HomeMy WebLinkAboutF-2c - Certificates of Participation for Construction of the New Central LibraryY OF iVr:' .. ;1 3EACH
MAY 1 1 1992
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May 1, 1992
CITY OF NEWPORT BEACH
DEPARTMENT OF FINANCE
AGENDA NO. F-2-(C)
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Dennis Danner, Finance Director
SUBJECT: CERTIFICATES OF PARTICIPATION FOR CONSTRUCTION
OF THE NEW CENTRAL LIBRARY
BACKGROUND:
As you are aware, the Newport Beach Public Facilities Corporation
(Corporation) is planning on issuing Certificates of Participation
(COPS) for the construction of the new Main Library. The City, in
turn, will lease the completed facility from the Corporation. In
order to issue the COPS, the attached Resolution and other
financing documents must be approved by the City at its meeting of
May 11, 1992. In addition, the Corporation will approve the
leasing transaction at its meeting scheduled for May 26, 1992.
The resolution contains, in part, the following sections:
Commitment to Issue and Sell Certificates. The City hereby
authorizes the award, sale and issuance of the Certificates
for such purposes and in such maximum principal amount as
described in the resolution.
Approval of Lease Transactions; Approval of Documents. The
City hereby approves the leasing transactions contemplated by
the Site Lease, Project Lease, Assignment Agreement and Trust
Agreement on file with the City Clerk.
Certificate Sale. The award of sale of the Certificates is
hereby delegated to the Finance Director provided that the net
interest costs of the Certificates shall not exceed 8.0% per
annum and the underwriter's discount shall not exceed 2.0% of
the principal amount of the Certificates issued.
Official Statement. The City Manager is authorized and
directed to cause the Preliminary Official Statement to be
brought into the form of a final official statement.
Certificate Counsel. The Special Counsel Agreement is hereby
approved and the City Manager is authorized and directed to
execute and deliver the same.
CERTIFICATES OF PARTICIPATION
Page Two
Official Action. The City Manager, Finance Director and any
other officers of the City are hereby authorized and directed
to take all actions and do all things necessary or desirable
hereunder with respect to the sale of the Certificates, the
issuance thereof, the lease transactions, and the financing of
the Project.
RECOMMENDATION:
That the City approve the following financing documents for the
issuance of Certificates of Participation for the construction of
the Central Library:
Resolution, Preliminary Official Statement, Notice Inviting
Bids, Notice of Sale, Site Lease, Project Lease, Trust
Agreement, Assignment Agreement, Special Counsel Agreement and
all other financing documents necessary for the Certificate
sale.
All of these documents are attached to, and become a part of, this
report. All documents are on file with the City Clerk.
SPECIAL COUNSEL AGREEMENT
THIS AGREEMENT is made and entered into this day of G , 1992,
by and between the CITY OF NEWPORT BEACH, CALIFORNIA, a p lic corporation
(hereinafter referred to as "City"), and BROWN, DIVEN & HENTSCHKE (hereinafter
referred to as "Counsel").
NOW, THEREFORE, IT IS HEREBY AGREED by and between the parties hereto as follows:
SECTION 1. That Counsel shall perform legal services in connection with the issu-
ance of certificates of participation evidencing an interest in lease
payments from the City to finance a library (the "COPS").
Said services shall include:
A. Preparation of all resolutions, notices, contracts, lease agree-
ments, COPS forms, and other papers and documents required in the
proceedings;
B. Examination of the proceedings, step by step, as taken;
C. Appear at all hearings under the proceedings, and attend any meeting
where attendance is required;
D. Make recommendations as to sale of COPS, as required;
E. Instruction and advice in connection with any of the foregoing;
F. Issuance of an approving legal opinion attesting to the validity of
the proceedings and the issuance of the COPS;
G. Any and all other customary proceedings relating to the issuance of
COPS.
SECTION 2. That the City shall perform as follows:
A. Furnish to Counsel such maps, records, title searches, and other
documents and proceedings, or certified copies thereof, as
necessary.
B. Pay to Counsel a fee computed on the final principal amount of the
COPS issue as follows:
$20,000.00, plus one -quarter of one percent (.25%) of the issue
amount in excess of $4,000,000.00.
SECTION 3. The fee specified in Section 2 above does not include any services in
connection with the acquisition, by contract or condemnation, of any
easements or other property necessary for the project, or any services
in connection with any other litigation.
At the request of the City, Counsel will represent it in any other
matters relating to said project, including, but not limited to, the
following:
A. Environmental proceedings;
B. Acquisition of property by negotiation or condemnation;
C. Litigation challenging the validity of the proceedings.
Counsel will perform any of the above services at a rate to be mutually
agreed upon before any work is actually performed.
SECTION 4. This Agreement contemplates that Counsel shall pay all ordinary out-of-
pocket expenses incurred, including travel, telephone and copy, and the
only expenses to be billed to City would be extraordinary expenses such
as messenger or overnight mail delivery services.
SECTION 5. In the event the proceedings are terminated or abandoned prior to the
sale of COPS or Counsel is discharged, Counsel shall be paid a reason-
able fee based on $120.00 per hour for services rendered to the date of
such termination, abandonment or discharge, which fee shall not exceed
$5,000.00.
SECTION 6. Counsel hereby states that it does not represent clients with adverse
interests to the City, as it relates to the issuance and sale of the
COPS.
SECTION 7. Subject to Section 5 above, this Agreement may be terminated by either
party hereto by mailing written notice thereof to the other party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on
the day and year first hereinabove written. .
"CITY"
CITY OF NEWPORT BEACH
l
By: G
CIT NAGER
"COUNSEL"
BROW DIVEN & HENTSCHKE
By:
1
F. MACKENZIE BROWN
RESOLUTION NO. 92-48
A RESOLUTION OF THE CITY OF NEWPORT BEACH,
CALIFORNIA AUTHORIZING AND DIRECTING
APPROPRIATE OFFICIALS OF THE CITY TO CAUSE THE
EXECUTION OF A SITE LEASE, PROJECT LEASE,
TRUST AGREEMENT, AND OTHER NECESSARY DOCUMENTS
IN CONNECTION WITH THE DELIVERY AND SALE OF A
MAXIMUM OF $7,500,000.00 OF CERTIFICATES OF
PARTICIPATION; AUTHORIZING THE SALE AND AWARD
OF THE CERTIFICATES AND THE DISTRIBUTION OF
THE OFFICIAL STATEMENT; RATIFYING PRIOR ACTS;
AND APPROVAL OF COUNSEL AGREEMENT; ALL IN
CONNECTION WITH FINANCING A CENTRAL LIBRARY
FACILITY AND EQUIPMENT FOR THE BENEFIT OF CITY
OF NEWPORT BEACH.
RESOLVED, by the City Council of the City of Newport Beach,
California (the "City"):
WHEREAS, the City has authorized and directed the creation of
the Newport Beach Public Facilities Corporation, a not for profit
corporation (the "Corporation") organized under the Laws of the
State of California and authorized pursuant to said law and the
charter creating the Corporation to assist the financing of public
capital improvements of the City through, among other things, the
leasing transactions described in this resolution;
WHEREAS, the City desires to provide financing for the
construction of a new central library for the City through the
issuance of certain certificates of participation all as described
in the various documents identified and approved by this resolution
and on file with the Clerk of the City, including the Preliminary
official Statement, said construction financing generally referred
to herein and in the other documents as the "Project";
WHEREAS, the City and the Corporation wish to finance the
Project Costs and Delivery Costs (as such terms are defined in the
transaction documents) by entering into a Site Lease whereby the
City will lease the Project site to the Corporation and by entering
into a Project Lease whereby the Corporation will leaseback the
site improved by the Project to the City, which leases contain
terms and condition as this City Council deems to be in the best
interest of the City;
WHEREAS, the City will pay Lease Payments under the Project
Lease representing the fair market rental value of the property
leased thereunder in amounts sufficient to pay components of
principal, premium, if any, and interest with respect to the
Certificates hereinafter defined;
WHEREAS, Bank of America National Trust and Savings
Association (the "Trustee") agrees to execute and deliver to the
purchaser thereof Certificates of Participation in the maximum
principal amount of $7,500,000.00 (the "Certificates"), each
representing proportionate interests in the Lease Payments made by
the City under the Project Lease, pursuant to a Trust Agreement
entered into by the City, the Corporation and the Trustee;
WHEREAS, as security for the Certificate owners, the
Corporation will assign pursuant to an Assignment Agreement the
rights to receive the Lease Payments to the Trustee for the benefit
of the owners of the Certificates;
WHEREAS, the Trustee has agreed to disburse proceeds received
from the sale of the Certificates (to be deposited in a project
fund) to pay the Project Costs and Delivery Costs of the Project;
WHEREAS, the Financial Advisor to the City has caused to be
prepared a Preliminary Official Statement and Official Notice of
Sale describing the Certificates and providing for the sale of the
Certificates, which documents this City Council has had an
opportunity to review;
WHEREAS, a special counsel agreement has been submitted by
Brown, Diven & Hentschke;
WHEREAS, a public sale of the Certificates pursuant to the
Official Notice of Sale is scheduled and a highest and best bid
(determined as prescribed in the Official Notice of Sale) is
anticipated to be received;
WHEREAS, the City desires to authorize the award, sale and
issuance of the Certificates, the distribution of the Preliminary
Official Statement and the lease transactions necessary for the
financing of the Project;
WHEREAS, this City Council approves all of said transactions
as being in the public interest;
NOW, THEREFORE, it is hereby ORDERED and DETERMINED, as
follows:
SECTION 1. Recitals. The above recitals are true and
correct, confirmed and ratified.
SECTION 2. Commitment to Issue and Sell Certificates. The
City hereby authorizes the award, sale and issuance of the
Certificates for such purposes and in such maximum principal amount
as are described above. The Certificates shall be issued under and
pursuant to the Trust Agreement, in substantially the form on file
with the City Clerk together with any changes therein, additions
thereto, or both deemed advisable by the City Manager or his
designee whose execution thereof shall be conclusive evidence of
his consent to such changes, additions or both.
SECTION 3. Approval of Lease Transactions; Approval of
Documents. The City hereby approves the leasing transactions
contemplated by the Site Lease, Project Lease, Assignment Agreement
and Trust Agreement on file with the City Clerk and authorizes the
execution and delivery of the Site Lease, Project Lease, Assignment
Agreement and Trust Agreement in form substantially similar to the
form on file with the City, together with any changes therein or
additions thereto deemed advisable by the City Manager or his
designee, whose execution thereof shall be conclusive evidence of
his consent to such changes, additions or both.
SECTION 4. Approval of Preliminary Official Statement and
Notice of Sale. The City hereby ratifies and approves the form of
Preliminary Official Statement and Official Notice of Sale
submitted to and on file with the City Clerk subject to such
changes as are deemed necessary by the City Manager or his
designee. The City further ratifies and approves the distribution
of the Preliminary Official Statement, which the City Manager is
authorized to deem and certify to be in near final form, and
Official Notice of Sale in connection with the sale of the
Certificates, which sale is hereby authorized pursuant to the terms
of the Official Notice of Sale.
SECTION 5. Certificate Sale. The award of the sale of the
Certificates is hereby delegated to the Finance Director or his
designee (provided, however, that the net interest cost on the
Certificates shall not be in excess of 8.0% per annum and the
underwriter's discount shall not exceed 2.0% of the principal
amount of the Certificates issued). Final acceptance of the
successful bid shall be evidenced by the signature of the Finance
Director or his designee on behalf of the City.
SECTION 6. Official Statement. The City Manager or his
designee is authorized and directed to cause the Preliminary
official Statement to be brought into the form of a final official
statement (the "Final Official Statement") and to execute, dated as
of the date of the delivery of the Certificates, a statement that
the facts contained in the Final Official Statement, and any
supplement or amendment thereto (which shall be deemed an original
part thereof for the purpose of such statement) were, at the time
of sale of the Certificates, true and correct in all material
respects and that the Final Official Statement did not, on the date
of sale of the Certificates, and does not, as of the date of
delivery of the Certificates, contain any untrue statement of a
material fact with respect to the City or omit to state material
facts with respect to the City required be stated where necessary
to make any statement made therein not misleading in the light of
the circumstances under which it was made. The City Manager or his
designeee shall take such further actions as are deemed necessary
or appropriate to verify the accuracy thereof.
SECTION 7. Certificate Counsel. The Special Counsel
Agreement is hereby approved and the City Manager is authorized and
directed to execute and deliver the same.
SECTION 8. Official Action. The City Manager, Finance
Director and any other officers of the City are hereby authorized
and directed to take all actions and do all things necessary or
desirable hereunder with respect to the sale of the Certificates,
the issuance thereof, the lease transactions, and the financing of
the Project.
SECTION 9. Effective Date. This Resolution shall take effect
immediately upon its passage and adoption.
ADOPTED THIS 11th day of May, 1992.
ayor
ATTEST:
PREL. NARY OFFICIAL STATEMENT DATED MAY _ 1992
Standard & Poor's Corporation: "
Moody's Investors Service: "
NEW ISSUE ( -See "RATINGS" herein)
In the opinion of Brown, Diven & Hentschke, San Diego, California, Special Counsel, under existing statutes, regulations, rulings and court decisions, the
portion of each Lease Payment made by the City under the Lease designated as and representing interest and received by the Certificate Owners is exempt from
present State of California personal income taxation and assuming continued compliance by the Corporation and the City with the terms of the Indenture and
with certain exceptions set forth under the caption "TAX EXEMPTION" herein, the interest on the Certificates is excludable from gross income for federal
income tax purposes.
$7,500,000
CERTIFICATES OF PARTICIPATION
Series 1992
Dated: June 1, 1992
(Central Library Building Project)
Evidencing A Proportionate Interest Of The Owners Thereof In
Lease Payments To Be Made By the
CITY OF NEWPORT BEACH
(Orange County, California)
To The
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
(A California Nonprofit Public Facilities Corporation)
Due: June 1, as shown below
The Certificates are being sold, executed and delivered to finance the construction of a new library located in the City of Newport Beach, California (the
"City"), a charter city. The Certificates will be used by the Newport Beach Public Facilities Corporation (the "Corporation") in connection with the construction
of the City's Central Library (the "Project") which will be leased by the City, pursuant to the terms and conditions of a Lease Agreement, dated as of June 1,
1992 (the "Lease") entered into between the Corporation, a California nonprofit public benefit corporation, and the City. The Certificates evidence assignments
of proportionate interests in certain lease payments (the "Lease Payments") under the Lease.
Interest on the Certificates will be payable semiannually on June I and December I of each year commencing December 1, 1992. Principal installments
due with respect to the Certificates are payable annually on June 1 of each year commencing June 1, 1994. The Certificates will be delivered as fully registered
Certificates in the denomination of $5,000 each or any integral multiple thereof. Principal installments of the Certificates are payable at the corporate trust office
of Bank of America N.T. & S.A., Los Angeles, California, as trustee (the "Trustee") under the Trust Agreement dated as of June 1, 1992, by and among the City,
the Corporation and the Trustee (the "Trust Agreement"). Interest on Certificates is payable by check mailed by first class mail to the registered owner. The
Certificates are subject to prepayment prior to maturity as described herein.
MATURITY SCHEDULE
Due
Principal
Interest Due Principal Interest
Time 1 of
Amount
Rate Yield Tune 1 of Amount Rate Price
1994
$130,000
% % 2000 $175,000 % 9
1995
135,000
2001 185,000
1996
145,000
2002 200.E
1997
150,000
2003 210,000
1998
160,000
2004 220,E
1999
165,000
2005 235,000
$5,390,000
% Term Certificates due June 1, 2019 - % Yield
--Mus Accrued Interest from June 1, 1992)
Under the terms of the Lease, as described herein, the City is obligated to make Lease Payments in each year payable from the revenues of the City lawfully
available therefor. The obligation of the City to make Lease Payments does not constitute an obligation of the City for which the City is obligated to levy or
pledge any form of taxation or for which the City has levied or pledged any form of taxation.
Payment of the principal of and interest with respect to the Certificates when due will be insured by a municipal bond insurance policy to be issued by
(" " or the "Insurer") simultaneously with
the delivery of the Certificates.
NEITHER THE CERTIFICATES NOR THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS UNDER THE LEASE CONSTITUTE AN
INDEBTEDNESS OF THE CITY, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF, WITHIN THE MEANING OF THE
CONSTITUTION OF THE STATE OF CALIFORNIA OR OTHERWISE. NEITHER THE LEASE, THE INDENTURE NOR THE CERTIFICATES
DIRECTLY OR INDIRECTLY OBLIGATE THE CITY TO MAKE ANY PAYMENTS BEYOND THOSE APPROPRIATED FOR ANY SINGLE FISCAL
YEAR IN WHICH THE LEASE MAY BE IN EFFECT. EXCEPT TO THE EXTENT PAYABLE FROM THE PROCEEDS OF THE CERTIFICATES AND
INCOME FROM THE INVESTMENT THEREOF, THE NET PROCEEDS OF CERTAIN INSURANCE POLICIES, PERFORMANCE BONDS AND
CONDEMNATION AWARDS, THE NET PROCEEDS RECEIVED AS A RESULT OF DEFAULTS UNDER CONSTRUCTION CONTRACTS AND NET
PROCEEDS FROM THE FORECLOSURE AND SALE OF THE PROJECT, THE CERTIFICATES ARE PAYABLE DURING THE LEASE TERM
SOLELY FROM LEASE PAYMENTS TO BE PAID BY THE CITY UNDER THE LEASE AND THE INCOME FROM CERTAIN INVESTMENTS
UNDER THE INDENTURE.
The Certificates are to be offered when, as and if sold, executed and delivered, subject to the approval as to their legality by Brown, Diven & Hentschke,
San Diego, California, Special Counsel. It is anticipated that the Certificates in definitive form will be available for delivery in Los Angeles, California, on or
about June 3, 1992.
The date of this Official Statement is June __, 1992.
CITY OF NEWPORT BEACH
ORANGE COUNTY, CALIFORNIA
CITY COUNCIL
Phil Sansone, Mayor
Clarence J. Turner, Vice Mayor
John W. Hedges
Ruthelyn Plummer
Evelyn Hart
Jean Watt
John C. Cox, Jr.
CITY STAFF
Kevin J. Murphy, City Manager
Dennis C. Danner, City Treasurer/Director of Finance
Robert H. Burnham, City Attorney
Wanda E. Raggio, City Clerk
Ben Nolan, Public Works Director
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
Board of Directors
Phil Sansone, President
Clarence J. Turner, Vice President
John W. Hedges
Ruthelyn Plummer
Evelyn Hart
Jean Watt
John C. Cox, Jr.
Kevin J. Murphy, Secretary
Dennis C. Danner, Chief Financial Officer
Robert H. Burnham, Attorney
Special Counsel
Brown, Diven & Hentschke
San Diego, California
Trustee
Bank of America N.T. & S.A.
Los Angeles, California
Financial Consultant
Miller & Schroeder Financial, Inc.
Solana Beach, California
TABLE OF CONTENTS
Page
Page
Introduction . . . . . . . . . . .
1
Constitutional Limitations on Taxes
The Project . . . . . . . . . . . .
2
and Expenditures . . . . . . .
14
Sources and Uses of Funds . . . .
3
Lease Payments Unsecured . . . .
16
The Certificates . . . . . . . . . .
3
No Liability of the Corporation
Optional Redemption . . . . . . .
3
to the Owners . . . . . . . . .
16
Extraordinary/Mandatory Prepayment
4
Limited Recourse on Default . . . .
16
Notice of Prepayment . . . . . . .
4
Abatement . . . . . . . . . . .
17
Nature of the Certificates . . . . .
5
Loss of Tax Exemption . . . . . .
17
Source of Lease Payments . . . . .
5
The Corporation . . . . . . . . . .
17
Lease Payments . . . . . . . . .
5
Tax Exemption . . . . . . . . . .
18
Summary of Certain Provisions of
Certain Legal Matters . . . . . . . .
18
Legal Documents . . . . . . . .
7
Absence of Litigation . . . . . . . .
18
The Site Lease . . . . . . . . . .
7
Certificate Insurance . . . . . . . .
19
The Lease Agreement . . . . . . . .
7
Ratings . . . . . . . . . . . . .
19
Trust Agreement . . . . . . . . . .
12
Financial Consultant . . . . . . . .
19
Investment of Moneys in Funds and
Underwriting . . . . . . . . . . .
19
Accounts . . . . . . . . . .
13
Miscellaneous . . . . . . . . . . .
20
Events of Default . . . . . . . .
13
Supplemental Information -
Risk Factors . . . . . . . . . . .
14
The City of Newport Beach . . . .
21
Lease Payments-Nonappropriation
14
Appendix A - Definitions . . . . . .
A-1
Certificates Not General Obligations
14
Appendix B -Specimen Insurance Policy
B-1
For purposes of compliance with Rule 15c2-12 of the Securities and
Exchange Commission, the Preliminary Official Statement and the Official
Statement, as of their respective dates, are deemed final by the City and the
Corporation, provided, however, that pricing, underwriting and other information
contained in the Preliminary Official Statement is subject to completion or
amendment in accordance with Rule 15c2-12.
No dealer, broker, salesperson or other person has been authorized by the
City or the Corporation to give any information or to make any representations
other than those contained herein and, if given or made, such other information or
representation must not be relied upon as having been authorized by the City or
the Corporation. This Official Statement does not constitute an offer to sell or the
solicitation of an offer to buy nor will there be any offer or sale of the Certificates
by a person in any jurisdiction in which it is unlawful for such person to make
such an offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the
purchasers of the Certificates. Statements contained in this Official Statement
which involve estimates, forecasts or matters of opinion, whether or not expressly
so described herein, are intended solely as such and are not to be construed as a
representation of facts.
The information set forth herein has been obtained from official sources
which are believed to be reliable but it is not guaranteed as to accuracy or
completeness. The information and expression of opinions herein are subject to
change without notice and neither delivery of this Official Statement nor any sale
made hereunder will, under any circumstances, create any implication that there
has been no change in the affairs of the City or the Corporation since the date
hereof. All summaries of the Lease and the Indenture, or 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 Page Left Intentionally Blank)
$795009000
CERTIFICATES OF PARTICIPATION
Series 1992
(Central Library Building Project)
Evidencing a Proportionate Interest of the Owners Thereof in
Lease Payments to Be Made by the
CITY OF NEWPORT BEACH
(Orange County, California)
To The
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
(A California Nonprofit Public Benefit Corporation)
INTRODUCTION
The purpose of this Official Statement is to provide certain information concerning the sale
and delivery of Certificates of Participation, Series 1992 (the "Certificates"), in the aggregate
principal amount of $7,500,000. The Certificates represent the direct and proportionate interests of
registered owners (collectively, the "Owners") thereof in lease payments (the "Lease Payments") to
be made by the City of Newport Beach, California (the "City") to the Newport Beach Public
Facilities Corporation (the "Corporation") for certain facilities, real property, improvements and
equipment, to be leased pursuant to a Lease Agreement, dated as of June 1, 1992 (the "Lease"),
between the City and the Corporation. The Certificates are being issued pursuant to a Trust
Agreement, dated as of June 1, 1992 (the "Trust Agreement"), between the City, the Corporation
and Bank of America N.T. & S.A., Los Angeles, California (the "Trustee"). Pursuant to the Trust
Agreement the Corporation has assigned to the Trustee for the benefit of the Owners of the
Certificates its rights (i) to amounts payable by the City under the Lease, and (ii) to enforce its
rights upon default by the City.
The Certificates are being issued for the purpose of paying the costs of acquiring and
improving property to be used as the City's Central Library. The Land, Equipment and
Improvements are described herein collectively as the "Project."
The Corporation, as lessee, has acquired a leasehold interest in the land and the equipment
pursuant to a Site Lease, dated as of June 1, 1992, with the City, as lessor (the "Site Lease").
Pursuant to the Lease, the City has agreed to lease the Project from the Corporation. In
accordance with the Lease, the City is required to pay to the Trustee specified Lease Payments for
the Project which are designed to be sufficient in both time and amount to pay, when due, the
principal and interest on the Certificates, and as additional payment, any taxes, assessment charges,
utility charges, maintenance and repair costs of the Project (see "SUMMARY OF CERTAIN
PROVISIONS OF LEGAL DOCUMENTS - LEASE AGREEMENT" herein).
The City has covenanted in the Lease to take such action as may be necessary to include all
such total Lease Payments in its annual budget and has further covenanted to make the necessary
annual appropriation for all such Lease Payments. Said covenants on the part of the City are
deemed to be and will be construed to be duties imposed by law. The amount of Lease Payments
will be abated during any period in which by reason of damage or destruction, there is a substantial
interference with the use and occupancy of the Project by the City, except to the extent moneys on
deposit in the Debt Service Reserve Fund will be used as a credit for Lease Payments. The
1
obligation of the City to pay Lease Payments does not constitute an obligation of the City for which
the City is obligated to levy or pledge any form of taxation. The obligation of the City to make
Lease Payments does not constitute a debt of the City within the meaning of any statutory or
constitutional debt limitations, and payment will be made only from funds lawfully available
therefore.
All capitalized terms in this Official Statement, not defined in the text hereof, are defined in
the Trust Agreement and the Lease. Brief descriptions of the Certificates, the Site Lease, the Lease,
the Trust Agreement and certain other matters are included in this Official Statement. Such
descriptions do not purport to be comprehensive or definitive. All references herein to the Site
Lease, the Lease and the Trust Agreement are qualified in their entirety by reference to such
documents, copies of which may be viewed at the offices of the City. All references to the
Certificates are qualified in their entirety by the definitive terms thereof and the information with
respect thereto included in the Lease and the Trust Agreement. Information concerning the
Corporation and the City has been supplied by the Corporation and the City, respectively, and has
not been verified by the Financial Consultant. The Financial Consultant makes no representation or
warranty, express or implied, as to the accuracy or completeness of such information.
THE PROJECT
A new Central Library is being created for the Newport Beach community. The 52,000
square foot building will be located near the intersection of MacArthur Boulevard and Pacific Coast
Highway. The new four acre site for the Library is being provided through a land exchange
agreement with The Irvine Company, in exchange for the current 1.97 acre site of the current
Newport Center Library.
Simon Martin-Vegue Winkelstein Moris of San Francisco in association with James L.
Pirdy of Newport Beach are designers of the building. The contemporary styling of the stucco and
stone building will take advantage of the ocean views. It will be compatible with surrounding
buildings in the Newport Center/Fashion Island area.
The design of the building with dramatic natural lighting will be open and inviting for its
many users. The two-story building will provide for a popular library (with current books, sound
and video recordings), children's room, young adult area and public meeting room on the first
level. The second level will contain the reference and information desk, the adult fiction and non-
fiction collections and a special area for the business collection.
The Library will house for public access 260,000 books and recordings, 500 current
magazine and newspaper subscriptions and 300,000 microforms. Reference collections including a
special business collection, will support the varied interests of the community. Exhibit space will
highlight works of art from the community artists.
The scheduled starting date for construction is June, 1992. The building will be open for
service in December, 1993.
Performance. Labor and Material Payment Bonds. The City agrees that at all times during
the planning, developing, acquiring, constructing, improving, furnishing and equipping of the
Project, the City or the Contractors under the construction contract, will maintain in full force and
effect performance bonds and labor and material payment bonds in the full amount of the
construction contract. Such bonds shall be in such form as is approved by the City. Copies or
certificates of such performance bonds and labor and material payment bonds shall be delivered to
the Corporation and the Trustee. Any and all moneys received by the City under such bonds or
from the Contractors or other suppliers of machinery or equipment as a result of a breach of
contract, resulting from refunds or adjustments, shall become a part of and be deposited in the
Project Fund.
2
Sources and Uses of Funds
The proceeds to be received from the sale of the Certificates are anticipated to be applied as
follows:
Sources:
Principal Amount of Certificates ................................ $7,500,000.00
Cash Contribution from Library Foundation .................. 1,000,000.00
Total Sources ............................................ $8,500,000.00
Uses:
Underwriter's Discount .......................................... $ 131,250.00
Project Fund ...................................................... 6,889,531.25 1
Reserve Fund(1)................................................. 599,300.00
Lease Payment Fund(2)......................................... 699,918.75
Costs of Issuance Account(3).................................. 180,000.00
Total Uses ................................................ $8,500,000.00
(1) An amount equal to the Reserve Requirement on the Certificates.
(2) An amount which, when added to the accrued interest paid by the purchasers of the
Certificates, is equal to eighteen (18) months' interest on the Certificates.
(3) Costs of issuance includes estimated Trustee fees, Special Counsel fees, Certificate insurance
premium, rating agency fees, costs of printing and other miscellaneous expenses.
THE CERTIFICATES
The Certificates will be sold, executed, and delivered in the aggregate principal amount of
$7,500,000, will be dated June 1, 1992, and will bear interest at the rates per annum set forth on
the cover page hereof. Principal due with respect to the Certificates is payable annually on June 1
of each year commencing June 1, 1994. Interest on the Certificates will be payable commencing on
December 1, 1992, and semiannually thereafter on June 1 and December 1 subject to the mandatory
prepayment provisions as set forth herein.
The Certificates are deliverable in fully registered form, in the denominations of $5,000 or
any integral multiple thereof. Principal will be payable only at the corporate trust office of the
Trustee in Los Angeles, California. Payment of interest with respect to the Certificates will be
made by check mailed by first class mail to the person in whose name each Certificate is registered
on the fifteenth (15) day of the month next preceding an Interest Payment Date at such person's
address as it appears on the Certificate registration books kept by the Trustee under the Trust
Agreement.
Optional Prepayment
The Certificates, including portions thereof, maturing on or after June 1, 2001, shall be
subject to prepayment prior to maturity, upon instructions from the City, on June 1, 2000, and each
Interest Payment Date thereafter as a whole or in part in inverse order of maturity and by lot within
any maturity, at the respective prepayment prices (expressed as percentages of principal amount) set
out below, plus accrued interest thereon to the prepayment date:
Prepayment Dates
June 1, 2000 and December 1, 2000
June 1, 2001 and December 1, 2001
June 1, 2002 and thereafter
K�
Prepayment Prices
102%
101 %
100%
Extraordinary/Mandatory Prepayment
The Certificates shall be subject to extraordinary prepayment prior to the stated maturity
thereof, as a whole or in part at any time pro rata among maturities and by lot within any maturity,
on any date, at a prepayment price of 100% of the principal amount of the Certificates being called
for prepayment, plus accrued interest thereon to the prepayment date, upon the occurrence of any of
the following conditions or events:
(1) if title to, or the use of, substantially all of the Project is condemned by any
authority having power of eminent domain;
(2) if title to substantially all of the Project is found to be deficient or nonexistent
to the extent that the efficient utilization of the Project by the City is impaired;
(3) if substantially all of the Project is damaged or destroyed by fire, earthquake
or other casualty and is not rebuilt, repaired, restored or replaced by the City; or
(4) if as a result of changes in the Constitution of the State of California, or of
legislative or administrative action by the State of California or any political subdivision
thereof, or by the United States, or by reason of any action instituted in any court, the Lease
shall become void or unenforceable.
Mandatory Prepayment -Sinking Fund Payment The Term Certificates maturing on June 1,
2019 (the "Term Certificates") will be subject to mandatory prepayment, on each June 1
commencing on June 1, 2006, at a prepayment price equal to the principal amount thereof together
with accrued interest thereon to the prepayment date, without premium, in the years and amounts as
set forth in the following table:
Year
Year
(June 1)
Amount
(June 1)
Amount
2006
250,000
2013
385,000
2007
265,000
2014
410,000
2008
280,000
2015
435,000
2009
300,000
2016
465,000
2010
320,000
2017
495,000
2011
340,000
2018
525,000
2012
360,000
2019 (1)
560,000
(1) Maturity.
If some but not all of the Term Certificates have been optionally prepaid or prepaid by
mandatory prepayment other than mandatory sinking fund prepayments, the total amount of the
respective future sinking fund payments shall be reduced by the aggregate principal amount of
Term Certificates so prepaid, to be allocated among such sinking fund payments on a pro rata basis
in integral multiples of $5,000.
Notice of Prepayment
Notice of the call for any prepayment identifying the Certificates or portions thereof to be
prepaid will be given by the Trustee to the Owners of Certificates by mailing a copy of the
prepayment notice by first class mail, postage prepaid, at least 30 days, but not more than 60 days,
prior to the prepayment date to the Owner of each Certificate to be prepaid at the address shown on
the registration books maintained by the Trustee; provided however, that any defect in giving such
0
notice by mailing as aforesaid will not affect the validity of any proceedings for the prepayment of
Certificates. Any notice of prepayment will state the date and place of prepayment, the series,
maturity numbers and CUSIP numbers of the Certificates or portions thereof to be prepaid, and in
the case of the prepayment of a portion of any Certificate the principal amount thereof being
prepaid, the prepayment price and that interest will cease to accrue from and after the prepayment
date.
Nature of the Certificates
Each Certificate represents a proportionate interest in Lease Payments to be made by the
City under the Lease which become payable from annual appropriations of the City from funds
lawfully available therefor.
The Lease provides that the City will take action as may be necessary to include all Lease
Payments in its annual budget and to make annual appropriations for all Lease Payments (see
"RISK FACTORS" herein). The City has covenanted through the Lease to pay or cause to be paid
all taxes, assessments, insurance and other costs.
The Trustee, as assignee of the Corporation, will enforce the Lease and hold the City liable
for all Lease Payments on an annual basis.
The City may not mortgage, pledge, assign or transfer its interest in the Lease without the
consent of the Trustee and the Corporation. The City has the right to sublet the Project from time to
time with the approval of the Trustee and the Corporation.
A policy or policies of title insurance, will be provided, insuring the City's interest in the
Project as of the date of issuance of said policy, subject to the terms and conditions of said policy
or policies.
Sources of Lease Payments
The City's obligation under the Lease is based on its authority to acquire and lease property
for the common benefit and in furtherance of its public purposes, as described in the California
Government Code Section 37350. Lease Payments are an expense, not a debt, of the City. Lease
Payments made by the City to the Corporation are payable from any revenues available to the City
except certain special fund revenues which are legally restricted as to use.
Lease Payments
The City covenants and agrees that, not later than five (5) days prior to June 1 and
December 1 of each Fiscal Year, beginning five (5) days prior to June 1, 1994, it will make a Lease
Payment to the Trustee for the account of the Corporation in an amount which, together with
moneys then on deposit in the Lease Payment Fund and available for payment of the principal of,
premium, if any, and interest on the Certificates, shall be sufficient to pay the principal of,
premium, if any, and interest on the Certificates coming due on the immediately succeeding Interest
Payment Date as provided in the Trust Agreement. A portion of each Lease Payment is paid as,
and represents the payment of, interest and the balance of each Lease Payment is paid as, and
represents the payment of, principal.
The Trustee shall calculate the Lease Payments due on any Interest Payment Date as an
amount equal to the total principal and
interest coming due on the Certificates on such Interest
Payment Date estimated as follows:
Interest
Principal
Sinking Fund Interest
Total
Payment Date
Component
Payments Component
Lease Payment (2)
December 1, 1992
$ 233,306.25
$ 233,306.25 (1)
June 1, 1993
233,306.25
233,306.25 (1)
December 1, 1993
233,306.25
233,306.25 (1)
June 1, 1994
$ 130,000.00
233,306.25
363,306.25
December 1, 1994
230,056.25
230,056.25
June 1, 1995
135,000.00
230,056.25
365,056.25
December 1, 1995
226,681.25
226,681.25
June 1, 1996
145,000.00
226,681.25
371,681.25
December 1, 1996
222,875.00
222,875.00
June 1, 1997
150,000.00
222,875.00
372,875.00
December 1, 1997
218,937.50
218,937.50
June 1, 1998
160,000.00
218,937.50
378,937.50
December 1, 1998
214,537.50
214,537.50
June 1, 1999
165,000.00
214,537.50
379,537.50
December 1, 1999
210,000.00
210,000.00
June 1, 2000
175,000.00
210,000.00
385,000.00
December 1, 2000
204,968.75
204,968.75
June 1, 1991
185,000.00
204,968.75
389,968.75
December 1, 2001
199,650.00
199,650.00
June 1, 2002
200,000.00
199,650.00
399,650.00
December 1, 2002
193,650.00
193,650.00
June 1, 2003
210,000.00
193,650.00
403,650.00
December 1, 2003
187,350.00
187,350.00
June 1, 2004
220,000.00
187,350.00
407,350.00
December 1, 2004
180,750.00
180,750.00
June 1, 2005
235,000.00
180,750.00
415,750.00
December 1, 2005
173,406.25
173,406.25
June 1, 2006
$ 250,000.00 173,406.25
423,406.25
December 1, 2006
165,593.75
165,593.75
June 1, 2007
265,000.00 165,593.75
430,593.75
December 1, 2007
157,312.50
157,312.50
June 1, 2008
280,000.00 157,312.50
437,312.50
December 1, 2008
148,562.50
148,562.50
June 1, 2009
300,000.00 148,562.50
448,562.50
December 1, 2009
139,187.50
139,187.50
June 1, 2010
320,000.00 139,187.50
459,187.50
December 1, 2010
129,187.50
129,187.50
June 1, 2011
340,000.00 129,187.50
469,187.50
December 1, 2011
118,137.50
118,137.50
June 1, 2012
360,000.00 118,137.50
478,137.50
December 1, 2012
106,437.50
106,437.50
June 1, 2013
385,000.00 106,437.50
491,437.50
December 1, 2013
93,925.00
93,925.00
June 1, 2014
410,000.00 93,925.00
503,925.00
December 1, 2014
80,600.00
80,600.00
June 1, 2015
435,000.00 80,600.00
515,600.00
December 1, 2015
66,462.50
66,462.50
0
Interest Principal
Sinking Fund
Interest
Total
Payment Date Component
Payments
Component
Lease Payment (2)
June 1, 2016
$ 465,000.00
$ 66,462.50
$ 531,462.50
December 1, 2016
51,350.00
51,350.00
June 1, 2017
495,000.00
51,350.00
546,350.00
December 1, 2017
35,262.50
35,262.50
June 1, 2018
525,000.00
35,262.50
560,262.50
December 1, 2018
18,200.00
18,200.00
June 1, 2019
560.000.00
18,200.00
578,200.00
Totals $2,110,000.00
$5,390,000.00
$8,479,387.50
$15,979,387.50
(1) To be paid from the Capitalized Interest deposited in the Lease Payment Fund.
(2) Estimated.
SUMMARY OF CERTAIN PROVISIONS OF LEGAL DOCUMENTS
The following are brief outlines of certain provisions contained in the Site Lease, the Lease
and the Trust Agreement and are not considered full statements pertaining thereto. Reference is
made to each for the complete text thereof. Copies of said documents are available for inspection at
the offices of the City.
SITE LEASE
In accordance with the Site Lease dated as June 1, 1992 by and between the City, as lessor
and the Corporation, as lessee, the Corporation intends to acquire an interest in the site and to make
improvements to the Project, and to lease its interest in the Project to the City pursuant to the Lease.
The City entered into the Site Lease with the Corporation to transfer a leasehold interest in the Site
solely for the purpose of acquiring, constructing, improving, rehabilitating, remodeling and
equipping the Project and leasing back the Site to the City or others pursuant to the Lease.
The term of the Site Lease will terminate on the expiration of the Lease, unless the term is
sooner terminated, or extended, as provided in the Site Lease.
The Corporation will pay annually to the City as and for the rental due thereunder, the sum
of $1.00 commencing with the execution and delivery of the Site Lease and continuing to and
including the termination of the Lease.
LEASE AGREEMENT
Construction of the Project. The City, as agent for the Corporation pursuant to the Agency
Agreement, will provide for the construction, acquisition and improvement of the Project pursuant
to the requirements of the City. Payment of the costs of the Project will be made from the moneys
deposited in trust with the City as provided in the Agency Agreement.
Upon completion of the construction, acquisition and improvement of the Project, the City
shall deliver any excess funds remaining in the Project Fund to the Trustee after the filing of the
Certificate of Completion as provided in the Trust Agreement.
7
The Corporation agrees to lease the Project to the City pursuant to the Lease. The term of
the Lease shall become effective upon its delivery and subject to earlier termination as provided in
the Lease, and shall terminate June 1, 2020 (the "Term") subject to automatic extension, as
provided in the Lease, if the Certificates have not been fully paid, or if the Lease Payments were
abated at any time except that the Term shall in no event be extended beyond June 1, 2029.
Fair Market Rental Value. The Lease Payments when combined with the costs of
maintenance, insurance and other costs of the Project have been determined to not exceed the fair
market rental value of the Project.
Budget. Pursuant to the Lease, the City covenants to take such action as may be necessary
to include all Lease Payments, Additional Payments and Reserve Replenishment Rent to the extent
known to the City at the time the annual budget is proposed, in each of its annual budgets and to
make the necessary annual appropriations for all such Lease Payments, Additional Payments and
Reserve Replenishment Rents during the term of the Lease. During the Lease term, the City will
furnish to the Trustee by October 1 of each year, a certification by an authorized representative of
the City that appropriations sufficient to make Lease Payments, Additional Payments and Reserve
Replenishment Rents for that fiscal year are provided for therein. The covenants on the part of the
City shall be deemed to be and shall be construed to be duties imposed by law and it shall be the
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. The obligation of the City to make Lease Payments, Additional Payments or Reserve
Replenishment Rents does not constitute an obligation of the City for which the City is obligated to
levy or pledge any form of taxation or for which the City has levied or pledged any form of
taxation. Neither the Certificates nor the obligation of the City to make Lease Payments, Additional
Payments or Reserve Replenishment Rents constitutes an indebtedness of the City, the State or any
of its political subdivisions within the meaning of any constitutional or statutory debt limitation or
restriction.
Maintenance.• Repairs and Replacement. Throughout the Lease Term, as part of the
consideration for the rental of the Project, all repair and maintenance of the Project shall be the
responsibility of the City. The City shall pay for or otherwise arrange for the payment of the cost
of the repair and replacement of any portion of the Project resulting from ordinary wear and tear or
want of care on the part of the City or any sublessee thereof. In exchange for the Lease Payments,
the Corporation agrees to provide only the Project.
Operating Costs. The City covenants and agrees that it will, during the Lease Term, pay all
of the costs incurred by it in operating, maintaining and using the Project.
Taxes Assessments and Other Governmental Charges. The City shall pay or cause to be
paid all taxes and assessments, including but not limited to utility charges of any type or nature
charged to the Corporation or the City as levied, assessed or charged against any portion of the
Project 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 Lease Term as and when the same become due.
Casualty Insurance. During the construction period, the contractor will assume all risks of
damage to the work and materials from fire, earthquake, storm or other causes before the
completion and acceptance of the Project. The contractor will at their own expense repair or replace
any work or materials damaged or destroyed.
N.
Upon the completion and acceptance of the Project, the City shall, at its sole cost and
expense, obtain and shall maintain a policy or policies of insurance to keep the Project constantly
insured against loss or damage by fire, lightning, earthquake, flood and all other risks covered by
the extended coverage insurance endorsement then in use in the State of California in an amount
equal to the Full Insurable Value thereof (subject to a $100,000 loss deductible clause). The Full
Insurable Value of the Project shall be determined from time to time at the request of the
Corporation or the City (but not more frequently than once in every three years) by an architect,
contractor, appraiser, appraisal company or one of the insurers, to be selected and paid by the City.
The insurance required pursuant to the Trust Agreement shall be maintained at the City's sole cost
and expense, and shall be maintained with a generally recognized responsible insurance company
or companies authorized to do business in the State of California as may be selected by the City.
Copies of the insurance policies required under the Trust Agreement, or originals or certificates
thereof, each bearing notations evidencing payment of the premiums or other evidence of such
payment, shall be delivered by the City to the Corporation. All such policies of insurance and all
renewals thereof, shall name the Corporation, the City and the Trustee as insureds as their
respective interests may appear, shall contain a provision that such insurance may not be cancelled
by the issuer thereof without at least thirty (30) days' advance written notice to the Corporation, the
City and Trustee, and shall be payable to the Trustee.
In the event of loss or damage to the Project, the Net Proceeds of casualty insurance carried
pursuant to the Lease shall be paid to the Trustee and shall be applied as provided in the Lease.
Public Liability Insurance. Prior to the commencement of work by the contractor, a
certificate of insurance will be provided to the City which shall indicate that public liability and
property damage insurance in the amount of not less than $1,000,000 is in effect and will be
maintained in full force and effect during the period of construction. The policies must be in a form
acceptable to the City and require at least 30 days written notice before any of the policies are
cancelled, limited or not renewed.
After the completion of the construction and acceptance of the Project, the City shall at its
sole cost and expense, maintain or cause to be maintained at all times during the Lease Term general
property damage and public liability insurance (including but not limited to coverage for all losses
whatsoever arising from the ownership, maintenance, operation or use of any automobile, truck or
other motor vehicle), with respect to the Project under which the Corporation, the City and the
Trustee shall be named as insureds, properly protecting and indemnifying the Corporation and the
Trustee in an amount not less than $1,000,000 for bodily injury (including death) of each person
and property damage in one occurance and $5,000,000 in the aggregate. Such public liability and
property damage insurance may, however, be in the form of a single limit policy covering all risks
in an amount equal to $5,000,000. The policies of said insurance shall contain a provision that
such insurance may not be cancelled by the issuer thereof without at least thirty (30) days' advance
written notice to the Corporation, the City and the Trustee. Such policies or copies or certificates
thereof shall be furnished to the Corporation.
In the event of a public liability occurrence, the Net Proceeds of liability insurance carried
pursuant to the Lease shall be applied toward the extinguishment or satisfaction of the liability with
respect to which such proceeds have been paid.
Worker's Co=nsation Insurance. The City agrees throughout the Lease Term to maintain
or cause to be maintained, in connection with the Project, any worker's compensation coverage
required by the laws of the State of California (with provision for self-insurance of $100,000).
Rental Interruption or Use and Occupancy Insurance. The City shall procure, and maintain
through the Lease Term, rental interruption or use and occupancy insurance to cover loss, total or
partial, of the use of any structures constituting any part of the Project as a result of any of the
hazards covered in the insurance required pursuant to the Lease, in an amount sufficient to pay the
L�
maximum remaining Lease Payments in any future one-year period thereunder, except that such
insurance need be maintained as to the peril of earthquake only if in the opinion of the City such
insurance is available at reasonable cost on the open market from reputable insurance companies.
The net proceeds of such insurance will be paid to the Trustee and deposited in the Reserve Fund to
the extent necessary and then to the Lease Payment Fund, and will be credited towards the payment
of the Lease Payments in the order in which such Lease Payments come due and payable. Such
insurance may be maintained as part of or in conjunction with any other rental income insurance
carried by the City.
Title Insurance. The City will provide, at its own expense, a title insurance policy in form
satisfactory to the Corporation. Said policy shall insure the City's title to the land constituting the
Project subject only to Permitted Encumbrances. All Net Proceeds received under said policy shall
be deposited with the Trustee in the Net Proceeds Fund and shall be credited towards the
prepayment of the remaining Lease Payments.
Blanket Insurance Policies and Self -Insurance. The City may satisfy any of the insurance
requirements set forth in the Lease by using blanket policies of insurance, provided that the City
complies with each and all of the requirements and specifications of the Lease.
The City's current self-insurance program as of the date of the Lease shall be deemed to
satisfy all of the insurance requirements set forth in the Lease.
Subject to the provisions of the Lease, the City may modify the insurance coverage,
including its self-insurance, in whole or in part, for any coverage, taking into account the cost and
availability of insurance and the effect of the terms and rates of such insurance upon the City's
costs and charges for its services upon filing with the Trustee the City's certificate that the new
coverage is equal to or better than that which is being replaced.
Option to Prepay Lease Payments. The City will have the option to prepay in whole or in
part, the principal amount of Lease Payments relating to the Certificates in the amounts, on the
dates and at the prepayment prices provided in the Trust Agreement.
Assignment and Subleasing. The City may not assign the Lease or sublease the Project or
any portion thereof without the prior written consent of the Corporation and the Trustee, and the
Trustee having obtained an opinion from the Bond Counsel determining that such assignment or
sublease would not impair the tax exempt nature of the Certificates, provided, however, no
assignment of the Lease or subleasing of the Project will release or discharge the City from its
duties and obligations under the Lease.
Events of Default The following constitute an "event of default" under the Lease:
(1) Default in the due and punctual payment of a Lease Payment, or any Reserve
Replenishment Rents;
(2) Default in the due observance or performance of any other covenant,
agreement, obligation or provision of the Lease on the City's part to be observed or
performed, and such default shall continue for 30 days after the Corporation or the Trustee
has given to the City written notice specifying such default or such longer period as shall be
reasonably required to cure such default; provided that (1) the City has commenced such
cure within said 30-day period, and (2) the City diligently prosecutes such cure to
completion;
(3) The City or the Corporation (i) files a petition in bankruptcy or for
reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the federal Bankruptcy Code as now or in the future amended or any other
10
similar present or future federal or state statute or regulation, or file a pleading asking for
such relief, (ii) makes an assignment for the benefit of its creditors; (iii) consents to the
appointment of a trustee, receiver or liquidator for all or a major portion of its property or
fails to have vacated or set aside the appointment of any trustee, receiver or liquidator which
was made without the City's or Corporation's consent or acquiescence; or
(4) The City vacates or abandons the Project or any portion thereof, and the
same remains uncared for and unoccupied for a period of 60 days.
Remedies on Default. If any Event of Default under the Lease shall have occurred and be
continuing, the Trustee as assignee under the Assignment Agreement for the Corporation may
(subject, however, to the restrictions contained in the Lease against acceleration of the Lease
Payments) while such default continues, take any one or more of the following actions:
(a) give the City written notice of intention to terminate the Lease and repossess
and re -lease the Project on a date specified in such notice, which date will not be earlier than
30 days after such notice is given, and if all defaults have not then been cured, on the date
so specified, the City's rights to possession of the Project will cease and the Lease will
thereupon be terminated, and the Trustee as assignee for the Corporation may re-enter and
take possession of the Project; or
(b) without terminating the Lease, re-enter the Project or take possession thereof
pursuant to legal proceedings or pursuant to any notice provided for by law, and having
elected to re-enter or take possession of the Project without terminating the Lease, the
Trustee will use reasonable diligence to relet the Project, or parts thereof, for such term or
terms and at such rental and upon such other provisions and conditions as the Trustee may
deem advisable, with the right to make alterations and repairs to the Project, and no such re-
entry or taking of possession of the Project by the Trustee will be construed as an election
on the Trustee's part to terminate the Lease, and no such re-entry or taking of possession by
the Trustee will relieve the City of its obligation to pay Lease Payments or Additional
Payments (at the time or times provided in the Lease), or of any of its other obligations
under the Lease, all of which shall survive such re-entry or taking of possession, and the
City will continue to pay the Lease Payments and Additional Payments specified in the
Lease until the end of the Fiscal Year whether or not the Project shall have been relet, less
the net proceeds, if any, of any reletting of the Project after deducting all of the Trustee's
reasonable expenses in, or in connection with, such reletting, including without limitation
all repossession costs, brokerage commissions, legal expenses, expenses of employees,
alteration costs and expenses of preparation for reletting. Said net proceeds of any reletting
shall be deposited in the Lease Payment Fund
Having elected to re-enter or take possession of the Project without terminating the Lease,
the Trustee as assignee for the Corporation may (subject, however, to any restrictions in the Trust
Agreement against termination of the Lease), by notice to the City given at any time thereafter while
the City is in default in the payment of Lease Payments, Additional Payments or Reserve
Replenishment Rents or in the performance of any other obligation under the Lease, elect to
terminate the Lease on a date to be specified in such notice, which date will be not earlier than 30
days after re-entry under subparagraph (a) above, and if all defaults will have not then been cured
on the date so specified, the Lease will thereupon be terminated. If in accordance with any of the
foregoing provisions of the Lease the Trustee has the right to elect to re-enter and take possession
of the Project, the Trustee may enter and expel the City and those claiming through or under the
City and remove the property and effects of both or either (forcibly if necessary) without being
guilty of any manner of trespass and without prejudice to any remedies for arrears of rent or for
preceding breach of covenant. The Trustee may take whatever action at law or in equity which may
appear necessary or desirable to collect rent then due and thereafter to become due, or to enforce
performance and observance of any obligation, agreement or covenant of the City under the Lease.
11
In addition to the above remedies, the Trustee may file such suits in law or equity as
deemed most effectual to protect and enforce any right under the Lease including, but not limited to,
suits to require the City to account as the trustee of an express trust, to enjoin the City from actions
which may be unlawful or in violation of the rights of the Corporation or the Trustee or to compel
the City to perform its duties and obligations under the law and under the Lease.
In the Event of Default, there shall be no right under any circumstances to accelerate the
Lease Payments or otherwise declare any Lease Payments not then in default to be immediately due
and payable. The enforceability of the rights and remedies of the Owners may be subject to certain
laws or principal of equity.
Abatement of Rental in the Event of Loss of Use. The amount of Lease Payments shall be
abated, during any period in which by reason of damage, destruction or by taking by eminent
domain there is a substantial interference with the use and possession of the Project by the City.
The amount of such abatement shall be determined by the City so that the resulting Lease Payments
represent fair consideration for the use and occupancy of the portions of the Project not damaged or
destroyed. Such abatement shall continue for the period commencing with such damage or
destruction and ending with the completion of the work of repair or reconstruction. In the event of
any such damage or destruction, the Lease shall continue in full force and effect and the City
waives any right to terminate the Lease by virtue of any such damage or destruction.
TRUST AGREEMENT
Trustee. The Trustee is appointed pursuant to the Trust Agreement to execute and deliver
the Certificates and to act as a depository of certain amounts held thereunder. The Trustee is
required to make deposits into and withdrawals from funds, and invest such amounts held under
the Trust Agreement in accordance with the City's instructions.
Assignments. Pursuant to the Trust Agreement and the Assignment Agreement, the
Corporation assigns to the Trustee certain of its rights, title and interest in and to the Lease
including all Lease Payments, prepayments thereof and other amounts required to be deposited in
the Lease Payment Fund, together with the Corporation's rights to enforce payment of all Lease
Payments, prepayments thereof and such other amounts and exercise the Corporation's rights in an
event of default.
Assignment of Revenues by the orporation. The Corporation will, pursuant to the Trust
Agreement, assign and pledge any rents, revenues and receipts receivable by it under the Lease, to
the Trustee as security for payment of the principal of, interest and premium, if any, on the
Certificates and the City consents to such pledge and assignment.
Funds and Accounts. The Trust Agreement creates the following special trust funds, to be
held in trust by the Trustee, in the name of the Corporation to be designated as follows:
(1) "City of Newport Beach Lease Payment Fund" (the "Lease Payment
Fund").
(2) "City of Newport Beach Reserve Fund" (the "Reserve Fund").
(3) "City of Newport Beach Net Proceeds Fund" (the "Net Proceeds Fund").
Deuosit of Certificate Proceeds. The proceeds received from the sale of the Certificates,
including accrued interest thereon, shall be deposited simultaneously with the delivery of the
Certificates, as follows:
12
(1) There will be deposited in the Lease Payment Fund the sum of $
which shall be applied to the payment of interest accruing on the Certificates to and
including December 1, 1993.
(2) There will be deposited in the Reserve Fund an amount which, together with
other moneys deposited therein or transferred thereto, shall equal the Reserve Requirement.
(3) There will be transferred to the City to be held in the Project Fund the
remaining balance of the proceeds of the Certificates.
Investment of Moneys in Funds and Accounts
Moneys held in the Lease Payment Fund and the Reserve Fund will, pursuant to written
order of the City, be separately invested and reinvested by the Trustee in Permitted Investments
which mature or are subject to prepayment by the holder prior to the date when such Funds will be
needed. Any such Permitted Investments will be held by or under the control of the Trustee and
shall be deemed at all times to be a part of the Fund in which such moneys are originally held; and,
except as provided in the next sentence, the interest accruing thereon and any gain realized from
such Permitted Investments will be credited to and accumulated in such Fund, and any loss
resulting from such Permitted Investments will be charged to such Fund. Prior to the Completion
Date, all interest or income realized on Permitted Investments in the Lease Payment Fund and the
Reserve Fund and interest earnings thereon will be credited to and accumulated in the Project Fund.
After the Completion Date, all interest and income realized on Permitted Investments in the
Reserve Fund shall be deposited into the Lease Payment Fund. After the Trustee has notice
pursuant to the Trust Agreement of the existence of an Event of Default, the Trustee shall direct the
investment of moneys in the Lease Payment Fund and the Reserve Fund. The Trustee shall, at the
direction of the City (except as provided following an Event of Default), sell and reduce to cash a
sufficient amount of such Permitted Investments whenever the cash balance in any Fund is
insufficient for the purposes of the Fund.
Events of Default
An Event of Default under the Lease also constitutes an Event of Default under the Trust
Agreement (Please refer to "LEASE -AGREEMENT - Events of Default." herein).
Exercise of Remedies by the Trustee. If an Event of Default has occurred and be
continuing, the Trustee may, and if requested to do so by the Owners of at least a majority in
aggregate principal amount of Certificates then Outstanding, the Trustee shall, pursue and exercise
any available remedy at law or in equity by suit, action, mandamus or other proceeding or exercise
one or more of the rights and remedies conferred by the Trust Agreement as the Trustee, being
advised by counsel, shall deem most expedient in the interests of the Certificate Owners, to enforce
the payment of the principal of, premium, if any, and interest on the Certificates then Outstanding,
and to enforce and compel the performance of the duties and obligations of the Corporation.
If an Event of Default shall happen, THERE SHALL BE NO RIGHT UNDER ANY
CIRCUMSTANCES TO ACCELERATE THE MATURITIES OF THE CERTIFICATES OR
OTHERWISE DECLARE ANY LEASE PAYMENTS NOT THEN IN DEFAULT TO BE
IMMEDIATELY DUE AND PAYABLE.
All rights of action under the Trust Agreement or under any of the Certificates may be
enforced by the Trustee without the possession of any of the Certificates or the production thereof
in any trial or other proceedings relating thereto, and any such suit or proceeding instituted by the
Trustee shall be brought in its name as Trustee without necessity of joining as plaintiffs or
13
defendants any Owners of the Certificates, and any recovery of judgment will, subject to the
provisions of the Trust Agreement, be for the equal benefit of all the Owners of the Outstanding
Certificates.
Amendments. The Trust Agreement can be modified or amended at any time without the
consent of the Certificate Owners but only to the extent permitted by law and only (1) to cure,
correct or supplement any ambiguous or defective provision in the Lease or the Trust Agreement,
and (2) to the extent that in the opinion of the Trustee the modification or amendment shall not
adversely affect the interest of the Certificate Owners.
Except for the amendments, changes or modifications as specified above, neither the
Corporation nor the Trustee will consent to any other amendment, change or modification of the
Lease without the giving of notice and the obtaining of the written consent of the Owners of not
less than a majority in aggregate principal amount of the Certificates at the time Outstanding given
and obtained as provided in the Trust Agreement. If at any time the Corporation and the City shall
request the consent of the Trustee to any such proposed amendment, change or modification of the
Lease, the Trustee will cause notice of such proposed amendment, change or modification to be
given in the same manner as provided in the Trust Agreement with respect to Supplemental Trust
Agreements. Such notice will briefly set forth the nature of such proposed amendment, change or
modification and will state that copies of the same are on file at the principal office of the Trustee
for inspection by all Certificate Owners.
RISK FACTORS
Lease Payments- Nona pprop riation
Lease Payments payable under the terms of the Lease are limited obligations of the City and
are not secured by any pledge of taxes or other revenues of the City. The cost and expense of the
performance by the City of its obligations under the Lease and the incurrence of any liabilities of the
City under the Lease, including without limitation, the payment of all Lease Payments, Additional
Payments and all other amounts required to be paid by the City under the Lease, are subject to and
dependent upon annual appropriations being made by the City Council of the City for such
purposes. The City has covenanted in the Lease to budget for, appropriate and make Lease
Payments in each year during the term of the Lease, but such action is dependent upon an annual
decision to be made in the City's sole discretion.
Certificates Not General Obligations
The obligation of the City to make Lease Payments does not constitute an obligation of the
City for which the City is obligated to levy or pledge any form of taxation or for which the City has
levied or pledged any form of taxation. Neither the Certificates nor the obligation of the City to
make Lease Payments under the Lease constitutes a debt or indebtedness of the City, the Agency,
the State of California or any of its political subdivisions within the meaning of any constitutional
or statutory debt limitation or restriction.
Constitutional Limitations on Taxes and Expenditures
Article XHI A of the California Constitution limits the taxing powers of California public
agencies. Article YM A provides that the maximum ad valorem tax on real property cannot exceed
1% of the "full cash value" which is defined as "the county assessor's valuation of real property as
shown on the 1975-76 tax bill under 'full cash value' or, thereafter, the appraised value of real
property when purchased, newly constructed, or a change in ownership has occurred after the 1975
assessment," subject to exceptions for certain circumstances of transfer or reconstruction. The "full
14
cash value" is subject to annual adjustment to reflect increases not to exceed 2% per year, or
decreases in the consumer price index or comparable local data, or to reflect reduction in property
value caused by damage, destruction or other factors.
Article XIII A requires a vote of two-thirds of the qualified electorate to impose special
taxes, while totally precluding the imposition of any additional ad valorem sales or transaction tax
on real property. As recently amended, Article XIII A exempts from the 1% tax limitation any
taxes above the level required to any debt service on certain voter -approved general obligation
bonds. In addition, Article XIII A requires the approval of two-thirds of all members of the State
Legislature to change any State laws resulting in increased tax revenues.
The California Supreme Court has upheld the general validity of Article XIIIA against a
series of challenges which attacked the initiative which, among other things, enacted Article XIIIA
as a whole. The Court found that it was premature to rule on a claim that Article XIIIA
impermissibly interfered with contracts in violation of the U.S. Constitution, stating that such a
challenge must come when a specific contract or obligation is impaired.
In early 1990, the United States Supreme Court struck down as a violation of equal
protection certain property tax assessment practices in West Virginia, which had resulted in vastly
different assessments of similar properties. Since Article XIIIA of the California Constitution
provides that property may only be reassessed up to 2% per year, except upon certain changes of
ownership or new construction, recent purchasers may pay substantially higher property taxes than
long-time owners of comparable property in a community. The United States Supreme Court in the
West Virginia case expressly declined to comment in any way on the constitutionality of Article
XIIIA. Based on this decision, however, property owners in California brought three suits
challenging the acquisition value assessment provision of Article XIIIA. Two cases include
residential property, and one case involves commercial property. In all three cases, State trial and
appellate courts have upheld the constitutionality of Article XIIIA's assessment rules and concluded
that the West Virginia case did not apply to California's laws. However, the United States
Supreme Court has recently heard the appeal in Nordlinger v. Hahn (225 Cal. App. 3d. 1259), one
of the challenges relating to residential property. Neither the Corporation nor the City can predict
how the Supreme Court will resolve the challenges to Article XIIIA. If the plaintiffs' contentions
are upheld, it is possible that property assessments will be substantially reduced for those who
purchased property after Article XIIIA was enacted. Neither the Corporation nor the City can
predict the ultimate effect any decision holding the State's present system of property tax
assessment unconstitutional would have on general fund revenues or on the City's ability to meet
its obligations under the Lease.
Article XIII B limits the annual appropriations of the State and of any city, county, school
district, authority or other political subdivision of the State to the level of appropriations for the
prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by
the government entity. This limit is popularly known as the "Gann Limit," named after the author
and chief proponent of the measure. The "base year" for establishing such appropriation limit is the
1978-79 fiscal year and the limit is to be adjusted annually to reflect changes in population,
consumer price index and certain increases in the cost of services provided by these public
agencies.
Appropriations subject to Article XIII B include generally the proceeds of taxes levied by
the State or other entity of local government, exclusive of certain State subventions, refunds of
taxes, benefit payments from retirement, unemployment insurance and disability insurance funds.
"Proceeds of taxes" include, but are not limited to, all tax revenues and the proceeds to an entity of
government from (i) regulatory licenses, user charges, and user fees (but only to the extent such
proceeds exceed the cost of providing the service or regulation), and (ii) the investment of tax
15
revenues. Article XIII B includes a requirement that if an entity's revenues in any year exceed the
amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee
schedules over the subsequent two years.
If the City is at or over its Gann Limit, the City may be effectively precluded from utilizing
options such as a property tax or utility users tax, because such tax revenues are not exempt from
the Gann limit. General obligation bonds, in which the annual debt payments or increased tax
revenues are exempt from the Gann limit, could provide a financing alternative, but would require
two-thirds voter approval.
Both Article XIII A and XIII B were adopted as measures that qualified for the ballot
pursuant to California's constitutional initiative process. From time to time other initiative
measures could be adopted, affecting the ability of the City to increase revenues and to increase
appropriations.
Lease Payments Unsecured
The Lease Payments and other amounts due under the Lease, including payment of costs of
improvements, repair, operation and maintenance of the Project, taxes and other governmental
charges and assessments levied against the Project are not secured by any pledge of taxes, but are
payable from funds lawfully available to the City. In the event that the City's revenue sources are
less than its total obligations, the City could choose to fund other municipal services before making
Lease Payments. The same result could occur if, because of State of California Constitutional
limits on expenditures, the City is not permitted to appropriate and spend all of its available
revenues. However, the City has covenanted in the Lease to budget for, appropriate and make the
Lease Payments and other payments due under the Lease in each year during which it has use and
possession of the Project.
No Liability of the Corporation to the Owners
Except as expressly provided in the Trust Agreement, the Corporation, as lessor, will not
have any obligation or liability to the Owners of the Certificates with respect to the payment when
due of the Lease Payments by the City, or with respect to the observance or performance by the
City of other agreements, conditions, covenants and terms required to be observed or performed by
the City under the Lease or under the Trust Agreement, with respect to the performance by the
Trustee of any obligation required to be performed by it under the Trust Agreement.
Limited Recourse on Default
If the City should default on its obligation to make Lease Payments with respect to the
Project, the Trustee, as assignee of the Corporation, may, subject to the Site Lease, re-enter and
take possession of the Project pursuant to the Lease and hold the City liable for all Lease Payments
on an annual basis. Such re-entry and re -letting will not effect a waiver or release of the Lease.
Alternatively, the Trustee may, subject to the Site Lease, terminate the Lease and proceed against
the City to recover damages pursuant to the terms of the Lease. If the City defaults on its
obligations to make Lease Payments, the Trustee may, subject to the Site Lease, have limited ability
to re -let the Project so as to preserve the tax exempt nature of the interest component of the Lease
Payments and Certificates. In any event, the Trustee may have limited ability to re -let the Project
due to the nature of the Project itself and due to the essential nature of the Project to the City it is not
certain whether a court would permit the exercise of the remedies of repossession and re -letting
with respect thereto.
Any suit for money damages would be subject to limitations on legal remedies against cities
in the State of California, including a limitation on enforcement or judgments against funds needed
to serve the public welfare and interest.
16
Abatement
The amount of Lease Payments will be abated, during any period in which by reason of
damage or destruction (other than by condemnation which is described below) there is a substantial
interference with the use and possession of the Project by the City; except that no such abatement
will occur during the period prior to the deposit with the Trustee of any Net Proceeds of use and
occupancy insurance resulting from such damage or destruction and the application thereof to the
payment of the Certificates. The amount of such abatement will be agreed upon by the City and
Trustee such that the resulting Lease Payments represent fair consideration for the use and
occupancy of the portions of the Project not damaged or destroyed, giving due regard to the
payment of the Certificates remaining outstanding after the application of the Net Proceeds of such
insurance. Such abatement will continue for the period commencing with such damage or
destruction and ending with the completion of the replacement or work of repair or reconstruction.
In the event of any such damage or destruction, the Lease will continue in full force and effect and
the City waives any right to terminate the Lease by virtue of any such damage or destruction. In the
event such portion of the Project cannot be repaired during the period of time that proceeds of the
City's rental interruption insurance will be available in lieu of Lease Payments, plus the period for
which funds are available in the Reserve Fund, or in the event that casualty insurance proceeds or
condemnation proceeds are insufficient to provide for complete repair or replacement of such
portion of the affected Project or redemption of the Certificates, there may be insufficiency funds to
cover payments to the Owners in full.
If the entire Project is taken permanently under the power of eminent domain, the Lease
Term will cease as of the day possession shall be so taken. If less than the entire Project is taken
permanently, or if the entire Project or any part thereof is taken temporarily, under the power of
eminent domain, (1) the Lease will continue in full force and effect and will not be terminated by
virtue of such taking and the parties waive the benefit of any law to the contrary, and (2) there will
be a partial abatement of Lease Payments to be agreed upon by the City and the Trustee, but in no
event will the resulting Lease Payments be less than the amount required for the payment of the
principal and interest with respect to the Outstanding Certificates as the same become due and
payable.
Loss of Tax Exemption
As discussed under the caption "TAX EXEMPTION" herein, the interest due with respect
to the Certificates could become includable in gross income for purposes of federal income taxation
retroactive to the date such Certificates were issued, as a result of acts or omissions of the City or
the Corporation in violation of its covenants in the Trust Agreement and the Lease. Should such an
event of taxability occur, the Certificates are not subject to special prepayment and will remain
Outstanding until maturity or until prepaid under one of the redemption provisions contained in the
Trust Agreement.
THE CORPORATION
The Newport Beach Public Facilities Corporation was incorporated on March 9, 1992, and
is a nonprofit public benefit corporation duly organized and existing under the Nonprofit Public
Benefit Corporation Law for the purpose of benefitting and carrying out the purposes of the City of
Newport Beach, by providing for the planning, development, acquisition, construction,
improvement, extension, repair, renovation and/or financing of public buildings, works, projects,
facilities, furnishings and equipment for the benefit or use of the City.
17
TAX EXEMPTION
In the opinion of Brown, Diven & Hentschke, Special Counsel, under existing law, the
interest on the Certificates (a) is exempt from present State of California personal income taxation,
(b) is excludable from gross income for federal income tax purposes and (c) is not an item of tax
preference for purposes of federal alternative minimum tax imposed on individuals and
corporations; however, it should be noted that with respect to corporations (as defined for federal
income tax purposes), such interest is taken into account in determining adjusted net book income
(adjusted current earnings for taxable years beginning after 1989) for the purpose of computing the
alternative minimum tax imposed on such corporations. The opinion set forth in clause (b) above is
subject to the condition that the Trustee, the Corporation and 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 in order that interest thereon be (or continue to be) excluded from
gross income for federal income tax purposes. Failure to comply with certain of such requirements
could cause the interest on the Certificates to be so included in gross income retroactive to the date
of issuance of the Certificates. The Trustee, the Corporation and the City have covenanted to
comply with all such requirements. Special Counsel expresses no opinion regarding other federal
tax consequences arising with respect to the Certificates.
Prospective purchasers of the Certificates should be aware that (i) Section 265 of the Code
denies a deduction for interest on indebtedness incurred or continued to purchase or carry the
Certificates, except with respect to certain financial institutions (within the meaning of Section
265(b)(5) of the Code); (ii) with respect to insurance companies subject to the tax imposed by
Section 831 of the Code, for taxable years beginning after December 31, 1986, Section
832(b)(5)(B)(i) reduces the deduction for loss reserves by 15 percent of the sum of certain items,
including interest on the Certificates; (iii) for taxable years beginning after December 31, 1986 and
before January 1, 1992, interest on the Certificates earned by some corporations could be subject to
the environmental tax imposed by Section 59A of the Code; (iv) for taxable years beginning after
December 31, 1986, interest on the Certificates earned by certain foreign corporations doing
business in the United States could be subject to a branch profits tax imposed by Section 884 of the
Code; (v) passive investment income including interest on the Certificates, may be subject to federal
income taxation under Section 1375 of the Code for Subchapter S corporations that have
Subchapter C earnings and profits at the close of the taxable year if greater than 25% of the gross
receipts of such Subchapter S corporation is passive investment income; and (vi) Section 86 of the
Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take
into account in determining gross income, receipts or accruals of interest on the Certificates.
CERTAIN LEGAL MATTERS
Brown, Diven & Hentschke, San Diego, California, Special Counsel, will render an
opinion with respect to the validity and enforceability of the Lease and the Trust Agreement and as
to the validity of the Certificates. Copies of such approving opinion will be available at the time of
delivery of the Certificates and will be printed on the Certificates.
ABSENCE OF LITIGATION
There is no action, suit or proceeding known to be pending or threatened, restraining or
enjoining the execution or delivery of the Certificates, the Lease or the Trust Agreement or in any
way contesting or affecting the validity of the foregoing or any proceeding of the City taken with
respect to any of the foregoing.
18
CERTIFICATE INSURANCE
[Information to follow.]
RATINGS
Standard & Poor's Corporation and Moody's Investors Service, Inc. have assigned their
respective municipal ratings of " " and " " to this issue of Certificates with the
understanding that upon delivery of the Certificates, a policy insuring the payment when due of the
principal of and interest on the Certificates will be issued by AMBAC Indemnity. The ratings
reflect only the views of the respective rating organization, and explanation of the significance of
the ratings may be obtained from Standard & Poor's Corporation, 25 Broadway, New York, New
York 10004 (212) 208-800 or Moody's Investors Service, Inc., 99 Church Street, New York,
New York 10007, (212) 553-0300. There is no assurance that the ratings will continue for any
given period of time or that it will not be revised downward or withdrawn entirely by the respective
rating agency, if in the judgment of the rating agency circumstances so warrant. Any such
downward revision or withdrawal of the ratings may have an adverse effect on the market price of
the Certificates.
FINANCIAL CONSULTANT
Miller & Schroeder Financial, Inc. ("Miller & Schroeder"), has acted as financial consultant
to the City and the Corporation concerning the Certificates. As financial consultant, Miller &
Schroeder will receive compensation upon the sale and delivery of the Certificates.
UNDERWRITING
The Certificates have been sold at a net interest rate of %. The original
purchase price to be paid for the Certificates is $ . The underwriter intends to offer the
Certificates to the public initially at the price set forth on the cover page of this Official Statement,
plus accrued interest from June 1, 1992, which price may subsequently change without any
requirement of prior notice.
The underwriter may 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.
19
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.
MISCELLANEOUS
References are made herein to certain documents and reports which are brief summaries
thereof which do not purport to be complete or definitive and reference is made to such documents
and reports for full and complete statements of the contents thereof.
Any statements in this Official Statement involving matters of opinion, whether or not
expressly so stated, are intended as such and not as representations of fact. This Official Statement
is not to be construed as a contract or agreement among the Corporation and the purchasers or
Owners of any of the Certificates.
The execution and delivery of this Official Statement has been duly authorized by the
Corporation.
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
By /s/
President
20
SUPPLEMENTAL INFORMATION
THE CITY OF NEWPORT BEACH
The following information concerning the City of Alhambra and surrounding areas is
included only for the purpose of supplying general information regarding the community. The
Certificates are not a debt of the City of Alhambra, the State of California or any of its political
subdivisions, and neither the City, the State nor any of its political subdivisions is liable therefor.
General Description
The City of Newport Beach was incorporated September 1, 1906. The Council -Manager
form of government was established by Municipal Charter on January 7. 1955. The location of the
City is 85 miles north of San Diego and 50 miles south of Los Angeles.
The tourist population is high throughout the year. Its harbor, recreation and special
attraction draws many to the City.
Population
The City's population, as of January 1, 1991 was 67,300 according to the California
Demographic Research Department. A historical summary of the City's population is reflected
below, which shows population trends for Newport Beach.
City of Newport Beach
Population
1980 .................... 62,556 1990.................. 66,736
1988 .................... 66,327 1991.................. 67,300
1989 .................... 66,684
Source: California Demographic Research Department.
Commerce
The number of establishments selling merchandise subject to sales tax and the valuation of
taxable transactions is presented in the following table.
City of Newport Beach
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions
Retail Stores
Taxable
Value of
Year
Permits
Transactions
1987
1,122
$701,623,000
1988
1,175
726,882,000
1989
1,176
790,444,000
1990
1,254
773,089,000
1991(1)
1,283
175,561,000
(1) Second Quarter Report.
Source: State Board of Equalization, California.
Total All Outlets
Taxable
Value of
Permits
Transactions
4,107
966,145,000
4,126
1,001,485,000
4,155
1,063,011,000
4,285
1,025,977,000
4,254
236,755,000
21
Financial Information
Management of the City is responsible for establishing and maintaining an internal control
structure designed to ensure that the City's assets are protected from loss, theft, or misuses; and to
ensure that adequate accounting data are compiled to allow for the preparation of financial
statements in conformity with generally accepted accounting principles. The internal control
structure is designed to provide reasonable, but not absolute, assurance that these objectives are
met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not
exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires
estimates and judgments by management.
General Government Function. The following schedule (expressed in thousands) presents
a summary of General Fund, Special Revenue Fund and Capital Projects Fund revenues for the
fiscal year ended June 30, 1991 and the amount and percentage of increases and decreases in
relation to prior year revenues.
Fiscal Year 1990-91 Revenues
Amount
Revenues
($11000)
Taxes
40,479
Licenses and Permits
2,808
Intergovernmental
11,029
Charges for Services
4,789
Fines and Forfeits
3,115
Use of Money and Property
9,999
Miscellaneous
3.556
Total
JZ5,775
% of Total
Change
% Change
53.41%
2,089
5.44%
3.71
154
5.82
14.55
(5,307)
-32.49
6.32
(128)
-2.60
4.11
(261)
-7.75
13.20
233
2.39
4.70
2 5
-7.42
100.00%
$(3,505)
-4.42%
The net decrease in total revenue since last year is representative of the overall economic
decline, as well as some one-time aberrations in specific areas. It would appear that the most
significant single development in revenue was the decline in revenue received from other
governmental sources. However, the size of this decrease (32.49%) is largely a correction for the
exceptionally large increase of 46.15% that occurred last year, primarily representing funds
received for the Pacific Coast Highway Widening project, which was then at its peak. This years
figure of $11,029,000 is actually quite consistent with the long-term trend in revenues from this
source, as can be seen from the information concerning revenues over the past ten years contained
in the statistical section. Without this decline, overall revenue would actually have shown a small
increase over the prior year.
About 45% of the revenue from use of money and property represents investment income.
In spite of declining interest rates, the City's revised investment program resulted in virtually no
decline in revenue from this source. This, along with a slight increase in revenues from rentals and
concessions, precluded a potential decrease in this category. The increase in revenue from taxes
and licenses and permits is still generally consistent with long-term trends, but a continuation of the
economic slowdown will begin to affect these categories much more significantly in the future.
The schedule below presents a summary of General Fund, Special Revenue Fund and
Capital Projects Fund expenditures for the fiscal year ended June 30, 1991 and the percentage of
increase or decrease in relation to prior year amounts.
The significant increase in general government expenditures was due primarily to large
payments on self -insured liability claims and other self -insured programs during the 1990-91 fiscal
year.
22
The significant decrease in capital outlay was due primarily to completion/winding down of
a major highway widening project in the City. The other expenditure accounts have not increased
or decreased significantly.
Fiscal Year 1990-91 Expenditures
Amount
Revenues
($1,000)
% of Total
Change
% Change
General Government
7,301
9.31%
1,936
36.09%
Public Safety
26,912
34.32
183
0.68
Community Development
183
2.30
(3)
-1.60
Public Works
17,247
21.99
1,422
9.12
Culture and Recreation
7,283
9.29
673
10.18
Capital Outlay
19.499
24
4.112
-17.42
Total
$78,425
100.00%
$ 119
0.15%
City's Assessed Valuation
The City's assessed valuation for the last ten fiscal years are as follows:
Fiscal
Year
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
Secured
Valuation
4,115,108,534
4,704,345,159
5,165,387,560
6,095,601,115
6,600,799,830
7,090,960,057
7,710,141,525
8,357,952,682
8,992,749,635
10,013,611,946
Public
Utilitv
52,977,030
58,414,910
67,215,880
68,160,450
72,892,420
78,565,100
80,391,430
575,220 (1)
575,220 (1)
575,220 (1)
Unsecured
Valuation
440,875,830
540,597,900
540,974,823
594,036,653
691,688,711
649,193,026
839,685,023
688,645,933
771,046,663
894,916,739
Total
Assessed
Valuation
4,608,961,394
5,303,357,969
5,773,578,263
6,757,798,218
7,365,380,961
7,818,718,183
8,630,217,978
9,047,173,835
9,764,371,518
10,909,093,905
(1) Effective fiscal year 1988-89, public utility values have decreased due to AB2890 and AB 454
transferring the public utility values to a county -wide tax rate area.
Source: County of Orange Auditor -Controller's Office.
23
Secured Property Tax Levies and Collections
The City's secured property tax levies and collections for the last ten fiscal years are as
follows:
Total
Total
% of
Delinquent
% of Total
Fiscal
Current
Current
Levy
Tax
Total
Tax Collections
Year
Levv
Collections
Collected
Collections
Collections
To Total Levy
1981-82
8,249,330
T 7,742,923
93.86%
181,278
T 7,924,201
96.06%
1982-83
9,466,008
9,181,218
96.99
265,800
9,447,018
99.80
1983-84
9,744,840
9,586,308
98.37
409,694
9,996,002
102.58
1984-85
11,544,979
10,815,544
93.68
392,904
11,208,448
97.09
1985-86
12,978,040
12,189,094
93.92
364,658
12,553,752
96.73
1986-87
14,395,151
13,783,508
95.75
465,780
14,249,288
98.99
1987-88
15,942,564
15,311,519
96.04
493,507
15,805,026
99.14
1988-89
17,308,591
16,678,689
96.36
432,523
17,111,212
98.86
1989-90
18,962,055
18,119,326
95.56
392,912
18,512,238
97.63
1990-91
21,031,117
19,863,098
94.45
433,571
20,296,669
96.51
Source: County of Orange Auditor -Controller's Office.
Employment and Industry
The City of Newport Beach is a part of the Orange County Labor Market Area. The
distribution of employment in this area is as follows:
Orange County Labor Market Area (1)
Employment by Industry
(in thousands)
Manufacturing
Wholesale & retail trade
Services
Government
Finance, insurance & real estate
Transportation & public utilities
Construction
Mining
Agriculture
Total All Industries
Orange County Labor Market Area (1)
9 9
1990
1991 (4)
259.1
251.9
243.8
316.0
309.5
299.6
312.9
330.1
334.4
125.6
129.0
127.9
96.0
103.5
103.2
35.5
38.6
38.3
74.2
63.0
62.2
1.4
1.3
1.1
5.7
4.5
4.4
1,226.4
1,231.4
1,214.9
Total Civilian Labor Force (2)
1,394.2
1,371.0
1,386.1
Total Unemployment
33.6
55.9
69.0
Unemployment Rate (3)
2.4%
4.1 %
5.0%
(1) Average employment reported for the years indicated by place of work excluding self-
employed, unpaid families and workers involved in labor disputes. Columns may not add
due to rounding.
(2) Annual average total labor force (and components) by location of residence; includes workers
involved in trade disputes.
(3) The unemployment rate is computed from unrounded data; therefore, it may differ from rates
using rounded figures.
(4) As of October.
Source: State Development Department, Employment and Data Research.
24
Construction Activity
The following table is a five year summary of the valuation of building permits issued in the
City.
City of Newport Beach
Building Permit Valuation
(Valuation in Thousands of Dollars)
1987 1988 1989
Residential
New single -dwelling
New multi -dwelling
Additions, alterations
Total Residential
Non -Residential
New commercial/industrial
Other
Additions, alterations
Total Non -Residential
Total Valuation
No. of New Dwelling Units
Single -dwelling
Multi -dwelling
Total Units
$ 46,757 $ 26,965 $ 23,943
10,577 24,772 21,363
14,684 18,506 24,046
$ 72,018 $ 7%243 $ 69,352
1990 1991
$ 35,521
$16,216
6,905
4,636
23.995
19,601
$ 66,421
$40,453
$ 29,968
$ 66,123
$ 17,741
$ 14,181
$ 1,243
3,398
9,141
3,271
4,946
4,781
32398
28,819
37.104
27,813
14,781
$ 65.764
$104.083
$ 58,11646,940
2 805
137 782
1174,326
127 468
113 361
$61,258
265
147
99
239
63
119
258
216
61
18
384
405
315
300
101
Source: "California Building Permt Activity" Economic Sciences Corporation.
25
Schedule of Direct and Overlapping Bonded Debt
The City's direct and overlapping bonded indebtedness is as follows:
1991-92 Assessed Valuation: $11,375,799,795 (after deducting $218,371,115 redevelop-
ment tax allocation increment).
Percent
DIRECT AND OVERLAPPING BONDED DEBT:
Applicable
Debt 6/1/92
Orange County
7.515%
88,301
Orange County Building Authorities
7.515
20,777,453
Orange County Flood Control District
7.522
329,464
Orange County Sanitation Districts #5,6&7
Certificates of Participation
7.343-97.130
27,984,286
Orange County Water District
1.602
2,090,994
Metropolitan Water District
1.519
10,367,707
Municipal Water District of Orange County Water
Facilities Corporation
0.048
28,752
Coast Community College District Certificates of
Participation
26.002
4,969,683
Saddleback Community College District Certificates of
Participation
0.960
262,608
Newport Mesa Unified School District
60.528
808,049
Newport Mesa Unified School District Community
Facilities District #90-1
35.070
1,665,825
Santa Ana Unified School District and Certificates
of Participation
9.816
2,493,264
Other School Districts and Authorities
Various
100,373
Irvine Ranch Water District Certificates of Participation and
Improvement Districts
0.035-15.942
4,503,588
City of Newport Beach Certificates of Participation
100.000
7.500.000 (1)
TOTAL GROSS DIRECT AND OVERLAPPING BONDED DEBT
$83,970,347 (2)
Less: Municipal Water District of Orange County Water Facilities
Corporation (100% self-supporting)
28,752
TOTAL NET DIRECT AND OVERLAPPING BONDED DEBT
$83,941,595
Ratios to 1991-92 Assessed Valuation:
Direct Debt 0.07 %
Total Gross Debt 0.74%
Total Net Debt 0.74%
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/91: $16,181
(1) Certificates of participation to be sold.
(2) Excludes tax and revenue anticipation notes, revenue, mortgage revenue and tax allocation
bonds and non -bonded capital lease obligations.
Source: California Municipals Statistics, Inc.
9�
Utilities
Water is supplied by the City of Newport Beach. Southern California Gas Company
supplies natural gas and electric power is provided by the Souther California Edison Company.
Telephone service is provided by the Pacific Bell Telephone Company.
Community Service Facilities
The City of Newport Beach provides police and fire protection, trash collection and library
service. Hoag Memorial Hospital is located with the City with 5 general, medical and dental clinics
also available.
The City of Newport Beach has 18 elementary schools, 4 high schools and a combination
of 15 community and 4-year Colleges, universities and vocational schools all located within a 15
mile radius.
Cultural and recreational facilities include 25 churches, 4 libraries, 28 parks, 5 post offices,
2 local and regional newspapers, 1 local radio station, yacht clubs, gardens, and museums located
within convenient driving distance.
Transportation
Four main freeways access the City - Interstate 405 and State Highways 55, 73 and 1
(Pacific Coast Highway). The John Wayne Orange County Airport is the closest airway service
with Greyhound bus service and Amtrak Train station to serve as the ground transportation needs.
Climate
The City of Newport Beach is located by the Pacific Ocean with a winter climate average of
57.3 degrees and a summer climate average of 74.01 degrees. Average rainfall is 11.09 inches
annually.
27
APPENDIX A
DEFINITIONS
APPENDIX B
SPECIMEN INSURANCE POLICY
NOTICE INVITING BIDS
$7,500,000
CERTIFICATES OF PARTICIPATION
Series 1992
(Central Library Building Project)
Evidencing a Proportionate Interest of the Owners Thereof in
Lease Payments to Be Made by the
CITY OF NEWPORT BEACH
(Orange County, California)
To The
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
(A California Nonprofit Public Benefit Corporation)
NOTICE IS HEREBY GIVEN that sealed proposals will be received by the Newport
Beach Public Facilities Corporation (the "Corporation"), at the offices of Jeffries Banknote
Company, 1330 West Pico Boulevard, Los Angeles, California 90015 on
May 27, 1992
at 11:00 o'clock A.M. Pacific Standard Time for the purchase of $7,500,000 Certificates of
Participation Series 1992 (Central Library Building Project) (the "Certificates") Evidencing a
Proportionate Interest of the Owners Thereof in Lease Payments to be Made by the City of
Newport Beach (the "City") pursuant to a Lease Agreement with the Corporation authorized to be
executed and delivered under the provisions of the Constitution and Laws of the State of California
and pursuant to the provisions of a trust agreement (the "Trust Agreement") to be entered into by
and among the City, the Corporation and Bank of America N.T. & S.A. as Trustee. The
Certificates are more particularly described in the Trust Agreement and in the Preliminary Official
Statement which has been prepared in connection with the Certificates (which is incorporated
herein by reference).
OPENING OF BIDS: The bids will be received at the above time and place, will be
opened by the Financial Consultant, and Special Counsel, and will be presented to the Finance
Director of the City for consideration and approval later in the day on which the bids are received.
If bids are not accepted by the City on May 27, 1992, the Certificates will be sold at the same time
and place on June 3, 1992 or June 10, 1992, until bids are accepted.
ISSUE: $7,500,000 aggregate principal amount consisting of fully registered Certificates
in the denomination of $5,000 or any integral multiple thereof not exceeding the principal amount
of Certificates maturing at any one time, all dated June 1, 1992.
INTEREST RATE: Maximum not to exceed the maximum interest rate permitted by
law, which is twelve percent (12%) per annum, payable on December 1, 1992 and semiannually
thereafter on June 1 and December 1 of each year. Bidders must specify the rate or rates of interest
which the Certificates shall bear; provided that (a) all Certificates maturing by their terms in any
one year must bear the same rate of interest; (b) each interest rate specified must be in a multiple of
1/20 or 1/8 of 1 % and a zero rate of interest cannot be specified; (c) any rate of interest bid for any
maturity must be equal to or higher than the interest bid for the preceding maturity; (d) no
Certificate shall bear more than one rate of interest; (e) each Certificate shall bear interest from its
date to its stated maturity date at the interest rate specified in the bid; and (f) any premium must be
paid in immediately available moneys as part of the purchase price and no bid will be accepted
which contemplates the waiver of any interest or other concession by the bidder as a substitute for
payment in full of the purchase price in immediately available moneys. Bids which do not conform
to the terms of this paragraph will be rejected.
MATURITIES: The Certificates will mature as follows:
Maturity Date Principal Maturity Date
(June 1) Amount (June 1)
Principal
Amount
1994
$130,000
2001
$ 185,000
1995
135,000
2002
200,000
1996
145,000
2003
210,000
1997
150,000
2004
220,000
1998
160,000
2005
235,000
1999
165,000
2019 (1)
5,390,000
2000
175,000
(1) Final Maturity.
REDEMPTION: Optional Prepayment. The Certificates, including portions thereof,
maturing on or after June 1, 2001, shall be subject to prepayment prior to maturity, upon
instructions from the City, on June 1, 2000, and each Interest Payment Date thereafter as a whole
or in part in inverse order of maturity and by lot within any maturity, at the respective prepayment
prices (expressed as percentages of principal amount) set out below, plus accrued interest thereon
to the prepayment date:
Prepayment Dates Prepayment Prices
June 1, 2000 and December 1, 2000 102%
June 1, 2001 and December 1, 2001 101%
June 1, 2002 and thereafter 100%
Extraordinarv/MandaM Prepayment. The Certificates shall be subject to extraordinary
prepayment prior to the stated maturity thereof, as a whole or in part at any time pro rata among
maturities and by lot within any maturity, on any date, at a prepayment price of 100% of the
principal amount of the Certificates being called for prepayment, plus accrued interest thereon to
the prepayment date, upon the occurrence of any of the following conditions or events:
(1) if title to, or the use of, substantially all of the Project is condemned by any
authority having power of eminent domain;
(2) if title to substantially all of the Project is found to be deficient or
nonexistent to the extent that the efficient utilization of the Project by the City is impaired;
(3) if substantially all of the Project is damaged or destroyed by fire, earthquake
or other casualty and is not rebuilt, repaired, restored or replaced by the City; or
(4) if as a result of changes in the Constitution of the State of California, or of
legislative or administrative action by the State of California or any political subdivision
thereof, or by the United States, or by reason of any action instituted in any court, the
Lease shall become void or unenforceable.
Fa
Mandatory Prepayment -Sinking Fund Pam. The Term Certificates maturing on June
1, 2019 (the "Term Certificates") will be subject to mandatory prepayment, on each June 1
commencing on June 1, 2006, at a prepayment price equal to the principal amount thereof together
with accrued interest thereon to the prepayment date, without premium, in the years and amounts
as set forth in the following table:
Year
Year
(June 1)
Amount
(June 1)
2006
250,000
2011
2007
265,000
2012
2008
280,000
2013
2009
300,000
2014
2010
320,000
2015
(1) Final Maturity.
Year
Amount
(June 1)
Amount
340,000
2016
465,000
360,000
2017
495,000
385,000
2018
525,000
410,000
2019 (1)
560,000
435,000
If some but not all of the Term Certificates have been optionally prepaid or prepaid by
mandatory prepayment other than mandatory sinking fund prepayments, the total amount of the
respective future sinking fund payments shall be reduced by the aggregate principal amount of
Term Certificates so prepaid, to be allocated among such sinking fund payments on a pro rata basis
in integral multiples of $5,000.
Notice of Prepayment. Notice of the call for any prepayment identifying the Certificates or
portions thereof to be prepaid will be given by the Trustee to the Owners of Certificates by mailing
a copy of the prepayment notice by first class mail, postage prepaid, at least 30 days, but not more
than 60 days, prior to the prepayment date to the Owner of each Certificate to be prepaid at the
address shown on the registration books maintained by the Trustee; provided however, that any
defect in giving such notice by mailing as aforesaid will not affect the validity of any proceedings
for the prepayment of Certificates. Any notice of prepayment will state the date and place of
prepayment, the series, maturity numbers and CUSIP numbers of the Certificates or portions
thereof to be prepaid, and in the case of the prepayment of a portion of any Certificate the principal
amount thereof being prepaid, the prepayment price and that interest will cease to accrue from and
after the prepayment date.
PAYMENT: The principal of and premium, if any, with respect to the Certificates are
payable in lawful money of the United States of America at the corporate trust offices of Bank of
America N.T. & S.A., Los Angeles, California, the Trustee with respect to the Certificates.
Interest with respect to the Certificates will be payable in like money by check mailed to the
registered owners of the Certificates as of the record date at the addresses shown on the registration
books of the Trustee, or at the option of the owner of at least $1,000,000 aggregate principal
amount of Certificates, by wire transfer.
REGISTRATION: The Certificates will be issued in fully registered form, and will be
exchangeable upon the terms set forth in the Trust Agreement.
PURPOSE: The Certificates are being issued by the City to provide funds to aid in
financing the acquisition and construction of the central library facility to be located in the City.
CITY'S BUDGET: The obligation of the City to make Lease Payments under the Lease
Agreement constitutes a current expense of the City. The City shall covenant in the Lease
Agreement, however, to include and maintain all lease payments due under the terms of the Lease
Agreement during any fiscal year in its budget for such year, commencing in the 1993-94 fiscal
3
year, and continuing each year thereafter, and further covenants to make the necessary
appropriations therefor. The Lease Agreement provides that the several actions required by such
covenants will be construed to be ministerial duties imposed by law and it will be the ministerial
duty of the officials of the City to carry out and perform the covenants in the Lease Agreement
agreed to be carried out and performed by the City.
TAX EXEMPT STATUS: In the event that prior to the delivery of the Certificates (a)
the income received by any private holder from bonds or obligations of the same type and character
shall be declared to be taxable (either at the time of such declaration or at any future date) under any
federal income tax laws, either by the terms of such laws or by ruling of a federal income tax
authority or official which is followed by the Internal Revenue Service or by decision of any
federal court, or (b) any federal income tax law is adopted which will have a substantial adverse tax
effect upon holders of the Certificates as such, the successful bidder may, at its option, prior to the
tender of the Certificates by the City, be relieved of its obligation under the contract to purchase the
Certificates, and in such case the deposit accompanying its bid will be returned.
LEGAL OPINION: The legal opinion of Brown, Diven & Hentschke, San Diego,
California, approving the validity of the Certificates, will be furnished to the successful bidder
without charge. A copy of the legal opinion, certified by the official in whose office the original is
filed, will be printed on each Certificate without charge to the purchaser.
CERTIFICATE INSURANCE: Payment of the principal of and interest on the
Certificates will be guaranteed by a municipal bond insurance policy to be issued by the
(the "Insurer")
simultaneously with the delivery of the Certificates. Payment of the insurance premium will be the
responsibility of the City.
TERMS OF SALE
HIGHEST BID: The Certificates will be awarded to the responsible bidder or bidders
considering the interest rate or rates specified and the premium offered (if any) from, or by adding
the amount of the discount specified (if any) to, the total amount of interest which the City would
be required to pay from the date of the Certificates to their respective maturity dates at the rates
specified in the bid and the award will be made on the basis of the lowest net interest cost to the
City. The purchaser must pay accrued interest from the date of the Certificates to the date of
delivery. All interest will be computed on a 360-day year basis consisting of 12 months of 30 days
each. The cost of printing the Certificates will be borne by the City.
FORM OF BID; MAXIMUM DISCOUNT: Each bid must be for not less than all of
the Certificates hereby offered for sale and accrued interest to the date of delivery, plus such
premium as is offered or less such discount as is specified in the bid; provided that the amount of
discount specified in any bid shall not exceed one and three-quarters percent (1 3/4%) of the
principal amount of the Certificates. Each bid, together with bidder's check, must be enclosed in a
sealed envelope addressed to the City of Newport Beach and delivered to its representative at the
address above mentioned with the envelope clearly marked: PROPOSAL FOR PURCHASE OF
CERTIFICATES OF PARTICIPATION SERIES 1992 (CENTRAL LIBRARY BUILDING
PROJECT)."
RIGHT OF REJECTION: The City reserves the right, in its discretion, to reject any
and all bids and to waive any irregularity or informality in any bid.
4
PROMPT AWARD: The City will take action awarding the Certificates or rejecting all
bids on May 27, 1992 or such later date as bids are received, provided that the award may be made
after the expiration of the specified time if the bidder shall not have given to the City a notice in
writing of withdrawal of such bid.
DELIVERY AND PAYMENT: Delivery of the Certificates will be made to the
successful bidder in Los Angeles, California, as soon as the Certificates can be prepared, which
delivery date is presently estimated to be within thirty days of the date of sale. Payment for the
Certificates must be made in moneys immediately available to the City in Los Angeles, California.
Any expense of providing immediate Los Angeles funds, whether by transfer of Federal Reserve
Bank funds or otherwise, shall be borne by the purchaser.
RIGHT OF CANCELLATION: The successful bidder shall have the right, at its
option, to cancel the contract of purchase if the City shall fail to execute the Certificates and tender
the same for delivery within 60 days from the date of sale thereof, and in such event the successful
bidder shall be entitled to the return of the deposit accompanying its bid.
BID CHECK: A certified or cashier's check drawn on a bank or trust company
transacting business in the State of California, in the amount of $100,000 payable to the order of
the City, must accompany each bid as a guaranty that the bidder, if successful, will accept and pay
for the Certificates in accordance with the terms of its bid. The check accompanying any accepted
bid shall be applied to the purchase price. The check shall be cashed and the amount thereof
retained by the City if, after the award of the Certificates, the successful bidder fails to complete its
purchase on the terms stated in its bid. The check accompanying each unaccepted bid will be
returned promptly. No interest will be paid upon the deposit made by any bidder.
STATEMENT OF NET INTEREST COST: Each bidder is requested, but not
required, to state in its bid the total net interest cost in dollars to the City and the percentage net
interest rate determined thereby, which shall be considered as information only and not binding on
either the bidder or the City.
NO LITIGATION: There is no litigation pending concerning the validity of the
Certificates, the existence of the City or the title of the officers thereof to their respective offices,
and the City will furnish to the successful bidder a no -litigation certificate certifying to the
foregoing as of and at the time of delivery of the Certificates.
CUSIP NUMBERS: It is anticipated that CUSIP identification numbers will be printed
on the Certificates, but neither the failure to print such number on any Certificate nor any error with
respect thereto shall constitute cause for a failure or refusal by the purchaser thereof to accept
delivery of and pay for the Certificates in accordance with the terms of its bid. All expenses in
relation to the assignment of CUSIP numbers and the printing of CUSIP numbers on the
Certificates shall be paid for by the Corporation; provided, however, that the CUSIP Service
Bureau charge for the assignment of said numbers shall be the responsibility of and shall be paid
for by the purchaser.
CERTIFICATE OF SUCCESSFUL BIDDER: At the time of delivery of the
Certificates to the successful bidder, such bidder will be requested to furnish to the Corporation a
certificate stating the initial reoffering prices at which a substantial amount of the Certificates were
sold to the public.
OFFICIAL STATEMENT: The Corporation has approved a Preliminary Official
Statement relating to the Certificates, in a form deemed "nearly final" by the Corporation for
purposes of SEC Rule 15c2-12(b)(1), subject to revision, amendment and completion in a final
Official Statement. Within seven (7) business days after the award of the bid, the Corporation will
5
furnish to the successful bidder, at no charge, such number of copies of the final Official Statement
as said bidder may reasonably request (but not to exceed 500) for use in connection with any resale
of the Certificates.
CALIFORNIA DEBT ADVISORY COMMISSION FEE: Attention of bidders is
directed to California Government Code Section 8856, which provides that the lead underwriter or
the purchaser of the Certificates may be charged the California Debt Advisory Commission fee,
which is .0001% (not to exceed $1,500) of the principal amount of the Certificates issued.
INFORMATION AVAILABLE: Request for copies of the Official Statement
pertaining to the Certificates, the Official Bid Form, or for other information concerning the
Corporation, should be addressed to Miller & Schroeder Financial, Inc., 505 Lomas Santa Fe
Drive, Solana Beach, California 92075, telephone (619) 481-5894.
GIVEN by resolution of the Corporation adopted on May 11, 1992.
By /s/ Kevin J. Murphy
Secretary of the
Newport Beach Public
Facilities Corporation
2
OFFICIAL BID FORM
$7,500,000
CERTIFICATES OF PARTICIPATION
Series 1992
(Central Library Building Project)
Evidencing a Proportionate Interest of the Owners Thereof in
Lease Payments to Be Made by the
CITY OF NEWPORT BEACH
(Orange County, California)
To The
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
(A California Nonprofit Public Benefit Corporation)
May 27, 1992
Newport Beach Public Facilities Corporation
City of Newport Beach, California
Pursuant to the Notice Inviting Bids (the terms of which are made a part of this bid) we
offer to purchase $7,500,000, principal amount, all or none, of the "Certificates of Participation
Series 1992 (Central Library Building Project) Evidencing a Proportionate Interest of the Owners
Thereof in Lease Payments to be Made by the City of Newport Beach pursuant to a Lease
Agreement with the Newport Beach Public Facilities Corporation" at the par value thereof plus a
premium of $ or minus a discount of $ (making an aggregate sum of
$ ) plus interest accrued on such Certificates from their date to the date of delivery
thereof.
The Certificates are to bear interest at the rates set forth in the following schedule:
Maturity Date
Principal
Interest
Maturity Date
Principal
Interest
June 1 of
Amount
Rate
June 1 of
Amount
Rate
1994
$130,000
%
2001
$ 185,000
%
1995
135,000
%
2002
200,000
%
1996
145,000
%
2003
210,000
%
1997
150,000
%
2004
220,000
1998
160,000
%
2005
235,000
%
1999
165,000
%
2019 (Term)
5,390,000
2000
175,000
%
There is
enclosed herewith a certified
or cashier's check
for one hundred thousand
($100,000) dollars, payable to the order of the City.
We hereby request that printed copies of the Official Statement (not to exceed 500
copies) be furnished us in accordance with the terms of the Notice Inviting Bids.
Our calculation of the net interest cost and net interest rate, which is considered to be
informative only and not a part of the bid, is as follows:
Total Interest
Less Premium or Plus Discount $
Net Interest Cost
Net Interest Rate
Respectfully submitted,
Name
By
Address
City
State
Telephone ( )
Accepted By:
Account Manager
Newport Beach Public Facilities Corporation Title Date
NOTICE OF SALE
$795009000
CERTIFICATES OF PARTICIPATION
Series 1992
(Central Library Building Project)
Evidencing A Proportionate Interest Of The Owners Thereof In
Lease Payments To Be Made By the
CITY OF NEWPORT BEACH
(Orange County, California)
To The
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
(A California Nonprofit Public Facilities Corporation)
Sealed proposals will be received up to 11:00 a.m., Wednesday
MAY 27,1992
at the offices of Jeffries Banknote Company, 1330 West Pico Boulevard, Los
Angeles, California 90015 for the purchase of the $7,500,000 Certificates of
Participation, Series 1992 (Central Library Building Project).
The principal of and interest on the Certificates will be paid from lease
payments to be received by the Corporation from the City of Newport Beach for the
lease of certain real property and improvements to be leased to the City of Newport
Beach.
The Certificates will be dated June 1, 1992 and will mature serially on June 1
in the years 1994 to 2005, inclusive, and on June 1, 2019 (Term Bonds with
mandatory sinking account installments in the years 2006 to 2019, inclusive) as
provided in the Trust Agreement securing the payments of the Certificates. Interest
will be paid on December 1, 1992 and semiannually thereafter on June 1 and
December 1 of each year. The Certificates are subject to call as provided in the
Trust Agreement.
The legal opinion of Brown, Divert & Hentschke, San Diego, California will be
furnished to the successful bidder.
Further information may be obtained from Miller & Schroeder Financial, Inc.
at 505 Lomas Santa Fe Drive, Suite 100, Solana Beach, California 92075-0819 or
by telephone at (619) 481-5894.
KEVIN J. MURPHY
Secretary, Newport Beach Public Facilities Corporation
Siy�9�
DRAFT
Recording Requested By:
CITY OF NEWPORT BEACH
When Recorded Mail To:
CITY OF NEWPORT BEACH
3300 Newport Boulevard
Newport Beach, California 92659
Attn: Finance Director
This document is recorded for the benefit of the CITY OF NEWPORT BEACH, and recording
is fee exempt under §27383 of the Government Code.
SITE LEASE
between
CITY OF NEWPORT BEACH
and
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
Dated as of June 1, 1992
SITE LEASE
This Site Lease is made and entered into as of June 1, 1992, by and between CITY
OF NEWPORT BEACH (the "City"), a municipal corporation duly organized and existing under
the laws of the State of California, as lessor hereunder, and NEWPORT BEACH PUBLIC
FACILITIES CORPORATION, a not for profif corporation duly organized and existing under the
laws of the State of California, (the "Corporation"), as lessee hereunder.
WITNESSETH:
WHEREAS, the City may lease (as lessor) any real property of the City for municipal
purposes pursuant;
WHEREAS, the City has entered into this Site Lease (the "Site Lease") with the
Corporation, without an option to purchase, dated the date hereof, wherein the City has
leased the real property described in Exhibit "A" hereto (the "Site") to the Corporation, as
lessee hereunder;
WHEREAS, the City intends to lease back such Site from the Corporation pursuant to
the terms of a Project Lease dated the date hereof, between the Corporation and the City (the
"Lease"); and
WHEREAS, the City and the Corporation intend to enter into a Trust Agreement, dated
the date hereof (the "Trust Agreement"), with the Trustee thereunder (the "Trustee") to
provide for the execution and delivery of Certificates of Participation (the "Certificates")
representing, in part, proportionate interests in Lease Payments and Prepayments made by the
City thereunder;
NOW, THEREFORE, it is hereby mutually agreed as follows:
SECTION 1. Definitions. Unless the context otherwise requires, the capitalized terms
herein shall have the meanings specified in the Trust Agreement.
SECTION 2. Site Lease. The City hereby leases to the Corporation and the Corporation
hereby leases from the City, on the terms and conditions hereinafter set forth, the Site (i.e.,
the Site described in Exhibit "A" hereto, together with the structures located thereon)
provided that the Lease is duly executed and delivered by the parties hereto simultaneously
herewith.
SECTION 3. Term. The term of this Site Lease shall commence as of the date of
recordation hereof and shall remain in effect until the expiration of the term of the Lease, as
defined in the Lease and which terminates as provided therein, provided, however, if Lease
Payments (as defined therein) due under the Lease remain unpaid at the expiration of the
Lease term, then this Site Lease shall not terminate until the earlier of (i) June 1, 2019 or (ii)
the date on which the Certificates have been paid in full (plus a recovery of the cost of any
investment made by the Trustee as assignee of the Corporation); provided that this Site Lease
shall not expire during the term of any lease executed and delivered in place of the Lease
pursuant to Section 13.10 of the Trust Agreement, unless such term is sooner terminated as
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hereinafter provided.
SECTION 4. Rental. The Corporation, and any assignee or successor in interest of the
Corporation under this Site Lease, shall pay annually to the City as and for rental hereunder,
the sum of One Dollar ($1.00), commencing on the date hereof, and continuing to and
including the date of termination of this Site Lease.
SECTION 5. Purpose. The Corporation shall use the Site solely for the purpose of
leasing back the Site to the City or others pursuant to the Lease and for such purposes as
may be incidental thereto.
SECTION 6. Owner in Fee. The City covenants that it is the owner in fee of the Site.
SECTION 7. Assignments and Site Leases. The City acknowledges and affirms the
assignment by the Corporation of its rights under this Site Lease to the Trustee, under the
terms of the Assignment Agreement, dated as of the date hereof, between the Corporation
and the Trustee, for the benefit of the owners of the Certificates.
SECTION 8. Termination. The Corporation agrees, upon the termination of this Site
Lease, to quit and surrender the Site in the same good order and condition as the same was
in at the time of commencement of the term hereunder, 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 title thereto shall vest in
the City.
Upon prepayment by the City of all Lease Payments due during the term of the Lease,
the term of this Site Lease shall terminate as provided herein.
Upon payment by the City of all Lease Payments due during the term of the Lease, as
provided for in Article IV thereof, the term of this Site Lease shall terminate subject to Section
3 hereof.
SECTION 9. Quiet Enjoyment. The Corporation at all times during the term of this
Lease shall peaceably and quietly have, hold and enjoy all of the Site.
SECTION 10. Default. In the event the Corporation 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 Corporation, the City, with the consent of the Trustee (subject to the Trust
Agreement), may exercise any and all remedies granted by law which do not adversely affect
the interests of the owners of the Certificates, provided that the City may not terminate this
Site Lease and shall exercise only remedies providing for specific performance hereunder, and
provided further, however, that so long as any of the Certificates are Outstanding and unpaid
in accordance with the terms thereof, the Lease Payments assigned by the Corporation to the
Trustee under the Trust Agreement shall continue to be paid to the Trustee.
SECTION 11. Taxes. Subject to the provisions of Section 7.6(c) of the Lease, the City
covenants and agrees to pay any and all assessments of any kind or character and also all
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taxes, including possessory interest taxes, levied or assessed upon the Site.
SECTION 12. Eminent Domain. In the event the whole or any part of the Project is
taken by eminent domain proceedings, the interest of the Corporation shall be recognized and
is hereby determined to be the amount of unpaid Lease Payments or Additional Payments due
the Corporation under the Lease.
SECTION 13. Partial Invalidity. If any one 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 sha!l be affected thereby, and each provision of this Site Lease
shall be valid and enforceable to the fullest extent permitted by law.
SECTION 14. Applicable Law. This Site Lease shall be governed by and construed in
accordance with the laws of the State of California.
SECTION 15. Representatives. Whenever under the provisions of this Site Lease the
approval of the Corporation or the City is required, or the Corporation 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 Corporation by the Representative as defined in the Lease and for the City by its City
Representative, 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
sufficiently given and shall be deemed to have been received 24 hours after deposit in the
United States mail in registered or certified form, postage prepaid:
If to the City:
CITY OF NEWPORT BEACH
3300 Newport Boulevard
Newport Beach, California 92659
Attention: Finance Director
If to the Corporation:
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
3300 Newport Boulevard
Newport Beach, California 92659
Attention: City Treasurer
The Corporation and the City, by notice given hereunder, may designate different
addresses to which subsequent notices or other communications will be sent.
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SECTION 17. Cargions. The captions or headings in this Site Lease are for convenience
only and in no way define, limit or describe the scope or intent of any provision or Section of
this Site Lease.
SECTION 18. Execution in Counterparts. 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. Incorporation. This Site Lease is hereby made a part of the Lease and
shall be subject to all the terms and conditions of the Lease.
SECTION 20. Amendment. This Site Lease may be amended with the consent of the
Trustee to provide for the substitution of sites for the Site or the addition of real property as
a Site hereunder, provided that the Lease is correspondingly amended as provided in Section
8.3 thereof.
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 NEWPORT BEACH
Bv:
City Manager
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
By:
Authorized Representative
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STATE OF CALIFORNIA )
) SS.
COUNTY OF ORANGE )
On this day of June in the year 1992 before me, the undersigned, a Notary
Public in and for the State of California, personally appeared to me ,
known to me (or proved to me on the basis of satisfactory evidence) to be the person who
executed the within instrument and acknowledged to me that he executed the within
instrument pursuant to a resolution of the Board of Directors of the NEWPORT BEACH PUBLIC
FACILITIES CORPORATION, the public agency that executed the within instrument.
WITNESS my hand and official seal.
Notary Public
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STATE OF CALIFORNIA )
) SS.
COUNTY OF ORANGE )
On this day of June in the year 1992 before me, the undersigned, a Notary
Public in and for the State of California, personally appeared to me, , known to
me (or proved to me on the basis of satisfactory evidence) to be the of CITY OF
NEWPORT BEACH, the public agency that executed the within instrument, and personally
known to me (or proved on the basis of satisfactory evidence) to be the person who executed
the within instrument on behalf of said City, and acknowledged to me that he executed the
within instrument pursuant to a resolution of said City.
WITNESS my hand and official seal.
Notary Public
ls3
EXHIBIT "A"
DESCRIPTION OF SITE
[description of Library Site]
A-1
s/y/va
DRAFT
Recording Requested By:
CITY OF NEWPORT BEACH
When Recorded Mail To:
CITY OF NEWPORT BEACH
3300 Newport Boulevard
Newport Beach, California 92659
Attn: Finance Director
This document is recorded for the benefit of CITY OF NEWPORT BEACH, and recording is fee
exempt under §27383 of the Government Code.
PROJECT LEASE
between
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
Lessor
and
CITY OF NEWPORT BEACH
Lessee
Dated as of June 1, 1992
SECTION 1.1
SECTION 1.2
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND EXHIBITS
Definitions and Rules of Construction ................. 2
Exhibits ..................................... 2
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
SECTION 2.1 Representations, Covenants and Warranties of the City ..... 3
SECTION 2.2 Representations, Covenants and Warranties of the Corporation 4
ARTICLE III
ACQUISITION, CONSTRUCTION AND IMPROVEMENT OF THE PROJECT
SECTION 3.1 Deposit of Certificate Proceeds ..................... 5
SECTION 3.2 Payment of Project Costs ......................... 5
SECTION 3.3 Completion Certification .......................... 5
SECTION 3.4 Further Assurances and Corrective Instruments .......... 6
ARTICLE IV
AGREEMENT TO LEASE; TERM OF LEASE;
LEASE PAYMENTS; ADDITIONAL PAYMENTS
SECTION 4.1
Lease ....................................... 6
SECTION 4.2
Term ....................................... 6
SECTION 4.3
Lease Payments ................................ 6
SECTION 4.4
No Withholding ................................ 7
SECTION 4.5
Fair Market Rental Value .......................... 7
SECTION 4.6
Assignment of Lease Payments ..................... 7
SECTION 4.7
Use and Possession ............................. 7
SECTION 4.8
Abatement of Lease Payments in Event of Loss of Use ..... 8
SECTION 4.9
Additional Payments ............................. 8
SECTION 4.10
Net -Net -Net Lease .............................. 8
ARTICLE V
INSURANCE
SECTION 5.1 Public Liability and Property Damage ................. 9
SECTION 5.2 Workers' Compensation .......................... 9
SECTION 5.3 Casualty Insurance .............................. 9
SECTION
5.4
Rental Interruption Insurance .......................
10
SECTION
5.5
Title Insurance .................................
10
SECTION
5.6
General Insurance Provisions .......................
10
SECTION
5.7
Cooperation ..................................
11
ARTICLE VI
DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS
SECTION 6.1 Application of Net Proceeds ....................... 12
SECTION 6.2 Application of Other Moneys ....................... 14
ARTICLE VII
COVENANTS WITH RESPECT TO THE SITE
SECTION 7.1
Use of the Site; Non -abandonment ...................
14
SECTION 7.2
Interest in the Site ..............................
14
SECTION 7.3
Quiet Enjoyment ...............................
14
SECTION 7.4
Installation of City's Personal Property ................
15
SECTION 7.5
Access to the Site ..............................
15
SECTION 7.6
Maintenance, Utilities, Taxes and Assessments; Operating Costs
15
SECTION 7.7
Modification of the Site ..........................
16
SECTION 7.8
Liens .......................................
17
17
SECTION 7.9
Corporation's Disclaimer of Warranties ................
ARTICLE Vill
ASSIGNMENT, SUBLEASING AND AMENDMENT
SECTION 8.1 Assignment by the Corporation ..................... 18
SECTION 8.2 Assignment and Subleasing by the City ............... 18
SECTION 8.3 Amendments and Modifications ..................... 18
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
SECTION 9.1
Events of Default Defined .........................
18
SECTION 9.2
Remedies on Default ............................
19
SECTION 9.3
No Remedy Exclusive ............................
21
21
SECTION 9.4
Agreement to Pay Attorneys' Fees and Expenses ........
SECTION 9.5
No Additional Waiver Implied by One Waiver ............
21
SECTION 9.6
Application of the Proceeds from the Re -Lease of the Project
22
SECTION 9.7
Trustee and Certificate Owners to Exercise Rights ........
ARTICLE X
PREPAYMENT OF LEASE PAYMENTS
SECTION 10.1 Mandatory Prepayment From Net Proceeds, State Reimbursement
Moneys
or Other Moneys 22
SECTION 10.2 Optional Prepayment ............................ 22
SECTION 10.'3 Credit for Amounts on Deposit ..................... 22
SECTION 10.4 Effect of Prepayment ............................ 23
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Notices ...................................... 23
SECTION 11.2 Binding Effect ................................. 24
SECTION 11.3 Severability................................... 24
SECTION 11.4 Execution in Counterparts ......................... 24
SECTION 11.5 Applicable Law ................................ 24
Exhibit A - Schedule of Lease Payments ............................. A-1
Exhibit B - General Description of the Project .......................... B-1
Exhibit C - Form of Lease Supplement ............................... C-1
Exhibit D - Legal Description of the Site .............................. D-1
PROJECT LEASE
THIS PROJECT LEASE, dated as of June 1, 1992, by and between the NEWPORT
BEACH PUBLIC FACILITIES CORPORATION, a public agency duly organized and existing under
the laws of the State of California, including without limitation Section 6500 et seq. of the
Government Code of the State of California, as lessor (the "Corporation"), and CITY OF
NEWPORT BEACH, a municipal corporation duly organized and existing under the Constitution
and laws of said State, as lessee (the "City");
WITNESSETH:
WHEREAS, the Corporation and the City wish to provide financing for the acquisition
and construction, as described herein, of certain improvements described in Exhibit B hereto
referred to as the "Project" by entering into this Lease and authorizing and directing the
execution and delivery of Certificates of Participation, described below, evidencing an
undivided and proportionate interest in lease payments to be made by the City hereunder;
WHEREAS, the City has entered into a Site Lease of even date herewith (the "Site
Lease") with the Corporation under which the Corporation has agreed to lease the site (as
herein defined) from the City and improve or provide for the acquisition, construction and
improvement of the Project.to be used by the City and to lease back the Site to the City
pursuant to Section 4.1 hereof, and which Site Lease provides that the title to such Site shall
vest in the City at the expiration of such Site Lease (as provided in Section 8 ,thereof), and
contains other terms and conditions as the Board of Education of the City deems to be in the
best interest of the City;
WHEREAS, the Corporation is a public agency organized under the laws of the State
of California including without limitation the Joint Exercise of Powers Law consisting of
Chapter 5 of Division 7 of Title 1 (commencing with Section 6500) of the Government Code;
WHEREAS, the Corporation is authorized pursuant to the Joint Exercise of Powers Law
and the Joint Exercise of Powers Agreement creating the Corporation to provide for the
financing of public capital improvements of the City through the leasing transaction
contemplated by this Lease;
WHEREAS, the City is authorized to enter into the lease and leaseback of the site
pursuant to Section 39360.1 of the Education Code of the State of California to provide
financing for the Project;
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:
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ARTICLE I
DEFINITIONS AND EXHIBITS
SECTION 1.1. Definitions and Rules of Construction. Unless the context otherwise
requires, the capitalized terms used herein shall, for all purposes of this Lease, have the
meanings specified in the Trust Agreement, dated as of the date hereof, by and among U.S.
Trust Company of California, N.A., as trustee thereunder, the Corporation, and the City (the
"Trust Agreement"), together with any amendments thereof or supplements thereto permitted
to be made thereunder; 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.
"Permitted Encumbrances" means, as of any particular time: (i) liens for general ad
valorem taxes and assessments, if any, not then delinquent, or which the City may, pursuant
to provisions of Article VII hereof, permit to remain unpaid; (ii) the Assignment Agreement,
as it may be amended from time to time; (iii) the Site Lease, as it may be amended from time
to time; (iv) this Lease, as it may be amended from time to time; (v) any right or claim of any
mechanic, laborer, materialman, supplier or vendor not filed or perfected in the manner
prescribed by law; NO easements, rights of way, mineral rights, drilling rights and other rights,
reservations, covenants, conditions or restrictions which exist of record as of the.Closing Date
and which will not materially impair the use of the Site by the City; (vii) any lien naming the
State of California or any agency thereof securing the State in any commitment to reimburse
the City for Project costs and expenses provided such lien is expressly made subordinate to
the lien of the Trust Agreement; and (viii) easements, rights of way, mineral rights, drilling
rights and other rights, reservations, covenants, conditions or restrictions established
following the date of recordation of this Lease and to which the Corporation, the Trustee and
the City consent in writing, and which, in the opinion of Counsel to the City do not materially
affect use by the City of the Project as intended.
"Proiec " means the Project described in Exhibit B hereto.
"Site" means the site or sites described in Exhibit D hereto together with all
improvements thereon.
SECTION 1.2. Exhibits. The following Exhibits are attached to, and by reference made
part of, this Lease:
Exhibit A: Schedule of Lease Payments to be paid by the City to the Corporation,
showing the Lease Payment Date and amount of each Lease Payment.
Exhibit B: General description of the Project.
Exhibit C: Lease Supplement Form.
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Exhibit D: Legal Description of the Site.
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
SECTION 2.1. Representations Covenants and Warranties of the City. The City
represents, covenants and warrants to the Corporation as follows:
(a) Due Organization and Existence. The City is a municipal corporation of the
State, duly organized and existing under the Constitution and laws of the State.
(b) Authorization: Enforceability. The Constitution and laws of the State authorize
the City to enter into this Lease, the Site Lease 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 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 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, (i) 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 Project except for the
pledges contained in the Trust Agreement and except for Permitted Encumbrances, and (ii)
results in an abatement of the City's obligations hereunder.
(d) Execution and Delivery. The City has duly authorized and executed this Lease
in accordance with the Constitution and laws of the State.
(e) Indemnification of Corporation. The City covenants to defend, indemnify and
hold harmless the Corporation and its directors and employees and assignees (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. In particular, without
limitation, 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,
-3-
arising out of (i) the use, maintenance, condition or management of, or from any work or thing
done on the Project by the City, (ii) any breach or default on the part of the City in the
performance of any of its obligations under this Lease, (iii) any act or negligence of the City
or of any of its agents, contractors, servants, employees or licensees with respect to the
Project, (iv) any act or negligence of any assignee or sublessee of the City with respect to the
Project, or (v) the acquisition and construction of the Project or the authorization of payment
of the Project Costs by the City.
(f) General Tax and Arbitrage 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 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
Agreement to be "arbitrage bonds" subject to federal income taxation by reason of Section
148 of the Internal Revenue Code of 1986, as amended (the "Code").
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 any other funds of the City or take
or omit to take any other action that would cause such obligations to be a "private activity
bond" 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 any Lease Payment is unpaid,
the City, with respect to such proceeds and such other funds, 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 Internal Revenue Code of 1954, as
amended, to the extent that such requirements are, at the time, applicable and in effect.
(g) Budget. The City covenants to budget and appropriate all Lease Payments and
Additional Payments (to the extent the amount of such Additional Payments are known to the
City at the time its annual budget is proposed) due hereunder in its annual budget and to
maintain such items to the extent unpaid in that Fiscal Year in its budget throughout such
Year. To the extent the amount of such payments becomes known after the adoption of the
annual budget, such amounts shall be included and maintained in such budget as amended.
During the Term, the City will annually on or before October 1 of each year furnish to the
Trustee certification that the City has complied with the requirements of this Section. The
covenants on the part of the City herein contained shall be deemed to be and shall be
construed to be duties imposed by law and it shall be the 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.
SECTION 2.2. Representations Covenants and Warranties of the Corporation. The
Corporation represents, covenants and warrants to the City as follows:
(a) Due Organization and Existence; Enforceability. The Corporation is a public
agency duly organized and existing 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
-4-
lease and sell the same; and has duly authorized the execution and delivery of all of the
aforesaid Agreements. This Lease, the Site Lease, the Assignment Agreement and the Trust
Agreement constitute the legal, valid and binding obligations of the Corporation 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 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 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 Corporation is now a party or by which the Corporation 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
Corporation, or upon the Project except by the pledges contained in the Trust Agreement and
except for Permitted Encumbrances.
(c) Execution and Delivery. The Corporation has duly authorized and executed this
Lease in accordance with the Constitution and laws of the State.
(e) General Tax and Arbitrage Covenant. The Corporation covenants that,
notwithstanding any other provision of this Agreement, it will make no use of the proceeds
of the 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
Agreement to be "arbitrage bonds" subject to federal income taxation by reason of Section
148 of the Internal Revenue Code of 1986, as amended.
In addition, the Corporation covenants that it will not make any use of the proceeds
of the obligations provided herein or in the Trust Agreement or any other funds of the City or
take or omit to take any other action that would cause such obligations to be a "private
activity bond" 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 any Lease Payment
is unpaid, the Corporation, with respect to such proceeds and such other funds, 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 Internal Revenue Code of 1954,
as amended, to the extent that such requirements are, at the time, applicable and in effect.
ARTICLE III
ACQUISITION, CONSTRUCTION AND IMPROVEMENT OF THE PROJECT
SECTION 3.1. Deposit of Certificate Proceeds. On the Closing Date the Corporation
agrees to pay or cause to be paid to the City moneys to be deposited with the Trustee as
provided in Section 3.01 of the Trust Agreement.
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SECTION 3.2. Payment of Protect Costs. The City, as agent of the Corporation, will
provide for the construction, acquisition and improvement of the Project pursuant to the
requirements of the City. Payment of the Project Costs shall be made from the moneys
deposited with the Trustee in the Acquisition and Construction Fund as provided in Section
3.1 hereof and Section 3.01 of the Trust Agreement, which shall be disbursed from the
Acquisition and Construction Fund in accordance and upon compliance with Article III of the
Trust Agreement.
SECTION 3.3. Completion Certification. Upon acquisition, construction, improvement
or conclusion of the Project satisfactory to the City, the City shall deliver to the Trustee the
certificate of completion with respect thereto. On the date of filing the certificate of
Completion, all excess moneys remaining in the Acquisition and Construction Fund shall be
transferred by the City to the Trustee as provided in Section 3.03 of the Trust Agreement.
SECTION 3.4. Further Assurances and Corrective Instruments. The Corporation 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 Project or for carrying out the expressed intention of this Lease.
ARTICLE IV
AGREEMENT TO LEASE; TERM OF LEASE;
LEASE PAYMENTS; ADDITIONAL PAYMENTS
SECTION 4.1. Lease. The Corporation hereby leases the Site to the City, and the City
hereby leases the Site from the Corporation, upon the terms and conditions set forth herein.
SECTION 4.2. Term.
(a) The term of this Lease shall commence on the date hereof and shall end on
June 1, 2018, unless terminated prior thereto upon the earliest of any of the following events:
(i) Default and Termination. A default by the City and the Corporation's
election to terminate this Lease under Section 9.2(b) hereof;
Payment of All Lease Payments. The payment by the City of all Lease
Payments required under Section 4.3 hereof and any Additional
Payments required under Section 4.9 hereof when due and payable,
upon prepayment as provided in Article X hereof or upon provision for
payment of all Outstanding Certificates, as provided by Article XIV of
the Trust Agreement.
(b) If on June 1, 2018, the Certificates shall not be fully paid, or if the Lease
Payments hereunder shall have been abated at any time and for any reason, then the Term
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shall be extended until all Certificates shall be fully paid, except that the Term shall in no
event be extended beyond June 1, 2028.
SECTION 4.3. Lease Paymen
(a) Time and Amount. Commencing as of the date hereof, subject to the provisions
of Section 4.8 (regarding abatement in event of loss of use of any portion of the Site) and
Article X (regarding prepayment of Lease Payments), the City agrees to pay to the
Corporation, its successors and assigns, as annual rental for the use and possession of the
Site, the Lease Payments (denominated into components of principal and interest), in the
semi-annual amounts specified in Exhibit "A", to be due and payable on the dates specified
in Exhibit "A" (each a "Lease Payment Date") which are sufficient in both time and amount
to pay when due the annual principal and semi-annual interest represented by the Certificates.
In the event the City does not pay Lease Payments on any such day, the Trustee shall
provide prompt written notice to the City of such failure to pay and, if unpaid, that failure to
make Lease Payments shall become an event of default in accordance with Section 9.1
hereof; provided, however, that failure to give such notice shall not excuse any event of
default under such section 9.1.
(b) Credits. Any monies on deposit in the Lease Payment Fund at the time that the
Trustee gives the City notice pursuant to Section 5.03 of the Trust Agreement (other than
amounts required for payment of past due principal or interest with respect to any Certificates
not presented for payment) shall be credited to the payment of Lease Payments due and
payable on such Lease Payment Date.
(c) Rate on Overdue Payments. In the event the City should fail to make any of the
Lease Payments required in this Section, the Lease Payment in default shall continue as an
obligation of the City until the amount in default shall have been fully paid, and the City
agrees to pay the same with interest thereon, to the extent permitted by law, from the date
such amount was originally payable at the rate equal to the original interest rate payable with
respect to each Certificate.
(d) Reserve Replenishment Rent. If
(1) funds have been withdrawn from the Reserve Fund in order to pay interest
or principal represented by the Certificates, or there shall be a deficiency in the Reserve Fund
resulting from a decrease of 10% or more in the market value of the Permitted Investments
in the Reserve Fund determined as provided in Section 8.05(a) of the Trust Agreement, and
Requirement,
(2) Lease Payments are not in abatement pursuant to Section 4.8 hereof, and
(3) the amount on deposit in the Reserve Fund is less than the Reserve
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then the City shall pay, from its first available moneys after payment of Lease Payments, to
the Trustee Reserve Replenishment Rent consistent with the fair market rental value of the
Project.
(i) over a period of not more than four months, in four (4) substantially equal
payments, in the event such deficiency results from a decrease of ten percent (10%) or more
in the market value of the Permitted Investments on deposit in the Reserve Fund, or
(ii) over a one-year period, in substantially equal semi-annual payments, in the
event such deficiency results from a withdrawal from the Reserve Fund.
SECTION 4.4. No Withholding. Notwithstanding any dispute between the Corporation
and the City, including a dispute as to the failure of any portion of the Site in use by or in
possession of the City to perform the task for which it is leased, the City shall make all Lease
Payments and Additional Payments when due and shall not _withhold any Lease Payments
pending the final resolution of such dispute.
SECTION 4.5. Fair Market Rental Value. The Lease Payments 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 is not in excess of the fair market rental value
of the Site. In making such determination, consideration has been given to the fair market
value of the Site, other obligations of the parties under this Lease (including but not limited
to costs of maintenance, taxes and insurance), the uses and purposes which may be served
by the Site and the benefits therefrom which will accrue to the City and to the general public,
the ability of the City to make additions, modifications and improvements to the Site and to
replace the Site as provided in Section 7.7 hereof, and the transfer of the Corporation's
leasehold interest in the Site at the end of the Term hereof.
SECTION 4.6. Assignment of Lease Payments. Certain of the Corporation's rights
under this Lease, including the right to receive and enforce payment of the Lease Payments,
Additional Payments, and Prepayments to be made by the City hereunder, have been assigned
to the Trustee, subject to certain exceptions, pursuant to the Assignment Agreement, dated
the date hereof, between the Trustee and the Corporation, to which assignment the City
hereby consents. The Corporation hereby directs the City, and the City hereby agrees to pay
to the Trustee at the Trustee's corporate trust office in Los Angeles, California, or to the
Trustee at such other place as the Trustee shall direct in writing, all Lease Payments or
Prepayments thereof, and Additional Payments payable by the City hereunder. The
Corporation will not assign or pledge the Lease Payments or other amounts derived from the
Site and 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 4.7. Use and Possession. The total Lease Payments due in any Fiscal Year
shall be for the use and possession of the Site for such Fiscal Year.
SECTION 4.8. Abatement of Lease Payments in Event of Loss of Use.
(a) Period. The obligation of the City to pay Lease Payments shall be abated during
any period in which by reason of damage, destruction or taking by eminent domain or
condemnation with respect to any item or portion of the Site there is substantial interference
with the use and possession of such item or portion of the Site by the City.
(b) Amount. The amount of such abatement shall be determined by the City such
that the resulting Lease Payments represent fair market rental value for the use and
possession of the item or portion of the Site not damaged, destroyed, or taken. Such
abatement shall commence with such damage, destruction or taking and end with the
substantial completion of the replacement or repair provided, however, that during abatement,
available moneys on deposit in the Reserve Fund or from drawings under an insurance policy
and the Lease Payment Fund, other special fund sources of money, including without
limitation, proceeds of rental interruption insurance, shall be applied to pay the Lease
Payments.
(c) Repair or Replacement. In the event of such abatement, the City will use its best
efforts to repair or replace the damaged or destroyed portion of the Site, with due diligence
and dispatch, as the case may be, from special funds of the City or other moneys, including
the proceeds of any property insurance policies associated with the Site, the application of
which would, in the opinion of Special Counsel addressed to the Trustee, the City and the
Corporation, not result in the obligations of the City hereunder constituting indebtedness of
the City in contravention of the Constitution and laws of the State.
SECTION 4.9. 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 Corporation relating to the Site or the Certificates, including
without limitation all expenses, compensation and indemnification of the Trustee payable by
the City under the Trust Agreement, fees of auditors, accountants, attorneys or engineers,
and all other necessary administrative costs of the Corporation or charges required to be paid
by it in order to maintain its existence or to comply with the terms of the Certificates or of
the Trust Agreement, including premiums on insurance maintained pursuant to Article V
hereof, or to indemnify the Corporation and its officers and directors.
SECTION 4.10. 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 Corporation, free and clear of any expenses, charges or set -offs whatsoever,
except as expressly provided herein.
ARTICLE V
INSURANCE
SECTION 5.1. Public Liability and Property Damage.
(a) Coverage. 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, its officers, agents and employees. 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 any City property or portion thereof.
(b) Limits. Said policy or policies shall provide coverage in the aggregate amount
of $1,000,000 for personal injury or death of each person 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
$150,000 (subject to a deductible clause of not to exceed $100,000) for damage to property
resulting from each accident or event. 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 $5,000,000.
(c) -Joint or Self -Insurance. Such liability insurance, including the deductible, may
be maintained as part of or in conjunction with any other insurance coverage carried by the
City, and may be maintained in the form of self-insurance by the City.
(d) Payment of Net Proceeds. The Net 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. Workers' Compensation. The City shall also maintain workers'
compensation insurance issued by a responsible carrier authorized under the laws of the State
of California to insure its employees against liability for compensation under the Workers'
Compensation Insurance and Safety Act now in force in California, or any act hereafter
enacted as an amendment or supplement thereto or in lieu thereof (with provision for self-
insurance of $100,000).
SECTION 5.3. Casualty Insurance.
(a) Casualty Insurance. The City shall procure and maintain, or cause to be
procured and maintained, throughout the Term of this Lease, insurance against loss or damage
to any item or portion of the Site by fire and lightning, with extended coverage and vandalism
and malicious mischief insurance, and earthquake insurance (but as to such earthquake
insurance only if such insurance is available at reasonable cost on the open market from
reputable insurance companies and only following completion of construction). Said extended
coverage insurance shall, as nearly as practicable, cover loss or damage by explosion,
windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally
covered by such insurance. Such insurance shall be in an amount equal to 100% of the
replacement cost of the Site as improved (except that such insurance may be subject to
deductible clauses of not to exceed $100,000 for any one loss); provided, however, that in
no event shall such insurance be maintained in an amount less than the aggregate principal
amount of Certificates at the time Outstanding. Such insurance may be maintained as part of
or in conjunction with any other insurance carried or required to be carried by the City, and
may be maintained in the form of self-insurance by the City.
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The City covenants that it will cause the risk manager of the provider of casualty
insurance, or an independent insurance consultant (including the manager/administrator of the
San Diego County Schools Risk Management Corporation) if the City self -insures for casualty
insurance, to review such program of casualty insurance and to annually, by June 1, notify
the Trustee that the City's or the insurance provider's reserves are adequate.
In the event that earthquake insurance is not available at reasonable cost on the open
market from reputable insurance companies as provided above, the City shall immediately
notify the Trustee of such event.
(b) Payment of Net Proceeds. The Net Proceeds of such insurance shall be paid to
the T rustee and deposited in the Net Proceeds Account and applied as provided in Section
6.1.
SECTION 5.4. Rental Interruption Insurance.
(a) Covera-ge and Amount. The City shall maintain or cause to be maintained on or
prior to the date that the City files the Certificates of Completion, rental income or use and
occupancy insurance in an amount not less than the maximum remaining scheduled Lease
Payments in any future eighteen 0 8) month period, to insure against loss of Lease Payments
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 as of the date on which the City
obtains possession of the Site.
(b) Joint Insurance. Such insurance may be maintained as part of or in conjunction
with any other rental income insurance carried by the City.
(c) Payment of Net Proceeds. The net proceeds of such rental interruption insurance
shall be paid to the Trustee and deposited in the Lease Payment Fund, to be credited towards
the payment of the Lease Payments in the order in which such Lease Payments come due and
payable.
SECTION 5.5. Title Insurance. The City shall obtain and, throughout the Term hereof,
maintain or cause to be maintained title insurance on the Site, in the form of a CLTA owner's
title policy in an amount equal to the aggregate principal component of unpaid Lease
Payments, issued by a company of recognized standing, duly authorized to issue the same,
subject only to Permitted Encumbrances. The Net Proceeds of such insurance shall be applied
as provided in Section 6.1 hereof.
SECTION 5.6. General Insurance Provisions.
(a) Form of Policies. All policies of insurance required to be procured and maintained
pursuant to this Lease, except the insurance required by Section 5.2 hereof, and any
statements of self-insurance shall be in form certified by an insurance agent, broker or
consultant (including the risk manager/administrator of the San Diego County Schools Risk
Management Corporation) to the City to comply with the provisions hereof. All such policies
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shall give the Trustee 30 days' notice of each expiration, any intended cancellation thereof
or reduction of the coverage provided thereby. Each policy of insurance required to be
procured and maintained pursuant to Section 5.3 (regarding casualty insurance), and Section
5.4 (regarding rental interruption insurance) and Section 5.5 (regarding title insurance) shall
provide that all proceeds thereunder shall be payable to the Trustee for the benefit of the
Owners. All policies pursuant to Section 5.3, 5.4 and 5.5 hereof shall be endorsed to name
the Trustee as co -loss payee with the City.
(b) Payment of Premiums. The City shall pay or cause to be paid when due the
premiums for all insurance policies required by this Lease.
(c) Protection of the Corporation and the Trustee. The Trustee shall not be
responsible for the sufficiency or adequacy of any insurance herein required and shall be fully
protected in accepting payment on account of such insurance or any adjustment, compromise
or settlement of any loss agreed to by the Trustee. The Corporation and the Trustee shall be
named as additional insureds under all policies required by this Article V.
(d) Evidence of Insurance. The City shall cause to be delivered to the Trustee on
the Closing Date and annually thereafter on or before October 1 of each year, a certificate of
the City stating that the insurance policies or self-insurance programs required by this Lease
are in full force and effect.
(e) Blanket Insurance Policies. The City may •satisfy any of the insurance
requirements set forth in this Lease by using blanket policies of insurance, provided that the
City complies with each and all of the requirements and specifications of this Lease.
(f) Modification of Insurance Policies. Subject to the other provisions of this Lease,
the City may modify its insurance coverage, including its self-insurance, in whole or in part,
taking into account the cost and availability of insurance and the effect of the terms and rates
of such insurance on the City's costs and charges for its services, upon filing with the Trustee
the City's Certificate that the new coverage is equal to or better than that which it replaces.
(g) In the event that the insurance reserves provided pursuant to Sections 5.1 and
5.2 shall be insufficient as determined in the annual actuarial valuation (under any program
of self-insurance) by the independent insurance consultant, the City shall immediately fund
such reserves to the required level.
SECTION 5.7. Cooperation. The Corporation 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
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SECTION 6.1. Application of Net Proceeds.
(a) Deposit in Net Proceeds Account. The City shall remit promptly to the Trustee
any Net Proceeds received by the City and the Trustee shall deposit such Net Proceeds
pursuant to Section 7.01 of the Trust Agreement, which it receives in the Net Proceeds Fund
as provided in Section 5.3 (regarding casualty insurance) and Section 5.5 (regarding title
insurance) promptly upon receipt thereof. The City, the Corporation, or both shall transfer to
the Trustee any other Net Proceeds received by the City, Corporation, or both in the event of
any accident, destruction, or taking by eminent domain or condemnation with respect to the
Site, for deposit in the Net Proceeds Fund.
(b) Disbursement for Replacement or Repair of the Proiect. 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 Net Proceeds Account to the person, firm or
corporation named in the requisition as provided in Section 7.02 of the Trust Agreement.
(1) Certification. The City Representative must certify to the Corporation
and the Trustee that:
(i) Sufficiency of Net Proceeds. The Net Proceeds available for
such purpose, together with any other funds supplied by the
City to the Trustee in a subaccount of the Net Proceeds Fund
for such purpose, are expected to equal at least 1 10% of the
projected costs of replacement or repair, as demonstrated in
an attached reconstruction budget;
(ii) Timely Completion. In the event that damage, destruction or
taking results or is expected to result 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, together with other identified available moneys will be
available to pay in full all Lease Payments coming due during
such period as demonstrated in an attached reconstruction
schedule; and
No Unauthorized Encumbrances. There are no encumbrances
on the Site other than Permitted Encumbrances.
(2) Requisition. The City Representative 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 Net
Proceeds Account, has not been the basis of any previous withdrawal, and specifying in
reasonable detail the nature of the obligation.
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Subject to the requirements of section 7.02 of the Trust Agreement, any
balance of the Net Proceeds remaining after such replacement or repair has been completed
shall be paid to the City.
(c) Disbursement for Prepayment. If the City shall not have determined to repair or
replace as provided above, the Trustee shall promptly transfer the Net Proceeds to the
Prepayment Account as provided in Section 7.02 of the Trust Agreement and apply them to
prepayment of the Certificates as provided in Section 4.02 of the Trust Agreement and
prepayment of Lease Payments as provided in Section 10.1 hereof, upon the earlier of the
following events:
(1) Written determination of the City Representative that the certification
provided in Section 6.1(b)(1) cannot be made and that replacement or repair of any item or
portion of the Site is not economically feasible or in the best interest of the City, or
(2) One year after the receipt of Net Proceeds.
SECTION 6.2. Application of Other Moneys. In the event of any accident, destruction,
theft or taking by eminent domain or condemnation with respect to a major portion of the
Site, as declared in a written certification to the Trustee, the City may pay to the Trustee for
deposit in the Prepayment Account, moneys, together with other available moneys therein,
if any, sufficient to prepay the Certificates in whole or in part as provided in Section 4.02 of
the'Trust Agreement and prepayment of Lease Payments as provided in Section 10.1 hereof.
ARTICLE VII
COVENANTS WITH RESPECT TO THE SITE
SECTION 7.1. Use of the Site: Non -abandonment. The City represents and warrants
that it is using and will continue to use all of the Site, and that the City's need for the Site is
not temporary or expected to diminish in the foreseeable future. The City shall not abandon
the Site during the term of this Lease, nor shall the City acquire or construct a facility which
would render the Site useless to the City.
SECTION 7.2. Interest in the Site.
(a) Corporation Holds Interest Durin4 Term. During the Term of this Lease, the
Corporation 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 Corporation's
leasehold interest in the Site at all times during the Term hereof.
(b) Interest Transferred to City at End of Term. Upon expiration of the Term as
provided in Section 4.2 hereof, the interest of the Corporation in and to the Site shall be
transferred to and vest in the City, without the necessity of any additional document of
transfer.
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SECTION 7.3. Quiet Enjoyment. During the Term, the Corporation 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
Corporation, or any person or entity claiming under or through the Corporation except as
expressly set forth in this Lease or the Trust Agreement. The Corporation 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 Corporation may lawfully do so. Notwithstanding the foregoing,
the Corporation shall have the right to inspect the Site as provided in Section 7.5 hereof.
SECTION 7.4. 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
other 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 the same may be affixed to such portion of the Site, in which neither the Corporation
nor the Trustee shall have any interest, and may be modified or removed by the City at any
time; provided 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 7.5. Access to the Site. The City agrees that the Corporation, any
Corporation Representative and the Corporation's successors or assigns, shall have the right
at all reasonable times to enter upon the Site or any portion thereof to examine and inspect
the Site. The City further agrees that the Corporation, any Corporation Representative, and
the Corporation's successors or assigns shall have 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 7.6. Maintenance Utilities Taxes and Assessments; Operating Costs.
(a) Maintenance: Repairs and Replacement. 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 any portion of the Site resulting from
ordinary wear and tear or want of care on the part of the City or any sublessee thereof. In
exchange for the Lease Payments herein provided, the Corporation agrees to provide only the
Site, as hereinbef ore more specifically set forth. The City waives the benefits of subsections
1 and 2 of Section 1932 of the California Civil Code, but such waiver shall not limit any of
the rights of the City under the terms of this Lease.
(b) Tax and Assessments; Utility Charges. The City shall also pay or cause to be
paid all taxes and assessments, including but not limited to utility charges of any type or
nature charged to the Corporation 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
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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; Provided that prior to such nonpayment it
shall furnish the Corporation and the Trustee with the opinion of an Independent Counsel,
acceptable to the Trustee, to the effect that, by nonpayment of any such items, the interest
of the Corporation 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 Corporation. The Corporation will cooperate fully in such contest upon the
request and at the expense of the City.
(d) Throughout the Term of this Lease the City shall pay all of the costs incurred
by the City in operating, maintaining and using the Site; and the City shall under no
circumstances look to the Corporation for any part of such costs
SECTION 7.7. Modification of the Site.
(a) Additions. Modifications and Improvements. 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. All such additions, modifications and improvements shall thereafter
comprise part of the Site and be subject to the provisions of this Lease. Such additions,
modifications and 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 federal income tax exclusion or the State
tax-exempt status 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 and
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 and
improvements.
(b) No Liens. The City will not permit any mechanics' or other lien to be established
or remain against the Site for labor or materials furnished in connection with any additions,
modifications or improvements or replacements made by the City pursuant to this Section;
provided that if any such lien is established and the City shall first notify or cause to be
notified the Corporation 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 Corporation with full security against any loss or
forfeiture which might arise from the nonpayment of any such item, in form satisfactory to
the Trustee as assignee of the Corporation. The Corporation will cooperate fully in any such
contest upon the request and at the expense of the City.
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(c) Replacements, Redevelopment and Renovation. The City shall, at its own
expense, have the right to make replacements, redevelopment or renovation of all or a portion
of the Site, including substitution of any other unencumbered assets of the City as and for the
Site, if the following conditions precedent are satisfied:
(1) The City receives an opinion of Special Counsel, which City shall furnish
to the Corporation and the Trustee, that (i) such replacement does not adversely affect the
federal income tax exclusion or the State tax-exempt status of the interest components of the
Lease Payments, and (ii) the Lease will remain the legal, valid, binding and enforceable
obligation of the City;
(2) In the event such replacement, redevelopment or renovation would
result in the temporary abatement of Lease Payments as provided in Section 4.9 hereof, the
City shall provide in advance for payment of Lease Payments from special funds of the City
or other moneys, the application of which would not, in the opinion of Special Counsel (a copy
of which shall have been delivered to the Trustee), result in such Lease Payments constituting
indebtedness of the City in contravention of the Constitution and laws of the State;
(3) The City shall certify to the Trustee that it has sufficient funds to
complete such replacement, redevelopment or renovation;
(4) In the event of such substitution, the City shall provide the Trustee and
the Corporation with (a) an appraisal of the fair rental value of.such substituted Site prepared
by an independent commercial real estate appraiser showing that the fair rental value is equal
to or greater than the Lease Payments due hereunder, and (b) a policy of Title Insurance for
such substituted Site in accordance with Section 5.5 of this Lease; and
(5) The City shall determine and certify to the Trustee that the annual fair
rental value of the replacements (including any substituted Site) will be at least equal to the
lesser of (i) the annual fair rental value of the Site immediately prior to such replacement,
redevelopment or renovation, or (ii) 150% of the maximum annual Lease Payments remaining
under the Lease.
(d) Release of Portion of Project. In connection with the City's option to partially
prepay Lease Payments, the City may release a portion of the Site from the lien of the Lease
so long as the City determines and certifies to the Trustee that the annual fair rental value of
the remaining components of the Site will be at least equal to the Lease Payments remaining
under the Lease.
SECTION 7.8. Liens. Except as provided in this Article, (including without limitation
Section 7.7 hereof) the City shall not, directly or indirectly, create, incur, assume or suffer to
exist any mortgage, pledge, lien, charge, encumbrance or claim, as applicable, on or with
respect to the Site, other than the respective rights of the Corporation and the City as herein
provided and except as to Permitted Encumbrances. 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; provided that the City may contest
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such liens if it desires to do so. The City shall reimburse the Corporation for any expense
incurred by it in order to discharge or remove any such mortgage, pledge, lien, change,
encumbrance or claim.
SECTION 7.9. Corporation's Disclaimer of Warranties. THE Corporation 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 ITEM OR
PORTION THEREOF. THE CITY ACKNOWLEDGES THAT THE Corporation IS NOT A
MANUFACTURER OF ITEMS OR PORTIONS OF THE SITE OR A DEALER THEREIN, AND THAT
THE CITY IS LEASING THE ITEMS OF THE SITE AS IS. In no event shall the Corporation be
liable for incidental, indirect, special or consequential 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.
ARTICLE VIII
ASSIGNMENT, SUBLEASING AND AMENDMENT
SECTION 8.1. Assignment by the Corporation. Except as provided herein and in the
Trust Agreement, the Corporation will not assign this Lease to any other person, firm or
corporation unless the Corporation has certified to the Trustee that such assignment will not
impair or violate the representations, covenants and warranties contained in Section 2.2
hereof.
SECTION 8.2. Assignment and Subleasing by the City. The rights under this Lease
may not be assigned by the City, nor may the City sublease all or any portion of the Site,
unless the City receives an opinion of Special Counsel stating that such assignment or
subleasing does not adversely affect the federal income tax exclusion or the State tax-exempt
status of the interest components of the Lease Payments or affect the validity of this Lease.
In the event that this Lease is assigned or subleased by the City, the obligation to make Lease
Payments hereunder shall remain the obligation of the City.
SECTION 8.3. Amendments and Modifications. This Lease may be amended or any of
its terms modified with the written consent of the City and the Trustee, as assignee of the
Corporation, in accordance with the Trust Agreement.
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
SECTION 9.1. Events of Default Defined. 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, any one or more of the following events:
(a) Lease Payment Default. Failure by the City to pay any Lease Payment required
to be paid hereunder by each Lease Payment Date.
(b) Covenant Default. Failure by the City to observe and perform any 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 Corporation, the Trustee
or the Owners of not less than twenty percent (20%) in aggregate principal amount of
Certificates then Outstanding; provided, however, if the failure stated in the notice cannot be
corrected within the applicable period, the Trustee as assignee of the Corporation or such
Owners, as the case may be, shall not unreasonably withhold consent to an extension of such
time if corrective action is instituted by the City within the applicable period and diligently
pursued until the default is corrected.
(c) Bankruptcy or Insolvency; Abandonment. 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 or 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; or
the:abandonment of the Site.
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
Corporation to exercise any and all remedies available pursuant to law or granted pursuant to
this Lease; provided, however, that in the event that there is in effect a Certificate Insurance
Policy issued by MBIA insuring the payment of principal and interest on the Certificates and
an Event of Default occurs, MBIA shall have the right to direct the selection and exercise of
the remedies; but, provided further 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 IN DEFAULT TO BE IMMEDIATELY DUE AND PAYABLE. After the occurrence of
an event of default hereunder, the City will surrender possession of the Site to the
Corporation, if requested to do so by the Corporation, the Trustee or the Owners of
Certificates in accordance with Section 13.08 of the Trust Agreement.
(a) No Termination: Repossession and Re -Lease on Behalf of Citv. In the event the
Corporation does not elect to terminate this Lease in the manner hereinafter provided for in
subparagraph (b) hereof, the Corporation may, with the consent of the City, which consent
is hereby irrevocably given, repossess the Site and re -lease the Site for the account of the
City, in which event the City's obligation will accrue from year to year in accordance with this
Lease and the City will continue to receive the value of the use of the Site from year to year
in the form of credits against its obligation to pay Lease Payments. The obligations of the City
shall remain the same as prior to such default: to pay fixed Lease Payments and Additional
Payments whether the Corporation re-enters or not. The City agrees to and shall remain liable
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m
for the payment of all Lease Payments and Additional Payments and the performance of all
conditions contained herein and shall reimburse the Corporation for any deficiency arising out
of the re -leasing of the Site, or, in the event the Corporation is unable to re -lease the Site,
then for the full amount of all Lease Payments to the end of the Term of this Lease, but said
Lease Payments, deficiency, or both, shall be payable only at the same time and in the same
manner as provided above for the payment of Lease Payments hereunder, notwithstanding
such repossession by the Corporation or any suit brought by the Corporation for the purpose
of effecting such repossession of the Site or the exercise of any other remedy by the
Corporation.
The City hereby irrevocably appoints the Corporation as the agent and attorney -in -fact
of the City to repossess and re -lease the Site in the event of default and to remove all
personal property whatsoever situated upon the Site, to place such property in storage or
other suitable place in CITY OF NEWPORT BEACH, for the account of and at the expense of
the City, and the City hereby exempts and agrees to save harmless the Corporation from any
costs, loss or damage whatsoever arising or occasioned by any such repossession and re-
leasing of the Site. The City hereby waives any and all claims for damage caused or which
may be caused by the Corporation in repossessing the Site as provided herein and all claims
for damages that may result from the destruction of or the injury to the Site and all claims for
damages to or loss of any property belonging to the City that may be in or upon the Site.
The City agrees that the terms of this Lease constitute full and sufficient notice of the
right of the Corporation to re -lease the Site in the event of such repossession without
effecting a surrender of this Lease, and further agrees that no acts of the Corporation in
effecting such re -leasing shall constitute a surrender or termination of this Lease irrespective
of the term for which such re -leasing is made or the terms and conditions of such re -leasing,
or otherwise, but that, on the contrary, in the event of such default by the City the right to
terminate this Lease shall vest in the Corporation to be effected in the sole and exclusive
manner provided for in subparagraph (b) below.
The Trustee shall remit to the City the portion of rental obtained by the Trustee as
assignee of the Corporation in excess of the Lease Payments and of the costs of the
Corporation of re -leasing the Site.
In the event that the liability of the City under this subsection (a) is held to constitute
indebtedness or liability in any year exceeding in any year the income and revenue provided
for such year, the Corporation, or the Trustee or the Certificate Owners as assignees of the
Corporation, shall not exercise the offending remedies provided by this subsection (a).
(b) Termination: Repossession and Re -Lease. In the event of the termination of this
Lease by the Corporation at its option and in the manner hereinafter provided on account of
default by the City (and notwithstanding any repossession of the Site by the Corporation in
any manner whatsoever or the re -leasing of the Site), the City nevertheless agrees to pay to
the Corporation all costs, losses or damages howsoever arising or occurring payable at the
same time and in the same manner as is provided herein in the case of payment of Lease
Payments. Any proceeds of the re -lease or other disposition of the Site by the Corporation
shall be deposited into the Lease Payment Fund and be applied in accordance with the
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provisions of Section 5.04 of the Trust Agreement. Any surplus received by the Trustee as
assignee of the Corporation from such re -leasing over the total Lease Payments that would
have been due hereunder and the cost of the Trustee as assignee of the Corporation on re-
leasing the Site shall be remitted to the City. Neither notice to pay rent or to deliver up
possession of the Site given pursuant to law nor any proceeding taken by the Corporation to
recover possession of the Site 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 otherwise, unless and until the Corporation shall have given written notice
to the City of the election on the part of the Corporation to terminate this Lease. The City
covenants and agrees that no surrender of the Site for the remainder of the Term hereof or
any termination of this Lease shall be valid in any manner or for any purpose whatsoever
unless stated or accepted by the Corporation by such written notice. No such termination shall
be effected either by operation of law or act of the parties hereto, except only in the manner
herein expressly provided.
The Corporation and City hereby agree that Section 1951.2 of the California
Civil Code shall apply to this Lease and that upon such termination, the Corporation may
recover, in addition to all other damages available by contract or at law, from the City: (i) the
worth at the time of award of the unpaid rental which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the unpaid rental for
the balance of the term after the time of the award exceeds the amount of such rental loss
that the City proves could have been reasonably avoided; and (iii) any other amount necessary
to compensate the Corporation for all the detriment proximately caused. by. the City's failure
to perform its obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom. The "worth at the time of award" of the amounts referred to in
clauses (i), (ii) and (iii) above is computed by allowing interest at the legal rate of interest per
annum at which judgments for money in the State bear interest.
(c) Opinion of Special Counsel. The re -leasing of the Site as provided herein shall
be subject (i) to the opinion of Special Counsel that such re -leasing will not cause interest on
the Certificates to become includable in gross income for Federal income tax purposes or
subject to State of California personal income taxes and (ii) the written consent of the
Trustee.
SECTION 9.3. No Remedy Exclusive. No remedy conferred herein upon or reserved to
the Corporation 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 Corporation 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
-21 -
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 of such attorneys and such other expenses so
incurred by the nondefaulting party.
SECTION 9.5. No Additional Waiver Implied by One Waiver. In the event any
agreement contained in this Lease should be breached by either party and thereafter waived
by the other party, such waiver shall be limited to the particular breach so waived and shall
not be deemed to waive any other breach hereunder.
SECTION 9.6. Application of the Proceeds from the Re -Lease of the Project. All
amounts received by the Corporation under this Article IX (other than as provided in Section
9.2(b) herein regarding certain surplus) shall be deposited by the Trustee in the Lease Payment
Fund and credited towards the Lease Payments in order of Lease Payment Date.
SECTION 9.7. Trustee and Certificate Owners to Exercise Rights. Such rights and
remedies as are given to the Corporation under this Article IX have been assigned by the
Corporation to the Trustee under the Trust Agreement, to which assignment the City hereby
consents. Such rights and remedies shall be exercised by the Trustee and the Owners as
provided in the Trust Agreement.
ARTICLE X
PREPAYMENT OF LEASE PAYMENTS
SECTION 10.1. Mandatory Prepayment From Net Proceeds, State Reimbursement
Moneys or Other Moneys. 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, State reimbursement
moneys or other moneys theretofore deposited in the Prepayment Account pursuant to
Section 4.02 of the Trust Agreement. The City and the Corporation hereby agree that such
Net Proceeds or other moneys shall be credited towards the City's obligations hereunder
(except in the case of such prepayment of the Lease Payments in whole) pro rata among
Lease Payments so that following prepayment, remaining annual Lease Payments are
proportionate to initial annual Lease Payments.
SECTION 10.2. Optional Prepayment. Subject to the terms and conditions of this
Section, the Corporation hereby grants an option to the City to prepay in whole or in part, the
principal amount of Lease Payments relating to Certificates in the amounts, on the dates and
at the prepayment prices provided in Section 4.03 of the Trust Agreement. The City shall
execute said option by giving written notice to the Trustee thereof at least 60 days prior to
the date of prepayment and depositing with said notice cash, in the amount of the Principal
Components of all Lease Payments 'to be prepaid plus (1) accrued interest on the principal
amount of Lease Payments to be prepaid to the date of prepayment, plus (2) any Lease
Payments then due but unpaid.
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The City and the Corporation hereby agree that such prepayment in part shall be
credited towards the City's obligations hereunder pro rata among the principal components
of Lease Payments not previously paid, so that following such prepayment the remaining
annual Lease Payments will, to the extent practicable given that amounts prepaid will be used
to prepay Certificates in integral multiples of $5,000, be proportionate to the initial amounts
of such Lease Payments.
SECTION 10.3. Credit for Amounts on Deposit. In the event of prepayment of the
Lease Payments in full under this Article X and the payment of all 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, the Acquisition and Construction Fund
and the Reserve Fund shall be credited toward the amounts then required to be so prepaid.
SECTION 10.4. Effect of Prepayment.
(a) In Whole. In the event that the City prepays all remaining Lease Payments
pursuant to Section 10.1 or 10.2 hereof and all amounts owing the Trustee pursuant to
Section 4.10 hereof, then 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
under this Article X.
(b) In Part. In the event the City prepays less than all of the remaining principal
components of the Lease Payments either pursuant to Sections 10.1 or 10.2 hereof from Net
Proceeds or other moneys, the amount of such prepayment shall be applied to reduce the
principal components of the remaining Lease Payments pro rata, corresponding to the resulting
prepayment of principal with respect to the Certificates.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Notices. All notices, certificates or other communications hereunder
to the Corporation and City shall be sufficiently given and shall be deemed to have been
received five business days after deposit in the United States mail in certified form, postage
prepaid, to the City or the Corporation, as the case may be, at the following addresses:
If to the City:
CITY OF NEWPORT BEACH
3300 Newport Boulevard
Newport Beach, California 92659
Attention: Finance Director
If to the Corporation:
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Newport Beach Public Facilities Corporation
3300 Newport Boulevard
Newport Beach, California 92659
Attention: City Treasurer
If to the Trustee:
Bank of America National Trust and Savings Association
Attention: Corporate Trust Division
All notices, certificates and other communications to the Trustee shall be sufficiently
given upon receipt by the Trustee. The Corporation, the City and the Trustee, by notice given
in writing 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 Corporation 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 deemed to be an original, but all together shall
constitute but one and the same instrument.
SECTION 11.5. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.
IN WITNESS THEREOF, the Corporation 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.
NEWPORT BEACH PUBLIC FACILITIES CORPORATION, as Lessor
By:
Authorized Representative
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CITY OF NEWPORT BEACH, as Lessee
By:
City Manager
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STATE OF CALIFORNIA )
) SS.
COUNTY OF ORANGE )
On this day of June in the year 1992 before me, the undersigned, a Notary
Public in and for the State of California, personally appeared to me, , known to
me (or proved to me on the basis of satisfactory evidence) to be the Authorized Representa-
tive of the NEWPORT BEACH PUBLIC FACILITIES CORPORATION, the public agency that
executed the within instrument, and personally known to me (or proved on the basis of
satisfactory evidence) to be the person who executed the within instrument on behalf of said
Corporation, and acknowledged to me that he executed the within instrument pursuant to a
resolution of the Board of Directors of said Corporation.
WITNESS my hand and official seal.
Notary Public
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STATE OF CALIFORNIA )
) SS.
COUNTY OF ORANGE )
On this day of June in the year 1992 before me, the undersigned, a Notary
Public in and for the State of California, personally appeared to me, , known to
me (or proved to me on the basis of satisfactory evidence) to be the of CITY
OF NEWPORT BEACH, the public agency that executed the within instrument, and personally
known to me (or proved on the basis of satisfactory evidence) to be the person who executed
the within instrument on behalf of said City, and acknowledged to me that he executed the
within instrument pursuant to a resolution of said City.
WITNESS my hand and official seal.
Notary Public
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EXHIBIT A
SCHEDULE OF LEASE PAYMENTS
Lease Interest Principal
Payment Date Component Component Total
May 15, 1992
November 15, 1993
May 15, 1993
November 15, 1994
May 15, 1994
November 15, 1995
May 15, 1995
November 15, 1996
May 15, 1996
November 15, 1997
May 15, 1997
November 15, 1998
May 15, 1998
November 15, 1999
May 15, 1999
November 15, 2000
May 15, 2000
November 15, 2001
May 15, 2001
November 15, 2002
May 15, 2002
November 15, 2003
May 15, 2003
November 15, 2004
May 15, 2004
November 15, 2005
May 15, 2005
November 15, 2006
May 15, 2006
November 15, 2007
May 15, 2007
November 15, 2008
May 15, 2008
November 15, 2009
May 15, 2009
November 15, 2010
May 15, 2010
November 15, 2011
May 15, 2011
November 15, 2012
May 15, 2012
November 15, 2013
May 15, 2013
November 15, 2014
May 15, 2014
November 15, 2015
May 15, 2015
November 15, 2016
May 15, 2016
November 15, 2017
May 15, 2017
November 15, 2018
May 15, 2018
A-1
November 15, 2019
May 15, 2009
TOTAL
A-2
EXHIBIT B
GENERAL DESCRIPTION OF PROJECT
EXHIBIT C
FORM OF LEASE SUPPLEMENT
There is hereby subjected to the terms of that certain Project Lease, dated as of June 1, 1992
(the "Lease"), between the NEWPORT BEACH PUBLIC FACILITIES CORPORATION (the
"Corporation") and CITY OF NEWPORT BEACH (the "City") the following property items
which shall comprise a portion of the Site, as defined therein:
Description of Substituted Site
I, the City Representative, hereby certify that:
(1) the fair rental value and the useful life of the above -described portion of the Site at least
equals the fair rental value and the useful life of the portion of the Site for which it was
substituted; if the fair rental value of such portion of the Site is greater than the portion of the
Site for which it was substituted, the City has deposited or caused to be deposited in the
Project Fund held by the Trustee an amount sufficient to pay such increased cost; and
(2) the above -described portion of the Site will be used by the City for authorized public
purposes and can be leased under the provisions of the Lease;
I, the City Representative, hereby certify that the portion. of the. Site being. acquired,
constructed or improved will be owned by the Corporation 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 Corporation will not encumber title to the substituted
portion of the Site while the Certificates remain outstanding.
The following property items, which formerly constituted a portion of the Site, are released
from the terms of the Lease:
CITY OF NEWPORT BEACH
By:
City Representative
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
am
C-1
EXHIBIT D
LEGAL DESCRIPTION OF THE SITE
D-1
TRUST AGREEMENT
Dated as of June 1, 1992
by and among
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
as Trustee
NEWPORT BEACH PUBLIC FACILITIES CORPORATION,
and
CITY OF NEWPORT BEACH
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions and Rules of Construction 1
SECTION 1.02 Authorization 9
ARTICLE II
THE CERTIFICATES OF PARTICIPATION
SECTION 2.01
Authorization
9
SECTION 2.02
Date
9
SECTION 2.03
Maturity; Interest Rates
10
SECTION 2.04
Registration; Interest
10
SECTION 2.05
Form of Certificates
10
SECTION 2.06
Execution
11
SECTION 2.07
Transfer and Exchange
11
SECTION 2.08
Certificates Mutilated, Lost, Destroyed or Stolen
11
SECTION 2.09
Payment
12
SECTION 2.10
Execution of Documents and Proof of Ownership
12
SECTION 2.11
Certificate Register
13
SECTION 2.12
Destruction of Canceled Certificates
13
ARTICLE III
APPLICATION OF PROCEEDS; ACQUISITION AND CONSTRUCTION FUND
SECTION 3.01 Application of Proceeds and Other Moneys 13
SECTION 3.02 [Reserved] 14
SECTION 3.03 Acquisition and Construction Fund 14
SECTION 3.04 Additional Certificates 14
SECTION 3.05 Validity of Certificates 14
ARTICLE IV
PREPAYMENT OF CERTIFICATES
SECTION 4.01 Establishment of Prepayment Fund 15
SECTION 4.02 Mandatory Prepayment 15
SECTION 4.03 Optional Prepayment 16
SECTION 4.04 Selection of Certificates for Prepayment 16
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions and Rules of Construction 1
SECTION 1.02 Authorization 9
ARTICLE II
THE CERTIFICATES OF PARTICIPATION
SECTION 2.01
Authorization
9
SECTION 2.02
Date
9
SECTION 2.03
Maturity; Interest Rates
10
SECTION 2.04
Registration; Interest
10
SECTION 2.05
Form of Certificates
10
SECTION 2.06
Execution
11
SECTION 2.07
Transfer and Exchange
11
SECTION 2.08
Certificates Mutilated, Lost, Destroyed or Stolen
11
SECTION 2.09
Payment
12
SECTION 2.10
Execution of Documents and Proof of Ownership
12
SECTION 2.11
Certificate Register
13
SECTION 2.12
Destruction of Canceled Certificates
13
ARTICLE III
APPLICATION OF PROCEEDS; ACQUISITION AND CONSTRUCTION FUND
SECTION 3.01 Application of Proceeds and Other Moneys 13
SECTION 3.02 [Reserved] 14
SECTION 3.03 Acquisition and Construction Fund 14
SECTION 3.04 Additional Certificates 14
SECTION 3.05 Validity of Certificates 14
ARTICLE IV
PREPAYMENT OF CERTIFICATES
SECTION 4.01 Establishment of Prepayment Fund 15
SECTION 4.02 Mandatory Prepayment 15
SECTION 4.03 Optional Prepayment 16
SECTION 4.04 Selection of Certificates for Prepayment 16
SECTION 4.05 Notice of Prepayment 16
SECTION 4.06 Partial Prepayment of Certificates 17
SECTION 4.07 Effect of Notice of Prepayment 17
SECTION 4.08 No Surplus 18
ARTICLE V
LEASE PAYMENTS; LEASE PAYMENT FUND
SECTION 5.01
Security Provisions
18
SECTION 5.02
Establishment of Lease Payment Fund
19
SECTION 5.03
Deposits
19
SECTION 5.04
Application of Moneys
19
SECTION 5.05
Interest Before Completion; Surplus
19
ARTICLE VI
RESERVE FUND
SECTION 6.01 Reserve Fund 19
SECTION 6.02 Deposits to the Reserve Fund 20
SECTION 6.03 Transfers of Excess 20
SECTION 6.04 Application of Reserve Fund in Event of Deficiency
in Lease Payment 20
SECTION 6.05 Transfer to Make all Lease Payments 20
ARTICLE VII
NET PROCEEDS FUND
SECTION 7.01
Establishment of Net Proceeds Fund; Deposits
21
SECTION 7.02
Disbursements
21
SECTION 7.03
Cooperation
21
ARTICLE Vill
MONEYS IN FUNDS; INVESTMENT
SECTION 8.01
Held in Trust
21
SECTION 8.02
Investments Authorized
21
SECTION 8.03
Disposition of Investments
22
SECTION 8.04
Accounting
22
SECTION 8.05
Valuation and Disposition of Investments
22
SECTION 8.06
Commingling of Moneys in Funds
22
SECTION 8.07 Arbitrage Covenant
SECTION 8.08 Rebate Fund
SECTION 8.09 Information Concerning Investments
SECTION 8.10 Notice Concerning Investments
ARTICLE IX
THE TRUSTEE
SECTION 9.01
Appointment of Trustee
SECTION 9.02
Merger or Consolidation
SECTION 9.03
Protection of the Trustee
SECTION 9.04
Rights of the Trustee
SECTION 9.05
Standard of Care
SECTION 9.06
Compensation of the Trustee
SECTION 9.07
Indemnification of the Trustee
ARTICLE X
MODIFICATION OR AMENDMENT OF AGREEMENT
SECTION 10.01 Amendments Permitted
SECTION 10.02 Procedure for Amendment with Written Consent of the Owners
SECTION 10.03 Disqualified Certificates
SECTION 10.04 Effect of Supplemental Agreement
SECTION 10.05 Endorsement or Replacement of Certificates Delivered After
Amendments
SECTION 10.06 Amendatory Endorsement of Certificates
SECTION 10.07 Trustee's Reliance on Opinion of Special Counsel
SECTION 10.08 Site Replacement
SECTION 11.01
SECTION 11.02
SECTION 11.03
SECTION 11.04
SECTION 11.05
SECTION 11.06
SECTION 11.07
SECTION 11.08
ARTICLE XI
COVENANTS; NOTICES
Compliance With and Enforcement of the Lease
Payment of Taxes
Observance of Laws and Regulations
Prosecution and Defense of Suits
City Budgets
Further Assurances
Tax Covenants
Notice of Trustee
22
23
24
24
25
25
26
26
27
27
28
28
29
30
30
31
31
31
32
31
32
32
32
32
32
32
33
ARTICLE XII
LIMITATION OF LIABILITY
SECTION 12.01 Limited Liability of the City 33
SECTION 12.02 No Liability of the City or Corporation for Trustee Performance 33
SECTION 12.03 Limited Liability of Trustee 33
SECTION 12.04 Limitation of Rights of Parties and Certificate Owners 34
ARTICLE XIII
EVENTS OF DEFAULT AND REMEDIES OF
CERTIFICATE OWNERS
SECTION 13.01
Assignment of Rights
34
SECTION 13.02
Events of Default
34
SECTION 13.03
Application of Funds
34
SECTION 13.04
Institution of Legal Proceedings
35
SECTION 13.05
Non -waiver
35
SECTION 13.06
Remedies Not Exclusive
35
SECTION 13.07
Power of Trustee to Control Proceedings
35
SECTION 13.08
Limitation on Certificate Owners' Right to Sue
36
SECTION 13.09
Agreement to Pay Attorneys' Fees and Expenses
36
SECTION 13.10
Term of a Substitute Lease
37
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01
Defeasance
37
SECTION 14.02
Non -Presentment of Certificates
38
SECTION 14.03
Records
38
SECTION 14.04
Execution in Counterparts
38
SECTION 14.05
Headings
38
SECTION 14.06
Waiver of Notice
39
SECTION 14.07
Separability of Invalid Provisions
39
SECTION 14.08
Payment on a Business Day
39
Exhibit A - Form of Certificate of Participation
A-1
Exhibit B - Lease
Payment Schedule
B-1
(iv)
TRUST AGREEMENT
THIS TRUST AGREEMENT, made and entered into as of this 1st day of June, 1992, by and
among BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as trustee (the
"Trustee"), NEWPORT BEACH PUBLIC FACILITIES CORPORATION, a not for profit corporation
duly organized and existing under the laws of the State of California,
(the "Corporation"), and CITY OF NEWPORT BEACH, a municipal corporation duly organized
and existing under the Constitution and laws of the State of California, as lessee under said
lease (the "City");
WITNESSETH:
WHEREAS, the City and the Corporation have entered into a leasing arrangement
whereby the Corporation has agreed to lease certain undeveloped property from the City and
the City has agreed to lease back such property and improvements thereto from the
Corporation;
WHEREAS, the City will pay Lease Payments under the Project Lease representing fair
market rental value of property leased thereunder in amounts sufficient to pay the components
of principal, premium, if any, and interest represented by the Certificates executed and
delivered hereunder;
WHEREAS, as security for the Certificates, the Corporation will assign the rights to
receive such Lease Payments to the Trustee, and the Corporation and City will grant a
security interest in all moneys held by the Trustee hereunder to the Trustee for the benefit of
the Owners of Certificates;
WHEREAS, the Trustee has agreed to transfer proceeds of the Certificates for deposit
in the Acquisition and Construction Fund to the City hereunder to pay certain Project Costs
and Delivery Costs for the Project described herein and in the Project Lease;
WHEREAS, the Trustee has agreed to execute and deliver Certificates, each evidencing
proportionate interests in the Lease Payments and Prepayments made by the City under the
Project Lease;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions and Rules of Construction. Unless the context otherwise
requires, the terms defined in this Section shall, for all purposes of this Agreement to Trust
Agreement Supplement Agreement to Supplemental Trust Agreement, have the meanings
herein specified. Unless the context otherwise indicates, words importing the singular number
- 1 -
shall include the plural number and vice versa. The terms "hereby," "hereof," "hereto,"
"herein," "hereunder" and any similar terms, as used in this Agreement, refer to this
Agreement as a whole.
"Acquisition and Construction Fund" means the Acquisition and Construction Fund
established and held by the City pursuant to Article III hereof.
"Additional Payments" means Additional Payments as defined in Section 4.9 of the
Lease.
"Assignment Agreement" means the Assignment Agreement, dated as of the date
hereof, by and between the Trustee and the Corporation, and any duly authorized and
executed amendments thereto.
"Authorized Denomination" means $5,000.00 or any integral multiple thereof.
"Business Day" means any day of the year other than Saturday or Sunday on which
banks in New York, New York, Los Angeles, California, or San Francisco, California, are not
authorized or obligated by law or executive order to close and on which the New York Stock
Exchange is not closed.
"Certificate Payment Date" means June 1 and December 1 of each year, commencing
December 1, 1992, so long as any Certificates remain outstanding.
"Certificate" or "Certificates" means the Certificates of Participation Series 1992
(Central Library Building Project) to be executed and delivered pursuant hereto.
"Certificate Year" means each successive one-year period ending on a date selected
by the City.
"City" means City of Newport Beach.
"City Representative" means the City Manager, or a person authorized by the City
Council or the City Manager to act on behalf of the City under or with respect to this
Agreement.
"Closing Date" means the day when the Certificates, duly executed by the Trustee,
are delivered to the Original Purchasers thereof.
"Code" means the Internal Revenue Code of 1986, as amended, and all regulations
promulgated thereunder, and all citations herein shall be deemed to refer to corresponding
sections in any such amended Code and regulations.
"Corporation" means Newport Beach Public Facilities Corporation.
"Corporation Representative" means the Chairman, President, Vice President, Chief
Financial Officer or Secretary of the Corporation, or any person authorized to act on behalf
of the Corporation under or with respect to the Lease.
-2-
"Delivery Costs" means and further includes all items of expense directly or indirectly
payable by or reimbursable to the City or the Corporation relating to the financing of the
Project from the proceeds of the Certificates, including but not limited to filing and recording
costs, settlement costs, printing costs, word processing costs, reproduction and binding
costs, initial fees and charges of the Trustee including its first annual administration fee and
the fees and charges of its counsel, Certificate insurance premiums, legal fees and charges,
financing and other professional consulting fees, costs of rating agencies or credit ratings,
fees for execution, transportation and safekeeping of the Certificates and charges and fees
in connection with the foregoing.
"Event of Default" means an event of default under the Lease, as defined in Section
9.1 thereof.
"Fiscal Year" means the fiscal year of the City commencing July 1 and ending on the
next following June 30.
"Government Obligations" means Permitted Investments as described in paragraph A
of the definition thereof.
"Independent Counsel" means an attorney duly admitted to the practice of law before
the highest court of the state in which such attorney maintains an office and who is not an
employee of the Corporation, the Trustee or the City.
"Lease" means the Project Lease.
"Lease Payment" or "Lease Payments" means any payment or payments required to
be paid by the City to the Corporation pursuant to Section 4.3 of the Lease, including the
payments set forth in Exhibit B to this Trust Agreement.
"Lease Payment Date" means May 15 and November 15 in each year.
"Lease Payment Fund" means the fund by that name established and held by the
Trustee pursuant to Article V hereof.
"Moody's" means Moody's Investors Service, Inc., its successors and assigns.
"Net Proceeds" means any proceeds of insurance carried pursuant to Sections 5.3 and
5.5 of the Lease, performance bonds, or a taking by eminent domain or condemnation paid
with respect to the Project and remaining after payment therefrom of any expenses (including
attorneys' fees) incurred in the collection thereof.
"Net Proceeds Fund" means the account by that name established and held by the
Trustee pursuant to Article VII hereof.
"Original Purchaser" means the original purchaser of the Certificates, or any successors
or assigns thereof.
-3-
"Outstanding" when used as of any particular time with respect to Certificates, means
(subject to the provisions of Section 10.03 hereof) all Certificates theretofore executed and
delivered by the Trustee under this Agreement except -
(1) Certificates theretofore canceled by the Trustee or surrendered to the
Trustee for cancellation;
(2) Certificates for the payment or prepayment of which funds or
Government Obligations, together with interest earned thereon, in the necessary amount shall
have theretofore been deposited with the Trustee (whether upon or prior to the maturity or
prepayment date of such Certificates) pursuant to Article XIV hereof, provided that, if such
Certificates are to be prepaid prior to maturity, notice of such prepayment shall have been
given as provided in Section 4.05 hereof or provision satisfactory to the Trustee shall have
been made for the giving of such notice; and
(3) Certificates in lieu of or in exchange for which other Certificates shall
have been executed and delivered by the Trustee pursuant to Sections 2.07 and 2.08 hereof.
"Owner" or "Certificate Owner" or "Owner of a Certificate," or any similar term, when
used with respect to a Certificate, means the person in whose name such Certificate is
registered on the registration books maintained by the Trustee.
"Permitted Investments" means any of the following which at the time of investment
are legal investments under the laws of the State for the moneys proposed to be invested
therein:
A. Direct obligations of the United States of America (including obligations issued
or held in book -entry form on the books of the Department of the Treasury) or
obligations the principal of and interest on which are unconditionally guaranteed
by the United States of America.
B. Bonds, debentures, notes or other evidence of indebtedness issued or
guaranteed by any of the following federal agencies, provided such obligations
are backed by the full faith and credit of the United States of America (stripped
securities are only permitted if they have been stripped by the agency itself):
U.S. Export -Import Bank (Eximbank)
Direct obligations or fully guaranteed certificates of beneficial
ownership
2. Farmers Home Administration (FHA)
Certificates of beneficial ownership
3. Federal Financing Bank
Federal Housing Administration Debentures(FHA)
General Services Administration
-4-
Participation certificates
Government National Mortgage Association ("GNMA" or "Ginnie Mae")
GNMA - guaranteed mortgage -backed bonds
GNMA - guaranteed pass -through obligations
U.S. Maritime Administration
Guaranteed Title XI financing
8. J.S. Department of Proiect Notes Housing and Urban Develooment(HUD)
Local Corporation Bonds
C. Bonds, debentures, notes or other evidence of indebtedness issued or
guaranteed by any of the following (non -full faith and credit U.S. government
agencies (stripped securities are only permitted if they have been stripped by
the agency itself):
Federal Home Loan Bank System (FHL Banks)
Senior debt obligations
2. Federal Home Loan Mortgage Corporation (FHLMC or "Freddie Mac")
Participation Certificates
Senior debt obligations
3. feral National Mortgage Association (FNMA or "Fannie Mae")
senior debt obligations(excluded are stripped mortgage securities which
are valued greater than par on the portion of unpaid principal)
4. Student Loan Marketing Association (SLMA or "Sallie Mae")
Senior debt obligations
5. Resolution Funding Corporation (REFCORP)
Only the interest component of REFCORP strips which have been
stripped by request to the Federal Reserve Bank of New York in book
entry from are acceptable.
D. Money market funds registered under the Federal Investment Company Act of
1940, whose shares are registered under the Federal Securities Act of 1933,
and having a rating by S&P of AAAm-G, AAAm, or AAm.
E. Certificates of deposit secured at all times by collateral described in (A), (B) or
(A) and (B) above. The collateral must be held by a third party and the Trustee
on behalf of the Certificate Owners must have a perfected first security interest
in the collateral. The certificates must have a one year or less maturity and
must be issued by commercial banks, savings and loan associations or mutual
savings banks whose short term obligations are rated A or better by S & P.
-5-
F. Certificates of deposit, savings accounts, deposit accounts or money market
deposits which are fully insured by the FDIC.
G. Investment Agreements, including guaranteed investment contracts, issued by
entities which are rated (i) in one of the two top long-term investment
categories by S&P or (ii) in the highest short-term rating category of S&P, in
either case, at the time of the investment and continuously during the term of
the investment.
H. Commercial paper rated, at the time of purchase, "Prime-1 " by Moody's and
"A-1 " or better by S&P.
I. Bonds or notes issued by any state or municipality which are rated by Moody's
and S&P in one of the two highest rating categories assigned by such agencies.
J. Federal funds or bankers acceptances with a maximum term of one year of any
bank which has an unsecured, uninsured and unguaranteed obligation rating of
"Prime-1 " or "A-3" or better by Moody's and "A-1 " or "A" or better by S&P.
K. Any state or county administered pool investment fund in which the City is
statutorily permitted or required to invest.
L. Repurchase agreements which provide for the transfer of securities from a
dealer bank or securities firm (seller/borrower) to a municipal entity
(buyer/lender), and the transfer of cash from a municipal entity to the dealer
bank or securities firm with an agreement that the dealer bank or securities firm
will repay the cash plus a yield to a municipal entity in exchange for the
securities at a specified date.
Repurchase agreements must satisfy the following criteria:
1. They must be between the municipal entity and a dealer bank or securities firm
which are:
a. Primary dealers on the Federal Reserve reporting dealer list which fall under
the jurisdiction of the Securities Investors Protection Corporation (the "SIPC")
and which are rated "A" or better by S&P and Moody's, or
b. Banks rated "A" or above by S&P and Moody's.
2. The written repo contract must include the following:
a. Securities which are acceptable for transfer:
(1.) Direct U.S. governments
(2.) Federal agencies backed by the full faith and credit of the U.S.
Government
b. The term of the repo may be up to 30 days
C. The collateral must be delivered to the municipal entity, Trustee (if the
Trustee is not supplying the collateral) or third party acting as agent for
the Trustee (if the Trustee is supplying the collateral)
before/simultaneous with payment (perfection by possession of
certificated securities).
d. The Trustee has a perfected first priority security interest in the
collateral.
e. Collateral is free and clear of third -party liens and in the case of a SIPC
broker was not acquired pursuant to a repo agreement or reverse repo
agreement.
f. Failure to maintain the requisite collateral percentage will require the
Trustee to liquidate collateral.
g. Valuation of Collateral
(1) The securities must be valued at least weekly, marked -to -market
at current market price plus accrued interest
(a) the value of collateral must be equal to 104% of the amount of cash
transferred by a municipal entity to the dealer bank or security firm
under the Repurchase Agreement plus accrued interest. If the value of
securities held as collateral slips below 104% of the value of the cash
transferred by a municipal entity, then additional cash and/or acceptable
securities must be transferred. If the securities used as collateral are
FNMA or FMAC, then the value of the collateral must equal 105%.
3. Le -gal opinion must be delivered to the municipal entity:
a. Repo Agreement meets guidelines under state law for legal investment
of public funds.
-7-
"Prepayment" means any payment made by the City pursuant to Article X of the Lease
as a prepayment of the Lease Payments.
"Prepayment Fund" means the account by that name established and held by the
Trustee pursuant to Article IV hereof.
"Principal Office" means the corporate trust office of the Trustee in Los Angeles,
California, or such other designated office of the Trustee, or the principal corporate trust
office of any successor Trustee.
"Project" means the Project as defined in the Lease.
"Project Costs" means, with respect to any item or portion of the Project, the contract
price paid or to be paid therefor upon construction, procurement or improvement thereof, in
accordance with a purchase order or contract therefor. Project Costs include, but are not
limited to, the administrative, engineering, legal, financial and other costs incurred by the City
and the Corporation in connection with the construction, procurement or improvement of the
Project, all applicable sales taxes and other charges resulting from such construction,
procurement or improvement of the Project, and the costs associated with making rebate
calculations required by the Code.
"Proiect Lease" means the lease dated the date hereof, between the City and the
Corporation, and any authorized and executed amendments thereto.
"Rebate Fund" means the fund established pursuant to Section 8.08 hereof.
"Record Date" means the close of business on the fifteenth day of the month
preceding each Certificate Payment Date, whether or not such fifteenth day is a Business Day.
"Reserve Fund" means the fund by that name established and held by the Trustee
pursuant to Article VI hereof.
"Reserve Replenishment Rent" means Reserve Replenishment Rent payable pursuant
to Section 4.3(d) of the Lease.
"Reserve Reauirement" means an amount equal to the least of (1) the maximum
aggregate annual Lease Payments payable under the Lease, (2) 125% of the average annual
aggregate Lease Payments payable under the Lease, or (3) 10% of the principal amount of
the Certificates Outstanding.
"Revenues" means all revenues subject to this Trust Agreement including, without
limitation, Lease Payments and Net Proceeds.
",S&P" means Standard & Poor's Corporation, its successors and assigns.
"Site" means the Site, as defined in the Lease.
"Site Lease" means the Site Lease, dated the date hereof, between the Corporation
and the City.
"Special Counsel" means an attorney or firm of attorneys of nationally recognized
standing in matters pertaining to the tax-exempt status of interest on certificates of
participation issued by states and their political subdivisions and acceptable to the City and
the Trustee.
"State" means the State of California.
"Tax Certificate" means that certain Tax Certificate executed by the City in connection
with the execution and delivery of the Certificates.
"Term" means the time during which the Lease is in effect, as provided in Section 4.2
of the Lease.
"Trustee" means Bank of America National Trust and Savings Association, a national
banking association or any successor trustee.
"Trust Agreement" or "Agreement" means this Agreement to Trust Agreement
Supplement Agreement to Supplemental Trust Agreement, together with any amendments
hereof or supplements hereto permitted to be made hereunder.
SECTION 1.02 Authorization. Each of the parties hereby represents and warrants that
it has full legal authority and is duly empowered to enter into this Agreement, and has taken
all actions necessary to authorize the execution of this Agreement by the officers and persons
signing it.
ARTICLE II
THE CERTIFICATES OF PARTICIPATION
SECTION 2.01 Authorization. The Trustee is hereby authorized and directed to execute
and deliver Certificates of Participation in an aggregate principal amount of $7,500,000.00
evidencing proportionate and undivided ownership interests in the Lease Payments and the
Prepayments payable under the Lease.
SECTION 2.02 Date. Each Certificate shall be dated June 1, 1992, and interest with
respect thereto shall be payable from the Certificate Payment Date next preceding the date
of execution thereof, unless:
(i) it is executed as of a Certificate Payment Date, in which event interest
with respect thereto shall be payable from the date thereof; or
it is executed after a Record Date and before the following Certificate
Payment Date, in which event interest with respect thereto shall be
payable from such following Certificate Payment Date, or
WE
SECTION 2.01 Authorization. The Trustee is hereby authorized and directed to execute
and deliver Certificates of Participation in an aggregate principal amount of $7,500,000.00
evidencing proportionate and undivided ownership interests in the Lease Payments and the
Prepayments payable under the Lease.
SECTION 2.02 Date. Each Certificate shall be dated June 1, 1992, and interest with
respect thereto shall be payable from the Certificate Payment Date next preceding the date
of execution thereof, unless:
(i) it is executed as of a Certificate Payment Date, in which event interest
with respect thereto shall be payable from the date thereof; or
it is executed after a Record Date and before the following Certificate
Payment Date, in which event interest with respect thereto shall be
payable from such following Certificate Payment Date, or
it is executed prior to the close of business on November 15, 1992,
in which event interest with respect thereto shall be payable from June
1, 1992;
provided, however, that if, as of the date of any Certificate, interest has not been paid when
due with respect to any Outstanding Certificate, interest with respect to such Certificate shall
be payable from the Certificate Payment Date to which interest has previously been paid or
made available for payment with respect to the Outstanding Certificates or from June 1, 1992
If no interest has been paid or made available for payment.
SECTION 2.03 Maturity: Interest Rates. The Certificates shall mature on June 1 of the
following years and shall bear interest at the following rates:
CERTIFICATES OF PARTICIPATION
Maturity
Principal
Interest
Maturity
Principal
Interest
(June 1)
Amount
Rate
(June 1
Amount
Rate
1994
$ 130,000
6.00%
2000
175,000
6.00%
1995
135,000
6.00%
2001
185,000
6.10%
1996
145,000
6.00%
2002
200,000
6.10%
1997
150,000
6.00%
2003
210,000
6.10%
1998
160,000
6.00%
2004
220,000
6.20%
1999
165,000
6.00%
2005
235,000
6.20%
2019 - $5,390,000 6.20% Term Certificates
SECTION 2.04 Registration: Interest. The Certificates shall be delivered in the
form of fully registered Certificates without coupons in the denomination of $ 5,000 or any
integral multiple thereof. The Certificates shall be numbered as the Trustee deems appropriate.
-10-
principal amount, when available and thereupon the temporary Certificates shall be
surrendered to the Trustee at its Principal Office. Until so exchanged, the temporary
Certificates shall be entitled to the same benefits under this Agreement as definitive
Certificates.
SECTION 2.06 Execution. The Certificates shall be executed by and in the name of
the Trustee by the manual signature of any authorized signatory of the Trustee. The Trustee
shall insert the date of execution of each Certificate in the place provided thereon.
SECTION 2.07 Transfer and Exchange.
(a) Transfer of Certificates. Any Certificate may, in accordance with its
terms, be transferred upon the books required to be kept pursuant to the provisions of Section
2.11 by the person in whose name it is registered, in person or by his duly authorized
attorney, upon surrender of such Certificate for cancellation at the Principal Office
accompanied by delivery of a written instrument of transfer in a form approved by the
Trustee, duly executed. Whenever any Certificate or Certificates shall be surrendered for
transfer, the Trustee shall execute and deliver a new Certificate or Certificates of the same
maturity and interest rate, for like aggregate principal amount.
(b) Exchange of Certificates. Certificates may be exchanged at the Principal
Office for a like aggregate principal amount of Certificates of other authorized denominations
of the same maturity and interest rate.
(c) Costs of Transfer or Exchange. The Trustee may require the payment by
the Certificate Owner requesting transfer or exchange of any tax or other governmental
charge required to be paid with respect to such transfer or exchange. The City shall pay all
other registration and transfer or exchange costs, including the cost of printing Certificates,
except the expense incurred under Section 2.08 hereof. All Certificates surrendered pursuant
to the provisions of this Section shall be canceled by the Trustee and shall not be redelivered.
(d) Time for Transfer or Exchange. The Trustee shall not be obligated to
transfer or exchange any Certificate (i) between 15 days prior to selection of Certificates for
prepayment and the date notice of prepayment is mailed and (ii) selected for prepayment.
SECTION 2.08 Certificates Mutilated, Lost. Destroyed or Stolen. If any Certificate shall
become mutilated, the Trustee, at the expense of the Owner of said Certificate, shall execute
and deliver a new Certificate of like tenor and numbered as the Trustee shall determine in
exchange and substitution for the Certificate so mutilated, but only upon surrender to the
Trustee of the Certificate so mutilated. Every mutilated Certificate so surrendered to the
Trustee shall be canceled by it. If any Certificate shall be lost, destroyed or stolen, evidence
of such loss, destruction or theft may be submitted to the Trustee, and, if such evidence is
satisfactory to the Trustee and, if an indemnity, satisfactory to the Trustee indemnifying the
Trustee, the Corporation and the City, shall be given, the Trustee, at the expense of the
Certificate Owner, shall execute and deliver a new Certificate of like tenor and maturity and
numbered as the Trustee shall determine in lieu of and in substitution for the Certificate so
lost, destroyed or stolen. The Trustee may require payment of an appropriate fee for each new
- 11 -
Certificate delivered under this Section and of the expenses which may be incurred by the
Trustee in carrying out the duties under this Section. Any Certificate executed under the
provisions of this Section in lieu of any Certificate alleged to be lost, destroyed or stolen shall
be equally and proportionately entitled to the benefits of this Agreement with all other
Certificates secured by this Agreement. The Trustee shall not be required to treat both the
original Certificate and any replacement Certificate as being Outstanding for the purpose of
determining the principal amount of Certificates which may be executed and delivered
hereunder or for the purpose of determining any percentage of Certificates Outstanding
hereunder, but both the original and replacement Certificate shall be treated as one and the
same. Notwithstanding any other provision of this Section, in lieu of delivering a new
Certificate which has been mutilated, lost, destroyed or stolen, and which has matured, the
Trustee may make payment with respect to such Certificate.
SECTION 2.09 Payment. Payment of interest with respect to any Certificate on any
Certificate Payment Date or prepayment date shall be made to the person appearing on the
registration books of the Trustee as the Owner thereof as of the Record Date immediately
preceding such Certificate Payment Date or prepayment date, as the case may be, such
interest to be paid by check mailed on the Certificate Payment Date by first class mail to such
Owner at his address as it appears on such registration books. Payment of interest with
respect to Certificates may, at the option of any Owner of at least $1,000,000 principal
amount of Certificates (such option to be exercised by the written request of such Owner to
the Trustee on or before the Record Date), be transmitted by wire transfer to the bank
account number on file with the Trustee as of the Record Date before the applicable
Certificate Payment Date. The principal payable upon maturity or prepayment with respect to
the Certificates shall be payable upon surrender at the Principal Office. Said amounts shall be
payable in lawful money of the United States of America. The Trustee is hereby authorized
to pay or prepay the Certificates when duly presented for payment at maturity or on
prepayment and to cancel all Certificates upon payment thereof.
SECTION 2.10 Execution of Documents and Proof of Ownership. Any request,
direction, consent, revocation of consent, or other instrument in writing required or permitted
by this Agreement to be signed or executed by Certificate Owners may be in any number of
concurrent instruments of similar tenor, and may be signed or executed by such Owners in
person or by their attorneys or agents appointed by an instrument in writing for that purpose,
or by any bank, trust company or other depository for such Certificates. Proof of the
execution of any,such instrument, or of any instrument appointing any such attorney or agent,
and of the ownership of Certificates shall be sufficient for any purpose of this Agreement
(except as otherwise herein provided), if made in the following manner:
(a) The fact and date of the execution by any Owner or his attorney or agent
of any such instrument and of any instrument appointing any such attorney or agent, may be
proved by a certificate, which need not be acknowledged or verified, of an officer of any bank
or trust company located within the United States of America, or of any notary public or other
officer authorized to take acknowledgments of deeds to be recorded in such jurisdictions, that
the persons signing such instruments acknowledged before him the execution thereof. Where
any such instrument is executed by an officer of a corporation or association or a member of
a partnership on behalf of such corporation, association or partnership, such certificate shall
also constitute sufficient proof of his authority.
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(b) The fact of the ownership of Certificates by any person, the amount and
numbers of such Certificates and the date of execution shall be proved by the registration
books maintained pursuant to Section 2.11.
Nothing contained in this Article II shall be construed as limiting the Trustee to
such proof, it being intended that the Trustee may accept any other evidence of the matters
herein stated which the Trustee may deem sufficient. Any request or consent of the Owner
of any Certificate shall bind every future Owner of the same Certificate in respect of anything
done or to be done by the Trustee in pursuance of such request or consent.
SECTION 2.11 Certificate Register. The Trustee will keep or cause to be kept at its
operational office sufficient books for the registration and transfer of the Certificates which
shall, during normal working hours and upon reasonable prior notice, be open to inspection
by the City and the Corporation; and, upon presentation for such purpose, the Trustee shall,
under such reasonable regulations as it may prescribe, register or transfer or cause to be
registered or transferred, on said books, Certificates as hereinbefore provided. The City, the
Corporation and the Trustee shall be entitled to treat the registered owner of a Certificate as
the absolute owner thereof for all purposes, whether or not a Certificate shall be overdue, and
the City, the Corporation and the Trustee shall not be affected by any notice to the contrary.
SECTION 2.12 Destruction of Canceled Certificates. Whenever in this Agreement
provision is made for the surrender or cancellation by the Trustee and the delivery to the City
of any Certificates, the Trustee shall, in lieu of such delivery, destroy such Certificates and
upon written request of the City deliver a certificate of such destruction to the City.
ARTICLE III
APPLICATION OF PROCEEDS; ACQUISITION AND CONSTRUCTION FUND
SECTION 3.01 Agglication of Proceeds and Other Moneys. The proceeds and other
moneys received by the Trustee from the original sale of the Certificates shall forthwith be
set aside or transferred by the Trustee in or to the following respective funds and accounts
and in the following order of priority:
(a) Lease Payment Fund: The Trustee shall deposit $693,427.50
(representing accrued interest of $20,546.00 and capitalized interest of
$672,881.50) in the Lease Payment Fund;
(b) Reserve Fund: The Trustee shall deposit $594,720.00 in the Reserve
Fund;
(c) Acauisition and Construction Fund: The Trustee shall transfer to the City
the balance of the proceeds to be held in the Acquisition and
Construction Fund.
SECTION 3.02 [Reserved]
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SECTION 3.03 Acquisition and Construction Fund. The proceeds of the Certificates
deposited in the Acquisition and Construction Fund shall be held by the City in the Acquisition
and Construction Fund for the purpose of providing funds to pay Delivery Costs and Project
Costs of the Project.
The moneys in the Acquisition and Construction Fund shall be held by the City in trust
and applied to (i) Delivery Costs and (ii) the costs of acquisition, construction and financing
of the Project and the expenses incident thereto or connected therewith, including, if
necessary, interest during construction and for a period of not to exceed twenty-four months
thereafter, architectural, engineering and inspection fees and expenses, apparatus, equipment
and furnishings for the Project, testing and inspection, surveys, insurance premiums, losses
during construction not insured against because of deductible amounts, the fees and expenses
of the Trustee, expenses in connection with the preparation, issuance, sale and delivery of the
Certificates, legal and accounting fees and expenses, and similar expenses.
When the Project shall have been completed and a certificate of the City stating the
fact and date of such acquisition or completion and stating that all of the cost of acquisition
or construction thereof, as the case may be, and incidental expenses have been determined
and paid (or that all of such costs and expenses have been paid less specified claims which
are subject to dispute and for which a retention in the Acquisition and Construction Fund is
to be maintained in the full amount of such claims until such dispute is resolved), shall be
delivered to the Trustee by the City. Any remaining balance in the Acquisition and
Construction Fund not needed for Acquisition and Construction Fund purposes (but less the
amount of any such retention) will be transferred to the Trustee for deposit in the Lease
Payment Fund established pursuant to Section 5.02 or at the direction of the City and upon
the receipt of an opinion of Special Counsel to the effect that the transfer will not adversely
effect the excludability of the interest component of the Certificate payments from federal
income taxation, to the Trustee for deposit in the Prepayment Fund and used to prepay
Certificates as early as practicable thereafter.
SECTION 3.04. Additional Certificates. So long as any of the Certificates remain
Outstanding, the City will not issue any Additional Certificates or certificates payable from
Revenues on a parity with the Certificates unless the Owners of at least sixty percent (60%)
in aggregate principal amount of the Certificates then Outstanding shall have consented in
writing to the issuance of such Additional Certificates or certificates.
SECTION 3.05. Validity of Certificates. The validity of the authorization and issuance
of the Certificates shall not be dependent on or affected in any way by any proceedings taken
by the City for acquisition or construction of the Project , or by any contracts made by the
City in connection therewith, or the failure to acquire or construct the Project or any part
thereof. The recital contained in the Certificates that the same are regularly issued pursuant
to law shall be conclusive evidence of their validity and of compliance with the provisions of
law in their issuance.
MIEZ
ARTICLE IV
PREPAYMENT OF CERTIFICATES
SECTION 4.01 Establishment of Prepayment Fund. The Trustee shall establish a
special fund designated in the name of the Certificates and as the "Prepayment Fund", shall
keep such Fund separate and apart from all other funds and moneys held by it, and shall
administer such fund as herein provided. Moneys to be used for prepayment of the
Certificates shall be deposited into the Prepayment Fund and used solely for the purpose of
prepaying the Certificates in advance of their maturity on the date designated for prepayment
and upon presentation and surrender of such Certificates.
SECTION 4.02 Mandatory Prepayment.
(a) The Certificates are subject to prepayment on any date, in whole or in part,
from Net Proceeds which the Trustee shall transfer to the Prepayment Fund or other moneys
deposited with the Trustee as provided in Sections 6.1(c) and 6.2 of the Lease at least 60
days prior to a Certificate Payment Date and credited towards the Prepayment made by the
City pursuant to section 10.1 of the Lease, at a prepayment price equal to the principal
amount of Certificates prepaid together with accrued interest to the date fixed for
prepayment, without premium.
(b) The Certificates are subject to mandatory prepayment in whole or in part on any
date, in any Authorized Denomination, if and to the extent the Corporation is required to do
so in order to preserve the excludability of interest on the Certificates from gross income for
purposes of federal income taxation, as set forth in an opinion of Special Counsel, at a
prepayment price equal to the principal amount of Certificates prepaid together with accrued
interest to the date fixed for pre -payment, without premium.
(c) Mandatory Prepayment -Sinking Fund Payment. The Term Certificates maturing on
June 1, 2019 (the "Term Certificates") will be subject to mandatory prepayment, on each
June 1, commencing on June 1, 2006, at a prepayment price equal to the principal amount
thereof together with accrued interest thereon to the prepayment date, without premium, in
the years and amounts as set forth in the following table:
Year Year
(June 1) Amount (June 1) Amount
2006
$250,000
2013
$385,000
2007
$265,000
2014
$410,000
2008
$280,000
2015
$435,000
2009
$300,000
2016
$465,000
2010
$320,000
2017
$495,000
2011
$340,000
2018
$525,000
2012
$360,000
2019"
$560,000
"maturity
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If some but not all of the Term Certificates have been optionally prepaid or prepaid by
mandatory prepayment other than mandatory sinking fund prepayments, the total amount of
the respective future sinking fund payments shall be reduced by the aggregate principal
amount of Term Certificates so prepaid, to be allocated among such sinking funds payments
on a pro rata basis in integral multiples of $5,000.
(d) In lieu of depositing cash with the Trustee as a payment for prepayment price of
any Certificate required to be prepaid as provided for above, the Corporation or its assignee
will have the option to tender to the Trustee for cancellation any amount of Certificates which
have been purchased by or upon the direction of the City with amounts on deposit in the
Prepayment Fund or from any other source of available funds. Such Certificates may be
purchased with amounts in the Prepayment Fund at public or private sale at prices not in
excess of the otherwise applicable prepayment price; provided, however that such Certificates
must be tendered to the Trustee for cancellation prior to the date on which the Trustee selects
Certificates for prepayment.
SECTION 4.03. Optional Prepayment. Certificates maturing on or before June 1,
2000 are not subject to optional prepayment prior to their stated maturity dates. The
Certificates, including portions thereof, maturing on or after June 1, 2001, shall be subject
to prepayment prior to maturity, upon instructions from the City, on June 1, 2000, and each
Certificate Payment Date thereafter as a whole or in part in inverse order of maturity and by
lot within any maturity, at the respective prepayment prices (expressed as percentages of
principal amount) set out below, plus accrued interest thereon to the prepayment date:
Prepayment Dates Prepayment Prices
June 1, 2000 and December 1, 2000 102%
June 1, 2001 and December 1, 2001 101 %
June 1, 2002 and thereafter 100%
SECTION 4.04 Selection of Certificates for Prepayment. Subject to Section 4.03
hereof, whenever provision is made in this Agreement for the prepayment of Certificates and
less than all Outstanding Certificates are called for prepayment, the Trustee shall select
Certificates for prepayment, from the Outstanding Certificates not previously called for
prepayment pursuant to Section 4.02 hereof, pro rata among maturities and by lot within any
maturity and, to the extent not equally allocable among maturities, in inverse order of
maturities so that following such prepayment, remaining annual payments of principal and
interest represented by the Certificates are, to the extent practicable given that Certificates
are issued in integral multiples of $5,000, proportionate to the initial amounts of such
payments. The Trustee shall promptly notify the City in writing of the Certificates so selected
for prepayment.
SECTION 4.05 Notice of Prepayment.
(a) Content. When prepayment is authorized or required pursuant to this Article IV,
the Trustee shall give written notice to the Owners of the prepayment of the Certificates on
behalf of and at the expense of the City. In connection with an optional prepayment, the
Trustee shall not give notice of such prepayment until the City's payment pursuant to Section
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10.2 of the Lease has been received by the Trustee. Such notice shall specify: (a) that the
Certificates or a designated portion thereof are to be prepaid, (b) the numbers of the
Certificates together with the CUSIP numbers to be prepaid, (provided, however, neither the
Trustee, City or the Corporation shall be liable for the accuracy of the CUSIP numbers), (c)
the date of notice and the date of prepayment, (d) the place or places where the prepayment
will be made, and (e) the following descriptive information regarding the Certificates: date,
interest rates and stated maturity dates; provided that if all Outstanding Certificates are being
prepaid, the notice need not contain the information required by (b) above. Such notice shall
further state that on the specified date there shall become due and payable upon each
Certificate to be prepaid, the portion of the principal amount of such Certificate to be prepaid,
together with interest accrued to said date and prepayment premium, if any, and that from
and after such date, provided that moneys therefor have been deposited with the Trustee,
interest with respect thereto shall cease to accrue and be payable.
(b) Recipients: Timing. Notice of such prepayment shall be sent by first class mail,
postage prepaid, to the Corporation, the City, Depository Trust Company at its address at:
Supervisor, Call Notification Department, The Depository Trust Company, 711 Stewart
Avenue, Garden City, New York, 1 1530-4719, and the respective Owners of any Certificates
designated for prepayment at their addresses appearing on the Certificate registration books,
at least 30 days, but not more than 60 days, prior to the prepayment date; provided that
neither failure to receive such notice nor any defect in any notice so mailed shall affect the
sufficiency of the proceedings for the prepayment of such Certificates.
SECTION 4.06 Partial Prer)avment of Certificates. Upon surrender by the Owner of a
Certificate for partial prepayment at the Principal Office, payment of such partial prepayment
of the principal amount of a Certificate will be made to such Owner by check. Upon surrender
of any Certificate prepaid in part only, the Trustee shall execute and deliver to the registered
Owner thereof, at the expense of the City, a new Certificate or Certificates which shall be of
authorized denominations equal in aggregate principal amount to the unrepaid portion of the
Certificate surrendered and of the same interest rate and the same maturity. Such partial
prepayment shall be valid upon payment of the amount thereby required to be paid to such
Owner, and the City, the Corporation and the Trustee shall be released and discharged from
all liability to the extent of such payment.
SECTION 4.07 Effect of Notice of Prer)avment. Notice having been given as aforesaid,
and the moneys for the prepayment (including the interest to the applicable date of
prepayment), having been set aside in the Prepayment Fund, the Certificates shall become due
and payable on said date of prepayment, and, upon presentation and surrender thereof at the
Principal Office, said Certificates shall be paid at the unpaid prepayment price with respect
thereto, plus interest accrued and unpaid to said date of prepayment.
If, on said date of prepayment, moneys for the prepayment of all the Certificates to be
prepaid, together with interest to said date of prepayment, shall be held by the Trustee so as
to be available therefor on such date of prepayment, and, if notice of prepayment thereof shall
have been given as aforesaid, then, from and after said date of prepayment, interest with
respect to the Certificates shall cease to accrue and become payable. All moneys held by or
on behalf of the Trustee for the prepayment of Certificates shall be held in trust for the
account of the Owners of the Certificates so to be prepaid.
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All Certificates paid at maturity or prepaid prior to maturity pursuant to the provisions
of this Article shall be canceled upon surrender thereof and delivered to or upon the order of
the City.
SECTION 4.08 No Surplus. Prepayment of Certificates shall be made in such manner
that there shall be no more than a minimal necessary amount of funds remaining in the
Prepayment Fund after prepayment and payment of all Certificates Outstanding, of any series,
including accrued interest and payment of any applicable fees to the Trustee or provision
made therefor satisfactory to the Trustee and provision for any amounts required to be
transferred to the Rebate Fund pursuant to Sections 8.07 and 8.08 hereof, and after payment
of any amounts due the Trustee pursuant to Sections 9.06 and 9.07 hereof.
ARTICLE V
LEASE PAYMENTS; LEASE PAYMENT FUND
SECTION 5.01 Security Provisions.
(a) Assignment of Rights in Lease. The Corporation has, pursuant to the
Assignment Agreement, assigned and set over to the Trustee certain of its rights in the Site
Lease and Lease, including but not limited to all of the Corporation's rights to receive and
collect all of the Lease Payments, the Prepayments, and all other amounts required to be
deposited in the Lease Payment Fund pursuant to the Lease or pursuant hereto. All Lease
Payments, Prepayments, and such other amounts to which the Corporation may at any time
be entitled shall be paid directly to the Trustee, and all of the Lease Payments and
Prepayments collected or received by the Corporation shall be deemed to be held and to have
been collected or received by the Corporation as the agent of the Trustee, and if received by
the Corporation at any time shall be deposited by the Corporation with the Trustee within one
Business Day after the receipt thereof, and all such Lease Payments, Prepayments, and such
other amounts shall be forthwith deposited by the Trustee upon the receipt thereof in the
Lease Payment Fund or Prepayment Fund.
(b) Security Interest in Moneys and Funds. The Corporation and the City, as their
interest may appear, hereby grant to the Trustee for the benefit of the Owners a first priority
lien on and a security interest in all moneys in the funds held by the Trustee under this Trust
Agreement (excepting only the Rebate Fund and any moneys to be deposited into such Rebate
Fund), including, without limitation, the Lease Payment Fund, the Prepayment Fund, and the
Net Proceeds Fund, and all such moneys shall be held by the Trustee in trust and applied to
the respective purposes specified herein and in the Lease.
(c) Pledge of Lease Payments. The Lease Payments are hereby irrevocably pledged
to and shall be used for the punctual payment of the interest and principal represented by the
Certificates and the Lease Payments shall not be used for any other purpose while any of the
Certificates remain Outstanding. This pledge shall constitute a first and exclusive lien on the
Lease Payments in accordance with the terms hereof, subject only to the provisions contained
in Section 9.06 hereof.
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SECTION 5.02 Establishment of Lease Payment Fund. The Trustee shall establish a
special fund designated in the name of the Certificates and as the "Lease Payment Fund." All
moneys at any time deposited by the Trustee in the Lease Payment Fund shall be held by the
Trustee in trust for the benefit of the Owners of the Certificates. So long as any Certificates
are Outstanding, neither the City nor the Corporation shall have any beneficial right or interest
in the Lease Payment Fund or the moneys deposited therein, except only as provided in this
Agreement, and such moneys shall be used and applied by the Trustee as hereinafter set
forth.
SECTION 5.03 Deposits. There shall be deposited in the Lease Payment Fund all Lease
Payments received by the Trustee an for deposit therein pursuant to Section 4.3 of the Lease
(regarding Lease Payments), Section 3.03 hereof (regarding unexpended Certificate proceeds),
and any other moneys required to be deposited therein pursuant to the Lease or pursuant to
this Agreement, including pursuant to Section 5.4(c) of the Lease (regarding proceeds of
rental interruption insurance). No later than five Business Days prior to each Lease Payment
Date, the Trustee shall notify the City as to what amounts are on deposit in the Lease
Payment Fund to be credited towards the Lease Payment due on such Lease Payment Date
as provided in Section 4.3(b) and Article X of the Lease; provided, however, that any failure
of the Trustee to send such notice shall not relieve the City of its obligation to make Lease
Payments.
SECTION 5.04 Application of Moneys. Except as provided in Section 5.05, all
amounts in the Lease Payment Fund shall be used and withdrawn by the Trustee solely for
the purpose of paying the principal and interest with respect to the Certificates, as the same
shall become due and payable, in accordance with the provisions hereof.
On each Certificate Payment Date, the Trustee shall mail by first class mail, postage
prepaid, to the Owners an amount sufficient to pay the interest evidenced by the Certificates
becoming due and payable on such date and retain any other amounts to pay the principal
and interest evidenced by the Certificates next becoming payable.
SECTION 5.05 Interest before Completion; Surplus. All interest earnings on the Lease
Payment Fund prior to the completion date shall be transferred to City for deposit to the
Acquisition and Construction Fund. Any funds remaining in the Lease Payment Fund on any
Certificate Payment Date after payment of all principal and interest and premiums, if any, due
and payable on the Certificates on such date, including accrued interest and payment of any
applicable fees to the Trustee, or provision made therefor satisfactory to the Trustee, and
provision for any amounts required to be transferred to the Rebate Fund pursuant to Sections
8.07 and 8.08 hereof, shall be withdrawn by the Trustee and remitted to the City after
payment of any amounts due the Trustee pursuant to Sections 9.06 and 9.07 hereof.
ARTICLE VI
RESERVE FUND
SECTION 6.01 Reserve Fund. The Trustee shall establish a special fund designated
in the mane of the Certificates and as the "Reserve Fund". All moneys at any time on deposit
in the Reserve Fund shall be held by the Trustee in trust for the benefit of the City and for the
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benefit of the Owners, as a reserve for the payment when due of all the Lease Payments and
Prepayments to be paid pursuant to the Lease and of all payments on the Certificates and
applied solely as provided herein.
SECTION 6.02 Deposits to the Reserve Fund.
(a) From Delinquent Lease Payments. The City hereby agrees that if at any time the
balance in the Reserve Fund shall be reduced below the Reserve Requirement, the first
payments of Lease Payments thereafter payable by the City and not needed to pay interest
and principal components of Lease Payments payable to the Certificate Owners on the next
Certificate Payment Date shall be used to increase the balance in the Reserve Fund to the
required Reserve Requirement.
(b) Reserve Replenishment Rent. Any Reserve Replenishment Rent payable pursuant
to the replenishment terms of the Lease shall be deposited in the Reserve Fund.
SECTION 6.03 Transfers of Excess.
The Trustee shall, on or before May 1 and November 1 of each year, provide written
notice to the City of any moneys held in the Reserve Fund which are in excess of the Reserve
Requirement and the Trustee shall transfer such excess moneys to the Lease Payment Fund
to be applied to the next Lease Payment due from the City.
SECTION 6.04 Application of Reserve Fund in Event of Deficiency in Lease Payment
Fund. Whether or not Lease Payments are then in abatement, if three days immediately
preceding any Certificate Payment Date the moneys available in the Lease Payment Fund do
not equal the amount of the principal and interest with respect to the Certificates then coming
due and payable, the Trustee shall apply the moneys available in the Reserve Fund (including
any investments purchased with such moneys, which investments shall be liquidated and the
proceeds thereof applied as required hereunder) to make delinquent Lease Payments on behalf
of the City by transferring the amount necessary for this purpose to the Lease Payment Fund.
The Trustee shall notify the City of the amount withdrawn from the Reserve Fund. The City
shall either pay Reserve Replenishment Rent if the requirements of Section 4.3 (d) of the
Lease can be met or certify to the Trustee its inability to do so.
SECTION 6.05 Transfer to Make All Lease Payments. If on any Certificate Payment
Date the moneys on deposit in the Reserve Fund and the Lease Payment Fund (excluding
amounts required for payment of past due principal or interest with respect to Certificates not
presented for payment) are sufficient to pay all Outstanding Certificates, including all principal,
interest and prepayment premiums (if any), the Trustee shall, upon the written direction or oral
direction confirmed in writing of the City Representative, transfer all amounts then on hand
in the Reserve Fund to the Lease Payment Fund to be applied to the payment of the Lease
Payments or Prepayments on behalf of the City, and such moneys shall be distributed to the
Owners of Certificates in accordance with Articles II and IV of this Trust Agreement. Any
amounts remaining in the Reserve Fund upon payment in full of all Outstanding Certificates,
or upon provision for such payments as provided in Section 14.01 hereof, shall be withdrawn
by the Trustee and paid to the City after payment of any amounts due the Trustee pursuant
to Sections 9.06 and 9.07 hereof.
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ARTICLE VII
NET PROCEEDS FUND
SECTION 7.01 Establishment of Net Proceeds Fund; Deaosits. The Trustee hereby
establishes a special fund designated in the mane of the Certificates and as the "Net Proceeds
Fund" to be maintained and held in trust for the benefit of the Owners, subject to
disbursement therefrom as provided herein. The Trustee shall deposit Net Proceeds in the Net
Proceeds Fund as provided in Section 6.1(a) of the Lease.
SECTION 7.02 Disbursements. The Trustee shall disburse Net Proceeds for
replacement or repair as provided in Section 6.1(b) of the Lease only if it has received the
certification and moneys, if any, required by Section 6.1(b)(1)(i) of the Lease (and the Trustee
shall be absolutely protected in making any disbursements from the Net Proceeds Fund in
reliance upon the requisition described in Section 6.1(b)(2) of the Lease), or transfer such
proceeds to the Prepayment Fund upon notification of the City Representative as provided in
section 6.1(c) of the Lease. After all of the Certificates have been retired and the entire
amount of principal and interest with respect to the Certificates has been paid in full, or
provision made for payment satisfactory to the Trustee, including provision for all amounts
required to be transferred to the Rebate Fund pursuant to Sections 8.07 and 8.08 hereof, the
Trustee shall pay any remaining moneys in the Net Proceeds Fund to the City after payment
of any amounts due to the Trustee pursuant to Sections 9.06 and 9.07 hereof.
SECTION 7.03 Cooperation. The Corporation and the Trustee 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 Article V of the Lease and in the prosecution or
defense of any prospective or pending condemnation proceeding with respect to the Project
or any item or portion thereof; provided, however, the Trustee shall not be required to conduct
such action.
ARTICLE VIII
MONEYS IN FUNDS; INVESTMENT
SECTION 8.01 Held in Trust. The moneys and investments held by the Treasurer and
the Trustee under this Agreement are irrevocably held in trust for the benefit of the Owners
of the Certificates, and, in the case of the Rebate Fund, for payment as required to the United
States Treasury and for the purposes herein specified, and such moneys, and any income or
interest earned thereon, shall be expended only as provided in this Agreement and shall not
be subject to levy or attachment or lien by or for the benefit of any creditor of the
Corporation, the Trustee or the City, or any of them.
SECTION 8.02 Investments Authorized.
(a) Upon Direction of City. The City Representative shall by written order filed with
the Trustee at least two days prior to making an investment direct such investment in specific
Permitted Investments identified in such written order. In the absence of such written order,
the Trustee shall make investments solely in those Permitted Investments set forth in (D) of
the definition thereof.
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(b) Registration. Such investments, if registrable, shall be registered in the name
of the Trustee for the benefit of the Owners and held by the Trustee.
(c) Trustee as Purchaser or Agent. The Trustee may purchase or sell to itself or any
affiliate, as principal or agent, investments authorized by this Section. The Trustee may act
as purchaser or agent in the making or disposing of any investment.
(d) Trustee Standard of Care. Except as otherwise provided in Section 9.05. the
Trustee shall not be responsible or liable for any loss suffered in connection with any
investment of funds made by it in accordance with this Section.
SECTION 8.03 Disposition of Investments. Any income, profit or loss on the
investment of moneys held by the Trustee or the Treasurer hereunder shall be credited to the
respective fund (or account within a fund, if applicable) for which it is held, except as
otherwise provided herein.
SECTION 8.04 Accounting. The Trustee shall furnish to the City, not less than
monthly, an accounting of all investments made by the Trustee and all amounts held by the
Trustee. The Trustee shall keep accurate records of all funds administered by it and of all
Certificates paid and discharged.
SECTION 8.05 Valuation and Disposition of Investments.
(a) Valuation. Subject to the provisions of Sections 8.07 and 8.08 hereof for the
purpose of determining the amount in any fund, all Permitted Investments credited to such
fund shall be valued at market price, exclusive of accrued interest. With respect to all funds,
valuation shall occur annually on or before May 1, except in the event of a withdrawal from
the Reserve Fund, whereupon it shall be valued immediately after such withdrawal pursuant
to being replenished as provided in Section 4.3(d) of the Lease.
(b) Disposition. Subject to the provisions of Sections 8.07 and 8.08 hereof and the
Tax Certificate, the Trustee shall sell or present for prepayment, any Permitted Investment so
purchased by the Trustee whenever it shall be necessary in order to provide moneys to meet
any required payment, transfer, withdrawal or disbursement from the fund to which such
Permitted Investment is credited.
SECTION 8.06 Commingling of Moneys in Funds. The Trustee may at its sole
discretion commingle any of the funds held by it pursuant to this Agreement into a separate
fund or funds for investment purposes only; provided, however, that all funds or accounts
held by the Trustee hereunder shall be accounted for separately notwithstanding such
commingling by the Trustee.
SECTION 8.07 Arbitrage Covenant. The Corporation and the City hereby covenant
with the Owners of the Certificates that, notwithstanding any other provision of this
Agreement, they will make no use of the proceeds of the Certificates that would cause the
Certificates to be "arbitrage bonds" under Section 148 of the Code, the interest on which is
not excludable from gross income for federal income tax purposes under Section 103 of the
Code.
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SECTION 8.08 Rebate Fund.
(a) The Trustee shall establish a special fund designated in the name of the
Certificates and as the "Rebate Fund" (the "Rebate Fund"). Within 55 days of the end of each
fifth Certificate Year, or as sooner determined by the City, (i) the City shall calculate or cause
to be calculated the amount that would be considered "rebatable arbitrage" in accordance
with Section 148(f) of the Code, including Section 148(f)(4)(B) of the Code, and Section
1.148-2T(a) of the Proposed and Temporary Regulations issued under Section 148(f) of the
Code (the "Rebate Regulations"), using as the "computation date" for this purpose the end
of such Certificate Year, and (ii) upon the City's written direction, an amount shall be
deposited to the Rebate Fund by the Trustee from deposits from the City, if and to the extent
required, so that the balance in the Rebate Fund shall equal the amount of "rebatable
arbitrage" so calculated. All money at any time deposited in the Rebate Fund shall be held by
the Trustee in trust, to the extent required to satisfy the Rebate Requirement, for payment to
the United States Treasury. All amounts on deposit in the Rebate Fund shall be governed by
this Section 8.08 and Section 8.07 of this Trust Agreement and by the Tax Certificate. The
Trustee shall be deemed conclusively to have complied with such provisions if it follows the
directions of the City, and shall have no liability or responsibility to enforce compliance by the
City with the terms of the Tax Certificate.
(b) Any funds remaining in the Rebate Fund after redemption and payment of all
the Certificates and any amounts described in paragraph (2) of subsection (c), or provision
made therefor satisfactory to the Trustee, including accrued interest and payment of any
applicable fees or other amounts due to the Trustee, shall be withdrawn by the Trustee and
remitted to the City.
(c) Upon the City's written direction, which directions shall be specific as to
payment amounts, the Trustee shall pay to the United States Treasury, out of amounts in the
Rebate Fund:
(1) not later than 60 days after the end of (i) the fifth Certificate Year, and
(ii) each fifth Certificate Year thereafter, an amount equal to at least
90% of the "rebatable arbitrage" calculated as of the end of such
Certificate Year in accordance with Section 148(f) of the Code,
including Section 148(f)(4)(B) of the Code, and Section 1.148-2T of the
Rebate Regulations; and
(2) not later than 60 days after the payment of all Certificates, an amount
equal to 100% of the "rebatable arbitrage" calculated as of the end of
such Certificate Year, and any income attributable to the "rebatable
arbitrage," both determined in accordance with Section 148(f) of the
Code, including Section 148(f)(4)(B) of the Code, and Section 1.148-2T
of the Rebate Regulations.
(d) In the event that, prior to the time of any payment required to be made from
the Rebate Fund, the amount in the Rebate Fund is not sufficient to make such payment when
such payment is due, the City shall calculate the amount of such deficiency and direct the
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Trustee to deposit an amount received from the City equal to such deficiency into the Rebate
Fund prior to the time such payment is due.
(e) Each payment required to be made pursuant to subsection (c) 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, which shall be prepared by the City and provided to the Trustee.
(f) In the event that immediately following the calculations required by the Tax
Certificate and the transfer of accounts required by subsection (a) above, the amount then on
deposit to the credit of the Rebate Fund exceeds the amount required to be on deposit therein
to make the payments required under subsection (c) above, upon written instructions from the
City, the Trustee shall withdraw the excess from the Rebate Fund and credit the excess to
the Lease Payment Fund.
(g) The Trustee shall invest all amounts held in the Rebate Fund in Permitted
Investments as directed in writing 2 days prior to the investment date by the City. In the
absence of such direction, the Trustee shall invest such amounts in Permitted Investments
specified in D of the definition thereof. Monies, including investment earnings, shall not be
transferred from the Rebate Fund until all rebate requirements have been satisfied and certified
by the City to the Trustee.
SECTION 8.09 Information Concerning Investments. The Trustee shall supply
information regarding investments made under this Article VIII at the request of the City, in
writing, including (i) purchase date; (ii) purchase price; (iii) information , if available to the
Trustee, reasonably establishing that the purchase price is the fair market value as of such
date (e.g., the published quoted bid by a dealer in such an investment on the date of
purchase); (iv) any accrued interest paid; (v) face amount; (vi) coupon rate; (vii) periodicity of
its interest payments; (viii) disposition price; (ix) any accrued interest received; and (x)
disposition date.
SECTION 8.10 Notice Concerning Investments. The Trustee shall provide notice to the
City of any investments made under this Article Vlll in monthly financial statements.
ARTICLE IX
THE TRUSTEE
SECTION 9.01 Apaointment of Trustee.
(a) Armointment. Bank of America National Trust and Savings Association, is
hereby appointed Trustee by the Corporation and the City.
(b) Qualifications. The Corporation and the City agree that they will maintain a
Trustee having a principal administrative office in Los Angeles or San Francisco, California.
Any successor Trustee appointed pursuant to the provisions of this section shall be a trust
company or bank duly authorized to exercise trust powers and subject to examination by
federal or state authority, and have a reported capital and surplus of not less than
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$25,000,000. If such bank or trust company publishes a report of condition at least annually
pursuant to law or to the requirements of any supervising or examining authority above
referred to then for the purpose of this Section the combined capital and surplus of such bank
or trust company shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published.
(c) Removal. So long as there is no Event of Default or occurrence that with the
passage of time will become an Event of Default, the City may upon 30 days written notice
remove the Trustee initially appointed, and any successor thereto, and may appoint a
successor or successors thereto.
(d) Resignation. The Trustee may resign by giving written notice to the City and the
Corporation provided that such resignation shall not take effect until the successor Trustee
is appointed as provided in this Section. Upon receiving such notice of resignation, the City
shall promptly appoint a successor Trustee. In the event the City does not name a successor
Trustee within 30 days of receipt of notice of the Trustee's resignation, then the Trustee may
petition a court of suitable jurisdiction to seek the immediate appointment of a successor
Trustee.
(e) Successor. Any successor Trustee shall be a bank or trust company meeting
the qualifications as set forth in Subsection (b) above. Any resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective upon acceptance of
appointment by the successor Trustee. Upon such acceptance, the successor Trustee shall
mail notice thereof to the Certificate Owners at their respective addresses set forth on the
Certificate registration books maintained pursuant to Section 2.11.
SECTION 9.02 Merger or Consolidation. Any company or national banking association
into which the Trustee may be merged or converted or with which it may be consolidated or
any company resulting from any merger, conversion or consolidation to which it shall be a
party or any company to which the Trustee may sell or transfer all or substantially all of its
corporate trust business, provided that such company shall be eligible under Section 9.01,
shall be the successor to the Trustee without the execution or filing of any paper or further
act, anything herein to the contrary notwithstanding. Notice of such merger or consolidation
shall be given to the City and the Corporation.
SECTION 9.03 Protection of the Trustee.
(a) Reliance Upon Papers or Documents. The Trustee shall be protected and shall
incur no liability in acting or proceeding in good faith upon any resolution, notice, telegram,
request, consent, waiver, certificate, statement, affidavit, voucher, bond, requisition or other
paper or document which it shall in good faith believe to be genuine and to have been passed
or signed by the proper board or person or to have been prepared and furnished pursuant to
any of the provisions of this Agreement, and the Trustee shall be under no duty to make any
investigation or inquiry as to any statements contained or matters referred to in any such
instrument, but may, in the absence of bad faith on its part, accept and rely upon the same
as conclusive evidence of the truth and accuracy of such statements.
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(b) Reliance Upon Opinions of Counsel. The Trustee may consult with counsel, who
may be counsel to the City, with regard to legal questions and the opinion of such counsel
shall be full and complete authorization and protection in respect of any action taken or
suffered by it hereunder in good faith in accordance therewith. Before being required to take
any action, the Trustee may require an opinion of Independent or Special Counsel acceptable
to the Trustee which opinion shall be made available to the other parties hereto upon request,
which counsel may be counsel to any of the parties hereto, or a verified certificate of any
party hereto, or both, concerning the proposed action. If it does so in good faith, Trustee shall
be absolutely protected in relying thereon.
(c) Reliance Upon Reauested Certificates. Whenever in the administration of its
duties under this Agreement, 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 herein specifically prescribed), in the absence of bad faith
on its part, shall be deemed to be conclusively proved and established by the certificate of the
City Representative or the Corporation Representative and such certificate shall be full
warranty to the Trustee, in the absence of bad faith on its part, for any action taken or
suffered under the provisions of this Agreement, but in its discretion the Trustee may, in lieu
thereof, accept other evidence of such matter or may require such additional evidence as to
it may seem reasonable.
(d) Additional Protection. No provision in this Trust Agreement shall require the
Trustee to risk or expend its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder.
The Trustee shall not be accountable for the use or application by the City or the
Corporation or any other party of any funds which the Trustee has released in accordance
with the terms of this Trust Agreement.
The Trustee makes no representation or warranty, express or implied, as to the title,
value, design, compliance with specifications or legal requirements, quality, durability,
operation, condition, merchantability or fitness for any particular purpose or fitness for the use
contemplated by the City or the Corporation of the Site. In no event shall the Trustee be liable
for incidental, indirect, special or consequential damages in connection with or arising from
the Lease or this Trust Agreement for the existence, furnishing or use of the Project or the
Site.
Before taking any action under Article XIII hereof or this Section at the request or
declaration of the Owners, the Trustee may require indemnity satisfactory to the Trustee be
furnished by the Owners for the reimbursement of all expenses to which it may reasonably
incur and to protect the Trustee against all liability except liability which is adjudicated to have
resulted from the Trustee's negligence or willful misconduct in connection with any action.
SECTION 9.04 Rights of the Trustee.
(a) Ownership of Certificates. The Trustee may become the Owner of the
Certificates with the same rights it would have if it were not Trustee; may acquire and dispose
of other bonds or evidence of indebtedness of the City with the same rights it would have if
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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 of Certificates, whether or not such committee shall
represent the Owners of the majority in principal amount of the Certificates then Outstanding.
(b) Attorneys, Agents, Receivers. The Trustee may execute any of the trusts or
powers hereof and perform the duties required of it hereunder by or through attorneys,
agents, custodians, or receivers, and shall be entitled to advice of counsel concerning all
matters of trust and its duty hereunder and the Trustee shall not be answerable for the default
or misconduct of any such attorney, agent or receiver selected by it with reasonable care.
Except as otherwise expressly provided herein, the Trustee shall not be bound to ascertain or
inquire as to the performance or observance of any of the terms, conditions, covenants or
arrangements herein or of any of the documents executed in connection with the Certificates,
or as to the exercise of an Event of Default thereunder.
SECTION 9.05 Standard of Care. So long as there is no Event of Default, the Trustee
shall not be liable in connection with the performance of its duties hereunder or under the
Assignment Agreement, except for its own negligence or willful misconduct. In the Event of
Default, the Trustee shall exercise such care in performing its duties hereunder as a prudent
person would exercise in the conduct of his affairs. The Trustee shall make investments as
provided in Section 8.02. The Trustee undertakes to perform such duties, and only such
duties, as are specifically set forth in this Trust Agreement and no implied duties or obligations
shall be read into this Agreement against the Trustee.
SECTION 9.06 Compensation of the Trustee. As Additional Payment under Section
4.9 of the Lease, the City shall pay to the Trustee compensation for its services as shall be
agreed upon by the Trustee and the City in connection with the Trustee's entry into this Trust
Agreement and shall reimburse the Trustee for all its reasonable expenses, advances and
disbursements, including but not limited to advances to and fees and expenses of independent
appraisers, accountants, consultants, counsel, agents, custodians and attorneys -at -law or
other experts employed by it in the exercise and performance of its powers and duties
hereunder and the Trustee shall have a lien therefor on any and all funds at any time held by
it under this Agreement, which lien shall be prior and superior to the lien of the Certificate
Owners. The City's obligations hereunder shall remain valid and binding notwithstanding
maturity and payment of the Certificates and the termination of this Agreement. The
compensation of the Trustee hereunder shall not be limited by any provision of law in regard
to the compensation of a trustee of an express trust.
SECTION 9.07 Indemnification of the Trustee. The City shall, to the extent permitted
by law, indemnify and hold the Trustee, its directors, officers, agents, employees, successors
and assigns harmless from and against all claims, losses, costs, expenses, liability 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 by the City, (ii) any breach
or default on the part of the City in the performance of any of its obligations under this
Agreement, the Lease and any other agreement made and entered into for purposes of the
Project, (iii) any act of negligence of the City or of any of its agents, contractors, servants,
employees or licensees with respect to the Project, (iv) any act of negligence of any assignee
of, or purchaser from, the City or of any of its or their agents, contractors, servants,
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employees or licensees with respect to the Project, (v) the construction or acquisition of the
Site or Project or Project Costs, (vi) the actions of any other party, including but not limited
to the ownership, operation or use of the Site by the City, (vii) the Trustee's exercise and
performance of its powers and duties hereunder or (viii) any untrue statement or alleged
untrue statement of any material fact or omission or alleged omission to state a material fact
necessary to make the statements made, in light of the circumstances under which they were
made, not misleading in any official statement or other offering circular utilized in connection
with the sale of the Certificates, including the costs and expenses of defending itself against
any claim of liability arising under this Trust Agreement. No indemnification will be made
under this Section or elsewhere in this Agreement for willful misconduct or negligence under
this Agreement by the Trustee, its officers, agents, employees, successors or assigns. The
City's obligations hereunder shall remain valid and binding notwithstanding maturity and
payment of the Certificates or resignation or removal of the Trustee or the termination of this
Trust Agreement.
ARTICLE X
MODIFICATION OR AMENDMENT OF AGREEMENT
SECTION 10.01 Amendments Permitted.
(a) With Consent. This Agreement and the rights and obligations of the Owners,
and the Lease and the rights and obligations of the parties thereto, may be modified or
amended at any time by a supplemental agreement which shall become effective when the
written consents of the Owners of a majority in aggregate principal amount of the Certificates
then Outstanding, exclusive of Certificates disqualified as provided in section 10.03 hereof,
shall have been filed with the Trustee. No such modification or amendment shall:
(1) extend or have the effect of extending the fixed maturity of any
Certificate or reducing the interest rate with respect thereto or extending
the time of payment of interest, or reducing the amount of principal
thereof or reducing any premium payable upon the prepayment thereof
without the express consent of the Owner of such Certificate, or
(2) reduce or have the effect of reducing the percentage of Certificates
required for the affirmative vote or written consent to an amendment or
modification of the Lease, or
(3) modify any of the rights or obligations of the Trustee without its written
assent thereto.
Copies of any such amendments or modifications to any of the foregoing documents shall be
sent by the City to S&P.
Any such supplemental agreement shall become effective as provided in section 10.02
hereof.
(b) Without Consent. This Agreement and the rights and obligations of the Owners,
and the Lease and the Site Lease and the rights and certificates of the parties thereto, may
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be modified or amended at any time by a supplemental agreement, without the consent of any
such Owners, but only to the extent permitted by law and only:
(1) to add to the agreements and covenants required herein and therein to
be performed by the City or Corporation other agreements and
covenants thereafter to be performed by the City or Corporation or to
surrender any right or power reserved to the City; or
(2) to cure, correct or supplement any ambiguous or defective provision
contained herein or therein which shall not materially adversely affect
the interests of the Owners; or
(3) in regard to matters arising hereunder or thereunder, as the parties
hereto or thereto may deem necessary or desirable and which, in the
opinion of the Trustee (which may be based upon opinions as provided
in Section 9.03(b), shall not adversely affect the interests of the
Owners.
Any such supplemental agreement shall become effective upon execution and delivery by the
parties hereto or thereto as the case may be.
SECTION 10.02 Procedure for Amendment with Written Consent of the Owners. This
Agreement or the Lease may be amended by supplemental agreement as provided in this
Section 10.02 in the event the consent of the Owners is required pursuant to Section
10.01(a) hereof. A copy of such supplemental agreement, together with a request to the
Owners for their consent thereto, shall be mailed by the Trustee by first class mail, postage
prepaid, to each Owner of a Certificate at his address as set forth in the Certificate
registration books maintained pursuant to Section 2.11 hereof, but failure to receive copies
of such supplemental agreement and request so mailed shall not affect the validity of the
supplemental agreement when assented to as in this Section provided.
Such supplemental agreement shall not become effective unless there shall be filed
with the Trustee the written consent of the Owners of at least a majority in aggregate
principal amount of the Certificates then Outstanding (exclusive of Certificates disqualified as
provided in Section 10.03 hereof) and notices shall have been mailed as hereinafter provided
in this Section. Each such consent shall be effective only if accompanied by proof of
ownership of the Certificates for which such consent is given, which proof shall be such as
is permitted by Section 2.11 hereof. Any such consent shall be binding upon the Owner of
the Certificate giving such consent and on any subsequent Owner (whether or not such
subsequent Owner has notice thereof) unless such consent is revoked in writing by the Owner
giving such consent or a subsequent Owner by filing such revocation with the Trustee prior
to the date when the notice hereinafter in this Section provided for has been mailed.
After the Owners of the required percentage of Certificates shall have filed their
consents to such supplemental agreement, the Trustee shall mail a notice to the Owners of
the Certificates in the manner hereinbefore provided in this Section for the mailing of such
supplemental agreement, stating in substance that such supplemental agreement has been
consented to by the Owners of the required percentage of Certificates and will be effective
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as provided in this Section (but failure to mail copies of said notice shall not affect the validity
of such supplemental agreement or consents thereto). A record, consisting of the papers
required by this Section to be filed with the Trustee, shall be proof of the matters therein
stated until the contrary is proved.
SECTION 10.03 Disqualified Certificates. Certificates owned or held by or for the
account of the City or the Corporation or by any person directly or indirectly controlled or
controlled by, or under direct or indirect common control with the City or the Corporation
(except any Certificates held in any pension or retirement fund) shall not be deemed
Outstanding for the purpose of any vote, consent, waiver or other action provided for in this
Agreement, and shall not be entitled to vote upon, consent to, or take any other action
provided for in this Agreement.
The City or Trustee may adopt appropriate regulations to require each Owner, before
his consent provided for in this Article X shall be deemed effective, to reveal if the Certificates
as to which such consent is given are disqualified as provided in Section 10.03 hereof.
SECTION 10.04 Effect of Supplemental Agreement. From and after the time any
supplemental agreement becomes effective pursuant to this Article X, this Agreement, the
Site Lease or the Lease, as the case may be, shall be deemed to be modified and amended in
accordance therewith, the respective rights, duties and obligations of the parties hereto or
thereto and all Owners of Certificates Outstanding, as the case may be, shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such modification and
amendment, and all the terms and conditions of any supplemental agreement shall be deemed
to be part of the terms and conditions of this Agreement, the Site Lease or the Lease, as the
case may be, for any and all purposes.
SECTION 10.05 Endorsement or Replacement of Certificates Delivered After
Amendments. The Trustee may determine that Certificates delivered after the effective date
of any action taken as provided in this Article X shall bear a notation, by endorsement, in form
approved by the Trustee, as to such action. In that case, upon demand of the Owner of any
Outstanding Certificate at such effective date and presentation of his Certificate for the
purpose at the Principal Office, a suitable notation shall be made on such Certificate at the
cost of the City. The City may determine that new Certificates, so modified as in the opinion
of the City is necessary to conform to such Owners' action, shall be prepared, executed and
delivered. In that case, upon demand of the Owner of any Certificate then Outstanding, such
new Certificate shall be exchanged in the Principal Office without cost to such Owner, for a
certificate of the same character then Outstanding, upon surrender of such Certificate.
SECTION 10.06 Amendatory Endorsement of Certificates. Subject to Section 10.01
hereof, the provisions of this Article X shall not prevent any Certificate Owner from accepting
any amendment as to the particular Certificates held by him, provided that due notification
thereof is made on such Certificates.
SECTION 10.07 Trustee's Reliance on Opinion of Special Counsel. The Trustee may
obtain an opinion of Special Counsel that any such supplemental agreement complies with the
provisions of this Article X and the Trustee may rely conclusively upon such opinion.
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SECTION 10.08 Site Replacement. If the Site is replaced pursuant to Section 7.7(c)
of the Lease, a substitute lease incorporating the substantive provisions of Exhibit C to the
Lease shall be recorded by the City.
ARTICLE XI
COVENANTS; NOTICES
SECTION 11.01 _Compliance With and Enforcement of the Lease. The City covenants
and agrees with the Owners to perform all obligations and duties imposed on it under the
Lease. The City will not do or permit anything to be done, or omit or refrain from doing
anything, in any case where any such act done or permitted to be done, or any such omission
of or refraining from action, would or might be a ground for cancellation or termination of the
Lease by the Corporation. The Corporation and the City, immediately upon receiving or giving
any notice, communication or other document in any way relating to or affecting their
respective estates, or the leasehold interests therein, which may or can in any manner affect
such estate of the City, will deliver the same, or a copy thereof, to the Trustee.
SECTION 11.02 Payment of Taxes. The City shall pay all taxes relating to the Site or
the Certificates as provided in Section 7.6(b) of the Lease.
SECTION 11.03 Observance of Laws and Regulations. The City will well and truly
keep, observe and perform all valid and lawful obligations or regulations now or hereafter
imposed on it by contract, or prescribed by any law of the United States, or of the State, or
by any officer, board or commission having jurisdiction or control, as a condition of the
continued enjoyment of any and every right, privilege or franchise now owned or hereafter
acquired by the City, including its right to exist and carry on business as a municipal
corporation, to the end that such rights, privileges and franchises shall be maintained and
preserved, and shall not become abandoned, forfeited or in any manner impaired.
SECTION 11.04 Prosecution and Defense of Suits. The City shall promptly, and also
upon request of the Trustee or any Owner, from time to time take such action as may be
necessary or proper to remedy or cure any defect in or cloud upon the title to the Site,
whether now existing or hereafter developing and shall prosecute all such suits, actions and
other proceedings as may be appropriate for such purpose and shall, to the extent permitted
by law, indemnify and save the Trustee and every Owner harmless from all loss, cost, damage
and expense, including attorneys' fees, which they or any of them may incur by reason of any
such defect, cloud, suit, action or proceeding.
SECTION 11.05 City Budgets. In accordance with Section 2.1(g) of the Lease, the
City will provide the Trustee with an annual certification by October 1 of each year that it has
complied with the obligations of the City required thereunder, and the City Representative
shall certify to the Trustee that the City has included all Lease Payments (other than Lease
Payments of advance rental) due under the Lease in the Fiscal Year covered by its proposed
annual budget and adopted budget. If the City fails to provide the Trustee with such
certification, the Trustee shall promptly provide the City written notice specifying that the City
has failed to observe and perform its covenant and agreement in such Section 2.1(g) and
requesting that such failure be remedied within 30 days, or such failure shall constitute an
Event of Default under Section 9.1(b) of the Lease. The Trustee shall forward a copy of such
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notice to the Corporation. Upon receipt of such notice, the City shall notify the Trustee of the
proceedings proposed to be taken by the City, and shall keep the Trustee advised of all
proceedings thereafter taken by the City.
SECTION 11.06 Further Assurances. The Corporation and the City 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 Agreement, and for the better assuring and confirming unto the Owners the rights and
benefits provided herein.
SECTION 11.07 Tax Covenants. The City will not make any use of the proceeds of
the Certificates or any other funds of the City or take or omit to take any other action that
would cause such certificates 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 any rental payments are unpaid, the City, with respect to such
proceeds and such other funds, 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 Internal Revenue Code of 1954, as amended, to the extent that such
requirements are, at the time, applicable and in effect.
The City will not use or permit the use of the Project or any portion thereof by any
person other than a governmental unit as such term is used in section 141 of the Code, in
such manner or to such extent as would result in the loss of exclusion from gross income for
federal income tax purposes of the interest portion of any Lease Payments.
SECTION 11.08 Notice of Trustee. The Trustee shall provide the City and the
Corporation with written notice within five days of the Trustee acquiring actual knowledge
of an Event of Default as defined in Section 9.1 of the Lease.
ARTICLE XII
LIMITATION OF LIABILITY
SECTION 12.01 Limited Liability of the City. Except for the payment of Lease
Payments, Additional Payments, and Prepayments when due in accordance with the Lease
and the performance of the other covenants and agreements of the City contained herein and
in the Lease, the City shall have no obligation or liability to any of the other parties or to the
Owners with respect to this Agreement or the terms, execution, delivery or transfer of the
Certificates, or the distribution of Lease Payments to the Owners by the Trustee.
SECTION 12.02 No Liability of the City or Corporation for Trustee Performance.
Except as expressly provided herein, neither the City nor the Corporation shall have any
obligation or liability to any of the other parties or to the Owners with respect to the
performance by the Trustee of any duty imposed upon it under this Agreement.
SECTION 12.03 Limited Liability of Trustee.
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(a) No Investment Advice. The Trustee shall have no obligations or responsibility
for providing information to the Owners concerning the investment character of the
Certificates.
(b) Sufficiency of this Agreement or Lease Payments. The Trustee makes no
representations as to the validity or sufficiency of the Certificates, shall incur no responsibility
in respect thereof, other than in connection with the duties or obligations herein or in the
Certificates assigned to or imposed upon it. The Trustee shall not be responsible for the
sufficiency of the Lease. The Trustee shall not be liable for the sufficiency or collection of any
Lease Payments or other moneys required to be paid to it under the Lease (except as provided
in this Agreement), its right to receive moneys pursuant to said Lease, or the value of or title
to the premises upon which the Project is located.
(c) Actions of Corporation and City. The Trustee shall have no obligation or liability
to any of the other parties or the Owners with respect to this Agreement or the failure or
refusal of any other party to perform any covenant or agreement made by any of them under
this Agreement or the Lease, but shall be responsible solely for the performance of the duties
and obligations expressly imposed upon it hereunder as provided in Section 9.05.
(d) Recitals and Agreements of Corporation and City. The recitals of facts,
covenants and agreements herein and in the Certificates contained shall be taken as
statements, covenants and agreements of the City or the Corporation (as the case may be),
and the Trustee assumes no responsibility for the correctness of the same.
(e) The Trustee shall have no responsibility or liability with respect to any
information, statement or recital in any disclosure material prepared or distributed with respect
to the sale of the Certificates.
SECTION 12.04 Limitation of Riahts of Parties and Certificate Owners. Nothing in this
Agreement or in the Certificates expressed or implied is intended or shall be construed to give
any person other than the City, the Corporation, the Trustee and the Owners, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any covenant,
condition or provision hereof; and all such covenants, conditions and provisions are and shall
be for the sole and exclusive benefit of the City, the Corporation, the Trustee and the Owners.
ARTICLE XIII
EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE OWNERS
SECTION 13.01 Assignment of Rights. The parties hereto acknowledge that pursuant
to the Assignment Agreement the Corporation has transferred, assigned and set over to the
Trustee for the benefit of the Owners, certain of the Corporation's rights under the Lease.
SECTION 13.02 Events of Default.
(a) Remedies. If an Event of Default shall happen, then, and in each and every such
case during the continuance of such Event of Default, the Trustee may exercise any and all
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remedies available pursuant to law or granted pursuant to the Lease; provided, however, that
notwithstanding anything herein or in the Lease to the contrary, THERE SHALL BE NO RIGHT
UNDER ANY CIRCUMSTANCES TO ACCELERATE THE MATURITIES OF THE CERTIFICATES
OR OTHERWISE TO DECLARE ANY LEASE PAYMENTS NOT THEN IN DEFAULT TO BE
IMMEDIATELY DUE AND PAYABLE.
(b) Actual Knowledge. The Trustee shall not be deemed to have knowledge of any
Event of Default hereunder unless and until it shall have actual knowledge thereof, or shall
have received written notice thereof, at its Principal Office.
SECTION 13.03 Ain lication of Funds. All moneys received by the Trustee pursuant
to any right given or action taken under the provisions of this Article XIII or of Article IX of
the Lease, shall be deposited into the Lease Payment Fund and be applied by the Trustee in
the following order upon presentation and surrender of the several Certificates, or the
stamping thereon of the payment if partially paid in amounts not equal to integral multiples
of $5,000 -
First, Costs and Expenses: to the payment of the costs and expenses of the
Trustee and of the Owners, including reasonable compensation to its or their
agents, attorneys and counsel;
Second, Interest: to the payment to the persons entitled thereto of all
installments of interest then due in the order of the maturity of such
installment, and, if the amount available shall not be sufficient to pay in full any
installment or installments maturing on the same date, then to the payment
thereof ratably, according to the amounts due thereon, to the persons entitled
thereto, without any discrimination or preference; and
Third, Principal: to the payment to the persons entitled thereto of the unpaid
principal of any Certificates which shall have become due, whether at maturity
or by call for prepayment, in the order of their due dates, with interest on the
overdue principal and interest at a rate equal to the rate paid with respect to
the Certificates and, if the amount available shall not be sufficient to pay in full
all the amounts due with respect to the Certificates on any date, together with
such interest, then to the payment thereof ratably, according to the amounts
of principal due on such date to the persons entitled thereto, without any
discrimination or preference.
SECTION 13.04 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 a majority in principal amount of the 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 by a suit in equity or action at law, either for the specific
performance of any covenant or agreement contained herein or in the Lease, or in aid of the
execution of any power herein granted, or by mandamus or other appropriate proceeding for
the enforcement of any other legal or equitable remedy as the Trustee shall deem most
effectual in support of any of its rights or duties hereunder.
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SECTION 13.05 Non -waiver. Nothing in this Article XIII or in any other provision of
this Agreement or in the Certificates shall affect or impair the obligations of the City which
is absolute and unconditional, to pay or prepay the Lease Payments as provided in the Lease.
No delay or omission of the Trustee or of any Owner of any of the 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 XIII to the Trustee or to the Owners
may be exercised from time to time and as often as shall be deemed expedient by the Trustee
or the Owners.
SECTION 13.06 Remedies Not Exclusive. No remedy herein conferred upon or
reserved to the Trustee or to the Owners is intended to be exclusive of any other remedy, and
every such remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing, at law or in equity or by statute or otherwise.
SECTION 13.07 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 a majority in principal amount of the Certificates then
Outstanding, it shall have full power, in the exercise of its discretion for the best interest of
the Owners of the Certificates, with respect to the continuance, discontinuance, withdrawal,
compromise, settlement or other disposal of such action; provided, however, that the Trustee
shall not, unless there no longer continues an Event of Default, discontinue, withdraw,
compromise or settle, or otherwise dispose of any litigation pending at law or in equity, if at
the time there has been filed with it a written request signed by the Owners of at least a
majority in principal amount of the Outstanding Certificates hereunder opposing such
discontinuance, withdrawal, compromise, settlement or other disposal of such litigation and
if such Owners continue to indemnify the Trustee to its satisfaction.
SECTION 13.08 Limitation on Certificate Owners' Right to Sue No Owner of any
Certificate executed hereunder shall have the right to institute any suit, action or proceeding
at law or in equity, for any remedy under or upon this Agreement, unless (a) such Owner shall
have previously given to the Trustee written notice of the occurrence of an Event of Default
under the Lease; (b) the Owners of a majority in aggregate principal amount of all the
Certificates then Outstanding shall have made written request upon the Trustee to exercise
the powers hereinbefore granted or to institute such action, suit or proceeding in its own
name; (c) said Owners 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 Owner of any
remedy hereunder; it being understood and intended that no one or more Owners shall have
any right in any manner whatever by his or their action to enforce any right under this
Agreement, except in the manner herein provided and for the equal benefit of all Owners of
the Outstanding Certificates.
-35-
The right of any Owner of any Certificate to receive payment of said Owner's
proportionate interest in the Lease Payments as the same become due, or to institute suit for
the enforcement of such payment, shall not be impaired or affected without the consent of
such Owner, notwithstanding the foregoing provisions of this Section or any other provision
of this Agreement.
SECTION 13.09 Agreement to Pay Attorneys' Fees and Expenses. In the event the City
or Corporation 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 or observance of any obligation or agreement on the part of the defaulting party
contained herein, the City or Corporation agrees that it will on demand therefor pay to the
nondefaulting party the reasonable fees of such attorneys and such other expenses so
incurred by the nondefaulting party.
SECTION 13.10 Term of a Substitute Lease. In the event that the Trustee as assignee
of the Corporation enters into a new lease or leases of the Site or a portion thereof pursuant
to Section 9.2 of the Lease in the event of a default thereunder, or in the event that the Lease
terminates before all Lease Payments have been paid, then such new lease shall have a term
no longer than the remaining term of the Site Lease and no longer than is necessary to recover
all payments on the Certificates payable hereunder and any further expenditure of money
made on the Site under the Site Lease in order to facilitate the execution of such new lease.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01 Defeasance.
(a) Methods. If and when any Outstanding Certificates shall be paid and discharged
in any one or more of the following ways:
(1) Payment: by well and truly paying or causing to be paid the principal of
and interest and prepayment premiums (if any) with respect to such
Certificates, as and when the same become due and payable, and all
Additional Payments have been paid;
(2) Cash: if prior to maturity and having given notice of prepayment by
irrevocably depositing with the Trustee, in trust, at or before maturity,
an amount of cash which (together with cash then on deposit in the
Lease Payment Fund and the Reserve Fund, in the event of payment or
provision for payment of all Outstanding Certificates) is sufficient to pay
such Certificates, including all principal and interest and premium, if any,
and all Additional Payments have been paid; or
(3) Government Obligations: by irrevocably depositing with the Trustee, in
trust, noncallable Government Obligations together with cash, if
required, in such amount as will, together with interest to accrue
thereon (and, in the event of payment or provision for payment of all
-36-
Outstanding Certificates moneys then on deposit in the Lease Payment
Fund together with the interest to accrue thereon), be fully sufficient to
pay and discharge all such Certificates (including all principal and
interest represented thereby and prepayment premiums, if any) at or
before their maturity date, as evidenced by an independent certified
public accountant verification as to the mathematical accuracy of the
calculations delivered to the Trustee, and all Additional Payments;
then, notwithstanding that any Certificates shall not have been surrendered for payment, all
obligations of the Corporation, the Trustee and the City with respect to such Certificates shall
cease and terminate, except only the obligations of the Trustee to pay or cause to be paid,
from Lease Payments paid by or on behalf of the City from funds deposited pursuant to
paragraphs (2) and (3) of this Section, to the Owners of the Certificates not so surrendered
and paid all sums due with respect thereto, and in the event of deposits pursuant to
paragraphs (2) and (3) of this Section, the Certificates shall continue to represent direct and
proportionate interests of the Owners thereof in Lease Payments under the Lease.
(b) Refunding. If payment or provision for payment of Outstanding Certificates
pursuant to subsection (a) is made wholly or partially from funds received from the issuance
of refunding bonds, Trustee shall receive an opinion of Special Counsel as to the effect that
(1) the refunding bonds are being issued in compliance with the laws of the State, (2) the
interest on the refunding bonds is tax exempt, and (3) the Certificates have been legally
defeased.
(c) Surplus Monies. Any funds held by the Trustee, at the time of payment or
provision for payment of all Outstanding Certificates pursuant to one of the procedures
described in paragraphs (1) through (3) of subsection (a), which are not required for the
payment to be made to Owners, shall be transferred to the Rebate Fund pursuant to Section
8.07 and 8.08 hereof, or paid to the Trustee pursuant to Section 9.06 and 9.07 hereof, and
then shall be paid over to the City.
(d) Surviving Provisions. Notwithstanding the satisfaction and discharge hereof,
the Trustee shall retain such rights, powers and privileges hereunder as may be necessary or
convenient for the payment of the principal, interest and prepayment premium, if any, on the
Certificates and for the registration, transfer and exchange of the Certificates.
SECTION 14.02 Non -Presentment of Certificates. In the event any Certificate shall not
be presented for payment when the principal with respect thereof becomes due, either at
maturity, or at the date fixed for prepayment thereof, if moneys sufficient to pay such
Certificate shall have been deposited in the Lease Payment Fund, all liability of the City to the
Owner thereof for payment of such Certificate shall forthwith cease, terminate and be
completely discharged, and thereupon it shall be the duty of the Trustee to hold such moneys,
without liability for interest thereon, for the benefit of the Owner of such Certificate who shall
thereafter be restricted exclusively to such moneys, for any claim of whatever nature on his
or her part under this Trust Agreement or on, or with respect to, said Certificate.
Any moneys so deposited with and held by the Trustee not so applied to the payment
of Certificates within two (2) years after the date on which the same shall have become due
-37-
shall be paid by the Trustee to the City in proportion to the shares in the Lease Payments
represented by the Certificates for payment of which such moneys were held, free from the
trusts created by this Trust Agreement. Thereafter, Owners shall be entitled to look only to
the City for payment, and then only to the extent of the amount so disbursed by the Trustee.
The City shall not be liable for any interest on the sums paid to it pursuant to this Section and
shall not be regarded as a trustee or trustees of such money.
SECTION 14.03 Records. The Trustee shall keep complete and accurate records of
all moneys received and disbursed under this Agreement, which shall be available upon prior
written notice for inspection by the City, the Corporation and any Owner, or the agent of any
of them, at any time during regular business hours.
SECTION 14.04 Execution in Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall constitute but
one and the same agreement.
SECTION 14.05 Headings. The headings or titles of the several Articles and Sections
hereof, and any table of contents appended to copies hereof, shall be solely for convenience
of reference and shall not affect the meaning, construction or effect of this Agreement. All
references herein to "Articles," "Sections" and other subdivisions are to the corresponding
Articles, Sections or subdivisions of this Agreement; and the words "herein," "hereof,"
"hereunder" and other words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or subdivision hereof.
SECTION 14.06 Waiver of Notice. Whenever in this Agreement the giving of notice
by mail or otherwise is required, the giving of such notice may be waived in writing by the
person entitled to receive such notice and in any case the giving or receipt of such notice shall
not be a condition precedent to the validity of any action taken in reliance upon such waiver.
SECTION 14.07 Separability of Invalid Provisions. In case any one or more of the
provisions contained in this Agreement or in the Certificates shall for any reason be held to
be invalid, illegal or unenforceable in any respect, then such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, and this Agreement
shall be construed as if such invalid or illegal or unenforceable provision had never been
contained herein. The parties hereto hereby declare that they would have entered into this
Agreement and each and every other section, paragraph, sentence, clause or phrase hereof
and authorized the delivery of the Certificates pursuant thereto irrespective of the fact that
any one or more sections, paragraphs, sentences, clauses or phrases of this Agreement may
be held illegal, invalid or unenforceable.
SECTION 14.08 Payment on a Business Day. If the date for making any payment or
the last day for the performance of any act or the exercising of any right, as provided in this
Agreement, is not a Business Day, such payment, with no interest accruing for the period
after such nominal date, or performance, may be made or act performed or right exercised on
the next succeeding Business Day with the same force and effect as if done on the nominal
date provided in this Agreement.
-38-
I
IN WITNESS WHEREOF, the parties have executed this Trust Agreement as of the date
and year first above written.
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Trustee���
By
riz,6d Signator
NEWPORT BEACH PUBLIC FACILITIES CORPORATION, as Lessor
1
By. -
C rporation Represent tive
CITY OF NEWPORT BEACH, as Lessee
4 jieL:::�
39
EXHIBIT A
CERTIFICATE OF PARTICIPATION
Series 1992
(Central Library Building Project)
Evidencing A Proportionate Interest
of the Owner Hereof In Lease Payments to be Made by the
CITY OF NEWPORT BEACH
(Orange County, California)
to
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
(A CALIFORNIA NONPROFIT PUBLIC BENEFIT CORPORATION)
Interest Rate Maturity Date Dated Date CUSIP
June 1, 1992
REGISTERED OWNER:
PRINCIPAL AMOUNT:
THIS IS TO CERTIFY THAT the registered owner named above, or registered assigns, as the
Registered Owner of this Certificate of Participation (the "Certificate") is the owner of a
proportionate and undivided interest in the right to receive certain Lease Payments and
Prepayments thereof under and defined in that certain Project Lease, dated as of June 1,
1992 (the "Lease"), by and between NEWPORT BEACH PUBLIC FACILITIES CORPORATION,
a nonprofit corporation duly organized and existing under the laws of the State of California
and the CITY OF NEWPORT BEACH, a municipal corporation duly organized and existing under
and by virtue of the Constitution and the laws of the State of California (the "City"), which
Lease Payments and Prepayments and certain other rights and interests under the Lease have
been assigned to BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as
trustee (the "Trustee"), having a corporate trust office at which it conducts corporate trust
business in Los Angeles, California (said office being herein referred to as the "Principal
Office").
The Registered Owner of this Certificate is entitled to receive, subject to the terms of
the Lease, on the maturity date specified above, the principal amount specified above,
representing a portion of the Lease Payments designated as principal coming due during the
preceding twelve months, and to receive on December 1, 1992, and semiannually thereafter
on June 1 and December 1 of each year (the "Certificate Payment Dates") until payment in
full of said portion of principal, the Registered Owner's portion of the Lease Payments
A-1
designated as interest coming due during the six months immediately preceding each of the
Certificate Payment Dates; provided that interest with respect hereto shall be payable from
the Certificate Payment Date next preceding the date of execution of this Certificate (unless
(i) this Certificate is executed on a Certificate Payment Date in which event it shall be payable
from the date thereof, or (ii) this Certificate is executed after the close of business on the
fifteenth day of the month prior to a Certificate Payment Date (the "Record Date"), and before
such Certificate Payment Date in which event interest shall be payable from such Certificate
Payment Date, or (iii) unless this Certificate is executed prior to the close of business on
November 15, 1992, in which event interest shall be payable from June 1, 1992). The portion
of the Lease Payments designated as interest is computed on the basis of a 360-day year of
twelve 30-day months and is the result of the multiplication of the aforesaid portion of the
Lease Payments designated as principal by the rate per annum identified above. Said amounts
are payable in lawful money of the United States of America. The amount representing
principal payable at maturity or upon prepayment in whole or in part is payable to the
Registered Owner upon presentation and surrender of this Certificate at the Principal Office.
In the event that this Certificate is paid in part only, payment of such partial prepayment of
principal represented by this Certificate will be by check upon presentation and surrender of
this Certificate at the Principal Office. The amounts representing interest are payable by check
mailed by first class mail on each Certificate Payment Date by the Trustee to the Registered
Owner hereof as of the Record Date preceding the Certificate Payment Date at his address
as it appears on the registration books of the Trustee or by wire transfer at the written
request of the Registered Owner of $1,000,000 or more of principal amount, such request
to be filed with the Trustee on or before the applicable Record Date.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS CERTIFICATE
ON THE REVERSE HEREOF WHICH SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT
AS THOUGH FULLY SET FORTH HEREIN.
IN WITNESS WHEREOF, this Certificate has been executed and delivered by Bank of
America National Trust and Savings Association, as Trustee, acting pursuant to the Trust
Agreement.
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Trustee
Authorized Signatory
Date of Execution:
M
[REVERSE SIDE OF CERTIFICATE]
This Certificate has been executed and delivered by the Trustee pursuant to the terms of a
Trust Agreement by and among the Trustee, Newport Beach Public Facilities Corporation, as
lessor (the "Corporation"), and the City, dated as of June 1, 1992 (the "Trust Agreement").
Reference is hereby made to the Lease and the Trust Agreement (copies of which are on file
at the Principal Office) for a description of the terms on which the Certificates are delivered,
the rights thereunder of the Registered Owners of the Certificates, the rights, duties and
immunities of the Trustee and the rights and obligations of the City under the Lease, to all of
the provisions of which Lease and Trust Agreement the Registered Owner of this Certificate,
by acceptance hereof, assents and agrees. Capitalized terms not otherwise defined herein
shall have the meanings set forth in the Trust Agreement.
The City is obligated to pay Lease Payments from any source of legally available funds, and
the City has covenanted in the Lease to make the necessary annual appropriations therefor.
The obligation of the City to pay the Lease Payments does not constitute an obligation of the
City for which the City is obligated to levy or pledge any form of taxation or for which the
City has levied or pledged any form of taxation. The obligations of the City to pay Lease
Payments does not constitute a debt of the City, the State of California or any of its political
subdivisions, and does not constitute an indebtedness within the meaning of any
constitutional or statutory debt limitation or restriction. The City's obligations to pay Lease
Payments may be abated during any period in which, by reason of material damage,
destruction or condemnation, there is substantial interference with the use and right of
possession by the City of the property which is the subject of the Lease. Failure of the City
to pay Lease Payments during any such period shall not constitute a default under the Lease,
the Trust Agreement or this Certificate.
To the extent and in the manner permitted by the terms of the Trust Agreement, the
provisions of the Trust Agreement may be amended by the parties thereto with the written
consent of the Registered Owners of at least a majority in aggregate principal amount of the
Certificates then Outstanding, and may be amended without such consent under certain
circumstances. No such modification or amendment shall (1) extend or have the effect of
extending the fixed maturity of any Certificate or reducing the interest rate with respect
thereto or extending the time of payment of interest, or reducing the amount of principal
thereof or reducing any premium payable upon the prepayment thereof, without the express
consent of the Owner of such Certificate, or (2) reduce or have the effect of reducing the
percentage of Certificates required for the affirmative vote or written consent to an
amendment or modification of the Lease, or (3) modify any of the rights or certificates of the
Trustee without its written assent thereto.
This Certificate is transferable by the Registered Owner hereof, in person or by his duly
authorized attorney, at the Principal Office, but only in the manner, subject to the limitations
and upon payment of the charges provided in the Trust Agreement and upon surrender and
cancellation of this Certificate. Upon such transfer a new Certificate or Certificates, of
authorized denomination or denominations, for the same aggregate principal amount, maturity
and interest rate, will be delivered to the transferee. The Trustee shall not be required to
A-3
register the transfer or exchange of any certificate (i) between 15 days prior to selection of
certificates for prepayment and the date of mailing notice of prepayment and (ii) as to any
certificate selected for prepayment. This Certificate also may be exchanged for a like
aggregate principal amount of Certificates of other authorized denominations as prescribed in
the Trust Agreement. The City, the Corporation and the Trustee may treat the Registered
Owner hereof as the absolute owner hereof for all purposes whether or not this Certificate
shall be overdue, and the City, the Corporation and the Trustee shall not be affected by any
notice to the contrary.
The Certificates are subject to mandatory prepayment on any date prior to maturity, in whole
or in part, from the Net Proceeds of insurance or condemnation if such proceeds are
insufficient to repair or replace the Site and the City has elected to apply such proceeds to the
prepayment of all or a portion of the outstanding Certificates, at a prepayment price equal to
the principal amount thereof, without premium, together with accrued interest to the date
fixed for prepayment. The Certificates are also subject to mandatory prepayment if and to
the extent required in order to preserve to excludability of interest on the Certificates from
gross income for purposes of federal income taxation, as set forth in an opinion of Special
Counsel at a prepayment price equal to the principal amount to be prepaid, without premium,
together with accrued interest to the date fixed for prepayment.
Whenever provision is made for the mandatory prepayment of Certificates and less than all
Outstanding Certificates are called for mandatory prepayment, the Trustee shall select
Certificates for prepayment pro rata among maturities and by lot within any maturity so that
following such prepayment remaining annual payments of principal and interest represented
by the Certificates are, to the extent practicable, proportionate to the initial amounts of such
payments.
The Term Certificates maturing on June 1, 2019 (the "Term Certificates") will be subject to
mandatory prepayment, on each June 1, commencing on June 1, 2006, at a prepayment price
equal to the principal amount thereof together with accrued interest thereon to the
prepayment date, without premium, in the years and amounts as set forth in the following
table:
Year
Year
(June 1)
Amount
(June 1 ?
Amount
2006
$250,000
2013
$385,000
2007
$265,000
2014
$410,000
2008
$280,000
2015
$435,000
2009
$300,000
2016
$465,000
2010
$320,000
2017
$495,000
2011
$340,000
2018
$525,000
2012
$360,000
2019
$560,000
A-4
If some but not all of the Term Certificates have been optionally prepaid or prepaid by
mandatory prepayment other than mandatory sinking fund prepayments, the total amount of
the respective future sinking fund payments shall be reduced by the aggregate principal
amount of Term Certificates so prepaid, to be allocated among such sinking funds payments
on a pro rata basis in integral multiples of $5,000.
Certificates maturing on or before June 1, 2000 are not subject to optional prepayment prior
to their stated maturity dates. Certificates maturing on or after June 1, 2001 are subject to
optional prepayment prior to maturity or any Certificate Payment Date on or after June 1,
2000, as a whole, or in part in inverse order of maturity and by lot within a maturity
at the respective prepayment prices (expressed as percentages of principal amount) set out
below, plus accrued interest thereon to the prepayment date:
Prepayment Dates Prepayment Prices
June 1, 2000 and December 1, 2000 102%
June 1, 2001 and December 1, 2001 101 %
June 1, 2002 and thereafter 100%
As provided in the Trust Agreement, notice of prepayment shall be sent by first class mail,
postage prepaid, not less than 30 days, and not more than 60 days, before the prepayment
date, to the Registered Owner of this Certificate, but neither failure to receive such notice nor
any defect in the notice so mailed shall affect the sufficiency of the proceedings for
prepayment.
If this Certificate is called for prepayment and payment is duly provided therefor as specified
in the Trust Agreement, interest shall cease to accrue with respect hereto from and after the
date fixed for prepayment.
The Trustee has no obligation or liability to the Registered Owners to make payments of
principal or interest components of Lease Payments pertaining to the Certificates except from
Lease Payments paid to the Trustee and from the various funds and accounts established
under the Trust Agreement. The recitals of facts, covenants and agreements in this
Certificate shall be taken as statements, covenants and agreements of the City, and the
Trustee assumes no responsibility for the correctness of the same.
The City has certified that all acts, conditions and things required by the Constitution and
statutes of the State of California and the Trust Agreement to exist, to have happened and
to have been performed precedent to and in connection with the execution and delivery of this
Certificate do exist, have happened and have been performed in regular and due time, form
and manner as required by law, and that the Trustee is duly authorized to execute and deliver
this Certificate, and that the amount of this Certificate, together with all other Certificates
executed and delivered under the Trust Agreement, is not in excess of the amount of
Certificates authorized to be executed and delivered thereunder.
A-5
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
(Please print or typewrite name, address and social security or other federal tax identifying
number of Transferee)
the within Certificate and all rights thereunder, and hereby irrevocably constitutes and
appoints
to transfer the within Certificate on the books kept for registration thereof, with full power
of substitution in the premises.
Dated:
NOTE: The signature to this assignment
must correspond with the name as written
Signature Guaranteed on the face of the within Bond in every
particular, without alteration or
enlargement or any change whatsoever.
NOTICE: Signature(s) must be guaranteed by a
member of the New York Stock Exchange or a
commercial bank or trust company
,,4—�,
,A-7-
EXHIBIT B
SCHEDULE OF LEASE PAYMENTS
Lease
Payment Date
Interest
Comr)onent
Principal
Component
Total
November 15, 1992
$ 231,142.50
$ 231,142.50
May 15, 1993
231,142.50
231,142.50
November 15, 1993
231,142.50
231,142.50
May 15, 1994
231,142.50
$130,000.00
361,142.50
November 15, 1994
227,242.50
227,242.50
May 15, 1995
227,242.50
135,000.00
362,242.50
November 15, 1995
223,192.50
223,192.50
May 15, 1996
223,192.50
145,000.00
368,192.50
November 15, 1996
218,842.50
218,842.50
May 15, 1997
218,842.50
150,000.00
368,842.50
November 15, 1997
214,342.50
214,342.50
May 15, 1998
214,342.50
160,000.00
374,342.50
November 15, 1998
209,542.50
209,542.50
May 15, 1999
209,542.50
165,000.00
374,542.50
November 15, 1999
204,592.50
204,592.50
May 15, 2000
204,592.50
175,000.00
379,592.50
November 15, 2000
199,342.50
199,342.50
May 15, 2001
199,342.50
185,000.00
384,342.50
November 15, 2001
193,700.00
193,700.00
May 15, 2002
193,700.00
200,000.00
393,700.00
November 15, 2002
187,600.00
187,600.00
May 15, 2003
187,600.00
210,000.00
397,600.00
November 15, 2003
181,195.00
181,195.00
May 15, 2004
181,195.00
220,000.00
401,195.00
November 15, 2004
174,375.00
174,375.00
May 15, 2005
174,375.00
235,000.00
409,375.00
November 15, 2005
167,090.00
167,090.00
May 15, 2006
167,090.00
250,000.00
417,090.00
November 15, 2006
159,340.00
159,340.00
May 15, 2007
159,340.00
265,000.00
424,340.00
November 15, 2007
151,125.00
151,125.00
May 15, 2008
151,125.00
280,000.00
431,125.00
November 15, 2008
142,445.00
142,445.00
May 15, 2009
142,445.00
300,000.00
442,445.00
November 15, 2009
133,145.00
133,145.00
May 15, 2010
133,145.00
320,000.00
453,145.00
November 15, 2010
123,225.00
123,225.00
May 15, 2011
123,225.00
340,000.00
463,225.00
November 15, 2011
112,685.00
112,685.00
May 15, 2012
112,685.00
360,000.00
472,685.00
November 15, 2012
101,525.00
101,525.00
May 15, 2013
101,525.00
385,000.00
486,525.00
November 15, 2013
89,590.00
89,590.00
May 15, 2014
89,590.00
410,000.00
499,590.00
November 15, 2014
76,880.00
76,880.00
May 15, 2015
76,880.00
435,000.00
511,880.00
November 15, 2015
63,395.00
63,395.00
May 15, 2016
63,395.00
465,000.00
528,395.00
November 15, 2016
48,980.00
48,980.00
May 15, 2017
48,980.00
495,000.00
543,980.00
November 15, 2017
33,635.00
33,635.00
May 15, 2018
33,635.00
525,000.00
558,635.00
November 15, 2018
17,360.00
17,360.00
May 15, 2019
17,360.00
560,000.00
577,360.00
TOTAL
$8,233,345.00
$7,500,000.00
$15,733,345.00
B-1
Recording Requested By:
CITY OF NEWPORT BEACH
When Recorded Mail To:
CITY OF NEWPORT BEACH
3300 Newport Boulevard
Newport Beach, California 92659
Attn: Finance Director
This document is recorded for the benefit of the CITY OF NEWPORT BEACH, and recording
is fee exempt under §27383 of the Government Code.
ASSIGNMENT AGREEMENT
between
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Trustee
Dated as of June 1, 1992
ASSIGNMENT AGREEMENT
This ASSIGNMENT AGREEMENT, executed and entered into as of June 1, 1992, by
NEWPORT BEACH PUBLIC FACILITIES CORPORATION, a not for profit duly organized and
existing under and by virtue of the laws of the State of California,
(the "Corporation"), and accepted by BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, a national banking association as Trustee (the "Trustee");
WITNESSETH:
WHEREAS, the Corporation and CITY OF NEWPORT BEACH, a municipal corporation
duly organized and existing under and by virtue of the Constitution and laws of the State of
California (the "City"), have executed and entered into a Site Lease (the "Site Lease") and a
Project Lease (the "Lease") as of the date hereof and previously recorded whereby the City
has agreed to respectively lease certain improved property of the City, as described in Exhibit
"A" hereto and incorporated by reference herein (the "Site"), to the Corporation and the
Corporation has agreed to lease back the Site as improved to the City (the "Project"), as
provided therein;
WHEREAS, under and pursuant to the Lease, the City is obligated to make Lease
Payments, as defined therein, to the Corporation for the lease of such Site;
WHEREAS, the Corporation desires to assign without recourse all of its rights to
receive the Lease Payments scheduled to be paid by the City under and pursuant to the Lease
to the Trustee;
WHEREAS, in consideration of such assignment and the execution and entering into
of a Trust Agreement (the "Trust Agreement") to be executed and entered into as of the date
hereof, by and among the Trustee, the Corporation and the City, the Trustee has agreed to
execute and deliver certificates of participation (the "Certificates") in an aggregate principal
amount equal to the aggregate principal components of such Lease Payments; and
WHEREAS, 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 assignment agreement (the "Assignment Agreement") do exist, have happened
and have been performed in regular and due time, form and manner as required by law and
the parties hereto are now duly authorized to execute and enter into the Assignment
Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants contained herein and for other valuable
consideration, the parties hereto do hereby agree as follows:
SECTION 1. Assignment.
(a) Site Lease. The Corporation hereby transfers, assigns and sets over to the
Trustee, for the benefit of the Owners of the Certificates, executed and delivered under the
Trust Agreement, all of the Corporation's rights under the Site Lease.
-1-
(b) Lease. The Corporation hereby transfers, assigns and sets over to the Trustee,
for the benefit of the Owners of Certificates executed and delivered under the Trust
Agreement, all of the Corporation's rights under the Lease (excepting only the Corporation's
rights under Section 9.4 of the Lease, regarding payment of attorneys' fees), including,
without limitation:
(1) the right to receive and collect all of the Lease Payments, Additional
Payments and Prepayments (all as defined in the Trust Agreement) from
the City under the Lease;
(2) the right to receive and collect any proceeds of any insurance
maintained thereunder, any condemnation award rendered with respect
to the Site, or any lease of the Project in the event of a default by the
City under the Lease;
(3) the right to take all actions and give all consents under the Lease,
including without limitation, Section 7.8 (regarding liens), 8.2 (regarding
subleases), Section 8.3 (regarding amendments of the Lease), and
Section 9.2 (regarding defaults);
(4) the right to exercise such rights and remedies conferred on the
Corporation pursuant to the Lease as may be necessary or convenient
(i) to enforce payment of the Lease Payments, Additional Payments,
Prepayments, and any other amounts required to be deposited in the
Lease Payment Fund, the Prepayment Fund, the Net Proceeds Fund or
any other funds established under the Trust Agreement, or (ii) otherwise
to protect the interests of the Corporation in the event of a default by
the City under the Lease; and
(5) the right of the Corporation to receive rental in excess of Lease
Payments as compensation for re -leasing the Site upon events of default
under the Lease, as provided in Section 9.2(a) and (b) of the Lease.
(c) Assignment for Owners of Certificates. All rights assigned by the Corporation
shall be administered by the Trustee as assignee thereof according to the provisions of the
Trust Agreement and for the equal and proportionate benefits of the Owners of Certificates.
SECTION 2. Acceptance.
The Trustee hereby accepts the foregoing assignment for the benefit of the Owners
of Certificates, subject to the conditions and terms of the Trust Agreement, and all such Lease
Payments shall be applied and all such rights so assigned shall be exercised by the Trustee
under and pursuant to the Trust Agreement.
SECTION 3. Conditions.
This Assignment Agreement shall confer no rights and shall impose no obligations upon
the Trustee beyond those expressly provided in the Trust Agreement.
-2-
SECTION 4. No Other Claims.
The Authority hereby represents and warrants that there are no present and
outstanding claims on Lease Payments or any other moneys assigned by the Authority to the
Trustee hereunder.
SECTION 5. Execution in Counterparts.
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
IN WITNESS WHEREOF, the parties hereto have executed and entered into this
Assignment Agreement by their officers thereunto duly authorized as of the day and year first
above written.
CITY OF NEWPORT BEACH
By:
Authorized Signatory
Accepted by:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Trustee
By:
Authorized Signatory
-3-
STATE OF CALIFORNIA )
SS.
COUNTY OF ORANGE )
On this day of June in the year 1992 before me, the undersigned, a Notary
Public in and for the State of California, personally appeared to me ,
known to me (or proved to me on the basis of satisfactory evidence) to be the person who
executed the within instrument on behalf of NEWPORT BEACH PUBLIC FACILITIES
CORPORATION, the authority that executed the within instrument.
WITNESS my hand and official seal.
Notary Public
-4-
STATE OF CALIFORNIA )
SS.
COUNTY OF LOS ANGELES )
On this day of in the year 1992 before me, the
undersigned, a Notary Public in and for the State of California, personally appeared to me,
known to me to be (or proved to me on the basis of satisfactory evidence), a
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, the banking corporation that executed the within instrument, and known to
me (or proved to me on the basis of satisfactory evidence) to be the person who executed the
within instrument -on behalf of said banking corporation.
WITNESS my hand and official seal.
Notary Public
-5-
EXHIBIT "A"
DESCRIPTION OF SITE
m