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Item 11 - 1995 Refunding Certificates of Participation ~-". AGENDA REPOR~Jn\BUg' tD -- TO: Honorable Mayor and Members of the City Council Chairman and Members of the Redevelopment Agency FROM: James L. Bowersox, City Man~ INITIATED BY: John D. Fitch, Assistant City Manager ~eggy A. Stewart, Director of Administrative servic~v DATE: June 20, 1995 SUBJECT: 1995 Refunding Certificates of Participation-- (1986 Capital Improvement Projects) ABSTRACT In order to proceed with the 1995 Refunding of Certificates of Participation (1986 Capital Improvement Projects), it is recommended that the City Council adopt the attached Bond Resolution and that the Poway Redevelopment Agency adopt its attached Bond Resolution and both approve the Trust Agreement, the Escrow Agreement, the Lease Agreement, the Site Lease, the Preliminary Official Statement, the Bond Purchase Agreement, the Assignment Agreement, and the Special Counsel Agreement. - ENVIRONMENTAL REVIEW This agenda item is not subject to environmental review according to CEQA guidelines. FISCAL IMPACT A net present value savings of $100,000 to the Redevelopment Agency and the City in debt service costs. ADDITIONAL PUBLIC NOTIFICATION AND CORRESPONDENCE None RECOMMENDATION It is recommended (1) that the City Council adopt the attached Bond Resolution and approve all the attachments for the City of Poway; (2) that the Poway Redeveloment Agency adopt the attached Bond Resolution and approve all the attachments for the Agency; and (3) that staff be directed to proceed with the refunding of the 1986 Certificates of Participation. ACTION - II 1 of 5 JUN 2 0 1995 ITEM 11 - -.- ~AGENDA REPOR_ CITY OF POW A Y TO: Honorable Mayor and Members of the City Council Chairman and Members of the_~~lopment Agency FROM: James L. Bowersox, City Man INITIATED BY: John D. Fitch, Assistant City Manager Peggy A. Stewart, Director of Administrative Services DATE: June 20, 1995 SUBJECT: 1995 Refunding Certificates of Participation-- (1986 Capital Improvement Projects) BACKGROUND The City of Poway issued Certificates of Participation (COPs) in the amount of $10,000,000 in 1986 to fund the installation, construction and equipping of a municipal swimming pool, a performing arts center, and a neighborhood park. The City of Poway makes Lease Payments to the Agency equivalent to annual debt service on the COPs. Financial Security Assurance will insure the refunding certificates of participation which will enable them to receive a AAA rating. Under this refunding and as provided in the Site Agreement and Lease Agreement, the City will substitute the following property to be covered under the refunding: City Hall Complex Fire Station No. I Fire Station No. 2 Vehicle Maintenance Building Operations Administration and Warehouse Vehicle Storage Facility Senior Center/Community Park This will result in the Agency's being able to obtain lower interest rates than are currently being paid for debt service. The 1986 COPs were issued at an average interest rate of 7.86%. Under current market conditions, the 1995 Refunding COPs could be issued between 5.2% and 5.5% average interest rate. The lower interest rate would mean an annual savings of approximately $100,000 in debt service and a total savings of approximately $2,290,000 over the life of the issue. The net present value of this savings is approximately $1,033,000. ACTION: I 2 of 5 rrE~ )) JUN 2 0 1995 11 -. - _. Agenda Report June 20, 1995 Page 2 The size of the refunding COPs issue will be approximately $690,000 greater than the current outstanding principal of the original COPs issue in 1986. The original issue was structured so that the COPs could not be called until August 1, 1996. In the meantime, the Agency must establish an escrow account with the proceeds of the refunding COPs. The interest generated by that escrow account will make the debt service payments on the original 1986 COPs. Between now and August 1, 1996 the Agency will be earning between 5.2% and 5.5% on funds in the escrow account and paying 7.86% on the outstanding 1986 COPs. It is therefore necessary to place an additional $340,000 in the escrow account to cover the difference. The remaining $350,000 covers issuance costs and bond insurance premium. The savings highlighted above includes the costs on the increased size of the refunding. FINDINGS An insured refunding of 1986 Certificates of Participation can be sold without any direct costs to the Redevelopment Agency. A primary benefit of this refunding mechanism is approximately $2,290,000 total savings in debt service payments over the life of the bonds. A refunding transaction of this kind is highly sensitive to interest rates. If interest rates move down, the benefit of refunding will increase and, if interest rates increase, it may not be advantageous to proceed. This bond - transaction will be completed only if there is positive benefit to the Agency. In order to proceed with the issuance of the bonds and to provide instructions to the Trustee, Registrar and Paying Agent, it is necessary for the City Council to adopt the following: Bond Resolution of the City of Poway: The resolution approves the refunding and authorizes staff to proceed with the documentation and execution of the transaction. The Poway Redevelopment Agency needs to adopt its attached bond resolution and approve the following documents: Bond Resolution of the Poway Redevelop- ment Agency: The resolution approves refunding and authorizes staff to proceed with the documentation and execution of the transaction. Both the City of Poway and the Poway Redevelopment Agency need to approve the following documents: Trust Agreement: The Trust Agreement is the contract between Bank of America National Trust & Savings Association as Trustee for the bond owners and the Agency describing the terms of the transaction and the sources of funds for repayment. 3 of 5 JUN 2 0 1995 ITEM 11 Agenda Report June 20, 1995 Page 3 Escrow Agreement: The agreement basically describes that Bank of America will hold the proceeds of the new issue and how and when those proceeds will be used to retire the previous bond issues. Preliminary Official Statement: The POS is the sales document that is distributed to all interested buyers at the time of sale of the bonds. Bond Purchase Agreement: The BPA is the contract between PaineWebber and the Agency describing how and when the money is paid in exchange for the specified bonds. Lease Agreement: The lease agreement describes the terms and conditions of the lease of the mobilehome park by the Agency to the City. Site Lease: The site lease describes the terms and conditions of the City leasing the site back to the Agency in order to obtain the funds for the advance refunding. Assignment Agreement: The Agency agrees to assign its interest in the Lease Agreement and the Site Agreement to the Trustee, including the right to receive lease payments. Special Counsel Agreement: Retains Stradling, Vocca, Carlson & Rauth as special counsel for the Agency. ENVIRONMENTAL REVIEW This agenda item is not subject to environmental review according to CEQA guidelines. FISCAL IMPACT A net present value savings of $100,000 to the Redevelopment Agency and the City in debt service costs. ADDITIONAL PUBLIC NOTIFICATION AND CORRESPONDENCE None JUN 2 0 1995 ITEM 11 4 of 5 - - Agenda Report June 20, 1995 Page 4 RECOMMENDATION It is recommended that: 1. The City Council adopt the attached Bond Resolution for the City of Poway and approve the Escrow Agreement, the Preliminary Official Statement, the Bond Purchase Agreement, the Lease Agreement, the Site Lease, the Trust Agreement, the Assignment Agreement, and the Special Counsel Agreement. 2. The Poway Redevelopment Agency adopt the attached Bond Resolution for the Agency and approve the Trust Agreement, the Escrow Agreement, the Preliminary Official Statement, the Bond Purchase Agreement, the Lease Agreement, the Site Lease, the Assignment Agreement, and the Special Counsel Agreement. 3. Staff be directed to proceed with the refunding of the 1986 Certificates of Participation, completing the transaction only if interest rates remain low and there continues to be a financial gain to the Agency and the City. JLB:JDF:PAS:eg Attachments (limited distribution): A. Bond Resolution, City of Poway B. Bond Resolution, Poway Redevelopment Agency C. Trust Agreement D. Escrow Agreement E. Preliminary Official Statement F. Bond Purchase Agreement G. Lease Agreement H. Site Lease 1. Assignment Agreement J. Special Counsel Agreement C:BONDAGR2.AGN - ,JUN 2 \l 1995 ' . 5 of 5 ------------- RESOLUTION NO. _ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF POWAY AUTHORIZING THE PREPARATION, SALE AND DELIVERY OF NOT TO EXCEED $10,000,000 PRINCIPAL AMOUNT OF 1995 REFUNDING CERTIFICATES OF PARTICIPATION (1986 CAPITAL IMPROVEMENT PROJECTS) AND APPROVING CERTAIN DOCUMENTS AND AUTHORIZING CERTAIN ACTIONS IN CONNECTION THEREWITH WHEREAS, the Poway Redevelopment Agency is a political subdivision of the State organized and existing under the laws of the State of California (the" Agency") with the authority to assist in the financing of capital facilities on behalf of the City of Poway, a municipal corporation (the "City"); and WHEREAS, the Agency has assisted the City in financing various capital facilities through the execution and delivery of the $10,000,000 1986 Certificates of Participation (Capital Improvement Projects); and WHEREAS, the City now desires to advance refund the 1991 Certificates, which Certificates were executed and delivered to finance the acquisition and construction of certain public facilities (the "Prior Certificates") through the execution and delivery of the Certificates (as defined below) and the entering into by the City of that certain Escrow Agreement, to be dated as of the first day of the month in which the Purchase Agreement (as defined herein) is executed, by and among the Agency, the City and Bank of America National Trust and Savings Association (the "Escrow Agent"), the form of which has been presented to this City Council at the meeting at which this Resolution has been adopted (the "Escrow Agreement"). WHEREAS, in order to accomplish the refunding of the Prior Certificates, the City and the Agency further desire to enter into that certain Site Lease, by and between the City and the Agency (the "Site Lease"), and that certain Lease Agreement, by and between the City and the Agency (the "Lease Agreement"), each to be dated as of the first day of the month in which the Purchase Agreement is executed, the forms of which have been presented to this City Council at the meeting at which this Resolution has been adopted, pursuant to which Site Lease the Agency will agree to lease certain real property and improvements from the City and pursuant to which Lease Agreement the City will agree to lease back such real property and improvements from the Agency and to pay certain lease payments in connection therewith which will be pledged by the Agency to the owners of the 1995 Refunding Certificates of Participation (1986 Capital Improvement Projects) (the "Certificates") to be executed and delivered pursuant to a Trust Agreement, to be dated as of the first day of the month in which the Purchase Agreement is executed, by and among Bank of America National Trust and Savings Association, as trustee (the "Trustee"), the City and the Agency (the "Trust Agreement"), the form of which has been presented to this City Council at the meeting at which this Resolution has been adopted; and ATTACHMENT A JUN 2 0 1995 ITEM 11 ---,--~-------- WHEREAS, the Agency and the City have determined that it would be in the best interests of the Agency, the City and the residents of the City to authorize the preparation, sale and delivery of the Certificates in an aggregate principal amount not to exceed $10,000,000, which Certificates evidence proportionate interests in certain rights under the Lease Agreement, including the right to receive certain lease payments to be made by the City thereunder; and WHEREAS, the City Council desires to consent to the assignment of certain of the Agency's rights, title and interest in and to the Site Lease and the Lease Agreement, including the right to receive such lease payments from the City, to the Trustee pursuant to an Assignment Agreement, between the Agency and the Trustee, to be dated as of the first day of the month in which the Purchase Agreement is executed (the" Assignment Agreement"), the form of which has been presented to this City Council at the meeting at which this Resolution has been adopted; and WHEREAS, the City Council desires to approve the form of a Purchase Agreement (the "Purchase Agreement"), by and between the City and PaineWebber Incorporated (the "Purchaser"), pursuant to which the Purchaser will agree to buy the Certificates on the terms and conditions set forth therein, the form of which has been presented to this City Council at the meeting at which this Resolution has been adopted and to approve the form of Special Counsel Agreement by and between the City and Stradling, Yocca, Carlson & Rauth, a Professional Corporation presented to this City Council at such meeting (the "Special Counsel Agreement"); and WHEREAS, the City Council desires to approve the form of a Preliminary Official Statement relating to the Certificates (the "Preliminary Official Statement") to be distributed to potential investors, for the purposes of facilitating the sale of the Certificates at the lowest feasible interest rate, the form of which has been presented to this City Council at the meeting at which this Resolution has been adopted; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Poway that: Section 1. Each of the foregoing recitals is true and correct. Section 2. This City Council hereby consents to the preparation, sale and delivery of the Certificates in an aggregate amount of not to exceed $10,000,000 in accordance with the terms and provisions of the Trust Agreement, with the exact principal amount to be that determined necessary by the City Manager to advance refund and defease the Prior Certificates. The purposes for which the proceeds of the Certificates shall be expended are to advance refund and defease the Prior Certificates and to provide for a reserve fund, if any, and the costs of the preparation, sale and delivery of the Certificates. Section 3. Bank of America National Trust and Savings Association is hereby appointed as Trustee on behalf of the owners of the Certificates, with the duties and powers of such Trustee as set forth in the Trust Agreement, and as the Escrow Agent with the duties and powers of the Escrow Agent as set forth in the Escrow Agreement. Section 4. The forms of the Escrow Agreement, the Site Lease, the Lease Agreement, the Trust Agreement and the Assignment Agreement presented at this meeting are hereby approved. Each of the Mayor of the City of Poway, the City Manager or his designee pUBL'27358_11138 1 B2345.62 2 (the "City Manager")and the City Clerk is hereby authorized for and in the name of the City to execute the Escrow Agreement, the Site Lease, the Lease Agreement and the Trust Agreement in substantially the forms hereby approved, with such additions thereto and changes therein as are recommended or approved by Stradling, Yocca, Carlson & Rauth, as Special Counsel to the City (" Special Counsel"), or City Manager and the officers executing the same, including all changes necessary to reflect the purchase of bond insurance as described in Section 5 below. Approval of such changes and the designation of the Site shall be conclusively evidenced by the execution and delivery of the foregoing documents by such officers. The Mayor of the City, the City Manager and the City Clerk are hereby authorized to execute, acknowledge and deliver any and all documents required to consummate the transactions contemplated by the Site Lease, the Lease Agreement and the Trust Agreement, including, but not limited to, any termination agreements with respect to the financing documents heretofore entered into in connection with the Prior Certificates which the City Manager determines are required to be executed in order to accomplish the defeasance of the Prior Certificates. Section 5. The form of the Purchase Agreement presented at this meeting and the sale of the Certificates pursuant thereto are hereby approved, and each of the Mayor of the City and the City Manager is hereby authorized to evidence the City's acceptance of the terms and provisions of the Purchase Agreement by executing and delivering the Purchase Agreement in the form presented to the City at this meeting, with such additions thereto and changes therein as are recommended or approved by Special Counsel and the officers executing the same. Approval of such additions and changes shall be conclusively evidenced by the execution and delivery of the Purchase Agreement; provided, however, that the Purchase Agreement shall be signed only if the aggregate principal amount of the Certificates does not exceed $10,000,000, the present value of the debt service payments due with respect to the Certificates is less than the present value of the debt service due with respect to the Prior Certificates (as set forth in writing by the City's Financial Advisor) and the Purchaser's discount (exclusive of original issue discount and any bond insurance premium) with respect to the Certificates does not exceed 2.0% of the aggregate principal amount of the Certificates. The City Manager is authorized to determine the day on which the Certificates are to be priced in order to produce the lowest financing cost for the Certificates, which determination shall be conclusively evidenced by the execution and delivery of the Purchase Agreement by one of the aforesaid officers, provided, however, that the net interest cost thereof shall not exceed 6.25 %. The City Manager, or his designee, is authorized to reject any terms presented by the Purchaser if determined not to be in the best interest of the City and is further authorized to evaluate whether the purchase of municipal bond insurance for the Certificates will result in a net savings to the City and if so to purchase such municipal bond insurance. Section 6. The form of the Certificates as set forth in the Trust Agreement (as the Trust Agreement may be modified pursuant to Section 4 hereof) is hereby approved. Section 7. The form of the Preliminary Official Statement presented at this meeting is hereby approved, and the Preliminary Official Statement may be distributed to prospective purchasers in the form so approved, together with such additions thereto and changes therein as are determined necessary by the City Manager, or his designee, to make such Preliminary Official Statement final as of its date for purposes of Rule 15c2-12 of the Securities and Exchange Commission. Each of the Mayor of the City and the City Manager is hereby authorized to execute a final Official Statement in the form of the Preliminary Official Statement, PUBL,27358 _111381 82345.62 3 ------_._--~--_.- __".___n______ __ together with such changes as are determined necessary by the City Manager, or his designee, to make such Official Statement complete and accurate as of its date. The Purchaser is further authorized to distribute the final Official Statement for the Certificates to the purchasers thereof upon its execution by an officer of the City as described above. The City Manager and his written designees are hereby authorized and directed to take whatever steps are necessary to comply with the requirements of Rule 15c(2)-12 applicable to the Certificates following their execution and delivery. Section 8. The form of Special Counsel Agreement presented at this meeting is hereby approved and the City Manager is authorized to execute such Agreement and deliver such to Special Counsel. Section 9. The Mayor of the City, the City Manager, or his written designee, and the City Clerk are hereby authorized, jointly and severally, to do any and all things and to execute and deliver any and all documents which they may deem necessary and advisable in order to consummate the sale and delivery of the Certificates and otherwise effectuate the purposes of this Resolution, including the advance refunding and defeasance of the Prior Certificates, and such actions previously taken by such officers are hereby ratified and confirmed. In the event the Mayor of the City is unavailable or unable to execute and deliver any of the above-referenced documents, any other member of the City Council may validly execute and deliver such document, and, in the event the City Clerk is unavailable or unable to execute and deliver any of the above-referenced documents, any deputy clerk may validly execute and deliver such document in her place. Section 10. This Resolution shall take effect from and after its date of adoption. ADOPTED, SIGNED AND APPROVED this _ day of , 1995. Mayor of the City ATTEST: City Clerk City of Poway, California PUBL,27358_1 1 138182345.62 4 STATE OF CALIFORNIA ) ) ss. County of San Diego ) I, , City Clerk of the City of Poway, California, hereby certify that the above and foregoing Resolution was duly and regularly adopted by the City Council of said City at a regular meeting thereof held on the _ day of _, 1995, and that it was so adopted by the following vote of said Council: AYES: Councilmembers NOES: Councilmembers ABSENT: Councilmembers IN WITNESS WHEREOF, I have hereunto set my hand and seal this _ day of , 1995. City Clerk of the City of Poway, California PUBL,27358 _11138182345.62 5 "-----.----- ~~-_._---_._- ---- RESOLUTION NO._ A RESOLUTION OF THE BOARD OF DIRECTORS OF THE POWAY REDEVELOPMENT AGENCY AUTHORIZING THE PREPARATION, SALE AND DELIVERY OF NOT TO EXCEED $10,000,000 PRINCIPAL AMOUNT OF 1995 REFUNDING CERTIFICATES OF PARTICIPATION (1986 CAPITAL IMPROVEMENT PROJECTS) AND APPROVING CERTAIN DOCUMENTS AND AUTHORIZING CERTAIN ACTIONS IN CONNECTION THEREWITH WHEREAS, the Poway Redevelopment Agency is a political subdivision of the State organized and existing under the laws of the State of California (the "Agency") with the authority to assist in the financing of capital facilities on behalf of the City of Poway, a municipal corporation (the "City"); and WHEREAS, the Agency has assisted the City in financing various capital facilities through the execution and delivery of the $10,000,000 1986 Certificates of Participation (Capital Improvement Projects); and WHEREAS, the City now desires to advance refund the 1986 Certificates, which Certificates were executed and delivered to finance the acquisition and construction of certain public facilities (the "Prior Certificates") through the execution and delivery of the Certificates (as defined below) and the entering into by the City and the Agency of that certain Escrow Agreement, to be dated as of the first day of the month in which the Purchase Agreement (as defined herein) is executed, by and among the Agency, the City and Bank of America National Trust and Savings Association (the "Escrow Agent"), the form of which has been presented to this Board of Directors at the meeting at which this Resolution has been adopted (the "Escrow Agreement"). WHEREAS, in order to accomplish the refunding of the Prior Certificates, the City and the Agency further desire to enter into that certain Site Lease, by and between the City and the Agency (the "Site Lease"), and that certain Lease Agreement, by and between the City and the Agency (the "Lease Agreement"), each to be dated as of the first day of the month in which the Purchase Agreement is executed, the forms of which have been presented to this Board of Directors at the meeting at which this Resolution has been adopted, pursuant to which Site Lease the Agency will agree to lease certain real property and improvements from the City and pursuant to which Lease Agreement the City will agree to lease back such real property and improvements from the Agency and to pay certain lease payments in connection therewith which will be pledged by the Agency to the owners of the 1995 Refunding Certificates of Participation (1986 Capital Improvement Projects) (the "Certificates") to be executed and delivered pursuant to a Trust Agreement by and among Bank of America National Trust and Savings Association, as trustee (the "Trustee"), the City and the Agency (the "Trust Agreement"), the form of which has been presented to this Board of Directors at the meeting at which this Resolution has been adopted; and ATTACHMENT B JUN 2 0 1995 ITEM In. ._--~......_-------".,._- -~- VHEREAS, the Agency and the City have determined that it would be in the best intere, of the Agency, the City and the residents of the City to authorize the preparation, sale and delivery of the Certificates in an aggregate principal amount not to exceed $10,000,000, which Certificates evidence proportionate interests in certain rights under the Lease Agreement, including the right to receive certain lease payments to be made by the City thereunder; and WHEREAS, the Board of Directors desires to consent to the assignment of certain of the Agency's rights, title and interest in and to the Site Lease and the Lease Agreement, including the right to receive such lease payments from the City, to the Trustee pursuant to an Assignment Agreement, between the Agency and the Trustee, to be dated as of the first day of the month in which the Purchase Agreement is executed (the" Assignment Agreement"), the form of which has been presented to this Board of Directors at the meeting at which this Resolution has been adopted; and WHEREAS, the Board of Directors desires to approve the form of a Purchase Agreement (the "Purchase Agreement"), by and between the City and PaineWebber Incorporated (the "Purchaser"), pursuant to which the Purchaser will agree to buy the Certificates on the terms and conditions set forth therein, the form of which has been presented to this Board of Directors at the meeting at which this Resolution has been adopted, and to approve the form of Special Counsel Agreement by and between the City and Stradling, Yocca, Carlson & Rauth, a Professional Corporation presented to this Board of Directors at such meeting (the "Special Counsel Agreement"); and WHEREAS, the Board of Directors desires to approve the form of a Preliminary Official Statement relating to the Certificates (the "Preliminary Official Statement") to be distributed to potential investors, for the purposes of facilitating the sale of the Certificates at the lowest feasible interest rate, the form of which has been presented to this Board of Directors at the meeting at which this Resolution has been adopted; NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Poway Redevelopment Agency that: Section 1. Each of the foregoing recitals is true and correct. Section 2. This Board of Directors hereby consents to the preparation, sale and delivery of the Certificates in an aggregate amount of not to exceed $10,000,000 in accordance with the terms and provisions of the Trust Agreement, with the exact principal amount to be that determined necessary by the City Manager to advance refund and defease the Prior Certificates. The purposes for which the proceeds of the Certificates shall be expended are to advance refund and defease the Prior Certi ficates and to provide for a reserve fund, if any, and the costs of the preparation, sale and delivery of the Certificates. Section 3. Bank of America National Trust and Savings Association is hereby appointed as Trustee on behalf of the owners of the Certificates, with the duties and powers of such Trustee as set forth in the Trust Agreement, and as the Escrow Agent with the duties and powers of the Escrow Agent as set forth in the Escrow Agreement. PUBL,27360_11138182345.62 2 Section 4. The forms of the Escrow Agreement, the Site Lease, the Lease Agreement, the Trust Agreement and the Assignment Agreement presented at this meeting are hereby approved. Each of the Chairman of the Poway Redevelopment Agency, the Executive Director of the Agency or his designee (the "Executive Director")and the Secretary of the Agency is hereby authorized for and in the name of the Agency to execute the Escrow Agreement, the Site Lease, the Lease Agreement, the Assignment Agreement and the Trust Agreement in substantially the forms hereby approved, with such additions thereto and changes therein as are recommended or approved by Stradling, Yocca, Carlson & Rauth, as Special Counsel to the City ("Special Counsel"), or Executive Director and the officers executing the same, including all changes necessary to reflect the purchase of bond insurance as described in Section 5 below. Approval of such changes and the designation of the Site shall be conclusively evidenced by the execution and delivery of the foregoing documents by such officers. The Chairman of the Agency, the Executive Director, and the Secretary of the Agency are hereby authorized to execute, acknowledge and deliver any and all documents required to consummate the transactions contemplated by the Site Lease, the Lease Agreement, the Assignment Agreement and the Trust Agreement, including, but not limited to, any termination agreements with respect to the fmancing documents heretofore entered into in connection with the Prior Certificates which the Executive Director determines are required to be executed in order to accomplish the defeasance of the Prior Certificates. Section 5. The form of the Purchase Agreement presented at this meeting and the sale of the Certificates pursuant thereto are hereby approved, and each of the Chairman of the Agency and the Executive Director is hereby authorized to evidence the Agency's acceptance of the terms and provisions of the Purchase Agreement by executing and delivering the Purchase Agreement in the form presented to the Agency at this meeting, with such additions thereto and changes therein as are recommended or approved by Special Counsel and the officers executing the same. Approval of such additions and changes shall be conclusively evidenced by the execution and delivery of the Purchase Agreement; provided, however, that the Purchase Agreement shall be signed only if the aggregate principal amount of the Certificates does not exceed $10,000,000, the present value of the debt service payments due with respect to the Certificates is less than the present value of the debt service due with respect to the Prior Certificates (as set forth in writing by the City's Financial Advisor) and the Purchaser's discount (exclusive of original issue discount and any bond insurance premium) with respect to the Certificates does not exceed 2.0% of the aggregate principal amount of the Certificates. The Executive Director is authorized to determine the day on which the Certificates are to be priced in order to produce the lowest financing cost for the Certificates, which determination shall be conclusively evidenced by the execution and delivery of the Purchase Agreement by one of the aforesaid officers, provided, however, that the net interest cost thereof shall not exceed 6.25 %. The Executive Director, or his designee, is authorized to reject any terms presented by the Purchaser if determined not to be in the best interest of the Agency and is further authorized to evaluate whether the purchase of municipal bond insurance for the Certificates will result in a net savings to the City and if so to purchase such municipal bond insurance. Section 6. The form of the Certificates as set forth in the Trust Agreement (as the Trust Agreement may be modified pursuant to Section 4 hereof) is hereby approved. Section 7. The form of the Preliminary Official Statement presented at this meeting is hereby approved, and the Preliminary Official Statement may be distributed to prospective PUBL,27360 _11138182345.62 3 -----.---- purchasers in the form so approved, together with such additions thereto and changes therein as are determined necessary by the Executive Director, or his designee, to make such Preliminary Official Statement final as of its date for purposes of Rule 15c2-12 of the Securities and Exchange Commission. Each of the Chairman of the Agency and the Executive Director is hereby authorized to execute a final Official Statement in the form of the Preliminary Official Statement, together with such changes as are determined necessary by the Executive Director, or his designee, to make such Official Statement complete and accurate as of its date. The Purchaser is further authorized to distribute the final Official Statement for the Certificates to the purchasers thereof upon its execution by an officer of the Agency as described above. The Executive Director and his written designees are hereby authorized and directed to take whatever steps are necessary to comply with the requirements of Rule 15c(2)-12 applicable to the Certificates following their execution and delivery. Section 8. The form of Special Counsel Agreement presented at this meeting is hereby approved and the City Manager is authorized to execute such Agreement and deliver such to Special Counsel. Section 9. The Chairman of the Agency, the Executive Director, or his written designee, and the Secretary of the Agency are hereby authorized, jointly and severally, to do any and all things and to execute and deliver any and all documents which they may deem necessary and advisable in order to consummate the sale and delivery of the Certificates and otherwise effectuate the purposes of this Resolution, including the advance refunding and defeasance of the Prior Certificates, and such actions previously taken by such officers are hereby ratified and confirmed. In the event the Chairman of the Agency is unavailable or unable to execute and deliver any of the above-referenced documents, any other member of the Board of Directors may validly execute and deliver such document, and, in the event the Secretary of the Agency is unavailable or unable to execute and deliver any of the above-referenced documents, any deputy secretary may validly execute and deliver such document in her place. Section 10. This Resolution shall take effect from and after its date of adoption. ADOPTED, SIGNED AND APPROVED this _ day of , 1995. Chairman of the Board of Directors of the Poway Redevelopment Agency ATTEST: Secretary Poway Redevelopment Agency, California PUBL,27360 _11138182345.62 4 STATE OF CALIFORNIA ) ) ss. County of San Diego ) I, , Secretary of the Poway Redevelopment Agency, California, hereby certify that the above and foregoing Resolution was duly and regularly adopted by the Board of Directors of said Agency at a regular meeting thereof held on the _ day of _, 1995, and that it was so adopted by the following vote of said Board: AYES: Directors NOES: Directors ABSENT: Directors IN WITNESS WHEREOF, I have hereunto set my hand and seal this _ day of , 1995. Secretary of the Board of Directors of the Poway Redevelopment Agency, California PUBL'27360_111381 B2345.62 5 - ---------.-------------- __u_.._.._____m______ TRUST AGREEMENT among CITY OF POW A Y and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Trustee and POW AY REDEVELOPMENT AGENCY Dated as of July 1, 1995 RELATING TO $ 1995 REFUNDING CERTIFICATES OF PARTICIPATION (1986 CAPITAL IMPROVEMENT PROJECfS) ATTACHMENT C JUN 2 0 1995 l1EM 11 ~.I "..... - ._,--_.-.._._-_.~--_._.__. -----" ---_.,_.._---,------_.-._-----_....-.~.. TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION Section 101. Definitions .................................... . 3 Section 102. Rules of Construction ............................ . 12 Section 103. Exhibits .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE II ASSIGNMENT; DECLARATION OF TRUST; REPRESENTATIONS AND RECITALS Section 201. Declaration of Trust by Trustee ...................... . 12 Section 202. Deposit of Moneys ............................... 13 Section 203. Conditions Precedent Satisfied ....................... . 13 Section 204. Due Authorization and Execution ..................... . 13 ARTICLE III TERMS AND PROVISIONS OF THE CERTIFICATES AND ADDITIONAL CERTIFICATES Section 301. Preparation of Certificates and Additional Certificates . . . . . . . . . . 13 Section 302. Payments from Trust Estate Only; Distribution of Trust Estate .... 14 Section 303. Description of the Certificates and Additional Certificates ...... . 14 Section 304. Medium of Payment ............................. . 16 Section 305. Execution and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 306. Negotiability, Transfer and Registry. . . . . . . . . . . . . . . . . . . . . 16 Section 307. Regulations with Respect to Exchanges and Transfers . . . . . . . . . . 17 Section 308. Certificates and Additional Certificates Mutilated, Destroyed, Stolen or Lost .................................. 17 Section 309. Temporary Certificates and Additional Certificates; Form of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 310. Redemption of Certificates and Additional Certificates . . . . . . . . . . 18 Section 311. Selection of Certificates and Additional Certificates to be Redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 312. Notice of Redemption ............................ . 20 Section 313. Payment of Redeemed Certificates and Additional Certificates . . . . . 22 Section 314. Cancellation of Certificates and Additional Certificates ........ . 22 Section 315. Nonpresentrnent of Certificates and Additional Certificates . . . . . . . 23 Section 316. Unclaimed Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 317. Additional Certificates ............................. 23 PUBL,27179 _11138182345.62 i ARTICLE IV ESTABLISHMENT AND ADMINISTRATION OF FUNDS AND ACCOUNTS Section 40 1. Estab Iishment of Funds; Disposition of Proceeds of Certificates and Additional Certificates ............................. 25 Section 402. Project Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 403. Lease Payment Fund .............................. 28 Section 404. Certificate Fund ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 405. Insurance and Condemnation Fund .................... . 31 Section 406. Rebate Fund ................................... 32 Section 407. Deposits of Money ............................... 34 Section 408. Investment of Certain Accounts ...................... . 34 Section 409. Valuation and Sale of Investments . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE V COVENANTS, EVENTS OF DEFAULT, REMEDffiS OF OWNERS AND LIMITATIONS OF LIABILITY Section 501. Trustee to Enforce Lease Agreement; Notice of Nonpayment .... . 36 Section 502. Assignment of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 503. Events of Default ................................ 36 Section 504. Application of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 505. Institution of Legal Proceedings ...................... . 37 Section 506. Non-Waiver .................................. . 37 Section 507. Remedies Not Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 508. Power of Trustee to Control Proceedings ................ . 38 Section 509. Limitation on Owners' Right to Sue. . . . . . . . . . . . . . . . . . . . . 38 Section 510. Reconstruction; Application of Net Proceeds .............. . 38 Section 511. Accounts and Reports ............................ . 39 Section 512. No Obligation by the City to Owners ... . . . . . . . . . . . . . . . . . 39 Section 513. No Obligation with Respect to Performance by Trustee . . . . . . . . . 39 Section 514. No Liability to Owners for Payment ................... . 39 Section 515. Possession and Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 516. Federal Tax Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 ARTICLE VI CONCERNING THE TRUSTEE AND PAYING AGENT Section 60 1. Employment of Trustee ........................... . 41 Section 602. Trustee Acceptance of Duties ......................... 41 Section 603. Evidence on Which Trustee May Act . . . . . . . . . . . . . . . . . . . . 41 Section 604. Obligations of Trustee ............................. 42 Section 605. Compensation ................................. . 42 PUBL,27179_11138 182345.62 ii - -_._.~_..~-_._-_._-------_..._-----_._- -- Section 606. Resignation of Trustee .. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 607. Removal of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 608. Appointment of Successor Trustee . . . . . . . . . . . . . . . . . . . . . . 43 Section 609. Transfer of Rights and Property to Successor Trustee . . . . . . . . . . 43 Section 610. Merger or Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 611. Adoption of Authorized Signature . . . . . . . . . . . . . . . . . . . . . . 44 Section 612. Trustee Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 613. Indemnification ................................ . 45 ARTICLE VII AMENDMENTS Section 701. Mailing ..................................... . 45 Section 702. Powers of Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 703. Consent of Owners ............................... 46 Section 704. Modifications by Unanimous Consent . . . . . . . . . . . . . . . . . . . . 48 Section 705. Exclusion of Certificates and Additional Certificates . . . . . . . . . . . 48 Section 706. Notation on Certificates and Additional Certificates .......... . 48 ARTICLE VIII BOOK-ENTRY SYSTEM Section 801. Book-Entry System; Limited Obligation of Agency .......... . 49 Section 802. Representation Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 803. Transfers Outside Book-Entry System. . . . . . . . . . . . . . . . . . . . 50 Section 804. Payments to the Nominee ........................... 50 Section 805. Initial Depository and Nominee . . . . . . . . . . . . . . . . . . . . . . . . 50 ARTICLE IX MISCELLANEOUS Section 901. Defeasance .................................... 51 Section 902. Evidence of Signatures of Certificate Owners and Ownership of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 903. Moneys Held for Particular Certificates and Additional Certificates 52 Section 904. Preservation and Inspection of Documents . . . . . . . . . . . . . . . . . 52 Section 905. Parties Interested Herein . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 906. Severability of Invalid Provisions ..................... . 53 Section 907. Recording and Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 908. Notices ..................................... . 53 Section 909. California Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 910. Binding on Successors ............................. 54 Section 911. Headings .................................... . 54 Section 912. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 PUBL'27179_11138182345.62 iii ARTICLE X , PROVISIONS RELATING TO MUNICIPAL BOND INSURANCE POLICY Section 1001. Consent of Insurer .............................. . 54 Section 1002. Notices to be Given to Insurer ........................ 55 Section 1003. Payment Procedure Pursuant to the Municipal Bond Insurance Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 1004. Trustee-Related Provisions ......................... . 57 Section 1005. Parties Interested Herein. . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 1006. Termination of Insurance Provisions ................... . 58 Exhibit A Form of Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. A-1 Exhibit B Form of Requisition ................................... B-1 PUBL,27179_1 1 138182345.62 iv ---- ---."-..--. -----...., TRUST AGREEMENT RELATING TO THE 1995 REFUNDING CERTIFICATES OF PARTICIPATION (1986 CAPITAL IMPROVEMENT PROJECTS) THIS TRUST AGREEMENT, dated as of July 1, 1995 (the "Trust Agreement"), is entered into by and among the City of Poway, a municipal corporation (the "City"), Bank of America National Trust and Savings Association, a national banking association organized and existing under the laws of the United States, as trustee (the "Trustee"), and the Poway Redevelopment Agency, a political subdivision of the State of California duly organized and existing under the laws of the State of California (the" Agency"); WIINESS.gIH: In consideration of the mutual agreements and covenants herein contained and for other valuable consideration, the parties hereto agree as follows: WHEREAS, the Agency and the City have entered into a Site Lease dated as of the date hereof (the "Site Lease"), pursuant to which the City has agreed to lease certain real property and improvements described therein (the "Site") to the Agency; and WHEREAS, the Agency and the City have entered into a Lease Agreement dated as of the date hereof (the "Lease Agreement"), pursuant to which the City has agreed to lease back from the Agency the Site for the purpose of facilitating the sale of the Certificates (as defined herein) and any Additional Certificates (as defmed herein) to be executed and delivered under this Trust Agreement, the proceeds of which will be used to advance refund those certain $10,000,000 1986 Certificates of Participation (Capital Improvement Projects) the proceeds of which were used to acquire and construct certain public improvements (the "Prior Certificates"); and WHEREAS, pursuant to an Assignment Agreement dated as of the date hereof (the "Assignment Agreement"), the Agency has transferred all of its rights, title and interest (excluding its rights to indemnification and payment or reimbursement of its costs and expenses) in and to the Site Lease and the Lease Agreement, including the right to receive certain rental payments due thereunder (the "Lease Payments"), to the Trustee for the benefit of the Owners of the Certificates and any Additional Certificates; and WHEREAS, the Trustee shall execute and deliver the Certificates and any Additional Certificates on the respective Delivery Dates therefor evidencing proportionate interests in certain rights under the Lease Agreement, including the right to receive Lease Payments payable thereunder, and shall undertake such other responsibilities as are assigned to the Trustee pursuant to this Trust Agreement; and WHEREAS, the Agency will deposit with the Trustee certain of the proceeds of the Certificates in order to advance refund the Prior Certificates and the proceeds of any Additional PUBL,27179_JI138182345.62 Certificates in order to fmance the costs of the Project and to accomplish any other purposes described for such Additional Certificates; and WHEREAS, the City and the Agency represent that all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and entering into of this Trust Agreement do exist, have happened and have been performed in due time, form and manner as required by law, and the parties hereto are duly authorized to execute and enter into this Trust Agreement; and NOW, THEREFORE, in consideration of the premises, of the acceptance by the Trustee of its duties hereby imposed, and of the purchase and acceptance of the Certificates and any Additional Certificates by the Owners thereof, and to fix and declare the terms and conditions upon which the Certificates and any Additional Certificates are to be executed, delivered, secured and accepted by all persons who shall from time to time be or become Owners thereof, and to secure the payment of the Certificates and any Additional Certificates and the interest with respect thereto according to their tenor, purpose and effect, and to secure the performance and observance of all of the covenants, agreements and conditions contained therein, herein and in the Lease Agreement, the City and the Agency by these presents do hereby grant, bargain, sell, warrant, convey, confirm, assign, transfer in trust, grant a security interest in and pledge unto the Trustee for the benefit of the Owners of Certificates and any Additional Certificates all their right, title and interest in and to the property, real and personal, hereinafter described, subject only to the provisions hereof permitting the application thereof for or to the purposes and on the terms and conditions set forth herein (said property being herein sometimes referred to as the "Trust Estate"): GRANTING CLAUSES All right, title and interest of the City and the Agency, if any, in the Lease and the Site Lease and all other security therefor or certificates or instruments evidencing the same, and all amendments, modifications and renewals thereof, and all casualty insurance proceeds or condemnation awards payable with respect thereto, and any interest earnings thereon, other than such parties' rights to indemnification and payment or reimbursement of costs and expenses thereunder. All right, title and interest of the City and the Agency in and to any moneys held under this Trust Agreement by the Trustee (other than amounts held in the Rebate Fund), including the proceeds of the Certificates and the interest, profits and other income derived from the investment thereof, all certificates or other instruments representing the same, and all renewals thereof, additions thereto and replacements or substitutions therefor. All funds, moneys and securities and any and all other rights and interests in property whether tangible or intangible from time to time hereafter by delivery or by writing of any kind, conveyed, mortgaged, pledged, assigned or transferred as and for additional security hereunder for the Certificates by the City or by anyone on its behalf or with its written consent to the Trustee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof. pUBL,27179_11138182345.62 2 -- .._..._-------~ --- _.__._--~~-~~.- TO HAVE AND TO HOLD all and singular with all privileges and appurtenances hereby given, granted, bargained, sold, conveyed, assigned, pledged, mortgaged and transferred or agreed or intended so to be, whether now owned or hereafter acquired, including any and all additional property that by virtue of any provision hereof or of any indenture supplemental hereto shall hereafter become subject to this Trust Agreement and to the trusts hereby created, unto the Trustee and its successors in trust and assigns forever; IN TRUST, NEVERTHELESS, upon the terms and trusts herein set forth for the equal and proportionate benefit, security and protection of the registered owners from time to time of any of the Certificates authenticated and delivered under this Trust Agreement and issued by the City and Outstanding, without preference, priority or distinction as to lien, or otherwise of any one Certificate over any other Certificate by reason of priority in the issue, sale or negotiation thereof, or of any other cause; PROVIDED, HOWEVER, that if the City, its successors or assigns, shall well and truly pay, or cause to be paid, the principal of, premium, if any, and interest due with respect to the Certificates, at the times and in the manner mentioned in the Certificates according to the true intent and meaning thereof, or shall provide, as permitted hereby, for the payment thereof by depositing with the Trustee the entire amount due or to become due thereon, and shall well and truly keep, perform and observe all the covenants and conditions pursuant to the terms of this Trust Agreement to be kept, performed and observed by it, and shall pay, cause to be paid or make provision for payment to the Trustee of all sums of money due or to become due in accordance with the terms and provisions hereof, then upon such final payment this Trust Agreement and the rights hereby granted shall cease, determine and be void; otherwise this Trust Agreement shall remain in full force and effect; AND IT IS HEREBY COVENANTED that all of the Certificates shall be issued, authenticated and delivered, and that the Trust Estate shall be held by the Trustee, subject to the further covenants, conditions, uses and trusts hereinafter set forth, and the City and the Agency agree and covenant with the Trustee and with the registered owners from time to time of the Certificates, as follows: ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION Section 101. Defmitions. The terms set forth in this section shall have the meanings ascribed to them for all purposes of this Trust Agreement unless the context clearly indicates some other meaning. Additional Certificates shall mean any certificates of participation executed and delivered by the Trustee in accordance with the provisions of Section 317 of this Trust Agreement subsequent to the Delivery Date for the Certificates which are secured on a parity with the Certificates. PUBL,27179_11138 1 82345.62 3 Additional Pavments shall mean any amount payable by City under the terms of the Lease Agreement, other than the Lease Payments. Assil!nment Al!reement shall mean that certain Assignment Agreement, dated as of July I, 1995, by and between the Agency and the Trustee, pursuant to which the Agency assigns certain of its rights, title and interest in and to the Lease Agreement and the Site Lease to the Trustee on behalf of the Owners of the Certificates and any Additional Certificates, as amended and supplemented from time to time. Authorized ReDresentative of the Al!ency shall mean the Executive Director of th Agency and any other person or persons designated by the governing board of the Agency and authorized to act on behalf of the Agency as certified by a written certificate signed on behalf of the Agency by the Executive Director of the Agency and containing the specimen signature of each such person. Authorized ReDresentative of the City shall mean the City Manager, his or her written designee, and any other person or persons designated by the City Council of the City and authorized to act on behalf of the City by a written certificate signed on behalf of the City by the Mayor of the City and containing the specimen signature of each such person. Bond Counsel shall mean an attorney or firm of attorneys of nationally recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Code and acceptable to the City. Business Dav shall mean any day other than (i) a Saturday or Sunday or legal holiday or a day on which banking institutions in the city in which the principal corporate trust office of the Trustee is located are authorized to close, (ii) a day on which the New York Stock Exchange is closed, (iii) if a Credit Facility is then in effect, a day on which the issuer of the Credit Facility is authorized or required by law or executive order to close, or (iv) if a Reserve Account Policy is then in effect, a day on which the issuer of any Reserve Account Policy is authorized or required by law or executive order to close. Certificate or Certificates shall mean the $ 1995 Refunding Certificates of Participation (1986 Capital Improvement Projects) executed and delivered by the Trustee pursuant to this Trust Agreement. Certificate Fund shall mean the fund by that name established in Section 401 hereof. Certificate Year shall mean, with respect to the Certificates and any Additional Certificates, (i) the period beginning on the Delivery Date of the Certificates or the Additional Certificates, as applicable, and ending on the Interest Payment Date next preceding the date that is twelve months subsequent to such Delivery Date, and (ii) each successive twelve month (or shorter) period thereafter until there are no longer any Certificates or Additional Certificates Outstanding. PUBL,27 1 79_1 1 1381 82345.62 4 - ----.-.-----...--- ------..----- --- - --- ----- T -<P. Pavment shall mean the amount to be paid by the City for the use and occupancy of the Site pursuant to Section 4.4 of the Lease Agreement, but does not include any Additional Payments. T -... PlIyment Date shall mean the fifth Business Day prior to each Interest Payment Date. T P"'<P. Pavment Fund shall mean the fund by that name established in Section 401 hereof. Lease Term shall mean the period during which the Lease Agreement is in effect as specified in the Lease Agreement. Moody's shall mean Moody's Investors Service, Inc., a municipal bond rating service with offices in New York, New York, or any successor thereto. Municioal Bond Insurance Policy shall mean the municipal bond insurance policy issued by the Insurer insuring the payment when due of the Interest Components and Principal Components represented by the Certificates and any municipal bond insurance policy issued in connection with an issue of Additional Certificates insuring the payment of the Interest Components and Principal Components represented by such issue of Additional Certificates. Net Proceeds shall mean the proceeds of any insurance required to be maintained pursuant to Sections 5.3 and 5.5 of the Lease Agreement or condemnation proceeds paid with respect to the Site and remaining after payment therefrom of all expenses incurred in the collection thereof. Nominee shall mean the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 801. Outstandinl!, when used with reference to any Certificates or Additional Certificates, shall mean, as of any date, the Certificates or Additional Certificates theretofore or thereupon being executed and delivered under this Trust Agreement except: (i) Certificates or Additional Certificates cancelled or delivered for cancellation by the Trustee on or prior to such date; (ii) Certificates (or portions of Certificates) or Additional Certificates (or portions of Additional Certificates) defeased as provided in Section 901 of this Trust Agreement; (iii) Certificates or Additional Certificates in lieu of or in substitution for which other Certificates or Additional Certificates, as applicable, shall have been executed and delivered pursuant to Article III of this Trust Agreement; and (iv) Certificates or Additional Certificates of the type described in Section 315 hereof. pUBL,27179_11138182345.62 7 Owner shall mean the registered Owner of any Certificate or Additional Certificate, as applicable. ParticiDants shall mean those broker-dealers, banks and other fmancial institutions from time to time for which the Depository holds Certificates as securities depository. Payinl! Al!ent shall mean the Trustee or such other entity as is appointed by the City to make principal and interest payments with respect to the Certificates and any Additional Certificates. Permitted Investments shall mean: (a) Cash (insured at all times by the Federal Deposit Insurance Agency or otherwise collateralized with obligations described in paragraph (b) below); or (b) Direct obligations of (including obligations issued or held in book entry form on the books of) the Department of Treasury of the United States of America; (c) obligations of any of the following federal agencies which obligations represent full faith and credit of the United States of America, including: - Export - Import Bank - Farmers Home Administration - General Services Administration - U.S. Maritime Administration - Small Business Administration - Government National Mortgage Association (GNMA) - U.S. Department of Housing & Urban Development (PHA's) - Federal Housing Administration; (d) bonds, notes or other evidences of indebtedness rated "AAA" by Standard & Poor's and "Aaa" by Moody's issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation with remaining maturities not exceeding three years; (e) U.S. dollar denominated deposit accounts, federal funds, certificates of deposit and banker's acceptances with domestic commercial banks (including the Trustee) which have the highest short-term rating of each Rating Agency and are payable on demand or mature no more than 360 days after the date of purchase. (Ratings on holding companies are not considered as the rating of the bank); (f) commercial paper which is rated in the single highest classification of each Rating Agency and which matures not more than 270 days after the date of purchase; PUBL,27179_11138182345.62 8 ~--_._----- .---..-----.-...---. (g) investments in a money market fund rated in the highest rating category of the Rating Agency; (h) Pre-refunded Municipal Obligations defmed as follows: Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and which are rated, based on the escrow, in the highest rating category of the Rating Agency; (i) other forms of investments approved in writing by the Insurer with notice to each Rating Agency; (j) deposits in the Local Agency Investment Fund as administered by the Treasurer of the State; and (k) shares of beneficial interest issued by diversified management companies, as defined in Section 23701m of the California Revenue and Taxation Code, investing in the securities and obligations as authorized by clauses (1) to (10), inclusive, of this definition. To be eligible for investment pursuant to this subdivision, these companies shall be rated in the highest rating category of the Rating Agency. Person shall mean natural persons, firms, corporations, partnerships, associations, trusts, public bodies and other entities. PreDavment shall mean any payment made by the City pursuant to Article X of the Lease Agreement as a prepayment of Lease Payments. PrinciDal ComDonent shall mean, with respect to a Lease Payment, the portion thereof which is designated and paid as principal pursuant to the terms of the Lease Agreement; the Principal Component of a Certificate or an Additional Certificate is the proportionate interest in the Principal Component of the Lease Payments which is evidenced by such Certificate or an Additional Certificate, as applicable. PrinciDal ComDonent Pavment Date shall mean August 1 of each year in which a Principal Component of a Certificate or an Additional Certificate is due. Prior Certificates shall mean the $10,000,000 1986 Certificates of Participation (Capital Improvement Projects) the proceeds of which were used to acquire and construct certain public improvements and which are being advance refunded with the proceeds of the Certificates. Proiect shall mean any capital improvements specified by the City from time to time to be acquired or constructed with the proceeds of any Additional Certificates. Proiect Fund shall mean the fund by that name which is established in Section 401 hereof. PUBL,27179_1 I 138182345.62 9 Oualified Bank shall mean a financial institution whose long-term obligations is rated not less than AA by Standard & Poor's and Aa by Moody's. RlItinl! Al!encv shall mean Moody's if Moody's then rates the Certificates and Standard & Poor's if Standard & Poor's then rates the Certificates and any of their respective successors and assigns that then rate the Certificates. Rebate Fund shall mean the fund by that name established in Section 401 hereof. Rebate Rel!ulations shall mean any final, temporary or proposed Treasury Regulations promulgated under Section 148(f) of the Code. Record Date shall mean the fifteenth calendar day of the month preceding each Interest Payment Date, whether or not such fifteenth day is a Business Day. Redemotion Date means the date fixed for an optional or mandatory redemption, as the case may be, prior to maturity, of the Certificates and any Additional Certificates. Redemotion Price shall mean with respect to each Certificate and Additional Certificate called for redemption an amount equal to the Principal Component to be prepaid, and the premium, if any, due thereon, together with the Interest Components due to the date fixed for redemption. Rental InterruDtion Insurance shall mean the policy of insurance required to be maintained pursuant to Section 5.4 of the Lease Agreement. ReDresentation Letter shall mean a representation letter from the City and the Trustee to the Depository, as described in Section 802 hereof. Reserve Account Policv shall mean a policy of insurance or surety bond issued by a municipal bond insurer, obligations insured by which have a rating by the Rating Agency which at the time of issuance is the highest rating then issued by said Rating Agency, to satisfy all or a portion of the Reserve Requirement. Reserve Reauirement shall mean, as of the date of calculation, the least of (i) an amount equal to the maximum amount of Lease Payments due on the fifth Business Day preceding any August 1 and the next preceding February 1 with respect to Outstanding Certificates and Additional Certificates, (ii) an amount equal to 10% of the proceeds (within the meaning of Section 148 of the Code) of all Certificates and Additional Certificates, or (iii) an amount equal to 125% of the average annual Lease Payments due with respect to Outstanding Certificates and Additional Certificates; provided, however, that with the prior approval of the Insurer such Reserve Requirement or a portion thereof may be provided by one or more Reserve Account Policies or Credit Facilities upon the filing by the City with the Trustee of (x) written evidence that the use of such Reserve Account Policies or Credit Facilities to satisfy the Reserve Requirement or any portion thereof will not by itself result in the downgrading or withdrawal of any credit rating then in effect with respect to the Certificates or Additional Certificates Outstanding, and (y) an opinion of Bond Counsel to the effect that such event will not impair the PUBL,27179_1 1 138182345.62 10 exclusion from gross income for federal income tax purposes or from State personal income taxes of the Interest Component of each Lease Payment. Serial Certificates shall mean, with respect to the Certificates, the Certificates maturing on August 1 in each of the years 19_ through 20_ and with respect to any Additional Certificates, the Additional Certificates so designated in the Supplemental Trust Agreement relating to such Additional Certificates. Sinkinl! Account Installment shall mean the Principal Component of Certificates required to be paid on any Sinking Account Installment Date pursuant to Section 31O(b) hereof or the Principal Component of any Additional Certificates required to be paid on a Sinking Account Installment Date pursuant to the Supplemental Trust Agreement relating thereto. Sinkinl! Account Installment Date shall mean, with respect to the Term Certificates, August 1 of each year, commencing August 1, 20_ and terminating August 1, 20_ and, with respect to any Additional Certificates, the date or dates so specified with respect to such Additional Certificates in the Supplemental Trust Agreement relating thereto. ~ shall mean the real property, including all buildings, structures and improvements located thereon, described from time to time in Exhibit A to the Site Lease and Exhibit A to the Lease Agreement, as such Exhibit A may be amended and supplemented from time to time in accordance with the provisions of the Lease. Site T p"'<e shall mean the Site Lease, dated as of July 1, 1995, by and between the Agency and the City pursuant to which the City has leased the Site to the Agency, and any and all modifications, alterations, amendments and supplements thereto made in accordance with the Lease Agreement and this Trust Agreement. Six-Month Period shall mean the period of time beginning on the Delivery Date of the Certificates or Additional Certificates, as applicable, and ending six consecutive months thereafter, and each six-month period thereafter until the latest maturity date of the Certificates and the Additional Certificates (and any obligations that refund the Certificates and the Additional Certificates). Standard & Poor's or ~ shall mean Standard & Poor's Rating Group, a municipal bond rating service with offices in New York, New York, or any successor thereto. ~ shall mean the State of California. SUDDlemental Trust Al!reement shall mean any agreement supplemental to or amendatory of this Trust Agreement. Tax Certificate shall mean the certificate by that name to be executed by the City on a Delivery Date to establish certain facts and expectations and which contains certain covenants relevant to compliance with the Code. PUBL,27179_1 1 138182345.62 11 - Term Certificates shall mean the Certificates maturing on August 1, 20_ and, with respect to any Additional Certificates, the Additional Certificates so designated in the Supplemental Trust Agreement relating to such Additional Certificates. Title Insurance shall mean the policy or policies of insurance required to be maintained pursuant to Section 5.5 of the Lease Agreement. Treasury Rel!ulations shall mean the regulations adopted or proposed by the Department of Treasury from time to time with respect to obligations issued pursuant to Section 103 of the Code. Trust Al!reement shall mean this Trust Agreement and any and all amendments hereof and supplements hereto made in accordance with the provisions hereof. Trust Estate shall mean as set forth in the Granting Clause hereof all right, title and interest of the Trustee in and to the Lease Payments and the Lease Agreement including, without limitation, all amounts from time to time deposited in the funds, accounts and subaccounts created pursuant to this Trust Agreement (other than the Rebate Fund), including to the extent set forth herein investment earnings thereon, and any additional property that may from time to time, by delivery or by writing of any kind, be subjected to the lien hereof by the City, the Agency, or by anyone on their behalf. Trustee shall mean Bank of America National Trust and Savings Association, and its successor or assigns which may at any time be substituted in its place pursuant to the provisions of this Trust Agreement. Section 102. Rules of Construction. Except where the context otherwise requires, words importing the singular number shall include the plural number and vice versa, and words importing persons shall include firms, associations and corporations. Section 103. Exhibits. The following exhibits are attached to and by this reference made a part of this Trust Agreement: Exhibit A: Form of Certificate Exhibit B: Form of Requisition ARTICLE II ASSIGNMENT; DECLARATION OF TRUST; REPRESENTATIONS AND RECITALS Section 201. Declaration of Trust by Trustee. The Trustee hereby declares that it holds and will hold the Trust Estate upon the trusts hereinafter set forth for the use and benefit of the Certificate Owners and the Owners of any Additional Certificates. PUBL'27179_1I 13818234S.62 12 ----.----- Section 202. Deposit of Moneys. In order to induce the City to proceed with the lease of the Site to the Agency and to provide the funds necessary to advance refund the Prior Certificates, the Agency has executed the Site Lease and the Lease Agreement and has consented to the Trustee's execution and delivery of the Certificates and has deposited the net proceeds of the sale of the Certificates with the Trustee. Upon receipt of such initial deposit, the Trustee shall transfer the amounts received from the Agency as specified in Section 401 hereof. Section 203. Conditions Precedent Satisfied. All acts, conditions and things required by law to exist, happen and be performed precedent to and in connection with the execution and entering into of this Trust Agreement have happened and have been performed in regular and due time, form and manner as required by law. Section 204. Due Authorization and Execution. Each of the parties hereby represents and warrants that it has full legal authority and is duly empowered to enter into this Trust Agreement, and has taken all actions necessary to authorize the execution and delivery of this Trust Agreement. ARTICLE III TERMS AND PROVISIONS OF TIlE CERTIFICATES AND ADDITIONAL CERTIFICATES Section 301. Preparation of Certificates and Additional Certificates. (a) The Agency hereby directs the Trustee to execute and deliver to the original purchaser or purchasers thereof Certificates in an aggregate principal amount of $ evidencing undivided proportionate interests in certain rights under the Lease Agreement, including the right to receive the Lease Payments to be paid by the City under the Lease Agreement. The Certificates shall originally be registered in the name of the Nominee. Additional Certificates may either be in book-entry form subject to the provisions of Article VIII or in physical form subject to the provisions of this Article III. Each Certificate and Additional Certificate shall represent an undivided proportionate interest in the Principal Component of the Lease Payments due and payable on certain Lease Payment Dates and in the Interest Component of the Lease Payments due and payable on each Lease Payment Date to and including each maturity date or Redemption Date. The Certificates shall be designated "City of Poway 1995 Refunding Certificates of Participation (1986 Capital Improvement Projects)". Additional Certificates shall be designated as set forth in a written certificate of an Authorized Representative of the City to the Trustee. (b) If at any time after the Delivery Date of the Certificates the City determines it necessary, the City may provide for the execution and delivery of and sell Additional Certificates secured on a parity with the Certificates provided that the conditions set forth in Section 317 hereof are satisfied. The Trustee shall not at any time while any Certificate or Additional Certificate is Outstanding execute and deliver certificates of participation payable from the Lease Payments except as provided in Sections 305,306,307,308,309,313 and 317 hereof. PUBL,27179 _I 1 138IB2345.62 13 Section 302. Payments from Trust Estate Only; Distribution of Trust Estate. (a) All amounts payable with respect to the Certificates and the Additional Certificates pursuant to this Trust Agreement shall be paid only from the income of and proceeds from the Trust Estate and only to the extent that the Trustee shall have actually received sufficient income or proceeds from the Trust Estate to make such payments in accordance with the terms of Article V hereof. Each Owner of a Certificate or Additional Certificate agrees to look solely to the income of and the proceeds from the Trust Estate to the extent available for distribution to such Owner as herein provided, and each Certificate Owner and each Owner of any Additional Certificate agrees that the Trustee is not personally liable to any Owner for any amounts payable under this Trust Agreement or subject to any liability under this Trust Agreement except liability under this Trust Agreement as a result of negligence or willful misconduct by the Trustee. (b) So long as the Lease Agreement shall be in effect, all Lease Payments, insurance proceeds and other payments of any kind constituting a part of the Trust Estate payable to the Trustee with respect to the Site, shall be paid directly to the Trustee for distribution, in accordance with Article IV of this Trust Agreement. Section 303. Description of the Certificates and Additional Certificates. (a) The Certificates shall be dated as of July 1, 1995 and the Principal Components evidenced thereby shall become due as set forth in Section 303(b) and (c) below. The Certificates shall be executed and delivered in the aggregate Principal Component of Dollars ($ ) with Interest Components accruing from July 1, 1995. (b) The Serial Certificates shall mature on August 1 in the years and amounts and interest with respect thereto shall be payable at the rates as shown below: Maturity Date Principal Interest (August I) Component Rate $ ,000.00 % ,000.00 ,000.00 ,000.00 ,000.00 ,000.00 ,000.00 ,000.00 ,000.00 ,000.00 ,000.00 ,000.00 ,000.00 PUBL,27179_1I 13818234S.62 14 '-' -.,.--- (c) The Term Certificates maturing August 1, 20_ shall be executed and delivered in the aggregate principal amount of $ , and the Principal Components evidenced thereby shall be subject to prior payment pursuant to mandatory Sinking Account Installments pursuant to Section 31 O(b) hereof and interest with respect thereto shall be payable at the rate of _ % per annum. (d) Interest with respect to each Certificate and Additional Certificate shall accrue from the Interest Payment Date next preceding the date of execution thereof, unless (i) it is executed on an Interest Payment Date, in which event interest shall accrue from the date of execution thereof, (ii) it is executed after a Record Date and before the close of business on the immediately following Interest Payment Date, in which event interest with respect thereto shall be payable from such Interest Payment Date, or (Hi) it is executed prior to the close of business on the first Record Date, in which event interest with respect thereto shall be payable from the dated date of such Certificate or Additional Certificate, as applicable; orovided, however, that, if at the time of registration of any Certificate or Additional Certificate interest with respect thereto is in default, interest with respect thereto shall be payable from the Interest Payment Date to which interest has previously been paid or made available for payment or from the dated date of such Certificate or Additional Certificate, as applicable, if no interest has been paid or made available for payment. Interest with respect to the Certificates and Additional Certificates shall accrue on overdue Principal Components at the same rate as borne by the particular Certificates or Additional Certificates. Interest with respect to any Certificate or Additional Certificate shall be payable on each Interest Payment Date following the Delivery Date therefor to the Owner thereof as of the close of business on the Record Date, such interest to be paid by check, mailed by the Trustee to the Owner first class mail, postage prepaid, on such Interest Payment Date, at his address as it appears on the registration books maintained by the Trustee pursuant to Section 306 hereof or, in the case of an Owner of Certificates representing at least $1,000,000 in aggregate Principal Components or an Owner of Additional Certificates representing at least $1,000,000 in aggregate Principal Components, by wire transfer in immediately available funds to an account in the United States designated in writing by such Owner to the Trustee prior to the applicable Record Date. Interest Components with respect to the Certificates and any Additional Certificates shall be computed on the basis of a 360-day year comprised of 12 months of 30 days each. Payments of defaulted Interest Components shall be paid in the same manner as payment is made on a regular Interest Payment Date on the payment date fixed therefor by the Trustee to the Owners of the Certificates and Owners of any Additional Certificates as of a special record date to be fixed by the Trustee, notice of which payment date and special record date shall be given to the Owners of the Certificates and the Owners of any Additional Certificates not less than ten days prior thereto. Principal Components and premium, if any, due with respect to any Certificate and Additional Certificate are payable at the location designated by the Nominee, or, at any time the Certificates and Additional Certificates are not in book-entry form pursuant to Article VIII, upon surrender thereof at the corporate trust office of the Trustee in Los Angeles, California. (e) The Certificates and any Additional Certificates shall be delivered in fully registered form and, except as otherwise provided in Section 801 hereof, in the denominations of $5,000 or any integral multiple thereof. Unless the Agency shall otherwise direct in writing, the Certificates and any Additional Certificates shall be lettered and numbered in such manner as the PUBL,27 1 79_1 I 138182345.62 15 Trustee shall deem adequate and appropriate fqr recordkeeping purposes. Subject to the provisions of this Trust Agreement, the Certificates shall be substantially in the form set forth in Exhibit A hereto and any Additional Certificates shall be substantially in the form set forth in the Supplemental Trust Agreement executed with respect to such Additional Certificates. (t) The Trustee shall maintain, or cause to be maintained at its principal corporate trust office a system by which a record of the names and addresses of the Owners of any Certificates and Additional Certificates as of any particular time can be kept; and the Trustee shall, upon written request of the City, furnish such information to the City. Section 304. Medium of Payment. The Certificates and any Additional Certificates shall be payable, with respect to Interest Components, Principal Components and premium, if any, in lawful money of the United States of America. Section 305. Execution and Exchange. (a) Subject to the provisions of Section 801 hereof, the Certificates and any Additional Certificates shall be executed in the name of, and by, the Trustee, as trustee under this Trust Agreement, by the manual signature of an authorized signatory of the Trustee. (b) Subject to the provisions of Section 801 hereof, upon surrender of a Certificate or an Additional Certificate at the corporate trust office of the Trustee in Los Angeles, California with a written instrument of transfer satisfactory to the Trustee, duly executed by such Owner or his duly authorized attorney, the Trustee shall, at the option of such Owner and upon payment by such Owner of any charges which the Trustee may make as provided in Section 307, exchange such Certificates or Additional Certificates, as applicable, for Certificates or Additional Certificates of the same issue representing the same aggregate amount of Principal Components and the same maturity and interest rate. Section 306. Negotiability, Transfer and Registry. (a) Each Certificate and Additional Certificate shall be transferable only upon the books of the Trustee which shall be kept for that purpose at the principal corporate trust office of the Trustee, by the Certificate Owner or Owner of any Additional Certificates in person or by his attorney duly authorized in writing, upon surrender thereof together with a written instrument of transfer satisfactory to the Trustee duly executed by such Owner or his duly authorized attorney. Upon the transfer of any such Certificate or Additional Certificate, the Trustee shall deliver in the name of the transferee a new Certificate or Additional Certificate of like maturity and representing the same issue and aggregate amount of Principal Components as the surrendered Certificate or Additional Certificate, as applicable. (b) The Trustee and the City may deem and treat the person in whose name any Certificate or Additional Certificate shall be registered upon the books of the Trustee as the absolute Owner of such Certificate or Additional Certificate, whether such Certificate or Additional Certificate shall be overdue or not, for the purpose of receiving payment of, or on account of, the Principal Components, premium, if any, and Interest Components due with PUBL'27179_1 1 138182345.62 16 --- --_.~-------_._._...__.- respect to such Certificate or Additional Certificate and for all other purposes; and all such payments so made to any such Owner or upon his order shall be valid and effectual to satisfy and discharge the liability upon such Certificate or Additional Certificate to the extent of the sum or sums so paid; and neither the City nor the Trustee shall be affected by any notice to the contrary. Section 307. Regulations with Respect to Exchanges and Transfers. In all cases in which the privilege of exchanging Certificates and Additional Certificates or transferring Certificates and Additional Certificates is exercised, the Trustee shall execute and deliver Certificates and Additional Certificates in accordance with the provisions of this Trust Agreement. All Certificates surrendered in any such exchanges or transfers shall forthwith be cancelled by the Trustee. For every such exchange or transfer of Certificates and Additional Certificates, whether temporary or definitive, the Trustee may make a charge sufficient to reimburse it for any tax, fee or other governmental charge required to be paid with respect to such exchange or transfer. The Trustee shall not be required to transfer or exchange any Certificates or Additional Certificates called for redemption (except for any unredeemed portion thereof) or any Certificates or Additional Certificates during the period of 15 days before the selection of Certificates or Additional Certificates for redemption. Section 308. Certificates and Additional Certificates Mutilated, Destroyed, Stolen or Lost. In case any Certificate or Additional Certificate shall become mutilated or be destroyed, stolen or lost, the Trustee shall execute and deliver, a new Certificate or Additional Certificate of the same issue and of like maturity and Principal Component as the Certificate or Additional Certificate so mutilated, destroyed, stolen or lost, in exchange and substitution for such mutilated Certificate or Additional Certificate, upon surrender and cancellation of such mutilated Certificate or Additional Certificate, or in lieu of and substitution for the Certificate or Additional Certificate, destroyed, stolen or lost, upon receipt by the Trustee of evidence satisfactory to the Trustee that such Certificate or Additional Certificate has been destroyed, stolen or lost and proof of ownership thereof, and upon furnishing the Trustee with indemnity satisfactory to the Trustee and complying with such other regulations as the Trustee may prescribe and paying such expenses as the Trustee may incur. All Certificates or Additional Certificates so surrendered to the Trustee shall be cancelled by it. Any such new Certificates or Additional Certificates issued pursuant to this Section in substitution for Certificates or Additional Certificates alleged to be destroyed, stolen or lost shall be equally secured by and entitled to equal and proportionate benefits, with all other Certificates and Additional Certificates delivered under this Trust Agreement, in any moneys or securities held by the Trustee for the benefit of the Certificate Owners and Owners of Additional Certificates. Notwithstanding any other provision of this Section 308, in lieu of delivering a new Certificate or Additional Certificate in exchange and substitution for a Certificate or Additional Certificate which has been mutilated, lost, destroyed or stolen, and which has matured or been redeemed, or has been selected for redemption, the Trustee may make payment of the principal of or interest with respect to such Certificate or Additional Certificate. Section 309. Temporary Certificates and Additional Certificates; Form of Certificates. So long as the Certificates and any Additional Certificates are in book-entry form, they may be typewritten or in any other form acceptable to the City and the Depository. At any time during which the Certificates and any Additional Certificates are not in book-entry form, the definitive Certificates and Additional Certificates shall be lithographed or printed with steel engraved borders. Until the defmitive Certificates and Additional Certificates are prepared, the PUBL,27179_1 I 138182345.62 17 Trustee may execute and deliver, in the same manner as is provided in Section 305, in lieu of definitive Certificates and Additional Certificates, one or more temporary certificates substantially of the tenor of the defmitive Certificates and Additional Certificates, as applicable, in any authorized denomination, and with such omissions, insertions and variations as may be appropriate to temporary certificates. The Trustee at the expense of the City shall execute and, upon the surrender of such temporary Certificates and Additional Certificates and the cancellation of such surrendered temporary Certificates and Additional Certificates, shall, without charge to the Owners thereof, in exchange therefor, deliver definitive Certificates and Additional Certificates, representing the same aggregate amount of Principal Components and of like maturity as the temporary Certificates and Additional Certificates. All temporary Certificates and Additional Certificates surrendered either in exchange for another temporary Certificate or Additional Certificate, as applicable, or for a definitive Certificate or Additional Certificate, as applicable, shall be forthwith cancelled by the Trustee and destroyed. Section 310. Redemption of Certificates and Additional Certificates. The Certificates and Additional Certificates shall be redeemable at such times, in such amount, upon such terms and upon such notice as are provided in this Article III. (a) The Certificates and the Additional Certificates, if any, are subject to extraordinary redemption on a pro rata basis among maturities (treating each Sinking Account Installment due with respect to the Certificates and the Additional Certificates as a separate maturity for such purpose) and by lot within a maturity, in whole or in part, as the case may be, without premium, in an amount equal to the Principal Component thereof, together with the Interest Components due with respect thereto to the date fixed for redemption on the first date for which notice of redemption can be given by the Trustee following the transfer of Net Proceeds to the Redemption Account of the Certificate Fund pursuant to Section 405(a) or (b) hereof; (b) The Term Certificates maturing on August 1,20_ shall be subject to mandatory redemption, in part, by lot, without premium, in an amount equal to the Principal Component thereof, together with the Interest Component due with respect thereto to the date fixed for redemption on August 1, 20_ and on each August 1 thereafter to and including August 1, 20_ from Sinking Account Installments transferred from the Lease Payment Fund to the Principal Account of the Certificate Fund according to the following schedule: PUBL,27179_11138182345.62 18 -----" --- TERM CERTIFICATES MATURING AUGUST 1, 20_ August 1 Principal of the Y ear Amount $ (maturity) To the extent that a partial redemption of the Term Certificates occurs under Section 310(a) or (c), each of the remaining Sinking Account Installments relating to such maturity of Term Certificates shall be reduced pro rata, as directed in writing by an Authorized Representative of the City, in multiples of $5,000. If during the twelve-month period immediately preceding one of the redemption dates specified in this Section 31O(b) the City, or the Trustee at the written direction of an Authorized Representative of the City, has purchased one or more of the applicable Term Certificates subject to redemption, at least 30 days prior to the Redemption Date the City shall confirm in writing with the Trustee as to the Principal Component purchased and the amount of Term Certificates so purchased shall be credited, to the extent of the full Principal Component thereof, to reduce the upcoming Sinking Account Installment for such Term Certificates. All Term Certificates purchased pursuant to this subsection shall be surrendered to the Trustee and cancelled. (c) The Certificates maturing on or before August 1, 20_ are not subject to optional redemption prior to maturity. The Certificates maturing on or after August I, 20_ are subject to optional redemption prior to maturity on or after August 1, 20_, at the option of the City, in whole or in part on any Interest Payment Date, from amounts deposited to the Lease Payment Fund by the City in furtherance of the exercise of the City's option to prepay Lease Payments in accordance with Section 7.3 of the Lease Agreement and transferred by the Trustee to the Redemption Account of the Certificate Fund, at the following prices expressed as percentages of the Principal Components to be redeemed, together with the Interest Components due thereon to the date fixed for redemption: Redemption Dates Redemption Price August 1, 20 and February 1, 20 % - - August 1,20_ and February 1,20_ % August 1, 20_ and thereafter % Section 311. Selection of Certificates and Additional Certificates to be Redeemed. For purposes of selecting Certificates and Additional Certificates for redemption, the Certificates PUBL,27179_1 I 138182345.62 19 and Additional Certificates shall be deemed to be comprised of $5,000 portions. If less than all of the Certificates and Additional Certificates shall be called for extraordinary redemption under Section 310(a), the particular Certificates or Additional Certificates, or portions thereof, to be redeemed shall be selected by the Trustee on a pro rata basis among maturities (treating each Sinking Accoum Installment due with respect to the Certificates and Additional Certificates as a separate maturity for such purpose) such that the Lease Payments to become due in each remaining year of the Lease Term shall be as nearly as practicable equal to the Lease Payments to become due in every other year. Within a maturity, the Trustee shall select Certificates and Additional Certificates for redemption by lot in any manner determined to be appropriate by the Trustee. If less than all of the Certificates shall be called for optional redemption under Section 31O(c), the particular Certificates or portions thereof to be redeemed shall be selected by the Trustee by lot from one or more maturities as specified, in writing, by an Authorized Representative of the City. Any Certificate or Additional Certificate of a denomination of more than $5,000 to be redeemed shall be redeemed in the principal amount of $5,000 or an integral multiple thereof. In selecting portions of the Certificates and Additional Certificates for redemption, the Trustee shall treat each such Certificate and Additional Certificate as representing that number of Certificates or Additional Certificates of $5,000 denomination which is obtained by dividing the principal amount of the Certificate or Additional Certificate to be redeemed in part by $5,000. The Trustee shall promptly notify the City and the Agency in writing of the Certificates and any Additional Certificates so selected for redemption. Section 312. Notice of Redemption. When redemption of Certificates and/or Additional Certificates is required, the City shall notify the Trustee in writing and the Trustee shall, at the expense of the City, give notice of the redemption of such Certificates and/or Additional Certificates, and such notice shall include (i) the date of the Certificates as set forth in Section 303(a) hereof or of the Additional Certificates as set forth in the Supplemental Trust Agreement relating to such Additional Certificates; (ii) the rate of interest borne by each Certificate or Additional Certificate being redeemed; (Hi) the Redemption Date and the place or places where amounts due upon such redemption will be payable; (iv) if less than all of the Certificates or Additional Certificates of a maturity are to be redeemed, the letters, numbers, CUSIP numbers or other distinguishing marks of such Certificates or Additional Certificates so to be redeemed; and (v) in the case of Certificates or Additional Certificates to be redeemed in part only, such notice shall also specify the respective portions of the principal amount thereof to be redeemed. Such notice shall further state that on such date there shall become due and payable upon each Certificate or Additional Certificate to be redeemed the Principal Component to be redeemed, together with the Interest Components accrued to the Redemption Date, and premium, if any, and that from and after such date interest on the Principal Components redeemed shall cease to accrue and be payable. The Trustee shall mail a copy of such notice, postage prepaid, first class United States mail, not less than 30 days and not more than 45 days before the Redemption Date, to the Owners of any Certificates or Additional Certificates or portions thereof which are to be redeemed, at their last addresses, appearing upon the registry books. Neither the failure of an Owner to receive a notice of redemption mailed by the Trustee nor any defect therein shall affect the sufficiency of the proceedings for the redemption of Certificates or Additional Certificates, as applicable. PUBL,27179_1 1 138182345.62 20 A copy of such notice of redemption shall be sent at least 30 days before the Redemption Date by registered or certified mail or overnight delivery service to the three registered securities depositories listed below and to any other registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Certificates specified by the City to the Trustee in writing and, on the date notice is mailed to the Certificate Owners or Owners of Additional Certificates, to the national information services listed below that disseminate notice of redemption of obligations as the Certificates and Additional Certificates; provided, however, that neither a defect in any notice sent pursuant to this paragraph nor any failure to mail notice as required by this paragraph shall in any manner defeat the effectiveness of a call for redemption if notice of such redemption is mailed to Certificate Owners and Owners of Additional Certificates as prescribed above. Rel!istered Securities Deoositories The Depository Trust Company 711 Stewart Avenue Garden City, New York 11530 Telecopy: (516) 227-4039 or 4190 Midwest Securities Trust Company Capital Structures-Call Notification 440 South LaSalle Street Chicago, Illinois 60605 Telecopy: (312) 663-2343 Philadelphia Depository Trust Company Reorganization Division 1900 Market Street Philadelphia, Pennsylvania 19103 Attention: Bond Department Telecopy: (215) 496-5058 National Information Services Financial Information, Inc. 's Financial Daily Called Bond Service 30 Montgomery Street, 10th Floor Jersey City, New Jersey 07302 Attention: Editor Kenny Information Service's Called Bond Service 65 Broadway New York, New York 10006 Standard and Poor's Called Bond Record 25 Broadway New York, New York 10004 PUBL:27179 _11138182345.62 21 . Upon the payment of the Redemption Price of Certificates and/or Additional Certificates being redeemed, each check or other transfer of funds issued for such purpose shall bear the CUSIP number identifying, by issue and maturity, the Certificates and/or Additional Certificates being redeemed with the proceeds of such check or other transfer. The Trustee shall have no responsibility for a defect in the CUSIP number that appears on any Certificate or in the notice of redemption. The redemption notice may provide that the CUSIP numbers have been assigned by an independent service and are included in the notice solely for the convenience of the Owners and that the Trustee and the City shall not be liable in any way for inaccuracies of said numbers. Section 313. Payment of Redeemed Certificates and Additional Certificates. Notice having been given in the manner provided in Section 312 hereof, the Certificates or portions thereof and/or the Additional Certificates or portions thereof so called for redemption shall become due and payable on the Redemption Date so designated at the Redemption Price for such Certificate and/or Additional Certificate, and, upon presentation and surrender thereof at the office specified in such notice, the Redemption Price of such Certificate and/or Additional Certificate to be redeemed shall be paid as provided in Section 303. If there shall be called for redemption less than all of a Certificate or Additional Certificate, the Trustee shall execute and deliver, upon the surrender of such Certificate or Additional Certificate, without charge to the Owner thereof, for the unredeemed balance of the Principal Component of any Certificate or Additional Certificate so surrendered, Certificates or Additional Certificates of the same issue and of like maturity and interest rate in any of the authorized denominations. If, on the Redemption Date, moneys for the redemption of all the Certificates or portions thereof and/or the Additional Certificates or portions thereof to be redeemed together with interest to the Redemption Date shall be held by the Trustee so as to be available therefor on said date and if notice of redemption shall have been given as aforesaid, then from and after the Redemption Date the Interest Components due with respect to such Certificates or portions thereof and/or the Additional Certificates or portions thereof so called for redemption shall cease to accrue and become payable. On each such Redemption Date other than a Sinking Account Installment Date, the Trustee shall give written notice to the City and the Agency of the Certificates and Additional Certificates selected for redemption in accordance with Section 311 hereof, and the City shall recompute the amount of Lease Payments to become due in each remaining year of the Lease Agreement following a redemption of the Certificates and Additional Certificates and shall notify the Agency and the Trustee in writing of the amount of such Lease Payments. Section 314. CanceUation of Certificates and Additional Certificates. All Certificates and Additional Certificates paid or redeemed, either at or before maturity, shall be delivered to the Trustee when such payment or redemption is made, and such Certificates and Additional Certificates shall thereupon be promptly cancelled and destroyed. Upon the cancellation of any Certificates or Additional Certificates by the Trustee, upon the written request of an Authorized Representative of the City, the Trustee shall execute a certificate of cancellation and destruction in duplicate by the signature of one of its authorized officers describing the Certificates or Additional Certificates so cancelled. One executed certificate shall be filed with the City, and the other executed certificate shall be retained by the Trustee. The Trustee may charge the City for its reasonable costs of permanent recordkeeping, including microfilming. PUBL:27179_1 1 138182345.62 22 ---~ _._----_._._--~_._- Section 315. Nonpresentment of Certificates and Additional Certificates. Except as otherwise provided in Section 316 hereof, in the event any Certificate or Additional Certificate shall not be presented for payment when the Principal Component thereof becomes due, if funds sufficient to pay such Certificate or Additional Certificate shall be held by the Trustee for the benefit of the Owner thereof, all liability of the City to the Owner thereof for the payment of the Principal Component of and Interest Component due with respect to such Certificate or Additional Certificate, as applicable, shall forthwith cease and be completely discharged and thereupon it shall be the duty of the Trustee to hold such funds (subject to Section 316 hereof), without liability for interest thereon, for the benefit of the Owner of such Certificate or Additional Certificate, as applicable, who shall thereafter be restricted exclusively to such funds for any claim of whatever nature on, or with respect to, such Certificate or Additional Certi ficate. Section 316. Unclaimed Money. All money which the Trustee shall have received from any source and set aside for the purpose of paying any of the Certificates and any Additional Certificates shall be held in trust for the respective Owners of such Certificates and Additional Certificates, but any money and earnings thereon which shall be so set aside or deposited by the Trustee and which shall remain unclaimed by the Owners of such Certificates and Additional Certificates for a period of two years after the date on which the payment with respect to which such money is set aside became due and payable shall be paid to the City. Thereafter, the Owners of such Certificates and any Additional Certificates shall look only to the City for payment and then only to the extent of the amount so received by the City from the Trustee without any interest thereon, and the Trustee shall have no responsibility with respect to such money. Section 317. Additional Certificates. At any time after the Delivery Date of the Certificates, the City may provide for the execution and delivery of and sell Additional Certificates secured on a parity with the Certificates, in such Principal Components as it deems necessary for its public purposes (evidenced by a resolution to that effect passed by the City's City Council), subject to the following conditions precedent to such execution, delivery and sale: (a) The City shall be in compliance with all covenants set forth in the Lease Agreement and this Trust Agreement and a certificate to that effect shall have been filed with the Trustee upon which Trustee may absolutely rely; (b) The City shall have obtained and provided to the Trustee the written consent of the Insurer; (c) The City shall have obtained and provided to the Trustee written confirmation from each Rating Agency that its then existing rating with respect to the Certificates and any Additional Certificates will not be reduced or withdrawn as a result of such execution and delivery of Additional Certificates; (d) The City shall have delivered to the Trustee a certificate from an independent and qualified MAl real estate appraiser selected by the City setting forth his or her findings that the Site based upon the then existing improvements on the Site (i) has an annual fair rental value during the remainder of the term of the Lease, as supplemented, which is equal to or greater than the total annual Lease Payments and P08L:27179_1 1 138182345.62 23 Additional Payments (assuming that the annual Additional Payments. due in the future will equal the average annual Additional Payments prior to the date of execution and delivery of such Additional Certificates) required to be paid under the Lease during any year of the remainder of the term following the execution and delivery of the Additional Certificates, and (ii) has a useful life at least equal to the remaining term of the Lease, as supplemented; provided, if the Additional Certificates are being executed and delivered solely for the purpose of making repairs, replacements, additions or improvements to the Site, an appraisal shall not be required if the City shall have certified in writing to the Trustee that it has entered into a fixed price construction contract for the repairs, replacements, additions or improvements to the Site, which contract includes a scheduled completion date and provides for liquidated damages sufficient to pay the portion of Lease Payments attributable thereto for each day from the scheduled completion date to the date on which such repairs, replacements, additions or improvements are accepted by the City, and deposited with the Trustee a sufficient amount of capitalized interest to pay the interest due with respect to the Additional Certificates until such scheduled completion date; (e) The City shall have obtained and provided to the Trustee a certificate stating that the City holds certificates of insurance relating to the Site (as it will be comprised at and after the execution and delivery of such Additional Certificates) which comply with the requirements of the Lease Agreement; (f) Provision shall have been made for the deposit into the Reserve Account of an amount equal to the amount necessary to increase the balance therein to the combined Reserve Requirement for the Certificates and any Additional Certificates, as calculated at the time such Additional Certificates are to be executed and delivered; (g) Provision shall have been made for the execution and delivery of a supplement to the Lease Agreement setting forth the total Lease Payments to be paid by the City following the execution and delivery of the Additional Certificates; (h) Provision shall have been made for the execution and delivery of a Supplemental Trust Agreement setting forth the terms of the Additional Certificates, including but not limited to (i) the purpose for which such Additional Certificates are to be executed and delivered and the funds into which the proceeds thereof are to be deposited on the Delivery Date of the Additional Certificates (including provision for any deposit required to be made to the Reserve Account as required by paragraph (e) above), (ii) the aggregate principal amount of Additional Certificates to be executed and delivered, (Hi) redemption premiums, if any, and the redemption terms, if any, for such Additional Certificates, and (iv) such other provisions as are necessary or appropriate and not inconsistent with this Trust Agreement; (i) The City shall have obtained and provided to the Trustee an opinion of Bond Counsel to the effect that (i) the execution and delivery of such Additional Certificates will not adversely affect the exclusion from gross income for federal income tax purposes or the exemption from State of California personal income taxation of the Interest Component of the Certificates and any Additional Certificates previously issued on a tax-exempt basis, and (ii) following the execution and delivery of such Additional PUBL:27179_1 1 138182345.62 24 Certificates, the Lease Agreement and this Trust Agreement, including any supplements to such agreements, will constitute the valid and legally binding agreements of the City enforceable in accordance with their terms; and (j) The execution and delivery of such Additional Certificates shall have been duly authorized by the City and the Agency and certified copies of the resolutions authorizing such execution and delivery shall have been delivered to the Trustee. So long as the City complies with the foregoing provisions, nothing in this Trust Agreement or the Lease Agreement shall be construed to prohibit the execution and delivery of Additional Certificates for the purpose of effecting a refunding of any Outstanding Certificate or Additional Certificate; provided, however, that the City need not obtain the appraisal required under (d) above if the effect of such refunding is to reduce the total Lease Payments owed by the City in each Fiscal Year during the remaining Term of the Lease Agreement. ARTICLE IV ESTABLISHMENT AND ADMINISTRATION OF FUNDS AND ACCOUNTS Section 401. Establishment of Funds; Disposition of Proceeds of Certificates and Additional Certificates. There are hereby established with the Trustee the following special trust funds and accounts to be designated as follows and each such fund and account shall be kept by the Trustee separate and apart from all other funds and accounts: (a) The Project Fund, in which there is hereby established an Agency Rental Payment Account, a Costs of Issuance Account and an Acquisition and Construction Account; (b) The Certificate Fund, in which there is hereby established an Interest Account, a Principal Account, a Redemption Account and a Reserve Account; (c) The Lease Payment Fund; (d) The Insurance and Condemnation Fund; and (e) The Rebate Fund, in which there shall be established an Earnings Account, a Rebate Account and an Alternative Penalty Account. At the written direction of the City, the Trustee shall establish subaccounts or additional Accounts in the foregoing Funds and Accounts in connection with the execution and delivery of any Additional Certificates in order that a separate accounting of the proceeds of such Additional Certificates may be maintained. The Trustee may establish such funds and accounts as it deems necessary to perform its obligations under this Trust Agreement. PUBL:27179 _11138182345.62 25 On the Delivery Date of the Certificates, the Trustee agrees to receive from the Agency and deposit in the Agency Rental Payment Account the net proceeds of the Certificates, representing the payment by the Agency of the rental due to the City under the Site Lease on the Delivery Date for the Certificates. The Trustee agrees that on the Delivery Date it will transfer $ to the Escrow Bank for deposit in the Escrow Fund in order to defease the Prior Certificates and that it will thereafter hold the remainder of such proceeds pursuant to the terms of this Trust Agreement for the benefit of the City and will transfer such amounts to the following funds and accounts in the following amounts: Interest Account: $ Costs of Issuance Account: $ Reserve Account: $ The Trustee agrees that it will immediately transfer $ from the Costs of Issuance Account to the Insurer as payment of the insurance premium for the Certificates. The Trustee shall deposit in the Acquisition and Construction Account from time to time any amounts deposited with it by the City from time to time which the City directs, in writing, to be deposited into the Acquisition and Construction Account. The net proceeds of any Additional Certificates shall be deposited in the Agency Rental Payment Account of the Project Fund and thereafter transferred in accordance with the provisions of the Supplemental Trust Agreement executed with respect to such Additional Certificates. Section 402. Project Fund. (a) Costs of Issuance Account. There shall be paid into the Costs of Issuance Account the amount required to be so paid by the provisions of Section 401 hereof and Costs of Issuance shall be paid from amounts on deposit therein by the Trustee in accordance with written instructions to be given to the Trustee by an Authorized Representative of the City substantially in the form set forth in Exhibit B hereto. Any unexpended proceeds of the Certificates or any issue of Additional Certificates, as applicable, remaining in the Costs of Issuance Account on the date which is 180 days after the Delivery Date for the Certificates or such Additional Certificates, respectively, or such earlier date as is specified in writing by an Authorized Representative of the City, shall be transferred by the Trustee in the case of any proceeds of the Certificates to the Interest Account of the Certificate Fund and in the case of any proceeds of Additional Certificates to the Acquisition and Construction Account. (b) Acauisition and Construction Account. In connection with the execution and delivery of any Additional Certificates, there shall be paid into the Acquisition and Construction Account the amount so required to be paid by the provisions of Section 40 1 and the Cost of the Project shall be paid from the amounts on deposit in such account. The Trustee shall make payments of the Cost of the Project from the Acquisition and Construction Account in the amounts, at the times, in the manner, and on the other terms and conditions set forth in this subsection. No such payment shall be made until the Trustee shall have received a requisition PUBL:27179_1 1 138182345.62 26 -....---.--." -.--.-- ---~-----_.-_.- signed by an Authorized Representative of the City substantially in the form set forth in Exhibit B hereto. Upon receipt of a requisition in the form of Exhibit B hereto, the Trustee is authorized to act thereon without further inquiry and shall not be responsible for the contents of such requisition or the application of such funds except for ascertaining that it has been signed by an Authorized Representative of the City. The Trustee shall issue its check or, upon request, a wire transfer, for each payment required by a requisition to the extent funds are available in the Acquisition and Construction Account. (c) Comoletion of Proiect. The completion of the acquisition, construction, delivery and installation of the Project, or the portion thereof to be completed with the proceeds of an issue of Additional Certificates, shall be evidenced by the filing of a Completion Certificate of an Authorized Representative of the City, which shall be filed with the Trustee, stating (1) that the acquisition, construction, delivery and installation of the Project, or the applicable portion thereof, has been completed substantially in accordance with the plans and specifications applicable thereto and that the Project, or the applicable portion thereof, is ready for use, (2) the date of such completion, and (3) the amount, if any, required, in the opinion of the signer or signers, for the payment of any remaining part of the Cost of the Project, which amount shall be retained in the Acquisition and Construction Account of the Project Fund. A separate Completion Certificate may be filed with respect to the portion of the Project to be financed from the proceeds of the Certificates and each issue of Additional Certificates. (d) Yield Restriction. If any moneys which are proceeds of an issue of Additional Certificates remain in the Project Fund on the date which is three years after the Delivery Date for such issue of Additional Certificates, all such amounts shall immediately be invested at the written direction of the City in Permitted Investments which are tax-exempt obligations the interest on which is not a specific preference item for purposes of the alternative minimum tax or in Permitted Investments the yield (as defmed in Section III of the Tax Certificate) on which does not exceed the yield on the issue of Additional Certificates from which such proceeds were derived, unless the Trustee is provided with an opinion of Bond Counsel stating that another investment of such amounts will not cause the Interest Component of any Lease Payment to be included in gross income for federal income tax purposes. (e) Transfer of Surolus. Upon the filing of a Completion Certificate with respect to an issue of Additional Certificates, the Trustee shall transfer from the Acquisition and Construction Account and deposit in the Reserve Account any amount necessary to increase the amount on deposit therein to the Reserve Requirement. Thereafter, and at the written direction of an Authorized Representative of the City, the Trustee shall (i) transfer any balance in the Acquisition and Construction Account to the Interest Account or the Principal Account of the Certificate Fund to pay the Principal Components and Interest Components due with respect to the Certificates and any Additional Certificates on the next Interest Payment Date, or (ii) retain any balance in the Acquisition and Construction Account to be used for any capital requirements of the City, whether or not related to the Project, upon such terms and conditions as shall not in the opinion of Bond Counsel impair the exclusion from gross income for federal income tax purposes of the Interest Component of any Lease Payment. PUBL:27179_11138182345.62 27 Section 403. Lease Payment Fund. There shall be paid into the Lease Payment Fund the amount required to be so paid by the provisions of Section 404(d)(iv) hereof, all Lease Payments, other than Prepayments, and any proceeds of Rental Interruption Insurance received by the Trustee with respect to the Lease Agreement immediately upon their receipt. The Trustee shall apply amounts deposited to the Lease Payment Fund as follows: (a) on the Business Day next preceding each Interest Payment Date, the Trustee shall transfer to the Interest Account of the Certificate Fund the amount necessary to increase the balance therein to an amount equal to the Interest Component due with respect to the Certificates and any Additional Certificates on such Interest Payment Date; (b) on the Business Day next preceding each Principal Component Payment Date on which a portion of the Principal Components is due at maturity or upon a Sinking Account Installment Date, the Trustee shall transfer to the Principal Account of the Certificate Fund the amount necessary to increase the balance therein to an amount equal to the Principal Components, including Sinking Account Installments, due with respect to the Certificates and any Additional Certificates on such Principal Component Payment Date; (c) on the date of receipt of any delinquent Lease Payments, the Trustee shall transfer to the Reserve Account of the Certificate Fund the amount needed to increase the amount therein to the Reserve Requirement; and (d) any amounts remaining in the Lease Payment Fund after the transfers referred to in (a), (b) and (c) above shall remain in the Lease Payment Fund until all Certificates and Additional Certificates are paid, redeemed or defeased, in which case all such amounts shall be paid to the City. Section 404. Certificate Fund. (a) Interest Account. Moneys transferred to the Interest Account from the Lease Payment Fund and the Reserve Account shall be applied to pay the Interest Components due on each Interest Payment Date. (b) Princioal Account. Moneys transferred to the Principal Account from the Lease Payment Fund and the Reserve Account shall be applied to pay the Principal Components at maturity or upon a Sinking Account Installment Date. To the extent that the Trustee has insufficient funds on deposit in the Interest Account, the Principal Account and the Redemption Account of the Certificate Fund (including amounts transferred from the Reserve Account) to pay the Principal Components and Interest Components due with respect to the Certificates and any Additional Certificates as a result of an abatement of Lease Payments pursuant to Section 4.10 of the Lease Agreement, each Owner of a Certificate and each Owner of an Additional Certificate remaining Outstanding will be paid a pro rata portion of the Interest Components and Principal Components of the Lease Payments actually received that corresponds to his proportionate interest in the Lease Payments. PUBL:27179_1 1 138182345.62 28 ----_._--,-_. ---- -----...- (c) Redemotion Account. The Trustee shall apply moneys in the Redemption Account as provided in this Section 404(c). Amounts in the Redemption Account shall be applied to pay the Redemption Price of Certificates and Additional Certificates pursuant to Sections 310(a) and (c) hereof and of any Additional Certificates as specified in the Supplemental Trust Agreement for such Additional Certificates. All expenses in connection with any redemption shall be paid by the City. The Trustee shall deposit in the Redemption Account as received, all Prepayments and any amounts to be transferred to the Redemption Account in accordance with Section 405. All of said moneys shall be set aside in the Redemption Account for the purpose of redeeming the Certificates and any Additional Certificates in advance of their maturity and shall be applied on or after the Redemption Date for such Certificates and Additional Certificates to the payment of the Redemption Price due with respect to the Certificates and Additional Certificates to be redeemed upon presentation and surrender of such Certificates and Additional Certificates. Any excess amounts remaining in the Redemption Account following the redemption or redemptions to be made with such amounts shall be transferred to the Lease Payment Fund. (d) Reserve Account. (i) The Reserve Requirement shall be maintained by the Trustee in the Reserve Account, which shall be kept separate and apart from all other funds and money held by the Trustee, until the Lease Payments are paid in full pursuant to the terms of the Lease Agreement or until this Trust Agreement is terminated. The Trustee shall apply moneys in the Reserve Account as provided in this Section 404(d). (ii) If on the Business Day prior to any Interest Payment Date the amount in the Interest Account of the Certificate Fund shall be less than the amount required for the Interest Components due with respect to the Certificates and any Additional Certificates on said Interest Payment Date, the Trustee shall withdraw from the Reserve Account and deposit in the Interest Account the amount necessary to make up the deficiency on such Business Day. In the event of any such transfer, the Trustee shall, within five days thereafter, provide written notice to the City of the amount and date of such transfer. (iii) If on the Business Day prior to any Principal Component Payment Date the amount in the Principal Account of the Certificate Fund shall be less than the amount required to pay the Principal Components payable on the Certificates and any Additional Certificates on such Principal Component Payment Date, the Trustee shall, after making any transfers required by the preceding paragraph, withdraw from the Reserve Account and deposit in the Principal Account the amount necessary to make up the deficiency on such Business Day. In the event of any such transfer, the Trustee shall, within five days thereafter, provide written notice to the City of the amount and date of such transfer. (iv) Except as permitted by the following sentence, in the event the amount on deposit in the Reserve Account exceeds the Reserve Requirement, the Trustee shall, upon written direction of the City, not less frequently than semiannually, transfer PUBL:27179_11138182345.62 29 - such amounts (a) to the Rebate Fund, if any deposit is then required to be made pursuant to Section 406 hereof, and (b) to the Lease Payment Fund for application in accordance with Section 403 hereof. In the event that a Reserve Account Policy or Credit Facility is provided to satisfy all or a portion of the Reserve Requirement, any cash on deposit in the Reserve Account which is no longer needed to satisfy the Reserve Requirement will be transferred by the Trustee, at the written direction of an Authorized Representative of the City, to the Project Fund for application in accordance with Section 401 hereof, to a special account to be established for the payment of the fees related to the Reserve Account Policy or Credit Facility, or to the City's General Fund provided that there shall have been delivered to the Trustee, the City and the Agency an opinion of Bond Counsel to the effect that such transfer to the City's General Fund will not impair the exclusion from gross income for federal income tax purposes of the Interest Component of any Lease Payment. For purposes of determining the amount on deposit at any time, the Trustee shall value all Permitted Investments in the Reserve Account in accordance with Section 409 hereof. A Reserve Account Policy must have a maturity date which is equal to the last maturity of any Outstanding Certificate or Additional Certificate. A Credit Facility must either have a maturity date which is equal to the last maturity of any Outstanding Certificate or Additional Certificate or provide that it may be drawn upon in its full stated amount unless prior to the expiration date of the Credit Facility a substitute Credit Facility, which when combined with the other amounts in the Reserve Account will equal the Reserve Requirement, has been delivered to the Trustee. Any Credit Facility must permit the Trustee to draw on such instrument in the full stated amount thereof in the event that the long-term obligations of the issuer thereof is rated less than AA by Standard & Poor's or Aa by Moody's. (v) Moneys in the Reserve Account shall be used solely for the purpose of: (A) making up deficiencies in the Interest Account as provided in Section 404(d)(ii) hereof; (B) making up deficiencies in the Principal Account as provided in Section 404(d)(iii) hereof; (C) making the transfers as provided in Section 404(d)(iv) hereof; (0) with respect to the amounts in any subaccount therein established for the Certificates or any Additional Certificates, providing for the payment of the final Lease Payments represented by the issue of Certificates or Additional Certificates for which such subaccount was created, in which event the Trustee shall transfer such amounts on deposit in the Reserve Account to the Lease Payment Fund to be applied as a credit against such final Lease Payments; or PUBL:27179_1 1 138182345.62 30 - --------------------- (E) providing for the defeasance pursuant to Section 901 hereof or the Prepayment of all Lease Payments attributable to the Certificates or an issue of Additional Certificates, in which case the amounts in the subaccount of the Reserve Account established for such issue, or in the case of a partial defeasance the amount in the subaccount that will no longer be required as a part of the Reserve Requirement following the defeasance, shall be transferred to the Redemption Account to be applied to the defeasance or redemption of the applicable issue of Certificates or Additional Certificates or portion thereof. Section 405. Insurance and Condemnation Fund. (a) Aoolication of Net Proceeds. There shall be paid into the Insurance and Condemnation Fund the Net Proceeds of the hazard insurance maintained pursuant to Section 5.3 of the Lease Agreement and any condemnation awards constituting Net Proceeds. In the event that the City elects to restore the Site as provided in Section 6. 1 (b) of the Lease Agreement, then such Net Proceeds shall be disbursed in accordance with requisitions submitted to the Trustee by an Authorized Representative of the City. Promptly upon determining that the restoration of the Site is complete, the Authorized Representative of the City shall so notify the Trustee in writing that the restoration is complete. Any balance of Net Proceeds remaining after the final disbursement to restore the Site, and, in the event the City elects not to restore the Site as provided in Section 6.1(c) of the Lease Agreement, all Net Proceeds shall be transferred by the Trustee to the Redemption Account and applied to the redemption of Certificates and any Additional Certificates on a pro rata basis pursuant to Section 31O(a)(i) hereof. (b) Annlication of Title Insurance Proceeds. The Net Proceeds of any Title Insurance obtained in accordance with Section 5.5 of the Lease Agreement and received by the Trustee in respect of the Site upon receipt shall be deposited in the Insurance and Condemnation Fund and shall be applied and disbursed by the Trustee as follows: (i) If the City determines that the title defect giving rise to such proceeds has not materially affected the operation of the Site and will not result in an abatement of Lease Payments payable by the City under the Lease Agreement, at the written direction of an Authorized Representative of the City, such proceeds shall be transferred into the Reserve Account of the Certificate Fund to the extent that the amount therein is less than the Reserve Requirement. Amounts not required to be so deposited shall be remitted to the City and used for any lawful purpose. (ii) If any portion of the Site has been affected by such title defect, and if the City determines that such title defect will result in an abatement of Lease Payments payable by the City under the Lease Agreement, then the Trustee, at the written direction of an Authorized Representative of the City, shall immediately transfer such proceeds to the Redemption Account of the Certificate Fund and such proceeds shall be applied to the redemption of Certificates and any Additional Certificates on a pro rata basis pursuant to Section 310(a)(ii) hereof. PUBL,27179_11138182345.62 31 Section 406. Rebate Fund. (a) Establishment of Rebate Fund. All money at any time deposited in the Rebate Account or the Alternative Penalty Account of the Rebate Fund shall be held by the Trustee in trust, for payment to the United States Treasury. A separate subaccount of the Rebate Account, the Alternate Penalty Account and the Earnings Account shall be established for the Certificates and each issue of Additional Certificates. All amounts on deposit in the Rebate Fund shall be governed by this Section 406 and the Tax Certificate, unless the City obtains an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of the Interest Component of each Lease Payment will not be adversely affected for federal income tax purposes if such requirements are not satisfied. (1) There shall be transferred to the Earnings Account for disposition as described in this Section the amounts described in Section 408(b) hereof. (2) Rebate Account. The following requirements shall be satisfied with respect to each subaccount of a Rebate Account: (i) Annual Comoutation. Within 55 days of the end of each Certificate Year, the City shall calculate or cause to be calculated the amount of rebatable arbitrage for the Certificates and each issue of Additional Certificates, in accordance with Section 148(f)(2) of tl:e Code and Section 1.148-3 of the Rebate Regulations (taking into account any applicable exceptions with respect to the computation of the rebatable arbitrage described in the Tax Certificate ~, the temporary investments exceptions of Section 148(f)(4)(B) and (C) of the Code), and taking into account whether the election pursuant to Section 148(f)(4)(C)(vii) of the Code (the "l'h% Penalty") has been made), for this purpose treating the last day of the applicable Certificate Year as a computation date, within the meaning of Section 1.148-1(b) of the Rebate Regulations (the "Rebatable Arbitrage"). The City shall obtain expert advice as to the amount of the Rebatable Arbitrage to comply with this Section. (ii) Annual Transfer. Within 55 days of the end of each Certificate Year for which Rebatable Arbitrage must be calculated as required by the Tax Certificate, upon the written direction of an Authorized Representative of the City, an amount shall be deposited to each subaccount of the Rebate Account by the Trustee from any funds, including the Earnings Account, so designated by the City if and to the extent required, so that the balance in the Rebate Account shall equal the amount of Rebatable Arbitrage so calculated by or on behalf of the City in accordance with (i) of this Subsection (a)(l) with respect to the Certificates and each issue of Additional Certificates. In the event that immediately following any transfer required by the previous sentence, or the date on which the City determines that no transfer is required for such Certificate Year, the amount then on deposit to the credit of the applicable subaccount of the Rebate Account exceeds the amount required to be on deposit therein, upon written instructions from an Authorized Representative of the City, the Trustee shall withdraw the excess from the appropriate subaccount of the Rebate Account and then credit the excess to the Lease Payment Fund. PUBL:27179_1 1 138182345.62 32 --- (iii) Pavment to the Treasury. The Trustee shall pay, as directed in writing by an Authorized Representative of the City, to the United States Treasury, out of amounts in each subaccount of the Rebate Account, (X) Not later than 60 days after the end of (A) the fifth Certificate Year for the Certificates and each issue of Additional Certificates, and (B) each applicable fifth Certificate Year thereafter, an amount equal to at least 90% of the Rebatable Arbitrage calculated as of the end of such Certificate Year for the Certificates and each issue of Additional Certificates, as applicable; and (Y) Not later than 60 days after the payment or redemption of all the Certificates or all Additional Certificates, as applicable, an amount equal to 100% of the Rebatable Arbitrage calculated as of the end of such applicable Certificate Year, and any income attributable to the Rebatable Arbitrage, computed in accordance with Section 148(f) of the Code. In the event that, prior to the time of any payment required to be made from the Rebate Account, the amount in the Rebate Account is not sufficient to make such payment when such payment is due, the City shall calculate or cause to be calculated the amount of such deficiency and deposit an amount received from any legally available source equal to such deficiency prior to the time such payment is due. Each payment required to be made pursuant to this Subsection (a)(l) shall be made to the Internal Revenue Service Center, Philadelphia, Pennsylvania 19255 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038-T, or shall be made in such other manner as provided under the Code. (3) Alternative Penalty Account. (i) Six-Month Comoutation. If the Ilh % Penalty has been elected, within 85 days of each particular Six-Month Period, the City shall determine or cause to be determined whether the l'h % Penalty is payable (and the amount of such penalty) as of the close of the applicable Six-Month Period. The City shall obtain expert advice in making such determinations. (ii) Six-Month Transfer. Within 85 days of the close of each Six-Month Period, the Trustee, at the written direction of an Authorized Representative of the City, shall deposit an amount in the Alternative Penalty Account from any source of funds held by the Trustee pursuant to this Trust Agreement and designated by the City in such written directions or provided to it by the City, if and to the extent required, so that the balance in the Alternative Penalty Account equals the amount of l'h % of the Penalty due and payable to the United States Treasury determined as provided in Subsection (a)(2)(i) above. In the event that immediately following any transfer provided for in the previous sentence, or the date on which the City determines that no transfer is required for such Certificate Year, the amount then on deposit to the credit of the Alternative Penalty Account exceeds the amount required to be on deposit therein to make the payments required by Subsection (iii) below, the Trustee, at the written direction of an Authorized Representative of the City, may withdraw the excess from the Alternative Penalty Account and credit the excess to the Lease Payment Fund. PUBL:27179 _11138182345.62 33 -, (Hi) Payment to the Treasury . The Trustee shall pay, as directed in writing by an Authorized Representative of the City, to the United States Treasury, out of amounts in an Alternative Penalty Account, not later than 90 days after the close of each Six-Month Period the I1h % Penalty, if applicable and payable, computed with respect to the Certificates or any issue of Additional Certificates in accordance with Section 148(t)(4) of the Code. In the event that, prior to the time of any payment required to be made from the Alternative Penalty Account, the amount in such Account is not sufficient to make such payment when such payment is due, the City shall calculate the amount of such deficiency and direct the Trustee, in writing, to deposit an amount equal to such deficiency into the Alternative Penalty Account from the applicable Earnings Account or any other funds held by the Trustee pursuant to this Trust Agreement and designated by the City in such written directions prior to the time such payment is due. Each payment required to be made pursuant to this Subsection (a)(2) shall be made to the Internal Revenue Service, Philadelphia, Pennsylvania 19255 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038-T or shall be made in such other manner as provided under the Code. (b) Disoosition of Unexoended Funds. Any funds remaining in the Rebate Fund with respect to the Certificates or an issue of Additional Certificates after redemption and payment of the Certificates or such related issue of Additional Certificates and the payments described in Subsection (a)(l)(iii) or (a)(2)(iii) (whichever is applicable), may be withdrawn by the Trustee at the written direction of the City and utilized in any manner by the City. (c) Survival of Def.."'c"l'tce and Final Payment. Notwithstanding anything in this Section or this Trust Agreement to the contrary, the obligation of the City to comply with the requirements of this Section shall survive the defeasance and final payment of the Certificates and any Additional Certificates. Section 407. Deposits of Money. All moneys required to be held by the Trustee under the provisions of this Trust Agreement shall be deposited with the Trustee. All moneys deposited under the provisions of th is Trust Agreement with the Trustee constituting a part of the Trust Estate shall be held in trust for the Owners of Certificates and the Owners of any Additional Certificates and applied only in accordance with the provisions of this Trust Agreement. All moneys deposited with the Trustee shall be credited to the particular fund, account or subaccount to which such moneys belong. Section 408. Investment of Certain Accounts. (a) Moneys held in all Funds, Accounts and subaccounts shall be invested and reinvested by the Trustee in Permitted Investments held in the name of the Trustee which mature not later than such times as shall be necessary to provide moneys when needed for payments to be made from such Funds, Accounts and subaccounts and in any event in the case of each subaccount of the Reserve Account not later than the final maturity of the Certificates or issue of Additional Certificates with respect to which subaccount was created; provided that funds in the PUBL:27179_11138182345.62 34 - -'-----~---~-_.- Reserve Account shall not be invested in Permitted Investments described in clause (j) of the definition thereof. Moneys in the Rebate Fund shall be invested only in obligations of, or obligations the payment of the principal of and interest on which is unconditionally guaranteed by, the United States of America and which have a maturity no longer than the date on which such amounts will be required to make any payments to the United States required by Section 406 hereof. The Trustee shall make all such investments of moneys held by it in accordance with written instructions received from an Authorized Representative of the City two days in advance of the investment. In the absence of such written instructions from the City, the Trustee shall invest in investments described in subparagraph (g) of the definition of .Permitted Investments.. (b) Any income or interest earned on any moneys or investments in the Project Fund or the Certificate Fund shall be deposited in the Acquisition and Construction Account of the Project Fund, if any, until all amounts in the Project Fund have been expended. After such date, all earnings on amounts in the Certificate Fund shall be deposited in the Lease Payment Fund except for income or interest earned on amounts in each subaccount of the Reserve Account in excess of the yield on the Certificates or Additional Certificates for which such subaccount was created which shall be deposited in the appropriate subaccount of the Earnings Account of the Rebate Fund. For purposes of this Section 408(b), the Trustee shall assume the yield on the Certificates to be _ % per annum and the yield on each issue of Additional Certificates to be as specified in a certificate of an Authorized Representative of the City and shall estimate the amount of the earnings on the Reserve Account which are in excess of such yields which are to be deposited in the Earnings Account. The Trustee shall have no responsibility for the accuracy of any such estimate. Additionally, any income or interest earned on any moneys or investments in any Fund, Account or subaccount other than the Project Fund and the Certificate Fund shall remain in the respective Funds, Accounts and subaccounts. In crediting interest earnings, the Trustee shall post earnings to the appropriate subaccount of each of the foregoing Funds, Accounts and subaccounts so that earnings on the proceeds of the Certificates and each issue of Additional Certificates are separately maintained and not commingled. (c) Nothing herein shall prevent any Permitted Investments acquired as investments of funds held hereunder from being issued or held in book -entry form on the books of the Department of the Treasury of the United States of America. (d) The Trustee may act as principal or agent in the acquisition or disposition of an investment. (e) To the extent that Permitted Investments are registerable securities, they shall be registered in the name of the Trustee. Section 409. Valuation and Sale of Investments. Obligations purchased as an investment of moneys in any Fund, Account or subaccount created under the provisions hereof shall be deemed at all times to be a part of such Fund, Account or subaccount and any profit realized from the liquidation of such investment shall be credited to, and any loss resulting from the liquidation of such investment shall be charged to, the computation of net interest earned on the moneys and investments of such Fund, Account or subaccount. PUBL:27179_11138182345.62 35 In computing the amount in any Fund or Account created under the-provisions hereof for any purpose provided herein, obligations purchased as an investment of moneys therein shall be valued at the market value thereof and amounts in the Reserve Account shall be so valued on or about the thirty-fifth calendar day preceding each Interest Payment Date. Except as otherwise provided herein, the Trustee shall sell at the best price obtainable or present for redemption or transfer as provided in the next sentence any obligation so purchased as an investment whenever it shall be requested in writing by an Authorized Representative of the City so to do or whenever it shall be necessary in order to provide moneys to meet any payment or transfer from any Fund, Account or subaccount held by it. In lieu of such sale or presentment for redemption, the Trustee may, in making the payment or transfer from any Fund, Account or subaccount mentioned in the preceding sentence, transfer such investment obligations or interest appertaining thereto if such investment obligations shall mature or be collectable at or prior to the time the proceeds thereof shall be needed and such transfer of investment obligations may be made in book-entry form. Except for its own negligence or willful misconduct, the Trustee shall not be liable or responsible for making any such investment in the manner provided in this Trust Agreement or for any loss resulting from any such investment or the sale or liquidation thereof. ARTICLE V COVENANTS, EVENTS OF DEFAULT, REMEDIES OF OWNERS AND LIMITATIONS OF LIABILITY Section 501. Trustee to Enforce Lease Agreement; Notice of Nonpayment. Subject to the provisions of this Trust Agreement, the Trustee covenants and agrees with the Certificate Owners and the Owners of any Additional Certificates to enforce the Lease Agreement against the City. In the event of delinquency in the payment of Lease Payments due by the City pursuant to the Lease Agreement, the Trustee shall on the Business Day following such delinquency give written notice of the delinquency and the amount thereof to the City. Section 502. Assignment of Rights. Pursuant to the Assignment Agreement, the Agency has transferred, assigned and set over to the Trustee all of the Agency's rights, title and interest in and to the Site Lease and the Lease Agreement (other than its rights to indemnification and the payment of certain of its costs and expenses), including without limitation all of the Agency's right to receive Lease Payments from the City under the Lease Agreement, its right to receive the Net Proceeds relating to the Site, its right to enforce payment of such Lease Payments when due, or otherwise protect its interests and enforce its rights under the Lease Agreement. Section 503. Events of Default. Any event of default under the Lease Agreement, as defined in Section 9.1 thereof, shall be an "Event of Default" under this Trust Agreement and the term "Events of Default" shall mean, whenever it is used in this Trust Agreement, anyone or more of such events. Section 504. Application of Funds. All moneys received by the Trustee pursuant to any right given or action taken under the provisions of this Article V or Article IX of the Lease Agreement shall be applied by the Trustee in the order following upon presentation of the PUBL:27179_11138182345.62 36 ----... Certificates and any Additional Certificates, and the stamping thereon of the payment if only partially paid, or upon the surrender thereof if fully paid -- f.ia1, to the payment of the costs and expenses of the Trustee and thereafter, to the Certificate Owners and the Owners of any Additional Certificates in declaring such Event of Default, including reasonable compensation to its or their agents, attorneys and counsel; Second, to the payment to the Persons entitled thereto of all Interest Components then due in the order of the due date thereof and, if the amount available shall not be sufficient to pay in full any Interest Component maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the Persons entitled thereto without discrimination or preference; Third, to the payment to the Persons entitled thereto of the unpaid Principal Components which shall have become due, whether at maturity or by call for redemption, in the order of their due dates, with interest on each overdue Principal Component at the rate represented by the respective Certificate or Additional Certificate to which such Principal Component relates, and, if the amount available shall not be sufficient to pay in full all the Certificates and Additional Certificates due on any date, then to the payment thereof ratably, according to the amounts of Principal Component due on such date to the Persons entitled thereto, without any discrimination or preference; and Fourth, if there shall exist any remainder after the foregoing payments, such remainder shall be paid to the City. Section 505. Institution of Legal Proceedings. If one or more Events of Default shall happen and be continuing, the Trustee in its discretion may, and upon the written request of the Owners of not less than a majority of the aggregate of the Certificates and Additional Certificates then Outstanding, and upon being indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of the Owners of Certificates and Additional Certificates by enforcing any of the remedies provided in Article IX of the Lease Agreement. Section 506. Non-Waiver. Nothing in this Article V or in any other provision of this Trust Agreement or in the Certificates or Additional Certificates, shall affect or impair the obligation of City to payor prepay the Lease Payments in accordance with and subject to the terms and provisions of the Lease Agreement. No delay or omission of the Trustee or any Certificate Owner or Owner of Additional Certificates to exercise any right or power arising upon the happening of any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein, and every power and remedy given by this Article V to the Trustee or to the Certificate Owners or Owners of Additional Certificates may be exercised from time to time and as often as shall be deemed expedient by the Trustee, the Certificate Owners or Owners of Additional Certificates. Section 507. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee or the Certificate Owners or Owners of Additional Certificates is intended to be exclusive of any other remedy, and every such remedy shall be cumulative and shall be in pUBL:27179_11138IB2345.62 37 addition to every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise. Section SOB. Power of Trustee to Control Proceedings. In the event that the Trustee, upon the happening of an Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its duties hereunder, whether upon its own discretion or upon the request of the Owners of the required percentages of Certificates and Additional Certificates as set forth in Section 505 hereof, it shall have full power, in the exercise of its discretion for the best interests of the Certificate Owners and Owners of any Additional Certificates, with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, however, that the Trustee shall not discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, without the consent of the Owners of a majority in aggregate Principal Components of the Certificates and Additional Certificates Outstanding. Section 509. Limitation on Owners' Right to Sue. No Certificate Owner or Owner of any Additional Certificate shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon this Trust Agreement, unless (a) such Certificate Owner or Owner of any Additional Certificate shall have previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of the required percentages of Certificates and Additional Certificates as set forth in Section 505 hereof shall have made written request upon the Trustee to exercise the powers granted to the Trustee as assignee of the Agency or to institute such action, suit or proceeding in its own name; (c) said Certificate Owner or Owner of any Additional Certificate shall have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of 60 days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee. Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Certificate Owner or Owner of any Additional Certificate of any remedy hereunder; it being understood and intended that no one or more Certificate Owner or Owner of any Additional Certificate shall have any right in any manner whatever by his or their action to enforce any right under this Trust Agreement, except in the manner herein provided, and that all proceedings at law or in equity with respect to an Event of Default shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Owners of the Outstanding Certificates and Additional Certificates. Notwithstanding the foregoing provisions of this Section or any other provision of this Trust Agreement, the right of any Certificate Owner or Owner of any Additional Certificate to receive payment of said Owner's proportionate interest in the Lease Payments as the same become due shall not be impaired or affected without the consent of such Owner. Section 510. Reconstruction; App6cation of Net Proceeds. If any useful portion of the Site shall be destroyed or is damaged by fire or other casualty, or title to, or the temporary use of, such portion shall be taken under the exercise of the power of eminent domain, the City shall, as expeditiously as possible, continuously and diligently prosecute or cause to be PUBL:27179 _11138182345.62 38 ~-------- ._~"'_._---_.._--". prosecuted the repair, reconstruction, restoration or replacement thereof, unless it is determined under the provisions of Section 6. 1 (c) of the Lease Agreement that such repair, reconstruction, restoration or replacement is not to be undertaken. If such repair, reconstruction, restoration or replacement is to be undertaken, Net Proceeds of any hazard insurance paid on account of such damage or destruction shall be held by the Trustee in the Insurance and Condemnation Fund, and made available for, and to the extent necessary be applied to, the cost of the repair, reconstruction, restoration or replacement of the Site or portion thereof damaged, destroyed or taken. Pending such application, such proceeds may be invested by the Trustee, upon written direction of an Authorized Representative of the City received two days prior to the date of making such investment, in Permitted Investments which mature not later than such times as shall be necessary to provide moneys when needed to pay such cost of repair, reconstruction, restoration or replacement. Section 511. Accounts and Reports. (a) The Trustee shall keep proper books of record and account in which complete and correct entries shall be made of its transactions relating to the Site, the Project and each Fund, Account and subaccount established under this Trust Agreement and the Principal Components of the Certificates and Additional Certificates and which shall at all reasonable times during business hours and upon reasonable prior notice be subject to the inspection of the City and Owners of at least 25 % of the aggregate Principal Components of Certificates and Additional Certificates Outstanding. (b) The Trustee shall provide the City on or before the twentieth day after the end of each month with, a copy of its customary cash and asset statements relating to each Fund, Account or subaccount held by it under the Trust Agreement; provided that the Trustee shall not be obligated to provide an accounting for any accounts that have had no activity since the last reporting date and that have a balance of zero. Section 512. No Obligation by the City to Owners. Except for the payment of Lease Payments when due in accordance with the Lease Agreement and any other payment due and owing by the City under the Lease Agreement and the performance of the other covenants and agreements of the City contained in the Lease Agreement or hereunder, the City shall have no obligation or liability to any of the other parties or to the Certificate Owners or Owners of any Additional Certificates with respect to this Trust Agreement or the terms, execution, delivery or transfer of the Certificates or any Additional Certificates, or the distribution of Lease Payments to the Certificate Owners and the Owners of any Additional Certificates by the Trustee. Section 513. No Obligation with Respect to Performance by Trustee. The Trustee acknowledges that neither the City nor the Agency shall have any obligation or liability to any of the other parties or to the Certificate Owners or Owners of any Additional Certificates with respect to the performance by the Trustee of any duty imposed upon it under this Trust Agreement. Section 514. No Liability to Owners for Payment. Except as provided in this Trust Agreement, neither the Trustee nor the Agency shall have any obligation or liability to the Certificate Owners or Owners of any Additional Certificates with respect to the payment of the PUBL:27179 _11138182345.62 39 _. Lease Payments by the City when due, or with respect to the performance by the City of any other covenant by it in the Lease Agreement. Section 515. Possession and Enjoyment. From and after the execution of the Lease Agreement, the City shall during the term of the Lease Agreement peaceably and quietly have and hold and enjoy the Site, without suit, trouble or hindrance from the Trustee, except as expressly set forth in the Lease Agreement and this Trust Agreement. The Trustee will, at the written request of the City and at the City's cost, join in any legal action in which the City asserts its right to such possession and enjoyment, to the extent Trustee lawfully may do so in accordance with the provisions of this Trust Agreement and the Lease Agreement. Section 516. Federal Tax Covenants. Notwithstanding any other provision of this Trust Agreement, absent an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of the Interest Components with respect to the Certificates and any Additional Certificates executed and delivered on a tax-exempt basis will not be adversely affected, the City covenants to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income and specifically covenants, without limiting the generality of the foregoing, as follows: (i) Private Activity. The City will not take or omit to take action or refrain from any action or make any use of the proceeds of the Certificates or of any Additional Certificates executed and delivered on a tax-exempt basis or of any other monies or property which would cause the Certificates or any Additional Certificates executed and delivered on a tax-exempt basis to be "private activity bonds" within the meaning of Section 141 of the Code; (ii) Arbitral!e. The City will make no use of the proceeds of the Certificates or of any Additional Certificates executed and delivered on a tax-exempt basis or of any other amounts or property, regardless of the source, or take or omit to take any action which will cause the Certificates or any Additional Certificates executed and delivered on a tax-exempt basis to be "arbitrage bonds" within the meaning of Section 148 of the Code; (iii) Federal Guarantee. The City will make no use of the proceeds of the Certificates or of any Additional Certificates executed and delivered on a tax-exempt basis or take or omit to take any action that would cause the Certificates or any Additional Certificates executed and delivered on a tax-exempt basis to be "federally guaranteed" within the meaning of Section 149(b) of the Code; (iv) Information Re1)Ortinl!. The City will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149(e) of the Code; (v) Hedl!e Bonds. The City will make no use of the proceeds of the Certificates or of any Additional Certificates executed and delivered on a tax-exempt basis or any other amounts or property, regardless of the source, or take or omit to take any action that would cause the Certificates or any Additional Certificates executed and delivered on a tax-exempt basis to be considered "hedge bonds" within the meaning of PUBL:27179_1 1 138182345.62 40 Section 149(g) of the Code unless the City takes all necessary action to assure compliance with the requirements of Section 149(g) of the Code to maintain the exclusion from gross income of the Interest Components due with respect to the Certificates and any Additional Certificates executed and delivered on a tax-exempt basis for federal income tax purposes; and (vi) Miscellaneous. The City will take no action inconsistent with its expectations stated in the Tax Certificate and will comply with the covenants and requirements stated therein and incorporated by reference herein. ARTICLE VI CONCERNING TIlE TRUSTEE AND PAYING AGENT Section 601. Employment of Trustee. In consideration of the recitals hereinabove set forth and for other valuable consideration, the Trustee hereby agrees to receive, hold, invest and disburse the moneys to be paid to it pursuant to the Lease Agreement for credit to the various funds, accounts and subaccounts established by this Trust Agreement; to execute and deliver the Certificates and each issue of Additional Certificates; and to apply and disburse the Trust Estate and other moneys received pursuant to the Lease Agreement to the Certificate Owners and Owners of any Additional Certificates; and to perform certain other functions, all as herein provided and subject to the terms and conditions of this Trust Agreement. Section 602. Trustee Acceptance of Duties. The Trustee shall signify its acceptance of the duties and obligations imposed upon it hereby by executing and delivering this Trust Agreement; and by executing such acceptance the Trustee shall be deemed to have accepted such duties and obligations with respect to all the Certificates and Additional Certificates thereafter delivered, but only, however, upon the terms and conditions set forth herein. No duties or obligations, fiduciary or otherwise, other than those described herein shall be implied against the Trustee. In case an Event of Default has occurred (which has not been cured or waived), the Trustee may exercise such of the rights and powers vested in it by this Trust Agreement, and shall use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. Section 603. Evidence on Which Trustee May Act. (a) The Trustee, upon receipt of any notice, resolution, request, consent, order, certificate, report, opinion, bond, or other paper or document (including facsimile copies thereof) furnished to it pursuant to any provision hereof, shall examine such instrument to determine whether it conforms to the requirements hereof and shall be protected in acting upon any such instrument believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who mayor may not be of counsel to the City, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. Any action taken or omitted to be taken by the Trustee in good faith pursuant to this Trust Agreement upon the request or authority or consent of any person who at the time of making such request or giving such authority or consent is the Owner of any PUBL:27179_11138182345.62 41 Certificate or Additional Certificate shall be conclusive and binding upon aM future Owners of the same Certificate or Additional Certificate and upon Certificates or Additional Certificates, as applicable, executed and delivered in exchange therefor or in place thereof. The Trustee shall not be bound to recognize any person as an Owner of any Certificate or to take any action at his request unless such person is the registered owner of a Certificate or Additional Certificate as shown on the registration books. (b) Whenever the Trustee'shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be therein specifically prescribed) may be deemed to be conclusively proved and established by a certificate of an Authorized Representative of the City, and such certificate shall be full warrant for any action taken or suffered in good faith under the provisions hereof upon the terms hereof; but in its discretion the Trustee may in lieu thereof accept other evidence of such fact or matter or may require such further or additional evidence as to it may seem reasonable, but shall in no case be bound to secure the same. The Trustee may accept a certificate of an Authorized Representative of the City or an Authorized Representative of the Agency to the effect that an authorization in the form therein set forth has been adopted by the City or the Agency, as the case may be, as conclusive evidence that such authorization has been duly adopted, and is in full force and effect. (c) Except as otherwise expressly provided herein, any request, order, notice 01' other direction required or permitted to be furnished pursuant to any provision hereof by the City to the Trustee shall be sufficiently executed in the name of the City by an Authorized Representative of the City. Section 604. Obligations of Trustee. Upon the termination of the Lease Term for the reasons stated in Section 4.2 of the Lease Agreement, upon the payment of all amounts due with respect to the Certificates and any Additional Certificates from whatever source following a termination of the Lease Agreement pursuant to Section 4.2 thereof, or upon a defeasance of all Certificates and any Additional Certificates Outstanding pursuant to Section 901 hereof and after the payment by the City of all reasonable expenses, charges, counsel fees and other disbursements of the Trustee as set forth in Section 605 herein and in the Lease Agreement, the Trustee shall conveyor relinquish all of its interests in the Site to the City free and clear of all liens thereon which Trustee may have. Section 60S. Compensation. The City has agreed in the Lease Agreement to pay to the Trustee from time to time reasonable compel1Sation for all services rendered hereunder and also all reasonable expenses, charges, counsel fees and other disbursements, including those of its attorneys, agents, and employees, incurred il\ and about the performance of its powers and duties hereunder. Upon an Event of Default, but only upon an Event of Default, the Trustee shall have a first lien with right to payment prior to paYment on account of principal of, premium, if any, and interest due with respect to any Certificate and Additional Certificate, upon the amounts held hereunder for the foregoing fees, charges and expenses incurred by it. Section 606. Resignation of Trustee. The Trustee may at any time resign and be discharged of the duties and obligations created hereby by giving not less than 30 days' written notice to the City, the Insurer and the Owners of the Certificates and Additional Certificates Outstanding, specifying the date when such resignation shall take effect, and such resignation PUBL:27179_1 1 138182345.62 , 42 ,-, shall take effect upon the later of the day specified in such notice or the day on which a successor appointed by the City or the Owners as provided in Section 608 shall have accepted its appointment as successor trustee. Section 607. Removal of Trustee. So long as no Event of Default shall have occurred and then be continuing, the Trustee may be removed upon 30 days' written notice by the City or by an instrument or concurrent instruments in writing, filed with the Trustee, and signed by the Owners of a majority in aggregate principal amount of the Certificates and any Additional Certificates then Outstanding or their attorneys-in-fact duly authorized. Section 608. Appointment of Successor Trustee. (a) In case at any time the Trustee shall resign or shall be removed pursuant to this Trust Agreement or shall become incapable of acting, or shall be adjudged as bankrupt or insolvent, or if a receiver, liquidator or conservator of the Trustee, or of its property, shall be appointed, or if any public officer shall take charge or control of the Trustee or of its property or affairs, a successor will be appointed by the City; provided, nevertheless, that unless a successor Trustee shall have been appointed as aforesaid, the Trustee shall forthwith appoint or petition a court of competent jurisdiction to appoint a Trustee to fill such vacancy until a successor Trustee shall be appointed by the City as authorized in this Section. (b) Any Trustee appointed under the provisions of this Section in succession to the Trustee shall be a commercial bank or trust company or national banking association subject to supervision and examination by federal or state banking authorities doing business and having its principal office in a city in which a Federal Reserve Bank is located or in the State and having the power of a trust company in the State and having (or if such trustee is a member of a bank holding company its parent bank holding company has) capital stock and surplus aggregating at least $50,000,000. (c) Immediately upon appointment, a successor Trustee shall mail notice to the Owners of the Certificates and any Additional Certificates Outstanding of its appointment. Section 609. Transfer of Rights and Property to Successor Trustee. Any successor Trustee appointed under this Trust Agreement shall execute, acknowledge and deliver to its predecessor Trustee an instrument accepting such appointment, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become fully vested with all moneys, estates, properties, rights, powers, duties and obligations of such predecessor Trustee, with like effect as if originally named as Trustee; but the Trustee ceasing to act shall nevertheless, on the written request of the successor Trustee, execute, acknowledge and deliver such instrument of conveyance and further assurance and do such other things as may reasonably be required for more fully and certainly vesting and confirming in such successor Trustee all the right, title and interest of the predecessor Trustee in and to any property held by it under this Trust Agreement, and shall pay over, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set forth. Should any deed, conveyance or instrument in writing from the City or the Agency be required by such successor Trustee for more fully and certainly vesting in and confirming to such successor Trustee any such estates, rights, power and duties, any and all such deeds, conveyances and instruments in writing shall, on request, and so PUBL:27179 _11138182345.62 43 far as may be authorized by law, be exC!Cuf.e!l, ac!mowledged and delivered by the City or the Agency. Section 610. Merger or Consoli~on. Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to whic\1 it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such company satisfies the requirements of Section 608 above and is a bank or trust company organized under the laws of any state of the United States or a national banking association and shall be authorized by law to perform all th~ duties imposed upon it hereby, shall be the successor to the Trustee without the execution or filing of any paper or the performance of any further act. Section 611. Adoption of AuthoriZed Sipature. In case any of the Certificates or Additional Certificates contemplated to be delivered hereunder shall have been executed but not delivered, any successor Trustee may, but shall not be required to, adopt the authorized signature of any predecessor Trustee so executing such Certificates or Additional Certificates and deliver such Certificates or Additional Certificates so executed; and in case any of the said Certificates or Additional Certificates shall not have been executed, any successor Trustee may, but shall not be required to, execute such Certificates or Adl\itional Certificates in the name of the successor Trustee, and in all such cases such certificate shall have the full force which it is anywhere in said Certificates or Additional Certificates or herein provided that the certificate of the Trustee shall have. Section 612. Trustee Liability. (a) No provision in this Trust Agreement shall require the Trustee to expend or risk its own funds or otherwise incur any fmancial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (b) The Trustee shall not be responsible for the sufficiency of the security for the Certificates or any Additional Certificates executed and delivered hereunder or intended to be secured hereby and the Trustee shall not be bound to ascertain or inquire as to the observance or performance of any covenants, conditions or agreements on the part of the City under the Lease Agreement. (c) The Trustee, in its individual or any other capacity, may become the Owner or pledgee of Certificates or Additional Certificates secured hereby with the same rights which it would have if not the Trustee; may lIcquire and dispose of other bonds or evidence of indebtedness of the City with the same rights it would have if it were not the Trustee; and may act as a depository for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Owners, whether or not such committee shall represent the Owners of the majority in aggregate principal amount of the Certificates and Additional Certificates then Outstanding. PUBL:27179_1 1 138182345.62 44 ---~ (d) The permissive right of the Trustee to do things enumerated in this Trust Agreement shall not be construed as a duty and it shall not be answerable for other than its negligence or willful misconduct. (e) The Trustee shall not be required to take notice or be deemed to have notice of any Event of Default hereunder except failure by the City to make any of the Lease Payments to the Trustee required to be made by the City pursuant to the Lease Agreement or failure by the City or the Agency to file with the Trustee any document required by this Trust Agreement or the Lease Agreement to be so filed subsequent to the delivery of the Certificates, unless the Trustee shall be specifically notified in writing of such default by the City, the Agency or by the Owners of at least 25 % in aggregate principal amount of Certificates and Additional Certificates then Outstanding and all notices or other instruments required by this Trust Agreement to be delivered to the Trustee must, in order to be effective, be delivered in accordance with the provisions of Section 908 hereof, and in the absence of such notice so delivered, the Trustee may conclusively assume there is no Event of Default except as aforesaid. (f) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Owners of a majority in aggregate principal amount of the Outstanding Certificates and Additional Certificates, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Trust Agreement. (g) The recitals, statements and representations in this Trust Agreement or in the Certificates and any Additional Certificates have not been made by the Trustee; and the Trustee shall be under no responsibility for the correctness thereof, except such recitals of the Trustee as are contained in Sections 201 and 204 hereof. Section 613. Indemnification. The City agrees to indemnify and save the Trustee harmless in accordance with the provisions of Section 2.1(e) of the Lease Agreement and against any loss, liability or expense which it may incur in the performance of its duties and powers under this Trust Agreement or the Lease Agreement which are not due to its negligence or willful misconduct. ARTICLE VII AMENDMENTS Section 701. Mailing. Except as provided in Sections 312 and 703 hereof, any provision in this Article for the mailing for a notice or other paper to Certificate Owners and any Owners of Additional Certificates shall be fully complied with only if it is mailed frrst class United States mail, postage prepaid to each Owner of Certificates and any Additional Certificates then Outstanding at his address, if any, appearing upon the registry books of the Trustee. PUBL:27179_1[138182345.62 45 Section 702. Powers of Amendment. This Trust Agreement and the rights and obligations provided herein may be modified or amended at any time by a Supplemental Trust Agreement, entered into among the Trustee, the Agency and the City but without the consent of any Certificate Owners or the Owners Q~ any! Additional Certificates, and the Assignment Agreement, the Lease Agreement and the Site Lease may be amended with the consent of the parties thereto and in the case of the Assignment Agreement, the City and in the case of the Lease Agreement and the Site Lease the Trustee but without the consent of the Certificate Owners or the Owners of any Additional Certificates, but only (1) to cure any ambiguity, supply any omission, or cure or correct any defect Qr inconsistent provision in this Trust Agreement, the Site Lease, the Assignment Agreement or the Lease Agreement, or (2) in regard to questions arising under this Trust Agreement, the Lease Agreement, the Assignment Agreement or the Site Lease which the City and the Trustee may deem necessary or desirable and not inconsistent with this Trust Agreement, the Lease Agreement, the Assignment Agreement or the Site Lease, and which shall not adversely affect the interests of the Owners of the Certificates or any Additional Certificates, or (3) to provide for the substitution of property in accordance with Section 3.6 of the Lease Agreement, or (4) to provide for the execution and delivery of Additional Certificates in accordance with the provisions of Section ~ 17 hereof, or (5) for any other reason, provided such modification or amendment does not adversely affect the interests of the Owners of the Certificates or any Additional Certificates. Any other modification or amendmenf hereof and of the rights and obligations of the Trustee and of the Owners of the Certificates or any Aciditional Certificates hereunder, in any particular, may be made only by a Supplemental Trust Agreement, entered into among the Trustee, the Agency and the City and the wrjtten consent, given as provided in Section 703, of the Owners of at least a majority in aggrega~ principal amount of the Certificates and Additional Certificates Outstanding at the time such coll$ent is given. Any other modification or amendment to the Assignment Agreement, the Lease Ag~ment or the Site Lease may be made only with the written consent, given as provided in Section 703, of the Owners of at least a majority in aggregate principal amount of the Certificates or Additional Certificates Outstanding at the time such consent is given. No such modification or amendment shall permit a change in the terms of redemption or maturity of the Principal Components of any Outstanding Certificates or Additional Certificates or payment of any Interest Component or a reduction in the Principal Component or the Redemption Price thereof, or in the rate of interest thereon or which will have a materially adverse effect on the security interest of the Owner without the consent of the Owner of such Certificate or Additional Certificate, or shall ,reduce the percentages or otherwise affect the classes of Certificates or Additional Certificates the consent of the Owners of which is required to effect any such modification or amendment, 9r shall change or modify any of the rights or obligations of the Trustee without the written consent of the Trustee. Section 703. Consent or Owners. The Trustee, the Agency and the City may at any time enter into a Supplemental Trust Agreement or amendment to the Lease Agreement, the Assignment Agreement or the Site Lease making a modification or amendment requiring the consent of Owners of Certificates or Additional Certificates under the provisions of Section 702 to take effect when and as provided in this ~ion. A copy of such Supplemental Trust Agreement or amendment to the Lease Agreement, the Assignment Agreement or the Site Lease (or brief summary thereof or reference thereto in form approved by Bond Counsel), together with a request to Owners of Certificates or Additional Certificates to approve the same shall be mailed to each Certificate Owner or Owner of any Additional Certificates (but failure to mail such copy PUBL:27179_11138182345.62 46 - ---_._-~- _ _________..________....__...__u and request shall not affect the validity of the Supplemental Trust Agreement or amendment to the Lease Agreement, the Assignment Agreement or the Site Lease when consented to as in this Section provided). Such Supplemental Trust Agreement or amendment to the Lease Agreement, the Assignment Agreement or the Site Lease shall not be effective unless and until (i) there shall have been filed with the Trustee (a) the written consents of the Owners of the percentages of Outstanding Certificates and Additional Certificates specified in Section 702 hereof, and (b) an opinion of Bond Counsel, stating that such Supplemental Trust Agreement or amendment to the Lease Agreement, the Assignment Agreement or the Site Lease has been duly and lawfully entered into by the City or the Agency, as applicable, and filed with the City and the Trustee in accordance with the provisions hereof, is authorized or permitted hereby, and is valid and binding upon the parties thereto in accordance with its terms. Each such consent shall be effective only if accompanied by proof of the Owner, at the date of such consent, of the Certificates or Additional Certificates with respect to which such consent is given, which proof shall be such as is permitted by Section 902. A certificate or certificates executed by the Trustee and filed with the City stating that it has examined such proof and that such proof is sufficient in accordance with Section 902 shall be conclusive that the consents have been given by the Owners of the Certificates and any Additional Certificates described in such certificate or certificates of the Trustee. Any such consent shan be binding upon the Owner of the Certificates and any Additional Certificates giving such consent and, anything in Section 902 to the contrary notwithstanding, upon any subsequent Owner of such Certificates or Additional Certificates and of any Certificates or Additional Certificates issued in exchange therefor (whether or not such subsequent Owner thereof has notice thereof) unless such consent is revoked in writing by the Owner of such Certificates or Additional Certificates giving such consent or a subsequent Owner thereof by filing with the Trustee, prior to the time when the written statement of the Trustee hereinafter in this Section provided for is filed, such revocation and, if such Certificates or Additional Certificates are held by the signer of such revocation in the manner permitted by Section 902. The fact that a consent has not been revoked may likewise be proved by a certificate of the Trustee filed with the City to the effect that no revocation thereof is on file with the Trustee. At any time after the Owners of the required percentages of Certificates or Additional Certificates shall have filed their consents to the Supplemental Trust Agreement or amendment to the Lease Agreement, the Assignment Agreement or the Site Lease, the Trustee shan make and file with the City a written statement that the Owners of such required percentages of Certificates and Additional Certificates have filed such consents. Such written statements shall be conclusive that such consents have been so filed. At any time after the filing of the required consents, notice shan be given by the City to the Owners of Certificates and any Additional Certificates stating in substance that the Supplemental Trust Agreement or amendment to the Lease Agreement, the Assignment Agreement or the Site Lease has been consented to by the Owners of the required percentages of Certificates and Additional Certificates by mailing such notice to the Owners of Certificates and any Additional Certificates (but failure to receive such notice shan not prevent such Supplemental Trust Agreement or amendment to the Lease Agreement, the Assignment Agreement or the Site Lease from becoming effective and binding as in this Section provided). The City shan file with the Trustee proof of the mailing of such notice. A record, consisting of the Certificates or statements required or permitted by this Section to be made by the Trustee, shall be proof of the matters therein stated. Such Supplemental Trust Agreement or amendment to the Lease Agreement, the Assignment Agreement or the Site Lease making such amendment or PUBL:27179_1 1 138182345.62 47 modification shall be deemed conclusively binding upon the City, the Trustee, the Agency and the Owners of all Certificates and AddmP:t CertifIcates at the expiration of 20 days after the filing with the Trustee of the proof of the 'ling of such last mentioned notice, except in the event of a final decree of a court of comperert jurisdiction setting aside such Supplemental Trust Agreement or amendment to the Lease "'gr~ment, the Assignment Agreement or the Site Lease in a legal action or equitable proceeding for ~uch purpose commenced within such 20 day period; provided, however, that the Trustee and the City during such 20 day period and any such further period during which any such action or proceeding may be pending shall be entitled in their absolute discretion to take such action, or to :refrain from taking such action, with respect to such Supplemental Trust Agreement or amenc!mer\t to the Lease Agreement, the Assignment Agreement or the Site Lease as they may delpm expedient. Section 704. Modifications by UDllnimous Consent. Subject to the provisions of Section 703 hereof, the terms and provisions, hereof and the rights and obligations of the Trustee and of the Owners of the Certificates and Additional Certificates hereunder may be modified or amended in any respect upon entering into by the parties thereto of a Supplemental Trust Agreement with the consent of the Ownel-s <#" all the Certificates and any Additional Certificates then Outstanding, such consent to be given 1IF provided in Section 703 except that no notice to such Owners by mailing shall be provided. Section 705. Exclusion of Cer(ifiC3tes and Additional Certificates. Certificates or Additional Certificates owned or held by. or for the account of the City or the Agency shall not be deemed Outstanding for the purpose Of cdnsent or other action or any calculation of Outstanding Certificates and Additional Certificates provided for in this Article, and neither the City nor the Agency shall be entitled with r~pect to such Certificates and Additional Certificates to give any consent or take any other action provided for in this Article. At the time of any consent or other action taken under this Article, the City shall furnish the Trustee a certificate of an Authorized Representative of the City., uppn which the Trustee may rely, describing all Certificates and Additional Certificates so to be excluded. , Section 706. Notation on Certifi+ and Additional Certificates. Certificates and Additional Certificates executed and deliverecll after the effective date of any action taken as provided in Article V or this Article providecll may, and if the City so determines shall, bear a notation by endorsement or otherwise in form approved by the City as to such action, and in that case upon demand of the Owner of any Certilficate or Additional Certificate Outstanding at such effective date and presentation of his CerlifiC1ite or Additional Certificate, as applicable, for the purpose at the principal corporate trust office of the Trustee or upon any transfer or exchange of any Certificate or Additional Certificate Outs~ding at such effective date, suitable notation shall be made on such Certificate or Additional Certificate or upon any Certificates or Additional Certificate issued upon any such transfer or exchange by the Trustee as to any such action. If the City shall so determine, new Certificates or Additional Certificates so modified as in the opinion of Bond Counsel and the City to conform to ~uch action shall be prepared, executed and delivered, and upon demand of the Owner of any Certificate or Additional Certificate then Outstanding shall be exchanged, without cost'to such Owner, for Certificates or Additional Certificate, as the case may be, of the same i$sue and maturity then Outstanding, upon surrender of such Certificates or Additional CertifiCates, as the case may be. PUBL:27179_11138182345.62 48 -- ARTICLE VIII BOOK-ENTRY SYSTEM Section 801. Book-Entry System; Limited Obligation of Agency. The Certificates shall and any issue of Additional Certificates so designated by an Authorized Representative of the City shall be initially delivered in the form of a separate single fully registered Certificate or Additional Certificate (which may be typewritten) for each of the maturities of the Certificates and applicable Additional Certificates. Upon initial delivery, the ownership of each such Certificate and Additional Certificate shall be registered in the registration books kept by the Trustee in the name of the Nominee as nominee of the Depository. Except as provided in Section 803 hereof, all of the Outstanding Certificates and applicable Additional Certificates shall be registered in the registration books kept by the Trustee in the name of the Nominee. With respect to Certificates and Additional Certificates registered in the registration books kept by the Trustee in the name of the Nominee, the City, the Agency and the Trustee shall have no responsibility or obligation to any such Participant or to any Person on behalf of which such a Participant holds an interest in the Certificates or Additional Certificates. Without limiting the immediately preceding sentence, the City, the Agency and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the records of the Depository, the Nominee, or any Participant with respect to any ownership interest in the Certificates or Additional Certificates, (ii) the delivery to any Participant or any other Person, other than an Owner as shown in the registration books kept by the Trustee, of any notice with respect to the Certificates or Additional Certificates, including any notice of redemption, (iii) the selection by the Depository and its Participants of the beneficial interests in the Certificates or Additional Certificates to be redeemed in the event the Certificates or Additional Certificates are redeemed in part, or (iv) the payment to any Participant or any other Person, other than an Owner as shown in the registration books kept by the Trustee, of any amount with respect to principal of, premium, if any, or interest due with respect to the Certificates or Additional Certificates. The City, the Agency and the Trustee may treat and consider the Person in whose name each Certificate and Additional Certificate is registered in the registration books kept by the Trustee as the holder and absolute owner of such Certificate and Additional Certificate for the p'lrpose of payment of Principal Components, premium, if any, and Interest Components with ;)ect to such Certificate, for the purpose of giving notices of redemption and other matters , respect to such Certificate and Additional Certificate, for the purpose of registering transfers with respect to such Certificate and Additional Certificate, and for all other purposes whatsoever. The Trustee shall pay all principal of, premium, if any, and interest due with respect to the Certificates and Additional Certificates only to or upon the order of the respective Owner, as shown in the registration books kept by the Trustee, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to satisfy and discharge fully the City's obligations with respect to payment of the Principal Components, premium, if any, and Interest Components due with respect to the Certificates and Additional Certificates to the extent of the sum or sums so paid. No Person other than an Owner, as shown in the registration books kept by the Trustee, shall receive a Certificate or Additional Certificates evidencing the obligation of the City to make payments of principal, premium, if any, and interest pursuant to this Trust Agreement. Upon delivery by the Depository to the Trustee, the City and the Agency of written notice to the effect that the Depository has determined to substitute a new nominee in place of the PUBL:27179 _11138182345.62 49 . Nominee, and subject to the provisions herein with respect to Record Dates, the word Nominee in this Trust Agreement shall refer to such new nominee of the Depository. Ii Section 802. Representation IJl!tter. In order to qualify the Certificates or Additional Certificates for the Depository's book-entry system, an authorized representative of the Trustee is hereby authorized by the City to execute from time to time and deliver to such Depository the Representation Letter. The execution l\Dd delivery of the Representation Letter shall not in any way limit the provisions of Section 801 or in any other way impose upon the City, the Agency or the Trustee any obligation whatsoever with respect to persons having interests in the Certificates or Additional Certificates other than the Owners, as shown on the registration books kept by the Trustee. The Trustee agrees to take all action necessary to continuously comply with all representations made by it in the Representation Letter. In addition to the execution and deli very of the Representation Letter, the Chair, the Secretary and all other officers of the Agency, and the Authorized Representative of the City, are hereby authorized to take any other actions, not inconsistent with this Trust Agreement, to qualify the Certificates or any Additional Certificates for the Depository's book-entry prograJll. Section 803. Transfers Outside Book-Entry System. In the event (i) the Depository determines not to continue to act as securities depository for the Certificates or an issue of Additional Certificates, or (ii) the City determines that the Depository shall no longer so act, then the City following delivery of a written notice of removal to the Depository will discontinue the book-entry system with the Depository. If the City fails to identify another ql!aiified securities depository to replace the Depository then the Certificates or Additional Certificates so designated shall no longer be restricted to being registered in the registration books kept by the Trustee in the name of the Nominee, but shall be registered in whatever name or names Persons transferring or exchanging Certificates shall desigrnlte, in accordance with the provisions of Section 306. Section 804. Payments to the Nominee. Notwithstanding any other provisions of this Trust Agreement to the contrary, so long as any Certificate or Additional Certificate is registered in the name of the Nominee, all payments with respect to Principal Components, premium, if any, and Interest Components due with respect to such Certificate or Additional Certificate and all notices with respect to such Certificate or Additional Certificate shall be made and given, respectively, as provided in the Representation Letter or as otherwise instructed by the Depository . Section 805. Initial Depository and Nominee. The initial Depository under this Article shall be The Depository Trust Company, New York, New York. The initial Nominee shall be Cede & Co., as Nominee of The Depository Trust Company, New York, New York. PUBL:27179_11138182345.62 50 ARTICLE IX MISCELLANEOUS Section 901. Defeasance. One or more of the Certificates and/or Additional Certificates may be paid and discharged in anyone or more of the following ways: (a) by paying or causing to be paid the Principal Component and the Interest Components with respect to said Certificate(s) and Additional Certificate(s), as and when the same become due and payable; (b) by depositing with the Trustee, in trust, at or before maturity, money which, together with the amounts then on deposit in the Lease Payment Fund and the Certificate Fund applicable to the Outstanding Certificate(s) or Additional Certificate(s) to be paid and discharged, is fully sufficient to pay the Outstanding Certificate(s) or Additional Certificate(s), as applicable, to be paid and discharged, including the Principal Component and the Interest Component thereof; or (c) by depositing with the Trustee, in trust, Permitted Investments of the type described in paragraphs (a) or (b) of the definition thereof in such amount as certified by an independent certified public accountant will be sufficient, together with the interest to accrue thereon, moneys then on deposit in the Lease Payment Fund and the Certificate Fund applicable to the Outstanding Certificate(s) and Additional Certificate(s) to be paid and other available moneys dedicated to such purpose, together with the interest to accrue thereon, to pay and discharge the Outstanding Certificate(s) and Additional Certificate(s) to be paid and discharged (including the Principal Component, any applicable premium, and the Interest Component thereof) at or before their respective maturity or Redemption Dates. Notwithstanding that any Certificates or Additional Certificates shall not have been surrendered for payment, all obligations of the Agency, the Trustee and the City under this Trust Agreement with respect to those Certificates or Additional Certificates paid, as provided in the above subsections (a) (b) or (c), shall cease and terminate and shall no longer be Outstanding hereunder, except only the obligation of the Trustee to payor cause to be paid from funds deposited therefor to the Owners of the Certificates and Additional Certificates not so surrendered and paid all sums due thereon and to transfer title to the Site to City as provided in Section 604 hereof and except the obligation of the City to comply with the covenants set forth in Section 516 hereof. Any funds held by the Trustee, at the time of one of the events described above in subsections (a) (b) or (c) shall have occurred as to all Outstanding Certificates and Additional Certificates, which are not required for the payment to be made to Owners, or for payments to be owed to the Trustee by the City under Sections 406 and 605 hereof or otherwise, shall be paid over to the City. Notwithstanding anything herein to the contrary, in the event that a Principal Component and/or Interest Component due with respect to a Certificate shall be paid by Insurer PUBL:27179_11138182345.62 51 . '! pursuant to the Municipal Bond Insurance Policy, such Certificate shall remain Outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid by the City, and the assignment and pledge of the Trust Estate and all covenants, agreements and other obligations of the City to the registered Certificate Owner shall continue to exist and shall run to the benefit of Insurer, and Insurer shall be subrogated to the rights of such registered Certificate Owner. Section 902. Evidence of Signatures of Certificate Owners and Ownership of Certificates . (a) Any request, consent, revocation of consent or other instrument which this Trust Agreement may require or permit to be signed and executed by the Owners of Certificates or any Additional Certificates may be in one or more instruments of similar tenor, and shall be signed or executed by such Owners of Certificates or any Additional Certificates in person or by their attorneys appointed in writing. Proof of (i) the execution of any such instrument, or of an instrument appointing any such attorney, or (ii) the holding by any person of the Certificates or any Additional Certificates, shall be sufficient for any purpose hereof (except as otherwise therein expressly provided) if made in the fOllowing manner, or in any other manner satisfactory to the Trustee, which may nevertheless in its discretion require further or other proof in cases where it deems the same desirable: the fact and date of the execution by any Owner of Certificates or any Additional Certificates or his attorney of such instruments may be proved by a guarantee of the signature thereon by a bank or trust company or by the certificate of any notary public or other officer authorized to take acknowledgments of deeds, that the person signing such request or other instrument acknowledged to him ,the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such notary public or other officer. Where such execution is by an officer of a corporation or association or a member of a partnership, on behalf of such corporation, association or partnership, such signature guarantee, certificate or affidavit shall also constitute sufficient proof of his authority. (b) The ownership of Certificates and any Additional Certificates and the amount, numbers and other identification, and date of holding the same shall be proved by the registry books. (c) Any request or consent by an Owner of Certificates and Additional Certificates shall bind all future Owners of Certificates and Additional Certificates in respect of anything done or suffered to be done by the Agency, the City or the Trustee in accordance therewith . Section 903. Moneys Held for Particular Certificates and Additional Certificates. The amounts held by the Trustee for the payment of the Interest Components, Principal Components or premium due on any date with respect to particular Certificates or Additional Certificates shall, on and after such date and pending such payment, be set aside on its books and held in trust, without responsibility for investment thereof, by it for the Owners of the Certificates or Additional Certificates entitled thereto, subject to Section 316 herein. Section 904. Preservation and Inspection of Documents. All documents received by the Trustee under the provisions of this Trust Agreement shall be retained in its possession and shall be subject at all reasonable times during business hours on any Business Day and upon reasonable prior notice to the inspection of the City, any Owner of 25 % of the Certificates and PUBL:27179_1 1 138182345.62 52 --- -~-^'_.~-- Additional Certificates and their agents and representatives, any of whom may make copies thereof. Section 905. Parties Interested Herein. Nothing in this Trust Agreement expressed or implied is intended or shall be construed to confer upon, or to give to, any person or corporation, other than the City, the Agency, the Trustee and the Owners of the Certificates and any Additional Certificates, any right, remedy or claim under or by reason of this Trust Agreement or any covenant, condition or stipulation thereof; and all the covenants, stipulations, promises and agreements herein contained by and on behalf of the Trustee shall be for the sole and exclusive benefit of the Trustee and the Owners of the Certificates and any Additional Certificates. Section 906. Severability of Invalid Provisions. If anyone or more of the covenants or agreements provided herein should be contrary to law, then such covenant or covenants or agreement or agreements shall be deemed severable from the remaining covenants and agreements, and shall in no way affect the validity of the other provisions hereof. Section 907. Recording and Filing. The City shall be responsible for the recording and filing of the Lease Agreement and financing statements (or continuation statements in connection therewith) or of any supplemental instruments or documents of further assurance as may be required by law in order to perfect the security interests created by the Lease Agreement. Section 908. Notices. All notices, certificates, requests or other communications hereunder shall be in writing and shall be sufficiently given and shall be deemed given when delivered or mailed by certified mail, postage prepaid, to the parties at their respective places of business as follows: If to the City: City of Poway 13325 Civic Center Drive Poway, California 92064 Attention: City Manager If to the Agency: Poway Redevelopment Agency 13325 Civic Center Drive Poway, California 92064 Attention: Executive Director PUBL:27179_1 1 138182345.62 53 If to the Trustee: . Bank of America National Trust and Savings Association 333 South Beaudry, 25th Floor Los Angeles, California 90071 Attention: Corporate Trust Department #8510 If to Insurer: Ann: Telecopier: The parties hereto by written notice hereunder may designate different addresses for the purposes of this Section. Section 909. California Law. This Trust Agreement shall be construed and governed in accordance with the laws of the State of California. Section 910. Binding on Successors. This Trust Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. Section 911. Headings. Headings preceding the text of the several Articles and Sections hereof, and the table of contents, are solely for convenience of reference and shall not constitute a part of this Trust Agreement or affect its meaning, construction or effect. Section 912. Execution in Counterparts. This Trust Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. ARTICLE X PROVISIONS RELATING TO MUNICIPAL BOND INSURANCE POLICY Section 1001. Consent of Insurer. (a) Any provision of this Trust Agreement expressly recognizing or granting rights in or to Insurer may not be amended in any manner which affects the rights of Insurer hereunder without the prior written consent of Insurer. (b) Insurer's consent shall be required in addition to Certificate owner's consent, when required, for the following purposes: (i) execution and delivery of any Supplemental Trust Agreement or any amendment, supplement or change to or modification of the Lease Agreement, the Site Lease or the Assignment Agreement; (ii) removal of the Trustee or Paying Agent and selection and appointment of any successor trustee or paying agent; and PUBL:27179_1 1 138182345.62 54 (iii) initiation or approval of any action not described in (i) or (ii) above which requires Certificate owner consent. (c) Anything in this Trust Agreement to the contrary notwithstanding, upon the occurrence and continuance of an Event of Default as defined herein, Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the Certificate owners or the Trustee for the benefit of the Certificate owners under this Trust Agreement. Section 1002. Notices to be Given to Insurer. (a) While the Municipal Bond Insurance Policy is in effect, the City shall furnish to Insurer: (i) as soon as practicable after the filing thereof, a copy of the adopted budget of the City and a copy of any audit and annual report of the City; (ii) a copy of any notice to be given to the registered owners of the Certificates, including, without limitation, notice of any redemption of or defeasance of Certificates, and any certificate rendered pursuant to this Trust Agreement relating to the security for the Certificates; and (iii) such additional information it may reasonably request. (b) The Trustee shall notify Insurer of any failure of the City to provide relevant notices or certificates to the Trustee required under the Trust Agreement or the Lease Agreement. The Trustee shall furnish to Insurer a copy of all notices given to it by the City pursuant to the Site Lease and the Lease Agreement. (c) The City will permit Insurer to discuss the affairs, finances and accounts of the City or any information Insurer may reasonably request regarding the security for the Certificates with appropriate officers of the City. The City will permit Insurer to have access to the Project and have access to and to make copies of all books and records relating to the Certificates at any reasonable time. (d) Insurer shall have the right to direct an accounting at the City's expense, and the City's failure to comply with such direction within thirty (30) days after receipt of written notice of the direction from Insurer shall be deemed a default hereunder; provided, however, that if compliance cannot occur within such period, then such period will be extended so long as compliance is begun within such period and diligently pursued, but only if such extension would not materially adversely affect the interests of any registered owner of the Certificates. (e) Notwithstanding any other provision of this Trust Agreement, the Trustee shall immediately notify Insurer if at any time there are insufficient moneys to make any payments of the Principal Components and/or Interest Components as required and immediately upon the occurrence of any Event of Default hereunder. PUBL:27179_11138182345.62 55 Section 1003. Payment Procedure Pursuant to the Municipal Bond Insurance Policy. As long as the Municipal Bond Insurance Policy is in full force and effect, the City, the Trustee and any Paying Agent agree to comply with the following provisions: (a) At least one (1) day prior to all Interest Payment Dates the Trustee or Paying Agent, if any, will determine whether there will be sufficient funds in the Funds and Accounts to pay the Principal Components or Interest Components due with respect to the Certificates on such Interest Payment Date. If the Trustee or Paying Agent, if any, determines that there will be insufficient funds in such Funds or Accounts the Trustee or Paying Agent, if any, shall so notify Insurer. Such notice shall specify the amount of the anticipated deficiency, the Certificates to which such deficiency is applicable and whether such Certificates will be deficient as to the Principal Components or Interest Components, or both. If the Trustee or Paying Agent, if any, has not so notified Insurer one (1) Business Day prior to an Interest Payment Date, Insurer will make payments of the Principal Components or Interest Components due with respect to the Certificates on or before the first (1st) Business Day next following the date on which Insurer shall have received notice of nonpayment from the Trustee or Paying Agent, if any. (b) The Trustee or Paying Agent, if any, shall, after giving notice to Insurer as provided in (a) above, make available to Insurer and, at Insurer's direction, to the United States Trust Company of New York, as insurance trustee for Insurer or any successor insurance trustee (the "Insurance Trustee"), the registration books of the City maintained by the Trustee or Paying Agent, if any, and all records relating to the Funds and Accounts maintained under this Trust Agreement. (c) The Trustee or Paying Agent, if any, shall provide Insurer and the Insurance Trustee with a list of registered owners of Certificates entitled to receive payment of the Principal Components or Interest Components from Insurer under the terms of the Municipal Bond Insurance Policy, and shall make arrangements with the Insurance Trustee (i) to mail checks or drafts to the registered owners of Certificates entitled to receive full or partial Interest Components from Insurer and (ii) to pay Principal Components due with respect to the Certificates surrendered to the Insurance Trustee by the registered owners of Certificates entitled to receive full or partial Principal Components from Insurer. (d) The Trustee or Paying Agent, if any, shall, at the time it provides notice to Insurer pursuant to (a) above, notify registered owners of Certificates entitled to receive the payment of Principal Components or Interest Components thereon from Insurer (i) as to the fact of such entitlement, (ii) that Insurer will remit to them all or a part of the Interest Components next coming due upon proof of Certificate owner's entitlement to Interest Components and delivery to the Insurance Trustee, in form satisfactory to the Insurance Trustee, of an appropriate assignment of the registered owner's right to payment, (Hi) that should they be entitled to receive full payment of Principal Components from Insurer, they must surrender their Certificates (along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee to permit ownership of such Certificates to be registered in the name of Insurer) for payment to the Insurance Trustee, and not the Trustee or Paying Agent, if any, and (iv) that should they be entitled to receive partial payment of Principal Components from Insurer, they must surrender their Certificates for payment thereon first to the Trustee or Paying Agent, if any, who shall note on such Certificates the portion of the Principal Components paid by the Trustee or Paying PUBL:27179_1 1 138182345.62 56 .---- -~~..._._,--,-_._..__._~-- Agent, if any, and then, along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee, to the Insurance Trustee, which will then pay the unpaid portion of Principal Components. (e) In the event that the Trustee or Paying Agent, if any, has notice that any payment of the Principal Components or Interest Components due with respect to a Certificate which has become Due for Payment (as defined in the Municipal Bond Insurance Policy) and which is made to a Certificate owner by or on behalf of the City has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court having competent jurisdiction, the Trustee or Paying Agent, if any, shall, at the time Insurer is notified pursuant to (a) above, notify all registered owners that in the event that any registered owner's payment is so recovered, such registered owner will be entitled to payment from Insurer to the extent of such recovery if sufficient funds are not otherwise available, and the Trustee or Paying Agent, if any, shall furnish to Insurer its records evidencing the payments of the Principal Components and Interest Components due with respect to the Certificates which have been made by the Trustee or Paying Agent, if any, and subsequently recovered from registered owners and the dates on which such payments were made. (f) In addition to those rights granted Insurer under this Trust Agreement, Insurer shall, to the extent it makes payment of the Principal Components or Interest Components due with respect to Certificates, become :;ubrogated to the rights of the recipients of such payments in accordance with the terms of the Municipal Bond Insurance Policy, and to evidence such subrogation (i) in the case of subrogation as to claims for past due Interest Components, the Trustee or Paying Agent, if any, shall note Insurer's rights as subrogee on the registration books of the City maintained by the Trustee or Paying Agent, if any, upon receipt from Insurer of proof of the payment of the Interest Components thereon to the registered owners of the Certificates, and (ii) in the case of subrogation as to claims for past due Principal Components, the Trustee or Paying Agent, if any, shall note Insurer's rights as subrogee on the registration books of the City maintained by the Trustee or Paying Agent, if any, upon surrender of the Certificates by the registered owners thereof together with proof of the payment of the Principal Components thereof. Section 1004. Trustee-Related Provisions. (a) The Trustee or Paying Agent, if any, may be removed at any time, at the request of Insurer, for any breach of this Trust Agreement set forth herein. (b) Insurer shall receive prior written notice of any Trustee or Paying Agent resignation. (c) Every successor Trustee appointed pursuant to Section 608 shall be a trust company or bank in good standing located in or incorporated under the laws of the State, duly authorized to exercise trust powers and subject to examination by federal or state authority , having (or if such successor Trustee is a member of a bank holding company system, its parent bank holding company has) a reported capital and surplus of not less than $75,000,000 and acceptable to Insurer. Any successor Paying Agent, if applicable, shall not be appointed unless Insurer approves such successor in writing. PUBL:27179_1 1 138182345.62 57 (d) Notwithstanding ","yother provision of this Trust Agreement, in determining whether the rights of the C<<iftificate owners will be adversely affected by any action taken pursuant to the terms and provisions of this Trust Agreement, the Trustee shall consider the effect on the Certificate owners as if thCl!'P were no Municipal Bond Insurance Policy. (e) Notwithstanding any other provision of this Trust Agreement, no removal, resignation or termination of the Trustee or Paying Agent, if any, shall take effect until a successor, acceptable to Insurer, shall be appointed. Section 1005. Parties Interested Herein. Nothing in this Trust Agreement expressed or implied is intended or shall be construed to confer upon, or to give to, any person or entity, other than the City, the Trustee, Insurer, the Paying Agent, if any, and the registered owners of the Certificates, any right, remedy or claim under or by reason of this Trust Agreement or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in this Trust Agreement contained by and on behalf of the City shall be for the sole and exclusive benefit of the City, the Trustee, Insurer, the Paying Agent, if any, and the registered owners of the Certificates. To the extent that this Trust Agreement confers upon or gives or grants to Insurer any right, remedy or claim under or by ,i\'e3Son of this Trust Agreement, Insurer is hereby explicitly recognized as being a third-party beneficiary hereunder and may enforce any such right, remedy or claim conferred, given or granted hereunder. Section 1006. Termination of Insurance Provisions. The provisions of this Article X shall apply only so long as the Municipal Bond Insurance Policy remains in effect and no default in payment has occurred thereunder. PUBL:27179_1 1 138182345.62 58 .-------- -----_.._----~"---~-- IN WITNESS WHEREOF, the parties have executed and attested this Trust Agreement by their officers thereunto duly authorized as of the date and year fIrst written above. CITY OF POW A Y By: Its: Mayor ATTEST: City Clerk POWAY REDEVELOPMENT AGENCY By: Its: Chairperson ATTEST: Secretary BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Trustee By: Its: Authorized Officer PUBL,27179_11138182345.62 59 ExHIBIT A . FORM OF CERTIFICATE No._ $ 1995 REFUNDING CERTIFICATE OF PARTICIPATION (1986 CAPITAL IMPROVEMENT PROJECTS) Evidencing a Proportionate Interest of the Owner Hereof in Lease Payments to be Made by the CITY OF POWAY, 115 Lessee As the Rental for a Certain Site Pursuant to a Lease Agreement with the Poway. Redevelopment Agency, as Lessor INTEREST CERTIFI~ATE RATE PAYMENT DATE DATED DATE CUSIP July 1, 1995 REGISTERED OWNER: Cede & Co. PRINCIPAL COMPONENT: DOLLARS THIS IS TO CERTIFY THAT the person or entity named above is the registered owner of this Certificate of Participation (the "Certificate"), evidencing a proportionate interest in that certain Lease Agreement, dated as of July 1, 1995 (the "Lease Agreement"), by and between the City of Poway as Lessee (the "City") and the Poway Redevelopment Agency, a nonprofit public benefit corporation, as Lessor (the" Agency"). The Agency's rights, title and interest as lessor under the Lease Agreement, including the right to receive Lease Payments and the right to enforce the payment thereof, have been .signed to Bank of America National Trust and Savings Association, as trustee (the "Trustee") pursuant to an Assignment Agreement, dated as of July 1, 1995 (the" Assignment Agreement"), between the Agency and the Trustee. PUBL:27179 _11138182345.62 A-I ~. The registered owner of this Certificate is entitled to receive, subject to the terms of the Lease Agreement and the Trust Agreement, dated as of July 1, 1995 (the "Trust Agreement"), by and among the City, the Agency and the Trustee, on the Certificate Payment Date specified above, unless redeemed prior thereto as provided herein, the Principal Component specified above, representing a portion of the Lease Payments designated as principal coming due on the Certificate Payment Date, and to receive on February 1, 1996 and on each August 1 and February 1 thereafter (each, an "Interest Payment Date"), to and including the Certificate Payment Date or the date of redemption, whichever is earlier, the registered owner's proportionate share of the Lease Payments designated as interest coming due on such Interest Payment Dates. Said proportionate share of the Lease Payments designated as interest is the product of the aforesaid portion of Lease Payments designated as principal multiplied by the Interest Rate set forth above and divided into semiannual payments (the "Interest Components "). Such proportionate share of the portion of the Lease Payments designated as interest shall be computed on the basis of a 36O-day year composed of 12 months of 30 days each. Interest with respect to this Certificate shall be payable from the Interest Payment Date next preceding the date of execution hereof, unless this Certificate is executed after the fifteenth day of the month immediately preceding an Interest Payment Date in which event interest shall be payable from such Interest Payment Date, or unless this Certificate is executed prior to the close of business on January 15, 1996, in which event interest with respect hereto shall be payable from July 1, 1995; provided, however, that, if at the time of registration of this Certificate interest with respect hereto is in default, interest with respect hereto shall be payable from the Interest Payment Date to which interest has previously been paid or made available for payment or from July 1, 1995 if no interest has been paid or made available for payment. Amounts due hereunder in respect of principal and premium, if any, are payable in lawful money of the United States of America upon the surrender hereof at maturity or the earlier redemption hereof at the corporate trust office of Bank of America National Trust and Savings Association, the Trustee, in the City of Los Angeles, California (or any successors thereto), or any paying agent appointed by the Trustee. Amounts representing interest are payable by check mailed by first class mail, postage prepaid, on the Interest Payment Date to the owner of this Certificate at such owner's address as it appears on the Certificate register as of the fifteenth day of the month next preceding the Interest Payment Date, or in the case of an Owner of $1,000,000 or more of Principal Components by wire transfer to an account within the United States upon compliance with the requirements set forth in the Trust Agreement. Payments of defaulted interest, if any, with respect to this Certificate shall be paid by check to the registered owner of this Certificate as of a special record date to be fixed by the Trustee, notice of which special record date shall be given to the owner of this Certificate not less than ten days prior thereto. All amounts payable by the Trustee with respect to this Certificate shall be paid only from Lease Payments received by the Trustee from the City and amounts from time to time deposited in accounts designated therefor under the Trust Agreement, including certain investments and investment earnings thereon, and only to the extent that the Trustee shall have actually received sufficient income or proceeds from such sources to make such payments. The payment of the principal of, premium, if any, and interest due with respect to the Certificates is not a liability or charge upon the credit of the Trustee, and the Trustee has no obligation to make such payments, other than the Trustee's obligation to make such payments from the sources described above, to the extent the source is actually received. PUBL:27179_1 1 138182345.62 A-2 This Certificate has been executed by the Trustee pursuant to the Trust Agreement. Copies of the Trust Agreement, the Assignment Agreement and the Lease Agreement are on file at the office of the City and at the corporate trust office of the Trustee in the City of Los Angeles, California, and reference to the!,T~t Ag~ent, the Assignment Agreement and the Lease Agreement and any and all supplements or amendments thereto is made for a description of the funds and accounts established under the Trust Agreement for the purpose of securing the Certi ficates, the agreements and covenants of the City in the Lease Agreement with respect to the Site, as defmed in the Lease Agreement, and Lease Payments to be made by the City, the nature, extent and manner of enforcement of such agreements and covenants, the rights and remedies of the Owners of the Certificates with respect thereto, and the other terms and conditions upon which the Certificates are delivered thereunder. To the extent and in the manner permitted by the terms of the Trust Agreement, the provisions of the Trust Agreement, the Lease Agreement, the Site Lease and the Assignment Agreement may be amended by the parties thereto, in some cases without the consent of Owners of the Certificates. No such amendment shall permit a change in the terms of redemption or maturity of the principal of any outstanding Certificate or of the right of any Owner to receive his proportionate share of any Lease Payment in accordance with his Certificate without the consent of such Owner. Additional Certificates may be executed and delivered pursuant to the Trust Agreement from time to time without the consent of the Owners of the Certificates provided the City complies with the provisions in the Trust Agreement for delivering such Additional Certificates. Any such Additional Certificates will be secured on a parity with the Certificates. This Certificate shall be transferable only upon the books of the Trustee, which shall be kept for that purpose at the corporate trust office of the Trustee, in the City of Los Angeles, California, upon surrender hereof together with a written instrument of transfer satisfactory to the Trustee duly executed by the registered owner or his duly authorized attorney. Upon the transfer of this Certificate, the Trustee shall deliver in the name of the transferee a new Certificate or Certificates, of the same aggregate Principal Component and maturity as the surrendered Certificate. The Trustee may deem and treat the person in whose name this Certificate is registered as the absolute owner hereof for all purposes, and the Trustee shall not be affected by any notice to the contrary. The Certificates shall be delivered in registered form in the denomination of $5,000 or any integral multiple of $5,000. This Certificate, upon surrender hereof at the corporate trust office of the Trustee in the City of Los Angeles, California with a written instrument of transfer satisfactory to the Trustee, duly executed by the registered owner hereof or his duly authorized attorney, may, at the option of the registered owner and upon payment by the registered owner of any charges which the Trustee may make as provided in the Trust Agreement, be exchanged for an equal aggregate Principal Component of registered Certificates of the same Certificate Payment Date and any authorized denominations. The Certificates and any Additional Certificates are subject to extraordinary redemption on a pro rata basis among maturities (treating each Sinking Account Installment (as defined in the Trust Agreement) due with respect to the Certificates and the Additional Certificates as a separate maturity for such purpose) and by lot within a maturity, in whole or in part, on any date, without PUBL:27179_11138182345.62 A-3 -------..- premium, in an amount equal to the Principal Component thereof, together with accrued interest due with respect to such Principal Components to the date fIxed for redemption upon the occurrence of any of the following events: the election by the City to apply the net proceeds of any insurance claim or condemnation award to the prepayment of all or a portion of the Lease Payments when all or a portion of the Site is destroyed or damaged by fire or other casualty, or title to, or the temporary use of all or a portion of the Site, shall be taken under the exercise of the power of eminent domain, or a title defect relating to the Site impairs the City's use of the Site. The Certificates maturing on or before August 1, 20_ are not subject to optional redemption prior to maturity. The Certificates maturing on or after August 1, 20 are subject to optional redemption prior to maturity on or after August 1, 20_, at the option of the City, in whole or in part on any Interest Payment Date, from amounts deposited with the Trustee by the City in furtherance of the exercise of the City's option to prepay Lease Payments in accordance with the Lease Agreement at the following prices expressed as percentages of the principal amount to be redeemed plus accrued interest to the Redemption Date: Redemotion Dates Redemotion Price August 1, 20_ and February 1,20_ % August 1, 20_ and February 1, 20_ % August 1, 20 and thereafter % The Certificates maturing on August 1, 20_ are subject to mandatory redemption, in part, by lot, on August 1, 20_ and on each August 1 thereafter to and including May 1,20_ from Sinking Account Installments made pursuant to the Trust Agreement, at the principal amount of such Certificates to be red~med, without premium, plus accrued but unpaid interest to the redemption date. The principal amount of such Certificates to be so redeemed (subject to credits for such CertifIcates purchased by the City or the Trustee during the preceding 12 months) and the dates therefor are as follows: TERM CERTIFICATES MATURING AUGUST 1,20_ August 1 Principal of the Year Amount $ ,000 ,000 .000 ,000 (maturity) ,000 If less than all of the Certificates shall be called for redemption from the net proceeds of any insurance or condemnation award, the particular Certificates or portions of Certificates to be redeemed shall be selected by the Trustee pro rata as approved in writing by an Authorized Representative of the City among various maturities such that the Lease Payments to become due in each remaining year of the Lease Term shall be as nearly as practicable equal to the Lease PUBL:27179 _11138182345.62 A-4 Payments to become due in every other year and by lot within a maturity. If less than all of the - Certificates shall be called for optional redemption, the particular Certificates or portions thereof to be redeemed shall be selected by the Trustee by lot from one or more maturities as specified, in writing, by an Authorized Represen~ve of the City. The portion of any Certificate of a denomination of more than $5,000 to be redeemed shall be in a Principal Component of $5,000 or an integral multiple thereof, and, in selecting portions of such Certificates for redemption, the Trustee shall treat each such Certificate as representing that number of Certificates of $5,000 denomination which is obtained by dividing the Principal Component of such Certificate to be redeemed in part by $5,000. Notice of redemption shall be given by mailing copies thereof to the Owners of any Certificates or portion of Certificate to be redeemed, postage prepaid, not less than 30 days nor more than 45 days prior to said Redemption Date at their last addresses, appearing on the registration books of the Trustee. Neither a failure of a Certificate Owner to receive such notice nor any defect in any notice so given shall affect the validity of the proceedings for the redemption of Certificates. If this Certificate is called for redemption and the Principal Component of this Certificate plus premium (if any) and Interest Components due with respect hereto are duly provided therefor as specified in the Trust Agreement, then interest shall cease to accrue with respect hereto from and after the date fixed for redemption. The City's obligation to make Lease Payments does not constitute a debt or liability of the City or the State of California or any political subdivision thereof within the meaning of any constitutional or statutory limitation and neither the faith and credit nor taxing power of the City or the State of California or any political subdivision thereof is pledged to make such payments. The City's obligation to pay Lease Payments is abated under certain circumstances described in the Lease Agreement during any period in which there is substantial interference with the use and right of possession by the City of the Site and funds are not otherwise available to the Trustee under the Trust Agreement to make such Lease Payments. Failure of the City to pay Lease Payments during any such period shall not constitute a default under the Lease Agreement, the Assignment Agreement, the Trust Agreement or this Certificate. To the extent that the Trustee lacks sufficient funds to pay the Interest Components or Principal Components due with respect to the Certificates as a result of an abatement in Lease Payments, each Certificate owner will be paid a pro rata portion of any Interest Components and Principal Components due with respect to a Certificate. The Trustee has no obligation or liability to the Owners of the Certificates with respect to the payment of Lease Payments by the City. The Trustee is not responsible for the accuracy of the recitals of fact herein. This Certificate shall not be entitled to any benefit under the Trust Agreement or become valid for any purpose until it has been duly manually executed and delivered by the Trustee. PUBL:27179_1 1 138182345.62 A-5 ---------~-~-_.- IN WITNESS WHEREOF, this Certificate has been executed by the manual signature of an Authorized Signatory of the Trustee, all as of the date specified below. Dated: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS TRUSTEE By Authorized Signatory PUBL:27179_1 1 138182345.62 A-6 (Form of Assignment) . ASSIGNMENT For value received the undersigned do(es) hereby sell, assign and transfer unto the within mentioned registered Certificate of Participation, and hereby irrevocably constitute(s) and appoint(s) attorney, to transfer the same on the books of the Trustee with full power of substitution in the premises. Dated: Note: The signature(s) of this Assignment must correspond with the name(s) as written on the face of the within registered Certificate in every particular without alteration or enlargement or any change whatsoever. Tax I.D. #: Signature Guaranteed: Note: Signature must be guaranteed by a qualified guarantor institution. PUBL:27179_1 1 138182345.62 A-7 --_..,~._---_.._----- ------~- -- -- - STATEMENT OF INSURANCE Municipal Bond Insurance Policy No. _ (the "Policy") with respect to payments due for principal of and interest on this certificate has been issued by (" - "). The Policy has been delivered to the United States Trust Company of New York, New York, New York, as the Insurance Trustee under said Policy and will be held by such Insurance Trustee or any successor insurance trustee. The Policy is on file and available for inspection at the principal office of the Insurance Trustee and a copy thereof may be secured from _ or the Insurance Trustee. All payments required to be made under the Policy shall be made in accordance with the provisions thereof. The Owner of this certificate acknowledges and consents to the subrogation rights of _ as more fully set forth in the Policy. EXHIBIT B FORM OF REQUISITION Requisition No. _ The undersigned states as follows: (1) The obligation or obligations in the stated amount or amounts described in Attachment 1 hereto have been incurred with respect to the Project and each item thereof is a proper charge against moneys in the Account of the Project Fund, and has not been the subject of a previous requisition; (2) There has not been filed with or served upon the City, or to the best knowledge of the undersigned served upon the Agency, notice of any lien, right to lien, attachment upon, or claim affecting the right to receive payment of any of the moneys payable to any of the persons named in Attachment 1 hereto, which has not been released or will not be released simultaneously with such payment, other than materialmen's liens accruing by mere operation of law which will not be released until fmal payment is made; and (3) For any payment listed above that is made under a construction contract, the City Manager of the City of Poway, or his designee, certifies approval thereof and further certifies that, insofar as such obligation was incurred for work, materials, equipment and supplies, such work was actually performed, or such materials, equipment or supplies were actually installed, in furtherance of the construction of the Project or delivered at the site of the work for the purpose of completing the Project, or delivered for storage or fabrication at a place or places approved by the City of Poway. Dated: Authorized Representative PUBL:27179_1 1 138182345.62 B-1 1986 ESCROW AGREEMENT THIS 1986 ESCROW AGREEMENT, dated as of 1, 1993, by and among the Poway Redevelopment Agency (the" Agency"), the City of Poway (the "City") and Bank of America National Trust and Savings Association, acting in its capacity as escrow bank (the "Escrow Bank") pursuant to this 1986 Escrow Agreement (the" Agreement"); WITNESSETH: WHEREAS, the Agency has issued its $10,000,000 Certificates of Participation (City of Poway 1986 Capital Improvement Projects) (the "1986 Bonds"); and WHEREAS, the Agency has determined that it is in its best interests and desirable that the 1986 Bonds be refinanced and be defeased; and WHEREAS, the Agency has agreed to provide funds necessary to secure payment of the 1986 Bonds and defease those bonds by authorizing the issuance of its $ 1995 Refunding Certificates of Participation (1986 Capital Improvement Projects) (the "Bonds"), for the purpose of providing moneys which will be sufficient (i) to provide for the payment when due of the principal and interest on the 1986 Bonds to and including August 1, 1996, (ii) to redeem the remaining outstanding 1986 Bonds on August 1, 1996 at par plus a redemption premium of 2 % of the principal amount of such 1986 Bonds (the sum of the amounts referred to in clauses (i) and (ii) of this preamble is hereinafter referred to as the "Redemption Price"); and WHEREAS, the Agency has determined that it is in its best interests and desirable for the Bonds to be issued and for a portion of the proceeds of the Bonds to be applied to the advance refunding of the 1986 Bonds; NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the Agency and the Escrow Bank agree as follows: SECTION 1. Deoosit of Moneys. (a) As used herein, the term "Investment Securities" means the Investment Securities set forth in Schedule A hereto which constitute direct noncallable nonprepayable obligations issued by the United States Treasury. The Agency hereby deposits with the Escrow Bank $ , representing $ of the net proceeds of the Bonds, and $ transferred from the Funds with respect to the 1986 Bonds to be held in irrevocable escrow by the Escrow Bank separate and apart from other funds of the Agency and the Escrow Bank ina fund hereby created and established and to be known as the "Escrow Fund", and to be applied solely as provided in this Agreement. Such moneys are at least equal to an amount sufficient to purchase the principal amount of Investment Securities set forth in Schedule A hereto; and the aggregate principal amount of Investment Securities described in Schedule A hereto, together with all interest due or to become due on such Investment Securities, will, in the opinion of Ernst & Young, be ATTACHMENT D JUN 2 0 1995 ITEM 11 ----,-'--- - --,._.._--~-- sufficient to pay when due (i) the principal and interest with respect to the 1986 Bonds and the prepayment price of the 1986 Bonds on August 1, 1996. (b) The Escrow Bank hereby acknowledges receipt of the written opinion of Ernst & Young, certified public accountants, dated , 1995 relating to the Investment Securities, and the opinion of Stradling, Yocca, Carlson & Rauth, dated ~ 1995, and relating to this Agreement with respect to the fact that the Agency's obligations with respect to the 1986 Bonds are defeased. SECTION 2. Use and Investment of Moneys. The Escrow Bank acknowledges receipt of the moneys described in Section 1 and agrees: (a) immediately to invest $ of the monies described in Section l(a) hereof in the Investment Securities set forth in Schedule A hereto and to deposit such Investment Securities in the Escrow Fund; and (b) to make the payments required under Section 3(a) hereof at the times set forth in Section 3(a) hereof. SECTION 3. Pavment of Refunded Certificates. (a) Pavment. As the principal of the Investment Securities set forth in Schedule A hereof and the investment income and earnings thereon are paid, the Escrow Bank shall, no later than the respective Interest Payment Dates (as defined in the Trust Agreement, dated as of August 1, 1986, with respect to the 1986 Bonds (the "1986 Trust Agreement") ), transfer from the Escrow Fund to the trustee for the 1986 Bonds amounts sufficient to pay (i) prior to and on August 1, 1996 the principal and interest on the 1986 Bonds; (ii) on August 1, 1996, the prepayment price of such bonds (as described in Schedule C attached hereto). Such transfers shall constitute the respective payments of the principal and interest with respect to the 1986 Bonds and prepayment price due from the Agency. Any amounts remaining in the Escrow Fund after provision for payment of the 1986 Bonds hereunder shall, after payment of amounts due the Trustee hereunder, be paid to the Agency. (b) Unclaimed Monevs. Any moneys which remain unclaimed for two (2) years after August 1, 1996, shall be repaid by the Escrow Bank to the Agency, provided, however, that the Escrow Bank shall, at the written request of the Agency, first publish a notice that said moneys remain unclaimed. (c) Priority of Pavments. The holders of the 1986 Bonds shall have a first lien on the moneys and Investment Securities in the Escrow Fund which are allowable and sufficient to pay the 1986 Bonds until such moneys and Investment Securities are used and applied as provided in this Agreement. Any cash or securities held in the Escrow Fund are irrevocably pledged only to the 1986 Bond holders. (d) Termination of Oblil!ation. Upon deposit of the moneys set forth in Section 1 hereof with the Escrow Bank pursuant to the provisions of Section 1 hereof and the simultaneous purchase of the Investment Securities as provided in Section 2 hereof, the holders of PUBL:26327 _21138182345.62 2 the 1989 Bonds shall cease to be entitled to any lien, benefit or security under the 1986 Trust Agreement. SECTION 4. Performance of Duties. The Escrow Bank agrees to perform such duties as are expressly set forth herein. SECTION 5. Reinvestment. Upon written direction of the Agency, the Escrow Bank may reinvest any uninvested amounts held as cash under this Agreement in noncallable nonprepayable obligations which are direct obligations issued by the United States Treasury or obligations which are unconditionally guaranteed as to full and timely payment by the United States of America (including pursuant to a forward purchase agreement) provided (i) the amounts of and dates on which the anticipated transfers from the Escrow Fund to the paying agent for the payment of the principal of, redemption price of, and interest on the 1986 Bonds will not be diminished or postponed thereby, (ii) the Escrow Bank shall receive the unqualified opinion of nationally recognized municipal bond attorneys to the effect that such reinvestment will not adversely affect the exclusion from gross income of interest with respect to the Bonds or the 1986 Bonds, (iii) the Escrow Bank shall receive from an independent certified public accountant a certification that, immediately after such reinvestment, the principal of and interest on obligations in the Escrow Fund will, together with other cash on deposit in the Escrow Fund available for such purposes, be sufficient without reinvestment to pay, when due, the principal or redemption price of and interest on the 1986 Bonds; and (iv) the Escrow Bank shall receive an opinion of nationally recognized bond counsel that such reinvestment is permissible under the Agreement. Except as provided in this Section 5 and Section 8 hereof, the Escrow Bank shall have no power or duty to invest any funds held under this Agreement or to sell, transfer or otherwise dispose of the moneys or Investment Securities held hereunder. In no event shall the Escrow Bank invest or reinvest monies held under this Agreement in mutual funds or unit investment trusts. SECTION 6. Indemnity. The Agency hereby assumes liability for, and hereby agrees (whether or not any of the transactions contemplated hereby are consummated) to indemnify, protect, save and keep harmless the Escrow Bank and its respective successors, assigns, agents, employees and servants, from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including reasonable legal fees and disbursements) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, the Escrow Bank at any time (whether or not also indemnified against the same by the Agency or any other person under any other agreement or instrument, but without double indemnity) in any way relating to or arising out of the execution, delivery and performance of its Agreement, the establiShment hereunder of the Escrow Fund, the acceptance of the funds and securities deposited therein, the purchase of the Investment Securities, the retention of the Investment Securities or the proceeds thereof and any payment, transfer or other application of moneys or securities by the Escrow Bank in accordance with the provisions of this Agreement; provided, however, that the Agency shall not be required to indemnify the Escrow Bank against the Escrow Bank's own negligence or willful misconduct or the negligent or willful misconduct of the Escrow Bank's employees or the breach by the Escrow Bank of the terms of this Agreement. In no event shall the Agency or the Escrow Bank be liable to any person by reason of the transactions contemplated hereby other than to each other as set forth in this section. The indemnities contained in this section shall survive the termination of this Agreement. PUBL:26327_21138182345.62 3 --- SECTION 7. Resoonsibilities of the Escrow Bank. The Escrow Bank and its respective successors, assigns, agents and servants shall not be held to any personal liability whatsoever, in tort, contract or otherwise, in connection with the execution and delivery of this Agreement, the establishment of the Escrow Fund, the acceptance of the moneys or securities deposited therein, the purchase of the Investment Securities, the retention of the Investment Securities or the proceeds thereof, the sufficiency of the Investment Securities to accomplish the defeasance of the 1986 Bonds or any payment, transfer or other application of moneys or obligations by the Escrow Bank: in accordance with the provisions of this Agreement or by reason of any non-negligent act, non-negligent omission or non-negligent error of the Escrow Bank made in good faith in the conduct of its duties. The recitals of fact contained in the "Whereas" clauses herein shall be taken as the statements of the Agency and the Escrow Bank assumes no responsibility for the correctness thereof. The Escrow Bank makes no representation as to the sufficiency of the Investment Securities to accomplish the defeasance of the 1986 Bonds or to the validity of this Agreement as to the Agency and, except as otherwise provided herein, the Escrow Bank: shall incur no liability with respect thereto. The Escrow Bank shall not be liable in connection with the performance of its duties under this Agreement except for its own negligence, willful misconduct or default, and the duties and obligations of the Escrow Bank shall be determined by the express provisions of this Agreement. The Escrow Bank may consult with counsel, who mayor may not be counsel to the Agency, and in reliance upon the written opinion of such counsel shall have full and complete authorization and protection with respect to any action taken, suffered or omitted by it in good faith in accordance therewith. Whenever the Escrow Bank shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering, or omitting any action under this Agreement, such matter may be deemed to be conclusively established by a certificate signed by an authorized officer of the Agency. SECTION 8. Substitution of Investment Securities. At the written request of the Agency and upon compliance with the conditions hereinafter set forth, the Escrow Bank shall have the power to sell, transfer, request the redemption or otherwise dispose of some or all of the Investment Securities in the Escrow Fund and to substitute noncallable nonprepayable obligations (the "Substitute Investment Securities") constituting direct obligations issued by the United States Treasury or obligations which are unconditionally guaranteed as to full and timely payment by the United States of America as contemplated by Section 801 of the 1986 Trust Agreement. The foregoing may be effected only if: (i) the substitution of Substitute Investment Securities for the Investment Securities (or Substitute Investment Securities) occurs simultaneously; (ii) the amounts of and dates on which the anticipated transfers from the Escrow Fund to the trustee for the payment of the principal of and/or redemption price of and/or interest on the 1986 Bonds will not be diminished or postponed thereby; (iii) the Escrow Bank shall receive the unqualified opinion of nationally recognized municipal bond attorneys to the effect that such disposition and substitution would not adversely affect the exclusion from gross income of interest with respect to the 1986 Bonds and the Bonds, and that the conditions of this Section 8 as to the disposition and substitution have been satisfied and that the substitution is permitted by this Agreement; and (iv) the Escrow Bank shall receive from an independent certified public accountant a certification that, immediately after such transaction, the principal of and interest on the Substitute Investment Securities in the Escrow Fund will, together with other cash on deposit in the Escrow Fund available for such purpose, be sufficient without reinvestment to pay, when due, the principal or redemption price of and interest on the 1986 Bonds. Any cash from the sale of Investment Securities (including U.S. Treasury Securities) received from the disposition and substitution of Substitute Investment Securities pursuant to this Section 8 to the extent such cash will not be PUBL:26327 _21138182345.62 4 -- required, in accordance with the 1986 Trust Agreement and this Agreement, and as demonstrated in the certification described in (iv) above, at any time for the payment when due of the principal or redemption price of or interest on the 1986 Bonds shall be paid to the Agency as received by the Escrow Bank free and clear of any trust, lien, pledge or assignment securing such bonds or otherwise existing under this Agreement. SECTION 9. Irrevocable Instructions as to Notice. The Escrow bank hereby acknowledges that upon the funding of the Escrow Fund as provided in this Agreement, the receipt of the opinions described in Section 1(b) of this Agreement and the giving of irrevocable instructions to mail as provided in the Irrevocable Instructions and Request to Trustee and Escrow Bank attached hereto as Schedule B (constituting all of the conditions precedent to the defeasance of the 1986 Bonds), the 1986 Bonds shall be paid in accordance with the 1986 Trust Agreement and the 1986 Bonds shall cease to be entitled to any lien, benefit or security under the 1986 Trust Agreement. SECTION 10. Amendments. This Agreement is made for the benefit of the Agency and the holders from time to time of the 1986 Bonds and it shall not be repealed, revoked, altered or amended without the written consent of all such holders, the Escrow Bank and the Agency; provided, however, but only after the receipt, by the Escrow Bank, of an opinion of nationally recognized bond counsel that the exclusion from gross income of interest with respect to the Bonds, and the 1986 Bonds will not be adversely affected for federal income tax purposes, that the Agency and the Escrow Bank may, without the consent of, or notice to, such holders, amend this Agreement or enter into such agreements supplemental to this Agreement as shall not adversely affect the rights of such holders and as shall not be inconsistent with the terms and provisions of this Agreement, for anyone or more of the following purposes: (i) to cure any ambiguity or formal defect or omission in this Agreement; (ii) to grant to, or confer upon, the Escrow Bank for the benefit of the holders of the 1986 Bonds any additional rights, remedies, powers or authority that may lawfully be granted to, or conferred upon, such holders or the Escrow Bank; and (Hi) to include under this Agreement additional funds, securities or properties. The Escrow Bank shall be entitled to rely conclusively upon an unqualified opinion of nationally recognized municipal bond attorneys with respect to compliance with this Section 10, including the extent, if any, to which any change, modification, addition or elimination affects the rights of the holders of the 1986 Bonds or that any instrument executed hereunder complies with the conditions and provisions of this Section 10. SECTION 11. Term. This Agreement shall commence upon its execution and delivery and shall terminate on the later to occur of either (i) the date upon which the 1986 Bonds have been paid in accordance with this Agreement or (ii) the date upon which no unclaimed moneys remain on deposit with the Escrow Bank pursuant to Section 3(b) of this Agreement. SECTION 12. Comoensation. The Escrow Bank shall receive its reasonable fees and expenses as previously agreed to; provided, however, that under no circumstances shall the Escrow Bank be entitled to any lien nor will it assert a lien whatsoever on any moneys or obligations in the Escrow Fund for the payment of fees and expenses for services rendered by the Escrow Bank under this Agreement. SECTION 13. Resil!nation or Removal of Trustee as Escrow Bank. PUBL:26327 _21138182345.62 5 (a) The Escrow Bank may resign by giving notice in writing to the Agency, which notice shall be published once in a newspaper of general circulation published at least once each calendar week in the County of San Diego, and in a daily newspaper of general circulation in the Borough of Manhattan, District and State of New York. The Escrow Bank may be removed (l) upon the direction of the City, without cause, (2) by (i) filing with the Agency of an instrument or instruments executed by the holders of at least 51 % in aggregate principal amount of the 1986 Bonds then remaining unpaid, (ii) the publishing of such notice at least 60 days prior to the effective date of said removal in a newspaper of general circulation in the County of San Diego, and in a daily newspaper of general circulation in the Borough of Manhattan, District and State of New York, and (iii) the delivery of a copy of the instruments filed with the Agency to the Escrow Bank or (3) by a court of competent jurisdiction for failure to act in accordance with the provisions of this Agreement upon application by the Agency or the holders of 51 % in aggregate principal amount of the 1986 Bonds then remaining unpaid. (b) If the position of Escrow Bank becomes vacant due to resignation or removal of the Escrow Bank or any other reason, a successor Escrow Bank may be appointed by the Agency. Notice of such appointment shall be published in accordance with the requirements more specifically set forth in clause (2) (ii) of subsection (a) of this Section. Within one year after a vacancy, the holders of a majority in principal amount of the 1986 Bonds then remaining unpaid may, by an instrument or instruments filed with the Agency, appoint a successor Escrow Bank who shall supersede any Escrow Bank theretofore appointed by the Agency. If no successor Escrow Bank is appointed by the Agency or the holders of such 1986 Bonds then remaining unpaid, within 45 days after any such resignation or removal, the holder of any such 1986 Bonds or any retiring Escrow Bank may apply to a court of competent jurisdiction for the appointment of a successor Escrow Bank. The responsibilities of the Escrow Bank under this Escrow Agreement will not be discharged until a new Escrow Bank is appointed and until the cash and investments held under this Escrow Agreement are transferred to the new Escrow Bank. SECTION 14. Severability. If anyone or more of the covenants or agreements provided in this Agreement on the part of the Agency or the Escrow Bank to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenants or agreements shall be null and void and shall be deemed separate from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Agreement. SECTION 15. Counternarts. This Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as one original and shall constitute and be but one and the same instrument. SECTION 16. Governinl! Law. This Agreement shall be construed under the laws of the State of California. SECTION 17. Holidays. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in this Agreement, shall be a legal holiday or a day on which banking institutions in the city in which is located the principal office of the Escrow Bank are authorized by law to remain closed, such payment may be made or act performed or right exercised on the next succeeding day not a legal holiday or a day on which such banking institutions are authorized by law to remain closed, with the same force and PUBL:26327 _21138182345.62 6 ---.- effect as if done on the nominal date provided in this Agreement, and no interest shall accrue for the period after such nominal date. SECTION 18. Assil!nment. This Agreement shall not be assigned by the Escrow Bank or any successor thereto without the prior written consent of the Agency. SECTION 19. Moody's and Standard and Poor's. The Agency agrees to provide to Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007, Attention: Public Finance Rating Desk/Refunded Bonds, and Standard & Poor's Corporation, 25 Broadway, New York, New York 10004, prior notice of each amendment entered into pursuant to Section 10 hereof and a copy of such proposed amendment, and to forward a copy (as soon as possible) of (i) each amendment hereto entered into pursuant to Section 10 hereof, and (ii) any action relating to severability or contemplated by Section 14 hereof. ,uBL:26327_21138182345.62 7 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers and their seals to be hereunder affixed and attested this _th day of , 1995. POW A Y REDEVELOPMENT AGENCY By: Its: Executive Director CITY OF POW A Y By: Its: City Manager BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Escrow Bank By: Its: Authorized Officer PUBL:26327 _21138182345.62 8 SCHEDULE A "Investment Securities" are defined to be, and shall be, as follows: Maturity Par Settlement Iml COUDOn Date Amount Price Date PUBL:26327 _ 211381 82345.62 SCHEDULE A-I -< -. -_._~-_.- SCHEDULE B IRREVOCABLE INSTRUCTIONS AND REQUEST TO TRUSTEE AND ESCROW BANK , 1995 Bank of America National Trust and Savings Association Los Angeles, California Re: $10,000,000 Certificates of Participation (City of Poway 1986 Capital Improvement Projects) Ladies and Gentlemen: As Trustee under that certain Trust Agreement dated as of August 1, 1986 for the Certificates of Participation referenced first above (the "1986 Bonds") (the "Trust Agreement"), and as Escrow Bank under that certain Escrow Agreement dated as of , 1995, by and between the Poway Redevelopment Agency and Bank of America National Trust and Savings Association, as Escrow Bank, you are hereby notified of the irrevocable election of the Agency to cause to be paid (i) on August 1, 1996 the redemption price of the 1986 Bonds, and (ii) principal and interest on all such Bonds on and prior to the redemption date thereof. You are hereby irrevocably instructed to mail, as provided in the Trust Agreement, notice of redemption of such principal amounts of said 1986 Bonds as are scheduled to be redeemed prior to maturity to the extent such 1986 Bonds have not been otherwise redeemed or purchased by the Escrow Bank prior to said dates. Such notice shall be in the appropriate form annexed hereto as Exhibit X. PUBL:26327 _211381 82345.62 SCHEDULE B-1 You are hereby further irrevocably instructed to mail a notice to the holders of such Bonds (in the appropriate form annexed hereto as Exhibit Y) that the deposit of investment securities and moneys has been made with you as such Escrow Bank and that the projected withdrawals from such escrow have been calculated to be adequate to pay the principal, redemption price of and the interest on said 1986 Bonds outstanding as such become due or are subject to redemption. POW A Y REDEVELOPMENT AGENCY By: Its: Receipt acknowledged and consented to: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Escrow Bank By: Its: PUBLo26327_21138182345.62 EXHffiIT X-I NOTICE OF REDEMPTION OF CERTIFICATES OF PARTICIPATION (CITY OF POWAY 1986 CAPITAL IMPROVEMENT PROJECTS) Notice is hereby given to the holders of the outstanding above-captioned certificates of participation (the "Certificates") maturing on August 1, 1997 and thereafter, that such Certificates have been called for redemption prior to maturity in accordance with their terms at a redemption price of 102 % of the principal amount thereof, together with accrued interest evidenced thereby to August 1, 1996. The source of the funds to be used for such redemption is the principal of and interest on investment securities heretofore deposited with Bank of America National Trust and Savings Association, as Escrow Bank, together with moneys, if any, heretofore deposited with the Escrow Bank. The redemption price of and accrued interest evidenced thereby on the Certificates maturing on August 1, 1996 and thereafter shall become due and payable on August 1, 1996 and from and after August 1, 1996, interest evidenced thereby on the Certificates maturing on August I, 1997 and thereafter shall cease to accrue and be payable. Holders of the Certificates maturing on August 1, 1997 and thereafter, will receive payment of the redemption price and accrued interest to which they are entitled upon presentation and surrender thereof at the principal corporate trust office of Bank of America National Trust and Savings Association. Dated this day of , POW A Y REDEVELOPMENT AGENCY Bank of America National Trust and Savings Association, as Trustee PUBL:26327 _21138182345.62 EXHffiIT X-I -- EXHffiIT Y-l NOTICE OF REFUNDING OF CERTIFICATES OF PARTICIPATION (CITY OF POWAY 1986 CAPITAL IMPROVEMENT PROJECTS Notice is hereby given to the holders of the outstanding certificates maturing on August 1, 1997 and thereafter designated as captioned above (the "Refunded Certificates") (i) that there has been deposited with Bank of America National Trust and Savings Association, as Escrow Bank, moneys and investment securities as permitted by the Trust Agreement, dated as of August 1, 1986, between the Poway Redevelopment Agency and Bank of America National Trust and Savings Association, as Trustee (the "1986 Trust Agreement"), the principal of and the interest on which when due will provide moneys which, together with such other moneys deposited with the Escrow Bank, shall be sufficient and available (a) to pay on and prior to August 1, 1996 the principal and interest on the Refunded Certificates and scheduled to be paid on and prior to August 1, 1996 and (b) to redeem on August 1, 1996 the Refunded Certificates at a redemption price (expressed as a percentage of the principal amount of the Refunded Certificates to be redeemed) equal to 102 %, and to pay interest evidenced by such Refunded Certificates when due on and prior to August 1, 1996; (ii) that the Escrow Bank has been irrevocably instructed to prepay on August 1, 1996 the Refunded Certificates; and (iii) that the Refunded Certificates are deemed to be paid in accordance with the 1986 Trust Agreement. Dated this _ day of ,199_. POW A Y REDEVELOPMENT AGENCY Bank of America National Trust and Savings Association, as Trustee PUBL:26327 _21138182345.62 EXHffiIT X-I --...----------------- -- - ----- ------------ ---- SCHEDULE C ESCROW FUND CASHFLOW Debt Service Ending Date Receiots Reauirements Balance ------------------ ------------------- PUBL:26327 _21138182345.62 SCHEDULE C-l - -- PRELIMINARY OFFICIAL STATEMENT DATED ,1995 In the opinion of Stradling, Yocca, Carlson & Rauth, a Professional Corporation ("Special Counsel"), under existing statutes, regulations, rulings, and judicial decisions and assuming certain representations and compliance with certain covenants and requirements described herein, the portion of the Lease Payments designated as and comprising interest is excluded from gross income for federal income tax purposes and is not a specific item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Special Counsel, the portion of Lease Payments designated as and comprising interest is exempt from State of California personal income tax. See "CONCLUDING INFORMATION -- Tax Exemption" herein. NEW ISSUE -- BOOK-ENTRY ONLY RATINGS: (See "CONCLUDING INFORMATION Ratings" herein.) $9,920,000. 1995 REFUNDING CERTIFICATES OF PARTICIPATION (1986 CAPITAL IMPROVEMENT PROJECTS) Evidencing Undivided Proportionate Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF POWAY, CALIFORNIA As Rental for Certain Property Pursuant to a Lease Agreement with the POWA Y REDEVELOPMENT AGENCY Dated: July 1, 1995 Due: August 1, As Shown Below The Certificates will be executed and delivered as fully registered certificates in book- entry form only, initially registered in the name of Cede & Co., New York, New York, as nominee of The Depository Trust Company ("DTC"), New York, New York. Purchasers will not receive certificates representing their interest in the Certificates. Individual purchases of the Certificates will be in principal amounts of $5,000 or in any integral multiples of $5,000. Interest payable with respect to the Certificates will be payable on February 1 and August 1 of each year, commencing February 1, 1996, and principal payable on the Certificates will be paid Or:! the dates set forth in the Maturity Schedule below. Payments of principal of and interest with respect to the Bonds will be paid by Bank of America National Trust and Savings Association, Los Angeles, California, as trustee (the "Trustee"), to DTC for subsequent disbursement to DTC Participants who will remit such payments to the Beneficial Owners of the Certificates. * Preliminary, subject to change LA\951310112 JUN 2 0 1995 ITEM l1r.1 ATTACHMENT E -- The Certificates are being sold, executed and delivered by the City of Poway (the "City") to (i) refund certain outstanding Certificates of Participation, Series 1986 issued by the City (the "1986 Certificates"), (ii) to fund, in whole or in part, a Reserve Account for the Certificates, and (iii) to pay certain costs of issuing the Certificates. The Certificates are subject to redemption prior to maturity as described herein. See "THE CERTIFICATES" herein. The Certificates represent undivided proportionate interests in certain Lease Payments (the "Lease Payments") and certain other payments to be made by the City pursuant to a Lease Agreement, dated as of July 1, 1995 (the "Lease Agreement"), by and between the City and the Agency. The City has covenanted in the Lease Agreement that, so long as the Site is available for the City's use, it will take such actions as may be necessary to include all lease payments due under the Lease Agreement in its annual budget and to make the necessary annual appropriations therefor. The Lease Payments are subject to abatement as described herein. See "RISK FACTORS" herein. This cover page contains information for general reference only. It is not a summary of the security or terms of this issue. Investors must read the entire Official Statement, including the section entitled "RISK FACTORS", for a discussion of special factors which should be considered, in addition to the other matters set forth herein, in considering the investment quality of the Certificates. Capitalized terms used on this cover page and not otherwise defined shall have the meanings set forth herein. Payment of the principal of and interest with respect to the Certificates when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Certificates by FINANCIAL SECURITY ASSURANCE INC. (the "Insurer"). [INSURANCE LOGO] THE CITY'S OBLIGATION TO MAKE LEASE PAYMENTS IS AN OBLIGATION PAYABLE FROM THE CITY'S GENERAL FUND OR ANY OTHER SOURCE OF FUNDS LEGALLY AVAILABLE TO THE CITY TO MAKE LEASE PAYMENTS. NEITHER THE CERTIFICATES NOR THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS CONSTITUTES A DEBT OF THE CITY OF POWAY OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION OR ANY OBLIGATION FOR WHICH THE CITY OR THE STATE OF CALIFORNIA IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY OR THE STATE OF CALIFORNIA HAS LEVIEiD OR PLEDGED ANY FORM OF TAXATION. LA\951310112 ,--- - MATURITY SCHEDULE. $_ Serial Certificates Maturity Price Maturity Price Date Principal Interest or Date Principal Interest or (AUI~ust 1) Amount Rate ~ (August 1) Amount Rate ~ 1996 2002 1997 2003 1998 2004 1999 2005 2000 2006 2001 2007 $_ _ % Term Certificate Due August 1, 2011, Price or Yield: _ % (Plus accrued interest from July 1, 1995) The Certificates are offered when, as and if sold, executed and delivered, subject to the approval as to their legality by Stradling, Yocca, Carlson & Rauth, a Professional Corporation, Newport Beach, California, Special Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Nossaman, Guthner, Knox & Elliott, Los Angeles, California, and for the City by McDougal, Love, Eckis & Grindle. It is anticipated that the Certificates in book-entry form, will be available for delivery to DTC in New York, New York, on or about ,199 . . Date: PAINEWEBBER INCORPORATED . Preliminary, subject to change LA\951310112 --------------~-------------------------------- ------------- CITY OF POWA Y, CALIFORNIA City Council Don Higginson, Mayor Susan Callery, Deputy Mayor Michael P. Cafagna, Councilmember Robert C. Emery, Councilmember Betty Rexford, Councilmember Poway Redevelopment Agency Don Higginson, Chairperson Susan Callery, Deputy Chairperson Michael P. Cafagna, Member Robert C. Emery, Member Betty Rexford, Member City/Agency Staff James L. Bowersox, Executive Director/City Manager John D. Fitch, Assistant Executive Director/Assistant City Manager Stephen M. Eckis, City Attorney Marjorie K. Wahlsten, Secretary/City Clerk Peggy A. Stewart, Director of Administrative Services David Narevsky, Redevelopment Manager Warren Shafer, Director of Redevelopment Services Reba Wright-Quastler, Director of Planning Services SPECIAL SERVICES Special Counsel Stradling, Yocca, Carlson & Rauth, a Professional Corporation Newport Beach, California Trustee Bank of America National Trust and Savings Association Los Angeles, California Verification Agent Ernst & Young Memphis, Tennessee LA\951310112 No dealer, salesperson or other person has been authorized by the City of Poway or the Poway Redevelopment Agency to give any information or to make any representation other than as contained in this Official Statement in connection with the offering described in it and, if given or made, such other information or representation must not be relied upon as having been authorized by the City of Poway or the poway Redevelopment Agency. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy any securities other than those described on the cover page, nor shall there be any offer to sell, solicitation of any offer to buy or sale of such securities by a person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers of the Certificates. The information contained in this Official Statement has been obtained from official sources deemed reliable. No representation is made, however, as to the accuracy or completeness of such information, and nothing contained in this Official Statement is, or shall be relied upon as, a promise or representation by the Underwriter. The Official Statement is submitted in connection with the sale of the securities described in it and may not be reproduced or used, in whole or in part, for any other purposes. The information and expression of opinions contained in this Official Statement are subject to change without notice and neither delivery of this Official Statement nor any sale made by means of it shall, under any circumstances, create any implication that there have not been changes in the affairs of the City or Agency since the date of this Official Statement. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT A LEVEL ABOUT THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. The District has certified that this Preliminary Official Statement has been "deemed final" as of its date, except for the omission of certain final pricing and related information, as required by Rule 15c2-12 of the Securities Exchange Commission. LA\951310112 TABLE OF CONTENTS Eag.e INTRODUCTION ................ .................... ......... ... ........ ...... ... ... ... ... ..... ... ....... ..... ... ....... .... 1 General... ... ......... .... ........ ...... ......... .................... .................... ............ ... ... ....... .... 1 The City and the Agency ..................................................................................... 1 Authority for the Certificates ..... ...... ...... ... ..... ... ... ... ... ... ... ........ ... ...... ... ... .... ... ... .... 1 Purpose............................................................................................................... 2 Security for the Certificates .................................................................................2 Abatement........................................................................................................... 3 Redemption......................................................................................................... 3 Assignment......................................................................................................... 3 Limited Obligations.............................................................................................. 3 Summaries Not Definitive.................................................................................... 3 THE REFUNDING PLAN ................................................................................................4 THE PROJECTS AND THE SITE ................................................................................... 4 The Projects......... ... ... ... ... ... ... ............ .............. ...... ... ...... ...... ............ ... ... ... ......... 4 The Site............................... ... ............ ........ ..................... ... ... ...... ......... ...... ... ...... 5 Release of Property; Substitution ....... ..... ... ... ... ... ...... ... ... ... ... ... ... ...... ... ... ... ... ...... 5 ESTIMATED SOURCES AND USES OF FUNDS........................................................... 6 THE CERTIFiCATES........... ................. ...... ........... .............. ... ... ...... ...... ......................... 7 General..... ......... ................. ...... ........... ...... ................................ ...... ................... 7 Optional Redemption' ... ......... ................. ....................... ............ ............ ......... .... 8 Mandatory and Extraordinary Redemption'......................................................... 8 Notice of Redemption.......................................................................................... 9 Selection of Certificates for Redemption ............................................................. 9 Book-Entry System........ ........... ...... ........ .............. ... ... ...... ......... ......................... 9 Additional Certificates........................................................................................ 12 SCHEDULE OF LEASE PAYMENTS ........................................................................... 13 SECURITY FOR THE CERTIFICATES ........................................................................ 14 General............................................................................................................. 14 Reserve Account............................................................................................... 14 Appropriation..................................................................................................... 15 Abatement......................................................................................................... 16 Assignment; Recourse on Default .... ........... ........... ... ... ... ... ... ... ... ...... ... ... ... ... .... 16 Insurance .............................. ...................... ......... ...... ..... ...... ......... ...... ............. 17 Lease Payments. ... ... ... ... ... ........... ... ... ........ ...... ... ... ........ ... ... ... ... .......... ...... ...... 17 Certificate Insurance. ... ... ... ... ... ..... ...... ... ...... ........ ... .............. ................ ... ... ...... 18 CERTIFICATE INSURANCE ......... ... ... ......... ..... ... .............. ... ............... ...... ...... ............ 18 The Insurance Policy................ .................... ....................... ... ........... ................ 18 The Insurer. .................................... ..... ............... ....................... ............ ... ......... 19 RISK FACTORS. ... ... ... ... ... ...... ... ... ...... ...... ...... ..... ...... ... ... ........ ...... ... .... .............. ......... 20 No Tax Pledge..... .................... ... ... ... ... ........ ... ... ... ... ... ..... ... .... ...... ... ................. 20 i Appropriation..................................................................................................... 20 No Limit on Additional Debt............................................................................... 21 Abatement and Eminent Domain.......................................................................21 Limitation on Enforcement of Remedies............................................................ 21 Bankruptcy ............. ...................... ......................... .......... ... ......... ....... .......... ..... 21 No Acceleration................................................................................................. 22 Loss of Tax Exemption... ..................................... ... ... ....... ................... .............. 22 Geologic, Topographic and Climatic Conditions ................................................22 State Budget.... ... ............. ... ...... ... ... ......... ................ ... ............. ... ...................... 23 Limitations on Remedies Available....................................................................23 Article XIIIA of the State Constitution ................................................................ 23 Article XIIIB of the State Constitution ................................................................ 24 CITY FINANCIAL INFORMATION.... ............. ................ ......... .......... ...... ...................... 25 General Fund..... ...... ................... ................... ... ......... ....................... ................ 25 Budgetary Process............................................................................................ 25 Summary of Revenues and Expenditures .........................................................27 1994/95 Budget......... ... ................ .......... ... .................................................... .... 28 Audits................................................................................................................ 28 Investments in County Investment Pool............................................................ 29 Outstanding Debt ....... ............. ... ....... ... ... ... .... ... ... ... ....... ... ... .......... ....... ... ......... 30 Direct and Overlapping Debt.............................................................................31 THE CITY. ... ... .... ....... ... ... .... ... ...... ...... ............. ............. .......... .......... ......... .... ............... 32 History and Location .. ... ... .... ... ... ...... .... ...... ... ... ... .... ... ... ....... ...... ....... ... .......... ... 32 ~i~m~~~:!liz.ati~~::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: ~~ Population......................................................................................................... 33 Housing and Income .........................................................................................33 Climate.............................................................................................................. 33 Transportation................................................................................................... 33 Services and Facilities....................... ... ... ................ ... .......................... .... ... ... ... 34 THE AGENCy.......... .......... ...... ... ... ... ............ ............. ............. ... ... ................ .......... ..... 34 General............................................................................................................. 34 Agency Powers and Duties ...............................................................................34 CONCLUDING INFORMATION...... .......... ............ ............. ................ ... ............. ........... 35 Underwriting. ....... ................... ... .......... ... ...... ................... ... ............. ...... ............ 35 Legal Opinion.................................................................................................... 35 Tax Exemption ............ ... ... .......... ...... ...................... ... ... ...... ....... ... .......... .......... 35 Litigation............................................................................................................ 36 Ratings.............................................................................................................. 37 Audited Financial Statements.... ...... ... ... ... ...... .... ...... ... ... ............. ................. ..... 37 Verification of Mathematical Accuracy...............................................................38 Miscellaneous ......... ................ ............................. ... ................... .... ...... ............. 38 APPENDIX A -- SUMMARY OF PRINCIPAL LEGAL DOCUMENTS ...........................A-1 APPENDIX B -- CITY OF POWA Y GENERAL DEMOGRAPHIC AND FINANCIAL INFORMATION .............. .... ......... ......... .... ...................... B-1 ii APPENDIX C -- AUDITED FINANCIAL STATEMENTS OF THE CITY FOR - FISCAL YEAR 1993/94......... ................. ... .......... ..... ......... ................. C-1 APPENDIX 0 - PROPOSED FORM OF FINAL OPINION ..........................................0-1 APPENDIX E -- SPECIMEN INSURANCE POLlCY.....................................................E-1 iii $9,920,000" 1995 REFUNDING CERTIFICATES OF PARTICIPATION (1986 CAPITAL IMPROVEMENT PROJECTS) Evidencing Undivided Proportionate Interests of the Owners Thereof in Lease Payments to be Made by the CITY OF POWAY As Rental for Certain Property Pursuant to a Lease Agreement with the POWAY REDEVELOPMENT AGENCY INTRODUCTION General The purpose of this Official Statement (which includes the cover page and the Appendices attached hereto) is to provide information concerning the sale and delivery by the City of Poway (the "City") of its 1995 Refunding Certificates of Participation (1986 Capital Improvement Projects) (the "Certificates"), in the aggregate principal amount of $9,920,000*. The City and the Agency The City is located in the inland valley of San Diego County, California, approximately 25 miles north of downtown San Diego along Interstate 15, just south of Rancho Bernardo. The City presently has a population of 45,263. For other selected information concerning the City, see "APPENDIX A - CITY OF POWAY GENERAL ECONOMIC AND FINANCIAL INFORMATION" hereto. The Poway Redevelopment Agency (the "Agency") was created pursuant to the provisions of the Section 33000 e1~. of the California Health and Safety Code (the "Redevelopment Law"), and was activated on April 26, 1983 by City Ordinance No. 96. The members of the City Council serve as the governing board of the Agency, and the City Manager acts as its Executive Director. Authority for the Certificates The Certificates are being executed and delivered pursuant to the provisions of a Trust Agreement, dated as of July 1, 1995 (the "Trust Agreement"), among the City, the Agency and Bank of America National Trust and Savings Association, as trustee (the "Trustee"). .. Preliminary, subject to change 1 LA\951310112 --- Purpose The proceeds of the sale of the Certificates will be used, together with other available moneys, to (i) prepay certain obligations of the City securing the City's Certificates of Participation, Series 1986 (the "1986 Certificates"), originally issued in the aggregate principal amount of $10,000,000, $ of which are currently outstanding, (ii) to fund, in whole or in part, a Reserve Account for the Certificates, and (iii) to pay certain costs of issuance of the Certificates, including the premium for the municipal bond insurance policy described herein. See "THE REFUNDING PLAN" and "ESTIMATED SOURCES AND USES OF FUNDS" herein. The proceeds of the 1986 Certificates were used principally for the installation, construction and equipping of a municipal swimming pool, a performing arts center and a neighborhood park (collectively, the "Projects"). Security for the Certificates The Certificates represent the direct and proportionate interest of registered owners thereof in certain lease payments (the "Lease Payments") and other payments to be made by the City for the use of the certain property leased to the City (the "Site") pursuant to a Lease Agreement, dated as of July 1, 1995 (the "Lease Agreement"), between the City and the Agency. The Certificates evidence the proportionate interest of the Owner thereof in the Lease Payments payable by the City, as lessee, to the Agency, as lessor for the use and occupancy of the Site. See "THE PROJECTS AND THE SITE" herein. In accordance with a Property Lease, dated as of July 1, 1995 (the "Property Lease") between the City, as lessor, and the Agency, as lessee, the City has agreed to lease to the Agency the Site. Pursuant to the Lease Agreement, the Agency is leasing the Site back to the City. In accordance with the Lease Agreement, the City is required to pay to the Trustee specified Lease Payments for the Site which are designed to be sufficient, in both time and amount, to pay, when due, the interest with respect to and the principal of the Certificates due on February 1 and August 1 of each year, any taxes, assessment charges, utility charges, maintenance and repair costs of the Site. See "APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS" herein. The City has covenanted in the Lease Agreement to pay the principal of and interest with respect to the Certificates, and to take such action as may be necessary to include all such total Lease Payments in its annual budgets. The City has further covenanted to make the necessary annual appropriations for all such Lease Payments. Said covenants on the part of the City are deemed to be and will be constructed to be duties imposed by law. Additionally, the City has covenanted to maintain insurance (including rental interruption insurance) on the Site. See "SECURITY FOR THE CERTIFICATES --Insurance" herein. In addition to the revenues and funds described herein, the City has purchased a municipal bond insurance policy (the "Policy"). For a detailed description thereof, see "CERTIFICATE INSURANCE" herein. Under the Trust Agreement, the City is permitted to execute and deliver Additional Certificates payable from Lease Payments on a parity with the Certificates. The City also has 2 LA\951310112 --.- the right to incur other obligations payable from its general revenues without the consent of the Owners of the Certificates. See "THE CERTIFICATES -- Additional Certificates" and "APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS -- The Trust Agreement." Concurrently with the issuance of the Certificates, the City is issuing its $31,020,000 principal amount of [Poway Royal Mobile Home Park Refunding Certificates of Participation] which are payable on a parity basis with the Certificates. Abatement The amount of Lease Payments due under the Lease Agreement and, correspondingly, the amount available to pay the principal and interest components of the Certificates, will be subject to adjustment or abatement during any period in which, by reason of damage or destruction or eminent domain, there is interference with the use and possession by the City of the Site. See "RISK FACTORS -- Abatement and Eminent Domain" herein. Redemption The Certificates are subject to redemption as described herein. Assignment Pursuant to an Assignment Agreement, dated as of July 1, 1995 (the "Assignment Agreement") between the Agency and the Trustee, the Agency has assigned to the Trustee for the benefit of the Owners of the Certificates (i) its right to receive Lease Payments from the City under the Lease Agreement, (ii) its rights under the Property Lease and (iii) without any further act on the part of the Agency, any and all of the other rights of the Agency under the Lease Agreement as may be necessary to enforce payments of Lease Payments when due and otherwise to protect the interests of the Owners. Limited Obligations THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS IS AN OBLIGATION PAYABLE EACH YEAR FROM THE CITY'S GENERAL FUND OR ANY SOURCE OF FUNDS LEGALLY AVAILABLE FOR THE PAYMENT OF LEASE PAYMENTS, BUT DOES NOT CONSTITUTE A DEBT OF THE CITY OR THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY STATUTORY OR CONSTITUTIONAL DEBT LIMITATION OR RESTRICTION, OR AN OBLIGATION FOR WHICH THE CITY OR THE STATE OF CALIFORNIA IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY OR THE STATE OF CALIFORNIA HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. Summaries Not Definitive The summaries and references of documents, statutes, reports and other instruments referred to herein do not purport to be complete, comprehensive or definitive, and each such summary and reference is qualified in its entirety by reference to each document, statute, report, or instrument. The capitalization of any word not conventionally capitalized, or otherwise defined herein, indicates that such word is defined in a particular agreement or other document and, as used herein, has the meaning given it in such agreement or document. See 3 LA\951310112 -- "APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS" for summaries of certain of such definitions. THE REFUNDING PLAN The proceeds of the Certificates will be used for the purpose of refunding the 1986 Certificates, to fund a Reserve Account for the Certificates and to pay costs of issuance of the Certificates. Concurrent with the issuance of the Certificates, the City will enter into an escrow agreement, dated as of July 1, 1995 (the "Escrow Agreement") with Bank of America National Trust and Savings Association, acting as escrow bank (the "Escrow Bank"). A portion of the proceeds from the sale of the Certificates will be deposited in the escrow fund (the "Escrow Fund") established under the Escrow Agreement. Amounts deposited into the Escrow Fund will be invested solely in direct, non-callable general obligations of the United States Department of the Treasury, the principal of and interest on which, together with any available cash to be held uninvested, have been verified by Ernst & Young, independent accountants, to be sufficient to pay the principal of, interest with respect to and premium on the applicable 1986 Certificates to and including the dates of redemption thereof and to redeem the applicable 1986 Certificates on their respective redemption date. See "CONCLUDING INFORMATION -- Verification of Mathematical Accuracy" herein. In addition to the proceeds of the Certificates deposited in the Escrow Fund, there will also be deposited therein certain funds remaining on deposit under the trust agreement executed in connection with the issuance of the 1986 Certificates. See "ESTIMATED SOURCES AND USES OF FUNDS" below. The moneys and securities held in the Escrow Fund are pledged to the payment of the 1986 Certificates. Neither the moneys or the principal of the escrow securities deposited with the Escrow Bank, nor the interest thereon, will be available for the payment of the Certificates. THE PROJECTS AND THE SITE The Projects The Projects consist of three components. The first is a 50 meter by 25 yard municipal swimming pool at Community Park, which includes showers, lockers, administrative offices, appurtenant pool decking, parking and associated landscaping. The second component consists of a performing arts center of approximately 800-900 seats located at Poway High School. The third component is a neighborhood park known as Valle Verde/Espola Park, located on a 4.62 acre site in the northwest portion of the City. The park includes a multi- purpose field, parking and offsite public improvements. All of the Projects have been completed. 4 LA\951310112 - ---...-- The Site Pursuant to the Property Lease, dated as of July 1, 1995 (the "Property Lease"), the City has leased the Site to the Agency, in consideration of, among other things, the Agency's promise to lease the Site back to the City pursuant to the Lease Agreement. The Site does not include the Projects. Instead, the City has determined to lease the following property: Property Square Total Description Footage &ru Value (1) 1. City Hall 11,800 2.20 $2,546,015 2. Agency Administration Building 1,300 (2) 61,036 3. Engineering/Planning Administration 6,500 (2) 228,560 4. Fire Station NO.1 15,800 2.35 2,568,049 5. Fire Station No.2 5,000 1.46 1,001,496 6. Vehicle Maintenance Building 4,900 3.93 945,066 7. Operations Admin. and Warehouse 7,800 7.75 1,665,186 8. Vehicle Storage Facility 5,100 (3) 302,316 9. Senior Center/Community Park 13,000 16.53 7.189700 TOTAL $16,417424 (1) Value of improvements based on insurance values, and value of real property based upon an estimated current square foot market value of $6 to $10, depending on location as determined by the City. (2) Located in City Hall complex. (3) Located in Operations complex. Release of Property; Substitution Under the Lease Agreement, the City may, from time to time, add other real property or improvements or substitute other real property or improvements for all or a portion of the initial Site, and the City may release a portion of the real property subject to the Lease Agreement, upon compliance with the terms of the Site Lease and the Lease Agreement. Such terms require that the Trustee be provided with: (a) Written consent by any municipal bond insurance company that has insured the Certificates or any Additional Certificates. (b) Written confirmation by each municipal bond rating agency that has rated the Certificates and any Additional Certificates that its then existing rating with respect to the Certificates or any Additional Certificates will not be reduced or withdrawn as a result of such addition, substitution or release; (c) A certificate from an independent and qualified real estate appraiser selected by the City setting forth his or her findings that the Site as constituted following such addition, substitution or release (i) has an annual fair rental value during the remainder of the Term of the 5 LA\951310112 Lease Agreement which is equal to or greater than the total annual Lease Payments required to be paid during any year of the remainder of the Term of the Lease Agreement; provided, however, that notwithstanding this subjection (c) that in the event of damage or destruction of the Site, the City may select an alternate replacement Site in accordance with the Lease Agreement; (d) Certificates of insurance applicable to the Site (at and after the addition, substitution or release) which comply with the requirements of the Lease Agreement; and (e) An opinion of nationally recognized bond counsel to the effect that such addition, substitution or release will not adversely affect the exclusion from gross income for federal income tax purposes or the exemption from State of California personal income taxation of interest component of the Lease Paymel'lts and that the Lease Agreement and the Site Lease, as amended, remain valid and binding obligations of the City. See "APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS -The Lease Agreement -- Release and Substitution." ESTIMATED SOURCES AND USES OF FUNDS The proceeds to be received from the sale of the Certificates, together with other moneys, are anticipated to be applied as follows: SOURCES: Principal Amount of Certificates.......................................... $9,920,000' Accrued Interest ................................................................. Original Issue Discount.. ............ ...................... .......... ......... Proceeds from 1986 Certificates......................................... City Contribution....... ................. ...... ........... ... ............... ..... TOTAL SOURCES: ............................................................ $ USES: Escrow Fund....................................................................... $ Reserve Account ......... ......... ........ .............. ...... ... ...... ......... Costs of Issuance Account (1)............................................ Interest Account (2) ............................................................ TOTAL USES: ... ... ........ ......... ... ... ........... ... ... ... ... ... ...... ... .... $ (1) Includes Underwriter's discount, premium for the Policy ard other costs of issuing the Certificates. (2) Includes accrued interest from dated date. . Preliminary, subject to change 6 LA\951310112 _._._-_.~-----_._- THE CERTIFICATES General The Certificates shall be delivered in the form of fully registered Certificates, without coupons, in denominations of $5,000 or any integral multiple thereof, and shall be dated July 1, 1995. The Certificates will mature on the dates and in the amounts set forth on the front cover of this Official Statement. The Certificates, when issued, will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, New York ("DTC"). So long as DTC, or Cede & Co. as its nominee, is the registered owner of all Certificates, all payments on the Certificates will be made directly to DTC, and disbursement of such payments to the DTC Participants (defined below) will be the responsibility of DTC, and disbursement of such payments to the DTC Participants (defined below) will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners (defined below) will be the responsibility of the DTC Participants, as more fully described hereinafter. (See "Book-Entry Only System" below.) Interest with respect to the Certificates (the "Interest Component") shall be payable on August 1 and February 1 of each year, commencing February 1, 1996, and continuing to and including the date of maturity or prior redemption, whichever is earlier. Principal represented by the Certificates (the "Principal Component") shall become payable on August 1 in each of the years and in the amounts set forth on the cover page of this Official Statement. Principal and premium, if any, with respect to the Certificates shall be payable upon presentation and surrender thereof at the corporate trust office of the Trustee in Los Angeles, California. Interest with respect to the Certificates shall be based on a 360-day year composed of twelve 30-day months and shall be payable by check from the Trustee mailed on each Interest Payment Date by first class mail to the registered Owners as of the close of business on the 15th calendar day of the month (whether or not such day is a Business Day) preceding an interest payment date (the "Record Date") at their addresses shown on the registration books maintained by the Trustee. Upon the written direction filed with the Trustee prior to any Record Date (as defined herein) by the Owner of Certificates in any aggregate principal amount of $1,000,000 or more, interest with respect to such Certificates shall be payable to the Owner thereof by federal wire transfer initiated by the Trustee on each succeeding Payment Date, to the account number of a bank or a trust company in the continental United States designated in such written direction. Any such written direction shall remain in effect unless and until revoked in writing by such Owner. Any Certificate may be transferred upon presentation of such Certificate to the Trustee by the person in whose name it is registered, in person or by his duly authorized attorney. Upon surrender, together with a duly executed instrument of transfer in form acceptable to the Trustee, and payment of a sum sufficient to cover any tax or other governmental charge, the Trustee shall execute and deliver a new Certificate or Certificates of the same maturity, for a like aggregate principal amount. The Trustee shall not be required to transfer any Certificate during the period of 15 days before selection of Certificates for redemption, nor shall the Trustee be required to transfer any Certificate or portion thereof selected for redemption. Certificates may be exchanged at the corporate trust office of the Trustee in Los Angeles, California, for a like aggregate prinCipal amount represented by such Certificates of other authorized denominations of the same maturity. The Trustee shall require the payment 7 LA\951310112 by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. ' The Trustee shall not be required to exchange any Certificate during the period of 15 days before selection of Certificates for nedemption, nor shall the Trustee be required to exchange any Certificate or portion therElof selected for redemption. Optional Redemption. The Certificates maturing on or after August 1, _ shall be subject to optional redemption prior to maturity, in whole or in part on any February 1 or August 1, on or after August 1, , at the option of the City in the event the City elects to exercise its option to prepay Lease Payments, at the following redemption prices (expressed as percentages of the Principal Component of Certificates called for redemption) plus the Interest Component due with respect thereto to the redemption date: Redemption Redemption Dates Prices August 1, _ and February 1, _ August 1, _ and February 1, _ August 1, _ and thereafter Mandatory and Extraordinary Redemption" The Certificates are subject to extraordinary redemption, in whole or in part, as the case may be, without premium, in an amount equal to the Principal Component thereof, together with the Interest Components due with respect thereto to the date fixed for redemption on the first date for which notice of redemption can be given by the Trustee following the transfer of Net Proceeds to the Redemption Account. The Certificates maturing on August 1, 2011 shall be subject to mandatory redemption, in part, without premium, in an amount E!qual to the Principal Component thereof, together with the Interest Component due with respect thereto to the date fixed for redemption on August 1, 2008 and on each August 1 thereafter to and including August 1, 2011 on the dates and in the amounts as follows: Redemption Date Redemption AUljust 1 Amount 2008 2009 2010 2011 (Maturity date) * Preliminary, subject to change 8 LA\951310112 - Notice of Redemption In the event of mandatory, extraordinary or optional redemption of Certificates, the Trustee will give notice of redemption to the respective Owners of Certificates designated for redemption and such notice shall be given by first class mail, postage prepaid. Each notice of redemption shall include (i) the date of the Certificates as set forth in the Trust Agreement; (ii) the rate of interest borne by each Certificate being redeemed; (iii) the Redemption Date and the place or places where amounts due upon such redemption will be payable; (iv) if less than all of the Certificates of a maturity are to be redeemed, the letters, numbers, CUSIP numbers or other distinguishing marks of such Certificates so to be redeemed; and (v) in the case of Certificates to be redeemed in part only, such notice shall also specify the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on said date there will become due and payable on each of said Certificates the redemption price thereof or of said speCified portion of the principal amount thereof in the case of a Certificate to be redeemed in part only, together with interest accrued thereon to the redemption date, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Certificates be then surrendered at the address or addresses of the Trustee specified in the redemption notice. Notice of such redemption will be mailed by first class mail to the respective registered Owners of any Certificates designated for redemption at their addresses appearing on the registration books of the Trustee, at least thirty (30) days but not more than forty-five (45) days prior to the redemption date; provided that neither the failure by the Trustee to mail such notice nor any defect in such notice shall affect the validity or sufficiency of the proceedings for the redemption of the Certificates. Selection of Certificates for Redemption If less than all Outstanding Certificates are to be redeemed from the Net Proceeds of any insurance or condemnation awards, the Trustee will select Certificates for redemption pro rata among the various maturities of Certificates outstanding (treating each Sinking Account Installment due with respect to the Certificates as a separate maturity for such purpose) such that the Lease Payments to become due in each remaining year of the Term of the Lease Agreement will be, as nearly as practicable, equal to the Lease Payments to become due in every other year. If less than all Outstanding Certificates are to be optionally redeemed, the Trustee will select that amount from the maturity or maturities as directed by the City in writing. Within a maturity, the Trustee will select Certificates for redemption by lot. Redemption by lot will be in such manner as the Trustee determines; provided, however, that the portion of any Certificate to be redeemed will be in the principal amount of $5,000 or an integral multiple thereof. Book-Entry System General. DTC will act as securities depository for the Certificates. The Certificates will be issued as fully-registered certificates registered in the name of Cede & Co. (DTC's partnership nominee). One fully-registered Certificate will be issued for each maturity of the 9 LA\951310112 Certificates, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of 1934. DTC holds securities that its participants (the "Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (the "Indirect Participants"). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Purchases of the Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the Certificates on DTC's records. The ownership interest of each actual purchaser of each Certificate (the "Beneficial Owner") is in turn recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interest in the Certificates are to be accomplished by entries made on the books of Participants acting on behalf of the Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Certificates, except in the event that use of the book-entry system for the Certificates is discontinued. To facilitate subsequent transfers, all Certificates deposited by Participants with DTC are registered in the name of DTC's partnership nominee, CEDE & Co. The deposit of Certificates with DTC and their registration in the name of CEDE & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Certificates; DTC's records reflect only the identity of the Direct Participants to whose accounts such securities are credited, which mayor may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to CEDE & Co. If less than all of the Certificates are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 10 LA\951310112 Neither DTC nor CEDE & Co. will consent or vote with respect to the Certificates. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns CEDE & Co. 's consenting or voting rights to those Direct Participants to whose accounts the Certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, mandatory redemption and interest payments on the Certificates will be made to DTC. DTC's practice is to credit Direct Participants' accounts on payment dates in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on the date payable. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form of registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the City and the Trustee, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be responsibility of Direct and Indirect Participants. The Trustee and the City cannot and do not give any assurances that DTC, DTC Participants or others will distribute payments of principal, interest or and premium with respect to the Certificates paid to DTC or its nominee as the registered owner, or any redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. The Trustee and the City are not responsible or liable for the failure of DTC or any DTC Participant to make any payment or give any notice to a Beneficial Owner with respect to the Certificates or an error or delay relating thereto. The foregoing description of the procedures and record-keeping with respect to beneficial ownership interests in the Certificates, payment of principal, interest and other payments on the Certificates to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in such Certificates and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these mattes and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the name with DTC or the DTC Participants, as the case may be. Discontinuance of Book-Entry. DTC may discontinue providing its services as securities depository with respect to the Certificates at any time by giving reasonable notice to the Trustee and discharging its responsibilities with respect thereto under applicable law, or the City may terminate participation in the system of book-entry transfers through DTC or any other securities depository at any time. In the event that the book-entry system is discontinued, the Trustee will authenticate and make available for delivery, replacement Certificates in the form of registered certificates. In addition, the following provisions would apply: the principal of and redemption premium, if any, on the Certificates will be payable at the corporate trust office of the Trustee, and interest on the Certificates will be payable by check mailed on each Payment Date to the registered Owners thereof as shown on the registration books of the Trustee as 11 LA\951310112 . described above. Certificates will be transferable and exchangeable on the terms and conditions provided in the Trust Agreement. Transfer Fees. For every transfer and exchange of Certificates, Beneficial Owners may be charged a sum sufficient to cover any tax, governmental charge or transfer fees that may be imposed in relation thereto, which charge may include transfer fees imposed by the Trustee, DTC or the DTC Participant in connection with such transfers or exchanges. Additional Certificates In addition to the Certificates, the Trust Agreement provides for the execution and delivery of Additional Certificates representing proportionate interests in certain rights under the Lease Agreement, including the right to receive additional Lease Payments made by the City thereunder, without the consent of the Owners, upon the satisfaction of certain conditions set forth in the Trust Agreement. The total annual Lease Payments and Additional Payments represented by the Certificates and any Additional Certificates hereafter executed and delivered may not exceed the annual fair rental value of the Site during the remainder of the Term of the Lease Agreement. Any Additional Certificates shall be payable on a parity with the Certificates, as provided in a Supplemental Trust Agreement authorizing the execution and delivery of such Additional Certificates. See "APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - The Trust Agreement - Additional Certificates." 12 LA\951310112 SCHEDULE OF LEASE PAYMENTS The table below shows the semiannual Lease Payments owed by the City.l1 ~ Principal Interest Period Total 02/01/96 08/01/96 02/01/97 08/01/97 02/01/98 08/01/98 02/01 /99 08/01/99 02/01/00 08/01/00 02/01/01 08/01/01 02/01/02 08/01/02 02/01/03 08/01/03 02/01/04 08/01 /04 02/01/05 08/01/05 02/01/06 08/01 /06 02/01/07 08/01/07 02/01/08 08/01/08 02/01 /09 08/01/09 02/01/10 08/01/10 02/01/11 08/01/11 II The dates indicated on the schedules are Payment Dates with respect to the Certificates. The related Lease Payments are due five (5) Business Days prior to a Payment Date. 13 LA\951310112 - SECURITY FOR THE CERTIFICATES General Each Certificate represents a proportionate interest in the Lease Payments to be made by the City to the Agency. The Agency, pursuant to the Assignment Agreement, will assign its rights and remedies under the Lease Agreement to the Trustee for the benefit of the Owners of the Certificates, including its right to receive Lease Payments thereunder. Principal of and interest with respect to the Certificates will be made from the Lease Payments for the use and possession of the Site, insurance or condemnation Net Proceeds pertaining to a component of the Site to the extent that such Net Proceeds are not used for repair or replacement, interest or other income derived from the investment of the funds and accounts held by the Trustee for the City pursuant to the Trust Agreement, or in certain instances, from the Reserve Account established by the Trust Agreement. The Trustee will not have any obligation or liability to the Owners to make payments of principal, premium, if any, or interest with respect to the Certificates from any other source. The City has covenanted under the Lease Agreement to make Lease Payments for the use and possession of the Site and, so long as the Components of the Site are available for the City's use, to take such action each year as may be necessary to include all Lease Payments in its annual budget and annually to appropriate an amount necessary to make such Lease Payments (see "Abatement" below). Additional Lease Payments due from the City to the Trustee include, without limitation, in each year, amounts sufficient to pay (i) all taxes and assessments levied upon the Site, (ii) insurance premiums, if any, all insurance the City is required or permitted to maintain under the Lease Agreement, (iii) all expenses incidental to the execution, sale and delivery of the Certificates, (iv) all administrative expenses, compensation and indemnification of the Trustee and the Agency required to be paid by them in order to comply with the terms of the Lease Agreement or the Trust Agreement, and (v) amounts to be rebated to the federal government. The amounts payable to the Trustee are to be used to make the payments of principal and interest due with respect to the Certificates. The obligation of the City to make lease payments (other than to the extent that funds to make lease payments are available in the Lease Payment Account or Reserve Account) may be abated in whole or in part if the City does not have full use and possession of a portion of the Site. Reserve Account A Reserve Account is established under the Trust Agreement, to be funded from proceeds of the Certificates in the amount listed in the table entitled "ESTIMATED SOURCES AND USES OF FUNDS" hereof (the "Reserve Retirement"). Amounts in the Reserve Account are to be used only for the payment of Lease Payments to the extent amounts in the Lease Payment Account are insufficient therefor or in the event of a full or partial defeasance of the Certificates. See "APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS" herein. At the option of the City, amounts to be held in the Reserve Account may be substituted, in whole or in part, by a Reserve Account Policy or Credit Facility deposited with the Trustee, in a stated amount equal to the amount so substituted, provided that the substitution of such Reserve Account Policy or Credit facility will not result in a withdrawal or downgrading of any rating of the Certificates then in effect and, provided further that there shall have been delivered to the Trustee an opinion of Bond Counsel to the effect that such event will not impair the 14 LA\951310112 ------ exclusion from gross income for federal income tax purposes or from State of California personal income taxes of the interest due with respect to the Certificates. Such substituted moneys will be transferred at the direction of the City. A Reserve Account Policy must have a maturity date which is equal to the last maturity of any Outstanding Certificate or Additional Certificate. A Credit Facility must either have a maturity date which is equal to the last maturity of any Outstanding Certificate or Additional Certificate or provide that it may be drawn upon in its full state amount unless prior to the expiration date of the Credit Facility a substitute Credit facility, which when combined with other amounts in the Reserve Account will equal the Reserve Requirement, has been delivered to the Trustee. Any Credit Facility must permit the Trustee to draw on such instrument in the full stated amount thereof in the event that the long-term obligations of the issuer thereof are rated less than "AA" by Standard & Poor's Corporation. Appropriation The City has covenanted to take such action as may be necessary to include all Lease Payments and Additional Payments due under the Lease Agreement in each of its proposed annual budgets and its final adopted annual budgets and to make the necessary appropriations for such Lease Payments and Additional Payments, except to the extent such payments are abated (see "Abatement" below). To the extent that the amount of such payment becomes known after the adoption of the annual budget, such amounts shall be included and maintained in such budget as amended. The City has covenanted to take such action as is necessary to include such amounts in a supplemental budget of the City. The covenants on the part of the City shall be deemed to be and shall be construed to be ministerial duties imposed by law and it shall be the ministerial duty of each and every public official to the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform its covenants and agreements in the Lease Agreement. The City has the right to incur other obligations payable from its general revenues, including Additional Certificates, without the consent of the Owners. See "THE CERTIFICATES -- Additional Certificates" and "RISK FACTORS -- No Limit on Additional Debt" herein. Concurrent with the delivery of the Certificates, the City is issuing its $31,020,000 principal amount of , which are payable on a parity basis with the Certificates. The obligation of the City to pay Lease Payments and Additional Payments shall constitute a current expense of the City and shall not in any way be construed to be a debt of the City, or the State, or any political subdivision thereof, in contravention of any applicable constitutional or statutory limitation or requirements concerning the creation of indebtedness by the City, the State, or any political subdivision thereof, nor shall such obligations constitute a pledge of general revenues, funds or moneys of the City beyond the Fiscal Year for which the City has appropriated funds to pay Lease Payments and Additional Payments or an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. 15 LA\951310112 - Abatement Except to the extent that proceeds of the type described in the following paragraph are available, the amount of Lease Payments and Additional Payments shall be abated during any period in which there is substantial interference with the use or possession of all or a portion of the Site by the City by condemnation, damage, destruction or title defect. The amount of such abatement shall be such that the resulting Lease Payments, exclusive of the amounts described in the following paragraph, do not exceed the fair rental value (as determined by an independent real estate appraiser selected by the City, who is not an employee of the City) for the use and possession of the portion of the Site for which no substantial interference has occurred. Such abatement shall continue for the period of the substantial interference with the use or possession of the Site. Except as provided in the Lease Agreement, in the event of any such interference with use or possession, the Lease Agreement shall continue in full force and effect and the City waives any right to terminate the Lease Agreement by virtue of any such interference. See "Insurance" below for a discussion of rental interruption insurance to be provided by the City. Notwithstanding a substantial interference with the use or possession of all or a portion of the Site, the City shall remain obligated to make Lease Payments (i) in an amount not to exceed the fair rental value during each Fiscal Year for the portion of the Site not damaged, destroyed, interfered with or taken, as determined by an independent real estate appraiser selected by the City (who is not an employee o.f the City); (ii) to the extent that moneys derived from any person as a result of any delay in the reconstruction, replacement or repair of the Site, or any portion thereof, are available to pay the amount which would otherwise be abated; or (iii) to the extent that moneys are available to the Lease Payment Account to pay the amount which would otherwise be abated, in which event the Lease Payments shall be payable from such amounts as an obligation of the City payable from a special fund. Notwithstanding these efforts, the moneys legally available to the Trustee following the occurrence of an event which gives rise to an abatement of Lease Payments, including moneys from the Reserve Account or the Interest Account representing rental interruption insurance, if any, may not be sufficient to pay principal and interest represented by the Certificates in the amounts and at the rates set forth thereon. In such event, all Owners of Certificates and the Owners of Additional Certificates would be paid a pro rata portion of interest attributable to abated Lease Payment payable during the period of abatement and, to the extent Certificates and Additional Certificates mature or are to be mandatory prepaid during a period of abatement, the Owners of such Certificates and the Owners of Additional certificates would be paid a pro rata portion of principal attributable to such abated Lease Payments. The failure to make such payments of principal and interest would not under such circumstances constitute a default under the Trust Agreement, the Lease Agreement or the Certificates. Assignment; Recourse on Default Pursuant to the Assignment Agreement, the Agency will assign to the Trustee for the benefit of the Owners of the Certificates its rights and remedies under the Lease Agreement, including its rights to receive amounts payable by the City under the Lease Agreement. Should the City default, the Trustee, as assignee of the Agency, may, subject to the rights of the Insurer, exercise any and all remedies authorized by law or granted pursuant to the 16 LA\951310112 Lease Agreement. The Lease Agreement expressly authorizes the Trustee, as assignee of the Agency, to reenter the Site for the purpose of retrieving any portion of, or reletting, the Site and, at its option, to terminate the Lease Agreement. In the event the Trustee, as assignee of the Agency, does not elect to terminate the Lease Agreement, it may enforce the Lease Agreement and hold the City liable for all Lease Payments and the performance of all conditions under the Lease Agreement. Any re-entry and re-Ietting will not effect a surrender of the Lease Agreement. The City, in the event of default, waives all rights to any rentals received by the Trustee through re-Ietting of the Lease Agreement. The City agrees to pay any and all costs, loss or damage, howsoever occurring, as a result of any re-entry or re-Ietting. See "RISK FACTORS -- Bankruptcy"; "-- Limitation as Enforcement of Remedies" and "-- No Acceleration" herein. The City may not mortgage, pledge, assign or transfer its interest in the Lease Agreement except as specifically provided in the Lease Agreement. The City has the right to sublet all or any portion of the Site from time to time but such subletting will not relieve the City of its obligations under the Lease Agreement. Insurance The Components of the Site are also insured to the extent set forth herein under the heading "APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS -- Lease Agreement - Insurance" and insurance proceeds are required to be applied to the repair of the Site; or if the proceeds are insufficient to repair or replace the Site, the City may either pay any additional amounts required to repair the Site or prepay the related Lease Payments and thereby cause the redemption of any outstanding Certificates. The Lease Agreement permits the City to satisfy certain of its insurance requirements through a self-insurance program. The City shall additionally maintain or cause to be maintained use and occupancy or business interruption or rental income insurance against the perils of fire, lightning, vandalism, malicious mischief and such other perils ordinarily defined as "extended coverage" in an amount equal to not less than the largest Lease Payments to be paid in any 12 month period by the City under the Lease Agreement. No assurance can be given that insurance proceeds will be adequate to avoid an interruption of Lease Payments. Under such a situation, an abatement of Lease Payments is likely to occur. See "Abatement" above. Lease Payments Lease Payments are required to be made by the City under the Lease Agreement five (5) Business Days prior to each Payment Date, commencing in January, 1996, (individually, a "Lease Payment Date"), for use and possession of the Site to the next occurring Lease Payment Date. Lease Payments are required to be deposited in the Lease Payment Account maintained by the Trustee. Pursuant to the Trust Agreement, on each Payment Date the Trustee will withdraw from the Lease Payment Account the amount of such Lease Payments and will apply such amounts to make principal and interest payments due with respect to the Certificates. 17 LA\951310112 - - The Trust Agreement provides that the Lease Payments due on each Lease Payment Date from the City shall be reduced by the amount of earnings received by the Trustee as of such Lease Payment Date from the investment of certain funds held by the Trustee. Certificate Insurance In addition to the revenues and funds described herein, the City has purchased the Policy. For a detailed description thereof, see "CERTIFICATE INSURANCE" herein. CERTIFICATE INSURANCE Set forth below is a brief summary of certain information concerning the Insurer and the terms of the Insurance Policy. Information with respect to the Insurer has been supplied to the City by the Insurer. The following discussion does not purport to be complete and its qualified in its entirety by reference to the Insurance Policy. The Insurance Policy Concurrently with the issuance of the Certificates, the Insurer will issue the Insurance Policy. The Insurance Policy unconditionally guarantees the payment. of that portion of the principal and interest in respect of the Certificates that has become due for payment, but shall be unpaid by reason of nonpayment by the City. On the later of the day on which such principal and interest is due or on the business day next following the business day on which the Insurer shall have received notice by telephone or telecopy, subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an Owner of Certificates or the Trustee as defined in the Insurance Policy), of the nonpayment of such amount by the City, the Insurer will disburse such amount due on any Certificates to the Trustee, for the benefit of the Owners or, at the election of the Insurer, directly to each Owner, in either case upon receipt by the Insurer in form reasonably satisfactory to it or (a) evidence of the Owner's right to receive payment of the principal and interest that is due for payment and (b) evidence, including any appropriate instruments of assignment, that all of such Owner's rights to payment of such principal and interest shall be vested in the Insurer. The term "nonpayment" in respect of a Certificate includes any payment of principal or interest insured by the Insurer made to an Owner of a Certificate that has been recovered from such Owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order of a court having competent jurisdiction. The Insurance Policy is non-cancelable and the premium will be fully paid at the time of delivery of the Certificates. The Insurance Policy covers failure to pay the principal in respect of the Certificates on their respective stated maturity dates, or dates on which the same shall have been duly called for mandatory sinking fund prepayment, and not on any other date on which the Certificates may have been called for prepayment, acceleration or other advancement of maturity, unless the Insurer shall elect, in its sole discretion, to pay the principal due upon acceleration together with any interest accrued, to the date of acceleration, and covers the failure to pay an installment of interest on the stated date for its payment. Payment by the Insurer of principal due upon acceleration and interest accrued to the accelerated maturity date 18 LA\951310112 (to the extent unpaid by the City) shall fully discharge the Insurer's obligations under the Insurance Policy. The Insurer may appoint a fiscal agent (the "Insurer's Fiscal Agent") for the purposes of the Insurance Policy by giving written notice to the Trustee specifying the name and notice address of the Insurer's Fiscal Agent. From and after the date of receipt of such notice by the Trustee, (I) copies of all notices required to be delivered to the Insurer pursuant to the Insurance Policy shall be simultaneously delivered to the Insurer's Fiscal Agent and to the Insurer and shall not be deemed received until received by both and (ii) all payments required to be made by the Insurer under the Insurance Policy may be made directly by the Insurer or by the Insurer's Fiscal Agent on behalf of the Insurer. The Insurer's Fiscal Agent is the agent of the Insurer only and the Insurer's Fiscal Agent shall in no event be liable to Owners of the Certificates for any acts of the Insurer's Fiscal Agent or any failure of the Insurer to deposit or cause to be deposited sufficient funds to make payments due under the Insurance Policy. Under the Insurance Policy, the Insurer will, to the extent permitted by applicable law, waive, only for the benefit of the Owners of Certificates, all rights and defenses that might otherwise have been available to the Insurer to avoid payment of its obligations under the Insurance Policy in accordance with its terms. THE INSURANCE POLICY IS NOT COVERED BY THE PROJECT/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. The Insurer The Insurer is a wholly owned subsidiary of Financial Security Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company. Holdings is owned approximately 61.2% by U S WEST Capital Corporation ("U S West"), 95% by Funds American Enterprises Holdings, Inc. ("Fund American"), and 7.5% by The Tokio Marine and Fire Insurance Co., Ltd. ("Tokio Marine"). U S WEST is a subsidiary of U S WEST, Inc., which operates businesses involved in communications, data solutions, marketing services and capital assets, including the provision of telephone services in 14 states in the Western and mid-Western United States. Fund American is a financial services holding company whose principal operating subsidiary is one of the nation's largest mortgage services. Tokio Marine is a major Japanese property and casualty insurance company. U S WEST has announced its intention to dispose of its remaining interest in Holdings as part of its strategic plan to withdraw from business not directly involved in telecommunications. Fund Amerjcan has certain rights to acquire additional shares of Holdings from U S WEST and Holdings. No shareholders of Holdings is obligated to pay any debt of the Insurer or any claim under any insurance policy issued by the Insurer or to make any additional contribution to the capital of the Insurer. The Insurer is domiciled in the State of New York and is subject to regulation by the state of New York Insurance Department. At March 31, 1995, the Insurer's total policyholders' surplus and contingency reserves were approximately $469,190,000 and its total unearned premium reserve was approximately $248,929,000, in accordance with statutory accounting principles. At March 31, 1995, the Insurer's total shareholders' equity was approximately $557,421,000 and its total net unearned premium reserve was approximately $217,048,000 in accordance with generally accepted accounting principles. 19 LA\951310112 - Copies of the Insurer's financial statements may be obtained by writing to Financial Security Assurance Inc., 350 Park Avenue, New York, New York 10022, Attention Communications Department. The Insurer's telephone number is (212) 826-0100. The Insurer's claims-paying ability is rate "Aaa" by Moody's Investors Services and "AM" by Standard & Poor's Ratings Group. Such ratings reflect only the views of the respective ratings agencies, are not recommendations to buy, sell or hold securities and the subject to revision or withdrawal at any time by such rating agencies. The Insurance Policy does not protect investors against changes in market value of the Certificates. The market value of the Certificates may be impaired as a result of changes in prevailing interest rates, changes in applicable ratings or other causes. The Insurance makes no representation regarding the Certificates or the advisability of investing in the Certificates. The Insurer makes no representation regarding this Official Statement, nor has it participated in the preparation hereof, except that the Insurer has provided to the City the information presented under this caption for inclusion in this Official Statement. See APPENDIX E hereto for a specimen of the Insurance Policy. RISK FACTORS The following factors, along with other information in this Official Statement, should be considered by potential investors in evaluating the risks in the purchase of the Certificates. There can be no assurance that other risk factors will not become evident at any future time. No Tax Pledge The obligation of the City to pay the Lease Payments does not constitute an obligation of the City for which the City has levied or pledged any form of taxation. The obligation of the City to pay Lease Payments does not constitute a debt or indebtedness of the City, the State of California or any of its political subdivisions, within the meaning of any constitutional or statutory debt limited or restriction. Appropriation Although the Lease Agreement does not create a pledge, lien or encumbrance upon the funds of the City, the City is obligated under the Lease Agreement, so long as the Site is available for its use and possession, to pay Lease Payments from any source of legally available funds (subject to certain exceptions) and has covenanted in the Lease Agreement that, for so long as the Site is available for its use, it will make the necessary annual appropriations within its budget for all Lease Payments. However, the City is currently liable on other obligations payable from general revenues, and the Lease Agreement does not prohibit the City from incurring additional obligations payable from general revenues on a parity with or prior to the Lease Payments. See "CITY FINANCIAL INFORMATION" herein and the financial statements included in APPENDIX C hereto. In the event the City's revenue sources are less than its total obligations, the City could choose to fund other municipal services before making Lease Payments and other payments due under the Lease Agreement. The same result could occur if, because the State Constitutional limits on expenditures, the City is not permitted to 20 LA\951310112 - -.-------- appropriate and spend all of its available revenues (see "Article XIIIS of the State Constitution" below). No Limit on Additional Debt The City has the ability to enter into other obligations which may constitute additional charges against its general revenues. To the extent that additional obligations are incurred by the City, the funds available to make Lease Payments may be decreased. , Abatement and Eminent Domain The obligation of the City to pay Lease Payments is in consideration for the use and possession of the Site. The obligation of the City to make Lease Payments (other than to the extent that funds to make Lease Payments are available in the Lease Payment Account, the Reserve Account created under the Trust Agreement) may be abated in whole or in part if the City does not have full use and possession of the Site. The amount of Lease Payments due under the Lease Agreement will be adjusted or abated during any period in which by reason of damage or destruction or eminent domain there is interference with the use and possession of the Site. Such adjustment or abatement will end with the substantial completion or replacement, repair or reconstruction of the Site. The Reserve Account will be funded by Certificate proceeds in the amount set forth in "ESTIMATED SOURCES AND USES OF FUNDS" herein and will be available in the event Lease Payments received by the Trustee are insufficient to pay principal and interest on the Certificates as such amounts become due. If damage or destruction or eminent domain proceedings with respect to the Site result in abatement or adjustment of Lease Payments and the resulting Lease Payments, together with moneys in the above-described amounts, are insufficient to make all payments of prinCipal and interest due with respect to the Certificates during the period that the Site is being replaced, repaired or reconstructed, then such payments or principal and interest may not be made and no remedy is available to the Trustee or the Owners of the Certificates, under the Lease Agreement or Trust Agreement, for nonpayment under such circumstances. Limitation on Enforcement of Remedies The enforcement of any remedies provided in the Lease Agreement and Trust Agreement could prove both expensive and time consuming. Although the Lease Agreement provides that the Trustee may take possession of the Site and lease them if there is a default by the City, and the Lease Agreement provides that the Trustee may have such rights of access to the Site as may be necessary to exercise any remedies, portions of such Site may not be easily recoverable since they may be affixed to property not owned by the Agency and even if recovered, could be of little value to others. Furthermore, due to the essential nature to the governmental functions of the City's Site, it is not certain whether a court would permit the exercise of the remedies of repossession and leasing with respect thereto. See "THE PROJECTS AND THE SITE" herein. Bankruptcy In addition to the limitations on remedies contained in the Lease Agreement and the Trust Agreement, the rights and remedies provided in the Lease Agreement and the Trust 21 LA\951310112 Agreement may be limited by and are subject to provisions of federal bankruptcy laws, as now or hereafter enacted, and to other laws or equitable principles that may affect the enforcement of creditors' rights. Additionally, bankruptcy by major property owners in the City, or failure by such owners to pay property taxes when due, will have an adverse impact on revenues available to pay Lease Payments. See "APPENDIX B - Assessed Valuation and Collections" hereto for a description of property tax collections and delinquencies within the City. No Acceleration IN THE EVENT OF A DEFAULT UNDER THE LEASE AGREEMENT, THERE IS NO AVAILABLE REMEDY OF ACCELERATION OF THE TOTAL LEASE PAYMENTS DUE OVER THE TERM OF THE LEASE AGREEMENT. THE CITY WILL ONLY BE LIABLE FOR LEASE PAYMENTS ON AN ANNUAL BASIS AS THEY COME DUE, AND THE TRUSTEE WOULD BE REQUIRED TO SEEK SEPARATE JUDGMENTS FOR THE LEASE PAYMENTS. IN ADDITION, ANY SUCH SUIT FOR MONEY DAMAGES COULD BE SUBJECT TO LIMITATIONS ON LEGAL REMEDIES AGAINST PUBLIC AGENCIES IN CALIFORNIA, INCLUDING A LIMITATION ON ENFORCEMENT OF JUDGMENTS AGAINST FUNDS NEEDED TO SERVE THE PUBLIC WELFARE AND INTEREST. Loss of Tax Exemption As discussed under "CONCLUDING INFORMATION-Tax Exemption" herein, the interest due with respect to the Certificates could become includable in gross income for purposes of federal income taxation retroactive to the date such Certificates were issued, as a result of acts or omissions of the City in violation of its covenants in the Trust Agreement and the Lease Agreement to comply with certain provisions of the Internal Revenue Code of 1986, as amended, subsequent to the execution and delivery of the Certificates. Should such an event of taxability occur, the Certificates are not subject to early redemption and will remain outstanding until maturity or until redeemed under one of the redemption provisions contained in the Trust Agreement. Geologic, Topographic and Climatic Conditions The value of the Site, and the financial stability of the City, can be adversely affected by a variety of factors, particularly those which may affect infrastructure and other public improvements and private improvements and the continued habitability and enjoyment of such private improvements. Such additional factors include, without limitation, geologic conditions (such as earthquakes), topographic conditions (such as earth movements and floods) and climatic conditions (such as droughts and tornadoes). The City is not in an active geological area. Building codes require that some of these factors be taken into account, to a limited extent, in the design of improvements, including improvements on the Site. Some of these factors may also be taken into account, to a limited extent, in the design of other infrastructure and publiC improvements neither designed nor subject to design approval by the City. Design criteria in any of these circumstances are established upon the basis of a variety of considerations and may change, leaving previously-designed improvements unaffected by more stringent subsequently established criteria. In general, design criteria reflect a balance at the time of protection and the future costs of lack of protection, based in part upon a present 22 LA\951310112 perception of the probability that the condition will occur and the seriousness of the condition should it occur. Conditions may occur and may result in damage to improvements of varying seriousness, that the damage may entail significant repair or replacement costs and that repair or replacement may never occur either because of the cost or because repair or replacement will not facilitate habitability or other use, or because other considerations preclude such repair or replacement. Under any of these circumstances, the actual value of the Site, as well as public and private improvements within the City in general, may well depreciate or disappear, notwithstanding the establishment of design criteria for any such condition. State Budget A State Budget for Fiscal Year 1995/96 has been proposed by the Governor. As of May 24, 1995 the State Legislative Analyst's Office has determined that the proposed budget deficit is approximately $1.8 billion. In prior years, the State has balanced the budget by, among other things, making significant reallocations of revenues among local agencies, including the City. While the Governor's proposed budget does not currently propose any shift of local agency revenues, the City cannot predict how the State will balance the budget or the impact of such actions, if any, on the City. Limitations on Remedies Available The enforceability of the rights and remedies of the Owners and the obligations of the City may become subject to the following: the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual equitable principles which may limit the specific enforcement under state law of certain remedies; the exercise by the United States of America of the powers delegated to it by the Federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State of California and its governmental bodies in the interest of servicing a significant and legitimate public purpose. Bankruptcy proceedings, or the exercising of powers by the federal or state government, if initiated, could subject the Owners to judicial discretion and interpretation of their rights in bankruptcy or otherwise and consequently may entail risks of delay, limitation, or modification of their rights. Article XIIIA of the State Constitution Article XIIIA of the State Constitution, known as Proposition 13, except under certain circumstances limits the maximum ad valorem tax on real property to 1 % of "full cash value," and provides that such tax shall be collected by the counties and apportioned according to State statutes. Section 2 of Article XIIIA defines "full cash value" to mean the county assessor's valuation of real property as shown on the 1975/76 Fiscal Year tax bill, or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred. The full cash value may be adjusted annually to reflect inflation at a rate not to exceed 2% per year, or to reflect a reduction in the consumer price index or comparable data for the taxing jurisdiction, or may be reduced in the event of declining property value caused by substantial damage, destruction or other factors. Legislation implementing Article XIIIA provides that, notwithstanding any other law, local agencies may not levy any ad valorem 23 LA\951310112 property tax except to pay debt service on indebtedness approved by the voters as described above. Such legislation further provides that each county will levy the maximum tax permitted by Article XIIIA, which is $1.00 per $100 of assessed market value. Since its adoption, Article XIIIA has been amended a number of times. These amendments have created a number of exceptions to the requirements that property be reassessed when it is purchased, newly constructed or undergoes a change in ownership. These amendments have resulted in marginal reductions in the property tax revenues of the City. Both the State Supreme Court and the United States Supreme Court have upheld the validity of Article XIIIA. Article XIIIB of the State Constitution In addition to the limits Article XIIIA imposes on property taxes that may be collected by local governments, certain other revenues of the State and most local governments are subject to an annual "appropriations limit" imposed by Article XIIIB which effectively limits the amount of such revenues those entities are permitted to spend. Article XIIIB, approved by the voters in July 1979, was modified substantially by Proposition 111 in 1990. The appropriations limit of each government entity applies to "proceeds of taxes," which consist of tax revenues, State subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed "the cost reasonably borne by such entity in providing the regulation, product or service." "Proceeds of taxes" excludes tax refunds and some benefit payments such as unemployment insurance. No limit is imposed on the appropriation of funds which are not "proceeds of taxes," such as reasonable user charges or fees, and certain other non-tax funds. Article XIIIS also does not limit appropriation of local revenues to pay debt services on bonds existing or authorizing by January 1, 1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal government, appropriations for qualified capital outlay projects, and appropriation by the State of revenues derived from any increase in gasoline taxes and motor vehicle weight fees above January 1, 1990 levels. The appropriations limit may also be exceeded in case of emergency; however, the appropriations limit for the next three years following such emergency appropriation must be reduced to the extent by which it was exceeded, unless the emergency arises from civil disturbance or natural disaster declared by the Governor, and the expenditure is approved by two-thirds of the legislative body of the local government. The State and each local government entity has its own appropriations limit. Each year, the limit is adjusted to allow for changes, if any, in the cost of living, the population of the jurisdiction, and any transfer to or from another government entity of financial responsibility for providing services. Proposition 111 requires that each agency's actual appropriations be tested against its limit every two years. If the aggregate "proceeds of taxes" for the preceding two-year period exceeds the aggregate limit, the excess must be returned to the agency's taxpayers through tax rate or fee reductions over the following two years. 24 LA\951310112 ------- CITY FINANCIAL INFORMATION General Fund The City General Fund finances the legally authorized activities of the City not provided for in other restricted funds. General fund revenues are derived from such sources as taxes; licenses and permits, fines, forfeits and penalties; use of money and property; aid from other governmental agencies; charges for current services; and other revenue. General Fund expenditures and encumbrances are classified by the functions of administrative services, public safety, public works, community development, and general government. Budgetary Process The fiscal year of the City begins on the first day of July each year and ends on the thirtieth day of July of the following year. At such date as the City Manager determines, such department head must furnish to the City Manager an estimate of Revenues and expenditures for such department for the ensuing fiscal year, detailed in such manner as may be predescribed by the City Manager. In preparing the proposed budget, the City Manager reviews the estimates, holds conferences thereon with the respective department heads, and revises the estimates as he deems advisable. At least thirty days prior to the beginning of each fiscal year, the City Manager submits to the City Council the proposed budget. After reviewing and making such revisions as it deems advisable, the City Council determines the time for the holding of a pUblic hearing thereon and causes to be published a notice thereof not less than ten days prior to the hearing date. Copies of the proposed budget are available for inspection by the public in the office of the City Clerk at least ten days prior to the hearing. At the conclusion of the public hearing, the City Council further considers the proposed budget and makes any revision thereof that it deems advisable. On or before July 30 it adopts the budget with revisions, if any, by the affirmative vote of at least a majority of the total members of the City Council. From the effective date of the budget, the several amounts stated as proposed expenditures become appropriated to the several department, offices and agencies for the objects and purposes named, provided that the City Manager may transfer the appropriations of a fund from one object or purpose to another within the same department, office or agency. All appropriations lapse at the end of the fiscal year to the extent that they have not been amended or lawfully encumbered. At the public meeting after the adoption of the budget, the City Council may amend or supplement the budget by motion adopted by the affirmative vote of at least three members of the five member City Council. The City Council employs, at the beginning of each fiscal year, an independent public accountant who, at such time or times as specified by the City Council, at least annually, and at such other times as he shall determine, examines the books, records, inventories and reports of all officers an employees who receive, control, handle or disburse public funds and of all such other officers, employees or departments as the City Council may direct. As soon a practicable 25 LA\951310112 "- after the end of the fiscal year, a final audit and report is submitted by such accountant to the City Council and a copy of the financial statements as of the close of the fiscal year is published. 26 LA\951310112 Summary of Revenues and Expenditures The following table summarizes General Fund revenues, expenditures, transfers, and ending fund balances for the City for Fiscal Years 1989/90 through 1993/94. See APPENDIX C herein for the complete audit report of the City for the year ended July 30, 1994. CITY OF POWA Y STATEMENT OF GENERAL FUND REVENUES, EXPENDITURES AND BALANCES Fiscal Year Ending July 30) 1JleQ .1W1 ~ 13m ~ REVENUES Taxes $6,707,247 $6,784,227 $6,956,653 $7,425,204 $7,889,870 Licenses and Permits 398,748 394,812 352,341 340,884 335,037 Intergovernmental 1,876,714 1,907,774 1,737,463 1,636,092 1,566,910 Charges for Services 5,696,519 5,294,671 3,963,179 4,098,276 4,453,428 Fines and Forfeitures 139,312 146,838 95,080 71,747 91,593 Interest and Rentals 1,033,822 1,306,988 1,033,443 1,070,136 869,443 Other 315391 1 000 430 1316961 1 102932 551 830 Total Revenues $16 167753 $16935740 $15455120 $15745271 $15758111 EXPENDITURES Current: General Government $4,561,589 $3,909,534 $3,011,399 $3,738,172 $2,531,457 Public Safety 5,563,163 8,212,765 8,019,225 8,322,611 8,371,953 Public Works 2,988,005 1,166,729 1,121,208 1,211,792 1,404,125 Community Services 3,080,322 2,656,274 2,519,556 2,666,515 2,496,504 Capital Expenditures 569,140 776,145 222,302 788,767 755,107 Debt Service 0 0 0 0 35 805 Total Expenditures $16789219 $16721 447 $14 893 690 $16727 857 $15594 951 Excess (Deficiency) of Revenue Over Expenses ($621 466) $214293 $561 430 ($982 586) $163160 Other Financing Sources (Uses) $1 380805 $1 776 237 ($670 459) $818614 ($168697) Excess (Deficiency) of Revenues and other Sources Over Expenditures and Other Uses $759,339 $1,990,530 ($109,029) ($163 972) ($5,537) Fund Baiance, Beginning $23 773 305 $24 360 708 $26511 895 $26 402 866 $26 238 894 Fund Balance, Ending $24 532 644 $26 351 238 $26 402 866 $26 238 894 $26 233 357 SOURCE: Annual City Audits 27 LA\951310112 - 1994/95 Budget The following table summarizes the approved Fiscal Year 1994/1995 General Fund Budget of the City. CITY OF POWA Y ADOPTED BUDGET - GENERAL FUND Fiscal Year 1994/95 BUDGET ITEM 1994/1995 Revenues: Taxes $8,015,620 Licenses and Permits 343,520 Intergovernmental 1,635,360 Charges for services 4,152,070 Fines and forfeitures 97,000 Interest and rentals 957,400 Other 259 230 Total Revenues $15460200 Expenditures: Current: General governmental 2,024,557 Public safety 8,379,957 Public works 2,445,359 Community services 2,725,380 Capital expenditures (20,000) Debt Service 0 Total Expenditures $15167.253 Excess (Deficiency) of $292 947 Revenue Over Expenses SOURCE: City of Poway. Audits The City, all its funds and the poway Redevelopment Agency are audited annually by the certified public accounting firm of Moreland & Associates, Inc. of 610 Newport Center Drive, Suite 500, Newport Beach, California 92660. A copy of the audited financial statements of the City for Fiscal Year 1993/94 is attached - hereto as APPENDIX C. 28 LA\951310112 Investments in County Investment Pool As of May 31, 1995, City, as a voluntary depositor, had invested approximately $62.5 million with the San Diego County Treasurer (the "Treasurer") in the San Diego County Investment Pool (the "Pool"). Of that amount, $23 million represented general operating reserve moneys of the City (out of a total City operating reserve of approximately $73 million) and $39.5 million represents a portion of bond proceeds of the Agency (out of a total of $43.5 million of proceeds). Based on reports from the County, as of May 31, 1995 the total deposits in the Pool were approximately $2.82 billion. The market value of the deposits as of May 31, 1995 was approximately $2.65 billion for an unrealized loss of approximately $174.4 million, or 6.3%. This unrealized loss compares to unrealized losses of approximately $284 million (or 9.1 %) as of March 31, 1995 and $374 million or (11.35%) as of December 31, 1994. As the result of the market value loss of the investments within the Pool, the City estimates its share (including the Agency) of the unrealized loss to be approximately $3.6 million, or 3% of its total investment portfolio (as of May 31, 1995). The continuing market value of the Pool will depend upon, among other factors, the maturity and type of investments in the Pool and general market conditions. While State law provides that depositors in the Pool are permitted to withdraw funds which they have deposited on 30 days' notice, due to the market value loss of the various investments within the Pool if a significant number of depositors requested withdrawal of their moneys at the same time the Treasurer would currently be unable to honor all withdrawal requests without liquidating investments in the Pool at a significant loss. In order to prevent this liquidity problem, the County, together with an oversight committee and a pool participant committee, approved a Phased Withdrawal Plan (the "Withdrawal Plan"). The Withdrawal Plan is structured to take advantage of the periods of projected high liquidity in the Pool, thereby avoiding the sale of investments at a loss to create liquidity. While depositors in the Pool are not legally required to participate in the Withdrawal Plan, depositors of approximately _ % of proceeds in the Pool have agreed to participate. The City has elected to withdraw its moneys invested in the Pool over an approximately three-year time period under what is known as the . Phased Withdrawal Plan. The City does not anticipate that it will lose any of the money it has invested in the Pool by withdrawing its moneys from the Pool under the Phased Withdrawal Plan, and believes that there will be adequate cash from all available sources to meet both the operating and the capital needs of the City, including the ability to make lease payments on the Certificates, through the final withdrawal date of February 2, 1998. There can be no guarantee that the City's and the County's expectations regarding the Withdrawal Plan will be realized. Participation in the Withdrawal Plan by depositors is not legally required and certain participants may request withdrawals which jeopardize the assumptions behind the Withdrawal Plan. In addition, the effect of interest rates and other market conditions may also result in negative consequences to the Pool and City's financial conditions. 29 LA\951310112 - Outstanding Debt The following table shows the City's debt service requirements to maturity for general obligation bonds 'and prior certificates of participation. including the 1986 Certificates but not including the Certificates. CITY OF POWAY CURRENT OUTSTANDING DEBT DEBT SERVICE REQUIREMENTS TO MATURITY Fiscal Year General Certificates of Endin9 Julv 30 Obli9ation Bonds Particioation 1995 $1.247.062 $4.802.122 1996 1.265,478 5.053.825 1997 1.120,827 5,101.362 1998 968.289 5.253,490 1999 988.978 5.253.898 2000 1.008,122 5,252.212 2001 959.203 5.243.692 2002 1.543.325 5.247.190 2003 850,975 5,245.312 2004 958.775 5.243,605 2005 958.600 5.242,418 2006 963,713 5.241.360 2007 & Beyond 0 11.517 022 $15.267.940 $73.697.508 SOURCE: City Administrative Services Department 30 LA\951310112 Direct and Overlapping Debt The direct and overlapping bonded debt of the City as of June 30. 1994 is shown below. CITY OF POWAY STATEMENT OF DIRECT AND OVERLAPPING BONDED DEBT 1993-94 Assessed Valuation:$1.959.261.620 (after deducting $1.074.705.577 redevelopment incremental valuation) DIRECT AND OVERLAPPING BONDED DEBT: % Aoplicable Debt 6/30/94 San Diego County Building Authorities 1.486% $12.567,444 San Diego County Superintendent of Schools Certificates of Participation 1 .486 23.751 San Diego County Water Authority 1.541 209.576 Metropolitan Water District 0.243 1.574.033 Poway Unified School District Certificates of Participation 20.235 1,408.331 Escondido Union High School District 0.082 60 San Pasqual Union School District 0.796 5.532 poway Municipal Water District 100. 7.890.000 Power Sewer Improvement District #1 99.995 299.865 Palomar Pomerado Hospital District 9.479 153.086 Palomar Pomerado Hospital District Authority 9.479 770.643 South Poway Community Facilities District #1 100. 30.440.000 City of Poway Community Facilities District #88-1 100. 36.385.000 City of Poway Certificates of Participation 100. 49.445.000 TOTAL DIRECT AND OVERLAPPING BONDED DEBT $141 172 321(1) Rations to Assessed Valuation: Direct Debt 1$49 445 000\ 2 52% Total Debt 7.28% SHARE OF AUTHORIZED AND UNSOLD BONDS: Metropolitan Water District $121.000 poway Municipal Water District $1.900.000 Poway Municipal Water District. I.D. #2 $1.620.000 Poway Municipal Water qistrict. I. D. #3 $140.000 STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/94 $0 (1) Excludes tax and revenue anticipation notes. mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. SOURCE: California Municipal Statistics. Inc. 31 LA\951310112 .- THE CITY The following material is descriptive of the City of Poway. It has been prepared by or excerpted from sources as noted herein and has not been reviewed by Special Counselor the Underwriter. For further information, see "APPENDIX B-CITY OF POWAY GENERAL DEMOGRAPHIC AND FINANCIAL INFORMATION" attached hereto. History and Location Poway developed as an unincorporated community until November 1980. when its 33.500 residents voted to incorporate an area of about 38 square miles. It began its formal existence as a City on December 1. 1980. In November. 1986. the City annexed an additional 1.325 acres. for a total area of about 40 square miles. Poway is located inland about three miles east of Interstate Highway 15. and is surrounded on three sides by the City of San Diego. Driving distance southerly to downtown San Diego or the San Diego International Airport is about 25 miles. The terrain is hilly and steep in some areas with gentle slopes in the center of the City. poway is relatively new in that over 70% of the housing stock postdates 1970. City Organization The City has, since incorporation. been governed and operated under the Council- Manager form of government. The City Manager directs a work force of 216 full-time employees and appoints department heads on the basis of specialized knowledge. experience - and education in their area of responsibility. The City employees are members of the State Public Employees Retirement System. The contributions to the System are current and no unfunded contractual liability exists for past services. Members. Mayor Don Higginson graduated from Brigham Young University in 1979 with a B.A. in Political Science. He received his J.D. from Western State Law School in 1982. and served for two years as legal liaison with the San Diego County Sheriffs Department. For the past five years Mr. Higginson has served as Corporate Counsel for Mail Boxes Etc. And is currently Vice President of FranX, Ltd. He is an active member of the San Diego Bar Association and is a current member of Antitrust and Trade Regulation Section of the State Bar of California. Mr. Higginson sits on the Franchise Tax Force of the Senate Select Committee on Small Business. He currently serves as Vice Chairman of the Hospice Foundation. Deputy Mayor Susan Callery was elected to the City Council and appointed to the Board of the Agency in November. 1992. After graduating from U.C.L.A.. Ms. Callery spent nine years in medical administration and research. Ms. Callery has been involved in numerous volunteer organizations in Poway. and served as Community Protection Chairman for Green Valley Community Association. Prior to her election, Ms. Callery served on the City's Migrant Worker Housing Committee from March to August. 1991. and the Redevelopment Committee from January. 1991. until her election to Council in November. 1992. * - To be updated. 32 LA\951310112 ------------ Councilmember Robert C. Emery is employed as a middle school teacher. He holds a B.A. in Political Science from San Diego State University and a M.A. in psychology from the University of San Diego. He was first elected to the City Council at the time of incorporation of the City in 1980. He has previously served as Mayor in 1982. 1985 and 1988. Mr. Emery has also served as an elected member to the Poway Planning and Development Program. an advisory group to the San Diego Planning Commission. Councilmember Michael P. Cafagna was appointed to a two-year term to the City Council and Agency Board of Directors in December. 1991. In addition to these duties. Mr. Cafagna also serves on the Mid-County Transportation Committee of the San Diego Association of Governments ("SANDAG") and is an alternate member of the San Diego Wastewater Management District. the SANDAG board of directors and the Metropolitan Transit Development Board. Mr. Cafagna owned and operated Square One. Inc., a diversified real estate firm. since 1974 and is a founding director and Vice President of the Poway Taxpayers' Association. Councilmember Betty Rexford [to come]. Population At incorporation in 1980, there were about 33.500 people in the City limits. Poway has grown to a population of 46.579. and expects to be built out according to general plan estimates a population of 52.000. Poway is a low density community predominately of single family homes. Housing and Income The average selling price for new and existing single family homes is about $261.000. 1988 median income for Poway was $45.837, the highest of incorporated cities in the County. The median age of Poway residents is 30.6. and the family/household size was 3.21 in 1988. Owner occupancy is high. and Poway is predominantly a single family community. Climate Poway. as part of San Diego County, has a relatively dry climate and its inland location spares it much of the summer fog experienced along the coast. Temperatures are frost-free over 350 days per year. and the City receives on the average approximately 11 inches of rain. principally between the months of October and April. Transportation Poway is served by a variety of transportation modes. Commercial air travel is supplied by Lindbergh Field. approximately 25 miles south in San Diego. and is supplemented by private and charter plan service from the Palomar Airport. about 20 minutes to the west. Automobile travel is facilitated by Interstate 15 which runs north/south several miles to the west of Poway. Bus travel is supplied by the San Diego County Regional Transit District and is supplemented by commuter service from Poway to downtown San Diego. 33 LA\951310112 -- Services and Facilities The City of Poway supplies its residents with water and sewer service. Power is supplied by San Diego Electric and Gas. and telephone service by Pacific Bell. The City has its own parks and community services departments and provides fire protection service. but contracts for police service from the County. The City currently has 197 full and part-time employees. Health care facilities are provided by Pomerado Hospital. a 130-bed. full-service facility. Educational facilities in the Poway Unified School District include 17 elementary schools (12 public and 5 private). 3 middle schools and 3 high schools. one of which is a continuation school. These educational facilities serve the populace of Poway as well as the neighboring communities of Rancho Bernardo and Rancho Penasquitos. Several schools within the Authority have recently been awarded national honors for excellence. The community is served by four savings and loan associations and six banks. Recreational facilities in the City of Poway include two community parks, one at the Community Center and one surrounding Lake Poway, a man-made lake. The Community Center also includes lighted softball/baseball fields and a swimming pool. Golfing is available at local nonmembership country clubs. A new 815-seat Poway Center for the Performing Arts opened in 1990. and features professional touring artists, entertainers and community programs. Residents of Poway have excellent access to cultural and recreational facilities in the metropolitan San Diego area as well. -- THE AGENCY General The Poway Redevelopment Agency was activated by the adoption of City Ordinance No. 96 on April 26, 1983. The City Council declared itself to be the Agency and acted upon redevelopment matters by the adoption of a Survey Area as required by the Community Redevelopment Law. Agency Powers and Duties The Agency is charged with the responsibility for elimination of blight through the process of redevelopment. All powers of the Agency are vested in its five members. The Agency exercises all of the governmental functions authorized under the Community Redevelopment Law and has, among other powers. the authority to acquire, administer. develop and sell or lease property. including the right of eminent domain, and the right to issue bonds and expend the proceeds. The Agency may sell or lease property within a redevelopment area in conformity with the redevelopment plan for such project area. may specify the period within which such redevelopment must begin. may establish certain restraints and controls over the development. and may set the period in which such development must be completed. Further. the Agency may. out of funds available to it for such purposes. pay all or part of the value of land, cost of buildings. facilities. structures or other improvements to be publicly owned and operated, to the 34 LA\951310112 extent that such improvements are of benefit to such project area and are in strict conformity with such redevelopment plan. Redevelopment in the State of California is carried out pursuant to the Community Redevelopment Law (Section 33000 e1~. Of the Health and Safety Code). Section 33020 of the Law defines redevelopment as the planning. development. replanning. redesign, clearance. reconstruction or rehabilitation. or any combination of these. of all or part of a survey area and the provision of such residential. commercial. industrial. public or other structures or spaces as may be appropriate or necessary in the interest of the general welfare. including recreational and other facilities incidental or appurtenant to them. CONCLUDING INFORMATION Underwriting The original purchase price to be paid for the Certificates. upon execution and delivery thereof. is $ . being the principal amount of the Certificates less an Underwriter's discount of $ . less original issue discount of $ plus accrued interest of $ . The Underwriter intends to offer the Certificates to the public initially at the prices and/or yields set forth on the cover page of this Official Statement. plus accrued interest from July 1. 1995. which prices or yields may subsequently change without any requirement of prior notice. The Underwriter reserves the right to join with dealers and other underwriters in offering the Certificates to the public. The Underwriter may offer and sell Certificates to certain dealers (including dealers depositing Certificates into investment trusts) at prices lower than the publiC offering prices. and such dealers may reallow any such discounts on sales to other dealers. In reoffering Certificates to the public. the Underwriter may overallocate or effect transactions which stabilize or maintain the market prices for Certificates at levels above those which might otherwise prevail. Such stabilization, if commenced. may be discontinued at any time. Legal Opinion Stradling. Yocca. Carlson & Rauth. a Professional Corporation. Newport Beach. California. Special Counsel. will render an opinion substantially in the form of APPENDIX D hereto with respect to the validity and enforceability of the City's obligations under the Lease Agreement and the validity of the Certificates. Except with respect to certain legal matters, Special Counsel undertakes no responsibility for the accuracy. completeness or fairness of the Official Statement. Special Counsel's fee for delivery of its opinion is contingent on successful execution and delivery of the Certificates. Certain matters will passed upon for the Underwriter by Nossaman. Guthner, Knox & Elliott. Los Angeles. California. and for the City by McDougal. Love. Eckis & Grindle. EI Cajon. California. Tax Exemption In the opinion of Stradling. Yocca. Carlson & Rauth. a Professional Corporation. Newport Beach. California. Special Counsel. under existing statutes. regulations. rulings and judicial decisions. the portion of the Lease Payments designated as and comprising interest is 35 LA\951310112 - excluded from gross income for federal income tax purposes. and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Special Counsel. the portion of the Lease Payments designated as and comprising interest is exempt from present State of California personal income tax. Special Counsel notes that with respect to corporations, the portion of the Lease Payments designated as and comprising interest may be included as an adjustment in the calculation of alternative minimum taxable income which may affect the alternative minimum tax liability of such corporations. Special Counsel's opinion as to the exclusion from gross income for federal income tax purposes of the portion of the Lease Payments designated as and comprising interest is based upon certain representations of fact and certifications made by the City. the Agency. the Underwriter and others and is subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986. as amended (the "Code"). that must be satisfied subsequent to the issuance of the Certificates to assure that the portion of the Lease Payments designated as and comprising interest will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the portion of the Lease Payments designated as and comprising interest to be included in gross income for federal income tax purposes retroactive to the date of execution and delivery of the Certificates. The City has covenanted to comply with all such requirements. Should the portion of the Lease Payments designated as and comprising interest become includable in gross income for federal income tax purposes, the Certificates are not subject to early redemption and will remain outstanding until maturity or until redeemed in accordance with the Trust Agreement. Special Counsel's opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Special Counsel has not undertaken to determine. or to inform any person, whether any such actions or events are taken or do occur. Although Special Counsel has rendered an opinion that the portion of the Lease Payments designated as and comprising interest is excluded from gross income for federal income tax purposes provided that the City continues to comply with certain requirements of the Code. the ownership of the Certificates and the accrual or receipt of interest with respect to the Certificates may otherwise affect the tax liability of certain persons. Special Counsel expresses no opinion regarding any such tax consequences. Accordingly. before purchasing any of the Certificates. all potential purchasers should consult their tax advisors with respect to collateral tax consequences with respect to the Certificates. Litigation Except as described below. the City is not aware of any pending or threatened litigation concerning the validity of the Certificates or challenging any action taken by the City or the Agency with respect to the Certificates. Furthermore, the City is not aware of any pending or threatened litigation to restrain. enjoin. question or otherwise affect the Lease Agreement or the Trust Agreement or in any way contesting or affecting the validity or enforceability of any of the foregoing or any proceedings of the City taken with respect to any of the foregoing. Although there are a number of lawsuits and claims pending against the City. except as described below it is the opinion of the City that such litigation and claims will not materially affect the City's finances or impair its ability to make Lease Payments or otherwise meet its obligations under 36 LA\951310112 finances or impair its ability to make Lease Payments or otherwise meet its obligations under the Lease Agreement. In January, 1995 the Poway Royal Mobile Homeowners Association and certain individual tenants within the Poway Royal Mobile Home Park (the "Park") (together. the "Plaintiffs") commenced a lawsuit in the Superior Court for the County of San Diego against the City. the City Council. the Agency and the City Manager seeking recovery of monetary damages approximating $20.000.000 in connection with the acquisition and operation of the Park by the City and the Agency. The City and the Agency are vigorously defending the lawsuit. The City Attorney believes that the complaint lacks merit and that all causes of actions resulting from the alleged excessive purchase price for the Park will be dismissed upon motion prior to trial. Motions to dismiss the excessive purchase price causes of action are scheduled to be heard on 1995. Due to the factual nature of the causes of action arising from claims of Mobilehome Park Act violations and inadequate maintenance of the Park. the City Attorney believes that a trial on these issues may be necessary. However. the City Attorney further believes that the City is in compliance with the Mobilehome Park Act and it is unlikely that the Plaintiffs will recover on the other grounds. Although the City. the Agency and the City Attorney do not anticipate that the lawsuit will have a significant effect upon the City's ability to make Lease Payments or otherwise negatively impact the City's financial condition. there can be no guarantee that the outcome of the litigation will be favorable to the City and the Agency. [DESCRIPTION OF INSURANCE COVERAGE, IF ANY. TO COME] Ratings Standard & Poor's Ratings Group. a Division of McGraw Hill ("Standard & Poor's") and Moody's Investors Service ("Moody's") have assigned their municipal bond ratings of "_ " and "- " respectively. to the Certificates with the understanding that upon delivery of the Certificates. a policy insuring the payment when due of the principal of and interest with respect to the Certificates will be issued by the Insurer. The ratings reflect only the views of such organizations. respectively. and an explanation of the significance of such ratings may be obtained from Standard & Poor's. 25 Broadway. New York, New York 10004. and Moody's. 99 Church Street. New York. New York 10007. There is no assurance that either rating will continue for any given periOd of time or that it will not be revised downward or witHdrawn entirely by such rating agency. if. in the judgment of such rating agency. circumstances so warrant. The City and the Insurer undertake no responsibility either to bring to the attention of the Owners the downward revision or withdrawal of any rating obtained or to Oppose any such revision or withdrawal. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Certificates. Audited Financial Statements The financial statements of the City for the year ended July 30. 1994 have been examined by Moreland & Associates, Inc.. Newport Beach. California. The auditor's report. the financial statements and the notes to the financial statements are attached hereto as APPENDIX C. 37 LA\951310112 - - Verification of Mathematical Accuracy - Upon delivery of the Certificates. Ernst & Young. Memphis. Tennessee. will deliver its independent certified public accountants verification report on the mathematical accuracy of certain computations, contained in schedules provided to them which were prepared on behalf of the City. relating to (a) the sufficiency of the anticipated receipts from the securities deposited with the Escrow Agent (the "Escrow Securities") to pay. when due. the principal whether at maturity or upon prior redemption, interest and redemption premium requirements of the 1986 Certificates and, (b) the "yield" on the Escrow Securities and on the Certificates considered by Special Counsel in connection with the tax opinion rendered by such firm. See "Tax Exemption" above. The report of Ernst & Young will include the statement that the scope of their engagement is limited to verifying the mathematical accuracy of the computations contained in such schedules provided to them, and that they have no obligation to updated their report because of events occurring. or data or information coming to their attention. subsequent to the date of their report. Miscellaneous All of the descriptions of the California Government Code, other applicable legislation. the Lease Agreement. the Trust Agreement. the Site, the City. the Agency. agreements and other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the City for further information in connection therewith. This Official Statement does not constitute a contract with the purchasers of the Certificates. Any statements made in this Official Statement involving matters of opinion or estimates, whether or not so expressly stated. are set forth as such and not as representations of fact. and no representation is made that any of the estimates will realize. The execution and delivery of this Official Statement has been duly authorized by the City Council of the City. CITY OF POWAY, CALIFORNIA By: Title: 38 LA\951310112 APPENDIX C SUMMARY OF PRINCIPAL LEGAL DOCUMENTS Tbe following is a summary of certain provisions of the legal documents which are not described elsewhere in this Official Statement. Tbese summaries do not purport to be comprehensive and reference should be made to the Trust Agreement, the Site Lease, the Lease and the Assignment Agreement for a full and complete statement of their provisions. All capitalized terms not defined in this Official Statement have the meanings set forth in the Trust Agreement. Definitions of Certain Tenns Additional Certificates shall mean any certificates of participation executed and delivered by the Trustee in accordance with the provisions of the Trust Agreement subsequent to the Delivery Date for the Certificates. Additional Pavments shall mean any amount payable by the City under the terms of the Lease, other than the Lease Payments. Bond Counsel shall mean an attorney or firm of attorneys of nationally recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Code and acceptable to the City. Business Dav shall mean any day other than (i) a Saturday or Sunday or legal holiday or a day on which banking institutions in the city in which the principal corporate trust office of the Trustee is located are authorized or required bylaw or executive order to close, (ii) a day on which the New York Stock Exchange is closed, (iii) if a Credit Facility is then in effect, a day on which the issuer of the Credit Facility is authorized or required by law or executive order to close, or (iv) if a Reserve Account Policy is then in effect, a day on which the issuer of any Reserve Account Policy is authorized or required by law or executive order to close. Certificate Fund shall mean the fund by that name established pursuant to the Trust Agreement. Code shall mean the Internal Revenue Code of 1986, as amended, and any regulations, rulings, judicial decisions, and notices, announcements, and other releases of the United States Treasury Department or Internal Revenue Service interpreting and construing it. Comoletion Certificate shall mean a certificate of an Authorized Representative of the City delivered pursuant to the Lease and in the form required by the Trust Agreement to the effect that the Project, or a portion thereof to which such certificate relates, has been completed substantially in conformity with the plans and specifications for the Project or such portion thereof. Cost shall mean and be deemed to include, with respect to the Project, together with any other proper item of cost not specifically mentioned in the Trust Agreement, (a) costs of payment of, or reimbursement for, acquisition, design, construction, rehabilitation, installation, delivery and financing of the Project, including, but not limited to, the payment of real property rental, administrative costs and capital expenditures relating to acquisition, construction and installation, inspection costs, filing and recording costs, printing costs, reproduction and binding costs, fees and charges of the Trustee pursuant to the Trust Agreement and other financing documents, legal fees and charges, financial, accounting and other professional consultant fees, costs of rating agencies or credit ratings, fees for the printing, PUBL,27186_1 1 138182345.62 C-I execution, transponation and safekeeping of the Certificates or any Additional Certificates; (b) all other costs which the City shall be required to pay under the terms of any contract or contracts for the acquisition, construction, delivery and installation of the Project, including, but not limited to. the cost of insurance; (c) any sums required to reimburse the City for advances made for any of the above items, or for any other costs incurred and for work done, which is properly chargeable to the Project; (d) any costs paid from the Net Proceeds to repair, restore or replace the Project; and (e) such other expenses not specified in the Trust Agreement as may be necessary or incidental to the acquisition, construction, delivery and installation of the Project, the financing thereof and the placing of the same in use and operation. Cost as defined in the Trust Agreement shall be deemed to include the cost and expenses incurred by any agent of the City for any of the above mentioned items. Costs of Issuance shall mean all the costs of executing and delivering the Certificates or any Additional Certificates, including, but not limited to, City administrative costs and expenses directly attributable to the execution and delivery of the Certificates, or any Additional Certificates, all printing and document preparation expenses in connection with the Trust Agreement, the Lease, the Assignment Agreement, the Site Lease, the Escrow Agreement, the Certificates, any Additional Certificates and the Official Statement pertaining to the Certificates or any Additional Certificates; rating agency fees; appraisal fees; market study fees; legal fees and expenses of counsel with respect to the financing of the Project; fees and costs associated with obtaining any Municipal Bond Insurance Policy, Credit Facility or Reserve Account Policy obtained in connection with an issue of Additional Certificates; any accounting, computer and other expenses incurred in connection with the Certificates or any Additional Certificates; the initial fees and expenses of the Trustee and its counsel and any paying agent (including, without limitation, origination fees and first annual fees payable in advance); the fees and expenses of the City's financial advisor; the fees and expenses of disclosure counsel; and other fees and expenses incurred in connection with the execution and delivery of the Certificates or any Additional Certificates or the implementation of the financing for the Project, including amounts to reimburse the City for advances made for any of the foregoing, to the extent such fees and expenses are approved by the City. Credit Facilitv shall mean an irrevocable and unconditional letter of credit, a standby purchase agreement, a line of credit or other similar credit arrangement issued by a Qualified Bank to satisfy all or a portion of the Reserve Requirement. Deliverv Date shall mean, as applicable, the date on which the Certificates or any Additional Certificates are initially delivered. Fiscal Year shall mean the twelve month fiscal period of the City which commences on July I in every year and ends on June 30 of the succeeding year. Insurance and Condemnation Proceeds Fund shall mean the fund by that name established under the Trust Agreement. Insurer shall mean Financial Security Assurance, Inc., a -domiciled stock insurance company. Interest Comoonent shall mean any Lease Payment, or portion thereof, which is designated and paid as interest pursuant to the terms of the Lease; the Interest Component of a Certificate or an Additional Certificate is the proportionate interest in the Interest Component of the Lease Payments which is evidenced by such Certificate or Additional Certificate, as applicable. C-2 Interest Pavment Date shall mean August I and February I of each year, commencing February I, 1995, until the earlier of the maturity date or redemption date of the last Outstanding Certificates or Additional Certificates. Lease Pavments shall mean the amount to be paid by the City for the use and occupancy of the Site pursuant to the Lease, but does not include any Additional Payments. Lease Payment Date shall mean the fifth Business Day prior to each Interest Payment Date. Lease Pavment Fund shall mean the fund by that name established in the Trust Agreement. Municioal Bond Insurance Policv shall mean the municipal bond insurance policy issued by the Insurer insuring the payment when due of the Interest Components and Principal Components represented by the Certificates and any municipal bond insurance policy issued in connection with an issue of Additional Certificates insuring the payment of the Interest Components and Principal Components represented by such issue of Additional Certificates. Net Proceeds shall mean the proceeds of any insurance required to be maintained pursuant to the Lease or condemnation proceeds paid with respect to the Site and remaining after payment therefrom of all expenses incurred in the collection thereof. Outstandinl!. when used with reference to any Certificates or Additional Certificates, shall mean, as of any date, the Certificates or Additional Certificates theretofore or thereupon being executed and delivered under the Trust Agreement except: (a) Certificates or Additional Certificates cancelled or delivered to the Trustee for cancellation on or prior to such date; (b) Certificates (or portions of Certificates) or Additional Certificates (or portions of Additional Certificates) defeased as provided in the Trust Agreement; (c) Certificates or Additional Certificates in lieu of or in substitution for which other Certificates or Additional Certificates, as applicable, shall have been executed and delivered pursuant to the Trust Agreement; and (d) Certificates or Additional Certificates of the type described in the Trust Agreement. Permi""" Investments shall mean: (a) cash (insured at all times by the Federal Deposit Insurance Corporation or otherwise collateralized with obligations described in paragraph (b) below); or (b) direct obligations of (including obligations issued or held in book entry form on the books of) the Department of Treasury of the United States of America; (c) obligations of any of the following federal agencies which obligations represent full faith and credit of the United States of America, including: C-3 - Export - Import Bank - Farm Credit System Financial Assistance Corporation Farmers Home Administration - General Services Administration - U.S. Maritime Administration - Small Business Administration - Government National Mortgage Association (GNMA) - U.S. Department of Housing and Urban Development (PHAs) - Federal Housing Administration; (d) senior debt obligations rated in the highest rating category by each Rating Agency issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation and other government sponsored agencies approved by the Insurer; (e) U.S. dollar denominated deposit accounts, federal funds and banker's acceptances with domestic commercial banks (including the Trustee) which have the highest short-term rating of each Rating Agency on the date of purchase and maturing no more than 360 days after the date of purchase. (Ratings on holding companies are not considered as the rating of the bank); (f) commercial paper which is rated in the single highest classification of each Rating Agency at the time of purchase, and which matures not more than 270 days after the date of purchase; (g) investments in a money market fund rated "AAAm" or "AAAm-G" or better by Standard & Poor's; (h) pre-refunded municipal obligations defined as follows: Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and which are rated, based on an irrevocable escrow account or fund (the "escrow"), in the highest rating category of each Rating Agency; (i) other forms of investments approved in writing by the Insurer with notice to each Rating Agency; (j) deposits in the Local Agency Investment Fund as administered by the Treasurer of the State; and (Ie) shares of beneficial interest issued by diversified management companies, as defined in Section 2370lm of the California Revenue and Taxation Code, investing in the securities and obligations as authorized by clauses (a) to (i), inclusive, of this definition. To be eligible for investment pursuant to this subdivision, these companies shall be rated in the highest rating category of the Rating Agency. "Value" of the above investments shall be determined as of the end of each month, and the value of any investments shall be calculated as follows: C-4 - (a) as to investments the bid and asked prices of which are published on a regular basis in The Wall Street Journal (or, if not there, then in The New York TImes): the average of the bid and asked prices for such investments so published on or most recently prior to such time of determination; (b) as to investments the bid and asked prices of which are not published on a regular basis in The Wall Street Journal or The New York TImes: the average bid price at such time of determination for such investments by any two nationally recognized government securities dealers (selected by the Trustee in its absolute discretion) at the time making a market in such investments or the bid price published by a nationally recognized pricing service; (c) as to certificates of deposit and bankers acceptances: the face amount thereof, plus accrued interest; and (d) as to any investment not specified above: the value thereof established by prior agreement between the City, the Trustee and the Bond Insurer. Preoavment shall mean any payment made by the City pursuant to the Lease as a prepayment of Lease Payments. Princioal Comoonent shall mean, with respect to a Lease Payment, the portion thereof which is designated and paid as principal pursuant to the terms of the Lease; the Principal Component of a Certificate or an Additional Certificate is the proportionate interest in the Principal Component of the Lease Payments which is evidenced by such Certificate or an Additional Certificate, as applicable. Princioal Comoonent Pavment Date shall mean November I of each year in which a Principal Component of a Certificate or Additional Certificate is due. Proiect shall mean the improvements financed with the proceeds of any Additional Certificates as described in a supplement to the Lease Agreement. Proiect Fund shall mean the fund by that name which is established under the Trust Agreement. Oualified Bank: shall mean a financial institution whose long-term obligations are rated in one of the two highest rating categories by each Rating Agency. Ratin!! A!!ency shall mean Moody's Investors Service, if it then rates the Certificates, Standard & Poor's Ratings Group, if it then rates the Certificates, and any of their respective successors and assigns that then rate the Certificates or any Additional Certificates. All rating categories of the Rating Agency referred to in the Trust Agreement shall be without regard to modifiers. Rebate Fund shall mean the fund by that name established in the Trust Agreement. Record Date shall mean the fifteenth calendar day of the month preceding each Interest Payment Date, whether or not such fifteenth day is a Business Day. Reserve Account Policv shall mean a policy of insurance or surety bond issued by a municipal bond insurer, obligations insured by which have a rating by the Rating Agency in the highest rating category then issued by said Rating Agency, to satisfy all or a portion of the Reserve Requirement. C-5 . Reserve Reauirement shall mean, as of the date of calculation, the least of (i) an amount equal to the maximum amount of Lease Payments due on the fifth Business Day preceding any August I and the next preceding February I with respect to Outstanding Certificates and Additional Certificates, (Ii) an amount equal to 10% of the proceeds (within the meaning of Section 148 of the Code) of all Certificates and Additional Certificates, or (iii) an amount equal to 125% of the average annual Lease Payments due with respect to Outstanding Certificates and Additional Certificates; provided, however, that with the prior approval of the Insurer such Reserve Requirement or a portion thereof may be provided by one or more Reserve Account Policies or Credit Facilities upon the filing by the City with the Trustee of (x) written evidence that the use of such Reserve Account Policies or Credit Facilities to satisfy the Reserve Requirement or any portion thereof will not by itself result in the downgrading or withdrawal of any credit rating then in effect with respect to the Certificates or Additional Certificates Outstanding, and (y) an opinion of Bond Counsel to the effect that such event will not impair the exclusion from gross income for federal income tax purposes or from State personal income taxes of the Interest Component of each Lease Payment. Sinkinl! Account Installment Date shall mean, with respect to the Term Certificates, August I of each year, commencing August 1, 20_ and terminating August I, 20_ and, with respect to any Additional Certificates, the date or dates so specified with respect to such Additional Certificates in the Supplemental Trust Agreement relating thereto. ~ shall mean the real property described from time to time in Exhibit A to the Site Lease and Exhibit A to the Lease, as such Exhibit A may be amended and supplemented from time to time in accordance with the provisions of the Site Lease and the Lease. SUDDlemental Trust AlITeement shall mean any agreement supplemental to or amendatory of the Trust Agreement, executed and delivered in accordance with the terms of the Trust Agreement. TIlE TRUST AGREEMENT The Trust Agreement provides for the appointment of the Trustee by the Agency and the City and acceptance of such appointment by the Trustee. The Trust Agreement also provides for the establishment and administration of funds and for the preparation and delivery of the Certificates. &tablishment of Funds There are established with the Trustee the following special trust funds and accounts to be designated as follows and each such fund and account shall be kept by the Trustee separate and apart from all other funds and accounts: (a) The Project Fund, in which there is established an Agency Rental Payment Account and a Costs of Issuance Account and an Acquisition and Construction Account; (b) The Certificate Fund, in which there is hereby established an Interest Account, a Principal Account, a Redemption Account and a Reserve Account; (c) The Lease Payment Fund; ..- (d) The Insurance and Condemnation Proceeds Fund, to be established and maintained when required; and C-6 - ---..-.....-.- (e) The Rebate Fund, in which there shall be established an Earnings Account, a Rebate Account and an Alternative Penalty Account. Project Fund Costs of Issuance Account. There shall be paid into the Costs of Issuance Account of the Project Fund the amount required to be so paid by the provisions of the Trust Agreement and Costs of Issuance shall be paid from amounts on deposit therein by the Trustee in accordance with written instructions to be given to the Trustee by an Authorized Representative of the City. Any unexpended proceeds of the Certificates or any issue of Additional Certificates, as applicable, remaining in the Costs of Issuance Account on the date which is 180 days after the Delivery Date for the Certificates or such Additional Certificates, respectively, or such earlier date as is specified in writing by an Authorized Representative of the City, shall be transferred by the Trustee in the case of any proceeds of the Certificates to the Interest Account of the Certificate Fund and in the case of any proceeds of Additional Certificates to the Acquisition and Construction Account or, if the balance therein is zero, then to the Interest Account. Acauisition and Construction Account. In connection with the execution and delivery of any Additional Certificates, there shall be paid into the Acquisition and Construction Account the amount so required to be paid by the provisions of the Trust Agreement and the Cost of the Project shall be paid from the amounts on deposit in such account. The Trustee shall make payments of the Cost of the Project from the Acquisition and Construction Account in the amounts, at the times, in the manner, and on the other terms and conditions set forth in this subsection. No such payment shall be made until the Trustee shall have received a requisition signed by an Authorized Representative of the City substantially in the form set forth in the Trust Agreement. Upon receipt of a requisition in the form required by the Trust Agreement, the Trustee is authorized to act thereon without further inquiry and shall not be responsible for the contents of such requisition or the application of such funds except for ascertaining that it has been signed by an Authorized Representative of the City. The Trustee shall issue its check or, upon request, a wire transfer, for each payment required by a requisition to the extent funds are available in the Acquisition and Construction Account. Comoletion of Proiect. The completion of the acquisition, construction, delivery and installation of the Project, or portion thereof, to be completed with the proceeds of an issue of Additional Certificates, shall be evidenced by the filing of a Completion Certificate of an Authorized Representative of the City, which shall be filed with the Trustee, stating (I) that the acquisition, construction, delivery and installation of the Project, or the applicable portion thereof, has been completed substantially in accordance with the plans and specifications applicable thereto and that the Project, or the applicable portion thereof, is ready for use, (2) the date of such completion, and (3) the amount, if any, required, in the opinion of the signer or signers, for the payment of any remaining part of the Cost of the Project, which amount shall be retained in the Acquisition and Construction Account of the Project Fund. A separate Completion Certificate may be filed with respect to the portion of the Project to be financed from the proceeds of each issue of Additional Certificates. Transfer of Surolus. Upon the filing of a Completion Certificate with respect to an issue of Additional Certificates, the Trustee shall transfer from the Acquisition and Construction Account and deposit in the Reserve Account any amount necessary to increase the amount on deposit therein to the Reserve Requirement. Thereafter, and at the written direction of an Authorized Representative of the City, the Trustee shall (i) transfer any balance in the Acquisition and Construction Account to the Interest Account or the Principal Account of the Certificate Fund to pay the Principal Components and Interest Components due with respect to the Certificates and any Additional Certificates as they become due, or (ii) retain any balance in the Acquisition and Construction Account to be used for any capital C-7 requirements of the City, whether or not related to the Project, upon such terms and conditions as shall not in the opinion of Bond Counsel impair the exclusion from gross income for federal income tax purposes of the Interest Component of any Lease Payment. Lease Payment Fund There shall be paid into the Lease Payment Fund the amount required to be so paid by the provisions of the Trust Agreement, all Lease Payments, other than Prepayments, and any proceeds of rental interruption insurance received by the Trustee with respect to the Lease immediately upon their receipt. The Trustee shall apply amounts deposited to the Lease Payment Fund as follows: (a) on the Business Day next preceding each Interest Payment Date, the Trustee shall transfer to the Interest Account of the Certificate Fund the amount necessary to increase the balance therein to an amount equal to the Interest Component due with respect to the Certificates and any Additional Certificates on such Interest Payment Date; (b) on the Business Day next preceding each Principal Component Payment Date on which a portion of the Principal Components is due at maturity or upon a Sinking Account Installment Date, the Trustee shall transfer to the Principal Account of the Certificate Fund the amount necessary to increase the balance therein to an amount equal to the Principal Components, including Sinking Account Installments, due with respect to the Certificates and any Additional Certificates on such Principal Component Payment Date; (c) on the date of receipt of any delinquent Lease Payments, the Trustee shall transfer to the Reserve Account of the Certificate Fund the amount needed to increase the amount therein to the Reserve Requirement; and (d) any amounts remaining in the Lease Payment Fund after the transfers referred to in (a), (b) and (c) above shall remain in the Lease Payment Fund until all Certificates and Additional Certificates are paid, redeemed or defeased, in which case all such amounts shall be paid to the City. Certificate Fund Interest Account. Moneys transferred to the Interest Account from the Lease Payment Fund and the Reserve Account shall be applied to pay the Interest Components due on each Interest Payment Date. Princioal Account. Moneys transferred to the Principal Account from the Lease Payment Fund and the Reserve Account shall be applied to pay the Principal Components at maturity or upon a Sinking Account Installment Date. To the extent that the Trustee has insufficient funds on deposit in the Interest Account, the Principal Account and the Redemption Account of the Certificate Fund (including amounts transferred from the Reserve Account) to pay the Principal Components and Interest Components due with respect to the Certificates and any Additional Certificates as a result of an abatement of Lease Payments pursuant to the Lease, each Owner of a Certificate and each Owner of an Additional Certificate remaining Outstanding will be paid a pro rata portion of the Interest Components and Principal Components of the Lease Payments actually received that corresponds to his proportionate interest in the Lease Payments. C-8 ---- RedemDtion Account. The Trustee shall apply moneys in the Redemption Account as provided in the Trust Agreement. Amounts in the Redemption Account shall be applied to pay the redemption price of Certificates and Additional Certificates pursuant to the Trust Agreement and of any Additional Certificates as specified in the Supplemental Trust Agreement for such Additional Certificates. All expenses in connection with any redemption shall be paid by the City. The Trustee shall deposit in the Redemption Account as received, all Prepayments and any amounts to be transferred to the Redemption Account in accordance with the Trust Agreement. All of said moneys shall be set aside in the Redemption Account for the purpose of redeeming the Certificates and any Additional Certificates in advance of their maturity and shall be applied on or after the redemption date for such Certificates and Additional Certificates to the payment of the redemption price due with respect to the Certificates and Additional Certificates to be redeemed upon presentation and surrender of such Certificates and Additional Certificates. Any excess amounts remaining in the Redemption Account following the redemption or redemptions to be made with such amounts shall be transferred to the Lease Payment Fund. Reserve Account. (a) The Reserve Requirement shall be maintained by the Trustee in the Reserve Account until the Lease Payments are paid in full pursuant to the terms of the Lease or until the Trust Agreement is terminated. The Trustee shall apply moneys in the Reserve Account as provided in the Trust Agreement. (b) If on the Business Day prior to any Interest Payment Date the amount in the Interest Account of the Certificate Fund shall be less than the amount required for the Interest Components due with respect to the Certificates and any Additional Certificates on said Interest Payment Date, the Trustee shall withdraw from the Reserve Account and deposit in the Interest Account the amount necessary to make up the deficiency on such Business Day. In the event of any such transfer, the Trustee shall, within five days thereafter, provide written notice to the City of the amount and date of such transfer. (c) If on the Business Day prior to any Principal Component Payment Date the amount in the Principal Account of the Certificate Fund shall be less than the amount required to pay the Principal Components payable on the Certificates and any Additional Certificates on such Principal Component Payment Date, the Trustee shall, after making any transfers required by the preceding paragraph, withdraw from the Reserve Account and deposit in the Principal Account the amount necessary to make up the deficiency on such Business Day. In the event of any such transfer, the Trustee shall, within five days thereafter, provide written notice to the City of the amount and date of such transfer. (d) Except as permitted by the following sentence, in the event the amount on deposit in the Reserve Account exceeds the Reserve Requirement, the Trustee shall, upon written direction of the City, not less frequently than semiannually, transfer such amounts (a) to the Rebate Fund, if any deposit is then required to be made pursuant to the Trust Agreement, and (b) to the Lease Payment Fund for application in accordance with the Trust Agreement. In the event that a Reserve Account Policy or Credit Facility is provided to satisfy all or a portion of the Reserve Requirement, any cash on deposit in the Reserve Account which is no longer needed to satisfy the Reserve Requirement will be transferred by the Trustee, at the written direction of an Authorized Representative of the City, to the Project Fund for application in accordance with the Trust Agreement, to a special account to be established for the payment of the fees related C-9 - to the Reserve Account Policy or Credit Facility, or, with an approving opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes and the exemption from State of California personal income taxation of the Interest Component of the Certificates will not be adversely affected, to the City's General Fund. For purposes of determining the amount on deposit at any time, the Trustee shall value all Permitted Investments in the Reserve Account in accordance with the provisions of the Trust Agreement. A Reserve Account Policy must have a maturity date which is equal to the last maturity of any Outstanding Certificate or Additional Certificate. A Credit Facility must either have a maturity date which is equal to the last maturity of any Outstanding Certificate or Additional Certificate or provide that it may be drawn upon in its full stated amount unless prior to the expiration date of the Credit Facility a substitute Credit Facility, which when combined with the other amounts in the Reserve Account will equal the Reserve Requirement, has been delivered to the Trustee. Any Credit Facility must permit the Trustee to draw on such instrument in the full stated amount thereof in the event that the long-term obligations of the issuer thereof are rated less than the two highest rating categories of the Rating Agency. (e) Moneys in the Reserve Account shall be used solely for the purpose of: (1) making up deficiencies in the Interest Account as provided in the Trust Agreement; (2) making up deficiencies in the Principal Account as provided in the Trust Agreement; (3) making the transfers as provided in (d) above; (4) with respect to the amounts in any subaccount therein established for the Certificates or any Additional Certificates, providing for the payment of the final Lease Payments represented by the issue of Certificates or Additional Certificates for which such subaccount was created, in which event the Trustee shall transfer such amounts on deposit in the Reserve Account to the Lease Payment Fund to be applied as a credit against such final Lease Payments; or (5) providing for the defeasance pursuant to the Trust Agreement or the Prepayment of all Lease Payments attributable to the Certificates or an issue of Additional Certificates, in which case the amounts in the subaccount of the Reserve Account established for such issue, or in the case of a partial defeasance the amount in the subaccount that will no longer be required as a part of the Reserve Requirement following the defeasance, shall be transferred to the Redemption Account to be applied to the defeasance or redemption of the applicable issue of Certificates or Additional Certificates or portion thereof. Insurance and Condemnation Fund Aoolication of Net Proceeds. There shall be paid into the Insurance and Condemnation Fund the Net Proceeds of the hazard insurance maintained pursuant to the Lease and any condemnation awards constituting Net Proceeds. In the event that the City elects to restore the Site as provided in the Lease, then such Net Proceeds shall be disbursed in accordance with requisitions submitted to the Trustee by an Authorized Representative of the City. Promptly upon determining that the restoration of the Site is C-IO ~----_._.__._._-_...._._._.__._.- complete, the Authorized Representative of the City shall so notify the Trustee in writing that the restoration is complete. Any balance of Net Proceeds remaining after the final disbursement to restore the Site, and, in the event the City elects not to restore the Site as provided in the Lease, all Net Proceeds shall be transferred by the Trustee to the Redemption Account and applied to the redemption of Certificates and any Additional Certificates on a pro rata basis pursuant to the Trust Agreement. Aoolication of Title Insurance Proceeds. The Net Proceeds of any title insurance obtained in accordance with the Lease and received by the Trustee in respect of the Site upon receipt shall be deposited in the Insurance and Condemnation Fund and shall be applied and disbursed by the Trustee as follows: (a) If the City determines that the title defect giving rise to such proceeds has not materially affected the operation of the Site and will not result in an abatement of Lease Payments payable by the City under the Lease, at the written direction of an Authorized Representative of the City, such proceeds shall be transferred into the Reserve Account of the Certificate Fund to the extent that the amount therein is less than the Reserve Requirement. Amounts not required to be so deposited shall be remitted to the City and used for any lawful purpose. (b) If any portion of the Site has been affected by such title defect, and if the City determines that such title defect will result in an abatement of Lease Payments payable by the City under the Lease, then the Trustee, at the written direction of an Authorized Representative of the City, shall immediately transfer such proceeds to the Redemption Account of the Certificate Fund and such proceeds shall be applied to the redemption of Certificates and any Additional Certificates on a pro rata basis pursuant to the Trust Agreement. Rebate Fund There shall be paid into the Rebate Fund the amounts required to be rebated to the United States in accordance with certain provisions of the Code. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust, for payment to the United States Treasury. In the event that immediately following the transfer required by the previous sentence, the amount then on deposit in the Rebate Fund exceeds the amount required to be on deposit therein, upon written instructions from an Authorized Representative of the City, the Trustee shall withdraw the excess from the Rebate Fund and then credit the excess to the Lease Payment Fund. Investment of Certain Accounts (i) Moneys held in all Funds, Accounts and subaccounts shall be invested and reinvested by the Trustee in Permitted Investments which mature not later than such times as shall be necessary to provide moneys when needed for payments to be made from such Funds, Accounts and subaccounts. Moneys in each subaccount of the Reserve Account shall be invested and reinvested by the Trustee in Permitted Investments which mature not later than five years following the date of purchase, and in no event later than the final maturity of the Certificates or issue of Additional Certificates with respect to which such subaccount was created; provided, however. that amounts in the Reserve Account may be invested in Permitted Investments of longer maturities so long as such Permitted Investments may be liquidated at par if needed to make timely payment of scheduled Interest Components and Principal Components. Moneys in the Rebate Fund shall be invested only in obligations of, or obligations the payment of the principal of and interest on which is unconditionally guaranteed by, the United States of America and which have a maturity no longer than the date on which such amounts will be required to make any payments to the United States required by the Trust Agreement. The Trustee shall make all C-11 . .-., - such investments of moneys held by it in accordance with written instructions received from an Authorized Representative of the City two days in advance of the investment. In the absence of such written instructions from the City, the Trustee shall invest in investments described in subparagraph (e) or (g) of the definition of "Permitted Investments." (ii) All earnings on amounts in the Certificate Fund shall be deposited in the Lease Payment Fund except for income or interest earned on amounts in each subaccount of the Reserve Account in excess of the yield on the Certificates or Additional Certificates for which such subaccount was created which shall be deposited in the appropriate subaccount of the Earnings Account of the Rebate Fund. Additionally, any income or interest earned on any moneys or investments in any Fund, Account or subaccount other than the Project Fund and the Certificate Fund shall remain in the respective Funds, Accounts and subaccounts. In crediting interest earnings, the Trustee shall post earnings to the appropriate subaccount of each of the foregoing Funds, Accounts and subaccounts so that earnings on the proceeds of the Certificates and each issue of Additional Certificates are separately maintained and not commingled. (Hi) Nothing in the Trust Agreement shall prevent any Permitted Investments acquired as investments of funds held thereunder from being issued or held in book-entry form on the books of the Department of the Treasury of the United States of America. (iv) The Trustee may act as principal or agent in the acquisition or disposition of an investment. Additional Certificates At any time after the Delivery Date of the Certificates, the City may provide for the execution and delivery of and sell Additional Certificates to be executed and delivered pursuant to the Trust Agreement, in such Principal Components as it deems necessary for its public purposes (evidenced by a resolution to that effect passed by the City's City Council), subject to the following conditions precedent to such execution, delivery and sale: (a) The City shall be in compliance with all covenants set forth in the Lease and the Trust Agreement and a certificate to that effect shall have been filed with the Trustee upon which Trustee may absolutely rely; (b) The City shall have obtained and provided to the Trustee the written consent of the Insurer; (c) The City shall have obtained and provided to the Trustee written confirmation from each Rating Agency that its then existing rating with respect to the Certificates and any Additional Certificates will not be reduced or withdrawn as a result of such execution and delivery of Additional Certificates; (d) The City shall have delivered to the Trustee a certificate from an independent and qualified MAl real estate appraiser selected by the City setting forth his or her findings that the Site based upon the then existing improvements on the Site (i) has an annual fair rental value during the remainder of the term of the Lease, as supplemented, which is equal to or greater than the total annual Lease Payments and Additional Payments (assuming that the annual Additional Payments due in the future will equal the average annual Additional Payments prior to the date of execution and delivery of such Additional Certificates ) required to be paid under the Lease C-12 -- during any year of the remainder of the term following the execution and delivery of the Additional Certificates, and (il) has a useful life at least equal to the remaining term of the Lease, as supplemented; provided, however, if the Additional Certificates are being executed and delivered solely for the purpose of making repairs, replacements, additions or improvements to the Site, an appraisal shall not be required if the City shall have certified in writing to the Trustee that it has entered into a fixed price construction contract for the repairs, replacements, additions or improvements to the Site, which contract includes a scheduled completion date and provides for liquidated damages sufficient to pay the portion of Lease Payments attributable thereto for each day from the scheduled completion date to the date on which such repairs, replacements, additions or improvements are accepted by the City, and deposited with the Trustee a sufficient amount of capitalized interest to pay the interest due with respect to the Additional Certificates until such scheduled completion date, as evidenced by a certificate of an Authorized Representative of the City to the Trustee as to the sufficiency of such deposit for such purpose; (e) The City shall have obtained and provided to the Trustee a certificate stating that the City holds certificates of insurance relating to the Site (as it will be comprised at and after the execution and delivery of such Additional Certificates) which comply with the requirements of the Lease; (f) Provision shall have been made for the deposit into the Reserve Account of an amount equal to the amount necessary to increase the balance therein to the combined Reserve Requirement for the Certificates and any Additional Certificates, as calculated at the time such Additional Certificates are to be executed and delivered; (g) Provision shall have been made for the execution and delivery of a supplement to the Lease setting forth the total Lease Payments to be paid by the City following the execution and delivery of the Additional Certificates; (h) Provision shall have been made for the execution and delivery of a Supplemental Trust Agreement setting forth the terms of the Additional Certificates, including but not limited to (i) the purpose for which such Additional Certificates are to be executed and delivered and the funds into which the proceeds thereof are to be deposited on the Delivery Date of the Additional Certificates (including provision for any deposit required to be made to the Reserve Account as required by paragraph (e) above), (ii) the aggregate principal amount of Additional Certificates to be executed and delivered, (iii) redemption premiums, if any, and the redemption terms, if any, for such Additional Certificates, and (iv) such other provisions as are necessary or appropriate and not inconsistent with the Trust Agreement; (i) The City shall have obtained and provided to the Trustee an opinion of Bond Counsel to the effect that (i) the execution and delivery of such Additional Certificates will not adversely affect the exclusion from gross income for federal income tax purposes or the exemption from State of California personal income taxation of the Interest Component of the Certificates and any Additional Certificates previously issued on a tax-exempt basis, and (il) following the execution and delivery of such Additional Certificates, the Lease and the Trust Agreement, including any supplements to such agreements, will constitute the valid and legally binding agreements of the City enforceable in accordance with their terms; and 0) The execution and delivery of such Additional Certificates shall have been duly authorized by the City and the Agency and certified copies of the resolutions authorizing such execution and delivery shall have been delivered to the Trustee. C-13 - - So long as the City complies with the foregoing provisions, nothing in the Trust Agreement or the Lease shall be construed to prohibit the execution lind delivery of Additional Certificates for the purpose of effecting a refunding of any Outstanding Certificate or Additional Certificate; provided. however, that the City need not obtain the appraisal required under (d) above if the effect of such refunding is to reduce the total Lease Payments owed by the City in each Fiscal Year during the remaining term of the Lease. Events of Default Any event of default under the Lease constitutes an "Event of Default" under the Trust Agreement. Application of Funds All moneys received by the Trustee pursuant to any right given or action taken under the provisions of the Trust Agreement or the Lease relating to an Event of Default shall be applied by the Trustee in the order following upon presentation of the Certificates and any Additional Certificates, and the stamping thereon of the payment if only partially paid, or upon the surrender thereof if fully paid - First, to the payment of the costs and expenses of the Trustee for performance of its duties under the Trust Agreement and thereafter, to the Certificate Owners and the Owners of any Additional Certificates in declaring such Event of Default, effecting collection of moneys due and owing as a result of such Event of Default, and exercising remedies with respect thereto, including reasonable compensation to its or their agents, attorneys and counsel; Second, to the payment to the persons entitled thereto of all Interest Components then due in the order of the due date thereof and, if the amount available shall not be sufficient to pay in full any Interest Component maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto without discrimination or preference; Third, to the payment to the persons entitled thereto of the unpaid Principal Components which shall have become due, whether at maturity or by call for redemption, in the order of their due dates, with interest on each overdue Principal Component at the rate represented by the respective Certificate or Additional Certificate to which such Principal Component relates, and, if the amount available shall not be sufficient to pay in full all the Certificates and Additional Certificates due on any date, then to the payment thereof ratably, according to the amounts of Principal Component due on such date to the persons entitled thereto, without any discrimination or preference; and fllJ!n!l, if there shall exist any remainder after the foregoing payments, such remainder shall be paid to the City. Consent of the Insurer Anything in the Trust Agreement to the contrary notwithstanding, upon the occurrence and continuance of an event of default under the Trust Agreement, the Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the Certificate Owners under the Trust Agreement. In addition, the initiation or approval of any action which requires the consent of the Certificate Owners shall also require the consent of the Insurer. C-14 Any reorganization or liquidation plan with respect to the City must be acceptable to the Insurer. In the event of any reorganization or liquidation, the Insurer shall have the right to vote on behalf of all Owners who hold Certificates absent a default by the Insurer under the Municipal Bond Insurance Policy. In determining whether the rights of the Owners will be adversely affected by any action taken pursuant to the terms and provisions of the Trust Agreement, the Trustee shall consider the effect on the Owners as if there were no Municipal Bond Insurance Policy. Institution of Legal Proceedings If one or more Events of Default shall happen and be continuing, the Trustee in its discretion may, and upon the written request of the Owners of not less than a majority of the aggregate of the Certificates and Additional Certificates then Outstanding, and upon being indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of the Owners of Certificates and Additional Certificates by enforcing any of the remedies provided in the Lease. Limitation on Owners' Right to Sue No Certificate Owner or Owner of any Additional Certificate shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon the Trust Agreement, unless (a) such Certificate Owner or Owner of any Additional Certificate shall have previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of the required percentages of Certificates and Additional Certificates as set forth in the Trust Agreement shall have made written request upon the Trustee to exercise the powers granted to the Trustee as assignee of the Agency or to institute such action, suit or proceeding in its own name; (c) said Certificate Owner or Owner of any Additional Certificate shall have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of 60 days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee. Such notification, request, tender of indemnity and refusal or omission are declared, in every case, to be conditions precedent to the exercise by any Certificate Owner or Owner of any Additional Certificate of any remedy under the Trust Agreement; it being understood and intended that no one or more Certificate Owner or Owner of any Additional Certificate shall have any right in any manner whatever by his or their action to enforce any right under the Trust Agreement, except in the manner provided in the Trust Agreement, and that all proceedings at law or in equity with respect to an Event of Default shall be instituted, had and maintained in the manner provided in the Trust Agreement and for the equal benefit of all Owners of the Outstanding Certificates and Additional Certificates. Provisions Relating to the Trustee In consideration of the recitals set forth in the Trust Agreement and for other valuable consideration, the Trustee agrees to receive, hold, invest and disburse the moneys to be paid to it pursuant to the Lease for credit to the various funds, accounts and subaccounts established by the Trust Agreement; to execute and deliver the Certificates and each issue of Additional Certificates; and to apply and disburse amounts held under the Trust Agreement and other moneys received pursuant to the Lease to the Certificate Owners and Owners of any Additional Certificates; and to perform certain other functions, all as provided in the Trust Agreement, subject to the terms and conditions of the Trust Agreement. C-15 _. The Trustee may at any time resign and be discharged of the duties and obligations created by the Trust Agreement by giving not less than 30 days' written notice to the Insurer, the City, the Owners of the Certificates and Additional Certificates Outstanding, specifying the date when such resignation shall take effect, and such resignation shall take effect upon the later of the day specified in such notice or the day on which a successor appointed by the City or the Owners as provided in the Trust Agreement shall have accepted its appointment as successor trustee. So long as no Event of Default or event which with the passage of time could become an Event of Default shall have occurred and then be continuing, the Trustee may be removed at any time upon the request of the Insurer for a breach of the terms of the Trust Agreement and upon 30 days' written notice by the City or by an instrument or concurrent instruments in writing, filed with the Trustee, and signed by the Owners of a majority in aggregate principal amount of the Certificates and any Additional Certificates then Outstanding or their attorneys-in-fact duly authorized. In addition, the Trustee may be removed at any time, at the request of the Insurer, for any breach of the trust set forth in the Trust Agreement. In case at any time the Trustee shall resign or shall be removed pursuant to the Trust Agreement or shall become incapable of acting, or shall be adjudged as bankrupt or insolvent, or if a receiver, liquidator or conservator of the Trustee, or of its property, shall be appointed, or if any public officer shall take charge or control of the Trustee or of its property or affairs, a successor will be appointed by the City; provided, nevertheless, that unless a successor Trustee shall have been appointed as aforesaid, the Trustee shall petition a court of competent jurisdiction to order the City to appoint the successor or to appoint a Trustee to fill such vacancy until a successor Trustee shall be appointed by the City as authorized in the Trust Agreement. Any Trustee appointed under the provisions of the Trust Agreement as a successor to the Trustee shall be a commercial bank or trust company or national banking association subject to supervision and examination by federal or state hanking authorities doing business and having its principal office in a city in which a Federal Reserve Bank is located or in the State and having the power of a trust company in the State and having (or if such trustee is a member of a bank holding company its parent bank holding company has) capital stock and surplus aggregating at least $75,000,000. Powers of Amendment The Trust Agreement and the rights and obligations provided in the Trust Agreement may be modified or amended at any time by a Supplemental Trust Agreement, entered into among the Trustee, the Agency and the City but without the consent of any Certificate Owners or the Owners of any Additional Certificates, and the Assignment Agreement, the Lease and the Site Lease may be amended with the consent of the parties thereto and in the case of the Assignment Agreement, the City, and in the case of the Lease and the Site Lease, the Trustee, but without the consent of the Certificate Owners or the Owners of any Additional Certificates, but only (1) to cure any ambiguity, supply any omission, or cure or correct any defect or inconsistent provision in the Trust Agreement, the Site Lease, the Assignment Agreement or the Lease, or (2) in regard to questions arising under the Trust Agreement, the Lease, the Assignment Agreement or the Site Lease which the City and the Trustee may deem necessary or desirable and not inconsistent with the Trust Agreement, the Lease, the Assignment Agreement or the Site Lease, and which shall not adversely affect the interests of the Owners of the Certificates or any Additional Certificates, or (3) to provide for the substitution or release of property in accordance with the Lease, or (4) to provide for the execution and delivery of Additional Certificates in accordance with the provisions of the Trust Agreement, or (5) for any other reason, provided such C-16 --- modification or amendment does not adversely affect the interests of the Owners of the Certificates or any Additional Certificates. Any other modification or amendment of the Trust Agreement and of the rights and obligations of the Trustee and of the Owners of the Certificates or any Additional Certificates under the Trust Agreement, in any particular, may be made only by a Supplemental Trust Agreement, entered into among the Trustee, the Agency and the City and the written consent, given as provided in the Trust Agreement, of the Owners of at least a majority in aggregate principal amount of the Certificates and Additional Certificates Outstanding at the time such consent is given. Any other modification or amendment to the Assignment Agreement, the Lease or the Site Lease may be made only with the written consent, given as provided in the Trust Agreement, of the Owners of at least a majority in aggregate principal amount of the Certificates or Additional Certificates Outstanding at the time such consent is given. No such modification or amendment shall permit a change in the terms of redemption or maturity of the Principal Components of any Outstanding Certificates or Additional Certificates or payment of any Interest Component or a reduction in the Principal Component or the redemption price thereof, or in the rate of interest thereon or which will have a materially adverse effect on the security interest of the Owner without the consent of the Owner of such Certificate or Additional Certificate, or shall reduce the percentages or otherwise affect the classes of Certificates or Additional Certificates the consent of the Owners of which is required to effect any such modification or amendment, or shall change or modify any of the rights or obligations of the Trustee without the written consent of the Trustee. Consent of Owners The Trustee, the Agency and the City may at any time enter into a Supplemental Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease making a modification or amendment requiring the consent of Owners of Certificates or Additional Certificates under the provisions of the Trust Agreement to take effect when and as provided in the Trust Agreement. A copy of such Supplemental Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease (or brief summary thereof or reference thereto in form approved by Bond Counsel), together with a request to Owners of Certificates or Additional Certificates to approve the same shall be mailed to each Certificate Owner or Owner of any Additional Certificates (but failure to mail such copy and request shall not affect the validity of the Supplemental Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease when consented to as provided in the Trust Agreement). Such Supplemental Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease shall not be effective unless and until (i) there shall have been filed with the Trustee (a) the written consents of the Owners of the percentages of Outstanding Certificates and Additional Certificates specified in the Trust Agreement, and (b) an opinion of Bond Counsel, stating that such Supplemental Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease has been duly and lawfully entered into by the City or the Agency, as applicable, and filed with the City and the Trustee in accordance with the provisions of the Trust Agreement, is authorized or permitted by the Trust Agreement, and is valid and binding upon the parties thereto in accordance with its terms. Each such consent shall be effective only if accompanied by proof of the Owner, at the date of such consent, of the Certificates or Additional Certificates with respect to which such consent is given, which proof shall be such as is permitted by the Trust Agreement. A certificate or certificates executed by the Trustee and filed with the City stating that it has examined such proof and that such proof is sufficient in accordance with the Trust Agreement shall be conclusive that the consents have been given by the Owners of the Certificates and any Additional Certificates described in such certificate or certificates of the Trustee. Any such consent shall be binding upon the Owner of the Certificates and any Additional Certificates giving such consent and, anything in the Trust Agreement to the contrary C-17 - - notwithstanding, upon any subsequent Owner of such Certificates or Additional Certificates and of any -- Certificates or Additional Certificates issued in exchange therefor (whether or not such subsequent Owner thereof has notice thereof) unless such consent is revoked in writing by the Owner of such Certificates or Additional Certificates giving such consent or a subsequent Owner thereof by filing with the Trustee, prior to the time when the written statement of the Trustee hereinafter provided for is filed, such revocation and, if such Certificates or Additional Certificates are held by the signer of such revocation in the manner permitted by the Trust Agreement. Tbe fact that a consent has not been revoked may likewise be proved by a certificate of the Trustee filed with the City to the effect that no revocation thereof is on file with the Trustee. At any time after the Owners of the required percentages of Certificates or Additional Certificates shall have filed their consents to the Supplemental Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease, the Trustee shall make and file with the City a written statement that the Owners of such required percentages of Certificates and Additional Certificates have filed such consents. Such written statements shall be conclusive that such consents have been so filed. At any time after the filing of the required consents, notice shall be given by the City to the Owners of Certificates and any Additional Certificates stating in substance that the Supplemental Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease has been consented to by the Owners of the required percentages of Certificates and Additional Certificates by mailing such notice to the Owners of Certificates and any Additional Certificates (but failure to receive such notice shall not prevent such Supplemental Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease from becoming effective and binding as provided in the Trust Agreement). The City shall file with the Trustee proof of the mailing of such notice. A record, consisting of the Certificates or statements required or permitted by the Trust Agreement to be made by the Trustee, shall be proof of the matters therein stated. Such Supplemental Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease making such amendment or modification shall be deemed conclusively binding upon the City, the Trustee, the Agency and the Owners of all Certificates and Additional Certificates at the expiration of 20 days after the filing with the Trustee of the proof of the mailing of such last mentioned notice, except in the event of a final decree of a court of competent jurisdiction setting aside such Supplemental Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease in a legal action or equitable proceeding for such purpose commenced within such 20 day period; provided, however, that the Trustee and the City during such 20 day period and any such further period during which any such action or proceeding may be pending shall be entitled in their absolute discretion to take such action, or to refrain from taking such action, with respect to such Supplemental Trust Agreement or amendment to the Lease, the Assignment Agreement or the Site Lease as they may deem expedient. Exclusion of Certificates and Additional Certificates Certificates or Additional Certificates owned or held by or for the account of the City or the Agency shall not be deemed Outstanding for the purpose of consent or other action or any calculation of Outstanding Certificates and Additional Certificates provided for in the Trust Agreement, and neither the City nor the Agency shall be entitled with respect to such Certificates and Additional Certificates to give any consent or take any other action provided for in the Trust Agreement. At the time of any consent or other action taken under the Trust Agreement, the City shall furnish the Trustee a certificate of an Authorized Representative of the City, upon which the Trustee may rely, describing all Certificates and Additional Certificates so to be excluded. C-18 Defeasance One or more of the Certificates and/or Additional Certificates may be paid and discharged in any one or more of the following ways: (a) by paying or causing to be paid the Principal Component and the Interest Components with respect to said Certificate(s) and Additional Certificate(s), as and when the same become due and payable; (b) by depositing with the Trustee, in trust, at or before maturity, money which is fully sufficient to pay the Outstanding Certificate(s) or Additional Certificate(s), as applicable, to be paid and discharged, including the Principal Component and the Interest Component thereof; or (c) by depositing with the Trustee, in trust, Permitted Investments of the type described in paragraphs (a) or (b) of the definition thereof in such amount as certified by an independent certified public accountant will be sufficient, together with the interest to accrue thereon to pay and discharge the Outstanding Certificate(s) and Additional Certificate(s) to be paid and discharged (including the Principal Component, any applicable premium, and the Interest Component thereof) at or before their respective maturity or redemption dates. Notwithstanding that any Certificates or Additional Certificates shall not have been surrendered for payment, all obligations of the Agency, the Trustee and the City under the Trust Agreement with respect to those Certificates or Additional Certificates paid, as provided in the above subsections (a) (b) or (c), shall cease and terminate and shall no longer be Outstanding under the Trust Agreement, except only the obligation (i) of the Trustee to payor cause to be paid from funds deposited therefor to the Owners of the Certificates and Additional Certificates not so surrendered and paid all sums due thereon and (ii) to transfer title to the Site to the City as provided in the Trust Agreement and (iii) of the City to comply with the covenants set forth in the Trust Agreement relating to compliance with the Code; provided, however, notwithstanding anything in the Trust Agreement to the contrary, in the event that the principal and/or interest represented by the Certificates shall be paid by the Insurer pursuant to the Municipal Bond Insurance Policy, the Certificates shall remain Outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid by the City, and the assignment and pledge of the Trust Estate and all covenants, agreements and other obligations of the City to the registered owners shall continue to exist and shall run to the benefit of the Insurer, and the Insurer shall be subrogated to the rights of such registered owners. Any funds held by the Trustee, at the time of one of the events described above in subsections (a) (b) or (c) shall have occurred as to all Outstanding Certificates and Additional Certificates, which are not required for the payment to be made to Owners, or for payments to be made to the Trustee by the City under the Trust Agreement or otherwise, shall be paid over to the City. Payment Procedure Pursuant to the Bond Insurance Policy As long as the Bond Insurance Policy shall be in full force and effect, the City, the Agency and the Trustee agree to comply with the following provisions: (a) At least one (I) day prior to all Interest Payment Dates the Trustee will determine whether there will be sufficient funds in the funds and account established under the Trust Agreement ("Funds and Accounts") to pay the C-19 - -. principal of or interest with respect to the Certificates on such Interest Payment Date. If the Trustee determines that there will be insufficient funds in such Funds or Accounts, the Trustee shall so notify the Insurer. Such notice shall specify the amount of the anticipated deficiency, the Certificates to which such deficiency is applicable and whether such Certificates will be deficient as to principal or interest, or both. If the Trustee has not so notified the Insurer at least one (I) day prior to an Interest Payment Date, the Insurer will make payments of principal or interest with respect to the Certificates on or before the first (1st) day next following the date on which the Insurer shall have received notice of nonpayment from the Trustee. (b) The Trustee shall, after giving notice to the Insurer as provided in (a) above, make available to the Insurer and, at the Insurer's direction, to the United States Trust Company of New York, as insurance trustee for the Insurer or any successor insurance trustee (the "Insurance Trustee"), the registration books of the Issuer maintained by the Trustee and all records relating to the Funds and Accounts maintained under this Trust Agreement. (c) The Trustee shall provide the Insurer and the Insurance Trustee with a list of registered owners of the Certificates entitled to receive principal or interest payments from the Insurer under the terms of the Bond Insurance Policy, and shall make arrangements with the Insurance Trustee (i) to mail checks or drafts to the registered owners of the Certificates entitled to receive full or partial interest payments from the Insurer and (ii) to pay principal upon the Certificates surrendered to the Insurance Trustee by the registered owners of the Certificates entitled to receive full or partial principal payments from the Insurer. (d) The Trustee shall, at the time it provides notice to the Insurer pursuant to (a) above, notify registered owners of the Certificates entitled to receive the payment of principal or interest thereon from the Insurer (i) as to the fact of such entitlement, (ii) that the Insurer will remit to them all or a part of the interest payments next coming due upon proof of Certificateholder entitlement to interest payments and delivery to the Insurance Trustee, in form satisfactory to the Insurance Trustee, of an appropriate assignment of the registered owner's right to payment, (Hi) that should they be entitled to receive full payment of principal from the Insurer, they must surrender their Certificates (along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee to permit ownership of such Certificates to be registered in the name of the Insurer for payment to the Insurance Trustee, and not the Trustee and (iv) that should they be entitled to receive partial payment of principal from the Insurer, they must surrender their Certificates for payment thereon first to the Trustee who shall note on such Certificates the portion of the principal paid by the Trustee, and then, along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee, to the Insurance Trustee, which will then pay the unpaid portion of principal. (e) In the event that the Trustee has notice that any payment of principal of or interest on a Certificate which has become Due for Payment and which is made to a Certificateholder by or on behalf of the City has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the C-20 __________ __.._______ - ____ __00__...- United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court having competent jurisdiction, the Trustee shall, at the time the Insurer is notified pursuant to (a) above, notify all registered owners that in the event that any registered owner's payment is so recovered, such registered owner will be entitled to payment from the Insurer to the extent of such recovery if sufficient funds are not otherwise available, and the Trustee shall furnish to the Insurer its records evidencing the payments of principal and interest represented by the Certificates which have been made by the Trustee and subsequently recovered from registered owners and the dates on which such payments were made. (0 In addition to those rights granted the Insurer under the Trust Agreement, the Insurer shall, to the extent it makes payment of principal or interest represented by the Certificates, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Bond Insurance Policy, and to evidence such subrogation (i) in the case of subrogation as to claims for past due interest, the Trustee shall note the Insurer's rights as subrogee on the registration books of the City maintained by the Trustee upon receipt from the Insurer of proof of the payment of interest thereon to the registered owners of the Certificates, and (ii) in the case of subrogation as to claims for past due principal, the Trustee shall note the Insurer's rights as subrogee on the registration books of the City maintained by the Trustee upon surrender of the Certificates by the registered owners thereof together with proof of the payment of principal thereof. TIlE LEASE The Lease is entered into by and between the Agency and the City and, pursuant to its terms, the Agency agrees to lease the Site to the City and the City agrees to lease the Site from the Agency. Term The Term of the Lease shall commence on the Delivery Date for the Certificates and shall end May I, 20_, unless extended pursuant to the Lease, or unless terminated prior thereto upon the earliest of any of the following events: (a) Pavment of All Lease Pavments. The payment by the City of all Lease Payments required under the Lease and any Additional Payments required under the Lease; or (b) Preoayment. The optional prepayment of all Lease Payments in accordance with the Lease and the payment of all Additional Payments due through such prepayment date and the defeasance of all the outstanding Certificates or Additional Certificates as provided in the Trust Agreement. Extension of Lease Term The Term of the Lease may be extended up to May I, 2035 in connection with the execution and delivery of any Additional Certificates. If on the final maturity date of the Certificates or any Additional Certificates all Interest Components and Principal Components represented thereby shall not be fully paid C-21 ,,"- by the City, or if the Lease Payments or Additional Payments under the Lease shall have been abated at any time as permitted by the terms of the Lease, then the Term shall be extended until all Cenificates and Additional Certificates shall be fully paid, except that the Term shall in no event be extended beyond May 1,2035. Lease Payments Subject to the provisions of the Lease regarding abatement in event of noncompletion of cenain improvements to the Site and loss of use of any ponion of the Site and regarding prepayment of Lease Payments, the City agrees to pay to the Agency, its successors and assigns, as annual rental for the use and possession of the Site, the Lease Payments (denominated into Interest Components and Principal Components) to be due and payable in arrears on the fifth Business Day prior to each May I and November I, commencing November I, 1995 (the "Lease Payment Date"), which are sufficient in both time and amount to pay when due the Principal Components and Interest Components represented by the Certificates and any Additional Certificates, as set forth in the Lease. In the event that any Additional Cenificates are executed and delivered pursuant to the Trust Agreement, the City and the Trustee shall execute an amendment to the Lease Payment schedule to state the Lease Payments due under the Lease as a result of the execution and delivery of such Additional Cenificates. Any amount held in the Lease Payment Fund or the Interest Account of the Cenificate Fund on the date any Lease Payment is made by the City (other than amounts required for payment of past due Principal Components or Interest Components with respect to any Cenificates or Additional Cenificates that have matured or been called for redemption and have not been presented for payment or amounts which have been paid with respect to a prior Lease Payment Date but not yet distributed to Owners) shall be credited towards the Lease Payment then due and payable. No payment need be made by the City on any Lease Payment Date if the amounts then held in the Lease Payment Fund and the Interest Account of the Cenificate Fund (other than those amounts excluded under the prior sentence and amounts transferred from the Reserve Account which causes the balance therein to be less than the Reserve Requirement) are at least equal to the Lease Payment then required to be paid. In the event the City should fail to make any Lease Payments, or any ponion of any such Lease Payment, the Lease Payment or ponion thereof in default shall continue as an obligation of the City until the amount in default shall have been fully paid, and the City agrees to pay the same with interest thereon, to the extent permitted by law, from the date such amount was originally payable at the rate equal to the original interest rate payable with respect to each Cenificate or Additional Cenificate, as applicable, represented by such delinquent Lease Payment. Notwithstanding any dispute between the Agency and the City, other than a dispute arising under the Lease as a result of which the City has concluded that it may not legally pay the Lease Payments in dispute, the City shall make all Lease Payments when due and shall not withhold any Lease Payments pending the fina1 resolution of such dispute. Budget and Appropriation The City covenants to take such action as may be necessary to include all Lease Payments and Additional Payments due under the Lease in each of its proposed annual budgets and to make the necessary appropriations for such Lease Payments and Additional Payments. The City shall furnish to the Trustee following adoption of the final budget a cenificate stating that Lease Payments were included in the final budget as adopted. C-22 ~ To the extent that the amount of such payment becomes known after the adoption of the annual budget, such amounts shall be included and maintained in such budget as amended. The City covenants to take such action as is necessary to include such amounts in a supplemental budget of the City. The covenants on the part of the City contained in the Lease shall be deemed to be and shall be construed to be ministerial duties imposed by law and it shall be the ministerial duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in the Lease agreed to be carried out and performed by the City. Abatement or Lease Payments and Additional Payments Except to the extent that proceeds of the type described in the following paragraph are available, the amount of Lease Payments and Additional Payments shall be abated during any period in which there is substantial interference with the use and possession of all or a portion of the Site by the City by condemnation, damage, destruction, or title defect. The amount of such abatement shall be such that the resulting Lease Payments, exclusive of the amounts described in the following paragraph, do not exceed the fair rental value (as determined by an independent real estate appraiser selected by the City, who is not an employee of the City) for the use and possession of the portion of the Site which has been made available for the City's use and for which no substantial interference has occurred. Such abatement shall continue for the period of the substantial interference with the use and possession of the Site. Except as provided in the Lease, in the event of such interference with use and possession, the Lease shall continue in full force and effect and the City waives any right to terminate the Lease by virtue of such events. Notwithstanding a substantial interference with the use and possession of all or a portion of the Site, the City shall remain obligated to make Lease Payments (i) to the extent that moneys derived from any person as a result of any delay in the reconstruction, replacement or repair of the Site, or any portion thereof, are available to pay the amount which would otherwise be abated; or (ii) to the extent that moneys are available in the Certificate Fund or the Lease Payment Fund to pay the amount which would otherwise be abated, in which event the Lease Payments shall be payable from such amounts as a special obligation of the City. Additional Payments In addition to the Lease Payments, the City shall also pay such amounts ("Additional Payments") as shall be required for the payment of all administrative costs of the Agency and the City relating to the Site, the Certificates and any Additional Certificates, including without limitation all expenses, assessments, compensation and indemnification of the Trustee payable by the City under the Trust Agreement, any amounts required to be rebated to the federal government in order to comply with the provisions of Section 148 of the Code, taxes of any sort whatsoever payable by the Agency as a result of its lease of the Site or undertaking of the transactions contemplated in the Lease or in the Trust Agreement, fees of auditors, accountants, attorneys or engineers, insurance premiums required by the Lease and all other necessary administrative costs of the Agency and the City or charges required to be paid by it in order to maintain its existence or to comply with the terms of the Certificates and any Additional Certificates or of the Trust Agreement, or to indemnify the Agency and its officers and directors. All such Additional Payments to be paid under the Lease shall be paid when due directly by the City to the respective parties to whom such Additional Payments are owing. C-23 ~ - Net-Net-Net Lease The Lease shall be deemed and construed to be a "net-net-net lease" and the City agrees that the Lease Payments shall be an absolute net return to the Agency, free and clear of any expenses, charges, counterclaims or set~ffs whatsoever, except as expressly provided therein. Insurance Public Liability and Prooertv Damal!e. The City shall maintain or cause to be maintained. throughout the Term of the Lease, a standard comprehensive general public liability and property damage insurance policy or policies in protection of the City and the Agency and their respective officers, agents, assigns and employees as additional insureds under the policy or policies. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the use or operation of the Site. Said policy or policies shall provide coverage in the minimum liability limits of $1,000,000 for personal injury or death of each person in each accident or event and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of $500,000 for damage to property resulting from each accident or event (subject to a deductible clause of not to exceed $250,000). Such public liability and property damage insurance may, however, be in the form of a single limit policy covering all such risks in an amount equal to the aggregate minimum liability limits set forth in the Lease. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance coverage carried by the City. Such liability insurance may be maintained by the City in the form of self-insurance which complies with the provisions of the Lease. Worker's Comoensation. The City shall also maintain worker's compensation insurance issued by a responsible carrier authorized under the laws of the State to insure its employees against liability for compensation under the Worker's Compensation Insurance and Safety Act now in force in the State; or any act hereafter enacted as an amendment or supplement thereto, or in lieu thereof such insurance, or a part thereof, may be maintained by the City in the form of self-insurance which complies with the requirements of the Lease. Hazard Insurance. The City shall maintain or cause to be maintained, throughout the Term of the Lease, a policy or policies of insurance against loss or damage to the Site resulting from fire, lightning, vandalism, malicious mischief and such perils ordinarily defined as "extended coverage," excluding flood and earthquake; provided, however, that a flood and earthquake rider shall be purchased if the City, in its reasonable discretion, determines that such coverage is available from reputable insurers at commercially reasonable rates. Said policy or policies shall be maintained in an amount not less than the full replacement value of the Site, subject to a "deductible clause" not to exceed one hundred thousand dollars ($100,000) for anyone loss or, in the case of a flood and earthquake rider, ten percent (10%) of the coverage obtained and shall name the Agency and the Trustee as additional insured under the policy or policies. The term "full replacement value" shall mean the actual replacement cost of the improvements located on the Site (including the cost of restoring the surface of the Site, but excluding the cost of restoring trees, plants and shrubs). The City may maintain such insurance as part of or in conjunction with any other insurance carried by the City. The City shall not maintain such insurance in the form of self-insurance. C-24 Rental Interruotion Insurance. The City shall maintain or cause to be maintained rental interruption or use and occupancy insurance in an amount not less than the scheduled Lease Payments in the next succeeding twelve month period during the Term of the Lease, to insure against loss of rental income or use and occupancy of the Site caused by perils covered by the insurance required to be maintained as provided in the Lease. Such insurance shall be obtained not later than the Delivery Date for the Certificates and shall be increased as required in connection with each issue of Additional Certificates. The City may maintain such insurance as part of or in conjunction with any other rental interruption or use and occupancy insurance carried by the City. The City shall not maintain rental interruption or use and occupancy insurance in the form of self-insurance. Title Insurance. The City shall obtain on the Delivery Date for the Certificates and in connection with any substitution of real property pursuant to the Lease title insurance on the Site, in the form of a CL T A leasehold title policy or an AL T A Owner'slLeasehold Policy with Western Regional Exceptions. in an amount at least equal to the aggregate Principal Component of unpaid Lease Payments, issued by a company of recognized standing duly authorized to issue the same. The title policy or policies shall insure the City's leasehold estate under the Lease in the Site, and the Agency's leasehold estate under the Site Lease, subject only to Permitted Encumbrances. The City shall not maintain title insurance in the form of self-insurance. Self-Insurance. Any self-insurance maintained by the City pursuant to the Lease shall afford reasonable protection to the Agency, the City and the Trustee. Before the City elects to provide self-insurance thereunder, and on each May 1 thereafter, there shall be filed with the Trustee a certificate of an actuary, independent insurance consultant selected by the City, or other qualified person selected by the City, who may be the City's Risk Manager, stating that, in the opinion of the signer, the method or plan of protection is sound and affords adequate protection to the Agency, the City and the Trustee against loss and damage from the hazards and risks covered thereby, and there shall also be filed with the Trustee a certificate of the City setting forth the details of such substitute method or plan. The Trustee shall be fully protected in relying on the certificate of the actuary, independent insurance consultant selected by the City, or other qualified person selected by the City, who may be the City's Risk Manager, and shall not be responsible for the review or verification of the certificate of the City describing such method or plan. The City shall provide adequate reserves to cover the amount of any deductible provisions of the insurance required to be maintained under the Lease. Deposit in Insurance and Condemnation Fund Pursuant to the provisions of the Trust Agreement, the Trustee shall deposit the Net Proceeds of hazard insurance and the title insurance required by the Lease in the Insurance and Condemnation Fund promptly upon receipt thereof. The City and/or the Agency shall transfer to the Trustee any other Net Proceeds received by the City and/or Agency in the event of any taking by eminent domain or condemnation with respect to the Site, for deposit in the Insurance and Condemnation Fund. Upon receipt of the certification and the requisition described below, the Trustee shall disburse moneys in the Insurance and Condemnation Fund to the person, firm or corporation named in the requisition as provided in the Trust Agreement. C-25 - - - An Authorized Representative of the City must provide to the Agency and the Trustee a certificate stating that: (a) The Net Proceeds available for such purpose, together with any other funds supplied by the City for such purpose, are sufficient to repair or replace the Site to a use which will have an annual fair rental value not less than the annual Lease Payments and Additional Payments (assuming that the annual Additional Payments due in the future will equal the average annual Additional Payments prior to such date) due under the Lease, and (b) In the event that damage, destruction, taking or title defect results in an abatement of Lease Payments, such replacement or repair can be fully completed within a period not in excess of the period in which rental interruption insurance proceeds as described in the Lease, together with other legally available funds, will be available to pay in full all Lease Payments coming due during such period. If an Authorized Representative of the City notifies the Trustee in writing of the City's determination that the foregoing certifications cannot be made or replacement or repair of any portion of the Site is not economically feasible or in the best interest of the City, then the City shall deposit with the Trustee an amount which when combined with the Net Proceeds will prepay enough Lease Payments and result in a corresponding redemption of Certificates and Additional Certificates such that the fair rental value of the remaining portion of the Site is sufficient to pay the Principal Components and Interest Components due with respect to the Certificates and Additional Certificates to remain Outstanding under the Trust Agreement after such Net Proceeds and such deposit by the City are applied to redeem Certificates and Additional Certificates under the Trust Agreement. The Trustee shall promptly transfer the Net Proceeds in respect of such portion to the Redemption Account of the Certificate Fund as provided in the Trust Agreement and apply them to the redemption of the Certificates and Additional Certificates as provided in the Trust Agreement and prepayment of Lease Payments as provided in the Lease. Substitution and Release The City shall have the right from time to time to add other real property and improvements (subject only to Permitted Encumbrances) or to substitute other real property or improvements (subject only to Permitted Encumbrances) for all or a portion of the Site or to release a portion of the real property or improvements constituting the Site, if it has provided the Trustee with a written Lease Supplement and has obtained and provided to the Trustee each of the following: (a) Written consent of each municipal bond insurance company that has insured the Certificates or a series of Additional Certificates, if any; (b) W rinen confirmation from each Rating Agency that has rated the Certificates or an issue of Additional Certificates that its then existing rating with respect to the Certificates or any Additional Certificates will not be reduced or withdrawn as a result of such addition, substitution or release; (c) A certificate from an independent and qualified real estate appraiser selected by the City setting forth his or her findings that the Site as constituted following such addition, substitution or release (i) has an annual fair rental value during the remainder of the Term which is equal to or greater than the total annual Lease Payments and Additional Payments (assuming that the annual Additional Payments due in the future will equal the average annual Additional C-26 Payments prior to such addition, substitution or release) required to be paid under the Lease during any year of the remainder of the Term and (ii) has a useful life at least equal to the remaining Term of the Lease; (d) Certificates of insurance applicable to the Site (at and after the addition, substitution or release) which comply with the requirements of the Lease; (e) An opinion of Bond Counsel to the effect that such addition, substitution or release will not adversely affect the exclusion from gross income for federal income tax purposes and the exemption from State personal income taxation of the Interest Component of the Lease Payments and that the Lease and the Site Lease, as amended, remain valid and binding obligations of the City. Certain Covenants With Respect to the Site Ouiet Eniovment. Subject only to the Permitted Encumbrances, during the Term of the Lease the Agency shall provide the City with quiet use and enjoyment of the Site, and the City shall during such Term peaceably and quietly have and hold and enjoy the Site, without suit, trouble or hindrance from the Agency, or any person or entity claiming under or through the Agency except as expressly set forth in the Lease or the Trust Agreement. The Agency will, at the request of the City, join in any legal action in which the City asserts its right to such possession and enjoyment to the extent the Agency may lawfully do so. Notwithstanding the foregoing, the Agency shall have the right of access to the Site as provided in the Lease. Access to the Site. The City agrees that the Agency, and the Agency's successors and assigns, shall have (I) the right at all reasonable times to enter upon the Site or any portion thereof to examine and inspect the Site, and (2) such rights of access to the Site as may be reasonably necessary to cause the proper maintenance of the Site in the event of failure by the City to perform its obligations under the Lease. Maintenance. Utilities. Taxes and Assessments. Throughout the Term of the Lease, as part of the consideration for the rental of the Site, all repair and maintenance of the Site shall be the responsibility of the City, and the City shall pay for or otherwise arrange for the payment of the cost of the repair and replacement of the Site resulting from ordinary wear and tear or want of care on the part of the City or any sublessee thereof. The City shall also payor cause to be paid all taxes and assessments, including but not limited to utility charges of any type or nature charged to the Agency or the City or levied, assessed or charged against any portion of the Site or the respective interests or estates therein; provided that, with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are required to be paid during the Term of the Lease as and when the same become due. The City may, at its expense and in its name, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom; orovided that prior to such nonpayment it shall furnish the Agency and the Trustee with the opinion of an Independent Counsel to the effect that, by nonpayment of any such items, the interest of the Agency in such portion of the Site will not be materially endangered and that the Site will not be subject to loss or forfeiture. Otherwise, the City shall promptly pay such taxes, assessments or charges or make C-27 - -. provisions for the payment thereof in form ,satisfactory to the Agency. The Agency will cooperate fully in such contest, upon the request and at the expense of the City. Additions. Modifications and Imorovements. The City shall, at its own expense, have the right to make additions, modifications and improvements to any portion of the Site if such additions, modifications or improvements are necessary or beneficial for the use of such portion of the Site. Such additions, modifications or improvements shall not in any way damage any portion of the Site or cause it to be used for purposes other than those authorized under the provisions of state and federal law or in any way which would impair the exclusion from gross income for federal income tax purposes of the Interest Components of the Lease Payments or diminish the fair rental value of the Site; and the Site, upon completion of any additions, modifications or improvements made pursuant to the Lease, shall be of a value which is not less than the value of the Site immediately prior to the making of such additions, modifications or improvements. ~. Except as permitted by the Lease, the City shall not, directly or indirectly, create, incur, assume or suffer to exist any mortgage, pledge, liens, charges, encumbrances or claims, as applicable, on or with respect to the Site, other than Permitted Encumbrances and other than the respective rights of the Agency and the City as provided in the Lease. Except as expressly provided in the Lease, the City shall promptly, at its own expense, take such action as may be necessary to duly discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim, for which it is responsible, if the same shall arise at any time; orovided that the City may contest such lien or claim if it desires to do so, so long as such contest will not materially, adversely affect the rights of the City to the Site or the payment of Lease Payments under the Lease. The City shall reimburse the Agency and its assigns for any expense incurred by it in order to discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim. Assignment and Subleasing The Lease may not be assigned by the City unless the City receives an opinion of Bond Counsel stating that such assignment does not adversely affect the exclusion from gross income for federal income tax purposes or the exemption from State personal income taxation of the Interest Components of the Lease Payments. In the event that the Lease is assigned by the City, the obligation to make Lease Payments and Additional Payments and perform the other covenants of the City therein shall remain the obligation of the City. The City may sublease any portion of the Site, with the prior written consent of the Trustee as assignee of the Agency, subject to all of the following conditions: (a) the Lease and the obligation of the City to make Lease Payments and Additional Payments and perform the other covenants of the City thereunder shall remain obligations of the City; (b) the City shall, within 30 days after the delivery thereof, furnish or cause to be furnished to the Agency and the Trustee a true and complete copy of such sublease; and (c) no sublease shall cause the Interest Components of the Lease Payments due with respect to the Site to become subject to federal income taxes or State personal income taxes. C-28 -- ..- No consent of the Trustee may be given with respect to the subleasing of the Site unless the Trustee shall have first received opinions of Independent Counsel with respect to the matters set forth in clause (a) above and the opinion of Bond Counsel with respect to the matters set forth in clause (c) above. Amendments and Modifications The Lease may be amended or any of its terms modified in accordance with the Trust Agreement, with the written consent of the Trustee, the City and the Agency. Events of Default The following shall be "events of default" under the Lease and the terms "events of default" and "default" shall mean, whenever they are used in the Lease, anyone or more of the following events: (a) Failure by the City to pay any Lease Payment or Additional Payments required to be paid under the Lease on the date such payments are due under the Lease. (b) Failure by the City to observe and perform any warranty, covenant, condition or agreement on its part to be observed or performed under the Lease or otherwise with respect to the Lease or in the Trust Agreement or in the Site Lease, other than as referred to in clause (a) above, for a period of 30 days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Agency, the Trustee or, subject to the provisions of the Trust Agreement, the Owners of not less than twenty-five percent (25 %) in aggregate principal amount of Certificates and Additional Certificates then Outstanding; orovided, however, if the failure stated in the notice cannot be corrected within the applicable period, then no event of default shall have occurred so long as corrective action is instituted by the City within the applicable period and diligently pursued until the default is corrected. (c) The filing by the City of a case in bankruptcy, or the subjection of any right or interest of the City under the Lease to any execution, garnishment or attachment, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted under the provisions of the federal bankruptcy code, as amended, or under any similar act which may hereafter be enacted . Remedies on Default Whenever any event of default referred to in the Lease shall have happened and be continuing, it shall be lawful for the Agency, or its assignee, subject to the Lease, to exercise any and all remedies available pursuant to law or granted pursuant to the Lease; orovided. however, that notwithstanding anything in the Lease or in the Trust Agreement to the contrary, THERE SHALL BE NO RIGHT UNDER ANY CIRCUMSTANCES TO ACCELERATE THE LEASE PAYMENTS OR OTHERWISE DECLARE ANY LEASE PAYMENTS NOT THEN DUE OR PAST DUE TO BE IMMEDIATELY DUE AND PAYABLE NOR SHALL THE Agency OR ITS ASSIGNEE HAVE ANY RIGHT TO REENTER OR RELET THE SITE, EXCEPT AS DESCRIBED IN THE LEASE. So long as any event of default exists under the Lease, the Agency, or its assignee, is expressly authorized to enter and re-enter the Site for the purpose of taking possession of any portion of the Site and to re-let the Site and, in addition, at its option, with or without such entry to terminate the Lease as C-29 - - described below. The City irrevocably appoints the Agency, or its assignee, as the agent and attorney-in-fact of the City either to enter upon the Site for purposes of terminating the Lease or to enter upon and re-let the Site in the event of default under the Lease by the City. The City exempts and agrees to save harmless the Agency and its assignee from any costs, loss or damage whatsoever arising or occasioned by any lawful entry upon or re-letting of the Site. The City waives any and all claims for damages caused, or which may be caused, by the Agency, or its assignee, lawfully entering and taking possession of the Site, other than damages caused by the negligence of the Agency, or its assignee. The City agrees that the terms of Lease constitute full and sufficient notice of the right of the Agency, or its assignee, to re-enter the Site for purposes of terminating the Lease and, alternatively, to enter upon and re-Iet the Site in the event of such re-entry without effecting a surrender of the Lease. In the event the Agency, or its assignee, elects to terminate the Lease, the City agrees to surrender immediately possession of the Site and to pay the Agency, or its assignee, all damages recoverable at law that the Agency, or its assignee, may incur by reason of default by the City, including, without limitation, any costs, loss or damage whatsoever arising out of, in connection with, or incident to any re-entry upon the Site by the Agency, or its duly authorized agents in accordance with such termination. Neither notice to pay rent or to deliver up possession of the Site given pursuant to law nor any entry or re-entry by the Agency, or its assignee, nor any proceeding in unlawful detainer, or otherwise, brought by the Agency, or its assignee, for the purpose of effecting such re-entry or obtaining possession of the Site nor the appointment of a receiver upon initiative of the Agency, or its assignee, to protect the interest of the Agency or its assignee under the Lease shall of itself operate to terminate the Lease, and no termination of the Lease on account of default by the City shall be or become effective by operation of law or acts of the parties to the Lease, or otherwise, unless and until the Agency, or its assignee, shall have given written notice to the City of its election to terminate the Lease. The City covenants and agrees that no surrender of the Site or any termination of this Lease shall be valid in any manner or for any purpose whatsoever unless stated or accepted by the Agency, or its assignee, by written notice. In the event that the Agency, or its assignee, does not elect to terminate the Lease, the City agrees to and shall remain liable for the payment of Lease Payments and Additional Payments and the performance of all conditions contained in the Lease and shall reimburse the Agency, or its assignee, for any deficiency arising out of the re-letting of the Site, or, in the event that the Agency, or its assignee, does not re-let the Site, then for the full amount of the Lease Payments and Additional Payments to the end of the Term of the Lease, but said Lease Payments, Additional Payments and/or deficiency shall be payable only at the same time and in the same manner as provided in the Lease, notwithstanding such entry or re-entry by the Agency, or its assignee, or any suit in unlawful detainer, or otherwise, brought by the Agency, or its assignee, for the purpose of effecting such entry or re-entry or obtaining possession of the Site or the exercise of any other remedy by the Agency or its assignee. In the event of a default, the City further agrees to reimburse the Agency, and its assignee, for any cost or expense, including attorneys' fees, incurred by the Agency or its assignee in connection with the exercise by the Agency, or its assignee, of the remedies under the Lease. TIlE SITE LEASE The Site Lease is entered into between the Agency and the City and, pursuant to its terms, the City agrees to lease the Site to the Agency and the Agency agrees to lease the Site from the City. C-30 ----------------- The Site Lease provides that its term shall commence as of the Delivery Date of the Certificates and shall remain in effect uJltil the earlier of August I, 20_ or the date of expiration of the Lease, unless such term is sooner terminated as provided in the Site Lease. The Term of the Site Lease may be extended if the term of the Lease is extended pursuant thereto, except that the term of the Site Lease shall in no event extend beyond August I, 2035. In the Site Lease, the City reserves the right at any time to substitute other real property and improvements for the real property described in the Site Lease upon compliance with the provisions of the Lease. THE ASSIGNMENT AGREEMENT The Assignment Agreement is entered into between the Agency and the Trustee and in it the Agency assigns and transfers to the Trustee, for the benefit of the Owners of the Certificates, all of its right, title and interest under the Lease (other than its rights to indemnification and payment or reimbursement for its cost or expenses thereunder), including its right to receive Lease Payments; its right to receive proceeds of condemnation of, and insurance on, the Site; and its right to enforce payment of the Lease Payments when due and otherwise to protect its interests in the event of a default by the City. The Trustee accepts such assignment for the benefit of the Owners of the Certificates and subject to the provisions of the Trust Agreement. C-31 - APPENDIX B CITY OF POWA Y GENERAL DEMOGRAPHIC AND FINANCIAL INFORMATION The following material is descriptive of the City of Poway and the surrounding areas of San Diego County. It has been prepared by or excerpted from sources as noted herein and has not been reviewed by Special Counselor the Underwriter. History and Location Poway developed as an unincorporated community until November 1980. when its 33.500 residents voted to incorporate an area of about 38 square miles. It began its formal existence as a City on December 1.1980. In November, 1986. the City annexed an additional 1.325 acres. for a total area of about 40 square miles. Poway is located inland about three miles east of Interstate Highway 15. and is surrounded on three sides by the City of San Diego. Driving distance southerly to downtown San Diego or the San Diego International Airport is about 25 miles. The terrain is hilly and steep in some areas with gentle slopes in the center of the City. poway is relatively new in that over 70% of the housing stock postdates 1970. City Organization The City has. since incorporation, been governed and operated under the Council-Manager form of government. The City Manager directs a work force of 197 full and part-time employees and appoints department heads on the basis of specialized knowledge. experience and education in their area of responsibility. The City employees are members of the State Public Employees Retirement System. The contributions to the System are current and no unfunded contractual liability exists for past services. Climate Poway. as part of San Diego County, has a relatively dry climate and its inland location spares it much of the summer fog experienced along the coast. Temperatures are frost-free over 350 days per year, and the City receives on the average approximately 11 inches of rain, principally between the months of October and April. Population At incorporation in 1980, there were about 33.500 in the City limits. Poway has grown to 46,579 and expects to be built out according to general plan estimates at 52,000. Poway is a low density community predominately of single family homes. Table 1 illustrates comparative population figures. B-1 LA\951310108 U 'if!. ::.e 0 m~~N~ ~NNN~ooNNN~ m~ .... ~mo~oo ~vv~o~~~~ro 00 ... 00 ~~O~~<~~~O~md~M~<~ . ; - m~v NZroN~N~OOV~~MZ~ c: '0 0. ~ CU - CU '0 ~ ~ ~""N~N~OONm~~~mv~v~~~ .... QI NV~~W~MO~~N ro~mm ~ 00 .s:: - m~~ONomO~O~v~oommv~ en 0 ~m~~Nrowoow~~~wt~irim ...: ~vN m~~N~N~vv V ~~ 00 1ij ~ ~ ..-...... ID Ci ~ N 00 m ~ - 00 ~ OOOOOOOOOOOOOOOOOO~ 0 ~ OO~~OOOOO~OO~O~OOO 0 .;: Nv~ON~~oooom~m~~~~v~ ID ~IDri~~~~~~~ID~ID~~irioo rIIi 0. <( ~vN m~......N~N~vv~v ......~ ... - ...... ..- ,.... 'II"""" ID 0 ~ N 00 cu Z cu - 0 ~ 0000000000000000001 0 cu j:: 00000000~0~00000000 0 '0 ~N~mM~m,.-,.-m~Mv~romNoo II) - U ~NID~OIDN~i~OOOO~ONMM~ t c: is QI mvN m~"""N N~Mv~v~"""~ 00 ~~ ,.- ...... ,......- ID ~ ~ N 0. Z:) ~ :)' 00 ...O>~ ~ ooooooooooooooooooi 00 ~ wUlDen 00000000~0000~0~000 0 :> ~""~oo~ooo~~~""""vONNON ... Cl ...JOZ";' iOOID~mIDOIDM~~M~OOMM~ rIIi l;: N lD<.:)Oo MN ro~"""N~N~M Mv~..-~ N 00 , <Cw-oo ~ ~ ~ ... :> fIl I-_I-en N 00 C:5'" ~ c: QI Z:) U <CD.. 0 (/)0 00 D.. ~ ~~~~v....~~~mm~OONO""~N~ ... m ~o ..-m"-"-~~~~NmroNMmM ... ~ ...J v~mN"'ON~m~ oo~NO""""oo .... ~ ri~W~ID~tIDMriW~~OO~ri~~ ...: 8 ~MN ro~ N~N~Nv..-M~......m ... 0 ...... 'If'""" ..- 'II"""" N c: l- . N cu ~ c: u: - 0 ~ O....O....N<(~mOOONOO ~~&:l~~i ID - c: O)NO)T"'"O)ZI.OCOoCX)f"-..c) ... QI <Ii vm....ooo ~~~........~ ~v~Zoo 00. E2 ~MOO~M iNOOOOID ..0 ,..: ci I.O~ ... t:cu ~ 00 ~ .... N~Nv"" I"--..-v ('t') ID cu E 00 00. 0..- ... QI- o81 QI- _00 CU'" U5~ '0 cu cu .s:: .- :> o m ~ m c: c: ca >. u -- ~ cu ca m >~ 0 ca ~ ,E...., ~o Om eo~ 08 m 0 =QI '05'O~C:~~-cu~-- g~ lD 0. cu ~ Ucu co ! mcao_~.~0c~~>.._camca ~ 0 cu c: .~.- c: ~ QI 0 :::!i QI OO-o:::!iCU~OQl:::!iOOCUCll _c:cuu 0 ~~~-Uou~ E~m~ccc~-.~ ...J ~ m ~ 0 m _ C 0 E m m m (.) 0 m m m 0 .~ C QI '" uuuowWW_...J...JzOD..(/)(/)(/)(/)>:) ~ ~ ~ :> 5!l ~NM~~~~romo~NM~~~~oom 0 0 :3 ..............-,....,.-,....,......-..-...... l- (/) - - Assessed Valuation and Collections The following Tables set forth assessed valuation growth in Poway. along with historical collections and delinquencies. The City receives only a portion of the total tax collections shown on Table 3. A portion of the basic 1% property tax rate is received by other taxing entities. After deducting such amounts. the City's share equals approximately 43% of the 1 % general tax levy. This amount may fluctuate from year to year due to growth in the Agency's redevelopment project area. Approximately 33% of the City is within the Agency's project area. Assessed valuation attributable to the Agency is approximately 42% of the total assessed valuation of the City. TABLE 2 CITY OF POWA Y ASSESSED VALUATION (As of June 30) Total Percent Fiscal Total Total Assessed Change From ~ Secured Unsecured Value Previous Year 1982(1) $ 883,493.134 $ 0 $ 883,493.134 -- 1983 866,571.050 14.845,839 981.416.889 11.08% 1984 1,019.953.883 16.685,712 1,036.639,595 5.63 1985 1.109.674,392 18.010.665 1.127.685,057 8.78 1986 1.224.261,949 19,624.399 1.243,886.348 10.30 1987 1.371,840,241 18,277.448 1.390,117.689 11.76 1988 1.546,330.363 24.897,449 1.571.227.812 13.03 1989 1.744,013.209 27.045,506 1.771.058.715 12.72 1990 2.052.405,447 30.240.937 2.082.646.384 17.59 1991 2,413.737.613 37,219.612 2,450,957.225 17.68 1992 2.684.903.547 44.186.797 2.729,090.344 11.35 1993 2.858.029.834 54,214.861 2.912.244.695 6.71 1994 2.964.014.503 69.952,694 3.033.967.197 4.18 (1) The first year that general property tax assessments were first applied to the City was in 1982. Source: County of San Diego Assessor's Office -. B-3 LA\951310108 en iliI c: ~ 'is 0 ;;1;;;1;COC'lOOOOLOOON~LOO c: C'lC'lCOC'lC'lCOLOLO~LOr-- Q) ,...:,....:NMa>OO)N,...:~Nlricri a. ~ ~~ ~ ~ N "0 Q) >. ., - ~ III !lj N Q) ~ ~ """,l.()<OO)~""'(",,)No)""''''''VIJ') ~ N(O("'),....mT""CX)O)(OI.O"""';S;CO ,....,....,....OCDO('t)('I')V('f')O) L() .s:: <Ci a:i <<)- 0- ~ cti __- ~ 0 ri ...: ('f'f ,....~ 0 LO("')COl.(),......~<O('l")O,....O("')M :.c N~~LO~ LOOOCO~C'lLO~ ;: ~ " C'l N 00 Ol ~ - jiU ~ 0 0 ts (J)mCX)L()I'-OOV(()CX)("')L{')or--- ......Nf"-..vl'COVl'-o)(OLOLOLO <( ..oLriaiaioaia)~crir--..:cia>""': III 0)0)0)0)00)0)0)0)0)00),..... Q) ~ ~ ~ I/) 'u . z ., III 0 ILO >.~ i= :!:X 0 c: ., ('l")Q)OVC\l<r"""'C\ICON,..........OO> ~- W ~I L.O........lO,....<ocom,....mCO,....MIl) E>' ...J CD--NOO(J)"""CO,....(O(J)('l")('l')O Ei ...J 0- ~..n N ci N m~,.....~......- ai 0>- cD N 0 ~ ("l')OOCOCO,....OLO......N__OI.Or--- 00. >-0_ C'lCOOOOOlNOONOlOlr--LOOl N Of: MMM.[.[LOLOcOr--:cONC>>C>> III a. <(Co 00 o Q) C')3:Z': ~ ~ Ol ~ O.s:: WO<(C III 0::- , c: ...J0.1/)::I ., o 0 lDILW-' I~I ,....MLOLO<OM:j:O)MO<O,....,.... ;: Q)"O "i <(0)'0 <O<OLOQJ,....CX) C'\IMO,....O)CO >. ::2 Q) CO ,....,....CX)('I')U')(J)'r"'"lONVCO,....('l') - 1->-W", (3 - aj ci ~ <O~ l.()~ ('I') c,or ,.....- a.O 0- ~ ci cD Q) ., 1-...J<( .s::- I.OlOLl),...........MvO,....('l")NOCO Q) _ III -x- tR---NNNNN,.-,....NV......M .s:: It,.. .S 0<( - Q) Q) 1- 0 "0 ~ - c: c: ~ alQ) ~ Q) c:: ._ 0 "OQ) o.li" Q)..c W U ~ 0.0 'S; 2l 0. 0 NCX)OOT"""NVM......V__O)('l")f'-.., ., ~c: 0 (X)('l")('l")N"-VM<OLO,....,....MLO Q) _Ill ~.U) c:: M....:NC'illi.q:Lri~,....:u?,...:Lri...,: ~ ~ 0. Q)~ ., Q) mO)o>O)O)O)O) 0)0)0)0)""'" ;: 0 Q) > 1Il~ >.., - c: 15.s:: c: 0 't: ..c Q)<..) a. .!.! E ~ E.s:: III 0 II NCOLOOl(OoocomO),....l.OO')CX) 1Il_ o ;: Ol;gOlN~r--~OOLOOOOlC'lOl Q) .- ~ - CO ('I')vvr---LOLOvLt>.....,....CO III "0 -~ III ~ 1Il..c c....or c:i ri co~ a.O 00- 1'--- 0)- N oi ~ cO ..0 .,<( Q) III ,....('t)Mti!)MCO,....(OT"" 00001000 X " Xen NLOCO comCO"","COCONT'""LO ., 0 ~ c: M M M M~".[ LO cO r--: cO N c>> Ol" _en ~ ~ >- ,!!;! .,'is to .- Q) Q) c: ~ 2l a.., 0.0 f:(/) III ~ CO"""("l')r'--CX)C"')COOLOlO""",,....O 0._ _a. )~ LOcoom......I.O(W')MCX),....O)vCO c:>. ,....OC'\l(O('t') "l\tCX>CX),....,..... co,.....C\I _ 0 Q) 0 ro- M- M <0- ri ~ N N~ 0>- <6 0>- ;g- ..0 .,>. ~- .s::_ <:rOo CO(O('I')Nr--.-COO>NO('l')('I') LO - c: c: 2 """COO>T""'CONCOCOOT"'" CO co co ~ ~ ('1')- ('1')- M "",,- "",,- ..n ..n <6 ai ai N O>~ N- ., 0 :.=~ ~<..) Q) c: ~ ~ ~ "0., - .. 1Il..c <Xl l!! Q) Q) c: 0 ",,0 "0.- C ~ ~ ., ~ Q) ~ -t ;:; ~ .s:: 0 o Q) I! N('I') """LO co r--.-co 0> 0 T""'N('I')"'" I-(/) Eo ~ 00000000000000000l0l0l0l0l a> 0l0l0l0l0l0l0l0l0l0l0l0l0l ~ ~ :3 ~ N T""'T""'T""'T""'T""'T""'T""'T""'T""'T""'T""'T""'T"'" ~ ~ -. TABLE 4 CITY OF POWAY TEN LARGEST TAXPAYERS (June 30, 1994 ~ Assessed Valuation Burnham Pacific Properties, Inc. $ 30.352.000 JMP Advisors Inc. 30.094,858 Stoneridge County Club Corp. 26.954.274 C.F. Poway Ltd. 25.351,104 Tech Business Center 17,147.015 R&R Partners - Poway 15,779.609 Beecroft. Joseph N. & Lois M. 11.923,832 Gateway Medical Building - Joint Venture 10.710.964 Poway Creekside Partners 9.136,744 Standard Pacific LP 8 251 770 $ 185 702.170 $185,702.170 is 6.12% of the total assessed value in Fiscal Year 1993/94 of $3.033.967.197. Source: San Diego County Assessor's Office and City Finance Division Audits The City, all its funds and the Poway Redevelopment Agency are audited annually by the certified public accounting firm of Moreland & Associations, Inc. of 610 Newport Center Drive, Suite 600. Newport Beach. California 92660. Copies of the audited financial statements for the respective fiscal years 1984/1985 through 1993/94 are on file with the City. B-5 LA\951310108 - -------- --- Retail and Total Taxable Sales Retail sales in the City increased over 31.4% in the period of 1988 to 1993. Total sales in the City increased over 40% in the same period. The following table present the retail taxable transactions of the City of Poway and San Diego County for the calendar years 1988 through 1993. TABLE 5 CITY OF POWAY NUMBER OF PERMITS AND VALUATION OF TAXABLE TRANSACTIONS ($ in thousands) Retail Stores Total All Outlets No. Of Taxable No of Taxable ~ Permits Transactions % Chanlle Permits Transactions % ChanQe 1988 306 $ 202.885 -- 957 $ 221,795 -- 1989 298 222.549 9.7% 962 246.122 11.0% 1990 334 208,483 (6.3) 1.049 235.346 (4.4) 1991 341 198.701 (4.7) 1.084 233,083 (1.0) 1992 376 227.383 14.4 1.124 271.986 16.7 1993 382 226.616 17.2 1,169 310.603 14.2 Source: California State Board of Equalization TABLE 6 COUNTY OF SAN DIEGO NUMBER OF PERMITS AND VALUATION OF TAXABLE TRANSACTIONS ($ in thousands) Retail Stores Total All Outlets No. Of Taxable No of Taxable ~ Permits Transactions % Change Permits Transactions % Change 1988 24,065 $13,734.895 --- 67.412 $19,381,882 --- 1989 25,305 14.883,857 8.4% 70.500 21.271.346 9.7% 1990 27,659 15.099,328 1.4 74,464 21.751.246 2.3 1991 27.695 14,599,366 (3.3) 73.092 20.836,975 (4.2) 19~2 27.997 15.083.222 3.3 73,969 21.357.857 2.5 1993 29.119 15.241.382 1.0 75.046 21,576.327 1.0 Source: California State Board of Equalization 8-6 LA\951310108 Construction Activity Residential and commercial construction values for Fiscal Years 1985/86 through 1993/94 are shown in Table 7. TABLE 7 CITY OF POWAY CONSTRUCTION ACTIVITY (As of June 30) Residential and Commercial Construction Value of Value of Fiscal Number Dwelling Residential Commercial YeaL of Permits Units Construction Construction 1985/86 1,303 579 $ 68,636.940 $ 2.544,400 1986/87 1.287 607 107,298,476 2.128.201 1987/88 1.948 626 91.244.133 20.778.035 1988/89 1.716 391 89,449.956 8.960.829 1989/90 1,619 325 70,107.550 1.343,125 1990/91 1.286 218 53,810.212 1.082,843 1991/92 1.273 50 17.152,028 16.157.812 1992/93 1.183 40 12,870.944 13.887.733 1993/94 1.210 81 19,829.254 915.093 Source: City of Poway Planning Department Income The following table compares effective buying income ("EBI") on an aggregate and median household basis for the years 1990 to 1993 for San Diego County. the State of California and the United States. EBI is a classification developed exclusively by Sales & Marketing Management to distinguish it from other sources reporting income statistics. EBI is defined as person income less personal tax and non-tax payments - a number often referred to as "disposable" or "after-tax" income. Personal income is the aggregate of wages and salaries, other labor related income (such as employer contributions to private pension funds). proprietor's income. rental income (which includes imputed rental income of owner-occupants of non-farm dwellings). dividends paid by corporations. interest income from all sources. and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal. state. and local). non-tax payments (fines. fees. penalties. etc.). and personal contributions to social insurance. B-7 LA\951310108 --.--.-- TABLE 8 SAN DIEGO COUNTY EFFECTIVE BUYING INCOME (Yearly Average for Calendar Years 1990 through 1993) Median Household Buying Income Effecting Year and Area 1000's Omitted) Buvin9 Income 1990 San Diego County $ 41,179,182 $32.013 California 477,784,771 33.342 United States 3,499.365.237 27.912 1991 San Diego County 40.840.447 35.776 California 490.749.649 36.943 United States 3.728.967.043 32,073 1992 San Diego County 42.282,698 36.502 California 509,152,667 37.686 United States 3,916,947.023 33.178 1993 San Diego County 43.795.963 38,082 California 528,958,745 39.330 United States 4.169,724.052 35.056 Source: Bill Publications - Sales & Marketing Management Survey of Buying Power. Housing The average selling price for new and existing single family homes is approximately $ . 199_ median income for Poway was $ , the highest of incorporated cities in the County. The median age of poway residents is _ years. and the family/household size was _ in 199_. Owner occupancy is high. and Poway is predominantly a single family community. The following Table compares the components of the housing element for the entire City of Poway. including property located within the Project Area. with those of other surrounding communities, including vacancy rates: B-8 LA\951310108 TABLE 9' - HOUSING INFORMATION BY SUBREGIONS (as of January 1, 199-l Jurisdiction ~ Family1L FamilyZl Home~ Milita~ ~ ~ Vacant~ Poway 22.637 18.467 3,338 797 35 21.850 737 3.5% Kearny Mesa 55.924 33.358 20.542 740 1.284 53,566 2.358 4.2% Coastal 40.306 18.650 20.753 481 422 36.203 4.103 10.2% University 20.930 7.955 12.973 2 0 19.693 1.237 5.9% Del Mar-Mira Mesa 37.563 27,294 9,949 321 0 35.683 1.880 5.0% North San Diego 29.954 19,433 10,440 81 0 26.885 3.069 10.2% Miramar 454 0 0 108 346 451 3 0.7% Elliott-Navajo 35.119 22.972 9,295 388 2,464 33,537 1,582 4.5% 1 Single family attached and detached units. 2 Two or more units in a structure. 3 Includes mobile homes on military bases. 4 Includes all permanent on-base and off-base military units. Does not include private housing occupied by military personnel. r- 5 Total vacant units divided by total housing units. Source: San Diego Association of Governments Employment The City of Poway is primarily a residential community. thus. there are few major employers in the community. The City itself, the Pomerado Hospital District, and the poway Unified School District are the largest employers in the area. Numerous small businesses make up the rest of the employment base in the community. In addition. there are plans in place to add to the employment base by developing the South Poway Industrial Park. Civilian labor force statistics for the City are unavailable. Poway is part of the Metropolitan Statistical Area (MSA) comprised of San Diego County. The two tables which follow set forth information with respect to employment by industry groups and the labor force in general in the County of San Diego. . To be updated by City if possible. B-9 LA\951310108 ---- TABLE 10 COUNTY OF SAN DIEGO EMPLOYMENT BY MAJOR INDUSTRY GROUP (1990 -1994) Maior Industry GrOUD 1m 199.1 1m 1m 1IDM Government 176,800 178.700 179.300 179.100 180.600 Services 275.700 281.200 283.600 287.300 294.500 Retail Trade 193.800 191.100 179.100 185.800 184.100 Manufacturing 136.500 131.700 124.100 117.500 112.300 Finance. Insurance. Real Estate 67.900 66.000 61,100 62,200 60.900 Transportation and Public Utilities 37.100 36.500 34.800 35.700 35.800 Construction 62.300 58.100 43.100 39.500 40.000 Wholesale Trade 44.300 43.900 42.300 39.700 41,300 Agriculture N/A 10.550 10.600 10.700 10,500 Mineral Extraction 700 700 500 400 400 Total 995.100 998.450 958.500 957.900 960,400 Source: State of California Employment Development Department as compiled by the Economic Re' 1r B-10 LA\951310108 TABLE 11 COUNTY OF SAN DIEGO Civilian Labor Force, Employment and Unemployment (1985 -1994) Unemployment Year Labor Force EmDloved(2) Unemployed Ratio(1) 1985 967.200 915.900 51.300 5.3% 1986 1.010.900 960.500 50.400 5.0 1987 1,059.100 1.011,400 47,700 4.5 1988 1,126.500 1.078,300 48.200 4.3 1989 1.173,400 1.127,200 46.200 3.9 1990 1.174,400 1,121.600 52.800 4.5 1991 1,176,200 1,104.100 72.100 6.1 1992 1.213.300 1.124,6700 88.700 7.3 1993 1.218.400 1.123,700 94.700 7.8 1994 1.234,500 1.146,000 88.500 7.2 (1) Unadjusted for season. (2) Does not equal totals in Table 10 due to Bureau of Labor Statistics method of calculation. Source: State of California Employment Development Department - B-11 LA\951310108 ---- TABLE 12 CITY OF POWAY Ten Principal Employers June, 1995 Type of Number of ~ Business EmDloyees (1\ Poway Unified School District School 3,500 Pomerado Hospital Hospital 700 Anacomp Inc. Manufactures micrographic 671 equipment Wal*Mart Retail department store 300 City of Poway Government 230 Executone Information Systems Business telephone systems 200 Lucky's Grocery store 134 Target Retail department store 125 New Poway Ford Automobile dealer 80 Vons Grocery store 74 Source: City of Poway (1) Includes part-time employees. Transportation poway is served by a variety of transportation modes. Commercial air travel is supplied by Lindbergh Field, approximately 25 miles south in San Diego. and is supplemented by private and charter plan service from the Palomar Airport. about 20 minutes to the west. Automobile travel is facilitated by Interstate 15 which runs north/south several miles to the west of Poway. Bus travel is supplied by the San Diego County Regional Transit District and is supplemented by commuter service from Poway to downtown San Diego. Services and Facilities The City of poway supplies its residents with water and sewer service. Power is supplied by San Diego Electric and Gas. and telephone service by Pacific Bell. The City has its own parks and community services departments and provides fire protection service. but contracts for police service from the County. Health care facilities are provided by Pomerado Hospital. a 130-bed. full- service facility. Educational facilities in the Poway Unified School District include 17 elementary schools (12 public and 5 private). 3 middle schools and 3 high schools. one of which is a continuation school. These educational facilities serve the populace of Poway as well as the neighboring communities of Rancho Bernardo and Rancho Penasquitos. Several schools within the Authority have recently been awarded national honors for excellence. B-12 LA\951310108 The community is served by four savings and loan associations and six banks. Recreational facilities in the City of poway include two community parks. one at the Community Center and one surrounding Lake Poway, a man-made lake. The Community Center also includes lighted softball/baseball fields and a swimming pool. Golfing is available at local nonmembership country clubs. A new 815-seat Poway Center for the Performing Arts opened in 1990, and features professional touring artists. entertainers and community programs. Residents of Poway have excellent access to cultural and recreational facilities in the metropolitan San Diego area as well. B-13 LA\951310108 APPENDIX C AUDITED FINANCIAL STATEMENTS OF THE CITY FOR FISCAL YEAR 1993/94 LA\951310108 APPENDIX D FORM OF LEGAL OPINION OF SPECIAL COUNSEL [CLOSING DA TEl City Council of the City of Poway Poway, California Board of Directors of the Poway Redevelopment Agency Poway, California Re: $ City of Poway, 1995 Refunding Certificates of Participation, (1986 Capital1mprovement Projects) Ladies and Gentlemen: We have reviewed the Constitution and the laws of the State of California and certain proceedings taken by the City of Poway, California (the "City") in connection with the authorization, execution and delivery by the City of the Lease Agreement, dated as of July I, 1995 (the "Lease"), by and between the Poway Redevelopment Agency (the "Agency") and the City. We have also reviewed the Trust Agreement, dated as of July I, 1995 (the "Trust Agreement"), by and among Bank of America National Trust and Savings Association, as trustee (the "Trustee"), the Agency and the City. All capitalized terms used herein shall have the meaning given them in the Trust Agreement unless otherwise defined. Pursuant to the Trust Agreement, the Trustee has agreed to execute and deliver the refunding certificates of participation (the "Certificates") evidencing proportionate interests of the Owners of the Certificates in lease payments (the "Lease Payments") to be made by the City pursuant to the Lease. Pursuant to an Assignment Agreement dated as of July I, 1995, by and between the Agency and the Trustee, the Agency has assigned to the Trustee the Agency's right to receive Lease Payments from the City under the Lease. -- City Council of the City of Poway Board of Directors of the Poway Redevelopment Agency [Closing Date] Page 2 The Certificates are dated July 1, 1995. The Certificates mature on the dates and in the amounts set forth in the Trust Agreement. Interest due with respect to the Certificates is payable on the dates and at the rates per annum set forth in the Trust Agreement. The Certificates are registered Certificates in the form set forth in the Trust Agreement and are subject to optional, extraordinary and mandatory redemption prior to maturity in the manner and upon the terms set forth in the Trust Agreement. Based upon our examination of the foregoing, and in reliance thereon and on all matters of fact as we deem relevant under the circumstances, and upon consideration of applicable laws, we are of the opinion that: 1. The obligation of the City to pay Lease Payments in accordance with the terms of the Lease is a valid and binding obligation payable from the funds of the City lawfully available therefor, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights, by equitable principles, by the exercise of judicial discretion in appropriate cases and by the limitations on legal remedies against cities in the State of California. The obligation of the City to make Lease Payments under the Lease does not constitute a debt of the City, the State of California or any political subdivision thereof within the meaning of any statutory or constitutional debt limitation or restriction and does not constitute a pledge of the faith and credit or taxing power of the City, the State of California or any political subdivision thereof. 2. The Lease and the Trust Agreement have been duly authorized, executed and delivered by the City and constitute valid and legally binding agreements of the City enforceable against the City in accordance with their terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights, by equitable principles, by the exercise of judicial discretion in appropriate cases and by the limitations on legal remedies against cities in the State of California, except that we express no opinion as to any provisions in the Lease or the Trust Agreement with respect to indemnification. 3. Under existing statutes, regulations, rulings and judicial decisions, the portion of the Lease Payments designated as and comprising interest is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, it should be noted that, with respect to corporations, such interest will be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations . The foregoing opinion is subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the execution and delivery of the Certificates to assure that the portion of the Lease Payments designated as and comprising interest will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements may cause the portion of the Lease Payments designated as and comprising interest to be included in gross income for federal income - City Council of the City of poway Board of Directors of the Poway Redevelopment Agency - [Closing Date] Page 3 tax purposes retroactive to the date of execution and delivery of the Certificates. The City has covenanted to comply with all such requirements. 4. The portion of the Lease Payments designated as and comprising interest described in paragraph (3) above is exempt from State of California personal income tax. Except as expressly set forth in paragraphs (3) and (4), we express no opinion regarding any tax consequences with respect to the Certificates. We have not made or undertaken to make an investigation of the state oftitle to any of the real property described in the Lease or the Site Lease or of the accuracy or sufficiency of the description of such property contained therein, and we express no opinion with respect to such matters. We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Certificates, and purchasers of the Certificates should not assume that we have reviewed the Official Statement. The opinions expressed herein are based upon our analysis and interpretation of existing statutes, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. The opinions expressed herein may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. In rendering this opinion, we have relied upon certain representations of fact and certifications made by the City, the Agency, the initial purchasers of the Certificates and others. We have not undertaken to verify through independent investigation the accuracy of the representations and certifications relied upon by us. Respectfully submitted, 1995 REFUNDING CERTIFICATES OF PARTICIPATION (1986 CAPITAL IMPROVEMENT PROJECTS) Evidencing the Undivided Proportionate Interests of the Owners Thereof in Lease Payments to be Made by THE CITY OF POW A Y as the Purchaser of Certain Property Pursuant to an Lease Agreement With the POW A Y REDEVELOPMENT AGENCY PURCHASE CONTRACT July _, 1995 City of Poway 13325 Civic Center Drive Poway, California 92064 Poway Redevelopment Agency 13325 Civic Center Drive Poway, California 92064 Ladies and Gentlemen: The undersigned (the "Underwriter") hereby offers to enter into this Purchase Contract with you, the City of Po way (the "City") and the Poway Redevelopment Agency (the "Agency"), for the purchase by the Underwriter and the delivery by you of the 1995 Refunding Certificates of Participation specified below. The proceeds of the Certificates will be used to refinance certain outstanding certificates of participation, the proceeds of which were used to finance various capital improvements (the "1986 Certificates"), to fund, in whole or in part, a Reserve Account, and to pay the costs of issuing the Certificates. This offer is made subject to acceptance by you prior to II :59 p.m., Los Angeles time, on the date hereof. Upon such acceptance, this Purchase Contract shall be in full force and effect in accordance with its terms and shall be binding upon you and the Underwriter. All terms not defined herein shall have the meanings set forth in the Trust Agreement (defined below). I. Upon the terms and conditions and upon the basis of the representations herein set forth, the Underwriter hereby agrees to purchase from the Agency for offering to the public, and the Agency hereby agrees to cause the Trustee (defined below) to execute and deliver to the Underwriter, all (but not less than all) of the $ aggregate principal I. LA \951380054 ATTACHMENT F JUN 2 0 1995 ITEM 11 - -- - amount of the 1995 Refunding Certificates of Participation (1986 Capital Improvement Projects) (the "Certificates") to be dated July 1, 1995 (and more fully described in the Official Statement), evidencing, undivided, proportional interests of the Owners thereof in Lease Payments to be made by the City to the Agency pursuant to a Lease Agreement (defined below), at a price of $ , being the principal amount of the Certificates less original issue discount of $ , less an Underwriter's discount of$ , plus accrued interest from July 1,1995 of$ The Underwriter agrees to make a bona fide public offering of all the Certificates at the initial public offering price or prices (or yields) set forth on Exhibit A attached hereto and made a part hereof, plus accrued interest from July 1, 1995; provided, however, the Underwriter reserves the right to change such initial public offering price as the Underwriter deems necessary or desirable, in its sole discretion in connection with the marketing of the Certificates, and to sell the Certificates to certain dealers (including dealers depositing the Certificates into investment trusts) and others at prices lower than the initial offering prices or higher than the yields set forth in the Official Statement. The Underwriter also reserves the right (a) to over-allot or effect transactions that stabilize or maintain the market price of the Certificates at a level above that which might otherwise prevail in the open market, and (b) to discontinue such stabilizing, if commenced, at any time. A "bona fide public offering" shall include an offering to institutional investors or registered investment companies, regardless of the number of such investors to which the Certificates are sold. The Certificates evidence the direct, undivided, proportionate interest of the owners thereof in Lease Payments to be paid with respect to the Site (as defined below) by the City (the "Lease Payments") pursuant to a Lease Agreement, dated as of July 1, 1995 (the "Lease Agreement"), between the City and the Agency. The Agency's rights to receive Lease Payments and to exercise remedies upon an Event of Default under the Lease Agreement have been assigned to Bank of America National Trust and Savings Association, a national banking association, as trustee (the "Trustee") for the benefit of the Certificate owners pursuant to the assignment agreement, dated as of July I, 1995 between the Agency and the Trustee (the "Assignment Agreement"). The Certificates shall be as described in and shall be secured under and pursuant to the trust agreement, dated as of July I, 1995 (the "Trust Agreement"), among the City, the Agency and Trustee, substantially in the form previously submitted to the Underwriter with only such changes therein as shall be mutually agreed upon by the City, the Trustee and the Underwriter. Pursuant to the Site Lease, dated as of July I, 1995 (the "Site Lease") between the City and the Agency, the City will lease certain real property and the improvements therein (the "Site") to the Agency in consideration of, among other things, the Agency's promise to lease the Site back to the City pursuant to the Lease Agreement. 2. LA\951380054 2. The City and the Agency have authorized the Underwriter to use and distribute, in connection with the offer and sale of the Certificates, the Preliminary Official Statement dated July _' 1995 relating to the Certificates, which, together with the cover page and all appendices thereto, is herein called the "Preliminary Official Statement." The Agency and the City hereby certify such Preliminary Official Statement to be final as of its date for purposes of SEC Rule 15c2-12 adopted by the Securities and Exchange Commission on August 28, 1986 ("Rule 15c2-12"), with the exception of certain final pricing and related information referred to in Rule 15c2-12. The Underwriter will distribute a single copy of the Preliminary Official Statement to any potential customer on request. 3. The City and the Agency shall deliver to the Underwriter ten (10) copies of the Official Statement manually executed by authorized officers thereof. The City and the Agency shall also deliver a sufficient number of copies of the Official Statement to enable the Underwriter to distribute a single copy of each Official Statement to any potential customer of the Underwriter requesting an Official Statement during the time period beginning when the Official Statement becomes available and ending on the End Date (defined below). The City and the Agency shall deliver these copies to the Underwriter within seven (7) business days after the execution of this Purchase Contract and in sufficient time to accompany or precede any sales confirmation that requests payment from any customer of the Underwriter. The Underwriter shall inform the City and the Agency in writing of the End Date, and covenants to file the Official Statement with a nationally recognized municipal securities information repository ("NRMSIR") on a timely basis. "End Date" as used herein is that date which is the earlier of: (a) ninety (90) days after the end of the underwriting period (as defined in Rule 15c2-12; or (b) the time when the Official Statement becomes available from a NRMSIR, but in no event less than twenty-five (25) days after the underwriting period (as defined in Rule l5c2-l2) ends. The City and the Agency have authorized the use of the Official Statement in connection with the public offering of the Certificates. The Underwriter has distributed a single copy of each Preliminary Official Statement to potential customers on request. 4. At 9:00 A.M., California time, on , 1995, or at such other time or on such earlier or later business day as shall have been mutually agreed upon by the City, the Agency and the Underwriter, the Agency will deliver (i) the Certificates to The Depository Trust Company ("DTC") in New York, New York, and (ii) the closing documents hereinafter mentioned at the offices of Stradling, Y occa, Carlson & Rauth, Newport Beach, California, or another place to be mutually agreed upon by the City, the Agency and the Underwriter. The Underwriter will pay the purchase price of the Certificates as set forth in 3. LA\951380054 _. - Section 1 hereof by wire transfer of immediately available funds. This payment and delivery, - together with the delivery of the aforementioned documents, is herein called the "Closing." 5. The City represents, warrants and covenants to the Underwriter that: (a) The City is a general law city and municipal corporation, duly organized and validly existing pursuant to the Constitution and laws of the State of California and has all necessary power and authority to enter into and perform its duties under the Lease Agreement, the Site Lease, the Escrow Agreement, dated as of July 1, 1995 (the "Escrow Agreement") among the City, the Agency and Bank of America National Trust and Savings Association, as escrow agent (the "Escrow Agent"), the Trust Agreement and this Purchase Contract (collectively, the "City Documents"). (b) Neither the execution and delivery of the City Documents, or the approval and execution of the Official Statement or this Purchase Contract, and compliance with the provisions on the City's part contained therein, nor the consummation of any other of the transactions herein and therein contemplated, nor the fulfillment of the terms hereof and thereof, conflicts with or constitutes a breach of or default under nor contravenes any law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or is otherwise subject, nor does any such execution, delivery, adoption or compliance result in the security interest or encumbrance of any nature whatsoever upon any of the properties or assets of the City under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by the City Documents. (c) Except as may be required under blue sky or other securities laws of any state, there is no consent, approval, authorization or other order of, or filing with, or certification by, any regulatory agency having jurisdiction over the City required for the execution and delivery of the Certificates or the consummation by the City of the other transactions contemplated by the Official Statement and this Purchase Contract. (d) To the best of the knowledge of the City, there is, and on the Closing (as hereinafter defined) there will be, no action, suit, proceeding or investigation at law or in equity before or by any court or governmental agency or body pending or threatened against the City to restrain or enjoin the delivery of any of the Certificates, or the payments to be made pursuant to the Lease Agreement, or in any way contesting or affecting the validity of the City Documents or the Certificates or the authority of the City to approve this Purchase Contract, or enter into the City Documents or contesting the powers of the City to enter into or perform its obligations under any of the foregoing or in any way contesting the powers of the City in connection with any action contemplated by this Purchase Contract or to restain or enjoin the execution, sale and delivery of the Certificates or the payment of Lease Payments, nor is there any basis for any such action, suit, proceeding or investigation. 4. LA\951380054 (e) The Preliminary Official Statement provided to the Underwriter has been deemed fmal by the City, as required by Rule 15c2-12. As of the date thereof and at all times subsequent thereto up to and including the End Date, the information relating to the City, the 1986 Certificates, the Certificates and the Site contained in the Official Statement was and will be complete. The information relating to the City, the 1986 Certificates, the Certificates and the Site contained in the Official Statement under the headings "THE CERTIFICATES," "THE PROJECTS AND THE SITE," "THE CITY," "CITY FINANCIAL INFORMATION" and "APPENDIX B" is true and correct in all material respects and such information does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading in any material respect. (f) The City agrees to cooperate with the Underwriter in endeavoring to qualify the Certificates for offering and sale under the securities or blue sky laws of such jurisdictions of the United States as the Underwriter may request; provided, however, that the City will not be required to execute a special or general consent to service of process in any jurisdiction in which it is not now so subject or to qualify to do business as a foreign corporation in any jurisdiction where it is not so qualified. (g) By official action of the City prior to or concurrently with the execution hereof, the City has duly approved the distribution of the Official Statement, and has duly authorized and approved the execution and delivery of, and the performance by the City of the obligations on its part contained in the City Documents and the consummation by it of all other transactions contemplated by the Official Statement and this Purchase Contract. (h) The City is not in breach of or default under any applicable law or administrative regulation of the State of California or the United States or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or is otherwise subject, and no event has occurred and is continuing which, with the passage oftime or the giving of notice, or both, would constitute a default or an event of default under any such instrument. (i) The City is not in default, nor has been in default at any time, as to the payment of principal or interest with respect to an obligation issued by the City or successor of the City or with respect to an obligation guaranteed by the City as guarantor or successor of a guarantor. (j) If between the date of this Purchase Contract and the End Date an event occurs, of which the City has knowledge, which might or would cause the information relating to the City, the Project or the City's functions, duties and responsibilities contained in the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was 5. LA\951380054 -' -- - presented, not misleading in any material respect, the City will notify the UnderWriter, and if, in the opinion of the Underwriter, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the City will cooperate with the Underwriter in the preparation of an amendment or supplement to the Official Statement in a form and in a manner approved by the Underwriter, provided all expenses thereby incurred will be paid for by the City. (k) If the information relating to the Site, the City, its functions, duties and responsibilities contained in the Official Statement is amended or supplemented pursuant to the immediately preceding subparagraph, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such subparagraph) at all times subsequent thereto up to and including the date of the Closing, the portions of the Official Statement so supplemented or amended (including any financial and statistical data contained therein) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was presented, not misleading in any material respect. (I) The City covenants that it will comply with all tax covenants relating to it in the City Documents, the Tax Certificate of the City and this Purchase Contract. (m) The written information supplied by the City to the Underwriter with respect to the financial information relating to the City and the improvements to be refinanced with the proceeds of the Certificates is true, correct and complete in all material respects for the purposes for which it was supplied. (n) No consent, approval, authorization or other action by an governmental or regulatory Agency that has not been obtained is or will be required of the City for the delivery and sale of the Certificates or the consummation of the other transactions contemplated by this Purchase Contract and the Official Statement, except as may be required under the state securities or blue sky laws in connection with the sale of the Certificates by the Underwriter. (0) Substantially all the proceeds from the sale of the Certificates (after deducting the expenses of issuance and sale of the Certificates paid for from such proceeds) will be used to refund the 1986 Certificates and to fund, in whole or in part, the Reserve Account and the City will not take or omit to take any action which action or omission will in any way cause the proceeds from the sale of the Certificates to be applied in a manner contrary to that provided in the Trust Agreement and the Lease Agreement, as amended from time to time. 6. LA\95 1380054 (p) The City will deliver all opinions, certificates, letters and other instruments and documents reasonably required by the Underwriter and this Purchase Contract. (q) Any certificate of the City delivered to the Underwriter shall be deemed a representation and warranty by the City to the Underwriter as to the statements made therein. (r) As of the time of acceptance hereof and as of the Closing the City does not and will not have outstanding any indebtedness which is secured by a lien on the City's general fund except as disclosed in the Official Statement. (s) Between the date of this Purchase Contract and the date of Closing, the City will not, without the prior written consent of the Underwriter, and except as disclosed in the Official Statement, offer or issue any Certificates, notes or other obligations for borrowed money, or incur any material liabilities, direct or contingent. 6. By its approval of the terms hereof, the Agency represents, warrants and covenants to the Underwriter that: (a) The Agency is a redevelopment agency, duly organized and validly existing pursuant to the laws of the State of California and has all necessary power and authority to enter into and perform its duties under the Trust Agreement, the Lease Agreement, the Site Lease the Assignment Agreement and this Purchase Contract (collectively, the "Agency Documents"). (b) The execution and delivery of the Agency Documents and compliance with the provisions thereof, will not conflict with, or constitute a breach of or default under, any law, administrative regulation, court decree, resolution, charter, by-laws or other agreement to which the Agency is subject or by which it is bound. (c) Except as may be required under blue sky or other securities laws of any state, there is no consent, approval, authorization or other order of, or filing with, or jurisdiction over the Agency required for the consummation by the Agency of the transactions contemplated by the Official Statement and this Purchase Contract. (d) To the best of the knowledge of the Agency, there is, and on the Closing (as hereinafter defined) there will be, no action, suit, proceeding or investigation at law or in equity before or by any court or governmental agency or body pending or threatened against the Agency to restrain or enjoin the delivery of any of the Certificates, or the assignment of the payments to be made pursuant to the Lease Agreement, or in any way contesting or affecting the validity of the Agency Documents or the authority of the Agency to enter into the Agency Documents or contesting the powers of the Agency to enter into or perform its obligations under any of the foregoing or in any way contesting the powers of the 7. LA\951380054 - Agency in connection with any action contemplated by this Purchase Contract, or is there any basis for such action, suit, proceeding or investigation. (e) The Preliminary Official Statement provided to the Underwriter has been deemed fmal by the Agency, as required by Rule 15c2-12. As of the date thereof and at all times subsequent thereto up to and including the End Date, the information relating to the Agency contained in the Official Statement was and will be complete. The information relating to the Agency, its function, duties and responsibilities contained in the Official Statement is true and correct in all material respects and such information does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading in any material respect. (f) By official action of the Agency prior to or concurrently with the execution hereof, the Agency has duly approved the distribution of the Official Statement, and has duly authorized and approved the execution and delivery of, and the performance by the Agency of the obligations on its part contained in the Agency Documents and the consummation by it of all other transactions contemplated by the Official Statement and the Purchase Contract. (g) The Agency is not in breach of or default under any applicable law or administrative regulation of the State of California or the United States or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Agency is a party or is otherwise subject which would have an adverse impact on the Agency's ability to perform its obligations under the Agency Documents, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or an event of default under any such instrument. (h) If between the date of this Purchase Contract and the date of the Closing an event occurs, of which the Agency has knowledge, which might or, would cause the information relating to the Site, the Agency or its functions, duties and responsibilities contained in the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was presented, not misleading, the Agency will notify the Underwriter, and if in the opinion of the Underwriter, such event requires the preparation and publication of a supplement or amendment to such portions of the Official Statement, the Agency will cooperate with the Underwriter in the preparation of an amendment or supplement to the Official Statement in a form and in a manner approved by the Underwriter, provided all expenses thereby incurred will be paid in accordance with Section II hereof. (i) If the information relating to the Agency or its functions, duties -- and responsibilities contained in the Official Statement is amended or supplemented 8. LA\95 1380054 pursuant to the immediately preceding subparagraph, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such subparagraph) at all times subsequent thereto up to and including the date of the Closing, the portions of the Official Statement so supplemented or amended (including any financial and statistical data contained therein) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was presented, not misleading. 7. The Underwriter has entered into this Purchase Contract in reliance upon the representations, warranties and agreements of the City and the Agency contained herein, and the opinions of Special Counsel, Counsel to the Trustee, Counsel to the City, Counsel to the Agency and Counsel to the Underwriter required hereby. The Underwriter's obligations under this Purchase Contract are and shall be subject to the following further conditions: (a) At the time of Closing, this Purchase Contract, the Trust Agreement, the Assignment Agreement, the Escrow Agreement and the Lease Agreement (collectively the "Legal Documents") all as described in the Official Statement, shall be in full force and effect as valid and binding agreements between or among the various parties thereto and the Legal Documents and the Official Statement shall not have been amended, modified or supplemented except as may have been agreed to in writing by the Underwriter, and there shall be in full force and effect such resolutions as, in the opinion of Stradling, Y occa, Carlson & Rauth, a Professional Corporation (herein called "Special Counsel"), shall be necessary in connection with the transactions contemplated hereby. (b) At or prior to the Closing, the Underwriter shall receive the following documents, in each case satisfactory in form and substance to them and their counsel: (1) The unqualified approving opinion of Special Counsel, dated the date of Closing, addressed to the City, the Agency, the Trustee and the Underwriter (or a reliance letter to the Underwriter and the Trustee), in substantially the form attached as APPENDIX D to the Official Statement; (2) A supplemental opinion of Special Counsel, addressed to, in substantially the form attached hereto as Exhibit B, and a defeasance opinion of Special Counsel addressed to the Insurer and the Underwriter (or a reliance letter to the Underwriter), to the effect that the 1986 Certificates are no longer outstanding and payable from payments made by the City from its general fund; (3) An opinion of Stephen M. Eckis, Esq., Counsel to the City, dated the date of Closing in form and substance satisfactory to the Underwriter, addressed to the Underwriter, to the effect that: 9. LA\951380054 . (i) the City is a municipal corporation and general law city, duly organized and validly existing under the Constitution and the laws of the State of California; (ii) the preparation and distribution of the Preliminary Official Statement and the Official Statement and this Purchase Contract have been duly approved by the City; (iii) the resolution of the City approving and authorizing the execution and delivery of the Official Statement and this Purchase Contract has been duly adopted at a meeting of the governing body of the City which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout and such resolution is in full force and effect and has not been amended, modified or rescinded; (iv) to the best knowledge of such counsel, after reasonable investigation, there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending or, to the best knowledge of such counsel, threatened against or affecting the City, which would adversely impact the City's ability to complete the transactions described in and contemplated by the Official Statement, to restrain or enjoin the payments under the Lease Agreement, or in any way contesting or affecting the validity of the City Documents, or the transactions described in the Official Statement wherein an unfavorable decision, ruling or finding would adversely affect the validity and enforceability of the City Documents; (v) the execution and delivery of the City Documents and the approval of the Official Statement, and compliance with the provisions thereof and hereof, under the circumstances contemplated thereby, do not and will not in any material respect conflict with or constitute on the part of the City a breach of or default under any agreement or other instrument to which the City is a party or by which it is bound or any existing law, regulation, court order or consent decree to which the City is subject; (vi) City Documents have been duly authorized, executed and delivered by the City, and, assuming due authorization, execution and delivery by the other parties thereto, constitute legal, valid and binding agreements of the City enforceable in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally and by the 10. LA\95 1380054 application of equitable principles if sought and by the limitations on legal remedies imposed on actions against cities in the State of California; (vii) except as may be required under blue sky or other securities laws of any State, no authorization, approval, consent, or other order of the State of California or any other governmental agency within the State of California is required for the valid authorization, execution and delivery of the City Documents and the approval of the Official Statement or the consummation of the other transactions contemplated by the Official Statement or this Purchase Contract; and (viii) nothing has come to their attention which would lead them to believe that the information relating to the City or the Site contained in the Official Statement contains an untrue statement or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (4) The favorable opinion of Stradling, Y occa, Carlson & Rauth, a Professional Corporation, Counsel to the Agency, dated the date of Closing, in form and substance satisfactory to the Underwriter, addressed to the Underwriter, to the effect that: (i) the Agency is a redevelopment agency, duly organized, validly existing and in good standing under the laws of the State of California; (ii) the Agency has the power to enter into the Agency Documents, and to perform its obligations thereunder; (iii) the resolution of the Agency approving and authorizing the execution and delivery of the Agency Documents and the Official Statement has been duly adopted at a meeting of the governing body of the Agency which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout; (iv) the Agency Documents and the Official Statement have been validly authorized, executed and delivered by the Agency and constitute legally valid and binding agreements of the Agency, enforceable in accordance with their respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting enforcement of 11. LA\95 1380054 creditors' rights and by the application of equitable principles if equitable remedies are sought; (v) the Agency has duly approved the distribution of the Preliminary Official Statement and Official Statements; (vi) no consent, approval, authorization or order of any court or governmental body is required for the consummation by the Agency of the transactions contemplated herein except such as have been obtained and except such as maybe required under the state securities or blue sky laws in connection with the purchase and distribution of the Certificates by the Underwriter; (vii) to the best knowledge of such counsel, after investigation, there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending or threatened against or affecting the Agency, which would adversely impact the Agency's ability to complete the transactions described in and contemplated by the Official Statement or in any way contesting or affecting the validity of the Agency Documents, or the transactions relating to the program as described and defined in the Official Statement wherein an unfavorable decision, ruling or finding would adversely affect the validity and enforceability of the Agency Documents or the Official Statement; (viii) to the best knowledge of such counsel, the execution and delivery of the Agency Documents and the Official Statement by the Agency and performance by the Agency of its obligations thereunder will not conflict with or result in a breach of any of the terms, conditions or provisions of any agreement or instrument to which the Agency is a party or constitute a default thereunder and all consents, approvals, authorizations and orders of a governmental or regulatory authority, if any, which are required to be obtained by the Agency for the consummation of the transactions contemplated thereby or as conditions precedent to the issuance of the Certificates have been obtained (provided no opinion need be expressed as to any action required under state securities or blue sky laws in connection with the purchase or distribution of the Certificates by the Underwriter); (ix) nothing has come to the attention of such counsel which would indicate that the description of the Agency contained in the Official Statement contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the -. 12. LA\951380054 circumstances under which they were made, not misleading in any material respect. (5) The opinion of counsel to the Trustee and the Escrow Agent, dated the date of Closing and addressed to the Underwriter, to the effect that: (i) the Trustee is a national banking association duly organized and validly existing under the laws of the United States having full power and being qualified to enter, accept and administer the trust created under the Trust Agreement, the Assignment Agreement and the Escrow Agreement, and to execute and deliver the Certificates; (ii) the Trust Agreement, the Assignment Agreement and the Escrow Agreement have been duly authorized, executed and delivered by the Trustee and constitute the valid and binding obligations of the Trustee in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws or equitable principles relating to or limiting creditors' rights generally; and (iii) the execution and delivery of the Certificates have been duly authorized by the Trustee and the Trustee has duly executed and delivered the Certificates in accordance with the Trust Agreement; (iv) No authorization, approval, consent or order of any governmental agency or any other person is required for the valid authorization, execution and delivery of the Trust Agreement, the Assignment Agreement or the Escrow Agreement or the execution and delivery of the Certificates. (6) the opinion of Nos sam an, Guthner, Knox & Elliott, counsel to the Underwriter, dated the Closing Date and addressed to the Underwriter, in a form and substance satisfactory to the Underwriter. In rendering such opinion, such counsel may rely on the opinions of Special Counsel, counsel to the City and counsel to the Agency. (7) A certificate, dated the date of Closing, signed by a duly authorized official of the City satisfactory in form and substance to the Underwriter and counsel to the Underwriter, (a) confirming as of such date the representations and warranties of the City contained in this Purchase Contract; (b) certifying that the City has complied with all agreements, covenants and conditions to be complied with by 13. LA\95 1380054 -- the City at or prior to the Closing under the City Documents; (c) certifying that to the best of such official's knowledge, no event affecting the City has occurred since the date of the Official Statement which either makes untrue or incorrect in any material respect as of the Closing the statements or information contained in the Official Statement or is not reflected in the Official Statement but should be reflected therein in order to make the statements and information therein not misleading in any material respect; and (d) certifying that the City has authorized and consented to the inclusion in the Official Statement of the City's financial report and accountant's opinion for the year ended July 30, 1994, and no further consent of any party is required for such inclusion. (8) A certificate, dated the date of Closing, signed by a duly authorized official of the Agency satisfactory in form and substance to the Underwriter and counsel to the Underwriter, (a) confirming as of such date the representations and warranties of the Agency contained in this Purchase Contract; (b) to the effect that, to the best of his knowledge, no event affecting the Agency has occurred since the date of the Official Statement which has not been disclosed therein or in any supplement of amendment thereto which event should be' disclosed in the Official Statement in order to make the statements therein, in light of the circumstances under which they were made, not misleading in any material respect (except such certificate need not cover information included therein by the Trustee, the Underwriter or the City). (9) A copy of a CL T A title insurance policy in an amount equal to the principal amount of the Certificates, insuring the Agency's leasehold interest in the Site subject only to permitted encumbrances or such other encumbrances approved in writing by the Underwriter. (10) Two executed or certified copies of the Legal Documents. (II) Two executed copies of the Official Statement. (12) Two certified copies of the general resolution of the Trustee authorizing the execution and delivery of certain documents by certain officers of the Trustee, which resolution authorizes the execution and delivery of documents such as the Certificates, the Trust Agreement, the Escrow Agreement and the Assignment Agreement. (13) Copies of the resolution adopted by the City and certified by the City Clerk authorizing the execution and delivery of the City Documents and the Official Statement. 14. LA\951380054 - - (14) Copies of the resolution adopted by the Agency and certified by the Secretary or Assistant Secretary of the Agency, authorizing the execution and delivery of the Agency Documents and the Official Statement. (15) Tax certifications by the City in form and substance acceptable to Special Counsel and counsel to the Underwriter. (16) A Certificate of the Trustee (acting in its capacity as Trustee and Escrow Agent), dated the Closing Date to the effect that: (i) the Trustee is duly organized and existing as a national banking association in good standing under the laws of the United States having the full power and authority to enter into and perform its duties under the Trust Agreement, the Escrow Agreement and the Assignment Agreement and to execute and deliver the Certificates to the Underwriter pursuant to this Purchase Contract; (H) the Trustee is duly authorized to enter into the Trust Agreement, the Escrow Agreement and the Assignment Agreement, and when the Trust Agreement, the Escrow Agreement and the Assignment Agreement are duly executed and delivered by the respective parties thereto, to execute and deliver the Certificates to the Underwriter pursuant to the Trust Agreement and this Purchase Contract; (Hi) no consent, approval, authorization or other action by any governmental or regulatory agency having jurisdiction over the Trustee that has not been obtained is or will be required for the execution and delivery of the Certificates or the consummation by the Trustee of the other transactions contemplated by this Purchase Contract, except as such may be required under the state securities or blue sky laws in connection with the distribution of the Certificates by the Underwriter; (iv) the execution and delivery by the Trustee of the Trust Agreement, the Certificates, the Assignment Agreement, the Escrow Agreement and compliance with the terms thereof will not conflict with, or result in a violation or breach of, or constitute a default under, any loan agreement, indenture, bond, note, resolution or any other agreement or instrument to which the Trustee is a party or by which it is bound, or any law or any rule, regulation, order or decree of any court or governmental agency or body having jurisdiction over the Trustee or any of its activities or properties (except that no representation, warranty or agreement is made by the Trustee with respect to any Federal or state securities or blue sky laws or regulations), 15. LA\951380054 or (except with respect to the lien of the Trust Agreement) result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Trustee; (v) there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court or governmental agency, public board or body pending or threatened against or affecting the existence of the Trustee or seeking to prohibit, restrain or enjoin the execution and delivery of the Certificates or the collection of Lease Payments to pay the principal and interest which are represented by the Certificates, or in any way contesting or affecting the validity or enforceability of the Certificates, the Trust Agreement, the Assignment Agreement or the Escrow Agreement or contesting the powers of the Trustee or its Agency to enter into and perform its obligation under any of the foregoing, wherein an unfavorable decision, ruling or finding would adversely affect the transactions contemplated hereby, or which, in any way, would adversely affect the validity of the Certificates, the Trust Agreement, the Escrow Agreement, the Assignment Agreement or any agreement or instrument to which the Trustee is a party and which is used or contemplated for use in the consummation of the transactions contemplated hereby; and (vi) subject to the provisions of the Trust Agreement, the Trustee will apply the proceeds from the Certificates to the purposes specified in the Trust Agreement. (17) If required, the written consent of the City auditing firm to the inclusion of its opinions relating to the City's financial statements in the Preliminary Official Statement and the Official Statement. (18) Evidence as of the Closing satisfactory to the Underwriter that the Certificates have received, at a minimum, a rating of "_" from Moody's Investors Service ("Moody's") and a rating of" " from Standard & Poor's Rating Group (S&P) (or such other equivalent ratings as Moody's and S&P shall issue), and that such ratings have not been revoked or downgraded. (19) A verification report, dated the Closing Date, from Ernst & Young, to the effect that amounts on deposit under the Escrow Agreement will be sufficient to pay principal of, premium, if any, and interest on the 1986 Certificates until such 1986 Certificates are redeemed in whole. 16. LA\951380054 - (20) An executed fmancial guaranty insurance policy (the "Policy") of Financial Security Assurance Inc. (the "Insurer") insuring the scheduled payment of principal of and interest on the Certificates, substantially in the form attached as APPENDIX E of the Official Statement. (21) An opinion of counsel to the Insurer, dated as of the date of the Closing, addressed to the Underwriter and in the form and substance acceptable to counsel to the Underwriter, substantially to the following effect: (i) the Insurer has been duly incorporated and in validly existing and in good standing under the laws of the State of New York. (ii) the Policy was issued in the ordinary course of business and constitutes the legal, valid and binding obligations of the Insurer enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, rehabilitation, and other similar laws of general applicability relating to or affecting creditors' and/or claimants' rights against insurance companies and to general equity principles. (iii) the information contained in the Official Statement under the heading "CERTIFICATE INSURANCE" does not, insofar as it relates to the Policy and the Insurer, contain any untrue statement of a material fact or, insofar as it relates to the Policy, intentionally omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (22) Evidence that the federal tax information form 8038-G has been prepared for filing. (23) A copy of the Notice of Final Sale required to be delivered to the California Debt Advisory Commission pursuant to Section 8855 of the California Government Code. (24) Such additional legal opinions, certificates, proceedings, instruments and other documents as Special Counsel and Counsel for the Underwriter may reasonably request to evidence compliance by the Trustee with legal requirements, the truth and accuracy, as of the time of Closing, of the representations contained herein and in the Official Statement and the due performance or satisfaction by the Trustee, the Agency and the City at or prior to such time of all agreements then to be performed and all conditions then to be satisfied. 17. LA \95 1380054 (c) All matters relating to this Purchase Contract, the Certificates and the sale thereof, the Legal Documents and the consummation of the transactions contemplated by this Purchase Contract shall have been approved by the Underwriter and Counsel for the Underwriter, such approval not to be unreasonably withheld. If the conditions to the Underwriter's obligations contained in this Purchase Contract are not satisfied or if the Underwriter's obligations shall be terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate and neither the Underwriter nor the City shall have any further obligation hereunder. 8. The Underwriter shall have the right to terminate this Purchase Contract, without liability therefor, by written notification to the City and the Agency if at any time at or prior to the Closing: (i) any event shall occur which causes any statement contained in the Official Statement to be materially misleading or results in a failure of the Official Statement to state a material fact necessary to make the statements in the Official Statement, in the light of the circumstances under which they were made, not misleading in any material respect; or (ii) the marketability of the Certificates or the market price thereof, in the opinion of the Underwriter, has been materially adversely affected by an amendment to the Constitution of the United States or by any legislation in or by the Congress of the United States or by the State, or the amendment of legislation pending as of the date of this Purchase Contract in the Congress of the United States, or the recommendation to Congress or endorsement for passage (by press release, other form of notice or otherwise) of legislation by the President of the United States, the Treasury Department of the United States, the Internal Revenue Service or the Chairman or ranking minority member of the Committee on Finance of the United States Senate or the Committee on Ways and Means of the United States House of Representatives, or the proposal for consideration of legislation by either such Committee, or the presentment of legislation for consideration as an option by either such Committee, or by the staff of the Joint Committee on Taxation of the Congress of the United States, or the favorable reporting for passage of legislation to either House of the Congress of the United States by a Committee of such House to which such legislation has been referred for consideration, or any decision of any Federal or state court or any ruling or regulation (final, temporary or proposed) or official statement on behalf of the United States Treasury Department, the Internal Revenue Service or other Federal or State authority materially adversely affecting the Federal or State tax status of the Agency, or the interest on the Certificates or notes or obligations of the general character of the Certificates; or (iii) any legislation, ordinance, rule or regulation shall be introduced in, or be enacted by any governmental body, department or agency of the States or a decision by any court of competent jurisdiction within the State or any court of the United States shall 18. LA\951380054 be rendered which, in the reasonable opinion of the Underwriter, materially adversely affects the market price of the Certificates; or (iv) legislation shall be enacted by the Congress of the United States, or a decision by a court of the United States shall be rendered, or a stop order, ruling, regulation or official statement by, or on behalf of, the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall be issued or made to the effect that the issuance, offering or sale of obligations of the general character of the Certificates, or the issuance, offering or sale of the Certificates, including all underlying obligations, as contemplated hereby or by the Official Statement, is in violation or would be in violation of, or that obligations of the general character of the Certificates, or the Certificates, are not exempt from registration under, any provision of the federal securities laws, including the Securities Act of 1933, as amended and as then in effect, or that the Trust Agreement needs to be qualified under the Trust Indenture Act of 1939, as amended and as then in effect; or (v) additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority by any national securities exchange which restrictions materially adversely affect the Underwriter's ability to market the Certificates; or (vi) a general banking moratorium shall have been established by federal or State authorities; or (vii) the United States has become engaged in hostilities which have resulted in a declaration of war or a national emergency or there has occurred any other outbreak of hostilities or a national or international calamity or crisis, financial or otherwise, the effect of such outbreak, calamity or crisis on the financial markets of the United States, being such as, in the reasonable opinion of the Underwriter, would affect materially and adversely the ability of the Underwriter to market the Certificates; or (viii) the commencement of any action, suit or proceeding which, in the judgment of the Underwriter, materially adversely affects the market price of the Certificates; or (ix) there shall be in force a general suspension of trading on the New York Stock Exchange; or (x) the market for the Certificates or the market prices of the Certificates or the ability of the Underwriter to enforce contracts for the sale of the Certificates shall have been materially and adversely affected, in the reasonable professional judgment of the Underwriter; or 19. LA\951380054 .. (xi) an event described in Section 50) or 6(h) hereof shall have occurred which, in the reasonable professional judgment of the Underwriter, requires the preparation and publication of a supplement or amendment to the Official Statement; or (xii) any rating of the Certificates by a national rating agency shall have been withdrawn or downgraded. 9. Performance by the City of its obligations under this Purchase Contract is conditioned upon (i) performance by the Underwriter of its obligations hereunder and (ii) receipt by the Underwriter of all opinions and certificates to be delivered at Closing by persons and entities other than the City. 10. After the Closing and until the End Date (a) the City will not adopt any amendment of or supplement to the Official Statement to which the Underwriter shall object in writing or which shall be disapproved by counsel for the Underwriter, and (b) if any event relating to or affecting the City or the Agency shall occur as a result of which it is necessary, in the opinion of counsel for the Underwriter, to amend or supplement the Official Statement in order to make the Official Statement not misleading in the light of the circumstances existing at the time it is delivered to an initial purchaser of the Certificates, the City and the Agency will forthwith prepare and furnish to the Underwriter a reasonable number of copies of an amendment of or supplement to the Official Statement (in form and substance satisfactory to counsel for the Underwriter) which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to an initial purchaser of the Certificates, not misleading. The costs of preparing any necessary amendment or supplement to the Official Statement to be utilized until the End Date shall be borne by the City and any costs incurred thereafter incident to amending or supplementing the Official Statement shall be borne by the Underwriter. For the purposes of this section the City and the Agency will each furnish such information with respect to itself as the Underwriter may from time to time request. II. In connection with the initial placement and underwriting, the City shall pay the following expenses (a) the cost of preparation, printing, engraving, execution and delivery of the Certificates; (b) the acceptance fees of the Trustee and any fees and expenses of the Trustee's counsel; (c) any fees charged by any rating agency for rating the Certificates; (d) fees payable to the California Debt Advisory Commission; (e) the fees and disbursements of Special Counsel, Counsel to the City, Counsel to the Agency, and any financial advisor or independent certified public accountant; and (f) any out-of-pocket disbursements of the City to be paid from the proceeds of the Certificates. All out-of-pocket expenses of the Underwriter, including Underwriter counsel and the cost of preparation, distribution, delivery, amendment or supplement of the Official Statement, the Blue Sky and Legal Investment Survey and this Purchase Contract and expenses to qualify the Certificates for sale under any Blue Sky laws shall be paid by the Underwriter. 20. LA\951380054 . ..- 12. Any notice or other communication to be given to the Underwriter may - be given by delivering the same to PaineWebber Incorporated, 725 South Figueroa Street, 41st Floor, Los Angeles, California 90017. Any notice or other communication to be given to the City or the Agency may be given by delivering the same to City of Po way, 13325 Civic Center Drive, Poway, California 92064, Attention: Director of Administrative Services. The approval of the Underwriter when required hereunder or the determination of satisfaction as to any document referred to herein shall be in writing signed by PaineWebber Incorporated and delivered to you. 13. This Purchase Contract is made solely for the benefit of the City, the Agency and the Underwriter (including the successors or assigns thereof) and no other person shall acquire or have any right hereunder or by virtue hereof. 14. This Purchase Contract may be executed by the parties hereto in separate counterparts, each of which such counterparts shall together constitute but one and the same instrument. This Purchase Contract shall be governed by the laws of the State of California. P AINEWEBBER INCORPORATED By: Title: Accepted: CITY OF POW A Y By: Title: POW A Y REDEVELOPMENT AGENCY By: Title: -. 21. LA\951380054 EXHmIT A MATURITY SCHEDULE Maturity Date Principal Interest Price or AUillst I Amount Rate Yield EXHIBIT A LA\951380054 - - EXHIBIT B FORM OF SUPPLEMENTAL OPINION OF SPECIAL COUNSEL -- EXHIBIT B 9331303W.LAl _n_ - - . RECORDING REQUESTED BY ) .- AND WHEN RECORDED MAIL TO: ) ) STRADLING, YOCCA, CARLSON & RAUTH ) 660 Newport Center Drive ) Suite 1600 ) Newport Beach, California 92660 ) Attn: Denise E. Hering, Esq. ) ) [Space above for recorder.J This document is recorded for the benefit of the City of Poway, and the recording is fee-exempt under Section 27383 of the Government Code. LEASE AGREEMENT between CITY OF POWAY, as Lessee and POWAY REDEVELOPMENT AGENCY, as Lessor Dated as of July I, 1995 Relating to $ 1995 Refunding Certificates of Participation (1986 Capital Improvement Projects) ATTACHMENT G JUN 2 0 1995 ITEM 11 ~,] .>--- TABLE OF CONTENTS Em ARTICLE I DEFINITIONS AND EXHmlTS SECTION 1.1 Definitions and Rules of Construction . . . . . . . . . . . . . . . . 2 SECTION 1.2 Exhibits ................................. . 3 ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES SECTION 2. I Representations, Covenants and Warranties of the City .... . 3 SECTION 2.2 Representations, Covenants and Warranties of the Agency .. . 5 ARTICLE III ACQUISITION, CONSTRUCTION AND IMPROVEMENT OF THE PROJECT SECTION 3.1 Deposit of Certificate Proceeds . . . . . . . . . . . . . . . . . . . . 7 SECTION 3.2 Acquisition, Construction and Improvement of the Project .. . 7 SECTION 3.3 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 3.4 Payment of Project Costs . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 3.5 Completion Date; Certification ................... . 7 SECTION 3.6 Substitution and Release ....................... . 7 SECTION 3.7 Further Assurances and Corrective Instruments .......... 8 ARTICLE IV AGREEMENT TO LEASE; TERM OF LEASE; LEASE PAYMENTS SECTION 4.1 Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 4.2 Term................................... . 9 SECTION 4.3 Extension of Lease Term . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 4.4 Lease Payments ............................ . 9 SECTION 4.5 No Withholding ........................... . 10 SECTION 4.6 Fair Rental Value .......................... . 10 SECTION 4.7 Budget and Appropriation ..................... . 10 SECTION 4.8 Assignment of Lease Payments ................... 11 SECTION 4.9 Use and Possession .......................... 11 SECTION 4.10 Abatement of Lease Payments and Additional Payments . . . . 11 SECTION 4.11 Additional Payments. . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 4.12 Net-Net-Net Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 PU8L,27190_1 1 138182345.62 i .. ARTICLE V INSURANCE SECTION 5.1 Public Liability and Property Damage . . . . . . . . . . . . . . . 12 SECTION 5.2 Worker's Compensation ....................... 13 SECTION 5.3 Hazard Insurance .......................... . 13 SECTION 5,4 Rental Interruption Insurance .................... 14 SECTION 5.5 Title Insurance ....... . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 5.6 General Insurance Provisions .................... 14 SECTION 5.7 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE VI DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS SECTION 6.1 Application of Net Proceeds . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE VII COVENANTS WITH RESPECT TO THE SITE SECTION 7.1 Use of the Site . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 7.2 Leasehold Interest in the Site .................... 17 SECTION 7.3 Option to Prepay Lease Payments ................ . 17 SECTION 7.4 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 7.5 Installation of City's Personal Property .............. 17 SECTION 7.6 Access to the Site ........................... 18 SECTION 7.7 Maintenance, Utilities, Taxes and Assessments ......... 18 SECTION 7.8 Modification of the Site . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 7.9 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 7.10 Agency's Disclaimer of Warranties ............... . 19 SECTION 7.11 City's Right to Enforce Warranties of Manufacturers, Vendors or Contractors . . . . . . . . . . . . . . . . . . . . . . . . 20 ARTICLE VIn ASSIGNMENT, SUBLEASING AND AMENDMENT SECTION 8.1 Assignment by the Agency . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 8.2 Assignment and Subleasing by the City .............. 20 SECTION 8.3 Amendments and Modifications . . . . . . . . . . . . . . . . . . . 21 ,uBL,2719O_1 1 138182345.62 ii ARTICLE IX EVENTS OF DEFAULT AND REMEDIES SECTION 9.1 Events of Default Defined ...................... 21 SECTION 9.2 Remedies on Default ........................ . 22 SECTION 9.3 No Remedy Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 9.4 Agreement to Pay Attorneys Fees and Expenses . . . . . . . . . 23 SECTION 9.5 No Additional Waiver Implied by One Waiver. . . . . . . . . . 23 SECTION 9.6 Application of the Proceeds Following Default ........ . 24 SECTION 9.7 Trustee and Certificate Owners to Exercise Rights ....... 24 ARTICLE X PREPAYMENT OF LEASE PAYMENTS SECTION 10.1 Security Deposit ............................ 24 SECTION 10.2 Extraordinary Prepayment From Net Proceeds . . . . . . . . . . 24 SECTION 10.3 Optional Prepayment ........................ . 24 SECTION lOA Sinking Fund Redemption ..................... . 25 SECTION 10.5 Credit for Amounts on Deposit ... . . . . . . . . . . . . . . . . 25 SECTION 10.6 Effect of Prepayment ......................... 25 ARTICLE XI MISCELLANEOUS SECTION ILl Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 11.2 Binding Effect ............................ . 26 SECTION 11.3 Severability ............................... 26 SECTION 11.4 Execution in Counterparts ...................... 26 SECTION 11.5 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 11.6 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Exhibit A - Description of the Site . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-I Exhibit B - Schedule of Lease Payments ........................ . B-1 Exhibit C - Lease Supplement .............................. . C-l PUBL,27190_11138IB2345.62 jji - - LEASE AGREEMENT THIS LEASE AGREEMENT, dated as of July 1, 1995, is entered into by and between the POW A Y REDEVELOPMENT AGENCY, a political subdivision of the State of California (the "State") duly organized and existing under the laws of the State of California, as lessor (the "Agency"), and the CITY OF POWAY, a municipal corporation of the State duly organized and existing under and by virtue of the Constitution and laws of the State of California, as lessee (the "City"); WITNESSETH: WHEREAS, pursuant to the Government Code of the State of California, the City may enter into leases and agreements relating to real property to be used by the City; WHEREAS, the Agency and City desire to enter into this Lease Agreement (the "Lease") and authorize the execution and delivery of certificates of participation, described below, evidencing proportionate interests in certain rights of the Agency under this Lease, including the right to receive lease payments to be made by the City hereunder, in order to advance refund the outstanding portion of those certain outstanding $10,000,000 1986 Certificates of Participation, the proceeds of which were used to finance the acquisition and construction of certain public improvements (the "Prior Certificates"); and WHEREAS, the City has entered into a Site Lease of even date herewith (the "Site Lease") with the Agency under which the Agency has agreed to lease from the City the Site, which is described in Exhibit A hereto, and which Site Lease contains other terms and conditions as the governing board of the City deems to be in the best interest of the City; and WHEREAS, in consideration of the lease payments to be paid by the City to the Agency hereunder, the Agency will lease back the Site to the City pursuant to Section 4.1 hereof; and WHEREAS, the Agency is authorized pursuant to the laws of the State of California and its articles of incorporation and bylaws to provide financial assistance to the City by acquiring, constructing and fmancing various public facilities, land and equipment and the leasing of facilities, land and equipment for the use, benefit and enjoyment of the public; NOW, THEREFORE, in consideration of the above premises and of the mutual covenants hereinafter contained and for other good and valuable consideration, the parties hereto agree as follows: PUBL:2719<U 1138182345.62 ARTICLE I DEFINITIONS AND EXIllBITS SEcnON 1.1 Definitions and Rules of Construction. Unless the context otherwise requires, the capitalized terms used herein shall, for all purposes of this Lease, have the meanings specified in the Trust Agreement; and the additional terms defined in this Section shall, for all purposes of this Lease, have the meanings herein specified. Unless the context otherwise indicates, words importing the singular number shall include the plural number and vice versa. The terms "hereby," "hereof," "hereto," "herein," "hereunder" and any similar terms, as used in this Lease, refer to this Lease as a whole. "Additional Certificates" means any certificates of participation executed and delivered by the Trustee pursuant to Section 317 of the Trust Agreement subsequent to the Delivery Date for the Certificates, which are secured on a parity with the Certificates. "Certificates" means the $ 1995 Refunding Certificates of Participation (1986 Capital Improvement Projects), executed and delivered by the Trustee pursuant to the Trust Agreement. "Comoletion Certificate" means a certificate of the City filed with the Trustee and signed by the City Representative, as prescribed by Section 3.5 hereof. "ComDonent" means any portion of the Site designated in Exhibit A hereto as a Component, as such Exhibit A may be amended from time to time in accordance herewith. "H~7;!rdous Substances" means any substance, waste, pollutants, or contaminants now or hereafter included in such (or any similar) term under any federal, state or local code, statute, regulation or ordinance now in effect or hereafter enacted or amended. "Indeoendent Counsel" means an attorney duly admitted to the practice of law before the highest court of the State and who is not an employee or officer of the Agency, the Trustee or the City. "Lease" means this Lease Agreement, by and between the City and the Agency, as amended and supplemented from time to time. "Lease SuoDlement" means one or more amendments to this Lease executed substantially in the form attached as Exhibit C hereto. "Permitted Encumbrances" means as of any particular time: (1) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the City may, pursuant to Section 7.7 hereof, permit to remain unpaid; (2) the Assignment Agreement, as it may be amended from time to time; (3) this Lease, as it may be amended from time to time; (4) the Site Lease, as it may be amended from time to time; (5) any right or claim of any mechanic, laborer, materialman, supplier or vendor filed or perfected in the manner prescribed by law after the Delivery Date for the Certificates which is being contested by the City in accordance with Section 7.8(b) hereof; (6) easements, rights of way, mineral rights, drilling rights and other rights, PUBL,27190_1 1 138182345.62 2 - - reservations, covenants, conditions or restrictions which exist of record as of the Delivery Date for the Certificates and which the City certifies in writing on the Delivery Date for the Certificates will not materially impair the use of the Site; and (7) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions established following the Delivery Date for the Certificates, or existing on any real property substituted for the Site, to which the Agency, the Insurer and the City consent in writing and which the City certifies will not materially impair the use of the Site or real property substituted for the Site, as the case may be. "Proiect" means any capital improvements specified by the City from time to time to be constructed with the proceeds of any Additional Certificates. "Site" means the real property, including all buildings, structures and improvements located thereon, described from time to time in Exhibit A hereto, as such Exhibit A may be amended and supplemented from time to time in accordance with the provisions of this Lease. "Site Lease" means the Site Lease, dated as of the date hereof, by and between the City, as lessor, and the Agency, as lessee, as amended and supplemented from time to time, and any duly authorized and executed amendments thereto. "Term" means the term of this Lease as established by Section 4.2 hereof. "Trust Al!reement" means the Trust Agreement, dated as of the date hereof, by and among Bank of America National Trust and Savings Association, as trustee, the City and the Agency, as amended and supplemented from time to time. SECTION 1.2 Exhibits. The following Exhibits are attached to, and by reference made a part of, this Lease: Exhibit A: Description of the Site. Exhibit B: Schedule of Lease Payments. Exhibit C: Lease Supplement. ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANrIES SECTION 2.1 Representations, Covenants and Warranties of the City. The City represents, covenants and warrants to the Agency as follows: (a) Due Orlzanization and Existence. The City is a political subdivision of the State, duly organized and existing under and by virtue of the Constitution and laws of the State, with the power and authority to own, lease and acquire real and personal property and equipment. pU8L27190_11138182345.62 3 (b) Authorization: Enforceability. The Constitution and laws of the State authorize the City to enter into this Lease, the Site Lease, the Escrow Agreement and the Trust Agreement and to enter into the transactions contemplated by and to carry out its obligations under all of the aforesaid agreements, and the City has duly authorized and executed all of the aforesaid agreements. This Lease, the Site Lease, the Escrow Agreement and the Trust Agreement constitute the legal, valid and binding obligations of the City, enforceable in accordance with their respective terms, except to the extent limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the rights of creditors generally. (c) No Conflicts or Default: No Liens or Encumbrances. Neither the execution and delivery of this Lease, the Site Lease, the Escrow Agreement or the Trust Agreement, nor the fulfillment of or compliance with the terms and conditions hereof or thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any agreement or instrument to which the City is now a party or by which the City is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the City or upon the Site, except for Permitted Encumbrances and the pledges contained in the Trust Agreement. (d) Execution and Delivery. The City has duly authorized and executed this Lease, the Site Lease, the Escrow Agreement and the Trust Agreement in accordance with the Constitution and laws of the State. (e) Indemnification of the Al!encv and the Trustee. To the extent permitted by law, the City covenants to defend, indemnify and hold harmless the Agency, the Trustee and their respective assigns, board members and employees (collectively, the "Indemnified Party") against any and all losses, claims, damages or liabilities, joint or several, including fees and expenses incurred in connection therewith, to which such Indemnified Party may become subject under any statute or at law or in equity or otherwise in connection with the transactions contemplated by this Lease, and shall reimburse any such Indemnified Party for any legal or other expenses incurred by it in connection with investigating any claims against it and defending any actions, insofar as such losses, claims, damages, liabilities or actions arise out of the transactions contemplated by this Lease or the Site Lease. In particular, without limitation, to the extent permitted by law, the City shall and hereby agrees to indemnify and save the Indemnified Party harmless from and against all claims, losses and damages, including legal fees and expenses, arising out of (i) the use, maintenance, condition or management of, or from any work or thing done on, the Site or the Project by the City including, without limitation, as a result of the use, storage, presence, disposal or release of any Hazardous Substances on or about the Site, (ii) any breach or default on the part of the City in the performance of any of its obligations under this Lease, (Hi) any act of negligence of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Site, (iv) any act of negligence of any assignee or sublessee of the City with respect to the Project, or (v) the completion of the Project or the authorization of payment of the Project Costs by the City. No indemnification is made under this Section or elsewhere in this Lease for claims, losses or damages, including pUBL,2719<U 1138182345.62 4 - - legal fees and expenses arising out of the willful misconduct, negligence, or breach of duty under this Lease by the Agency, its officers, board members, agents, employees, successors or assigns. (1) General Tax and Arbitra2e Covenant. The City hereby covenants that, notwithstanding any other provision of this Lease, it will make no use of the proceeds of the Certificates or any Additional Certificates or of any other amounts, regardless of the source, or of any property or take any action, or refrain from taking any action that may cause the obligations of the City under this Lease to be "arbitrage bonds" within the meaning of Section 148 of the Code, or under applicable Treasury Regulations promulgated thereunder or to cause the Interest Component of the Lease Payments to become subject to State of California personal income taxation. In addition, the City covenants that it will not make any use of the proceeds of the obligations provided herein or in the Trust Agreement or of any other funds of the City, or take or omit to take any other action that would cause the obligations of the City under this Lease to be "private activity bonds" within the meaning of Section 141 of the Code, or "federally guaranteed" within the meaning of Section 149(b) of the Code. To that end, so long as necessary to maintain the exclusion from gross income for federal income tax purposes of the Interest Component of the Lease Payments, the City will comply with all requirements of such Sections and all regulations thereunder and under Section 103 of the Code, to the extent that such requirements are, at the time, applicable and in effect. SEcrION 1.1 Representations, Covenants and Warranties of the Agency. The Agency represents, covenants and warrants to the City as follows: (a) Due Orl!anization and Existence: Enforceability. The Agency is a nonprofit public benefit corporation duly organized, existing and in good standing under and by virtue of the laws of the State, has the power to enter into this Lease, the Site Lease, the Assignment Agreement and the Trust Agreement; is possessed of full power to own and hold real and personal property, and to lease and sell the same; and has duly authorized the execution and delivery of this Lease, the Site Lease, the Assignment Agreement and the Trust Agreement. This Lease, the Site Lease, the Assignment Agreement and the Trust Agreement constitute the legal, valid and binding obligations of the Agency, enforceable in accordance with their respective terms, except to the extent limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the rights of creditors generally. (b) No Encumbrances. The Agency will not pledge or encumber the Lease Payments or Additional Payments or other amounts derived from the Site or from its other rights under this Lease or the Site Lease, except for Permitted Encumbrances and except as provided under the terms of this Lease, the Site Lease, the Assignment Agreement and the Trust Agreement. (c) No Conflicts or Defaults: No Liens or Encumbrances. Neither the execution and delivery of this Lease, the Site Lease, the Assignment Agreement or the Trust Agreement, nor the fulfillment of or compliance with the terms and conditions hereof or thereof, nor the consummation of the transactions contemplated hereby or PU8L,27190_1 1 138182345.62 5 thereby, conflicts with or results in a breach of the terms, conditions or provisions of the formation documents of the Agency or any restriction or any agreement or instrument to which the Agency is now a party or by which the Agency is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the Agency or upon the Site, except for Permitted Encumbrances and except by the pledges contained in the Trust Agreement. (d) Execution and Delivery. The Agency has duly authorized and executed this Lease, the Site Lease, the Assignment Agreement and the Trust Agreement in accordance with the Constitution and laws of the State. (e) General Tax and Arbitral!e Covenant. The Agency covenants that, notwithstanding any other provision of this Lease, it will make no use of the proceeds of the Certificates or any Additional Certificates or of any other amounts or property, regardless of the source, or take any action or refrain from taking any action that may cause the obligations of the City under this Lease to be "arbitrage bonds" subject to federal income taxation by reason of Section 148 of the Code or to cause the Interest Component of the Lease Payments to become subject to State of California personal income taxation. In addition, the Agency covenants that it will not make any use of the proceeds of the ob ligations provided herein or in the Trust Agreement or of any other funds of the City or take or omit to take any other action that would cause such obligations to be "private activity bonds" within the meaning of Section 141 of the Code, or "federally guaranteed" within the meaning of Section 149(b) of the Code. To that end, so long as necessary to maintain the exclusion from gross income for federal income tax purposes of the Interest Component of the Lease Payments, the Agency will comply with all requirements of such Sections and all regulations of the United States Department of the Treasury issued thereunder and under Section 103 of the Code, to the extent that such requirements are, at the time, applicable and in effect. (0 Maintenance of Existence. To the extent permitted by law, the Agency agrees that during the term hereof it will maintain its existence as a joint powers authority, will not dissolve or otherwise dispose of all or substantially all of its assets, if any, will not become a general or limited partner in any partnership or a joint venturer in any joint venture and will not combine or consolidate with or merge into any other entity or permit one or more other entities to consolidate with or merge into it, unless such action will not cause a merger of the City's leasehold estate in the Site and the successor thereto is a public agency which expressly agrees to assume all rights and responsibilities of the Agency under the Site Lease, the Assignment Agreement, the Trust Agreement and this Lease. PUBL,27190_11138182345.62 6 - - ARTICLE III ACQUlSmON, CONSTRUCTION AND IMPROVEMENT OF THE PROJECf SEcnON 3.1 Deposit of Certificate Proceeds. On the Delivery Date for the Certificates and on the Delivery Date for any Additional Certificates, the Agency agrees to pay or cause to be paid to the Trustee as the rental due under the Site Lease the amount specified in Section 4 thereof, which moneys shaH be deposited with the Trustee as provided in Section 401 of the Trust Agreement, or in the case of Additional Certificates as provided in any Supplemental Trust Agreement which relates to such Additional Certificates. SECTION 3.2 Acquisition, Construction and Improvement of the Project. The City agrees to acquire, construct, deliver and instaH the Project, or to cause it to be acquired, constructed, delivered and instaHed, with the proceeds of any Additional Certificates paid to the City by the Agency pursuant to Section 3.1 above and the Agency shall have no responsibility with respect thereto. SEcnON 3.3 Compliance with Law. The City shall comply with all applicable provisions for bids and contracts prescribed by law with respect to the Project, including, without limitation, Sections 20110 ~ ~ of the Public Contracts Code and Article 42 (commencing with Section 20670) of Part 3 of Division 2 of the Public Contracts Code. SEcnON 3.4 Payment of Project Costs. Payment of the Project Costs shall be made from the moneys deposited with the Trustee in the Project Fund as provided in Section 3.1 hereof and Section 402 of the Trust Agreement, which shall be disbursed from the Project Fund in accordance and upon compliance with Section 402 of the Trust Agreement and the provisions of any Supplemental Trust Agreement pursuant to which any Additional Certificates are executed and delivered. SEcnON 3.5 Completion Date; Certification. Upon the completion of acquisition, construction, delivery and installation of the portion of the Project to be financed with each issue of Additional Certificates, the City shall deliver to the Trustee a Completion Certificate with respect thereto. A separate Completion Certificate will be filed with respect to the portion of the Project to be financed from each issue of Additional Certificates. On the date of filing a Completion Certificate, all excess moneys remaining in the Acquisition and Construction Account of the Project Fund for the issue of Additional Certificates for which such Completion Certificate is delivered shall be applied in accordance with the provisions of Section 402(e) of the Trust Agreement. SECTION 3.6 Substitution and Release. The City shall have the right from time to time to add other real property and improvements (subject only to Permitted Encumbrances) or to substitute other real property or improvements (subject only to Permitted Encumbrances) for aH or a portion of the Site or to release a portion of the real property or improvements constituting the Site, if it has provided the Trustee with a written Lease Supplement and has obtained and provided to the Trustee each of the following: (a) Written consent of each municipal bond insurance company that has insured the Certificates or an issue of Additional Certificates, if any; PUBL,2719<U 1138182345.62 7 - (b) Written confirmation from each Rating Agency that has rated the Certificates or an issue of Additional Certificates that its then existing rating with respect to the Certificates or any Additional Certificates will not be reduced or withdrawn as a result of such addition, substitution or release; (c) A certificate from an independent and qualified MAl real estate appraiser selected by the City setting forth his or her findings that the Site as constituted following such addition, substitution or release (i) has an annual fair rental value during the remainder of the Term which is equal to or greater than the total annual Lease Payments and Additional Payments (assuming that the annual Additional Payments due in the future will equal the average annual Additional Payments prior to such addition, substitution or release) required to be paid hereunder during any year of the remainder of the Term, and (ii) has a useful life at least equal to the remaining Term hereof; (d) Certificates of insurance applicable to the Site (at and after the addition, substitution or release) which comply with the requirements of Sections 5.1, 5.3, 5.4 and 5.5 hereof; and (e) An opinion of Bond Counsel to the effect that such addition, substitution or release will not adversely affect the exclusion from gross income for federal income tax purposes and the exemption from State personal income taxation of the Interest Component of the Lease Payments and that this Lease and the Site Lease, as amended, remain valid and binding obligations of the City. In connection with a substitution or release, all interests of the Agency, and its assignee, in the portion of the Site released shall terminate and the Agency and its assignee shall execute and record with the County Recorder of the County of San Diego all documents deemed necessary by the City to evidence such termination of interest. Upon receipt of the items described in subparagraphs (a), (b), (c), (d) and (e) above, the Trustee also shall execute a Lease Supplement and, if necessary, a Supplemental Trust Agreement, and shall not impose on the City any further conditions or prerequisites to the requested addition, substitution or release. The City shall cause the Lease Supplement to be recorded in the real property records of the City. All costs and expenses incurred in connection with such addition, substitution or release shall be borne by the City. No addition, substitution or release under this Section 3.6 shall be, by itself, the basis for any reduction in or abatement of the Lease Payments due from the City hereunder. SECTION 3.7 Further Assurances and Corrective Instruments. The Agency and the City agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Site hereby leased or intended so to be or for carrying out the expressed intention of this Lease. 'U8L:27190_1 1 138182345.62 8 - - ARTICLE IV . AGREEMENT TO LEASE; TERM OF LEASE; LEASE PAYMENTS SECDON 4.1 Lease. The Agency hereby subleases the Site to the City upon the terms and conditions set forth herein. The subleasing by the Agency to the City of the Site described in Exhibit A hereto shall not effect or result in a merger of the City's leasehold estate pursuant to this Lease and its fee estate as lessor under the Site Lease, and the Agency shall continue to have and hold a leasehold estate in said Site pursuant to the Site Lease throughout the term of the Site Lease and the Term of this Lease. As to the Site, this Lease shall be deemed and constitute a sublease. SECDON 4.2 Term. The Term of this Lease shall commence on the Delivery Date for the Certificates and shall end on August 1, 20_, unless extended pursuant to Section 4.3 hereof, or unless terminated prior thereto upon the earliest of any of the following events: (a) Pavment of All Lease Payments. The payment by the City of all Lease Payments required under Section 4.4 hereof and any Additional Payments required under Section 4.11 hereof; or (b) Preoavment. The optional prepayment of all Lease Payments in - accordance with Section 10.3 hereof and the payment of all Additional Payments due through such prepayment date. SECDON 4.3 Extension of Lease Term. The Term of this Lease may be extended up to August 1, 2035 in connection with the execution and delivery of any Additional Certificates. If on the final maturity date of the Certificates or any Additional Certificates all Interest Components and Principal Components represented thereby shall not be fully paid by the City, or if the Lease Payments or Additional Payments hereunder shall have been abated at any time as permitted by the terms hereof, then the Term shall be extended until all Certificates and Additional Certificates shall be fully paid, except that the Term shall in no event be extended beyond August 1,2035. SECDON 4.4 Lease Payments. (a) Time and Amount. Subject to the provisions of Section 4.10 (regarding abatement in event of loss of use of any portion of the Site) and Article 10 hereof (regarding prepayment of Lease Payments), the City agrees to pay to the Agency, its successors and assigns, as annual rental for the use and possession of the Site, the Lease Payments (denominated into Interest Components and Principal Components). The Lease Payments are intended to be sufficient in both time and amount to pay when due the Principal Components and Interest Components represented by the Certificates and any Additional Certificates, and are due and payable in arrears and in immediately available funds on the fifth Business Day prior to each August 1 and February 1, commencing February 1, 1996 (the "Lease Payment Date") as set forth in Exhibit B hereto. In the event that any Additional Certificates are executed and delivered pursuant to the Trust PUBL,27190_111381B234S.62 9 Agreement, the City and the Trustee shall execute an amendment to Exhibit B to state the Lease Payments due hereunder as a result of the execution and delivery of such Additional Certificates. (b) Credits. Any amount held in the Lease Payment Fund or the Interest Account of the Certificate Fund on the date any Lease Payment is made by the City (other than amounts required for payment of past due Principal Components or Interest Components with respect to any Certificates or Additional Certificates that have matured or been called for redemption and have not been presented for payment or amounts which have been paid with respect to a prior Lease Payment Date but not yet distributed to Owners) shall be credited towards the Lease Payment then due and payable. No payment need be made by the City on any Lease Payment Date if the amounts then held in the Lease Payment Fund and the Interest Account of the Certificate Fund (other than those amounts excluded under the prior sentence) are at least equal to the Lease Payment then required to be paid. (c) Rate on Overdue Payments. In the event the City should fail to make any Lease Payments required by this Section 4.4, or any portion of any such Lease Payment, the Lease Payment or portion thereof in default shall continue as an obligation of the City until the amount in default shall have been fully paid, and the City agrees to pay the same with interest thereon, to the extent permitted by law, from the date such amount was ori{;inally payable at the rate equal to the original interest rate payable with respect to each Certificate or Additional Certificate, as applicable, represented by such delinquent Lease Payment. SECfION 4.5 No Withholding. Notwithstanding any dispute between the Agency and the City, other than a dispute arising under Section 4.10 hereof as a result of which the City has concluded that it may not legally pay the Lease Payments in dispute, the City shall make all Lease Payments when due and shall not withhold any Lease Payments pending the final resolution of such dispute. SECfION 4.6 Fair Rental Value. The Lease Payments and the Additional Payments (as defined in Section 4.11 hereof) shall be paid by the City in consideration of the right of possession of, and the continued quiet use and enjoyment of, the Site during each such period for which said rental is to be paid. The parties hereto have agreed and determined that such total rental to be paid hereunder does not exceed the fair rental value of the Site during the Term of this Lease. In making such determination, consideration has been given to the fair rental value of the Site (including but not limited to costs of maintenance, taxes and insurance), the uses and purposes which may be served by the Site and the essential public benefits therefrom which will accrue to the City and the general public. SECfION 4.7 Budget and Appropriation. The City covenants to take such action as may be necessary to include all Lease Payments and Additional Payments due hereunder in each of its proposed annual budgets and its final adopted annual budgets beginning with Fiscal Year 1995-96 through the Term of this Lease and to make the necessary appropriations for such Lease Payments and Additional Payments. The City shall furnish to the Trustee within 15 days following adoption of the final budget in each Fiscal Year a certificate stating that the Lease Payments were included in the final budget as adopted. PUBL:27190_11138182345.62 10 - -.. To the extent that the amount of such payment becomes known after the adoption of the - annual budget, such amounts shall be included and maintained in such budget as amended. The City covenants to take such action as is necessary to include such amounts in a supplemental budget of the City. The covenants on the part of the City herein contained shall be deemed to be and shall be construed to be ministerial duties imposed by law and it shall be the ministerial duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in this Lease agreed to be carried out and performed by the City. The obligation of the City to pay Lease Payments and Additional Payments hereunder shall constitute a current expense of the City and shall not in any way be construed to be a debt of the City, or the State, or any political subdivision thereof, in contravention of any applicable constitutional or statutory limitation or requirements concerning the creation of indebtedness by the City, the State, or any political subdivision thereof, nor shall anything contained herein constitute a pledge of general revenues, funds or moneys of the City or an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. SECTION 4.8 Assignment of Lease Payments. Certain of the Agency's rights under this Lease, including the right to receive and enforce payment of the Lease Payments to be made by the City hereunder, have been assigned to the Trustee, subject to certain exceptions, pursuant to the Assignment Agreement, to which assignment the City hereby consents. The Agency - hereby directs the City, and the City hereby agrees, to pay to the Trustee at the Trustee's corporate trust office, or to the Trustee at such other place as the Trustee shall direct in writing, all Lease Payments or Prepayments thereof payable by the City hereunder. The Agency will not assign or pledge the Lease Payments or other amounts derived from the Site or from its other rights under this Lease except as provided under the terms of this Lease, or its duties and obligations except as provided under the Assignment Agreement and the Trust Agreement. SECTION 4.9 Use and Possession. The total Lease Payments and Additional Payments due in any fiscal Year shall be for the use and possession of the Site for such fiscal Year. During the Term of this Lease, the City shall be entitled to the exclusive use and possession of the Site, subject only to the Permitted Encumbrances. SECTION 4.10 Abatement of Lease Payments and Additional Payments. Except to the extent that proceeds of the type described in the following paragraph are available, the amount of Lease Payments and Additional Payments shall be abated during any period in which there is substantial interference with the use or possession of all or a portion of the Site by the City by condemnation, damage, destruction or title defect. The amount of such abatement shall be such that the resulting Lease Payments, exclusive of the amounts described in the following paragraph, do not exceed the fair rental value (as determined by an independent real estate appraiser selected by the City, who is not an employee of the City) for the use and possession of the portion of the Site for which no substantial interference has occurred. Such abatement shall continue for the period of the substantial interference with the use or possession of the Site. Except as provided herein, in the event of any such interference with use or possession, this .- Lease shall continue in full force and effect and the City waives any right to terminate this Lease by virtue of any such interference. PUBL,2719CU 11381 82345.62 11 Notwithstanding a substantial interference with the use or possession of all or a portion of the Site, the City shall remain obligated to make Lease Payments (i) in an amount not to exceed the fair rental value during each Fiscal Year for the portion of the Site not damaged, destroyed, interfered with or taken, as determined by an independent real estate appraiser selected by the City (who is not an employee of the City); (ii) to the extent that moneys derived from any person as a result of any delay in the reconstruction, replacement or repair of the Site, or any portion thereof, are available to pay the amount which would otherwise be abated; or (iii) to the extent that moneys are available in the Certificate Fund or the Lease Payment Fund to pay the amount which would otherwise be abated, in which event the Lease Payments shall be payable from such amounts as an obligation of the City payable from a special fund. SECTION 4.11 Additional Payments. In addition to the Lease Payments, the City shall also pay such amounts ("Additional Payments") as shall be required for the payment of all administrative costs of the Agency and the City relating to the Site, the Certificates and any Additional Certificates, including without limitation all expenses, assessments, compensation and indemnification of the Trustee payable by the City under the Trust Agreement, any amounts required to be rebated to the federal government in order to comply with the provisions of Section 148 of the Code, taxes of any sort whatsoever payable by the Agency as a result of its lease of the Site or undertaking of the transactions contemplated herein or in the Trust Agreement, fees of auditors, accountants, attorneys or engineers, insurance premiums required by Article 5 hereof, items required by Section 7.7 hereof and all other necessary administrative costs of the Agency and the City or charges required to be paid by it in order to maintain its existence or to comply with the terms of the Certificates and any Additional Certificates or of the Trust Agreement, or to indemnify the Agency and its officers and directors. All such Additional Payments to be paid hereunder shall be paid when due directly by the City to the respective parties to whom such Additional Payments are owing. SECTION 4.12 Net-Net-Net Lease. This Lease shall be deemed and construed to be a "net-net-net lease" and the City hereby agrees that the Lease Payments shall be an absolute net return to the Agency, free and clear of any expenses, charges, counterclaims or set-offs whatsoever, except as expressly provided herein. ARTICLE V INSURANCE SECTION 5.1 Public Liability and Property Damage. (a) Coveral!e. The City shall maintain or cause to be maintained, throughout the Term hereof, a standard comprehensive general public liability and property damage insurance policy or policies in protection of the City and the Agency and their respective officers, agents and employees as additional insureds under the policy or policies. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the use or operation of the Site. PU8L,27190_11138182345.62 12 - (b) Limits. Said policy or policies shall provide coverage in the minimum liability limits of $1,000,000 for personal injury or death of each person in each accident or event and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of $500,000 for damage to property resulting from each accident or event (subject to a deductible clause of not to exceed $250,(00). Such public liability and property damage insurance may, however, be in the form of a single limit policy covering all such risks in an amount equal to the aggregate minimum liability limits set forth herein. (c) Joint or Self-Insurance. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance coverage carried by the City. Such liability insurance may be maintained by the City in the form of self-insurance which complies with Section 5.6(e) hereof. (d) Pavment of Proceeds. The proceeds of such liability insurance shall be applied toward extinguishment or satisfaction of the liability with respect to which the insurance proceeds shall have been paid. SECTION 5.2 Worker's Compensation. The City shall also maintain worker's compensation insurance issued by a responsible carrier authorized under the laws of the State to insure its employees against liability for compensation under the Worker's Compensation Insurance and Safety Act now in force in the State; or any act hereafter enacted as an amendment or supplement thereto, or in lieu thereof such insurance, or a part thereof, may be maintained by -.. the City in the form of self-insurance which complies with Section 5.6(e) hereof. SECTION 5.3 Hazard Insurance. (a) Coveral!e. The City shall maintain or cause to be maintained, throughout the Term hereof, a policy or policies of insurance against loss or damage to the Site resulting from fire, lightning, vandalism, malicious mischief and such perils ordinarily defined as "extended coverage", excluding flood and earthquake; provided, however, that a flood and earthquake rider shall be purchased if the City, in its reasonable discretion, determines that such coverage is available from reputable insurers at commercially reasonable rates. Said policy or policies shall be maintained in an amount not less than the full replacement value of the Site, subject to a "deductible clause" not to exceed one hundred thousand doIlars ($l(JO,OOO) for anyone loss or, in the case of a flood and earthquake rider, ten percent (10 %) of the coverage obtained and shall name the Agency as an additional insured under the policy or policies. The term "fuIl replacement value" as used in this Section 5.3 shall mean the actual replacement cost of the improvements located on the Site (including the cost of restoring the surface of the Site, but excluding the cost of restoring trees, plants and shrubs). (b) Joint or Self-Insurance. Such insurance may be maintained as part of or in conjunction with any other insurance carried by the City. The City shall not maintain such insurance in the form of self-insurance. (c) Pavment of Net Proceeds. The Net Proceeds of such insurance shall be applied as provided in Section 6.1 (a) hereof. PU8L,2719(U 11381 82345.62 13 ------_._-~ - SECDON 5.4 Rental Interruption Insurance. (a) Coveral!e and Amount. The City shall maintain or cause to be maintained rental interruption insurance in an amount not less than the scheduled Lease Payments in the next succeeding twelve month period during the Term hereof, to insure against loss of rental income from the Site caused by perils covered by the insurance required to be maintained as provided in Section 5.3 hereof. Such insurance shall be obtained not later than the Delivery Date for the Certificates and shall be increased as required in connection with each issue of Additional Certificates. (b) Joint Insurance. Such insurance may be maintained as part of or in conjunction with any other rental interruption insurance carried by the City. The City shall not maintain rental interruption insurance in the form of self-insurance. (c) Pavment of Proceeds. The proceeds of such rental interruption insurance shall be paid to the Trustee and deposited (1) frrst in the Reserve Account to make up any deficiencies therein, and (2) then deposited in the Lease Payment Fund, to be held therein and credited towards the payment of the Lease Payments in the order in which such Lease Payments come due and payable. SECDON 5.5 Title Insurance. The City shall obtain on the Delivery Date for the Certificates and in connection with any substitution of real property pursuant to Section 3.6 hereof, title insurance on the Site, in the form of a CLTA leasehold title policy or an ALTA Owner's/Leasehold Policy with Western Regional Exceptions, the title policy or policies in effect at any time with respect to the Site shall be in an amount at least equal to the aggregate Principal Component of unpaid Lease Payments, could be issued by a company of recognized standing duly authorized to issue the same. The title policy or policies shall insure the City's leasehold estate hereunder in the Site, subject only to Permitted Encumbrances. The proceeds of such insurance shall be applied as provided in Section 6.1 (a) hereof. The City shall not maintain title insurance in the form of self-insurance. SECDON 5.6 General Insurance Provisions. (a) Form of Policies. All policies of insurance required to be procured and maintained pursuant to this Lease, other than the worker's compensation insurance and the title insurance specified in Sections 5.2 and 5.5 hereof, respectively, and any statements of self-insurance shall provide that the City and the Trustee shall receive 30 days' notice of each expiration, or any intended cancellation thereof or reduction of the coverage provided thereby. Insurance required to be procured and maintained pursuant to Section 5.3 hereof (regarding hazard insurance); Section 5.4 hereof (regarding rental interruption insurance) and Section 5.5 hereof (regarding title insurance) shall provide that all proceeds thereunder shall be payable to the Trustee as the insured or loss payee. (b) Pavment of Premiums. The City shall payor cause to be paid when due the premiums for all insurance policies required by this Lease. (c) Protection of the Trustee. The Trustee shall not be responsible for the sufficiency or adequacy of any insurance herein required and shall be fully protected in PUBL:27190_1I 1381B2345.62 14 - accepting payment on account of such insurance or any adjustment, .compromise or settlement of any loss agreed to by the City. (d) Evidence of Insurance. The City shall deliver certificates to the Trustee within the 30 days prior to July 1 of each year during the Term of this Lease to the effect that the insurance policies required by this Lease are in full force and effect. (e) Self-Insurance. Any self-insurance maintained by the City pursuant to Section 5.I(c) or 5.2 hereof shall afford reasonable protection to the Agency, the City and the Trustee. Before the City elects to provide self-insurance hereunder, and on each July 1 thereafter, there shall be filed with the Trustee a certificate of an actuary, independent insurance consultant selected by the City, or other qualified person selected by the City, who may be the City's Risk Manager, stating that, in the opinion of the signer, the method or plan of protection is sound and affords adequate protection to the Agency, the City and the Trustee against loss and damage from the hazards and risks covered thereby, and there shall also be filed with the Trustee a certificate of the City setting forth the details of such substitute method or plan. The Trustee shall be fully protected in relying on the certificate provided in accordance with this Section 5.6(e) and shall not be responsible for the review or verification of the certificate describing such method or plan. The City shall provide adequate reserves to cover the amount of any deductible provisions of the insurance required to be maintained pursuant to Sections 5.1, 5.2, 5.3 and 5.4 hereof. SECTION 5.7 Cooperation. The Agency shall cooperate fully with the City at the expense of the City in filing any proof of loss with respect to any insurance policy maintained pursuant to this Article and in the prosecution or defense of any prospective or pending condemnation proceeding with respect to the Site or any portion thereof. ARTICLE VI DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS SECTION 6.1 Application of Net Proceeds. (a) Deoosit in Insurance and Condemnation Fund. Pursuant to Section 405 of the Trust Agreement, the Trustee shall deposit the Net Proceeds of any insurance required by Section 5.3 hereof and the proceeds of the title insurance required by Section 5.5 hereof in the Insurance and Condemnation Fund promptly upon receipt thereof. The City and/or the Agency shall transfer to the Trustee any other Net Proceeds received by the City and/or Agency in the event of any taking by eminent domain or condemnation with respect to the Site, for deposit in the Insurance and Condemnation Fund. (b) Disbursement for Reolacement or Reoair of the Site. Upon receipt of the certification described in paragraph (1) below and the requisition described in paragraph (2) below, the Trustee shall disburse moneys in the Insurance and PUBL,27190_1 I 138182345.62 15 ------------------------- Condemnation Fund to the person, firm or corporation named in the requisition as provided in Section 405 of the Trust Agreement. (1) Certification. An Authorized Representative of the City must provide to the Agency and the Trustee a certificate stating that: (i) Sufficiency of Net Proceeds. The Net Proceeds available for such purpose, together with any other funds supplied by the City for such purpose, are sufficient to repair or replace the Site to a use which will have an annual fair rental value not less than the annual Lease Payments and Additional Payments (assuming that the annual Additional Payments due in the future will equal the average annual Additional Payments prior to such date) due hereunder, and (ii) Timelv ComDletion. In the event that damage, destruction, title defect or taking results in an abatement of Lease Payments, such replacement or repair can be fully completed within a period not in excess of the period in which rental interruption insurance proceeds as described in Section 5.4 hereof, together with other legally available funds, will be available to pay in full all Lease Payments coming due during such period. (2) Reouisition. An Authorized Representative of the City must state with respect to each payment to be made (i) the requisition number, (ii) the name and address of the person, firm or corporation to whom payment is due, (iii) the amount to be paid, and (iv) that each obligation mentioned therein has been properly incurred, is a proper charge against the Insurance and Condemnation Fund, has not been the basis of any previous withdrawal, and specifying in reasonable detail the nature of the obligation. Any balance of the Net Proceeds remaining after such replacement or repair has been completed shall be disbursed as provided in Section 405 of the Trust Agreement. (c) Disbursement for PreDayment. If an Authorized Representative of the City notifies the Trustee in writing of the City's determination that the certification provided in ~,:ction 6. 1 (b)(1) hereof cannot be made or replacement or repair of any portion of the Site is not economically feasible or in the best interest of the City, then the City shall deposit with the Trustee an amount which when combined with the Net Proceeds will prepay enoullh Lease Payments and result in a corresponding redemption of Certificates and Additional Certificates such that the fair rental value of the remaining portion of the Site is sufficient to provide for payment of the Principal Components and Interest Components due with respect to the Certificates and Additional Certificates to remain Outstanding under the Trust Agreement after such Net Proceeds and such deposit by the City are applied to redeem Certificates and Additional Certificates under the Trust Agreement. The Trustee shall promptly transfer the Net Proceeds in respect of such portion to the Redemption Account of the Certificate Fund as provided in Section 405 of the Trust Agreement and apply them to the redemption of the Certificates and Additional Certificates as provided in Section 31O(a) of the Trust Agreement and prepayment of Lease Payments as provided in Section 10.2 hereof. PUBL,27190_1 I 138182345.62 16 - ARTICLE VII COVENANTS WITH RESPECT TO TIlE SITE SECTION 7.1 Use of the Site. The City represents and warrants that it has an immediate essential need for all of the Site, which need is not expected to be temporary or to diminish in the foreseeable future. SECTION 7.2 Leasehold Interest in the Site. (a) A!!encv Holds T ""'.ehold Interest Durin!! Term. During the term of the Site Lease, the Agency shall hold a leasehold interest in the Site pursuant to the Site Lease. The City shall take any and all actions reasonably required, including but not limited to executing and filing any and all documents, reasonably required to maintain and evidence the Agency's leasehold interest in the Site at all times during the term of the Site Lease. The execution of this Lease shall not cause a merger of the interests created by the Site Lease and this Lease. (b) T ""'.ehold Interest Transferred to City at End of Term. On the day of the expiration of the Term as provided in Section 4.2 hereof, the Agency's leasehold interest in the Site pursuant to the Site Lease and all right, title and interest of the Agency in the Site shall be transferred to and vest in the City, free and clear of any interest of the Agency or its assigns, without the necessity of any additional document of transfer. SECTION 7.3 Option to Prepay Lease Payments. The City may exercise an option to prepay all or a portion of the Lease Payments in accordance with Article 10 hereof and, by prepaying Lease Payments in the amounts necessary to cause the termination of the Term as provided in Section 4.2(b) hereof, terminate the Agency's leasehold interest in the Site under the Site Lease and all right, title and interest of the Agency in the Site. If the City elects to prepay a portion of the Lease Payments, and if the Lease Payments have been allocated to Components of the Site in Exhibit B hereto, then it may specify to which Component of the Site such prepayment is applicable. SECTION 7.4 Quiet Enjoyment. Subject only to the Permitted Encumbrances, during the Term of this Lease the Agency shall provide the City with quiet use and enjoyment of the Site, and the City shall during such Term peaceably and quietly have and hold and enjoy the Site, without suit, trouble or hindrance from the Agency, or any person or entity claiming under or through the Agency except as expressly set forth in this Lease or the Trust Agreement. The Agency will, at the request of the City, join in any legal action in which the City asserts its right to such possession and enjoyment to the extent the Agency may lawfully do so. Notwithstanding the foregoing, the Agency shall have the right of access to the Site as provided in Section 7.6 hereof. SECTION 7.S Installation of City's Personal Property. The City may at any time and from time to time, in its sole discretion and at its own expense, install or permit to be installed items of equipment or other personal property in or upon any portion of the Site. All such items shall remain the sole personal property of the City, regardless of the manner in which PUBL'27190_1 I 138182345.62 17 ------_..._----~. the same may be affIXed to such portion of the Site, in which neither the Agency nor the Trustee shall have any interest, and may be modified or removed by the City at any time; orovided that the City shall repair and restore any and all damage to such portion of the Site resulting from the installation, modification or removal of any such items of equipment. Nothing in this Lease shall prevent the City from purchasing items to be installed pursuant to this Section, provided that no . lien or security interest attaching to such items shall attach to any part of the Site. SECTION 7.6 Access to the Site. The City agrees that the Agency, and the Agency's successors and assigns, shall have (1) the right at all reasonable times to enter upon the Site or any portion thereof to examine and inspect the Site, and (2) such rights of access to the Site as may be reasonably necessary to cause the proper maintenance of the Site in the event of failure by the City to perform its obligations hereunder. SECTION 7.7 Maintenance, Utilities, Taxes and Assessments. (a) Maintenance: Reoair and Reolacement. Throughout the Term of this Lease, as part of the consideration for the rental of the Site, all repair and maintenance of the Site shall be the responsibility of the City, and the City shall pay for or otherwise arrange for the payment of the cost of the repair and replacement of the Site resulting from ordinary wear and tear or want of care on the part of the City or any sublessee thereof. The City shall provide or cause to be provided all security service, custodial service, power, gas, telephone, light, heating and water, and all other public utility services for the Site. In exchange for the Lease Payments herein provided, the Agency agrees to provide only the Site. (b) Tax and Assessments: Utility Char!!es. The City shall also payor cause to be paid all taxes and assessments, including but not limited to utility charges of any type or nature charged to the Agency or the City or levied, assessed or charged against any portion of the Site or the respective interests or estates therein; provided that, with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are required to be paid during the Term of this Lease as and when the same become due. (c) Contests. The City may, at its expense and in its name, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom; orovided that prior to such nonpayment it shall furnish the Agency and the Trustee with the opinion of an Independent Counsel to the effect that, by nonpayment of any such items, the interest of the Agency in such portion of the Site will not be materially endangered and that the Site will not be subject to loss or forfeiture. Otherwise, the City shall promptly pay such taxes, assessments or charges or make provisions for the payment thereof in form satisfactory to the Agency. The Agency will cooperate fully in such contest, upon the request and at the expense of the City. PUBL,27190_11138182345.62 18 SECTION 7.8 Modification of the Site. (a) Additions. Modifications and Imorovements. The City shall, at its own expense, have the right to make additions, modifications and improvements to any portion of the Site if such additions, modifications or improvements are necessary or beneficial for the use of such portion of the Site. Such additions, modifications or improvements shall not in any way damage any portion of the Site or cause it to be used for purposes other than those authorized under the provisions of state and federal law or in any way which would impair the exclusion from gross income for federal income tax purposes of the Interest Components of the Lease Payments or diminish the fair rental value of the Site; and the Site, upon completion of any additions, modifications or improvements made pursuant to this Section, shall be of a value which is not less than the value of the Site immediately prior to the making of such additions, modifications or improvements. (b) No Liens. Except for Permitted Encumbrances, the City will not permit any mechanic's or other lien to be established or remain against the Site for labor or materials furnished in connection with any additions, modifications or improvements made by the City pursuant to this Section; orovided that if any such lien is established and the City shall first notify or cause to be notified the Agency of the City's intention to do so, the City may in good faith contest any lien filed or established against the Site, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom and shall provide the Agency and its assigns with full security against any loss or forfeiture which might arise from the nonpayment of any such lien, in form satisfactory to the Trustee as assignee of the Agency. The Agency will cooperate fully in any such contest, upon the request and at the expense of the City. SECTION 7.9 Liens. Except as permitted by this Lease (including without limitation Section 7.8, Section 8.1 or Section 8.2 hereof), the City shall not, directly or indirectly, create, incur, assume or suffer to exist any mortgage, pledge, liens, charges, encumbrances or claims, as applicable, on or with respect to the Site, other than Permitted Encumbrances and other than the respective rights of the Agency and the City as herein provided. Except as expressly provided in this Article, the City shall promptly, at its own expense, take such action as may be necessary to duly discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim, for which it is responsible, if the same shall arise at any time; Drovided that the City may contest such lien or claim if it desires to do so, so long as such contest will not materially, adversely affect the rights of the City to the Site or the payment of Lease Payments hereunder. The City shall reimburse the Agency and its assigns for any expense incurred by it in order to discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim. SECTION 7.10 Agency's Disclaimer of Warranties. THE AGENCY MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR FITNESS FOR THE USE CONTEMPLATED BY THE CITY OF THE SITE OR ANY PORTION THEREOF. THE CITY ACKNOWLEDGES THAT THE AGENCY IS NOT A MANUFACTURER OF THE SITE OR OF ANY PORTION THEREOF, AND IS NOT A DEALER THEREIN, AND THAT THE CITY IS LEASING THE SITE AS IS. In no event shall the Agency be liable for incidental, indirect, special or consequential PUOL,27190_1 1 138182345.62 19 damages, in connection with or arising out of this Lease, the Site Lease, the Assignment Agreement or the Trust Agreement for the existence, furnishing, functioning or City's use and possession of the Site. SECTION 7.11 City's Right to Enforce Warranties of Manufacturers, Vendors or. Contractors. The Agency hereby irrevocably appoints the City its agent and attorney-in-fact during the Term, so long as the City shall not be in default hereunder, to assert from time to time whatever claims and rights, including without limitation, warranty claims, claims for indemnification and claims for breach of any representations, respecting the Site or the Project which the Agency may have against any vendor or contractor, or any agents thereof. The City's sole remedy for the breach of any such warranty, indemnification or representation shall be against the vendor or contractor with respect thereto, and not against the Agency, nor shall such matter have any effect whatsoever on the rights and obligations of the Agency with respect to this Lease, including the right to receive full and timely Lease Payments and to cause the City to make all other payments due hereunder. The City shall be entitled to retain any and all amounts recovered as a result of the assertion of any such claims and rights. The Agency shall, upon the City's request and at the City's expense, do all things and take all such actions as the City may request in connection with the assertion of any such claims and rights. The City expressly acknowledges that neither the Agency nor the Trustee makes, or has made, any representation or warranty whatsoever as to the existence or availability of such warranties of the manufacturer, vendor or contractor with respect to any portion of the Project. ARTICLE VIII ASSIGNMENT, SUBLEASING AND AMENDMENT SECTION 8.1 Assignment by the Agency. Except as provided herein and in the Trust Agreement, the Agency will not assign this Lease, or any right, title or interest of the Agency in and to this Lease, to any other person, firm or corporation so as to impair or violate the representations, covenants and warranties contained in Section 2.2 hereof. SECTION 8.2 Assignment and Subleasing by the City. (a) Assil!nment. This Lease may not be assigned by the City unless the City receives an opinion of Bond Counsel stating that such assignment does not adversely affect the exclusion from gross income for federal income tax purposes or the exemption from State personal income laxation of the Interest Components of the Lease Payments. In the event that this Lease is assigned by the City, the obligation to make Lease Payments and Additional Payments and perform the other covenants of the City hereunder shall remain the obligation of the City. PUOL,27190_11138182345.62 20 (b) Sublease. The City may sublease any portion of the' Site, with the prior written consent of the Trustee as assignee of the Agency, subject to all of the following conditions: (i) this Lease and the obligation of the City to make Lease Payments and Additional Payments and perform the other covenants of the City hereunder shall remain obligations of the City; (ii) the City shall, within 30 days after the delivery thereof, furnish or cause to be furnished to the Agency and the Trustee a true and complete copy of such sublease; and (Hi) no sublease shall cause the Interest Components of the Lease Payments due with respect to the Site to become subject to federal income taxes or State personal income taxes. No consent of the Trustee may be given under this subsection (b) unless the Trustee shall have first received opinions of Independent Counsel with respect to the matters set forth in clause (i) above and the opinion of Bond Counsel with respect to the matters set forth in clause (iii) above. SECTION 8.3 Amendments and Modifications. This Lease may be amended or any of its terms modified in accordance with Article VII of the Trust Agreement, with the written consent of the Trustee, the City and the Agency. ARTICLE IX EVENTS OF DEFAULT AND REMEDIES SECTION 9.1 Events of Default Dermed. The following shall be "events of default" under this Lease and the terms "events of default" and "default" shall mean, whenever they are used in this Lease, anyone or more of the following events: (a) Pavment Default. Failure by the City to pay any Lease Payment or Additional Payments required to be paid hereunder on the date such payments are due hereunder . (b) Covenant Default. Failure by the City to observe and perform any warranty, covenant, condition or agreement on its part to be observed or performed herein or otherwise with respect hereto or in the Trust Agreement or in the Site Lease, other than as referred to in clause (a) of this Section, for a period of 30 days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Agency, the Trustee or, subject to the provisions of Section 505 of the Trust Agreement, the Owners of not less than twenty-five percent (25 %) in aggregate principal amount of Certificates and Additional Certificates then Outstanding; Drovided, however, if the failure stated in the notice cannot be corrected within the applicable period, then no PUBL,27190_11138182345.62 21 --------- event of default shall have occurred so long as corrective action is instituted by the City within the applicable period and diligently pursued until the default is corrected. (c) Bankruotcy or Insolvency. The filing by the City of a case in bankruptcy, or the subjection of any right or interest of the City under this Lease to any execution, garnishment or attachment, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted under the provisions of the federal bankruptcy code, as amended, or under any similar act which may hereafter be enacted . SECTION 9.2 Remedies on Default. Whenever any event of default referred to in Section 9.1 hereof shall have happened and be continuing, it shall be lawful for the Agency, or its assignee, subject to Section 9.7 hereof, to exercise any and all remedies available pursuant to law or granted pursuant to this Lease; orovided, however, that notwithstanding anything herein or in the Trust Agreement to the contrary, THERE SHALL BE NO RIGHT UNDER ANY CIRCUMSTANCES TO ACCELERATE THE LEASE PAYMENTS OR OTHERWISE DECLARE ANY LEASE PAYMENTS NOT THEN DUE OR PAST DUE TO BE IMMEDIATELY DUE AND PAYABLE NOR SHALL THE Agency OR ITS ASSIGNEE HA VB ANY RIGHT TO REENTER OR RELET THE SITE, EXCEPT AS DESCRIBED IN THIS SECTION 9.2. So long as any event of default exists hereunder, the Agency, or its assignee, is expressly authorized hereby to enter and re-enter the Site for the purpose of taking possession of any portion of the Site and to re-Iet the Site and, in addition, at its option, with or without such entry to terminate this Lease as described below. The City hereby irrevocably appoints the Agency, or its assignee, as the agent and attorney-in-fact of the City either to enter upon the Site for purposes of terminating this Lease or to enter upon and re-Iet the Site in the event of default hereunder by the City. The City hereby exempts and agrees to save harmless the Agency and its assignee from any costs, loss or damage whatsoever arising or occasioned by any lawful entry upon or re-Ietting of the Site. The City hereby waives any and all claims for damages caused, or which may be caused, by the Agency, or its assignee, lawfully entering and taking possession of the Site, other than damages caused by the negligence of the Agency, or its assignee. The City agrees that the terms of this Lease constitute full and sufficient notice of the right of the Agency, or its assignee, to re-enter the Site for purposes of terminating this Lease and, alternatively, to enter upon and re-Iet the Site in the event of such re-entry without effecting a surrender of this Lease. In the event the Agency, or its assignee, elects to terminate this Lease, the City agrees to surrender immediately possession of the Site and to pay the Agency, or its assignee, all damages recoverable at law that the Agency, or its assignee, may incur by reason of default by the City, including, without limitation, any costs, loss or damage whatsoever arising out of, in connection with, or incident to any re-entry upon the Site by the Agency, or its duly authorized agents in accordance with such termination. Neither notice to pay rent or to deliver up possession of the Site given pursuant to law nor any entry or re-entry by the Agency, or its assignee, nor any proceeding in unlawful detainer, or otherwise, brought by the Agency, or its assignee, for the purpose of effecting such re-entry or obtaining possession of the Site nor the appointment of a PUBL,27190_1 1 138182345.62 22 - -. receiver upon initiative of the Agency, or its assignee, to protect the interest of the Agency or its assignee under this Lease shall of itself operate to terminate this Lease, and no termination of this Lease on account of default by the City shall be or become effective by operation of law or acts of the parties hereto, or otherwise, unless and until the Agency, or its assignee, shall have given written notice to the City of its election to terminate this Lease. The City covenants and agrees that no surrender of the Site or any termination of this Lease shall be valid in any manner or for any purpose whatsoever unless stated or accepted by the Agency, or its assignee, by written notice. In the event that the Agency, or its assignee, does not elect to terminate this Lease, the City agrees to and shall remain liable for the payment of Lease Payments and Additional Payments and the performance of all conditions herein contained and shall reimburse the Agency, or its assignee, for any deficiency arising out of the re-Ietting of the Site, or, in the event that the Agency, or its assignee, does not re-let the Site, then for the full amount of the Lease Payments and Additional Payments to the end of the Term of this Lease, but said Lease Payments, Additional Payments and/or deficiency shall be payable only at the same time and in the same manner as provided in Sections 4.4 and 4.11, notwithstanding such entry or re-entry by the Agency, or its assignee, or any suit in unlawful detainer, or otherwise, brought by the Agency, or its assignee, for the purpose of effecting such entry or re-entry or obtaining possession of the Site or the exercise of any other remedy by the Agency or its assignee. In the event of a default, the City further agrees to reimburse the Agency, and its assignee, for any cost or expense, including attorneys' fees, incurred by the Agency or its assignee in connection with the exercise by the Agency, or its assignee, of the remedies hereunder. SECTION 9.3 No Remedy Exclusive. No remedy conferred herein upon or reserved to the Agency is intended to be exclusive and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Lease or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Agency to exercise any remedy reserved to it in this Article it shall not be necessary to give any notice, other than such notice as may be required in this Article or by law. SECTION 9.4 Agreement to Pay Attorneys Fees and Expenses. In the event either party to this Lease should default under any of the provisions hereof and the nondefaulting party should employ attorneys or incur other expenses for the collection of moneys or the enforcement of performance or observance of any obligation or agreement on the part of the defaulting party contained herein, the defaulting party agrees that it will pay on demand to the nondefaulting party the reasonable fees and disbursements of such entity's attorneys and such other expenses so incurred by the nondefaulting party. SECTION 9.S No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Lease should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. PUBL:27190_1 1 138182345.62 23 --- --- ------.----- SECTION 9.6 Application of the Proceeds Following Default. All amounts received by the Agency under this Article 9 (other than fees and expenses recovered under Section 9.4 above) shall be deposited by the Trustee in the Lease Payment Fund for application in accordance with Section 504 of the Trust Agreement. SECTION 9.7 Trustee and Certificate Owners to Exercise Rights. Such rights and remedies as are given to the Agency under this Article 9 have been assigned by the Agency to the Trustee under the Assignment Agreement and the Trust Agreement, to which assignment the City hereby consents. Such rights and remedies shall be exercised by the Trustee, the Certificate Owners and owners of any Additional Certificates as provided in Article V of the Trust Agreement. ARTICLE X PREPAYMENT OF LEASE PAYMENTS SECTION 10.1 Security Deposit. Notwithstanding any other provision of this Lease, the City may, on any date, secure the payment of any unpaid Lease Payment attributable to the Site as set forth in Exhibit B hereto by an irrevocable deposit by it with the Trustee of cash and/or Permitted Investments of the type described in paragraph (b) of the definition thereof, which are adequate in the opinion of 3D independent certified public accountant to provide for payment of such unpaid Lease Payment as it becomes due and payable hereunder. In the event that the City has secured the payment of all unpaid Lease Payments attributable to the Site, and provided that the City has made arrangements acceptable to the Trustee to pay any Additional Payments due hereunder, all obligations of the City under this Lease, and all security provided by this Lease for said obligations, shall cease and terminate, excepting only the obligation of the City to make, or cause to be made, Lease Payments from such deposit. Said deposit shall be deemed to be and shall constitute a special fund for the payment of Lease Payments in accordance with the provisions of this Lease. The Agency shall execute and deliver such further instruments and take such further action as may reasonably be requested by the City for carrying out the leasehold interest transfer for which a security deposit is made hereunder. SECTION 10.2 Extraordinary Prepayment From Net Proceeds. The City shall be obligated to prepay the Lease Payments in whole or in part on any date, from and to the extent of any Net Proceeds transferred to the Redemption Account pursuant to Section 405 of the Trust Agreement. The City and the Agency hereby agree that such proceeds shall be credited towards the City's obligations hereunder such that approximately equal annual Lease Payments will prevail with respect to the Site following such prepayment and, if the Lease Payments have been allocated to discrete Components of the Site in Exhibit B hereto, the Lease Payments with respect to the Component or Components from which such Net Proceeds were delivered will be reduced accordingly. SECTION 10.3 Optional Prepayment. Subject to the terms and conditions of this Section, the Agency hereby grants an option to the City to prepay in whole or in part the Principal Components of Lease Payments relating to the Site, to the extent, on the dates and at pUBL,27190_11138182345.62 24 - the prepayment prices provided in Section 310(c) of the Trust Agreement as such Section 310(c) may be amended from time to time with respect to Additional Certificates. The City shall execute said option by giving written notice to the Trustee thereof at least 45 days (or such shorter period as approved by the Trustee) prior to the date of redemption of Certificates and Additional Certificates from such prepayment and depositing with said notice cash in the minimum amount of (1) accrued interest on the Principal Component of Lease Payments to be prepaid to the date of redemption of Certificates and Additional Certificates with the proceeds of such prepayment, plus (2) the Principal Component of any Lease Payments to be prepaid, plus (3) the applicable prepayment premium described in such Section 310(c) of the Trust Agreement as such Section 310(c) may be amended from time to time with respect to Additional Certificates. SECTION 10.4 Sinking Fund Redemption. The City and the Agency acknowledge that the Term Certificates are subject to mandatory redemption from the Principal Components of Lease Payments on the dates, at the times and in the amounts provided in Section 31O(b) of the Trust Agreement. SECTION 10.S Credit for Amounts on Deposit. In the event of prepayment of the Lease Payments in full under this Article 10 and the payment of all due and payable Additional Payments, such that the Trust Agreement shall be discharged by its terms as a result of such prepayment, all amounts then on deposit in the Lease Payment Fund and the Certificate Fund shall be credited toward the amounts then required to be so prepaid. SECTION 10.6 Effect of Prepayment. (a) In Whole. In the event that the City prepays all remaining Lease Payments pursuant to Section 10.3 or Section 10.2 hereof and has paid all Additional Payments due hereunder, the City's obligations under this Lease shall thereupon cease and terminate, including but not limited to the City's obligation to continue to pay Lease Payments hereunder. (b) In Part. In the event the City prepays less than all of the remaining Principal Component of the Lease Payments pursuant to Section 10.2 or 10.3 hereof, the amount of such prepayment shall be applied to reduce the Principal Component of the remaining Lease Payments corresponding to the resulting prepayment of the Principal Component with respect to the Certificates and the Additional Certificates. ARTICLE XI MISCELLANEOUS SECTION 11.1 Notices. All notices, certificates or other communications hereunder to the Agency and City shall be in writing and shall be sufficiently given and shall be deemed given when delivered or mailed by certified mail, postage prepaid, to the parties listed below: PUBL,27190_11138182345.62 25 --- ---- ----------------- -- If to the City: City of Poway 13325 Civic Center Drive Poway, California 92064 Attention: City Manager (619) 679-4204 Telecopier: (619) 748-1455 If to the Agency: Poway Redevelopment Agency 13325 Civic Center Drive Poway, California 92064 Attention: Executive Director (619) 679-4204 Telecopier: (619) 748-1455 If to the Trustee: Bank of America National Trust and Savings Association 333 South Beaudry, 25th Floor #8510 Los Angeles, California 90071 Attention: Corporate Trust Department (213) 345- Telecopier: (213) Notice shall also be given to the Rating Agency at the address(es) then in effect for the Rating Agency pursuant to Section 908 of the Indenture. Notices to the Trustee shall be given initially either telephonically or by written telecommunication and shall then be confirmed in writing delivered by registered or certified mail, return receipt requested. The Agency, the City and the Trustee, by notice given hereunder, may designate different addresses to which subsequent notices, certificates or other communications will be sent. SECTION 11.2 Binding Effect. This Lease shall inure to the benefit of and shall be binding upon the Agency and the City and their respective successors and assigns. SECTION 11.3 Severability. In the event any provision of this Lease shall be held invalid or unenforceable by a court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. SECTION 11.4 Execution in Counterparts. This Lease may be executed in any number of counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 11.S Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State. SECTION 11.6 Captions. The captions or headings in this Lease are for convenience only and in no way define, limit or describe the scope or intent of any provisions or sections of this Lease. PU8L,27190_1 1 138182345.62 26 - IN WITNESS WHEREOF, the Agency has caused this Lease to be' executed in its name by its duly authorized officers, and the City has caused this Lease to be executed in its name by its duly authorized officers, as of the date first above written. POWAY REDEVELOPMENT AGENCY, as Lessor By: Chairperson ATTEST: Secretary CITY OF POWAY, as Lessee By: Mayor ATTEST: City Clerk - PUBL,27190_1 1 138182345.62 27 CERTIFICATE OF ACCEPTANCE This is to certify that the interest in real property conveyed under the foregoing to the City of Poway, a body corporate and politic, is hereby accepted by the undersigned officer or agent on behalf of the City Council of the City of Poway, pursuant to authority conferred by resolution of the said City Council adopted on June 20, 1995, and the grantee consents to recordation thereof by its duly authorized officer. Dated: ,1995 CITY OF POW A Y By: Its: Mayor PU8L,27190_1 1 138182345.62 .- - State of California ) ) ss. County of ) On , 199_, before me, (1UUtIe, title of officer, ..g., Jan< Do<, N0t4ry Public") personally appeared (1UUtIe(s) of signer(s)) 0 personally known to me -OR- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in hislher/their authorized capacity/ies, and that by hislher/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Witness my hand and official seal. (SignMUT< of Notary) Capacity claimed by signer: (lhis s<ction is OPI10NAL.) 0 Individual 0 Corporate Officer(s): 0 Partner(s): o General o Limited 0 Attorney-in-fact 0 Trustee( s) 0 Guardian/Conservator 0 Other: Signer is representing: (1UUtIe OJ person(s) or mlIty(.<s)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. TIllS CERTIFICATE Title or Type of Document MUST BE ATTACHED TO TIlE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above PU8L,27190 _11138182345.62 ---- State of California ) ) ss. County of ) On , 199_, before me, (~. title of officu, e.g., Jane DO<!, Notary Public") personally appeared (~(s) of sigMr(s)) 0 personally known to me -OR- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in hislher/their authorized capacity/ies, and that by hislher/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Witness my hand and official seal. (Signature of Notary) Capacity claimed by signer: (This section is OP110NAL.) 0 Individual 0 Corporate Officer(s): 0 Partner(s): o General o Limited 0 Attorney-in-fact 0 Trustee(s) 0 Guardian/Conservator 0 Other: Signer is representing: (~ oj puson(s) or eMty(IeS)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. THIS CERTIFICATE Title or Type of Document MUST BE ATTACHED TO TIlE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above pU8L,27190_1 1 138182345.62 - - - State of California ) ) ss. County of ) On ,199 , before me, - (1Ia11Ie, litt.! of oiJiCt!1', ..g., JanL DO<!, Notary Public') personally appeared (IIa11Ie(S) of sig71t!1'(s)) 0 personally known to me -OR- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity/ies, and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Witness my hand and official seal. (SignaJll" of Notary) Capacity claimed by signer: (This s",lion is OP110NAL.) 0 Individual 0 Corporate Officer(s): 0 Partner(s): o General o Limited 0 Attorney-in-fact 0 Trustee(s) 0 Guardian/Conservator 0 Other: Signer is representing: (1Ia11Ie OJ pt!1'son(s) or mhty(IU)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. TIllS CERTIFICATE Title or Type of Document MUST BE ATTACHED TO TIlE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above PU8L,27190_1 1 138182345.62 State of California ) ) ss. County of ) On , 199_, before me, (Iltlme, title of officer, e.g., JiUIL Doe, Notary Public") personally appeared (Iltlme(s) of signer(s)) 0 personally known to me -DR- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in hislher/their authorized capacity/ies, and that by hislher/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Witness my hand and official seal. (Signatl4re of Notary) Capacity claimed by signer: (This section is OP170NAL.) 0 Individual 0 Corporate Officer(s): 0 Partner(s): o General o Limited 0 Attorney-in-fact 0 Trustee(s) 0 Guardian/Conservator 0 Other: Signer is representing: (Iltlme OJ person(s) or mtIty(.es)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. THIS CERTIFICATE Title or Type of Document MUST BE ATTACHED TO TIlE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above pU8L,27190_11138182345.62 - EXHIBIT A . DESCRIPTION OF THE SITE I. [City Hall of the City of Poway] 2. [Building "C", Redevelopment Agency Administration] 3. [Building" A" and "B", Engineering/Planning Administration] 4. [Fire Station #1, Safety Services Administration] 5. [Fire Station #2, North End Fire Station] 6. [14415 Lake Poway Road, Vehicle Maintenance Building] 7. [14445 Lake Poway Road, Operations Administration and Warehouse] 8. [14446 Lake Poway Road, Vehicle Storage Facility] 9. [13094 Bowron Road - Senior Center and Community Park with ball fields, tennis courts, playgrounds and pool] 10. [13094 Bowron Road - City Autitorium] - PU8L,27190_11138182345.62 A-I EXHIBIT B SCHEDULE OF LEASE PAYMENTS LEASE PAYMENT DATE (five Business Days before each of the following PRINCIPAL INTEREST dates) COMPONENT COMPONENT PERIOD TOTAL F1SCAL TOTAL 08/01/95 $ $ $ $ 02/01/96 08/01/96 02/01/97 08/01/97 02/01/98 08/01/98 02/01/99 08/01/99 02/01/00 08/01/00 02/01/01 08/01/01 02/01/02 08/01/02 02/01/03 08/01/03 02/01/04 08/01/04 02/01/05 08/01/05 02/01/06 08/01/06 02/01107 08/01/07 02/01/08 08/01/08 02/01/09 08/01/09 02/01/10 08/01/10 02/01/11 08/01/11 02/01/12 TOTALS: ~ ~ ~ ~ pU8L,27190_11138182345.62 B-1 - _. ExmBIT C LEASE SUPPI.F.MF.NT There is hereby subjected to the terms of that certain Lease Agreement (the "Lease"), dated as of July 1, 1995, between the Poway Redevelopment Agency (the "Agency") and the City of Poway, California (the "City") the following real property [and improvements, if applicable] (the "Substituted Property") which shall hereafter comprise the Site, as defmed therein: DescriDtion of Substituted Prooertv: Certification I, the Authorized Representative of the City, hereby certify that: (I) the useful life of the Substituted Property at least equals the remaining Term of the Lease; and (2) the fair rental value of the Substituted Property is such that no reduction of Lease Payments will occur upon the delivery of the Substituted Property and the portion of the Lease Payments and Additional Payments attributable to the Substituted Property does not exceed the fair rental value for the Substituted Property; and (3) the Substituted Property will be used by the City for authorized public purposes, can be leased under the provisions of the Lease and the Permitted Encumbrances thereon will not materially impair the City's use of the Site; (4) the City will cause Exhibit A to the Lease and Exhibit A to the Site Lease and the Assignment Agreement (each as defined in the Lease) to be amended to reflect the Substituted Property and will have such amendments recorded for the Substituted Property and the previous Site in the City of Poway recorder's office; (5) all of the documents required to be delivered under Section 3.6 of the Lease in connection with the provision of the Substituted Property have been delivered. The undersigned hereby certifies that it has received copies of the documents required pursuant to Section 3.6 of the Lease; and (6) the Site now consists of the Substituted Property set forth in Exhibit I hereto and Exhibit B to the Lease is hereby deemed to be deleted in its entirety and replaced by Exhibit 1 hereto, and the schedule of Lease Payments is set forth in Exhibit 2 hereto and Exhibit B to the Lease is hereby deemed to be amended to incorporate the schedule of Lease Payments set forth in Exhibit 2 hereto. pU8L,27190_11138182345.62 C-l I, the Authorized Representative of the City, hereby certify that the Substituted Property will be leased to the Agency free and clear of all liens or claims of others, except for the lien of the Trust Agreement referred to in the Lease and the rights of the City under the Lease, and that the Agency will not encumber title to the Substituted Property while the Certificates and Additional Certificates remain outstanding. CITY OF POWAY, as Lessee By: Title The Undersigned Acknowledges Receipt of this Supplement: , as assignee of the Lessor By: Title pU8L,27190_11138182345.62 C-2 . - EXHIBIT 1 DESCRIPTION OF SUBSTITUTED PROPERTY PU8L,27190_11138182345.62 EXHIBIT 2 AMENDED SCHEDULE OF LEASE PAYMENTS pU8L,27190_11138182345.62 - - Recording Requested By and ) -- When Recorded Mail To: ) ) Stradling, Yocca, Carlson & Rauth ) 660 Newport Center Drive, Suite 1600 ) Newport Beach, California 92660 ) Attention: Denise E. Hering, Esq. ) ) This document is recorded for the benefit of the City of Poway, and the recording is fee-exempt under Section 27383 of the Government Code. SITE LEASE between CITY OF POW A Y and POW A Y REDEVEWPMENT AGENCY Dated as of July 1, 1995 Relating to $ 1995 Refunding Certificates of Participation (1986 Capital Improvement Projects) ATTACHMENT H JUN 2 0 1995 ITEM 11 \J,:"j -- ~--- SITE LEASE . This Site Lease is made and entered into as of July 1, 1995, by and between the CITY OF POWAY, a municipal corporation of the State of California (the "State") duly organized and existing under and by virtue of the laws of the State, as lessor (the "City"), and the POW A Y REDEVELOPMENT AGENCY, a political subdivision of the State duly organized and existing under the laws of the State, as lessee (the" Agency"). W!IN~SS:!HH: WHEREAS, the City has entered into this Site Lease (the "Site Lease") with the Agency for the purpose of leasing the real property (including all existing and future buildings, structures and improvements thereon) described in Exhibit A hereto as such Exhibit A may be amended and supplemented from time to time (the "Site"), to the Agency, as lessee hereunder; and WHEREAS, the City intends to lease the Site from the Agency, pursuant to the terms of that certain Lease Agreement, dated the date hereof, between the Agency and the City (the "Lease") in order to obtain funds to advance refund the outstanding portion of those certain $10,000,000 1986 Certificates of Participation (Capital Improvement Projects) which was used to finance the acquisition and construction of certain public improvements (such portion being referred to herein as the "Prior Certificates") which advance refunding will lower the City's costs of financing and provide a benefit to the City; and WHEREAS, by resolution of the City Council of the City, the City has agreed to execute this Site Lease and to deliver it upon performance and compliance by the Agency of all terms or conditions of this contract to be performed concurrently herewith, including without limitation, the delivery of certain certificates of participation (the "Certificates") and Additional Certificates, if any, executed and delivered on the Delivery Date therefor pursuant to that certain Trust Agreement, dated as of the date hereof (as amended and supplemented from time to time, the "Trust Agreement"), among the Agency, the City and Bank of America National Trust and Savings Association, as trustee (the "Trustee"); NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other valuable consideration, it is hereby mutually agreed as follows: SECTION 1. Definitions. Unless the context otherwise requires, the capitalized terms herein which are not defined herein shall have the meanings specified in the Trust Agreement. SECTION 2. T po'e of the Site: Substitution. The City hereby leases to the Agency and the Agency hereby leases from the City the Site, on the terms and conditions hereinafter set forth. pU8L,27181_11138182345.62 - - The City reserves the right at any time to substitute other real property and improvements for the real property described in Exhibit A hereto, upon compliance with the provisions of Section 3.6 of the Lease (a "Substitution"). In the event of such Substitution, the parties hereto agree to execute the appropriate documents evidencing the termination of the Agency's right hereunder in the prior Site or any portion thereof and its acceptance of an interest in the new Site, such documents to include the replacement of Exhibit A hereto with a new Exhibit A accurately describing the substitute real property and any improvements thereon. The Agency shall not be entitled to any offset, abatement or reduction in rental hereunder as a result of any Substitution. SECTION 3. Term. The term of this Site Lease shall commence as of the Delivery Date for the Certificates and shall remain in effect until the earlier of August 1, 20_ or the date of expiration of the Lease as provided for by Section 4.2 thereof, unless such term is sooner terminated as hereinafter provided, however, if the term of the Lease is extended pursuant to Section 4.3 of the Lease, the term of this Site Lease shall also be extended, except that the term of this Site Lease shall in no event extend beyond August 1, 2035. SECTION 4. ~. The Agency, or any assignee or successor in interest of the Agency under this Site Lease, shall pay upon execution and delivery of this Site Lease to the City as and for rental hereunder, the sum of $ and upon the Delivery Date for each issue of Additional Certificates shall pay as additional rental due hereunder an amount as specified in connection with the sale of such Additional Certificates. The Agency shall pay such rental to the Trustee for disbursement in accordance with Section 401 of the Trust Agreement, and in the case of any Additional Certificates for disbursement as provided in a supplement to the Trust Agreement. As additional consideration for the leasing of the Site to it, the Agency shall execute and deliver the Lease and the Trust Agreement and any amendments thereto required in connection with the execution and delivery of Additional Certificates and shall perform its obligations thereunder. The Agency hereby waives any right that it may have under the laws of the State of California to receive a rebate of any rent paid hereunder in full or in part in the event there is a substantial interference with the use and right of possession by the Agency or its sublessee of the Site or any portion thereof as a result of material damage, destruction or condemnation. SECTION 5. Puroose. The Agency shall lease back the Site to the City pursuant to the Lease for the purposes described in the Lease and for such purposes as may be incidental thereto. SECTION 6. Reoresentations. Warranties and Covenants. The City represents and warrants that it is the owner in fee of the Site. The Agency covenants that it shall not encumber the Site except for Permitted Encumbrances (as such term is defined in the Lease). SECTION 7. Assil!nments. The City acknowledges and affirms the assignment by the Agency of its right, title and interest in and to this Site Lease to the Trustee, under the terms of the Assignment Agreement dated as of the date hereof, between the Agency and the Trustee, for the benefit of the Owners of the Certificates and the Owners of any Additional Certificates. No other assignment of any rights hereunder shall be permitted without the consent of the City and the Trustee. PU8L,27181_1 I 138182345.62 2 --- ----- SECTION 8. Actions on Termination. The Agency agrees, upon the termination of this Site Lease, to quit and surrender the Site in the same good order and condition as it was in at the time the real property then constituting the Site became subject to this Site Lease, reasonable wear and tear excepted, and agrees that any permanent improvements and structures existing upon the Site at the time of the termination of this Site Lease shall remain thereon and all interest therein shall vest in the City free and clear of any interest of the Agency. SECTION 9. Quiet Enioyment. The Agency at all times during the term of this Site Lease shall peaceably and quietly have, hold and enjoy all of the Site, subject only to Permitted Encumbrances (as such term is defined in the Lease). SECTION 10. Default. In the event the Agency shall be in default in the performance of any obligation on its part to be performed under the terms of this Site Lease, which default continues for 30 days following written notice to and demand for correction thereof by the City, the City may exercise any and all remedies granted by law which do not adversely affect the interests of the Owners of the Certificates and the owners of any Additional Certificates, with the prior consent of the Trustee; orovided that the City may not terminate this Site Lease and shall exercise only remedies providing for specific performance hereunder. SECTION 11. ~. The City covenants and agrees to pay any and all assessments of any kind or character and also all taxes, including possessory interest taxes, levied or assessed upon thl~ Site. SECTION 12. Eminent Domain. In the event the whole or any part of the Site is taken by eminent domain proceedings, the interest of the Agency shall be recognized and is hereby determined to be the amount of unpaid Lease Payments and Additional Payments due the Agency under the Lease. SECTION 13. Partial Invalidity. If anyone or more of the terms, provisions, covenants or conditions of this Site Lease shall to any extent be declared invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, the finding or order or decree of which becomes final, none of the remaining terms, provisions, covenants and conditions of this Site Lease shall be affected thereby, and each provision of this Site Lease shall be valid and enforceable to the fullest extent permitted by law. SECTION 14. Aoolicable Law. This Site Lease shall be governed by and construed in accordance with the laws of the State. SECTION 15. Reoresentatives. Whenever under the provisions of this Site Lease the approval of the Agency or the City is required, or the Agency or the City is required to take some action at the request of the other, such approval or such request shall be given for the Agency by an Authorized Representative of the Agency and for the City by an Authorized Representative of the City and any party hereto shall be authorized to rely upon any such approval or request. SECTION 16. Notices. All notices or other communications hereunder shall be in writing and shall be sufficiently given and shall be deemed given when delivered or mailed by certified mail, postage prepaid: PU8L,27181_1 1 138182345.62 3 - .- If to the City: City of Poway 13325 Civic Center Drive Poway, California 92064 Attention: City Manager If to the Agency: Poway Redevelopment Agency 13325 Civic Center Drive Poway, California 92064 Attention: Executive Director If to the Trustee: Bank of America National Trust and Savings Association 333 South Beaudry Avenue 25th Floor Los Angeles, California 90071 Attention: Corporate Trust Department #8510 Notice shall also be given to the Rating Agency at the address(es) then in effect for the Rating Agency pursuant to Section 908 of the Trust Agreement. The Agency, the City and the Trustee, by notice given hereunder, may designate different addresses to which subsequent notices or other communications will be sent. SECTION 17. Caotions. The captions or headings in this Site Lease are for convenience only and in no way defme, limit or describe the scope or intent of any provision or section of this Site Lease. SECTION 18. Execution in Countemarts. This Site Lease may be executed in any number of counterparts, each of which shall be deemed to be an original but all together shall constitute but one and the same instrument. SECTION 19. Amendment. The terms of this Site Lease shall not be waived, altered, modified, supplemented or amended in any manner whatsoever, except by written instrument signed by the Agency and the City, in accordance with Article VII of the Trust Agreement, with the prior written consent of the Trustee and subsequent notice thereof to the Rating Agency. PU8L,27181_1 1 138182345.62 4 ------~---- ---- - - ---_._---------_.~-- - -- --- ------------- - ------ IN WITNESS WHEREOF, the parties have caused this Site Lease to be executed by their duly authorized officers on the date and year first above written. CITY OF POWAY, as Lessor By: Mayor ATTEST: Clerk to the Board of Supervisors POWAY REDEVELOPMENT AGENCY, as Lessee By: Chairperson ATTEST: Secretary PU8L,27181_1 1 138182345.62 5 - - State of California ) ) ss. County of ) On , 199_, before me, (NJ17Ie, title of officu, ..g., Jane Doe. Notary Public') personally appeared (NJ17Ie(S) of ngnu(s)) 0 personally known to me -QR- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in hislher/their authorized capacity/ies, and that by hislher/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Witness my hand and official seal. (Signmun oj Notary) -- Capacity claimed by signer: (l/Ii.J section i.< OPTIONAL.) 0 Individual 0 Corporate Officer(s): 0 Partner(s): o General o Limited 0 Attorney-in-fact 0 Trustee(s) 0 Guardian/Conservator 0 Other: Signer is representing: (1I.tlInI OJ person(s) or Dlhty(les)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. TIllS CERTIFICATE Title or Type of Document MUST BE ATIACHED TO THE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above PUOL,27181_1 1 138182345.62 State of California ) ) ss. County of ) On , 199_, before me, (/lam<!, /ilk of officer, e.g., Jane Doe, Notary Public") personally appeared (/lam<!(') of signer(s)) 0 personally known to me -oR- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in hislher/their authorized capacity/ies, and that by hislher/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Witness my hand and official seal. (Silf7llID're of Notary) Capacity claimed by signer: (This sec/iOft is OP'l70NAL.) 0 Individual 0 Corporate Officer(s): 0 Partoer(s): o General DLirnited 0 Attorney-in-fact 0 Trustee(s) 0 Guardian/Conservator 0 Other: Signer is representing: (/lam<! OJ persOft(s) or entIty(.U)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. THIS CERTIFICATE Title or Type of Document MUST BE ATTACHED TO TIlE DOCUMENT Number of Pages Date' of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above PU8L:27181_1 1 138182345.62 - State of California ) ) ss. County of ) On , 199_, before me, (""""', title of officer, e.g., Jane Doe, NoUlry Public') personally appeared ("""",(s) of signer(s)) 0 personally known to me -OR- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity/ies, and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Witness my hand and official seal. (Signatllre of NoUlry) Capacity claimed by signer: (lhis section is OP170NAL.) 0 Individual 0 Corporate Officer( s): 0 Partner(s): o General o Limited 0 Attorney-in-fact 0 Trustee(s) 0 Guardian/Conservator 0 Other: Signer is representing: ("""'" OJ person(s) or mtlty(les)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. THIS CERTIFICATE Title or Type of Document MUST BE ATTACHED TO TIlE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above PU8L'27181_1 I 138182345.62 State of California ) ) ss. County of ) On , 199_, before me, (name. title of officer. ..g.. JaM D",. Notary Public') personally appeared (name(.) of signo(.)) 0 personally known to me -0R- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in hislher/their authorized capacity/ies, and that by hislher/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) . acted, executed the instrument. Witness my hand and official seal. (Sigroaru.. of Notary) Capacity claimed by signer: ([his uction is OP170NAL.) 0 Individual 0 Corporate Officer(s): 0 Partner(s): o General o Limited 0 Attorney-in-fact 0 Trustee(s) 0 Guardian/Conservator 0 Other: Signer is representing: (name OJ per.on(.) or mtlty(...)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. TIllS CERTIFICATE Title or Type of Document MUST BE ATIACHED TO TIlE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above PU8L,27181_11138182345.62 EXHIBIT A LEGAL DESCRIPTION OF THE SITE 1. [City Hall of the City of Poway] 2. [Building "C", Redevelopment Agency Administration] 3. [Building "A" and "B", Engineering/Planning Administration] 4. [Fire Station #1, Safety Services Administration] 5. [Fire Station #2, North End Fire Station] 6. [14415 Lake Poway Road, Vehicle Maintenance Building] 7. [14445 Lake Poway Road, Operations Administration and Warehouse] 8. [14446 Lake Poway Road, Vehicle Storage Facility] 9. [13094 Bowron Road - Senior Center and Community Park with ball fields, tennis courts, playgrounds and pool] 10. [13094 Bowron Road - City Autitorium] PU8L,27181_1 I 138182345.62 A-I RECORDING REQUESTED BY ) AND WHEN RECORDED MAIL TO: ) ) STRADLING, YOCCA, CARLSON & RAUTH ) 660 Newport Center Drive ) Suite 1600 ) Newport Beach, California 92660 ) Attn: Denise E. Hering, Esq. ) ) This document is recorded for the benefit of the City of Poway, and the recording is fee-exempt under A27383 of the Government Code. ASSIGNMENT AGREEMENT between Poway Redevelopment Agency and Bank of America National Trust and Savings Association as Trustee Dated as of July 1, 1995 Relating to $ 1995 Refunding Certificates of Participation (1986 Capital Improvement Projects) ATTACHMENT I JUN 2 0 1995 ITEM 11 ' , , ASSIGNMENT AGREEMENT This Assignment Agreement, dated as of July 1, 1995 (this "Assignment Agreement"), is made and entered into by and between the Poway Redevelopment Agency, a political subdivision of the State of California organized and existing under the laws of the State of California (the" Agency"), as assignor, and Bank of America National Trust and Savings Association, a national banking association organized and existing under the laws of the United States, as trustee (the "Trustee"), as assignee; WIINgS.S.gIH: In the joint and mutual exercise of their powers, in consideration of the mutual covenants herein contained, and for other valuable consideration, the parties hereto recite and agree as follows: SECTION 1. Recitals. (a) The terms capitalized in this Assignment Agreement shall have the meanings ascribed to them in Section 101 of the Trust Agreement, dated as of July 1, 1995, by and among the City of Poway (the "City"), the Trustee and the Agency (the "Trust Agreement"). (b) The Agency and the City have entered into a certain Site Lease dated as of July 1, 1995 (the "Site Lease"), whereby the City has leased to the Agency certain real property, including the improvements thereon, described in Exhibit A thereto, as amended from time to time, together with any real property added or substituted in the manner and on the terms set forth in the Lease Agreement (defined below) (the "Site"). The Site consists of the real property described in Exhibit A hereto, including the improvements thereon. (c) The Agency and the City have entered into a certain Lease Agreement, dated as of July 1, 1995 (the "Lease Agreement"), whereby the Agency has leased to the City, and the City has leased from the Agency, the Site. (d) Under the Site Lease, the Agency is required to deposit or cause to be deposited with the Trustee certain sums of money to be credited, held and applied in accordance with the Site Lease and the Trust Agreement. (e) Pursuant to the Lease Agreement the City is obligated to pay certain Lease Payments to the Agency or its assignee. For the purpose of obtaining the moneys required to be deposited by it pursuant to the Site Lease, the Agency is willing to assign and transfer certain of its rights, title and interest in and to the Site Lease and the Lease Agreement to the Trustee for the benefit of the Owners of the Certificates and the Owners of any Additional Certificates to be executed and delivered under the Trust Agreement. In consideration of such assignment, the Trustee is delivering the Certificates and will deliver any Additional Certificates to the original purchasers thereof in accordance with the provisions of the Trust Agreement. The PU8L,27280_1 1 138182345.62 06/13/95 . proceeds from the sale of the Certificates (and the proceeds from the sale of Additional Certificates, if any) will be deposited by the Trustee on behalf of the Agency in the various funds and accounts created pursuant to the Trust Agreement and any supplement thereto. (f) Each of the parties has authority to enter into this Assignment Agreement, and has taken all actions necessary to authorize its officers to execute and deliver this Assignment Agreement on its respective behalf. SECTION 2. Assil!nment. The Agency, for consideration received, does hereby absolutely and irrevocably grant, sell, assign and transfer to the Trustee, for the benefit of the Owners of the Certificates and the Owners of any Additional Certificates executed and delivered under the Trust Agreement, all of its right, title and interest (but none of its duties or obligations) in and to the Site Lease and the Lease Agreement (other than its rights to indemnification and payment or reimbursement of its costs or expenses thereunder), including its right to receive Lease Payments from the City under the Lease Agreement; its right to receive proceeds of condemnation of, and insurance on, the Site; and its right to enforce payment of such Lease Payments when due and otherwise to protect its interests and enforce its rights under the Lease Agreement in the event of a default by the City. The Lease Payments shall be applied, and the rights so assigned shall be exercised, by the Trustee as provided in the Trust Agreement. The assignment provided for in this Section 2 shall grant in favor of the Trustee all of the Agency's right, title and interest in and to the Site Lease and the Lease Agreement (other than its rights to indemnification and payment or reimbursement for its costs or expenses thereunder) and all of its interest in the Site. SECTION 3. Acceotance. The Trustee hereby accepts the assignment made herein for the benefit of the Certificate Owners and the Owners of any Additional Certificates, subject to the provisions of the Trust Agreement. SECTION 4. Consent of Al!encv to Deliverv of Certificates and Additional Certificates. The Agency does hereby consent to the execution and delivery of the Certificates (and Additional Certificates, if any shall ever be executed and delivered) by the Trustee, the receipt of payment by the Trustee for the Certificates and any Additional Certificates when the same shall be sold to the original purchaser or purchasers thereof and the transfer and deposit of such proceeds by the Trustee into the funds and accounts created by the Trust Agreement, or any supplement thereto, all in accordance with the terms of the Trust Agreement. SECTION 5. Further Assurances. The Agency will make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Assignment Agreement, and for better assuring and confirming to the Owners of the Certificates and the Owners of any Additional Certificates the rights and benefits intended to be conveyed pursuant hereto. PU8L:2728O_1 1 138182345.62 2 06/13/95 SECTION 6. Amendments. . The terms of this Assignment Agreement shall not be waived, altered, modified, supplemented or amended in any manner whatsoever except by written instrument signed by the Agency and the Trustee, in accordance with Article VII of the Trust Agreement, with the prior written consent of the City and subsequent notice thereof to the Rating Agency. SECTION 7. ADolicable Law. This Assignment Agreement shall be governed by and construed in accordance with the laws of the State. SECTION 8. Conditions. This Assignment Agreement shall confer no rights and shall impose no obligations upon the Trustee beyond those expressly provided in the Trust Agreement. The Trustee does not warrant the accuracy of the recitals hereto. SECTION 9. Partial Invalidity. If anyone or more of the terms, provisions, covenants or conditions of this Assignment Agreement shall to any extent be declared invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, the finding or order or decree of which becomes final, none of the remaining terms, provisions, covenants and conditions of this Assignment Agreement shall be affected thereby, and each provision of this Assignment Agreement shall be valid and enforceable to the fullest extent permitted by law. SECTION 10. Notices. Notice shall also be given to the Rating Agency at the address(es) then in effect for the Rating Agency pursuant to Section 908 of the Trust Agreement. All notices or other communications hereunder shall be in writing and shall be sufficiently given and shall be deemed given when delivered or mailed by certified mail, postage prepaid, to the parties at their respective places of business, as follows: If to the City: City of Poway 13325 Civic Center Drive Poway, California 92064 Attention: City Manager If to the Agency: Poway Redevelopment Agency 13325 Civic Center Drive Poway, California 92064 Attention: Executive Director PU8L,27280 _111381 82345.62 3 06/13/95 -_. If to the Trustee: Bank of America National Trust and Savings Association 333 South Beaudry, 25th Floor Los Angeles, California 90017 Attention: Corporate Trust Department, #8510 The Agency, the City and the Trustee, by notice given hereunder, may designate different addresses to which subsequent notices or other communications will be sent. SECTION 11. Caotions. The captions or headings in this Assignment Agreement are for convenience only and in no way define, limit or describe the scope or intent of any provision or section of this Assignment Agreement. SECTION 12. Execution in Countemarts. This Assignment Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original but all together shall constitute but one and the same instrument. SECTION 13. Bindinl! Effect. This Assignment Agreement shall inure to the benefit of and shall be binding upon the Agency and the Trustee and their respective successors and assigns. PU8L:27280_1 1 138182345.62 4 06/13/95 --~--- IN WITNESS WHEREOF, the parties have executed this Assignment Agreement by their officers thereunto duly authorized as of the day and year first written above. Poway Redevelopment Agency By: Chair ATTEST: Secretary Bank of America National Trust and Savings Association, as Trustee By: Authorized Officer PU8L,2728O_1 1 138182345.62 5 06113/95 .- State of Cali fornia ) ) ss. City of ) On ,199 , before me, - (name, title of oJJiur. ..g., JaM Doe, Noto.ry Public") personally appeared (name(s) of signer(s)) 0 personally known to me -OR- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity/ies, and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Witness my hand and official seal. (Signature of Noto.ry) Capacity claimed by signer: (!his s.ction i.r OPTIONAL.) 0 Individual 0 Corporate Officer(s): 0 Partner(s): o General o Limited 0 Attorney-in-fact 0 Trustee(s) 0 Guardian/Conservator 0 Other: Signer is representing: (name OJ ptmon(s) or ,,"'ty(les)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. TIllS CERTIFICATE Title or Type of Document MUST BE ATTACHED TO TIlE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above PU8L,27280_1 1 138182345.62 06/13/95 ---..-------- - ------- ------ ---- ------ ---- ---- State of California ) ) ss. City of ) On ,199 ,before me, - (name, title of officer, e.g., Jane Doe, Notary Public") personally appeared (name(s) of signer(s)) 0 personally known to me -QR- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in hislher/their authorized capacity/ies, and that by hislher/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Wimess my hand and official seal. (Signmure of Notary) Capacity claimed by signer: (This section is OPTIONAL.) 0 Individual 0 Corporate Officer(s): 0 Partner(s): o General o Limited 0 Attorney-in-fact 0 Trustee(s) 0 Guardian/Conservator 0 Other: Signer is representing: (name OJ person(s) or entltY(les)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. TIllS CERTIFICATE Title or Type of Document MUST BE ATTACHED TO TIlE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above PU8L,27280_1 1 138182345.62 06113/95 _. State of California ) ) ss. City of ) On , 199_, before me, (name, title of officer, e.g., Jt11U! Doe, Notary Public") personally appeared (name(s) of signer(s)) 0 personally known to me -OR- 0 proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity/ies, and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. Witness my hand and official seal. (Signotllre of Notary) Capacity claimed by signer: (This section is OPTIONAL.) 0 Individual 0 Corporate Officer(s): 0 Partner(s): o General o Limited 0 Attorney-in-fact 0 Trustee(s) 0 Guardian/Conservator 0 Other: Signer is representing: (~ OJ person(s) or entIty(les)) Attention Notary: Although the information requested below is OPTIONAL, it could prevent fraudulent attachment of this certificate to an unauthorized document. TIllS CERTIFICATE Title or Type of Document MUST BE ATTACHED TO THE DOCUMENT Number of Pages Date of Document DESCRIBED AT RIGHT: Signer(s) Other than Named Above pU8L,27280_11138182345.62 06/13/95 CONSENT . The City of Poway hereby consents to the foregoing assignment to the Trustee. City of Poway, as Lessee By: Mayor ATTEST: City Clerk PUOL,27280_11138182345.62 06/13/95 - EXHffiIT A - LEGAL DESCRIPTION OF THE SITE 1. [City Hall of the City of Poway] 2. [Building "C", Redevelopment Agency Administration] 3. [Building" A" and "B", Engineering/Planning Administration] 4. [Fire Station #1, Safety Services Administration] 5. [Fire Station #2, North End Fire Station] 6. [14415 Lake Poway Road, Vehicle Maintenance Building] 7. [14445 Lake Poway Road, Operations Administration and Warehouse] 8. [14446 Lake Poway Road, Vehicle Storage Facility] 9. [13094 Bowron Road - Senior Center and Community Park with ball fields, tennis courts, playgrounds and pool] 10. [13094 Bowron Road - City Autitorium] PU8L,27280 _111381 82345.62 A-I 06113/95 -- AGREEMENT RE SPECIAL COUNSEL SERVICES April 6, 1995 The Poway Redevelopment Agency (hereinafter referred to as the "Agency") and Stradling, Yocca, Carlson & Rauth, a Professional Corporation, (hereinafter referred to as "Special Counsel") hereby agree as follows: 1. SERVICES The Agency retains Special Counsel to provide, and Special Counsel agrees to provide, legal services in connection with the Agency's execution and delivery of certificates of participation (hereinafter referred to as the "Certificates") to refinance its $10,000,000 Certificates of Participation, Series 1986. Such services will be divided into two phases: (a) program planning and development of a financing plan; and (b) implementation of the financing plan. In the first phase -- the planning stage -- we would expect: (i) to research applicable laws and ordinances relating to the proposed program, including federal and state tax laws, securities laws and other laws that may be applicable to financing structure currently proposed; (ii) to attend conferences and consult with the Agency ICity staff (including the Agency Executive Director) and counsel regarding such laws, to participate with any fmancial advisors, underwriters, developers, lenders and other experts retained by the Agency in structuring the financing; and (iii) to consult with other firms active in the bond practice when necessary to ensure that any novel approaches being considered would be generally accepted in the bond community. In the second phase -- the implementation stage -- we would expect: (i) to supervise and prepare documentation of all steps to be taken through the execution and delivery of the Certificates including: a. drafting all resolutions, rules and regulations of the Agency and all other basic documents relating to the security of the Certificates, in consultation with the Agency, its counsel and financial advisors, underwriters and other experts; b. preparing the record of proceedings for the authorization, sale, execution and delivery of the Certificates by City and Agency; ATTACHMENT J JUN 2 0 1995 ITEM 11 ----~_.. c. preparing documents relating to the financing, including the indenture and escrow agreement; d. assisting in the preparation or review of any description in the official statement or placement memorandum of California and federal law pertinent to the validity of the Certificates and tax treatment of interest components of lease payments paid, the terms of the Certificates and our opinion; e. reviewing the Certificates purchase contracts or the bidding documents and participating in the related negotiations; f. attending information meetings and other conferences scheduled by the Agency, the financial advisors or the underwriters; g. consulting with counsel to the Agency concerning any legislation or litigation during the course of the financing; h. consulting with the trustee and counsel to the trustee; i. preparing the form of the Certificates, and supervising their production or printing, signing, authentication and delivery; and j. rendering any necessary collateral legal opinions as to the inapplicability of the registration requirements of federal securities laws and other matters related to the execution and delivery of the Certificates, the City authority and Agency authority with respect to the financing generally. (ii) to render a final legal opinion pertaining to the execution and delivery of the Certificates to the effect that: a. the Certificates have been properly authorized and executed and delivered and are valid and binding obligations; b. the essential sources of security for the Certificates have been legally provided; and c. all interest components of lease payments with respect to the Certificates are excludable from gross income for federal income tax purposes and exempt from California personal income taxation. pU8L,25213_11138182345.9 2 - - - 2. INDIVIDUAL RESPONSffiLE FOR PROVIDING SERVICES The Agency agrees to accept and Special Counsel agrees to provide the aforementioned services primarily through Denise E. Hering and Carol L. Lew. Should the above attorneys be unable to provide such services due to death, disability, or similar event, Special Counsel reserves the right to substitute unilaterally another of its attorneys to provide such services, and such substitution shall not alter or affect in any way Special Counsel's other obligations under this agreement. 3. FEES AND EXPENSES a. Certificates Fee The Agency agrees to pay Special Counsel a fee in accordance with the schedule attached hereto as Exhibit 1, provided that payment of such fee is entirely contingent upon the successful sale of the Certificates, and payment thereof is to be made from the proceeds of the Certificates. b. Out-of Pocket EXDenses The Agency also agrees to reimburse Special Counsel for the actual cost of out-of-pocket expenses reasonably incurred, excluding any indirect cost such as Special Counsel's overhead, in connection with the provision of the aforementioned services, including (i) telephone, telex, and telegram charges, (ii) messenger and delivery charges, (iii) traveling expenses, for travel at the Agency's request, (iv) document productwn charges, and (v) similar out-of-pocket expenses. PU8L,25213_11138182345.9 3 '"-------~ 4. FOLLOW-UP SERVICES Special Counsel agrees to provide without additional cost normal follow-up consultation and related services following the sale of the Certificates. Should the Agency require Special Counsel to provide extraordinary services after the sale of the Certificates, such services shall be provided at an additional fee to be agreed upon at a later date. Date: POW A Y REDEVELOPMENT AGENCY By STRADLING, YOCCA, CARLSON & RAUTH, a Professional Corporation By Denise E. Hering PU8L25213_11138182345.9 4 - -. EXHIBIT I Certificates of Particioation Fee Schedule Basic Fee: The fee for the services described in the Agreement to which this Schedule is attached shall be based upon the total principal amount of Certificates authorized and sold and will be computed in accordance with the following schedule: Princioal Amount of Certificates Fee $1,000,000 or less $15,000 $1,000,001 to $5,000,000 $15,000 plus 1/4 of 1 % of the excess over $1,000,000 $5,000,001 to $15,000,000 $38,000 $15,000,001 or more $48,000 Out-of-Pocket Exoenses: In addition to the Basic Fee, Special Counsel shall be reimbursed for out-of-pocket expenses incurred pursuant to Section 3(b) of the Agreement. ,u8L,25213_1 1 138182345.9 5