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Res 87-026RESOLUTION NO. R7-(~ ~6 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF POWAY ACTING AS THE LEGISLATIVE BODY OF THE SOUTH POWAY COMMUNITY FACILITIES DISTRICT NO. 1 (POMERADO BUSINESS PARK PROJECT) DECLARING THE RESULTS OF A SPECIAL ELECTION, AUTHORIZING THE ISSUANCE OF ITS 1987 SPECIAL TAX REFUNDING BONDS IN A PRINCIPAL AMOUNT OF THIRTY-TWO MILLION EIGHT HUNDRED THOUSAND DOLLARS ($32,800,000), AND APPROVING CERTAIN DOCUMENTS AND TAKING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH WHEREAS, the City Council of the City of Poway, California (hereinafter referred to as the "legislative body of the local agency'), has heretofore undertaken proceedings and declared the necessity to issue bonds on behalf of the South Poway Community Facilities District No. 1 (Pomerado Business Park Project) (the "District") pursuant to the terms and provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5, of the Government Code of the State of California (the 'Act"); and WHEREAS, pursuant to Resolution No. 87-011 adopted by the legislative body of the District on the 27th day of January, 1987, the bond proposition (attached as Exhibit A hereto and incorporated herein by reference) was submitted to CF Poway, Ltd., the sole qualified elector within the District, and was unanimously approved at an election held on March 3, 1987; and WHEREAS, the legislative body of the District has determined that it would be prudent in the management of the District's fiscal affairs to issue refunding bonds to defease the District's Special Tax Bonds Series 1985 in order to realize net debt service savings over the maturity of the refunding bonds; and WHEREAS, based upon Resolution No. 87-011 and the election, the District is now authorized to issue refunding bonds in one or more series, pursuant to the Act and the provisions of Article 11 of Chapter 3 of Division 2 of Title 5 of the Government Code of the State of California, in an aggregate principal amount not to exceed $40,000,000 for the purpose of refunding the District's Special Tax Bonds Series 1985 as set forth in Resolution No. 87-011; and WHEREAS, the legislative body of the District hereby desires to proceed to issue the refunding bonds in an aggregate principal amount of $32,800,000 designated as the "South Poway Community Facilities District No. 1, 1987 Special Tax Refu.nding Bonds" (the "Bonds"); and WHEREAS, the legislative body of the District has determined in accordance with Government Code Section 53360.4 that a negotiated sale of the Bonds to Drexel Burnham Lambert Incorporated in accordance with the terms of the Bond Purchase Agreement approved as to form by this legislative body in Resolution No. 87-015 will result in a lower overall cost to the District than a public sale; NOW, THEREFORE, the City Council of the City of Poway acting as the legislative body of the South Poway Community Facilities District No. 1 DOES HEREBY RESOLVE, ORDER AND DETERMINE AS FOLLOWS: SECTION 1. Each of the above recitals is true and correct. SECTION 2. The Registrar of Voters of the County of San Diego has certified to the legislative body of the District that Proposition A and Proposition B presented to the qualified elector of the District on March 3, 1987, copies of which are attached as Exhibit A, have received a unanimous vote of the qualified elector voting at said election, and Proposition A and Proposition B each has carried, and, accordingly, the legislative body of the District is hereby authorized to issue from time to time as determined by the legislative body bonds for the benefit of the District for the purposes set forth in Proposition A and to take the necessary steps to levy the special tax authorized by Proposition A. SECTION 3. The issuance of the Bonds in a principal amount of $32,800,000 is hereby authorized pursuant to the Act and the provisions of Article 11 of Chapter 3 of Division 2 of Title 5 of the Government Code of the State of California. The Bonds shall mature on the dates and pay interest at the rates set forth in Exhibit B hereto and shall be substantially in the form set forth in Exhibit B hereto. All other provisions of the Bonds shall be governed by the terms and conditions set forth in a Supplement to Resolution to be prepared by Bond Counsel to the District and executed by the Mayor or the City - Manager, which Supplement to Resolution, upon execution, shall be attached to the original'and all copies of this Resolution by the City Clerk as Exhibit C. The Supplement to Resolution shall be substantially in the form attached hereto as Exhibit B, with such additions thereto and changes therein as are recommended or approved by Bond Counsel to the District and the City Manager, with such approval to be conclusively evi'denced by the execution and delivery of the Supplement to Resolution. 4897k/2468-03 -2- SECTION 4. The Bonds shall be executed on behalf of the District by the manual or facsimile signature of the Mayor, and the seal of the District, or a facsimile thereof, shall be impressed or imprinted thereon and attested with the manual or facsimile signature of the City Clerk. SECTION 5. The form of the Escrow Agreement presented at this meeting is hereby approved and the Mayor or City Manager and the City Clerk are hereby authorized and directed to execute an Escrow Agreement in substantially the form hereby approved, with such additions thereto and changes therein as are recommended or approved by Bond Counsel to the District and the City Manager, with such approval to be conclusively evidenced by the execution and delivery of the Escrow Agreement. SECTION 6. Ail actions heretofore taken by officers and agents of the City and the District with respect to the sale and issuance of the Bonds are hereby approved, confirmed and ratified, and the Mayor, the City Manager, his written designee, and the City Clerk are hereby authorized and directed to take any actions and execute and deliver any and all documents as are necessary to accomplish the issuance, sale and delivery of the Bonds in accordance with the provisions of this Resolution. SECTION 7. Security Pacific National Bank is hereby appointed to act as Fiscal Agent for the Bonds and as the Escrow Bank pursuant to the Escrow Agreement. ADOPTED, SIGNED AND APPROVED this 3rd day of March, 1987 by the City Council of the City of Poway acting as the legislative body of the South Poway Community Facilities District No. 1 (Pomerado Business Park Project). Mayor, Cit~£ Powa~? ATTEST: City C~e. rk, City of Poway -3- 4897k/2468-03 STATE OF CALIFORNIA ) COUNTY OF SAN DIEGO ) i,Marjorie K. Wahl~ten , City Clerk of the City of Poway, do hereby certify that the foregoing Resolution was duly adopted by the City Council of said City acting in its capacity as the legislative body of the South Poway Community Facilities District No. 1 (Pomerado Business Park Project) at a meeting of said City Council held on the/rd day of March, 1987, and that it was so adopted by the following vote: AYES: Brannon, Emery, Higginson, Kruse, Tarzy NOES: None ABSTAIN: None ABSENT: None City Clerk, City of Poway 4897k/2468-03 -4- EXHIBIT A OFFICIAL BALLOT SOUTH POWAY COIe~4UNITY FACILITIES DISTRICT NO. 1 OF THE CITY OF POWAY SPECIAL BOND ELECTION March 3, 1987 The landowner voting this ballot is entitled to one vote for each acre, or portion of an acre, of land owned within the South Poway Community Facilities District No. 1 (Pomerado Business Park Project). To vote, stamp a cross (+) in the voting square after the word "YES" or after the word "NO". All marks otherwise made are forbidden. All distinguishing marks are forbidden and make the ballot void. If you wrongly mark, tear, or deface this ballot, return it to the Registrar of Voters and obtain another. PROPOSITION NO. A: Shall the South Poway Community Facilities District No. 1 (Pomerado Business Park Project) (the "District") incur an indebtedness and issue bonds in the maximum aggregate principal amount of $40,000,000, with interest at a coupon rate or rates not to exceed the maximum interest rate permitted by law, the-pro- ceeds of which will be used to refund and defease the District's Special Tax Bonds Series 1985 and shall the Special Tax approved by the voters of the District and authorized to be levied in accordance with Ordinance No. 182 of the City be levied to repay such bonded indebtedness? YES NO PROPOSITION NO. B: Shall the appropriations limit, as defined in Subdivision (h) of Section 8 of Article XIII B of the California Con- stitution for the District be an amount equal to all of the proceeds of the Special Tax collected annually, as adjusted for changes in the cost of living and changes in population pursuant to the provisions of Article XIII B? YES NO -6- 4897k/2468-03 EXHIBIT B SUPPLEMENT TO RESOLUTION TABLE OF CONTENTS Section 1.01 Section 2.01 Section 2.02 Section 2.03 Section 2.04 Section 2.05 Section 2.06 Section 2.07 Section 2.08 Section 2.09 Section 2.10 Section 2.11 Section 2.12 Section 3.01 Section 3.02 Section 3.03 Section 3.04 Section 3.05 Section 3.06 Section 3.07 Section 3.08 Section 3.09 Section 3.10 Article I Definitions Definitions ............................. Article II General Authorization and Bond Terms Amount, Issuance, Purpose and Nature of Bonds ................................ Payment of 1985 Bonds ................... Type and Nature of Bond ................. Equality of Bonds, Pledge of Net Taxes.. Description of Bonds; Interest Rates .... Place and Form of Payment ............... Form of Bonds; Temporary Bonds .......... Execution and Authentication ............ Bond Register ................... '. ....... Registration of Exchange or Transfer .... Mutilated, Lost, Destroyed or Stolen Bonds ................................... Validity of Bonds ....................... Article III Creation of Funds and Application of Proceeds and Net Taxes Creation of Funds ....................... Disposition of Bond Proceeds; Costs of Issuance Fund ........................ Deposit and Disbursement of Special Tax Revenues; Costs of Issuance Fund .... Special Tax Fund ........................ Redemption Fund ......................... Reserve Fund ............................ Excess Investment Earnings Fund ......... Administrative Expense Fund ............. Acquisition Fund ........................ Investments ............................. Page 6 7 7 8 · 8 9 10 10 11 11 12 12 12 13 14 15 16 17 20 20 21 -i- Page Section 4.01 Section 4.02 Section 4.03 Section 4.04 Section 4.05 Section 5.01 Section 5.02 Section 6.01. Section 6.02 Section 6.03 Section 7.01 Section 7.02 Section 7.03 Section 7.04 Section 8.01 Section 8.02 Section 8.03 Section 9.01 Section 9.02 Article IV Redemption of Bonds Redemption of Bonds ..................... Selection of Bonds for Redemption ....... Notice of Redemption .................... Partial Redemption of Bonds ............. Effect of Notice and Availability of Redemption Money ........................ Article V Covenants and Warranty Warranty ................................ Covenants ............................... Article VI Amendments to Resolution Supplemental Resolutions or Orders Not Requiring Bondowner Consent ............. Supplemental Resolutions or Orders Requiring Bondowner Consent ............. Notation of Bonds; Delivery of Amended Bonds ................................... Article VII Fiscal Agent Fiscal Agent ............................ Removal of Fiscal Agent ................. Resignation of Fiscal Agent ............. Liability of Fiscal Agent ............... Article VIII Events of Default; Remedies Events of Default ....................... Remedies of Owners ...................... Actions by Fiscal Agent as Attorney-in- Fact .................................... Article IX Defeasance and Parity Bonds Defeasance .............................. Conditions for the Issuance of Parity Bonds ........................ 22 24 24 25 25 25 26 29 30 31 32 33 33 33 34 34 36 36 37 -ii- Page Article X Miscellaneous Section 10.O1 Section 10.02 Section 10.03 Section 10.04 Section 10.05 Section 10.06 Section 10.07 Section 10.08 Cancellation of Bonds ................... Execution of Documents and Proof of Ownership ............................... Unclaimed Moneys ........................ Provisions Constitute Contract .......... Future Contracts ........................ Further Assurances ...................... Severability ............................ Notices ................................. Signatures ............................................. Exhibit "1" Exhibit "2" Form of Special Tax Bond Requisition for Disbursement of Project Costs 4O 41 41 42 42 43 43 43 43 -iii- SUPPLEMENT TO RESOLUTION NO. 87-026 ARTICLE I DEFINITIONS Section 1.01. Definitions. Unless the context otherwise requires, the following terms shall have the following meanings: "Acquisition Agreement" means the Acquisition Agreement between the District and CF Poway, Ltd. dated as of December 30, 1985. "Act" means the Mello-Roos Community Facilities Act of 1982, as amended, Sections 53311 et seq. of the California Government Code. "Administrative Expenses" means the administrative costs with respect to the calculation and collection of the Special Taxes, or costs otherwise incurred by the City staff on behalf of the District in order to carry out the purposes of the District as set forth in the Resolution of Formation and the fees and expenses of the Fiscal Agent and the Escrow Bank. "Authorized Investments" means, subject to applicable law, United States Treasury notes, bonds, bills or certificates of indebtedness (including United States Treasury Obligations - State and Local Government Series ("SLGS") or other direct obligations issued by the United States Treasury for which the faith and credit of the United States are pledged for the payment of principal and interest); and (except with respect to the defeasance of the Bonds as permitted by Section 9.01 hereof) obligations issued by banks for cooperatives, federal and land banks, federal intermediate credit banks, federal home loan banks, the Federal Home Loan Bank Board, the Tennessee Valley Authority, or other federal agencies or United States government-sponsored enterprises; and (except with respect to Section 9.01) any other investment in which funds of the District may be legally invested, including taxable government money market portfolios restricted to obligations with maturities of one year or less insured or fully guaranteed as to the principal and interest thereon by the full faith and credit of the United States of America and tax-exempt obligations rated in the highest rating category by either Standard & Poor's Corporation or Moody's Investors Service, Inc. "Bond Counsel" means an attorney at law or a firm of attorneys selected by the District of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issued by states and their political subdivisions duly admitted to the practice of law before the highest court of any state of the United States of America or the District of Columbia. "Bond Register" means the books which the Fiscal Agent' shall keep or cause to be kept on which the registration and transfer of the Bonds shall be recorded. t'Bondowner" or "Owner" means the person or persons in whose name or names any Bond is registered. "Bonds" means the South Poway Community Facilities District No. 1 1987 Special Tax Refunding Bonds. "Bond Year" means the year commencing each February 2 and ending each February 1. "City" means the City of Poway, California. "Code" means the Internal Revenue Code of 1986, as amended. "Computation Year" means the twelve (12) month period commencing on March 10 and ending on March 9 of the following year. "Costs of Issuance" means the costs and expenses incurred in connection with the issuance and sale of the Bonds including the acceptance and initial annual fees and expenses of the Fiscal Agent and the Escrow Bank, legal fees and expenses, costs of printing the Bonds and Official Statement, fees of financial consultants and other fees and expenses set forth in a Certificate of the City Manager, or his designee. "Delivery Date" means the date on which the Bonds were issued. "District" means the South Poway Community Facilities District No. I (Pomerado Business Park Project) established pursuant to the Act and Resolution No. 85-093 adopted by the legislative body of the District on November 26, 1985. "Escrow Bank" means Security Pacific National Bank, together with any successors thereto. "Escrow Agreement" means that certain agreement between~the District and the Escrow Bank made and entered into as of March 1, 1987 providing for the refunding of the 1985 Bonds. "Fiscal Agent" means Security Pacific National Bank, and any successor thereto. 02/22/87 4899k/2468-03 -2- "Fiscal Year" means the period beginning on July 1 and ending on the next following June 30. "Gross Proceeds" means the sum of the following amounts: (i) original proceeds, being the amounts received by the District, or held by the Fiscal Agent as proceeds of the original issuance of the Bonds (after payment of all expenses of issuing the Bonds); (ii) investment proceeds, being amounts received at any time by the District or the Fiscal Agent, such as interest and dividends, resulting from the investment of proceeds of the Bonds, including profits and less losses received on such investment; (iii) transferred proceeds (as defined in Section 1.103-14(e)(2)(ii) of the Regulations) of the 1985 Bonds; (iv) amounts, other than original proceeds and investment proceeds, held in any fund or account and reasonably expected to be used to pay principal of or interest on the Bonds; (v) securities or obligations pledged as security for the payment of the Bonds by an ultimate obligor (or a related person) or the District; (vi) amounts used to pay principal or interest with respect to the Bonds; and (vii) amounts received as a result of investing the amounts listed in clauses (i) through (vi). "Independent Financial Consultant" means a financial consultant or firm of such consultants generally recognized to be well qualified in the financial consulting field, appointed and paid by the District and satisfactory to and approved by the Fiscal Agent (which shall be under no liability by reason of such approval) and who, or each of whom: (1) is in fact independent and not under the domination of the District; (2) does not have any substantial interest, direct or indirect, with the District; and (3) is not connected with the District as a member, officer or employee of the District, but who may be regularly retained to make annual or other reports to the District. "Interest Payment Date" means each February 2 and August 2, commencing August 2, 1987 and, if any such day is not a business day, the business day next succeeding such date. "Investment Property" means any security (as said term is defined in Section 165(g)(2)(A) or (B) of the Code), obligation, annuity or investment-type property, excluding, however, obligations the interest on which is excluded from gross income for federal income tax purposes under Section 103 of the Code. 02/22/87 4899k/2468-03 -3- "1985 Bonds" means the District's $30,000,000 Special Tax Bonds Series 1985 issued pursuant to Resolution No. 85-109. "Maximum Annual Debt Service" shall be the maximum sum obtained for any Bond Year prior to the final maturity on the Bonds by totaling the following for each Bond Year: (1) the principal amount of all outstanding Bonds and any Parity Bonds payable in such Bond Year either at maturity or pursuant to a Sinking Fund Payment; and (2) the interest payable on the aggregate principal amount of the Bonds and any Parity Bonds outstanding in such Bond Year if the Bonds and any Parity Bonds are retired as scheduled. "Net Taxes" means the amount of all Special Taxes received by the District from the Treasurer-Tax Collector of the County of San Diego, together with the proceeds from the sale of property collected pursuant to the foreclosure provisions of this Resolution for the delinquency of such Special Taxes and, when and if received, the $820,000 to be paid to the District by the Poway Redevelopment Agency pursuant to the terms of the Owner Participation Agreement between the Poway Redevelopment Agency and CF Poway, Ltd. dated December 30, 1985. "Nonpurpose Obligation" means any security or obligation (other than an obligation on which interest is excludable from gross income for federal income tax purposes under Section 103 of the Code) in which Gross Proceeds are invested and which is not acquired to carry out the governmental purpose of the Bonds. "Ordinance" means Ordinance No. 182 adopted by the legislative body providing for the levying of the Special Tax. "Outstanding Bonds" means all Bonds theretofore issued by the District, except: (1) Bonds theretofore cancelled or surrendered for cancellation in accordance with Section 9.01 hereof; and (2) Bonds for payment or redemption of which monies shall have been theretofore deposited in trust (whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Bonds are to be ~ - redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in this Resolution or any applicable Parity Bond resolution. 02/22/87 4899k/2468-03 -4- "Parity Bonds" means all bonds, notes or other similar evidences of indebtedness hereafter issued, payable out of the Net Taxes and which, as provided in this Resolution or any Supplemental Resolution, rank on a parity with the Bonds. "Project" means certain real and other tangible property with an estimated useful life of five years or longer, which is to be acquired or constructed within and without the District, for street and road improvements and a bridge, as more particularly described in the Acquisition Agreement. "Project Costs" means the amounts necessary to finance the Project, to create and replenish any necessary reserve funds, to pay the annual costs associated with the Bonds or any Parity Bonds, including, but not limited to, remarketing, credit enhancement, Fiscal Agent and other fees and to pay any "incidental expenses" of the District, as such term is defined in the Act. "Purchase Price", for the purpose of computation of the Yield of the Bonds, has the same meaning as the term "issue price" in Sections 1273(b) and 1274 of the Code, and, in general, means the initial offering price to the public (not including bond houses and brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers) at which price a substantial amount of the Bonds are sold or, if the Bonds are privately placed, the price paid by the Original Purchaser or the acquisition cost of the Original Purchaser. The term "Purchase Price"; for the purpose of computation of the Yield of Nonpurpose Obligations, means the fair market value of the Nonpurpose Obligations on the date of use of Gross Proceeds for acquisition thereof, or, if later, on the date that Investment Property constituting a Nonpurpose Obligation becomes a Nonpurpose Obligation of the Bonds. "Record Date" means the fifteenth day of the month preceding an Interest Payment Date or, if such day is not a business day, the business day next preceding such date of any year in which any of the Bonds are outstanding. "Regulations" means regulations adopted by the Department of Treasury from time to time with respect to obligations issued pursuant to Section 103 of the Code. "Reserve Requirement" means, as of any date of calculation, an amount equal to $3,000,000. "Resolution" means Resolution No. of the District, together with this Supplement to Resolution, as amended or supplemented pursuant to the terms hereof. 02/22/87 4899k/2468-03 -5- "Resolution of Formation" means Resolution No. 85-093 adopted by the legislative body of the District on November 26, 1985, pursuant to which the City formed the District. "Sinking Fund Payment" means the annual payment to be deposited in the Redemption Fund to redeem a portion of the Term Bonds in accordance with the schedule set forth in Section 4.01(b) hereof. "Special Taxes" means the taxes authorized to be levied by the District and in accordance with the Ordinance, the Resolution of Formation, the Act and the voter approval obtained at the November 26, 1985 and the March 3, 1987 elections in the District. "Supplemental Resolution" means any resolution authorizing the issuance of any Parity Bonds. "Term Bonds" means the Bonds maturing on February 2, 2011. "Treasurer" means the Treasurer of the City acting on behalf of the District. "Underwriter" means Drexel Burnham Lambert Incorporated. "Yield" means that yield which, when used in computing the present worth of all payments of principal and interest (or other payments in the case of Nonpurpose Obligations which require payments in a form not characterized as principal and interest) on a Nonpurpose Obligation or on the Bonds produces an amount equal to the Purchase Price of such Nonpurpose Obligation or the Bonds, as the case may be, all computed as prescribed in the applicable Tax Regulations. ARTICLE II GENERAL AUTHORIZATION AND BOND TERMS Section 2.01. Amount, Issuance, Purpose and Nature of Bonds. Under and pursuant to the Act, the Bonds in the amount of $32,800,000, together with any Parity Bonds, shall be issued for the purposes of constructing, acquiring and completing the Project, provided that the aggregate principal amount of the Bonds and any Parity Bonds shall not exceed the total indebtedness approved by the qualified electors of the District in accordance with the Act. The Bonds shall be and are limited obligations of the District and shall be payable as to the principal thereof and interest thereon and any premiums upon the redemption thereof solely from, the Net Taxes, the amounts in the funds created hereunder and earnings thereon. 02/22/87 4899k/2468-03 -6- Section 2.02. Payment of 1985 Bonds. In connection with the refunding of the 1985 Bonds: (a) Section 3.02 hereof provides for the deposit of a portion of the proceeds of the sale of the Bonds and certain other available moneys in the 1985 Bonds Escrow Fund established by the Escrow Bank in a sufficient sum to accomplish the refunding of the 1985 Bonds. Upon delivery of the Bonds hereunder, such sums are to be deposited with the Escrow Bank and to be used as provided in the Escrow Agreement. (b) The Agency and/or the Escrow Bank, as the case may be, shall take all action necessary to pay and retire the 1985 Bonds as set forth in (c) below, including, without limitation, all actions required by this Resolution. (c) The Agency hereby directs the Escrow Bank to transfer to the Fiscal Agent for the 1985 Bonds, from time to time, the amounts available in the 1985 Bonds Escrow Fund to pay the principal of, premium and interest on the 1985 Bonds at maturity on or prior to March 2, 1996 and upon the call and redemption of the 1985 Bonds remaining outstanding on March 2, 1996 at a price of par plus a premium of 3~. Section 2.03. Type and Nature of Bond. The Bonds and interest thereon, together with any premium paid thereon upon redemption, are not obligations of the City, but are limited obligations of the District secured by and payable from an irrevocable first lien on the Net Taxes. Except with respect to the Special Tax, neither the faith and credit nor the taxing power of the District or the City is pledged for the payment of the Bonds or the interest thereon, and no Owner of the Bonds may compel the exercise of the taxing power by the District or the City or the forfeiture of any of their property. The principal of and interest on the B6nds and premiums upon the redemption thereof, if any, are not a debt of the District, the City, the State of California or any of its political subdivisions within the meaning of any constitutional or statutory limitation or restriction. The Bonds are not a legal or equitable pledge, charge, lien, or encumbrance, upon any of the District's property, or upon any of its income, receipts, or revenues, except the Net Taxes which are, under the terms of this Resolution and the Act, set aside for the payment of the Bonds and interest thereon and neither the members of the legislative body of the District or the City Council of the City nor any persons executing the Bonds are liable personally on the Bonds by reason of their issuance. Notwithstanding anything contained in this Resolution, the District shall not be required to advance any money derived from any source of income other than the Net Taxes for the 02/22/87 4899k/2468-03 -7- payment of the interest on or the principal of the Bonds or for the performance of any covenants herein contained. The District may, however, advance funds for any such purpose, provided that such funds are derived from a source legally' available for such purpose. Section 2.04. Equality of Bonds, Pledge of Net Taxes. Pursuant to the Act and this Resolution, the Bonds and any Parity Bonds shall be equally payable from the Net Taxes without priority for number, date of the Bonds, date of sale, date of execution, or date of delivery, and the payment of the interest on and principal of the Bonds and any Parity Bonds and any premiums upon the redemption thereof, shall be exclusively paid from the Net Taxes which are hereby set aside for the payment of the Bonds and any Parity Bonds. The Net Taxes and any interest earned on the Net Taxes shall constitute a trust fund held for the benefit of the Owners to be applied to the payment of the interest on and principal of the Bonds and any Parity Bonds and so long as any of the Bonds and any Parity Bonds or interest thereon remain Outstanding shall not be used for any other purpose, except as permitted by this Resolution or any Supplemental Resolution. Nothing in this Resolution or any Supplemental Resolution shall preclude: (a) the redemption prior to maturity of any Bonds subject to call and redemption and payment of said Bonds from proceeds of refunding bonds issued under the Act as the same now exists or as hereafter amended, or under any other law of the State of California; or (b) the issuance, subject to the limitations contained herein, of Parity Bonds which shall be payable from Net Taxes. Section 2.05. Description of Bonds; Interest Rates. The Bonds shall be issued in fully registered form in denominations of $5,000 or any integral multiple thereof within a single maturity and shall be numbered as desired by the Fiscal Agent. The Bonds shall be designated "SOUTH POWAY COMMUNITY FACILITIES DISTRICT NO. 1 1987 SPECIAL TAX REFUNDING BONDS". The Bonds shall be dated as Of February 2, 1987 and shall mature and be payable on February 2 and August 2 in the years and in the aggregate principal amounts and shall be subject to and shall bear interest at the rates set forth in the table below: Date Principal Amount Interest Rate February 2, 1989 August 2, 1989 February 2, 1990 August 2, 1990 February 2, 1991 August 2, 1991 100,000.00 200,000.00 200,000.00 205,000.00 200,000.00 200,000.00 5 o00% 5 ooo% 5 5oo% 5 5o0% 5 750% 5 750% 02/22/87 4899k/2468-03 -8- February 2, 1992 210 August 2, 1992 215 February 2, 1993 255 August 2, 1993 265 February 2, 1994 310 August 2, 1994 320 February 2, 1995 370 August 2, 1995 380 February 2, 1996 435 August 2, 1996 450 February 2, 1997 505 February 2, 2011 27,980 000 000 000 000 000 000 000 000 000 000 000 000 00 6 O0 6 00 6 00 6 00 6 00 6 00 6 00 6 O0 6 00 6 00 6 O0 7 o00% oo0% 2oo% 200% 400% 400% 600% 6oo% 75o% 750% 80o% 125% Interest shall be payable with respect to each Bond on each Interest Payment Date until the principal sum of that Bond has been paid; provided, however, that if at the maturity date of any Bond (or if the same is redeemable and shall be duly called for redemption, then at the date fixed for redemption) funds are available for the payment or redemption thereof, in full accordance with terms of this Resolution, such Bonds shall then cease to bear interest. Interest due on the Bonds shall be calculated on the basis of a 360-day year comprised of twelve 30-day months. Section 2.06. Place and Form of Payment. The Bonds shall be payable both as to principal and interest, and as to any premiums upon the redemption thereof, in lawful money of the United States of America. The principal of the Bonds and any premiums due upon the redemption thereof shall be payable upon presentation thereof at the principal corporate trust office of the Fiscal Agent in Los Angeles, California. Interest on any Bond shall be payable from the Interest Payment Date next preceding the date of authentication of that Bond, unless (i) such date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication, (ii) the date of authentication is after a Record Date but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication or (iii) the date of authentication is prior to the close of business on the first Record Date in which event interest shall be payable from February 2, 1987; provided, however, that if at the time of authentication of such Bond, interest is in default, interest on that Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment. Interest on any Bond shall be paid to the person whose name shall appear in the Bond Register as the Owner of such Bond as of the close of business on the Record Date. Such interest shall be paid by check of the Fiscal Agent mailed by first class mail, postage prepaid, 02/22/87 4899k/2468-03 -9- to such Bondowner at his or her address as it appears on the Bond Register. Section 2.07. Form of Bonds; Temporary Bonds. The definitive Bonds shall be printed from steel engraved or lithographic plates, and the Bonds and the certificate of authentication shall be substantially in the form attached hereto as Exhibit A, which form is hereby approved and adopted as the form of the Bonds and of the certificate of authentication. Until definitive Bonds shall be prepared, the District may cause to be executed and delivered in lieu of such definitive Bonds temporary bonds in typed, printed, lithographed or engraved form and in fully registered form, subject to the same provisions, limitations and conditions as are applicable in the case of definitive Bonds, except that they may be in any denominations authorized by the District. Until exchanged for definitive Bonds, any temporary bond shall be entitled and subject to the same benefits and provisions of this Resolution as definitive Bonds. If the District issues temporary Bonds, it will execute and furnish definitive Bonds without unnecessary delay and thereupon any temporary Bond may be surrendered to the Fiscal Agent at its office, without expense to the Owner, in exchange for a definitive Bond of the same maturity, interest rate and principal amount in any authorized denomination. All temporary Bonds so surrendered shall be cancelled by the Fiscal Agent and shall not be reissued. Section 2.08. Execution and Authentication. The Bonds shall be signed on behalf of the District by the manual or facsimile signature of the Mayor of the City and by the manual or facsimile signature of the City Clerk, or any duly appointed deputy clerk, in their capacity as officers of the District, and the seal of the District (or a facsimile thereof) shall be impressed, imprinted, engraved or otherwise reproduced thereon, and attested by the signature of the City Clerk. In case any one or more of the officers who shall have signed or sealed any of the Bonds shall cease to be such officer before the Bonds so signed and sealed have been authenticated and delivered by the Fiscal Agent (including new Bonds delivered pursuant to the provisions hereof with reference to the transfer and exchange of Bonds or to lost, stolen, destroyed or mutilated Bonds), such Bonds shall nevertheless be valid and may be authenticated and'delivered as herein provided, and may be issued as if the person who signed or sealed such Bonds had not ceased to hold such office. Only such Bonds as shall bear thereon such certificate of authentication in the form set forth in Exhibit A hereto shall be entitled to any right or benefit under this Resolution, and 02/22/87 4899k/2468-03 -10- no Bond shall be valid or obligatory for any purpose until such certificate of authentication shall have been duly executed by the Fiscal Agent. Section 2.09. Bond Register. The Fiscal Agent will keep or cause to be kept, at its corporate trust office, sufficient books for the registration and transfer of the Bonds which shall be open to inspection by the District during all regular business hours, and, upon presentation for such purpose, the Fiscal Agent shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be transferred on said Bond Register, Bonds as herein provided. The District and the Fiscal Agent may treat the Owner of the Bond whose name appears on the Bond Register as the absolute Owner of the Bond for any and all purposes, and the District and the Fiscal Agent shall not be affected by any notice to the contrary. The District and the Fiscal Agent may rely on the address of the Bondowner as it appears in the Bond Register for any and all purposes. It shall be the duty of the Bondowner to give written notice to the Fiscal Agent of any change in the Bondowner's address so that the Bond Register may be revised accordingly. Section 2.10. Registration of Exchange or Transfer. The registration of any Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond for cancellation at the corporate trust office of the Fiscal Agent, accompanied by delivery of written instrument of transfer in a form approved by the Fiscal Agent and duly executed by the Bondowner or his or her duly authorized attorney. Bonds may be exchanged at the corporate trust office of the Fiscal Agent for a like aggregate principal amount of Bonds of other authorized denominations of the same maturity. The Fiscal Agent will not charge the Owner for any new Bond issued upon any exchange, but shall require the Bondowner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. Whenever any Bond or Bonds shall be surrendered for registration of transfer or exchange, the District shall execute and the Fiscal Agent shall authenticate and deliver a new Bond or Bonds of the same maturity, for a like aggregate principal amount; provided that the Fiscal Agent shall not be required to register transfers or make exchanges of (i) Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed, or (ii) any Bonds chosen for redemption. 02/22/87 4899k/2468-03 -11- Section 2.11. Mutilated, Lost, Destroyed or Stolen Bonds. If any Bond shall become mutilated, the District shall execute, and the Fiscal Agent shall authenticate and deliver, a new Bond of like tenor, date and maturity in exchange and substitution for the Bond so mutilated, but only upon surrender to the Fiscal Agent of the Bond so mutilated. Every mutilated Bond so surrendered to the Fiscal Agent shall be cancelled by the Fiscal Agent pursuant to Section 10.01. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Fiscal Agent and, if such evidence is satisfactory to the Fiscal Agent and, if any indemnity satisfactory to the District and the Fiscal Agent shall be given, the District, at the expense of the Bondowner, shall execute and the Fiscal Agent shall authenticate and deliver, a new Bond of like tenor and maturity, numbered and dated as such Fiscal Agent shall determine in lieu of and in substitution for the Bond so lost, destroyed or stolen. Any Bond issued in lieu of any Bond alleged to be mutiliated, lost, destroyed or stolen, shall be equally and proportionately entitled to the benefits hereof with all other Bonds issued hereunder. The Fiscal Agent shall not treat both the original Bond and any replacement Bond as being outstanding for the purpose of determining the principal amount of Bonds which may be executed, authenticated and delivered hereunder or for the purpose of determining any percentage of Bonds outstanding hereunder, but both the original and duplicate Bond shall be treated as one and the same. Notwithstanding any other provision of this Section, in lieu of delivering a new Bond which has been mutilated, lost, destroyed or stolen, and which has matured, the Fiscal Agent may make payment with respect to such Bonds. Section 2.12. Validity of Bonds. The validity of the authorization and issuance of the Bonds shall not be affected in any way by any proceedings taken by the District for the financing of the Project, or by any contracts made by the District in connection therewith, and shall not be dependent upon the completion of the financing of the Project or upon the performance by any person of his obligation with respect to the Project, and the recital contained in the Bonds that the same are issued pursuant to the Act shall be conclusive evidence of their validity and of the regularity of their issuance. ARTICLE III CREATION OF FUNDS AND APPLICATION OF PROCEEDS AND NET TAXES Section 3.01. Creation of Funds. There is hereby created and established and shall be maintained by the Fiscal Agent of the District the following funds: 02/22/87 4899k/2468-03 -12- (1) The South Poway Community Facilities District No. 1 1987 Costs of Issuance Fund (the "Costs of Issuance Fund"). (2) The South Poway Community Facilities District No. 1 1987 Special Tax Fund (the "Special Tax Fund") in which there shall be established and created an Interest Account and a Principal Account. (3) The South District No. 1 1987 Fund"). Poway Community Facilities Redemption Fund (the "Redemption (4) The South Poway Community Facilities District No. 1 1987 Reserve Fund (the "Reserve Fund"). (5) The South Poway Community Facilities District No. 1 1987 Excess Investment Earnings Fund (the "Excess Investment Earnings Fund"). (6) The South Poway Community Facilities District No. 1 1987 Administrative Fund (the "Administrative Fund"). (7) The South Poway Community Facilities District No. 1 1987 Acquisition Fund (the "Acquisition Fund"). Section 3.02. Disposition of Bond Proceeds and the 1985 Bond Proceeds. The proceeds of the sale of the Bonds and the 1985 Bond proceeds shall be received by the Fiscal Agent on behalf of the District and deposited as follows: (1) The amount representing the accrued interest equal to $242,301.46 on the Bonds shall be deposited in the Interest Account of the Special'Fund from Bond proceeds, and such amount shall be applied to the payment of interest on August 2, 1987; (2) $167,829.11 shall be deposited in the Costs of Issuance Fund from Bond proceeds; (3) $3,000,000 shall be placed in the Reserve Fund from Bond proceeds; (4) $3,220,489 on deposit in the 1985 Bonds Reserve Fund, $2,652,000 on deposit in the 1985 Bonds Special Fund, and $28,752,095.89 of Bond proceeds, shall be deposited in the 1985 Bonds Escrow Fund established with the Escrow Bank and be applied in accordance with the Escrow Agreement to discharge the 1985 Bonds; 02/22/87 4899k/2468-03 -13- (5) After making the transfers required by (4) above, all remaining amounts on deposit in the 1985 Bonds Special Fund, the 1985 Bonds Reserve Fund and the 1985 Bonds Administrative Fund shall be transferred to the Special Fund; and (6) Ail amounts on deposit in the 1985 Bonds Acquisition Fund shall be transferred to the Acquisition Fund. Section 3.03. Deposits to and Disbursements from Special Tax Fund; Costs of Issuance Fund. The Treasurer shall, on each date on which the Special Taxes have been collected by the District from the Tax-Collector-Treasurer of the County of San Diego and in no event later than seven days prior to the Interest Payment Date on which such Special Taxes will be needed to pay amounts due in accordance with the terms of this Resolution, transfer the Special Taxes to the Fiscal Agent for deposit in the Special Tax Fund, to be held in trust and transferred on the dates and in the amounts set forth in the following Sections, in the following order of priority, to: (1) The Interest Account; (2) The Principal Account; (3) The Redemption Fund; (4) The Reserve Fund; (5) The Excess Investment Earnings Fund; and (6) The Administrative Fund. Notwithstanding anything herein to the contrary, moneys transferred to the Special Tax Fund from the Acquisition Fund in accordance with Section 3.09 hereof shall, unless in the opinion of Bond Counsel another use of such funds will not impair the exclusiOn from gross income of interest on the Bonds, be held in a separate account within the Special Tax Fund known as the "Purchase Account" which the Fiscal Agent is directed to establish when and if such transfer is required to be made and moneys in such separate account shall be invested in tax-exempt Authorized Investments or in Authorized Inv6stments at a Yield not in excess of the Yield on the Bonds and shall be applied only (i) to the purchase of Bonds by the District in the open market, at a price not to. exceed the principal amount thereof plus accrued interest, which Bonds shall thereupon be cancelled, (ii) to make interest payments on the Bonds, or (iii) to redeem Bonds at the earliest redemption date permitted by this Resolution, without premium. 02/22/87 4899k/2468-03 -14- Moneys deposited in the Costs of Issuance Fund shall be applied by the Fiscal Agent to the payment of Costs of Issuance. Any moneys remaining in the Costs of Issuance Fund on August 1, 1987 shall be transferred by the Fiscal Agent to the Interest Account. Section 3.04. Special Tax Fund. The principal and interest on the Bonds until maturity, otherwise than by redemption, shall be paid by the Fiscal Agent from the Special Tax Fund. At the maturity of the Bonds and, after all principal and interest then due on the Bonds then outstanding has been paid or provided for, moneys in the Special Tax Fund shall be transferred to the District. For the purpose of assuring that the payment of principal and interest on the Bonds will be made when. due, on or prior to each February 1 and August 1, the Fiscal Agent shall make the following transfers first to the Interest Account and then to the Principal Account; provided, however, that to the extent that deposits have been made in the Interest Account or the Principal Account from the proceeds of the sale of the Bonds or otherwise, the transfer from the Special Tax Fund need not be made: (a) To the Interest Account, an amount such that the balance in the Interest Account one (1) day prior to each Interest Payment Date shall be equal to the installment of interest due on the Bonds on said Interest Payment Date. Moneys in the Interest Account shall be used for the payment of interest on the Bonds as the same become due. (b) To the Principal Account, an amount such that the balance in the Principal Account one (1) day prior to February 2 and August 2 of each year shall equal the principal payment due on the Bonds maturing on the next succeeding February 2 and August 2, respectively. Moneys in the Principal Account shall be used for the payment of the principal of such Bonds as the same become due at maturity. Section 3.05. Redemption Fund. (a) After the deposits have been made to the Interest Account and the Principal Account as required by the preceding section, the Fiscal Agent shall next transfer into the Redemption Fund from the Special Tax Fund the amount needed to make the balance in the Redemption Fund equal to the Sinking Fund Payment due on the outstanding Term Bonds on the next succeeding February 2 or August 2. Moneys so deposited in the Redemption Fund shall be used and applied by the Fiscal Agent to call and redeem the largest principal amount of outstanding 02/22/87 4899k/2468-03 -15- Term Bonds which can be called with the moneys available and any such call and redemption shall be made in accordance with the provisions and according to the Sinking Fund Payment schedule set forth in Section 4.01(b) hereof. In lieu or partially in lieu of such call and redemption, moneys deposited in the Redemption Fund as set forth above may be used to purchase outstanding Bonds in the manner hereinafter provided. Purchases of outstanding Bonds may be made by the District at public or private sale as and when and at such prices as the District may in its discretion determine but only at prices (including brokerage or other expenses) not more than par plus accrued interest plus the premium applicable at the next following call date according to the premium schedule established pursuant to Section 4.01(a) hereof, and any accrued interest payable upon the purchase of Bonds may be paid from the amount reserved in the Interest Account for the payment of interest on the next following Interest Payment Date. (b) After making the deposits to the Interest Account and the Principal Account pursuant to Section 3.04 above and to the Redemption Fund for Sinking Fund Payments then due pursuant to subparagraph (a) of this section, and in accordance with the District's election to call Bonds for optional redemption as set forth in Section 4.01(a), the Fiscal Agent shall transfer from the Special Tax Fund and deposit in the Redemption Fund moneys available for the purpose and sufficient to pay the principal and the premiums payable as provided in Section 4.01(a) on the Bonds called for optional redemption. Moneys set aside in the Redemption Fund shall be used solely for the purpose of redeeming Bonds and shall be applied on or after the redemption date to the payment of principal and premium on the Bonds to be redeemed upon presentation and surrender of such Bonds. If, after all of the Bonds have been redeemed and cancelled or paid and cancelled, there are moneys remaining in the Redemption Fund, said moneys shall be transferred to the Special Tax Fund; provided, that if said moneys are part of the proceeds of refunding bonds said moneys shall be transferred to the fund or account created for the payment of principal of and interest on such refunding bonds. Section 3.06. Reserve Fund. There shall be maintained in the Reserve Fund an amount equal to the Reserve Requirement. Moneys in the Reserve Fund shall be used solely for the purpose of paying the principal of, including Sinking Fund Payments, and interest on the Bonds when due in the event that the moneys in the Special Tax Fund are insufficient therefor or moneys in the Redemption Fund are insufficient to make a 02/22/87 4899k/2468-03 -16- mandatory redemption in accordance with the provisions of Section 4.01(b). If the amounts in the Special Tax Fund are insufficient for such purpose, the Fiscal Agent shall withdraw from the Reserve Fund for deposit in the Interest Account or the Principal Account or the Redemption Fund moneys necessary for such purpose. On each date that the Fiscal Agent makes a transfer from the Reserve Fund to the Interest Account, the Principal Account or the Redemption Fund, the Fiscal Agent shall notify the Treasurer, in writing, as to the date and amount of such transfer. The District shall then take the steps necessary to cause to be deposited to the Special Tax Fund the amount needed to replenish the Reserve Fund to the Reserve Requirement either through including such amount in the next annual Special Tax levy, or otherwise. Notwithstanding anything herein to the contrary, whenever moneys are withdrawn from the Reserve Fund, after making the required transfers to the Interest Account, the Principal Account and the Redemption Fund, the Fiscal Agent shall transfer to the Reserve Fund the amount needed to restore the amount of such fund to the Reserve Requirement. The Fiscal Agent shall make such transfer from the available moneys in the Special Tax Fund. Moneys in the Special Tax Fund shall be deemed available .for transfer to the Reserve Fund only if the Fiscal Agent determines that such amounts will not be needed to make the deposits required to be made to the Interest Account, the Principal Account and the Redemption Fund. Notwithstanding any provision herein to the contrary, moneys in the Reserve Fund in excess of the Reserve Requirement shall be withdrawn from the Reserve Fund by the Fiscal Agent on each February 2 and August 2 and transferred to the Special Tax Fund. Section 3.07. Excess Investment Earnings Fund. (a) The District shall calculate Excess Investment Earnings in accordance with paragraph (b) and shall pay Excess Investment Earnings to the United States government in accordance with paragraph (c). The term "Excess Investment Earnings" means an amount equal to the sum of: (i) the excess of: (A) the aggregate amount earned from the Delivery Date on all Nonpurpose Obligations in which Gross Proceeds of the Bonds are invested (other than amounts attributable to an excess described in this subparagraph (i)), over (B) the amount that would have been earned if the yield on such Nonpurpose Obligations (other than amounts 02/22/87 4899k/2468-03 -17- attributable to an excess described in this subparagraph (i)) had been equal to the yield on the Bonds, plus (ii) any income attributable to the excess described in paragraph (i). (b) At or prior to the last day of the first Computation Year, the District shall calculate the Excess Investment Earnings referenced in subparagraph (i) of paragraph (a) and shall deposit the same into the Excess Investment Earnings Fund to the extent funds are available first from the Special Tax Fund and then from any legally available funds. Thereafter, prior to the last day of each Computation Year and on the date of the retirement of the Bonds, the District shall calculate the amount of Excess Investment Earnings referenced in subparagraphs (i) and (ii) of paragraph (a) and direct corresponding transfers into the Excess Investment Earnings Fund. The calculations shall be made by a nationally recognized bond counsel, an Independent Certified Public Accountant or another organization whose calculations of rebate under Section 148(f) of the Code have been accepted by other public agencies in the State retained by the District in accordance with the following: (1) Except as provided in (2), in determining the amount described in subparagraph (i)(A) of paragraph (a), the aggregate amount earned on Nonpurpose Obligations shall include (i) all income realized under federal income tax accounting principles (whether or not the person earning such income is subject to federal income tax) with respect to such Nonpurpose Obligation and with respect to the reinvestment of investment receipts from such Nonpurpose Obligations (without regard to the transaction costs incurred in acquiring, carrying, selling or redeeming such Nonpurpose Obligations), including, but not limited to, gain or loss realized on the disposition of such Nonpurpose Obligations (without regard to when such gains are taken into account under Section 453 of the Code relating to the taxable year of inclusion of gross income), and income under Section 1272 of the Code (relating to original issue discount) and (ii) any unrealized gain or loss as of the date of retirement of the Bonds if any Nonpurpose Obligation 'is retained after such date. (2) In determining the amount described in subparagraph (i) of paragraph (a), an obligation or security shall be treated as acquired for its fair market value at the time it becomes a Nonpurpose Obligation, so that gain or loss on the disposition of such an obligation or security shall be computed with reference to such fair market value as its adjusted basis. 02/22/87 4899k/2468-03 -18- (3) In determining the amount described in subparagraph (i)(B) of paragraph (a), the Yield on the Bonds shall be determined based on the actual Yield of the Bonds during the period between the Delivery Date and the date the computation is made (with adjustments for discount or premium). (4) In determining the amount described in subparagraph (ii) of paragraph (a), all income attributable to the excess described in subparagraph (i) of paragraph (a) must be taken into account, whether or not that income exceeds the Yield on the Bonds, and no amount may be treated as "negative arbitrage." (5) In determining the amount described in subsection (a) of this Section, there shall be excluded any amount earned on any fund or account which is used primarily to achieve a proper matching of revenues and annual debt service on the Bonds during each Bond Year and which is depleted at least once a year except for a reasonable carryover amount not in excess of the greater of one year's earnings on such fund or account or one-twelfth (1/12) of annual debt service on the Bonds, as well as amounts earned on said earnings if the gross earnings on all such funds and accounts for the Computation Year are less than $100,000. (c) Upon written direction of the District, the Fiscal Agent shall pay Excess Investment Earnings to the United States government in installments with the first payment to be made not later than thirty (30) days after the end of the fifth Computation Year and with subsequent payments to be made not later than five (5) years after the preceding payment was due. The District shall assure that each installment is in an amount equal to at least 90 percent of the Excess Investment Earnings with respect to the Bonds as of the close of the computation period. Upon the direction of the District, which direction shall be given before thirty (30) days after the retirement of the Bonds, the Fiscal Agent shall pay from the Excess Investment Earnings Fund, or the District shall pay directly, 100 percent of the theretofore unpaid Excess Investment Earnings of the Bonds. The Fiscal Agent or the District shall remit such payments to the United States government at the address and in the manner directed by the District prescribed by the Regulations as the same may be in time to time in effect, together with such reports and statements prepared by District as may be prescribed by such Regulations. If the Fiscal Agent follows the written instructions as supplied by the District, it shall be deemed to have complied with this subsection and shall have no responsibility to calculate Excess Investment Earnings or to take action in the absence of instructions from the District. 02/22/87 4899k/2468-03 -19- (d) In order to assure that Excess Investment Earnings are paid to the United States rather than to a third party, investments by the District in certificates of deposit and in investment agreements shall be made only in accordance with the Regulations therefor as from time to time in effect. (e) The District shall keep and retain for a period of six (6) years following the retirement of the Bonds records of the determinations made pursuant to this Section. The Fiscal Agent shall keep a record of all investments made with moneys on deposit in any Fund or Account held by it hereunder and shall provide such records to the District at least quarterly. Such records shall contain a reference to the date of purchase, the date of sale, the purchase price, the sales price, the principal amount and coupon rate of each obligation purchased or sold. (f) Payments pursuant to this Section shall be made to the maximum extent possible from moneys on deposit in the Excess Investment Earnings Fund and, to the extent of any deficiency therein for such purpose, shall be made from the Special Tax Fund. In the event of any remaining deficiency in available moneys for the purposes of such transfer, such deficiency shall be paid by the District from any available funds. (g) Notwithstanding the foregoing, the foregoing method of computing Excess Investment Earnings may be modified, in whole or in part, without the consent of the Owners of the Bonds upon receipt by the District of an opinion of Bond CounSel to the effect that such modification will not adversely affect the exclusion from gross income of interest on the Bonds. Section 3.08. Administrative Expense Fund. After making the transfers required by Sections 3.04, 3.05, 3.06 and 3.07, the Fiscal Agent shall withdraw from the Special Tax Fund and place in the Administrative Expense Fund an amount necessary to pay all Administrative Expenses. Moneys in the Administrative Expense Fund may be invested in any Authorized Investments, provided that the maturity or maturities thereof shall not exceed 30 days from the date of purchase. Section 3.09. Acquisition Fund. (a) The moneys in the Acquisition Fund shall be applied exclusively to pay the Project Costs. Amounts for Project Costs shall be disbursed by the Fiscal Agent only upon receipt of a sequentially numbered written requisition, substantially in the form attached hereto as Exhibit B, from the City Manager, or his designee, or such other person as is designated in writing to the Fiscal Agent by the legislative body of the District, stating that (1) the conditions to the release of such funds stated in the Acquisition Agreement have been satisfied, (2) the 02/22/87 4899k/2468-03 -20- name of the person to whom payment is due, (3) the amount to be paid, (4) the purpose for which the obligation to be paid was incurred, (5) there has not been filed with or served upon the District notice of any lien, right to lien or attachment upon, stop notice or claim affecting the right to receive payment of, any of the moneys payable to any of the persons named in such certificate or written requisition, which has not been released or will not be released simultaneously with the payment of such obligation, other than materialmen's or mechanic's liens accruing by mere operation of law, and (6) sufficient money remains in the Acquisition Fund to pay all remaining costs of acquisition, construction and financing of the Project. Each requisition shall be accompanied by the invoices which are being paid or by other evidence of payment of such amounts by the District. The Fiscal Agent shall have no liability for disbursing funds in accordance with the provisions of this Section 3.09(a). (b) Upon receipt of a certificate from the City Manager, or his designee, that all Project Costs have been paid, the Fiscal Agent shall transfer moneys on deposit in the Acquisition Fund to the Special Tax Fund. (c) Notwithstanding anything herein to the contrary, if on August 2, 1988, any funds remain on deposit in the Acquisition Fund, the Fiscal Agent shall not later than 30 days thereafter invest such amounts in tax-exempt obligations or shall restrict the Yield on such amounts such that the Yield on such amounts is not in excess of the Yield on the Bonds (as set forth in the Non-Arbitrage Certificate of the District), unless in the opinion of Bond Counsel such restriction is not necessary to prevent interest on the Bonds from being included in gross income for federal income tax purposes. Section 3.10. Investments. Moneys held in any of the Funds and Accounts under this Resolution Shall be invested only in Authorized Investments which shall be deemed at all times to be a part of such Funds and Accounts. Any income realized or loss resulting from such Authorized Investments shall be credited or charged to the Fund or Account from which such investment was made; provided, however, (i) investment earnings on all amounts deposited in the Acquisition Fund prior to August 2, 1988 shall be deposited (1) in the Acquisition Fund until the Project is completed, and (2) thereafter, in the Special Tax Fund, (ii) investment earnings on all amounts in the Excess Investment Earnings Fund shall be deposited therein, and (iii) all other investment earnings shall be deposited in the Special Tax Fund. Moneys in the Funds and Accounts held under this Resolution may be from time to time invested by the Fiscal Agent at the direction of the Treasurer subject to the following restrictions: 02/22/87 4899k/2468-03 -21- (a) Moneys in the Acquisition Fund shall be invested in Authorized Investments which will by their terms mature as close as practicable to the date the District estimates the moneys represented by the particular investment will be needed for withdrawal from the Acquisition Fund. (b) Moneys in the Redemption Fund shall be invested only in Authorized Investments which will by their terms mature on such dates so as to ensure the payment of principal and interest on the Bonds as the same become due. (c) The moneys in the Reserve Fund may be invested initially only in Authorized Investments which mature not later than February 2, 1992 and thereafter shall be invested in Authorized Investments which mature not more than six months from the date of purchase by the Fiscal Agent, provided that no such Authorized Investment shall mature later than the final maturity of the Bonds. The Fiscal Agent shall sell at the best price obtainable or present for redemption any obligations so purchased whenever it may be necessary to do so in order to provide moneys to meet any payment or transfer for such funds and accounts or from such funds and accounts. For the purpose of determining at any given time the balance in any such funds, any such investments constituting a part of such funds and accounts shall be valued at their cost. Notwithstanding anything herein to the contrary, neither the Fiscal Agent nor the Treasurer shall be responsible for any loss from investments, sale or transfer authorized pursuant to this Resolution. The Fiscal Agent shall provide the District with monthly reports relating to the investments made in all Funds and Accounts and the investment earnings, income or loss posted to each Fund or Account. ARTICLE IV REDEMPTION OF BONDS Section 4.01. Redemption of Bonds. (a) Optional Redemption. The Bonds maturing on or before February 2, 1997 are not subject to call and redemption prior to maturity. The Bonds maturing on February 2, 2011 may be redeemed, at the option of the District on February 2, 1997, or on any Interest Payment Date thereafter, prior, to maturity in whole or in part, by lot, at the following redemption prices, expressed as a percentage of par value, together with accrued interest to the date of redemption. 02/22/87 4899k/2468-03 -22- Redemption Dates February 2, 1997 and August 2, 1997 February 2, 1998 and August 2, 1998 February 2, 1999 and August 2, 1999 February 2, 2000 and thereafter Redemption Prices 103% 102% lO1% lOO% In the event the District shall elect to redeem Bonds as provided in this Section 4.01(a), the District shall give written notice to the Fiscal Agent of its election so to redeem, the redemption date and the principal amount of the Bonds to be redeemed. The notice to the Fiscal Agent shall be given at least 45 but no more than 90 days prior to the redemption date or such shorter period as shall be acceptable to the Fiscal Agent. (b) Mandatory Sinking Fund Redemption. (i) The outstanding Term Bonds maturing on February 2, 2011 will be called before maturity and redeemed from the Sinking Fund Payments that have been deposited into the Redemption Fund on August 2, 1997, and on each February 2 and August 2 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall be redeemed at a redemption price for each redeemed Bond equal to the principal amount thereof, plus accrued interest to the redemption date without premium as follows: Date August 2, 1997 February 2, 1998 August 2, 1998 February 2, 1999 August 2, 1999 February 2, 2000 August 2, 2000 February 2, 2001 August 2, 2001 February 2, 2002 August 2, 2002 February 2, 2003 August 2, 2003 February 2, 2004 August 2, 2004 February 2, 2005 August 2, 2005 February 2, 2006 August 2, 2006 February 2, 2007 Principal Amount $ 520 000.00 580000.00 605000.00 ~70 i 000.00 695.000.00 720000.00 745.000.00 770.000.00 795.000.00 825,000.00 855,000.00 885,000.00 915,000.00 950,000.00 985 000.00 1,020.000.00 1,055,000.00 1,090,000.00 1,130,000.00 1,170,000.00 02/22/87 4899k/2468-03 -23- August 2, 2007 February 2, 2008 August 2, 2008 February 2, 2009 August 2, 2009 February 2, 2010 August 2, 2010 February 2, 2011 1,215,000.00 1,255,000.00 1,30o,000.00 1,345,000.00 1,395,000.00 1,445,000.00 1,495,000.00 1,550,000.00 Section 4.02. Selection of Bonds for Redemption. If less than all of the Outstanding Bonds are to be redeemed, the Fiscal Agent shall select the Bonds to be redeemed by lot in any manner which the Fiscal Agent deems fair; provided, however, that the portion of any Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of $5,000 or a multiple thereof, and that, in selecting portions of such Bonds for redemption, the Fiscal Agent shall treat each such Bond as representing that number of Bonds of $5,000 denomination which is obtained by dividing the principal amount of such Bond to be redeemed in part by $5,000. The Fiscal Agent shall promptly notify the District in writing of the Bonds, or portions thereof, selected for redemption. Section 4.03. Notice of Redemption. When Bonds are due for redemption under Section 4.01(b) above and when the Fiscal Agent receives notice from the District of its election to redeem Bonds under Section 4.01(a) above, the Fiscal Agent shall give notice, in the name of the District, of the redemption of such Bonds. Such notice of redemption shall (a) specify the serial numbers and the maturity date or dates of the Bonds selected for redemption, except that where all the Bonds subject to redemption, or all the Bonds of one maturity, are to be redeemed, the serial numbers thereof need not be specified; (b) state the date fixed for redemption and surrender of the Bonds to be redeemed; (c) state the redemption price; (d) state the place or places where the Bonds are to be redeemed; and (e) in the case of Bonds to be redeemed only in part, state the portion of such Bond which is to be redeemed. Such notice shall further state that on the date fixed for redemption, there shall become due and payable on each Bond or portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the redemption date, and that from and after such date, interest thereon shall cease to accrue and be payable. At least 30 days bug no more than 60 days prior to the redemption date, the Fiscal Agent shall mail a copy of such notice, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register. The actual receipt by the Owner of any Bond of notice of such redemption shall not be a condition precedent thereto, and failure to receive such notice shall not affect the validity of the 02/22/87 4899k/2468-03 -24- proceedings for the redemption of such Bonds, or the cessation of interest on the redemption date. A certificate by the Fiscal Agent that notice of such redemption has been given as herein provided shall be conclusive as against all parties and the Owner shall be entitled to show that he or she failed to receive notice of such redemption. Section 4.04. Partial Redemption of Bonds. Upon surrender of any Bond to be redeemed in part only, the District shall execute and the Fiscal Agent shall authenticate and deliver to the Bondowner, at the expense of the District, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered, with the same interest rate and the same maturity. Section 4.05. Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in Section 4.03, and the amount necessary for the redemption having been made available for that purpose and being available therefor on the date fixed for such redemption: (a) The Bonds, or portions thereof, designated for redemption shall, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in this Resolution, anything in this Resolution or in the Bonds to the contrary notwithstanding; (b) Upon presentation and surrender thereof at the corporate trust office of the Fiscal Agenti the redemption price of such Bonds shall be paid to the Owner thereof; (c) After the redemption date the Bonds or portions thereof so designated for redemption shall be deemed to be no longer outstanding and such Bonds or portions thereof shall cease to bear further interest; and (d) After the date fixed for redemption no Owner of any of the Bonds or portions thereof so designated for redemption shall be entitled to any of the benefits of this Resolution, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available. ARTICLE V COVENANTS AND WARRANTY Section 5.01. Warranty. The District shall preserve and protect the security of the Bonds and the rights against all claims and demands of all persons. 02/22/87 4899k/2468-03 -25- Section 5.02. Covenants. So long as any of the Bonds issued hereunder are Outstanding and unpaid, the District makes the following covenants with the Bondowners under the provisions of the Act and this Resolution (to be performed' by the District or its proper officers, agents or employees), which covenants are necessary, convenient and desirable to secure the Bonds and tend to make them more marketable; provided, however, that said covenants do not require the District to expend any funds or moneys other than the Special Taxes: (a) Punctual Payment; Against Encumbrances. The District covenants that it will receive all Net Taxes in trust and will immediately deposit the Net Taxes with the Fiscal Agent and the District shall have no beneficial right or interest in the amounts so deposited except as provided by this Resolution. All such Net Taxes, whether received by the District in trust or deposited with the Fiscal Agent as trustee, all as herein provided, shall nevertheless be disbursed, allocated and applied solely to the uses and purposes herein or therein set forth, and shall be accounted for separately and apart from all other money, funds, accounts or other resources of the District. The District covenants that it will duly and punctually pay or cause to be paid the principal of and interest on every Bond issued hereunder, together with the premium, if any, thereon on the date, at the place and in the manner set forth in the Bonds and in accordance with this Resolution to the extent Special Taxes are available therefor, and that the payments into the Funds and Accounts created hereunder will be made, all in strict conformity with the terms of the Bonds and this Resolution, and that it will faithfully observe and perform all of the conditions, covenants and requirements of this Resolution and all Supplemental Resolutions and of the Bonds issued hereunder. The District will not mortgage or otherwise encumber, pledge or place any charge upon any of the Net Taxes, except as provided in the ReSolution, and will not issue any obligation or security superior to or on a parity with the Bonds payable in whole or in part from the Net Taxes, other than Parity Bonds. (b) Levy of Special Tax. The legislative body of the District shall cause the Treasurer to levy the Special Tax in an amount sufficient to pay the principal of and interest on the Bonds, any Parity Bonds and the Administrative Expenses and any amounts required to maintain the Reserve Fund at the Reserve Requirement so long as any Bonds issued under this Resolution are outstanding. 02/22/87 4899k/2468-03 -26- (c) Commence Foreclosure Proceedings. The District covenants for the benefit of the Owners of the Bonds that it will commence appropriate foreclosure proceedings within the earlier of 150 days of notice of a delinquency in the aggregate Special Tax collections or 150 days from receipt of Special Taxes from the County of San Diego in an amount which is less than the Special Tax levied, and diligently pursue to completion such foreclosure proceedings in the event any Special Tax installment becomes delinquent. (d) Payment of Claims. The District will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon any portion of the Project owned by the District or upon the Net Taxes or any part thereof, or upon any funds in the hands of the Fiscal Agent, or which might impair the security of the Bonds; provided that nothing herein contained shall require the District to make any such payments so long as the District in good faith shall contest the validity of any such claims. (e) Books and Accounts. The District will keep proper books of records and accounts, separate from all other records and accounts of the District, in which complete and correct entries shall be made of all transactions relating to the Project, the levy of the Special Tax and the deposits to the Special Tax Fund. Such books of record and accounts shall at all times during business hours be subject to the inspection of the Fiscal Agent or of the Owners of not less than ten percent (10X) of the principal amount of the Bonds then outstanding or their representatives authorized in writing. (f) Tax Covenants. In order to preserve the exclusion from gross income of interest on the Bonds for federal income tax purposes, the District covenants to comply with all applicable requirements of the Code, together with any amendments thereto or regulations promulgated thereunder necessary to preserve such exclusion from gross income and specifically covenants, without limiting the generality of the foregoing, that: (1) it will make no use of the proceeds of the Bonds at any time which will cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code and applicable Regulations adopted thereunder by the Internal Revenue Service; (2) it will not use in excess of 5~ o.f the proceeds of the Bonds to make or finance loans to any person other than a governmental unit (other than loans which are used to 02/22/87 4899k/2468-03 -27- acquire or carry Nonpurpose Investments or are for the purpose of enabling the borrower to finance any governmental tax or assessment of general application for a specific essential governmental function, all as set forth in Section 141(c) of the Code); (3) it will neither use nor permit the use of more than l0x of the proceeds of the Bonds for any private business use, or enter into an arrangement such that more than l0x of the proceeds of the Bonds is, directly or indirectly, secured by any interest in (i) property used or to be used for a private business use or (ii) payments in respect of such property or to be derived from payments in respect of property, or borrowed money, used or to be used for a private business use, all as set forth in Section 141(b) of the Code, or take any other action which would cause the Bonds to be "private activity bonds" within the meaning of Section 141(a) of the Code; (4) it will ensure that the payment of principal of and interest on the Bonds shall not be directly or indirectly guaranteed (in whole or in part) by the United States (or any agency or instrumentality thereof) and no portion of the moneys contained in any of the Funds or Accounts created herein shall be (i) used in making loans guaranteed by the United States (or any agency or instrumentality thereof); (ii) invested directly or indirectly in deposits or accounts insured by the Federal Deposit Insurance Corporation, Federal Savings and Loan Insurance Corporation, National Credit Union Administration or any other similar federally chartered corporation; (iii) otherwise invested directly or indirectly in obligations guaranteed (in whole or in part) by the United States (or any agency or instrumentality thereof); except (1) during the initial period following issuance of the Bonds and ending on the final expenditure of the Bond proceeds; (2) for amounts held in the Reserve Account, or other reserve funds satisfying Section 148(d) of the Code; (3) for amounts held in the Special Fund and other bona fide debt service funds; (4) for investments in obligations issued by the United States Treasury; (5) for investments in obligations guaranteed by the Federal National Mortgage Association, Government National Mortgage Association or Federal Home Loan Mortgage Corporation, or (6) for investments permitted under Regulations issued .pursuant to Section 149(b)(3)(B) of the Code; and (5) (i) it shall keep a detailed accounting of all transactions contemplated under this Resolution or in any way relating to the receipt or disbursement of any of the Gross Proceeds of the Bonds for a period of six years after the later of the date of payment of all Excess Investment 02/22/87 4899k/2468-03 -28- Earnings to the United States or the date the District disburses the last of the Gross Proceeds of the Bonds; (ii) except for the investment of moneys in tax-exempt bonds or Gross Proceeds invested during an applicable temporary period permitted under the Regulations, it will not allow Gross Proceeds of the Bonds to be invested at any time in Nonpurpose Obligations with a Yield in excess of the Yield on the Bonds; (iii) it will neither invest Gross Proceeds nor cause Gross Proceeds to be invested in Nonpurpose Obligations if the yield on such Nonpurpose Obligations would be less than the yield that would have resulted in an arm's-length transaction; and (iv) it will not sell or otherwise dispose of or cause to be sold or otherwise disposed of Nonpurpose Obligations, if such sale or disposition would result in a smaller profit or larger loss than would have resulted from a sale at. fair market value arrived at in an arm's-length transaction. (g) Completion of Project. The District will diligently carry out and continue to completion with all practical dispatch the acquisition and construction of the Project in accordance with the Act. and the proceedings for the formation of the District and in a sound and economical manner. The Project to be acquired or constructed may be amended as provided in the Act, but no amendment may be made which would substantially impair the security of the Bonds or the rights of the Owners. The District will maintain the Project, or cause it to be maintained, in accordance with the customary and reasonable maintenance and repair practices for such facilities. ARTICLE VI AMENDMENTS TO RESOLUTION Section 6.01. Supplemental Resolutions or Orders Not Requiring Bondowner Consent. The District may from time to time, and at any time, without notice to or consent of any of the Bondowners, adopt resolutions or orders supplemental hereto for any of the following purposes: (a) to cure any ambiguity, to correct or supplement any provisions herein which may be inconsistent with any other provision herein, or to make any other provision with respect to matters or questions arising under this Resolution or in any additional resolution or order, provided that such action is not materially adverse to the interest of the Bondowners; (b) to add to the covenants and agreements of and the limitations and the restrictions upon the District contained in this Resolution, other covenants, agreements, limitations and restrictions to be observed by the District which are not 02/22/87 4899k/2468-03 -29- contrary to or inconsistent with this Resolution as theretofore in effect; (c) to provide for the issuance of any Parity Bonds, and to provide the terms and conditions under which such Parity Bonds may be issued, subject to and in accordance with the provisions of this Resolution; (d) to modify, amend or supplement this Resolution in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds; or (e) to modify, alter, amend or supplement this Resolution in any other respect which is not materially adverse to the Bondowners. Section 6.02. Supplemental Resolutions or Orders Requiring Bondowner Consent. Exclusive of the resolutions or orders supplemental hereto set forth in Section 6.01, the Owners of not less than 60~ in aggregate principal amount of the Bonds then outstanding shall have the right to consent to and approve the adoption by the District of such resolutions or orders supplemental hereto as shall be deemed necessary or desirable by the District for the purpose of waiving, modifying, alternate, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Resolution; provided, however, that nothing herein shall permit, or be construed as permitting, (a) an extension of the maturity date of the principal, or the payment date of interest on, any Bond (b) a reduction in the principal amount of, or redemption premium on, any Bond or the rate of interest thereon, (c) a preference or priority of any Bond or Bonds over any other Bond or Bonds, or (d) a reduction in the aggregate principal amount of the Bonds the Owners of which are required to consent to'such resolution or order, without the consent of the Owners of all Bonds then outstanding. If at any time the District shall desire to adopt a resolution or order supplemental hereto, which pursuant to the terms of this section shall require the consent of the Bondowners, the District shall so notify the Fiscal Agent and shall deliver to the Fiscal Agent a copy of the proposed resolution or order. The Fiscal Agent shall, at the expense of the District, cause notice of the proposed resolution or order to be mailed, by first class mail postage prepaid, to all Bondowners at their addresses as they appear in the Bond Register. Such notice shall briefly set forth the nature of the 02/22/87 4899k/2468-03 -30- proposed resolution or order and shall state that a copy thereof is on file at the office of the Treasurer for inspection by all Bondowners. The failure of any Bondowners to receive such notice shall not affect the validity of such resolution or order when consented to and approved by the Owners of not less than 60% in aggregate principal amount of the Bonds then outstanding as required by this section. Whenever at any time within one year after the date of the first mailing of such notice, the Fiscal Agent shall receive an instrument or instruments purporting to be executed by the Owners of not less than 60~ in aggregate principal amount of the Bonds then outstanding, which instrument or instruments shall refer to the proposed resolution or order described in such notice, and shall specifically consent to and approve the adoption thereof by the District substantially in the form of the copy referred to in such notice as on file with the Treasurer, such proposed resolution or order, when duly adopted by the District, shall thereafter become a part of the proceedings for the issuance of the Bonds. In determining whether the Owners of 60~ of the aggregate principal amount of the Bonds have consented to the adoption of any supplemental resolution or order, Bonds which are owned by the District or by any person directly or indirectly controlling or controlled by or under the direct or indirect common control with the District, shall be disregarded and shall be treated as though they were not outstanding for the purpose of any such determination. Upon the adoption of any resolution or order supplemental hereto and the receipt of consent to any such resolution or order from the Owners of not less than 60~ in aggregate principal amount of Bonds outstanding in instances where such consent is required pursuant to the provisions of this section, this Resolution shall be, and shall be deemed to be, modified and amended in accordance therewith, and the respective rights, duties and obligations under this Resolution of the District and all Owners of Bonds then outstanding shall thereafter be determined, exercised and enforced hereunder, subject to all respects to such modifications and amendments. Section 6.03. Notation of Bonds; Delivery of Amended Bonds. After the effective date of any action taken as hereinabove provided, the District may determine that the Bonds may bear a notation, by endorsement in form approved by the District, as to such action, and in that case upon demand of the Own.er of any Bond Outstanding at such effective date and presentation of his Bond for the purpose at the office of the Fiscal Agent or at such additional offices as.the Fiscal Agent may select and designate for that purpose, a suitable notation as to such action shall be made on such Bonds. If the District shall so determine, new Bonds so modified as, in the opinion of the District, shall be necessary to conform to such action shall 02/22/87 4899k/2468-03 -31- be prepared and executed, and in that case upon demand of the Owner of any Bond outstanding at such effective date such new Bonds shall be exchanged at the office of the Fiscal Agent or at such additional offices as the Fiscal Agent may select and- designate for that purpose, without cost to each Owner, for Bonds then outstanding, upon surrender of such outstanding Bonds. ARTICLE VII FISCAL AGENT Section 7.01. Fiscal Agent. Security Pacific National Bank, having a corporate trust office in Los Angeles, California, is hereby appointed Fiscal Agent for the District for the purpose of receiving all money which the District is required to deposit with the Fiscal Agent hereunder and to allocate, use and apply the same as provided in the Resolution. The Fiscal Agent is hereby authorized to and shall mail by first class mail, postage prepaid, interest payments to the Bondowners, select Bonds for redemption, and maintain the Bond Register. The Fiscal Agent is hereby authorized to pay the principal of and premium, if any, on the Bonds when the same are duly presented to it for payment at maturity or on call and redemption, to provide for the registration of transfer and exchange of Bonds presented to it for such purposes, to provide for the cancellation of Bonds all as provided in this Resolution, and to provide for the authentication of Bonds, and shall perform all other duties assigned to or imposed on it as provided in this Resolution. The Fiscal Agent shall keep accurate records of all funds administered by it and all Bond paid and discharged by it. The Fiscal Agent is hereby authorized to redeem the Bonds when duly presented for payment at maturity, or on redemption prior to maturity. The Fiscal Agent shall cancel all Bonds upon payment thereof in accordance with the provisions of Section 10.01 hereor. The Fiscal Agent shall keep accurate records of all Bonds paid and discharged and cancelled by it. The District shall from time to time, subject to any agreement between the District and the Fiscal Agent then in force, pay to the Fiscal Agent compensation for its services, reimburse the Fiscal Agent for all its advances and expenditures, including, but not limited to, advances to and fee~ and expenses of independent accountants, counsel and engineers or other experts employed by it in the exercise and performance of its powers and duties hereunder, and indemnify and save the Fiscal Agent harmless against expenses and liabilities not arising from its own negligence or willful misconduct which it may incur in the exercise and performance of its powers and duties hereunder.' 02/22/87 4899k/2468-03 -32- Section 7.02. Removal of Fiscal Agent. The District may at any time at its sole discretion remove the Fiscal Agent initially appointed, and any successor thereto, by delivering to the Fiscal Agent a written notice of its decision to remove the Fiscal Agent and may appoint a successor or successors thereto; provided that any such successor shall be a bank or trust company doing business and having a principal office in Los Angeles, California, having a combined capital (exclusive of borrowed capital) and surplus of at least fifty million dollars ($50,000,000), and subject to supervision or examination by federal or state authority. Any removal shall become effective only upon acceptance of appointment by the successor Fiscal Agent. If such bank or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this section the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Section 7.03. Resignation of Fiscal Agent. The Fiscal Agent may at any time resign by giving written notice to the District and by giving to the Owners notice of such resignation, which notice shall be mailed to the Owners at their addresses appearing in the registration books in the office of the Fiscal Agent. Upon receiving such notice of resignation, the District shall promptly appoint a successor Fiscal Agent by an instrument in writing. Any resignation or removal of the Fiscal Agent and appointment of a successor Fiscal Agent shall become effective only upon acceptance of appointment by the successor Fisaal Agent. Section 7.04. Liability of Fiscal Agent. The recitals of fact and all promises, covenants and agreements contained herein and in the Bonds shall be taken as statements, promises, covenants and agreements of the District, and the Fiscal Agent assumes no responsibility for the correctness of the same and makes no representations as to the validity or sufficiency of this Resolution or of the Bonds, and shall incur no responsibility in respect thereof, other than in connection with its duties or obligations specifically set forth herein or in the Bonds or in the certificate of authentication assigned to or imposed upon the Fiscal Agent. The Fiscal Agent shall be under no responsibility or duty with respect to the issuance of the Bonds for value. The Fiscal Agent shall not be liable in con~ection with the performance of its duties hereunder, except for its own negligence or willful misconduct. . The Fiscal Agent shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, Bond or other paper or document believed by it to be 02/22/87 4899k/2468-03 -33- genuine and to have been signed or presented by the proper party or parties. The Fiscal Agent may consult with counsel, who may be counsel to the District, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered hereunder in good faith and in accordance therewith. The Fiscal Agent shall not be bound to recognize any person as the Owner of a Bond unless and until such Bond is submitted for inspection, if required, and his title thereto satisfactorily established, if disputed. Whenever in the administration of its duties under the Resolution the Fiscal Agent 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 herein specifically prescribed) may, in the absence of bad faith on the part of the Fiscal Agent, be deemed to be conclusively proved and established by a written certificate of the District, and such certificate shall be full warrant to the Fiscal Agent for any action taken or suffered under the provisions of the Resolution upon the faith thereof, but in its discretion the Fiscal Agent may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. ARTICLE VIII EVENTS OF DEFAULT; REMEDIES Section 8.01. Events of Default. Any one or more of the following events shall constitute an "event of default": (a) Default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise; (b) Default in the due and punctual payment of the interest on any Bond when and as the same shall become due and payable; or (c) Default shall be made by the District in the observance of any of the agreements, conditions or covenants on its part in the Resolution or in the Bonds contained, and such default shall have continued for a period of thirty (30) days after the District shall have been given notice in writing of such default by the Fiscal Agent. Section 8.02. Remedies of Owners. Following the occurrence of an event of default, any Owner shall have the right for the equal benefit and protection of all Owners similarly situated: 02/22/87 4899k/2468-03 -34- (a) By mandamus or other suit or proceeding at law or in equity to enforce his rights against the District and any of the members, officers and employees of the District, and to compel the District or any such members, officers or employees to perform and carry out their duties under the Act and their agreements with the Owners as provided in the Resolution; (b) By suit in equity to enjoin any actions or things which are unlawful or violate the rights of the Owners; or (c) Upon the happening of an event of default (as defined in Section 8.01), by a suit in equity to require the District and its members, officers and employees to account as the trustee of an express trust. Nothing in this article or in any other'provision of the Resolution, or in the Bonds, shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the interest on and principal of the Bonds to the respective Owners of the Bonds at the respective dates of maturity, as. herein provided, out of the Net Taxes pledged for such payment, or affect or impair the right of action, which is also absolute and unconditional, of such Owners to institute suit to enforce such payment by virtue of the contract embodied in the Bonds and in the Resolution. A waiver of any default or breach of duty or contract by any Owner shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission by any Owner 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 of any such default or an acquiescence therein, and every power and remedy conferred upon the Owners by the Act or by this article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Owners. If any suit, action or proceeding to enforce any right or exercise any remedy is abandoned or determined adversely to the Owners, the District and the Owners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. No remedy herein conferred upon or reserved to the Owners is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition t.o every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law. 02/22/87 4899k/2468-03 -35- Section 8.03. Actions by Fiscal Agent as Attorney-in- Fact. Any su/t, action or proceeding which any Owner shall have the right to bring to enforce any right or remedy hereunder may be brought by the Fiscal Agent for the equal benefit and protection of all Owners, and the Fiscal Agent is hereby appointed (and the successive respective Owners of the Bonds and interest coupons issued hereunder, by taking and holding the same, shall be conclusively deemed so to have appointed it) the true and lawful attorney-in-fact of the Owners for the purpose of bringing any such suit, action or proceeding and to do and perform any and all acts and things for and on behalf of the Owners as a class or classes, as may be necessary or advisable in the opinion of the Fiscal Agent as such attorney-in-fact. ARTICLE IX DEFEASANCE AND PARITY BONDS Section 9.01. Defeasance. If the District shall pay or cause to be paid, or there shall otherwise be paid, to the Owners of all outstanding Bonds the interest due thereon and the principal thereof, at the times and in the manner stipulated therein and in the Resolution, then the Owners of such Bonds shall cease to be entitled to the pledge of Net Taxes, and all covenants, agreements and other obligations of the District to the Owners of such Bonds under the Resolution shall thereupon cease, terminate and become void and be discharged and satisfied. In such event, the Fiscal Agent shall execute and deliver to the District all such instruments as may be desirable to evidence such discharge and satisfaction, and the Fiscal Agent shall pay over or deliver to the District all money or securities held by them pursuant to the Resolution which are not required for the payment of the interest due on and the principal of such Bonds. Any outstanding Bond shall be deemed to have been paid within the meaning expressed in the first paragraph of this section if the Bonds are paid in any one or more of the following ways: (a) by paying or causing to be paid the principal of and interest with respect to all Bonds outstanding, as and when the same become due and payable; (b) by depositing with the Fiscal Agent, in trust, at or before maturity, money which, together with the amounts then on deposit in the Special Tax Fund, the Costs of Issuance Fund and the Redemption Fund, is fully sufficient to pay the principal of and interest on al! Bonds outstanding as and when the same shall become due and payable; or 02/22/87 4899k/2468-03 -36- (c) by depositing with the Fiscal Agent, in trust, direct obligations of, or obligations guaranteed by, the United States of America, in which the District may lawfully invest its money, in such amount as the Fiscal Agent shall determine will, together with the interest to accrue thereon and moneys then on deposit in the Special Tax Fund, the Costs of Issuance Fund and the Redemption Fund, together with the interest to accrue thereon, be fully sufficient to pay and discharge the principal of and interest on all Bonds outstanding as and when the same shall become due and pay- able; then, at the election of the District, and notwith- standing that any Bonds shall not have been surrendered for payment, all obligations of the District under this Resolu- tion with respect to all outstanding Bonds shall cease and terminate, except for the obligation of the Fiscal Agent to pay or cause to be paid to the Owners of the Bonds not so surrendered and paid, all sums due thereon. Notice of such election shall be filed with the Fiscal Agent not less than thirty (30) days prior to the proposed defeasance date. On or prior to the defeasance date, there shall be provided to the Fiscal Agent a certificate of a certified public accountant stating its opinion as to the sufficiency of the moneys or securities deposited with the Fiscal Agent to pay and discharge the principal of and interest on all Bonds outstanding as and when the same shall become due and payable, and an opinion of a nationally-recognized Bond Counsel (which may rely upon the opinion of the certified public accountant) to the effect that the Bonds have been legally defeased in accordance with this Resolution. Upon being provided with the required report of a certified public account and opinion of bond counsel, the Fiscal Agent, upon request of the District, shall release the rights of the Bondholders under this Resolution and execute and deliver to the District all such instruments as may be desirable to evidence such release, discharge and satisfaction, and the Fiscal Agent shall pay over or deliver to the District any funds held by the Fiscal Agent at the time of a defeasance, which are not required for the purpose of paying and discharging the principal of or interest on the Bonds when due. The Fiscal Agent shall, at the written direction of the District, mail, first class, postage prepaid, a notice to the Bondholders, in the form directed by the District, stating that the defeasance has occurred Section 9.02. Conditions for the Issuance of Parity Bonds. The District may at any time after the issuance and delivery of the Bonds hereunder issue Parity Bonds payable, from the Net Taxes and secured by a lien and charge upon the Net Taxes equal to the lien and charge securing the Outstanding Bonds theretofore issued hereunder, but only subject to the following specific conditions, which are hereby made conditions precedent to the issuance of any such Parity Bonds: 02/22/87 4899k/2468-03 -37- (a) The District shall be in compliance with all covenants set forth in this Resolution and a certificate of the District to that effect shall have been filed with the Fiscal Agent. (b) The issuance of such Parity Bonds shall have been duly authorized pursuant to the Act and all applicable laws, and the issuance of such Parity Bonds shall have been provided for by a Supplemental Resolution duly adopted by the District which shall specify the following: (1) The purpose for which such Parity Bonds are to be issued and the fund or funds into which the proceeds thereof are to be deposited, including a provision requiring the proceeds of such Parity Bonds to be applied solely for (i) the purpose of aiding in financing the Project, including payment of all costs incidental to or connected with such financing, and/or (ii) the purpose of refunding any Bonds, including payment of all costs incidental to or connected with such refunding; (2) The authorized principal amount of such Parity Bonds; (3) The date and the maturity date or dates of such Parity Bonds; provided that (i) each maturity date shall fall upon the same date as is the maturity date for the Bonds or a maturity date after the maturity of the Term Bonds, (ii) all such Parity Bonds of like maturity shall be identical in all respects, except as to number, and (iii) fixed serial maturities or mandatory sinking account payments, or any combination thereof, shall be established to provide for the retirement of all such Parity Bonds on or before their respective maturity dates; (4) The interest payment dates for such Parity Bonds; provided that interest payment dates shall be on the same semiannual dates as the Interest Payment Dates for the Bonds; (5) The denomination and method of numbering of such Parity Bonds; (6) The redemption premiums, if any, and the redemption terms, if any, for such Parity Bonds; provided that, in the event that less than all of such Parity Bonds are to be redeemed at any one time, the Fiscal Agent shall redeem that amount of Bonds issued prior to the issuance of such Parity Bonds and that amount of such Parity Bonds in the proportion which the then outstanding principal amount of Bonds issued prior to the issuance of such Parity Bonds 02/22/87 4899k/2468-03 -38- bears to the then outstanding principal amount of such Parity Bonds; (7) The amount and due date of each mandatory sinking fund account payment, if any, for such Parity Bonds; (8) The amount, if any, to be deposited from the proceeds of such Parity Bonds in any interest account; (9) The amount, if any, to be deposited from the proceeds of such Parity Bonds in any reserve account; provided that such reserve account shall be increased at or prior to the time such Parity Bonds become outstanding to an amount at least equal to the Maximum Annual Debt Service on all then outstanding Bonds and Parity Bonds, and that an amount at least equal to the Maximum Annual Debt Service on all outstanding Bonds shall be maintained thereafter in such reserve account; (10) The form of such Parity Bonds; and (11) Such other provisions as are necessary or appropriate and not inconsistent with the Resolution. (c) The Fiscal Agent shall have received the following documents or money or securities, all of such documents dated or certified, as the case may be, as of the date of delivery of such Parity Bonds by the Fiscal Agent (unless the Fiscal Agent shall accept any of such documents bearing a prior date): (1) A certified copy of the Supplemental Resolution authorizing the issuance of such Parity Bonds; (2) A written request of the District as to the delivery of such Parity Bonds; (3) An opinion of Bond Counsel to the effect that (a) the District has the right and power under the Act to adopt the Resolution and all Supplemental Resolutions thereto, and the Resolution and all such Supplemental Resolutions have been duly and lawfully adopted by the District, are in full force and effect and are valid and binding upon the District and enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors' rights), and no other authorization for the Resolution or such Supplemental Resolutions is required; (b) 'the Resolution creates the valid pledge which it purports to create of the Net Taxes as provided in the Resolution, subject to the application thereof to the purposes and on the conditions 02/22/87 4899k/2468-03 -39- permitted by the Resolution; (c) such Parity Bonds are valid and binding limited obligations of the District, enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors' rights) and the terms of the Resolution and all Supplemental Resolutions thereto and entitled to the benefits of the Resolution and all such Supplemental Resolutions and the Act, and such Parity Bonds have been duly and validly aulthorized and issued in accordance with the Act and the Resolution and all such Supplemental Resolutions; and (d) the issuance of the Parity Bonds will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or the exemption from State of California personal income taxation; (4) A certificate of the District containing such statements as may be reasonably necessary to show compliance with the requirements of the Resolution; (5) A certificate of an Independent Financial Consultant certifying that the maximum Special Tax that may be levied by the District pursuant to the Act and the applicable resolutions and ordinances of the District is at least 1.15 times the amount required to pay debt service on all Outstanding Bonds and Parity Bonds; (6) If the issuance of the Parity Bonds would result in publicly financed indebtedness on land with the District in excess of $32,800,000, exclusive of indebtedness issued prior to the Bonds, the total amount of indebtedness issued subsequent to the Bonds imposing a tax or assessment lien on the land located within the District, including the Parity Bonds, will not exceed thirty-three percent (33%) of the total fair market value of the land and existing improvements within the District appraised to include the value of any additional facilities to be constructed with the proceeds of such Parity Bonds; and (7) Such further documents, money and securities as are required by the provisions of the Resolution and the Supplemental Resolution providing for the issuance of such Parity Bonds. ARTICLE X MISCELLANEOUS Section 10o01. Cancellation of Bonds. Ail Bonds surrendered to the Fiscal Agent for payment upon maturity or for redemption shall upon payment therefor and any Bond purchased by 02/22/87 4899k/2468-03 -40- the District as authorized herein shall be cancelled forthwith and shall not be reissued. The Fiscal Agent shall destroy such Bonds, as provided by law, and furnish to the District a certificate of such destruction. Section 10.02. Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by this Resolution to be signed or executed by Bondowners may be in any number of concurrent instruments of similar tenor may be signed or executed by such Owners in person or by their attorneys appointed by an instrument in writing for that purpose, or by the bank, trust company or other depository for such Bonds. Proof of the execution of any such instrument, or of any instrument appointing any such attorney, and of the ownership of Bonds shall be sufficient for the purposes of this Resolution (except as otherwise herein provided), if made in the following manner: (a) The fact and date of the execution by any Owner or his or her attorney of any such instrument and of any instrument appointing any such attorney, may be proved by a signature guarantee of any bank or trust company located within the United States of America. Where any such instrument is executed 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 shall also constitute sufficient proof of his authority. (b) As to any Bond, the person in whose name the same shall be registered in the Bond Register.shall be deemed and regarded as the absolute Owner thereof for all purposes, and payment of or on account of the principal of any such Bond, and the interest thereon, shall be made only to or upon the order of the registered Owner thereof or his or her legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond and the interest thereon to the extent of the sum or sums to be paid. The Fiscal Agent shall not be affected by any notice to the contrary. Nothing contained in this Resolution shall be construed as limiting the Fiscal Agent to such proof, it being intended that the Fiscal Agent may accept any other evidence of the matters herein stated which the Fiscal Agent may deem sufficient. Any request or consent of the Owner of any Bond shall bind every future Owner of the same Bond in respect of anything done or suffered to be done by the Fiscal Agent in pursuance of such request or consent. Section 10.03. Unclaimed Moneys. Anything in the Resolution to the contrary notwithstanding, any money held by 02/22/87 4899k/2468-03 -41- the Fiscal Agent intrust for the payment and discharge of any of the Bonds which remain unclaimed for five (5) years after the date when such Bonds have become due and payable, if such money was held by the Fiscal Agent at such date, or for five (5) years after the date of deposit of such money if deposited with the Fiscal Agent after the said date when such Bonds become due and payable, shall, at the written request of the District, be repaid by the Fiscal Agent to the District, as its absolute property and free from trust, and the Fiscal Agent shall thereupon be released and discharged with respect thereto and the Owners shall look only to the District for the payment of such Bonds; provided, however, that, before being required to make any such payment to the District, the Fiscal Agent shall, at the expense of the District, cause to be mailed to the registered Owners of such Bonds at their addresses as they appear on the registration books of the Fiscal Agent a notice that said money remains unclaimed and that, after a date named in said notice, which date shall not be less than thirty (30) days after the date of the mailing of such notice, the balance of such money then unclaimed will be returned to the District. Section 10.04. Provisions Constitute Contract. The provisions of this Resolution shall constitute a contract between the District and the Bondowners and the provisions hereof shall be construed in accordance with the laws of the State of California. In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and the Bondowner or the Fiscal Agent shall prevail, the Bondowner or the Fiscal Agent shall be entitled to receive from the Special Tax Fund reimbursement for reasonable costs, expense, outlays and attorney's fees and should said suit, action or proceeding be abandoned, or be determined adversely to the Bondowners or the Fiscal Agent, then the District, the Fiscal Agent and the Bondowners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. After the issuance and delivery of the Bonds this Resolution shall be irrepealable, but shall be subject to modifications to the extent and in the manner provided in this Resolution, but to no greater extent and in no other manner. Section 10.05. Future Contracts. Nothing herein contained shall be deemed to restrict or prohibit the District from making contracts or creating bonded or other indebtedness payable from the general fund of the District or from taxes'or any source other than the Net Taxes as defined herein, and, from and after the sale of the Bonds, the general fund of the District shall not include the Net Taxes and no contract or other obligations 02/22/87 4899k/2468-03 -42- payable from the general fund of the District shall be payable from the Net Taxes, except as provided herein. Section 10.06. Further Assurances. The District will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonable necessary or proper to carry out the intention or to facilitate the performance of the Resolution, and for the better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in the Resolution. Section 10.07. Severability. If any covenant, agreement or provision, or any portion thereof, contained in this Resolution, or the application thereof to any person or circumstance, is held to be unconstitutional, invalid or unenforceable, the remainder of this Resolution and the application of any such covenant, agreement or provision, or portion thereof, to other persons or circumstances, shall be deemed severable and shall not be affected thereby, and this Resolution and the Bonds issued pursuant hereto shall remain valid and the Bondowners shall retain all valid rights and benefits accorded to them under the laws of the State of California. Section 10.08. Notices. Any notices required to be given to the District with respect to the Bonds or this Resolution shall be mailed, first class, or personally delivered to the City Manager and the City Clerk at 13325 Civic Center Drive, Poway, California 92064, and all notices to the Fiscal Agent shall be mailed, first class, or personally delivered to the Fiscal Agent at 333 South Beaudry Avenue, 24th Floor, Los Angeles, California 90017, Attention: Corporate Trust Division (W24-30), Reference No. 1-7- SIGNED AND APPROVED this __ day of March, 1987 by the City Manager of the City of Poway acting on behalf of the South Poway Community Facilities District No. 1 (Pomerado Business Park Project).  nge r - ATTEST: City Cl~rk, City of Poway 02/22/87 4899k/2468-03 -43- EXHIBIT "A" No. UNITED STATES OF AMERICA STATE OF CALIFORNIA SOUTH POWAY COMMUNITY FACILITIES DISTRICT NO. (POMERADO BUSINESS PARK PROJECT) 1987 SPECIAL TAX REFUNDING BOND INTEREST RATE MATURITY DATE DATED DATE CUSIP NUMBER REGISTERED OWNER: PRINCIPAL AMOUNT THE SOUTH POWAY COMMUNITY FACILITIES DISTRICT NO. 1 (POMER3~DO BUSINESS PARK PROJECT) (the "District") situated in the City of Poway, State of California (the "City"), FOR VALUE RECEIVED, hereby promises to pay solely from Special Taxes (as hereinafter defined) to be collected in the District, to the Registered Owner named above, or registered assigns, on the Maturity Date set forth above, unless redeemed prior thereto as hereinafter provided, the Principal Amount set forth above, and to pay interest on such Principal ~Jnount from February 2, 1987 or from the most recent interest payment date to which interest has been paid or duly provided for, semiannually on February 2 and August 2 (each an "Interest Payment Date"), commencing August 2, 1987 at the Interest Rate set forth above, until the Principal Amount hereof is paid or made available for payment. The principal of and premium, if any, on this Bond are payable to the Registered Owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office of Security Pacific National Bank (the "Fiscal Agent") in Los Angeles, California. Interest on this Bond shall be paid by check of the Fiscal Agent mailed to the Registered Owner hereof as of the close of business on the 15th day of the month preceding the month in which the Interest Payment Date occurs or, if such day is not a business day, on the next succeeding business day (the "Record Date") at such Registered Owner's address as it appears on the registration books maintained by the Fiscal Agent. 02/22/87 4899k/2468-03 A-1 This Bond is one of a duly authorized issue of "South Poway Community Facilities District No. 1 (Pomerado Business Park Project) 1987 Special Tax Refunding Bonds" (the "Bonds") issued in the aggregate principal amount of $32,800,000 pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, Sections 53311, et seq., of the California Government Code (the "Act") and Article 11 of Chapter 3 of Division 2 of Title 5 of the California Government Code for the purpose of financing the installation and acquisition of certain improvements in the District (the "Project"). The issuance of the Bonds and the terms and conditions thereof are provided for by a resolution adopted by the City Council of the City of Poway acting in its capacity as the legislative body of the District (the "Legislative Body") on March 3, 1987 (the "Resolution"), and this reference incorporates the Resolution herein, and by acceptance hereof the Registered Owner of this Bond assents to said terms and conditions. The Resolution is adopted under and this Bond is issued under, and both are to be construed in accordance with, the laws of the State of California. Pursuant to the Act and the Resolution, the principal of, premium, if any, and interest on this Bond are payable solely from the annual special taxes authorized under the Act to be collected within the District (the "Special Taxes"). Any tax for the payment hereof shall be limited to the Special Tax, except to the extent that provision for payment has been made by the Legislative Body, as may be permitted by law. Interest on this Bond shall be payable from the Interest Payment Date next preceding the date of authentication hereof, unless such date of registration is after a Record Date but on or prior to an Interest Payment Date, in which event interest will be payable from such Interest Payment Date, or unless such' date of authentication is prior to the first Record Date, in which event interest will be payabl~ from February 2, 1987. The Bonds maturing on February 2, 2011 may be redeemed at the option of the District on February 2, 1997, or on any Interest Payment Date thereafter prior to maturity, in whole or in part, by lot, at the following redemption prices, expressed as a percentage of par value, together with accrued interest to the date of redemption: Redemption Dates Redemption Prices February 2, 1997 and August 2, 1997 February 2, 1998 and August 2, 1998 February 2, 1999 and August 2, 1999 February 2, 2000 and thereafter 103% 102% 101% 100% 02/22/87 4899k/2468-03 A-2 In addition, the Term Bonds maturing on February 2, 2011 shall be subject to mandatory redemption prior to maturity, in part, by lot, from Sinking Fund Payments (as defined in the Resolution) at a price of par to the extent, in the manner and subject to the terms of the Resolution. In addition, the Bonds are subject to mandatory redemption, in whole or in part, on the Interest Payment Date following a determination by the District, in its sole discretion, that the Project, or any required portions thereof, cannot be acquired or constructed in accordance with the provisions of the Resolution at a price of par to the extent, in the manner and subject to the terms of the Resolution. Notice of redemption with respect to the Bonds to be redeemed shall be given to the Registered Owners thereof, in the manner, to the extent and subject to the provisions of the Resolution. This Bond shall be registered in the name of the Registered Owner hereof, as to both principal and interest. Each registration and transfer of registration of this Bond shall be entered by the Fiscal Agent on the Bond Register and authenticated by its manual signature upon the certificate of authentication and registration endorsed hereon. No transfer hereof shall be valid for any purpose unless made by the Registered Owner, by execution of the form of assignment endorsed hereon, and authenticated as herein provided, and the principal hereof, ~interest hereon and any redemption premium shall be payable only to the Registered Owner or to such Registered Owner's order. The Fiscal Agent shall require any Registered Owner requesting transfer or exchange to pay any tax or other governmental charge required to be paid with respect to such transfer or exchange. THE BONDS DO NOT CONSTITUTE OBLIGATIONS OF THE CITY OF POWAY OR THE DISTRICT FOR WHICH THE CITY OF POWAY OR THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE, OR HAS LEVIED OR PLEDGED, GENERAL OR SPECIAL TAXATION, OTHER THAN THE SPECIAL TAXES. THE DISTRICT HAS COVENANTED FOR THE BENEFIT OF THE OWNERS OF THE BONDS THAT IT WILL COMMENCE WITHIN 150 DAYS AND DILIGENTLY PURSUE TO COMPLETION APPROPRIATE FORECLOSURE ACTIONS IN THE EVENT OF DELINQUENCIES OF ANY SPECIAL TAX INSTALLMENTS LEVIED FOR PAYMENT OF PRINCIPAL AND INTEREST. This Bond shall not become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been dated and signed by the Paying Agent. 02/22/87 4899k/2468-03 A-3 IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond have existed, happened and been performed, in due time, form and manner as required by law, and that the amount of this Bond, together with all other indebtedness of the District, does not exceed any debt limit prescribed by the laws or Constitution of the State of California. IN WITNESS WHEREOF, South Poway Community Facilities District No. 1 (Pomerado Business Park Project) has caused this Bond to be dated as of February 2, 1987, to be signed by the Mayor of the City of Poway by his facsimile signature and attested by the signature of the City Clerk. Mayor of the/City of~ow~y, sitting as ~he legisla~ve body of South Poway'Community/Facilities District No. 1 (Pomerado Business Park Project) ATTE ST: City Cierk of the City of Poway, sitting as the legislative body of South~Dway Community Facilities District No. 1 (Pomerado Business Park Project) 02/22/87 4899k/2468-03 A-4 FORM OF FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION AND REGISTRATION This is one of the Bonds described in the within defined Resolution. Dated: By: SECURITY PACIFIC NATIONAL BANK, as Fiscal Agent By: Authorized Signatory FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned do(es) hereby sell, assign and transfer unto the within-mentioned registered Bond and hereby irrevocably constitute(s) and appoint(s) attorney, to transfer the same on the books of the Fiscal Agent with full power of substitution in the premises. Dated: Signature Guaranteed Note: Signature(s) must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. Notice: The signature on this assignment must correspond with the name(s) as written on the face of the within Bond in every particular without alteration or enlargement, or any change whatsoever. 02/22/87 4899k/2468-03 A-5 EXHIBIT "B" REQUISITION FOR DISBURSEMENT OF PROJECT COSTS The undersigned, a duly authorized representative of South Poway Community Facilities District No. 1 (Pomerado Business Park Project), hereby certifies to Security Pacific National Bank, Fiscal Agent, for purposes of disbursing funds from the Acquisition Fund to pay Project Costs that: (1) The Fiscal Agent is to pay to the payees set forth on Exhibit 1 hereto the amount set forth next to each payee's name for the item described on Exhibit 1; (2) The conditions to the release of these amounts from the Acquisition Fund have been satisfied; (3) There has not been filed with or served upon the District notice of any lien, right to lien or attachment upon, stop notice or claim affecting the right to receive payment of, any of the moneys payable to any of the payees named on Exhibit 1 hereto which has not been released or will not be released simultaneously with the payment of such amounts, other than materialmen's or mechanic's liens accruing by mere operation of law; and (4) Sufficient money remains in the Acquisition Fund to pay all remaining costs of acquisition, construction and financing of the Project. Dated: SOUTH POWAY COMMUNITY FACILITIES DISTRICT NO. 1 (POMERADO BUSINESS PARK PROJECT) By: Authoriz~ Dffic~/ 02/22/87 4899k/2468-03 EXHIBIT 1 Payee Amount Due Purpose of Expenditure 02/22/87 4899k/2468-03 EXHIBIT C SUPPLEMENT TO RESOLUTION TABLE OF CONTENTS Section 1.01 Section 2.01 Section 2.02 Section 2.03 Section 2.04 Section 2.05 Section 2.06 Section 2.07 Section 2.08 Section 2.09 Section 2.10 Section 2.11 Section 2.12 Section 3.01 Section 3.02 Section 3.03 Section 3.04 Section 3.05 Section 3.06 Section 3.07 Section 3.08 Section 3.09 Section 3.10 Page Article I Definitions Definitions ............................. 1 Article II General Authorization and Bond Terms Amount, Issuance, Purpose and Nature of Bonds ................................ 6 Payment of 1985 Bonds ................... 7 Type and Nature of Bond ................. 7 Equality of Bonds, Pledge of Net Taxes.. 8 Description of Bonds; Interest Rates .... 8 Place and Form of Payment ................ 9 Form of Bonds; Temporary Bonds .......... 10 Execution and Authentication ............ 10 Bond Register ........................... 11 Registration of Exchange or Transfer .... 11 Mutilated, Lost, Destroyed or Stolen Bonds ................................... 12 Validity of Bonds ....................... 12 Article iii Creation of Funds and Application of Proceeds and Net Taxes Creation of Funds ........................ 12 Disposition of'Bond Proceeds and the 1985 Bond Proceeds ...................... 13 Deposit and Disbursement of Special Tax Revenues; Costs of Issuance Fund .... 14 Special Tax Fund ........................ 15 Redemption Fund ......................... 15 Reserve Fund ............................ 16 Excess Investment Earnings Fund ......... 17 Administrative Expense Fund ............. 20 Acquisition Fund ........................ 21 Investments ............................. 21 -i- Page Section 4.01 Section 4.02 Section 4.03 Section 4.04 Section 4.05 Section 5.01 Section 5.02 Section 6.01 Section 6.02 Section 6.03 Section 7.01 Section 7.02 Section 7.03 Section 7.04 Section 8.01 Section 8.02 Section 8.03 Section 9.01 Section 9.02 Article IV Redemption of Bonds Redemption of Bonds ..................... Selection of Bonds for Redemption ....... Notice of Redemption .................... Partial Redemption of Bonds ............. Effect of Notice and Availability of Redemption Money ........................ Article V Covenants and Warranty Warranty ................................ Covenants ............................... Article VI Amendments to Resolution Supplemental Resolutions or Orders Not Requiring Bondowner Consent ............. Supplemental Resolutions or Orders Requiring Bondowner Consent ............. Notation of Bonds; Delivery of Amended Bonds ................................... Article VII Fiscal Agent Fiscal Agent ............................ Removal of Fiscal Agent ................. Resignation of Fiscal Agent ............. Liability of Fiscal Agent ............... Article VIII Events of Default; Remedies Events of Default ....................... Remedies of Owners ...................... Actions by Fiscal Agent as Attorney-in- Fact .................................... Article IX Defeasance and Parity Bonds Defeasance .............................. Conditions for the Issuance of Parity Bonds and Other Additional Indebtedness ............................ 23 24 24 25 25 26 26 29 3O 31 32 33 33 33 34 35 36 36 38 -ii- Page Article X Miscellaneous Section 10.01 Section 10.02 Section 10.03 Section 10.04 Section 10.05 Section 10.06 Section 10.07 Section 10.08 Cancellation of Bonds ................... Execution of Documents and Proof of Ownership ............................... Unclaimed Moneys ........................ Provisions Constitute Contract .......... Future Contracts ........................ Further Assurances ...................... Severability ............................ Notices ................................. Signatures ............................................. Exhibit "1" Exhibit "2" Form of Special Tax Bond Requisition for Disbursement of Project Costs 41 41 42 42 43 43 43 44 44 -iii- SUPPLEMENT TO RESOLUTION ARTICLE I DEFINITIONS Section 1.01. Definitions. Unless the context otherwise requires, the following terms shall have the following meanings: "Acquisition Agreement" means the Acquisition Agreement between the District and CF Poway, Ltd. dated as of December 30, 1985. "Act" means the Mello-Roos Community Facilities Act of 1982, as amended, Sections 53311 et seq. of the California Government Code. "Administrative Expenses" means the administrative costs with respect to the calculation and collection of the Special Taxes, or costs otherwise incurred by the City staff on behalf of the District in order to carry out the purposes of the District as set forth in the Resolution of Formation and the fees and expenses of the Fiscal Agent and the Escrow Bank. "Authorized Investments" means, subject to applicable law, United States Treasury notes, bonds, bills or certificates of indebtedness (including United States Treasury Obligations - State and Local Government Series ("SLGS") or other direct obligations issued by the United States Treasury for which the faith and credit of the United States are pledged for the payment of principal and interest); and (except with respect to the defeasance of the Bonds as permitted by Section 9.01 hereof) obligations issued by banks for cooperatives, federal and land banks, federal intermediate credit banks, federal home loan banks, the Federal Home Loan Bank Board, the Tennessee Valley Authority, or other federal agencies or United States government-sponsored enterprises; and (except with respect to Section 9.01) any other investment in which funds of the District may be legally invested, including taxable government money market portfolios restricted to obligations with maturities of one year or less insured or fully guaranteed as to the principal and interest thereon by the full faith and credit of the United States of America and tax-exempt obligations rated in the highest rating category by either Standard & Poor's Corporation or Moody's Investors Service, Inc. "Bond Counsel" means an attorney at law or a firm of attorneys selected by the District of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issued by states and their political subdivisions duly admitted to the practice of law before the highest court of any state of the United States of America or the District of Columbia. "Bond Register" means the books which the Fiscal Agent shall keep or cause to be kept on which the registration and transfer of the Bonds shall be recorded. "Bondowner" or "Owner" means the person or persons in whose name or names any Bond is registered. "Bonds" means the South Poway Community Facilities District No. 1 1987 Special Tax Refunding Bonds. "Bond Year" means the year commencing each February 2 and ending each February 1. "Certificate of the City Manager" means a written certificate executed by the City Manager of the City or any written designee of the City whose specimen signature has been filed with the Fiscal Agent. "City" means the City of Poway, California. "Code" means the Internal Revenue Code of 1986, as amended. "Computation Year" means the twelve (12) month period commencing on March 10 and ending on March 9 of the following year. "Costs of Issuance" means the costs and expenses incurred in connection with the issuance and sale of the Bonds including the acceptance and initial annual fees and expenses of the Fiscal Agent and the Escrow Bank, legal fees and expenses, costs of printing the Bonds and Official Statement, fees of financial consultants and other fees and expenses set forth in a Certificate of the City Manager, or his designee. "Delivery Date" means the date on which the Bonds were issued. "District" means the South Poway Community Facilities District No. 1 established pursuant to the Act and Resolution No. 85-093 adopted by the legislative body of the District on November 26, 1985. "Escrow Bank" means Security Pacific National Bank, together with any successors thereto. "Escrow Agreement" means that certain agreement between the District and the Escrow Bank made and entered into as of March 1, 1987 providing for the refunding of the 1985 Bonds. 03/07/87 4979k/2468-03 -2- "Fiscal Agent" means Security Pacific National Bank, and any successor thereto. "Fiscal Year" means the period beginning on July 1 and ending on the next following June 30. "Gross Proceeds" means the sum of the following amounts: (i) original proceeds, being the amounts received by the District, or held by the Fiscal Agent as proceeds of the original issuance of the Bonds (after payment of all expenses of issuing the Bonds); (ii) investment proceeds, being amounts received at any time by the District or the Fiscal Agent, such as interest and dividends, resulting from the investment of proceeds of the Bonds, including profits and less losses received on such investment; (iii) transferred proceeds (as defined in Section 1.103-14(e)(2)(ii) of the Regulations) of the 1985 Bonds; (iv) amounts, other than original proceeds and investment proceeds, held in any fund or account and reasonably expected to be used to pay principal of or interest on the Bonds; (v) securities or obligations pledged as security for the payment of the Bonds by an ultimate obligor (or a related person) or the District; (vi) amounts used to pay principal or interest With respect to the Bonds; and (vii) amounts received as a result of investing the amounts listed in clauses (i) through (vi). "Independent Financial Consultant" means a financial consultant or firm of such consultants generally recognized to be well qualified in the financial consulting field, appointed and paid by the District and satisfactory to and approved by the Fiscal Agent (which shall be under no liability by reason of such approval) and who, or each of whom: (1) is in fact independent and not under the domination of the District; (2) does not have any substantial interest, direct or indirect, with the District; and (3) is not connected with the District as a member, officer or employee of the District, but who may be regularly retained to make annual or other reports to the District. "Interest Payment Date" means each February 2 and August 2, commencing August 2, 1987 and, if any such day.is not a business day, the business day next succeeding such date. "Investment Property" means any security (as said term is defined in Section 165(g)(2)(A) or (B) of the Code), obligation, annuity or investment-type property, excluding, 03/07/87 4979k/2468-03 -3- however, obligations the interest on which is excluded from gross income for federal income tax purposes under Section 103 of the Code. "1985 Bonds" means the District's $30,000,000 SPecial Tax Bonds Series 1985 issued pursuant to Resolution No. 85-109. "Maximum Annual Debt Service" shall be the maximum sum obtained for any Bond Year prior to the final maturity on the Bonds by totaling the following for each Bond Year: (1) the principal amount of all outstanding Bonds and any Parity Bonds payable in such Bond Year either at maturity or pursuant to a Sinking Fund Payment; and (2) the interest payable on the aggregate principal amount of the Bonds and any Parity Bonds outstanding in such Bond Year if the Bonds and any Parity Bonds are retired as scheduled. "Net Taxes" means the amount of all Special Taxes received by the District from the Treasurer-Tax Collector of the County of San Diego, together with the proceeds collected from the sale of property pursuant to the foreclosure provisions of this Resolution for the delinquency of such Special Taxes and, when and if received, the $820,000 to be paid to the District by the Poway Redevelopment Agency pursuant to the terms of the Owner Participation Agreement between the Poway Redevelopment Agency and CF Poway, Ltd. dated December 30, 1985. "Nonpurpose Obligation" means any security or obligation (other than an obligation on which interest is excludable from gross income for federal income tax purposes under Section 103 of the Code) in which Gross Proceeds are invested and which is not acquired to carry out the governmental purpose of the Bonds. "Ordinance" means Ordinance No. 182 adopted by the legislative body providing for the levying of the Special Tax. "Outstanding Bonds" means all Bonds theretofore issued by the District, except: (1) Bonds theretofore cancelled or surrendered for cancellation in accordance with Section 9.01 hereof; and (2) Bonds for payment or redemption.of which monies shall have been theretofore deposited in trust (whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in this Resolution or any applicable Parity Bond resolution. 03/07/87 4979k/2468-03 -4- "Parity Bonds" means all bonds, notes or other similar evidences of indebtedness hereafter issued, payable out of. the Net Taxes and which, as provided in this Resolution or any Supplemental Resolution, rank on a parity with the Bonds. "Project" means certain real and other tangible property with an estimated useful life of five years or longer, which is to be acquired or constructed within and without the District, for street and road improvements and a bridge, as more particularly described in the Acquisition Agreement. "Project Costs" means the amounts necessary to finance the Project, to create and replenish any necessary reserve funds, to pay the annual costs associated with the Bonds or any Parity Bonds, including, but not limited to, remarketing, credit enhancement, Fiscal Agent and other fees and to pay any "incidental expenses" of the District, as such term is defined in the Act. "Purchase Price", for the purpose of computation of the Yield of the Bonds, has the same meaning as the term "issue price" in Sections 1273(b) and 1274 of the Code, and, in general, means the initial offering price to the public (not including bond houses and brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers) at which price a substantial amount of the Bonds are sold or, if the Bonds are privately placed, the price paid by the original purchaser or the acquisition cost of the original purchaser. The term "Purchase Price", for the purpose of computation of the Yield of Nonpurpose Obligations, means the fair market value of the Nonpurpose Obligations on the date of use of Gross Proceeds for acquisition thereof, or, if later, on the date that Investment Property constituting a Nonpurpose Obligation becomes a Nonpurpose Obligation of the Bonds. "Record Date" means the fifteenth day of the month preceding an Interest Payment Date or, if such day is not a business day, the business day next preceding such date of any year in which any of the Bonds are outstanding. "Regulations" means regulations adopted by the Department of Treasury from time to time with respect to obligations issued pursuant to Section 103 of the Code. "Reserve Requirement" means, as of any date of calculation, an amount equal to $3,000,000. "Resolution" means Resolution No. 87-026 of the District, together with this Supplement to Resolution, as amended or supplemented pursuant to the terms hereof. 03/07/87 4979k/2468-03 -5- "Resolution of Formation" means Resolution No. 85-093 adopted by the legislative body of the District on November 26, 1985, pursuant to which the City formed the District. "Sinking Fund Payment" means the annual payment to be deposited in the Redemption Fund to redeem a portion of the Term Bonds in accordance with the schedule set forth in Section 4.01(b) hereof. "Special Taxes" means the taxes authorized to be levied by the District and in accordance with the Ordinance, the Resolution of Formation, the Act and the voter approval obtained at the November 26, 1985 and the March 3, 1987 elections in the District. "Supplemental Resolution" means any resolution authorizing the issuance of any Parity Bonds. "Term Bonds" means the Bonds maturing on February 2, 2011. "Treasurer" means the Treasurer of the City acting on behalf of the District. "Underwriter" means Drexel Burnham Lambert Incorporated. "Yield" means that Yield which, when used in computing the present worth of all payments of principal and interest (or other payments in the case of Nonpurpose Obligations which require payments in a form not characterized as principal and interest) on a Nonpurpose Obligation or on the Bonds produces an amount equal to the Purchase Price of such Nonpurpose Obligation or the Bonds, as the case may be, all computed as prescribed in the applicable Regulations. ARTICLE~II GENERAL AUTHORIZATION AND BOND TERMS Section 2.01. Amount, Issuance, Purpose and Nature of Bonds. Under and pursuant to the Act, the Bonds in the amount of $32,800,000, together with any Parity Bonds, shall be issued for the purposes of refunding the 1985 Bonds, provided that the aggregate principal amount .of the Bonds and any Parity Bonds shall not exceed the total indebtedness approved by the qualified electors of the District in accordance with the Act. The Bonds shall be and are limited obligations of the District and shall be payable as to the principal thereof and interest thereon and any premiums upon the redemption thereof solely from, the Net Taxes, the amounts in the funds created hereunder and earnings thereon. 03/07/87 4979k/2468-03 -6- Section 2.02. Payment of 1985 Bonds. In connection With the refunding of the 1985 Bonds: (a) Section 3.02 hereof provides for the deposit of a portion of the proceeds of the sale of the Bonds and certain other available moneys in the 1985 Bonds Escrow Fund established by the Escrow Bank in a sufficient sum to accomplish the refunding of the 1985 Bonds. Upon delivery of the Bonds hereunder, such sums are to be deposited with the Escrow. Bank and to be used as provided in the Escrow Agreement. (b) The Agency and/or the Escrow Bank, as the case may be, shall take all action necessary to pay and retire the 1985 Bonds as set forth in (c) below, including, without limitation, all actions required by this Resolution. (c) The Agency hereby directs the Escrow Bank to transfer to the Fiscal Agent for the 1985 Bonds, from time to time, the amounts available in the 1985 Bonds Escrow Fund to pay the principal of, premium and interest on the 1985 Bonds as the same shall become due on or prior to March 2, 1996 and upon the call and redemption of the 1985 Bonds remaining outstanding on March 2, 1996 at a price of par plus a premium of 3%. Section 2.03. Type and Nature of Bond. The Bonds and interest thereon, together with any premium paid thereon upon redemption, are not obligations of the City, but are limited obligations of the District secured by and payable from an irrevocable first lien on the Net Taxes. Except with respect to the Special Tax, neither the faith and credit nor the taxing power of the District or the City is pledged for the payment of the Bonds or the interest thereon, and no Owner of the Bonds may compel the exercise of the taxing power by the District or the City or the forfeiture of any of their property. The principal of and interest on the Bonds and premiums upon the redemption thereof, if any, are not a debt of the District, the City, the State of California or any of its political subdivisions within the meaning of any constitutional or statutory limitation or restriction. The Bonds are not a legal or equitable pledge, charge, lien, or encumbrance, upon any of the District's property, or upon any of its income, receipts, or revenues, except the Net Taxes which are, under the terms of this Resolution and the Act, set aside for the payment of the --~ Bonds and interest thereon and neither the members of the legislative body of the District or the City Council of the City nor any persons executing the Bonds are liable personally on the Bonds by reason of their issuance. Notwithstanding anything contained in this Resolution, the District shall not be required to advance any money derived from any source of income other than the Net Taxes for the 03/07/87 4979k/2468-03 -7- payment of the interest on or the principal of the Bonds or for the performance of any covenants herein contained. The District may, however, advance funds for any such purpose, provided that such funds are derived from a source legally available for such purpose. Section 2.04. Equality of Bonds, Pledge of Net Taxes. Pursuant to the Act and this Resolution, the Bonds and any Parity Bonds shall be equally payable from the Net Taxes without priority for number, date of the Bonds, date of sale, date of execution, or date of delivery, and the payment of the interest on and principal of the Bonds and any Parity Bonds and any premiums upon the redemption thereof, shall be exclusively paid from the Net Taxes which are hereby set aside for the payment of the Bonds-and any Parity Bonds. The Net Taxes and any interest earned on the Net Taxes shall constitute a trust fund held for the benefit of the Owners to be applied to the payment of the interest on and principal of the Bonds .and any Parity Bonds and so long as any of the Bonds and any Parity Bonds or interest thereon remain Outstanding shall not be used for any other purpose, except as permitted by this Resolution or any Supplemental Resolution. Nothing in this Resolution or any Supplemental Resolution shall preclude: (a) the redemption prior to maturity of any Bonds subject to call and redemption and payment of said Bonds from proceeds of refunding bonds issued under the Act as the same now exists or as hereafter amended, or under any other law of the State of California; or (b) the issuance, subject to the limitations contained herein, of Parity Bonds which shall be payable from Net Taxes. Section 2.05. Description of Bonds; Interest Rates. The Bonds shall be issued in fully registered form in denominations of $5,000 or any integral multiple .thereof within a single maturity and shall be numbered as desired by the Fiscal Agent. The Bonds shall be designated "SOUTH POWAY COMMUNITY FACILITIES DISTRICT NO. 1 (POMERADO BUSINESS PARK PROJECT) 1987 SPECIAL TAX REFUNDING BONDS". The Bonds shall be dated as of February 2, 1987 and shall mature and be payable on February 2 and August 2 in the years and in the aggregate principal amounts and shall be subject to and shall bear interest at the rates set forth in the table below: Date Principal Amount Interest Rate February 2, 1989 $ 100,000.00 5.000% August 2, 1989 200,000.00 5.000% February 2, 1990 200,000.00 5.500% August 2, 1990 205,000.00 5.500% February 2, 1991 200,000.00 5.750% August 2, 1991 200,000.00 5.750% 03/07/87 4979k/2468-03 -8- February 2, 1992 August 2, 1992 February 2, 1993 August 2, 1993 February 2, 1994 August 2, 1994 February 2, 1995 August 2, 1995 February 2, 1996 August 2, 1996 February 2, 1997 February 2, 2011 210 000.00 215 OOO O0 255 000 00 265 000 00 310 000 00 320 000 00 370 000 00 380 000 O0 435 000.00 450 000.00 505000.00 27,980,000.00 6.000% 6.ooo% 6.200% 6.200% 6.400% 6.400% 6.600% 6.600% 6.750% 6.750% 6.800% 7.125% Interest shall be payable with respect to each Bond on each Interest Payment Date until the principal sum of that Bond has been paid; provided, however, that if at the maturity date of any Bond (or if the same is redeemable and shall be duly called for redemption, then at the date fixed for redemption) funds are available for the payment or redemption thereof, in full accordance with terms of this Resolution, such Bonds shall then cease to bear interest. Interest due on the Bonds shall be calculated on the basis of a 360-day year comprised of twelve 30-day months. Section 2.06. Place and Form of Payment. The Bonds shall be payable both as to principal and interest, and as to any premiums upon the redemption thereof, in lawful money of the United States of America. The principal of the Bonds and any premiums due upon the redemption thereof shall be payable upon presentation thereof at the corporate trust office of the Fiscal Agent in Los Angeles, California. Interest on any Bond shall be payable from the Interest Payment Date next preceding the date of authentication of that Bond, unless (i) such date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication, (ii) the date of authentication is after a Record Date but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication or (iii) the date of authentication is prior to the close of business on the first Record Date in which event interest shall be payable from February 2, 1987; provided, however, that if at the time of authentication of such Bond, interest is in default, interest on that Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment. Interest on any Bond shall be paid to the person whose name shall appear in the Bond Register as the Owner of such Bond as of the close of business on the Record Date. Such interest shall be paid by check of the Fiscal Agent 03/07/87 4979k/2468-03 -9- mailed by first class mail, postage prepaid, to such Bondowner at his or her address as it appears on the Bond Register. Section 2.07. Form of Bonds; Temporary Bonds. The definitive Bonds shall be printed from steel engraved or lithographic plates, and the Bonds and the certificate of authentication shall be substantially in the form attached hereto as Exhibit A, which form is hereby approved and adopted as the form of the Bonds and of the certificate of authentication. Until.definitive Bonds shall be prepared, the District may cause to be executed and delivered in lieu of such definitive Bonds temporary bonds in typed, printed, lithographed or engraved form and in fully registered form,.subject to the same provisions, limitations and conditions as are applicable in the case of definitive Bonds, except that they may be in any denominations authorized by the District. Until exchanged for definitive Bonds, any temporary bond shall be entitled and subject to the same benefits and provisions of this Resolution as definitive Bonds. If the District issues temporary Bonds, it will execute and furnish definitive Bonds without unnecessary delay and thereupon any temporary Bond may be surrendered to the Fiscal Agent at its office, without expense to the Owner, in exchange for a definitive Bond of the same maturity, interest rate and principal amount in any authorized denomination. All temporary Bonds so surrendered shall be cancelled by the Fiscal Agent and shall not be reissued. Section 2.08. Execution and Authentication. The Bonds shall be signed on behalf of the District by the manual or facsimile signature of the Mayor of the City and by the manual or facsimile signature of the City Clerk, or any duly appointed deputy clerk, in their capacity as officers of the District, and the seal of the District (or a facsimile thereof) shall be impressed, imprinted, engraved or otherwise reproduced thereon, and attested by the signature of the City Clerk. In case any one or more of the officers who shall have signed or sealed any of the Bonds shall cease to be such officer before the Bonds so signed and sealed have been authenticated and delivered by the Fiscal Agent (including new Bonds delivered pursuant to the provisions hereof with reference to the transfer and exchange of Bonds or to lost, stolen, destroyed or mutilated Bonds), such Bonds shall nevertheless be valid and may be authenticated and delivered as herein provided, and may be issued as if the person who signed or sealed such Bonds had not ceased to hold such office. Only such Bonds as shall bear thereon such certificate of authentication in the form set forth in Exhibit A hereto shall be entitled to any right or benefit under this Resolution, and 03/07/87 4979k/2468-03 -10- no Bond shall be valid or obligatory for any purpose until such · certificate of authentication shall have been duly executed by the Fiscal Agent. Section 2.09. Bond Register. The Fiscal Agent will keep or cause to be kept, at its corporate trust office, sufficient books for the registration and transfer of the Bonds which shall be open to inspection by the District during all regular business hours, and, upon presentation for such purpose, the Fiscal Agent shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be transferred on said Bond Register, Bonds as herein provided. The District and the Fiscal Agent may treat the Owner of the Bond whose name appears on the Bond Register as the absolute Owner of the Bond for any and all purposes, and the District and the Fiscal Agent shall not be affected by any notice to the contrary. The District and the Fiscal Agent may rely on the address of the Bondowner as it appears in the Bond Register for any and all purposes. It shall be the duty of the Bondowner to give written notice to the Fiscal Agent of any change in the Bondowner's address so that the Bond Register may be revised accordingly. Section 2.10. Registration of Exchange or Transfer. The registration of any Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond for cancellation at the corporate trust office of the Fiscal Agent, accompanied by delivery of written instrument of transfer in a form approved by the Fiscal Agent and duly executed by the Bondowner or his or her duly authorized attorney. Bonds may be exchanged at the corporate trust office of the Fiscal Agent for a like aggregate principal amount of Bonds of other authorized denominations of the same maturity. The Fiscal Agent will not charge the Owner for any new Bond issued upon any exchange, but shall require the Bondowner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. Whenever any Bond or Bonds shall be surrendered for registration of transfer or exchange, the District shall execute and the Fiscal Agent shall authenticate and deliver a new Bond or Bonds of-the- same maturity, for a like aggregate principal amount; provided that the Fiscal Agent shall not be required to register transfers or make exchanges of (i) Bonds for a'period of 15 days next preceding any selection of the Bonds to be redeemed, or (ii) any Bonds chosen for redemption. 03/07/87 4979k/2468-03 -11- Section 2.11. Mutilated, Lost, Destroyed or Stolen Bonds. If any Bond shall become mutilated, the District shall execute, and the Fiscal Agent shall authenticate and deliver, a new Bond of like tenor, date and maturity in exchange and substitution for the Bond so mutilated, but only upon surrender to the Fiscal Agent of the Bond so mutilated. Every mutilated Bond so surrendered to the Fiscal Agent shall be cancelled by the Fiscal Agent pursuant to Section 10.01. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Fiscal Agent and, if such evidence is satisfactory to the Fiscal Agent and, if any indemnity, satisfactory to the District and the Fiscal Agent shall be given, the District, at the expense of the Bondowner, shall execute and the Fiscal Agent shall authenticate and deliver, a new Bond of like.tenor and maturity, numbered and dated as such Fiscal Agent shall determine in lieu of and in substitution for the Bond so lost, destroyed or stolen. Any Bond issued in lieu of any Bond alleged to be mutiliated, lost, destroyed or stolen, shall be equally and proportionately entitled to the benefits hereof with all other Bonds issued hereunder. The Fiscal Agent shall not treat both the original Bond and any replacement Bond as being outstanding for the purpose of determining the principal amount of Bonds which may be executed, authenticated and delivered hereunder or for the purpose of determining any percentage of Bonds outstanding hereunder, but both the original and replacement Bond shall be treated as one and the same. Notwithstanding any other provision of this Section, in lieu of delivering a new Bond which has been mutilated, lost, destroyed or stolen, and which has matured, the Fiscal Agent may make payment with respect to such Bonds. Section 2.12. Validity of Bonds. The validity of the authorization and issuance of the Bonds shall not be affected in any way by any proceedings taken by the District for the financing of the Project, or by any contracts made by the District in connection therewith, and shall not be dependent upon the completion of the financing of the Project or upon the performance by any person of his obligation with respect to the Project, and the recital contained in the Bonds that the same are issued pursuant to the Act and other applicable laws of the State shall be conclusive evidence of their validity and of the regularity of their issuance. ARTICLE III CREATION OF FUNDS AND APPLICATION OF PROCEEDS AND NET TAXES Section 3.01. Creation of Funds. There is hereby created and established and shall be maintained by the Fiscal Agent of the District the following funds: 03/07/87 4979k/2468-03 -12- (1) The South Poway Community Facilities District No. 1 1987 Costs of Issuance Fund (the "Costs of Issuance Fund"). (2) The South Poway Community Facilities District No. 1 1987 Special Tax Fund (the "Special Tax Fund") in which there shall be established and created an Interest Account and a Principal Account. (3) The South Poway Community Facilities District No. 1 1987 Redemption Fund (the "Redemption Fund"). (4) The South Poway Community Facilities District No. 1 1987 Reserve Fund (the "Reserve Fund"). (5) The South Poway Community Facilities District No. 1 1987 Excess Investment Earnings Fund (the "Excess Investment Earnings Fund"). (6) The South Poway Community Facilities District No. 1 1987 Administrative Fund (the "Administrative Fund"). (7) The South Poway Community Facilities District No. t 1987 Acquisition Fund (the "Acquisition Fund" ) . Section 3.02. Disposition of Bond Proceeds and the 1985 Bond Proceeds. The proceeds of the sale of the Bonds and the 1985 Bond proceeds shall be received by the Fiscal Agent on behalf of the District and deposited as follows: (1) The amount representing the accrued interest equal to $242,301.46 on the Bonds shall be deposited in the Interest Account of the Special Tax Fund from Bond proceeds, and such amount shall be applied to the payment of interest on August 2, 1987; (2) $137,829.08 shall be deposited in the Costs of Issuance Fund from Bond proceeds; (3) $3,000,000 shall be placed in the Reserve Fund from Bond proceeds; (4) $2,200,353.86 on deposit in the 1985 Bonds Reserve Fund, $2,740,760.57 on deposit in the 1985 Bonds Special Tax Fund, $968,562.06 on deposit in the 1985 Bonds Bond Fund and $28,782,095.92 of Bond proceeds, shall be deposited in the 1985 Bonds Escrow Fund established with the Escrow Bank and be applied in accordance with the Escrow Agreement to discharge the 1985 Bonds; 03/07/87 4979k/2468-03 -13- (5) After making the transfers required by (4) above, all remaining ·amounts on deposit in the 1985 Bonds Special Tax Fund, including any interest earnings on any 1985 Bonds funds and accounts, shall be transferred to the Special Tax Fund; and (6) Ail amounts on deposit in the 1985 Bonds Acquisition Fund shall be transferred to the Acquisition Fund. Section 3.03. Deposits to and Disbursements from Special Tax Fund; Costs of Issuance Fund. The Treasurer shall, on each date on which the Special Taxes have been collected by the District from the Treasurer-Tax Collector of the County of San Diego and in no event later than seven days prior to the Interest Payment Date on which such Special. Taxes will be needed to pay amounts due in accordance with the terms of this Resolution, transfer the Special Taxes to the Fiscal Agent for deposit in the Special Tax Fund, to be held in trust and transferred on the dates and in the amounts set forth in the following Sections, in the following order of priority, to: (1) The Interest Account; (2) The Principal Account; (3) The Redemption Fund; (4) The Reserve Fund; (5) The Excess Investment Earnings Fund; and (6) The Administrative Fund. Notwithstanding anything herei~ to the contrary, moneys transferred to the Special Tax Fund from the Acquisition Fund in accordance with Section 3.09(b) hereof shall, unless in the opinion of Bond Counsel another use of such funds will not impair the exclusion from gross income of interest on the Bonds, be held in a separate account within the Special Tax Fund known as the "Purchase Account" which the Fiscal Agent is directed to establish when and if such transfer is required to be made and moneys in such separate account shall be invested in tax-exempt Authorized Investments or in Authorized Investments at a Yield not in excess of the Yield on the Bonds and shall be applied only (i) to the purchase of Bonds by the District in the open market, at a price not to exceed the principal amount thereof plus accrued interest, which Bonds shall thereupon be cancelled, (ii) to make interest payments on the Bonds, or (iii) to redeem Bonds at the earliest redemption date permitted by this Resolution, without premium. 03/07/87 4979k/2468-03 -14- Moneys deposited in the Costs of Issuance Fund shall be applied by the Fiscal Agent to the payment of Costs of Issuance upon receipt of a Certificate of the City Manager authorizing disbursement by the Fiscal Agent. Any moneys remaining in the Costs of Issuance Fund on August 1, 1987 shall be transferred by the Fiscal Agent to the Interest Account. Section 3.04. Special Tax Fund. The principal and interest due on the Bonds until maturity, otherwise than by redemption, shall be paid by the Fiscal Agent from the Special Tax Fund. At the maturity of the Bonds and, after all principal, and interest then due on the Bonds then outstanding has been paid or provided for, moneys in the Special Tax Fund shall be transferred to the District. For the purpose of assuring that the payment of principal and interest on the Bonds will be made when due, on or prior to each February 1 and August 1, the Fiscal Agent shall make the following transfers first to the Interest Account and then to the Principal Account; provided, however, that to the extent that deposits have been made in the Interest Account or the Principal Account from the proceeds of the sale of the Bonds or otherwise, the transfer from the Special Tax Fund need not be made: (a) To the Interest Account, an amount such that the balance in the Interest Account one (1) day prior to each Interest Payment Date shall be equal to the installment of interest due on the Bonds on said Interest Payment Date. Moneys in the Interest Account shall be used for the payment of interest on the Bonds as the same become due. (b) To the Principal Account, an amount such that the balance in the Principal Account one (1) day prior to February 2 and August 2 of each year commencing with 1989 shall equal the principal payment due on the Bonds maturing on the next succeeding February 2 and August 2, respectively. Moneys in the Principal Account shall be used for the payment of the principal of such Bonds as the same become due at maturity. Section 3.05. Redemption Fund. (a) Commencing on August 1, 1997 and on each February 1 and August 1 thereafter, after the deposits have been made to the Interest Account and the Principal Account as required by the preceding section, the Fiscal Agent shall next transfer into the Redemption Fund from the Special Tax Fund the amount needed to make the balance in the Redemption Fund equal to the Sinking Fund Payment due on the outstanding Term Bonds on the next succeeding February 2 or August 2. Moneys so deposited in the Redemption Fund shall be used and applied by the Fiscal 03/07/87 4979k/2468-03 -15- Agent to call and redeem the largest principal amount of outstanding Term Bonds which can be called with the moneys available and any such call and redemption shall be made in accordance with the provisions and according to the Sinking Fund Payment schedule set forth in Section 4.01(b) hereof. (b) After making the deposits to the Interest Account and the Principal Account pursuant to Section 3.04 above and to the Redemption Fund for Sinking Fund Payments then due pursuant to subparagraph (a) of this section, and in accordance with the District's election to call Bonds for optional redemption as set forth-in Section 4.01(a), the Fiscal Agent shall transfer from the Special Tax Fund and deposit in the Redemption Fund moneys available for the purpose and sufficient to pay the principal and the premiums payable as provided in Section 4.01(a) on the Bonds called for optional redemption. Moneys set aside in the Redemption Fund shall be used solely for the purpose of redeeming Bonds and shall be applied on or after the redemption date to the payment of principal and premium on the Bonds to be redeemed upon presentation and surrender of such Bonds; provided, however, in lieu or partially in lieu of such call and redemption, moneys deposited in the Redemption Fund as set forth above may be used to purchase outstanding Bonds in the manner hereinafter provided. Purchases of outstanding Bonds may be made by the District at public or private sale as and when and at such prices as the District may in its discretion determine but only at prices (including brokerage or other expenses) not more than par plus accrued interest, or, in the case of purchases to be made from funds to be applied to a redemption pursuant to Section 4.01(a), par plus accrued interest, plus the premium applicable at the next following call date according to the premium schedule established pursuant to Section 4.01(a) hereof. Any accrued interest payable upon the purchase of Bonds may be paid from the amount reserved in the Interest Account for the payment of interest on the next following Interest Payment Date. If, after all of the Bonds have been redeemed and cancelled or paid and cancelled, there are moneys remaining in the Redemption Fund, said moneys shall be transferred to the Special Tax Fund; provided, that if said moneys are part of the proceeds of refunding bonds said moneys shall be transferred to the fund or account created for the payment of principal of and interest on such refunding bonds. Section 3.06. Reserve Fund. There shall be maintained in the Reserve Fund an amount equal to the Reserve Requirement. Moneys in the Reserve Fund shall be used solely for the purpose of paying the principal of, including Sinking Fund Payments, and interest on the Bonds when due in the event that the moneys in the Special Tax Fund are insufficient therefor or 03/07/87 4979k/2468-03 -16- moneys in the Redemption Fund are insufficient to make a mandatory redemption in accordance with the provisions of Section 4.01(b). ~f the amounts in the Special Tax Fund are insufficient for such purpose, the Fiscal Agent shall withdraw from the Reserve Fund for deposit in the Interest Account or the Principal Account or the Redemption Fund moneys necessary for such purpose. On each date that the Fiscal Agent makes a transfer from the Reserve Fund to the Interest Account, the Principal Account or the Redemption Fund, the Fiscal Agent shall notify the Treasurer, in writing, as to the date and amount~of such transfer. The District shall then take the steps necessary to cause to be deposited to the Special Tax Fund the amount needed to replenish the Reserve Fund to the Reserve Requirement either through including such amount in the next annual Special Tax levy, or otherwise. Notwithstanding anything herein to the contrary, whenever moneys are withdrawn from the Reserve Fund, after making the required transfers to the Interest Account, the Principal Account and the Redemption Fund, the Fiscal Agent shall transfer to the Reserve Fund the amount needed to restore the amount of such fund to the Reserve Requirement. The Fiscal Agent shall make such transfer from the available moneys in the Special Tax Fund. Moneys in the Special Tax Fund shall be deemed available for transfer to the Reserve Fund only if the Fiscal Agent determines that such amounts will'not be needed to make the deposits required to be made to the Interest Account, the Principal Account and the Redemption Fund. Notwithstanding any provision herein to the contrary, moneys in the Reserve Fund in excess of the Reserve Requirement shall be withdrawn from the Reserve Fund by the Fiscal Agent on each February 2 and August 2 and transferred to the Special Tax Fund. Section 3.07. Excess Investment Earnings Fund. (a) The District shall calculate Excess Investment Earnings in accordance with paragraph (b) and shall pay Excess Investment Earnings to the United States government in accordance with paragraph (c). The term "Excess Investment Earnings" means an amount equal to the sum of: (i) the excess of: (A) the aggregate amount earned from the Delivery Date on all Nonpurpose Obligations in which Gross Proceeds of the Bonds are invested (other than amounts attributable to an excess described in this subparagraph (i)), over (B) the amount that would have been earned if the yield on such Nonpurpose Obligations (other than amounts 03/07/87 4979k/2468-03 -17- attributable to an excess described in this subparagraph (i)) had been equal to the Yield on the Bonds, plus (ii) any income attributable to the excess described in paragraph (i). (b) On each December 1 during which the Bonds are outstanding, the Fiscal Agent shall mail a notice to the District setting forth the District's obligation to make the calculation of Excess Investment Earnings for the current Computation Year. The Fiscal Agent shall not be liable to the District, the Owners of the Bonds or any other party for (1) its failure to so notify the District and (2) the failure of the District to act upon any such notice provided by the Fiscal Agent. The Fiscal Agent shall have no responsibility to ensure the obligation of the District to make the calculation of the Excess Investment Earnings. At or prior to the last day of the first Computation Year, the District shall calculate the Excess Investment Earnings referenced in subparagraph (i) of paragraph (a) and shall deposit the same into the Excess Investment Earnings Fund to the extent funds are available first from the Special Tax Fund and then from any legally available funds. Thereafter, prior to the last day of each Computation Year and on the date of the retirement of the Bonds, the District shall calculate the amount of Excess Investment Earnings referenced in subparagraphs (i) and (ii) of paragraph (a) and direct corresponding transfers into the Excess Investment Earnings Fund. The calculations shall be made by a nationally recognized bond counsel, an independent Certified Public Accountant or another organization whose calculations of rebate under Section 148(f) of the Code have been accepted by other public agencies in the State retained by the District in accordance with the following: (1) Except as provided in (2), in determining the amount described in subparagraph (i)(A) of paragraph (a), the aggregate amount earned on Nonpurpose Obligations shall include (i) all income realized under federal income tax accounting principles (whether or not the person earning such income is subject to federal income tax) with respect to such Nonpurpose Obligation and with respect to the reinvestment of investment receipts from such Nonpurpose Obligations (without regard to the transaction costs incurred in acquiring, carrying, selling or redeeming such Nonpurpose Obligations), including, but not limited to, gain or loss realized on the disposition of such Nonpurpose Obligations (without regard to when such gains are taken into account under Section 453 of the Code relating to the taxable year of inclusion of gross income), and income under Section 1272 of the Code (relating to original issue 03/07/87 4979k/2468-03 -18- discount) and (ii) any unrealized gain or loss as of the date of retirement of the Bonds if any Nonpurpose Obligation is retained after such date. (2) In determining the amount described in subparagraph (i) of paragraph (a), an obligation or security shall be treated.as acquired for its fair market value at the time it becomes a Nonpurpose Obligation, so that gain or loss on the disposition of such an obligation or security shall be computed with reference to such fair market value as its adjusted basis. (3) In determining the amount described in subparagraph (i)(B) of paragraph (a), the Yield on the Bonds shall be determined based on the actual Yield of the Bonds during the period between the Delivery Date and the date the computation is made (with adjustments for discount or premium). (4) In determining the amount described in subparagraph (ii) of paragraph (a), all income attributable to the excess described in subparagraph (i) of paragraph (a) must be taken into account, whether or not that income exceeds the Yield on the Bonds, and no amount may be treated as "negative arbitrage." (5) In determining the amount described in subsection (a) of this Section, there shall be excluded any amount earned on any fund or account which is used primarily to achieve a proper matching of revenues and annual debt service on the Bonds during each Bond Year and which is depleted at least once a year except for a reasonable carryover amount not in excess of the greater of one year's earnings on such fund or account or one-twelfth (1/12) of annual debt service on the Bonds, as well as amounts earned on said earnings if the gross earnings on all such funds and accounts for the Computation Year are less than $100,000. (c) Upon written direction of the District, the Fiscal Agent shall pay Excess Investment Earnings to the United States government in installments with the first payment to be made not later than thirty (30) days after the end of the fifth Computation Year and with subsequent payments to be made not later than five (5) years after the preceding payment was due. The District shall assure that each installment is in an amount equal to at least 90 percent of the Excess Investment Earnings with respect to the Bonds as of the close of the computation period. Upon the direction of the District, which direction shall be given before thirty (30) days after the retirement of the Bonds, the Fiscal Agent shall pay from the Excess Investment 03/07/87 4979k/2468-03 -19- Earnings Fund, or the District shall pay directly, 100 percent of the theretofore unpaid Excess Investment Earnings of the Bonds. The Fiscal Agent or the District shall remit such payments to the United States government at the address and in the manner directed by the District prescribed by the Regulations as the same may be in time to time in effect, together with such reports and statements prepared by District as may be prescribed by such Regulations. If the Fiscal Agent follows the written instructions as supplied by the District, it shall be deemed to have complied with this subsection and shall have no responsibility to calculate Excess Investment Earnings or to take action in the absence of instructions from the District. (d) In order to assure that Excess Investment Earnings are paid to the United States rather than to a third party, investments by the District in certificates of deposit and in investment agreements shall be made only in accordance with the Regulations therefor as from time to time in effect. (e) The District shall keep and retain for a period of six (6) years following the retirement of the Bonds records of the determinations made pursuant to this Section. The Fiscal Agent shall keep a record of all investments made with moneys on deposit in any Fund or Account held by it hereunder and shall provide such records to the District at least quarterly. Such records shall contain a reference to the date of purchase, the date of sale, the purchase price, the sales price, the principal amount and coupon rate of each obligation purchased or sold. (f) Payments pursuant to this Section shall be made to the maximum extent possible from moneys on deposit in the Excess Investment Earnings Fund and, to the extent of any deficiency therein for such purpose, shall be.made from the Special Tax Fund. In the event of any remaining deficiency in available moneys for the purposes of such transfer, such deficiency shall be paid by the District from any available funds. (g) Notwithstanding the foregoing, the foregoing method of computing Excess Investment Earnings may be modified, in whole or in part, without the consent of the Owners of the Bonds upon receipt by the District of an opinion of Bond Counsel to the effect that such modification will not adversely affect the exclusion from gross income of interest on the Bonds. Section 3.08. Administrative Expense Fund. After making the transfers required by Sections 3.04, 3.05,'3.06 and 3.07, the Fiscal Agent shall withdraw from the Special Tax Fund and place in the Administrative Expense Fund an amount necessary to pay all Administrative Expenses. Moneys in the Administrative 03/07/87 4979k/2468-03 -20- Expense Fund may be invested in any Authorized Investments, provided that the maturity or maturities thereof shall not exceed 30 days from the date of purchase. Section 3.09. Acquisition Fund. (a) The moneys in the Acquisition Fund shall be applied exclusively to pay the Project Costs. Amounts for Project Costs shall be disbursed by the Fiscal Agent only upon receipt of a sequentially numbered written requisition, substantially in the form attached hereto as Exhibit B, from the City Manager, or his designee, or such other person as is designated in writing to the Fiscal Agent by the legislative body of the District, stating that (1) the conditions to the release of such funds stated in the Acquisition Agreement have been satisfied, (2) the name of the person to whom payment is due, (3) the amount to be paid, (4) the purpose for which the obligation to be paid was incurred, (5) there has not been filed with or served upon the District notice of any lien, right to lien or attachment upon, stop notice or claim affecting the right to receive payment of, any of the moneys payable to any of the persons named in such certificate or written requisition, which has not been released or will not be released simultaneously with the payment of such obligation, other than materialmen's or mechanic's liens accruing by mere operation of law, and (6) sufficient money remains in the Acquisition Fund to pay all remaining costs of acquisition, construction and financing of the Project. Each requisition shall be accompanied by the invoices which are being paid or by other evidence of payment of such amounts by the District. The Fiscal Agent shall have no liability for disbursing funds in accordance with the provisions of this Section 3.09(a). (b) Upon receipt of a Certificate of the City Manager, or his designee, that all Project Costs have been paid, the Fiscal Agent shall transfer moneys on deposit in the Acquisition Fund to the Special Tax Fund. (c) Notwithstanding anything herein to the contrary, on March 2, 1988, 1.3~ of the balance on deposit in the Acquisition Fund and on December 1, 1988 any funds remaining on deposit in the Acquisition Fund shall be invested by the District only in tax-exempt Authorized Investments or in Authorized Investments at a Yield not in excess of the Yield on the Bonds (as set forth in the Non-Arbitrage Certificate of the District), unless in the opinion of Bond Counsel such restriction is not necessary to prevent interest on the Bonds from being included in gross income for federal income tax purposes. Section 3.10. Investments. Moneys held in any of the Funds and Accounts under this Resolution shall be invested only in Authorized Investments which shall be deemed at all times to be 03/07/87 4979k/2468-03 -21- a part of such Funds and Accounts. Any income realized or loss resulting from such Authorized Investments shall be credited or charged to the Fund or Account from which such investment was made; provided, however, (i) investment earnings on all amounts deposited in the Acquisition Fund prior to August 2, 1988 shall be deposited (1) in the Acquisition Fund until the Project is completed, and (2) thereafter, in the Special Tax Fund, (ii) investment earnings on all amounts in the Excess Investment Earnings Fund shall be deposited therein, and (iii) all other investment earnings shall be deposited in the Special Tax Fund. Moneys in the Funds and Accounts held under this Resolution may be from time to time invested by the Fiscal Agent at the direction of the Treasurer subject to the following restrictions: (a) Moneys in the Acquisition Fund shall be invested in Authorized Investments which will by their terms mature as close as practicable to the date the District estimates the moneys represented by the particular investment will be needed for withdrawal from the Acquisition Fund. (b) Moneys in the Redemption Fund shall be invested only in Authorized Investments which will by their terms mature on such dates so as to ensure the payment of principal and interest on the Bonds as the same become due. (c) The moneys in the Reserve Fund may be invested initially only in Authorized Investments which mature not later than February 2, 1992 and thereafter shall be invested in Authorized Investments which mature not more than six months from the date of purchase by the Fiscal Agent, provided that no such Authorized Investment shall mature later than the final maturity of the Bonds; and, provided, further, that prior to March 2, 1996 amounts on deposit in the Reserve Fund shall not be invested at a Yield in excess of the Yield on the Bonds. The Fiscal Agent shall sell at the best price obtainable or present for redemption any obligations so purchased whenever it may be necessary to do so in order to provide moneys to meet any payment or transfer for such Funds and Accounts or from such Funds and Accounts. For the purpose of determining at any given time the balance in any such funds, any such investments constituting a part of such funds and accounts shall be valued at their cost. Notwithstanding anything herein to the contrary, neither the Fiscal Agent nor the Treasurer shall be responsible for any loss from investments, sale or transfer authorized pursuant to this Resolution. The Fiscal Agent shall provide the District with monthly reports relating to the investments made in all Funds and Accounts and the investment earnings, income or loss posted to each Fund or Account. 03/07/87 4979k/2468-03 -22- ARTICLE IV REDEMPTION OF BONDS Section 4.01. Redemption of Bonds. (a) Optional Redemption. The Bonds maturing on or before February 2, 1997 are not subject to call and redemption prior to maturity. The Term Bonds maturing on February 2, 2011 may be redeemed, at the option of the District on February 2, 1997, or on any. Interest Payment Date thereafter, prior to maturity in whole or in part, by lot, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the date of redemption. Redemption Dates Redemption Prices February 2, 1997 February 2, 1998 February 2, 1999 February 2, 2000 and August 2, 1997 and August 2, 1998 and August 2, 1999 and thereafter 103% 102% 101% lO0% In the event the District shall elect to redeem Bonds as provided in this Section 4.01(a), the District shall give written notice to the Fiscal Agent of its election so to redeem, the redemption date and the principal amount of the Bonds to be redeemed. The notice to the Fiscal Agent shall be given at least 60 but no more than 90 days prior to the redemption date or such shorter period as shall be acceptable to the Fiscal Agent. (b) Mandatory Sinking Fund Redemption. (i) The outstanding Term Bonds maturing on February 2, 2011 will be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Fund, on August 2, 1997, and on each February 2 and August 2 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall be redeemed at a redemption price for each redeemed Bond equal to the principal amount thereof, plus accrued interest to the redemption date without premium as follows: - Date Principal Amount August 2, 1997 February 2, 1998 August 2, 1998 February 2, 1999 August 2, 1999 520,000.00 580,000.00 6O5,O0O.OO 670,000.00 695,000.00 03/07/87 4979k/2468-03 -23- February 2, 2000 August 2, 2000 February 2, 2001 August 2, 2001 February 2, 2002 August 2, 2002 February 2, 2003 August 2, 2003 February 2, 2004 August 2, 2004 February 2, 2005 August 2, 2005 February 2, 2006 August 2, 2006 February 2, 2007 August 2, 2007 February 2, 2008 August 2, 2008 February 2, 2009 August 2, 2009 February 2, 2010 August 2, 2010 February 2, 2011(maturity) 720,000.00 745,000.00 770,000.00 795,000.00 825,000.00 855,000.00 885,000.00 915,000.00 950,000.00 985,000.00 1,020,000.00 1,055,000.00 1,090,000.00 1,130,000 00 1,170,000 O0 1,215,000 00 1,255,000 00 1,300,000 00 1,345,000 00 1,395,000 00 1,445,000 00 1,495,000 O0 1,550,000.00 Section 4.02. Selection of Bonds for Redemption. If less than all of the Outstanding Bonds are to be redeemed, the Fiscal Agent shall select the Bonds to be redeemed by lot in any manner which the Fiscal Agent deems fair; provided, however, that the portion of any Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of $5,000 or a multiple thereof, and that, in selecting portions of such Bonds for redemption, the Fiscal Agent shall treat each such Bond as representing that number of Bonds of $5,000 denomination which is obtained by dividing the principal amount of such Bond to be redeemed in part by $5,000. The Fiscal Agent shall promptly notify the District in writing of the Bonds, or portions thereof, selected for redemption. Section 4.03. Notice of Redemption. When Bonds are due for redemption under Section 4.01(b) above and when the Fiscal Agent receives notice from the District of its election to redeem Bonds under Section 4.01(a) above, the Fiscal Agent shall give notice, in the name of the District, of the redemption of such Bonds. Such notice of redemption shall (a) specify the CUSIP numbers, the serial numbers and the maturity date or dates of the Bonds selected for redemption, except that where all the Bonds subject to redemption, or'all the Bonds of one maturity, are to be redeemed, the serial numbers thereof need not be specified; (b) state the date fixed for redemption and surrender of the Bonds to be redeemed; (c) state the redemption price; (d) state the place or places where the Bonds 03/07/87 4979k/2468-03 -24- are to be redeemed; and (e) in the case of Bonds to be redeemed only in part, state the portion of such Bond which is to be redeemed. Such notice shall further state that on the date fixed for redemption, there shall become due and payable on each Bond or portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the redemption date, and that from and after such date, interest thereon shall cease to accrue and be payable. At least 30 days but no more than 60 days prior to the redemption date, the Fiscal Agent shall mail a copy of such notice, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register and shall publish such notice in a financial newspaper circulated in the City of Los Angeles. The actual receipt by the Owner of any Bond of notice of such redemption shall not be a condition precedent thereto, and failure to receive such notice shall not affect the validity of the proceedings for the redemption of such Bonds, or the cessation of interest on the redemption date. A certificate by the Fiscal Agent that notice of such redemption has been given as herein provided shall be conclusive as against all parties and the Owner shall be entitled to show that he or she failed to receive notice of such redemption. Section 4.04. Partial Redemption of Bonds. Upon surrender of any Bond to be redeemed in part only, the District shall execute and the Fiscal Agent shall authenticate and deliver to the Bondowner, at the expense of the District, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered, with the same interest rate and the same maturity. Section 4.05. Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in Section 4.03, and the amount necessary for the redemption having been made available for that purpose and being available therefor on the date fixed for such redemption: (a) The Bonds, or portions thereof, designated for redemption shall, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in this Resolution, anything in this Resolution or in the Bonds to the contrary notwithstanding; (b) Upon presentation and surrender thereof at the corporate trust office of the Fiscal Agent~ the redemption price of such Bonds shall be paid to the Owner thereof; (c) After the redemption date the Bonds or portions thereof so designated for redemption shall be deemed to be no longer Outstanding and such Bonds or portions thereof shall cease to bear further interest; and 03/07/87 4979k/2468-03 -25- (d) After the date fixed for redemption no Owner of any of the Bonds or portions thereof so designated for redemption shall be entitled to any of the benefits of this Resolution, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available. ARTICLE V COVENANTS AND WARRANTY Section 5.01. Warranty. The District shall preserve and protect the security of the Bonds against all claims and demands of all persons. Section 5.02. Covenants. So long as any of the Bonds issued hereunder are Outstanding and unpaid, the District makes the following covenants with the Bondowners under the provisions of.the Act and this Resolution (to be performed by the District or its proper officers, agents or employees), which covenants are necessary, convenient and desirable to secure the Bonds and tend to make them more marketable; provided, however, that said covenants do not require the District to expend any funds or moneys other than the Special Taxes: (a) Punctual Payment; Against Encumbrances. The District covenants that it will receive all Net Taxes in trust and will immediately deposit the Net Taxes with the Fiscal Agent and the District shall have no beneficial right or interest in the amounts so deposited except as provided by this Resolution. All such Net Taxes, whether received by the District in trust or deposited with the Fiscal Agent as trustee, all as herein provided, shall nevertheless be disbursed, allocated and applied solely to the uses and purposes herein or therein set forth, and shall be accounted for separately and apart from all other money, funds, accounts or other resources of the District. The District covenants that it will duly and punctually pay or cause to be paid the principal of and interest on every Bond issued hereunder, together with the premium, if any, thereon on the date, at the place and in the manner set forth in the Bonds and in accordance with this Resolution to the extent Special Taxes are available therefor, and that the payments into the Funds and Accounts created hereunder will be made, all in strict conformity with the terms of the Bonds and this Resolution, and that it will faithfully observe and perform all of the conditions, covenants and requirements of this Resolution and all Supplemental Resolutions and of the Bonds issued hereunder. 03/07/87 4979k/2468-03 -26- The District will not mortgage or otherwise encumber, pledge or place any charge upon any of the Net Taxes, except as provided in the Resolution, and will not issue any obligation or security superior to or on a parity with the Bonds payable in whole or in part from the Net Taxes, other than Parity Bonds. (b) Levy of Special Tax. The legislative body of the District shall cause the Treasurer to levy the Special Tax in an amount sufficient to pay the principal of and interest on the Bonds, any Parity Bonds and the Administrative Expenses and any amounts required to maintain the Reserve Fund at the Reserve Requirement so long as any Bonds issued under this Resolution are outstanding. (c) Commence Foreclosure Proceedings. The District covenants for the benefit of the Owners of the Bonds that it will commence appropriate foreclosure proceedings within the earlier of 150 days of notice of a delinquency in the aggregate Special Tax collections or 150 days from receipt of Special Taxes from the County of San Diego in an amount which is less than the Special Tax levied, and diligently pursue to completion such foreclosure proceedings in the event any Special Tax installment becomes delinquent. (d) Payment of Claims. The District will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon any portion of the Project owned by the District or upon the Net Taxes or any part thereof, or upon any funds in the hands of the Fiscal Agent, or which might impair the security of the Bonds; provided that nothing herein contained shall require the District to make any such payments so long as the District in good faith shall contest the validity of any such claims. (e) Books and Accounts. The District will keep proper books of records and accounts, separate from all other records and accounts of the District, in which complete and correct entries shall be made of all transactions relating to the Project, the levy of the Special Tax and the deposits to the Special Tax Fund. Such books of record and accounts shall at all times during business hours be subject to the inspection of the Fiscal Agent or of the Owners of not less than ten percent (10X) of the principal amount of the Bonds then outstanding or their representatives authorized in writing. (f) Tax Covenants. In order to preserve.the exclusion from gross income of interest on the Bonds for federal income tax purposes, the District covenants to comply with all applicable requirements of the Code, together with any amendments thereto or regulations promulgated thereunder necessary to preserve such exclusion from gross income and 03/07/87 4979k/2468-03 -27- specifically covenants, without limiting the generality of the foregoing, that: (1) it will make no use of the proceeds of the Bonds at any time which will cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code and applicable Regulations adopted thereunder by the Internal Revenue Service; (2) it will not use in excess of 5% of the proceeds of the Bonds to make or finance loans to any person other than a governmental unit (other than loans which are used to acquire or carry Nonpurpose Investments or are for the purpose of enabling the borrower to finance any governmental tax or assessment of general application for a specific essential governmental function, all as set forth in Section 141(c) of the Code); (3) it will neither use nor permit the use of more than 10% of the proceeds of the Bonds for any private business use, or enter into an arrangement such that more than l0x of the proceeds of the Bonds is, directly or indirectly, secured by any interest in (i) property used or to be used for a private business use or (ii) payments in respect of such property or to be derived from payments in respect of property, or borrowed money, used or to be used for a private business use, all as set forth in Section 141(b) of the Code, or take any other action which would cause the Bonds to be "private activity bonds" within the meaning of Section 141(a) of the Code; (4) it will ensure that the payment of principal of and interest on the Bonds shall not be directly or indirectly guaranteed (in whole or in part) by the United States (or any agency or instrumentality thereof) and no portion of the moneys contained in any of the Funds or Accounts created herein shall be (i) used in making loans guaranteed by the United States (or any agency or instrumentality thereof); (ii) invested directly or indirectly in deposits or accounts insured by the Federal Deposit Insurance Corporation, Federal Savings and Loan Insurance Corporation, National Credit Union Administration or any other similar federally chartered corporation; (iii) otherwise invested directly or indirectly in obligations guaranteed (in whole or in part) by the United States (or any agency or instrumentality thereof); except (1) during the initial Period following issuance of the Bonds and ending on the final expenditure of the Bond proceeds; (2) for amounts held in the Reserve Fund, or other reserve funds satisfying Section 148(d) of the Code; (3) for amounts held in the Special Tax Fund and other bona fide debt service funds; (4) for investments in 03/07/87 4979k/2468-03 -28- obligations issued by the United States Treasury; (5) for investments in obligations guaranteed by the Federal National Mortgage Association, Government National Mortgage Association or Federal Home Loan Mortgage Corporation, or (6) for investments permitted under Regulations issued pursuant to Section 149(b)(3)(B) of the Code; and (5) (i) it shall keep a detailed accounting of all transactions contemplated under this Resolution or in any way relating to the receipt or disbursement of any of the Gross Proceeds of the Bonds for a period of six years after the later of the date of payment of all Excess Investment Earnings to the United States or the date the District disburses the last of the Gross Proceeds of the Bonds; (ii) except for the investment of moneys in tax-exempt bonds or Gross Proceeds invested during an applicable temporary period permitted under the Regulations, it will not allow Gross Proceeds of the Bonds to be invested at any time in Nonpurpose Obligations with a Yield in excess of the Yield on the Bonds; (iii) it will neither invest Gross Proceeds nor cause Gross Proceeds to be invested in Nonpurpose Obligations if the yield on such Nonpurpose Obligations would be less than the yield that would have resulted in an arm's-length transaction; and (iv) it will not sell or otherwise dispose of or cause to be sold or otherwise disposed of Nonpurpose Obligations, if such sale or disposition would result in a smaller profit or larger loss than would have resulted from a sale at fair market value arrived at in an arm's-length transaction. (g) Completion of Project. The District will diligently carry out and continue to completion with all practical dispatch the acquisition of the Project in accordance with the Act and the proceedings for the formation of the District and in a sound and economical manner. The Project to be acquired or constructed may be amended as provided in the Act, but no amendment may be made which would substantially impair the security of the Bonds or the rights of the Owners. Once acquired, the District will maintain the Project, or cause it to be maintained, in accordance with the customary and reasonable maintenance and repair practices for such facilities. ARTICLE VI AMENDMENTS TO RESOLUTION Section 6.01. Supplemental Resolutions or Orders Not Requiring Bondowner Consent. The District may from time to time, and at any time, without notice to or consent of any of the Bondowners, adopt resolutions or orders supplemental hereto for any of the following purposes: 03/07/87 4979k/2468-03 -29- (a) to cure any ambiguity, to correct or supplement any provisions herein which may be inconsistent with any other provision herein, or to make any other provision with respect to matters or questions arising under this Resolution or in any additional resolution or order, provided that such action is not materially adverse to the interest of the Bondowners; (b) to add to the covenants-and agreements of and the limitations and the restrictions upon the District contained in this Resolution, other covenants, agreements, limitations and restrictions to be observed by the District which are not contrary to or inconsistent with this Resolution as theretofore in effect; (c) to provide for the issuance of any Parity Bonds, and to provide the terms and conditions under which such Parity Bonds may be issued, subject to and in accordance with the provisions of this Resolution; (d) to modify, amend or supplement this Resolution in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds; or (e) to modify, alter, amend or supplement this Resolution in any other respect which is not materially adverse to the Bondowners. Section 6.02. Supplemental Resolutions or Orders Requiring Bondowner Consent. Exclusive of the resolutions or orders supplemental hereto set forth in Section 6.01, the Owners of not less than 60~ in aggregate principal amount of the Bonds then Outstanding shall have the right to consent to and approve the adoption by the District of such resolutions or orders supplemental hereto as shall be deemed necessary or desirable by the District for the purpose of waiving, modifying, alternate, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Resolution; provided, however, that nothing herein shall permit, or be construed as permitting, (a) an extension of the maturity date of the principal, or the payment date of interest on, any Bond (b) a reduction in the principal amount of, or redemption premium on, any Bond or the rate of interest thereon, (c) a preference or priority of any Bond or Bonds over any other Bond or Bonds, or (d) a reduction in the aggregate principal amount of the Bonds the Owners of which are required to consent to such resolution or order, without the consent of the Owners of all Bonds then outstanding. 03/07/87 4979k/2468-03 -30- If at any time the District shall desire to adopt a resolution or order supplemental hereto, which pursuant to the terms of this section shall require the consent of the Bondowners, the District shall so notify the Fiscal Agent and shall deliver to the Fiscal Agent a copy of the proposed resolution or order. The Fiscal Agent shall, at the expense of the District, cause notice of the proposed resolution or order to be mailed, by first class mail postage prepaid, to all Bondowners at their addresses as they appear in the Bond Register. Such notice shall briefly set forth the nature of the proposed resolution or order and shall state that a copy thereof is on file at the office of the Treasurer for inspection by all Bondowners. The failure of any Bondowners to receive such notice shall not affect the validity of such resolution or order when consented to and approved by the Owners of not less than 60~ in aggregate principal amount of the Bonds then outstanding as required by this section. Whenever at any time within one year after the date of the first mailing of such notice, the Fiscal Agent shall receive an instrument or instruments purporting to be executed by the Owners of not less than 60~ in aggregate principal amount of the Bonds then outstanding, which instrument or instruments shall refer to the proposed resolution or order described in such notice, and shall specifically consent to and approve the adoption thereof by the District substantially in the form of the copy referred to in such notice as on file with the Treasurer, such proposed resolution or order, when duly adopted by the District, shall thereafter become a part of the proceedings for the issuance of the Bonds. In determining whether the Owners of 60~ of the aggregate principal amount of the Bonds have consented to the adoption of any supplemental resolution or order, Bonds which are owned by the District or by any person directly or indirectly controlling or controlled by or under the direct or indirect common control with the District, shall be disregarded and shall be treated as though they were not outstanding for the purpose of any such determination. Upon the adoption of any resolution or order supplemental hereto and the receipt of consent to any such resolution or order from the Owners of not less than 60~ in aggregate principal amount of Bonds outstanding in instances where such consent is required pursuant to the provisions of this section, this Resolution shall be, and shall be deemed to be, modified and amended in accordance therewith, and the respective rights, duties and obligations under this Resolution of the District and all Owners of Bonds then outstanding shall thereafter be determined, exercised and enforced hereunder, subject to all respects to such modifications and amendments. Section 6.03. Notation of Bonds; Delivery of Amended Bonds. After the effective date of any action taken as 03/07/87 4979k/2468-03 -31- hereinabove provided, the District may determine that the Bonds may bear a notation, by endorsement in form approved by the District, as to such action, and in that case upon demand of the Owner of any Bond Outstanding at such effective date and presentation of his Bond for the purpose at the office of the Fiscal Agent or at such additional offices as the Fiscal Agent may select and designate for that purpose, a suitable notation as to such action shall be made on such Bonds. If the District shall so determine, new Bonds so modified as, in the opinion of the District, shall be necessary to conform to such action shall be prepared and executed, and in that case upon demand of the Owner of any Bond outstanding at such effective date such new Bonds shall be exchanged at the office of the Fiscal Agent or at such additional offices as the Fiscal Agent may select and designate for that purpose, without cost to each Owner, for Bonds then Outstanding, upon surrender of such Outstanding Bonds. ARTICLE VII FISCAL AGENT Section 7.01. Fiscal Agent. Security Pacific National Bank, having a corporate trust office in Los Angeles, California, is hereby appointed Fiscal Agent for the District for the purpose of receiving all money which the District is required to deposit with the Fiscal Agent hereunder and to allocate, use and apply the same as provided in the Resolution. The Fiscal Agent is hereby authorized to and shall mail by first class mail, postage prepaid, interest payments to the Bondowners, select Bonds for redemption, and maintain the Bond Register. The Fiscal Agent is hereby authorized to pay the principal of and premium, if any, on the Bonds when the same are duly presented to it for payment at maturity or on call and redemption, to provide for the registration of transfer and exchange of Bonds presented to it for such purposes, to provide for the cancellation of Bonds all as provided in this Resolution, and to provide for the authentication of Bonds, and shall perform all other duties assigned to or imposed on it as provided in this Resolution. The Fiscal Agent shall keep accurate records of all funds administered by it and all Bond paid and discharged by it. The Fiscal Agent is hereby authorized to redeem the Bonds when duly presented for payment at maturity, or on redemption prior to maturity. The Fiscal Agent shall cancel all Bonds upon payment thereof in accordance with the provisions of Section 10.01 hereof. The Fiscal Agent shall keep accurate records of all Bonds paid and discharged and cancelled by it. The District shall from time to time, subject to any agreement between the District and the Fiscal Agent then in 03/07/87 4979k/2468-03 -32- force, pay to the Fiscal Agent compensation for its services, reimburse the Fiscal Agent for all its advances and expenditures, including, but not limited to, advances to and fees and expenses of independent accountants, counsel and engineers or other experts employed by it in the exercise and performance of its powers and duties hereunder, and indemnify and save the Fiscal Agent harmless against expenses and liabilities not arising from its own negligence or willful misconduct which it may incur in the exercise and performance of its powers and duties hereunder. Section 7.02. Removal of Fiscal Agent. The District may at any time at its sole discretion remove the Fiscal Agent initially appointed, and any successor thereto, by delivering to the Fiscal Agent a written notice of its decision to remove the Fiscal Agent and may appoint a successor or successors thereto; provided that any such successor shall be a bank or trust company doing business and having a principal office in California, having a combined capital (exclusive of borrowed capital) and surplus of at least fifty million dollars ($50,000,000), and subject to supervision or examination by federal or state authority. Any removal shall become effective only upon acceptance of appointment by the successor Fiscal Agent. If such bank or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this section the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Section 7.03. Resignation of Fiscal Agent. The Fiscal Agent may at any time resign by giving written notice to the District and by giving to the Owners notice of such resignation, which notice shall be mailed to the Owners at their addresses appearing in the registration books in the office of the Fiscal Agent. Upon receiving such notice of resignation, the District shall promptly appoint a successor Fiscal Agent by an instrument in writing. Any resignation or removal of the Fiscal Agent and appointment of a successor Fiscal Agent shall become effective only upon acceptance of appointment by the successor Fiscal Agent. Section 7.04. Liability of Fiscal Agent. The recitals of fact and all promises, covenants and agreements contained herein and in the Bonds shall be taken as statements, promises, covenants and agreements of the District, and 'the Fiscal Agent assumes no responsibility for the correctness of the same and makes no representations as to the validity or sufficiency of this Resolution or of the Bonds, and shall incur no responsibility in respect thereof, other than in connection with 03/07/87 4979k/2468-03 -33- its duties or obligations specifically set forth herein or in the Bonds or in the certificate of authentication assigned to or imposed upon the Fiscal Agent. The Fiscal Agent shall be under no responsibility or duty with respect to the issuance of the Bonds for value. The Fiscal Agent shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. The Fiscal Agent shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, Bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Fiscal Agent may consult with counsel, who may be counsel to the District, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered hereunder in good faith and in accordance therewith. The Fiscal Agent shall not be bound to recognize any person as the Owner of a Bond unless and until such Bond is submitted for inspection, if required, and his title thereto satisfactorily established, if disputed. Whenever in the administration of its duties under the Resolution the Fiscal Agent 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 herein specifically prescribed) may, in the absence of bad faith on the part of the Fiscal Agent, be deemed to be conclusively proved and established by a written certificate of the District, and such certificate shall be full warrant to the Fiscal Agent for any action taken or suffered under the provisions of the Resolution upon the faith thereof, but in its discretion the Fiscal Agent may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. ARTICLE VIII EVENTS OF DEFAULT; REMEDIES Section 8.01. Events of Default. Any one or more of the following events shall constitute an "event of default": (a) Default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise; (b) Default in the due and punctual payment of the interest on any Bond when and as the same shall become due and payable; or 03/07/87 4979k/2468-03 -34- (c) Default shall be made by the District in the observance of any of the agreements, conditions or covenants on its part in the Resolution or in the Bonds contained, and such default shall have continued for a period of thirty (30) days after the District shall have been given notice in writing of such default by the Fiscal Agent. Section 8.02. Remedies of Owners. Following the occurrence of an event of default, any Owner shall have the right for the equal benefit and protection of all Owners similarly situated: (a) By mandamus or other suit or proceeding at law or in equity to enforce his rights against the District and any of the members, officers and employees of the District, and to compel the District or any such members, officers or employees to perform and carry out their duties under the Act and their agreements with the Owners as provided in the Resolution; (b) By suit in equity to enjoin any actions or things which are unlawful or violate the rights of the Owners; or (c) Upon the happening of an event of default (as defined in Section 8.01), by a suit in equity to require the District and its members, officers and employees to account as the trustee of an express trust. Nothing in this article or in any other provision of the Resolution, or in the Bonds, shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the interest on and principal of the Bonds to the respective Owners of the Bonds at the respective dates of maturity, as herein provided, out of the Net Taxes pledged for such payment, or affect or impair the right of action, which is also absolute and unconditional, of such Owners to institute suit to enforce such payment by virtue of the contract embodied in the Bonds and in the Resolution. A waiver of any default or breach of duty or contract by any Owner shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission by any Owner 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 of any such default or an acquiescence therein, and every power and remedy conferred upon the Owners by the Act or by this article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Owners. If any suit, action or proceeding to enforce any right or exercise any remedy is abandoned or determined adversely to the Owners, the District and the Owners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. 03/07/87 4979k/2468-03 -35- No remedy herein conferred upon or reserved to the Owners is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law. In case the moneys held by the Fiscal Agent after an event of default pursuant to Section 8.01(a) or (b) shall be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, then all available amounts shall be applied to the payment of such principal and interest without preference or priority of principal over interest, or interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest. Section 8.03. Actions by Fiscal Agent as Attorney-in- Fact. Any suit, action or proceeding which any Owner shall have the right to bring to enforce any right or remedy hereunder may be brought by the Fiscal Agent for the equal benefit and protection of all Owners, and the Fiscal Agent is hereby appointed (and the successive respective Owners of the Bonds and interest coupons issued hereunder, by taking and holding the same, shall be conclusively deemed so to have appointed it) the true and lawful attorney-in-fact of the Owners for the purpose of bringing any such suit, action or proceeding and to do and perform any and all acts and things for and on behalf of the Owners as a class or classes, as may be necessary or advisable in the opinion of the Fiscal Agent as such attorney-in-fact; provided, however, that the Fiscal Agent shall not be required to take any action hereunder unless it is provided with indemnity satisfactory to it. ARTICLE IX DEFEASANCE AND PARITY BONDS Section 9.01. Defeasance. If the District shall pay or cause to be paid, or there shall otherwise be paid, to the Owners of all outstanding Bonds the interest due thereon and the principal thereof, at the times and in the manner stipulated therein and in the Resolution, then the Owners of such Bonds shall cease to be entitled to the pledge of Net Taxes, and all covenants, agreements and other obligations of the District to the Owners of such Bonds under the Resolution shall thereupon cease, terminate and become void and be discharged and satisfied. In such event, the Fiscal Agent shall execute and deliver to the District all such instruments as may be desirable to evidence such discharge and satisfaction, and the Fiscal 03/07/87 4979k/2468-03 -36- Agent shall pay over or deliver to the District all money or securities held by them pursuant to the Resolution which are not required for the payment of the interest~ due on and the principal of such Bonds. Any outstanding Bond shall be deemed to have been paid within the meaning expressed in the first paragraph of this section if the Bonds are paid in any one or more of the following ways: (a) by paying or causing to be paid the principal of, premium, if any, and interest with respect to all Bonds outstanding, as and when the same become due and payable; (b) by depositing with the Fiscal Agent, in trust, at or before maturity, money which, together with the amounts then on deposit in the Special Tax Fund, the Costs of Issuance Fund and the Redemption Fund, is fully sufficient to pay the principal of, premium, if any, and interest on all Bonds outstanding as and when the same shall become due and payable; or (c) by depositing with the Fiscal Agent, in trust, direct noncallable obligations of, or noncallable obligations guaranteed by, the United States of America, in which the District may lawfully invest its money, in such amount as the Fiscal Agent shall determine will, together with the interest to accrue thereon and moneys then on deposit in the Special Tax Fund, the Costs of Issuance Fund and the Redemption Fund, together with the interest to accrue thereon, be fully sufficient to pay and discharge the principal of, premium, if any, and interest on all Bonds outstanding as and when the same shall become due and payable; then, at the election of the District, and notwithstanding that any Bonds shall not have been surrendered for payment, all obligations of the District under this Resolu- tion with respect to all outstanding Bonds shall cease and terminate, except for the obligation of the Fiscal Agent to pay or cause to be paid to the Owners of the Bonds not so surrendered and paid, all sums due thereon. Notice of such election shall be filed with the Fiscal Agent not less than thirty (30) days prior to the proposed defeasance date. On or prior to the defeasance date, there shall be provided to the Fiscal Agent a certificate of a certified public accountant stating its opinion as to the sufficiency of the moneys or securities-- deposited with the Fiscal Agent to pay and discharge the principal of and interest on all Bonds outstanding as and when the same shall become due and payable, and an opinion of Bond Counsel (which may rely upon the opinion of the certified public accountant) to the effect that the Bonds have been legally defeased in accordance with this Resolution. Upon being provided with the required report of 03/07/87 4979k/2468-03 -37- a certified public account and opinion of Bond Counsel, the Fiscal Agent, upon request of the District, shall release the rights of the Bondowners under this Resolution and execute and deliver to the District all such instruments as may be desirable to evidence such release, discharge and satisfaction, and the Fiscal Agent shall pay over or deliver to the District any funds held by the Fiscal Agent at the time of a defeasance, which are not required for the purpose of paying and discharging the principal of or interest on the Bonds when due. The Fiscal Agent shall, at the written direction of the District, mail, first class, postage prepaid, a notice to the Bondowners, in the form directed by the District, stating that the defeasance has occurred. Section 9.02. Conditions for the Issuance of Parity Bonds and Other Additional Indebtedness. The District may at any time after the issuance and delivery of the Bonds hereunder issue Parity Bonds payable from the Net Taxes and secured by a lien and charge upon the Net Taxes equal to the lien and charge securing the Outstanding Bonds theretofore issued hereunder, but only subject to the following specific conditions, which are hereby made conditions precedent to the issuance of any such Parity Bonds: (a) The District shall be in compliance with all covenants set forth in this Resolution and a certificate of the District to that effect shall have been filed with the Fiscal Agent. (b) The issuance of such Parity Bonds shall have been duly authorized pursuant to the Act and all applicable laws, and the issuance of such Parity Bonds shall have been provided for by a Supplemental Resolution duly adopted by the District which shall specify the following: (1) The purpose for which such Parity Bonds are to be issued and the fund or funds into which the proceeds thereof are to be deposited, including a provision requiring the proceeds of such Parity Bonds to be applied solely for (i) the purpose of aiding in financing the Project, including payment of all costs incidental to or connected with such financing, and/or (ii) the purpose of refunding any Bonds, including payment of all costs incidental to or connected with such refunding; (2) The authorized principal amount of such Parity Bonds; (3) The date and the maturity date or dates of such Parity Bonds; provided that (i) each maturity date shall fall upon the same date as is the maturity date for 03/07/87 4979k/2468-03 -38- the Bonds or a maturity date after the maturity of the Term Bonds, (ii) all such Parity Bonds of like maturity shall be identical in all respects, except as to number, and (iii) fixed serial maturities or mandatory sinking account payments, or any combination thereof, shall be established to provide for the retirement of all such Parity Bonds on or before their respective maturity dates; (4) The interest payment dates for such Parity Bonds; provided that interest payment dates shall be on the same semiannual dates as the Interest Payment Dates for the Bonds; (5) The denomination and method of numbering of such Parity Bonds; (6) The redemption premiums, if any, and the redemption terms, if any, for such Parity Bonds; provided that, in the event that less than all of such Parity Bonds are to be redeemed at any one time, the Fiscal Agent shall redeem that amount of Bonds issued prior to the issuance of such Parity Bonds and that amount of such Parity Bonds in the proportion which the then outstanding principal amount of Bonds issued prior to the issuance of such Parity Bonds bears to the then outstanding principal amount of such Parity Bonds;. (7) The amount and due date of each mandatory sinking fund account payment, if any, for such Parity Bonds; (8) The amount, if any, to be deposited from the proceeds of such Parity Bonds in any interest account; (9) The amount, if any, to be deposited from the proceeds of such Parity Bonds in any reserve account; provided that such reserve account shall be increased at or prior to the time such Parity Bonds become outstanding to an amount at least equal to the lesser of 9~ of the then outstanding Bonds and Parity Bonds or Maximum Annual Debt Service on all then outstanding Bonds and Parity Bonds, and that an amount at least equal to the lesser of 9~ of the then outstanding Bonds and Parity Bonds or Maximum Annual Debt Service on all outstanding Bonds shall be maintained thereafter in such reserve account; - (10) The form of such Parity Bonds; and (11) Such other provisions as are necessary or appropriate and not inconsistent with the Resolution. 03/07/87 4979k/2468-03 -39- (c) The Fiscal Agent shall have received the following documents or money or securities, all of such documents dated or certified, as the case may be, as of the date of delivery of such Parity Bonds by the Fiscal Agent (unless the Fiscal Agent shall accept any of such documents bearing a prior date): (1) A certified copy of the Supplemental Resolution authorizing the issuance of such Parity Bonds; (2) A written request of the District as to the delivery of such Parity Bonds; (3) An opinion of Bond Counsel to the effect that (a) the District has the right and power under the Act to adopt the Resolution and all Supplemental Resolutions thereto, and the Resolution and all such Supplemental Resolutions have been duly and lawfully adopted by the District, are in full force and effect and are valid and binding upon the District and enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors' rights), and no other authorization for the Resolution or such Supplemental Resolutions is required; (b) the Resolution creates the valid pledge which it purports to create of the Net Taxes as provided in the Resolution, subject to the application thereof to the purposes and on the conditions permitted by the Resolution; (c) such Parity Bonds are valid and binding limited obligations of the District, enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors' rights) and the terms of the Resolution and all Supplemental Resolutions thereto and entitled to the benefits of the Resolution and all such Supplemental Resolutions and the Act, and such Parity Bonds have been duly and validly authorized and issued in accordance with the Act (or other applicable laws) and the Resolution and all such Supplemental Resolutions; and (d) the issuance of the Parity Bonds will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or the exemption from State of California personal income taxation of interest on the Bonds; (4) A certificate of the District containing such statements as may be reasonably necessary to show compliance with the requirements of the Resolution; (5) A certificate of an Independent Financial Consultant certifying that the maximum Special Tax that may be levied by the District pursuant to the Act and the 03/07/87 4979k/2468-03 -40- applicable resolutions and ordinances of the District is at least 1.15 times the amount required to pay debt service on all Outstanding Bonds and Parity Bonds; and (6) Such further documents, money and securities as are required by the provisions of the Resolution and the Supplemental Resolution providing for the issuance of such Parity Bonds. The District covenants not to issue additional indebtedness secured by a tax or assessment lien on the land within the District if the indebtedness would result in publicly financed indebtedness on the land within the boundaries of the District in excess of $32,800,000, exclusive of indebtedness existing prior to the Delivery Date, without obtaining an appraisal of a qualified MAI appraiser demonstrating that the value of the land within the boundaries of the District, including existing improvements plus proposed improvements to be financed through the additional indebtedness, is such that such total indebtedness, including the proposed additional indebtedness, is not more than thirty-three percent (33%) of the total value of the land within the boundaries of the District. ARTICLE X MISCELLANEOUS Section 10.01. Cancellation of Bonds. Ail Bonds surrendered to the Fiscal Agent for payment upon maturity or for redemption shall upon payment therefor and any Bond purchased by the District as authorized herein shall be cancelled forthwith and shall not be reissued. The Fiscal Agent shall destroy such Bonds, as provided by law, and furnish to the District a certificate of such destruction. Section 10.02. Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by this Resolution to be signed or executed by Bondowners may be in any number of concurrent instruments of similar tenor may be signed or executed by such Owners in person or by their attorneys appointed by an instrument in writing for that purpose, or by the bank, trust Company or other depository for such Bonds. Proof of the execution of any such instrument,-or- of any instrument appointing any such attorney, and of the ownership of Bonds shall be sufficient for the purposes of this Resolution (except as otherwise herein provided), if made in the following manner: (a) The fact and date of the execution by any Owner or his or her attorney of any such instrument and of any instrument appointing any such attorney, may be proved by a signature 03/07/87 4979k/2468-03 -41- guarantee of any bank or trust company located within the United States of America. Where any such instrument is executed 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 shall also constitute sufficient proof of his authority. (b) As to any Bond, the person in whose name the same shall be registered i~ the Bond Register shall be deemed and regarded as the absolute Owner thereof for all purposes, and payment of or on account of the principal of any such Bond, and the interest thereon, shall be made only to or upon the order of the registered Owner thereof or his or her legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond and the interest thereon to the extent of the sum or 'sums to be paid, The Fiscal Agent shall not be affected by any notice to the contrary. Nothing contained in this Resolution shall be construed as limiting the Fiscal Agent to such proof, it being intended that the Fiscal Agent may accept any other evidence of the matters herein stated which the Fiscal Agent may deem sufficient. Any request or consent of the Owner of any Bond shall bind every future Owner of the same Bond in respect of anything done or suffered to be done by the Fiscal Agent in pursuance of such request or consent. Section 10.03. Unclaimed Moneys. Anything in the Resolution to the contrary notwithstanding, any money held by the Fiscal Agent in trust for the payment and discharge of any of the Bonds which remain unclaimed for five (5) years after the date when such Bonds have become due and payable, if such money was held by the Fiscal Agent at such date, or for five (5) years after the date of deposit of such money if deposited with the Fiscal Agent after the said date when such Bonds become due and payable, shall, at the written request of the District, be repaid by the Fiscal Agent to the District, as its absolute property and free from trust, and the Fiscal Agent shall thereupon be released and discharged with respect thereto and the Owners shall look only to the District for the payment of such Bonds; provided, however, that, before being required to make any such payment to the District, the Fiscal Agent Shall, at the expense of the District, cause to be mailed to the registered Owners of such Bonds at their addresses as they appear on the registration books of the Fiscal Agent a notice that said money remains unclaimed and that, after a date named in said notice, which date shall not be less than thirty (30) days after the date of the mailing of such notice, the balance of such money then unclaimed will be returned to the District. 03/07/87 4979k/2468-03 -42- Section 10.04. Provisions Constitute Contract. The provisions of this Resolution shall constitute a contract between the District and the Bondowners and the provisions hereof shall be construed in accordance with the laws of the State of California. In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and the Bondowner or the Fiscal Agent shall prevail, the Bondowner or the Fiscal Agent shall be entitled to receive from the Special Tax Fund reimbursement for reasonable costs, expense, outlays and attorney's fees and should said suit, action or proceeding be abandoned, or be determined adversely to the Bondowners or the Fiscal Agent, then the District, the Fiscal Agent and the Bondowners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. After the issuance and delivery of the Bonds this Resolution shall be irrepealable, but shall be subject to modifications to the extent and in the manner provided in this Resolution, but to no greater extent and in no other manner. Section 10.05. Future Contracts. Subject to the provisions of Section 9.02, nothing herein contained shall be deemed to restrict or prohibit the District from making contracts or creating bonded or other indebtedness payable from the general fund of the District or from taxes or any source other than the Net Taxes as defined herein, and, from and after the sale of the Bonds, the general fund of the District shall not include the Net Taxes and no contract or other obligations payable from the general fund of the District shall be payable from the Net Taxes, except as provided herein. Section 10.06. Further Assurances. The District will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonable necessary or proper to carry out the intention or to facilitate the performance of the Resolution, and for the better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in the Resolution. Section 10.07. Severability. If any covenant, agreement or provision, or any portion thereof, contained in this Resolution, or the application thereof to any person or circumstance, is held to be unconstitutional, invalid or unenforceable, the remainder of this Resolution and the application of any such covenant, agreement or provision, or portion thereof, to other persons or circumstances, shall be deemed severable and shall not be affected thereby, and this Resolution and the Bonds issued pursuant hereto shall remain valid and the Bondowners shall retain all valid rights and benefits accorded to them under the laws of the State of California. 03/07/87 4979k/2468-03 -43- Section 10.08. Notices. Any notices required to be given to the District with respect to the Bonds or this Resolution shall be mailed, first class, or personally delivered to the City Manager and the City Clerk at 13325 Civic Center Drive, Poway, California 92064, and all notices to the Fiscal Agent shall be mailed, first class, or personally delivered to the Fiscal Agent at 333 South Beaudry Avenue, 24th Floor, Los Angeles, California 90017, Attention: Corporate Trust Division (W24-30), Reference No. 11-7-07440-0. 6. SIGNED AND APPROVED this 10th day of March, 1987 by the City Manager of the City of Poway acting on behalf of the South Poway Community Facilities District No. 1 (Pomerado Business Park Project). Cit~{~ger- / - 03/07/87 4979k/2468-03 -44- EXHIBIT "1" NO. UNITED STATES OF AMERICA STATE OF CALIFORNIA SOUTH POWAY COMMUNITY FACILITIES DISTRICT NO. 1 (POMERADO BUSINESS PARK PROJECT) 1987 SPECIAL TAX REFUNDING BOND INTEREST RATE MATURITY DATE DATED DATE CUSIP NUMBER REGISTERED OWNER: PRINCIPAL AMOUNT THE SOUTH POWAY COMMUNITY FACILITIES DISTRICT NO. 1 (the "District") situated in the City of Poway, State of California (the "City"), FOR VALUE RECEIVED, hereby promises to pay solely from Special Taxes (as hereinafter defined) to be collected in the District, to the Registered Owner named above, or registered assigns, on the Maturity Date set forth above, unless redeemed prior thereto as hereinafter provided, the Principal Amount set forth above, and to pay interest on such Principal Amount from the Interest Payment Date (as hereinafter defined) next preceding the date of registration hereof, unless such date of registration is after a Record Date (as hereinafter defined) but on or prior to an Interest Payment Date, in which event interest will be payable from such Interest Payment Date, or unless such date of registration is prior to the first Record Date, in which event interest will be payable from February 2, 1987 semiannually on February 2 and August 2 (each an "Interest Payment Date"), commencing August 2, 1987 at the Interest Rate set forth above, until the Principal Amount hereof is paid or made available for payment. The principal of and premium, if any, on this Bond are payable to the Registered Owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office of Security Pacific National Bank (the "Fiscal Agent") in Los Angeles, California. Interest on this Bond shall be paid by check of the Fiscal Agent mailed, by first class mail, postage prepaid, to the Registered Owner hereof as of the close of business on the 15th day of the month preceding the month in which the Interest Payment Date occurs or, if such day is not a business day, on 03/07/87 4979k/2468-03 1-1 the next succeeding business day (the "Record Date") at such Registered Owner's address as it appears on the registration books maintained by the Fiscal Agent. This Bond is one of a duly authorized issue of "South Poway Community Facilities District No. 1 (Pomerado Business Park Project) 1987 Special Tax Refunding Bonds" (the "Bonds") issued in the aggregate principal amount of $32,800,000 pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, being Sections 53311, et seq., of the California Government Code (the "Act"), and Article 11 of Chapter 3 of Division 2 of Title 5 of the California Government Code, for the purpose of refunding the District's Special Tax Bonds Series 1985, paying certain costs related to the issuance of the Bonds and establishing a reserve fund. The issuance of the Bonds and the terms and conditions thereof are provided for by a resolution adopted by the City Council of the City of Poway acting in its capacity as the legislative body of the District (the "Legislative Body") on March 3, 1987 (the "Resolution"), and this reference incorporates the Resolution herein, and by acceptance hereof the Registered Owner of this Bond assents to said terms and conditions. The Resolution is adopted under and this Bond is issued under, and both are to be construed in accordance with, the laws of the State of California. Pursuant to the Act and the Resolution, the principal of, premium, if any, and interest on this Bond are payable solely from the annual special taxes authorized under the Act to be collected within the District (the "Special Taxes"). Any tax for the payment hereof shall be limited to the Special Taxes collected, except to the extent that provision for payment has been made by the Legislative Body, as may be permitted by law. Additional bonds payable from the Special Taxes may be issued which will rank equally as to security with the Bonds, but only in accordance with the terms and conditions set forth in the Resolution. The Bonds maturing on February 2, 2011 (the "Term Bonds") may be redeemed at the option of the District on February 2, 1997, or on any Interest Payment Date thereafter prior to maturity, in whole or in part, by lot, at the following redemption prices, expressed as a percentage of the principal amount thereof, together with accrued interest to the date of redemption: Redemption Dates Redemption Prices February 2, 1997 and August 2, 1997 February 2, 1998 and August 2, 1998 February 2, 1999 and August 2, 1999 February 2, 2000 and thereafter 103% 102% 101% 100% 03/07/87 4979k/2468-03 1-2 In addition, the Term Bonds shall be subject to mandatory sinking fund redemption prior to maturity, in part, by lot, from Sinking Fund Payments (as defined in the Resolution) at a price equal to the principal amount thereof, together with accrued interest to the date of redemption, to the extent, in the manner and subject to the terms of the Resolution. Notice of redemption with respect to the Bonds to be redeemed shall be mailed to the Registered Owners thereof not less than 30 nor more than 60 days prior to the redemption date by first class mail, postage prepaid, to the address set forth in the registration books. A failure of the Registered Owner hereof to receive such notice will not affect the validity of the proceedings for redemption. All Bonds or portions thereof so called for redemption will cease to accrue interest on the specified redemption date; provided that funds for the redemption are on deposit with the Fiscal Agent on the redemption date. Thereafter, the registered owners of such Bonds shall have no rights except to receive payment of the redemption price upon the surrender of the Bonds. This Bond shall be registered in the name of the Registered Owner hereof, as to both principal and interest, and the District and the Fiscal Agent may treat the Registered Owner hereof as the absolute owner for all purposes and shall not be affected by any notice to the contrary. The Bonds are issuable only in fully registered form in the denomination of $5,000 or any integral multiple of $5,000 and may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations of the same issue and maturity, all as more fully set forth in the Resolution. This Bond is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the corporate trust office of the Fiscal Agent in Los Angeles, California, but only in the manner, subject to the limitations and upon payment of the charges provided in the Resolution, upon surrender and cancellation of this Bond. Upon such transfer, a new registered Bond of authorized denomination or denominations for the same aggregate principal amount of the same issue and maturity will be issued to the transferee in exchange therefor. The rights and obligations of the District and of the registered owners of the Bonds may be amended at any time, and in certain cases without the consent of the registered owners - to the extent and upon the terms provided in the Resolution. THE BONDS DO NOT CONSTITUTE OBLIGATIONS oF THE CITY OF POWAY OR THE DISTRICT FOR WHICH THE CITY OF POWAY OR THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE, OR HAS LEVIED OR PLEDGED, GENERAL OR SPECIAL TAXATION, OTHER THAN THE SPECIAL 03/07/87 4979k/2468-03 1-3 TAXES. THE BONDS ARE NOT A DEBT OF THE DISTRICT, THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION. THE DISTRICT HAS COVENANTED FOR THE BENEFIT OF THE OWNERS OF THE BONDS THAT IT WILL COMMENCE WITHIN 150 DAYS AND DILIGENTLY PURSUE TO COMPLETION APPROPRIATE FORECLOSURE ACTIONS IN THE EVENT OF DELINQUENCIES OF ANY SPECIAL TAX INSTALLMENTS LEVIED FOR PAYMENT OF PRINCIPAL AND INTEREST. This Bond shall not become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been dated and signed by the Fiscal Agent. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond have existed, happened and been performed in due time, form and manner as required by law, and that the amount of this Bond, together with all other indebtedness of the District, does not exceed any debt limit prescribed by the laws or Constitution of the State of California. IN WITNESS WHEREOF, South Poway Community Facilities District No. 1 has caused this Bond to be dated as of February 2, 1987, to be signed by the Mayor of the City of Poway by his facsimile signature and attested by the facsimile signature of the City Clerk and has caused its seal to be reproduced hereon. Mayor of the City of Poway, sitting as the legislative body of South Poway Community Facilities District No. 1 ATTEST: City Clerk of the City of Poway, sitting as the legislative body of South Poway Community Facilities District No. 1 03/07/87 4979k/2468-03 1-4 FORM OF FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION AND REGISTRATION This is one of the Bonds described in the within defined Resolution. Dated: By: SECURITY PACIFIC NATIONAL BANK, as Fiscal Agent By: Authorized Signatory FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned do(es) hereby sell, assign and transfer unto the within-mentioned registered Bond and hereby irrevocably constitute(s) and appoint(s) attorney, to transfer the same on the books of the Fiscal Agent with full power of substitution in the premises. Dated: Signature Guaranteed Note: Signature(s) must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. Notice: The signature on this assignment must correspond with the name(s) as written on the face of the within Bond in every particular without --- alteration or enlargement, or any change.whatsoever. 03/07/87 4979k/2468-03 1-5 EXHIBIT "B" REQUISITION FOR DISBURSEMENT OF PROJECT COSTS The undersigned, a duly authorized representative of South Poway Community Facilities District No. 1, hereby certifies to Security Pacific National Bank, Fiscal Agent, for purposes of disbursing funds from the Acquisition Fund to pay Project Costs that: (1) The Fiscal Agent is to pay to the payees set forth on Exhibit 1 hereto the amount set forth next to each payee's name for the item described on Exhibit 1; (2) The conditions to the release of these amounts from the Acquisition Fund have been satisfied; (3) There has not been filed with or served upon the District notice of any lien, right to lien or attachment upon, stop notice or claim affecting the right to receive payment of, any of the moneys payable to any of the payees named on Exhibit 1 hereto which has not been released or will not be released simultaneously with the payment of such amounts, other than materialmen's or mechanic's liens accruing by mere operation of law; and (4) Sufficient money remains in the Acquisition Fund to pay all remaining costs of acquisition, construction and financing of the Project. Dated: SOUTH POWAY COMMUNITY FACILITIES DISTRICT NO. 1 By: Authorized Officer 03/07/87 4979k/2468-03 EXHIBIT 1 Payee Amount Due Purpose of Expenditure 03/07/87 4979k/2468-03