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HomeMy WebLinkAbout0 - PFCMay 1 S, 1998 TO: FROM: SUBJECT: CITY OF ,•, 1 Resource Management Division 1 • • FACILITIES CORPORATION May 26, 1998 Corporation Meeting Dennis Danner, Treasurer - Newport Beach Public Facilities Corporation /jl DISCUSSION: In June, 1992, the Newport Beach Public Facilities Corporation issued Library Certificates of Participation (COPS) in the principal amount of $7,500,000, the proceeds of which were used to construct the new Central Library. These COPS were issued for 25 years with an average coupon rate of approximately 6.1 %. Several months ago staff began examining whether annual debt service savings could be achieved by refinancing these COPs because of the current low interest rates, We contacted Robin Thomas of Miller & Schroeder Financial, Inc. (the original financial consultant for this issue) and asked her to compute the savings that could be achieved by refinancing. At the time of her calculations she estimated that the Library COPS could be refinanced at an average coupon rate of 4.35% with net savings of approximately $590,000 over the remaining years of the issue, after administrative costs. Staff then contacted AMBAC and received their commitment to insure the refunded issue if it was economically viable. Staff also contacted bond counsel to begin work on drafting the necessary legal documents required for the refunding. All worked performed to date has been done with the knowledge that if the refunding does not take place the City will incur no expenses. This information was presented to the Finance Committee in February and that Committee directed staff to proceed working on the refunding. Almost immediately interest rates increased and the anticipated savings nearly all evaporated. Since that time, interest rates have returned to approximately their prior level when the original refunding computation was performed and the anticipated savings are approximately the amounts reported above. It is recommended that the Newport Beach Public Facilities Corporation approve the attached resolution which is titled: A resolution of the Newport Beach Public Facilities Corporation authorizing the preparation, sale and delivery of not to exceed $7,500,000 principal amount of Refunding Certificates of Participation, Series 1998 (Central Library Building Project) and approving certain documents and authorizing certain actions in connection therewith. It is further recommended that the Public Facilities Corporation direct staff to proceed with the refunding only if the approximate desired level of debt service savings is achieved. MY.MO.nOC 05/18/98 9:20 AM RESOLUTION NO. RESOLUTION OF THE NEWPORT BEACH PUBLIC FACILITIES CORPORATION AUTHORIZING THE PREPARATION, SALE AND DELIVERY OF NOT TO EXCEED $7,500,000 PRINCIPAL AMOUNT OF REFUNDING CERTIFICATES OF PARTICIPATION, SERIES 1998 (CENTRAL LIBRARY BUILDING PROJECT) AND APPROVING CERTAIN DOCUMENTS AND AUTHORIZING CERTAIN ACTIONS IN CONNECTION THEREWITH WHEREAS, the City Council (the "City Council ") of the City of Newport Beach (the "City ") has previously adopted its resolution authorizing the execution and delivery of those certain Certificates of Participation, Series 1992 (Central Library Building Project) of the City (the "Prior Certificates"); and WHEREAS, the Board of Directors (the `Board ") of the Newport Beach Public Facilities Corporation (the "Corporation') has previously adopted its resolution approving the Corporation's participation in the acquisition of the certain real property known as Central Library Building Project and related public improvements for general municipal purposes (the "Project") through the execution and delivery of the Prior Certificates; and WHEREAS, a refunding of the Prior Certificates will result in a reduction of the lease payments required to be paid by the City in connection with the Project, thereby creating a public benefit; and WHEREAS, in order to reduce its costs associated with the Project, the City now desires to refund the outstanding portion of the Prior Certificates through the execution and delivery of those certain Refunding Certificates of Participation, Series 1998 (Central Library Building Project) (the "Certificates "); and WHEREAS, in order to accomplish the refunding of the Prior Certificates, the City and the Corporation further desire to enter into that certain Site Lease, by and between the City and the Corporation (the "Site Lease "), and that certain Project Lease, by and between the City and the Corporation (the "Lease Agreement "), each to be dated as of the first day of the month in which the Certificates are executed and delivered, the forms of which have been presented to the Corporation for approval; and WHEREAS, pursuant to the Site Lease, the Corporation will agree to lease certain real property, improvements, furnishings and equipment described therein (the "Leased Property") from the City and pursuant to the Lease Agreement the City will agree to lease back the Leased Property from the Corporation and to pay certain lease payments in connection therewith; and WHEREAS, the Corporation desires to assign certain rights under the Site Lease and the Lease Agreement, including its right to receive such lease payments from the City, to U.S. Bank Trust 584600.322459.0005 -I- National Association, Los Angeles, California (the "Trustee ") pursuant to an Assignment Agreement to be dated as of the first day of the month in which such Assignment Agreement is executed by the parties thereto, between the Corporation and the Trustee (the "Assignment Agreement'), the form of which has been presented to the Corporation for approval; and WHEREAS, there has been presented to the Corporation for approval the form of a Purchase Agreement (the "Purchase Agreement ") to be entered into by the City and Miller & Schroeder Financial, Inc. (the "Purchaser ") pursuant to which the Purchaser will agree to buy the Certificates on the terms and conditions set forth therein; and WHEREAS, there has been presented to the Corporation for approval the form of a Preliminary Official Statement to be delivered to prospective purchasers of the Certificates; NOW, THEREFORE, the Newport Beach Public Facilities Corporation does hereby resolve, determine and order as follows: Section I. Each of the foregoing recitals is true and correct. Section 2. The Corporation hereby authorizes the preparation, sale and delivery of the Certificates in an aggregate principal amount not to exceed $7,500,000 in accordance with the terms and provisions of the Trust Agreement. The proceeds of the Certificates shall be expended to refund the Prior Certificates and to provide for a reserve fund, if required, and for payment of the costs of the sale and delivery of the Certificates. Section 3. The Corporation hereby approves the appointment by the City of U.S. Bank Trust National Association, to act as Trustee on behalf of the owners of the Certificates, with the duties and powers of the Trustee as set forth in the Trust Agreement, Section 4. The forms of the Escrow Agreement, the Site Lease, the Lease Agreement, the Trust Agreement and the Assignment Agreement presented at this meeting are hereby approved. Each of the President and Secretary of the Corporation are hereby authorized to execute, acknowledge and deliver any and all documents required to consummate the transactions contemplated by the Site Lease, the Lease Agreement, the Trust Agreement and the Assignment Agreement and this Resolution. Each of the President and the Secretary of the Corporation are hereby authorized for and in the name of the Corporation to execute and deliver the Site Lease, the Lease Agreement, the Trust Agreement and the Assignment Agreement in substantially the forms hereby approved, with such additions thereto and changes therein as are recommended or approved by Stradling Yocca Carlson & Rauth, a Professional Corporation, as Special Counsel to the City ("Special Counsel "), and approved by the officer or officers executing the same, such approval to be conclusively evidenced by the execution and delivery thereof. Section 5. The form of the Certificates as set forth in the Trust Agreement (as the Trust Agreement may be modified pursuant to the preceding section hereof) is hereby approved. Section 6. The form of the Purchase Agreement presented at this meeting is hereby approved and the sale of the Certificates pursuant thereto is hereby consented to by the Corporation; provided that the aggregate principal amount of the Certificates does not exceed $7,500,000, the present value of the debt service payments due with respect to the Certificates is at least three percent 584600.3\22459.0005 -2- (3 %) less than the present value of the debt service payments due with respect to the Prior Certificates (as set forth in writing by the City and/or the Purchaser) and the discount paid to the Purchaser (exclusive of original issue discount and any bond insurance premium) with respect to the Certificates does not exceed one and one -half percent (1'/2 %) of the aggregate principal amount of the Certificates. Section 7. The Corporation consents to the preparation and distribution by the City of a Preliminary Official Statement to prospective purchasers of the Certificates in the form deemed final by the City for purposes of Rule 15c2 -12 of the Securities and Exchange Commission and to the preparation of a final Official Statement in substantially the form of the Preliminary Official Statement, with such additions thereto and changes therein as are recommended or approved by the City Attorney, and approved by the officer or officers executing the same on behalf of the City. Section 8. The President, Secretary and other officers of the Corporation are hereby authorized, jointly and severally, to do any and all things and to execute and deliver any and all documents which they may deem necessary and advisable in order to consummate the sale and delivery of the Certificates and otherwise effectuate the purposes of this Resolution and such actions previously taken by such officers are hereby ratified. Specifically and without limiting the foregoing, the Finance Director is authorized and directed to solicit and accept bids for bond insurance for the Certificates, provided he determines acceptance of the best bid will result in further debt service savings, and appropriate changes to each of the documents referenced herein to evidence such bond insurance and the terms thereof, are hereby authorized and approved. Section 9. In the event the President is unavailable or unable to execute and deliver any of the above- referenced documents, any other member of the Board of the Corporation may validly execute and deliver such documents, and any documents required to be signed by the Secretary may be signed by any deputy secretary. Section 10. This Resolution shall take effect from and after its date of adoption. ADOPTED, SIGNED AND APPROVED this day of May, 1998, President of the Newport Beach Public Facilities Corporation ATTEST: Secretary of the Newport Beach Public Facilities Corporation STATE OF CALIFORNIA ) ) ss. COUNTY OF ORANGE ) 584600.3122459.0045 -3- I hereby certify that the foregoing Resolution was duly and regularly adopted by the Board of Directors of the Newport Beach Public Facilities Corporation at a regular meeting thereof held on the day of May, 1498, by the following vote: AYES: BOARD MEMBERS: ABSTAIN: BOARD MEMBERS: Secretary of the Newport Beach Public Facilities Corporation 5846003M459,0005 -4- TRUST AGREEMENT .. r U.S. BANK TRUST NATIONAL ASSOCIATION as Trustee NEWPORT BEACH PUBLIC FACILITIES CORPORATION, and CITY OF NEWPORT BEACH Dated as of June 1, 1998 CITY OF NEWPORT BEACH REFUNDING CERTIFICATES OF PARTICIPATION SERIES 1998 (CENTRAL LIBRARY BUILDING PROJECT) 566725.2224594005 May 26, 1998 Corporation Meeting Supplemental TABLE OF CONTENTS ARTICLE I DEFINITIONS Section 1.1. Definitions and Rules of Construction... ... ....... ...... ........... - ....... ......... Section 1.2, Authorization. ...... - ...... ............. - ............. ____ ........... ................ ARTICLE H 01a ARTICLE III APPLICATION OF PROCEEDS; ESCROW FUND Section 3, 1. Application of Proceeds and Other Moneys.............................. ..............._._._..._._...AS Section 3.2. [Reserved].. .......... ___ ..... _ ......... ...... ........ __ ..... - ......... 15 Section 3.3. Escrow Fund ... ........... ...... ....................... ............. ...... __ ........ ___ 15 Section 3.4. Additional Certificates . ................. ....... ........... .... ___ A5 Section 3.5. Validity of Certificates.- . ..... - ............ ...... _ ................. ...... __ ... ..... ....... ....... __ ... 16 FRISH16103 THE REFUNDING CERTIFICATES OF PARTICIPATION Section 2.1. Authorization....... ..... ... __ ... _ ......... - ..... .................... ......................... ....... .... _10 Section2.2. Date . .................. - .... ......................................... __ ....... ..................................... ___10 Section 2.3. Maturity; Interest Rates......._ .............................. __ ....................................... 10 Section 2.4. Registration; Interest ........................................... .................................. _ ....... 17 Section 2.5. Form of Certificates, .................................... __ .............. ___ ............................ 18 Section 2.6. Execution ........ ...... ............................ ....... ....... 19 Section 2.7. Transfer and Exchange, ...................... ...... _ ......... . ...... I1 Section 2,8. Certificates Mutilated, Lost, Destroyed or Stolen........................... .............................12 .... 20 Section2.9. Payment . ........ ......... __ ......... _ ...... _ ........ _ ....... ............... ...... 12 Section 2.10. Execution of Documents and Proof of Ownership . ...................... ........... - ....... .... 12 Section 2.11. Certificate Register. . . . ... - . . ... ......... ..................... ........... ....... .... A3 Section 2.12. Destruction of Canceled Certificates.. ..... ........ .......... _,_ ....... ..... _A3 Section 2.13. Book-Entry System, ......... ...... ...... ...... ......... _ ..................... ___13 ARTICLE III APPLICATION OF PROCEEDS; ESCROW FUND Section 3, 1. Application of Proceeds and Other Moneys.............................. ..............._._._..._._...AS Section 3.2. [Reserved].. .......... ___ ..... _ ......... ...... ........ __ ..... - ......... 15 Section 3.3. Escrow Fund ... ........... ...... ....................... ............. ...... __ ........ ___ 15 Section 3.4. Additional Certificates . ................. ....... ........... .... ___ A5 Section 3.5. Validity of Certificates.- . ..... - ............ ...... _ ................. ...... __ ... ..... ....... ....... __ ... 16 FRISH16103 566725.2\22459-0005 1 PREPAYMENT OF CERTIFICATES Section 4.1. Establishment of Prepayment Fund_ .......... - ...... ....................... ...... 16 Section 4.2. Mandatory Prepayment . ...................... .................. ........... .................. � 16 Section 4.3. Optional Prepayment..... ............................... ............ ........ ............ _ .... _ ........... 17 Section 4.4. Selection of Certificates for Prepayment. ....... ____ ....... _ ...... .... _ ........ _ ....... 17 Section 4.5, Notice of Prepayment. . .................................... ............................. 18 Section 4.6. Partial Prepayment of Certificates ..................... ­ ...... ­­ ................................... 19 Section 4.7. Effect of Notice of Prepayment ................. ...... 1111-11-11- ................... ................ ­­_119 Section4.8. No Surplus .............. ...................... ..... - ........... - ... .... ........... - .......................... .... 20 566725.2\22459-0005 1 ARTICLE V LEASE PAYMENTS; LEASE PAYMENT FUND Section 5.1_ Security Provisions ......................................................................... .............................20 Section 5.2. Establishment of Lease Payment Fund. . ...... .... - ....... - ............... ............... 21 Section 5.3. Deposits....... .................. --- . Section 5.4. Application of Moneys .................. ..........................................._..... .............................21 Section 5.5. Surplus Revenues. . — — - . . ....................... ........ — ................ ............ ............. 21 ARTICLE VI RESERVE FUND Section 6.1. Reserve Fund ................... ....._.............. ..... .. .................. --- ....................... ............... 21 Section 6.2. Deposits to the Reserve Fund ......................................................... .............................22 Section 63. Transfers of Excess ......................................................................... .............................22 Section 6.4. Application of Reserve Fund in Event of Deficiency in Lease Payment Fund,.—..... .............. -- ............. ................. ............................... _.............................. 22 Section 6.5. Transfer to Make All Lease Payments-- . ..................... -- ... ..................................... 23 ARTICLE VII 566725.Z22459.0005 ii NET PROCEEDS FUND Section 7. L Establishment of Net Proceeds Fund; Deposits .............................. .............................23 Section 7.2. Disbursements ................................................................................ .............................23 Section7.3. Cooperation ..................................................................................... .............................23 Section8.1. Held in Trust ................................................................................... .............................23 Section 8.2. investments Authorized...... ...................... — ....... ............... -- ....................... - ... -- .... 24 Section 8.3 Disposition of Investments. .......... ......... — ....... ................ Section8.4. Accounting.. ................... - ...... — ............ ....... ................ .......... 24 Section 8.5. Valuation and Disposition of Investments ....................................... .............................24 Section 8.6. Commingling of Moneys in Funds .................................................. .............................25 Section 8.7. Arbitrage Covenant. ......... ......... -----25 Section 8.8. Rebate-- ..... ...... ...... ...... -- ...... ..... --25 Section 8.9. Information Concerning Investments. . .......... ......... -- ....... ......... ..... 28 Section 8.1(w Notice Concerning Investments. . ........... ...................... -- ........ ...... ............... 28 566725.Z22459.0005 ii THE TRUSTEE Section 9.1. Appointment of Trustee, ................................................................. .............................28 Section 9.2. Merger or Consolidation-- ............ ...... .................. Section 9.3. Protection of the Trustee,..... ... ....... .. Section 9.4. Rights of the Trustee...... ................ ......... .................. .. ....... ............ ............................ ..30 Section9.5. Standard of Care ............................................................................. .............................30 Section 9.6. Compensation of the Trustee .................. Section 9.7. Indemnification of the Trustee. ....................... ............... ...................... .... — ......... 31 566725.Z22459.0005 ii ARTICLE X ARTICLE XH LIMITATION OF LIABILITY Section 12.1. Limited Liability of the City . ........ ...... ... 36 Section 12.2. No Liability of the City or Corporation for Trustee Performance,,.,.,...,,.. ................ --37 Section 12.3. Limited Liability of Trustee...— ......... -- ..... ...... — .... - ....... ................. ............. . ...... -37 &ctiqU. 12.4. Limitation of Rights of Parties and Certificate Owners................... .............................37 ARTICLE XIH EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE OWNERS MODIFICATION OR AMENDMENT OF AGREEMENT Section 13.1. A Section 10.1. Amendments Permitted. ............................. -- .......... -- .................................. .... 32 Section 10.2. Procedure for Amendment with Written Consent of the Owners .... .............................33 ........... -- .... 34 Section 10.3. Disqualified Certificates ............................... ..... ---- ....................... ............ ........ -.33 Section 10.4. Effect of Supplemental Agreement . .................. -- ... -- ................... — ............. --- ... -33 Section 105. Endorsement or Replacement of Certificates Delivered After ...... ......... ....... ......... 35 Sectign_11.6. Amendments. ....... --- ......... .............................. ............. -----.34 Section 10.6. Amendatory Endorsement of Certificates, .................. ......... — ....... 34 Section 10.7. Trustee's Reliance on Opinion of Special Counsel........................ ..............._.............34 ...................................... ----36 Section 10.8. Site Replacement. ....... — .... ............. .......................... ................ --- .... .......... ... 34 ARTICLE XH LIMITATION OF LIABILITY Section 12.1. Limited Liability of the City . ........ ...... ... 36 Section 12.2. No Liability of the City or Corporation for Trustee Performance,,.,.,...,,.. ................ --37 Section 12.3. Limited Liability of Trustee...— ......... -- ..... ...... — .... - ....... ................. ............. . ...... -37 &ctiqU. 12.4. Limitation of Rights of Parties and Certificate Owners................... .............................37 ARTICLE XIH EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE OWNERS COVENANTS; NOTICES Section 13.1. A Section 11.1. Compliance With and Enforcement of the Lease...........- ............... .............................34 Section 11.2. Payment of Taxes. .. — . . . ......... .................... ..................... ........... -- .... 34 Section 11.3. Observance of Laws and Regulations. --- --- ......... ....... 35 Section 11.4. Prosecution and Defense of Suits. . ................. ...... _.......... .............................35 Section 1I.5. City Budgets. ..,. ...... ....... ..... ---- ...... ......... ....... ......... 35 Sectign_11.6. Further Assurances....... ..... — ............................... ................................ .................. ... 35 Section 11.7. Federal Tax Covenants . ................................... -- .............................. ......... -- .... -35 Section 11.8. Notice of Trustee . .... -- .................................... ...................................... ----36 Section 11.9. Continuing Disclosure Agreement . ................. ................................ ... -36 ARTICLE XH LIMITATION OF LIABILITY Section 12.1. Limited Liability of the City . ........ ...... ... 36 Section 12.2. No Liability of the City or Corporation for Trustee Performance,,.,.,...,,.. ................ --37 Section 12.3. Limited Liability of Trustee...— ......... -- ..... ...... — .... - ....... ................. ............. . ...... -37 &ctiqU. 12.4. Limitation of Rights of Parties and Certificate Owners................... .............................37 ARTICLE XIH EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE OWNERS Section 13.1. A Assignment of Rights.... ............................. ...... -- ............ .......... ....... - - ... --37 Section 13.2. E Events of Default. . .......... ...... . ........ 38 Section 13.3. A Application of Funds.........._ ............ -- ..... ................ - --38 Section 13.4. I Institution of Legal Proceedings.....,.- ....................... ...... ....... ...... ........ . ....... 38 Section13.5. N Non- waiver...- .... ......... ....... -- .... ........ ---- ....... .......... -- ................................ - -39 Section 13.6. R Remedies Not Exclusive ................................... -- ..... ..... ......... ......... .... — — ... ... ---39 Section 13.7. P Power of Trustee to Control Proceedings . ......... ...... -- ................................... - -- .... —39 Section 13.8. L Limitation on Certificate Owners' Right to Sue. .. .......................................... . ... -- ... —39 Section 13.9. A Agreement to Pay Attorneys' Fees and Expenses........................... .............................40 566725.2\22459-0005 iii Section 14.1 Section 14.2 Section 14.3 Section 14.4 Section 14.5 Section 14.6 Section 14. Section 14.8 ARTICLE XfV MISCELLANEOUS Defeasance ................. ............................... Non-Presentment of Certificates . ........... Records...................... ............................... Execution in Counterparts .... ............. - ..... Headings.................... ............................... Waiver of Notice ........ .............................. Separability of Invalid Provisions ... Payment on a Business Day.... ............. EXHIBIT A FORM OF CERTIFICATE OF PARTICIPATION EXHIBIT' B SCHEDULE OF LEASE PAYMENTS 566725,2122459.0005 IV .............. __40 ............... _ 41 .....42 ...... .... ___42 ...............42 .............42 ...................42 ............ __.42 TRUST AGREEMENT THIS TRUST AGREEMENT, made and entered into as of this 1 st of June, 1998, by and among U.S. BANK TRUST NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, 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 chartered city and municipal corporation duly organized and existing under the Constitution and laws of the State of California, as lessee under the Project Lease referenced below (the "City "): W ITNESSETH: WHEREAS, the City and the Corporation have previously entered into a leasing arrangement pursuant to a Project Lease dated as of June 1, 1992 (the "Prior Lease ") whereby the Corporation agreed to lease certain undeveloped property from the City and the City agreed to lease back such property and improvements thereto from the Corporation; and WHEREAS, the City agreed to pay lease payments under the Prior Lease in amounts sufficient to pay the components of principal, premium, if any, and interest represented by certain Certificates of Participation (the "Prior Certificates ") executed and delivered pursuant to a Trust Agreement dated as of June 1, 1992 (the "Prior Trust Agreement ") between the Corporation, the City and Bank of America National Trust and Savings Association, as trustee; and WHEREAS, the City and the Corporation have determined to amend and restate the lease obligation and to authorize the execution and delivery of Refunding Certificates of Participation pursuant to this Trust Agreement to effect interest rate savings for the City and to effectuate other valid public purposes of the City; and WHEREAS, the City and the Corporation have entered into an amended and restated leasing arrangement pursuant to a Project Lease dated as of June 1, 1998, whereby the Corporation has agreed to lease the improved property which is the subject of the Prior Lease from the City and the City has agreed to lease back such property and improvements thereto from the Corporation; and WHEREAS, the City will pay Lease Payments under the Project Lease representing fair market rental value of the 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; and 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; and WHEREAS, the Trustee has agreed to transfer proceeds of the Certificates for deposit in the Escrow Fund to the City hereunder to provide funds to defease the Prior Certificates and to pay Deliver Costs for the Project described herein and in the Project Lease; and 566725.2\22459.0005 )NIHEREAS, 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 1.1. Definitions and Rules of Construction. Unless the context otherwise requires, the terms defined in this Section shall, for all purposes of this Trust Agreement, 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 Agreement, refer to this Agreement as a whole. "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, or Los Angeles, 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 I and December 1 of each year, commencing December 1, 1998, so long as any Certificates remain outstanding. "Certificate" or "Certificates" means the Refunding Certificates of Participation, Series 1998 . (Central Library Building Project) to be executed and delivered pursuant hereto. City. "Certificate Year" means each successive one -year period ending on a date selected by the "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 any regulations, rulings, judicial decisions, and notices, announcements, and other releases of the United States Treasury Department or Internal Revenue Service interpreting and construing it. 5667252\22459.0005 "Corporation' ' means Newport Beach Public Facilities Corporation, and its authorized successors and assigns. "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. "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, bond insurance premiums, fees for execution, transportation and safekeeping of the Certificates and charges and fees in connection with the foregoing. "Depository" means The Depository Trust Company, New York, New York, and its successors and assigns as securities depository for the Certificates, or any other securities depository acting as Depository under Section 2.13. "Escrow Agreement" means the Escrow Agreement dated June 1, 1998 between the City and the Prior Trustee, as Escrow Bank, providing for the defeasance of the Prior Certificates, and any duly authorized and executed amendments thereto. "Escrow Fund" means the Escrow Fund established and held by the City pursuant to Article III hereof. "Event of Default" means an event of default under the Lease, as defined in Section 9.1 M fM "Fiscal Year" means the fiscal year of the City commencing July I 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. "Interest Component" means any Lease Payment, or portion thereof, which is designated and paid as interest pursuant to the terms of the Lease Agreement; the Interest Component of a Certificate is the proportionate interest in the Interest Component of the Lease Payments which is evidenced by such Certificate. "Lease" means the Project Lease. 366725.2122959.0005 "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. "Nominee" means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.13. "Original Purchaser" means the original purchaser of the Certificates, or any successors or assigns thereof. "Outstanding" when used as of any particular time with respect to Certificates, means (subject to the provisions of Section 10.3 hereof) all Certificates theretofore executed and delivered by the Trustee under this Agreement except: (a) Certificates theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (b) 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 4.5 hereof or provision satisfactory to the Trustee shall have been made for the giving of such notice; and (c) Certificates in lieu of or in exchange for which other Certificates shall have been executed and delivered by the Trustee pursuant to Sections 2.7 and 2.8 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. "Participants" means those broker - dealers, banks and other financial institutions from time to time for which the Depository holds Certificates as securities depository. 566725.2\22459.0005 4 "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 Federal Financing Bank Federal Housing Administration Debentures (FHA) General Services Administration Participation certificates 4. 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 6. U.S. Department of Project Notes Housing and Urban Development aRM) 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 (I U MC or "Freddie Mac ") Participation Certificates Senior debt obligations 3. Federal 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) 566725.2122454.0005 4. Student Loan Marketing Association (SLMA or "Sallie Mae) Senior debt obligations 5. Resolution Fundine 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. B. 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 (6) 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. 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 temi 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. 1. 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: 5667251=459.0005 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. 1 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 ma} 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. 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 market -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 566725.2\22459.0005 as collateral are FNMA or FMAC, then the value of the collateral must equal 105 %. 3. Le al o inion must be delivered to the municipal entitv: a. Repo Agreement meets guidelines under state law for legal investment of public funds. "Person" means natural persons, firms, corporations, partnerships, associations, trusts, public bodies and other entities. "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 Component" means, with respect to a Lease Payment, the portion thereof which is designated and paid as principal pursuant to the terms of the Lease Agreement; the Principal Component of a Certificate is the proportionate interest in the Principal Component of the Lease Payments which is evidenced by such Certificate. "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. "Prior Certificates" means the $7,500,000 Certificates of Participation, Series 1992 (Central Library Building Project) authorized to be executed and delivered pursuant to the Prior Trust Agreement. "Prior Lease" means that certain Project Lease dated as of June 1, 1992 between the Corporation and the City pertaining to the Prior Certificates. "Prior Trust Agreement" means the Trust Agreement dated as of June I, 1992 by and among the Prior Trustee, the City and the Corporation providing for the execution and delivery of the Prior Certificates. "Prior Trustee" means U.S. Bank Trust National Association, as successor -in- interest to Bank of America National Trust and Savings Association, in its capacity as trustee for the Prior Certificates. "Project" means the Project as defined in the Lease. "Project Lease" means the amended and restated Project 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 8.8 hereof. "Rebate Regulations" means any final or temporary Treasury Regulations promulgated under Section 148(f) of the Code. 566725.2122459.0445 "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. "Representation Letter" means the Blanket Letter of Representation from the City and the Trustee, respectively, to the Depository, as described in Section 2.13(b) hereof. "Reserve Fund" means the fund by that name established and held by the Trustee pursuant to Article V hereof. "Reserve Replenishment Rent" means Reserve Replenishment Rent payable pursuant to Section 4.3(d) of the Lease. "Reserve Requirement" 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 original principal amount of the Certificates. "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 Refunding 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 on the Delivery Date to establish certain facts and expectations and which contains certain covenants related to compliance with the Code. "Term" means the time during which the Lease is in effect, as provided in Section 4.2 of the Lease. "Treasury Regulations" means the regulations adopted by the Department of Treasury from time to time with respect to obligations issued pursuant to Section 103 of the Code. "Trustee" means U.S. Bank Trust National Association, a national banking association organized and existing under the laws of the United States of America 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. 566725.2\22459.0005 Section 11. 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. THE REFUNDING CERTIFICATES OF PARTICIPATION Section 2.1. Authorization. The Trustee is hereby authorized and directed to execute and deliver Refunding Certificates of Participation in an aggregate principal amount of $ evidencing proportionate and undivided ownership interests in the Lease Payments and the Prepayments payable under the Lease. Section 2.2. Date. Each Certificate shall be dated June 1, 1998, and interest with respect thereto shall be payable Tom 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 (ii) 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 (ii) it is executed prior to the close of business on November 15, 1998, in which event interest with respect thereto shall be payable from June 1, 1998; 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 Certificated shall be payable from the Certificated Payment Date to which interest has previously been paid or made available for payment with respect to the Outstanding Certificates, or from June 1, 1998, if no interest has been paid or made available for payment. Section 2.3. Maturity Interest Rates. The Certificates shall mature on June I of the following years and shall bear interest at the following rates: REFUNDING CERTIFICATES OF PARTICIPATION Maturity Principal Interest Maturity Principal Interest (June 1) Amount Rate (June 1 ) Amount Rate 1998 1999 2000 2001 2002 2003 566725.2\22459.0005 10 2004 2005 2006 2007 2008 2009 (final maturity) Section 2.4. 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. Section 2.5. Form of Certificates. (a) Until definitive Certificates are prepared, the Trustee may execute and deliver, in the same manner as is provided in this Article H in lieu of definitive Certificates, one or more temporary Certificates substantially of the tenor of the definitive Certificates in lieu of which such temporary Certificate or Certificates are issued, in denominations authorized hereunder, so long as no such Certificate shall have its Principal Component becoming payable in more than one year, and with such omissions, insertions and variations as may be appropriate to temporary Certificates. At the expense of the City, the City shall prepare and the Trustee shall execute and, upon the surrender of such temporary Certificates and the cancellation of such surrendered, temporary Certificates, the Trustee shall without charge to the owner thereof, in exchange thereof, deliver definitive Certificates, of the same Principal Component, series and maturity as the temporary Certificates surrendered. (b) Until so exchanged, the temporary Certificates shall be entitled to the same benefits under this Agreement as definitive Certificates. Section 2.6. 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 2.7. Transfer and Excx hhnge. (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) Exchan ge 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 2.8 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. 566725.2122459.0005 11 Section 2.8. 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 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 bath 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 2.9. 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: 566725.222459.0005 12 (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. (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 R 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. Section 2.13. Book -Entry System. (a) Book =Entry System. The Certificates shall be initially delivered in the form of a separate single fully registered Certificate (which may be typewritten) for each of the maturities of the Certificates. Upon initial delivery, the ownership of each such Certificate shall be registered in the registration books kept by the Trustee in the name of the Nominee as nominee of the Depository. Except as provided in Section 2.13(c) hereof, all of the Outstanding Certificates shall be registered in the registration books kept by the Trustee in the name of the Nominee. With respect to Certificates registered in the registration books kept by the Trustee in the name of the Nominee, the City, the Corporation and the Trustee shall have no responsibility or obligation to any such Participant or to any Person on behalf of which such a Participant holds an interest in the Certificates. Without limiting the immediately preceding sentence, the City, the Corporation and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of sccns.sizzasg.00as 13 the records of the Depository, the Nominee, or any Participant with respect to any ownership interest in the Certificates, (ii) the delivery to any Participant or any other Person, other than an Owner as shown in the registration books kept by the Trustee, of any notice with respect to the Certificates, including any notice of redemption, (iii) the selection by the Depository and its Participants of the beneficial interests in the Certificates to be redeemed in the event the Certificates are redeemed in part, or (iv) the payment to any Participant or any other Person, other than an Owner as shown in the registration books kept by the Trustee, of any amount with respect to principal of premium, if any, or interest due with respect to the Certificates. The City, the Corporation and the Trustee may treat and consider the Person in whose name each Certificate is registered in the registration books kept by the Trustee as the holder and absolute owner of such Certificate for the purpose of payment of principal components, premium, if any, and interest components with respect to such Certificate, for the purpose of giving notices of redemption and other matters with respect to such Certificate, for the purpose of registering transfers with respect to such Certificate, and for all other purposes whatsoever. The Trustee shall pay all principal o£, premium, if any, and interest due with respect to the Certificates only to or upon the order of the respective Owner, as shown in the registration books kept by the Trustee, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to satisfy and discharge fully the City's obligations with respect to payment of the principal components, premium, if any, and interest components due with respect to the Certificates to the extent of the sum or sums so paid. No Person other than an Owner, as shown in the registration books kept by the Trustee, shall receive a Certificate evidencing the obligation of the City to make payments of principal, premium, if any, and interest pursuant to this Trust Agreement. Upon delivery by the Depository to the Trustee, the City and the Corporation of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record Dates, the word Nominee in this Trust Agreement shall refer to such new nominee of the Depository. (b) Representation Letter. In order to qualify the Certificates for the Depository's book -entry system, the Trustee and the City agree to execute from time to time and deliver to such Depository a Representation Letter. The execution and delivery of the Representation Letters shall not in any way limit the provisions of Section 2.13(a) or in any other way impose upon the City, the Corporation or the Trustee any obligation whatsoever with respect to persons having interests in the Certificates other than the Owners, as shown on the registration books kept by the Trustee. The Trustee agrees to take all action necessary to continuously comply with all representations made by it in its Representation Letter. In addition to the execution and delivery of the Representation Letter, the Corporation Representative and the City Representative are hereby authorized to take any other actions, not inconsistent with this Trust Agreement, to qualify the Certificates for the Depository's book -entry program_ (c) Transfers Outside Book -Entry stem. In the event (i) the Depository determines not to continue to act as securities depository for the Certificates, or (ii) the City determines that the Depository shall no longer so act, then the City following delivery of a written notice of removal to the Depository will discontinue the book -entry system with the Depository. If the City fails to identify another qualified securities depository to replace the Depository then the Certificates so designated shall no longer be restricted to being registered in the registration books kept by the Trustee in the name of the Nominee, but shall be registered in whatever name or names Persons transferring or exchanging Certificates shall designate, in accordance with the provisions of Section 2.7. 5667251\22459.0005 14 (d) Payments to the Nominee. Notwithstanding any other provisions of this Trust Agreement to the contrary, so long as any Certificate is registered in the name of the Nominee, all payments with respect to principal components, premium, if any, and interest components due with respect to such Certificate and all notices with respect to such Certificate shall be made and given, respectively, as provided in the Representation Letter or as otherwise instructed by the Depository. (e) Initial Depository and Nominee. The initial Depository under this Section shall be The Depository Trust Company, New York, New York. The initial Nominee shall be Cede & Co., as Nominee of The Depository Trust Company, New York, New York. ARTICLE III APPLICATION OF PROCEEDS; ESCROW FUND Section 3.1. Application 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 $ (representing accrued interest of $ and capitalized interest of $ ) in the Lease Payment Fund: (b) Reserve Fund. The Trustee shall deposit $ in the Reserve Fund; (c) Escrow Fund. The Trustee shall transfer to the City the balance of the proceeds to be held in the Escrow Fund. Section 3.2. [Reserved]. Section 3.3. Escrow Fund. The proceeds of the Certificates deposited in the Escrow Fund shall be held by the Trustee and applied as follows on the Delivery Date: (a) an amount equal to $ shall be deposited with the Prior Trustee for application to the defeasance of the Prior Certificates pursuant to the Escrow Agreement, and (b)an amount equal to $ shall be retained therein. The moneys in the Escrow Fund not transferred to the Prior Trustee as described above and applied to pay Delivery Costs from time to time upon receipt by the Trustee of a written direction of the City identifying the payee and amount and certifying that such amount is a bona fide Delivery Cost hereunder. Any remaining balance in the Escrow Fund not used to pay Delivery Costs by December 1, 1998 needed for Escrow 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 5.2. Section 3.4. Additional Certificates. So long as any of the Certificates remain Outstanding, the City will not cause any obligations to be issued or incurred payable from Revenues on a parity with the Certificates. 566725.222459.0005 15 Section 3.5. Validitv 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 executed and delivered pursuant to law shall be conclusive evidence of their validity and of compliance with the provisions of law in their execution and delivery. ARTICLE IV PREPAYMENT OF CERTIFICATES Section 4.1. Establishment of Preayment 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 4.2. Mandatory Prepavment. (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 prepayment, without premium. (c) Mandatory PrepUment: 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, 2010, 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: 566725.2\22459.0005 16 Year (June 1) Amount 2010 2011 2012 2013 2014 *maturity Year (June 1) Amount 2015 2016 2017 2018 2019* 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 Tenn 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 4.3. Optional Prepayment. Certificates maturing on or before June 1, are not subject to optional prepayment prior to their stated maturity dates. The Certificates, including portions thereof, maturing on or after June 1, shall be subject to prepayment prior to maturity, upon instructions from the City, on June 1, , 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, 2007 and December 1, 2007 102% June 1, 2008 and December 1, 2008 101% June 1, 2009 and thereafter 1000/0 Section 4.4. Selection of Certificates for Pre aayment, Subject to Section 4.3 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 4.2 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 566725.2V2459.0005 17 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 4.5. Notice of Preoavment. (a) Content. When prepayment is authorized or required pursuant to this Article IV, the Trustee shall give written notice to dte 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 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; Timine. Notice of such prepayment shall be sent by first class mail, postage prepaid, to the Corporation, the City, The Depository, 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. A copy of such notice of redemption shall be sent at least 30 days before the Redemption Date by registered or certified mail or overnight delivery service to the three registered securities depositories listed below or to other registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Certificates specified by the City to the Trustee in writing and, on the date notice is mailed to the Certificate Owners, to the national information services listed below, or to any national information services then in the business of receiving such information, that disseminate notice of redemption of obligations as the Certificates; provided, however, that neither a defect in any notice sent pursuant to this paragraph nor any failure to mail notice as required by this paragraph shall in any manner defeat the effectiveness of a call for redemption if notice of such redemption is mailed to Certificate Owners as prescribed above. Registered Securities Depositories The Depository Trust Company 711 Stewart Avenue Garden City, New York 11530 Telecopy: (516) 227 -4039 or 4190 56625.222459.0005 18 Midwest Securities Trust Company Capital Structures -Call Notification 440 South LaSalle Street Chicago, Illinois 60605 Telecopy: (312) 663 -2343 Philadelphia Depository Trust Company Reorganization Division 1900 Market Street Philadelphia, Pennsylvania 19103 Attention: Bond Department Telecopy: (215) 496 -5058 National Information Services Financial Information, Inc.'s Financial Daily Called Bond Service 30 Montgomery Street, 10th Floor Jersey City, New Jersey 01302 Attention: Editor Kenny Information Service's Called Bond Service 65 Broadway New York, New York 10006 Standard and Poor's Called Bond Record 25 Broadway New York, New York 10004 Section 4.6. Partial Prepayment 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 unprepaid 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 4.1. Effect of Notice of Prepayment, 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 566725.2122459.0005 19 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. 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 4.8. 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 8.7 and 8.8 hereof, and after payment of any amounts due the Trustee pursuant to Sections 9.6 and 9.7 hereof. ARTICLE V LEASE PAYMENTS; LEASE PAYMENT FUND Section 5.1. 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 566725.222459.0005 20 Payments in accordance with the terms hereof, subject only to the provisions contained in Section 9.6 hereof Section 5.2. 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 5.3. Deposits. There shall be deposited in the Lease Payment Fund all Lease Payments received by the Trustee for deposit therein pursuant to Section 4.3 of the Lease (regarding Lease Payments), Section 3.3 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 5.4. Application of Moneys. Except as provided in Section 5.5, 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 5.5. Surplus Revenues. 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 8.7 and 8.8 hereof, shall be withdrawn by the Trustee and remitted to the City after payment of any amounts due the Trustee pursuant to Sections 9.6 and 9.7 hereof. ARTICLE VI Section 6.1. Reserve Fund. The Trustee shall establish a. special fund designated in the name 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 benefit of the Owners, 566725.2122459-0005 21 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 shall be applied solely as provided herein. Section 6.2. 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 Components 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 6.3. Transfers of Excess. The Trustee shall, on or before May 15 and November 15 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 provided, however, such income or interest earned on amounts in the Reserve Fund in excess of the yield on the Certificates shall, at the direction of the City, be deposited in the Earnings Account of the Rebate Fund. Section 6.4. 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 otherwise delinquent Lease Payments (or Lease Payments otherwise due but for abatement) 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. 566725.2122459.0005 22 Section 6.5. 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 Components, Interest Components 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 11 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 14.1 hereof, shall be withdrawn by the Trustee and paid to the City after payment of any amounts due the Trustee pursuant to Sections 9.6 and 9.7 hereof ARTICLE VII NET PROCEEDS FUND Section 7.1. Establishment of Net Proceeds Fund Deposits, The Trustee hereby establishes a special fiord designated in the name 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 61(a) of the Lease. Section 7.2. 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)(I )(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 Components and Interest Components 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 8.7 and 8.8 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 9.6 and 9.7 hereof. Section 7.3. 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, unless provision acceptable to it is made for the payment of its fees and it receives indemnity satisfactory to it relative to such action. ARTICLE VIII MONEYS IN FUNDS; INVESTMENT Section 8.1. 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 5667251122459.4005 23 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 8.2. 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 (b) Registration. Such investments, if registerable, 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 9.5, 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 8.3. 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 8.4. 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 8.5. Valuation and Disposition of Investments. (a) Valuation. Subject to the provisions of Sections 8.7 and 8.8 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 43(d) of the Lease. (b) Disposition. Subject to the provisions of Sections 8.7 and 8.8 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. 564725.2122459.0005 24 Section 8.6. 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 8.7, 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 1.43 of the Code. Section 8.8. Rebate. (a) The Trustee shall establish a special fund designated in the name of the Certificates and as the "Rebate Fund" (the "Rebate Fund ") and accounts therein designate the Earnings Account, the Rebate Account and the Alternate Penalty Account. All money at any time deposited in the Rebate Account or the Alternative Penalty Account of the Rebate Fund shall be held by the Trustee in trust, for payment to the United States Treasury. All amounts on deposit in the Rebate Fund and accounts therein shall be governed by this Section 8.8 and the Tax Certificate, unless the City obtains an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of the Interest Component of each Lease Payment will not be adversely affected for federal income tax purposes if such requirements are not satisfied. (i) There shall be transferred to the Earnings Account for disposition as described in this Section the amounts described in Section 6.3 hereof. (ii) Rebate Account. The following requirements shall be satisfied with respect to the Rebate Account: (A) Annual Computation. Within 55 days of the end of each Certificate Year, the City shall calculate or cause to be calculated the amount of rebatable arbitrage for the Certificates, in accordance with Section 148(f)(2) of the Code and Section 1.148 -3 of the Rebate Regulations (taking into account any applicable exceptions with respect to the computation of the rebatable arbitrage described in the Tax Certificate (e.g., the temporary investments exceptions of Section 148(f)(4)(B) and (C) of the Code), and taking into account whether the election pursuant to Section 148(f)(4)(C)(vii) of the Code (the "12% Penalty ") has been made), for this purpose treating the last day of the applicable Certificate Year as a computation date, within the meaning of Section 1.148 -1(b) of the Rebate Regulations (the "Rebatable Arbitrage "). The City shall obtain expert advice as to the amount of the Rebatable Arbitrage to comply with this Section. (B) Annual Transfer. Within 55 days of the end of each Certificate Year for which Rebatable Arbitrage must be calculated as required by the Tax Certificate, upon the written direction of an Authorized Representative of the City, an amount shall be deposited to each subaccount of the Rebate Account by the Trustee from any funds, including the Earnings Account, so designated 566725.2;22459.6005 25 by the City if and to the extent required, so that the balance in the Rebate Account shall equal the amount of Rebatable Arbitrage so calculated by or on behalf of the City in accordance with (A) of this Subsection (a)(ii) with respect to the Certificates. In the event that immediately following any transfer required by the previous sentence, or the date on which the City determines that no transfer is required for such Certificate Year, the amount then on deposit to the credit of the applicable subaccount of the Rebate Account exceeds the amount required to be on deposit therein, upon written instructions from an Authorized Representative of the City, the Trustee shall withdraw the excess from the Rebate Account and then credit the excess to the Lease Payment Fund. (C) Payment to the Treasury. The Trustee shall pay, as directed in writing by an Authorized Representative of the City, to the United States Treasury, out of amounts in each subaccount of the Rebate Account, (1) Not later than 60 days after the end of (A) the fifth Certificate Year for the Certificates, and (B) each applicable fifth Certificate Year thereafter, an amount equal to at least 90% of the Rebatable Arbitrage calculated as of the end of such Certificate Year for the Certificates; and (2) Not later than 60 days after the payment or redemption of all the Certificates, an amount equal to 100% of the Rebatable Arbitrage calculated as of the end of such applicable Certificate Year, and any income attributable to the Rebatable Arbitrage, computed in accordance with Section 148(f) of the Code. In the event that, prior to the time of any payment required to be made from the Rebate Account, the amount in the Rebate Account is not sufficient to make such payment when such payment is due, the City shall calculate or cause to be calculated the amount of such deficiency and deposit an amount received from any legally available source equal to such deficiency prior to the time such payment is due. Each payment required to be made pursuant to this Subsection (a)(ii) 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 Intemal Revenue Service Form 8038 -T, which form shall be prepared by the City and provided to the Trustee, or shall be made in such other manner as directed by the City in accordance with the Code. (iii) Alternative Penalty Account. (A) Six -Month Computation. If the 1 I2% Penalty has been elected, within 85 days of each particular Six -Month Period, the City shall determine or cause to be determined whether the 1' /2% Penalty is payable (and the amount of such penalty) as of the close of the applicable Six -Month Period. The City shall obtain expert advice in making such determinations. (B) Six -Month Transfer. Within 85 days of the close of each Six - Month Period, the Trustee, at the written direction of an Authorized 566725.2122459.0005 26 Representative of the City, shall deposit an amount in the Alternative Penalty Account from any source of funds held by the Trustee pursuant to this Trust Agreement and designated by the City in such written directions or provided to it by the City, if and to the extent required, so that the balance in the Alternative Penalty Account equals the amount of 1' /a% of the Penalty due and payable to the United States Treasury determined as provided in Subsection (a)(iii)(A) above. In the event that immediately following any transfer provided for in the previous sentence, or the date on which the City determines that no transfer is required for such Certificate Year, the amount then on deposit to the credit of the Alternative Penalty Account exceeds the amount required to be on deposit therein to make the payments required by Subsection (C) below, the Trustee, at the written direction of an Authorized Representative of the City, may withdraw the excess from the Alternative Penalty Account and credit the excess to the Lease Payment Fund. (C) Payment to the Treasury. The Trustee shall pay, as directed in writing by an Authorized Representative of the City, to the United States Treasury, out of amounts in the Alternative Penalty Account, not later than 90 days after the close of each Six -Month Period the 1' /2% Penalty, if applicable and payable, computed with respect to the Certificates in accordance with Section 148(f)(4) of the Code. in the event that, prior to the time of any payment required to be made from the Alternative Penalty Account, the amount in such Account is not sufficient to make such payment when such payment is due, the City shall calculate the amount of such deficiency and direct the Trustee, in writing, to deposit an amount equal to such deficiency into the Alternative Penalty Account from the Earnings Account or any other funds held by the Trustee pursuant to this Trust Agreement and designated by the City in such written directions prior to the time such payment is due. Each payment required to be made pursuant to this Subsection (a)(ii) shall be made to the internal Revenue Service, Philadelphia, Pennsylvania 19255 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038 -T, which form shall be prepared by the City and provided to the Trustee, or shall be made in such other manner as the City shall direct in accordance with the Code. (b) Disposition of Unexpended Funds. Any funds remaining in the Rebate Fund with respect to the Certificates after redemption and payment of the Certificates and the payments described in Subsection (a)(ii)(C) or (a)(iii)(C) (whichever is applicable), may be withdrawn by the Trustee at the written direction of the City and utilized in any manner by the City. (c) Survival of Defeasance and Final Payment. Notwithstanding anything in this Section or this Trust Agreement to the contrary, the obligation of the City to comply with the requirements of this Section shall survive the defeasance and final payment of the Certificates. (d) The Trustee shall be deemed conclusively to have complied with the provisions of this Section 8.8 if it follows the written directions of the City and shall have no liability or responsibility for enforcing compliance by the City with the terms of this Section 8.8. 566725M 22459.0005 27 (e) In the event that immediately following the calculations required by the Tax Certificate and the transfer of accounts required by the subsections (a) -(d) 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 (d) above, upon written instructions from the City, the Trustee shall withdraw the excess from the Rebate Fund (and accounts therein) and credit the excess to the Lease Payment Fund. (f) The Trustee shall invest all amounts held in the Rebate Fund and accounts therein 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 to the City until all rebate requirements have been satisfied and certified by the City to the Trustee. Section 8.9. Information Conceming 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 ConceminQ Investments. The Trustee shall provide notice to the City of any investments made under this Article VIII in monthly financial statements. ARTICLE IX THE TRUSTEE Sec 'qn 9, 1. Appointment of Trustee. (a) Appointment. U.S. Bank Trust National 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 Iess than $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. 566725.2\22459,0005 28 (d) Resi >n ation. 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 9.2. 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. 1, 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 9.3. 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. (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 parries 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 Requested 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 566725.2 @2459.0005 29 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, famishing or use of the Project or the Site. Before taking any action under Article XIH hereof or this Section at the request or declaration of the Owners, the Trustee may require indemnity satisfactory to the Trustee be famished 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 iri connection with any action. Section 9.4. Rialits 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 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 9.5. Standard of Qrp. 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 5667251\22459.6005 30 conduct of his affairs. The Trustee shall make investments as provided in Section 8.2. 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 9.6. 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 9.7. 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, 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. 566725.2\22459.0005 31 Section I O.I. 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 10.3 hereof, shall have been filed with the Trustee. No such modification or amendment shall: (i) 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 (ii) 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 (iii) 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 10.2 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 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: (i) 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 (ii) 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 (iii) 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 566725,2 \22459.0005 32 Trustee (which may be based upon opinions as provided in Section 9.3(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 10.2. 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 10.2 in the event the consent of the Owners is required pursuant to Section 10.1(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 10.3 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 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 10.3. 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 10.3 hereof. Section 10.4. 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 566725.222459.0005 33 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 10.5. 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 10.6. Amendatory Endorsement of Certificates. Subject to Section 10.1 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 10.7. 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. Section 10.8. 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. COVENANTS; NOTICES Section 11.1. 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 1 l .2. 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. 5667252\22459.0005 34 Section 11.3. 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 11.4. 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 11.5. City Budgets. In accordance with Section 2.1(g) of the Lease, the City will provide the Trustee with an annual certification by December 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 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 11.6. 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 11.7. Federal Tax Covenants. Notwithstanding any other provision of this Trust Agreement, absent an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of the Interest Components with respect to the Certificates will not be adversely affected, the City covenant to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income and specifically covenants, without limiting the generality of the foregoing, as follows: (a) Private Activity. The City will not take or omit to take action or refrain from any action or make any use of the proceeds of the Certificates of any other monies or property which would cause the Certificates to be "private activity bonds" within the meaning of Section 141 of the Code; 566725.2\22459.0005 35 (b) Arbitrate. The City will make no use of the proceeds of the Certificates or of any other amounts or property, regardless of the source, or take or omit to take any action which will cause the Certificates to be "arbitrage bonds" within the meaning of Section 148 of the Code; (c) Federal Guarantee. The City will make no use of the proceeds of the Certificates or take or omit to take any action that would cause the Certificates to be "federally guaranteed" within the meaning of Section 149(b) of the Code; (d) Information Reporting. The City will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149(e) of the Code; (e) Hedge Bonds. The City will make no use of the proceeds of the Certificates or any other amounts or property, regardless of the source, or take or omit to take any action that would cause the Certificates to be considered "hedge bonds" within the meaning of Section 149(g) of the Code unless the City takes all necessary action to assure compliance with the requirements of Section 149(8) of the Code to maintain the exclusion from gross income of the Interest Components due with respect to the Certificates for federal income tax purposes; and (f) Miscellaneous. The City will take no action inconsistent with its expectations stated in the Tax Certificate and will comply with the covenants and requirements stated therein and incorporated by reference herein, Section 11.8. Nonce 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. Section 11.9. Continuing Disclosure Agreement. The City hereby covenants and agrees that it will comply with and carry out all of its obligations under the Continuing Disclosure Agreement to be executed and delivered by the City in connection with the execution of the Certificates. Notwithstanding any other provision of this Trust Agreement, failure of the City to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default; however, any Owner or Beneficial Owner may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Section 11.9. For purposes of this Section, `Beneficial Owner" means any person which has or shares the power, directly or indirectly, to make investment decisions concerning ownership of any Certificates (including persons holding Certificates through nominees, depositories or other intermediaries). ARTICLE XII Section 12.1. 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. 566725.2=459MO5 36 Section 12.2. No Liability of the City or Comoration 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 12.3. Limited Liability of Trustee. (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 Citv. 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 parry 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 9.5. (d) Recitals and Agreements of Corporation and Citv. 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 12.4. Limitation of Rights 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 renal 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 13.1. 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. 566725.2\22459.0005 37 Section 13.2. 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 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 13.3. Application 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 LY 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 Components 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 Components 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 Components due on such date to the persons entitled thereto, without any discrimination or preference. Section 13.4. 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 566925.2\22454.0005 38 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. Section 13.5. 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 XIU 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 13.6. 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 13.7. 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 13.8. 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 proceedings 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. 566725.2\22459.0005 39 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 13.9. 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 expanses 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 14.1. Defeasance. (a) Methods. If and when any Outstanding Certificates shall be paid and discharged in any one or more of the following ways: (i) 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; (ii) 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 (iii) Government Obligations: by irrevocably depositing with the Trustee, in trust, noncaliable 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 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 566725.2 @2459.0005 40 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 (21 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 certificates, Trustee shall receive an opinion of Special Counsel as to the effect that (1) the refunding certificates are being issued in compliance with the laws of the State, (2) the interest on the refunding certificates 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 8.7 and 8.8 hereof, or paid to the Trustee pursuant to Section 9.6 and 9.7 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 14.2. 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 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. 566725.222459.0005 41 Section 14.3. 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 14.4. 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 14.5, 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 14.6. 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 14.7. 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 14.8. 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. 5667251'+22454.0005 42 IN WITNESS WHEREOF, the parties have executed this Trust Agreement as of the date and year first above written. U.S. Bank Trust National Association, as Trustee In Authorized Signatory NEWPORT BEACH PUBLIC FACILITIES CORPORATION, as Lessor 0 Corporation Representative CITY OF NEWPORT BEACH, as Lessee In City Representative 566725.222459.0005 43 rie REFUNDING CERTIFICATE OF PARTICIPATION Series 1998 (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, 1998 . REGISTERED OWNER: 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, 1998 (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 chartered city and 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 U.S. Bank Trust National 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, 1998, and semiannually thereafter on June I 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 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 566725M22459,0005 A -I 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, 1998, in which event interest shall be payable from June 1, 1998). 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 U.S. Bank Trust National Association, as Trustee, acting pursuant to the Trust Agreement. U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee Authorized Signatory Date of Execution: 566925.2\22459.0005 A -2 [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, 1998 (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 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 566925.2\22459M05 A -3 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 an 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, 2010, . 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 (June 1) 2010 2011 2012 2013 2014 Amount Year (June 1) 2015 2016 2017 2018 2019 . (maturity) Amount 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, 2008 are not subject to optional prepayment prior to their stated maturity dates. Certificates maturing on or after June 1, 2008 are subject to optional prepayment prior to maturity or any Certificate Payment Date on or after June 1, 2007, as a whole, or in part in inverse order of maturity and by lot within a maturity at the respective prepayment prices 566725.Z22459.0005 A-4 (expressed as percentages of principal amount) set out below, plus accrued interest thereon to the prepayment date: Prepayment Dates PrepUment Prices June 1, 2007 and December 1, 2007 102% June 1, 2008 and December 1, 2008 101% June 1, 2009 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 duty 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 perforated 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. 5667252;22454.0005 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 on the face of the within Certificate in every particular, without alteration or enlargement or any change whatsoever. Signature Guaranteed NOTICE: Signature(s) must be guaranteed by a member of the New York Stock Exchange or a commercial bank or trust company 566725.2\22459.0005 A -6 EXHIBIT B SCHEDULE OF LEASE PAYMENTS Lease Interest Principal Payment Date Component Component Total 566725.222459.0005 B -I 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 FTfi �l CITY OF NEWPORT BEACH Lessee Dated as of June 1, 1998 566678.2\22459.0005 DEFINITIONS AND EXHIBITS Section 1.1. Definitions and Rules of Construction ................. Section 1.2. Exhibits ................................. ............................... rJt41NLq -111 REPRESENTATIONS, COVENANTS AND WARRANTIES Section 2.1. Representations, Covenants and Warranties of the City...... ..... ..... ... ......... Section 2.2. Representations, Covenants and Warranties of the Corporation ................ GIB "0 11 REFUNDING OF THE PRIOR CERTIFICATES Section 3.1. Deposit of Certificate Proceeds ....................... ... ......... --- ... .... ........ Section 3.2. Payment of Project Costs ... ......................... .................. .....-- ........... Section 3.3. Completion Certification......_ ............................ ............................... Section 3.4. Further Assurances and Corrective instruments ...._ .......... ............ ... Section 3.5. Substitution and Release..... . ... - ...... ..... — ..... — .......... .. _.................. ARTICLE IV AGREEMENT TO LEASE; TERM OF LEASE; LEASE PAYMENTS; ADDMONAL PAYMENTS Section4, L Lease ......................................................... ............................... Section4.1 Term . ....... -- ...... ......... ...... .... ....... ......... ... ............ .. .......... ....... Section 4.3. Lease Payments. .............. -- ................... ......... ...... ......... Section 4.4. No Withholding, . .................. Section 4.5, Fair Market Rental Value.....—. ... ............... Section 4.6. Assignment of Lease Payments ................ ............................... Section 4.7. Use and Possession...... ...... ............ .................... -- Section 4.8. Abatement of Lease Payments in Event of Loss of Use........... Section 4,9. Additional Payments ................................. ............................... Section 4.10. Net - Net -Net Lease.............. ...... .... --- ...... ...... . ARTICLE V INSURANCE Page 2 3 3 5 ..........6 .... - 6 ....6 ....6 ..........6 .7 .7 .9 .4 9 .9 10 10 10 Section 5.1. Public Liability and Property Damage ............................................ .............................10 Section 5.2. Workers' Compensations......_ ....................................................... ..............................I I Section 53. Casualty Insurance ........................................................................ ............................... l 1 Section 5.4. Rental Interruption Insurance .......................................................... .............................12 Section 5.5, Title Insurance. . ... ....... -- .......... .................... — ... --- ...... .... - 12 566678.2\22459.0005 1 TABLE OF CONTENTS UM Section 5.6. General Insurance Provisions .......................................................... .............................12 Section5.7. Cooperation ..................................................................................... .............................13 ARTICLE VI DAMAGE, DESTRUCTION AND EMINENT .DOMAIN; USE OF NET PROCEEDS Section 6.1. Application of Net Proceeds.... . ....... ...... _ ........... ...................... ____ ......... 13 Section 6.2. Application of Other Moneys .. ............................... ARTICLE VII ARTICLE VIII ASSIGNMENT, SUBLEASING AND AMENDMENT Section 8.1. Assignment by the Corporation ....................................................... .............................21 Section 8.2. Assignment and Subleasing by the City. . ......... ....................... Section 8.3. Amendments and Modifications ..................................................... .............................21 ARTICLE IX COVENANTS WITH RESPECT TO THE SITE Section 7.1. Use of the Site; Non - Abandonment ................................................ .............................15 ___ .... .21 Section 7.2. Interest in the Site. . . . ... - ............... _ .......... .................... ...... ...... 15 Section 7.3. Quiet Enjoyment. . .... _ ............ ....... ............. 15 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 .. .............................16 .... ... . 24 Section 7.7. Modification of the Site ................................................................... .............................17 ... __24 Section7.8. Liens ............................................................................................... .............................18 Section 7.9. Corporation's Disclaimer of Warranties .......................................... .............................18 Section 7.10. No Condemnation of the Site . ..... .................. ...... .................... ._.......................... ,,,,,.,.18 Section 7.11. Compliance with Environmental Law, Regulations, Etc ................. .............................19 Section 7.12. Environmental Compliance ............................................................. .............................19 ARTICLE VIII ASSIGNMENT, SUBLEASING AND AMENDMENT Section 8.1. Assignment by the Corporation ....................................................... .............................21 Section 8.2. Assignment and Subleasing by the City. . ......... ....................... Section 8.3. Amendments and Modifications ..................................................... .............................21 ARTICLE IX 566678.2\22459.0065 ii EVENTS OF DEFAULT AND REMEDIES Section 9.1. Events of Default Defined.._ . .... __ ......... .................... .......... ___ .... .21 Section 9,2. Remedies on Default........ ....... _ ..... ........ _......,...... ., ........ .............. ........... ............,,.,..22 Section 9.3. No Remedy Exclusive .................................................................... .............................24 Section 9.4. Agreement to Pay Attomeys` Fees and Expenses........................... .............................24 Section 9.5. No Additional Waiver Implied by One Waiver._... ...... .............................. ..... 24 Section 9.6. Application of the Proceeds from the Re -Lease of the Project............................. .... ... . 24 Section 9.7. Trustee and Certificate Owners to Exercise Rights.,... ................................. ... __24 566678.2\22459.0065 ii I ". DI"GOMA"I IN I KV Section 10.1. Mandatory Prepayment From Net Proceeds or Other Moneys. Section 10.2. Optional Prepayments............................... ............................... Section 10.3. Credit for Amounts on Deposit.. . ...... ....... Section 10.4. Effect of Prepayment . ...... --- ...... — .... ........... ................... ARTICLE XI MISCELLANEOUS Section 11.1. Notices ...... ............................... Section 11.2. Binding Effect .... — ... ..... ......... Section 11.3. Severability.............................. Section 11.4. Execution in Counterparts........ Section 11.5. Applicable Law.. . Exhibit A - Schedule of Lease Payments . Exhibit B - General Description of the Project., Exhibit C - Form of Lease Supplement ............. Exhibit D - Legal Description ........................... 566678.2%22459.0005 iii Page ---24 .........25 .......25 .......25 .......26 — ....26 ---26 ---26 ---27 —A-1 —B-1 —D-1 THIS PROJECT LEASE, dated as of June 1, 1998, by and between the NEWPORT BEACH PUBLIC FACILITIES CORPORATION, (the "Corporation "), a nonprofit corporation duly organized and existing under the laws of the State of California, as lessor and CITY OF NEWPORT BEACH, (the "City") a chartered city and municipal corporation duly organized and existing under the Constitution and laws of said State, as lessee; WHEREAS, the Corporation and the City have previously provided financing for the acquisition and construction of certain improvements described in Exhibit B hereto referred to as the "Project" by entering into a Project Lease (the "Prior Lease ") dated as of June 1, 1992 and authorizing and directing the execution and delivery of Certificates of Participation (the "Prior Certificates "), evidencing an undivided and proportionate interest in certain lease payments to be made by the City thereunder; and WHEREAS, the City has previously entered into a Site Lease dated as of June 1, 1992 (the "Prior Site Lease ") with the Corporation under which the Corporation has agreed to lease the Site (as herein defined) from the City and to improve the Site by providing for the acquisition, construction and improvement of the Project and to lease back the Project to the City, and which Site Lease provides that the title to such Project shall vest in the City at the expiration of such Site Lease (as provided in Section 8 thereof); and WHEREAS, pursuant to the City Charter and Government Code of the State of California, the City may enter into leases and agreements relating to real property and equipment to be used by the City; and WHEREAS, the City is authorized to enter into the transactions contemplated hereunder to provide refinancing for the Project; and WHEREAS, the City Council (the "Council ") has determined that it is in the best interests of the City and for the common benefit of the citizens residing in the City to refinance the Project by refunding the Prior Certificates and securing the remaining lease payments due under the Prior Lease pursuant to Section 10.3 thereof, and WHEREAS, the Corporation and the City wish to amend and restate the Prior Lease to refinance its obligations thereunder by entering into this Project Lease (the "Lease") and authorizing and directing the execution and delivery of Refunding Certificates of Participation, described below, evidencing an undivided and proportionate interest in Lease Payments to be made by the City hereunder, and 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 to improve the Site by providing for the acquisition, construction and improvement of the Project and to lease back the Project to the City, and which Site Lease provides that the title to such Project shall vest in the City at the expiration of such Site Lease (as provided in Section 8 thereof) and 566678.2=459.0005 contains other terms and conditions as the City Council of the City deems to be in the best interest of the City; 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: s t r 41421 Section 1.1. Definitions and Rules of Construction. Unless the context otherwise requires, the capitalized terns 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. Bank Trust National Association, 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. "Asbestos Containing Materials" shall mean material in friable form containing more than one percent (1 %) of the asbestiform varieties of (a) chrysoltile (serpentine); crocidolite (ricbeckite); (c) amosite (cummington- itegrinerite); (d) anthophyllite; (e) tremolite; and (f) actinolite. "Environmental Regulation" shall mean all Laws and Regulations, now or hereafter in effect, with respect to Hazardous Materials, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act, as amended (42 U.S.C. Section 9601, et sea.) (together with the regulations promulgated thereunder, "CERCLA" ), the Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 6901, et seq.) (together with the regulations promulgated thereunder, "RCRA "), the Emergency Planning and Community Right -to -Know Act, as amended (42 U.S.C. Section 11001, et SeMc .) (together with the regulations promulgated thereunder, "Title IIP'), the Clean Water Act, as amended (33 U.S.C. Section 1321, et sM.) (together with the regulations promulgated thereunder, "CWN ), the Clean Air Act, as amended (42 U.S.C. Section 7401, et seq.) (together with the regulations promulgated thereunder, "CAA") and the Toxic Substances Control Act, as amended (15 U.S.C. 2601 et M.) (together with the regulations promulgated thereunder, "TSCA "), and any state or local similar laws and regulations and any so- called local, state or federal "superfund" or "superlien" law. "Hazardous Substances" means any substance, waste, pollutants, or contaminants now or hereafter included in such (or any similar) term under any federal, state or local code, statute, regulation or ordinance now in effect or hereafter enacted or amended. "Lease Supplement" means one or more amendments to this Lease executed substantially in the form attached as Exhibit C hereto. "Permitted Encumbrances" means, as of any particular time: (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 566678.2\22459.0005 2 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, (vi) 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 Project by the City; and (vii) 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. " Proiect' means the Project described in Exhibit B hereto. "Site" means the site or sites described in Exhibit D hereto together with all improvements from time to time thereon. Section 1.2. Exhibits. The following Exhibits are attached to, and by reference made a 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. Exhibit D: Legal Description of the Site. WISI C04:911 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. chartered city and municipal corporation of the State, duly organized and existing under the Constitution and laws of the State. (b) Authorization; Enforceability. The City Charter and 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 lease transaction agreements, and the City has duly authorized and executed all of the aforesaid lease transaction 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 56667&2=459.0005 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 (i) 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 City Charter, 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, 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 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 Lease 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) Bud et. 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 566678.2\22459.0005 4 to the extent unpaid in that Fiscal Year in its budget throughout such Fiscal 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 I of each year famish 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 nonprofit corporation 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 lease and sell the same, and has duly authorized the execution and delivery of all of the aforesaid lease transaction 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 Encumbranceq. 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. (d) General Tax and Arbitrage Covenant. The Corporation 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 Certificates 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 Certificates or any other funds of the City or take or omit to take any other action that would cause such Certificates 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 566678.2\22459.0005 5 Treasury issued thereunder and under Section 103 of the Internal Revenue Code of 1986, as amended, to the extent that such requirements are, at the time, applicable and in effect. ARTICLE III REFUNDING OF THE PRIOR CERTIFICATES Section 3.1. Deposit of Certificate Proceeds. On the Closing Date the Corporation agrees to transfer or cause to be transferred to the City certain moneys derived from the sale of the Certificates and to be deposited with the Trustee as provided in Section 3.01 of the Trust Agreement, Section 3.2. Pant of Project Costs. The Corporation hereby appoints, authorizes and directs the City to act as its agent to provide for the defeasance of the Prior Certificates. Section 3.3. Completion Certification. The acquisition, construction, improvement or conclusion of the Project has occurred and the City has previously delivered to the Trustee the certificate of completion with respect thereto. 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. Section 3.5. Substitution and Release. The City shall have the right from time to time to add other real property and improvements (subject only to Permitted Encumbrances) or to substitute other real property or improvements (subject only to Permitted Encumbrances) for all or a portion of the Site or to release a portion of the real property and improvements constituting the Site, if it has provided the Trustee with a written Lease Supplement and has obtained and provided to the Trustee each of the following: (a) Written consent of each municipal bond insurance company that has insured the Certificates, if any; (b) A copy of the written notice sent to each Rating Agency that has rated the Certificates describing the proposed addition, substitution or release; (c) A certificate from an independent and qualified MAI real estate appraiser selected by the City setting forth his or her findings that the Site as constituted following such addition, substitution or release (i) has an annual fair rental value during the remainder of the Term which is equal to or greater than the total annual Lease Payments and Additional Payments (assuming that the annual Additional Payments due in the future will equal the average annual Additional Payments prior to such addition, substitution or release) required to be paid hereunder during any year of the remainder of the Term, and (ii) has a useful life at least equal to the remaining Term hereof; (d) Certificates of insurance applicable to the Site (at and after the addition, substitution or release) which comply with the requirements of Sections 5.1, 5.3, 5.4 and 5.5 hereof; 566678.2122459.0005 6 (e) An opinion of Bond Counsel to the effect that such addition, substitution or release will not adversely affect the exclusion from gross income for federal income tax purposes and the exemption from State personal income taxation of the Interest Component of the Lease Payments and that this Lease and the Site Lease, as amended, remain valid and binding obligations of the City; and (f) A certificate of an Authorized Representative of the City that the essentiality of the remaining or substituted real property to City operations is at least comparable to that of the real property and improvements being released. In connection with a substitution or release, all interests of the Corporation, and its assignee, in the portion of the Site released shall terminate and the Corporation and its assignee shall execute and record with the County Recorder of the County of Orange all documents deemed necessary by the City to evidence such termination of interest. Upon receipt of the items described in subparagraphs (a), (b), (c), (d), (e) and (f) above, the Trustee also shall execute a Lease Supplement and, if necessary, a Supplemental Trust Agreement, and shall not impose on the City any further conditions or prerequisites to the requested addition, substitution or release. The City shall cause the Lease Supplement to be recorded in the real property records of the County of Orange. All costs and expenses incurred in connection with such addition, substitution or release shall be home by the City. No addition, substitution or release under this Section 3.6 shall be, by itself, the basis for any reduction in or abatement of the Lease Payments due from the City hereunder. ARTICLE IV AGREEMENT TO LEASE; TERM OF LEASE; LEASE PAYMENTS; ADDITIONAL PAYMENTS Section 4.1. Lease, The Corporation hereby leases the Site, as improved by the Project, to the City, and the City hereby leases the Site, as improved by the Project, 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 card on June 1, 2020, 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, (ii) 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. 566678.222459.0005 (b) If on June 1, 2020, 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 shall be extended until all Certificates shall be fully paid, except that the Term shall in no event be extended beyond June 1, 2030. Section 4.3. Lease Payments. (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 semiannual 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 (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 Requirement, 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: 566678.222459.0005 (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 semiannual 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 Pam. 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 that are due to the Trustee 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. 566679.2\22459.0005 9 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, or in the Lease Payment Fund, or from 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. ERVICOM INSURANCE Section 5.1. Public Liability and Property Damage. (a) 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 566678.222459.0005 10 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 occurrence 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 canceled 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 famished to the Corporation. (b) Joint 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. (c) 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' Compensations. The City shall maintain workers' compensation insurance issued by a responsible carrier authorized under the laws of the State of Califomia 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) Coverage and Amount. The City shall procure and maintain, or cause to be procured and maintained, throughout the Tenn 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. 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. The City is not required to obtain earthquake or flood insurance with respect to the Site (unless such earthquake or flood insurance is available at reasonable cost on the open market from reputable insurance companies). Such insurance shall be in an amount equal to 100% of the full insurable value of the Site as improved (except that such insurance may be subject to deductible clauses of not to exceed $100,000 for anyone loss). 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, 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. The insurance required pursuant to this Section 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 as may be selected by the City. Copies of the insurance policies, 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 canceled by the issuer thereof without at least thirty (3 0) days' advance written notice to the Corporation, the City and Trustee, and shall be payable to the Trustee. Such insurance 566678.2\22454,0005 11 may be maintained as part of or in conjunction with any other insurance carried or required to be carried by the City. (b) Payment of Net Proceeds. The Net Proceeds of such insurance shall be paid to the Trustee and deposited in the Net Proceeds Fund and applied as provided in Section 6.1. Section 5.4. Rental Interruption Insurance. (a) Coverage and Amount. The City shall maintain or cause to be maintained on or prior to the date that the City files the certificate of completion, rental interruption insurance in an amount not less than the maximum remaining scheduled Lease Payments in any future twelve (12) 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 interruption 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 Reserve Fund to the extent necessary and to 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 leasehold 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 paid to the Trustee, deposited in the Net Proceeds Fund and 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 to the City to comply with the provisions hereof. All such policies shall give the Corporation, the City and 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 f 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 Corporation and the Trustee shall not be responsible for the sufficiency or adequacy of any insurance herein required and 566678.2122454.0005 12 shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any Ioss 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. ._I 1.f_ DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS Section 6.1. Application of Net Proceeds. (a) Deposit in Net Proceeds Fund. The City shall remit promptly to the Trustee any Net Proceeds received by the City from insurance coverage required pursuant to Sections 5.3 and 5.5 hereof and the Trustee shall deposit such Net Proceeds pursuant to Section 7.01 of the Trust Agreement 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 (except for rental interruption insurance which shall be transferred to the Trustee for deposit in the Lease Payment Fund). (b) Disbursement for Replacement or Repair of the Project. Upon receipt of the certification described in paragraph (1) below and the requisition described in paragraph (2) below, the 566678.2\22459.0005 13 Trustee shall disburse moneys in the Net Proceeds Fund to the person, firm or corporation named in the requisition as provided in Section 7.02 of the Trust Agreement. and the Trustee that: (1) Certification. The City Representative must certify to the Corporation (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, 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 Com In etion. 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 (iii) 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. 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 Fund 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 Fund, moneys, together with other available moneys therein, if any, sufficient to prepay the Certificates in 566678.2\22459.0005 14 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. MWiZ4>" 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 During 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. Section 7.3. ui t Enjayuent. 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 tQ 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 566678.2122459.0005 15 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; provided however, the Corporation's assigns shall not have an obligation to cause such proper maintenance. Section 7.6. Maintenance, Utilities Taxes and Assessments, Operating Costs. (a) Maintenance: Repairs and Re llaacement. Throughout the Tenn 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 sub lessee thereof. In exchange for the Lease Payments herein provided, the Corporation agrees to provide only the Site, as herembefore more specifically set forth. The City waives the benefits of subsections I 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, Unli1y 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 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. 566678.2\22459.0005 16 Section 7.7. Modification of the Site. (a) Additions, Modifications and Irnrovements. 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 and Trustee 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. (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 the 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 4.8 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 566678.M24591.0005 17 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 Proiect. 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 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. Coloration'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. Section 7.10. No Condemnation of the Site. The Lessee hereby covenants and agrees, to the extent it may lawfully do so, that so long as any of the Certificates remain outstanding and unpaid, the Lessee will not exercise the power of condemnation with respect to the Site. The Lessee further covenants and agrees, to the extent it may lawfully do so, that if for any reason the foregoing covenant is determined to be unenforceable or if the Lessee should fail or refuse to abide by such covenant and condemns the Site, the appraised value of the Site shall not be less than the greater of (i) if such Certificates are then subject to redemption, the principal and interest components of the Certificates outstanding through the date of their redemption, or (ii) if such Certificates are not then subject to redemption, the amount necessary to defease such Certificates to the first available redemption date in accordance with the Trust Agreement. 566678.2\22459.0005 18 Section 7.11. Compliance with Environmental Law. Regulations. Etc. (a) The City has, after due inquiry, no knowledge and has not given or received any written notice indicating that the Site or the past or present use thereof or any practice, procedure or policy employed by it in the conduct of its business materially violates any applicable law, regulation, code, order, rule, judgment or consent agreement, including, without limitation, those relating to zoning, building, use and occupancy, fire safety, health, sanitation, air pollution, ecological matters, environmental protection, hazardous or toxic materials, substances or wastes, conservation, parking, architectural barriers. to the handicapped, or restrictive covenants or other agreements affecting title to the Site (collectively, "Laws and Regulations "). Without limiting the generality of the foregoing, neither the City nor to the best of its knowledge, after due inquiry, any prior or present owner, tenant or subtenant of any of the Site has, other than as set forth in subsections (a) and (b) of this Section or as may have been remediated in accordance with Laws and Regulations, (i) used, treated, stored, transported or disposed of any material amount of flammable explosives, polychlorinated biphenyl compounds, heavy metals, chlorinated solvents, cyanide, radon, petroleum products, asbestos or any Asbestos Containing Materials, methane, radioactive materials, pollutants, hazardous materials, hazardous wastes, hazardous, toxic, or regulated substances or related materials, as defined in CERCLA, RCRA, CWA, CAA, TSCA and Title III, and the regulations promulgated pursuant thereto, and in all other Environmental Regulations applicable to the City, any of the Site or the business operations conducted by the City thereon (collectively, "Hazardous Materials") on, from or beneath its Site, (ii) pumped, spilled, leaked, disposed of, emptied, discharged or released (hereinafter collectively referred to as "Release ") any material amount of Hazardous Materials on, from or beneath the Site, or (iii) stored any material amount of petroleum products at the Site in underground storage tanks. (b) Excluded from the representations and warranties in subsection (a) hereof with respect to Hazardous Materials are those Hazardous Materials in those amounts ordinarily found in the inventory of or used in the operation of a city library, the use, treatment, storage, transportation and disposal of which has been and shall be in compliance with all Laws and Regulations. (c) No Site located in an area of high potential incidence of radon has an unventilated basement or subsurface portion which is occupied or used for any purpose other than the foundation or support of the improvements to such Site. Section 7.12. Environmental Compliance. (a) The City shall not use or permit the Site or any part thereof to be used to generate, manufacture, refine, treat, store, handle, transport or dispose of, transfer, produce or process Hazardous Materials, except, and only to the extent, if necessary to maintain the improvements on the Site and then, only in compliance with all Environmental Regulations, and any state equivalent laws and regulations, nor shall it permit, as a result of any intentional or unintentional act or omission on its part or by any tenant, subtenant, licensee, guest, invitee, contractor, employee and agent, the storage, transportation, disposal or use of Hazardous Materials or the Release or threat of Release of Hazardous Materials on, from or beneath the Site or onto any other property excluding, however, those Hazardous Materials in those amounts ordinarily found in the inventory of or used in the operation of a city civic center, the use, storage, treatment, transportation and disposal of which shall be in compliance with all Environmental Regulations. Upon the occurrence of any Release or threat of Release of Hazardous 566678.2122459.0005 19 Materials, the City shall promptly commence and perform, or cause to be commenced and performed promptly, [without cost to the Insurer], all investigations, studies, sampling and testing, and all remedial, removal and other actions necessary to clean up and remove all Hazardous Materials so released, on, from or beneath the Site or other property, in compliance with all Environmental Regulations. Notwithstanding anything to the contrary contained herein, underground storage tanks shall only be permitted subject to compliance with subsection (d) and only to the extent necessary to maintain the improvements on the Site. (b) The City shall comply with, and shall use its best efforts to assure that its tenant's, subtenants, agents, licensees, employees, contractors, and agents comply with, all Environmental Regulations and shall keep the Site free and clear; provided, however, that notwithstanding that a portion of this covenant is limited to the City's use of its best efforts, the City shall remain solely responsible for ensuring such compliance and such limitation shall not diminish of affect in any way the City's obligations contained in subsection (c) hereof as provided in subsection (c) hereof Upon receipt of any notice from any person with regard to the Release of Hazardous Materials on, from or beneath the Site, the City shall give prompt written notice thereof to the Insurer, (and in any event, prior to the expiration of any period in which to respond to such notice under any Environmental Regulation). (c) Irrespective of whether any representation or warranty contained in Section 7.13 is not true or correct, the City shall defend, indemnify and hold harmless, the Certificate Owners and the Insurer, its partners, depositors and each of its and their employees, agents, officers, directors, trustees, successors and assigns, from and against any claims, demands, penalties, fines, attorneys' fees (including, without limitation, attorneys' fees incurred to enforce the indemnification contained in this Section 7.14, consultants' fees, investigation and laboratory fees, liabilities, settlements (five (5) Business Days' prior notice of which the Trustee or Insurer, as appropriate, shall have delivered to the City), court costs, damages, losses, costs or expenses of whatever kind or nature, known or unknown, contingent or otherwise, occurring in whole or in part, arising out of or in any way related to, (i) the presence, disposal, Release, threat of Release, removal, discharge, storage or transportation of any Hazardous Materials on, from or beneath the Site, (ii) any lawsuit brought or threatened, settlement reached (five (5) Business Days' prior notice of which the Trustee or Insurer, as appropriate, shall have delivered to the City), or governmental order relating to Hazardous Materials on, from or beneath any of the Site, (iv) any violation of Environmental Regulations or subsection (a) or (b) [, or (e) hereof by it or any of its agents, tenants, employees, contractors, licensees, guests, subtenants or invitees, and (v) the imposition of any governmental Lien for the recovery of environmental cleanup or removal costs. To the extent that the City is strictly liable under any Environmental Regulation, its obligation to the Certificate Owners and Issuer and the other indemnitees under the foregoing indemnification shall likewise be without regard to fault on its part with respect to the violation of any Environmental Regulation which results in liability to any mdemnitee. (d) The City shall conform to and carry out a reasonable program of maintenance and inspection of all underground storage tanks if and when installed and shall maintain, repair, and replace such tanks only in accordance with Laws and Regulations, including but not limited to Environmental Regulations. 566678.2\22459.0005 20 ARTICLE VIII ASSIGNMENT, SUBLEASING AND AMENDMENT Section 8.1. Assignment by the Co orp ration. 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 Subleasine 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 dtis 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 LY 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 of a petition applicable to the City in any proceedings 566678.2\222459.0005 21 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 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 1M?vIEDIATELY 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 BehalfqLCity. 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 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 the 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 -lease 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 566681\22459.0005 22 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, Additional 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 by a court of competent jurisdiction 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 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 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 and Additional 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 to the opinion of Special Counsel that such re- leasing will not cause interest on the 566678.2122459.0005 23 Certificates to become includable in gross income for Federal income tax purposes or subject to State of California personal income taxes. 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 Pav Attomevs' Fees and Expenses. hi the event either party to this Lease should default under any of the provisions hereof and the nondefaulting party should employ attorneys or incur other expenses for the collection of moneys or the enforcement of performance or observance of any obligation or agreement on the part of the defaulting party contained herein, the defaulting party agrees that it will pay on demand to the nondefaulting party the reasonable fees 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 parry 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 RiEhts. 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 assigrunent 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 Prepayrnent From Net Proceeds 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 or other moneys transferred to the Trustee pursuant to Section 6.1(c) or 6.2 hereof and deposited in the Prepayment Fund 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. 566678.2122459.6605 24 Section 10.2. Optional Prayments. 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. The City and the Corporation hereby agree that such prepayment in part shall be credited towards the City s obligations hereunder among the principal components of Lease Payments not previously paid on the same basis as the prepayment of Certificates, so that following such prepayment the remaining annual Lease Payments will, given that amounts prepaid will be used to prepay Certificates in integral multiples of $5,000, be proportionate to the remaining Certificate payments. Section 10.3. Credit for Amounts on Deposit. (a) 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 and the Reserve Fund shall be credited toward the amounts then required to be so prepaid. (b) Notwithstanding any other provision of this Lease, the City may, on any date, secure the payment of any unpaid Lease Payment attributable to the Site by an irrevocable deposit by it with the Trustee of cash and/or Permitted Investments of the type described in paragraph (b) of the definition thereof, which are adequate in the opinion of an independent certified public accountant to provide for payment of such unpaid Lease Payment as it becomes due and payable hereunder. In the event that the City has secured the payment of all unpaid Lease Payments attributable to the Site, and provided that the City has made arrangements acceptable to the Trustee to pay any Additional Payments due hereunder, all obligations of the City under this Lease, and all security provided by this Lease for said obligations, shall cease and terminate, excepting only the obligation of the City to make, or cause to be made, Lease Payments from such deposit. Said deposit shall be deemed to be and shall constitute a special fund for the payment of Lease Payments in accordance with the provisions of this Lease. The Corporation shall execute and deliver such further instruments and take such further action as may reasonably be requested by the City for carrying out the leasehold interest transfer for which a security deposit is made hereunder. Section 10.4. Effect of Prepa nom. (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 4.9 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 566678M22459.0005 25 the remaining Lease Payments pro rata, corresponding to the resulting prepayment of principal with respect to the Certificates. ' M1_ d MISCELLANEOUS Section l ll. 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 first class or 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: Newport Beach Public Facilities Corporation 3300 Newport Boulevard Newport Beach, California 92659 Attention: Chief Financial Officer If to the Trustee: U.S. Bank Trust National Association 550 South Hope Street, Suite 500 Los Angeles, CA 90071 Attention: Corporate Trust Department 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 l 1.2. 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 1 l .3. Severabilitv. in the event any provision o£ 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. 566678.2\22459.0005 26 Section 11.5. Applicable Law. This Agreement shall be governed by and construed in accordance with the Iaws of the State of California. 566678.2\22459.0005 27 IN WITNESS THEREOF, the Corporation has caused this Lease to be executed in its name by its duty 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 Lm Authorized Representative CITY OF NEWPORT BEACH, as Lessee City Manager 566678.2\22459.0005 28 STATE OF CALIFORNIA COUNTY OF On personally appeared ss. before me, , Notary Public, (Print Name of Notary Public) ❑ personally known to me -or- proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is /are subscribed to the within instrument and acknowledged to me that he /she /they executed the same in his /her /their authorized capacity(ies), and that by his /her /their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal, ignature Of MoTary Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. E p Individual ❑ Corporate Officer Title(s) ❑ Partner(s) ❑ Limited ❑ General • Attomey -In -Fact • Trustee(s) ❑ Guardian /Conservator ❑ Other: Signer is representing: Name Of Persons) Or Entity(ies) 566678.2122 459.4005 Title Or Type Of Document Number Of Pages Date Of Document Signers) Other Than Named Above STATE OF CALIFORNIA COUNTY OF On personally appeared } ss. before me, , Notary Public, (Print Name of Notary Public) ❑ personally known to me -or- proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is /are subscribed to the within instrument and acknowledged to me that he /she /they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature Of Notary Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. CAPACITY CLAIMED BY SIGNER ❑ Individual ❑ Corporate Officer T {le(s) ❑ Partner(s) ❑ Limited ❑ General • Attomey -ln -Fact • Trustee(s) ❑ Guardian /Conservator ❑ Other: Signer is representing: Name Of Person(s) Or Entity(ies) 566698142454.0005 DESCRIPTION OF ATTACHED DOCUMENT Titte Or Type Of Number Of Pages Date Of Document Signers) Other Than Named Above VAN i i:3 Y lI:\ Lease Interest Principal Payment Date Component Component Total 566678.2\22459.0005 A -1 The project is a library for the City of Newport Beach located on the Site. The library is a two story building of approximately 52,000 square feet constructed pursuant to plans and specifications on file with the City of Newport Beach. [CITY TO UPDATE.] 566678.2\22459.0005 B -t There is hereby subjected to the terms of that certain Lease Agreement (the "Lease "), dated as of June 1, 1998, between the Newport Beach Public Facilities Corporation (the "Corporation ") and the City of Newport Beach, California (the "City ") the following real property [and improvements, if applicable] (the "Substituted Property ") which shall hereafter comprise the Site, as defined therein: Description of Substituted Property: Certification 1, the Authorized Representative of the City, hereby certify that: (1) the useful life of the Substituted Property at least equals the remaining Term of the Lease; and (2) the fair rental value of the Substituted Property is such that no reduction of Lease Payments will occur upon the delivery of the Substituted Property and the portion of the Lease Payments and Additional Payments attributable to the Substituted Property does not exceed the fair rental value for the Substituted Property; and (3) the Substituted Property will be used by the City for authorized public purposes, can be leased under the provisions of the Lease and the Permitted Encumbrances thereon will not materially impair the City's use of the Site; (4) the City will cause Exhibit A to the Lease and Exhibit A to the Site Lease and the Assignment Agreement (each as defined in the Lease) to be amended to reflect the Substituted Property and will have such amendments recorded for the Substituted Property and the previous Site in the County of Orange's recorder's office; (5) all of the documents required to be delivered under Section 3.6 of the Lease in connection with the provision of the Substituted Property have been delivered. The undersigned hereby certifies that it has received copies of the documents required pursuant to Section 3.6 of the Lease; and (6) the Site now consists of the Substituted Property set forth in Exhibit 1 hereto and Exhibit A to the Lease is hereby deemed to be deleted in its entirety and replaced by Exhibit 1 hereto, and the schedule of Lease Payments is set forth in Exhibit 2 hereto and Exhibit C to the Lease is hereby deemed to be amended to incorporate the schedule of Lease Payments set forth in Exhibit 2 hereto. $66678 - 2=459.0005 C -1 I, the City Representative, hereby certify that the Substituted Property will be leased to 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 Property while the Certificates remain outstanding. CITY OF NEWPORT BEACH, as Lessee By Its The Undersigned Acknowledges Receipt of this Supplement: as assignee of the Lessor By Its 566678.2\22459.0005 C -2 ' � 1 DESCRIPTION THE LAND SITUATED IN THE STATE OF CALIFORNIA COUNTY OF ORANGE, CITY OF NEWPORT BEACH, AND IS DESCRIBED AS FOLLOWS: f7fZ•I•IiI.il THE SOUTHWESTERLY ONE -HALF OF PARCEL 2 AS SHOWN ON PARCEL MAP NO, 90 -361, FILED IN BOOK 270, PAGES AS TO 18 INCLUSIVE OF PARCEL MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA. EXCEPTING THEREFROM ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS RIGHTS, AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN, GEOTHERMAL STEAM AND ALL PRODUCTS DERIVED FROM ANW OF THE FOREGOING, THAT MAY BE WITHIN OR UNDER THE LAND, TOGETHER WITH TIM PERPETUAL RIGHT OF DRILLING, DRILLING, DRILLING, MINING, EXPLORING AND OPERATING THEREFOR AND STORING IN AND REMOVING THE SAME FROM THE LAND OR ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND ]MINE FROM LANDS OTHER THAN THOSE CONVEYED HEREBY, OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE LAND, AND TO BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT, HOWEVER, THE RIGHT TO DRILL MINE, STORE, EXPLORE AND OPERATE THROUGH THE SURFACE OR THE UPPER 500 FEET OF THE SUBSURFACE OF THE LAND, AS RESERVED BY THE IRVINE COMPANY IN THE DEED RECORDED MAY 8, 1998 AS INSTRUMENT NO. 92- 304758 OF OFFICIAL RECORDS. THE NORTHEASTERLY ONE -HALF OF PARCEL 2 AS SHOWN ON PARCEL MAP NO. 90 361, FILED IN BOOK 270, PAGES 15 TO 18 INCLUSIVE OF PARCEL MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA. • t t • '• •1 tt " 11 " 566678.2122459.0005 D -I BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT, HOWEVER, THE RIGHT TO DRILL, MINE, STORE, EXPLORE AND OPERATE THROUGH THE SURFACE OR UPPER 500 FEET OF THE SUBSURFACE OF THE LAND, AS RESERVED BY THE IRVINE COMPANY IN GIFT DEED RECORDED MAY 8, 1998 AS INSTRUMENT NO, 92- 304760 OF OFFICIAL RECORDS. 566678.2\22459.0065 D -2 Recording Requested By: When Recorded Mail To: CITY OF NEWPORT BEACH 3300 Newport Boulevard Newport Beach, California 92659 Attn: Finance Director [Space above for recorder.] 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 FIfl U.S. BANK TRUST NATIONAL ASSOCIATION. as Trustee Dated as of June 1, 1998 566195.2\22459.0005 ASSIGNMENT AGREEMENT This ASSIGNMENT AGREEMENT, executed and entered into as of June 1, 1998, by NEWPORT BEACH PUBLIC FACILITIES CORPORATION, a nonprofit corporation duly organized and existing under and by virtue of the laws of the State of California (the "Corporation"), and accepted by U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee under the herein - defined Trust Agreement (the "Trustee "); WITNESSETH: WHEREAS, the Corporation and the 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 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 (the "Project "), to the City 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 the Project; WHEREAS, the Corporation desires to assign without recourse all of its rights in and under the Site Lease and 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 data hereof, by and among the Trustee, the Corporation and the City, the Trustee has agreed to execute and deliver Refunding 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 I. 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 in, to and under the Site Lease. 566195.2\22459.0005 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 in, to and under the Lease (excepting only the Corporation's rights under Section 9.4 of the Lease, regarding payment of attorneys' fees and the Corporation's obligations pursuant to Section 2.2 of the Lease). 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. 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. Section 4. No Other Claims. The Corporation hereby represents and warrants that there are no present and outstanding claims on Lease Payments or any other moneys assigned by the Corporation 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. 566195.2\22459.0005 2 TN WI'T'NESS 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. NEWPORT BEACH PUBLIC FACILITIES CORPORATION Corporation Representative Accepted by: U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee M 566195.2\224540Q05 Authorized Signatory STATE OF CALIFORNIA COUNTY OF On personally appeared ss. before me, , Notary Public, (Print Name of Notary Public) ❑ personally known to me -or- proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is /are subscribed to the within instrument and acknowledged to me that he /she /they executed the same in his /her /their authorized capacity(ies), and that by his /her /their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal, Signature Uf Notary M2 I L41,01 FA Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. • V ❑ individual ❑ Corporate Officer Tftle(s) ❑ Partner(s) ❑ Limited ❑ General ❑ Attorney -In -Fact ❑ Trustee(S) ❑ Guardian /Conservator ❑ Other: Signer Is representing: Name Of Person(s) Or Entity(ies) 566195.2+22459.0005 Title Or Type Of Document Number Of Pages Date Of Document Signer(s) Other Than Named Above STATE OF CALIFORNIA COUNTY OF On personally appeared } ss. } before me, , Notary Public, (Print Name of Notary Public) ❑ personally known to me -or- proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is /are subscribed to the within instrument and acknowledged to me that he /she /they executed the same in his/her /their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. signature Of Notary Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. CAPACITY CLAIMED BY SIGNER ❑ Individual ❑ Corporate Officer Title(s) ❑ Partner(s) ❑ Limited ❑ General • Attorney -In -Fact • Trustee(s) ❑ Guardian/Conservator ❑ Other: Signer is representing: Name Of Person(s) Or Entlty(ies) 566195.2\22459A005 DESCRIPTION OF ATTACHED DOCUMENT Title Or Type Of Document Number Of Pages Date Of Document Signer(s) Other Than Named Above DESCRIPTION THE LAND SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF ORANGE, CITY OF NEWPORT BEACH, AND IS DESCRIBED AS FOLLOWS: PARCEL A: THE SOUTHWESTERLY ONE -HALF OF PARCEL 2 AS SHOWN ON PARCEL MAP NO. 90 -361, FILED IN BOOK 270, PAGES 15 TO 18 INCLUSIVE OF PARCEL MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA. EXCEPTING THEREFROM ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS RIGHTS, AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN, GEOTHERMAL STEAM AND ALL PRODUCTS DERIVED PROM ANY OF THE FOREGOING, THAT MAY BE WITHIN OR UNDER THE LAND, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING AND OPERATING THEREFOR AND STORING IN AND REMOVING THE SAME FROM THE LAND OR ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE FROM LANDS OTHER THAN THOSE CONVEYED HEREBY, OU, OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE LAND, AND TO BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP, MAIN"T"AIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT, HOWEVER, THE RIGHT TO DRILL, MINE, STORE, EXPLORE AND OPERATE THROUGH THE SURFACE OR THE UPPER 500 FEET OF THE SUBSURFACE OF THE LAND, AS RESERVED BY THE IRVINE COMPANY IN THE DEED RECORDED MAY 8, 1998 AS INSTRUMENT NO. 92- 304758 OF OFFICIAL RECORDS. 17s11:T40flos � THE NORTHEASTERLY ONE -HALF OF PARCEL 2 AS SHOWN ON PARCEL MAP NO. 90 -361 FILED IN BOOK 270, PAGES 15 TO 18 INCLUSIVE OF PARCEL MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA. EXCEPTING THEREFROM ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL. GAS RIGHTS, AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN, GEOTHERMAL STEAM AND ALL PRODUCTS DERIVED PROM ANY OF THE FOREGOING, THAT MAY BE WITHIN OR UNDER THE LAND, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING AND OPERATING THEREFOR AND STORING IN AND REMOVING THE SAME FROM THE LAND OR ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE FROM LANDS OTHER THAN THOSE CONVEYED HEREBY, OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE LAND, AND TO BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR. DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT, HOWEVER, THE RIGHT TO DRILL, MINE, STORE, EXPLORE AND OPERATE THROUGH THE SURFACE OR THE UPPER 500 FEET OF THE SUBSURFACE OF THE LAND, AS RESERVED BY THE IRVINE COMPANY IN THE GIFT DEED RECORDED MAY 8, 1998 AS INSTRUMENT NO. 92- 304760 OF OFFICIAL RECORDS. 5661952=459.0005 A -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 [Space above for 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, 1998 569210.2\22459.M05 SITE LEASE This Site Lease is made and entered into as of June 1, 1998, by and between CITY OF NEWPORT BEACH (the "City "), a chartered city and municipal corporation duly organized and existing under the laws of the State of California, as lessor hereunder, and NEWPORT BEACH PUBLIC FACILITIES CORPORATION (the "Corporation "), a nonprofit corporation duly organized and existing under the laws of the State of California, as lessee hereunder. WITNESSETH: WHEREAS, the City may lease (as lessor) any real property of the City for municipal purposes; and WHEREAS, the City and the Corporation have previously entered into a prior Site Lease (the "Prior Site Lease ") dated as of June 1, 1992 with respect to the Site (defined herein) and a prior Project Lease of the same date to provide for the lease financing of the City's central library building project; and WHEREAS, this Site Lease (the "Site Lease"), without an option to purchase, amends and restates the Prior Site Lease and is entered into by the City for the purpose of leasing the real property described in Exhibit `°A" hereto (the "Site ") to the Corporation; and WHEREAS, the City intends to lease back such Site from the Corporation pursuant to the terms of a Project Lease dated the date hereof (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 Refunding Certificates of Participation (the "Certificates ") representing, in part, proportionate interests in Lease Payments and Prepayments made by the City under the Lease; 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 presently and in the future 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, which terminates as provided therein; provided, however, if Lease Payments 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, 2020 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); and provided further that this Site Lease shall not expire during the term of any lease executed and delivered in place of the Lease 5662101122459.0605 pursuant to Section 13.10 of the Trust Agreement, unless such term is sooner terminated as 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 acquiring or constructing, or causing the acquisition or construction of, the Project and of leasing back the Site and Project 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. 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, that so long as any of the Certificates are Outstanding and unpaid in accordance with their terms, the Lease Payments assigned by the Corporation to the Trustee under the Assignment 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 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. 566210.2t22459.0005 Section 13. Partial Invalid. 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 shall be affected thereby, and each provision of this Site Lease shall be valid and enforceable to the fullest extent permitted by law, Section 14. 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: 3300 Newport Boulevard Newport Beach, California 92659 Attention: Chief Financial Officer The Corporation and the City, by notice given hereunder, may designate different addresses to which subsequent notices or other communications will be sent. Section 17, Captions. 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. 566210.2122459.0005 Section 19. 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 M City Manager • , C o Vold"WI—VW11 CORPORATION Un Corporation Representative 566210.=24s9.0005 4 STATE OF CALIFORNIA COUNTY OF On personally appeared ss, before me, , Notary Public (Print Name of Notary Public) ❑ personally known to me -or- proved to me on the basis of satisfactory evidence to be the person(s) whose name($) is /are subscribed to the within instrument and acknowledged to me that he /she /they executed the same in his /her /their authorized capacity(ies), and that by his /her /their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature Of Notary Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. MID ■ ❑ Individual ❑ Corporate Officer Title(s) ❑ Partner(s) ❑ Limited General • Attorney -In -Fact • Trustee(s) ❑ Guardian /Conservator ❑ Other: Signer is representing: Name Of Person(s) Or Erdity(ies) 566210.X22454.0005 � • • E s♦ Or Type Of Document Number Of Pages Date Of Document Signer(s) Other Than Named Above STATE OF CALIFORNIA COUNTY OF On personally appeared ss. ) before me, , Notary Public, (Print Name of Notary Public) ❑ personally known to me -or- proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) istare subscribed to the within instrument and acknowledged to me that he/she /they executed the same in his /her /their authorized capacity(ies), and that by his /her /their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature Of Notary Though the data below is not required by taw, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. ❑ Individual ❑ Corporate Officer Title(s) ❑ Partner(s) ❑ Limited ❑ General • Attomey -in -Fact • Trustee(s) ❑ Guardian /Conservator ❑ Other: Signer is representing: Name Of Person(s) Or Entity(ies) 5662101@2459.0005 Title Or Type Of Document Number Of Pages Date Of Document Signer(s) Other Than Named Above iAMIMM DESCRIPTION THE LAND SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF ORANGE, CITY OF NEWPORT BEACH, AND IS DESCRIBED AS FOLLOWS: PARCEL A: THE SOUTHWESTERLY ONE -HALF OF PARCEL 2 AS SHOWN ON PARCEL MAP NO. 90 -361, FILED IN BOOK 270, PAGES 15 TO 18 INCLUSIVE OF PARCEL MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA. EXCEPTING THEREFROM ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS RIGHTS, AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN, GEOTHERMAL STEAM AND ALL PRODUCTS DERIVED PROM ANY OF THE FOREGOING, THAT MAY BE WITHIN OR UNDER THE LAND, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING AND OPERATING THEREFOR AND STORING IN AND REMOVING THE SAME PROM THE LAND OR ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE FROM LANDS OTHER THAN THOSE CONVEYED HEREBY, OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE LAND, AND TO BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT, HOWEVER, THE RIGHT TO DRILL, MINE, STORE, EXPLORE AND OPERATE THROUGH THE SURFACE OR THE UPPER 500 FEET OF THE SUBSURFACE OP THE LAND, AS RESERVED BY THE IRVINE COMPANY IN THE DEED RECORDED MAY 8, 1998 AS INSTRUMENT NO. 92- 304758 OF OFFICIAL RECORDS. .._ ; THE NORTHEASTERLY ONE -HALF OF PARCEL 2 AS SHOWN ON PARCEL MAP NO. 90- 361, FILED IN BOOK 270 PAGES 15 TO 18 INCLUSIVE OF PARCEL MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA. EXCEPTING THEREFROM ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS RIGHTS, AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN, GEOTHERMAL. STEAM AND ALL PRODUCTS DERIVED PROM ANY OF THE FOREGOING, THAT MAY BE WITHIN OR UNDER THE LAND, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING AND OPERATING THEREFOR AND STORING IN AND REMOVING THE SAME PROM THE LAND OR ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE FROM LANDS OTHER THAN THOSE CONVEYED HEREBY, OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE LAND, AND TO BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT, HOWEVER, THE RIGHT TO DRILL, MINE, STORE, EXPLORE AND OPERATE THROUGH THE SURFACE OR THE UPPER 500 FEET OF THE SUBSURFACE OF THE LAND, AS RESERVED BY THE IRVINE COMPANY IN THE GIFT DEED RECORDED MAY 8, 1998 AS INSTRUMENT NO. 92-304760 OF OFFICIAL RECORDS. 566210.2'22459.0005 AA by and between y[�'� ' (i)_T�I��i�L;ii7:7117ti07aF�fll 1=41 U.S. BANK, TRUST NATIONAL ASSOCIATION, as Escrow Bank Dated as of June 1, 1998 REFUNDING CERTIFICATES OF PARTICIPATION SERIES 1998 (CENTRAL LIBRARY BUILDING PROJECT) 588141122459.0005 THIS ESCROW AGREEMENT, dated as of June 1, 1998 (this "Agreement "), is by and between the City of Newport Beach (the "City ") and U.S. Bank Trust National Association, acting in its capacity as escrow bank (the "Escrow Bank") pursuant to this Agreement, 97TNESSETH: WHEREAS, to finance the costs of certain public facilities, the City has previously executed documents related to the $7,500,000 City of Newport Beach Certificates of Participation, Series 1992 (Central Library Building Project) (the "Prior Certificates "); and WHEREAS, the execution and delivery of the Prior Certificates was effected pursuant to the provisions of a Trust Agreement, dated as of June 1, 1992 (the "Prior Trust Agreement"), by and between U.S. Bank Trust National Association, as successor trustee to Bank of America National Trust and Savings Association, as trustee (the "Prior Trustee"), the Newport Beach Public Facilities Corporation (the "Corporation "), and the City, and the Prior Certificates represent undivided proportionate interest of the owners thereof in payments to be made by the City, as the rental for certain real property and improvements thereto pursuant to a Project Lease, dated as of June 1, 1992 (the "Prior Lease "), by and between the Corporation and the City; and WHEREAS, the City desires to refund all Prior Certificates that remain outstanding as set forth in Schedule A with the proceeds of the $ Refunding Certificates of Participation, Series 1998 (Central Library Building Project) (the "Refunding Certificates "), executed and delivered pursuant to the Trust Agreement, dated as of June 1, 1998, by and among the City, the Corporation and U.S. Bank Trust National Association, as trustee thereunder (the "Trustee"), evidencing and representing interest in the holders thereof in lease payments to be made by the City to the Corporation under the Project Lease, dated as of June 1, 1998, by and between the City and the Corporation; and WHEREAS, the City has determined that it is in its best interests to cause the Refunding Certificates to be executed and delivered and apply the net proceeds of the Refunding Certificates to secure the payment of lease payments due under the Prior Lease as permitted by Section 14.1 thereof and effect a refunding of the Prior Certificates with the lease payments due under the Prior Lease and payable from the amounts described herein, all as set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the City and the Escrow Bank agree as follows: Section 1. Deposit of Moneys. (a) As used herein, the term "Investment Securities" means the Investment Securities set forth in Schedule B hereto which constitute direct noncallable nonprepayable obligations issued by the United States Treasury. The City hereby deposits with the Escrow Bank $ representing $ of the net proceeds of the Refunding Certificates, and 588141.1=459.0045 $_ transferred from those certain funds held by the Prior Trustee with respect to the Prior Certificates, to be held in irrevocable escrow by the Escrow Bank separate and apart from other funds of the City, the Escrow Bank, and the Prior Trustee, in a fund hereby created and established and to be known as the "Escrow Fund", and to be applied solely as provided in this Agreement. The City represents that such moneys are at least equal to an amount sufficient to purchase the principal amount of investment Securities set forth in Schedule B hereto; and the aggregate principal amount of Investment Securities described in Schedule B hereto, together with all interest due or to become due on such Investment Securities, plus $_ held as cash, will be sufficient to pay when due (i) the principal and interest evidenced and represented by the Prior Certificates to and including June 1, 2000, and (ii) the redemption price due with respect to the Prior Certificates on June 1, 2000. (b) The Escrow Bank hereby acknowledges receipt of the written opinion of certified public accountants, dated , 199$ relating to the Investment Securities. Section 2. Use and Investment of Moneys. The Escrow Bank acknowledges receipt of the moneys described in Section I and agrees: (a) immediately to invest $ of the monies described in Section 1(a) hereof in the Investment Securities all as set forth in Schedule B hereto and to deposit such Investment Securities in the Escrow Fund and to hold $ uninvested as cash; and (b) to make the payments required under Section 3(a) hereof at the times set forth in Section 3(a)hereof. Section 3. Payment of Prior Certificates. (a) Payment. As the principal of the Investment Securities set forth in Schedule B hereof and the investment income and earnings thereon are paid, the Escrow Bank shall, no later than the respective Lease Payment Dates (as defined in the Prior Trust Agreement), transfer from the Escrow Fund to the Prior Trustee amounts sufficient to pay (i) on each December 1 and June I to and including June 1, 2000, the principal and interest evidenced and represented by the Prior Certificates, and (ii) on June 1, 2000, the redemption price of such Prior Certificates, all as further described in Schedule E attached hereto. Such transfers shall constitute payment of the lease payments pursuant to Section 14.1 of the Prior Lease and payment of the principal and interest evidenced and represented by the Prior Certificates. (b) Unclaimed Moneys. Any moneys which remain unclaimed for two (2) years after June 1, 2000, shall be repaid by the Escrow Bank to the City, provided, however, that the Escrow Bank shall first publish a notice as more fully described in the Prior Trust Agreement that said moneys remain unclaimed. (c) Priority of Payments. The holders of the Prior Certificates shall have a first lien on the moneys and Investment Securities in the Escrow Fund which are allowable and sufficient to pay the Prior Certificates until such moneys and Investment Securities are used and applied as provided in this Agreement. Any cash or securities held in the Escrow Fund are irrevocably pledged only to the Prior Certificate holders. 588141.1=459.0005 Section 4. Performance of Duties. The Escrow Bank agrees to perform the duties set forth herein. Section 5. Reinvestment. Upon written direction of the City, the Escrow Bank may reinvest any uninvested amounts held as cash under this Agreement in noncallable nonprepayable obligations which are direct obligations issued by the United States Treasury or obligations which are unconditionally guaranteed as to full and timely payment by the United States of America provided (i) the amounts of and dates on which the anticipated transfers from the Escrow Fund to the paying agent for the payment of the principal or prepayment price, and interest evidenced and represented by the Prior Certificates will not be diminished or postponed thereby, (ii) the Escrow Bank shall receive the unqualified opinion of nationally recognized municipal bond attorneys to the effect that such reinvestment will not adversely affect the exclusion from gross income of interest with respect to the Refunding Certificates or the Prior Certificates, (iii) the Escrow Bank shall receive from an independent certified public accountant a certification that, immediately after such reinvestment, the principal of and interest on obligations in the Escrow Fund will, together with other cash on deposit in the Escrow Fund available for such purposes, be sufficient without reinvestment to pay, when due, the principal or prepayment price and interest evidenced and represented by the Prior Certificates; and (iv) the Escrow Bank shall receive an opinion of nationally recognized bond counsel that such reinvestment is permissible under this Agreement. Except as provided in this Section 5 and Section & hereof, the Escrow Bank shall have no power or duty to invest any funds held under this Agreement or to sell, transfer or otherwise dispose of the moneys or Investment Securities held hereunder. In no event shall the Escrow Bank invest or reinvest monies held under this Agreement in mutual funds or unit investment trusts. Notwithstanding any other provision in this Agreement, the Escrow Bank shall reinvest amounts held in the Escrow Fund as described in Schedule E. The Escrow Bank may hold any uninvested cash in demand deposit accounts maintained by any of its corporate affiliates as depository agent Section 6. Indemnity. The City hereby assumes liability for, and hereby agrees (whether or not any of the transactions contemplated hereby are consummated) to indemnify, protect, save and keep harmless the Escrow Bank and its respective successors, assigns, directors, agents, employees and servants, from and against any and all liabilities, obligations, Iosses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including reasonable legal fees and disbursements) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, the Escrow Bank at any time (whether or not also indemnified against the same by the City or any other person under any other agreement or instrument, but without double indemnity) in any way relating to or arising out of the execution, delivery and performance of this Agreement, the establishment hereunder of the Escrow Fund, the acceptance of the funds and securities deposited therein, the purchase of the Investment Securities, the retention of the investment Securities or the proceeds thereof and any payment, transfer or other application of moneys or securities by the Escrow Bank in accordance with the provisions of this Agreement; provided, however, that the City shall not be required to indemnify the Escrow Bank against the Escrow Bank's own negligence or willful misconduct or the negligent or willful misconduct of the Escrow Bank's respective agents and employees or the breach by the Escrow Bank of the terms of this Agreement. In no event shall the City or the Escrow Bank be liable to any person by reason of the transactions contemplated hereby other than to each other as set forth in this section. The indemnities contained in this section shall survive the termination of this Agreement and resignation or removal of the Escrow Bank. 5 85141.1122459.0005 Section 7. Responsibilities of the Escrow Bank, The Escrow Bank and its respective successors, assigns, agents and servants shall not be held to any personal liability whatsoever, in tort, contract or otherwise, in connection with the execution and delivery of this Agreement, the establishment of the Escrow Fund, the acceptance of the moneys or securities deposited therein, the purchase of the Investment Securities, the retention of the Investment Securities or the proceeds thereof, the sufficiency of the Investment Securities to accomplish the defeasance of the Prior Certificates or any payment, transfer or other application of moneys or obligations by the Escrow Bank in accordance with the provisions of this Agreement or by reason of any non - negligent act, non - negligent omission or non - negligent error of the Escrow Bank made in good faith in the conduct of its duties. The recitals of fact contained in the "Whereas" clauses herein shall be taken as the statements of the City and the Escrow Bank assumes no responsibility for the correctness thereof, The Escrow Bank makes no representation as to the sufficiency of the Investment Securities to accomplish the defeasance of the Prior Certificates or to the validity of this Agreement as to the City and, except as otherwise provided herein, the Escrow Bank shall incur no liability with respect thereto. The Escrow Bank shall not be liable in connection with the performance of its duties under this Agreement except for its own negligence or willful misconduct, and the duties and obligations of the Escrow Bank shall be determined by the express provisions of this Agreement. The Escrow Bank may consult with counsel, who may or may not be counsel to the City, and in reliance upon the written opinion of such counsel shall have full and complete authorization and protection with respect to any action taken, suffered or omitted by it in good faith in accordance therewith. Whenever the Escrow Bank shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering, or omitting any action under this Agreement, such matter may be deemed to be conclusively established by a certificate signed by an authorized officer of the City. Section 8. Substitution of Investment Securities. At the written request of the City and upon compliance with the conditions hereinafter set forth, the Escrow Bank shall have the power to sell, transfer, request the redemption or otherwise dispose of some or all of the Investment Securities in the Escrow Fund and to substitute noncallable nonprepayable obligations (the "Substitute Investment Securities ") constituting direct obligations issued by the United States Treasury or obligations which are unconditionally guaranteed as to full and timely payment by the United States of America. The foregoing may be effected only if (i) the substitution of Substitute Investment Securities for the Investment Securities (or Substitute Investment Securities) occurs simultaneously; (ii) the amounts of and dates on which the anticipated transfers from the Escrow Fund to the Prior Trustee for the payment of the principal and/or prepayment price and/or interest evidenced and represented by the Prior Certificates will not be diminished or postponed thereby; (iii) the Escrow Bank shall receive the unqualified opinion of nationally recognized bond counsel to the effect that such disposition and substitution would not adversely affect the exclusion from gross income of interest evidenced and represented by the Prior Certificates or the Refunding Certificates, and that the conditions of this Section 8 as to the disposition and substitution have been satisfied and that the substitution is permitted by this Agreement; and (iv) the Escrow Bank shall receive from an independent certified public accountant a certification that, immediately after such transaction, the principal of and interest on the Substitute Investment Securities in the Escrow Fund will, together with other cash on deposit in the Escrow Fund available for such purpose, be sufficient without reinvestment to pay, when due, the principal or prepayment price and interest evidenced and represented by the Prior Certificates. Any cash from the sale of Investment Securities (including U.S. Treasury Securities) received from the disposition and substitution of Substitute Investment Securities pursuant to this Section 8 to the extent such cash will not be required, in accordance with the Prior Trust Agreement and this Agreement, and 58814L1122459.0005 as demonstrated in the certification described in (iv) above, at any time for the payment when due of the principal or prepayment price or interest evidenced and represented by the Prior Certificates shall be paid to the City as received by the Escrow Bank free and clear of any trust, lien, pledge or assignment securing such Prior Certificates or otherwise existing under this Agreement. Any other substitution of securities in the Escrow Fund not described in the previous sentence must satisfy the requirements of this Section 8. In no event shall the Escrow Bank invest or reinvest monies held under this Agreement in mutual funds or unit investment trusts. Section 4, Irrevocable Instructions as to Notice. The Escrow Bank hereby acknowledges that upon the funding of the Escrow Fund as provided in this Agreement, the receipt of the opinions described in Section 1(b) of this Agreement and the giving of irrevocable instructions to mail as provided in the Irrevocable Instructions and Request to Prior Trustee and Escrow Bank attached hereto as Schedule C (constituting all of the conditions precedent to the defeasance of the Prior Certificates), the Prior Certificates shall be paid in accordance with the Prior Trust Agreement and the Prior Certificates shall cease to be entitled to any lien, benefit or security under the Prior Trust Agreement. Section 10. Amendments. This Agreement is made for the benefit of the City and the holders from time to time of the Prior Certificates and it shall not be repealed, revoked, altered or amended without the written consent of all such holders, the Escrow Bank, the City and as insurer of the Refunding Certificates; provided, however, but only after the receipt by the Escrow Bank of an opinion of nationally recognized bond counsel that the exclusion from gross income of interest evidenced and represented by the Prior Certificates and the Refunding Certificates will not be adversely affected for federal income tax purposes, the City and the Escrow Bank may, without the consent of, or notice to, such holders, amend this Agreement or enter into such agreements supplemental to this Agreement as shall not adversely affect the rights of such holders and as shall not be inconsistent with the terms and provisions of this Agreement for any one or more of the following purposes: (i) to cure any ambiguity or formal defect or omission in this Agreement; (ii) to grant to, or confer upon, the Escrow Bank for the benefit of the holders of the Prior Certificates any additional rights, remedies, powers or authority that may lawfully be granted to, or conferred upon, such holders or the Escrow Bank; and (iii) to include under this Agreement additional funds, securities or properties. The Escrow Bank shall be entitled to rely conclusively upon an unqualified opinion of nationally recognized bond counsel with respect to compliance with this Section 10, including the extent, if any, to which any change, modification, addition or elimination affects the rights of the holders of the Prior Certificates or that any instrument executed hereunder complies with the conditions and provisions of this Section 10. Section 11. Term. This Agreement shall commence upon its execution and delivery and shall terminate on the later to occur of either (i) the date upon which the Prior Certificates have been paid in accordance with this Agreement, or (ii) the date upon which no unclaimed moneys remain on deposit with the Escrow Bank pursuant to Section 3(b) of this Agreement and all amounts owed to the Escrow Bank shall have been paid in full. Section 12. Com ensation. The Escrow Bank shall receive its reasonable fees and expenses as previously agreed to; provided, however, that under no circumstances shall the Escrow Bank be entitled to any lien nor will it assert a lien whatsoever on any moneys or obligations in the Escrow Fund for the payment of fees and expenses for services rendered by the Escrow Bank under this Agreement. 588141.1122454.61195 Section 13. Resignation or Removal of Trustee as Escrow Bank. (a) The Escrow Bank may resign by giving 30 days prior written notice in writing to the City. The Escrow Bank may be removed (1) by (i) filing with the City and the Escrow Bank of an instrument or instruments executed by the holders of at least 51% in aggregate principal amount of the Prior Certificates then remaining unpaid, (ii) the City delivering written notice to the Escrow Bank, or (2) by a court of competent jurisdiction for failure to act in accordance with the provisions of this Agreement upon application by the City or the holders of 5% in aggregate principal amount of the Prior Certificates then remaining unpaid. (b) No resignation or removal of the Escrow Bank shall become effective until a successor Escrow Bank has been appointed hereunder and until the cash and investments held under this Agreement are transferred to the new Escrow Bank. The City or the holders of a majority in principal amount of the Prior Certificates then remaining unpaid may, by an instrument or instruments filed with the City, appoint a successor Escrow Bank who shall supersede any Escrow Bank theretofore appointed by the City. If no successor Escrow Bank is appointed by the City or the holders of such Prior Certificates then remaining unpaid, within 45 days after notice of any such resignation or removal, the holder of any such Prior Certificates or any retiring Escrow Bank may apply to a court of competent jurisdiction for the appointment of a successor Escrow Bank. Section 1.4. Severability. If any one or more of the covenants or agreements provided in this Agreement on the part of the City or the Escrow Bank to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenants or agreements shall be null and void and shall be deemed separate from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Agreement. Section 15. Counterparts. This Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as one original and shall constitute and be but one and the same instrument. Section 16. Governing Law. This Agreement shall be construed under the laws of the State of California. Section 17, Holidays. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in this Agreement, shall be a legal holiday or a day on which banking institutions in the city in which is located the principal office of the Escrow Bank are authorized by law to remain closed, such payment may be made or act performed or right exercised on the next succeeding day not a legal holiday or a day on which such banking institutions are authorized by law to remain closed, with the same force and effect as if done on the nominal date provided in this Agreement, and no interest shall accrue for the period from and after such nominal date. Section 18. Assignment. This Agreement shall not be assigned by the Escrow Bank or any successor thereto without the prior written consent of the City, except in the event that the Escrow Bank is merged or consolidated into another entity authorized to perform all the duties imposed upon the Escrow Bank hereunder, such entity shall be the successor Escrow Bank without the execution or filing of any paper or performance of any further act. 588141.1122459.0005 Section 19. Moody's and Standard & Poor's. The City agrees to provide to Moody's Investors Service, 99 Church Street, New York, New York 1.0007, Attention: Public Finance Rating Desk/Refunded Bonds, and Standard & Poor's Ratings Group, 25 Broadway, New York, New York 10004, prior notice of each amendment entered into pursuant to Section 10 hereof and a copy of such proposed amendment, and to forward a copy (as soon as possible) of (i) each amendment hereto entered into pursuant to Section 10 hereof, and (ii) any action relating to severability or contemplated by Section 14 hereof. 588141.1\22459.0005 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers and their seals to be hereunder affixed and attested as of the date and year first written above. CITY OF NEWPORT BEACH By: Its: City Manager U.S. BANK TRUST NATIONAL ASSOCIATION, as Escrow Bank By: Its: Authorized Officer 588141.1\22459.0005 �. 01 it Maturity Date Principal Amount interest Rate 5sE14I,1=459.0005 Schedule A -f "Investment Securities" are defined to be, and shall consist as follows: Maturity Par Twe Date .Amount Coupon 598141.1\2.2459.0005 Schedule B -I SCHEDULE C MY Mpg MR VNIA � VIII � J '• .' 1 as U.S. BANK TRUST NATIONAL ASSOCIATION, as trustee ESCROW AGREEMENT RELATING TO A REFUNDING OF $7,500,000 CITY OF NEWPORT BEACH, CALIFORNIA CERTIFICATES OF PARTICIPATION, SERIES 1992 (CENTRAL LIBRARY BUILDING PROJECT) (the "Prior Certificates ") Ladies and Gentlemen: As trustee under that certain Trust Agreement dated as of June 1, 1992 (the "Prior Trust Agreement"), you are hereby notified of the irrevocable election of the City of Newport Beach to defease all of the outstanding Prior Certificates and to redeem on June 1, 2000 all of the Prior Certificates maturing on and after June 1, 2000. You are hereby irrevocably instructed to mail, as provided in the Prior Trust Agreement, notice of redemption of the Prior Certificates scheduled to be redeemed prior to maturity. Such notice shall substantially be in the form annexed hereto as Exhibit X. You are hereby further irrevocably instructed to mail, as soon as practicable, a notice to the holders of the Prior Certificates (in the form annexed hereto as Exhibit Y) that the deposit of investment securities and moneys has been made with U.S. Bank Trust National Association, as Escrow Bank, and that the projected withdrawals from such escrow have been calculated to be adequate to pay the principal, redemption price and interest evidenced and represented by said Prior Certificates outstanding as such become due or are subject to redemption. By: _ Its: City Manager 588141J=459.0005 Schedule C -1 Receipt acknowledged and consented to: U.S. BANK TRUST NATIONAL ASSOCIATION, as Escrow Bank and Prior Trustee By: Its: Authorized Officer $88141.1\22459.0005 Schedule C -2 ON MTKO t • $ $7,500,000 CITY OF O ,... Notice is hereby given to the holders of the outstanding $7,500,000 City of Newport Beach Certificates of Participation, Series 1992 (Central Library Building Project) that the Certificates have been called for redemption prior to maturity on June 1, 2000, in accordance with their terms, at a redemption price of 102% of the principal amount thereof with respect to Certificates maturing on or after June 1, 2001, together with accrued interest evidenced and represented thereby to the date of redemption. The source of the funds to be used for such redemption is the principal of and interest on investment securities heretofore deposited with U.S. Bank Trust National Association, as Escrow Bank, together with moneys, if any, heretofore deposited with the Escrow Bank. The redemption price and accrued interest evidenced and represented by the foregoing Certificates shall become due and payable on June 1, 2000 and, from and after June 1, 2000, interest evidenced and represented by the foregoing Certificates shall cease to accrue and be payable. Holders of the foregoing Certificates will receive payment of the redemption price and accrued interest to which they are entitled upon presentation and surrender thereof at the principal corporate trust office of U.S. Bank Trust National Association, at Los Angeles, California Dated this day of 19 CITY OF NEWPORT BEACH, CALIFORNIA U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee 588141.1=459.0005 Exhibit X -1 MM31��� $7,500,000 CITY OF NEWPORT BEACH, CALIFORNIA CERTIFICATES OF PARTICIPATION, SERIES 1992 (CENTRAL LIBRARY BUILDING PROJECT) Notice is hereby given to the holders of the $7,500,000 City of Newport Beach, Certificates of Participation, Series 1992 (Central Library Building Project) (the "Certificates ") that (i) such Certificates have been advance refunded and defeased; (ii) there has been deposited with U.S. Bank Trust National Association, as Escrow Bank, moneys and investment securities as permitted by the Trust Agreement, dated as of June 1, 1998 (the "Trust Agreement'), relating to the Certificates, the principal of and the interest on which when due will provide moneys which, together with such other moneys deposited with the Escrow Bank, will be sufficient and available (a) to pay on each June 1 and December I to and including June 1, 2002 the principal and interest evidenced and represented by the Certificates and scheduled to be paid on such dates, and (b) to redeem on June 1, 2002 the Certificates maturing after June 1, 2002 at the applicable redemption price contained in the Trust Agreement; and (iii) the Escrow Bank has been irrevocably instructed to redeem all outstanding Certificates on August 1. 1998. In accordance with Section 14.01 of the Prior Trust Agreement, the Prior Trust Agreement has been discharged. At least 30 days, but not more than 60 days, prior to June 1, 2002, in accordance with the terms of the Trust Agreement, the Trustee will mail a redemption notice for the Certificates. Dated this _ day of , 1998. U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee 588141.1\22459.0005 Exhibit Y -1 SCHEDULED IMIUV U, 588141.1\22459.0005 Schedule D -1 Reinvestment Date REINVESTMENT Reinvestment Maturity Amount Rate 588141.1\22459.0005 Schedule E-1 Interest Securi Rate $7,330,000* REFUNDING CERTIFICATES OF PARTICIPATION Series 1998 (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) June ,1998 City of Newport Beach 3300 Newport Boulevard Newport Beach, California 92663 -8915 Ladies and Gentlemen: The undersigned, Miller & Schroeder Financial, Inc. (hereinafter referred to as the "Underwriter'), offers to enter into this purchase agreement (the "Purchase Agreement ") with the City of Newport Beach (herein referred to as the "City"), which will be binding upon the City and the Underwriter upon the City's acceptance hereof. This offer is made subject to the City's acceptance by execution of this Purchase Agreement and its delivery to the Underwriter on or before 11:59 p.m., California time, on the date hereof. L Purchase and Sale. Upon the terms and conditions and upon the basis of the representations, warranties and agreements hereinafter set forth, the City hereby agrees to sell all (but not less than all) of $7,330,000* aggregate principal amount of City of Newport Beach Refunding Certificates of Participation, Series 1998 (Central Library Building Project) (the "Certificates "), dated as of June 1, 1998, at the aggregate purchase price of $ (which is the aggregate principal amount of the Certificates ($7,330,000 *), less an underwriting discount of $ and less an original issue discount of $ , plus interest accrued on the Certificates from June 1, 1998, to the date of the Closing (as hereinafter defined). Each Certificate evidences the proportionate interests of the owners thereof in certain Lease Payments to be made by the City pursuant to, and as defined in, the Project Lease, dated as of June 1, 1998 (the "Project Lease "), by and between the City and the Newport Beach Public Facilities Corporation (the "Corporation ") for the Central Library Building Project (the "Project "). The Underwriter hereby agrees to purchase from the City for offering to the public all (but not less than all) of the Certificates. The Certificates will mature June 1 in the years and bear interest at the respective rates set forth on Exhibit A hereto. The Certificates will be subject to prepayment as set forth in the Official Statement herein described. * Preliminary, subject to change. The Corporation will assign certain of its interests and rights in the Project Lease, including the right to receive Lease Payments, to U.S. Bank Trust National Association (the "Trustee ") pursuant to the Assignment Agreement, dated as of June 1, 1998 . (the "Assignment Agreement "), between the Corporation and the Trustee. 2. Authorizing Instruments. The Certificates shall be executed, delivered and secured under the provisions of a trust agreement, dated as of June 1, 1998 (the "Trust Agreement "), by and among the City, the Corporation and the Trustee. The Certificates are secured by Lease Payments, payable from the revenues of the City lawfully available therefor. The proceeds of the Certificates shall be applied in accordance with the Trust Agreement to (i) advance refund the City's Certificates of Participation, Series 1992 (Central Library Building Project) (the "Refunded Certificates "), (ii) establish a debt service reserve account under the Trust Agreement, and (iii) pay certain costs relating to the execution and delivery of the Certificates. Unless otherwise defined herein, capitalized terms used herein shall have the meaning set forth in the Trust Agreement. 3. Public Offering. The City hereby ratifies, confirms and approves of the use and distribution by the Underwriter prior to the date hereof of the preliminary official statement, dated May _, 1998, relating to the Certificates (the "Preliminary Official Statement "). The City hereby agrees to deliver or cause to be delivered to the Underwriter, within seven (7) business days of the date hereof, copies of the final official statement relating to the Certificates, dated the date hereof (including all information previously permitted to have been omitted by Rule 15c2- 12 and any amendments or supplements as have been approved by the City and the Underwriter) (the "Official Statement ") in such quantity as the Underwriter shall request. The City hereby approves of the use and distribution by the Underwriter of the Official Statement in connection with the offer and sale of the Certificates. The Underwriter agrees to make a bona fide public offering of all the Certificates initially at the public offering prices (or yields) set forth on the cover page of the Official Statement. Subsequent to the initial public offering, the Underwriter reserves the right to change the public offering prices (or yields) as it deems necessary in connection with the marketing of the Certificates. The Certificates may be offered and sold to certain dealers at prices lower than such initial public offering prices. The Underwriter agrees to certify to the City the price at which a substantial amount (at least 10 %) of each maturity of the Certificates were sold to the public. 4. The Closing. At 8:00 a.m., California time, on June _ 1998, or at such other time or on such earlier or later business day as shall have been mutually agreed upon by the City and the Underwriter, the City will deliver or cause to be delivered (i) the Certificates to the Underwriter through the facilities of The Depository Trust Company, and (ii) the closing documents hereinafter mentioned at the offices of Stradling, Yocca, Carlson & Rauth, a Professional Corporation, Newport Beach, California, or another place to be mutually agreed upon by the City and the Underwriter. The Underwriter will accept such delivery and pay the purchase price of the Certificates as set forth in Section I hereof payable in immediately available funds to the order of the City. This payment and delivery, together with the delivery of the aforementioned documents, is herein called the "Closing." 5, Representations, Warranties and Covenants. The City represents, warrants and covenants to the Underwriter that: 2 (a) The City is a charter city, duly organized and operating under the Constitution (the "Constitution ") and laws of the State of California, with full right, power and authority to execute, deliver and perform its obligations under this Purchase Agreement, the Trust Agreement, the Project Lease, the Escrow Agreement, the Assignment Agreement and the Continuing Disclosure Agreement by and between the City and the Trustee, as Dissemination Agent (collectively, the "Financing Documents "); (b) The Financing Documents, when duly executed and delivered by all parties thereto, will constitute valid, legal and binding obligations of the City, enforceable against the City, in accordance with their respective terms, except as the enforceability thereof may be limited by the application of equitable principles, if equitable remedies are sought, or by applicable bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally; (c) The City has, and at the date of the Closing will have, full legal right, power and authority to enter into the Financing Documents, and to cause the execution and delivery of the Certificates to the Underwriter as provided herein, and will have duly authorized and approved the execution and delivery of, and the performance by, the City, of the obligations contained in the Financing Documents; (d) As of the date thereof, the Official Statement did not contain any untrue statement of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (e) If between the date hereof and the date which is 25 days after the End of the Underwriting Period (as hereinafter defined) for the Certificates, an event occurs of which the City has knowledge and which might or would cause the information contained in the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make such information therein, in light of the circumstances under which it was presented, not misleading, the City will notify the Underwriter, and, if in the opinion of the City, the Underwriter or their respective counsel, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the City will forthwith prepare and furnish to the Underwriter (at the expense of the City) a reasonable number of copies (not to exceed 300) of an amendment of or supplement to the Official Statement which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to prospective purchasers, not misleading. For the purposes of this subsection, between the date hereof and the date which is 25 days after the End of the Underwriting Period for the Certificates, the City will furnish such information with respect to itself as the Underwriter may from time to time reasonably request; (f) If the information contained in the Official Statement is amended or supplemented pursuant to paragraph (e) hereof, at the time of each supplement or amendment thereto, the portions of the Official Statement so supplemented or amended (including any financial and statistical data contained therein) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make such information therein, in light of the circumstances under which it was presented, not misleading; (g) After the Closing, the City will not participate in the issuance of any amendment of or supplement to the Official Statement to which, after being famished with a copy, the Underwriter shall reasonably object in writing or which shall be reasonably disapproved by Disclosure Counsel; (h) As used herein and for the purposes of the foregoing, the term "End of the Underwriting Period" for the Certificates shall mean the earlier of (i) the Closing Date wiless the City shall have been notified in writing to the contrary by the Underwriter on or prior to the Closing Date, or (ii) the date on which the End of the Underwriting Period for the Certificates has occurred under Rule 15c2 -12; provided, however, that the City may treat as the End of the Underwriting Period for the Certificates the date specified as such in a notice from the Underwriter stating the date which is the End of the Underwriting Period; (i) At the time of the Closing, to the best of its knowledge, there shall not have been any material adverse changes in the financial condition of the City (as described in the Official Statement) since June 30, 1997; 0) As of the time of acceptance hereof and as of the time of the Closing, and, except as disclosed to the Underwriter, the City is not, nor will be, in material breach of or in material default under any applicable law or administrative regulation of the State of California or the United States, or to the best of its knowledge, any applicable judgment or decree or any trust agreement, Ioan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the City, is a party or is otherwise subject which breach would have a material adverse effect on the Certificates; and, as of such times, the execution and delivery of the Financing Documents and compliance with the provisions of each of them do not and will not conflict with or constitute a breach of or default under any applicable law or administrative regulation of the State of California or the United States or any applicable judgment or decree or any trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the City is a party or is otherwise subject which breach or default would have a material adverse effect on the Certificates; (k) Between the time of acceptance hereof and the Closing, the City will not, without the prior written consent of the Underwriter, issue any Certificates or securities with a pledge of or lien on the Lease Payments superior to or on a parity with the City's obligation to pay the Lease Payments; (1) As of the time of acceptance hereof and the Closing, no litigation is or will be pending and served or, to the knowledge of the City, threatened in any court (i) in any way challenging the City, or (ii) seeking to restrain or enjoin the issuance or delivery of any of the Certificates, or the collection of the Lease Payments, or in any way contesting or affecting the validity of the Certificates, the Financing Documents or the collection of or the pledge of the Lease Payments under the Trust Agreement, or contesting the powers of the City, or the power of the City to execute and deliver the Project Lease, or (iii) contesting in any way the completeness, accuracy or fairness of the Official Statement; (m) As of the time of acceptance hereof and as of the date of the Closing, the City does not and will not have outstanding any indebtedness (other than as described in the Official Statement) which indebtedness is secured by a lien on the Lease Payments superior to or on a parity with the lien of the Project Lease. As of the time of acceptance hereof and as of the date of the Closing, the City does not and will not have outstanding any indebtedness which indebtedness is payable prior to the Project Lease from the Lease Payments except as described in the Official Statement; and (n) The City will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as it may reasonably request in order to qualify the Certificates for offer and sale under the Blue Sky or other securities laws and EI regulations of such states and other jurisdictions of the United States as the Underwriter may designate; provided, however, that the City will not be required to execute a special or general . consent to service of process or qualify as a foreign corporation in connection with any such qualification in any jurisdiction. 6. Closing Conditions. The Underwriter has entered into this Purchase Agreement in reliance upon the representations, warranties and covenants herein and the performance by the City of its obligations hereunder, both as of the date hereof and as of the date of the Closing. The Underwriter's obligations under this Purchase Agreement are and shall be subject to the following conditions: (a) The Underwriter shall receive, within seven (7) business days of the date hereof, copies of the Official Statement (including all information previously permitted to have been omitted by Rule 15c2 -12 and any amendments or supplements as have been approved by the Underwriter), in such quantity (not to exceed 300 copies) as the Underwriter shall have requested; (b) The representations and warranties of the City contained herein shall be true, complete and correct in all material respects at the date hereof and on the date of the Closing, as if made on the date of the Closing; (c) At the time of the Closing, the City shall perform or have performed all of its obligations required under or specified in the Financing Documents to be performed at or prior to the Closing; (d) At the time of the Closing, no default shall have occurred or be existing under the Financing Documents and the City shall not be in default in the payment of principal or interest on any of its indebtedness which default shall materially adversely impact the ability of the City to make its Lease Payments; (e) In recognition of the desire of the City and the Underwriter to effect a successful public offering of the Certificates, and in view of the potential adverse impact of any of the following events on such a public offering, the Underwriter shall have the right to terminate this agreement by written notification to the City if at any time at or prior to the Closing, but only to the extent such statements of fact were not known to the Underwriter on the date of this Purchase Agreement: (i) any event shall occur which causes any statement contained in the Official Statement to be materially misleading or results in a failure of the Official Statement to state a material fact necessary to make the statements in the Official Statement, in light of the circumstance which they were made, not misleading; or (ii) the marketability of the Certificates or the market price thereof, in the opinion of the Underwriter, has been materially adversely affected by an amendment to the Constitution of the United States or by any legislation in or by the Congress of the United States or by the State of California, or the amendment of legislation pending as of the date of this Purchase Agreement in the Congress of the United States, or the recommendation to Congress or endorsement for passage (by press release, other form of notice or otherwise) of legislation by the President of the United States, the Treasury Department of the United States, the Internal Revenue Service or the Chairman or ranking minority member of the Committee on Finance of the United States Senate or the Committee on Ways and Means of the United States House of Representatives, or the proposal for consideration of legislation by either such Committee or by any member thereof, or the presentment of legislation for consideration as an option by either such Committee, or by the staff of the Joint Committee on Taxation of the Congress of the United States, or the favorable reporting for passage of legislation to either House of the Congress of the United States by a Committee of such House to which such legislation has been referred for consideration, or any decision of any Federal or State court or any ruling or regulation (final, temporary or proposed) or official statement on behalf of the United States Treasury Department, the Internal Revenue Service or other federal or State authority materially adversely affecting the federal or State tax status of the City, or the interest with respect to the Certificates or notes or obligations of the general character of the Certificates; or (iii) any legislation, ordinance, rule or regulation shall be introduced in, or be enacted by any governmental body, department or agency of the State of California, or a decision by any court of competent jurisdiction within the State of California shall be rendered which materially adversely affects the market price of the Certificates; or (iv) a stop order, ruling, regulation or statement by, or on behalf of, the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall be issued or made to the effect that the issuance, offering or sale of obligations of the general character of the Certificates, or the execution, offering or sale of the Certificates, including all underlying obligations, as contemplated hereby or by the Official Statement, is in violation or would be in violation of any provision of the federal securities laws, including the Securities Act of 1933, as amended and as then in effect, or that the Trust Agreement need be qualified under the Trust Indenture Act of 1939, as amended and as then in effect; or (v) legislation shall be enacted by the Congress of the United States, or a decision by a court of the United States shall be rendered, to the effect that obligations of the general character of the Certificates, or the Certificates, are not exempt from registration under or other requirements of the Securities Act of 1933, as amended and as then in effect, or the Securities Exchange Act of 1934, as amended and as then in effect, or that the Trust Agreement is not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended and as then in effect; or (vi) additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange which restrictions materially adversely affect the Underwriter's ability to trade the Certificates; or (vii) a general banking moratorium shall have been established by federal or State authorities; or (viii) the United States has become engaged in hostilities which have resulted in a declaration of war or a national emergency or there has occurred any other outbreak of hostilities or a national or international calamity or crisis, financial or otherwise, the effect of such outbreak, calamity or crisis on the financial markets of the United States, being such as, in the reasonable opinion of the Underwriter, would affect materially and adversely the ability of the Underwriter to market the Certificates (it being agreed by the Underwriter that there is no outbreak, calamity or crisis of such character as of the date hereof; or (ix) the rating on any Certificates, notes or other obligations of the City shall have been downgraded, suspended or withdrawn by a national rating service, which, in the Underwriter's reasonable opinion, materially adversely affects the market price of the Certificates; or (x) the commencement of any action, suit or proceeding described in 5(1) hereof which, in the judgment of the Underwriter, materially adversely affects the market price of the Certificates. (t) At or prior to the Closing, the Underwriter shall receive with respect to the Certificates (unless the context otherwise indicates) the following documents: (i) Final Approving Opinion. The approving opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Special Counsel to the City, dated the date of the Closing. (ii) Supplemental Opinion. A supplemental opinion or opinions of Special Counsel, addressed to the Underwriter, in form and substance acceptable to the Underwriter, and dated the date of the Closing to the following effect: (1) The Purchase Agreement has been duly authorized, executed and delivered by the City and, assuming due and valid authorization, execution and delivery by the other parties thereto, constitutes the valid, legal and binding agreement of the City, enforceable in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium or other similar laws affecting enforcement of creditors' rights, by application of equitable principles if equitable remedies are sought and by the limitations on legal remedies against public agencies in the State of California. (2) The statements contained in the Official Statement on the cover relating to the tax - exempt status of the Certificates, and under the captions "THE CERTIFICATES" (excluding "Book -Entry System "), "TAX EXEMPTION," the "PROJECT LEASE" and in the "TRUST AGREEMENT ", insofar as such statements purport to summarize certain provisions of the Certificates, the Trust Agreement and federal tax law, are accurate in all material respects; and (3) The Certificates are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Trust Agreement is exempt from qualification pursuant to the Trust Indenture Act of 1939, as amended. (iii) City Counsel Opinion. An opinion of Counsel to the City, dated the date of the Closing and addressed to the Underwriter, in form and substance acceptable to the Underwriter, to the following effect: (1) The information in the Official Statement fairly and accurately summarizes the information presented therein, and without independently determining the completeness or fairness of any other information contained in the Official Statement relating to the City, nothing has come to the attention of such counsel which would lead it to believe that such information (excluding therefrom the financial and statistical data and forecasts included therein as to which no opinion need be expressed) contains any untrue statement of material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (2) To the best of its knowledge, except as otherwise disclosed in the Official Statement, there is no litigation or proceeding, pending and served, or threatened, challenging the creation, organization or existence of the City, or the validity of the Financing Documents or seeking to restrain or enjoin any of the transactions referred to therein or contemplated thereby, or under which a determination adverse to the City would have a material adverse effect upon the financial condition or the revenues of the City, or which, in any manner, questions the right of the City to use the Lease Payments for debt service on the Certificates; provided the Underwriter may in its sole discretion accept the opinion of counsel acceptable to the Underwriter and its counsel in lieu of the opinion required by this clause, that in the opinion of such counsel the issues raised in any related or threatened litigation are without substance or that the contentions of any plaintiff therein are without merit; and (3) The execution, delivery and performance by the City of this Purchase Agreement and Financing Documents and the execution, sale and delivery of the Certificates and compliance with the provisions thereof will not conflict with or constitute a material breach of or a default under any law, administrative regulation, judgment, decree or any agreement or other instrument known to them to which the City is a party or otherwise subject, nor will any such delivery, issuance, sale, adoption or compliance result in the creation or imposition of any lien, charge, encumbrance or security interest of any nature whatsoever upon any of the revenues, property or assets of the City except as expressly provided or permitted by the Financing Documents; (iv) City Certificate. A certificate of the City, dated the date of the Closing, signed on behalf of the City by its duly authorized officers to the effect that: (1) the representations and warranties of the City contained herein are true and correct in all material respects on and as of the date of the Closing as if made on the date of the Closing; provided that the Underwriter may in its sole discretion accept the opinion of Counsel to the City in lieu of the renewal of the representation and warranty of Section 5(1) hereof, acceptable in form and substance to them and their counsel, that in the opinion of such counsel the issues raised in any related or threatened litigation are without substance or that the contentions of any plaintiffs therein are without merit; and (2) no event affecting the City has occurred since the date of the Official Statement which has not been disclosed therein or in any supplement or amendment thereto which event should be disclosed in the Official Statement in order to make the statements therein relating to the City, in light of the circumstances under which they were made, not misleading. (v) Financing Documents and Official Statement. Fully executed copies of all Financing Documents and the Official Statement. (vi) Trustee/Escrow Bank. The Certificate of the Trustee/Escrow Bank, dated the Closing Date, to the effect that (i) the Trustee /Escrow Bank is duly organized and existing as a state banking corporation under the laws of the State having the full power and authority to perform its duties under the Escrow Agreement, (ii) the Trustee /Escrow Bank is duly authorized to accept the obligations created by the Escrow Agreement and to authenticate the Certificates pursuant to the terms of the Trust Agreement; (iii) no consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Trustee/Escrow Bank that has not been obtained or will be required for the authentication of the Certificates or the consummation by the Trustee/Escrow Bank of the other transactions contemplated to be performed by the Trustee /Escrow Bank in connection with the authentication of the Certificates and the acceptance and performance of the obligations created by the Escrow Agreement and Trust Agreement; and (iv) compliance with the terms of the Escrow Agreement and Trust Agreement will not conflict with or result in a violation or breach of, or constitute a default under, any loan agreement, escrow agreement, bond, note, resolution or any other agreement or instrument to which the Trustee /Escrow Bank is a party or by which it is bound, or any law or any rule, regulation, order or decree of any court or governmental agency or body having jurisdiction over the Trustee /Escrow Bank or any of its activities or properties. (vii) Disclosure Opinion. An opinion, dated the date of the Closing and addressed to the Underwriter, of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, to the effect that, (i) based upon its participation in the preparation of the Official Statement and without having undertaken to determine independently the accuracy or completeness of the statements in the Official Statement, such counsel has no reason to believe that, as of the date of Closing, the Official Statement (except any financial statements and any other financial and statistical data included in the Official Statement as to all of which no view need be expressed) contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and (ii) that the Certificates are exempt from the registration requirement of the Securities Act of 1933, as amended, and the Trust Agreement is exempt from qualification under the Trust Indenture Act of 1939, as amended. (viii) Nonarbitrage Certificate. A tax and nonarbitrage certificate in form satisfactory to Special Counsel. (ix) CDIAC Statement. A copy of the State of California Notice of Sale required to be delivered to the California Debt Investment Advisory Commission . pursuant to section 53583 of the California Government Code and section 8855(g) of the California Government Code. (x) Reliance Letter. A letter, dated the date of Closing and addressed to the Underwriter, from Special Counsel to the effect that the opinion referred to in paragraph (1) above may be relied upon by the Underwriter to the same extent as if such opinion was addressed to it. (xi) Additional Documents. Such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably deem necessary to evidence the truth and accuracy as of the time of the Closing of the representations of the City and the due performance or satisfaction by the City at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by the City. 0 If the City shall be unable to satisfy the conditions contained in this Purchase Agreement, or if the obligations of the Underwriter shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall terminate and neither the Underwriter nor the City shall be under further obligation hereunder, except as further set forth in Section 7 hereof. 7. Expenses. (a) City. The City shall pay or cause to be paid the expenses incident to the performance of its obligations hereunder, including but not limited to: (i) the cost of processing and printing of the Preliminary Official Statement and the Official Statement, not to exceed 300 copies, and all other documents prepared in connection with the transactions contemplated hereby; (ii) the fees and disbursements of the Trustee /Escrow Bank in connection with the execution and delivery of the Certificates; (iii) the fees and disbursements of Special Counsel and any other experts or consultants retained by the City in connection with the transactions contemplated hereby; (iv) the fees and disbursements of Disclosure Counsel; and (v) the costs related to obtaining ratings and insurance on the Certificates. (b) Underwriter. The Underwriter shall pay: (i) all advertising expenses in connection with the public offering of the Certificates; (ii) California Debt Investment Advisory Commission fees; and (iii) all other expenses incurred by it in connection with its public offering and distribution of the Certificates. 8. Notice. Any notice or other communication to be given to the City under this Purchase Agreement may be given by delivering the same in writing to the City, at the address indicated on the first page hereof. Any notice or other communication to be given to the Underwriter under this Purchase Agreement may be given by delivering the same in writing to Miller & Schroeder Financial Inc., 505 Lomas Santa Fe Drive, Suite 100, Post Office Box 946, Solana Beach, California 92075, 9. Entire Agreement. Except as otherwise provided herein, this Purchase Agreement, when accepted by the City, shall constitute the entire agreement between the City and the Underwriter and is made solely for the benefit of the City and the Underwriter (including the successors or assigns of the Underwriter). No other person shall acquire or have any right hereunder by virtue hereof, except as provided herein. All the representations, warranties and agreements of the City in this Purchase Agreement shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Underwriter or with regard to delivery of and payment for the Certificates hereunder, and (b) any termination of this Purchase Agreement. to 10. Counterparts. This Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 11. Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof. 12. State of California Law Governs. The validity, interpretation and performance of this Purchase Agreement shall be governed by the laws of the State of California. 13. No Assigmnent. The rights and obligations created by this Purchase Agreement shall not be subject to assignment by the Underwriter or the City without the prior written consent of the other parties hereto. Accepted as of the date first stated above: CITY OF NEWPORT BEACH IN Title: MILLER & SCHROEDER FINANCIAL, INC. 0 Title: I1 MATURITY, PRINCIPAL AMOUNT, INTEREST RATE AND REOFFERING PRICE Maturity Principal Interest Reoffering (June 1) Amount Rate Price 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2019 Totals A -1 PRELIMINi f OFFICIAL STATEMENT DATED I Y ,1998 NEW ISSUE - (Book -Entry Only) In the o, existing status requirements discount with purposes o n Counsel, t iel is exempt frw price at whicl to . a suosianuat , respect to such Standard & Poor's: Moody's Investors Service: ' ( Insured —See "Ratings" herein) r /son & Routh, a Professional Corporation, Newport Beach, California ( "Special Counsel'), under !judicial decisions, and assuming certain representations and compliance with certain covenants and m ojthe Lease payments (as defened herein) designated as and comprising interest (and on ina! issue is excluded from gross income (or federal income tai purposes and is not an item of tax pre erence for rnative minimum tax imposed on individuals and aorporatis In the further optnton of S ecial nts designated os and comprising interest (and artqfinal issue discormt with respect to lire Certi tcates) "I income tax. The difference, , f any, between fhe issue price with respect to a Certtftcate the first e Certificates with respect to a maturity are to be sold to the public) and the stated redemption price at �aeanatev original issue discount. See "Tax Matters" herein. $7,330, 000* REFUNDING CERTIFICATES OF PARTICIPATION Series 1998 (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) Dated: June 1, 1998 Due: June 1, as shown below The Certificates are being sold, executed and delivered to refund the $7,500,000 Certificates of Participation, Series 1992 (the "Refunded Certificates ") currently outstanding in the amount of $6,940,000. The Refunded Certificates were used by the Newport Beach Public Facilities Corporation (the "Corporation ") in connection with the construction of the City's Central Library (the "Project ") which is leased by the City of Newport Beach (the "City " }, pursuant to the terms and conditions of a Project Lease, dated as of Lune 1, 1998 (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. The Certificates wilt e delivered in f�i�y registered form on] and, when issued, will in of The Depository Trust Company, New York, New York ('DTC" DTC will act as securitie in the Cettificates may be purchased, m denominations of $5,000, or any integral mu[tipfe the Upon rcoeipt of payments of principal of, premium,, if any, and interest on the CercificaCes, any, and interest to the partiaipants m DTC (as desanbed herein) for subsequent disbursement Interest on the Cerifcates will be payable semiannually on June I and December I of et installments due with respect to the Certificates are payable annually on June 1 of each year c( the Certificates are pa able at the corporate trust office of U.S. Bank Trust National Ass "Trustee ") under the Trust Agreement dated as of June 1, 1998 by and among the C. Agreement'). Interest on Certificates is payable by check mailed by first class mail to the prepayment prior to maturity as described herein. MATURITY SCHEDULE in the name of Cede & Co. as nominee will in turn i Ire beneficial c year commene nendinQ June 1 as owner. The Certificates are subject to Due Principal Interest Due Principal Interest June I Amount Rate Yield June I Amount Rate Yield 1999 2004 2000 2005 2001 2006 2002 2007 2003 2008 $ % Tenn Bonds Due June 1, 2019, - Yield 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 chitgation of the City to make Lease Payyments 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. In addition payment of the principal and interest installments of the Certificates when due will be insured by a municipal bond insurance policy to be issue] y simultaneously with the delivery of the Certificates. THE CERTIFICATES AN INDEBTEDNESS TION OF STATE ( CERTAIN li1►k1 tes are to be offered when, as and if sold, executed and delivered, subject to the appproval as to their legality by Stradfing Routh, a Professional Corporation, Newport Beach, Cali ornia, Special Counsel. In addition, certain legal »ratters will be Corporation by Strolling Yaeca Carlson & Routh, a Professional Car oration, and for the Trustee by its counsel. It is e Certificates in definitive form will be available for delivery through theJacilities of DTC in New York, New York on or about IMMiller& Schroeder Financial, Inc. The date of this Official Statement is June 1998 Preliminary, subject to change. CITY COUNCIL Thomas C. Edwards, Mayor Dennis D. O'Neil, Vice Mayor John W. Hedges, Council Member Janice A. Debay, Council Member Norma J. Glover, Council Member John E. Noyes, Council Member Tom W. Thompson, Council Member CITY STAFF Kevin J. Murphy, City Manager Dennis C. Danner, City Treasurer /Administrative Services Director Richard C. Kurth, Administrative Services Deputy Director LaDonna Klenitz, Community Services Director /City Librarian Robert H. Burnham, City Attorney LaVonne M. Harkless, City Clerk Don Webb, Public Works Director NEWPORT BEACH PUBLIC FACILITIES CORPORATION Board of Directors Thomas C. Edwards, Chairman Dennis D. O'Neil John W. Hedges Janice A. Debay Norma J. Glover John E. Noyes Tom W. Thompson Kevin J. Murphy, President Dennis C. Danner, Chie Financial Officer LaVonne M. Hark less, Secretary Robert H. Burnham, Attorney Special Counsel and Disclosure Counsel Stradling Yocca Carlson & Rauth, a Professional Corporation Newport Beach, California Trustee/Escrow Bank U.S. Bank Trust National Association Los Angeles, California Underwriter Miller & Schroeder Financial, Inc. Solana Beach, California Certificates Not General Obligations . ............................... 21 Constitutional Limitations on Taxes and Expenditures. ...... 21 Paee INTRODUCTION ....................................... I THE PROJECT ........... ............................... 2 Sources and Uses of Funds ............... 3 THE CERTIFICATES .. ............................... 3 Book -Entry System... ......... ............ - 3 Optional Prepayment ........................ 6 Mandatory Prepayment ..................... 6 Notice of Prepayment ....................... 7 Nature of the Certificates ..................7 Sources of Lease Payments ............... 8 Lease Payments .. ............................... 8 SUMMARY OF CERTAIN PROVISIONS 26 OF LEGAL DOCUMENTS .................. 10 SITE LEASE ............ ............................... 10 PROJECT LEASE ..... ............................... 1.0 TRUST AGREEMENT.. ................. ..... __ 16 Investment of Moneys in Funds...... 18 Events of Default ............................19 RISK FACTORS ....... ............................... 21 Certificates Not General Obligations . ............................... 21 Constitutional Limitations on Taxes and Expenditures. ...... 21 For purposes of compliance with Rule I5c2 -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 this neither delivery of 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 Trust Agreement, 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. Page No Liability of the Corporation to the Owners . .............................23 Limited Resource on Default.., ......... 23 Abatement..... ...... ____ ... __ ......... ... . 23 Loss of Tax Exemption .....................24 THE CORPORATION ... .............................24 TAX MATTERS ........... .............................24 CERTAIN LEGAL MATTERS ....................25 ABSENCE OF LITIGATION .......................25 UNDERWRITING ......... .............................25 VERIFICATION OF MATHEMATICAL COMPUTATIONS.. .............. ............... 26 CONTINUING DISCLOSURE ..................... 26 CERTIFICATE INSURER ...........................26 RATINGS .................... .............................26 MISCELLANEOUS_ ....... ... _ .................. ,, 27 SUPPLEMENTAL INFORMATION - THE CITY OF NEWPORT BEACH .......28 APPENDIX A - DEFINITIONS ...... ........... A -1 APPENDIX B - SPECIMEN MUNICIPAL BOND INSURANCE POLICY ............. B -1 APPENDIX C - FORM OF CONTINUING DISCLOSURE AGREEMENT ............. C -1 For purposes of compliance with Rule I5c2 -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 this neither delivery of 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 Trust Agreement, 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) REFUNDING CERTIFICATES OF PARTICIPATION Series 1998 (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) The purpose of this Official Statement is to provide certain information concerning the sale and delivery of Refunding Certificates of Participation, Series 1998 (the "Certificates "), in the aggregate principal amount of $7,330,000 *. 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 Project Lease, dated as of June 1, 1998 (the "Lease "), between the City and the Corporation. The Certificates are being issued pursuant to a Trust Agreement, dated as of June 1, 1998 (the "Trust Agreement "), between the City, the Corporation and U.S. Bank Trust National Association, 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 refunding the $7,500,000 certificates of Participation, Series 1992 (the "Refunded Certificates "). The proceeds of the Refunded Certificates were used for 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 improved land pursuant to a Site Lease, dated as of June 1, 1998, 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 - PROJECT LEASE" 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 * Preliminary, subject to change. 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 Reserve Fund will be used as a credit for Lease Payments. The 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. In addition, payment of the principal and interest installments of the Certificates when due will be insured by a municipal bond insurance policy to be issued by simultaneously with the delivery of the Certificates. 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 Underwriter. The Underwriter makes no representation or warranty, express or implied, as to the accuracy or completeness of such information. The Central Library was created for the Newport Beach community. The 52,000 square foot building is located near the intersection of MacArthur Boulevard and Pacific Coast Highway. The four acre site for the Library was provided through a land exchange agreement with The Irvine Company, in exchange for the current 1.97 acre site of the previous Newport Center Library. Simon Martin -Vegue Winkelstein Moris of San Francisco in association with Tames L. Pirdy of Newport Beach designed the building. The contemporary styling of the stucco and stone building takes advantage of the ocean views. It is compatible with surrounding buildings in the Newport Center/Fashion Island area. The design of the building with dramatic natural lighting is open and inviting for its many users. The two -story building provides 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 contains the reference and information desk, the adult faction and non - fiction collections and a special area for the business collection. The Library houses 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, support the varied interests of the community. Exhibit space highlights works of art from the community artists. 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 .......... ............................... $7,330,000.00* Transfers from Refunded Certificates Accounts... ............ _ Total Sources ............................ ............................... Uses: Underwriter's Discount ......................... ............................... Refunded Certificates Escrow Fund (1)_ ..... _ ...... ___ ........ Reserve Fund ( 2) ................................... ............................... Costs of Issuance Fund ......................... ............................... TotalUses ................................. ............................... (1) An amount to be used to purchase Federal Securities which will be sufficient, together with other moneys in the Refunded Certificates Escrow Fund and interest earnings thereon, to provide for the payment of the principal of, premium and interest on the Refunded Certificates in full to the first call date of June 1, 2000. (2) An amount equal to the Reserve Requirement on the Certificates. THE CERTIFICATES The Certificates will be executed and delivered as one fully registered Certificate for each maturity, in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ( "DTC "), as registered owner of all Certificates. See 'Book -Entry System" below. The Certificates will be dated June 1, 1998 and mature on June I in the years and in the amounts shown on the cover page of this Official Statement. The Certificates will bear interest at the rates shown on the cover page of this Official Statement, payable semiannually on June 1 and December I in each year, commencing on December 1, 1998, by check mailed by first class mail on each Interest Payment Date to the registered owners thereof or upon the request of the Owners of $1,000,000 or more in principal amount of Certificates„ by wire transfer to an account which shall be designated by such Owner to the Trustee on or before the Regular Record Date preceding the Interest Payment Date. Book -Entry System DTC will act as securities depository for the Certificates. The Certificates will be issued as fully- registered Certificates registered in the name of Cede & Co. (DTC's partnership nominee). One fully- registered Certificate will be issued for each maturity of the Certificates, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC is a limited - purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants (the "Participants ") deposit with DTC. DTC also facilitates the settlement among Participants of * Preliminary, subject to change. securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book -entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities Certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( "Indirect Participants"), The rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Purchasers of the Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the Certificates on DTC's records. The ownership interest of each actual purchaser of each Certificate ( "Beneficial Owners ") is in turn recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Certificates are to be accomplished by entries made on the books of Participants acting on behalf of the Beneficial Owners. Beneficial Owners will not receive Certificates representing their ownership interests in the Certificates, except in the event that use of the book -entry system for the Certificates is discontinued. To facilitate subsequent transfers, all Certificates deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Certificates with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership DTC has no knowledge of the actual Beneficial Owners of the Certificates; DTC's records reflect only the identity of the Direct Participants to whose accounts such securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. So long as Cede & Co. is the registered owner of the Certificates, as nominee of DTC, references herein to the holders or registered owners of the Certificates will mean Cede & Co. and will not mean the Beneficial Owners of the Certificates. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to Cede & Co. If less than all of the Certificates within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the Certificates. Under its usual procedures, DTC mails an Omnibus Proxy to an issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Certificates are credited on the Record Date (identified in a listing attached to the Omnibus Proxy). Principal, sinking fund and interest payments with respect to the Certificates will be made to DTC. DTC's practice is to credit Participants' accounts on payment dates in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on the date payable. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for 19 the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee, the Corporation or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the City or the Trustee, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. The City, the Corporation, the Underwriter and the Trustee do not have any responsibility or obligation to DTC Participants, to the persons for whom they act as nominees, to Beneficial Owners, or to any other person who is not shown on the registration books as being an owner of the Certificates, with respect to (i) the accuracy of any records maintained by DTC or any DTC Participants; (ii) the payment by DTC or any DTC Participant of any amount in respect of the principal of, redemption price of or interest on the Certificates; (iii) the delivery of any notice which is permitted or required to be given to registered owners under the Trust Agreement; (iv) the selection by DTC or any DTC Participant of any person to receive payment in the event of a partial redemption of the Certificates; (v) any consent given or other action taken by DTC as registered owner; or (vi) any other matter arising with respect to the Certificates or the Indenture. The City, the Corporation, the Underwriter and the Trustee cannot and do not give any assurances that DTC Participants or others will distribute payments of principal of or interest on the Certificates paid to DTC or its nominee, as the registered owner, or any notices to the Beneficial Owners or that they will do so on a timely basis or will serve and act in a manner described in this Official Statement. The City and the Trustee are not responsible or liable for the failure of DTC or any DTC Participant to make any payment or give any notice to a Beneficial Owner in respect to the Certificates or any error or delay relating thereto. The foregoing description of the procedures and record - keeping with respect to beneficial ownership interests in the Certificates, payment of principal, interest and other payments on the Certificates to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in such Certificates and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be. Discontinuance o(Book- Entry. DTC may discontinue providing its services with respect to the Certificates at any time by giving notice to the Trustee and discharging its responsibilities with respect thereto under applicable law or the City may terminate participation in the system of book -entry transfers through DTC or any other securities depository at any time. In the event that the book -entry system is discontinued, the City will execute, and the Trustee will authenticate and make available for delivery, replacement Certificates in the form of registered Certificates. In addition, the following provisions would apply: the principal of and redemption premium, if any, on the Certificates will be payable at the principal corporate trust office of the Trustee, and interest on the Certificates will be payable by check mailed on each Interest Payment Date to the Owners thereof as shown on the registration books of the Trustee as of the close of business on the fifteenth day of the calendar month immediately preceding the applicable Interest Payment Date, or by wire transfer to Owners of $1,000,000 or more in aggregate principal amount of Certificates, upon request, as provided in the Indenture. The Certificates will be transferable and exchangeable on the terms and conditions provided in the Trust Agreement. Transfer Fees. For every transfer and exchange of Certificates, Owners may be charged a sum sufficient to cover any tax, governmental charge or transfer fees that may be imposed in relation thereto, which charge may include transfer fees imposed by the Trustee, DTC or the DTC Participant in connection with such transfers or exchanges. Optional Prepayment Certificates maturing on or before June 1, 2007 are not subject to optional prepayment prior to their stated maturity dates, The Certificates, including portions thereof, maturing on or after June 1, 2008, shall be subject to prepayment prior to maturity, upon instructions from the City, on June 1, 2007, 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 prepaid) set out below, plus accrued interest thereon to the prepayment date: Prepayment hates Prepayment Prices June 1, 2007 and December 1, 2007 102% June 1, 2008 and December 1, 2008 101% June 1, 2009 and thereafter 100% Mandatory Prepayment 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 the Lease at least 60 days prior to a Certificate Payment Date and credited towards the Prepayment made by the City pursuant to 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. 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 prepayment, without premium. 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, 2009, 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 (June 1) 2009 2010 2011 2012 2013 2014 (1) Maturity. Amount 0 Year (June 1) 2015 2016 2017 2018 2019(l) Amount 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. In lieu of depositing cash with the Trustee as a payment for the prepayment price of any Certificates 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. Notice of Prepayment When prepayment is authorized or required pursuant to the Trust Agreement, 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 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. , Notice of such prepayment shall be sent by first class mail, postage prepaid, to the Corporation, the City, The Depository Trust Company 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. Nature of the Certificates Each Certificate represents a proportionate and undivided ownership interest in Lease Payments and the Prepayments to be made by the City under the Lease which become payable from annual appropriations of the City from funds lawfully available therefor. The City covenants in the Lease that it will budget and appropriate all Lease Payments and Additional Payments (see "RISK FACTORS" and "SUMMARY OF CERTAIN PROVISIONS OF LEGAL DOCUMENTS — Project Lease" herein). The City has covenanted through the Lease to pay or cause to be paid all taxes, assessments, insurance and other costs. See "SUMMARY OF CERTAIN PROVISIONS OF LEGAL DOCUMENTS — Project Lease" herein. W The Trustee, as assignee of the Corporation, has been assigned without recourse all of the Corporation's rights in and under the Site Lease and all of the Corporation's rights to receive Lease Payments scheduled to be paid by the City under and pursuant to the Lease. The City may not assign or sublease its rights under the Lease without an opinion of Special Counsel to the effect that such assignment or sublease would not impair the tax - exempt status of the Certificates. See "SUMMARY OF CERTAIN PROVISIONS OF LEGAL DOCUMENTS —The Project Lease — Assignment and Subleasing" herein. A policy or policies of title insurance will be obtained by the City in an amount equal to the aggregate principal component of unpaid Lease Payments. See "SUMMARY OF CERTAIN PROVISIONS OF LEGAL DOCUMENTS —The Project Lease —Title Insurance" herein. 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 Pursuant to the Lease, the City agrees that, not later than May 15 and November 15 of each Fiscal Year, beginning November 15, 1998, it will make semiannual Lease Payments to the Corporation in an amount which shall be sufficient to pay the annual principal of and semi - annual interest on the Certificates when due. 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 following table sets forth aggregate Lease Payments due under the Lease and payable with respect to the Certificates: Lease Total Payment Date Principal Interest Fiscal Year December 1, 1998 June 1, 1999 December 1, 1999 June 1, 2000 December 1, 2000 June 1, 2001 December 1, 2001 June 1, 2002 December 1, 2002 June 1, 2003 December 1, 2003 June 1, 2004 December 1, 2004 Junc 1, 2005 December 1, 2005 June 1, 2006 December 1, 2006 June 1, 2007 December 1, 2007 June 1, 2008 December 1, 2008 June 1, 2009 December 1, 2009 June 1, 2010 December 1, 2010 June 1., 2011 December 1, 2011 June 1, 2012 December 1, 2012 June 1, 2013 December 1, 2013 June 1, 2014 December 1, 2014 June 1, 20I5 December 1, 2015 June 1, 2016 December 1, 2016 June 1, 2017 December 1, 2017 June 1, 2018 December 1, 2018 June 1, 2019 December 1, 2019 Totals 0 r t tt The following are brief outlines of certain provisions contained in the Site Lease, the Project 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, 1998 by and between the City, as lessor and the Corporation, as lessee, the Corporation acquired an interest in the Site and made improvements to the Site. The City will lease back the Site, as improved by the Project, from the Corporation pursuant to the Project Lease. Pursuant to the Site Lease, the Corporation shall use the Site solely for the purpose of acquiring or constructing, or causing the acquisition or construction of, the Project and of leasing back the Site and Project to the City or others pursuant to the Lease and for such purposes as may be incidental thereto. 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 pays annually to the City as and for the rental due, the sum of $1.00, commencing with the execution and delivery of the Site Lease and continuing to and including the date of tennination of the Site Lease. Y R The Corporation agrees to lease the Site, as improved by the Project, to the City pursuant to the Lease. The term of the Lease shall become effective upon the date thereof and subject to earlier termination as provided in the Lease, and shall terminate June 1, 2020 (the "Term "). If, on June 1, , the Certificates have not been fully paid, or if the Lease Payments were abated at any time and for any reason, then the Term is extended until all Certificates are fully paid, except that the Tenn shall in no event be extended beyond June 1, Fair Market Rental Value. The Lease Payments will 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 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 the 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 Project pursuant to the Lease, and the transfer of the Corporation's leasehold interest in the Project at the end of the Term thereof. Budge . The City covenants to budget and appropriate all Lease Payments and Additional Payments (to the extent the amount of such Additional Payment are known to the City at the time its annual budget is proposed) due under the Lease in its annual budget and to maintain such items to the extent unpaid in that Fiscal Year in its budget throughout such Fiscal 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 the Lease. 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 IN 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. Maintenance, Repairs and Replacement. Throughout the Lease Term, 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. 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, the Corporation agrees to provide only the Site. The City waives the benefits of subsections 1 and 2 of Section 1932 of the California Civil Code, but such waiver does not limit any of the rights of the City under the terms of the Lease. 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 Site, and under no circumstances will the City look to the Corporation for any part of such costs. 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 or 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. The City will procure and maintain, or cause to be procured and maintained, throughout the Term of the 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. 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. The City is not required to obtain earthquake or flood insurance with respect to the Site (unless such earthquake or flood insurance is available at reasonable cost on the open market from reputable insurance companies). Such insurance shall be in an amount equal to 100% of the full insurable value 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). 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, 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. The insurance required pursuant to the Lease 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 as may be selected by the City. Copies of the insurance policies, 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 canceled 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. Such insurance may be maintained as part of or in conjunction with any other insurance carried or required to be carved by the City. 11 Public Liability and Property _Damage Insurance. The City will 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 will 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 occurrence 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 will 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 will 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 Compensation Insurance. The City will 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). Rental Interruption Insurance. The City will maintain or cause to be maintained on or prior to the date that the City files the certificate of completion, rental interruption insurance in an amount not less than the maximum remaining scheduled Lease Payments in any future twelve (12) month period, to insure against loss of Lease Payments from the Site caused by perils covered by the casualty insurance required to be maintained by the Lease. Such insurance will be obtained as of the date on which the City obtains possession of the Site. Such insurance may be maintained as part of or in conjunction with any other rental interruption insurance carried by the City. The net proceeds of such rental interruption insurance will be paid to the Trustee and deposited in the Reserve Fund to the extent necessary and to 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. Title Insurance. The City will obtain and, throughout the Lease Term, maintain or cause to be maintained title insurance on the Site, in the form of a CLTA leasehold 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 will be paid to the Trustee, deposited in the Net Proceeds Fund and applied as provided in the Lease. Blanket Insurance Policie§ and Self - Insurance. The City may satisfy any of the insurance requirements set forth in the Lease by using blanket insurance policies provided that the City complies with each and all of the requirements and specifications of 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, 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. 12 Option to Prepay Lease Payments. Subject to the terms of the Lease, 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 its rights under the Lease nor sublease all or a portion of the Site unless the City receives an opinion of Special Counsel stating that such assignment or sublease 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 the Lease. In the event that the Lease is assigned or subleased by the City, the obligation to make Lease Payments will remain the obligation of the City. Events of Default. The following constitute an "event of default" under the Lease: (a) Lease Payment Default. Failure by the City to pay any Lease Payment required to be paid 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 or otherwise with respect to the Lease or in the Trust Agreement or in the Site Lease, other than as referred to in clause (a) above, for a period of 30 days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Corporation, the Trustee or the Owners of not less than twenty percent (20 1/o) 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 the Lease to any execution, garnishment or attachment, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted under the provisions of the federal bankruptcy code, as amended, or under any similar act which may hereafter be enacted; or the abandonment of the Site. Remedies on Default. Whenever any event of default 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 the Lease; provided, however, that notwithstanding anything in the Lease or in the Trust Agreement to the contrary, 'THERE SHALL BE NO RIGHT UNDER ANY CIRCUMSTANCES TO ACCELERATE THE LEASE PAYMENTS OR OTHERWISE DECLARE ANY LEASE PAYMENTS NOT THEN IN DEFAULT TO BE IMMEDIATELY DUE AND PAYABLE. After the occurrence of an event of default, 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 the Trust Agreement. (a) No Termination: Repossession and Re -Lease on Behalf of City. In the event the Corporation does not elect to terminate the Lease in the manner hereinafter provided for in subparagraph (b) below, the Corporation may, with the consent of the City, which consent is 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 the 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. 13 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 for the payment of all Lease Payments and Additional Payments and the performance of all conditions contained in the Lease 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 the Lease, but said Lease Payments, deficiency, or both, shall be payable only at the same time and in the same manner as provided for the payment of Lease Payments, 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 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 the City, for the account of and at the expense of the City, and the City 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 waives any and all claims for damage caused or which may be caused by the Corporation in repossessing the Site 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 the 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 the Lease, and agrees that no acts of the Corporation in effecting such re- leasing shall constitute a surrender or termination of the 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 the 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- teasing 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 the Lease by the Corporation at its option and in the manner provided in the Lease 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 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 provisions 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 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 14 to recover possession of the Site shall of itself operate to terminate the Lease, and no termination of the Lease on account of default by the City shall be or become effective by operation of law, or 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 the Lease. The City covenants and agrees that no surrender of the Site for the remainder of the Term of the Lease or any termination of the 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 thereto, except only in the manner expressly provided. (e) Opinion of Special Counsel. The re- leasing of the Site shall be subject 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. Abatement of Lease Payments in the Event of Loss of Use. 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 a substantial interference with the use and possession of such item or portion of the Site by the City. The amount of such abatement shall be determined by the City so that the resulting Lease Payments represent fair market rental value for the use and possession of the 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, or in the Lease Payment Fund, or from other special fund sources of money, including without limitation, proceeds of rental interruption insurance, shall be applied to pay the Lease Payments. 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 under the Lease constituting indebtedness of the City in contravention of the Constitution and laws of the State. 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 the Lease or to indemnify the Corporation and its officers and directors. Net- Net -Net Lease. The Lease is deemed and construed to be a "net-net-net lease" and the City agrees that the Lease Payments will be an absolute net return to the Corporation, free and clear of any expenses, charges or set -offs whatsoever, except as expressly provided in the Lease. 15 TRUST AGREEMENT rustee. Pursuant to the Trust Agreement, the Corporation will assign the rights to receive Lease Payments to the Trustee, as security for the Certificates, and the Corporation and City will grant a security interest in all moneys held by the Trustee to the Trustee for the benefit of the Owners of Certificates. The Trustee agrees to transfer proceeds of the Certificates for deposit in the Escrow Fund to the City to provide funds to defease the Prior Certificates and to pay Delivery Costs for the Project. The Trustee agrees to execute and deliver Certificates, each evidencing proportionate interests in the Lease Payments and Prepayments made by the City under the Project Lease. Assienments. Pursuant to the Trust Agreement and the Assignment Agreement, the Corporation assigns to the Trustee certain of its rights in the Site Lease and the 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 (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 Corporation. 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. Annlication of Proceeds and Other Moneys. The proceeds and other moneys received by the Trustee from the original sale of the Certificates will be set aside or transferred by the Trustee in or to the following respective funds and accounts in the following order of priority: (1) "Lease Payment Fund." The Trustee will deposit $ (representing accrued interest of $ and capitalized interest of $ ) in the Lease Payment Fund. (2) "Reserve Fund." The Trustee will deposit $ in the Reserve Fund. (3) "Escrow Fund." The Trustee will transfer to the City the balance of the proceeds to be held in the Escrow Fund. Escrow Fund. The proceeds of the Certificates deposited in the Escrow Fund will be held by the Trustee and applied as follows on the Delivery Date: (a) an amount equal to $ will be deposited with the Prior Trustee for application to the defeasance of the Prior Certificates pursuant to the Escrow Agreement, and (b) an amount equal to $ will be retained therein. The moneys in the Escrow Fund not transferred to the Prior Trustee as described above and applied to pay Delivery Costs from time to time upon receipt by the Trustee of a written direction of the City identifying the payee and amount and certifying that such amount is a bona fide Delivery Cost hereunder. Any remaining balance in the Escrow Fund not used to pay Delivery Costs by October 1, 1998 needed for Escrow Fund purposes (but less the amount of any such retention) will be transferred to the Trustee for deposit in the Lease Payment Fund. 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 16 shall have any beneficial right or interest in the Lease Payment Fund or the moneys deposited therein, except only as provided in the Trust Agreement, and such moneys shall be used and applied by the Trustee as hereinafter set forth. There shall be deposited in the Lease Payment Fund all Lease Payments received by the Trustee, and any, moneys received by the Trustee for deposit therein pursuant to the Lease (regarding Lease Payments), the Trust Agreement (regarding unexpended Certificate proceeds), and any other moneys required to be deposited therein pursuant to the Lease or pursuant to the Trust Agreement, including pursuant to 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 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. Except as provided in the Trust Agreement, 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 of the Trust Agreement. Reserve Fund. All moneys at any time on deposit in the Reserve Fund will be held by the Trustee in trust for the benefit of the City and for the 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 in the Trust Agreement. The City agrees in the Trust Agreement 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 will be used to increase the balance in the Reserve Fund to the required Reserve Requirement. Any Reserve Replenishment Rent payable pursuant to the replenishment terms of the Lease will be deposited in the Reserve Fund. The Trustee will, 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. 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 will 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 thereunder) 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 will notify the City of the amount withdrawn from the Reserve Fund. The City will either pay Reserve Replenishment Rent if the requirements of the Lease can be met or certify to the Trustee its inability to do so. Net Proceeds Fund. The Trustee will disburse Net Proceeds for replacement or repair as provided in the Lease only if it has received the certification and moneys, if any, required by the Lease (and the Trustee will be absolutely protected in making any disbursements from the Net Proceeds Fund in reliance upon the requisition described in the Lease), or transfer such proceeds to the Prepayment Fund upon notification of the City Representative as provided in the Lease. 17 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 the Trust Agreement, the Trustee will pay any remaining moneys in the Net Proceeds Fund to the City after payment of any amounts due to the Trustee pursuant to the Trust Agreement. Prepayment Fund. Moneys to be used for prepayment of the Certificates will 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. Rebate Fund. All money at any time deposited in the Rebate Fund will 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 are governed by the Trust Agreement and by the Tax Certificate. The Trustee will be deemed conclusively to have complied with such provisions if it follows the directions of the City, and will have no liability or responsibility to enforce compliance by the City with the terms of the Tax Certificate. Investment of Moneys in Funds The moneys and investments held by the Treasurer and the Trustee under the Trust 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 specified, and such moneys, and any income or interest earned thereon, will be expended only as provided in the Trust Agreement and will 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. The City Representative will 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 will make investments solely in those Permitted Investments set forth in (D) of the definition thereof. See "APPENDIX A— DEFINITIONS." Such investments, if registrable, will be registered in the name of the Trustee for the benefit of the Owners and held by the Trustee. The Trustee may purchase or sell to itself or any affiliate, as principal or agent, investments authorized by the Trust Agreement. The Trustee may act as purchaser or agent in the making or disposing of any investment. Except as otherwise provided in the Trust Agreement, the Trustee will not be responsible or liable for any loss suffered in connection with any investment of funds made by it in accordance with the Trust Agreement. Any income, profit or loss on the investment of moneys held by the Trustee or the Treasurer under the Trust Agreement will be credited to the respective Fund (or account within a fund, if applicable) for which it is held, except as otherwise provided. The Trustee will 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 will keep accurate records of all funds administered by it and of all Certificates paid and discharged. Subject to the provisions of the Trust Agreement, for the purpose of determining the amount in any fiord, all Permitted Investments credited to such fund will be valued at market price, exclusive of accrued interest. With respect to all funds, valuation will occur annually on or before May 1, except in the event of a withdrawal from the Reserve Fund, whereupon it will be valued immediately after such withdrawal pursuant to being replenished as provided in the Lease. Subject to the provisions of the Trust Agreement and the Tax Certificate, the Trustee will sell or present for prepayment, any Permitted Investment so purchased by the Trustee whenever it becomes 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. W Events of Default An Event of Default under the Lease constitutes an Event of Default under the Trust Agreement (Please refer to "PROJECT LEASE - Events of Default." herein). Remedies. If an Event of Default happens, then, and in each and every such case during the continuance of such Event of Default, the Trustee may exercise any and all 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. All moneys received by the Trustee pursuant to any right given or action taken under the provisions of the Trust Agreement or the Lease, will 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 maturity of such installment, and, if the amount available is not 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 have become due, whether at maturity or by all 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. Institution of Legal Proceedings. If one or more Events of Default happen and are 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 in the Trust Agreement or in the Lease, or in aid of the execution of any power granted in the Trust Agreement, 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. Remedies Not Exclusive. No remedy conferred upon or reserved to the Trustee or to the Owners is intended to be exclusive of any other remedy, and every such remedy will be cumulative and will be in addition to every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise. 19 Power of Trustee to Control Proceedings. In the event that the Trustee, upon the happening of an Event of Default, takes any action, by judicial proceedings or otherwise, pursuant to its duties, 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 will 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 opposing such discontinuance, withdrawal, compromise, settlement or other disposal of such litigation and if such Owners continue to indemnify the Trustee to its satisfaction. Amendments. The Trust 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 will 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 the Trust Agreement 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. The Trust 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 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 and 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 in the Trust Agreement or the Lease which shall not materially adversely affect the interests of the Owners; or (3) in regard to matters arising in the Trust Agreement or the Lease, as the parties may deem necessary or desirable and which, in the opinion of the Trustee shall not adversely affect the interests of the Owners. Any such supplemental agreement shall become effective upon execution and delivery by the parties. The Trust Agreement or the Lease may be amended by supplemental agreement in the event the consent of the Owners is required. A copy of such supplemental agreement, together with a request to the Owners for their consent thereto, will 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, 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 provided in the Trust Agreement. Such supplemental agreement will not become effective unless there is 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) and notices shall have been mailed as provided in the Trust Agreement. Each such consent will be effective only if accompanied by proof of ownership of the Certificates for which such consent is given. Any such consent will 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 provided for has been mailed. 911 After the Owners of the required percentage of Certificates have filed their consents to such supplemental agreement, the Trustee will mail a notice to the Owners of the Certificates 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 as provided in the Trust Agreement (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 to be filed with the Trustee, will be proof of the matters therein stated until the contrary is provided. T , 1 # I y 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 Corporation, 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 E.xpenditures Article XIII A of the California Constitution limits the taxing powers of California public agencies. Article XIII 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 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 21 XIIIA. Two eases 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 riles 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 Nordlinaer 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 "Gams. 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 or decreases in the cost of services provided by these public agencies. In the June, 1990 election, the voters of the State approved Proposition 111 amending the method of calculation of State and local appropriations limits. Proposition 111 made several changes to Article XIII B, two of which were reflected in the County's 1990 -91 computation of its appropriations limit. First, the term "change in the cost of living" was redefined as the change in the California per capita personal income ( "CPCPI ") from the preceding year. Previously the lower of the CPCPI or the United States Consumer Price Index was recomputed by adjusting the 1986 -87 limit by the CPCPI for the three subsequent years. Next, Proposition II I excluded appropriations for "qualified capital outlay for fiscal 1990 -91 as defined by the legislature" from proceeds of taxes. 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 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. 22 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 Iimitations 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. Abatement The amount of Lease Payments will 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 a substantial interference with the use and possession of such item or portion of the Site by the City. The amount of such abatement will 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 will 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, or in the Lease Payment Fund, or from other special fund sources of money, including without limitation, proceeds of rental interruption insurance, shall be applied to pay the Lease Payments. 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. 23 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 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 benefiting 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. In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Special Counsel, under existing statutes, regulations, rulings and judicial decisions, the portion of each Lease Payment constituting interest (and original issue discount with respect to the Certificates) is excluded from gross income for federal income tax purposes, and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Special Counsel, the portion of each Lease Payment constituting interest (and original issue discount with respect to the Certificates) is exempt from State of California personal income tax. Special Counsel notes that, with respect to corporations, the portion of each Lease Payment constituting interest (and original issue discount with respect to the Certificates) may be included as an adjustment in the calculation of alternative minimum taxable income which may affect the alternative minimum tax liability of such corporations. Special Counsel's opinion as to the exclusion from gross income of the portion of each Lease Payment constituting interest (and original issue discount with respect to the Certificates) is based upon certain representations of fact and certifications made by the City and others and is subject to the condition that the City complies with all requirements of the Internal Revenue Code of 1986, , as amended (the "Code "), that must be satisfied subsequent to the execution and delivery of the Certificates to assure that the portion of each lease Payment constituting interest (and original issue discount with respect to the Certificates) will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the portion of each Lease Payment constituting interest (and original issue discount with respect to the Certificates) to be included in gross income for federal income tax purposes retroactive to the date of execution and delivery of the Certificates. The City has covenanted to comply with all such requirements. The difference, if any, between the issue price with respect to a Certificate (the first price at which a substantial amount of the Certificates with respect to a maturity are to be sold to the public) and the stated redemption price at maturity with respect to such Certificate constitutes original issue discount. Original issue discount accrues wider a constant yield method, and original issue discount will accrue to a Certificate Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Certificate Owner will increase the Certificate Owner's basis in the applicable Certificate. 24 Special Counsel's opinion may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof Special Counsel has not undertaken to determine or to inform any person, whether any such actions or events are taken or do occur. The Trust Agreement and the Tax Certificate relating to the Certificates permit certain actions to be taken or to be omitted if a favorable opinion of Special Counsel is provided with respect thereto. Special Counsel expresses no opinion as to the exclusion from gross income of the portion of each Lease Payment constituting interest (and original issue discount with respect to the Certificates) for federal income tax purposes if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth. Although Special Counsel has rendered an opinion that the portion of each Lease Payment constituting interest (and original issue discount with respect to the Certificates) is excluded from gross income for federal income tax purposes provided that the City continues to comply with certain requirements of the Code, the ownership of the Certificates and the accrual or receipt of interest (and original issue discount with respect to the Certificates) with respect to the Certificates may otherwise affect the tax liability of certain persons. Special Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Certificates, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Certificates. Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Special Counsel, will render an opinion with respect to the validity and enforceability of the Lease and the Trust Agreement. Copies of such approving opinion will be available at the time of delivery of the Certificates and will be printed on the Certificates. In addition, certain legal matters will be passed upon for the Corporation by Stradling Yocca Carlson & Rauth, a Professional Corporation and for the Trustee by its counsel. 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. The Certificates have been sold by the City to Miller & Schroeder Financial, Inc, pursuant to a Purchase Contract dated , 1998 at a purchase price of $ . The Underwriter intends to offer the Certificates to the public initially at the prices or yields set forth on the cover page of this Official Statement, plus accrued interest from June 1, 1998, which prices or yields 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. 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, 25 r t t t t Upon delivery of the Certificates, McGladrey & Pullen, LLP, Minneapolis, Minnesota, a firm of independent public accounts, will deliver a report on the mathematical accuracy of certain computations based upon certain information and assertions provided to them by the Underwriter relating to (a) the adequacy of the maturing principal of and interest earned on the Federal Securities to pay all of the principal and the prepayment premium represented by and interest due with respect to the Refunded Certificates as such principal, prepayment premium and interest becomes due and payable, and (b) the computations of yield of the Certificates and the Federal Securities which support Special Counsel's opinion that the portion of each Lease Payment due under the Lease and designated as and comprising interest is not includable in gross income for federal income tax purposes. The City has covenanted in a Continuing Disclosure Agreement for the benefit of the holders and beneficial owners of the Certificates to provide certain financial information and operating data relating to the City by not later than two hundred ten (210) days following the end of the City's Fiscal Year (currently its fiscal Year ends on June 30) (the "Annual Report"), commending with the report for Fiscal Year ending June 30, 1998, and to provide notices of the occurrence of certain enumerated events, if material. The Annual Report and the notices of material events will be filed by the City with each Nationally Recognized Municipal Securities Information Repository. The specific nature of the information to be contained in the annual Report and the notice of material events is set forth in "APPENDIX C —FORM OF CONTINUING DISCLOSURE AGREEMENT" hereto. These covenants have been made in order to assist the Underwriter in complying with Rule 15c2- 12(b)(5) promulgated under the Securities Exchange Act of 1934. [INFORMATION TO FOLLOW] Standard & Poor's Ratings Group and Moody's Investors Service, Inc. have assigned their respective municipal ratings of "AAA" and "Aaa" 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 installments on the Certificates will be issued by 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 Ratings Group, 25 Broadway, New York, New York 10004 (212) 208 -8000 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. 26 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 City and the purchasers or Owners of any of the Certificates. City. The execution and delivery of this Official Statement has been duly authorized by the 27 CITY OF NEWPORT BEACH City Manager i • Y The following information concerning the City of Newport Beach and surrounding areas is included only for the purpose ofsupplying general information regarding the community. 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 City is located in Orange County and is 75 miles north of San Diego, 15 miles south of Long Beach 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, 1997 was 70,000 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 1991 ......................... 67,000 1992 ......................... 67,600 1993 ......................... 68,200 1994 ......................... 68,600 1995 ......................... 68,900 1996 ......................... 69,200 1997 ......................... 70,000 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 Source: State Board of Equalization, California. FT Retail Stores Total All Outlets Taxable Value of Taxable Value of Year Permits Transactions Permits Transactions 1992 1,319 664,322,000 4,328 875,785,000 1993 , 1,361 681,135,000 4,394 918,021,000 1994 1,368 739,506,000 4,296 1,021,939,000 1995 1,425 801,862,000 4,389 1,073,186,000 1996 1,455 878,593,000 4,287 1,187,127,000 Source: State Board of Equalization, California. FT 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. Revenues The following schedule (expressed in thousands) presents a summary of General Fund, Special Revenue Fund, Debt Service Fund and Capital Projects Fund revenues for the fiscal year ended June 30, 1997 and the percentage of increases and decreases in relation to revenues during the previous fiscal year, as well as the percentage increases and decreases for the six year period beginning with fiscal year 1990 -91. Fiscal Year 1996 -97 Governmental Revenues Percentage Cumulative Source: City of Newport Beach, Comprehensive Annual Financial Report, Year Ended June 30, 1997. 29 Change Change Amount Percent From FY Since FY Revenues (000) of Total 1995 -96 1990 -91 Taxes $44,524 48.98% 3.90% 9.99% Licenses, Fees and Permits 4,082 4.49 33.75 45.37 Intergovernmental 11,871 13.06 42.75 7.63 Charges for Services 7,185 7.90 14.45 50.03 Fines and Forfeitures 2,529 2.78 -11.45 -18.81 Use of Money and Property 10,498 11.55 -4.56 4.98 Miscellaneous 10,208 11.23 22.40 495.22 Total $90,897 100.00% 9.92%0 1995% Source: City of Newport Beach, Comprehensive Annual Financial Report, Year Ended June 30, 1997. 29 Expenditures The following schedule (expressed in thousands) presents a summary of general governmental expenditures for the fiscal year ended June 30, 1997 and the dollar value of the increase or decrease during the past six years. Fiscal Year 1996 -97 Governmental Expenditures Percent Change of From FY Total 1995 -96 6.42% $ 230 40.36 17.55 3.77 7.46 23.43 i.01 100.00 °la 1,076 722 378 699 9,405 -178 $12.302 Change Since FY 1990 -91 -$1,628 8,735 1,045 356 -698 1,198 891 IM —00 Source: City of Newport Beach, Comprehensive Annual Financial Report, Year Ended June 30, 1997. City's Assessed Valuation The City's assessed valuation for the last ten fiscal years are as follows: Assessed and Estimated Actual Value of Taxable Property (Last Ten Fiscal Years) Fiscal Current Public Amount Expenditures (000) General Government $ 5,673 Public Safety 35,647 Public Works 15,502 Community Development 3,330 Culture and Recreation 6,585 Capital Expenditures 20,697 Debt Service 891 Total 88 325 Percent Change of From FY Total 1995 -96 6.42% $ 230 40.36 17.55 3.77 7.46 23.43 i.01 100.00 °la 1,076 722 378 699 9,405 -178 $12.302 Change Since FY 1990 -91 -$1,628 8,735 1,045 356 -698 1,198 891 IM —00 Source: City of Newport Beach, Comprehensive Annual Financial Report, Year Ended June 30, 1997. City's Assessed Valuation The City's assessed valuation for the last ten fiscal years are as follows: Assessed and Estimated Actual Value of Taxable Property (Last Ten Fiscal Years) Fiscal Secured Public Unsecured Year Valuation Utility Valuation 1987 -1988 $ 7,772,854,712 $80,739,100 S 841,558,697 1988 -1989 8,463,563,058 575,220(l) 689,901,568 1989 -1.990 9,120,361,600 575,220(l) 776,287,650 1990 -1991 10,013,611,946 575,220(l) 894,906,739 1991 -1992 10,583,498,762 354,820(l) 1,010,317,328 1992 -1.993 11,182,809,052 354,820(l) 893,375,850 1993 -1994 11,179,271,032 354,820(l) 865,424,090 1994 -1995 11,178,202,789 354,820(l) 686,344,530 1995 -1996 11,078,301,482 354,820(l) 725,943,222 1996 -1997 11,154,286,162 354,820(l) 754,892,821 Total Assessed & Estimated Valuation 8,695,152,509 9,154,039,846 9,897,224,470 10,909,093,905 11,594,170,910 12,076,539,722 12,045,049,942 11,864,902,139 11,804,599,524 11,909,533,803 (1) Effective fiscal year 1988 -89, public utility values have decreased due to AB2890 and AB454 transferring the public utility values to a county -wide tax rate area. Source: City of Newport Beach, Comprehensive Annual Financial Report, Year Ended June 30, 1997. 30 Secured Property Tax Levies and Collections The City's secured property tax levies and collections for the last ten fiscal years are as follows: Secured Property Tax Levies and Collections (Last Ten Fiscal Years) Total Current Collections Total Fiscal Current Year Levy 1987 -1988 $15,942,564 1988 -1989 17,308,591 1989 -1990 18,962,055 1990 -1991 21,031,117 1991 -1992 21,516,647 1992 -1993 18,859,889(1) 1993 -1994 17,870,028 (1) 1994 -1995 17,730,237 (1) 1995 -1996 17,843,233 (1) 1.996- 1997 20,563,561 (1) Total Current Collections % of Levy Collected Delinquent Tax Collections Total Collections % of Total Tax Collections To Total Levy $15,311,519 96.04% $493,507 $15,805,026 99.14% 16,678,689 96.36 432,523 17,111,212 98.86 18,119,326 95.56 392,912 18,512,238 97.63 19,863,098 94.45 433,571 20,296,669 9651 21,255,177 98.78 504,000 21,759,177 101.13 18,508,590 98.14 536,760 19,396,649 102.85 17,131,159 95.87 526,025 17,657,184 98.81 17,105,142 (2) 96.47 409,355(2) 17,514,497 98.78 17,432,840 97.70 368,913 17,801,753 99.77 20,096,688 97.73 897,670 20,994,358 102.09 (1) Effective FY92/93- FY95/96, Orange County reduced Secured Property Tax Levy as a result of the State Budget Process. (2) Funds were withheld due to the Orange County Bankruptcy. Source: City of Newport Beach, Comprehensive Annual Financial Report, Year Ended June 30, 1997. Principal Taxpayers The City's largest local secured taxpayers for fiscal year 1996 -97 are as follows: City of Newport Beach Principal Taxpayers June 30,1997 Property Tax (listed alphabetically) Property Owner Bayview Trust Downey Savings & Loan HMH Properties, Inc. Hughes Aircraft Company Irvine Company Irvine Apartment Communities Kell Center Pacific Mutual Life Insurance Company Park Newport Land Ltd. Rockwell International Corporation Total Type of Business 1996 -97 Assessed Valuation Percent of Total Financial $ 32,627,700 0.19% Financial 42,056,337 0.19 Real Estate 91,411,825 0.20 Aerospace 45,116,550 0.21 Real Estate 640,564,159 0.20 Real Estate 166,737,098 0.15 Office Buildings 35,629,377 0.21 Life Insurance 30,131,237 0.20 Real Estate 63,308,620 0.20 Aerospace 467,372,034 107 $1,615,954,937 Source: City of Newport Beach, Comprehensive Annual Financial Report, Year Ended June 30, 1997. 31 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: Estimated Number of Wage and Salary Workers By Industry Anaheim -Santa Ana Metropolitan Statistical Area (Orange County) Annual Average 1994 -1997 (in thousands) Industry 1994 1995 1996 1997 Agriculture (1) 7.0 6.3 6.8 6.9 Mining .9 .9 .9 .9 Construction (2) 47.3 49.8 52.1 58.0 Manufacturing: nondurable goods 69.5 71.0 72.1 73.8 durable goods 135.5 134.5 139.7 148.1 Transportation and public utilities 39.4 42.4 42.6 44.9 Wholesale trade 79.3 84.5 89.4 93.8 Retail trade 203.4 207.1 207.8 214.4 Finance, insurance and real estate 91.8 84.9 85.6 91.5 Services 330.6 348.6 364.1 370.8 Government (3) 129.2 128.2 129.9 133.2 Total 1,133.8 1,158.0 1,191.0 1,236.2 Total Civilian Labor Force 1,335.0 1,331.5 1,343.9 1,379.3 Total Civilian Unemployment 76.5 67.7 55.2 45.2 Unemployment Rate 5.7% 5.10/ 4.1% 3.3% (1) Does not include farmers and unpaid family workers. (2) Includes employees of construction contractors and operative builders; does not include force account or government construction workers. (3) Includes all civilian employees of federal, state and local governments regardless of the activity in which the employee is engaged. Source: State of California, Employment Development Department, Employment Data and Research. 32 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) 1993 1994 1995 1996 1997 Residential Valuation New single-dwelling $13,798 $13,583 $16,919 $ 52,207 $65,260 New multi- dwelling 2,322 2,893 3,624 61,987 27,065 Additions, alterations 19,468 19.074 18,912 0 0 Total Residential $35,588 ILL4W 95 92 325 No. of New Dwelling Units Single- dwelling 46 47 60 205 222 Multi- dwelling 24 24 28 566 244 Total Units 70 71 88 771 466 Source: "California Building Permit Activity" Economic Sciences Corporation. [t3G3 Schedule of Direct and Overlapping Bonded Debt The City's direct and overlapping bonded indebtedness is as follows: Schedule of Direct and Overlapping Bonded Debt June 30,1997 1996 -97 Assessed Valuation: City of Newport Beach 1915 Act Bonds City of Newport Beach Special Improvement District No. 95 -1 Total Direct Bonded Debt Orange County Improvement Bonds Metropolitan Water District Irvine Ranch Water District Improvement District #206 Irvine Ranch Water District Improvement District #106 Irvine Ranch Water District Improvement District #161 Irvine Ranch Water District Improvement District #261 Irvine Ranch Water District Improvement District #140 Irvine Ranch Water District Improvement District #240 Total Overlapping Bonded Debt Ratios to Assessed Valuation: Direct Debt Total Gross Debt 0.16% 0.25% 12 174 915 378 Percent Applicable Debt 6/30/97 100.000% $ 3,204,506 100.000 16,075,000 $19,279,506 6.873% $ 13,745 1.384 8,034,174 19.717 2,285,351 8.292 1,197,636 9.140 44,694 18.490 158,648 0.014 3,855 0.014 5,973 $11,744,076 $31,023x582 (1) Reflects general obligation debt being repaid through voter - approved indebtedness. It excludes revenue, mortgage revenue, tax allocation bonds, interim financing obligations, non- bonded capital lease obligations and certificates of participation. Source: City of Newport Beach, Comprehensive Annual Financial Report, Year Ended June 30, 1997. 34 Utilities Water is supplied by the City of Newport Beach. Southern California Gas Company supplies natural gas and electric power is provided by the Southern 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. 35 (This Page Left Intentionally Blank) I: a»1y17 :t1 r (This Page Left Intentionally Blank) The following are definitions of certain terms contained in the Trust Agreement and used in this Official Statement. Additional Payments means Additional Payments as defined in the Lease. Assignment Agreement means the Assignment Agreement dated June 1, 1998 by and between the Trustee and the Corporation, and any duly authorized and executed amendments thereto. Business Dav 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 or Certificates means the Refunding Certificates of Participation Series 1998 (Central Library Building Project) to be executed and delivered pursuant to the Trust Agreement. Certificate Insurer means Certificates Payment Date means June 1 and December I of each year, commencing December 1, 1998, so long as any Certificates remain outstanding. Certificate Year means each successive one -year period ending on a date selected by the City. Qi!y means the 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 the Trust 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. 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 administrative 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. FEW DTC means The Depository Trust Company, New York, New York, and its successors and assigns. Escrow Agreement means the Escrow Deposit and Trust Agreement dated June 1, 1998 between the City, the Trustee and the Prior Trustee providing for the defeasance of the Prior Certificates. Fiscal Year means the fiscal year of the City commencing July 1 and ending on the next following June 30. Independent Counsel means any 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. Information Services means Financial Information, Inc.'s "Daily Called Bond Service," 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07202, Attention: Editor; Kenny Information Services' "Called Bond Service," 65 Broadway, 16th Floor, New York, New York 10006; Moody's Investors Service "Municipal and Government, " 5250 77 Center Drive, Suite 150, Charlotte, North Carolina 28217, Attention: Called Bond Department; Standard & Poor's Corporation "Called Bond Record," 25 Broadway, 3rd Floor, New York, New York 10004; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other services providing information with respect to the redemption of bonds as the city may designate in a Request of the City delivered to the Trustee. Lease means the Project Lease. Lease_ P^ayment or Lease Payments means any payment or payments required to be paid by the City to the Corporation pursuant to the Lease, including payments set forth in the Trust Agreement. Lease Payment Date means May 15 and November 15 in each year. Moody's oody's means Moody's Investors Service, Inc., its successors and assigns. Municipal Bond Insurance Policy means the municipal bond insurance policy issued by the Certificate Insurer insuring the payment when due of the principal of and interest on the Certificates as provided therein. Net Proceeds means any proceeds of insurance carried pursuant to 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. Original Purchaser means the original purchaser of the Certificates, or any successors or assigns thereof. Qutstanding means, when used as of any particular time with respect to Certificates, (subject to the provisions of the Trust Agreement) all Certificates theretofore executed and delivered by the Trustee under the Trust Agreement except: (1) Certificates theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; ME (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 the Trust Agreement; and (3) Certificates in lieu of or in exchange for which other Certificates shall have been executed and delivered by the Trustee pursuant to the Trust Agreement. 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 Farmers Home Administration (FHA) Certificates of beneficial ownership I Federal Financing Bank Federal Housing Administration Debentures (FHA) General Services Administration Participation certificates 4. Government National Mortgage Association ( "GNMA" or "Ginnie Mae" GNMA - guaranteed mortgage - backed bonds GNMA. - guaranteed pass - through obligations 5. I U.S. Maritime Administration Guaranteed Title XI financing (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 Banks) Senior debt obligations A -3 r4 3. 4. Participation Certificates Senior debt obligations Senior debt obligations (excluded are stripped mortgage securiti which are valued greater than par on the portion of unpaid principal) 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 form 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. (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 top two long -term investment categories by S &P or (ii) in the highest short -term rating categories 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. (7) 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 -I" 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 A -4 agreement that the dealer bank or securities firm with repay the cash plus a yield to a municipal entity in exchange for the securities at a specified date. Repurchase agreements must satisfy the criteria contained in the Trust Agreement. Prepayment means any payment made by the City pursuant to the Lease as a prepayment of the Lease Payments. 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. Prior Certificates means the $7,500,000 Certificates of Participation, Series 1992 (Central Library Building Project) authorized to be executed and delivered pursuant to the Prior Trust Agreement. Prior Lease means that certain Project Lease dated as of June 1, 1992 between the Corporation and the City pertaining to the Prior Certificates. Prior Trust Agreement means the Trust Agreement dated as of June 1, 1992 by and among the Prior Trustee, the City and the Corporation providing for the execution and delivery of the Prior Certificates. Prior "Trustee means First Trust of California, National Association, as successor -in- interest to Bank of America National Trust and Savings Association, in its capacity as trustee for the Prior Certificates. Proiect means the Project as defined in the Lease. Proiect Lease means the lease dated June 1, 1998, between the City and the Corporation, and any authorized and executed amendments thereto. 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 Replenishment Rent means Reserve Replenishment Rent payable pursuant to the Lease. Reserve Requirement means any amount equal to the least of (i) the maximum aggregate annual Lease Payments payable under the Lease, (ii) 125% of the average annual aggregate Lease Payments payable under the Lease, or (iii) 10% of the principal amount of the Certificates Outstanding. Revenues means all revenues subject to the Trust Agreement including, without limitation, Lease Payments and Net Proceeds. Securities Depositories means The Depository Trust Company, 711 Stewart Avenue, Garden City, New York 11530, Fax (516) 227 -4039 or 4190; Midwest Securities Trust Company, Capital Structures -Call Notification, 440 South La Salle Street, Chicago, Illinois 60605, Fax (312) 663 -2343; Philadelphia Depository Trust Company, Reorganization Division, 1900 Market Street, Philadelphia, Pennsylvania 19103, Attention: Bond Department, Fax (215) 496 -5058; and, in accordance with the current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the City may designate in a Certificate of the City delivered to the Trustee. S &P means Standard & Poor's Ratings Group, its successors and assigns. A -5 Site means the Site, as defined in the Lease. Site Lease means the Site Lease, dated June 1, 1998, 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 Refunding 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. Trustee means U.S. Bank Trust National Association, Los Angeles, California or any successor trustee. Trust Agreement or Agreement means the Trust Agreement, together with any amendments thereto or supplements thereto permitted. M ralvasaff" ;�, � (This Page Left Intentionally Blank) (This Page Left Intentionally Blank) PUBLIC FACILITIES CORPORATION RESOLUTIONS DATE ADOPTED PFC- I Authorizing the Preparation, Sale and Delivery to Exe ed -57,500,000 Principal Among of Refunding Certificates of Participation, :�S 1998 (Central Library Building Project) and Approving Certain Documents and Authorizing Certain Actions in Connection Therewith 5-26-98 PFC-2 RESOLUTION NO. PFC- I RESOLUTION OF THE NEWPORT BEACH PUBLIC FACILITIES CORPORATION AUTHORIZING THE PREPARATION, SALE AND DELIVERY OF NOT TO EXCEED $7,500,000 PRINCIPAL AMOUNT OF REFUNDING CERTIFICATES OF PARTICIPATION, SERIES 1998 (CENTRAL LIBRARY BUILDING PROJECT) AND APPROVING CERTAIN DOCUMENTS AND AUTHORIZING CERTAIN ACTIONS IN CONNECTION THEREWITH WHEREAS, the City Council (the "City Council ") of the City of Newport Beach (the "City") has previously adopted its resolution authorizing the execution and delivery of those certain Certificates of Participation, Series 1992 (Central Library Building Project) of the City (the "Prior Certificates"), and WHEREAS, the Board of Directors (the "Board ") of the Newport Beach Public Facilities Corporation (the "Corporation ") has previously adopted its resolution approving the Corporation's participation in the acquisition of the certain real property known as Central Library Building Project and related public improvements for general municipal purposes (the "Project ") through the execution and delivery of the Prior Certificates; and WF'REAS, a refunding of the Prior Certificates will result in a reduction of the lease payments required to be paid by the City in connection with the Project, thereby creating a public benefit; and WHEREAS, in order to reduce its costs associated with the Project, the City now desires to refund the outstanding portion of the Prior Certificates through the execution and delivery of those certain Refunding Certificates of Participation, Series 1998 (Central Library Building Project) (the "Certificates "); and WHEREAS, in order to accomplish the refunding of the Prior Certificates, the City and the Corporation further desire to enter into that certain Site Lease, by and between the City and the Corporation (the "Site Lease "), and that certain Project Lease, by and between the City and the Corporation (the "Lease Agreement "), each to be dated as of the first day of the month in which the Certificates are executed and delivered, the farms of which have been presented to the Corporation for approval; and WHEREAS, pursuant to the Site Lease, the Corporation will agree to lease certain real property, improvements, furnishings and equipment described therein (the "Leased Property ") from the City and pursuant to the Lease Agreement the City will agree to lease back the Leased Property from the Corporation and to pay certain lease payments in connection therewith; and WHEREAS, the Corporation desires to assign certain rights under the Site Lease and the Lease Agreement, including its right to receive such lease payments from the City, to U.S. Bank Trust 5846003\22459.0005 -I- National Association, Los Angeles, Cahfomia (the "Trustee ") pursuant to an Assignment Agreement to be dated as of the first day of the month in which such Assignment Agreement is executed by the parties thereto, between the Corporation and the Trustee (the "Assignment Agreement"), the form of which has been presented to the Corporation for approval; and WHEREAS, there has been presented to the Corporation for approval the form of a Purchase Agreement (the "Purchase Agreement ") to be entered into by the City and Vfiller & Schroeder Financial, Inc. (the "Purchaser ") pursuant to which the Purchaser will agree to buy the Certificates on the terms and conditions set forth therein; and WHEREAS, there has been presented to the Corporation for approval the form of a Preliminary Official Statement to be delivered to prospective purchasers of the Certificates; NOW, THEREFORE, the Newport Beach Public Facilities Corporation does hereby resolve, determine and order as follows: Section 1. Each of the foregoing recitals is true and correct. Section 2. The Corporation hereby authorizes the preparation, sale and delivery of the Certificates in an aggregate principal amount not to exceed $7,500,000 in accordance with the terms and provisions of the Trust Agreement, The proceeds of the Certificates shall be expended to refund the Prior Certificates and to provide for a reserve fund, if required, and for payment of the costs of the sale and delivery of the Certificates. Section 3. The Corporation hereby approves the appointment by the City of U.S. Bank Trust National Association, to act as Trustee on behalf of the owners of the Certificates, with the duties and powers of the Trustee as set forth in the Trust Agreement. Section 4. The forms of the Escrow Agreement, the Site Lease, the Lease Agreement, the Trust Agreement and the Assignment Agreement presented at this meeting are hereby approved. Each of the President and Secretary of the Corporation are hereby authorized to execute, acknowledge and deliver any and all documents required to consummate the transactions contemplated by the Site Lease, the Lease Agreement, the Trust Agreement and the Assignment Agreement and this Resolution. Each of the President and the Secretary of the Corporation are hereby authorized for and in the name of the Corporation to execute and deliver the Site Lease, the Lease Agreement, the Trust Agreement and the Assignment Agreement in substantially the forms hereby approved, with such additions thereto and changes therein as are recommended or approved by Stradling Yocca Carlson & Rauth, a Professional Corporation, as Special Counsel to the City ("Special Counsel "), and approved by the officer or officers executing the same, such approval to be conclusively evidenced by the execution and delivery thereof. Section 5. The form of the Certificates as set forth in the Trust Agreement (as the Trust Agreement may be modified pursuant to the preceding section hereof] is hereby approved. Section 6. The form of the Purchase Agreement presented at this meeting is hereby approved and the sale of the Certificates pursuant thereto is hereby consented to by the Corporation; provided that the aggregate principal amount of the Certificates does not exceed $7,500,000, the present value of the debt service payments due with respect to the Certificates is at least three percent 5846003\22459,0005 -2- (3 %) less than the present value of the debt service payments due with respect to the Prior Certificates (as set forth in writing by the City and/or the Purchaser) and the discount paid to the Purchaser (exclusive of original issue discount and any bond insurance premium) with respect to the Certificates does not exceed one and one -half percent (1'h %) of the aggregate principal amount of the Certificates. Section 7. The Corporation consents to the preparation and distribution by the City of a Preliminary Official Statement to prospective purchasers of the Certificates in the form deemed final by the City for purposes of Rule 150-12 of the Securities and Exchange Commission and to the preparation of a final Official Statement in substantially the form of the Preliminary Official Statement, with such additions thereto and changes therein as are recommended or approved by the City Attorney, and approved by the officer or officers executing the same on behalf of the City. Section 8. The President, Secretary and other officers of the Corporation are hereby authorized, jointly and severally, to do any and all things and to execute and deliver any and all documents which they may deem necessary and advisable in order to consummate the sale and delivery of the Certificates and otherwise effectuate the purposes of this Resolution and such actions previously taken by such officers are hereby ratified. Specifically and without limiting the foregoing, the Finance Director is authorized and directed to solicit and accept bids for bond insurance for the Certificates, provided he determines acceptance of the best bid will result in further debt service savings, and appropriate changes to each of the documents referenced herein to evidence such bond insurance and the terms thereof, are hereby authorized and approved. Section 9. In the event the President is unavailable or unable to execute and deliver any of the above- referenced documents, any other member of the Board of the Corporation may validly execute and deliver such documents, and any documents required to be signed by the Secretary may be signed by any deputy secretary. Section 10. This Resolution shall take effect from and after its date of adoption. ADOPTED, SIGNED AND APPROVED this 26th day of May, 1998. 1� President of the Newport Beach Public Facilities Corporation ATTEST: Secretary of th Ne rt ach Public Facilities Corporation STATE OF CALIFORNIA ) ) ss. COUNTY OF ORANGE ) 584606.3122459.4065 -3- I hereby certify that the foregoing Resolution was duly and regularly adopted by the Board of Directors of the Newport Beach Public Facilities Corporation at a regular meeting thereof held on the 26th day of May, 1998, by the following vote: AYES: BOARD MEMBERS: Debay, Noyes, Glover, Edwards ABSENT: BOARDMEMBERS: Hedges, O'Neil, Thomson G :i• i 1. SecreAaryPtZe e ort Beach Public Facilities Corporation 5846003 \22459.0005 -4-