY IS LEASING THE SITE AS IS. In no event shall the Agency be liable for incidental, indirect, special or consequential PUBL,27201_111381 B2345.52 19 .~-~ damages, in connection with or arising out of this Lease, the Site Lease, the Assignment Agreement or the Trust Agreement for the existence, furnishing, functioning or City's use and possession of the Site. SECTION 7.11 City's Right to Enforce Warranties of Manufacturers, Vendors or Contractors. The Agency hereby irrevocably appoints the City its agent and attorney-in-fact during the Term, so long as the City shall not be in default hereunder, to assert from time to time whatever claims and rights, including without limitation, warranty claims, claims for indemnification and claims for breach of any representations, respecting the Site or the Project which the Agency may have against any vendor or contractor, or any agents thereof. The City's sole remedy for the breach of any such warranty, indemnification or representation shall be against the vendor or contractor with respect thereto, and not against the Agency, nor shall such matter have any effect whatsoever on the rights and obligations of the Agency with respect to this Lease, including the right to receive full and timely Lease Payments and to cause the City to make all other payments due hereunder. The City shall be entitled to retain any and all amounts recovered as a result of the assertion of any such claims and rights. The Agency shall, upon the City's request and at the City's expense, do all things and take all such actions as the City may request in connection with the assertion of any such claims and rights. The City expressly acknowledges that neither the Agency nor the Trustee makes, or has made, any representation or warranty whatsoever as to the existence or availability of such warranties of the manufacturer, vendor or contractor with respect to any portion of the Project. ARTICLE VIII ASSIGNMENT, SUBLEASING AND AMENDMENT SECTION 8.1 Assignment by the Agency. Except as provided herein and in the Trust Agreement, the Agency will not assign this Lease, or any right, title or interest of the Agency in and to this Lease, to any other person, firm or corporation so as to impair or violate the representations, covenants and warranties contained in Section 2.2 hereof. SECTION 8.2 Assignment and Subleasing by the City. (a) Assil!nment. This Lease may not be assigned by the City unless the City receives an opinion of Bond Counsel stating that such assignment does not adversely affect the exclusion from gross income for federal income tax purposes or the exemption from State personal income taxation of the Interest Components of the Lease Payments. In the event that this Lease is assigned by the City, the obligation to make Lease Payments and Additional Payments and perform the other covenants of the City hereunder shall remain the obligation of the City. PUBL27201_11138IB2345.52 20 - - (b) Sublease. The City may sublease any portion of the Site, with the prior written consent of the Trustee as assignee of the Agency, subject to all of the following conditions: (i) this Lease and the obligation of the City to make Lease Payments and Additional Payments and perform the other covenants of the City hereunder shall remain obligations of the City; (ii) the City shall, within 30 days after the delivery thereof, furnish or cause to be furnished to the Agency and the Trustee a true and comp lete copy of such sublease; and (iii) no sublease shall cause the Interest Components of the Lease Payments due with respect to the Site to become subject to federal income taxes or State personal income taxes. No consent of the Trustee may be given under this subsection (b) unless the Trustee shall have first received opinions of Independent Counsel with respect to the matters set forth in clause (i) above and the opinion of Bond Counsel with respect to the matters set forth in clause (iii) above. SECTION 8.3 Amendments and Modifications. This Lease may be amended or any of its terms modified in accordance with Article VII of the Trust Agreement, with the written consent of the Trustee, the City and the Agency. ARTICLE IX EVENTS OF DEF AUL T AND REMEDIES SECTION 9.1 Events of Default Dermed. The following shall be "events of default" under this Lease and the terms "events of default" and "default" shall mean, whenever they are used in this Lease, anyone or more of the following events: (a) Payment Default. Failure by the City to pay any Lease Payment or Additional Payments required to be paid hereunder on the date such payments are due hereunder. (b) Covenant Default. Failure by the City to observe and perform any warranty, covenant, condition or agreement on its part to be observed or performed herein or otherwise with respect hereto or in the Trust Agreement or in the Site Lease, other than as referred to in clause (a) of this Section, for a period of 30 days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Agency, the Trustee or, subject to the provisions of Section 505 of the Trust Agreement, the Owners of not less than twenty-five percent (25 %) in aggregate principal amount of Certificates and Additional Certificates then Outstanding; Drovided, however, if the failure stated in the notice cannot be corrected within the applicable period, then no PUBL,27201_1113B 1 82345.52 21 event of default shall have occurred so long as corrective action is instituted by the City within the applicable period and diligently pursued until the default is corrected. (c) BankruDtCY or Insolvency. The filing by the City of a case in bankruptcy, or the subjection of any right or interest of the City under this Lease to any execution, garnishment or attachment, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted under the provisions of the federal bankruptcy code, as amended, or under any similar act which may hereafter be enacted . SECTION 9.2 Remedies on Default. Whenever any event of default referred to in Section 9.1 hereof shall have happened and be continuing, it shall be lawful for the Agency, or its assignee, subject to Section 9.7 hereof, to exercise any and all remedies available pursuant to law or granted pursuant to this Lease; Drovided, however, that notwithstanding anything herein or in the Trust Agreement to the contrary, THERE SHALL BE NO RIGHT UNDER ANY CIRCUMSTANCES TO ACCELERATE THE LEASE PAYMENTS OR OTHERWISE DECLARE ANY LEASE PAYMENTS NOT THEN DUE OR PAST DUE TO BE IMMEDIATELY DUE AND PAYABLE NOR SHALL THE AGENCY OR ITS ASSIGNEE HA VB ANY RIGHT TO REENTER OR RELET THE SITE, EXCEPT AS DESCRffiED IN THIS SECTION 9.2. So long as any event of default exists hereunder, the Agency, or its assignee, is expressly authorized hereby to enter and re-enter the Site for the purpose of taking possession of any portion of the Site and to re-let the Site and, in addition, at its option, with or without such entry to terminate this Lease as described below. The City hereby irrevocably appoints the Agency, or its assignee, as the agent and attorney-in-fact of the City either to enter upon the Site for purposes of terminating this Lease or to enter upon and re-Iet the Site in the event of default hereunder by the City. The City hereby exempts and agrees to save harmless the Agency and its assignee from any costs, loss or damage whatsoever arising or occasioned by any lawful entry upon or re-letting of the Site. The City hereby waives any and all claims for damages caused, or which may be caused, by the Agency, or its assignee, lawfully entering and taking possession of the Site, other than damages caused by the negligence of the Agency, or its assignee. The City agrees that the terms of this Lease constitute full and sufficient notice of the right of the Agency, or its assignee, to re-enter the Site for purposes of terminating this Lease and, alternatively, to enter upon and re-Iet the Site in the event of such re-entry without effecting a surrender of this Lease. In the event the Agency, or its assignee, elects to terminate this Lease, the City agrees to surrender immediately possession of the Site and to pay the Agency, or its assignee, all damages recoverable at law that the Agency, or its assignee, may incur by reason of default by the City, including, without limitation, any costs, loss or damage whatsoever arising out of, in connection with, or incident to any re-entry upon the Site by the Agency, or its duly authorized agents in accordance with such termination. Neither notice to pay rent or to deliver up possession of the Site given pursuant to law nor any entry or re-entry by the Agency, or its assignee, nor any proceeding in unlawful detainer, or otherwise, brought by the Agency, or its assignee, for the purpose of effecting such re-entry or obtaining possession of the Site nor the appointment of a PUBL,27201_111381 B2345.52 22 - receiver upon initiative of the Agency, or its assignee, to protect the interest of the Agency or its assignee under this Lease shall of itself operate to terminate this Lease, and no termination of this Lease on account of default by the City shall be or become effective by operation of law or acts of the parties hereto, or otherwise, unless and until the Agency, or its assignee, shall have given written notice to the City of its election to terminate this Lease. The City covenants and agrees that no surrender of the Site or any termination of this Lease shall be valid in any manner or for any purpose whatsoever unless stated or accepted by the Agency, or its assignee, by written notice. In the event that the Agency, or its assignee, does not elect to terminate this Lease, the City agrees to and shall remain liable for the payment of Lease Payments and Additional Payments and the performance of all conditions herein contained and shall reimburse the Agency, or its assignee, for any deficiency arising out of the re-Ietting of the Site, or, in the event that the Agency, or its assignee, does not re-Iet the Site, then for the full amount of the Lease Payments and Additional Payments to the end of the Term of this Lease, but said Lease Payments, Additional Payments and/or deficiency shall be payable only at the same time and in the same manner as provided in Sections 4.4 and 4.11, notwithstanding such entry or re-entry by the Agency, or its assignee, or any suit in unlawful detainer, or otherwise, brought by the Agency, or its assignee, for the purpose of effecting such entry or re-entry or obtaining possession of the Site or the exercise of any other remedy by the Agency or its assignee. In the event of a default, the City further agrees to reimburse the Agency, and its assignee, for any cost or expense, including attorneys' fees, incurred by the Agency or its assignee in connection with the exercise by the Agency, or its assignee, of the remedies hereunder. SECTION 9.3 No Remedy Exclusive. No remedy conferred herein upon or reserved to the Agency is intended to be exclusive and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Lease or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Agency to exercise any remedy reserved to it in this Article it shall not be necessary to give any notice, other than such notice as may be required in this Article or by law. SECTION 9.4 Agreement to Pay Attorneys Fees and Expenses. In the event either party to this Lease should default under any of the provisions hereof and the nondefaulting party should employ attorneys or incur other expenses for the collection of moneys or the enforcement of performance or observance of any obligation or agreement on the part of the defaulting party contained herein, the defaulting party agrees that it will pay on demand to the nondefaulting party the reasonable fees and disbursements of such entity's attorneys and such other expenses so incurred by the nondefaulting party. SECTION 9.5 No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Lease should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. pUBL,27201_1113BI B2345.52 23 SECTION 9.6 Application of the Proceeds Following Default. All amounts received by the Agency under this Article 9 (other than fees and expenses recovered under Section 9.4 above) shall be deposited by the Trustee in the Lease Payment Fund for application in accordance with Section 504 of the Trust Agreement. SECTION 9.7 Trustee and Certificate Owners to Exercise Rights. Such rights and remedies as are given to the Agency under this Article 9 have been assigned by the Agency to the Trustee under the Assignment Agreement and the Trust Agreement, to which assignment the City hereby consents. Such rights and remedies shall be exercised by the Trustee, the Certificate Owners and owners of any Additional Certificates as provided in Article V of the Trust Agreement. ARTICLE X PREPAYMENT OF LEASE PAYMENTS SECTION 10.1 Security Deposit. Notwithstanding any other provision of this Lease, the City may, on any date, secure the payment of any unpaid Lease Payment attributable to the Site as set forth in Exhibit B hereto by an irrevocable deposit by it with the Trustee of cash and/or Permitted Investments of the type described in paragraph (b) of the definition thereof, which are adequate in the opinion of an independent certified public accountant to provide for payment of such unpaid Lease Payment as it becomes due and payable hereunder. In the event that the City has secured the payment of all unpaid Lease Payments attributable to the Site, and provided that the City has made arrangements acceptable to the Trustee to pay any Additional Payments due hereunder, all obligations of the City under this Lease, and all security provided by this Lease for said obligations, shall cease and terminate, excepting only the obligation of the City to make, or cause to be made, Lease Payments from such deposit. Said deposit shall be deemed to be and shall constitute a special fund for the payment of Lease Payments in accordance with the provisions of this Lease. The Agency shall execute and deliver such further instruments and take such further action as may reasonably be requested by the City for carrying out the leasehold interest transfer for which a security deposit is made hereunder. SECTION 10.2 Extraordinary Prepayment From Net Proceeds. The City shall be obligated to prepay the Lease Payments in whole or in part on any date, from and to the extent of any Net Proceeds transferred to the Redemption Account pursuant to Section 405 of the Trust Agreement. The City and the Agency hereby agree that such proceeds shall be credited towards the City's obligations hereunder such that approximately equal annual Lease Payments will prevail with respect to the Site following such prepayment and, if the Lease Payments have been allocated to discrete Components of the Site in Exhibit B hereto, the Lease Payments with respect to the Component or Components from which such Net Proceeds were delivered will be reduced accordingly. SECTION 10.3 Optional Prepayment. Subject to the terms and conditions of this Section, the Agency hereby grants an option to the City to prepay in whole or in part the Principal Components of Lease Payments relating to the Site, to the extent, on the dates and at pUBL,27201_111381 B2345.52 24 - - the prepayment prices provided in Section 310(c) of the Trust Agreement as such Section 310(c) may be amended from time to time with respect to Additional Certificates. The City shall execute said option by giving written notice to the Trustee thereof at least 45 days (or such shorter period as approved by the Trustee) prior to the date of redemption of Certificates and Additional Certificates from such prepayment and depositing with said notice cash in the minimum amount of (1) accrued interest on the Principal Component of. Lease Payments to be prepaid to the date of redemption of Certificates and Additional Certificates with the proceeds of such prepayment, plus (2) the Principal Component of any Lease Payments to be prepaid, plus (3) the applicable prepayment premium described in such Section 310(c) of the Trust Agreement as such Section 31O(c) may be amended from time to time with respect to Additional Certificates. SECTION 10.4 Sinking Fund Redemption. The City and the Agency acknowledge that the Term Certificates are subject to mandatory redemption from the Principal Components of Lease Payments on the dates, at the times and in the amounts provided in Section 31 O(b) of the Trust Agreement. SECTION 10.5 Credit for Amounts on Deposit. In the event of prepayment of the Lease Payments in full under this Article 10 and the payment of all due and payable Additional Payments, such that the Trust Agreement shall be discharged by its terms as a result of such prepayment, all amounts then on deposit in the Lease Payment Fund and the Certificate Fund shall be credited toward the amounts then required to be so prepaid. SECTION 10.6 Effect of Prepayment. (a) In Whole. In the event that the City prepays all remaining Lease Payments pursuant to Section 10.3 or Section 10.2 hereof and has paid all Additional Payments due hereunder, the City's obligations under this Lease shall thereupon cease and terminate, including but not limited to the City's obligation to continue to pay Lease Payments hereunder. (b) In Part. In the event the City prepays less than all of the remaining Principal Component of the Lease Payments pursuant to Section 10.2 or 10.3 hereof, the amount of such prepayment shall be applied to reduce the Principal Component of the remaining Lease Payments corresponding to the resulting prepayment of the Principal Component with respect to the Certificates and the Additional Certificates. ARTICLE XI MISCELLANEOUS SECTION 11.1 Notices. All notices, certificates or other communications hereunder to the Agency and City shall be in writing and shall be sufficiently given and shall be deemed given when delivered or mailed by certified mail, postage prepaid, to the parties listed below: PUBL,27201_1113B 1 82345.52 25 ----- If to the City: City of Poway 13325 Civic Center Drive Poway, California 92064 Attention: City Manager (619) 679-4204 Telecopier: (619) 748-1455 If to the Agency: Poway Redevelopment Agency 13325 Civic Center Drive Poway, California 92064 Attention: Executive Director (619) 679-4204 Telecopier: (619) 748-1455 If to the Trustee: Bank of America National Trust and Savings Association 333 South Beaudry, 25th Floor #8510 Los Angeles, California 90071 Attention: Corporate Trust Department (213) 345-_ Telecopier: (213) Notice shall also be given to the Rating Agency at the address(es) then in effect for the Rating Agency pursuant to Section 908 of the Indenture. Notices to the Trustee shall be given initially either telephonically or by written telecommunication and shall then be confirmed in writing delivered by registered or certified mail, return receipt requested. The Agency, the City and the Trustee, by notice given hereunder, may designate different addresses to which subsequent notices, certificates or other communications will be sent. SECTION 11.2 Binding Effect. This Lease shall inure to the benefit of and shall be binding upon the Agency and the City and their respective successors and assigns. SECTION 11.3 Severability. In the event any provision of this Lease shall be held invalid or unenforceable by a court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. SECTION 11.4 Execution in Counterparts. This Lease may be executed in any number of counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 11.5 Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State. SECTION 11.6 Captions. The captions or headings in this Lease are for convenience only and in no way define, limit or describe the scope or intent of any provisions or sections of this Lease. PUBL,27201_11 1381B2345.52 26 _. IN WITNESS WHEREOF, the Agency has caused this Lease to be executed in its name - by its duly authorized officers, and the City has caused this Lease to be executed in its name by its duly authorized officers, as of the date first above written. POWAY REDEVELOPMENT AGENCY, as Lessor By: Chairperson ATTEST: Secretary CITY OF POWAY, as Lessee By: Mayor ATTEST: City Clerk PUBL,27201_1I 138IB2345.52 27 -- - -----...-- CERTIFICATE OF ACCEPTANCE This is to certify that the interest in real property conveyed under the foregoing to the City of Poway, a body corporate and politic, is hereby accepted by the undersigned officer or agent on behalf of the City Council of the City of Poway, pursuant to authority conferred by resolution of the said City Council adopted on , 1995, and the grantee consents to recordation thereof by its duly authorized officer. Dated: , 1995 CITY OF POW A Y By: Its: Mayor PUBL,27201_1 1 138182345.52 _. State of California ) ) ss. County of ) On , 199_, before me, (name. title of officer. e.g.. Jane Doe. Notary Public") personally appeared (name(s) of signer(s)) 0 personally known to me -oR- D proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in hislher/their authorized capacity lies , and that by hislher/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Witness my hand and official seal. (Signature of Notary) Capacity claimed by signer: (This section is OP110NAL.) D Individual D Corporate Officer( s): 0 Partner(s): D General D Limited D Attorney-in-fact D Trustee(s) D Guardian/Conservator 0 Other: Signer is representing: (name OJ person(s) or ennty(les)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. TmS CERTIFICATE Title or Type of Document MUST BE ATTACHED TO THE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above - PUBL,27201_11138182345.52 State of California ) ) ss. County of ) On , 199_, before me, (name. title of officer, e.g.. Jane Doe. Notary Public") personally appeared (name(s) of signer(s)) 0 personally known to me -OR- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity/ies, and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Witness my hand and official seal. (Signature of Notary) Capacity claimed by signer: (!his section is OPTIONAL.) 0 Individual 0 Corporate Officer(s): 0 Partner( s): o General o Limited 0 Attorney - in-fact 0 Trustee( s) 0 Guardian/Conservator 0 Other: Signer is representing: (name oj person(s) or enhty(U!S)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. THIS CERTIFICATE Title or Type of Document MUST BE ATTACHED TO THE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above PUBL,2720U 11381 B2345.52 - State of California ) ) ss. County of ) On , 199_, before me, (name, title of officer, e.g.. Jane Doe, Notary Public") personally appeared (name(s) of signer(s)) 0 personally known to me -QR- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity/ies, and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Witness my hand and official seal. (Signature of Notary) - Capacity claimed by signer: (This sectiOll is OP110NAL.) 0 Individual 0 Corporate Officer(s): 0 Partner(s): o General o Limited 0 Attorney-in-fact 0 Trustee(s) 0 Guardian/Conservator 0 Other: Signer is representing: (name OJ person(s) or entlty(le&)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. THIS CERTIFICATE Title or Type of Document MUST BE ATTACHED TO THE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above PUBL,27201_1 1 138182345.52 State of California ) ) ss. County of ) On , 199_, before me, (name, tille of officer. e.g.. Jane Doe. Notary Public") personally appeared (name(s) of signer(s)) 0 personally known to me -QR- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in hislher/their authorized capacity/ies, and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Witness my hand and official seal. (Signature of NOlary) Capacity claimed by signer: (This section is OP110NAL.) 0 Individual 0 Corporate Officer(s): 0 Partner(s): o General o Limited 0 Attorney-in-fact 0 Trustee( s) 0 Guardian/Conservator 0 Other: Signer is representing: (name oj person(s) or enhty(les)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. THIS CERTIFICATE Title or Type of Document MUST BE ATTACHED TO THE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above PUBL,2720U 11381 B2345.52 EXHIBIT A DESCRIPTION OF THE SITE Poway Royal Mobilehome Park with a total of 399 spaces, recreational and community buildings, parking and storage lots, and landscaping located on the property describred below: PUBL,27201_11138182345.52 A-1 ----- '. . _.110. '01471 -13 1 DESCllIPTlON ..ucn 1. All of tIl. ....tIl..1f of _ __n Qun.. .f ....i_ U. _.Up 14 'outll. laD.. 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'0. .01471 013 2 DESCRIP110N ,..tl t.btaCI a.aqnt " ..1. C1&nlt lorth ". 10' 00' lalt, 20.11 ,..t to &be ...imU... of . .....e.t. '71.00 foot 1'1'1"1 CV91. CODe'" lDU",,-.'\lr1,. t.lwD.CI .or~...t'l'l, aloaa ~ arc of ..1. Car9I, ~OUIh . CeRtl'al aac1. .f SO. 04' 00', . 411L1DCI .f '1.11 f..tl t.beae. &&aIIAt to ..1. carge. .Dr~ .6- 14' 00' ...t, 171.70 f.n to &!lo ...laIWlI of a toq...t J7S. 00 foot .0lU... ....... -... .ou~...t'1'17J t.beDCI .Dr~..t.rl,. alODl (be arc .f ..1. curwl, ~.Ulh . c~tr.l ....1. of U. 11' 00' . .1.toIlC. of 151." f..t, dI..... toq'Bt U 101. """. _o.dI It_ 12' 00. ...t, 101." f..t ~o . f01Dt .. tba "Itlrl, ltDe .f ..i. '.a~.t Qun.ar of PI aIN'tlIftI' Qurttr of ...\loa 1,. ....c. lonll 01- 11' SO' lan, al_ 101. SonlrlJ l1a1. 14 0.14 f.lt. .eo . 1.... U dll ,.1IIt .f ...laIWlI. lPA&C&L 2. AD ..._t ... .1tht ef -J I. ,..IIU. I'" .......... WO. ... 0.1." dI. V....o1J 00.00 f... .f dll __n Quarter of dI. ....&!lo... Quartl' ... &!lo V....o1J 10.00 f.n of dll _o._n Quarter of &!lo .......n Quartl' of dI. ....&!lo... Qua.... of ...t1_ 11, ~_.l>1p 14 ....dI. ..... 2 V.... loa ......lUao IIorU1oa, 111 dll _tJ of loa Dio.o, ...U of CoUfonil, accortl1ll& U Official 'lU &!lo...f. . . . . : " Paqe 2 of 2 -- --- EXHIBIT B SCHEDULE OF LEASE PAYMENTS LEASE PAYMENT DATE (five Business Days before each of the following PRINCIPAL INTEREST dates) COMPONENT COMPONENT PERIOD TOTAL FISCAL TOTAL 08/01/95 $ $ $ $ 02/01/96 08/01/96 02/01/97 08/01/97 02/01/98 08/01/98 02/01/99 08/01/99 02/01/00 08/01/00 02/01/01 08/01/01 02/01/02 08/01/02 02/01/03 08/01/03 02/01/04 08/01/04 02/01/05 08/01/05 02/01/06 08/01/06 02/01/07 08/01/07 02/01/08 08/01/08 02/01/09 08/01/09 02/01110 08/01/10 02/01/11 08/01/11 02/01/12 TOTALS: $ $ $ $ PUBL,27201_11138182345.52 B-1 - - EXIllBIT C LEASE SUPPLEMENT There is hereby subjected to the terms of that certain Lease Agreement (the "Lease"), dated as of July 1, 1995, between the Poway Redevelopment Agency (the "Agency") and the City of Poway, California (the "City") the following real property [and improvements, if applicable] (the "Substituted Property") which shall hereafter comprise the Site, as defined therein: Descriotion of Substituted ProDerty: Certification I, the Authorized Representative of the City, hereby certify that: (1) the useful life of the Substituted Property at least equals the remaining Term of the Lease; and (2) the fair rental value of the Substituted Property is such that no reduction of Lease Payments will occur upon the delivery of the Substituted Property and the portion of the Lease Payments and Additional Payments attributable to the Substituted Property does not exceed the fair rental value for the Substituted Property; and (3) the Substituted Property will be used by the City for authorized public purposes, can be leased under the provisions of the Lease and the Permitted Encumbrances thereon will not materially impair the City's use of the Site; (4) the City will cause Exhibit A to the Lease and Exhibit A to the Site Lease and the Assignment Agreement (each as defined in the Lease) to be amended to reflect the Substituted Property and will have such amendments recorded for the Substituted Property and the previous Site in the City of Poway recorder's office; (5) all of the documents required to be delivered under Section 3.6 of the Lease in connection with the provision of the Substituted Property have been delivered. The undersigned hereby certifies that it has received copies of the documents required pursuant to Section 3.6 of the Lease; and (6) the Site now consists of the Substituted Property set forth in Exhibit 1 hereto and Exhibit B to the Lease is hereby deemed to be deleted in its entirety and replaced by Exhibit 1 hereto, and the schedule of Lease Payments is set forth in Exhibit 2 hereto and Exhibit B to the Lease is hereby deemed to be amended to incorporate the schedule of Lease Payments set forth in Exhibit 2 hereto. - PUBL,27201_11138182345.52 C-1 I, the Authorized Representative of the City, hereby certify that the Substituted Property will be leased to the Agency free and clear of all liens or claims of others, except for the lien of the Trust Agreement referred to in the Lease and the rights of the City under the Lease, and that the Agency will not encumber title to the Substituted Property while the Certificates and Additional Certificates remain outstanding. CITY OF POWAY, as Lessee By: Title The Undersigned Acknowledges Receipt of this Supplement: , as assignee of the Lessor By: Title PUBL,27201_11 138IB2345.52 C-2 - - EXHffiIT 1 -- DESCRIPTION OF SUBSTITUTED PROPERTY PUBL,27201_11138182345.52 EXHffiIT 2 AMENDED SCHEDULE OF LEASE PAYMENTS PUBL,27201_111381 B2345.52 - Recording Requested By and ) .- When Recorded Mail To: ) ) Stradling, Yocca, Carlson & Rauth ) 660 Newport Center Drive, Suite 1600 ) Newport Beach, California 92660 ) Attention: Denise E. Hering, Esq. ) ) This document is recorded for the benefit of the City of Poway, and the recording is fee-exempt under Section 27383 of the Government Code. SITE LEASE between CITY OF POW A Y and POW A Y REDEVELOPMENT AGENCY Dated as of July 1, 1995 Relating to $ 1995 Refunding Certificates of Participation (City of Poway 1991 Capital Improvement Project _ Poway Royal Mobilehome Park) JUN 2 0 1995 ITEM 10 i ATTACHMENT H SITE LEASE This Site Lease is made and entered into as of July 1, 1995, by and between the CITY OF POW A Y, a municipal corporation of the State of California (the "State") duly organized and existing under and by virtue of the laws of the State, as lessor (the "City"), and the POWAY REDEVELOPMENT AGENCY, a political subdivision of the State duly organized and existing under the laws of the State, as lessee (the" Agency"). WIINgS.S.gIH: WHEREAS, the City has entered into this Site Lease (the "Site Lease") with the Agency for the purpose of leasing the real property (including all existing and future improvements thereon) described in Exhibit A hereto as such Exhibit A may be amended and supplemented from time to time (the "Site"), to the Agency, as lessee hereunder; and WHEREAS, the City intends to lease the Site from the Agency, pursuant to the terms of that certain Lease Agreement, dated the date hereof, between the Agency and the City (the "Lease") in order to obtain funds to advance refund the outstanding portion of those certain $10,000,000 1986 Certificates of Participation (Capital Improvement Projects) which was used to finance the acquisition and construction of certain public improvements (such portion being referred to herein as the "Prior Certificates") which advance refunding will lower the City's costs of financing and provide a benefit to the City; and WHEREAS, by resolution of the City Council of the City, the City has agreed to execute this Site Lease and to deliver it upon performance and compliance by the Agency of all terms or conditlons of this contract to be performed concurrently herewith, including without limitation, the delivery of certain certificates of participation (the "Certificates") and Additional Certificates, if any, executed and delivered on the Delivery Date therefor pursuant to that certain Trust Agreement, dated as of the date hereof (as amended and supplemented from time to time, the "Trust Agreement"), among the Agency, the City and Bank of America National Trust and Savings Association, as trustee (the "Trustee"); NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other valuable consideration, it is hereby mutually agreed as follows: SECTION 1. Definitions. Unless the context otherwise requires, the capitalized terms herein which are not defined herein shall have the meanings specified in the Trust Agreement. SECTION 2. Lease of the Site: Substitution. The City hereby leases to the Agency and the Agency hereby leases from the City the Site, on the terms and conditions hereinafter set forth. The City reserves the right at any time to substitute other real property and improvements for the real property described in Exhibit A hereto, upon compliance with the PUBL,2721O_111381 B2345.52 - - provisions of Section 3.6 of the Lease (a "Substitution"). In the event of such Substitution, the - parties hereto agree to execute the appropriate documents evidencing the termination of the Agency's right hereunder in the prior Site or any portion thereof and its acceptance of an interest in the new Site, such documents to include the replacement of Exhibit A hereto with a new Exhibit A accurately describing the substitute real property and any improvements thereon. The Agency shall not be entitled to any offset, abatement or reduction in rental hereunder as a result of any Substitution. SECTION 3. Term. The term of this Site Lease shall commence as of the Delivery Date for the Certificates and shall remain in effect until the earlier of August 1, 20_ or the date of expiration of the Lease as provided for by Section 4.2 thereof, unless such term is sooner terminated as hereinafter provided, however, if the term of the Lease. is extended pursuant to Section 4.3 of the Lease, the term of this Site Lease shall also be extended, except that the term of this Site Lease shall in no event extend beyond August 1,2035. SECTION 4. Rental. The Agency, or any assignee or successor in interest of the Agency under this Site Lease, shall pay upon execution and delivery of this Site Lease to the City as and for rental hereunder, the sum of $ and upon the Delivery Date for each issue of Additional Certificates shall pay as additional rental due hereunder an amount as specified in connection with the sale of such Additional Certificates. The Agency shall pay such rental to the Trustee for disbursement in accordance with Section 401 of the Trust Agreement, and in the case of any Additional Certificates for disbursement as provided in a supplement to the Trust Agreement. As additional consideration for the leasing of the Site to it, the Agency shall execute and deliver the Lease and the Trust Agreement and any amendments thereto required in connection with the execution and delivery of Additional Certificates and shall perform its obligations thereunder. The Agency hereby waives any right that it may have under the laws of the State of California to receive a rebate of any rent paid hereunder in full or in part in the event there is a substantial interference with the use and right of possession by the Agency or its sublessee of the Site or any portion thereof as a result of material damage, destruction or condemnation. SECTION 5. Puroose. The Agency shall lease back the Site to the City pursuant to the Lease for the purposes described in the Lease and for such purposes as may be incidental thereto. SECTION 6. Reoresentations. Warranties and Covenants. The City represents and warrants that it is the owner in fee of the Site. The Agency covenants that it shall not encumber the Site except for Permitted Encumbrances (as such term is defined in the Lease). SECTION 7. Assil!nments. The City acknowledges and affirms the assignment by the Agency of its right, title and interest in and to this Site Lease to the Trustee, under the terms of the Assignment Agreement dated as of the date hereof, between the Agency and the Trustee, for the benefit of the Owners of the Certificates and the Owners of any Additional Certificates. No other assignment of any rights hereunder shall be permitted without the consent of the City and the Trustee. SECTION 8. Actions on Termination. The Agency agrees, upon the termination of this Site Lease, to quit and surrender the Site in the same good order and condition as it was PUBU72IO_1 I 138182345.52 2 in at the time the real property then constituting the Site became subject to this Site Lease, reasonable wear and tear excepted, and agrees that any permanent improvements and structures existing upon the Site at the time of the termination of this Site Lease shall remain thereon and all interest therein shall vest in the City free and clear of any interest of the Agency. SECTION 9. Ouiet Enioyment. The Agency at all times during the term of this Site Lease shall peaceably and quietly have, hold and enjoy all of the Site, subject only to Permitted Encumbrances (as such term is defined in the Lease). SECTION 10. Default. In the event the Agency shall be in default in the performance of any obligation on its part to be performed under the terms of this Site Lease, which default continues for 30 days following written notice to and demand for correction thereof by the City, the City may exercise any and all remedies granted by law which do not adversely affect the interests of the Owners of the Certificates and the owners of any Additional Certificates, with the prior consent of the Trustee; Drovided that the City may not terminate this Site Lease and shall exercise only remedies providing for specific performance hereunder. SECTION 11. Taxes. The City covenants and agrees to pay any and all assessments of any kind or character and also all taxes, including possessory interest taxes, levied or assessed upon the Site. SECTION 12. Eminent Domain. In the event the whole or any part of the Site is taken by eminent domain proceedings, the interest of the Agency shall be recognized and is hereby determined to be the amount of unpaid Lease Payments and Additional Payments due the Agency under the Lease. SECTION 13. Partial Invalidity. If anyone or more of the terms, provisions, covenants or conditions of this Site Lease shall to any extent be declared invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, the finding or order or decree of which becomes final, none of the remaining terms, provisions, covenants and conditions of this Site Lease shall be affected thereby, and each provision of this Site Lease shall be valid and enforceable to the fullest extent permitted by law. SECTION 14. ADDlicable Law. This Site Lease shall be governed by and construed in accordance with the laws of the State. SECTION 15. Reoresentatives. Whenever under the provisions of this Site Lease the approval of the Agency or the City is required, or the Agency or the City is required to take some action at the request of the other, such approval or such request shall be given for the Agency by an Authorized Representative of the Agency and for the City by an Authorized Representative of the City and any party hereto shall be authorized to rely upon any such approval or request. SECTION 16. Notices. All notices or other communications hereunder shall be in writing and shall be sufficiently given and shall be deemed given when delivered or mailed by certified mail, postage prepaid: PUBL,2721O_III381 B2345.52 3 _. - If to the City: City of Poway - 13325 Civic Center Drive Poway, California 92064 Attention: City Manager If to the Agency: Poway Redevelopment Agency 13325 Civic Center Drive Poway, California 92064 Attention: Executive Director If to the Trustee: Bank of America National Trust and Savings Association 333 South Beaudry Avenue 25th Floor Los Angeles, California 90071 Attention: Corporate Trust Department #8510 Notice shall also be given to the Rating Agency at the address(es) then in effect for the Rating Agency pursuant to Section 908 of the Trust Agreement. The Agency, the City and the Trustee, by notice given hereunder, may designate different addresses to which subsequent notices or other communications will be sent. SECTION 17. CaDtions. The captions or headings in this Site Lease are for convenience only and in no way define, limit or describe the scope or intent of any provision or section of this Site Lease. SECTION 18. Execution in Countemarts. This Site Lease may be executed in any number of counterparts, each of which shall be deemed to be an original but all together shall constitute but one and the same instrument. SECTION 19. Amendment. The terms of this Site Lease shall not be waived, altered, modified, supplemented or amended in any manner whatsoever, except by written instrument signed by the Agency and the City, in accordance with Article VII of the Trust Agreement, with the prior written consent of the Trustee and subsequent notice thereof to the Rating Agency. - PUBL,2721O_ljI381 B2345.52 4 IN WITNESS WHEREOF, the parties have caused this Site Lease to be executed by their duly authorized officers on the date and year first above written. CITY OF POWAY, as Lessor By: Mayor ATTEST: Clerk to the Board of Supervisors POWAY REDEVELOPMENT AGENCY, as Lessee By: Chairperson ATTEST: Secretary PUBL,2721O_111381 B2345.52 5 - State of California ) ) ss. County of ) On , 199_, before me, (name. title of officer. e.g.. Jane Doe. Notary Public") personally appeared (name(s) of 3igMr(s)) 0 personally known to me -QR- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in hislher/their authorized capacity/ies, and that by hislher/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Witness my hand and official seal. (SignatUre of Notary) Capacity claimed by signer: (This section is OP710NAL.) 0 Individual 0 Corporate Officer(s): 0 Partner( s): o General o Limited 0 Attorney-in-fact 0 Trustee( s) 0 Guardian/Conservator 0 Other: Signer is representing: (name OJ person(a) or entJtyOes)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. THIS CERTIFICATE Title or Type of Document MUST BE ATTACHED TO THE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above PUBL,27210_111381 B2345.52 State of California ) ) ss. County of ) On , 199 , before me, - (name, title of officer. e.g.. Jane Doe. Notary Public") personally appeared (name(s) of signer(s)) 0 personally known to me -OR- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in hislher/their authorized capacity/ies, and that by hislher/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Witness my hand and official seal. (Signature of Notary) Capacity claimed by signer: (This section is OPTIONAL.) 0 Individual 0 Corporate Officer( s): 0 Partner( s): o General o Limited 0 Jlttorney-in-fact 0 Trustee(s) 0 Guardian/Conservator 0 Other: Signer is representing: (name OJ person(s) or entlty(les)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. THIS CERTIFICATE Title or Type of Document MUST BE ATTACHED TO THE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above PUBL,2721O_11138 I 82345.52 - - State of California ) ) ss. County of ) On , 199 _, before me, (name. title of officer. e.g., Jane Doe, Notary Public") personally appeared (name(s) of signer(s)) 0 personally known to me -QR- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in hislher/their authorized capacity/ies, and that by hislher/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Witness my hand and official seal. (Signature of Notary) Capacity claimed by signer: (This section is OP110NAL.) 0 Individual 0 Corporate Officer(s): 0 Partner( s): o General o Limited 0 Attorney-in-fact 0 Trustee(s) 0 Guardian/Conservator 0 Other: Signer is representing: (name OJ person(s) or entzty(les)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. THIS CERTIFICATE Title or Type of Document MUST BE ATTACHED TO THE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above -- PUBL27210_11138182345.52 State of California ) ) ss. County of ) On , 199_, before me, (name. title of officer. e.g.. Jone Doe, Notary Public") personally appeared (name(s) of signer(s)) 0 personally known to me -OR- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity/ies, and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Witness my hand and official seal. (Signature of Notary) Capacity claimed by signer: (This section is OPTIONAL.) 0 Individual 0 Corporate Officer(s): 0 Partner( s): o General o Limited 0 Attorney-in-fact 0 Trustee( s) 0 Guardian/Conservator 0 Other: Signer is representing: (name OJ person!s) or entlty!IeS)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. TffiS CERTIFICATE Title or Type of Document MUST BE ATTACHED TO THE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above PUBL,2721O,,111381 B2345.52 - - EXHffiIT A LEGAL DESCRIPTION OF THE SITE Poway Royal Mobilehome Park with a total of 400 spaces, recreational and community buildings, parking and storage lots, and landscaping located on the property described below: - PUBL,2721O_11 138IB2345.52 A-I --- RECORDING REQUESTED BY ) AND WHEN RECORDED MAIL TO: ) ) STRADLING, YOCCA, CARLSON & RAUTH ) 660 Newport Center Drive ) Suite 1600 ) Newport Beach, California 92660 ) Attn: Denise E. Hering, Esq. ) ) This document is recorded for the benefit of the City of Poway, and the recording is fee-exempt under ~27383 of the Government Code. ASSIGNMENT AGREEMENT between Poway Redevelopment Agency and Bank of America National Trust and Savings Association as Trustee Dated as of July 1, 1995 Relating to $ 1995 Refunding Certificates of Participation (City of Poway 1991 Capital Improvement Project-poway Royal Mobilehome Park) ATTACHMENT I JUN 2 0 1995 ITEM 10 ASSIGNMENT AGREEMENT This Assignment Agreement, dated as of July 1, 1995 (this "Assignment Agreement"), is made and entered into by and between the Poway Redevelopment Agency, a political subdivision of the State of California organized and existing under the laws of the State of California (the" Agency"), as assignor, and Bank of America National Trust and Savings Association, a national banking association organized and existing under the laws of the United States, as trustee (the "Trustee"), as assignee; WIINg~~gIH: In the joint and mutual exercise of their powers, in consideration of the mutual covenants herein contained, and for other valuable consideration, the parties hereto recite and agree as follows: SECTION 1. Recitals. (a) The terms capitalized in this Assignment Agreement shall have the meanings ascribed to them in Section 101 of the Trust Agreement, dated as of July 1, 1995, by and among the City of Poway (the "City"), the Trustee and the Agency (the "Trust Agreement"). (b) The Agency and the City have entered into a certain Site Lease dated as of July 1, 1995 (the "Site Lease"), whereby the City has leased to the Agency certain real property, including the improvements thereon, described in Exhibit A thereto, as amended from time to time, together with any real property added or substituted in the manner and on the terms set forth in the Lease Agreement (defined below) (the "Site"). The Site consists of the real property described in Exhibit A hereto, including the improvements thereon. (c) The Agency and the City have entered into a certain Lease Agreement, dated as of July 1, 1995 (the "Lease Agreement"), whereby the Agency has leased to the City, and the City has leased from the Agency, the Site. (d) Under the Site Lease, the Agency is required to deposit or cause to be deposited with the Trustee certain sums of money to be credited, held and applied in accordance with the Site Lease and the Trust Agreement. (e) Pursuant to the Lease Agreement the City is obligated to pay certain Lease Payments to the Agency or its assignee. For the purpose of obtaining the moneys required to be deposited by it pursuant to the Site Lease, the Agency is willing to assign and transfer certain of its rights, title and interest in and to the Site Lease and the Lease Agreement to the Trustee for the benefit of the Owners of the Certificates and the Owners of any Additional Certificates to be executed and delivered under the Trust Agreement. In consideration of such assignment, the Trustee is delivering the Certificates and will deliver any Additional Certificates to the original purchasers thereof in accordance with the provisions of the Trust Agreement. The PUBL,27280_111381 B2345.62 06/13/95 - proceeds from the sale of the Certificates (and the proceeds from the sale of Additional Certificates, if any) will be deposited by the Trustee on behalf of the Agency in the various funds and accounts created pursuant to the Trust Agreement and any supplement thereto. (f) Each of the parties has authority to enter into this Assignment Agreement, and has taken all actions necessary to authorize its officers to execute and deliver this Assignment Agreement on its respective behalf. SECTION 2. Assil!nment. The Agency, for consideration received, does hereby absolutely and irrevocably grant, sell, assign and transfer to the Trustee, for the benefit of the Owners of the Certificates and the Owners of any Additional Certificates executed and delivered under the Trust Agreement, all of its right, title and interest (but none of its duties or obligations) in and to the Site Lease and the Lease Agreement (other than its rights to indemnification and payment or reimbursement of its costs or expenses thereunder), including its right to receive Lease Payments from the City under the Lease Agreement; its right to receive proceeds of condemnation of, and insurance on, the Site; and its right to enforce payment of such Lease Payments when due and otherwise to protect its interests and enforce its rights under the Lease Agreement in the event of a default by the City. The Lease Payments shall be applied, and the rights so assigned shall be exercised, by the Trustee as provided in the Trust Agreement. The assignment provided for in this Section 2 shall grant in favor of the Trustee all of the Agency's right, title and interest in and to the Site Lease and the Lease Agreement (other than its rights to indemnification and payment or reimbursement for its costs or expenses thereunder) and all of its interest in the Site. SECTION 3. Acceotance. The Trustee hereby accepts the assignment made herein for the benefit of the Certificate Owners and the Owners of any Additional Certificates, subject to the provisions of the Trust Agreement. SECTION 4. Consent of Al!ency to Deliverv of Certificates and Additional Certi ficates. The Agency does hereby consent to the execution and delivery of the Certificates (and Additional Certificates, if any shall ever be executed and delivered) by the Trustee, the receipt of payment by the Trustee for the Certificates and any Additional Certificates when the same shall be sold to the original purchaser or purchasers thereof and the transfer and deposit of such proceeds by the Trustee into the funds and accounts created by the Trust Agreement, or any supplement thereto, all in accordance with the terms of the Trust Agreement. SECTION 5. Further Assurances. The Agency will make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Assignment Agreement, and for better assuring and - confirming to the Owners of the Certificates and the Owners of any Additional Certificates the rights and benefits intended to be conveyed pursuant hereto. PUBL,27280_11138182345.62 2 06/13/95 -- SECTION 6. Amendments. The terms of this Assignment Agreement shall not be waived, altered, modified, supplemented or amended in any manner whatsoever except by written instrument signed by the Agency and the Trustee, in accordance with Article VII of the Trust Agreement, with the prior written consent of the City and subsequent notice thereof to the Rating Agency. SECTION 7. ADDlicable Law. This Assignment Agreement shall be governed by and construed in accordance with the laws of the State. SECTION 8. Conditions. This Assignment Agreement shall confer no rights and shall impose no obligations upon the Trustee beyond those expressly provided in the Trust Agreement. The Trustee does not warrant the accuracy of the recitals hereto. SECTION 9. Partial Invalidity. If anyone or more of the terms, provisions, covenants or conditions of this Assignment Agreement shall to any extent be declared invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, the finding or order or decree of which becomes final, none of the remaining terms, provisions, covenants and conditions of this Assignment Agreement shall be affected thereby, and each provision of this Assignment Agreement shall be valid and enforceable to the fullest extent permitted by law. SECTION 10. Notices. Notice shall also be given to the Rating Agency at the address(es) then in effect for the Rating Agency pursuant to Section 908 of the Trust Agreement. All notices or other communications hereunder shall be in writing and shall be sufficiently given and shall be deemed given when delivered or mailed by certified mail, postage prepaid, to the parties at their respective places of business, as follows: If to the City: City of Poway 13325 Civic Center Drive Poway, California 92064 Attention: City Manager If to the Agency: Poway Redevelopment Agency 13325 Civic Center Drive Poway, California 92064 Attention: Executive Director pUBL,27280_11 \381 B2345.62 3 06/13/95 - If to the Trustee: Bank of America National Trust and Savings Association 333 South Beaudry, 25th Floor Los Angeles, California 90017 Attention: Corporate Trust Department, #8510 The Agency, the City and the Trustee, by notice given hereunder, may designate different addresses to which subsequent notices or other communications will be sent. SECTION 11. CaDtions. The captions or headings in this Assignment Agreement are for convenience only and in no way define, limit or describe the scope or intent of any provision or section of this Assignment Agreement. SECTION 12. Execution in Counteroarts. This Assignment Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original but all together shall constitute but one and the same instrument. SECTION 13. Bindinl! Effect. This Assignment Agreement shall inure to the benefit of and shall be binding upon the Agency and the Trustee and their respective successors and assigns. -- PUBL,27280_1 1 138182345.62 4 06/13/95 ----~ --- -- IN WITNESS WHEREOF, the parties have executed this Assignment Agreement by their officers thereunto duly authorized as of the day and year first written above. Poway Redevelopment Agency By: Chairman ATTEST: Secretary Bank of America National Trust and Savings Association, as Trustee By: Authorized Officer pUBL,27280 _111381 B2345.62 5 06/13/95 - State of California ) ) ss. City of ) On , 199_, before me, (name. title of officer. e.g., Jane Doe. Notary Public ") personally appeared (name(s) of signer(s)) 0 personally known to me -OR- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity/ies, and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Witness my hand and official seal. (Signature of Notary) Capacity claimed by signer: (This section is OP110NAL.) 0 Individual 0 Corporate Officer(s): 0 Partner(s): o General o Limited 0 Attorney-in-fact 0 Trustee(s) 0 Guardian/Conservator 0 Other: Signer is representing: (name ot person(s) or entIty(..s)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. THIS CERTIFICATE Title or Type of Document MUST BE ATTACHED TO THE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above PUBL,27280_111381 B2345.62 06/13/95 State of California ) ) ss. City of ) On ,199_, before me, (name. title of officer. e.g.. Jane DOl!, Notary Public") personally appeared (name(s) of signer(s)) 0 personally known to me -OR- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity/ies, and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Witness my hand and official seal. (Signature of Notary) Capacity claimed by signer: (This section is OPTIONAL.) 0 Individual 0 Corporate Officer(s): 0 Partner(s): o General o Limited 0 Attorney-in-fact 0 Trustee( s) 0 Guardian/Conservator 0 Other: Signer is representing: (name OJ person(s) or entlty(les)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. THIS CERTIFICATE Title or Type of Document MUST BE ATTACHED TO THE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above PUBL,27280_111381 B2345.62 06/13/95 .- State of California ) ) ss. City of ) On , 199_, before me, (name, title of officer, e.g.. Jane Doe. Notary Public") personally appeared (name(s) of signer(s)) 0 personally known to me -QR- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity/ies, and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Witness my hand and official seal. (Signature of Notary) Capacity claimed by signer: (This section is OPTIONAL.) 0 Individual 0 Corporate Officer( s): 0 Partner(s): o General o Limited 0 Attorney-in-fact 0 Trustee(s) 0 Guardian/Conservator 0 Other: Signer is representing: (name OJ person(s) or enhty(les)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. THIS CERTIFICATE Title or Type of Document MUST BE ATTACHED TO THE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above - PUBL,27280_111381 B2345.62 06/13/95 CONSENT The City of Poway hereby consents to the foregoing assignment to the Trustee. City of Poway, as Lessee By: Mayor ATTEST: City Clerk PUBL,27280_11138 I 82345.62 06/13/95 EXHffiIT A LEGAL DESCRIPTION OF THE SITE Poway Royal Mobilehome Park with a total of 399 spaces, recreational and community buildings, parking and storage lots, and landscaping located on the property describred below: - PUBL,27280_l 1 138182345.62 A-I 06/13/95 -.--- -- AGREEMENT RE SPECIAL COUNSEL SERVICES January 1, 1994 The Poway Redevelopment Agency (hereinafter referred to as the "Agency") and Stradling, Yocca, Carlson & Rauth, a Professional Corporation, (hereinafter referred to as "Special Counsel") hereby agree as follows: 1. SERVICES The Agency retains Special Counsel to provide, and Special Counsel agrees to provide, legal services in connection with the Agency's issuance of certificates of participation (hereinafter referred to as the "Certificates") to refund its $28,300,000 City of Poway Certificates of Participation (City of Poway 1991 Capital Improvement Project - Poway Royal Mobilehome Park). Such services will be divided into two phases: (a) program planning and development of a financing plan; and (b) implementation of the fmancing plan. In the first phase -- the planning stage -- we would expect: (i) to research applicable laws and ordinances relating to the proposed - program, including federal and state tax laws, securities laws and other laws that may be applicable; (ii) to attend conferences and consult with the Agency ICity staff and counsel regarding such laws, to participate with any financial advisors, underwriters, developers, lenders and other experts retained by the Agency in structuring the financing; and (iii) to consult with other firms active in the bond practice when necessary to ensure that any novel approaches being considered would be generally accepted in the bond community. In the second phase -- the implementation stage -- we would expect: (i) to supervise and prepare documentation of all steps to be taken through the issuance of the Certificates including: a. drafting all resolutions, rules and regulations of the Agency and all other basic documents relating to the security of the Certificates, in consultation with the Agency, its counsel and financial advisors, underwriters and other experts; b. preparing the record of proceedings for the authorization, sale and - issuance of the Certificates; ATTACHMENT J JUN 2 0 1995 ITEM 10 c. preparing documents relating to the financing, including the trust agreement, lease agreement, escrow agreement, the amended and restated 1991 Lease Agreement and Amendment No.1 to the 1991 Trust Agreement; d. assisting in the preparation or review of any description in the official statement or placement memorandum of California and federal law pertinent to the validity of the Certificates and tax treatment of interest paid thereon, the terms of the Certificates and our opinion; e. reviewing the Certificate purchase contracts or the bidding documents and participating in the related negotiations; f. attending information meetings and other conferences scheduled by the Agency, the financial advisors or the underwriters; g. consulting with counsel to the Agency concerning any legislation or litigation during the course of the financing; h. consulting with the trustee and counsel to the trustee; i. preparing the form of the Certificates, and, if printed, supervising their production or printing, signing, authentication and delivery; and j. rendering any necessary collateral legal opinions as to the inapplicability of the registration requirements of federal securities laws and other matters related to the issuance of the Certificates. (ii) to render a final legal opinion pertaining to the issuance of the Certificates to the effect that: a. the Certificates have been properly authorized and issued and are valid and binding obligations; b. the essential sources of security for the Certificates have been legally provided; and c. all interest with respect to the Certificates is exempt from federal and California income taxation. 2. INDIVIDUAL RESPONSIBLE FOR PROVIDING SERVICES The Agency agrees to accept and Special Counsel agrees to provide the aforementioned services primarily through Denise E. Hering and Carol L. Lew. PUBL,I0906_111381 B2345.52 2 - Should the above attorney be unable to provide such services due to death, .... disability, or similar event, Special Counsel reserves the right to substitute unilaterally another of its attorneys to provide such services, and such substitution shall not alter or affect in any way Special Counsel's other obligations under this agreement. 3. a. Certificate Fee The Agency agrees to pay Special Counsel a fee in accordance with the schedule attached hereto as Exhibit I, provided that payment of such fee is entirely contingent upon the successful sale of the Certificates, and payment thereof is to be made from the proceeds of the Certi ficates. b. Out-of Pocket EXDenses The Agency also agrees to reimburse Special Counsel for the actual cost of out-of-pocket expenses reasonably incurred, excluding any indirect cost such as Special Counsel's overhead, in connection with the provision of the aforementioned services, including (i) telephone, telex, and telegram charges, (ii) messenger and delivery charges, (iii) traveling expenses, for travel at the Agency's request, - (iv) document production charges, and (v) similar out-of-pocket expenses. 4. FOLLOW-UP SERVICES Special counsel agrees to provide without additional cost normal follow-up consultation and related services following the sale of the Certificates. Should the Agency require Special Counsel to provide extraordinary services after the sale of the Certificates, such services shall be provided at an additional fee to be agreed upon at a later date. Date: POW A Y REDEVELOPMENT AGENCY By STRADLING, YOCCA, CARLSON & RAUTH a Professional Corporation - By Denise E. Hering PUBU0906_111381 B2345.52 3 -------- EXHffiIT 1 Refundinl! Certificate of ParticiDation Basic Fee: The fee for the services described in the Agreement to which this Schedule is attached shall be based upon the total principal amount of certificates authorized and sold and will be computed in accordance with the following schedule: PrinciDal Amount of Certificates m $1,000,000 or less $15,000 $1,000,001 to $5,000,000 $15,000 plus 1/4 of 1 % of the excess over $1,000,000 $5,000,001 to $15,000,000 $38,000 $15,000,001 to $35,000,000 $48,000 Out-of-Pocket EXDenses: In addition to the Basic Fee, Special Counsel shall be reimbursed for out-of-pocket expenses incurred pursuant to Section 3(b) of the Agreement. PUBL,10906_11138 1 B2345.52 4