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HomeMy WebLinkAbout95-41 - Special Assessment District 72 - Balboa CovesRESOLUTION NO. 95 -41 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH, CALIFORNIA, AUTHORIZING ISSUANCE OF TAXABLE BONDS AND APPROVING BOND DOCUMENTS FOR A SPECIAL ASSESSMENT DISTRICT WHEREAS, the CITY COUNCIL of the CITY OF NEWPORT BEACH, CALIFORNIA, is conducting proceedings for the installation of certain public improvements in a special assessment • district pursuant to the terms and provisions of the "Municipal Improvement Act of 1913 ", being Division 12 of the Streets and Highways Code of the State of California, said special assessment district known and designated as ASSESSMENT DISTRICT NO. 72 (BALBOA COVES) (hereinafter referred to as the "Assessment District"); and, WHEREAS, this legislative body has previously declared in its Resolution of Intention to issue bonds to finance said improvements, said bonds to issue pursuant to the terms and provisions of the "Improvement Bond Act of 1915 ", being Division 10 of said Code; and, WHEREAS, at this time this legislative body is desirous to set forth all formal terms and conditions relating to the authorization, issuance and administration of said bonds; and, WHEREAS, this legislative body anticipates that the interest payable on the bonds will be included in income for federal income tax purposes, but exempt from personal income taxation by the State of California; and, WHEREAS, there has been presented, considered and ready for approval a bond indenture setting forth formal terms and conditions relating to the issuance and sale of bonds; and, WHEREAS, there has also been presented for consideration by this legislative body a form of Bond Purchase Contract authorizing the sale of bonds to M. L. STERN & CO., the designated underwriter, and, WHEREAS, this legislative body hereby further determines that the unpaid assessments shall be specifically in the amount as shown and set forth in the Certificate of Paid and Unpaid Assessments as certified by and on file with the Treasurer, and for particulars as to the amount of said unpaid assessments, said Certificate and list shall control and govern. NOW, THEREFORE, IT IS HEREBY RESOLVED AS FOLLOWS: RECITALS SECTION 1. That the above recitals are true and correct. BOND AUTHORIZATION SECTION 2. That this legislative body does authorize the issuance of limited obligation improvement bonds in an aggregate principal amount not to exceed the aggregate principal amount of the unpaid assessments pursuant to the terms and provisions of the "Improvement Bond Act of 1915 ", being Division 10 of the Streets and Highways Code of the State of California, and also pursuant to the specific terns and conditions as set forth in the Bond Indenture presented herein. BONDINDENTURE SECTION 3. That the Bond Indenture is approved substantially in the form presented • herein. The Treasurer is hereby authorized and directed for and on behalf of the City to execute the Bond Indenture with such additions thereto or changes therein as may be approved by the Treasurer, such approval by the Treasurer to be conclusively evidenced by the execution and delivery thereof. A copy of said Bond Indenture shall be kept on file with the transcript of these proceedings and open for public inspection. BOND PURCHASE CONTRACT SECTION 4. That the Bond Purchase Contract as submitted by M.L. STERN & CO., INC., the designated underwriter, is hereby approved substantially in the form presented herein. The Treasurer is hereby authorized and directed for and on behalf of the City to evidence the City's acceptance of the terms and provisions of the Bond Purchase Contract in the form presented to the City Council at this meeting, with such changes therein as are approved by the Treasurer, such approval by the Treasurer to be conclusively evidenced by the execution and delivery thereof, provided, however, the Treasurer shall execute the Bond Purchase Contract only if the aggregate principal amount of the Bonds is equal to the unpaid assessments within the Assessment District, the underwriter's discount does not exceed two and one -half percent (2.5 %) and the interest rate on the Bonds shall not exceed ten percent (10 %) per annum. FINAL BOND DELIVERY SECTION 5. No further action will be required by this legislative body if the bonds are priced, sold and delivered prior to September 1, 1995. FINAL ASSESSMENTS SECTION 6. That the Certificate of Paid and Unpaid Assessments, as certified by the Treasurer, shall remain on file in that office and be open for public inspection for all particulars as it relates to the amount of unpaid assessments to secure bonds for this Assessment District. SUPERIOR COURT FORECLOSURE • SECTION 7. This legislative body does further specifically covenant for the benefit of the bondholders to commence and prosecute to completion foreclosure actions regarding delinquent installments of the assessments in the manner, within the time limits and pursuant to the terms and conditions as set forth in the Bond Indenture as submitted and approved through the adoption of this Resolution. OTHER ACTS SECTION 8. All actions heretofore taken by the officers and agents of the City with respect isto the sale and issuance of the bonds are hereby approved, confirmed and ratified, and the Treasurer and any and all other officers of the City are hereby authorized and directed, for and in the name and on behalf of the City, to do any and all things and take any and all actions relating to the execution and delivery of any and all certificates, requisitions, agreements and other documents, which the Treasurer may deem necessary or advisable in order to consummate the lawful issuance and delivery of the bonds in accordance with this resolution. APPROVED and ADOPTED this 8th day of May 1995. Jv -) MAYOR ATTEST: • i BONDINDENTURE This Bond Indenture (the 'Indenture ") dated as of June 1, 1995, entered into and approved by the City of Newport Beach, California, (the "Issuer"), a municipal corporation duly organized and existing pursuant to the Constitution and the laws of the State of California, to establish the terms and conditions pertaining to the issuance of bonds in a special assessment district known and designated as ASSESSMENT DISTRICT NO. 72 (BALBOA COVES) (the "Assessment District'). SECTION 1. Issuance. Designation and Amount. Pursuant to the provisions of the • 'Improvement Bond Act of 1915" (the "Act'), being Division 10 of the Streets and Highways Code of the State of California, the Issuer does hereby authorize the issuance of bonds to represent unpaid assessments within the Assessment District in principal amount of $ , and designated as the City of Newport Beach Assessment District No. 72 (Balboa Coves) Limited Obligation Improvement Bonds (the 'Bonds "). SECTION 2. Unpaid Assessments. The Issuer shall, immediately upon the completion of the 30-day cash collection period, determine the assessments which are unpaid and the aggregate amount thereof as authorized by Section 8621 of the Streets and Highways Code of the State of California. SECTION 3. Term of Bonds. Bonds to represent the unpaid assessments, will be issued in the manner provided in the 'Improvement Bond Act of 1915 ", being Division 10 of the Streets and Highways Code of the State of California (the "Bond Act'). The provisions of Part 11.1 of said Act, providing an alternative procedure for the advance payment of assessments and the calling of Bonds shall apply. SECTION 4. Registered Bonds and Denominations. Bonds shall be issuable only in denominations of $5,000, or any integral multiple thereof. SECTION 5. Date of Bonds. All of said Bonds shall be dated June_, 1995, and Interest shall accrue from that date. SECTION 6. Maturity. The Bonds shall be issued in serial form with annual maturities on September 2nd of every year, commencing September 2, 1996, until the whole is paid. The amount maturing (or becoming subject to mandatory prior redemption) each year shall be the principal amounts maturing in the respective years of maturity as shown on Exhibit "A" attached hereto and incorporated herein by this reference. SECTION 7. Interes . Each Bond shall be of a single maturity and shall bear interest at the rate as set forth in Exhibit "A" attached hereto for said Bonds from the interest payment date next preceding the date on which it is authenticated and registered, unless said Bond is authenticated and registered as of an interest payment date, in which case it shall bear interest from said interest payment date, or unless said Bond is authenticated and registered prior to the first interest payment date, in which case it shall bear interest from its date, or unless a prior interest payment is in default on such date, in which case it shall bear interest from the last day on i which interest was paid in full or from its dated date if no interest has been paid, until payment of its principal sum has been discharged. SECTION 8. Payment. The principal on the Bonds shall be payable in lawful money of the United States of America upon surrender of the Bond at the principal office of , Los Angeles, CA, the designated registrar, transfer agent, paying agent and Paying Agent of the Issuer ( "Paying Agent'), or such other registrar, transfer agent, paying agent or Paying Agent as may be designated by supplemental Indenture of the Issuer. • Interest on said Bonds shall be paid on March 2 and September 2 of each year, commencing September 2, 1995, by check mailed by first class mail postage prepaid to the registered owner thereof at the owner's address as it appears on the books of registration as of the 15th day of the month immediately preceding said interest payment date (each a "Record Date "). Interest may also be paid by wire transfer made on each Interest Payment Date to any owner of $1,000,000 or more in aggregate principal amount of the Bonds who shall have requested such transfer pursuant to written notice filed with the Paying Agent on or before the preceding Record Date. If any payment is due on a day which is a Saturday, Sunday or legal holiday or a day on which the Paying Agent and the New York Stock Exchange is closed, payment shall be made the next succeeding business day. SECTION 9. Redemption. (a) The Bonds shall be subject to redemption prior to maturity at the option of the Issuer, In whole or in part, on September 2, 1995, or on any March 2 or September 2 thereafter at a redemption price equal to 103% of the principal amount thereof, together with accrued interest to the date of redemption, from any source of funds. (b) Selection of Bonds for Redemption. If less than all of the outstanding bonds are to be redeemed, the Paying Agent shall select the Bonds to be redeemed in authorized denominations from each maturity in the same proportion which such maturity represents with respect to all of the outstanding Bonds and by lot within a single maturity; provided, however, that the portion of any Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of $5,000 or a multiple thereof, and that, in selecting portions of such Bonds for redemption, the Paying Agent shall treat each such Bond as representing that number of Bonds of $5,000 denominations which is obtained by dividing the principal amount of such Bonds to be redeemed in part by $5,000. The Paying Agent shall promptly notify the Issuer in writing of the Bonds, or portions thereof, selected for redemption. (c) Notice of Redemption. When the Paying Agent shall receive notice from the Issuer of its election to redeem Bonds at least sixty (60) days prior to the applicable redemption date, or when Bonds are otherwise to be redeemed pursuant to this Section 9, the Paying Agent shall give notice, in the name and at the expense of the Issuer, of the redemption of such Bonds. Such notice of redemption shall (a) specify the CUSIP numbers and the numbers of the Bonds selected for redemption, except that where all the Bonds are subject to redemption, the numbers thereof need not be specified; (b) state the date fixed for redemption; (c) state the redemption price; (d) state the place or places where the Bonds are to be redeemed; and (e) in the case of Bonds to be redeemed only in part, state the portion of the Bond which • is to be redeemed. Such notice shall further state that on the date fixed for redemption there shall become due and payable on each Bond, or portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the redemption date, and that from and after such date, interest thereon shall cease to accrue and be payable. At least 30 days but no more than 45 days prior to the redemption date, the Paying Agent shall mail by registered or certified mail, postage prepaid, a copy of such notice to the respective owners of the Bonds to be redeemed at their addresses appearing on the bond register. The actual receipt by the owner of any Bond of notice of such redemption shall not be a condition precedent thereto, and failure to receive such notice shall not affect the validity of the proceedings for the redemption of such Bonds, or the cessation of interest on the redemption date. A certificate by the Paying Agent that notice of such redemption has been given as herein provided shall be conclusive as against all parties, and it shall not be open to any Bond owner to show that he or she failed to receive notice of such redemption. Notice of redemption shall be sent by the Paying Agent on the date the notice of redemption is mailed to the Bond owners by facsimile transmission, registered or certified mail or overnight delivery service to the registered securities depositories listed below which are then in the business of holding substantial amounts of obligations of types comprising the Bonds and, on the date notice of redemption is mailed to the Bond owners, to the national information services listed below that disseminate notice of redemption of obligations similar to the Bonds or, in accordance with the then - current guidelines of the Securities and Exchange Commission, such other securities depositories and services providing information on called bonds, or no such securities depositories and services, as the Treasurer may designate in written instructions delivered to the Paying Agent. Registered Securities Depositories Muni Reorganization Manager The Depository Trust Company 711 Stewart Avenue Garden City, New York 11530 Facsimile transmission: (516) 227 -4039 or 4190 3 Midwest Securities Trust Company Capital Structures -Call Notification 440 South LaSalle Street Chicago, Illinois 60605 Facsimile transmission: (312) 663 -2343 Philadelphia Depository Trust Company Reorganization Division 1900 Market Street • Philadelphia, Pennsylvania 19103 Facsimile transmission: 215) 496 -5058 National Information Services Financial Information, Inc.'s Financial Daily Called Bond Service 30 Montgomery Street, 10th Floor Jersey City, New Jersey 07302 Attention: Editor Kenny Information Service's "Called Bond Service" 65 Broadway, 16th Floor New York, New York 10006 Moody's Investors Service "Municipal and Government" 5250 77 Center Dr, #150 Charlotte, North Carolina 28217 Attention: Called Bonds Dept. Standard & Poor's Corporation "Called Bond Record" 25 Broadway, 3rd Floor New York, New York 10004 No defect in this notice to either the above - listed depositories or information services nor any failure to give all or any portion of such notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given to the Bond owners as prescribed in the first paragraph of this subsection (e). (e) Partial Redemption of Bonds. Upon surrender of any Bond to be redeemed in part only, the Issuershall execute and the Paying Agent shall authenticate and deliver to the Bond owner, at the expense of the Issuer, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bond surrendered, with the same interest rate and the same maturity. 4 (f) Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in this Section 9, and the amount necessary for the redemption having been made available for that purpose and being available therefor on the dated fixed for such redemption: (1) The Bonds, or portions thereof, designated for redemption shall, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in this Indenture, anything in this Indenture or in the Bonds to the contrary notwithstanding; is (2) Upon presentation and surrender thereof at the principal corporate trust office of the Paying Agent, such Bonds shall be redeemed at the specified redemption price; (3) From and after the redemption date the Bonds or portions thereof so designated for redemption shall be deemed to be no longer outstanding and such Bonds or portions thereof shall cease to bear further interest; and (4) From and after the date fixed for redemption no owner of any Bond or portion thereof so designated for redemption shall be entitled to any of the benefits of this Indenture, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available. SECTION 10. Transfer of Registered Bonds. Any Bond may, in accordance with its terms, be transferred, upon the books of registration required to be kept pursuant to the provisions of Section 12, by the owner in whose name it is registered, or by his duly authorized attorney or legal representative, upon surrender of such Bond for registration of such transfer, accompanied by delivery of a written instrument of transfer in a form approved by the Paying Agent and duly executed by the owner of said Bond. The Paying Agent shall require the payment by the owner requesting such transfer of any tax or other govemmental charge required to be paid with respect to such transfer and such charges as provided for in the system of registration for registered debt obligations. No transfer of Bonds shall be required to be made during the fifteen (15) days preceding the selection of any Bonds for redemption prior to the maturity thereof, nor with respect to any Bond which has been selected for redemption prior to the maturity thereof. Upon any such registration of transfer, a new Bond or Bonds shall be authenticated and delivered in exchange for such Bond, in the name of the transferee, of any denomination or denominations authorized by this Indenture, and in an aggregate principal amount equal to the principal amount of such Bond 5 or principal amount of such Bond or Bonds so surrendered. In all cases in which Bonds shall be exchanged or transferred, the Paying Agent shall authenticate at the earliest practical time, Bonds in accordance with the provisions of this Indenture. All Bonds surrendered in such exchange or registration transfer shall forthwith be cancelled. SECTION 11. Exchange of Bonds. Bonds may be exchanged at the principal office of the Paying Agent for a like • aggregate principal amount of Bonds of the same series, interest rate and maturity, subject to the terms and conditions provided in the system of registration for registered debt obligations, including the payment of certain charges, if any, upon surrender and cancellation of the Bond. Upon such transfer and exchange, a new registered Bond or Bonds of any authorized denomination or denominations of the same maturity for the same aggregate principal amount will be issued to the transferee in exchange therefor. SECTION 12. Books of Registration. There shall be kept by the Paying Agent sufficient books for the registration and transfer of the Bonds and, upon presentation for such purpose, the Paying Agent shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said register, Bonds as hereinbefore provided. SECTION 13. Execution of Bonds. The Bonds shall be executed substantially in the form of the Bond attached hereto as Exhibit "B" and shall be in facsimile by the Treasurer and by the City Clerk. The Bonds shall then be delivered to the Paying Agent for authentication and registration. In case an officer who shall have signed or attested to any of the Bonds by facsimile or otherwise shall cease to be such officer before the authentication, delivery and issuance of the Bonds, such Bonds nevertheless may be authenticated, delivered and issued, and upon such authentication, delivery and issue, shall be as binding as though those who signed and attested the same had remained in office. SECTION 14. Authentication. Only such of the Bonds as shall bear thereon a certificate of authentication substantially in the form below, manually executed by the Paying Agent, shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of the transfer agent and registrar shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder, and are entitled to the benefits of this Indenture. FORM OF CERTIFICATE OF AUTHENTICATION AND REGISTRATION This is one of the Bonds described in the Indenture authorizing the issuance of the Bonds. as Paying Agent By: Authorized Signatory Dated: SECTION 15. Ownership of Bonds. The person in whose name any Bond shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal and redemption premium, if any, of any such Bond, and the interest on any such Bond, shall be made only to or upon the order of the registered owner thereof or his legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond, including the redemption premium, if any, and interest thereon, to the extent of the sum or sums so paid. SECTION 16. Mutilated, Destroyed. Stolen or Lost Bonds. In case any Bond secured hereby shall become mutilated or be destroyed, stolen or lost, the Issuer shall cause to be executed and authenticated a new Bond of like date and tenor in exchange and substitution for and upon the cancellation of such mutilated Bond or in lieu of and in substitution for such Bond mutilated, destroyed, stolen or lost, upon the owner's paying the reasonable expenses and charges in connection therewith, and, in the case of a Bond destroyed, stolen or lost, his filing with the Paying Agent and Issuer of evidence satisfactory to them that such Bond was destroyed, stolen or lost, and of his ownership thereof, and furnishing the Paying Agent and Issuer with indemnity satisfactory to them. SECTION 17. Cancellation of Bonds. All Bonds paid or redeemed, either at or before maturity, shall be cancelled upon the payment or redemption of such Bonds, and shall be delivered to the Paying Agent when such payment or redemption is made. All Bonds cancelled under any of the provisions of this Indenture shall be destroyed by the Paying Agent, which shall execute a certificate in duplicate describing the Bonds so destroyed, and shall retain said executed certificate in its permanent files for the issue. 7 SECTION 18. Application of Bond Proceeds and Proceeds of Prepayment of Assessments. The proceeds of the sale of Bonds, the good faith security deposit, if any, and the proceeds of the prepayment of assessments, if any, shall be received by the Paying Agent and deposited in accordance with written instructions of the Issuer to be provided at the time of, or prior to, the delivery of the Bonds. SECTION 19. Creation of Funds. • The Treasurer is hereby authorized and directed to establish and maintain the following Funds for purposes of making payment for the costs and expenses for the works of improvement and payment of principal and interest on the Bonds. The Funds to be created are designated as follows: IMPROVEMENT FUND: The proceeds from the sale of the Bonds (after deposit of required amounts in the Reserve Fund and Redemption Fund), the amount representing the good faith security deposit, if any, and the proceeds of the prepayment of assessments collected prior to June _, 1995, if any, shall be placed by the Paying Agent in the Fund hereby created, pursuant to the Act, which shall be called the 'Improvement Fund ", and the monies in said Fund shall be used only for Project Costs as that term is defined hereinafter. "Project Costs" shall mean the costs of acquisition or construction of the works of improvement as authorized in the assessment proceedings and all incidental costs related thereto, all as more particular described in the Engineer's Report for Assessment District No. 72 (Balboa Coves) on file in the Office of the City Clerk of the Issuer. Any surplus in the Improvement Fund after completion of the improvements shall remain in the Improvement Fund for a period of not less than two (2) nor more than three (3) years from the receipt of Bond proceeds and thereafter shall be utilized or distributed as determined by the Issuer and authorized by the Bond Act. REDEMPTION FUND: The Treasurer is hereby authorized and directed to keep a Redemption Fund designated by the name of the proceedings, into which shall be placed (i) initially, an amount from proceeds of the Bonds which represents accrued interest, if any, on the Bonds, (ii) all sums received from the Issuer representing the collection of the assessments and (iii) any surplus in the Improvement Fund authorized by the Issuer pursuant to Streets and Highways Code Section 10427.1 to be credited against unpaid assessments. The Treasurer shall transfer or cause to be transferred sufficient sums received for the collection of the assessments, interest and penalties thereon and required by the Act to be deposited in the Redemption Fund, and sums received for the prepayment of assessments (excepting therefrom any administrative fee for the cost of collection the prepayments and of redeeming Bonds) to the Paying Agent within five (5) business days of each interest payment date. Principal of and interest on said Bonds shall be paid by the Paying Agent to the registered owners out of the Redemption Fund to the extent funds on deposit in said Redemption Fund are available therefor. In all respects not recited herein, said Bonds shall a be governed by the provisions of the Act. Under no circumstances shall the Bonds or interest thereon be paid out of any other fund except as provided by law. Prior to the first redemption date there shall be established by the Treasurer a prepayment subaccount within the Redemption Fund to be known as the Prepayment Account ( "Prepayment Account'). The Treasurer shall deposit In the Prepayment Account all monies received representing the principal of and redemption premium on any prepaid assessments. Such monies shall be applied • solely to the payment of principal of and premium on Bonds to be redeemed prior to maturity pursuant to the provisions of Section 9 of this Indenture. RESERVE FUND: Pursuant to the Act there shall be created a special reserve fund for the Bonds to be designated by the name of the Assessment District and specified as the "Reserve Fund ". An amount equal to five percent (5 %) of the principal amount of the Bonds issued shall be deposited in the Reserve Fund out of the Bond proceeds. Monies in the Reserve Fund shall be applied by the Treasurer as follows: A. Whenever there are insufficient funds in the Redemption Fund to pay the next maturing installment of principal of or interest on the Bonds on the business day preceding such date of payment, the Treasurer shall transfer the amount necessary to make up such deficiency from the Reserve Fund to the Redemption Fund. The amounts so advanced shall be reimbursed upon receipt thereof by the Issuer and transfer thereof to the Treasurer for deposit into the Reserve Fund from the proceeds of redemption or sale of the parcels for which payment of delinquent installments of assessments and interest thereon have been made from the Reserve Fund. B. In the event an unpaid assessment is paid in cash in advance of the final Bond maturity date, the Issuer shall credit such prepaid assessment with a proportionate share of the Reserve Fund, thus reducing the total amount of the Reserve Fund. The amount to be so credited shall be the pro -rata share of the original amount deposited in the Reserve Fund, less any amount previously credited to the parcel with respect to a prior prepayment and less any amount previously transferred from the Reserve Fund to the Redemption Fund as a result of the delinquency in the payment of assessment installments for the parcel for which the assessment is being prepaid. The Treasurer shall transfer the amount representing such credit from the Reserve Fund to the Redemption Fund. C. Interest earned on permitted investments of Reserve Fund monies shall remain in the Reserve Fund so that the amount therein may accumulate to and subsequently be maintained at the "Reserve Requirement ". "Reserve Requirement" means an amount equal to the lesser of (i) the Maximum Annual Debt Service on the Bonds, (ii) 125% of the Average Annual Debt Service on the Bonds, or (iii) 10% of the original principal amount of the 0 Bonds. "Annual Debt Service" on the Bonds for each year ending September 2 shall equal the sum of (a) the interest falling due on the outstanding Bonds in such 12 month period, assuming that the outstanding Bonds are refired as scheduled, and (b) the principal amount of the outstanding Bonds falling due during such 12 month period. "Average Annual Debt Service" shall mean the average Annual Debt Service during the term of the Bonds. "Maximum Annual Debt Service" shall mean, as computed from time to time, the largest Annual Debt Service during the period from the date of such computation through the final maturity of any • outstanding Bonds. D. Prior to each interest payment date, any interest earned on the investment of monies on deposit in the Reserve Fund which would cause the amount therein to exceed the Reserve Requirement shall be transferred to the Redemption Fund and shall be credited towards unpaid assessments each year during which part of the Bonds remain outstanding. The Auditor's Record prepared by the Issuer pursuant to Section 8682 of the Act shall reflect credits against each of the unpaid assessments in the manner provided in Section 10427.1 therein in amounts equal to each assessment parcels' proportionate share of any such Reserve Fund disbursement. E. All sums remaining in the Reserve Fund in the year in which the last installments of the assessments become due and payable shall be credited toward the assessments as follows: Prior to June 30th of the Fiscal Year next preceding the Fiscal Year in which the last unpaid assessment installment becomes due and payable, the Issuer shall determine the amount remaining in the Reserve Fund, if any, after all sums advanced and interest thereon have been reimbursed, and shall order the same to be distributed and/or credited pursuant to its written direction in the manner set forth in Section 10427.1 of the Act, provided only that where all or any part of such assessments remain unpaid and are payable installments, the amount apportioned to each parcel shall be credited against the last unpaid assessment installment, then such excess shall be credited against the next to last unpaid assessment installment. Whenever the balance in the Reserve Fund is sufficient to retire all remaining outstanding Bonds, whether by advance retirement or otherwise, collection of the principal of and interest on the assessments shall be discontinued and the Reserve Fund shall be liquidated by the Paying Agent pursuant to the written direction of the Treasurer and utilized in the retirement of the Bonds. In the event that the balance in the Reserve Fund at the time of liquidation exceeds the amount required to retire all outstanding Bonds in the issue, the excess shall be apportioned by the Issuer to each parcel upon which the individual assessment remained unpaid at the time the balance in the Reserve Fund was sufficient to retire all outstanding Bonds in the issue. F 47 The payments shall be made in cash by the Treasurer to the respective owners of the parcels except that, if the excess is not greater than one thousand dollars ($1,000), the excess may be transferred to the general fund of the Issuer. SECTION 20. Investments. Obligations purchased as investments of monies in any of the funds and accounts in which investments are authorized shall be deemed at all times to be part of • such funds and accounts. Except as provided in Section 19 hereof with respect to the Reserve Fund, all investment earnings on monies held under this Indenture shall, prior to the earlier of (i) the substantial completion of the works of improvement, (il) three (3) years from the date of delivery of the Bonds, or (iii) the date on which an amount equal to the Bond proceeds allocable to the works of improvement and authorized incidental expense have been expended ( "Completion Date "), be deposited into the Improvement Fund. After the Completion Date, all such investment earnings shall be deposited in the Redemption Fund. The Treasurer shall sell at the best price reasonably obtainable or present for redemption any obligations so purchased whenever it may be necessary to do so in order to provide monies to meet any payment or transfer for such funds and accounts or from such funds and accounts. For the purpose of determining at any given time the balance in any such funds or accounts, any such investments constituting a part of such funds and accounts shall be valued at the lesser of their market value or cost. Notwithstanding anything herein to the contrary, the Issuer shall not be responsible for any loss from any investments pursuant to this Indenture. "Authorized Investments" means any of the following to the extent such securities are eligible for the legal investment of funds of the District: (1) United States Treasury notes, bonds, bills or certificates of indebtedness, or those for which the faith and credit of the United States is pledged for the payment of principal and interest; (2) Time certificates of deposit or negotiable certificates of deposit issued by a state or nationally chartered bank or trust company, including the Paying Agent, or a state or federal savings and loan association; provided, that such certificates of deposit shall be (1) continuously and fully insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation, or (ii) issued by any bank or trust company organized under the laws of any state of the United States of America or any national banking association (including the Paying Agent) having a combined capital and surplus of at least one hundred million dollars ($100,000,000), and such certificates shall have maturities of six (6)months or less, or (iii) continuously 11 and fully secured by such securities as are described in clause (1) above, which securities shall have a market value (as determined on a marked -to- market basis calculated at least weekly, and exclusive of accrued interest) of not less than the principal amount of such certificates of deposit; (3) Bills of exchange or time drafts drawn on and accepted by a commercial bank (including the Paying Agent), otherwise known as bankers' acceptances, which are eligible for purchase by members of the Federal Reserve System; provided, that purchases of eligible bankers' acceptances • may not exceed two hundred seventy (270) days' maturity; (4) Commercial paper of "prime" quality of the highest ranking or of the highest letter and numerical rating as provided by either Moody's or Standard & Poor's, which commercial paper is limited to issuing corporations that are organized and operating within the United States of America and that have total assets in excess of five hundred million dollars ($500,000,000) and that have an °A" or higher rating for the issuer's debentures, other than commercial paper, as provided by either Moody's or Standard & Poor's; provided, that purchases of eligible commercial paper may not exceed one hundred eighty (180) days' maturity nor represent more than ten percent (10 %) of the outstanding commercial paper of an issuing corporation; (5) Any repurchase agreement with any bank or trust company organized under the laws of any state of the United States of America (including the Paying Agent) or any national banking association or government bond dealer reporting to, trading with and recognized as a primary dealer by, the Federal Reserve Bank of New York, which agreement is secured by any one or more of the securities described in clause (1) above; provided, that the underlying securities are (i) required by the repurchase agreement to be held by any such bank, trust company or primary dealer having a combined capital and surplus of at least one hundred million dollars ($100,000,000) and being independent of the issuer of such repurchase agreement, and (ii) maintained at a market value (as determined on a marked -to- market basis calculated at least weekly) of not less than 103% of the amount so invested; (6) Bonds, notes, warrants or other evidence of indebtedness of the State of Califomia or of any political subdivision or public agency thereof which are rated in one of the two highest short-term or long -term rating categories by either Moody's or Standard & Poor's; (7) Units of a taxable government money market portfolio restricted to obligations issued or guaranteed as to payment of principal and interest by the full faith and credit of the United States government or repurchase agreements collateralized by such obligations; and (8) The Local Agency Investment Fund established pursuant to Section 16429.1 of the Government Code of the State of Califomia. 12 SECTION 21. No Issuer Liability. It is hereby further determined and declared that the Issuer will not obligate itself to advance any available funds from its Treasury to cure any deficiency or delinquency which may occur in the Redemption Fund by failure of property owners to pay annual special assessments. This determination shall be clearly set forth and stated in the title of the Bonds to be issued pursuant to these proceedings as authorized and required by Section 8769 of the Streets and Highways Code of the State of California. • SECTION 22. Covenant to Foreclose. The legislative body hereby covenants that it will determine, no later than August 1 of each fiscal year in which the Bonds are outstanding, those parcels for which the assessment installments due and payable during the preceding fiscal year are delinquent and that it will initiate no later than the following December 1 Superior Court foreclosure proceedings to foreclose the assessment lien on such parcels and thereafter diligently prosecute to completion such proceedings; provided, however, that the commencement of any foreclosure may be deferred in the sole discretion of the Issuer if, and so long as, the Reserve Fund is maintained at an amount at least equal to seventy percent (70 %) of the Reserve Requirement.. SECTION 23. Order to Print and Authenticate Bonds. The Treasurer is hereby instructed to cause Bonds, as set forth above, to be printed, and to proceed to cause said Bonds to be authenticated and delivered to an authorized representative of the purchaser, upon payment of the purchase price as set forth in the accepted proposal for the sale of Bonds. SECTION 24. Arbitraae Certificate. On the basis of the facts, estimates and circumstances now in existence and in existence on the date of issue of the Bonds, as determined by the Treasurer, said Treasurer is hereby authorized to certify that it is not expected that the proceeds of the issue will be used in a manner that would cause such obligations to be arbitrage Bonds. Such certification shall be delivered to the purchaser together with the Bonds. SECTION 25. Pavina Aaent. The Issuer hereby appoints , as Paying Agent for the Bonds. The Paying Agent is hereby authorized to and shall mail interest payments to the Bond owners, select Bonds for redemption, give notice of redemption of Bonds, and maintain the Bond register as provided in this Indenture. The Paying Agent is hereby authorized to pay the principal of and premium, if any, on the Bonds when the same are duly presented to it for payment at maturity or on call and redemption, to provide for the registration of transfer and exchange of Bonds presented to it for such purposes, to provide for 13 the cancellation of Bonds, all as provided in this Indenture, and to provide for the authentication of Bonds, and shall perform all other duties assigned to or imposed on it as provided in this Indenture. The Paying Agent shall keep accurate records of all funds administered by it and all Bonds paid and discharged by it. The Paying Agent initially appointed, and any successor thereto, may be removed by the Issuer and a successor or successors may be appointed. So long as any Bonds are outstanding and unpaid the Paying Agent and any successor or successors thereto designated by the Issuer shall continue to be Paying Agent of the Issuer for all of said purposes until the designation by the Issuer of a • successor or successors as Paying Agent. The Issuer shall compensate the Paying Agent for the performance of its services hereunder pursuant to the Paying Agent Agreement. A Paying Agent appointed hereunder may resign at any time upon 90 days written notice and after appointment by the Issuer of a successor. Upon merger, consolidation or reorganization of a Paying Agent, the Issuer will appoint a new Paying Agent, which may be the corporation resulting from such reorganization. SECTION 26. Liability of Paying Agent. The recitals of fact and all promises, covenants and agreements contained herein and in the Bonds shall be taken as statements, promises, covenants and agreements of the Issuer, and the Paying Agent assumes no responsibility for the correctness of the same and makes no representations as to the validity or sufficiency of this Indenture or of the Bonds, and shall incur no responsibility in respect thereof other than In connection with its duties or obligations herein, or in the Bonds or in the certificate of authorization assigned to or imposed upon the Paying Agent. The Paying Agent shall be under no responsibility or duty with respect to the issuance of the Bonds for value. The Paying Agent shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. The Paying Agent shall be protected in acting on any notice, resolution, request, consent, certificate or other document believed by it to be genuine and to have been signed or presented by the proper party. SECTION 27. Defeasance. If all outstanding Bonds shall be paid and discharged in any one or more of the following ways: (a) by paying or causing to be paid the principal of and interest with respect to all Bonds outstanding, as and when the same become due and payable; (b) by depositing with an escrow agent, in trust, at or before maturity, money which, together with the amounts then on deposit in the Redemption Fund and the Reserve Fund, is fully sufficient to pay the principal of and interest on all Bonds outstanding as and when the same shall become due and payable; or 14 (c) by depositing with an escrow agent, in trust, direct non - callable obligations of, or non - callable obligations guaranteed by, the United States of America, in which the Issuer may lawfully invest its money, in such amount as a firm of certified public accountants selected by the Issuer shall determine, at the expense of the Issuer, will, together with the interest to accrue thereon and monies then on deposit in the Redemption Fund and the Reserve Fund together with the interest to accrue thereon, be fully sufficient to pay and discharge the principal of and interest on all Bonds outstanding as and when the same shall become due and payable; • then, at the election of the Issuer, and notwithstanding that any Bonds shall not have been surrendered for payment, all obligations of the Issuer under this Indenture shall cease and terminate, except for the obligation to pay the fees and expenses of the Paying Agent and any indemnifications which by their terms survive the termination of this Indenture, and with respect to all outstanding Bonds shall cease and terminate, except for the obligation of the Paying Agent to pay or cause to be paid to the owners of the Bonds not so surrendered and paid, all sums due thereon. Notice of such election shall be filed with the Paying Agent. Any funds held by the Paying Agent, at the time of receipt of such notice from the Issuer, which are not required for the purpose above mentioned, shall be paid over to the Treasurer. SECTION 28. Provisions Constitute Contract. The provisions of this Indenture and the Bonds shall constitute a contract between the Issuer and the Bond owners and the provisions hereof and thereof shall be enforceable by any Bond owner for the equal benefit and protection of all Bond owners similarity situated by mandamus, accounting, mandatory injunction or any other suit, action or proceeding at law or in equity that is now or may hereafter be authorized under the laws of the State of Califomia in any court of competent jurisdiction. Said contract is made under and is to be construed in accordance with the laws of the State of Califomia. After the issuance and delivery of the Bonds this Indenture shall not be subject to recession, but shall be subject to modification to the extent and in the manner provided in this Indenture, but to no greater extent and in other manner. SECTION 29. Unclaimed Funds. Notwithstanding any provisions of this Indenture, subject to applicable state escheat laws, any monies held by the Paying Agent in trust for the payment of the principal or premium, if any, or interest on, any Bonds and remaining unclaimed for one year after the principal of all of the Bonds has become due and payable (whether at maturity or upon call for redemption or by declaration as provided in this Indenture), if such monies were held at such date, or one year after the date of deposit of such monies if deposited after said date when all of the Bonds became due and payable, shall be repaid to the Issuer free from the lien created by this Indenture, and all liability of the Paying Agent with respect to such monies 15 shall thereupon cease and the Bond owners shall, upon such payment, look only to the Issuer for payment; provided, however, that before the repayment of such monies to the Issuer as aforesaid, the Paying Agent may (at the cost of the Issuer) first publish at least once in a nationally recognized financial publication published in New York, New York, and Los Angeles, California, a notice, In such form as may be deemed appropriate by the Paying Agent, with respect to the provisions relating to the repayment to the Issuer of the monies held for the payment thereof. SECTION 30. Amendments or Supplements. • The Issuer may, by adoption of a resolution from time to time, and at any time, without notice to or consent of any of the Bond owners, approve an amendment or supplemental indenture hereto for any of the following purposes: (a) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provision with respect to matters or questions arising under this Indenture or in any supplemental indenture, provided that such action shall not materially adversely effect the interests of the Bondholders; (b) to add to the covenants and agreements of and the limitations and the restrictions upon the Issuer contained in this Indenture, other covenants, agreements, limitations and restrictions to be observed by the Issuer which are not contrary to or inconsistent with this Indenture as theretofore in effect; or (c) to modify, alter, amend or supplement this Indenture in any other respect which is not materially adverse to the interests of the Bond owners. Exclusive of the supplemental indentures hereto provided for in the first paragraph of this Section 30, the Owners of not less than 60% in aggregate principal amount of the Bonds then Outstanding shall have the right to consent to and approve the adoption by the Issuer of such supplemental indentures as shall be deemed necessary or desirable by the Issuer for the purpose of waiving, modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Indenture, provided, however, that nothing herein shall permit, or be construed as permitting, (a) an extension of the maturity date of the principal of, or the payment date of interest on, any Bond, (b) a reduction in the principal amount of, or redemption premium on, any Bond or the rate of interest thereon, (c) a preference or priority of any Bond or Bonds over any other Bond or Bonds, or (d) a reduction in the aggregate principal amount of the Bonds the owners of which are required to consent to such resolution or order, without the consent of the Owners of all Bonds then outstanding. SECTION 33. Severability of Invalid Provisions. If any one or more of the provisions contained in this Indenture or in the Bonds shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be 16 deemed severable from the remaining provisions contained in this Indenture, and this Indenture shall be construed as if such valid or illegal or unenforceable provision had never been contained herein. The Issuer hereby declares that It would have entered into this Indenture and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issuance of the Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses or phrases of this Indenture may be held illegal, invalid or unenforceable. • SECTION 34. Notices. All notices or communications herein required or permitted to be given to the Issuer or the Paying Agent shall be in writing and shall be deemed to have been sufficiently given or served for all purposes by baling delivered or sent by telecopy or by being deposited, postage prepaid, in a post office letter box, addressed as follows: If to the Issuer. City of Newport Beach 3300 Newport Blvd. Newport Beach, CA 92658 Attn: Treasurer If to the Paying Agent: Attn: Corporate Trust IN WITNESS WHEREOF, the Issuer and the Paying Agent has executed this Bond Indenture effective the date first written hereinabove. CITY OF NEWPORT BEACH By: TREASURER as Paying Agent By: 17 EXHIBIT "A" MATURITY SCHEDULE YEAR PRINCIPAL INTEREST RATE 18 EXHIBIT 'B" [FORM OF BOND] 1u